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+Monitoring of social media data and loT data in combination
+with marketing initiatives
+92
+Corporate Governance Fundamentals
+74
+Financial Performance: Review and Analysis
+71
+Environmental Performance: Energy and Emissions
+66
+Employees and Social Investments
+59
+Performance Management System..
+57
+Customers.
+55
+Partner Ecosystem
+54
+Acquisitions.....
+.48
+Products, Research & Development, and Services
+45
+Strategy and Business Model.
+.44
+Overview of the SAP Group..
+43
+Risk Management and Risks.
+General Information About This Management Report.
+.95
+120
+2
+.223
+Publication Details.
+.222
+Financial and Sustainability Publications
+221
+Addresses
+.220
+Financial Calendar
+.207
+Glossary..
+.203
+Five-Year Summary.
+Additional Information
+201
+Consolidated Financial Statements
+over Financial Reporting in the
+Management's Annual Report on Internal Control
+135
+Notes...
+Consolidated Financial Statements IFRS
+.127
+Events after the Reporting Period...
+Expected Developments and Opportunities
+Combined Management Report
+Auditor's Opinion ..........
+Responsibility Statement.
+920
+965
+-18
+7.3
+6.0
+-9
+500
+455
+17
+19.1
+22.4
+2) 2015 numbers are based on the proposed dividend for 2015 and on 2015 closing level of treasury stock.
+Numbers based on year-end.
+Renewable energy sourced (as a percentage)
+Data center energy consumed (in GWh)
+Energy consumed per employee³) (in kWh)
+Total energy consumption (in GWh)
+Net Greenhouse gas emissions (in kilotons)
+Greenhouse gas emissions per employee³) (in tons)
+Environment
+Customer Net Promoter Score 5) (as a percentage)
+Customer
+-2
+93.5
+5
+12,500
+13,400
+-7
+.40
+39
+24
+Compensation Report.
+.17
+Report from the Supervisory Board.
+.14
+Corporate Governance Report
+10
+Investor Relations
+8
+To Our Stakeholders
+Global Managing Board.
+To Our Stakeholders
+Contents
+5) The 2015 Customer NPS is not fully comparable to the prior year's score.
+4) The BHCI score for 2014 was recalculated from 70% to 72% based on two updated questions in the people survey concerning work-life balance.
+3) Full-time equivalents.
+0
+100
+100
+39
+179
+249
+Letter from the CEO
+91.8
+Letter from the CEO.
+Global Managing Board.
+(ASCO) and the National Center for Tumor Diseases (NCT) in
+Germany are already transforming the treatment and effort to
+cure cancer with SAP HANA. The raw computing power of SAP
+HANA means that doctors can rely on genome sequencing at a
+fraction of the time and cost. It also means that data from
+diagnostic procedures and clinical trials can be aggregated and
+searched for powerful insights about how to treat specific
+tumors.
+6
+To Our Stakeholders Letter from the CEO
+Businesses are hungry for growth and looking to the Internet of
+Things, robotics, artificial intelligence, and context-rich
+applications. Smart cities and connected manufacturing are
+making it possible to deliver mass personalization at scale for
+end consumers. Industries like healthcare are about to
+experience wide-scale disruption as technology finally
+converges around a common vision for personalized medicine.
+Healthcare, in particular, is a vivid illustration of SAP's long-term
+growth potential. The American Society of Clinical Oncology
+The only constant in technology is change. With breakthroughs
+such as SAP HANA and SAP S/4HANA only just scratching the
+surface of their full potential, SAP is strongly positioned to shape
+the future.
+THE ROAD AHEAD
+For SAP, doing well has always been about enabling us to do
+good. We've never been more committed to doing both.
+On the world stage we acted with purpose as a true global
+market leader. We engaged with policy makers to forge a
+compromise on data sharing standards and joined the United
+Nations in setting clear benchmarks for a more sustainable
+planet. With the We Are Family Foundation, we gave brilliant
+young innovators the chance to be heard at TedxTeen. Through
+the unprecedented #One4 project, we stood with the refugees
+who escaped warzones in search of a more peaceful and
+promising future.
+According to our employee survey, we finished the year with a
+10-year high in employee engagement (81%), along with
+increases in leadership trust and work-life balance, including
+employee health. We also remained committed to our high
+standards for reducing carbon emissions and introduced new
+programs to support employees battling cancer. We continued
+our focus on building great careers for the people of SAP,
+whether they come to us direct from university or as
+experienced professionals. Our University Alliance program has
+momentum everywhere in the world, building on the 2,400+
+university partnerships we already have and opening new doors
+in places like China, Russia and the Middle East. Our Autism at
+Work program continued as a role model for the world, proving
+that there is no limit to what any person can achieve when they
+are given the opportunity to share their unique talents.
+Through our direct-to-consumer business unit, SAP Digital,
+more than 50,000 transactions in 32 countries were processed
+in 2015 alone. We see this volume only accelerating as SAP
+develops even more offerings that can be bought and used with
+little or no human interaction, such as SAP Lumira and SAP
+Anywhere.
+already enabling. Our cloud applications - led by the momentum
+of the SAP SuccessFactors Employee Central - are soaring. Our
+business network companies are shaping the future of
+commerce and growing in triple digits.
+Our core business has been accelerated by the fast adoption of
+SAP S/4HANA and the transformative business outcomes it is
+In virtually every financial metric, 2015 was a record year. We
+grew our full-year non-IFRS cloud subscription and support
+revenue by 109%. Our full-year non-IFRS cloud and software
+revenue increased by 20%. Our fourth quarter was SAP's best
+quarter ever, with all regions performing at record levels, despite
+continued uncertainty in many geographic markets.
+Non-IFRS total revenue for SAP was €20.8 billion, a 12% CAGR
+since we started in 2010. Even during the transformation of our
+company, our full-year non-IFRS operating profit was €6.35
+billion, a 10% CAGR since 2010. Very few companies can claim
+this rate of growth on both the top and the bottom line. In
+addition, as SAP's percentage of more predictable revenues
+increase, we are aggressively managing this transformation to
+protect our margin profile and ensure continued shareholder
+value.
+The proof of our successful strategy lies in our 2015
+achievements.
+SAP IS A PROFITABLE GROWTH COMPANY
+SAP is committed to delivering on these expectations.
+CEOs of large businesses and small businesses alike have made
+it clear: narrowly focused IT solutions have made things more
+complicated. They need full alignment between the supply chain
+and the demand chain. They need to run businesses based on
+live data and have the agility to make fast decisions. They need
+an intuitive user experience that empowers every employee and
+unleashes their unique abilities.
+-
+Finally, we recognized that businesses would need to think
+about partnerships in an entirely new way. Whether procuring
+materials or hiring new workers, digital connections would need
+to be made more seamless than ever before. For a longstanding
+challenge like business travel and expense management, we
+needed a network approach that allows multiple businesses to
+collaborate for the ultimate benefit of the end user. With SAP
+Ariba, SAP Fieldglass, and Concur solutions, our business
+network companies are best-in-class and focused on extending
+the walls of a digital enterprise. These companies are magnets
+for other businesses in their respective categories building
+new ecosystems to develop applications and create new value
+streams.
+The business networks
+extend and integrate any and all SAP applications (cloud and on-
+premise) including SAP S/4HANA, SAP SuccessFactors and
+business networks. Thousands of our customers are using HCP
+to maximize their investment in SAP applications and
+simultaneously empower their developers with the power of in-
+memory computing to build and deploy next-generation digital
+applications.
+5
+SAP is charging into this future with optimism. We'll continue
+leading the reinvention of business technology as we look to help
+solve the world's greatest challenges because we see them as
+our greatest opportunities.
+To Our Stakeholders Letter from the CEO
+IN SUMMARY
+This integrated report seeks to expand on this story in vivid
+detail. It also reflects our commitment to unprecedented
+transparency. We believe that our stakeholders deserve to
+8
+To Our Stakeholders Global Managing Board
+Products & Innovation
+Member of the Executive Board
+Bernd Leukert
+Chief Financial Officer and Chief Operating Officer
+Member of the Executive Board
+Luka Mucic
+President, Global Customer Operations
+Member of the Executive Board
+Robert Enslin
+CEO and Member of the Executive Board
+Bill McDermott
+These photographs were taken during the SAP Executive Board meeting on February 17, 2016. The Executive Board members were
+using the SAP Digital Boardroom solution to discuss SAP's performance in real-time.
+Global Managing Board
+To Our Stakeholders Letter from the CEO
+7
+Chief Executive Officer
+Bill McDermott
+Thank you for your interest in and support of SAP.
+SAP's vision is to help the world run better and improve people's
+lives. We're passionate in service to this enduring purpose. We
+also know that vision isn't just what we see it's what we feel
+and how we make other people feel. Whether you rely on SAP as
+a customer, invest in us as a shareholder, work for us as an
+employee, or partner with us in the ecosystem, we work every
+day to make you feel proud of our success and confident in our
+future. We will never lose our sense of urgency. We'll always be
+driven to rise even higher and to earn the privilege of following in
+the footsteps of our founders. Indeed, we aspire to leave
+footprints of our own for others to follow.
+-
+understand the market conditions, strategy and software that
+will power SAP to deliver on our short, mid, and long-term
+expectations. We also believe that the full measure of a great
+business is not just in its financial results, but also in its social
+responsibility. That's why we include metrics like environmental
+impact and diversity alongside revenue and operating income -
+to give you the full picture of an ambitious, successful, and
+sustainable company.
+Over the past six years, whether you measure us on the basis of
+our customer satisfaction, extraordinary top line growth,
+dramatic expansion of operating profit, the successful
+management of our business model transformation, or our
+consistent commitment to corporate citizenship, SAP has never
+been in a stronger position. Our 77,000 colleagues are firmly
+united in purpose to serve the more than 300,000 customers
+who have placed their trust in SAP. Together with our open
+partner ecosystem, we are reshaping every sector of the
+modern economy in nearly every country.
+Another critical piece of our cloud story is our Platform-as-a-
+Service, the SAP HANA Cloud Platform (HCP). HCP is a
+standards based, open platform that allows customers to easily
+Whether for human capital management, customer engagement
+or to run an entire enterprise, SAP is excelling in the cloud.
+Because many companies want faster innovation cycles and
+time to value, we focused on choice of consumption as a major
+priority for SAP. Today, customers can run SAP software in a
+multitenant public cloud, their own private cloud, or with the
+SAP HANA Enterprise Cloud service. Our SAP SuccessFactors
+solutions, for example, combined with SAP Fieldglass solutions,
+are best-in-class applications to manage a total workforce,
+including temporary workers. Anchored by SAP Hybris
+solutions, our customer engagement and commerce solutions
+go way beyond the administrative functions of traditional
+customer relationship management (CRM). Altogether, SAP
+now reaches more than 95 million cloud users, more than any
+other company in enterprise software.
+The cloud
+THE BACKDROP: A FAST-CHANGING DIGITAL ECONOMY
+In the spirit of design thinking and innovation, the mission of
+SAP is always driven by the state of the world.
+The history of SAP was especially meaningful last year as we
+mourned the loss of Klaus Tschira. More than four decades ago,
+Hasso Plattner, Dietmar Hopp, Claus Wellenreuther, Hans-
+Werner Hector and Klaus founded SAP by innovating a new way
+for businesses to run better. In honoring Klaus's memory, we are
+reminded that we stand on the shoulders of giants. As part of
+the SAP family, we have a solemn obligation to constantly push
+the boundaries of what's possible; to be curious and
+courageous; and to never tire of rising beyond the highest
+expectations for what our company can achieve. Those five
+partners set a course 44 years ago; we continue to follow it to
+this day.
+2010 was the year we started on this journey. 2015 was the year
+we proved it is the right one for the stakeholders of SAP - a
+course that is worthy of the rich traditions of market leadership
+that date back to our five original innovators and their audacious
+dream for a better way.
+Six years ago, we charted a bold new course for SAP. We set a
+vision to help the world run better and improve people's lives.
+We designed a strategy to transform SAP into THE cloud
+company powered by SAP HANA. We redoubled our focus on
+helping businesses grow and prosper in 25 distinctly different
+industries.
+I'm honored to present the SAP Integrated Report 2015.
+Dear Stakeholders,
+Overview
+LL
+Letter from the CEO
+3
+40
+Auditor's Opinion
+39
+Responsibility Statement.
+.24
+Compensation Report.
+.17
+Report from the Supervisory Board.
+14
+Corporate Governance Report.
+10
+Investor Relations
+8
+To Our Stakeholders Letter from the CEO
+4
+The theme of the 2016 World Economic Forum in Davos,
+Switzerland, said it all: we live and work in the midst of the
+"Fourth Industrial Revolution." The world is changing faster
+today than ever. By 2020, 21 billion devices will be connected in
+the Internet of Things (IoT). Thriving economies like China are
+investing in digital technologies to deliver efficiency and
+accelerate growth. Industry lines are blurring as legacy
+businesses invent new business models to strengthen their long-
+term prospects.
+In each and every example, yesterday's technologies are not
+keeping pace with tomorrow's opportunities.
+With this massive new processing power, we turned our
+attention to SAP's flagship suite of core business applications
+for finance and logistics. In February 2015, we made history by
+unveiling SAP S/4HANA, our next-generation suite engineered
+specifically to realize unprecedented functionality increases
+made possible by SAP HANA. SAP S/4HANA is delivering 25x
+higher transactional performance, nearly 13x reductions in data
+footprint and dramatically simplified application code, to name
+only a few. In less than one year, more than 2,700 customers
+adopted SAP S/4HANA, beginning a once-in-decades
+innovation cycle and proving that enterprise resource planning
+(ERP) has shifted from a system of record to a system of
+innovation. It took SAP R/3 two years to take off; SAP S/4HANA
+is already off to a much faster start.
+The core applications
+We engineered our entire software portfolio for the SAP HANA
+platform, the only true in-memory column store database in the
+marketplace. In just a few short years, nearly 10,000 customers
+and startup companies chose to innovate on SAP HANA,
+momentum that continued to accelerate in 2015 with the release
+of SAP HANA Vora. The in-memory revolution is real and SAP is
+several years ahead of our competition.
+The database
+HOW WE ARE LEADING: COMPLETENESS OF VISION
+From the database to core applications, to the cloud and to
+business networks, SAP's offerings are truly end-to-end.
+We have paved the way to bring simplicity into every aspect of
+enterprise computing from the legacy IT stack to new,
+context-aware applications. As a trusted innovator, we have
+moved beyond the limitations of the past into a period of
+limitless possibilities for the digital, inter-connected future of the
+world.
+-
+commerce
+A new multi-channel approach to customer engagement and
+Real-time monitoring of company's performance in a Digital
+Boardroom
+New applications for simulation and optimization
+4
+Predictive analytics for forecasting new planning applications
+with more intelligence and speed
+Much higher transactional performance and much lower data
+footprint
+Data entry transaction can run in parallel without database
+locking
+-
+-
+-
+-
+-
+This makes it possible to achieve transformative technology and
+business outcomes:
+As we have done many times in our history, SAP delivered a
+fundamentally new architecture engineered for a new economy.
+With SAP HANA, SAP is able to break with a 45+ old tradition:
+enterprise systems based on three data pillars master data,
+transactional data and aggregations of transactional data - were
+the foundation for all these years. The real time management of
+aggregated data was the cornerstone of the system, enabling
+users to have instant insights along predefined hierarchies. Any
+change of these aggregations required programming and painful
+data restructuring. This new architecture is based on the
+assumption that all reports, statutory or analytical, key figures,
+prediction, simulation and optimization are a mapping between
+millions to billions of data and presentations of a few hundred
+characters.
+-
+SAP customers no longer compete in a business-to-business
+economy. It's now a consumer-to-business economy that is
+generating unprecedented quantities of structured and
+unstructured information. In this era, individual consumers
+expect businesses to deliver relevant, personalized experiences
+to them wherever they are, whenever they want. Businesses
+that rise to this expectation will win. Those that can't, or choose
+not to, will lose.
+- Analysis of point of sales data for signals and trends in real
+time
+Employee retention (as a percentage)
+2015 ANNUAL REPORT
+72
+2,797
+30
+2,557
+3,313
+Cost of cloud and software (non-IFRS)
+Cost of cloud and software (IFRS)
+10
+1,818
+2,008
+Cost of software licenses and support (non-IFRS)
+10
+2,076
+2,291
+Cost of software licenses and support (IFRS)
+101
+393
+789
+Cost of cloud subscriptions and support (non-IFRS)
+112
+481
+1,022
+Cost of cloud subscriptions and support (IFRS)
+Operating expenses
+2,211
+150
+27
+3,313
+-1
+55.8
+55.3
+Cloud subscriptions and support margin (as a percentage of corresponding revenue, IFRS)
+Cloud subscriptions and support margin (as a percentage of corresponding revenue, non-IFRS)
+Cloud and software margin (as a percentage of corresponding revenue, IFRS)
+Cloud and software margin (as a percentage of corresponding revenue, non-IFRS)
+Profits and Margins
+22
+2,331
+2,845
+24
+4,801
+5,930
+Research and development (IFRS)
+Total cost of revenue (non-IFRS)
+26
+5,272
+6,626
+21
+2,590
+3,133
+Total cost of revenue (IFRS)
+Cost of services (non-IFRS)
+22
+2,716
+Cost of services (IFRS)
+644
+1,614
+SAP Business Network Segment revenue
+13,228
+14,928
+Software licenses and support (IFRS)
+109
+1,101
+2,296
+Cloud subscriptions and support (non-IFRS)
+110
+1,087
+2,286
+Cloud subscriptions and support (IFRS)
+Revenues
+A in %
+2014
+2015
+€ millions, unless otherwise stated
+PERFORMANCE SUMMARY
+Key Facts
+The Best-Run Businesses Run SAP
+SAP
+THE ROCHES
+Reimagine
+Your Business
+4
+13
+Software licenses and support (non-IFRS)
+14,930
+13,233
+13
+16,871
+19,126
+Applications, Technology & Services Segment revenue
+18
+17,580
+20,805
+Total revenue (non-IFRS)
+18
+17,560
+20,793
+65.6
+Total revenue (IFRS)
+3,245
+3,579
+20
+17,226
+Services (IFRS = non-IFRS)
+Cloud and software (non-IFRS)
+20
+14,315
+17,214
+Cloud and software (IFRS)
+13
+10
+64.3
+14,334
+80.8
+73.38
+5
+1.10
+1.15
+-7
+2.75
+2.56
+1,229
+1,229
+11
+51
+56
+9
+65
+71
+-27
+-7,670
+-5,615
+9
+2,762
+3,001
+-5
+32.1
+58.26
+26
+90.18
+71.60
+75
+2
+Business Health Culture Index4) (as a percentage)
+3
+79
+81
+Employee Engagement Index (as a percentage)
+11
+21.3
+23.6
+Women in management¹) (total, as a percentage of total number of employees)
+30.5
+31
+Women working at SAP (as a percentage)
+13
+111
+126
+Personnel expenses per employee - excluding share-based payments (in € thousands)
+3
+76,986
+Number of employees ¹). 3)
+Employees and personnel expenses
+Market capitalization¹) (in € billions)
+26
+31
+-17
+74,406
+20.5
+Free cash flow
+Operating margin (as a percentage of total revenue, non-IFRS)
+Operating margin (as a percentage of total revenue, IFRS)
+Operating profit (non-IFRS)
+Operating profit (IFRS)
+SAP Business Network Segment gross margin (as a percentage of corresponding revenue, IFRS)
+Applications, Technology & Services Segment gross margin (as a percentage of corresponding
+revenue, IFRS)
+Total gross margin (as a percentage of total revenue, non-IFRS)
+€ millions, unless otherwise stated
+-3
+70.0
+Net liquidity
+68.1
+12.5
+-54
+16.3
+7.4
+Services margin (as a percentage of corresponding revenue, IFRS)
+Services margin (as a percentage of corresponding revenue, non-IFRS)
+Total gross margin (as a percentage of total revenue, IFRS)
+-1
+84.6
+83.8
+24.7
+-2
+82.1
+-38
+Days' sales outstanding (DSO, in days)
+20.2
+Key SAP Stock Facts
+6,348
+5,638
+Equity ratio (total equity as a percentage of total assets)
+13
+-2
+4,331
+4,252
+1
+67
+-1
+73
+72
+66
+-2
+72.7
+71.5
+Issued shares (in millions)
+A in %
+2014
+Earnings per share, basic (in €)
+2015
+SAP share price¹) (in €)
+Dividend per share²) (in €)
+Deferred taxes
+106
+70
+Surplus arising from offsetting
+1
+30,953
+Total assets
+-836
+30,206
+Funds of financial resources at the
+beginning of the year
+5,175
+-720
+Net decrease/increase in funds of
+financial resources
+33
+-3,118
+4,233
+charges
+360
+Liquid assets
+2014
+-5,368
+691
+Net cash flows from operating activities
+1,835
+Net cash flows from financing activities
+1,309
+3,778
+Prepaid expenses and deferred
+Net cash flows from investing activities
+447
+-7,204
+173
+146
+Short-term assets
+-4,648
+SAP SE shareholders' equity rose 12% to €14,024 million (2014:
+€12,494 million). Against outflows of €1,316 million associated
+with the payment of the 2014 dividend, there was a
+€2,664 million increase in net income and an inflow of
+€180 million from the issuance of shares to service the share-
+based payments of employees. The equity ratio (that is, the ratio
+of shareholders' equity to total assets) increased from 41% in
+2014 to 45% in 2015.
+Cash and cash equivalents
+30,206
+Financial assets increased €304 million compared with the
+previous year to €25,257 million (2014: €24,953 million), due
+mainly to the increase in contributions to subsidiaries. Short-
+term assets stood at €4,233 million (2014: €3,778 million), a
+year-over-year increase of €455 million, reflecting a
+€787 million increase in accounts receivable and €331 million
+decrease in liquid assets.
+Provisions increased €145 million to €1,247 million (2014:
+€1,102 million). While the other provisions increased
+€170 million to €844 million primarily as a result of additions to
+Cash flow from operating activities increased €526 million to
+€1,835 million in 2015 (2014: €1,309 million), largely caused by
+the increase in net income.
+of
+SAP SE net cash flows from investing activities were
+€447 million in 2015 compared to a cash outflow
+€7,204 million in 2014. Received finance income of
+€1,160 million and inflows of €76 million from sales of property,
+plant, and equipment were in part offset by outflows of
+€295 million for financial assets, €248 million for intangible
+assets and property, plant, and equipment and €244 million
+contributions to plan assets. The previous year net cash outflow
+from investing activities was notably due to the contributions to
+the capital of SAP America, Inc. in 2014 in connection with the
+acquisition of Concur and Fieldglass.
+Net cash outflows from financing activities were €3,118 million in
+2015 compared to a cash inflow of €5,175 million in 2014.
+Inflows of €1,926 million were attributable to issued new bonds
+of €1,750 million, taking up intercompany loans of €111 million
+and €65 million inflows were generated from the reissuance of
+treasury shares for share-based payments. SAP SE outflows
+included the dividend of €1,316 million (2014: €1,194 million),
+Combined Management Report Financial Performance: Review and Analysis
+90
+9:0
+interest payments of €158 million (2014: €115 million) and
+repayments of financial liabilities of €3,570 million.
+At the close of the year, SAP SE funds of financial resources
+amounted to €-6,204 million (2014: €-5,368 million), a year-
+over-year decrease of €836 million; thereof €505 million were
+cash contributions by subsidiaries through SAP SE centralized
+management of finance and liquidity. In addition short-term
+liquid assets decreased by €331 million and closed at
+€360 million (2014: €691 million).
+2015
+Opportunities and Risks
+SAP SE is subject to materially the same opportunities and risks
+as the SAP Group. For more information, see the Risk
+Management and Risks section as well as the Expected
+Developments and Opportunities section
+30,953
+Equity and liabilities
+Total shareholders' equity and
+liabilities
+-5,368
+360
+691
+Shareholders' equity
+Provisions
+14,024
+1,247
+12,494
+Cash pool balances
+-6,564
+-6,059
+Other liabilities
+Deferred income
+15,679
+3
+1,102
+16,605
+Funds of financial resources at the
+end of the year
+-6,204
+5
+€ millions
+-263
+3,872
+-1,764
+-1,476
+Depreciation and amortization
+-272
+Other operating expenses
+-3,955
+Personnel expenses
+-2,697
+2,573
+2,135
+Finance income
+929
+921
+Income from ordinary activities
+Operating profit
+2014
+8,957
+722
+-3,099
+-4,031
+Cost of services and materials
+Employee-related activities increased the value of our employee
+base and our own software. For more information, see the
+Employees and Social Investment section and the Products,
+Research & Development, and Services section. We also
+increased the value of our partner ecosystem by continuing to
+develop sales and development partnerships.
+Combined Management Report Financial Performance: Review and Analysis
+REPORT ON THE ECONOMIC POSITION OF SAP SE
+SAP SE is headquartered in Walldorf, Germany, and is the
+parent company of the SAP Group, which comprises 256
+companies. SAP SE is the Group holding company and employs
+most of the Group's Germany-based development and service
+and support personnel.
+As the owner of the intellectual property in most SAP software,
+SAP SE derives its revenue mainly from software license fees
+paid by its subsidiaries for the right to market SAP solutions.
+The SAP SE annual financial statements are prepared in
+accordance with the reporting standards in the German
+Commercial Code and the German Stock Corporation Act. The
+full SAP SE annual financial report and unqualified audit report
+are submitted to the operator of the Elektronischer
+Bundesanzeiger (Online German Federal Gazette) for
+publication and inclusion in the Unternehmensregister (German
+Business Register). It is available from SAP SE on request.
+Income
+The income statement uses the nature of expense method and
+presents amounts in millions of euros.
+SAP SE Income Statement - German Commercial Code
+(Short Version)
+€ millions
+2015
+Total revenue
+10,866
+Other operating income
+1,719
+3,501
+3,056
+Taxes
+-837
+26,440
+26,179
+2
+2
+Assets and Financial Position
+In 2015, SAP SE total assets closed at €30,953 million (2014:
+€30,206 million).
+SAP SE Balance Sheet - German Commercial Code
+(Short Version)
+€ millions
+Assets
+Inventories
+12/31/2015 12/31/2014
+the other employee-related liabilities, the reserves for tax
+decreased €28 million to €398 million (2014: €426 million).
+Other liabilities decreased €926 million to €15,679 million
+(2014: €16,605 million). This decrease is mainly attributable to
+contrasting effects: On the one hand, SAP SE issued new debt in
+the amount of €1,750 million and liabilities to affiliated
+companies increased €817 million, primarily due to increased
+cash contributions by subsidiaries through SAP SE centralized
+management of finance and liquidity; on the other hand, SAP SE
+repaid €3,020 million in liabilities to banks and made a
+scheduled repayment of a bond in the amount of € 550 million.
+SAP SE Cash Flow Statement - German Commercial Code
+(Short Version)
+Accounts receivable
+Fixed assets
+3,085
+232
+994
+24,953
+Financial assets
+-749
+Net income
+2,664
+2,307
+The total revenue of SAP SE in 2015 was €10,866 million (2014:
+€8,957 million), an increase of 21%. Product revenue increased
+€1,125 million to €8,051 million (2014: €6,926 million). As in
+previous years, product revenue was primarily generated from
+license fees paid by subsidiaries of SAP SE. Therefore, the
+increase in SAP SE revenue in 2015 was principally a result of
+the increase in cloud and software revenue achieved by the SAP
+Group. Due to intensified pooling of services at SAP SE and
+positive currency effects, other revenues increased by 47% to
+€2,270 million.
+SAP SE operating profit increased 21% to €2,573 million (2014:
+€2,135 million) owing to the growth in revenue. Other operating
+income increased €997 million to €1,719 million (2014:
+€722 million). The year-over-year increase is due primarily to an
+increase in gains from currency effects. SAP SE cost of services
+and materials increased 30% to €4,031 million (2014:
+€3,099 million). SAP SE cost of services and materials
+comprises third-party services, including those provided by SAP
+subsidiaries. The rise is mainly due to increased services
+received in the context of intra group cost allocations. SAP SE
+personnel expenses, mainly the labor cost of software
+developers, service and support employees, and administration
+staff employed by SAP SE, increased 20% to €1,764 million
+(2014: €1,476 million) primarily because of higher share-based
+compensation expenses and headcount increase over the year.
+Other operating expenses increased 47% to €3,955 million
+(2014: €2,697 million). This increase is mainly attributable to
+€722 million higher losses from currency effects, a €385 million
+increase in expenses for licenses and provisions and
+restructuring costs that increased by €261 million compared to
+the previous year. The effect was partly offset by a €256 million
+decrease in miscellaneous other expenses.
+Finance income was €929 million (2014: €921 million), an
+increase of €8 million compared with the previous year. The
+increase is primarily due to a €48 million higher income from
+profit transfer agreements and a decrease of €11 million in write-
+downs of financial assets. These were partly offset by a
+decrease of €46 million in net interest income.
+SAP SE income from ordinary activities, which is the sum of
+operating profit and finance income, increased €445 million to
+€3,501 million (2014: €3,056 million). Income and other taxes
+increased 12% to €837 million (2014: €749 million). After
+deducting taxes, the resultant net income is €2,664 million
+(2014: €2,307 million), an increase of €357 million year-over-
+year.
+Combined Management Report Financial Performance: Review and Analysis
+89
+Intangible assets
+184
+Property, plant, and equipment
+999
+25,257
+91
+L
+CORPORATE GOVERNANCE STATEMENT
+L
+M
+M
+H
+20-39%
+L
+L
+L
+M
+1-19%
+L
+L
+L
+M
+M
+40-59%
+H
+H
+Insignificant
+Minor
+Moderate
+Major
+Business Critical
+80-99%
+L
+M
+H
+H
+H
+60-79%
+L
+M
+M
+Impact
+L = Low Risk
+M = Medium Risk
+H = High Risk
+properly reflected in the IFRS Consolidated Financial
+Statements.
+Our ICRMSFR also includes policies, procedures, and measures
+designed to ensure compliance of SAP's financial reports with
+applicable laws and standards. We analyze new statutes,
+standards, and other pronouncements concerning IFRS
+accounting and its impact on our financial statements and
+ICRMSFR. Failure to adhere to these new statutes, standards,
+and other pronouncements would present a substantial risk to
+the compliance of our financial reporting. Finally, the ICRMSFR
+has both preventive and detective controls, including, for
+example, automated and non-automated reconciliations,
+segregated duties with two-person responsibility, authorization
+concepts in our software systems, and monitoring.
+Our Corporate Financial Reporting department codifies all
+accounting policies in our global Group Accounting and Revenue
+Recognition Guidelines. These policies, the corporate closing
+schedule, and our process handbooks together define the
+closing process. Under this closing process, we prepare,
+predominately through centralized and outsourced services, the
+financial statements of all SAP legal entities for consolidation by
+our Corporate Financial Reporting department. The Corporate
+Financial Reporting department and other corporate
+departments assist in the efforts to comply with Group
+accounting policies and monitor the accounting work. Our
+Corporate Financial Reporting department conducts reviews of
+our accounting processes and books.
+We have outsourced some work, such as valuing projected
+benefit obligations and share-based payment obligations,
+quarterly tax calculations for most entities, and purchase price
+allocations in the context of asset acquisitions and business
+combinations. We have also outsourced the preparation of the
+local statutory financial statements of most of our subsidiaries.
+The employees who work on SAP's financial reporting receive
+training in the respective policies and processes.
+Based on an analysis of the design and operating effectiveness
+of our respective internal controls over financial reporting, a
+committee presents the results of the assessment on the
+ICRMSFR effectiveness with respect to our IFRS Consolidated
+Financial Statements as at December 31 each year to the Group
+CFO. The committee meets regularly to set the annual scope for
+the test of effectiveness, to evaluate any possible weaknesses in
+the controls, and to determine measures to address them
+adequately. During its own meetings, the Audit Committee of
+the Supervisory Board regularly scrutinizes the resulting
+assessments of the effectiveness of the internal controls over
+financial reporting with respect to the IFRS consolidated
+financial statements.
+The assessment of the effectiveness of the ICRMSFR related to
+our IFRS consolidated financial statements was that on
+December 31, 2015, the Group had an effective internal control
+system over financial reporting in place.
+Risk Management and Internal Control Governance
+Our Executive Board is responsible for ensuring the
+effectiveness of the risk management and internal control
+system. The effectiveness of both systems and their
+implementation in the different Executive Board areas is
+monitored by each board member. We regularly provide a status
+on the risk management and the internal control system to the
+Audit Committee. Key risks are reported quarterly to the
+chairperson of the Supervisory Board and to the Audit
+Committee of the Supervisory Board. The Audit Committee of
+our Supervisory Board regularly monitors the effectiveness of
+SAP's risk management and internal control system. In this
+regard, our Audit Committee requested the Corporate Audit
+department to regularly audit various aspects of the risk
+management system and its effectiveness. Additional
+reassurance is obtained through the external audit of the
+effectiveness of our internal control system over financial
+reporting and the internal warning system.
+Software Solution Deployed
+We use our own risk management software (SAP solutions for
+GRC) powered by SAP HANA to effectively support the
+governance process. Risk managers record and address
+identified risks using our risk management software to create
+transparency across all known risks that exist in the Group, as
+well as to facilitate risk management and the associated risk
+reporting. This information is available to managers through a
+mobile app as well as regularly issued reports, and is
+consolidated and aggregated for the quarterly risk report to the
+Executive Board. The solution also supports the risk-based
+approach of SAP's internal control and risk management system
+for financial reporting (ICRMSFR).
+RISK FACTORS
+The following sections outline risk factors that we identify and
+track using our risk management software (SAP solutions for
+GRC) powered by SAP HANA. They are presented below at a
+more aggregated level as compared to their use in internal
+controlling, but are broken down by the same risk categories we
+use in our internal risk management system reporting structure.
+An overview of the risk factors presented below is outlined in the
+following table. It shows the clarification of the risk factors
+according to our framework detailed in the Risk Management
+Methodology and Reporting section.
+Combined Management Report Risk Management and Risks
+98
+companies are SAP customers. To help us improve insight into
+our customers' view of SAP, in 2012 we began measuring our
+Customer Net Promoter Score (NPS), a metric that gives a more
+complete picture of customer loyalty as it answers the question
+of how likely our customers would be to recommend SAP. For
+more information about our new customers and the Customer
+NPS, see the Customers section.
+46
+Based on the combination of the likelihood that a risk will occur
+and its impact on SAP's reputation, business, financial position,
+profit, and cash flow classify the risks as "high," "medium," or
+"low."
+97
+SAP's internal control and risk management system for financial
+reporting (ICRMSFR) is based on our Group-wide risk
+management methodology. The ICRMSFR includes organiza-
+tional, control, and monitoring structures designed to ensure
+that data and information concerning our business are collected,
+compiled, and analyzed in accordance with applicable laws and
+Combined Management Report Risk Management and Risks
+96
+Risk analysis is followed by risk response and risk monitoring.
+Our risk managers work in close cooperation with the business
+owners, ensuring that effective strategies are implemented to
+address risks. Business owners are responsible for continuously
+monitoring the risks and the effectiveness of mitigation
+strategies, with support from the respective risk managers.
+Risks may be reduced by taking active steps based on risk
+approval. To provide greater risk transparency and enable
+appropriate decision making for business owners, we have
+established a risk delegation of authority (RDOA) for relevant
+parts of the organization as deemed appropriate. Risk DOA is a
+risk management decision-making hierarchy that helps business
+owners gain timely insight into projects and processes with the
+greatest risk, so they are better able to review the relevant
+information, understand the risk profile and associated
+mitigation strategies, and determine if their approval is
+warranted. Depending on the exposure, approval is required at
+different levels of the Company, up to and including the
+Executive Board.
+All identified and relevant risks are reported at the local,
+regional, and global levels in accordance with our risk
+management policy. At local, regional, and global levels, we have
+established executive risk councils that regularly discuss risks
+and countermeasures and that monitor the success of risk
+mitigation. In addition, the Executive Board is informed quarterly
+about individual risks based on clearly defined reporting criteria.
+Newly identified or existing significant risks that are above a
+defined threshold or with a potential significant impact are also
+reported to the chairperson of the Supervisory Board and to the
+Audit Committee of the Supervisory Board. This includes any
+risks of potential ongoing concern.
+We also have a process in place that analyzes those risks with
+respect to potential effects on liquidity, excessive indebtedness,
+and insolvency, which could be possible threats to the Group's
+ability to continue as a going concern.
+Risk Management Organization
+Our risk management organization ensures the coverage of the
+functions of risk management governance, strategic,
+operational, financial, and compliance risk management. Our
+Global Governance, Risk & Compliance (GRC) organization
+comprises a Group-wide governance function, including regular
+maintenance and implementation of our risk management
+policy. The uniform process model comprises all essential
+elements of risk management: risk planning, risk identification,
+risk analysis, risk response, and risk monitoring. This function is
+also responsible for standardized risk reporting to risk
+committees at different levels of the Company, including the
+Executive Board as well as the chairperson and the Audit
+Committee of the Supervisory Board.
+Our strategic risk management function resides within our
+Global Controlling organization and is responsible for enabling
+early identification and mitigation of risks that could threaten
+the successful execution of SAP's strategic priorities and
+targets. It also supports the successful execution of our
+corporate strategy by creating transparency regarding risks that
+could threaten commercial interests or intangible assets such as
+corporate or product reputation and brand image.
+Operational and financial risk management is uniformly
+implemented at SAP. Independent GRC risk managers are
+assigned to each of SAP's important business units and
+business activities and to selected strategic initiatives. All GRC
+risk managers, together with assigned risk contacts in the
+business units, continuously identify and assess risks associated
+with material business operations using a uniform approach and
+monitor the implementation and effectiveness of the measures
+chosen to mitigate risks. Further financial risk management
+activities are performed by our global treasury function.
+During the merger and acquisition and post-merger integration
+phase, newly acquired companies are subject to risk
+management performed by our Corporate Development M&A
+function. Furthermore, as long as they are not integrated,
+existing risk management structures are maintained or
+enhanced within the acquired companies to ensure that legal
+requirements are met.
+Risk managers are responsible for supporting and monitoring
+the implementation of risk management across the Group that
+is both effective and compliant with regulatory requirements
+and SAP's global risk management policy. Based on our risk
+management policy, all risks and risk-related matters have to be
+reported to the Global GRC organization.
+The head of Global GRC, together with other key functions (for
+example, Global Controlling or Global Treasury), is responsible
+for SAP's internal control and risk management program, and
+provides regular updates to the Audit Committee of the
+Supervisory Board. The overall risk profile of the Group is
+consolidated by the head of Global GRC, who reports to the
+Group CFO.
+Internal Control and Risk Management System for Financial
+Reporting
+The purpose of our system of internal control over financial
+reporting is to ensure with sufficient certainty that its financial
+reporting is reliable and in compliance with applicable generally
+accepted accounting principles. Because of the inherent
+limitations of internal control over financial reporting, it may not
+prevent or bring to light all potential misstatements in our
+financial statements.
+Combined Management Report Risk Management and Risks
+In this framework, we define a remote risk as one that will occur
+only under exceptional circumstances and a near certain risk as
+Highly Likely
+Near Certainty
+Likely
+with any shares that were previously acquired and are still
+held by SAP in treasury and any other shares controlled by
+SAP, must not in total exceed 10% of SAP's share capital.
+Executive Board powers, such as those described to issue
+and repurchase stock and to grant rights of conversion and
+subscription to shares of SAP, are widely followed common
+practice among German companies such as SAP. They give
+the Executive Board the flexibility it needs, in particular, the
+options to use SAP shares as consideration in equity
+investments, raise funds on the financial markets at short
+notice on favorable terms, or return value to shareholders
+during the course of the year.
+Material agreements with change of control provisions:
+SAP SE has concluded the following material agreements
+with provisions that take effect in the event of a change of
+control, whether following a takeover bid or otherwise:
+The terms of SAP's syndicated €2 billion revolving credit
+facility include a change-of-control clause. For more
+information about this syndicated credit facility, see the
+Notes to the Consolidated Financial Statements section, Note
+(25). This clause obliges SAP SE to notify the banks in case of
+a change of control. If, on receiving the notification, banks
+that represent at least two-thirds of the credit volume so
+require, the banks have the right to cancel the credit facility
+and demand complete repayment of the outstanding debt. If
+no continuation agreement is reached, the credit facility
+would end and the obligation to repay would become
+effective at an ascertainable time.
+In agreements between SAP SE and various banks for
+bilateral credit facilities that totaled €471 million as at
+December 31, 2015, we have agreed customary material
+adverse change clauses permitting the banks to terminate if
+events occur that are materially averse to the economic
+standing of SAP SE, which may possibly also include a
+change of control. We believe that in view of our current
+liquidity situation, termination of these credit facilities would
+not have a material adverse effect, at least in the near term.
+In 2012, SAP set up a Debt Issuance Program that currently
+has a volume of €8 billion. Of SAP's total amount of
+Eurobonds of €5.75 billion outstanding as of December 31,
+2015, €5.25 billion were issued under the Debt Issuance
+Program. For more information about SAP's Eurobonds, see
+the Notes to the Consolidated Financial Statements section,
+Note (17b). Under the terms agreed with the buyers, we are
+required to notify the buyers of any change of control without
+delay. If there is a change of control and SAP is consequently
+assigned a lower credit rating within a defined period, buyers
+are entitled to demand repayment.
+Under the terms of our U.S. private placements totaling
+US$2.35 billion, we are required to offer lenders repayment
+of outstanding debt if there is a change of control and SAP is
+consequently assigned a lower credit rating within a defined
+period. For more information about these private
+placements, see the Notes to the Consolidated Financial
+Statements section, Note (17b). Lenders would have at least
+30 days to accept the offer.
+Combined Management Report Corporate Governance Fundamentals
+93
+93
+We have entered into relationships with other companies to
+jointly develop and market new software products. These
+relationships are governed by development and marketing
+agreements with the respective companies. Some of the
+agreements include provisions that, in the event of a change
+of control over one of the parties, give the other party a right
+to consent to the assignment of the agreement or to
+terminate it.
+Change of control provisions in Executive Board
+compensation agreements: Agreements have been
+concluded with the members of the Executive Board
+concerning compensation in the event of a change of control.
+These agreements, which are customary in Germany and
+elsewhere, are described in the compensation report, which
+is an integral part of this management report. We have no
+analogous compensation agreements with other employees.
+Combined Management Report Corporate Governance Fundamentals
+94
+==
+Risk Management
+and Risks
+OUR RISK MANAGEMENT
+Internal Control and Risk Management System
+Power to issue and repurchase shares: The Annual General
+Meeting of Shareholders on May 25, 2011, granted powers to
+the Executive Board, subject to the consent of the
+Supervisory Board, to issue convertible and warrant-linked
+bonds and to grant conversion and option rights in respect of
+SAP SE shares representing a total attributable portion of the
+share capital of not more than €100 million secured by a
+corresponding amount of contingent capital. These powers
+will expire on May 24, 2016. The Executive Board is also
+authorized until May 19, 2020, to increase the share capital
+by not more than €250 million by issuing new shares against
+contributions in cash and to increase the share capital by not
+more than €250 million by issuing new shares against
+contributions in cash or in kind. For more details about the
+different tranches of authorized capital and the
+aforementioned contingent capital, see the Articles of
+Incorporation, section 4. The Annual General Meeting of
+Shareholders on June 4, 2013, granted a power to the
+Executive Board in accordance with the German Stock
+Corporation Act, section 71 (1)(8), to buy back for treasury on
+or before June 3, 2018, SAP SE shares attributable in total to
+not more than €120 million of the share capital. The power is
+subject to the proviso that the shares repurchased, together
+As a global company, SAP is exposed to a broad range of risks
+across our business operations. As a consequence, our
+Executive Board has put comprehensive risk management and
+internal control structures in place that enable SAP to identify
+and analyze risks early and take appropriate action. Our risk
+management and internal control system is designed to identify
+potential events that could negatively impact the Company and
+to provide reasonable assurance regarding the operating
+effectiveness over our financial reporting in place ensuring the
+achievement of the Company objectives, specifically our ability
+to achieve our financial, operational, or strategic goals as
+planned.
+SE Regulation, articles 39 and 46. The number of members of
+the Executive Board is decided by the Supervisory Board.
+Executive Board members may be reappointed for, or their
+term of office extended by, a maximum of five years. A simple
+majority of the Supervisory Board membership is required for
+Executive Board appointments. In the event of a tie, the
+chairperson of the Supervisory Board has the casting vote.
+The Supervisory Board can appoint a chairperson of the
+Executive Board and one or more deputy chairpersons from
+among the members of the Executive Board. The Supervisory
+Board can revoke appointments to the Executive Board in
+accordance with the SE Regulation, article 9, and the German
+Stock Corporation Act, section 84, if compelling reasons
+exist, such as gross negligence on the part of the Executive
+Board member. If the Executive Board is short of a required
+member, one may be appointed in urgent cases by a court in
+accordance with the SE Regulation, article 9, and the German
+Stock Corporation Act, section 85. In accordance with the SE
+Regulation, article 59, and the German Stock Corporation Act,
+section 179, an amendment of the Articles of Incorporation
+requires a resolution of the General Meeting of Shareholders
+with a majority of at least three-quarters of the valid votes
+cast. For any amendments of the Articles of Incorporation
+that require a simple majority for stock corporations
+established under German law, however, the simple majority
+of the valid votes cast is sufficient if at least half of the
+subscribed capital is represented or, in the absence of such
+quorum, the majority prescribed by law (that is, two-thirds of
+the votes cast, pursuant to article 59 of the SE Regulation) is
+sufficient. Section 11 (2) of the Articles of Incorporation
+authorizes the Supervisory Board to amend the Articles of
+Incorporation where such amendments only concern the
+wording.
+92
+The German Commercial Code, section 289a, requires that as a
+listed company, SAP SE publish a corporate governance
+statement either as part of our management report or on our
+Web site. The Executive Board of SAP SE filed the corporate
+governance statement on February 24, 2016, and published it on
+our public Web site at
+www.sap.com/corporate-en/investors/governance.
+For more information about the corporate governance of SAP,
+see the Corporate Governance Report section.
+CHANGES IN MANAGEMENT
+On January 9, 2015, Michael Kleinemeier and Steve Singh were
+appointed to the Global Managing Board, with immediate effect.
+Steve Singh, CEO of Concur, is responsible for our business
+network strategy. Michael Kleinemeier led service and support
+efforts worldwide. As of November 1, 2015, Michael Kleinemeier
+was appointed to the Executive Board and assumed sole
+responsibility for the Global Service & Support organization.
+With effect from July 15, 2015, the Executive Board appointed
+Quentin Clark to the Global Managing Board. He became our
+new chief business officer as of October 1, 2015.
+On November 1, 2015, Gerhard Oswald assumed responsibility
+for our new Product Quality & Enablement organization.
+INFORMATION CONCERNING TAKEOVERS
+Information required under the German Commercial Code,
+sections 289 (4) and 315 (4), with explanatory report:
+Composition of share capital: For information about the
+composition of SAP SE share capital as at December 31,
+2015, see the Notes to the Consolidated Financial Statements
+section, Note (20). Each share entitles the bearer to one vote.
+American depositary receipts (ADRs) representing our
+shares are listed on the New York Stock Exchange in the
+United States. ADRs are certificates representing non-U.S.
+shares and are traded on U.S. stock exchanges instead of the
+underlying shares. One SAP ADR corresponds to one SAP
+share.
+Restrictions applying to share voting rights or transfers:
+SAP shares are not subject to transfer restrictions except the
+lock-in period under the SAP Share Matching Plan (SMP),
+described below. SAP held 30,551,035 treasury shares as at
+December 31, 2015. Treasury shares do not entitle us to any
+voting rights or dividend rights or other rights. Shares issued
+in 2015 under the employee SMP are subject to contractual
+transfer restrictions for a three-year lock-in period unless the
+plan member's employment with SAP is ended during that
+period. Until that lock-in period has expired, the participating
+employees are not ordinarily allowed to dispose of the shares
+they have acquired under the plan. We are not aware of any
+other restrictions applying to share voting rights or to share
+transfers.
+Shareholdings that exceed 10% of the voting rights: We
+are not aware of any direct or indirect SAP SE shareholdings
+that exceed 10% of the voting rights.
+Shares with special rights conferring powers of control: No
+SAP shareholder has special rights conferring powers of
+control.
+Type of control over voting rights applying to employee
+shareholders who do not directly exercise their control
+rights: As with other shareholders, employee holders of SAP
+shares exercise their control rights in accordance with the
+law and the Articles of Incorporation. In votes on the formal
+approval of their acts at the Annual General Meeting of
+Shareholders, employee representatives on the Supervisory
+Board, as all other members of the Supervisory Board, are
+prohibited from exercising the voting rights associated with
+their shares.
+Requirements concerning appointments and dismissals of
+members of the Executive Board and amendments to the
+Articles of Incorporation: Conditions for the appointment
+and dismissal of members of the Executive Board and
+amendment to the Articles of Incorporation reflect the
+relevant provisions of applicable European and German law,
+including Council Regulation (EC) No. 2157/2001 on the
+Statute for a European Company (the "SE Regulation") and
+the German Stock Corporation Act. Under the Articles of
+Incorporation, the Executive Board consists of at least two
+members who are appointed for a period of not more than
+five years by the Supervisory Board in accordance with the
+Combined Management Report Corporate Governance Fundamentals
+92
+Corporate Governance
+Fundamentals
+This system comprises numerous control mechanisms and is an
+important element of our corporate decision-making process; it
+is therefore implemented as an integral part of SAP's business
+processes across the entire Group. To ensure that our global
+risk management efforts are effective while also enabling us to
+aggregate risks and report on them transparently, we have
+adopted an integrated risk management and internal control
+approach.
+Our risk management system is based on five pillars, which
+include a dedicated risk management policy and a standardized
+risk management methodology as well as a global risk
+management organization. Our internal control system consists
+of the internal control and risk management system for financial
+reporting (ICRMSFR) that also covers the broader business
+one that can be expected to occur within the specified time
+horizon. The period for analyzing our risks is at least the used
+forecast period. The period for analyzing our risks that could be
+possible threats to the Group's ability to continue as a going
+concern is eight rolling quarters.
+Impact Level
+Insignificant
+Minor
+Moderate
+Major
+Business-Critical
+Impact Definition
+Negligible negative impact on
+business, financial position, profit,
+and cash flows
+Limited negative impact on
+business, financial position, profit,
+and cash flows
+Some potential negative impact
+on business, financial position,
+profit, and cash flows
+Considerable negative impact on
+business, financial position, profit,
+and cash flows
+Detrimental negative impact on
+business, financial position, profit,
+and cash flows
+60% to 79%
+80% to 99%
+Unlikely
+Due to our public listings in both, Germany and the United
+States, we are subject to both, German and U.S. regulatory
+requirements that relate to risk management and internal
+controls over financial reporting, such as provisions in the
+German Stock Corporation Act, section 91 (2) and the U.S.
+Sarbanes-Oxley Act (SOX) of 2002, specifically sections 302
+and 404. Hence, our Executive Board has established an early
+warning system (risk management system) to ensure
+compliance with applicable regulations and an effective
+management of risks.
+Remote
+40% to 59%
+environment. In 2015, we adjusted existing control designs to
+adequately address the changed risk environment and
+continued to automate our internal control landscape leveraging
+continuous control monitoring and continuous auditing activities
+in selected business areas. Using the current Committee of
+Sponsoring Organizations of the Treadway Commission (COSO)
+framework of 2013, we define and cover internal controls along
+the value chain on a process and subprocess level to ensure that
+sound business objectives are set in line with the organization's
+strategic, operational, financial, and compliance goals. In
+addition, we have a governance model in place across risk
+management and the internal control system to ensure both
+systems are effective, as well as a central software solution to
+store, maintain, and report all risk-relevant information.
+Risk Management Policy and Framework
+The risk management policy issued by our Executive Board
+governs how we handle risk in line with the Company's risk
+appetite and defines a methodology that is applied uniformly
+across all parts of the Group. The policy stipulates who is
+responsible for conducting risk management activities and
+defines reporting and monitoring structures. In 2015, as part of
+our regular review, we updated and rolled out this mandatory
+policy to all employees. Our global corporate audit function
+conducts regular audits to assess the effectiveness of our risk
+management system. Every year, SAP's external auditor
+assesses if the SAP SE early risk identification system is
+adequate to identify risks that may endanger our ability to
+continue as a going concern. SAP's enterprise risk management
+covers risks in the areas of strategy, operational business,
+financial reporting, and compliance. As of today, the risk
+management system analyzes risks and only assesses or
+analyzes opportunities where deemed appropriate.
+Risk Management Methodology and Reporting
+The following sections describe the key elements of the risk
+management process as part of SAP's risk management policy:
+risk planning, identification, analysis, response, and monitoring.
+Risk planning and risk identification for both internal and
+external risks are conducted in cooperation between risk
+managers and the business units or subsidiaries across the
+Combined Management Report Risk Management and Risks
+95
+95
+Group. We use various techniques to identify risks. For example,
+we have identified risk indicators and developed a
+comprehensive risk catalog that includes risk mitigation
+strategies for known product and project risks. Risk
+identification takes place at various levels of our organization to
+ensure that common risk trends are identified and end-to-end
+risk management across organizational borders is enabled. We
+apply both a qualitative and quantitative risk analysis as well as
+other risk analysis methods such as sensitivity analyses and
+simulation techniques.
+To determine which risks pose the highest threat to the viability
+of the SAP Group, we classify them as "high," "medium," or
+"low" based on the likelihood that a risk will occur within the
+assessment horizon as well as the impact the risk would have on
+SAP's business objectives if it were to occur. The scales for
+measuring these two indicators are given in the following tables.
+Probability/Likelihood of
+Occurrence
+1% to 19%
+20% to 39%
+Description
+unlikely
+Product Security
+Enable and train sufficient resources to promote, sell, and
+support to scale to targeted markets
+101
+Combined Management Report Risk Management and Risks
+We address these risks with various measures depending on the
+circumstances, including, for example, a strong legal and
+compliance office presence in the main countries, maintaining
+an effective data protection and privacy office and associated
+policy, receiving guidance from external economics consultants,
+law firms, tax advisors, and authorities in the concerned
+countries, and taking legal actions.
+As we expand into new countries and markets, these risks could
+intensify. The application of these laws and regulations to our
+business is sometimes unclear, subject to change over time, and
+often conflict among jurisdictions. Additionally, these laws and
+government approaches to enforcement are continuing to
+change and evolve, just as our products and services continually
+evolve. Compliance with these varying laws and regulations
+could involve significant costs or require changes in products or
+business practices. Non-compliance could result in the
+imposition of penalties or cessation of orders due to alleged
+non-compliant activity. One or more of these factors could have
+an adverse effect on our operations globally or in one or more
+countries or regions, which could have an adverse effect on our
+business, financial position, profit, and cash flows.
+Compliance with various industry standards (such as
+Payment Card Industry Data Security Standard)
+Challenges with effectively managing a large distribution
+network of third-party companies
+Country-specific software certification requirements
+Difficulties enforcing intellectual property and contractual
+rights in certain jurisdictions
+Works councils, labor unions, and immigration laws in
+different countries
+Protectionist trade policies, import and export regulations,
+and trade sanctions and embargoes
+Operational difficulties in countries with a high corruption
+perceptions index
+Expenses associated with the localization of our products and
+compliance with local regulatory requirements
+Discriminatory or conflicting fiscal policies
+Possible tax constraints impeding business operations in
+certain countries
+Conflict and overlap among tax regimes
+Data residency requirements (the requirement to store
+certain data only in and, in some cases, also to access such
+data only from within a certain jurisdiction)
+Data protection and privacy regulation regarding access by
+government authorities to customer, partner, or employee
+data
+-
+-
+-
+Although we estimate the probability of occurrence of this risk
+to be unlikely, we cannot completely exclude the possibility that
+this risk could have a major impact on our business, financial
+position, profit, and cash flows, or cause a negative deviation
+from our revenue and operating profit target. We classify this
+risk as a medium risk.
+Social and political instability caused by state-based
+conflicts, terrorist attacks, civil unrest, war, or international
+hostilities, as well as pandemic disease outbreaks or natural
+disasters, may disrupt SAP's business operations.
+Terrorist attacks (such as the attacks in Paris in November
+2015) as well as other acts of violence or war, civil, religious, and
+political unrest (such as in Ukraine, Israel, Syria, and in other
+parts of the Middle East, Libya, and in other parts of Africa);
+natural disasters (such as hurricanes, flooding, or similar
+events); or pandemic diseases (such as Ebola in West Africa)
+could have a significant adverse effect on the local economy and
+beyond. Such an event could lead, for example, to the loss of a
+significant number of our employees, or to the disruption or
+disablement of operations at our locations, and could affect our
+ability to provide business services and maintain effective
+business operations. Furthermore, this could have a significant
+adverse effect on our partners as well as our customers and
+their investment decisions, which could have an adverse effect
+on our reputation, business, financial position, profit, and cash
+flows.
+Our mitigation measures have been designed and implemented
+to minimize such adverse effects. To ensure continuous
+operations of all business processes, we have been
+implementing and operating a worldwide business continuity
+management and crisis management system. To enable
+effective response and minimize possible losses in case of crisis
+situations, we have installed local crisis management teams at
+our main locations, supplemented by regional crisis
+management teams for the Americas (including Latin America
+and North America), APJ (including Greater China), EMEA, and
+MEE regions, and a global crisis management team.
+The level of configurability or customizability of the software
+Missing integration scenarios between on-premise products
+and cloud-to-cloud solutions
+Concerns with entrusting a third-party to store and manage
+critical employee or company confidential data
+Customer concerns about security capabilities and reliability
+Customer concerns about the ability to scale operations for
+large enterprise customers
+-
+-
+-
+-
+Other factors that could affect the market acceptance of cloud
+solutions and services include:
+The market for cloud computing is increasing and shows strong
+growth relative to the market for our on-premise solutions. To
+offer a broad cloud service portfolio and generate the associated
+business value for our customers, we have acquired cloud
+computing companies such as Ariba, Concur, Fieldglass, and
+SuccessFactors. Due to ongoing contracts and previous
+substantial investments to integrate traditional on-premise
+enterprise software into their businesses, as well as concerns
+about data protection, security capabilities, and reliability,
+customers and partners might be reluctant or unwilling to
+migrate to the cloud.
+The success of our cloud computing strategy depends on
+market perception and an increasing market adoption of our
+cloud solutions and managed cloud services. Insufficient
+adoption of our solutions and services could lead to a loss of
+SAP's position as a leading cloud company.
+-
+With regards to our volume in cloud business as well as the
+conversion of traditional on-premise licenses to cloud
+subscriptions licenses, we estimate the probability of this risk
+materializing to be unlikely. However, we cannot completely
+exclude the possibility that it could have a business-critical
+impact on our business, financial position, profit, and cash flows,
+or cause a negative deviation from our revenue and operating
+profit target. Overall, we classify this risk as medium risk.
+102
+Combined Management Report Risk Management and Risks
+In early 2015, we combined organizationally two main
+departments responsible for services and support at SAP in
+regards to the Applications, Technology, and Services segment,
+into one Global Service & Support unit. This combined
+organization offers a wide range of support, including premium
+support services (SAP MaxAttention and SAP
+ActiveEmbedded), and professional services to increase
+business benefit for our customers. For the SAP Business
+Working closely with SAP user groups, we continuously
+demonstrate the business value and the benefits of our solution,
+service and support portfolio in terms of innovation, quality, and
+high service level as well as through customer references and
+success stories. Additionally, we continuously monitor the
+performance and the perceived value of our services and the
+satisfaction of our customers. We implement mitigating steps
+where required.
+In 2015, we continued to depend materially on the success of
+our support portfolio and on our ability to deliver high-quality
+services. Traditionally, our large installed customer base
+generates additional new software, maintenance, consulting,
+and training revenue. Despite the high quality and service level
+of our transformed and expanded service offering in the area of
+premium support services, we may be unable to meet customer
+expectations with regards to delivery and value proposition. This
+may lead to a potentially adverse impact on customer
+experience. Existing customers might cancel or not renew their
+maintenance contracts, decide not to buy additional products
+and services, not subscribe to our cloud offerings, or accept
+alternative offerings from other vendors. In addition, the
+increasing volume in our cloud business as well as the
+conversion of traditional on-premise licenses to cloud
+subscriptions licenses could have a potential negative impact on
+our software and maintenance revenue streams. This could
+have an adverse effect on our business, financial position, profit,
+and cash flows.
+Our established customers might not buy additional software
+solutions, subscribe to our cloud offerings, renew
+maintenance agreements, purchase additional professional
+services, or they might switch to other products or service
+offerings (including competitive products).
+Market Risks
+With regards to the relevance of current and anticipated political
+crisis situations and acts of violence as well as pandemic
+diseases impacting SAP's business, we believe that the
+likelihood of this risk materializing is unlikely; however, we
+cannot exclude the possibility of such a risk occurring and
+having a business-critical impact on our reputation, business,
+financial position, profit, and cash flows, or causing a negative
+deviation from our revenue and operating profit target. We
+classify this risk as a medium risk.
+To protect our key IT infrastructure (especially our data
+centers), critical business systems, and processes from material
+adverse effects in crisis situations, disaster recovery and
+business continuity plans have been developed that include
+implementation of data redundancies and daily data backup
+strategies. To verify and improve our approach, our IT-related
+organizations have been certified to the internationally
+recognized ISO 22301:2013 (Business Continuity Management)
+standard with regards to the Applications, Technology, and
+Services segment. In addition, our corporate headquarters,
+which houses certain critical business functions, is located in the
+German state of Baden-Württemberg. This area has historically
+been free of natural disasters.
+Network segment, we continue the established service and
+support models.
+Failure to securely and successfully deliver cloud services by
+any cloud service provider could have a negative impact on
+customer trust in cloud solutions
+-
+We are a global company and currently market our products and
+services in more than 180 countries and territories in the
+Americas (Latin America and North America); Asia Pacific Japan
+All described risks are applicable to a different extent to our
+reportable segments (Applications, Technology, and Services
+and SAP Business Network) unless otherwise noted.
+unchanged →
+increased >
+1) Evolution: Risk Level compared with previous year.
+decreased
+Icon:
+→
+low
+minor
+remote
+Venture Capital
+→
+medium
+business critical
+remote
+Insurance
+7
+medium
+major
+unlikely
+SAP SE is the parent company of the SAP Group. Consequently,
+the risks described below also apply, directly or indirectly, to
+SAP SE.
+Economic, Political, Social, and Regulatory Risk
+Uncertainty in the global economy, financial markets, or
+political conditions could have a negative impact on our
+business, financial position, profit, as well as cash flows, and
+put pressure on our operating profit.
+Our business is influenced by multiple risk factors that are both
+difficult to predict and beyond our influence and control. These
+factors include global economic and business conditions, and
+fluctuations in national currencies. Other examples are political
+Our international business activities and processes expose us
+to numerous and often conflicting laws and regulations,
+policies, standards or other requirements and sometimes
+even conflicting regulatory requirements, and to risks that
+could harm our business, financial position, profit, and cash
+flows.
+We estimate the probability of occurrence of this risk to be likely.
+Therefore, we cannot completely exclude the possibility that it
+will have a business-critical impact on our business, financial
+position, profit, and cash flows. This could exacerbate the other
+risks we describe in this report or cause a negative deviation
+from our revenue and operating profit target. We classify this
+risk as a high risk.
+SAP has established measures and conducted scenario
+analyses to address and mitigate the described risks and
+adverse effects to the extent possible. We offer our customers
+standard software and product packages that are fast and easy
+to install, as well as financially attractive financing, software
+licensing, and subscription models. Our ongoing shift to a higher
+share of cloud subscriptions and software support revenue
+streams will lead to more predictable streams over time
+providing increased stability against financial volatilities.
+Furthermore, we continue to apply cost discipline internally and
+have a conservative financial planning policy. Additionally, SAP
+is continuously reshaping its organizational structure and
+processes to increase efficiency.
+Any one or more of these developments could reduce our ability
+to sell and deliver our software and services which could have an
+adverse effect on our business, financial position, profit, and
+cash flows.
+Increased price competition and demand for cheaper
+products and services
+Market disruption from aggressive competitive behavior,
+acquisitions, or business practices
+Increased default risk, which may lead to significant
+impairment charges in the future
+Increased number of bankruptcies among customers,
+business partners, and key suppliers
+Higher credit barriers for customers, reducing their ability to
+finance software purchases
+(APJ); China, Hong Kong, Macau, and Taiwan (Greater China);
+Europe, Middle East, and Africa (EMEA); and Middle and Eastern
+Europe (MEE) regions. Our business in these countries is subject
+to numerous risks inherent in international business operations.
+Among others, these risks include:
+Potential lawsuits from customers due to denied provision of
+service as a result of sanctioned-party lists or export control
+issues
+-
+-
+-
+-
+These events could reduce the demand for SAP software and
+services, and lead to:
+100
+Combined Management Report Risk Management and Risks
+Macroeconomic developments, such as financial market
+volatility episodes, global economic crises, chronic fiscal
+imbalances, slowing economic conditions, or disruptions in
+emerging markets, could limit our customers' ability and
+willingness to invest in our solutions or delay purchases. In
+addition, changes in the euro conversion rates for particular
+currencies might have an adverse effect on business activities
+with local customers and partners. Furthermore, political
+instabilities in regions such as the Middle East and Africa,
+political crises (such as in Greece or Ukraine), natural disasters,
+pandemic diseases (such as Ebola in West Africa) and terrorist
+attacks (such as the attacks in Paris, France, in November 2015)
+could contribute to economic and political uncertainty.
+developments and general regulations as well as budgetary
+constraints or shifts in spending priorities of national
+governments.
+Delays in purchases, decreased deal size, or cancellations of
+proposed investments
+Business Operations
+Strategic alliances among our competitors in the cloud area
+could lead to significantly increased competition in the
+market with regards to pricing and ability to integrate
+solutions
+If organizations do not perceive the benefits of cloud computing,
+the market for cloud business might not develop further, or it
+may develop more slowly than we expect, either of which could
+have an adverse effect on our business, financial position, profit,
+reputation and cash flows.
+It is conceivable that data transfers to further countries that do
+not provide a level of data protection and privacy comparable to
+the European level may be challenged, too.
+To mitigate risks due to legal non-compliance, SAP actively
+monitors changes to applicable laws and regulations so that we
+can take adequate measures and certify our existing standards
+and policies on an ongoing basis. We have implemented a wide
+range of measures to protect data controlled by SAP and our
+customers from unauthorized access and processing, as well as
+from accidental loss or destruction. This includes, among
+others, a continuous enhancement of our data center operations
+worldwide, also taking into account local and/or sector-specific
+market and legal requirements. We have implemented a
+certified data protection management system in areas critical to
+data protection, such as global service and support, human
+resources (HR), marketing, products and innovation, and
+custom development, whereby implementation is audited
+internally as well as externally by the British Standard
+Institutions on an annual basis. Furthermore, customers are
+provided with security certifications (such as ISO/IEC 27001),
+security white papers, and reports from our independent
+auditors and certification bodies.
+Notwithstanding the aforementioned, and to address the
+potential risks resulting from the ECJ ruling on Safe Harbor in
+particular, we are analyzing all processes by which personal data
+is transferred to or remotely accessed by U.S.-based SAP
+entities or external third parties. Any of these processes that are
+still based upon Safe Harbor will be amended to address any
+requirements based upon the Standard Contractual Clauses
+that are still considered a valid legal basis to transfer personal
+data from within the EU to the United States. SAP further works
+on investigating possibilities to host and process all personal
+data that is in the legal responsibility of EU/ European Economic
+Area (EEA)-based SAP entities in the EU/EEA only. With respect
+to customers, the EU Access service by which already today
+Combined Management Report Risk Management and Risks
+107
+many European customers can be supported from within the
+EU/EEA countries shall be expanded.
+We estimate this risk to be unlikely, and cannot rule out the
+possibility of it having a business-critical impact on our
+business, financial position, profit, and cash flows, and causing
+damage to our reputation, or causing a negative deviation from
+our revenue and operating profit target. We classify this risk as a
+medium risk.
+Failure to meet customer, partner, or other stakeholder
+expectations or generally accepted standards on climate
+change, energy constraints, and our social investment
+strategy could negatively impact SAP's business, results of
+operations, and reputation.
+Energy and emissions management are an integral component
+of our holistic management of social, environmental, and
+economic risks and opportunities. We have identified risks in
+these major areas:
+-
+Our solutions
+-
+Our own operations energy management and other
+environmental issues such as carbon management, water
+use, and waste
+Because our customers, employees, and investors expect a
+reliable energy and carbon strategy, we have reemphasized our
+previously communicated targets, especially our 2020 target for
+greenhouse gas emissions. In case these targets cannot be
+achieved, our customers might no longer recognize SAP for our
+environmental leadership and might buy other vendors'
+products and services. Consequently, we could fail to achieve
+our revenue target. If we do not meet stakeholder expectations
+in the areas identified, our rating in sustainable investment
+indexes might decrease, which could have an adverse effect on
+our reputation, business, financial position, profit, and cash
+flows.
+In recent years, SAP has shown that it is possible to take a
+proactive position on social and environmental issues while
+delivering robust financial growth. As a result, we received great
+recognition for our sustainability efforts. As a proof point for
+SAP's sustainability performance, we continue to be listed in the
+most prominent and recognized sustainability indexes, such as
+the Dow Jones Sustainability Indices and the CDP Climate
+Performance and Disclosure Leadership Indices. In 2015, SAP's
+greenhouse gas emissions added up to 455 kilotons CO2, which
+means we did not meet our greenhouse gas emissions target of
+420 kilotons by 35 kilotons. If we do not meet our greenhouse
+gas emissions target for 2020, we might fail to meet
+expectations regarding our energy and emission performance.
+However, we believe that the risk of failing to meet expectations
+regarding our energy and emission strategy is unlikely to occur
+and that if the risk were to occur, it would only have a moderate
+Human Capital Risks
+impact on our reputation, business, financial position, profit, and
+cash flows, as well as on the achievement of our revenue and
+operating profit target. We classify this risk as a low risk.
+Unethical behavior and non-compliance with our integrity
+standards due to intentional and fraudulent employee
+behavior could seriously harm our business, financial
+position, profit, and reputation.
+United States can no longer be based on Safe Harbor. While SAP
+has not widely relied upon Safe Harbor, the data protection
+supervisory authorities have challenged the legality of other
+transfer mechanisms, such as the Standard Contractual Clauses
+used by SAP, on the same grounds by which the ECJ has
+declared Safe Harbor invalid. The data protection supervisory
+authorities have threatened to start enforcement activities as
+early as end of January 2016 against European companies that
+still transfer data to the United States (or grant U.S. companies
+remote access to systems containing personal data in the EU)
+based on a transfer mechanism that the authorities consider
+invalid. Enforcement activities against SAP or against SAP
+customers because of services and products that SAP provides
+with the help of our U.S.-based entities and/or U.S.-based
+suppliers could lead to fines, civil liability, loss of customers, and
+damage to our reputation, and could have an adverse effect on
+our business, financial position, profit, and cash flows.
+Further, recent landmark decisions by the ECJ on data
+protection matters, as well as official statements made by the
+European data protection supervisory authorities, require SAP
+to carefully review our globalized business practices. Most
+importantly, the ECJ on October 6, 2015, ruled that data
+transfers by European companies to data processors in the
+As a global software and service provider, SAP is required to
+comply with local laws wherever SAP does business.
+Consequently, we must ensure that any legal requirements in
+connection with the provision of products and services are
+properly implemented. With regards to data protection
+requirements, significant changes are expected subject to the
+upcoming European Data Protection Regulation. Furthermore,
+SAP is affected by the consequences of the decision of the
+European Court of Justice (ECJ), which declared Safe Harbor
+invalid, so that data transfers from within the European Union
+(EU) to the United States are no longer permitted based on Safe
+Harbor. This means that acquired SAP affiliates that have not
+already implemented the requirements for data transfers based
+on the Standard Contractual Clauses will have to implement
+these requirements immediately. However, this will be ensured
+by the implementation of the new Intra Group Agreement that
+provides a data protection level at the Standard Contractual
+Clauses within the SAP Group. These laws and regulations
+amend and supplement existing requirements regarding the
+processing of personal data that SAP and SAP customers must
+fulfill and which we must consequently address with our
+products and services, including cloud delivery. Failure to
+comply with applicable laws or to adequately address privacy
+concerns of customers, even if unfounded, could lead to
+investigations by supervisory authorities, civil liability, fines, (in
+the future, potentially calculated based on the Company's
+annual revenue), loss of customers, damage to our reputation,
+and could have an adverse effect on our business, financial
+position, profit, and cash flows.
+Non-compliance with applicable data protection and privacy
+laws or failure to adequately meet the requirements of SAP's
+customers with respect to our products and services could
+lead to civil liabilities and fines, as well as loss of customers
+and damage to SAP's reputation.
+If we do not effectively manage our geographically dispersed
+workforce, we may not be able to run our business efficiently
+and successfully.
+Our success is dependent on appropriate alignment of our
+internal and external workforce planning processes and our
+location strategy with our general strategy. It is critical that we
+manage our internationally dispersed workforce effectively,
+taking short- and long-term workforce and skill requirements
+into consideration. This applies to the management of our
+internal as well as our external workforce. Changes in headcount
+and infrastructure needs as well as local legal or tax regulations
+could result in a mismatch between our expenses and revenue.
+Failure to manage our geographically dispersed workforce
+effectively could hinder our ability to run our business efficiently
+and successfully and could have an adverse effect on our
+business, financial position, profit, and cash flows.
+We focus on mitigating this risk through a range of activities
+including succession management; workforce planning (which
+aims to achieve diversity and the right mix of talent and to take
+account of demographic changes); outsourcing; external short-
+term staffing; employer branding; career management (such as
+offering opportunities for short-term assignments and
+opportunities to improve skills, competencies, and
+qualifications); and extended benefit programs - for example, a
+performance-oriented remuneration system, an employer-
+financed pension plan in certain countries, and long-term
+incentive plans.
+We estimate this risk to be a remote possibility, but we cannot
+completely exclude the possibility of this risk to have a major
+impact on our business, financial position, profit, and cash flows,
+Combined Management Report Risk Management and Risks
+105
+or cause a negative deviation from our revenue and operating
+profit target. We classify this risk as a low risk.
+If we are unable to attract, develop, and retain leaders and
+employees with specialized knowledge and technology skills,
+or are unable to achieve internal diversity and inclusion
+objectives, we might not be able to manage our operations
+effectively and successfully, or develop successful new
+solutions and services.
+Our highly qualified workforce is the foundation for our
+continued success. In certain regions and specific technology
+and solution areas, we continue to set very high growth targets,
+specifically in countries and regions such as Africa, China, Latin
+America, and the Middle East. In the execution of SAP's
+strategic priorities, we depend on highly skilled and specialized
+personnel and leaders, both male and female. Successful
+maintenance and expansion of our highly skilled and specialized
+workforce in the area of cloud is a key success factor for our
+transition to be the leading cloud company. The availability of
+such personnel is limited and, as a result, competition in our
+industry is intense and could expose us to claims by other
+companies seeking to prevent their employees from working for
+a competitor. If we are unable to identify, attract, develop,
+motivate, adequately compensate, and retain well-qualified and
+engaged personnel, or if existing highly skilled and specialized
+personnel leave SAP and ready successors or adequate
+replacements are not available, we may not be able to manage
+our operations effectively, which could have an adverse effect on
+our reputation, business, financial position, profit, and cash
+flows. Furthermore, we may not be able to develop, sell, or
+implement successful new solutions and services as planned.
+This is particularly true as we continue to introduce new and
+innovative technology offerings and expand our business in
+emerging markets. The lack of appropriate or inadequately
+executed benefit and compensation programs could limit SAP's
+ability to attract or retain qualified employees and lead to
+financial losses. In addition, we might not be able to achieve our
+internal gender diversity objectives to increase the number of
+women in management from 18% in 2010 to 25% by 2017.
+SAP's leadership position in the global market is founded on the
+long-term and sustainable trust of our stakeholders worldwide.
+Our heritage is one of corporate transparency, open
+communication with financial markets, and adherence to
+recognized standards of business integrity. The SAP Code of
+Business Conduct, adopted by the Executive Board on January
+29, 2003, and updated as necessary since then, memorialized
+and supplemented the already existing guidelines and
+expectations for the business behavior practiced at SAP.
+These risks notwithstanding, we continue to believe our leading
+market position, employer brand, and extended benefit
+programs will enable us to hire top talent internationally with the
+potential to contribute to SAP's growing business success in the
+future. We address the risk of an adverse effect on our business
+operations from a failure to recruit the employees we need or
+from the loss of leaders and employees by seeking to build
+employee and leadership strengths through a range of targeted
+professional development, mentoring, and coaching programs,
+a gender diversity program, and a special focus on accelerated
+high-potential employee development that aims to develop
+talent as well as leadership talent, in particular. A strong focus
+on succession planning for leadership and key positions seeks to
+ensure sustainable leadership and to safeguard the business
+from disruption caused by staff turnover.
+Organizational and Governance-Related Risks
+Laws and regulatory requirements in Germany, the United
+States, and elsewhere have become much more stringent.
+As a European company domiciled in Germany with securities
+listed in Germany and the United States, we are subject to
+European, German, U.S., and other governance-related
+regulatory requirements. Changes in laws and regulations and
+related interpretations, including changes in accounting
+standards and taxation requirements, and increased
+enforcement actions and penalties may alter the business
+environment in which we operate. Regulatory requirements have
+become significantly more stringent in recent years, and some
+legislation, such as the anticorruption legislation in Germany,
+the U.S. Foreign Corrupt Practices Act, the UK Bribery Act, and
+other local laws prohibiting corrupt payments by employees,
+vendors, distributors, or agents, is being applied more
+rigorously. Emerging markets are a significant focus of our
+international growth strategy. The nature of these markets
+presents a number of inherent risks. A failure by SAP to comply
+with applicable laws and regulations, or any related allegations
+of wrongdoing against us, whether merited or not, could have an
+adverse effect on our business, financial position, profit, cash
+flows and reputation.
+It is difficult to assess the precise potential risk, because there is
+a wide variety of complex legal and regulatory requirements that
+apply, and therefore an equally wide variety of potential non-
+compliance scenarios exist.
+However, we continuously monitor new and increased
+regulatory requirements, updated or new enforcement trends,
+and publicly available information on compliance issues in the
+computer software industry, the emerging markets where we
+invest our resources, and in the business environment in general
+to cope with an increase in regulation enforcement efforts of
+certain countries or state-driven protectionism. Based on this
+information and any other available sources, we continuously
+update and refresh our compliance programs to achieve the
+most effective approach possible and to ensure that our
+employees understand and comply with the SAP Code of
+Business Conduct. This process is coordinated by our Legal
+Compliance and Integrity Office, a team of dedicated resources
+who are tasked with managing our policy-related compliance
+measures. Our chief compliance officer coordinates policy
+implementation, training, and enforcement efforts throughout
+SAP. Those efforts are monitored and tracked to allow trending
+and risk analysis and to ensure consistent policy application
+Combined Management Report Risk Management and Risks
+106
+throughout the SAP Group. Despite our comprehensive
+compliance programs and established internal controls,
+intentional efforts of individuals to circumvent controls or
+engage in fraud for personal gains cannot always be prevented.
+With regards to the increase of regulation enforcement efforts
+we have already experienced and continue to expect as well as
+state-driven protectionism, we estimate the likelihood of this
+risk to be unlikely. We cannot completely exclude the possibility
+that this risk could have a major impact on our reputation,
+business, financial position, profit, and cash flows, or cause a
+negative deviation from our revenue and operating profit target.
+We classify this risk as a medium risk.
+Although the risks related to failure to attract, develop, and
+retain talent could materialize, we believe that this is unlikely
+and that the impact on our reputation, business, financial
+position, profit, and cash flows, or potential negative deviation
+from our revenue and operating profit target would be major. We
+classify this risk as a medium risk.
+Failure to get the full commitment of our partners might
+reduce speed and impact in the market reach
+However, we may encounter unethical behavior and non-
+compliance with our integrity standards due to intentional and
+fraudulent behavior of individual employees, possibly in
+collusion with external third parties. In addition to intentional
+behavior, problems could also arise due to negligence in the
+adherence to rules and regulations. Unethical behavior and
+misconduct attributable to SAP could not only lead to criminal
+charges, fines, and claims by injured parties, but also to financial
+loss, and severe reputational damage. This could have an
+adverse effect on our business, financial position, profit, and
+cash flows.
+The SAP Code of Business Conduct is mandatory and applies to
+every SAP employee. It provides legal compliance guidance on
+how to avoid unethical behavior and solve dilemma situations.
+On an annual basis, the SAP Code of Business Conduct is re-
+confirmed by SAP's workforce (except where disallowed by local
+legal regulations). We also rolled out and enforced various
+additional compliance policies aimed at managing third parties
+and preventing misuse of third-party payments for illegal
+purposes; ensuring controls around travel, entertainment, gift,
+and expense policies; and promoting a commitment to business
+with integrity through our partner and vendor ecosystems.
+These efforts are flanked by continuous education including e-
+learning and classroom training to target audiences as identified
+by compliance risk assessment. The overall CMS approach by
+SAP is continuously monitored internally and externally, and
+adapted accordingly, if needed.
+If our customers do not renew their subscriptions, renew on
+terms less favorable to us, or fail to purchase additional modules
+or users, our revenue and billings will decline, and we may not
+realize significantly improved operating results from our
+customer base. This could have an adverse effect on our
+business, financial position, profit, and cash flows.
+To maintain or improve our operating results in the cloud
+business, it is important that our customers renew their
+agreements with us when the initial contract term expires and
+purchase additional modules or additional capacities. Our
+customers have no obligation to renew their subscriptions after
+the initial subscription period, and we cannot assure that
+customers will renew subscriptions at the same or at a higher
+level of service, or at all. Our customers' renewal rates may
+decline or fluctuate as a result of various factors, including their
+satisfaction or dissatisfaction with our cloud solution and
+services portfolio; our ability to efficiently provide cloud services
+according to customer expectations and meeting the service
+level agreements, service availability and provisioning, the
+integration capabilities of our cloud solutions into their existing
+IT environment (including hybrid solutions combining both cloud
+and on-premise solutions); our customer support; concerns
+regarding stable, efficient, and secure cloud operations and
+compliance with legal and regulatory requirements; our pricing;
+the pricing of competing products or services; mergers and
+acquisitions affecting our customer base; global economic
+conditions; and reductions in our customers' spending levels.
+We recognize cloud subscriptions revenue as we provide the
+respective services, which typically range from one-to-three
+years with some up to five years. This revenue recognition and
+our increasing subscription revenues could have a temporary
+adverse effect on our financial position, profit, and cash flows.
+Though downturns or upturns in cloud sales may not be
+immediately reflected in our operating results, any decline in
+our customer renewals would harm the future operating
+results of our cloud business.
+We estimate the probability of occurrence of this risk to be
+remote, but cannot completely exclude the possibility that this
+risk could have a business-critical impact on our business,
+financial position, profit, and cash flows, or cause a negative
+deviation from our revenue and operating profit target. We
+classify this risk as a medium risk.
+To mitigate this risk, SAP is balancing the distribution of our
+strategic investments by evolving and protecting our core
+businesses and simultaneously developing new solutions,
+technologies, and business models for markets, such as those in
+analytics, applications, and database and technology.
+Furthermore, we continuously demonstrate the benefits of our
+solution and services portfolio through customer references and
+success stories as well as the provision of support excellence to
+ensure customer satisfaction with and after the implementation
+of our solution.
+Our business consists of new software licenses, software license
+updates, and support and maintenance fees as well as of cloud
+subscriptions. Our customers are expecting to take advantage
+of technological breakthroughs from SAP without compromising
+their previous IT investments. However, the introduction of new
+SAP solutions, technologies, and business models as well as
+delivery and consumption models is subject to uncertainties as
+to whether customers will be able to perceive the additional
+value and realize the expected benefits we deliver along our road
+maps. There is a risk that such uncertainties may lead
+customers to wait for proof of concept through reference
+customers or more mature versions first, which might result in a
+lower level of adoption of our new solutions, technologies,
+business models, and flexible consumption models, or no
+adoption at all. This could have an adverse effect on our
+business, financial position, profit, and cash flows.
+Demand for our new solutions may not develop as planned
+and our strategy on new business models and flexible
+consumption models may not be successful.
+Business Strategy Risks
+Although we estimate the probability of this risk being a major
+impact unlikely, we cannot completely exclude the possibility
+that this risk could have a major impact on our business,
+financial position, profit, and cash flows, or cause a negative
+deviation from our revenue and operating profit target. We
+classify this risk as a medium risk.
+organizational structures. Furthermore, in the Application,
+Technology, and Services segment, we have policies in place to
+effectively manage conversions from on-premise software
+arrangement to cloud arrangements.
+103
+Combined Management Report Risk Management and Risks
+We believe we will be able to protect our leadership in the
+market by continuing to execute successfully on our customer-
+centric innovation strategy, which is driven by a mix of organic
+growth, targeted acquisitions, and attractive cloud solution
+offerings. To compete successfully in the market, we
+continuously enhance our global processes and adjust our
+Additionally, related to our Applications, Technology, and
+Services segment, customers could change their buying
+behavior by accelerating their acceptance of cloud solutions to
+reduce their investments, which might have a temporary
+adverse effect on our operating results. Furthermore, the trend
+in the market to invest more in cloud solutions might lead to a
+risk of the potential loss of existing on-premise customers. It
+may also have a temporary adverse effect on our revenue due to
+the number of conversions from on-premise licenses to cloud
+subscriptions from existing SAP customers in our installed base,
+as we recognize cloud subscriptions revenue over the respective
+service provision, and that typically ranges from one-to-three
+years with some up to five years.
+The software industry continues to evolve rapidly and is
+currently undergoing a significant shift due to innovations in the
+areas of enterprise mobility, cybersecurity, Big Data,
+hyperconnectivity, the Internet of Things, digitization,
+supercomputing, cloud computing, and social media. While
+smaller innovative companies tend to create new markets
+continuously and expand their reach through mergers, large
+traditional IT vendors tend to enter such markets mostly
+through acquisitions. SAP faces increased competition in our
+business environment from traditional as well as new
+competitors. This competition could cause price pressure, cost
+increases, and loss of market share, which could have an
+adverse effect on our business, financial position, profit, and
+cash flows.
+Our market share and profit could decline due to increased
+competition, market consolidation and technological
+innovation as well as new business models in the software
+industry.
+Although we estimate the probability of occurrence of this risk
+to be unlikely, we cannot completely exclude the possibility that
+this risk could have a business-critical impact on our reputation,
+business, financial position, profit, and cash flows, or cause a
+negative deviation from our revenue and operating profit target.
+We classify the risk as a medium risk.
+In addition to measures to communicate the business value of
+our cloud solutions to the market, we invest significantly in
+infrastructure and processes that ensure secure operations of
+our cloud solutions including the adaption of cloud service
+delivery to local and/or specific market requirements (such as
+local or regional data centers) and the compliance with all local
+legal regulations regarding data protection and privacy as well
+as data security.
+Furthermore, we are continuously improving and adapting cloud
+services delivery to local and/or specific market requirements
+(such as local or regional data centers, customer expectations,
+and in accordance with legal and regulatory requirements).
+Combined Management Report Risk Management and Risks
+104
+Although we estimate the probability of occurrence of this risk
+to be remote, we cannot completely exclude the possibility that
+this risk could have a business-critical impact on our business,
+financial position, profit, and cash flows, or cause a negative
+deviation from our revenue and operating profit target. We
+classify this risk as a medium risk.
+Combined Management Report Risk Management and Risks
+108
+With the transformation of SAP's business model, partners play
+an increasingly important role in co-locating our cloud solutions
+as well as operating SAP's cloud solutions for their customers.
+Therefore, we estimate the probability of occurrence of this risk
+to be likely, and we cannot exclude the possibility that this risk
+could have a major impact on our reputation, business, financial
+position, profit, and cash flows, or cause a negative deviation
+from our revenue and operating profit target if it were to
+materialize. We classify this risk as a medium risk.
+SAP continues to invest in long-term, mutually beneficial
+relationships and agreements with partners. We continue to
+develop and enhance a wide range of partner programs to retain
+existing and attract new partners of all types. We offer training
+opportunities to a wide range of resources for our partners and
+additionally provide demo solutions to enable partners to lead
+business value discussions on cloud and on-premise solutions
+with customers. A thorough certification process for third-party
+solutions has been designed and established to ensure
+consistent high-quality and seamless integration.
+If one or more of these risks materialize, this may have an
+adverse effect on the demand for our products and services as
+well as the partner's loyalty and ability to deliver. As a result, we
+may not be able to scale our business to compete successfully
+with other software vendors, which could have an adverse effect
+on our reputation, business, financial position, profit, and cash
+flows.
+Provide ability and capacity to meet customer expectations
+regarding service provisioning.
+Comply with applicable laws and regulations, resulting in
+delayed, disrupted, or terminated sales and services
+Transform their business model in accordance with the
+transformation of SAP's business model in a timely manner
+Renew their existing agreements with us or enter into new
+agreements on terms acceptable to us or at all
+Embed our solutions sufficiently enough to profitably drive
+product adoption, especially with innovations such as SAP
+S/4HANA and SAP HANA Cloud Platform
+Drive growth of references by creating customer use cases
+and demo systems
+To help prevent this, we instituted a comprehensive compliance
+management system (CMS), which is based on the three pillars
+of prevention, detection, and reaction. Our CMS program
+comprises several educational, counseling, control, and
+investigative instruments. The objective is to minimize and
+mitigate the risk of unethical behavior, whether intentional or
+negligent.
+Provide high-quality products and services to meet customer
+expectations
+-
+-
+-
+-
+-
+-
+If partners consider our products or services model less
+strategic and/or financially less attractive compared to our
+competition and/or less appropriate for their respective channel
+and target market, if partners fear direct competition by SAP or
+if SAP fails to establish and enable a network of qualified
+partners meeting our quality requirements and the
+requirements of our customers, then, among other things,
+partners might not:
+An open and vibrant partner ecosystem is a fundamental pillar
+of our success and growth strategy. We have entered into
+partnership agreements that drive co-innovation on our
+platforms, profitably expand all our routes to market to optimize
+market coverage, optimize cloud delivery, and provide high-
+quality services capacity in all market segments. Partners play a
+key role in driving market adoption of our entire solutions
+portfolio, by co-innovating on our platforms, embedding our
+technology, and reselling and/or implementing our software.
+If we are unable to scale and enhance an effective partner
+ecosystem, revenue might not increase as expected.
+Develop a sufficient number of new solutions and content on
+our platforms
+←
+We share our overall long-term cloud strategy and our
+integration road map with our customers and continuously
+implement improvements that enhance our cloud solutions,
+including instant provisioning, a consumer-grade user
+experience, and a fast time to value, among others. To
+continuously improve our services, we closely monitor any issue
+and work together with customers to perform a root-cause
+analysis and provide a solution. We have a strong focus on
+providing our cloud services efficiently and according to
+customer expectations, including service provisioning, quality,
+and security as well as data protection and privacy.
+business critical
+→
+Data Protection and Privacy
+unlikely
+business critical
+medium
+→
+Climate Change, Energy and Emissions
+unlikely
+moderate
+low
+→
+remote
+←
+major
+low
+←
+Communication and Information Risks
+Unauthorized Disclosure of Information
+medium
+medium
+major
+unlikely
+Corporate Governance Laws and Regulations
+remote
+business critical
+medium
+→
+likely
+major
+medium
+→
+Human Capital Risks
+major
+Managing the Geographically Dispersed Workforce
+major
+low
+→
+Attracting, Develop, and Retaining People
+Organizational and Governance-Related Risks
+unlikely
+major
+medium
+←
+Product and Technology Risks
+remote
+medium
+unlikely
+Project Risks
+moderate
+unlikely
+Management Use of Estimates
+→
+medium
+business critical
+remote
+Liquidity
+→
+low
+moderate
+unlikely
+Quarterly Sales Fluctuations
+Financial Risks
+→
+medium
+business critical
+remote
+medium
+low
+→
+Accounting Pronouncement
+unlikely
+Evolution¹)
+Risk Level
+Probability Impact
+Overview Risk Factors
+9
+99
+Combined Management Report Risk Management and Risks
+>>
+low
+Implementation Projects
+minor
+Derivative Instruments for Share-Based Payment Plans
+→
+low
+major
+remote
+Currency and Interest Rate Fluctuations
+→
+medium
+major
+remote
+business critical
+Ethical Behavior
+Relationships with Partners
+medium
+business critical
+unlikely
+Cloud Performance
+←
+medium
+business critical
+unlikely
+Technology and Product Strategy
+→>
+medium
+business critical
+remote
+Innovation
+→
+medium
+major
+likely
+Third Party Licensing
+→
+Operational Risks
+Infringement of Intellectual Property
+likely
+unlikely
+Cybersecurity
+←
+high
+business critical
+likely
+Enforcement of Intellectual Property
+→
+remote
+←
+business critical
+Mergers and Acquisitions
+→
+high
+business critical
+likely
+Lawsuits
+←
+high
+business critical
+unlikely
+medium
+medium
+unlikely
+Market Risks
+Demand for New and Existing Solutions
+Market Development for Cloud
+unlikely
+business critical
+medium
+unlikely
+business critical
+medium
+→
+→>
+major
+medium
+←
+Market Share and Profit
+Solution Demand
+←
+←
+business critical
+Cloud Business Model
+unlikely
+medium
+Business Strategy Risks
+unlikely
+Undectected Defects in Products
+business critical
+medium
+→
+Overview Risk Factors
+Economic, Political, Social, and Regulatory Risks
+Probability Impact
+Risk Level Evolution¹)
+Global Economy
+business critical
+business critical
+high
+←
+International Business Activities
+unlikely
+major
+medium
+Environmental, Social and Political Instability
+likely
+←
+For more information about risks arising from financial
+instruments, including our currency and interest rate risks and
+our related hedging activity, see the Notes to the Consolidated
+Financial Statements section, Notes (24) to (25).
+We believe that the likelihood of this risk of significant currency
+and interest rate fluctuations affecting our reported revenue and
+income materializing is remote and that if the risk were to occur,
+its impact on our business, financial position, profit, and cash
+flows could be major, or cause a negative deviation from our
+revenue and operating profit target. We classify this risk as a low
+risk.
+We continuously monitor our exposure to currency fluctuation
+risks based on balance-sheet items and expected cash flows,
+and pursue a Group-wide foreign exchange risk management
+strategy using, for example, derivative financial instruments as
+appropriate. With regards to our financial debt, we have a very
+balanced maturity profile and mixture of fixed and floating
+interest rate arrangements in place.
+currency has an adverse effect while depreciation of the euro
+relative to another currency has a positive effect. Variable
+interest balance-sheet items are also subject to changes in
+interest rates. Such changes may have an adverse effect on our
+business, financial position, profit and cash flows or cause an
+adverse deviation from our revenue and operating profit target.
+110
+Combined Management Report Risk Management and Risks
+We regularly monitor our compliance with applicable financial
+reporting standards and review new pronouncements and drafts
+thereof that are relevant to us. As a result of new standards,
+changes to existing standards (including the new IFRS 15 on
+revenue from contracts with customers that we will need to
+adopt in 2018) and changes in their interpretation, we might be
+required to change our accounting policies, particularly
+concerning revenue recognition, to alter our operational policies
+so that they reflect new or amended financial reporting
+standards, or to restate our published financial statements.
+Such changes may have an adverse effect on our reputation,
+business, financial position, and profit, or cause an adverse
+deviation from our revenue and operating profit target.
+Because we conduct operations throughout the world, our
+business, financial position, profit, and cash flows may be
+affected by currency and interest rate fluctuations.
+Although we estimate the probability of occurrence of the risk to
+be unlikely, we cannot completely exclude the possibility of a
+major impact. We classify this risk as a medium risk.
+Current and future accounting pronouncements and other
+financial reporting standards, especially but not only
+concerning revenue recognition, may negatively impact our
+financial results.
+Although we estimate the probability of occurrence of the risk to
+be unlikely, we cannot completely exclude the possibility of a
+moderate impact on our business, financial position, profit, and
+cash flows, or a negative deviation from our revenue and
+operating profit target. We classify this risk as a low risk.
+We have a number of control procedures in place to make sure
+that our estimates and judgments are adequate. For example,
+we apply two-person verification to significant estimating.
+others for our major patent disputes) that affect the reported
+financial figures. The facts and circumstances, as well as
+assumptions on which management bases these estimates and
+judgments and management's judgment regarding the facts and
+circumstances, may change from time to time and this could
+result in significant changes in the estimates and judgments
+and, consequently, in the reported financials. Such changes
+could have an adverse effect on our business, financial position,
+profit and cash flows.
+To comply with IFRS, management is required to make
+numerous judgments, estimates, and assumptions (among
+Our Group-wide management reporting and our external
+financial reporting are both in euros. Nevertheless, a significant
+portion of our business is conducted in currencies other than the
+euro. Approximately 74% of our revenue in 2015 was
+attributable to operations outside the euro area and was
+translated into euros. Consequently, period-over-period
+changes in the euro rates for particular currencies can
+significantly affect our reported revenues, profits and cash
+flows. In general, appreciation of the euro relative to another
+The cost of using derivative instruments to hedge share-
+based payments may exceed the benefits of hedging them.
+Consolidated Risk Profile
+We believe that the likelihood of this risk materializing is remote
+and that if the risk were to occur, its potential impact on our
+business, financial position, profit, cash flows, and operating
+profit target would be minor. We classify this risk as a low risk.
+Our insurance coverage might not be sufficient and we might
+be subject to uninsured losses.
+Management use of estimates could negatively affect our
+business, financial position, profit, and cash flows.
+We maintain insurance coverage to protect us against a broad
+range of risks, at levels we believe are appropriate and
+consistent with current industry practice. Our objective is to
+exclude or minimize risk of financial loss at reasonable cost.
+However, we may incur losses that may be beyond the limits, or
+outside the scope, of coverage of our insurance and that may
+limit or prevent indemnification under our insurance policies. In
+addition, we might not be able to maintain adequate insurance
+coverage on commercially reasonable terms in the future.
+Further, certain categories of risks are currently not insurable at
+reasonable cost, which could have an adverse effect on our
+business, financial position, profit, and cash flows. Finally, there
+can be no assurance of the financial ability of the insurance
+companies to meet their claim payment obligations.
+In view of the scope of our insurance coverage and our selection
+of insurers, and because we keep our insurance programs under
+constant review, we believe that the likelihood of this risk
+materializing is remote.
+However, we cannot exclude the possibility of a business-critical
+impact on our business, financial position, profit, cash flows, and
+operating profit target if the risk were to occur. We classify this
+risk as a medium risk.
+We could incur significant losses in connection with venture
+capital investments.
+We use derivative instruments to reduce the impact of our
+share-based payments on our income statement and to limit
+future expense associated with those plans. Based on a defined
+hedging strategy, we align the decision of individual hedging
+transactions with the Group CFO in the Treasury Committee.
+The expense of hedging the share-based payments could
+exceed the benefit achieved by hedging them. On the other
+hand, a decision to leave the plans materially unhedged could
+prove disadvantageous. This could have an adverse effect on
+our business, financial position, profit and cash flows or cause
+an adverse deviation from our revenue and operating profit
+target.
+Through Sapphire Ventures (formerly SAP Ventures), our
+consolidated venture investment funds, we plan to continue
+investing in new and promising technology businesses. Many
+such investments initially generate net losses and require
+additional expenditures from their investors. Changes to
+planned business operations have, in the past affected, and may
+in the future affect, the performance of companies in which
+Sapphire Ventures holds investments, and that could have an
+adverse effect on the value of our investments in Sapphire
+Ventures, which could have an adverse effect on our business,
+financial position, profit, and cash flows. Furthermore, tax
+deductibility of capital losses and impairment in connection with
+equity securities are often restricted and could therefore have
+an adverse effect on our effective tax rate.
+We believe that the likelihood of this risk materializing is remote
+and that if the risk were to occur, its potential impact on our
+business, financial position, profit, cash flows, and operating
+profit target would be minor. We classify this risk as a low risk.
+SAP consolidates and aggregates all risks reported by the
+different business units and functions following our risk
+management policy, monitored by a Group-wide risk
+management governance function.
+In 2015, we recognized only minor changes in the percentages of
+all reported risks categorized as "high" or "medium" in our risk-
+level matrix. The number of risks categorized as "high"
+Combined Management Report Risk Management and Risks
+118
+Implementation of SAP software often involves a significant
+commitment of resources by our customers and is subject to
+a number of significant risks over which we often have no
+control.
+Project Risks
+To address this risk, Sapphire Ventures diversifies its portfolio
+and manages our investments actively. In addition, our venture
+capital activities have a limited scope.
+Although we estimate the probability of occurrence of this risk
+to be remote, there can be no assurance that the prescribed
+measures will be successful or that uncertainty in global
+economic conditions could not have a business-critical impact
+on our business, financial position, profit, cash flows, or
+operating profit target. We classify this risk as a medium risk.
+-
+Macroeconomic factors such as an economic downturn could
+have an adverse effect on our future liquidity. We use a globally
+centralized financial management to control financial risk, such
+as liquidity, exchange rate, interest rate, counterparty, and
+equity price risks. The primary aim is to maintain liquidity in the
+SAP Group at a level that is adequate to meet our obligations at
+any time. Our total Group liquidity is supported by our strong
+operating cash flows, of which a large part is recurring, and by
+credit facilities from which we can draw if necessary. However,
+adverse macroeconomic factors could increase the default risk
+associated with the investment of our total Group liquidity
+including possible liquidity shortages limiting SAP's ability to
+repay financial debt. This could have an impact on the value of
+our financial assets, which could have an adverse effect on our
+business, financial position, profit, and cash flows.
+-
+-
+-
+The relatively long sales cycles for our products
+-
+Our revenue and operating results can vary and have varied in
+the past, sometimes substantially, from quarter to quarter. Our
+revenue in general, and our software revenue in particular, is
+difficult to forecast for a number of reasons, including:
+Our sales are subject to quarterly fluctuations and our sales
+forecasts may not be accurate.
+Financial Risks
+Although we estimate the likelihood of occurrence of this risk to
+be remote, we cannot completely exclude the possibility that
+this risk could have a business-critical impact on our reputation,
+business, financial position, profit, and cash flows, or cause a
+negative deviation from our operating profit target. We classify
+this risk as a medium risk.
+We take a wide range of actions to prevent unauthorized
+disclosure of information, including procedural and
+organizational measures. These measures include mandatory
+security awareness training for all employees, social engineering
+tests, standards for safe internal and external communication,
+and technical security features in our IT hardware and
+communication channels, such as mandatory encryption of
+sensitive data.
+Confidential information and internal information related to
+topics such as our strategy, new technologies, mergers and
+acquisitions, unpublished financial results, or personal data,
+could be prematurely or inadvertently disclosed and
+subsequently lead to market misperception and volatility. This
+could require us to notify multiple regulatory agencies and
+comply with applicable regulatory requirements and, where
+appropriate, the data owner, which could result in a loss of
+reputation for SAP. For example, leaked information during a
+merger or acquisition deal could cause the loss of our deal
+target, or our share price could react significantly in case of
+prematurely published financial results. This could have an
+adverse effect on our market position and lead to fines and
+penalties. In addition, this could have an adverse effect on our
+business, financial position, profit, and cash flows.
+Our controls and efforts to prevent the unauthorized
+disclosure of confidential information might not be effective.
+Communication and Information Risks
+Although we estimate the probability of occurrence of
+intentional or negligent major unethical conduct to be remote,
+we cannot exclude the possibility that this risk could materialize.
+In that event, this risk could have a major impact on our
+reputation, business, financial position, profit, and cash flows
+and could cause a negative deviation from our operating profit
+target. We classify this risk as a low risk.
+Although we estimate the probability of occurrence of this risk
+to be unlikely, we cannot completely exclude the possibility that
+any misuse, theft, or breach of security could have a major
+impact on our business, financial position, profit, and cash flows
+as well as on our revenue and operating profit target. Due to our
+strategic transition into cloud business operations, we classify
+this increased risk as a medium risk.
+-
+-
+-
+The large size, complexity, and extended timing of individual
+customer transactions
+External factors could impact our liquidity and increase the
+default risk associated with, and the valuation of, our
+financial assets.
+Although we estimate the probability of occurrence of this risk
+to be unlikely, we cannot completely exclude the possibility that
+this risk could have a moderate impact on our business, financial
+position, profit, and cash flows, or cause a negative deviation
+from our revenue and operating profit target. We classify this
+risk as a low risk.
+cloud subscriptions and support revenue over the respective
+service period that typically ranges from one-to-three years with
+some up to five years, the relevance and impact of sales
+fluctuations decrease along with the growing importance of
+these revenues.
+109
+Combined Management Report Risk Management and Risks
+We use a "pipeline" system for forecasting sales and trends in
+our business. Pipeline analysis informs and guides our business
+planning, budgeting, and forecasting, but pipeline estimates do
+not necessarily consistently correlate to revenue in a particular
+quarter, potentially due to one or more of the reasons outlined
+above. The reliability of our plans, budgets, and forecasts may
+therefore be compromised. Because our operating expenses are
+based upon anticipated revenue levels and a high percentage of
+our expenses are relatively fixed in the near term, any shortfall in
+anticipated revenue or delay in revenue recognition could result
+in significant variations in our operating results from quarter to
+quarter or year to year. Continued deterioration in global
+economic conditions would make it increasingly difficult for us
+to accurately forecast demand for our products and services,
+and could cause our revenue, operating results, and cash flows
+to fall short of our expectations and public forecasts. This could
+have an adverse effect on our stock price. To the extent any
+future expenditure fails to generate the anticipated increase in
+revenue, our quarterly or annual operating results may be
+subject to an adverse effect and may vary significantly
+compared to preceding or subsequent periods. As we recognize
+Since many of our customers make their IT purchasing
+decisions near the end of calendar quarters, and with a
+significant percentage of those decisions being made during our
+fourth quarter, even a small delay in purchasing decisions for
+our on-premise software could have an adverse effect on our
+revenue results for a given year. Our dependence on large
+transactions has decreased in recent years with a trend towards
+an increased number of transactions coupled with a decrease in
+deal size. However, the loss or delay of one or a few large
+opportunities could have an adverse effect on our business,
+financial position, profit, and cash flows.
+SAP's investment policy with regards to total Group liquidity is
+set out in our internal treasury guideline, which is a collection of
+uniform rules that apply globally to all companies in the SAP
+Group. Among others, it requires that we invest, with limited
+exceptions, only in assets and funds rated BBB flat or better.
+The weighted average rating of the investments of our total
+Group liquidity is in the range A to A-. We continue to pursue a
+policy of cautious investment characterized by wide portfolio
+diversification with a variety of counterparties, predominantly
+short-term investments, and standard investment instruments.
+Other general economic, social, environmental, and market
+conditions, such as a global economic crisis and difficulties
+for countries with large debt
+Adoption of, and conversion to, new business models leading
+to changed or delayed payment terms
+over an extended period of time
+The timing, size, and length of customers' services projects
+Deployment models that require the recognition of revenue
+Decreased software sales that could have an adverse effect
+on related maintenance and services revenue
+Changes in customer budgets
+The timing of the introduction of new products or product
+enhancements by SAP or our competitors
+The introduction of licensing and deployment models such as
+cloud subscription models
+- Seasonality of a customers' technology purchases
+Limited visibility during the ongoing integration of acquired
+companies into their ability to accurately predict their sales
+pipelines and the likelihood that the projected pipeline will
+convert favorably into sales
+To minimize these risks, we have implemented several technical
+and organizational measures designed to safeguard our
+information, IT and facility infrastructure, and other assets.
+These measures include, for example, physical access control
+systems at facilities, multilevel access controls, closed-circuit
+television surveillance, security personnel in all critical areas,
+and recurring social engineering tests for SAP premises and
+data centers. Access to information and information systems is
+controlled using authorization concepts. Managers and
+employees are regularly sensitized to the issues and given
+mandatory security and compliance training. We keep these
+measures under continuous review to mitigate current threats.
+Our Legal Compliance and Integrity Office is responsible for
+constantly assessing and managing risks associated with third-
+party intellectual property. It works closely with our Global GRC
+organization. The Legal Compliance and Integrity Office
+investigates the way we handle intellectual property, sets
+internal policies, and monitors compliance with these policies.
+We may not be able to protect our critical information and
+assets or to safeguard our business operations against
+disruption.
+Combined Management Report Risk Management and Risks
+113
+and research projects, often in close cooperation with our
+customers and partners. We strive for strategic acquisitions
+with the potential to drive innovation and contribute to achieving
+our growth target.
+We believe that the likelihood of this risk materializing is remote;
+however, we cannot exclude the business-critical impact this
+risk would have on our reputation, business, financial position,
+profit, and cash flows, or the potential negative deviation from
+our revenue and operating profit target if it were to materialize.
+We classify this risk as a medium risk.
+Our technology and/or product strategy may not be
+successful or our customers and partners might not adopt
+our technology platforms and other innovations accordingly.
+We offer customers a broad portfolio of products, solutions, and
+services. Our technology strategy centers on SAP HANA as a
+real-time in-memory computing platform for analytics and
+applications, the SAP S/4HANA suite as the digital core, the
+business network, and SAP HANA Cloud Platform as our
+platform-as-a-service offering. The success of our technology
+strategy depends on the delivery of the new digital framework,
+as our technology continues to deliver business value to meet
+changing customer expectations. Our technology strategy also
+relies on our ability to maintain a dynamic network of partner
+organizations developing their own business applications using
+our technology platforms.
+We might not be successful in integrating our platforms,
+enabling the complete product and cloud service portfolio,
+harmonizing our user interface design and technology,
+integrating acquired technologies, or bringing new solutions
+based on the SAP HANA platform as well as SAP HANA Cloud
+Platform to the market as fast as expected, in particular,
+innovative applications such as SAP S/4HANA. In addition, we
+may not be able to compete effectively in the area of cloud
+services and our new applications and services might not meet
+customer expectations. As a result, our partner organizations
+and customers might not adopt our technology platforms,
+applications, or cloud services quickly enough or they might
+consider competitive solutions. This could have an adverse
+effect on our reputation, business, financial position, profit, and
+cash flows.
+We believe that we will be able to deliver additional business
+value with minimum disruption to our customers if we can
+successfully drive the integration and convergence of our
+technology platform offerings, SAP S/4HANA, as well as
+acquired technologies, enable our current product portfolio for
+SAP HANA, develop new solutions based on SAP HANA, and
+offer comprehensive cloud-based services, extendable with SAP
+HANA Cloud Platform. We enable and encourage partners to
+leverage SAP technology by providing guidance about business
+opportunities, architecture, and technology, as well as a com-
+prehensive certification program designed to ensure that
+relevant third-party solutions are of consistently high quality.
+We believe that the likelihood of this risk materializing is unlikely.
+If this risk were to occur, its impact on our reputation, business,
+financial position, profit, cash flows, and revenue and operating
+profit target would be business-critical. We classify this risk as a
+medium risk.
+Our cloud offerings might be subject to a security attack,
+become unavailable, or fail to perform properly.
+The software used in our cloud portfolio is inherently complex
+and any defects in product functionality, data center operations,
+or system stability that cause interruptions in the availability of
+our application portfolio could result in the following:
+-
+SAP is highly dependent on the exchange of a wide range of
+information across our global operations and on the availability
+of our infrastructure. With regards to our physical environment,
+we face several key security risks such as industrial and/or
+economic espionage, serious and organized crime, and other
+illegal activities, as well as violent extremism and terrorism. We
+might be endangered by threats including, but not limited to,
+social engineering, misuse, or theft of information or assets, or
+damage to assets by trespassers in our facilities or by people
+who have gained unauthorized physical access to our facilities,
+systems, or information. These could have an adverse effect on
+our business, financial profile, profit, and cash flows.
+-
+-
+-
+Lost or delayed market acceptance and sales
+Breach of warranty or other contract breach or mis-
+representation claims
+Sales credits or refunds to our customers or partners
+Loss of customers and/or partners
+Diversion of development and customer service resources
+Breach of data protection and privacy laws and regulations
+Customers considering competitive cloud offerings
+Loss of customer satisfaction and brand reputation
+The costs incurred in correcting any defects or errors might be
+substantial and could have an adverse effect on our reputation,
+business, financial position, profit, and cash flows. The
+availability of our cloud applications could be interrupted by a
+number of factors, resulting in customers' inability to access
+their cloud applications, system outages, failure of our network
+due to human or other errors, security breaches, or variability in
+user traffic for our cloud applications. Because of the large
+amount of data that we collect and manage, hardware failures,
+defects in our software, or errors in our systems could result in
+data loss or corruption, or cause the information that we collect
+to be incomplete or contain inaccuracies that our customers
+regard as significant. Additionally, any loss of the right to use
+hardware purchased or leased from third parties could result in
+delays in our ability to provide our cloud applications until
+equivalent technology is either developed by us or, if available,
+identified. Furthermore, our cooperation with partners in the
+area of cloud includes the co-location of data centers that might
+expose SAP to additional risks in the area of security and data
+protection, as well as the potential for breached service-level
+agreements by partners.
+We have administrative, technical, and physical security
+measures in place as well as contracts that require third-party
+data centers to have appropriate security and data protection
+and privacy measures in place. In this context, customers might
+demand to use only specific and/or local data centers. However,
+if these security measures are breached as a result of third-
+party action, employee error or malfeasance, or otherwise, and
+Combined Management Report Risk Management and Risks
+114
+We will continue to align our organization, processes, products,
+delivery models, and services to changing markets and
+customer and partner demands. We develop new technology
+and new solutions such as the next-generation suite SAP
+S/4HANA or adopt the latest technology if there is a clear
+business opportunity for SAP and if it provides value to our
+customers. To ensure that we remain competitive in the future,
+we still conduct wide-ranging market and technology analyses
+if, as a result, someone obtains unauthorized access to our
+customers' data, which may include personally identifiable
+information regarding users, our reputation could be damaged,
+our business may suffer, local data protection and privacy laws
+or regulations might be breached, and we could incur significant
+liability.
+We might not be successful in bringing new business models,
+solutions, solution enhancements, and/or services to market
+before our competitors. We may also face increasing
+competition from open source software initiatives in which
+competitors may provide software and intellectual property free
+and/or under terms and conditions unfavorable for SAP. In
+addition, we might not be able to generate enough revenue to
+offset the significant research and development costs we incur
+to deliver technological innovations or to offset the required
+infrastructure costs to deliver our solutions and services as part
+of our new business models. Moreover, we might not anticipate
+and develop technological improvements or succeed in adapting
+our products, services, processes, and business models to
+technological change, changing regulatory requirements,
+emerging industry standards, and changing requirements of our
+customers and partners. Finally, we might not succeed in
+producing high-quality products, enhancements, and releases in
+a timely and cost-effective manner to compete with products,
+solutions, and other technologies offered by our competitors,
+which could have an adverse effect on our reputation, business,
+financial position, profit, and cash flows.
+If we are unable to keep up with rapid technological, process
+and service innovations, and new business models as well as
+changing market expectations, we might not be able to
+compete effectively.
+A core element of our business is the successful implementation
+of software solutions to enable our customers to master
+complexity and help our customers' business run at their best.
+The implementation of SAP software is led by SAP, by partners,
+by customers, or by a combination thereof. Depending on
+various factors, such as the complexity of solutions, the
+customer's implementation, integration and migration needs, or
+the resources required, SAP faces a number of different risks.
+For example, functional requirement changes, delays in timeline,
+or deviation from recommended best practices may occur
+during the course of a project. These scenarios have a direct
+impact on the project resource model and on securing adequate
+internal personnel or consultants in a timely manner and could
+therefore prove challenging.
+As a result of these and other risks, SAP and/or some of our
+customers have incurred significant implementation costs in
+connection with the purchase and installation of SAP software
+products. Some customer implementations have taken longer
+than planned. We cannot guarantee that we can reduce or
+eliminate protracted installation or significant third-party
+consulting costs, for example, that trained consultants will be
+readily available, that our costs will not exceed the fees agreed in
+fixed-price contracts, or that customers will be satisfied with the
+implementation of our software and solutions. Unsuccessful,
+lengthy, or costly customer implementation and integration
+projects could result in claims from customers, harm SAP's
+reputation, and could have an adverse effect on our business,
+financial position, profit, and cash flows.
+Our customers continue to follow project approaches to
+optimize their IT solutions in a non-disruptive manner. Our
+projects also include risk management processes that are
+integrated into SAP project management methods intended to
+safeguard implementations with coordinated risk and quality
+management programs. As part of our processes, we make
+adequate financial planning provisions for the remaining
+individual risks.
+We estimate the probability of occurrence of this risk to be
+unlikely, but we cannot completely exclude the possibility that
+this risk could have a major negative impact on our reputation,
+business, financial position, profit, and cash flows, or cause a
+negative deviation from our revenue and operating profit target.
+We classify this risk as a medium risk.
+Combined Management Report Risk Management and Risks
+111
+Product and Technology Risks
+Undetected security vulnerabilities shipped and deployed
+within our products might cause damage to SAP and our
+customers, and partners.
+Customer systems or systems operated by SAP itself to provide
+services could potentially be compromised by vulnerabilities if
+they are exploited by hackers. This could lead to theft,
+destruction, or abuse of data, or systems could be rendered
+unusable (for example, due to distributed denial of service
+attacks). The detection of security vulnerabilities in our
+software, our customers' systems, or SAP systems used in the
+provision of services, especially in case of exploitation, could
+prevent us from meeting our contractual obligations and
+subsequently might lead to customer claims and reputational
+damage, which might have an adverse effect on our business,
+financial position, profit, and cash flows.
+We have implemented a software security development lifecycle
+as a mandatory integral part of our software development
+process. We systematically align our software security
+development lifecycle to the recommendations of ISO/IEC
+27034, applying methods to develop secure software in all
+development phases starting early in the design phase. This
+includes industry best practices such as security risk
+identification, threat modeling, a comprehensive security testing
+strategy, mandatory security training for all developers, and
+security validation of our products, patches, and services before
+shipment.
+SAP has a software security response process in place to rapidly
+react to detected vulnerabilities and provide fixes. We have also
+improved the roll-out procedures for security-relevant notes,
+patches, and service packs to ensure easy and fast consumption
+on the customer side. However, with regards to the Applications,
+Technology and Services segment, there is a risk that
+customers do not upgrade or patch their business systems on a
+timely basis according to SAP's recommendations.
+We cannot completely exclude the possibility of a negative
+impact on our customers' and partners' or our own operations
+globally or in one or more countries or regions. We estimate the
+probability of occurrence of the risk of severe damages to
+customers and SAP to be unlikely. If such an occurrence
+happens, it could have a business-critical impact on our
+reputation, business, financial position, profit, and cash flows as
+well as on the achievement of our revenue and operating profit
+target. We classify this risk as a medium risk.
+Undetected defects in the introduction of new products and
+product enhancements could increase our costs, and reduce
+customer demand.
+Our development investment, including new product launches
+and enhancements, is subject to risks. For example, software
+products and services might not completely meet our high-
+quality standards, including security standards; might not fulfill
+market needs or customer expectations; or might not comply
+with local standards and requirements. Furthermore, this risk
+also exists with respect to acquired companies' technologies
+and products where we might not be able to manage these as
+quickly and successfully as expected. Therefore, market
+launches, entering new markets, or the introduction of new
+innovations could be delayed or not be successful.
+In addition, new products and cloud offerings, including third-
+party technologies we have licensed and open source software
+components we use in those products, could contain
+undetected defects or they might not be mature enough from
+the customer's point of view for business-critical solutions. The
+detection and correction of any defects especially after delivery
+could be expensive and time-consuming and we might not be
+able to meet the expectations of customers regarding time and
+quality in the defect resolution process. In some circumstances,
+we might not be in a position to rectify such defects or entirely
+meet the expectations of customers, specifically as we are
+expanding our product portfolio into additional markets. As a
+result, we might be faced with customer claims for cash refunds,
+damages, replacement software, or other concessions. The risk
+of defects and their adverse consequences could increase as we
+seek to introduce a variety of new software products and
+product enhancements at a higher innovation rate. This is
+especially relevant for cloud products as delivery cycles are even
+shorter (up to daily deliveries) and our complete cloud product
+customer base could receive undetected defects
+simultaneously. Furthermore, for products that use third-party
+(not SAP) cloud services, we cannot detect defects in advance.
+Significant undetected defects or delays in introducing new
+products or product enhancements could affect market
+acceptance of SAP software products and could have an
+adverse effect on our reputation, business, financial position,
+profit, and cash flows.
+The use of existing SAP software products by customers in
+business-critical solutions and processes and the relative
+complexity and technical interdependency of our software
+products and services create a risk that customers or third
+parties may pursue warranty, performance, or other claims
+against us for actual or alleged defects in SAP software
+products, in our provision of services, or in our application
+hosting services. We have in the past been, and may in the
+future be, subject to warranty, performance, or other similar
+claims.
+Although our contracts generally contain provisions designed to
+limit our exposure due to actual or alleged defects in SAP
+software products or in our provision of services, these
+provisions may not cover every eventuality or be effective under
+the applicable law. Regardless of its merits, any claim could
+entail substantial expense and require the devotion of significant
+time and attention by key management personnel. Publicity
+Combined Management Report Risk Management and Risks
+112
+surrounding such claims could affect our reputation and the
+demand for our software.
+We counter these risks using a broad range of techniques,
+including project management, project monitoring, product
+standards and governance, and rigid and regular quality
+assurance measures certified to ISO 9001:2008, applicable to
+the Applications, Technology and Services segment.
+Additionally, we conduct program risk assessments during
+product development as well as market introduction phases,
+and direct customer feedback is considered in the market
+release decision process. Delivering high-quality software
+products is a priority and part of our core business. Our strong
+investment and permanent efforts lead to a generally high level
+of quality of our products, which is made transparent in the
+defined quality perception and support index and confirmed by
+our constantly high customer satisfaction ratings as measured
+by customer quality perception reporting.
+With regards to the increased volume of open source software
+components used in our software products and services as well
+as in the products and services of our acquired companies, we
+see a probability of this risk to materialize but rate the
+probability as unlikely. We cannot completely exclude the
+possibility that this risk, if it were to occur, could have a
+business-critical impact on our reputation, business, financial
+position, profit, and cash flows, or cause a negative deviation
+from our revenue and operating profit target. We classify this
+risk as a medium risk.
+Changes in our rights to use software, cloud services, and
+technologies we license from third parties that are an integral
+part of SAP's products could slow down time to market and
+influence our license pricing and therefore the
+competitiveness with other software vendors. Furthermore, it
+could diminish our software's or cloud functional capabilities
+and therefore could jeopardize the stability of our solution
+portfolio offering.
+The numerous third-party solutions we have licensed and
+certain open source software components we use have become
+an integral part of our product and service portfolio. We depend
+on those solutions for the functionality of our software and cloud
+services. Changes to, or the loss of, third-party licenses as well
+as open source licenses being construed could significantly
+increase the cost of these licenses and significantly reduce
+software or cloud functionality and/or usability of SAP's
+software or cloud offerings. As a result, we might incur
+additional development or license costs to ensure the continued
+functionality of our products, which could have an adverse effect
+on our business, financial position, profit, and cash flows. This
+risk increases with each of our acquisitions of a company or a
+company's intellectual property assets that had been subject to
+third-party solution licensing, open source software and product
+standards less rigorous than our own.
+We strive to execute appropriate due diligence and contract
+management processes and to continuously monitor
+development projects through our product implementation
+lifecycle process and monitoring as part of our cloud
+deployment.
+We believe that the probability of occurrence of this risk is likely
+and we cannot exclude the possibility of a major impact on our
+business, financial position, profit, and cash flows, or the
+possibility of a negative deviation from our revenue and
+operating profit target. We classify this risk as a medium risk.
+Our future success depends upon our ability to keep pace with
+technological and process innovations and new business
+models, as well as our ability to develop new products and
+services, enhance and expand our existing products and
+services portfolio, and integrate products and services we obtain
+through acquisitions. To be successful, we are required to adapt
+our products and our go-to-market approach to a cloud-based
+delivery model to satisfy changing customer demand.
+In addition, our insurance coverage might not cover claims
+against us for loss or security breach of data or other indirect or
+consequential damages. Moreover, defending a suit, regardless
+of its merit, could be costly and time-consuming. In addition to
+potential liability, if we experience interruptions in the availability
+of our cloud applications, our reputation could be harmed and
+we could lose customers.
+-
+Although we estimate the probability of occurrence of this risk
+to be unlikely, we cannot completely exclude the possibility that
+any disruption of our cloud operations could result in a business-
+critical impact on our reputation, business, financial position,
+profit, cash flows, and revenue and operating profit target. We
+classify this risk as a medium risk.
+Failure to integrate the acquired company's operations
+across SAP's different cultures, languages, and local
+protocols, all within the constraints of applicable local laws
+Failure to meet the needs of the acquired company's
+customers and partners in the combined company
+The diversion of management's time and attention from daily
+operations
+Loss of key personnel of the acquired business
+Material unknown liabilities and contingent liabilities of
+acquired companies, including legal, tax, accounting,
+intellectual property, or other significant liabilities that may
+not be detected through the acquisition due diligence
+process
+Legal and regulatory constraints (such as contract
+obligations, privacy frameworks, and agreements)
+Difficulties in implementing, restoring, or maintaining internal
+controls, procedures, and policies
+Practices or policies of the acquired company that may be
+incompatible with our compliance requirements
+An adverse effect on relationships with existing customers,
+partners, or third-party providers of technology or products
+Difficulties in integrating the acquired company's accounting,
+HR, and other administrative systems and coordination of the
+acquired company's research and development (R&D), sales,
+and marketing functions
+Debt incurrence or significant cash expenditures
+Constraints in enforcing acquired companies' compliance
+with existing SAP security standards in a timely manner
+Difficulties in customer implementation projects combining
+technologies and solutions from both SAP and the acquired
+company
+In addition, acquired businesses might not perform as
+anticipated, resulting in charges for the impairment of goodwill
+and other intangible assets on our statements of financial
+position. Such charges may have an adverse effect on our
+business, financial position, profit, and cash flows. We have
+entered into, and expect to continue to enter into, alliance
+arrangements for a variety of purposes, including the
+development of new products and services. There can be no
+assurance that any such products or services will be
+successfully developed or that we will not incur significant
+unanticipated liabilities in connection with such arrangements.
+We may not be successful in overcoming these risks and we may
+therefore not benefit as anticipated from acquisitions or
+alliances.
+We counter these acquisition-related risks with many different
+methodological and organizational measures. These include
+Combined Management Report Risk Management and Risks
+116
+technical, operational, financial, and legal due diligence on the
+company or assets to be acquired and a holistic evaluation of
+material transaction and integration risks. The methods we use
+depend on the integration scenario. Our integration planning is
+detailed and standardized, and carried out by a dedicated
+integration team. We therefore believe we have minimized this
+risk.
+Although we estimate this risk to be unlikely, we cannot
+completely exclude the possibility that this risk could have a
+business-critical impact on our business, financial position,
+profit, cash flows, and revenue and operating profit target. We
+classify this risk as a medium risk.
+Our mitigation measures have been designed and implemented
+to minimize such adverse effects. We continuously invest in
+protecting the integrity and security of our products and
+services as well as internal and external data that is managed
+within our data centers. We are consolidating and harmonizing
+our data centers and our data protection measures, including
+implementing security information and event management
+solutions as well as network access control enforcement, to run
+a homogeneous landscape that supports the complex
+infrastructure, application, and security requirements so that we
+can deliver the required service level for cloud services.
+Protecting and defending our intellectual property is crucial to
+our success. We use a variety of means to identify and monitor
+potential risks and to protect our intellectual property. These
+include applying for patents, registering trademarks and other
+marks and copyrights, implementing measures to stop
+copyright and trademark infringement, entering into licensing,
+confidentiality, and non-disclosure agreements, and deploying
+protection technology. Despite our efforts, we might not be able
+to prevent third parties from obtaining, using, or selling without
+authorization what we regard as our proprietary technology and
+information. All of these measures afford only limited protection,
+and our proprietary rights could be challenged, invalidated, held
+unenforceable, or otherwise affected. Some intellectual property
+might be vulnerable to disclosure or misappropriation by
+employees, partners, or other third parties. Third parties might
+independently develop technologies that are substantially
+equivalent or superior to our technology. Finally, third parties
+might reverse-engineer or otherwise obtain and use technology
+and information that we regard as proprietary. Accordingly, we
+might not be able to protect our proprietary rights against
+unauthorized third-party copying or utilization, which could have
+an adverse effect on our competitive and financial positions, and
+result in reduced sales. Any legal action we bring to enforce our
+proprietary rights could also involve enforcement against a
+partner or other third party, which may have an adverse effect
+on our ability, and our customers' ability, to use that partner's or
+other third parties' products. In addition, the laws and courts of
+certain countries may not offer effective means to enforce our
+intellectual property rights. This could have an adverse effect on
+our reputation, business, financial position, profit, and cash
+flows.
+We rely on a combination of the protections provided by
+applicable statutory and common law rights, including trade
+secret, copyright, patent, and trademark laws, license and non-
+disclosure agreements, and technical measures to establish and
+protect our proprietary rights in our products. We have
+established various internal programs, such as internal policies,
+processes, and monitoring, to assess and manage the risks
+associated with standards organizations, open source, and
+third-party intellectual property.
+We may be dependent in the aggregate on technology that we
+license from third parties that is embedded in our products or
+that we resell to our customers. We have licensed and will
+continue to license numerous third-party software products that
+we incorporate into and/or distribute with our existing products.
+We endeavor to protect ourselves in the respective agreements
+by obtaining certain rights in case such agreements are
+terminated.
+We are party to certain patent cross-license agreements with
+third parties.
+We estimate the probability of this risk occurring as likely, and
+that it could have a business-critical impact on our reputation,
+business, financial position, profit, cash flows, and revenue and
+operating profit target. We classify this risk as a high risk.
+SAP's business strategy focuses on certain business models
+that are highly dependent on a working cyberspace. A
+cybersecurity breach could have an adverse effect on our
+customers, our reputation, and our business.
+The key cybersecurity risks currently applicable to us include
+state-driven economic espionage as well as competitor-driven
+industrial espionage, and criminal activities including, but not
+limited to, cyberattacks and "mega breaches" against cloud
+services and hosted on-premise software. This might result in,
+for example, disclosure of confidential information and
+intellectual property, defective products, production downtimes,
+supply shortages, and compromised data (including personal
+data). A failure of our cybersecurity measures could impact our
+compliance with legal demands (for example, Sarbanes-Oxley
+Act, Payment Card Industry Data Security Standard, data
+privacy) and expose our business operations as well as service
+delivery to the described risks, for example, virtual attack,
+disruption, damage, and/or unauthorized access. Additionally,
+we could be subject to recovery costs, for example, as well as
+significant contractual and legal claims by customers, partners,
+authorities, and third-party service providers for damages
+against us, which could have an adverse effect on our
+reputation, business, financial position, profit, and cash flows.
+To address the increasing cybersecurity threats, we are
+continuously adapting and modifying our security procedures.
+We have multiple security measures in place, such as technical
+IT security measures, identity and access management, and
+mandatory security and compliance training. In addition, our
+security governance model clearly defines security management
+accountabilities for all security areas regarding product security
+and corporate security, which enables us to respond quickly to
+identified cybersecurity risks. In 2015, we have established a
+global security function as well as an independent security audit
+Combined Management Report Risk Management and Risks
+117
+department within the Corporate Audit organization to
+appropriately address potential security threats.
+Although we still consider the occurrence of this risk to be
+unlikely, we cannot completely exclude the possibility that this
+risk could have a business-critical impact on our business,
+financial position, profit, cash flows, and reputation as well as
+revenue and operating profit target. We classify this risk as a
+medium risk.
+Failure to successfully integrate acquired technologies or
+solutions into SAP's solution portfolio and strategy in a timely
+and profitable manner
+Failure to properly evaluate the acquired business and its
+different business and licensing models
+We may not be able to obtain adequate title to, or licenses in,
+or to enforce, intellectual property.
+-
+Selection of the wrong integration model for the acquired
+company and/or technology
+Operational Risks
+Third parties have claimed, and might claim in the future,
+that we infringe their intellectual property rights, which could
+lead to damages being awarded against us and limit our
+ability to use certain technologies in the future.
+We believe that we will increasingly be subject to intellectual
+property infringement claims as our solution portfolio grows; as
+we acquire companies with increased use of third-party code
+including open source code; as we expand into new industries
+with our offerings, resulting in greater overlap in the functional
+scope of offerings; and as non-practicing entities that do not
+design, manufacture, or distribute products increasingly assert
+intellectual property infringement claims.
+Any claims, with or without merit, and negotiations or litigation
+relating to such claims, could preclude us from utilizing certain
+technologies in our products, be time-consuming, result in
+costly litigation, and require us to pay damages to third parties,
+stop selling or reconfigure our products and, under certain
+circumstances, pay fines and indemnify our customers, which
+could have an adverse effect on our business, financial profile,
+profit, cash flows, and reputation. They could also require us to
+enter into royalty and licensing arrangements on terms that are
+not favorable to us, cause product shipment delays, subject our
+products to injunctions, require a complete or partial redesign of
+products, result in delays to our customers' investment
+decisions, and damage our reputation.
+Software includes many components or modules that provide
+different features and perform different functions. Some of
+these features or functions may be subject to third-party
+intellectual property rights. The rights of another party could
+encompass technical aspects that are similar to one or more
+technologies in one or more of our products. Intellectual
+property rights of third parties could preclude us from using
+certain technologies in our products or require us to enter into
+royalty and licensing arrangements on unfavorable or expensive
+terms.
+SAP continues to expand our participation in standards
+organizations and increase the use of such standards in our
+products. Participation in standards organizations might require
+the licensing of SAP's intellectual property to contributors to the
+standard and to all standards implementers, including
+competitors, on a non-discriminatory basis in accordance with
+licensing terms defined by standards organizations. Within the
+software-related standards field, there is a trend toward
+expanding the scope of licensing obligations and narrowing an
+intellectual property owner's right to revoke a license if sued by
+a licensee. In certain situations, limitations on SAP's rights to
+revoke a license could reduce SAP's ability to assert a patent
+infringement claim against a third-party. Assertion of patents
+inadvertently licensed through standards could expose SAP to
+third-party claims.
+We consider the probability of this risk materializing to be likely,
+and that any claims concerning intellectual property rights of
+third parties, open source requirements, or certain standards
+could have a business-critical impact on our business, financial
+Combined Management Report Risk Management and Risks
+115
+position, profit, cash flows and reputation, as well as on the
+achievement of our revenue and operating profit target, and
+could also exacerbate the other risks we describe in this report.
+We classify this risk as a high risk.
+We are named as a defendant in various legal proceedings for
+alleged intellectual property infringements. For more
+information and a more detailed report relating to certain of
+these legal proceedings, see the Notes to the Consolidated
+Financial Statements, Note (23).
+Claims and lawsuits against us could have an adverse effect
+on our business, financial position, profit, cash flows, and
+reputation.
+The software industry is making increasing use of open source
+software in its development work on solutions. We also integrate
+certain open source software components from third parties
+into our software. Open source licenses may require that the
+software code in those components or the software into which
+they are integrated be freely accessible under open source
+terms. Third-party claims may require us to make freely
+accessible under open source terms one of our products or
+third-party (not SAP) software upon which we depend.
+The outcome of litigation and other claims or lawsuits is
+intrinsically uncertain. Management's view of the litigation may
+also change in the future. Actual outcomes of litigation and other
+claims or lawsuits could differ from the assessments made by
+management in prior periods, which are the basis for our
+accounting for these litigations and claims under IFRS.
+-
+Claims and lawsuits are brought against us, including claims and
+lawsuits involving businesses we have acquired. Adverse
+outcomes to some or all of the claims and lawsuits pending
+against us might result in the award of significant damages or
+injunctive relief against us that could hinder our ability to
+conduct our business and could have an adverse effect on our
+reputation, business, financial position, profit, and cash flows.
+-
+-
+-
+-
+-
+or
+We might not acquire and integrate companies effectively or
+successfully and our strategic alliances might not be
+successful.
+For more information and a more detailed report relating to
+certain of these legal proceedings, see the Notes to the
+Consolidated Financial Statements, Note (23).
+We consider the probability of occurrence of this risk to be likely,
+and cannot exclude its business-critical impact on
+reputation, business, financial position, profit, cash flows, and
+revenue and operating profit target if it were to materialize. We
+classify this risk as a high risk.
+our
+To expand our business, we acquire businesses, products, and
+technologies, and we expect to continue to make acquisitions in
+the future. Over time certain of these acquisitions have
+increased in size and in strategic importance for SAP,
+Management negotiation of potential acquisitions and alliances
+and integration of acquired businesses, products,
+technologies demands time, focus, and resources of
+management and of the workforce. Acquisitions of companies,
+businesses, and technology expose us to unpredictable
+operational difficulties, expenditures, and risks. These risks
+include, among others:
+Sub-Saharan Africa
+2.8
+North Africa
+3.6
+2.5
+Middle East and
+1.5
+3.4
+2.8
+Central and Eastern Europe
+1.7
+1.6
+5.0
+3.1
+3.5
+-0.3
+Euro area
+Asia Pacific Japan (APJ)
+Germany
+-0.3
+1.3
+Central and South America,
+Caribbean
+1.7
+4.0
+1.2
+Canada
+2.6
+2.5
+2.4
+United States
+Americas
+2.5
+1.7
+OPERATIONAL TARGETS FOR 2016 (NON-IFRS)
+0.9
+0.0
+accounted for 11% of all reported risks, while the risks
+categorized as “medium” accounted for 68% of all risks
+reported in the Risk Factors section.
+In our view, considering their likelihood of occurrence and
+impact level, the risks described in our aggregated risk report do
+not individually or cumulatively threaten our ability to continue
+as a going concern. Management remains confident that the
+Group's earnings strength forms a solid basis for our future
+business development and provides the necessary resource to
+pursue the opportunities available to the Group. Because of our
+strong position in the market, our technological leadership, our
+highly motivated employees, and our structured processes for
+early risk identification, we are confident that we can continue to
+successfully counter the challenges arising from the risks in our
+risk profile in 2016.
+Combined Management Report Risk Management and Risks
+119
+Expected
+Developments and
+Opportunities
+FUTURE TRENDS IN THE GLOBAL ECONOMY
+In its most recent report, the European Central Bank (ECB)
+forecasts moderate growth in the world economy and it expects
+that this growth will vary across regions and countries in 2016. It
+foresees more favorable prospects for advanced economies
+than for emerging markets and developing economies.
+Geopolitical risks, especially of heightened tensions in the
+Middle East, could undermine global economic performance, the
+ECB warns.
+In the Europe, Middle East, and Africa (EMEA) region, the ECB
+expects the euro-area economy to recover slightly more rapidly
+in 2016 than in the previous year. It suggests that low oil prices,
+increased publicsector spending on assistance for refugees, and
+its own monetary measures may encourage that acceleration. In
+Central and Eastern Europe, the ECB expects economic activity
+to remain stable but for performance to vary from country to
+country. The European Union's structural funds and strong
+consumer spending may be principal factors behind such
+growth. In Russia, on the other hand, the economic situation is
+expected to remain difficult. The ECB expects further cuts in
+public spending as a consequence of declining oil revenue.
+The ECB's forecasts for 2016 for a number of major countries in
+the Americas region are cautious. For the United States, the
+ECB expects that economic growth may slow following the
+Federal Reserve's move on interest rates in December 2015. The
+ECB expects political uncertainty, a tightening of monetary
+policy, and more restrictive financing conditions to continue to
+weigh on Brazil's economy.
+For the Asia Pacific Japan (APJ) region, the ECB expects that
+wage increases and low oil prices will improve consumer
+spending in Japan. Japan's exports should also pick up. For
+China, though, the ECB expects that economic growth will
+continue to slow following the refocusing of its economy. It
+believes that the prospects for India's economy are positive in
+2016.
+Economic Trends -Year-Over-Year GDP Growth
+Percent
+World
+2014e
+2015p
+2016p
+Africa (EMEA)
+Europe, Middle East, and
+economies
+4.3
+4.0
+4.6
+1.5
+Developing and emerging
+1.9
+1.8
+Advanced economies
+3.4
+3.1
+3.4
+2.1
+0.6
+Total IT
+Asian developing economies
+China
+146
+146
+146
+.147
+148
+148
+148
+151
+151
+151
+.152
+153
+156
+156
+158
+135
+.135
+.135
+134
+(15) Goodwill and Intangible Assets.
+(16) Property, Plant, and Equipment...
+(17) Trade and Other Payables, Financial Liabilities, and Other Non-Financial Liabilities.
+(18) Provisions.
+(19) Deferred Income
+(20) Total Equity...
+(21) Additional Capital Disclosures.
+162
+(22) Other Financial Commitments
+(24) Financial Risk Factors.
+(25) Financial Risk Management...
+(26) Additional Fair Value Disclosures on Financial Instruments.
+129
+130
+131
+133
+(23) Litigation and Claims.
+(14) Other Non-Financial Assets
+163
+165
+Management's Annual Report on Internal Control over Financial Reporting in the Consolidated Financial Statements
+201
+subscriptions and support revenue and software support
+revenue to be in a range of 63% to 65% of total revenue in 2017.
+123
+Combined Management Report Expected Developments and Opportunities
+We continue to anticipate that the fast-growing cloud business
+along with growth in support revenue will drive a higher share of
+more predictable revenue. Given the current software license
+revenue momentum, we now expect the total of cloud
+Assuming a stable exchange rate environment going forward,
+SAP now expects non-IFRS cloud subscriptions and support
+revenue in a range of €3.8 billion to €4.0 billion in 2017. The
+upper end of this range represents a 2015 to 2017 compound
+annual growth rate (CAGR) of 32%. Non-IFRS total revenue is
+expected to be in a range of €23.0 billion to €23.5 billion in 2017.
+We now expect our 2017 non-IFRS operating profit to be in a
+range of €6.7 billion to €7.0 billion.
+momentum.
+We are raising our 2017 ambition compared to our outlook
+previously communicated in 2015 to reflect both the current
+exchange rate environment and our excellent business
+We expect to grow our more predictable revenue business while
+steadily increasing operating profit. Our strategic objectives are
+focused primarily on the following financial and non-financial
+objectives: growth, profitability, customer loyalty, and employee
+engagement.
+In this section, all discussion of the medium-term prospects is
+based exclusively on non-IFRS measures.
+MEDIUM-TERM PROSPECTS
+Among the assumptions underlying this outlook are those
+presented above concerning the economy and our expectations
+for the performance of the SAP Group.
+The outlook projections for the SAP Group in respect of liquidity,
+finance, investment, and dividend are equally applicable to SAP
+SE.
+We believe SAP SE, the parent company of the SAP Group, will
+receive investment income in the form of profit transfers and
+dividends again in the future. The growth we expect from the
+SAP Group should have a positive effect on SAP SE investment
+income.
+(34) Subsidiaries and Other Equity Investments.
+(33) Events After the Reporting Period.
+(32) German Code of Corporate Governance.
+(31) Principal Accountant Fees and Services.
+166
+.167
+169
+173
+180
+184
+189
+164
+193
+194
+194
+195
+(27) Share-Based Payments
+(28) Segment and Geographic Information
+(29) Board of Directors..
+(30) Related Party Transactions.
+194
+(13) Trade and Other Receivables.
+(12) Other Financial Assets.
+(11) Earnings per Share.
+As far as opportunities are likely to occur, we have incorporated
+them into our business plans, our outlook for 2016, and our
+medium-term prospects outlined in this report. Therefore, the
+following section focuses on future trends or events that might
+result in an uplift of our outlook and medium-term prospects, if
+they develop better than we have anticipated in our forecasts.
+SAP SE is the parent company of the SAP Group and earns most
+of its revenue from software license fees, subscriptions fees,
+and dividends paid by affiliates. Consequently, the opportunities
+described below also apply - directly or indirectly - to SAP SE.
+Combined Management Report Expected Developments and Opportunities
+124
+Opportunities from Economic Conditions
+Economic conditions have a clear influence on our business,
+financial position, profit, and cash flows. Should the global
+economy experience a more sustained growth than is reflected
+in our plans today, our revenue and profit may exceed our
+current outlook and medium-term prospects.
+Our midterm planning is based on unchanged market conditions
+in emerging markets. Should their stability increase again, this
+would be an upside to our midterm planning.
+For more information about future trends in the global economy
+and the IT market outlook as well as their potential influence on
+SAP, see the Expected Developments and Opportunities section.
+Opportunities from Research and Development Traction
+Our continued growth through innovation is based on our ability
+to leverage research and development resources effectively. We
+continue to improve our development processes through design
+thinking and lean methodologies. We are accelerating innovation
+cycles especially in the area of cloud solutions and engaging
+more closely with our customers to ensure accuracy and
+success.
+While speed is a key strength, we also focus on ease of adoption
+and providing compelling returns. This allows our customers to
+easily consume technologies and software applications with
+immediate benefits for their businesses. If we make innovations
+available faster than currently anticipated, or if customers adopt
+the innovations faster than currently expected, for example,
+shifting faster to managed clouds for enterprise resource
+planning, or shifting faster to our new SAP S/4HANA solutions,
+this could positively impact our revenue, profit, and cash flows,
+and result in their exceeding our stated outlook and medium-
+term prospects.
+For more information about future opportunities in research and
+development for SAP, see the Products, Research &
+Development, and Services section as well as the Expected
+Developments and Opportunities section.
+Opportunities from Our Strategy for Profitable Growth
+SAP strives to generate profitable growth across our portfolio of
+products, solutions, and services to keep or improve its market
+position. Our aim is to continue to expand our addressable
+market to €320 billion in 2020, based on new assets in our SAP
+Business Network Segment, our new technologies, and the
+extension of our cloud portfolio.
+We see opportunities in growing product and market areas, such
+as in-memory computing, cloud, mobile, business networks,
+digital marketing, social media, Big Data, the Internet of Things,
+and predictive analytics. In addition to organic developments
+and tuck-in acquisitions, large strategic acquisitions in particular
+may boost our revenue and profits significantly. For example,
+the acquisition of Concur significantly strengthens the value
+proposition of a business network from SAP by addressing one
+of the most important enterprise spend categories travel
+expenses. Furthermore, SAP seeks to establish new business
+models and leverage our expanding ecosystem of partners to
+achieve scale and maximize opportunities.
+We have established a framework for opportunity management
+by evaluating and analyzing four key areas: current markets,
+competitive landscapes, external scenarios, and technological
+trends. Additionally, we have delved into customer and product
+segmentation, growth drivers, and industry-specific success
+factors. Based on these combined insights, our Executive Board
+defines our market strategies. Our shareholder value relies
+heavily upon a fine balance of risk mitigation and value-driven
+opportunities. Therefore, our strong governance model ensures
+that decisions are based on return, investment required, and
+risk mitigation. We rely on the talent and resources within SAP
+and our entire ecosystem.
+Our customers rely on SAP as the trusted partner in their
+business transformation, not only for providing in-memory
+technology, standardized on-premise and cloud solutions, and
+access to business networks, but also for helping them drive
+new business outcomes and enabling business model
+innovations. To meet these expectations, we must grow
+consistently and accelerate the pace of our own business
+transformation by exploiting new opportunities.
+OPPORTUNITIES
+Further, our customers' satisfaction with the solutions we offer
+is very important to us. We want our customers not only to be
+satisfied, but also to see us as a trusted partner for innovation.
+We measure this customer loyalty metric using the Customer
+Net Promoter Score (NPS). For 2016, we aim to achieve a
+Customer NPS of 25% (2015: 22.4%).
+In 2015, we communicated our long term, high-level ambitions
+for the year 2020. We are not adjusting this long-term ambition
+at this time. Thus, we continue to strive for reaching the
+following by 2020:
+-
+-
+-
+€7.5 billion to €8.0 billion non-IFRS cloud subscriptions and
+support revenue
+€26 billion to €28 billion non-IFRS total revenue
+€8.0 billion to €9.0 billion non-IFRS operating profit
+Our strong assets in applications and analytics, as well as
+database and technology, continue to offer solid multiyear
+growth opportunities as we bring innovative technologies with
+simplified consumption to our installed base and continue to
+add net-new customers. Unexpected portfolio growth may
+positively impact our revenue, profit, and cash flows, and result
+in their exceeding our stated outlook and medium-term
+prospects. Specifically, the SAP HANA platform, cloud offerings,
+and SAP S/4HANA solutions, could create even more demand
+than is reflected in our stated outlook and medium-term
+prospects. Further upside potential is possible by higher than
+expected renewal rates of our cloud solutions.
+70% to 75% share of more predictable revenue (defined as
+the total of cloud subscriptions and support revenue and
+software support revenue)
+We also strive for significantly improving, over the next few
+years, the profitability of our cloud business. We expect that the
+flat or slightly increasing cloud subscriptions and support
+margin development in 2016 will be followed by further margin
+increases in the following years until we reach our envisioned
+long-term cloud subscriptions and support margin targets in
+2020. These will continue to increase at different rates: We
+expect the gross margin from our public cloud to reach
+approximately 80% (2015: approximately 70%) in 2020.
+Likewise, we expect our business network gross margin to reach
+approximately 80% (2015: approximately 75%) in 2020. The
+gross margin for our private cloud is expected to break even in
+2016 and reach about 40% in 2020.
+In a mature state of our cloud business, we expect that
+approximately 80% of the cloud subscription business will be
+generated from existing contracts and their renewals and
+approximately 20% from new business. This is compared to
+approximately 60% from existing contracts and renewals and
+40% from new business in the fast-growth phase of our cloud
+business.
+We also communicated in 2015 that we aim at further improving
+the profitability of our on-premise software business. It is our
+target, from that point in time, to grow, until 2020, our gross
+profit from software licenses and support by a compound
+annual growth rate of approximately 3%, leading to an
+improvement in the software licenses and support gross margin
+of approximately 2 percentage points.
+NON-FINANCIAL GOALS 2016
+In addition to our financial goals, we also focus on two non-
+financial targets: customer loyalty and employee engagement.
+We believe it is essential that our employees are engaged, drive
+our success, and support our strategy. We remain committed to
+achieving an 82% employee engagement score in 2016 (2015:
+81%).
+By 2020, we expect our business network offering to generate
+the largest portion of the cloud subscriptions and support
+revenue. The share of this portion of revenue is expected to be
+followed by our public cloud offerings. Both of these offerings
+are expected to each generate, in 2020, cloud subscriptions and
+support revenues that are significantly higher than the cloud
+subscriptions and support revenue generated from our private
+cloud offerings.
+For more information about future opportunities for SAP, see
+the Strategy and Business Model section as well as Expected
+Developments and Opportunities section.
+Opportunities from Our Partner Ecosystem
+SAP continues to grow and develop a global partner ecosystem.
+To increase market coverage, we want to enhance our portfolio
+and spur innovation with the specified objective of increasing the
+partner revenue contribution to SAP's overall revenue target. In
+addition to strengthening our core, we will leverage our entire
+ecosystem to drive adoption of SAP HANA, cloud solutions, SAP
+S/4HANA, and SAP HANA Cloud Platform. This includes
+strategic partnerships across all areas: third-party software
+vendors, systems integrators, service providers, and
+infrastructure providers. As a result, we are creating an ever-
+stronger setup, where SAP, along with our customers and
+partners, co-innovate and develop new innovative solutions on
+top of SAP HANA. Should the business of our partners develop
+better than currently expected, our indirect sales (partner
+revenue) could grow stronger than reflected in our outlook and
+medium-term prospects. This may positively impact our
+revenue, profit, and cash flows, and result in their exceeding our
+stated medium-term prospects.
+Combined Management Report Events after the Reporting Period
+127
+Consolidated Financial Statements IFRS
+Consolidated Income Statements.
+Consolidated Statements of Comprehensive Income...........
+Consolidated Statements of Financial Position
+Consolidated Statements of Changes in Equity.
+Consolidated Statements of Cash Flows.....
+The Global Managing Board will be dissolved on March 31, 2016.
+Notes
+(3) Summary of Significant Accounting Policies..
+(4) Business Combinations.
+(5) Revenue..
+(6) Restructuring.
+(7) Employee Benefits Expense and Headcount.
+(8) Other Non-Operating Income/Expense, Net..
+(9) Financial Income, Net..
+(10) Income Tax...
+(1) General Information about Consolidated Financial Statements
+(2) Scope of Consolidation
+Provided the SAP Group continues to hit its revenue and profit
+targets, we expect SAP SE to sustain revenue and operating
+income growth into the medium term.
+Stefan Ries will continue his role as Chief Human Resources
+Officer and also take on the role of SAP Labor Relations Director.
+Steve Singh will continue to lead the SAP Business Network
+Group.
+We are in the process of preparing the consolidation of
+intellectual property rights from hybris AG to SAP SE. For more
+information about this transfer, see Note (33).
+For more information about opportunities arising from our
+partner ecosystem, see the Partner Ecosystem as well as
+Expected Developments and Opportunities sections.
+Opportunities from Our Employees
+Our employees drive our innovation, are the value to our
+customers, and consistently promote our growth and
+profitability. In 2015, we increased the number of full-time
+employees accompanied with balanced job restructurings to
+drive our simplification and growth. We anticipate
+improvements in employee productivity as a result of our
+continued endeavors in design-thinking principles. As described
+in the Employees and Social Investment section, we constantly
+Combined Management Report Expected Developments and Opportunities
+125
+invest in our talents to increase engagement, collaboration,
+social innovation, and health.
+To ensure continuous innovation and sustained business
+success, we need to continuously tap into the global talent pool
+and bring the best and brightest talent to SAP. To do so, we aim
+to further strengthen our brand perception in the market and
+optimize our recruiting experience to emphasize our focus on
+helping the world run better and improving people's lives.
+Furthermore, we will maximize mobile channels and innovative
+talent strategies to tap into new talent pools.
+The Supervisory Board of SAP SE appointed Stefan Ries and
+Steve Singh to the SAP Executive Board, with effect from April 1,
+2016.
+Our outlook and medium-term prospects are based on certain
+assumptions regarding employee turnover and our Business
+Health Culture Index (as defined in the Employees and Social
+Investment section. Should these develop better than expected
+there might be an upside to employee productivity and
+engagement. In turn, this might positively impact our revenue,
+profit, and cash flows, and result in their exceeding our stated
+medium-term prospects.
+Opportunities from Our Customer Engagement
+SAP goes to market by region, customer segments, line of
+business, and industry. We evolve and invest in our go-to-
+market coverage model to effectively sell industry-specific
+solutions while increasing our engagement with customers. We
+focus on the dynamic and fast-changing landscape each
+industry faces as technology evolves.
+We offer unique services that support a significant return on
+investment, and continue to actively look at new opportunities to
+increase the value we deliver to our customers. In 2015, we
+closely aligned two main organizations responsible for service
+and support to the Applications, Technology, and Services
+segment to increase the benefit for our customers. This could
+potentially lead to an increased level of customer loyalty and
+higher renewal rates.
+In general, our outlook and medium-term prospects are based
+on certain assumptions regarding the success of our go-to-
+market approaches. If the actual go-to-market success exceeds
+these assumptions, this could positively impact our revenue,
+profit, and cash flows, and result in their exceeding our stated
+medium-term prospects.
+Combined Management Report Expected Developments and Opportunities
+126
+1.0
+Events after the
+Reporting Period
+For more information about future opportunities from our
+employees, see the Employees and Social Performance section.
+As the granted IP rights are accompanied by royalty payments
+and IP-related research and development costs, we also expect
+the operating expenses to rise noticeably. Thus, we anticipate
+the operating result of SAP SE to be similar to 2015, provided
+SAP Group achieves its targets set for 2016 and there are no
+non-recurring negative effects.
+By 2017, we continue to expect the rapidly growing cloud
+subscriptions and support revenue to be close to software
+license revenue and they are expected to exceed software
+license revenue in 2018. At that time, SAP expects to reach a
+scale in its cloud business that will clear the way for accelerated
+operating profit expansion.
+Against this background and due to the rise in cloud and
+software anticipated for the SAP Group in 2016 of around 6% to
+5.6
+5.4
+4.5
+Applications
+5.2
+4.8
+4.0
+Packaged software
+2.0
+4.6
+3.9
+Europe, Middle East, and
+Africa (EMEA)
+3.0
+2.8
+3.0
+2.2
+1.9
+2.6
+128
+2.8
+2.8
+IT services
+7.8
+8.9
+8.5
+Applications
+IT services
+7.3
+6.8
+Packaged software
+3.7
+8% (non-IFRS, at constant currencies), we expect a very strong
+growth of SAP SEs product revenue at constant currencies.
+4.2
+Total IT
+IT services
+Americas
+8.4
+7.1
+7.3
+6.9
+In the Asia Pacific Japan (APJ) region, IDC believes growth in the
+IT market might reach 2.5%. However, growth rates again are
+expected to vary from country to country. IDC expects the IT
+market in Japan will grow by about 3% in 2016. It anticipates
+that China's IT market will expand only in the low to middle
+single-digit percentage range in the years ahead. The IT market
+in India, on the other hand, might continue to grow by rates at or
+above 10% a year, according to IDC.
+IDC expects the Americas region IT spending to increase 3.7% in
+2016. It believes the IT market in the United States will grow at a
+similar rate and that, with 7% growth, the software segment will
+again be the fastest to expand there. For Brazil, IDC expects that
+the government will pursue a strict program of economic reform
+in the next few years, which could slow growth in the IT market
+to a rate of 3% or 4%. IDC forecasts that the IT market in Mexico
+will also grow by about 3% annually in the next few years.
+In the Europe, Middle East, and Africa (EMEA) region, IDC
+expects overall IT market growth to decelerate to 2% in 2016.
+Notably, the IT market in Western Europe is expected to grow
+just 1% to 2% in the coming years. The IT market in Germany is
+not expected to grow much above these rates either, according
+to IDC. The institute believes that IT spending in Russia might
+recover as early as 2016 and grow 6% as a result of short-term
+government stimulus measures.
+The worldwide IT market is at the dawn of a new era, according
+to U.S. market research firm IDC. It expects IT market growth to
+decline in a number of emerging economies, notably Brazil,
+China, and Russia. For a decade, these countries were the
+driving force in all segments of the global IT market while the
+advanced economies were already focusing on the transition
+from traditional technologies to innovations such as cloud and
+mobile computing. IDC expects that the growth in traditional IT
+will also slow in the emerging markets and developing
+economies in the years ahead. It believes that cloud, mobile, and
+Big Data will offer the main opportunities for growth. In view of
+that prediction, IDC expects the worldwide IT market to grow
+just 2.8% in 2016. Hardware spending is expected to increase by
+about 1%, and software spending by almost 7% (mainly due to
+software-as-a-service and platform-as-a-service solutions).
+IT MARKET: THE OUTLOOK FOR 2016
+120
+Combined Management Report Expected Developments and Opportunities
+Trends in the IT Market -
+Source: International Monetary Fund (IMF), World Economic Outlook Update
+January 2016, Subdued Demand, Diminished Prospects, as of January 19,
+2016, p. 6.
+Japan
+6.3
+6.9
+7.3
+6.3
+6.6
+6.8
+e = estimate; p = projection
+2.6
+Increased IT Spending Year-Over-Year
+World
+Applications
+6.8
+6.8
+5.6
+Packaged software
+1.1
+5.5
+Percent
+5.2
+2.8
+4.9
+4.5
+2016p
+2015p
+2014e
+Total IT
+Hardware
+Asia Pacific Japan (APJ)
+4.6
+5.9
+We do not expect any Company-wide restructuring programs in
+2016.
+Total IT
+738
+690 to 740
+40 to 60
+724
+590 to 630
+Share-based payment expenses
+Acquisition-related charges
+Restructuring
+11
+<20
+for 2015
+for 2016
+Actual
+Amounts
+Estimated
+Amounts
+Revenue adjustments
+€ millions
+The Company expects a full-year 2016 effective tax rate (IFRS)
+of 22.5% to 23.5% (2015: 23.4%) and an effective tax rate (non-
+IFRS) of 24.5% to 25.5% (2015: 26.1%).
+Goals for Liquidity and Finance
+On December 31, 2015, we had a negative net liquidity. We
+believe that our liquid assets combined with our undrawn credit
+facilities are sufficient to meet our present operating financing
+needs also in 2016 and, together with expected cash flows from
+operations, will support debt repayments and our currently
+planned capital expenditure requirements over the near term
+and medium term.
+In 2016, we expect a positive development of our operating cash
+flow mainly due to lower restructuring related payments.
+In December 2015, SAP SE concluded license agreements with
+affiliated companies granting SAP SE as of January 2016 world-
+wide distribution and utilization rights of IP held by these
+companies. This mainly concerns the IP rights of our
+acquisitions from the passed years: Ariba, Concur, Fieldglass,
+SuccessFactors, and Sybase. The planned centralization of the IP
+rights at SAP SE pursues the goal of simplifying enterprise
+processes as well as of steering future strategic development
+decisions more efficiently and more directly.
+The primary source of revenue for SAP SE is the license fees it
+charges subsidiaries for the right to market and maintain SAP
+software solutions. Consequently, the performance of SAP SE in
+operating terms is closely tied to the cloud and software revenue
+of the SAP Group.
+OUTLOOK FOR SAP SE
+Among the premises on which this outlook is based are those
+presented concerning economic development and the
+assumption that there will be no effects from major acquisitions
+in 2016 and 2017.
+In preparing our outlook guidance, we have taken into account
+all events known to us at the time we prepared this report that
+could influence SAP's business going forward.
+Premises on Which Our Outlook Is Based
+We intend to continue our dividend policy in 2017 as well, which
+is to pay a dividend totaling more than 35% of the prior year's
+profit after tax.
+Non-IFRS Measures
+Proposed Dividend
+Our planned capital expenditures for 2016 and 2017, other than
+from business combinations, mainly comprise the construction
+activities described in the Assets (IFRS) section of this report.
+We expect investments from these activities of approximately
+€450 million during the next two years. These investments can
+be covered in full by operating cash flow.
+Investment Goals
+Based on this planning, at this point in time we expect we will
+noticeably reduce our net debt in 2016 and gradually return to a
+positive net liquidity in subsequent years.
+By the time of this report, we have no concrete plans for future
+share buybacks.
+We intend to repay a US$600 million U.S. private placement
+when it matures in June. Additionally, we are planning to further
+repay our outstanding €1.25 billion bank loan.
+122
+Combined Management Report Expected Developments and Opportunities
+SAP does not plan any significant acquisitions in 2016 and 2017
+but will rather focus on organic growth.
+The following table shows the estimates of the items that
+represent the differences between our non-IFRS financial
+measures and our IFRS financial measures.
+621
+We continuously strive for profit expansion in all our segments,
+therefore, we expect an increase in both segments' profits. The
+vast majority of the profit expansion comes from our
+Applications, Technology, and Services segment. Overall, in the
+SAP Business Network segment, operating profit growth is
+higher than in the Applications, Technology, and Services
+segment, but at significantly lower volume.
+IMPACT ON SAP
+Source: IDC Worldwide Black Book Pivot V3.1, 2015
+e estimate, p = projection
+IT services
+4.6
+4.6
+5.3
+SAP expects to outperform the global economy and the IT
+industry again in 2016 in terms of revenue growth.
+7.7
+5.6
+8.0
+4.9
+Across all segments we expect our 2016 non-IFRS cloud
+subscriptions and support gross margin to be at least stable or
+to slightly increase compared to 2015. For SAP's managed-
+cloud offerings, we still expect negative margins in 2016 which
+by 2017 are expected to break even.
+Packaged software
+Applications
+2.5
+5.9
+5.1
+Our 2015 results validate our strategy of innovating across the
+core, the cloud, and business networks to help our customers
+become true digital enterprises.
+4.5
+In 2015, we have transformed our Company and made it leaner
+by shifting investments from non-core activities to strategic
+growth areas enabling us to capture the growth opportunities in
+the market.
+Our innovation cycle for SAP S/4HANA is well underway and the
+completeness of our vision in the cloud has distinguished SAP
+from both legacy players and point solution providers. We have
+beaten our guidance for 2015 on cloud and software as well as
+on operating income.
+segment with a significantly higher total revenue growth rate at
+lower absolute levels. As such, we expect we will seize a huge
+market opportunity with continued strong mid- and long-term
+growth potential.
+We expect that non-IFRS total revenue will continue to depend
+largely on the revenue from cloud and software. However, the
+revenue growth we expect from this is below the outlook
+provided for non-IFRS cloud subscriptions and support revenue.
+We expect the software license revenue in 2016 to be at the
+same level as in 2015 with SAP gaining market share against our
+main on-premise license competitors.
+While our full-year 2016 business outlook is at constant
+currencies, actual currency reported figures are expected to
+continue to be impacted by currency exchange rate fluctuations.
+We expect our headcount to experience an increase similar to
+the increase in 2015.
+SAP expects full-year 2016 non-IFRS operating profit to be in
+a range of €6.4 billion to €6.7 billion at constant currencies
+(2015: €6.35 billion).
+SAP expects full year 2016 non-IFRS cloud and software
+revenue to increase by 6% to 8% at constant currencies
+(2015: €17.23 billion).
+Based on the continued strong momentum in SAP's cloud
+business the Company expects full year 2016 non-IFRS cloud
+subscriptions and support revenue to be in a range of
+€2.95 billion to €3.05 billion at constant currencies (2015:
+€2.30 billion). The upper end of this range represents a
+growth rate of 33% at constant currencies.
+We expect that most of the total revenue growth (non-IFRS) will
+come from the Applications, Technology, and Services segment,
+equally distributed into software licenses and support revenue
+growth and cloud subscriptions and support revenue growth.
+Nevertheless, we anticipate our SAP Business Network segment
+will outpace the Applications, Technology, and Services
+Revenue and Operating Profit Outlook
+A comparison of our business outlook with forecasts for the
+global economy and IT industry shows that we can be successful
+even in a tough economic environment and will further
+strengthen our position as the market leader of enterprise
+application software.
+We are confident we can achieve our medium-term targets for
+2017 and 2020, assuming that the economic environment and IT
+industry develop as currently forecasted. Balanced in terms of
+regions as well as industries, we are well-positioned with our
+product offering to offset smaller individual fluctuations in the
+global economy and IT market.
+We plan to continue to invest in countries in which we expect
+significant growth, helping us reach our ambitious 2016 outlook
+targets and medium-term aspirations for 2017 and 2020.
+121
+Combined Management Report Expected Developments and Opportunities
+We are providing the following outlook for the full-year 2016:
+We are well-positioned for the future as reflected in the increase
+of our ambition for 2017.
+833
+1,421
+Net cash flows from investing activities
+-334
+-7,240
+-1,781
+Proceeds from borrowings
+Proceeds from reissuance of treasury shares
+Repayments of borrowings
+(20)
+-1,316
+1,880
+-1,194
+Dividends paid
+Proceeds from sales of equity or debt instruments of other entities
+-566
+-910
+-1,871
+Purchase of equity or debt instruments of other entities
+55
+46
+68
+Proceeds from sales of intangible assets or property, plant, and equipment
+-737
+-636
+Purchase of intangible assets and property, plant, and equipment
+-1,160
+-6,472
+226
+-1,013
+-1,531
+64
+2014
+49
+1.0688
+1.2132
+1.2302
+Canadian dollar
+CAD
+1.5116
+1.4063
+1.4227
+1.4645
+1.3710
+Australian dollar
+AUD
+1.4897
+1.4829
+1.4753
+1.4650
+1.3944
+1.2024
+1.0835
+CHF
+Swiss franc
+1.2141
+1.1071
+1.3198
+1.3301
+Pound sterling
+GBP
+0.7340
+0.7789
+Revenue Recognition
+0.7255
+0.8482
+Japanese yen
+JPY
+131.07
+145.23
+134.12
+140.61
+130.21
+0.8037
+Classes of Revenue
+We derive our revenue from fees charged to our customers for
+(a) the use of our hosted cloud offerings, (b) licenses to our on-
+premise software products, and (c) standardized and premium
+support services, consulting, customer-specific on-premise
+software development agreements, training, and other services.
+Cloud and software revenue, as presented in our Consolidated
+Income Statements, is the sum of our cloud subscriptions and
+support revenue, our software licenses revenue, and our
+software support revenue.
+Cloud subscriptions and support revenue is recognized as the
+services are performed. Where a periodical fixed fee is agreed
+for the right to continuously access and use a cloud offering for
+a certain term, the fee is recognized ratably over the term
+covered by the fixed fee. Fees that are based on actual
+transaction volumes are recognized as the transactions occur.
+In general, our cloud subscriptions and support contracts
+include certain set-up activities. If these set-up activities have
+stand-alone value, they are accounted for as distinct
+deliverables with the respective revenue being classified as
+service revenue and recognized as the set-up activity is
+performed. If we conclude that such set-up activities are not
+distinct deliverables, we do not account for them separately.
+Revenue from the sale of perpetual licenses of our standard on-
+premise software products is recognized upon delivery of the
+software, that is, when the customer has access to the software.
+Occasionally, we license on-premise software for a specified
+period of time. Revenue from short-term time-based licenses,
+which usually include support services during the license period,
+is recognized ratably over the license term. Revenue from multi-
+year time-based licenses that include support services, whether
+separately priced or not, is recognized ratably over the license
+term unless a substantive support service renewal rate exists; if
+this is the case, the amount allocated to the delivered software is
+recognized as software licenses revenue based on the residual
+method once the basic criteria described above have been met.
+In general, our on-premise software license agreements include
+neither acceptance-testing provisions nor rights to return the
+software. If an arrangement allows for customer acceptance-
+testing of the software, we defer revenue until the earlier of
+customer acceptance or when the acceptance right lapses. If an
+arrangement allows for returning the software, we defer
+recognition of software revenue until the right to return expires.
+We usually recognize revenue from on-premise software
+arrangements involving resellers on evidence of sell-through by
+the reseller to the end-customer, because the inflow of the
+economic benefits associated with the arrangements to us is not
+probable before sell-through has occurred.
+Software licenses revenue from customer-specific on-premise
+software development agreements that qualify for revenue
+recognition by reference to the stage of completion of the
+contract activity is recognized using the percentage-of-
+completion method based on contract costs incurred to date as
+a percentage of total estimated contract costs required to
+complete the development work.
+On-premise software subscription contracts combine software
+and support service elements, as under these contracts the
+customer is provided with current software products, rights to
+receive unspecified future software products, and rights to
+product support during the on-premise software subscription
+term. Typically, customers pay a periodic fee for a defined
+subscription term, and we recognize such fees ratably over the
+term of the arrangement beginning with the delivery of the first
+product. Revenue from on-premise software subscription
+contracts is allocated to the software licenses revenue and
+software support revenue line items in our Consolidated Income
+Statements.
+Consolidated Financial Statements IFRS Notes
+In general, we invoice fees for standard software upon contract
+closure and delivery. Periodical fixed fees for cloud subscription
+services and software support services are mostly invoiced
+yearly or quarterly in advance. Fees based on actual transaction
+volumes for cloud subscriptions and fees charged for non-
+periodical services are invoiced as the services are delivered.
+137
+We recognize services revenue as the services are rendered.
+Usually, our professional services contracts and premium
+support services contracts do not involve significant production,
+modification, or customization of software and the related
+revenue is recognized as the services are provided using the
+percentage-of-completion method of accounting. For
+messaging services, we measure the progress of service
+rendering based on the number of messages successfully
+processed and delivered except for fixed-price messaging
+arrangements, for which revenue is recognized ratably over the
+contractual term of the arrangement. Revenue from our training
+services is recognized when the customer consumes the
+respective classroom training. For on-demand training services,
+whereby our performance obligation is to stand ready and
+provide the customer with access to the training courses and
+learning content services, revenue is recognized ratably over the
+contractual term of the arrangement.
+Measurement of Revenue
+Revenue is recognized net of returns and allowances, trade
+discounts, and volume rebates.
+Our contributions to resellers that allow our resellers to execute
+qualified and approved marketing activities are recognized as an
+offset to revenue, unless we obtain a separate identifiable
+benefit for the contribution and the fair value of that benefit is
+reasonably estimable.
+Multiple-Element Arrangements
+We combine two or more customer contracts with the same
+customer and account for the contracts as a single contract if
+the contracts are negotiated as a package or otherwise linked.
+Thus, the majority of our contracts that contain cloud offerings
+or on-premise software also include other goods or services
+(multiple-element arrangements).
+We account for the different goods and services promised under
+our customer contracts as separate units of account (distinct
+deliverables) unless:
+(4)
+Under our standardized support services, our performance
+obligation is to stand ready to provide technical product support
+and unspecified updates, upgrades, and enhancements on a
+when-and-if-available basis. Consequently, we recognize
+support revenue ratably over the term of the support
+arrangement.
+1.0887
+We do not start recognizing revenue from customer
+arrangements before evidence of an arrangement exists and the
+amount of revenue and associated costs can be measured
+reliably and collection of the related receivable is probable. If, for
+any of our product or service offerings, we determine at the
+outset of an arrangement that the amount of revenue cannot be
+measured reliably, we conclude that the inflow of economic
+benefits associated with the transaction is not probable, and we
+defer revenue recognition until the arrangement fee becomes
+due and payable by the customer. If, at the outset of an
+arrangement, we determine that collectability is not probable,
+we conclude that the inflow of economic benefits associated
+with the transaction is not probable, and we defer revenue
+recognition until the earlier of when collectability becomes
+probable or payment is received. If a customer is specifically
+identified as a bad debtor, we stop recognizing revenue from the
+customer except to the extent of the fees that have already been
+collected.
+We account for out-of-pocket expenses invoiced by SAP and
+reimbursed by customers as cloud subscriptions and support,
+software support, or services revenue, depending on the nature
+of the service for which the out-of-pocket expenses were
+incurred.
+Revenue from cloud subscriptions and support represents
+fees earned from providing customers with:
+■
+■
+Software-as-a-Service (SaaS), that is, a right to use
+software functionality in a cloud-based-infrastructure
+(hosting) provided by SAP, where the customer does not
+have the right to terminate the hosting contract and take
+possession of the software to run it on the customer's own
+IT infrastructure or by a third-party hosting provider
+without significant penalty, or
+Platform-as-a-Service (PaaS), that is, access to a cloud-
+based infrastructure to develop, run, and manage
+applications, or
+Infrastructure-as-a-Service (IaaS), that is, hosting services
+for software hosted by SAP, where the customer has the
+right to terminate the hosting contract and take
+•
+possession of the software at any time without significant
+penalty and related application management services, or
+Additional premium cloud subscription support beyond
+the regular support that is embedded in the basic cloud
+subscription fees, or
+Timing of Revenue Recognition
+Business Network Services, that is, connecting companies
+in a cloud-based-environment to perform business
+processes between the connected companies.
+Software licenses revenue represents fees earned from the
+sale or license of software to customers for use on the
+customer's premises, in other words, where the customer
+has the right to take possession of the software for
+installation on
+the customer's premises (on-premise
+software). Software licenses revenue includes revenue from
+both the sale of our standard software products and
+customer-specific on-premise software development
+agreements.
+Consolidated Financial Statements IFRS Notes
+136
+support services and unspecified software upgrades,
+updates, and enhancements.
+Services revenue as presented in our Consolidated Income
+Statements represents fees earned from providing customers
+with:
+-
+-
+Professional services, that is, consulting services that
+primarily relate to the installation and configuration of our
+cloud subscriptions and on-premise software products,
+Premium support services, that is, high-end support services
+tailored to customer requirements,
+Training services,
+Messaging services (primarly transmission of electronic text
+messages from one mobile phone provider to another), and
+Payment services in connection with our travel and expense
+management offerings.
+Software support revenue represents fees earned from
+providing customers with standardized support services
+which comprise unspecified future software updates,
+upgrades, enhancements, and technical product support
+services for on-premise software products. We do not sell
+separately technical product support or unspecified software
+upgrades, updates, and enhancements. Accordingly, we do
+not distinguish within software support revenue or within cost
+of software support the amounts attributable to technical
+51
+USD
+2013
+2,477
+Cash and cash equivalents at the end of the period
+(20)
+3,411
+3,328
+2,748
+The accompanying Notes are an integral part of these Consolidated Financial Statements.
+Consolidated Financial Statements IFRS
+134
+Notes
+(1) GENERAL INFORMATION ABOUT CONSOLIDATED
+FINANCIAL STATEMENTS
+The accompanying Consolidated Financial Statements of SAP
+SE and its subsidiaries (collectively, “we,” “us,” “our," "SAP,"
+"Group," and "Company") have been prepared in accordance
+with International Financial Reporting Standards (IFRS).
+We have applied all standards and interpretations that were
+effective on and endorsed by the European Union (EU) as at
+December 31, 2015. There were no standards or interpretations
+impacting our Consolidated Financial Statements for the years
+ended December 31, 2015, 2014, and 2013, that were effective
+but not yet endorsed. Therefore, our Consolidated Financial
+Statements comply with both IFRS as issued by the
+International Accounting Standards Board (IASB) and with IFRS
+as endorsed by the EU.
+Our Executive Board approved the Consolidated Financial
+Statements on February 25, 2016, for submission to our
+Supervisory Board.
+All amounts included in the Consolidated Financial Statements
+are reported in millions of euros (€ millions) except where
+otherwise stated. Due to rounding, numbers presented
+throughout this document may not add up precisely to the totals
+we provide and percentages may not precisely reflect the
+absolute figures.
+(2) SCOPE OF CONSOLIDATION
+Entities Consolidated in the Financial Statements
+2,748
+3,328
+(20)
+Cash and cash equivalents at the beginning of the period
+1,748
+7,503
+1,000
+-3,852
+-2,062
+-1,625
+Net cash flows from financing activities
+-3,356
+Total
+4,298
+Effect of foreign currency rates on cash and cash equivalents
+135
+23
+-191
+Net decrease/increase in cash and cash equivalents
+83
+580
+271
+-1,589
+272
+58
+-43
+December 31, 2013
+Consequently, we have combined the revenue from premium
+support services with the revenue from professional services
+and other services in a new services revenue line item.
+Previously, revenues from premium support services were
+classified as support revenues (2014: €539 million, 2013:
+€445 million) and related costs were classified as cost of
+software and software-related services (2014: €337 million,
+2013: €259 million). Simultaneously with this change, we
+simplified and clarified the labeling of several income statement
+line items. This includes renaming the previous revenue subtotal
+labeled software and support (which included premium support
+revenues) to software licenses and support (which no longer
+includes premium support revenues). The previous revenue
+subtotal labeled software and software-related service revenue
+Consolidated Financial Statements IFRS Notes
+135
+is renamed cloud and software and accordingly no longer
+includes premium support revenue. All of these changes have
+been applied retrospectively.
+The two other revenue line items cloud subscriptions and
+support and total revenue are not affected by any of these
+changes and remain unaltered.
+Business Combinations and Goodwill
+We decide on a transaction-by-transaction basis whether to
+measure the non-controlling interest in the acquiree at fair value
+or at the proportionate share of the acquiree's identifiable net
+assets. Acquisition-related costs are accounted as expense in
+the periods in which the costs are incurred and the services are
+Exchange Rates
+We modified and simplified the presentation of our services
+revenue in our income statement starting with the first quarter
+of 2015 to align our financial reporting with the change in our
+services business under the ONE Service approach. Under this
+approach, we combine premium support services and
+professional services in a way that no longer allows us to
+separate premium support revenues from professional services
+revenues or to separate their related cost of services.
+Equivalent to €1
+Foreign Currencies
+Income and expenses and operating cash flows of our foreign
+subsidiaries that use a functional currency other than the euro
+are translated at average rates of foreign exchange (FX)
+computed on a monthly basis. Exchange differences resulting
+from foreign currency transactions are recognized in other non-
+operating income/expense, net.
+The exchange rates of key currencies affecting the Company
+were as follows:
+Annual Average Exchange Rate
+Middle Rate
+as at December 31
+2015
+2014
+2015
+received, with the expense being classified as general and
+administration expense.
+U.S. dollar
+(3b) Relevant Accounting Policies
+Reclassifications
+Monetary assets and liabilities denominated in foreign
+currencies are translated at period-end exchange rates.
+Post-employment benefits are measured according to IAS 19
+(Employee Benefits) as described in Note (18a).
+Additions
+Disposals
+December 31, 2014
+287
+Additions
+Disposals
+-40
+December 31, 2015
+Where applicable, information about the methods and
+assumptions used in determining the respective measurement
+bases is disclosed in the Notes specific to that asset or liability.
+255
+The additions relate to legal entities added in connection with
+acquisitions and foundations. The disposals are mainly due to
+mergers and liquidations of legal entities.
+(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
+(3a) Bases of Measurement
+The Consolidated Financial Statements have been prepared on
+the historical cost basis except for the following:
+-
+-
+-
+Derivative financial instruments, available-for-sale financial
+assets, and liabilities for cash-settled share-based payments
+are measured at fair value.
+8
+Total cash flows for business combinations, net of cash and cash equivalents acquired
+2
+-111
+Non-
+Equity Attributable to Owners of Parent
+Other Components of Equity Treasury
+Retained
+Earnings
+Share
+Capital Premium
+Issued
+€ millions
+Consolidated Statements of Changes in Equity of SAP Group for the Years Ended December 31
+Total
+132
+19,534
+38,565
+41,390
+23,295
+(20)
+34
+28
+The accompanying Notes are an integral part of these Consolidated Financial Statements.
+Consolidated Financial Statements IFRS
+Total equity and liabilities
+Total
+Available-
+13,934
+492
+1,229
+January 1, 2013
+(20)
+(20)
+(20)
+Exchange
+Diffe-
+rences
+Notes
+Financial
+Hedges
+for-Sale
+Equity
+Control-
+ling
+Interests
+Cash Flow
+Shares
+Assets
+-236
+Total equity
+19,499
+10,457
+10,228
+Total non-current liabilities
+78
+106
+(19)
+Deferred income
+Total liabilities
+603
+(10)
+Deferred tax liabilities
+151
+180
+(18)
+Provisions
+219
+448
+Non-controlling interests
+Issued capital
+19,031
+23,267
+-1,224
+-1,124
+564
+2,561
+18,317
+20,044
+18,095
+Equity attributable to owners of parent
+Other components of equity
+Retained earnings
+614
+558
+Share premium
+1,229
+1,229
+Treasury shares
+331
+Profit after tax
+Other comprehensive
+16,048
+8
+16,040
+-1,280
+20
+82
+-820
+Profit after tax
+16,258
+1,229
+December 31, 2013
+-1
+1
+-2
+-2
+Other changes
+551
+payments
+3,280
+3,280
+Share-based payments
+4,539
+4,539
+-28
+128
+1,182
+3,257
+3,280
+Comprehensive income
+1,259
+1,259
+-28
+128
+1,182
+-23
+Other comprehensive
+income
+3,326
+shares under share-based
+86
+(20)
+Statement of Comprehensive
+29
+Reissuance of treasury
+-1,013
+Dividends
+30
+Income
+Share-based payments
+-584
+3,339
+Comprehensive income
+income
+60
+-584
+13
+60
+86
+22
+-1,337
+57
+-1,013
+-1,013
+30
+30
+2,814
+-1
+20
+2,815
+-511
+3,325
+-1
+3,326
+14,133
+8
+14,125
+-511
+34
+(17)
+8,980
+2015
+Notes
+Other financial assets
+Cash and cash equivalents
+€ millions
+Consolidated Statements of Financial Position of SAP Group as at December 31
+130
+2014
+Consolidated Financial Statements IFRS
+-1
+0
+-8
+Attributable to non-controlling interests
+2,815
+4,539
+5,044
+The accompanying Notes are an integral part of these Consolidated Financial Statements.
+Attributable to owners of parent
+3,411
+(12)
+8,999
+9,739
+215
+235
+435
+468
+(14)
+3,328
+4,342
+(13)
+Total current assets
+Tax assets
+Other non-financial assets
+Trade and other receivables
+678
+351
+5,275
+Goodwill
+2,814
+5,036
+128
+128
+(26)
+Available-for-sale financial assets
+-576
+1,161
+1,845
+60
+Exchange differences
+Items that will be reclassified subsequently to profit or loss
+13
+-23
+-17
+Other comprehensive income after tax for items that will not be reclassified to
+profit or loss
+-3
+7
+(20)
+4,539
+Cash flow hedges
+15
+Total comprehensive income
+-511
+1,259
+1,980
+Other comprehensive income net of tax
+-524
+1,282
+(25)
+1,997
+-8
+31
+10
+(10)
+Income tax relating to items that will be reclassified
+0
+-38
+Other comprehensive income after tax for items that will be reclassified to profit
+or loss
+Other non-financial liabilities
+(15)
+21,000
+2,561
+841
+(17)
+Trade and other payables
+Total current liabilities
+Deferred income
+Provisions
+(17)
+Other non-financial liabilities
+339
+230
+1,032
+1,088
+(17)
+2014
+2015
+Financial liabilities
+Notes
+3,407
+(18)
+8,681
+(17)
+Financial liabilities
+371
+402
+Tax liabilities
+55
+2,811
+81
+8,574
+7,867
+1,680
+2,001
+(19)
+150
+299
+(17)
+22,689
+Tax liabilities
+€ millions
+100
+87
+(13)
+Trade and other receivables
+1,021
+1,336
+(12)
+Other non-financial assets
+Other financial assets
+2,192
+(16)
+Property, plant, and equipment
+4,604
+4,280
+(15)
+Intangible assets
+2,102
+Trade and other payables
+(14)
+164
+Consolidated Statements of Financial Position of SAP Group as at December 31
+131
+Consolidated Financial Statements IFRS
+38,565
+41,390
+29,566
+31,651
+332
+343
+(10)
+Total assets
+Total non-current assets
+Deferred tax assets
+231
+282
+Tax assets
+453
+34
+34
+Dividends
+-246
+-152
+-181
+(9)
+-5
+-25
+-66
+115
+3,991
+4,396
+0
+86
+-8
+-935
+-1,161
+-1,063
+4,355
+(10)
+127
+-17
+-12,336
+4,331
+4,479
+Other non-operating income/expense, net
+Finance income
+Finance costs
+Financial income, net
+241
+Profit before tax
+Other income tax expense
+Income tax expense
+Profit after tax
+Attributable to owners of parent
+Attributable to non-controlling interests
+-256
+49
+Income tax Tomorrow Now and Versata litigation
+-13,230
+-935
+-1,071
+Consolidated Financial Statements IFRS
+129
+Consolidated Statements of Comprehensive Income of SAP Group for the Years Ended December 31
+€ millions
+Profit after tax
+Items that will not be reclassified to profit or loss
+Notes
+The accompanying Notes are an integral part of these Consolidated Financial Statements.
+2015
+2013
+3,056
+3,280
+3,325
+Remeasurements on defined benefit pension plans
+(18)
+-19
+2014
+(10)
+2.78
+2.56
+3,056
+3,280
+3,325
+3,064
+3,280
+3,326
+-8
+2.74
+0
+Earnings per share, basic (in €)
+(11)
+2.56
+2.75
+2.79
+Earnings per share, diluted (in €)
+(11)
+-1
+-30
+-16,541
+4,252
+Total operating expenses
+10,093
+8,829
+8,293
+14,928
+13,228
+12,809
+17,214
+4,516
+14,315
+3,579
+3,245
+3,310
+(5)
+20,793
+17,560
+16,815
+13,505
+Cost of cloud subscriptions and support
+4,399
+696
+Goods and services that do not qualify as distinct deliverables
+are combined into one unit of account (combined deliverables).
+Consolidated Income Statements of SAP Group for the Years Ended December 31
+€ millions, unless otherwise stated
+Cloud subscriptions and support
+Software licenses
+Software support
+Software licenses and support
+4,835
+Cloud and software
+Total revenue
+Notes
+2015
+2014
+2013
+2,286
+1,087
+Services
+Operating profit
+Cost of software licenses and support
+Cost of services
+-4,304
+-4,131
+-1,048
+-892
+-866
+-621
+-126
+-5,401
+-70
+0
+-309
+31
+Other operating income/expense, net
+1
+4
+12
+(23)
+Cost of cloud and software
+11,784
+14,167
+-2,845
+Total cost of revenue
+Gross profit
+Research and development
+Sales and marketing
+General and administration
+Restructuring
+TomorrowNow and Versata litigation
+12,288
+-2,331 -2,282
+-1,022
+-314
+-3,313
+-2,291 -2,076 -2,056
+-2,557 -2,370
+-3,313
+-2,716 -2,660
+-6,626
+-5,272 -5,031
+-481
+16
+266
+Cash receipts from derivative financial instruments related to business combinations
+-1,316
+-1,316
+Dividends
+-136
+-136
+-136
+5,036
+-1,316
+-8
+11
+125
+1,861
+3,047
+Share-based payments
+Comprehensive income
+1,980
+5,044
+1,980
+80
+180
+336
+-2
+2
+-4
+Consolidated Financial Statements IFRS
+The accompanying Notes are an integral part of these Consolidated Financial Statements.
+2,223
+100
+558 20,044
+1,229
+December 31, 2015
+Other changes
+payments
+shares under share-based
+Reissuance of treasury
+180
+-4
+3
+11
+1,861
+Other changes
+combinations
+26
+26
+Additions from business
+payments
+shares under share-based
+-4
+85
+56
+Income tax relating to items that will not be reclassified
+29
+Reissuance of treasury
+-1,194
+-1,194
+-1,194
+85
+125
+-4
+December 31, 2014
+-17
+Other comprehensive
+income
+3,056
+-8
+3,064
+3,064
+Profit after tax
+-4
+34 19,534
+-1,224
+-8
+211
+362
+18,317
+614
+1,229
+19,499
+-1,124
+23,267
+28
+-1
+-555
+0
+(23)
+Cash outflows due to TomorrowNow and Versata litigation
+125
+16
+Interest paid
+218
+-176
+573
+757
+Decrease/increase in trade payables, provisions, and other liabilities
+-136
+-329
+-313
+Decrease/increase in deferred income
+Decrease/increase in other assets
+Interest received
+-172
+-1,160
+-6,360
+-39
+Business combinations, net of cash and cash equivalents acquired
+3,832
+3,499
+3,638
+Income taxes paid, net of refunds
+Net cash flows from operating activities
+-1,356
+-1,420
+67
+59
+82
+-159
+-130
+-1,295
+-110
+-286
+-844
+1,289
+(15), (16)
+Depreciation and amortization
+Adjustments to reconcile profit after taxes to net cash provided by operating activities:
+3,325
+3,280
+3,056
+1,010
+2013
+2015
+Note
+Consolidated Statements of Cash Flows of SAP Group for the Years Ended December 31
+Profit after tax
+€ millions
+133
+23,295
+2014
+951
+Income tax expense
+(10)
+Decrease/increase in trade and other receivables
+62
+70
+-2
+Other adjustments for non-cash items
+42
+47
+45
+Decrease/increase in sales and bad debt allowances on trade receivables
+66
+25
+5
+(9)
+Financial income, net
+1,071
+1,075
+935
+0
+-1,075
+The services are not available from third-party vendors and
+are therefore deemed essential to the cloud subscription or
+on-premise software.
+For our on-premise software offerings, company-specific
+objective evidence of fair value can generally not be
+established and representative stand-alone selling prices are
+not discernible from past transactions. We therefore apply
+the residual method to multiple-element arrangements that
+include on-premise software. Under this method, the
+transaction fee is allocated to all undelivered elements in the
+amount of their respective fair values and the remaining
+The portion of the transaction fee allocated to one distinct
+deliverable is recognized in revenue separately under the
+policies applicable to the respective deliverable. For combined
+deliverables consisting of cloud offerings or on-premise
+software and other services, the allocated portion of the
+transaction fee is recognized using the percentage-of-
+completion method, as outlined above, or over the cloud
+subscription term, if applicable, depending on which service
+term is longer.
+We allocate the total transaction fee of a customer contract to
+the distinct deliverables under the contract based on their fair
+values. The allocation is done relative to the distinct
+deliverables' individual fair values unless the residual method is
+applied as outlined below. Fair value is determined by company-
+specific objective evidence of fair value which is the price
+charged consistently when that element is sold separately or, for
+elements not yet sold separately, the price established by our
+management if it is probable that the price will not change
+before the element is sold separately. Where company-specific
+objective evidence of fair value and third-party evidence of
+selling price cannot be established due to lacking stand-alone
+sales or lacking pricing consistency, we determine the fair value
+of a distinct deliverable by estimating its stand-alone selling
+price. Company-specific objective evidence of fair value and
+estimated stand-alone selling prices (ESP) for our major
+products and services are determined as follows:
+-
+We derive the company-specific objective evidence of fair
+value for our renewable support services from the rates
+charged to renew the support services annually after an initial
+period. Such renewal rates generally represent a fixed
+percentage of the discounted software license fee charged to
+the customer. The majority of our customers renew their
+annual support service contracts at these rates.
+Company-specific objective evidence of fair value for our
+professional services is derived from our consistently priced
+historic sales.
+Company-specific objective evidence of fair value can
+generally not be established for our cloud subscriptions. ESP
+for these offerings is determined based on the rates agreed
+with the individual customers to apply if and when the
+subscription arrangement renews. We determine ESP by
+considering multiple factors which include, but are not limited
+to, the following:
+"
+Substantive renewal rates stipulated in the cloud
+arrangement; and
+Gross margin expectations and expected internal costs of
+the respective cloud business model.
+Consolidated Financial Statements IFRS Notes
+138
+The contract involves significant production, modification, or
+customization of the cloud subscription or on-premise
+software; and
+4 to 20 years
+4 to 5 years
+Which deliverables under one contract are distinct and thus
+to be accounted for separately
+Impairment losses are presented in
+income/expense, net in profit or loss.
+Based on the term of
+the lease contract
+3 to 5 years
+Impairment of Goodwill and Non-Current Assets
+The annual goodwill impairment test is performed at the level of
+our operating segments since there are no lower levels in SAP at
+which goodwill is monitored for internal management purposes.
+The test is performed at the same time for all operating
+segments.
+25 to 50 years
+Property, plant, and equipment are depreciated over their
+expected useful lives, generally using the straight-line method.
+Office furniture
+Information technology
+equipment
+Leasehold improvements
+Buildings
+Useful Lives of Property, Plant, and Equipment
+Liabilities
+Automobiles
+Financial Liabilities
+Post-Employment Benefits
+Financial liabilities include trade and other payables, bank loans,
+issued bonds, private placements, and other financial liabilities
+that comprise derivative and non-derivative financial liabilities.
+They are classified as financial liabilities at amortized cost and at
+fair value through profit or loss. The latter include only those
+financial liabilities that are held for trading, as we do not
+designate financial liabilities at fair value through profit or loss.
+The preparation of the Consolidated Financial Statements in
+conformity with IFRS requires management to make judgments,
+estimates, and assumptions that affect the application of
+accounting policies and the reported amounts of assets,
+liabilities, revenues, and expenses, as well as disclosure of
+contingent assets and liabilities.
+(3c) Management Judgments and Sources of Estimation
+Uncertainty
+Deferred income is recognized as cloud subscriptions and
+support revenue, software licenses revenue, software support
+revenue, or services revenue, depending on the reason for the
+deferral, once the basic applicable revenue recognition criteria
+have been met. These criteria are met, for example, when the
+services are performed or when the discounts that relate to a
+material right granted in a purchase option are applied.
+Deferred Income
+Since our domestic defined benefit pension plans primarily
+consist of an employee-financed post-retirement plan that is
+fully financed with qualifying insurance policies, current service
+cost may become a credit as a result of adjusting the defined
+benefit liability's carrying amount to the fair value of the
+qualifying plan assets. Such adjustments are recorded in service
+cost.
+high-quality corporate bonds and government bonds for which
+the timing and amounts of payments match the timing and the
+amounts of our projected pension payments. The assumptions
+used to calculate pension liabilities and costs are disclosed in
+Note (18a). Net interest expense and other expenses related to
+defined benefit plans are recognized in employee expenses.
+other operating
+141
+The discount rates used in measuring our post-employment
+benefit assets and liabilities are derived from rates available on
+Property, plant, and equipment are carried at acquisition cost
+plus the fair value of related asset retirement costs if any and if
+reasonably estimable, less accumulated depreciation.
+The employee-related provisions include, amongst others, long-
+term employee benefits. They are secured by pledged
+reinsurance coverage and are offset against the settlement
+amount of the secured commitment.
+Provisions
+Expenses and gains/losses on financial liabilities mainly consist
+of interest expense, which is recognized based on the effective
+interest method.
+Customer funding liabilities are funds we draw from and make
+payments on on behalf of our customers for customers'
+employee expense reimbursements, related credit card
+payments, and vendor payments. We present these funds in
+cash and cash equivalents and record our obligation to make
+these expense reimbursements and payments on behalf of our
+customers as customer funding liabilities.
+Consolidated Financial Statements IFRS Notes
+Property, Plant, and Equipment
+Other non-financial assets are recorded at amortized cost. We
+recognize as an asset the direct and incremental cost incurred
+when obtaining a customer cloud subscription contract. We
+amortize these assets on a straight line basis over the period of
+providing the cloud subscriptions to which the assets relate.
+research and
+general and
+The method of retrospectively testing effectiveness depends on
+the type of the hedge as described further below:
+exchange rate contract or intrinsic value of the currency options,
+respectively. For interest-rate swaps, we also apply the critical
+terms match as the notional amounts, currencies, maturities,
+basis of the variable legs or fixed legs, respectively, reset dates,
+and the dates of the interest and principal payments are
+identical for the debt instrument and the corresponding interest-
+rate swaps. Therefore, over the life of the hedging instrument,
+the changes in the designated components of the hedging
+instrument will offset the impact of fluctuations of the
+underlying hedged items.
+The effectiveness of the hedging relationship is tested
+prospectively and retrospectively. Prospectively, we apply the
+critical terms match for our foreign currency hedges as
+currencies, maturities, and the amounts are identical for the
+forecasted transactions and the spot element of the forward
+Valuation and Testing of Effectiveness
+We apply fair value hedge accounting for certain of our fixed rate
+financial liabilities.
+b) Fair Value Hedge
+a) Cash Flow Hedge
+occur.
+In general, we apply cash flow hedge accounting to the foreign
+currency risk of highly probable forecasted transactions and
+interest-rate risk on variable rate financial liabilities.
+a) Cash Flow Hedge
+We use derivatives to hedge foreign currency risk or interest-
+rate risk and designate them as cash flow or fair value hedges if
+they qualify for hedge accounting under IAS 39. For more
+information about our hedges, see Note (24).
+Derivatives Designated as Hedging Instruments
+In addition, we occasionally have contracts that contain foreign
+currency embedded derivatives to be accounted for separately.
+Many transactions constitute economic hedges, and therefore
+contribute effectively to the securing of financial risks but do not
+qualify for hedge accounting under IAS 39. To hedge currency
+risks inherent in foreign-currency denominated and recognized
+monetary assets and liabilities, we do not designate our held-for-
+trading derivative financial instruments as accounting hedges,
+because the profits and losses from the underlying transactions
+are recognized in profit or loss in the same periods as the profits
+or losses from the derivatives.
+With regard to foreign currency risk, hedge accounting relates to
+the spot price and the intrinsic values of the derivatives
+designated and qualifying as cash flow hedges, while gains and
+losses on the interest element and on those time values
+excluded from the hedging relationship as well as the ineffective
+portion of gains or losses are recognized in profit or loss as they
+Amortization expenses of intangible assets are classified as cost
+of cloud and software, cost of services,
+development, sales and marketing, and
+administration, depending on the use of the respective
+intangible assets.
+Retrospectively, effectiveness is tested on a cumulative basis
+applying the dollar offset method by using the hypothetical
+derivative method. Under this approach, the change in fair value
+of a constructed hypothetical derivative with terms reflecting
+the relevant terms of the hedged item is compared to the
+change in the fair value of the hedging instrument employing its
+relevant terms. The hedge is deemed highly effective if the
+results are within the range 80% to 125%.
+Retrospectively, effectiveness is tested using statistical
+methods in the form of a regression analysis by which the
+validity and extent of the relationship between the change in
+value of the hedged items as the independent variable and the
+fair value change of the derivatives as the dependent variable is
+determined. The hedge is deemed highly effective if the
+determination coefficient between the hedged items and the
+hedging instruments exceeds 0.8 and the slope coefficient lies
+within a range of -0.8 to -1.25.
+Amortization for acquired in-process research and development
+project assets starts when the projects are complete and the
+developed software is taken to the market. We typically
+amortize these intangibles over five to seven years.
+All our purchased intangible assets other than goodwill have
+finite useful lives. They are initially measured at acquisition cost
+and subsequently amortized either based on expected
+consumption of economic benefits or on a straight-line basis
+over their estimated useful lives ranging from two to 20 years.
+We classify intangible assets according to their nature and use in
+our operation. Software and database licenses consist primarily
+of technology for internal use, whereas acquired technology
+consists primarily of purchased software to be incorporated into
+our product offerings and in-process research and development.
+Customer relationship and other intangibles consist primarily of
+customer contracts and acquired trademark licenses.
+Intangible Assets
+We base our judgments, estimates, and assumptions on
+historical and forecast information, as well as on regional and
+industry economic conditions in which we or our customers
+operate, changes to which could adversely affect our estimates.
+Although we believe we have made reasonable estimates about
+the ultimate resolution of the underlying uncertainties, no
+assurance can be given that the final outcome of these matters
+will be consistent with what is reflected in our assets, liabilities,
+revenues, and expenses. Actual results could differ from original
+estimates.
+Other Non-Financial Assets
+b) Fair Value Hedge
+Included in trade receivables are unbilled receivables related to
+fixed-fee and time-and-material consulting arrangements for
+contract work performed to date.
+Account balances are written off, that is, charged off against the
+allowance after all collection efforts have been exhausted and
+the likelihood of recovery is considered remote.
+140
+Consolidated Financial Statements IFRS Notes
+First, we consider the financial solvency of specific customers
+and record an allowance for specific customer balances when
+we believe it is probable that we will not collect the amount
+due according to the contractual terms of the arrangement.
+Second, we evaluate homogenous portfolios of trade
+receivables according to their default risk primarily based on
+the age of the receivable and historical loss experience, but
+also taking into consideration general market factors that
+might impact our trade receivable portfolio. We record a
+general bad debt allowance to record impairment losses for a
+portfolio of trade receivables when we believe that the age of
+the receivables indicates that it is probable that a loss has
+occurred and we will not collect some or all of the amounts
+due.
+Trade receivables are recorded at invoiced amounts less sales
+allowances and allowances for doubtful accounts. We record
+these allowances based on a specific review of all significant
+outstanding invoices. When analyzing the recoverability of our
+trade receivables, we consider the following factors:
+Trade and Other Receivables
+In our Consolidated Income Statements, expenses from
+recording bad debt allowances for a portfolio of trade
+receivables are classified as other operating income, net,
+whereas expenses from recording bad debt allowances for
+specific customer balances are classified as cost of cloud and
+software or cost of services, depending on the transaction from
+which the respective trade receivable results. Sales allowances
+are recorded as an offset to the respective revenue item.
+The accounting policies that most frequently require us to make
+judgments, estimates, and assumptions, and therefore are
+critical to understanding our results of operations, include the
+following:
+Accounting for business combinations
+Valuation of trade receivables
+290
+724
+Share-based payments
+40
+62
+113
+General and administration
+-66
+-25
+-5
+Financial income, net
+96
+76
+247
+Sales and marketing
+derivatives
+90
+35
+financial liabilities at amortized
+cost
+Cost of services
+126
+53
+327
+66
+-72
+-28
+-23
+Research and development
+166
+71
+Thereof interest expense from
+(10) INCOME TAX
+Thereof cash-settled
+637
+Foreign
+408
+The application of the percentage-of-completion method
+requires us to make estimates about total revenue, total cost to
+complete the project, and the stage of completion. The
+assumptions, estimates, and uncertainties inherent in
+determining the stage of completion affect the timing and
+amounts of revenue recognized.
+As described in the Revenue Recognition section of Note (3b),
+we do not recognize revenue before the amount of revenue can
+be measured reliably and collection of the related receivable is
+probable. The determination of whether the amount of revenue
+can be measured reliably or whether the fees are collectible is
+inherently judgmental, as it requires estimates as to whether
+and to what extent subsequent concessions may be granted to
+customers and whether the customer is expected to pay the
+contractual fees. The timing and amount of revenue recognition
+can vary depending on what assessments have been made.
+Revenue Recognition
+Our management periodically discusses these
+accounting policies with the Audit Committee of the Supervisory
+Board.
+836
+critical
+Accounting for legal contingencies
+Subsequent accounting for goodwill and other intangible
+assets
+Derivatives Not Designated as Hedging Instruments
+-
+Accounting for income tax
+Accounting for share-based payments
+Recognition of internally generated intangible assets from
+development
+Revenue recognition
+770
+Germany
+193
+240
+share-based payments
+Tax Expense According to Region
+Thereof equity-settled
+share-based payments
+87
+859
+96
+€ millions
+2015
+2014
+2013
+For more information about our share-based payments, see
+Note (27).
+Current tax expense
+87
+Derivatives
+Financial Assets
+139
+-25
+-27
+Miscellaneous expense
+1,249
+1,168
+1,278
+Tax expense for current year
+1
+3
+1
+Miscellaneous income
+expense/income
+assets/liabilities
+Current tax
+0
+-13
+-3
+-219
+184
+Major Components of Tax Expense
+receivables
+Thereof from financial
+-2
+-22
+226
+liabilities at amortized cost
+€ millions
+2015
+2014
+2013
+Thereof from non-financial
+-105
+Taxes for prior years
+-11
+24
+96
+9
+77
+Total deferred tax income
+-332
+-117
+Unused tax losses, research
+and development tax credits,
+and foreign tax credits
+-91
+935
+1,075
+1,071
+Consolidated Financial Statements IFRS Notes
+148
+Which contracts with the same customer are to be accounted
+for as one single contract
+Total income tax expense
+-213
+temporary differences
+-126
+-87
+Other non-operating
+-256
+49
+-17
+Total current tax expense
+-168
+1,267
+1,162
+income/expense, net
+Deferred tax
+expense/income
+Origination and reversal of
+-428
+1,192
+Thereof from loans and
+sale financial assets
+0
+Research and Development
+Cost of services includes the costs incurred in providing the
+services that generate service revenue including messaging
+revenues. The item also includes sales and marketing expenses
+related to our services that result from sales and marketing
+efforts that cannot be clearly separated from providing the
+services.
+Cost of Services
+Cost of cloud and software includes the costs incurred in
+producing the goods and providing the services that generate
+cloud and software revenue. Consequently, this line item
+primarily includes employee expenses relating to these services,
+amortization of acquired intangibles, fees for third-party
+licenses, shipping, ramp-up cost, and depreciation of our
+property, plant, and equipment.
+Cost of Cloud and Software
+We also consider FASB ASC 985-605 in our accounting for
+options that entitle the customer to purchase, in the future,
+additional on-premise software or services. We allocate revenue
+to future incremental discounts whenever customers are
+granted a material right, that is, the right to license additional
+on-premise software at a higher discount than the one given
+within the initial software license arrangement, or to purchase or
+renew services at rates below the fair values established for
+these services. We also consider whether future purchase
+options included in arrangements for cloud subscription
+deliverables constitute a material right.
+Research and development includes the costs incurred by
+activities related to the development of software solutions (new
+products, updates, and enhancements) including resource and
+hardware costs for the development systems.
+amount of the arrangement fee is allocated to the delivered
+element. With this policy, we have considered the guidance
+provided by FASB ASC Subtopic 985-605 (Software Revenue
+Recognition), where applicable, as authorized by IAS 8
+(Accounting Policies, Changes in Accounting Estimates and
+Errors).
+326
+(8) OTHER NON-OPERATING INCOME/EXPENSE, NET
+Total current tax expense
+1,267
+1,192
+1,162
+422
+Deferred tax
+We have determined that the conditions for recognizing
+internally generated intangible assets from our software
+development activities are not met until shortly before the
+products are available for sale. Development costs incurred
+after the recognition criteria are met have not been material.
+Consequently, research and development costs are expensed as
+incurred.
+Sales and marketing includes costs incurred for the selling and
+marketing activities related to our software and cloud solutions.
+Consolidated Financial Statements IFRS Notes
+Among the other impairment indicators in IAS 39 (Financial
+Instruments: Recognition and Measurement), for an investment
+in an equity security, objective evidence of impairment includes
+a significant (more than 20%) or prolonged (a period of more
+than nine months) decline in its fair value. Impairment losses on
+financial assets are recognized in financial income, net. For
+Regular way purchases and sales of financial assets are
+recorded as at the trade date.
+Our financial assets comprise cash and cash equivalents (highly
+liquid investments with original maturities of three months or
+less), loans and receivables, acquired equity and debt
+investments, and derivative financial instruments (derivatives)
+with positive fair values. Financial assets are only classified as
+financial assets at fair value through profit or loss if they are held
+for trading, as we do not designate financial assets at fair value
+through profit or loss. All other financial assets are classified as
+loans and receivables if we do not designate them as available-
+for-sale financial assets.
+28
+For more information about our share-based payments, see
+Note (27).
+Sales and Marketing
+Where we hedge our exposure to cash-settled awards, changes
+in the fair value of the respective hedging instruments are also
+recognized as employee benefits expenses in profit or loss. The
+fair values of hedging instruments are based on market data
+reflecting current market expectations.
+Share-based payments cover cash-settled and equity-settled
+awards issued to our employees. The respective expenses are
+recognized as employee benefits expenses and classified in our
+Consolidated Income Statements according to the activities that
+the employees owning the awards perform.
+Share-Based Payments
+We measure current and deferred tax liabilities and assets for
+uncertainties in income taxes based on our best estimate of the
+most likely amount payable to or recoverable from the tax
+authorities, assuming that the tax authorities will examine the
+amounts reported to them and have full knowledge of all
+relevant information.
+Accounting for Uncertainties in Income Taxes
+General and administration includes costs related to finance and
+administrative functions, human resources, and general
+management as long as they are not directly attributable to one
+of the other operating expense line items.
+General and Administration
+We grant our employees discounts on certain share-based
+payment awards. Since those discounts are not dependent on
+future services to be provided by our employees, the discount is
+recognized as an expense when the rights are granted.
+available-for-sale financial assets, which are non-derivative
+financial assets that are not assigned to loans and receivables or
+financial assets at fair value through profit or loss, impairment
+losses directly reduce an asset's carrying amount, while
+impairments on loans and receivables are recorded using
+allowance accounts. Such allowance accounts are always
+presented together with the accounts containing the asset's
+cost in other financial assets. Account balances are charged off
+against the respective allowance after all collection efforts have
+been exhausted and the likelihood of recovery is considered
+remote.
+€ millions
+2014
+-75
+Total deferred tax income
+-332
+-117
+-91
+assets/liabilities at fair
+83
+value through profit or loss
+935
+1,075
+1,071
+Thereof from available for
+-1
+0
+Total income tax expense
+2015
+-12
+-142
+2013
+expense/income
+Foreign currency exchange
+-230
+71
+4
+Thereof from financial
+Germany
+84
+51
+gain/loss, net
+Foreign
+-258
+-201
+-74
+74
+119
+-131
+2013
+Cost of services
+218
+24
+14
+Aggregate cost recognized
+2014
+294
+221
+Research and development
+156
+24
+(multi-year)
+Sales and marketing
+201
+2015
+€ millions
+12
+621
+126
+70
+To further drive our transition from an on-premise software
+vendor to a cloud company, we have carried out additional
+organizational changes as part of a new restructuring plan,
+which is intended to minimize cost-intensive and low-growth
+business activities worldwide. In addition, more redundancies
+resulted from the integration of our acquired companies.
+Restructuring provisions primarily include personnel costs that
+result from severance payments for employee terminations and
+onerous contract costs. Prior-year restructuring provisions
+relate to restructuring activities incurred in connection with the
+organizational changes triggered by our new cloud and
+simplification strategy and the integration of employees of our
+acquisitions. For more information, see Note (18b).
+If not presented separately in our income statement,
+restructuring expenses would break down by functional area as
+follows:
+Restructuring Expenses by Functional Area
+€ millions
+2015
+2014
+2013
+Construction Contracts in Progress
+Cost of cloud and software
+80
+9
+147
+13
+41
+Recognized result
+(+ profit/- loss;
+Restructuring expenses
+621
+126
+70
+multi-year)
+15
+Consolidated Financial Statements IFRS Notes
+(7) EMPLOYEE BENEFITS EXPENSE AND HEADCOUNT
+Employee Benefits Expense
+€ millions
+2015
+2014
+2013
+146
+28
+20
+General and administration
+20
+92
+As described in the Trade and Other Receivables section in
+Note (3b), we account for impairments of trade receivables by
+recording sales allowances and allowances for doubtful
+accounts on an individual receivable basis and on a portfolio
+basis. The assessment of whether a receivable is collectible is
+inherently judgmental and requires the use of assumptions
+about customer defaults that could change significantly.
+Judgment is required when we evaluate available information
+about a particular customer's financial situation to determine
+whether it is probable that a credit loss will occur and the
+amount of such loss is reasonably estimable and thus an
+allowance for that specific account is necessary. Basing the
+general allowance for the remaining receivables on our historical
+loss experience, too, is highly judgmental, as history may not be
+indicative of future development. Changes in our estimates
+about the allowance for doubtful accounts could materially
+impact reported assets and expenses, and our profit could be
+adversely affected if actual credit losses exceed our estimates.
+Valuation of Trade Receivables
+Additionally, our revenue for on-premise software contracts
+would be significantly different if we applied a revenue allocation
+policy other than the residual method.
+The approaches used to establish fair value
+Whether an appropriate measurement of fair value can be
+demonstrated for undelivered elements
+-
+In the area of allocating the transaction fee to the different
+deliverables under the respective customer contract, judgment
+is required in the determination of an appropriate fair value
+measurement which may impact the timing and amount of
+revenue recognized depending on the following:
+142
+Consolidated Financial Statements IFRS Notes
+Under a multiple-element arrangement including a cloud
+subscription, or on-premise software, and other deliverables, we
+do not account for the cloud subscription, or on-premise
+software, and the other deliverables separately if one of the
+other deliverables (such as consulting services) is deemed to be
+essential to the functionality of the cloud subscription or on-
+premise software. The determination whether an undelivered
+element is essential to the functionality of the delivered element
+requires the use of judgment. The timing and amount of revenue
+recognition can vary depending on how that judgment is
+exercised, because revenue may be recognized over a longer
+service term.
+The determination of whether different contracts with the same
+customer are to be accounted for as one contract is highly
+judgmental, as it requires us to evaluate whether the contracts
+are negotiated together or linked in any other way. The timing
+and amount of revenue recognition can vary depending on
+whether two contracts are accounted for separately or as one
+single contract.
+How to allocate the total arrangement fee to the deliverables
+of one contract
+87
+29
+7
+11
+57
+-
+The useful life of an intangible asset, as this determination is
+based on our estimates regarding the period over which the
+intangible asset is expected to produce economic benefits to
+The amortization method, as IFRS requires the straight-line
+method to be used unless we can reliably determine the
+pattern in which the asset's future economic benefits are
+expected to be consumed by us
+Both the amortization period and the amortization method have
+an impact on the amortization expense that is recorded in each
+period.
+In making impairment assessments for our intangible assets and
+goodwill, the outcome of these tests is highly dependent on
+management's latest estimates and assumptions regarding
+future cash flow projections and economic risks, which are
+complex and require significant judgment and assumptions
+about future developments. They can be affected by a variety of
+factors, including changes in our business strategy, our internal
+forecasts, and an estimate of our weighted-average cost of
+capital. These judgments impact the carrying amounts of our
+intangible assets and goodwill as well as the amounts of
+impairment charges recognized in profit or loss.
+The outcome of goodwill impairment tests and thus the carrying
+amounts of our recognized goodwill may depend on the
+allocation of goodwill to our operating segments. This allocation
+involves judgment as it is based on our estimates regarding
+which operating segments are expected to benefit from the
+synergies of the business combination. Additionally, judgment is
+required in the determination of our operating segments.
+Changes to the assumptions underlying our goodwill
+impairment tests could require material adjustments to the
+carrying amount of our recognized goodwill. For more
+information about the goodwill allocation and impairment
+testing, see Note (15).
+-
+Accounting for Legal Contingencies
+the appropriate amount for such provision should be. Notably,
+judgment is required in the following:
+Determining whether an obligation exists
+Determining the probability of outflow of economic benefits
+Determining whether the amount of an obligation is reliably
+estimable
+Estimating the amount of the expenditure required to settle
+the present obligation
+Due to uncertainties relating to these matters, provisions are
+based on the best information available at the time.
+At the end of each reporting period, we reassess the potential
+obligations related to our pending claims and litigation and
+adjust our respective provisions to reflect the current best
+estimate. In addition, we monitor and evaluate new information
+that we receive after the end of the respective reporting period
+but before the Consolidated Financial Statements are
+authorized for issue to determine whether this provides
+additional information regarding conditions that existed at the
+end of the reporting period. Changes to the estimates and
+assumptions underlying our accounting for legal contingencies
+and outcomes that differ from these estimates and assumptions
+could require material adjustments to the carrying amounts of
+the respective provisions recorded as well as additional
+provisions. For more information about legal contingencies, see
+Notes (18b) and (23).
+As described in Note (23), we are currently involved in various
+claims and legal proceedings. We review the status of each
+significant matter not less frequently than each quarter and
+assess our potential financial and business exposures related to
+such matters. Significant judgment is required in the
+determination of whether a provision is to be recorded and what
+As described in the Intangible Assets section in Note (3b), all of
+our intangible assets other than goodwill have finite useful lives.
+Consequently, the depreciable amount of the intangible assets is
+amortized on a systematic basis over their useful lives.
+Judgment is required in determining the following:
+Subsequent Accounting for Goodwill and Other Intangible
+Assets
+the estimated fair value) or additional income (if decreasing
+the estimated fair value).
+Cost of cloud and software
+Accounting for Share-Based Payments
+We use certain assumptions in estimating the fair values for our
+share-based payments, including expected future share price
+volatility and expected option life (which represents our
+estimate of the average amount of time remaining until the
+options are exercised or expire unexercised). In addition, the
+final payout for these plans also depends on our share price at
+the respective exercise dates. Changes to these assumptions
+and outcomes that differ from these assumptions could require
+material adjustments to the carrying amount of the liabilities we
+have recognized for these share-based payments.
+For the purpose of determining the estimated fair value of our
+stock options, we believe expected volatility is the most
+sensitive assumption. Regarding future payout under our cash-
+settled plans, the price of SAP stock will be the most relevant
+factor. Changes in these factors could significantly affect the
+estimated fair values as calculated by the option-pricing model,
+and the future payout. For more information about these plans,
+see Note (27).
+Accounting for Income Tax
+We are subject to changing tax laws in multiple jurisdictions
+within the countries in which we operate. Our ordinary business
+activities also include transactions where the ultimate tax
+outcome is uncertain, such as those involving revenue sharing
+and cost reimbursement arrangements between SAP Group
+entities. In addition, the amount of income tax we pay is
+generally subject to ongoing audits by domestic and foreign tax
+authorities. As a result, judgment is necessary in determining
+our worldwide income tax provisions. We make our estimates
+about the ultimate resolution of our tax uncertainties based on
+current tax laws and our interpretation thereof. Changes to the
+assumptions underlying these estimates and outcomes that
+differ from these assumptions could require material
+adjustments to the carrying amount of our income tax
+provisions.
+The assessment whether a deferred tax asset is impaired
+requires management judgment, as we need to estimate future
+taxable profits to determine whether the utilization of the
+deferred tax asset is probable. In evaluating our ability to utilize
+our deferred tax assets, we consider all available positive and
+negative evidence, including the level of historical taxable
+income and projections for future taxable income over the
+periods in which the deferred tax assets are recoverable. Our
+judgment regarding future taxable income is based on
+assumptions about future market conditions and future profits
+of SAP. Changes to these assumptions and outcomes that differ
+from these assumptions could require material adjustments to
+the carrying amount of our deferred tax assets.
+For more information about our income tax, see Note (10).
+Accounting for Business Combinations
+In our accounting for business combinations, judgment is
+required in determining whether an intangible asset is
+identifiable, and should be recorded separately from goodwill.
+Additionally, estimating the acquisition date fair values of the
+identifiable assets acquired and liabilities assumed involves
+considerable management judgment. The necessary
+measurements are based on information available on the
+acquisition date and are based on expectations and
+assumptions that have been deemed reasonable by
+management. These judgments, estimates, and assumptions
+can materially affect our financial position and profit for several
+reasons, including the following:
+Fair values assigned to assets subject to depreciation and
+amortization affect the amounts of depreciation and
+amortization to be recorded in operating profit in the periods
+following the acquisition.
+Subsequent negative changes in the estimated fair values of
+assets may result in additional expense from impairment
+charges.
+Subsequent changes in the estimated fair values of liabilities
+and provisions may result in additional expense (if increasing
+Consolidated Financial Statements IFRS Notes
+143
+Recognition of Internally Generated Intangible Assets from
+Development
+We believe that determining whether internally generated
+intangible assets from development are to be recognized as
+intangible assets requires significant judgment, particularly in
+the following areas:
+-
+-
+In 2015, we did not conclude any significant business
+combinations.
+Prior-year acquisitions are described in our 2014 Consolidated
+Financial Statements.
+We have retrospectively adjusted the provisional amounts
+recognized as at the dates of these acquisitions to reflect new
+information obtained about facts and circumstances that
+existed on the respective acquisition dates. For more
+information about significant adjustments, see
+Notes (10)
+and (15).
+(5) REVENUE
+For detailed information about our revenue recognition policies,
+see Note (3).
+For revenue information by geographic region, see Note (28).
+Revenue from construction contracts (contract revenue) is
+mainly included in software revenue and services revenue
+depending on the type of contract. In 2015, contract revenue of
+€292 million was recognized for all our construction contracts
+(2014: €285 million, 2013: €261 million). The status of our
+construction contracts in progress at the end of the reporting
+period accounted for under IAS 11 (Construction Contracts) was
+as follows:
+(6) RESTRUCTURING
+€ millions
+Employee-related
+restructuring expenses
+Onerous contract-related
+restructuring expenses
+Restructuring expenses
+2015
+2014
+2013
+610
+In the accounting for our multiple-element arrangements, we
+have to determine the following:
+(4) BUSINESS COMBINATIONS
+Salaries
+145
+On January 13, 2016, the IASB issued IFRS 16 (Leases). The
+standard becomes effective in fiscal year 2019 with earlier
+application permitted for those companies that also apply
+IFRS 15. The new standard is a major revision of lease
+accounting; whereas the accounting by lessors remains
+substantially unchanged, the lease accounting by lessees will
+change significantly as all leases (the majority of which were
+"off balance" in the past as they were operating leases) need
+to be recognized on a company's balance sheet as assets and
+liabilities. We have not yet completed the determination of
+the impact on our Consolidated Financial Statements.
+On January 29, 2016, the IASB published amendments to
+IAS 7 (Statement of Cash Flows). The standard becomes
+effective in fiscal year 2017 with earlier application permitted.
+The aim of the amendments is to improve the information
+provided to users of financial statements about an entity's
+financing activities and will most likely result in additional
+disclosures. We have not yet completed the determination of
+the impact on our Consolidated Financial Statements.
+-
+-
+Determining whether activities should be considered
+research activities or development activities.
+Determining whether the conditions for recognizing an
+intangible asset are met requires assumptions about future
+market conditions, customer demand, and other develop-
+ments.
+The term "technical feasibility" is not defined in IFRS, and
+therefore determining whether the completion of an asset is
+technically feasible requires judgment and a company-
+specific approach.
+Determining the future ability to use or sell the intangible
+asset arising from the development and the determination of
+the probability of future benefits from sale or use.
+Determining whether a cost is directly or indirectly
+attributable to an intangible asset and whether a cost is
+necessary for completing a development.
+These judgments impact the total amount of intangible assets
+that we present in our balance sheet as well as the timing of
+recognizing development expenses in profit or loss.
+Consolidated Financial Statements IFRS Notes
+144
+(3d) New Accounting Standards Adopted in the Current
+Period
+No new accounting standards adopted in 2015 had a material
+impact on our Consolidated Financial Statements.
+(3e) New Accounting Standards Not Yet Adopted
+The standards and interpretations (relevant to the Group) that
+are issued, but not yet effective, up to the date of issuance of the
+Group's financial statements are disclosed below. The Group
+intends to adopt these standards, if applicable, when they
+become effective:
+-
+On May 28, 2014, the IASB issued IFRS 15 (Revenue from
+Contracts with Customers). The standard becomes effective
+in fiscal year 2018 with earlier application permitted. We have
+not yet completed the determination of the impact on our
+Consolidated Financial Statements, and whether the overall
+impact will be material, but we expect the standard - for some
+of our contracts and business models - to impact the timing
+of recognizing revenue and the revenue classification. IFRS 15
+includes a cohesive set of disclosure requirements which we
+expect to lead to additional and amended disclosures. The
+standard foresees two possible transition methods for the
+adoption of the new guidance. We have not finally decided yet
+which of these two methods we intend to apply.
+On July 24, 2014, the IASB issued the fourth and final version
+of IFRS 9 (Financial Instruments), which will be applicable in
+fiscal year 2018 with earlier application permitted. The new
+guidance is expected to mainly impact the classification and
+measurement of financial assets and will result in additional
+disclosures. We have not yet completed the determination of
+the impact on our Consolidated Financial Statements.
+Consolidated Financial Statements IFRS Notes
+7,483
+us
+5,997
+2,436
+1,643
+944 5,023
+2,424
+1,445
+697
+4,566
+administration
+Infrastructure
+937 5,024
+SAP Group
+1,535 783 425 2,743 1,542
+33,906 22,166 20,914 76,986 33,340
+879
+22,071
+373 2,794 1,380 790
+18,995 74,406 30,993 19,568
+318
+2,488
+16,011
+66,572
+Thereof
+(December 31)
+2,434 1,653
+General and
+marketing
+Research and
+4,264 3,841 15,085
+9,676 4,233 7,029 20,938
+7,291
+9,049
+4,304
+3,974
+3,044 14,639
+5,885 18,908
+7,177 4,406 3,047 14,629
+8,806 3,630 5,367 17,804
+development
+Sales and
+7,186
+6,319
+7,314
+3,706
+18,206 7,069
+7,288
+3,611
+17,969 6,346 6,437
+3,041
+15,824
+acquisitions
+6,980
+73
+0
+2014
+2015
+€ millions
+-181
+-152
+-246
+Finance costs
+financial assets (equity)
+2013
+46
+176
+Thereof available-for-sale
+115
+127
+241
+Finance income
+2013
+€ millions
+30
+Thereof interest expense from
+(9) FINANCIAL INCOME, NET
+Share-Based Payments
+73
+814
+2,890 1,831 5,535
+511
+571
+29
+-135
+1,111
+SAP Group
+(months' end
+average)
+33,561
+21,832 19,788 75,180
+31,821 19,797
+16,725 68,343 30,238
+19,418
+15,752 65,409
+Consolidated Financial Statements IFRS Notes
+147
+Allocation of Share-Based Payment Expense
+The allocation of expense for share-based payments, net of the
+effects from hedging these instruments, to the various operating
+expense items is as follows:
+0
+Services
+software
+Total
+Number of Employees
+The number of employees in the following table is broken down
+by function and by the regions EMEA (Europe, Middle East, and
+Africa), Americas (North America and Latin America), and APJ
+(Asia Pacific Japan).
+Pension expense includes the amounts recorded for our defined
+benefit and defined contribution plans as described in
+Note (18a). Expenses for local state pension plans are included
+in social security expense.
+7,489
+7,877
+10,170
+Employee benefits expense
+of restructuring plans
+39
+22
+28
+Termination benefits outside
+restructuring expense
+57
+Full-time
+119
+Employee-related
+212
+211
+258
+Pension expense
+expense
+327
+290
+724
+Share-based payment
+857
+916
+1,067
+Social security expense
+610
+2014
+2015
+ricas
+December 31, 2014
+December 31, 2013
+equivalents
+EMEA
+Ame-
+APJ
+Total
+EMEA
+-93
+Cloud and
+6,095
+3,920
+4,976 14,991
+5,953
+Ame-
+ricas
+3,983 5,138 15,074
+APJ
+Total
+EMEA
+4,859
+Ame-
+ricas
+2,861 3,541 11,261
+APJ
+December 31, 2015
+4
+282
+Foreign currency exchange differences
+7
+73
+81
+615
+Retirements/disposals
+0
+-4
+-42
+-3
+-49
+December 31, 2014
+99
+78
+1,357
+1,489
+3,393
+Foreign currency exchange differences
+4
+10
+84
+89
+187
+Additions amortization
+76
+372
+0
+Additions amortization
+165
+255
+448
+Accumulated amortization
+1,129
+332
+800
+435
+164
+599
+Prepaid expenses primarily consist of prepayments for
+operating leases, support services, and software royalties.
+Consolidated Financial Statements IFRS Notes 152
+Created: 31.03.2016 15:16
+(15) GOODWILL AND INTANGIBLE ASSETS
+€ millions
+Goodwill
+Software and
+Database
+Licenses
+Acquired
+Technology/
+IPRD
+Customer
+Relationship
+and Other
+Intangibles
+Total
+Historical cost
+January 1, 2014
+13,785
+558
+1,929
+3,036
+19,308
+Foreign currency exchange differences
+1,242
+468
+33
+○
+33
+2014
+Current
+Non-Current
+Total
+Current
+Non-Current
+Total
+232
+83
+315
+212
+66
+277
+13
+113
+113
+101
+○
+101
+77
+250
+327
+90
+99
+188
+46
+0
+46
+0
+2,662
+160
+1,712
+0
+6
+5
+38
+Other additions
+Retirements/disposals
+○
+53
+0
+6
+59
+0
+-8
+-1
+-1
+-10
+December 31, 2015
+22,792
+727
+2,796
+5,033
+31,348
+361
+January 1, 2014
+95
+367
+1,071
+27
+Additions from business combinations
+2,264
+379
+Additions from business combinations
+6,072
+14
+540
+1,312
+7,938
+Other additions
+0
+86
+0
+2
+88
+Retirements/disposals
+297
+0
+-42
+-3
+-49
+December 31, 2014
+21,099
+667
+2,587
+4,644
+28,997
+Foreign currency exchange differences
+1,666
+15
+204
+-4
+809
+219
+○
+Applications, Technology & Services
+The recoverable amounts of the segment have been determined
+based on value-in-use calculations. The calculations use cash
+flow projections based on actual operating results and a group-
+wide five-year business plan approved by management.
+We believe that any reasonably possible change in any of the
+above key assumptions would not cause the carrying amount of
+our Applications, Technology & Services segment to exceed the
+recoverable amount.
+SAP Business Network
+The recoverable amounts of the segment have been determined
+based on fair value less costs of disposal calculations. The fair
+value measurement was categorized as a level 3 fair value based
+on the inputs used in the valuation technique. The cash flow
+projections are based on actual operating results and specific
+estimates covering a ten-year period and the terminal growth
+rate thereafter. The calculations use cash flow projections based
+on actual operating results and a group-wide five-year business
+plan approved by management. The projected results were
+determined based on management's estimates and are
+consistent with the assumptions a market participant would
+make. The segment operates in a relatively immature area with
+significant growth rates projected for the near future. We
+therefore have a longer and more detailed planning period than
+one would apply in a more mature segment.
+We are using a target margin of 33% for the segment at the end
+of the budgeted period as a key assumption, which is within the
+range of expectations of market participants (for example,
+industry analysts).
+The recoverable amount exceeds the carrying amount by
+€1,764 million.
+The following table shows amounts by which the key
+assumptions would need to change individually for the
+recoverable amount to be equal to the carrying amount:
+Sensitivity to Change in Assumptions
+Percentage points
+Budgeted revenue growth (average of the
+budgeted period)
+Pre-tax discount rate
+Terminal growth rate
+3.0
+SAP Business
+Network
+-2.1
+-1.7
+The recoverable amount for the SAP Business Network segment
+would equal the carrying amount if a margin of only 27% was
+achieved by 2022.
+Consolidated Financial Statements IFRS Notes
+155
+(16) PROPERTY, PLANT, AND EQUIPMENT
+€ millions
+Carrying amount
+December 31, 2014
+December 31, 2015
+Total additions (other than from business combinations)
+amounted to €580 million (2014: €629 million) and relate
+primarily to the replacement and purchase of computer
+hardware and vehicles acquired in the normal course of
+business and investments in data centers.
+(17) TRADE AND OTHER PAYABLES, FINANCIAL
+LIABILITIES, AND OTHER NON-FINANCIAL LIABILITIES
+(17a) Trade and Other Payables
+€ millions
+1.4
+Trade payables
+3.0
+11.7
+0
+0
+22,689
+The amount unallocated on January 1, 2015, relates to the
+goodwill from the acquisition of Concur in December 2014.
+Prior-year goodwill amounts have been adjusted by €55 million
+relating mainly to tax and non-controlling interest adjustments.
+For more information, see Note (10).
+Consolidated Financial Statements IFRS Notes
+154
+The key assumptions on which management based its cash flow
+projections for the period covered by the underlying business
+Key Assumption
+Budgeted revenue growth
+Budgeted operating margin
+Pre-tax discount rates
+Terminal growth rate
+plans are as follows:
+13.0
+Basis for Determining Values Assigned to Key Assumption
+Operating margin budgeted for a given budget period equals the operating margin
+achieved in the current fiscal year, increased by expected efficiency gains. Values
+assigned reflect past experience, except for efficiency gains.
+Our estimated cash flow projections are discounted to present value using pre-tax
+discount rates. Pre-tax discount rates are based on the weighted average cost of
+capital (WACC) approach.
+Our estimated cash flow projections for periods beyond the business plan were
+extrapolated using the segment-specific terminal growth rates. These growth rates do
+not exceed the long-term average growth rates for the markets in which our segments
+operate.
+Key Assumptions
+Percent
+Budgeted revenue growth
+(average of the budgeted
+Pre-tax discount rate
+Terminal growth rate
+SAP Business
+Network
+Applications,
+Technology &
+Services
+4.5
+16.2
+Revenue growth rate achieved in the current fiscal year, adjusted for an expected
+increase in SAP's addressable cloud, mobility, and database markets; expected
+growth in the established applications and analytics markets. Values assigned reflect
+our past experience and our expectations regarding an increase in the addressable
+markets.
+Advance payments received
+Miscellaneous other liabilities
+Trade and other payables
+112
+85
+81
+166
+138
+55
+193
+1,088
+81
+1,169
+1,032
+55
+1,087
+Miscellaneous other liabilities mainly include deferral amounts
+for free rent periods and liabilities related to government grants.
+0
+(17b) Financial Liabilities
+2015
+2014
+Nominal Volume
+Current
+Carrying Amount
+Nominal Volume
+Carrying Amount
+Non- Current
+Current
+Non-
+Current
+Total
+Current
+Non- Current
+Current
+Non-
+Current
+Total
+Bonds
+€ millions
+110
+○
+110
+Land and
+Buildings
+Other
+Advance
+Property,
+Payments and
+Plant, and Construction in
+Equipment
+Progress
+Total
+1,010
+1,050
+42
+2,102
+1,053
+1,073
+66
+2,192
+782
+0
+782
+893
+0
+893
+7,191
+Total
+Current
+Total
+Non-Current
+Current
+2014
+2015
+Non-Current
+15,497
+1,662
+0
+Business Objects - Customer relationships: Maintenance
+104
+126
+6 to 9
+-
+Sybase Acquired technologies
+80
+149
+approx. 1
+-
+Sybase Customer relationships: Maintenance
+363
+418
+8
+(in years)
+SuccessFactors - Acquired technologies
+184
+4
+SuccessFactors - Customer relationships: Subscription
+395
+402
+10
+Ariba Acquired technologies
+137
+166
+5
+Ariba Customer relationships
+525
+516
+10 to 12
+149
+2014
+2015
+Useful Life
+-8
+-1
+-1
+-10
+December 31, 2015
+103
+526
+1,812
+1,938
+4,379
+Carrying amount
+December 31, 2014
+December 31, 2015
+21,000
+2015
+1,230
+3,155
+Remaining
+Carrying Amount
+€ millions, unless otherwise stated
+Significant Intangible Assets
+153
+Consolidated Financial Statements IFRS Notes
+hybris Acquired technologies
+individually acquired from third parties and include cross-license
+agreements and patents.
+26,969
+3,095
+984
+201
+22,689
+25,604
+The additions, other than from business combinations, to
+software and database licenses in 2015 and 2014 were
+Retirements/disposals
+hybris Customer relationships
+Fieldglass Acquired technologies
+-
+Adjustment
+0
+0
+-31
+5,533
+86
+20,945
+55
+January 1, 2015, after adjustment
+0
+0
+15,381
+5,619
+21,000
+Reallocation due to changes in segment composition
+15,412
+14,401
+-15,381
+-5,619
+0
+Additions from business combinations
+27
+0
+0
+0
+27
+Foreign currency exchange differences
+December 31, 2015
+1,070
+592
+0
+6,599
+0
+0
+January 1, 2015, prior to adjustment
+Concur Customer relationships
+Total significant intangible assets
+100
+128
+5
+127
+136
+2 to 12
+89
+96
+7
+387
+445
+6
+1,299
+1,233
+15 to 19
+(2014)
+Services
+Total
+Unallocated
+Single
+Segment
+SAP Business
+Network
+Concur Acquired technologies
+Applications,
+Technology &
+been allocated for impairment testing purposes to SAP'S
+operating segments.
+Goodwill by Operating Segment
+SAP had two operating segments in 2015 (in 2014, we had a
+single operating segment). The carrying amount of goodwill has
+Goodwill Impairment Testing
+3,999
+3,755
+€ millions
+For more information about financial risk and how we manage it,
+see Notes (24) and (25).
+2
+Miscellaneous other assets
+tax assets, research and
+development tax credits,
+and foreign tax credits
+Other
+-24
+-37
+21
+Total income tax expense
+935
+1,075
+1,071
+Effective tax rate (in %)
+23.4
+24.7
+24.4
+We retrospectively adjusted the provisional amounts recognized
+for deferred tax assets and liabilities related to the 2014
+business combinations by a corresponding increase in goodwill
+in the amount of €102 million. The adjustments reflect new
+information obtained about facts and circumstances as of the
+acquisition date, mainly about the valuation of the carrying
+amount of investments in subsidiaries and the utilization of
+carryforwards of unused tax losses.
+Consolidated Financial Statements IFRS Notes
+149
+Items Not Resulting in a Deferred Tax Asset
+Total Income Tax
+€ millions
+2015
+2014
+-260
+2013
+5
+60
+87
+Deferred income
+40
+11
+Research and
+-31
+-41
+-41
+development and foreign
+Other
+11
+9
+tax credits
+Total deferred tax liabilities
+1,950
+2,129
+Prior-year taxes
+-55
+-10
+-113
+Reassessment of deferred
+43
+41
+Total deferred tax assets/liabilities,
+net
+€ millions
+2015
+2014
+comprehensive income that
+will not be reclassified to
+profit and loss
+Deductible temporary
+122
+96
+178
+differences
+Remeasurements on
+defined benefit pension
+plans
+-2
+-7
+3
+Unused research and
+development and foreign
+tax credits
+Not expiring
+34
+32
+25
+Income tax recorded in other
+comprehensive income that
+will be reclassified to profit
+and loss
+Expiring in the following year
+○
+○
+1
+Available-for-sale financial
+636
+875
+1,078
+Total unused tax losses
+2013
+Unused tax losses
+Income tax recorded in profit
+935
+1,075
+1,071
+Not expiring
+279
+140
+68
+Income tax recorded in share
+premium
+111
+-14
+-5
+Expiring in the following year
+95
+63
+43
+Income tax recorded in other
+Expiring after the following
+704
+672
+525
+year
+-3
+115
+Withholding taxes
+118
+15
+12
+The following table reconciles the expected income tax expense
+computed by applying our combined German tax rate of 26.4%
+(2014: 26.4%; 2013: 26.4%) to the actual income tax expense.
+Our 2015 combined German tax rate includes a corporate
+income tax rate of 15.0% (2014: 15.0%; 2013: 15.0%), plus a
+solidarity surcharge of 5.5% (2014: 5.5%; 2013: 5.5%) thereon,
+and trade taxes of 10.6% (2014: 10.6%; 2013: 10.6%).
+Relationship Between Tax Expense and Profit Before Tax
+Trade and other receivables
+64
+53
+Pension provisions
+Share-based payments
+98
+87
+163
+107
+Other provisions and obligations
+431
+403
+Deferred income
+104
+76
+Carryforwards of unused tax losses
+621
+752
+Research and development and foreign
+tax credits
+Other
+Other financial assets
+18
+24
+Property, plant, and equipment
+Profit Before Tax
+Recognized Deferred Tax Assets and Liabilities
+€ millions
+Germany
+Foreign
+Total
+2015
+2014
+2013
+€ millions
+2015
+2014
+187
+3,161
+3,126
+Deferred tax assets
+830
+1,017
+1,270
+Intangible assets
+99
+104
+3,991
+4,355
+4,396
+3,338
+2
+85
+172
+Trade and other receivables
+93
+69
+Foreign tax rates
+-126
+-117
+-116
+Pension provisions
+5
+4
+Non-deductible expenses
+61
+63
+158
+Share-based payments
+4
+3
+Tax exempt income
+-103
+-86
+-146
+Other provisions and obligations
+112
+Tax effect of:
+623
+389
+Other financial assets
+€ millions, unless otherwise
+stated
+2015
+2014
+2013
+Total deferred tax assets
+1,955
+1,869
+Profit before tax
+3,991
+4,355
+4,396
+149
+Deferred tax liabilities
+1,055
+1,151
+1,161
+Intangible assets
+1,234
+1,241
+rate of 26.4% (2014: 26.4%;
+Property, plant, and equipment
+62
+51
+2013: 26.4%)
+Tax expense at applicable tax
+0
+assets
+Expiring after the following
+2014
+Current Non-Current
+Total
+Current
+Non-Current
+Total
+Trade receivables, net
+5,198
+5,199
+4,253
+2
+4,255
+Other receivables
+77
+86
+163
+89
+99
+188
+Total
+5,275
+87
+5,362
+2015
+€ millions
+151
+Consolidated Financial Statements IFRS Notes
+554
+Investments in associates
+0
+58
+58
+0
+49
+49
+Total
+351
+1,336
+4,342
+1,687
+1,021
+1,699
+Loans and Other Financial Receivables
+Loans and other financial receivables mainly consist of time
+deposits, investments in pension assets for which the
+corresponding liability is included in employee-related
+obligations (see Note (18b)), other receivables, and loans to
+employees and third parties. The majority of our loans and other
+financial receivables are concentrated in the United States.
+As at December 31, 2015, there were no loans and other
+financial receivables past due but not impaired. We have no
+indications of impairments of loans and other financial
+receivables that are not past due and not impaired as at the
+reporting date. For general information about financial risk and
+the nature of risk, see Note (24).
+Available-for-Sale Financial Assets
+Our available-for-sale financial assets consist of debt
+investments in bonds of mainly financial and non-financial
+corporations and municipalities and equity investments in listed
+and unlisted securities, mainly held in U.S. dollars.
+For more information about fair value measurement with regard
+to our equity investments, see Note (26).
+Derivatives
+Detailed information about our derivative financial instruments
+is presented in Note (25).
+(13) TRADE AND OTHER RECEIVABLES
+678
+90
+100
+Carrying Amounts of Trade Receivables
+339
+net
+Past due 121 to 365 days
+257
+118
+The changes in the allowance for doubtful accounts charged to
+expense were immaterial in all periods presented.
+Total past due but not individually
+impaired
+Past due over 365 days
+38
+16
+1,196
+818
+Individually impaired, net of allowances
+85
+75
+Carrying amount of trade receivables,
+net
+5,199
+4,255
+(14) OTHER NON-FINANCIAL ASSETS
+€ millions
+Prepaid expenses
+Other tax assets
+Capitalized contract cost
+428
+Past due 31 to 120 days
+4,255
+5,199
+Aging of Trade Receivables
+€ millions
+2015
+2014
+€ millions
+2015
+2014
+Gross carrying amount
+5,428
+4,440
+Not past due and not individually impaired
+4,443
+3,918
+Sales allowances charged to revenue
+-153
+-134
+Past due but not individually impaired
+Allowance for doubtful accounts charged
+to expense
+-75
+-52
+Past due 1 to 30 days
+473
+345
+Carrying amount trade receivables,
+3,362
+Total
+464
+154
+2015
+2014
+2013
+Profit attributable to equity holders of SAP SE
+3,064
+3,280
+3,326
+Issued ordinary shares¹)
+1,229
+1,229
+1,229
+Effect of treasury shares¹)
+-32
+-34
+-35
+Weighted average shares outstanding, basic¹)
+1,197
+1,195
+1,193
+Dilutive effect of share-based payments¹)
+2
+3
+2
+€ millions, unless otherwise stated
+(11) EARNINGS PER SHARE
+150
+Consolidated Financial Statements IFRS Notes
+20
+22
+1
+Cash flow hedges
+4
+-10
+year
+Total unused tax credits
+54
+54
+27
+Weighted average shares outstanding, diluted¹)
+Exchange differences
+-21
+8
+Total
+909
+1,034
+1,077
+€429 million (2014: €441 million; 2013: €421 million) of the
+unused tax losses relate to U.S. state tax loss carryforwards. As
+described above, prior-year numbers for unused tax losses
+related to the 2014 business combinations were adjusted,
+resulting in a decrease in the amount of €235 million.
+In 2015, subsidiaries that suffered a tax loss in either the current
+or the preceding period recognized deferred tax assets in excess
+of deferred tax liabilities amounting to €129 million (2014:
+€73 million, 2013: €61 million), because it is probable that
+sufficient future taxable profit will be available to allow the
+benefit of the deferred tax assets to be utilized.
+We have not recognized a deferred tax liability on approximately
+€9.95 billion (2014: €8.87 billion) for undistributed profits of our
+subsidiaries, because we are in a position to control the timing of
+the reversal of the temporary difference and it is probable that
+such differences will not reverse in the foreseeable future.
+The proposed dividend payment of €1.15 per share for the year
+ended December 31, 2015, will not have any effects on the
+income tax of SAP SE.
+We are subject to ongoing tax audits by domestic and foreign tax
+authorities. Currently, we are mainly in dispute with the German
+and the Brazilian tax authorities. The German dispute is in
+respect of intercompany financing matters and certain secured
+capital investments, while the Brazilian dispute is in respect of
+license fee deductibility. In all cases, we expect that we will need
+to initiate litigation to prevail. For all of these matters, we have
+not recorded a provision as we believe that the tax authorities'
+claims have no merit and that no adjustment is warranted. If,
+contrary to our view, the tax authorities were to prevail in their
+arguments before the court, we would expect to have an
+additional tax expense (including related interest expenses and
+penalties) of approximately €1,045 million in total.
+-16
+283
+1,198
+1,195
+26
+0
+26
+40
+0
+40
+Equity investments
+1
+0
+881
+882
+1
+596
+597
+Available-for-sale financial assets
+27
+881
+908
+41
+596
+637
+Derivatives
+129
+Debt investments
+459
+286
+173
+Earnings per share, basic, attributable to equity holders
+2.56
+2.75
+2.79
+of SAP SE (in €)
+Earnings per share, diluted, attributable to equity holders
+of SAP SE (in €)
+2.56
+2.74
+2.78
+Number of shares in millions
+(12) OTHER FINANCIAL ASSETS
+1,197
+€ millions
+2014
+Current
+Non-Current
+Total
+Current
+Non-Current
+Total
+Loans and other financial receivables
+195
+243
+437
+2015
+5,750
+112
+5,733
+Bank Loans
+The U.S. private placement notes were issued by one of our
+subsidiaries that has the U.S. dollar as its functional currency.
+157
+Consolidated Financial Statements IFRS Notes
+2,195
+2,202
+Private placements
+88
+Maturity
+100
+3.57%
+3.53% (fix)
+2027
+Tranche 9-2012
+277
+318
+US$323
+3.37%
+US$100
+Coupon Rate
+Effective
+Interest Rate
+Concur term loan - Facility B
+1,268
+0
+€0
+ΝΑ
+NA
+2015
+Concur term loan - Facility A
+millions)
+currency in
+(in € millions)
+(in respective (in € millions)
+Carrying
+Amount
+2014
+Amount
+Carrying
+Volume
+Nominal
+2015
+3.33% (fix)
+2017
+2024
+372
+3.50%
+3.43% (fix)
+2018
+Tranche 4 2011
+494
+551
+US$600
+2.82%
+US$150
+2.77% (fix)
+Tranche 3-2011
+161
+180
+US$200
+3.03%
+2.95% (fix)
+2017
+Tranche 2-2010
+2016
+135
+121
+Tranche 5 2012
+426
+US$444.5
+3.22%
+3.18% (fix)
+2022
+Tranche 7-2012
+238
+271
+US$290
+2.86%
+2.82% (fix)
+2020
+Tranche 6-2012
+197
+221
+US$242.5
+2.16%
+2.13% (fix)
+2017
+Tranche 8-2012
+247
+0.45% (var.)
+€1,250
+Pension plans and similar obligations (see Note (18a))
+Total
+Non-
+Current
+Current
+Total
+Non-
+Current
+Current
+2014
+0
+2015
+(18) PROVISIONS
+Other taxes mainly comprise payroll tax liabilities and value-
+added tax liabilities.
+For more information about our share-based payments, see
+Note (27).
+Other employee-related liabilities mainly relate to vacation
+accruals, bonus and sales commission accruals, as well as
+employee-related social security obligations.
+3,030
+219
+2,811
+3,738
+€ millions
+117
+117
+2
+0
+158
+Consolidated Financial Statements IFRS Notes
+301
+151
+150
+479
+180
+299
+Total
+213
+65
+148
+362
+63
+299
+Other provisions (see Note (18b))
+88
+86
+331
+0.93%
+3,407
+543
+Total
+Non-Current
+Current
+2014
+2015
+€ millions
+(17c) Other Non-Financial Liabilities
+Our current other financial liabilities mainly comprise liabilities
+for accrued interest and customer funding liabilities amounting
+to €90 million (2014: €58 million).
+Current
+Other Financial Liabilities
+1,261
+Bank loans
+9
+16
+INR 1026
+Other loans
+2,984
+1,245
+4,261
+Non-Current
+Total
+Other employee-related liabilities
+0
+543
+597
+0
+597
+Other taxes
+386
+97
+289
+760
+205
+555
+Share-based payment liabilities
+2,101
+122
+1,979
+2,381
+126
+2,255
+Other non-financial liabilities
+0
+€750
+ΝΑ
+2,561
+9,522
+8,681
+841
+Financial liabilities
+123
+4
+119
+8,980
+NA
+199
+-5
+204
+ΝΑ
+ΝΑ
+Other financial liabilities
+333
+46
+ΝΑ
+11,542
+Financial liabilities are unsecured, except for the retention of
+title and similar rights customary in our industry. Effective
+interest rates on our financial debt (including the effects from
+interest-rate swaps) were 1.30% in 2015, 1.77% in 2014, and
+2.48% in 2013.
+2017
+Eurobond 2 - 2010
+millions)
+currency in
+(in respective (in € millions) (in € millions)
+2014
+Carrying
+Amount
+Carrying
+Amount
+2015
+Volume
+Nominal
+Effective
+Interest Rate
+Coupon Rate
+Issue Price
+Maturity
+Bonds
+about the risk associated with our financial liabilities, see
+Note (25). For information about fair values, see Note (26).
+For an analysis of the contractual cash flows of our financial
+liabilities based on maturity, see Note (24). For information
+156
+Consolidated Financial Statements IFRS Notes
+287
+99.780%
+NA
+128
+Bank loans
+transactions
+2,195
+1,948
+247
+4,629
+3,998
+631
+16
+4,000
+1,936
+2,202
+1,651
+551
+1,607
+551
+Private placement
+5,733
+US$0
+631
+247
+1,250
+16
+1,245
+58
+70
+ΝΑ
+ΝΑ
+Derivatives
+11,086
+8,936 2,155
+2,157
+9,195
+8,628
+567
+8,607
+567
+Financial debt
+4,261
+2,985
+1,277
+1,279 3,000
+1,261
+ΝΑ
+Eurobond 5-2012
+8,931
+ΝΑ
+Eurobonds
+593
+€600
+1.13%
+1.00% (fix)
+0
+648
+€650
+5,733
+0.23%
+100.000%
+99.264%
+2025
+Eurobond 12 - 2015
+2020
+Eurobond 11 - 2015
+0
+499
+€500
+0.259% (var.)
+4,547
+Other bonds
+0
+2015
+NA
+2015
+Tranche 1 2010
+U.S. private placements
+(in € millions)
+2014
+Carrying
+Amount
+(in € millions)
+Carrying
+Amount
+2015
+Nominal
+Volume
+(in respective
+currency in
+millions)
+Effective
+Interest Rate
+Maturity Coupon Rate
+All of our Eurobonds are listed for trading on the Luxembourg
+Stock Exchange.
+Private Placement Transactions
+Since September 2012, we have used a debt issuance program
+to issue bonds in a number of tranches. Currently, the total
+volume available under the program (including the amounts
+issued) is €8 billion.
+4,629
+5,733
+Bonds
+0.14%
+0.127% (var.)
+82
+2017
+2018
+Eurobond 7 - 2014
+778
+774
+€750
+2.29%
+2.125% (fix)
+99.307%
+Eurobond 6 - 2012
+549
+0
+€0
+NA
+490
+488
+100.000%
+3.50% (fix)
+ΝΑ
+€500
+3.59%
+100.000%
+0.208% (var.)
+2019
+749
+€1,000
+0.23%
+Eurobond 10 - 2015
+1.86%
+1.75% (fix)
+989
+2027
+Eurobond 9 - 2014
+992
+99.284%
+993
+748
+Eurobond 8 - 2014
+2023
+99.478%
+990
+1.125% (fix)
+1.24%
+€1,000
+Total expense
+3
+0
+0
+6
+0
+0
+0
+10
+1
+Past service cost
+0
+0
+0
+0
+0
+-25
+-29
+-22
+-1
+21
+-1
+1
+16
+144
+10
+Asset category
+Equity investments
+-2
+€ millions
+Plan Asset Allocation
+benefit plans. Although our policy is to invest in a risk-diversified
+portfolio consisting of a mix of assets, both the defined benefit
+obligation and plan assets can fluctuate over time, which
+exposes the Group to actuarial and market (investment) risks.
+Depending on the statutory requirements in each country, it
+might be necessary to reduce any underfunding by addition of
+liquid assets.
+Our investment strategies for foreign benefit plans vary
+according to the conditions in the country in which the
+respective benefit plans are situated. Generally, a long-term
+investment horizon has been adopted for all major foreign
+Our investment strategy on domestic benefit plans is to invest
+all contributions in stable insurance policies.
+20
+-74
+1
+1
+16
+2
+10
+0
+10
+133
+-76
+Actual return on plan
+assets
+26
+26
+41
+4
+7
+9
+-4
+2015
+-3
+10
+Current service cost
+2013
+2014
+2015
+2014 2013
+2015
+2013
+2014
+2015
+2014 2013
+Plans
+Total
+Other Post-Employment
+Foreign Plans
+Domestic Plans
+€ millions
+Total Expense of Defined Benefit Pension Plans
+957
+1,185
+1,221
+36
+Corporate bonds
+3
+7
+21
+16
+-20
+-23
+-17
+Interest income
+24
+29
+23
+1
+2
+3
+4
+-5
+5
+19
+22
+17
+Interest expense
+25
+25
+40
+3
+6
+9
+15
+3
+Government bonds
+Contractual Maturities of Non-Derivative Financial Liabilities
+Insurance policies
+2018
+2019
+Trade payables
+-893
+-893
+○
+0
+0
+Financial liabilities
+-9,395
+-863
+-2,778
+-980
+-836
+2020
+0
+-986
+Thereafter
+Total of non-derivative financial liabilities
+-10,288
+-1,756
+-2,778
+-980
+-836
+-986
+2017
+2016
+12/31/2015
+Contractual Cash Flows
+Investing activities
+Financing activities
+2015
+2014
+Cash Flow Risk
+Fair Value Risk Cash Flow Risk
+Fair Value Risk
+3,078
+3,157
+480
+6,038
+2,445
+0
+-3,683
+-3,683
+1,003
+6.077
+c) Equity Price Risk
+We are exposed to equity price risk with regard to our
+investments in listed equity securities (2015: €320 million; 2014:
+€209 million) and our share-based payments (for the exposure
+from these plans, see Note (27)).
+Credit Risk
+To reduce the credit risk in investments, we arrange to receive
+rights to collateral for certain investing activities in the full
+amount of the investment volume, which we would be allowed to
+make use of only in the case of default of the counterparty to the
+investment. In the absence of other significant agreements to
+reduce our credit risk exposure, the total amounts recognized as
+cash and cash equivalents, current investments, loans and other
+financial receivables, trade receivables, and derivative financial
+assets represent our maximum exposure to credit risks, except
+for the agreements mentioned above.
+Liquidity Risk
+The table below is an analysis of the remaining contractual
+maturities of all our financial liabilities held at December 31,
+2015. Financial liabilities for which repayment can be requested
+by the contract partner at any time are assigned to the earliest
+possible period. Variable interest payments were calculated
+using the latest relevant interest rate fixed as at December 31,
+2015. As we generally settle our derivative contracts gross, we
+show the pay and receive legs separately for all our currency and
+interest-rate derivatives, whether or not the fair value of the
+derivative is negative, except for the derivative forward
+contracts entered into in connection with the acquisition of
+Concur, where we bought and sold US$8.5 billion because we
+settled those net. The cash outflows for the currency derivatives
+are translated using the applicable forward rate.
+For more information about the cash flows for unrecognized but
+contractually agreed financial commitments, see Note (22).
+49
+€ millions
+Carrying
+Amount
+5,009
+Real estate
+€ millions
+Contractual Cash Flows
+0
+31
+0
+43
+1
+0
+5
+0
+60
+0
+101
+0
+75
+○
+93
+2014
+Not Quoted in
+an Active
+Market
+Quoted in an
+Active Market
+2015
+Not Quoted in
+an Active
+Market
+Quoted in an
+Active Market
+Consolidated Financial Statements IFRS Notes
+Total
+Others
+Cash and cash equivalents
+0
+736
+0
+780
+12/31/2014
+2015
+2016
+2017
+2018
+2019 Thereafter
+Trade payables
+-782
+-782
+○
+○
+Carrying
+Amount
+○
+0
+Financial liabilities
+-11,209
+-2,377
+-625
+-3,976
+-958
+36
+41
+0
+9
+0
+87
+1.1
+296
+0
+○
+0
+Non-current other financial assets
+Consolidated Statement of Financial
+Position:
+Amounts recognized in the
+88
+117
+33
+40
+42
+69
+13
+8
+Net defined benefit liability (asset)
+1,014
+1,023
+13
+42
+234
+265
+767
+716
+0
+○
+0
+0
+-42
+-69
+-13
+-8
+Total
+-86
+-117
+-33
+-40
+-40
+-69
+Fair value of the plan assets
+-13
+Non-current provisions
+-2
+0
+0
+0
+-2
+0
+0
+0
+Current provisions
+0
+-8
+57
+61
+20
+2014
+2015
+2014
+2015
+Total
+Other Post-
+Employment Plans
+Foreign Plans
+Domestic Plans
+€ millions
+Present Value of the Defined Benefit Obligations (DBO) and the Fair Value of the Plan Assets
+The measurement dates for our domestic and foreign benefit
+plans are December 31.
+2015
+Defined Benefit Plans
+-3,262
+Total of non-derivative financial liabilities
+-11,990
+-3,159
+-625
+-3,976
+-958
+-827
+-3,262
+Consolidated Financial Statements IFRS Notes
+168
+-827
+-40
+2014
+2014
+21
+37
+40
+0
+0
+Thereof unfunded plans
+1,045
+1,078
+26
+61
+239
+2015
+293
+724
+Thereof fully or partially funded plans
+1,102
+1,139
+46
+82
+276
+333
+780
+724
+Present value of the DBO
+780
+246
+-33
+-88
+2013
+2014
+2015
+Total
+Other Post-Employment
+Foreign Plans
+Domestic Plans
+€ millions
+Sensitivity Analysis
+159
+Consolidated Financial Statements IFRS Notes
+assumptions constant. A reasonable possible change in
+actuarial assumptions of 50 basis points in either direction,
+except for the discount rate assumption, would not materially
+influence the present value of all defined benefit obligations.
+The sensitivity analysis table shows how the present value of all
+defined benefit obligations would have been influenced by
+reasonable possible changes to above actuarial assumptions.
+The sensitivity analysis table presented below considers change
+in one actuarial assumption at a time, holding all other actuarial
+1.1
+1.3
+1.0
+1.3
+1.3
+1.4
+0
+0
+2.0
+Inflation
+2015
+2014
+2013
+2015
+359
+675
+840
+775
+Discount rate was 50 basis
+points lower
+points higher
+834
+1,028
+32 1,068
+44
+79
+2.5
+217
+311
+585
+725
+678
+Discount rate was 50 basis
+obligations if:
+defined benefit
+Present value of all
+2013
+2014
+Plans
+2014 2013 2015
+259
+1.3
+8.7
+9.9
+4.0
+2.1
+€ millions
+0.7
+3.6
+2.2
+2.7
+Discount rate
+2013
+2014
+2015
+4.2
+2013
+2015
+2013
+2014
+2015
+Other Post-Employment Plans
+Foreign Plans
+Domestic Plans
+Percent
+The following weighted average assumptions were used for the
+actuarial valuation of our domestic and foreign pension liabilities
+as well as other post-employment benefit obligations as at the
+respective measurement date:
+Actuarial Assumptions
+€664 million (2014: €714 million) of the present value of the
+DBO of our domestic plans relate to plans that provide for lump
+sum payments not based on final salary, and €287 million (2014:
+€234 million) of the present value of the DBO of our foreign
+plans relate to plans that provide for annuity payments not
+based on final salary.
+2014
+-117
+5.2
+2.5
+10.1
+10.3
+2.0
+2.0
+2.0
+Employee turnover
+0.0
+○
+0.0
+0
+0
+Future salary increases
+0
+2.0
+2.0
+Future pension increases
+4.7
+3.8
+6.3
+1.7
+1.7
+1.7
+2.5
+2.5
+2.0
+We are exposed to interest-rate risk as a result of our investing
+and financing activities mainly in euros and U.S. dollars as
+follows:
+164
+167
+797
+2
+-627
+-30
+7
+362
+Thereof current
+Thereof non-current
+148
+65
+299
+63
+Intellectual property-related provisions relate to litigation
+matters. Customer-related provisions relate primarily to
+disputes with individual customers. Both classes of provision are
+described in Note (23).
+For more information about our restructuring plans, see
+Note (6).
+The
+cash outflows associated with employee-related
+restructuring costs are substantially short-term in nature. In
+2015, employees received, under certain restructuring activities,
+credits to their working time accounts which will allow them to
+discontinue work earlier than their retirement date. These
+obligations are classified as employee-related provisions rather
+than restructuring provisions.
+Onerous contract and other provisions comprise facility-related
+and supplier-related provisions. The timing of these cash
+outflows associated is dependent on the remaining term of the
+underlying lease and of the supplier contract.
+(19) DEFERRED INCOME
+Deferred income consists mainly of prepayments made by our
+customers for cloud subscriptions and support; software
+support and services; fees from multiple-element arrangements
+allocated to undelivered elements; and amounts recorded in
+purchase accounting at fair value for obligations to perform
+under acquired contracts in connection with acquisitions.
+€ millions
+2015
+2014
+Current
+Non-
+Current
+213
+Total other provisions
+33
+1
+11
+Restructuring provisions
+60
+638
+○
+-496
+-17
+-1
+184
+Onerous contract provisions (other than
+24
+Total
+1
+-13
+-1
+2
+15
+from customer contracts)
+Other provisions
+31
+3
+0
+0
+-2
+2
+1
+Current
+Total
+January 1, 2013
+1,229
+-37
+1,229
+-1,337
+Reissuance of treasury shares under share-based payments
+0
+2
+0
+57
+December 31, 2013
+1,229
+-35
+1,229
+-1,280
+Reissuance of treasury shares under share-based payments
+○
+2
+0
+56
+December 31, 2014
+1,229
+-33
+Treasury
+Shares
+Capital
+Shares
+Capital
+Deferred Income
+2,001
+106
+2,107
+1,680
+78
+1,758
+Thereof deferred revenue from cloud subscriptions and
+support
+957
+0
+957
+Non-
+Current
+689
+689
+Consolidated Financial Statements IFRS Notes
+162
+(20) TOTAL EQUITY
+Issued Capital
+As at December 31, 2015, SAP SE had issued 1,228,504,232 no-
+par value bearer shares (December 31, 2014: 1,228,504,232)
+with a calculated nominal value of €1 per share. All the shares
+issued are fully paid.
+Change in Issued Capital and Treasury Shares
+Issued
+Shares (in millions)
+Treasury
+Value (in € millions)
+Issued
+0
+1,229
+-6
+0
+State plans
+429
+360
+316
+Total expense
+647
+548
+498
+Consolidated Financial Statements IFRS Notes
+Domestic Plans
+Foreign Plans
+Other Post-
+Employment Plans
+2015
+2014
+2015
+2014
+2015
+2014
+19
+10
+26
+23
+2
+182
+188
+218
+Defined contribution plans
+0
+27
+0
+287
+736
+234
+780
+160
+Our expected contribution in 2016 to our domestic and foreign
+defined benefit pension plans is immaterial. The weighted
+duration of our defined benefit plans amounted to 14 years as at
+December 31, 2015, and 14 years as at December 31, 2014.
+Maturity Analysis
+Total future benefit payments from our defined benefit plans as
+at December 31, 2015, are expected to be €1,432 million (2014:
+€1,409 million). Eighty-three percent of this amount has
+maturities of over five years.
+2
+€ millions
+Between 1 and 2 years
+Between 2 and 5 years
+Over 5 years
+Total
+Defined Contribution Plans/State Plans
+We also maintain domestic and foreign defined contribution
+plans. Amounts contributed by us under such plans are based
+on a percentage of the employees' salaries or the amount of
+contributions made by employees. Furthermore, in Germany
+and some other countries we make contributions to public
+pension plans that are operated by national or local government
+or a similar institution.
+Total Expense of Defined Contribution Plans and State Plans
+€ millions
+2015
+2014
+2013
+Less than a year
+-1
+18
+43
+12/31/
+2015
+Impact
+2015
+Employee-related provisions
+47
+59
+0
+-46
+-3
+1
+58
+Customer-related provisions
+39
+91
+0
+-71
+-1
+3
+61
+Intellectual property-related provisions
+12
+5
+Currency
+Release
+Addition Accretion Utilization
+1/1/
+40
+2
+2
+65
+56
+63
+58
+8
+6
+935
+983
+17
+223
+28
+17
+1,037
+1,066
+355
+316
+40
+27
+161
+(18b) Other Provisions
+€ millions
+195
+-1,224
+Reissuance of treasury shares under share-based payments
+December 31, 2015
+0
+Operating
+Purchase
+Leases
+Obligations
+Due 2016
+Due 2017 to 2020
+Due thereafter
+Total
+Contribution
+Commit-
+ments
+294
+428
+111
+657
+378
+0
+396
+66
+0
+1,347
+872
+111
+Our rental and operating lease expenses were €386 million,
+€291 million, and €273 million for the years 2015, 2014, and
+2013, respectively.
+€ millions
+€ millions
+Capital
+December 31, 2015
+(22) OTHER FINANCIAL COMMITMENTS
+83
+148
+95
+53
+Group liquidity
+3,559
+3,423
+136
+Current financial debt
+Net liquidity 1
+-567
+-2,157
+2015
+1,590
+2,992
+-8,607 -8,936
+1,266
+1,726
+329
+-5,615 -7,670
+2,055
+Consolidated Financial Statements IFRS Notes
+Distribution Policy
+Our general intention is to remain in a position to return liquidity
+to our shareholders by distributing annual dividends totaling
+more than 35% of our profit after tax. There are currently no
+plans for future share buybacks.
+In 2015, we distributed €1,316 million in dividends from our 2014
+profit (compared to €1,194 million in 2014 and €1,013 million in
+2013 related to 2013 and 2012 profit, respectively), representing
+€1.10 per share.
+As a result of our equity-settled share-based payments
+transactions (as described in Note (27)), we have commitments
+to grant SAP shares to employees. We intend to meet these
+commitments by reissuing treasury shares or issuing ordinary
+shares. For more information about contingent capital, see
+Note (20).
+Non-current financial debt
+Net liquidity 2
+3,328
+2014
+1,347
+Contingent liabilities exist from intellectual property-related
+litigation and claims for which no provision has been recognized.
+Generally, it is not practicable to estimate the financial impact of
+these contingent liabilities due to the uncertainties around the
+litigation and claims, as outlined above. The total amounts
+claimed by plaintiffs in those intellectual property-related
+lawsuits or claims in which a claim has been quantified were not
+material to us as of December 31, 2015 and 2014. Based on our
+past experience, most of the intellectual property-related
+litigation and claims tend to be either dismissed in court or
+settled out of court for amounts significantly below the originally
+claimed amounts and not material to our consolidated financial
+statements. Only a few cases (specifically the Tomorrow Now
+and the Versata litigation) ultimately resulted in a significant
+cash outflow in 2014.
+The individual cases of intellectual property-related litigation
+and claims are:
+In April 2007, United States-based Versata Software, Inc.
+(formerly Trilogy Software, Inc.) (Versata) instituted legal
+proceedings in the United States District Court for the Eastern
+District of Texas against SAP. Versata alleged that SAP's
+products infringe one or more of the claims in patents held by
+Versata. In August 2014, after numerous legal proceedings (for
+details, see our 2014 Integrated Report, Notes to the
+Consolidated Financial Statements section, Note (24)), Versata
+and SAP entered into a Patent License and Settlement
+Agreement (the "Agreement") to settle the patent litigation
+between the companies. Under the terms of the Agreement,
+Versata has licensed to SAP certain patents in exchange for a
+one-time cash payment and a potential additional contingent
+payment. Such contingent payment is not material to SAP. The
+Agreement also provides for general releases, indemnification
+for its violation, and dismisses the existing litigation with
+prejudice.
+In February 2010, United States-based TecSec, Inc. (TecSec)
+instituted legal proceedings in the United States against SAP
+(including its subsidiary Sybase) and many other defendants.
+TecSec alleged that SAP's and Sybase's products infringe one
+or more of the claims in five patents held by TecSec. In its
+complaint, TecSec seeks unspecified monetary damages and
+permanent injunctive relief. The lawsuit is proceeding but only
+with respect to one defendant. The trial for SAP (including its
+subsidiary Sybase) has not yet been scheduled - the lawsuit for
+SAP (including its subsidiary Sybase) remains stayed.
+In April 2010, SAP instituted legal proceedings (a declaratory
+judgment action) in the United States against Wellogix, Inc. and
+Wellogix Technology Licensing, LLC (Wellogix). The lawsuit
+seeks a declaratory judgment that five patents owned by
+Wellogix are invalid or not infringed by SAP. The trial has not yet
+been scheduled. The legal proceedings have been stayed
+pending the outcome of six reexaminations filed with the United
+States Patent and Trademark Office (USPTO). In September
+Consolidated Financial Statements IFRS Notes
+166
+2013, the USPTO issued a decision on four of the six
+reexaminations, invalidating every claim of each of the four
+patents. SAP is awaiting a decision on the two remaining
+reexamination requests. In response to SAP's patent
+Declaratory Judgment action, Wellogix has re-asserted trade
+secret misappropriation claims against SAP (which had
+previously been raised and abandoned). The court granted
+SAP's motion for an early dispositive decision on the trade
+secret claims; Wellogix's appeal of that decision is pending. In
+February 2015, SAP filed a declaratory judgment action in
+Frankfurt/Main, Germany, asking the German court to rule that
+SAP did not misappropriate any Wellogix trade secrets.
+Customer-Related Litigation and Claims
+Customer-related litigation and claims include cases in which we
+indemnify our customers against liabilities arising from a claim
+that our products infringe a third party's patent, copyright, trade
+secret, or other proprietary rights. Occasionally, consulting or
+software implementation projects result in disputes with
+customers. Where customers are dissatisfied with the products
+and services that we have delivered to them in routine
+consulting contracts or development arrangements, we may
+grant functions or performance guarantees.
+The carrying amount of the provisions recorded for customer-
+related litigation and claims and the development of the carrying
+amount in the reporting period are disclosed in Note (18b). The
+expected timing or amounts of any resulting outflows of
+economic benefits from these lawsuits and claims is uncertain
+and not estimable as they generally depend on the duration of
+the legal proceedings and settlement negotiations required to
+resolve the litigation and claims and the unpredictability of the
+outcomes of legal disputes in several jurisdictions. For more
+information, see Note (3c).
+Contingent liabilities exist from customer-related litigation and
+claims for which no provision has been recognized. Generally, it
+is not practicable to estimate the financial impact of these
+contingent liabilities due to the uncertainties around these
+lawsuits and claims outlined above.
+Non-Income Tax-Related Litigation and Claims
+We are subject to ongoing audits by domestic and foreign tax
+authorities. Along with many other companies operating in
+Brazil, we are involved in various proceedings with Brazilian
+authorities regarding assessments and litigation matters on
+non-income taxes on intercompany royalty payments and
+intercompany services. The total potential amount related to
+these matters for all applicable years is approximately
+€75 million. We have not recorded a provision for these matters,
+as we believe that we will prevail.
+For more information about income tax-related litigation, see
+Note (10).
+(24) FINANCIAL RISK FACTORS
+We are exposed to various financial risks, such as market risks
+(including foreign currency exchange rate risk, interest-rate risk,
+and equity price risk), credit risk, and liquidity risk.
+Market Risk
+a) Foreign Currency Exchange Rate Risk
+As we are active worldwide, our ordinary operations are subject
+to risks associated with fluctuations in foreign currencies. Since
+the Group's entities mainly conduct their operating business in
+their own functional currencies, our risk of exchange rate
+fluctuations from ongoing ordinary operations is not considered
+significant. However, we occasionally generate foreign currency-
+denominated receivables, payables, and other monetary items
+by transacting in a currency other than the functional currency.
+To mitigate the extent of the associated foreign currency
+exchange rate risk, the majority of these transactions are
+hedged as described in Note (25).
+In rare circumstances, transacting in a currency other than the
+functional currency also leads to embedded foreign currency
+derivatives being separated and measured at fair value through
+profit or loss.
+In addition, the intellectual property (IP) holders in the SAP
+Group are exposed to risks associated with forecasted
+intercompany cash flows in foreign currencies. These cash flows
+arise out of royalty payments from subsidiaries to the respective
+IP holder. The royalties are linked to the subsidiaries' external
+revenue. This arrangement leads to a concentration of the
+foreign currency exchange rate risk with the IP holders, as the
+royalties are mostly denominated in the subsidiaries' local
+currencies, while the functional currency of the IP holders with
+the highest royalty volume is the euro. The highest foreign
+currency exchange rate exposure of this kind relates to the
+currencies of subsidiaries with significant operations, for
+example the U.S. dollar, the pound sterling, the Japanese yen,
+the Swiss franc, the Brazilian real, and the Australian dollar.
+Generally, we are not exposed to any significant foreign
+currency exchange rate risk with regard to our investing and
+financing activities, as such activities are normally conducted in
+the functional currency of the investing or borrowing entity.
+However, we were exposed to a cash flow risk from the
+consideration to be paid in U.S. dollars for the acquisition of
+Concur and Fieldglass in 2014, as the funds were provided
+through our free cash and acquisition term loans, both mostly
+generated in euros. For more information, see Note (25).
+Consolidated Financial Statements IFRS Notes
+The carrying amount of the provisions recognized for intellectual
+property-related litigation and claims and the change in the
+carrying amount in the reporting period are disclosed in
+Note (18b). The expected timing of any resulting outflows of
+economic benefits from these lawsuits and claims is uncertain
+and not estimable as it depends generally on the duration of the
+legal proceedings and settlement negotiations required to
+resolve them. Uncertainties about the amounts result primarily
+from the unpredictability of the outcomes of legal disputes in
+several jurisdictions. For more information, see Note (3c).
+Intellectual Property-Related Litigation and Claims
+Intellectual property-related litigation and claims are cases in
+which third parties have threatened or initiated litigation
+claiming that SAP violates one or more intellectual property
+rights that they possess. Such intellectual property rights may
+include patents, copyrights, and other similar rights.
+Among the claims and lawsuits are the following classes:
+However, the outcome of litigation and claims is intrinsically
+subject to considerable uncertainty. Management's view of the
+litigation may also change in the future. Actual outcomes of
+litigation and claims may differ from the assessments made by
+management in prior periods, which could result in a material
+impact on our business, financial position, profit, cash flows, or
+reputation. Most of the lawsuits and claims are of a very
+individual nature and claims are either not quantified by the
+claimants or claim amounts quantified are, based on historical
+evidence, not expected to be a good proxy for the expenditure
+that would be required to settle the case concerned. The
+specifics of the jurisdictions where most of the claims are
+located further impair the predictability of the outcome of the
+cases. Therefore, it is not practicable to reliably estimate the
+financial effect that these lawsuits and claims would have if SAP
+were to incur expenditure for these cases.
+1,332
+Contractual obligations for acquisition of
+162
+111
+property, plant, and equipment and
+intangible assets
+Other purchase obligations
+710
+748
+Purchase obligations
+872
+Operating leases
+859
+111
+77
+Total
+2,330
+2,268
+Our operating leases relate primarily to the lease of office space,
+hardware, and vehicles, with remaining non-cancelable lease
+terms between less than one and 33 years. On a limited scale,
+the operating lease contracts include escalation clauses (based,
+for example, on the consumer price index) and renewal options.
+The contractual obligations for acquisition of property, plant,
+and equipment and intangible assets relate primarily to the
+construction of new and existing facilities and to the purchase of
+hardware, software, patents, office equipment, and vehicles.
+The remaining obligations relate mainly to marketing,
+consulting, maintenance, license agreements, and other third-
+party agreements. Historically, the majority of such purchase
+obligations have been realized.
+SAP invests and holds interests in other entities. As of
+December 31, 2015, total commitments to make such equity
+investments amounted to €197 million (2014: €123 million) of
+which €86 million had been drawn (2014: €46 million). By
+investing in such equity investments, we are exposed to the risks
+inherent in the business segments in which these entities
+operate. Our maximum exposure to loss is the amount invested
+plus unavoidable future capital contributions.
+Consolidated Financial Statements IFRS Notes
+165
+(23) LITIGATION AND CLAIMS
+We are subject to a variety of claims and lawsuits that arise from
+time to time in the ordinary course of our business, including
+proceedings and claims that relate to companies we have
+acquired, claims that relate to customers demanding
+indemnification for proceedings initiated against them based on
+their use of SAP software, and claims that relate to customers
+being dissatisfied with the products and services that we have
+delivered to them. We will continue to vigorously defend against
+all claims and lawsuits against us. We currently believe that
+resolving the claims and lawsuits pending as of December 31,
+2015, will neither individually nor in the aggregate have a
+material adverse effect on our business, financial position,
+profit, or cash flows. Consequently, the provisions recorded for
+these claims and lawsuits as of December 31, 2015, are neither
+individually nor in the aggregate material to SAP.
+Capital contribution commitments
+Δ
+2014
+2015
+3,411
+-53
+-2
+-19
+on available-for-sale financial
+assets
+Available-for-sale financial
+128
+128
+60
+assets
+Gains (losses) on cash-flow
+hedges
+-59
+-41
+78
+Reclassification adjustments
+on cash-flow hedges
+Cash-flow hedges
+60
+74
+3
+-78
+15
+-38
+By resolution of SAP SE's General Meeting of Shareholders held
+on June 4, 2013, the authorization granted by the General
+Meeting of Shareholders of June 8, 2010, regarding the
+acquisition of treasury shares was revoked to the extent it had
+not been exercised at that time, and replaced by a new
+authorization of the Executive Board of SAP SE to acquire, on or
+before June 3, 2018, shares of SAP SE representing a pro rata
+amount of capital stock of up to €120 million in aggregate,
+Consolidated Financial Statements IFRS Notes
+163
+Reclassification adjustments
+sale financial assets
+remeasuring available-for-
+79
+2
+0
+1,229
+-31
+1,229
+100
+-1,124
+Authorized Shares
+The Articles of Incorporation authorize the Executive Board to
+increase the issued capital by:
+Up to a total amount of €250 million by issuing new no-par
+value bearer shares against contributions in cash until
+May 19, 2020 (Authorized Capital I). The issuance is subject
+to the statutory subscription rights of existing shareholders.
+Up to a total amount of €250 million by issuing new no-par
+value bearer shares against contributions in cash or in kind
+until May 19, 2020 (Authorized Capital II). Subject to the
+consent of the Supervisory Board, the Executive Board is
+authorized to exclude the shareholders' statutory
+subscription rights in certain cases.
+Contingent Shares
+SAP SE's share capital is subject to a contingent capital increase
+which may be effected only to the extent that the holders or
+creditors of convertible bonds or stock options issued or
+guaranteed by SAP SE or any of its directly or indirectly
+controlled subsidiaries under certain share-based payments
+exercise their conversion or subscription rights, and no other
+methods for servicing these rights are used. As at December 31,
+2015, €100 million, representing 100 million shares, was still
+available for issuance (2014: €100 million).
+provided that the shares purchased under the authorization,
+together with any other shares in the Company previously
+acquired and held by, or attributable to, SAP SE do not account
+for more than 10% of SAP SE's issued share capital. Although
+treasury shares are legally considered outstanding, there are no
+dividend or voting rights associated with shares held in treasury.
+We may redeem or resell shares held in treasury, or we may use
+treasury shares for the purpose of servicing option or
+conversion rights under the Company's share-based payment
+plans. Also, we may use shares held in treasury as consideration
+in connection with mergers with, or acquisitions of, other
+companies.
+Other Comprehensive Income
+€ millions
+2015
+2014
+2013
+Gains (losses) on exchange
+differences
+1,845
+1,161
+-576
+Gains (losses) on
+181
+130
+Items Recognized in Other Comprehensive Income That Will
+Be Reclassified to Profit or Loss Before Tax
+Dividends
+The total dividend available for distribution to SAP SE
+shareholders is based on the profits of SAP SE as reported in its
+statutory financial statements prepared under the accounting
+rules in the German Commercial Code (Handelsgesetzbuch). For
+the year ended December 31, 2015, the Executive Board intends
+to propose that a dividend of €1.15 per share (that is, an
+estimated total dividend of €1,378 million), be paid from the
+profits of SAP SE.
+22
+-8
+10,228
+25
+10,457
+27
+-2
+18,095
+44
+19,031
+49
+8,574
+-5
+100
+38,565
+100
+7
+In 2015, we repaid €1,270 million in bank loans that we had
+taken to finance the Concur acquisition and refinanced another
+part of this loan through the issuance of a three-tranche
+Eurobond of €1.75 billion in total with maturities of two to 10
+years. We also repaid a €550 million Eurobond and a
+US$300 million U.S. private placement tranche at their
+maturity. Thus, the ratio of total financial debt to total equity and
+liabilities decreased by seven percentage points to 22% at the
+end of 2015 (29% as at December 31, 2014).
+Total financial debt consists of current and non-current bank
+loans, bonds, and private placements. For more information
+about our financial debt, see Note (17).
+As part of our financing activities in 2016, the Company intends
+to repay a US$600 million U.S. private placement tranche when
+it matures and a further substantial portion of our outstanding
+bank loans.
+While we continuously monitor the ratios presented in and below
+the table above, we actively manage our liquidity and structure
+of our financial indebtedness:
+Group Liquidity of SAP Group
+€ millions
+Cash and cash equivalents
+Current investments
+41,390
+b) Interest-Rate Risk
+19
+19
+Dividends per share for 2014 and 2013 were €1.10 and €1.00
+respectively and were paid in the succeeding year.
+(21) ADDITIONAL CAPITAL DISCLOSURES
+Capital Structure Management
+The primary objective of our capital structure management is to
+maintain a strong financial profile for investor, creditor, and
+customer confidence, and to support the growth of our
+business. We seek to maintain a capital structure that will allow
+us to cover our funding requirements through the capital
+markets at reasonable conditions, and in so doing, ensure a high
+level of independence, confidence, and financial flexibility.
+SAP SE's long-term credit rating is "A" by Standard and Poor's
+and "A2" by Moody's, both with stable outlook. Since their initial
+assignment in September 2014, the ratings and outlooks have
+not changed.
+Capital Structure
+Equity
+Current liabilities
+Non-current liabilities
+Liabilities
+Total equity and liabilities
+7,867
+2015
+A in %
+€ millions
+% of
+Total equity
+€ millions
+% of
+Total equity
+and liabilities
+and liabilities
+23,295
+56
+19,534
+51
+2014
+Treasury Shares
+(18a) Pension Plans and Similar Obligations
+Consolidated Financial Statements IFRS Notes
+Bonds
+-1,261
+-1,261
+-1,261
+-1,261
+AC
+Loans
+Non-derivative financial liabilities
+-9,522
+-276
+-893
+-893
+AC
+-1,169
+Financial liabilities
+Other payables²)
+Trade payables¹)
+Trade and other payables
+Liabilities
+6
+6
+6
+6
+HFT
+Call option on equity shares
+payments
+94
+69
+94
+AC
+-5,733
+-5,733
+-5,825
+HFT
+Consolidated Financial Statements IFRS Notes
+Total financial instruments, net
+FX forward contracts
+Not designated as hedging instrument
+Interest-rate swaps
+0
+○
+0
+0
+-10
+-10
+-10
+-10
+94
+FX forward contracts
+Derivatives
+-199
+-199
+-199
+-199
+AC
+Other non-derivative financial liabilities
+-2,288
+-2,288
+-2,202
+-2,202
+AC
+Private placements
+-5,825
+Designated as hedging instrument
+-117
+94
+Call options for share-based
+21
+299
+882
+Contractual Maturities of Derivative Financial Liabilities and Financial Assets
+€ millions
+Carrying
+Amount
+Contractual Cash
+Flows
+12/31/2015
+2016 Thereafter
+Carrying
+Amount
+12/31/2014
+Contractual Cash
+Flows
+2015 Thereafter
+Derivative financial liabilities
+Currency derivatives not designated as hedging
+instruments
+-117
+-310
+Cash outflows
+-2,896
+-58
+-4,110
+-44
+Cash inflows
+2,834
+0
+3,836
+0
+Currency derivatives designated as hedging instruments
+-10
+-22
+562
+882
+Investments in associates²)
+58
+69
+69
+69
+HFT
+FX forward contracts
+|
+Not designated as hedging instrument
+100
+100
+100
+100
+14
+14
+14
+HFT
+14
+FX forward contracts
+Designated as hedging instrument
+Derivative assets
+receivables
+316
+316
+316
+316
+L&R
+Other loans and other financial
+employee benefit plans²)
+121
+Financial instruments related to
+Loans and other financial receivables
+Interest-rate swaps
+-117
+-117
+-117
+Fair Values of Financial Instruments and Classification Within the Fair Value Hierarchy
+175
+Consolidated Financial Statements IFRS Notes
+13
+13
+43
+411
+13
+13
+HFT
+Call option on equity shares
+payments
+43
+43
+43
+HFT
+Call options for share-based
+411
+411
+411
+HFT
+FX forward contracts
+77
+77
+77
+77
+10
+10
+10
+€ millions
+Category
+December 31, 2015
+Carrying
+Amount
+-4,629
+AC
+Bonds
+-4,261
+-4,261
+-4,261
+-4,261
+AC
+Loans
+Non-derivative financial liabilities
+-11,542
+-305
+-782
+-782
+10
+AC
+Financial liabilities
+Other payables²)
+Trade payables¹)
+Trade and other payables
+Liabilities
+Cost
+Total
+Level 3
+Level 2
+Level 1
+Fair Value
+Measurement
+Categories
+At Fair
+Value
+Amortized
+At
+-1,087
+Not designated as hedging instrument
+Interest-rate swaps
+FX forward contracts
+4,255
+4,255
+L&R
+Trade receivables¹)
+4,443
+Trade and other receivables
+3,328
+3,328
+L&R
+Cash and cash equivalents¹)
+Total
+Level 3
+Level 2
+Level 1
+Other receivables²)
+Fair Value
+Measurement
+Categories
+At Fair
+Value
+Amortized
+Cost
+At
+Carrying
+Amount
+Category
+Assets
+€ millions
+Fair Values of Financial Instruments and Classification Within the Fair Value Hierarchy
+174
+-8,192
+568
+1,064 -5,500 -3,261
+-1,361
+-232
+December 31, 2014
+Cash outflows
+882
+1,699
+Designated as hedging instrument
+Derivative assets
+receivables
+324
+324
+324
+324
+L&R
+Other loans and other financial
+employee benefit plans²)
+136
+Financial instruments related to
+Loans and other financial receivables
+49
+Other financial assets
+Investments in associates²)
+388
+101
+108
+597
+597
+AFS
+Equity investments
+40
+40
+40
+40
+AFS
+Debt investments
+Available-for-sale financial assets
+597
+-489
+0
+-487
+0.03
+0.05
+0.07
+0.03
+0.04
+0.05
+0.08
+0.04
+Cash flow interest-rate risk
+From investments (including cash)
+3.08
+3.09
+3.37
+2.62
+2.45
+2.48
+2.74
+2.13
+From financing
+3.16
+3.73
+4.63
+3.16
+5.03
+0.75
+5.03
+○
+From interest-rate swaps
+2.69
+From investments
+Fair value interest-rate risk
+Low
+High
+Interest rates +100 bps in U.S. dollar area/+50 bps in euro area
+-105
+-116
+-24
+(2014: +100 bps in U.S. dollar area/+50 bps in euro area; 2013: +100 bps in U.S.
+dollar/euro area)
+Interest rates -50 bps in U.S. dollar/euro area
+62
+70
+5
+(2014: -50 bps in U.S. dollar/euro area; 2013: -20 bps in U.S. dollar/euro area)
+Variable rate financing
+Interest rates +50 bps in euro area
+Interest rates -50 bps in euro area
+-39
+2.67
+-65
+19
+65
+0
+Consolidated Financial Statements IFRS Notes
+171
+Our interest-rate exposure as at December 31 (and if year-end
+exposure is not representative, also our average/high/low
+exposure) was as follows:
+Interest-Rate Risk Exposure
+€ billion
+2015
+2014
+Year-End Average
+High
+Low Year-End
+Average
+0
+2.74
+2.64
+2.55
+Measurement
+Categories
+At Fair
+Value
+Fair Value
+Level 1
+Level 2
+Level 3
+Total
+Cost
+Cash and cash equivalents¹)
+L&R
+3,411
+3,411
+Trade and other receivables
+5,362
+Trade receivables¹)
+Amortized
+L&R
+5,199
+Other receivables²)
+163
+Other financial assets
+1,687
+Available-for-sale financial assets
+Debt investments
+AFS
+26
+26
+26
+26
+Equity investments
+AFS
+5,199
+Derivatives held within a designated fair value hedge relationship
+At
+December 31, 2015
+2.44
+2.55
+2.39
+Equity Price Risk Management
+Our investments in equity instruments with quoted market
+prices in active markets (2015: €320 million; 2014:
+€209 million) are monitored based on the current market value
+that is affected by the fluctuations in the volatile stock markets
+worldwide. An assumed 20% increase (decrease) in equity
+prices as at December 31, 2015 (2014), would not have a
+material impact on the value of our investments in marketable
+equity securities and the corresponding entries in other
+comprehensive income.
+We are exposed to equity price risk with regard to our share-
+based payments. In order to reduce resulting profit or loss
+volatility, we hedge certain cash flow exposures associated with
+these plans through the purchase of derivative instruments, but
+do not establish a designated hedge relationship. In our
+sensitivity analysis we include the underlying share-based
+payments and the hedging instruments. Thus, we base the
+calculation on our net exposure to equity prices as we believe
+taking only the derivative instrument into account would not
+properly reflect our equity price risk exposure. An assumed 20%
+increase (decrease) in equity prices as at December 31, 2015,
+would have increased (decreased) our share-based payment
+expenses by €200 million (€198 million) (2014: increased by
+€158 million (decreased by €80 million); 2013: increased by
+€126 million (decreased by €90 million)).
+Credit Risk Management
+To mitigate the credit risk from our investing activities and
+derivative financial assets, we conduct all our activities only with
+approved major financial institutions and issuers that carry high
+external ratings, as required by our internal treasury guideline.
+Among its stipulations, the guideline requires that we invest only
+in assets from issuers with a minimum rating of at least “BBB
+flat". We only make investments in issuers with a lower rating in
+exceptional cases. Such investments were not material in 2015.
+The weighted average rating of our financial assets is in the
+range A+ to A. We pursue a policy of cautious investments
+characterized by predominantly current investments, standard
+investment instruments, as well as a wide portfolio
+diversification by doing business with a variety of
+counterparties.
+To further reduce our credit risk, we require collateral for certain
+investments in the full amount of the investment volume which
+we would be allowed to make use of in the case of default of the
+counterparty to the investment. As such collateral, we only
+accept bonds with at least investment grade rating level.
+In addition, the concentration of credit risk that exists when
+counterparties are involved in similar activities by instrument,
+sector, or geographic area is further mitigated by diversification
+of counterparties throughout the world and adherence to an
+internal limit system for each counterparty. This internal limit
+system stipulates that the business volume with individual
+counterparties is restricted to a defined limit, which depends on
+the lowest official long-term credit rating available by at least
+one of the major rating agencies, the Tier 1 capital of the
+respective financial institution, or participation in the German
+Depositors' Guarantee Fund or similar protection schemes. We
+continuously monitor strict compliance with these counterparty
+limits. As the premium for credit default swaps mainly depends
+on market participants' assessments of the creditworthiness of
+a debtor, we also closely observe the development of credit
+default swap spreads in the market to evaluate probable risk
+developments to timely react to changes if these should
+manifest.
+The default risk of our trade receivables is managed separately,
+mainly based on assessing the creditworthiness of customers
+through external ratings and our past experience with the
+customers concerned. Outstanding receivables are continuously
+monitored locally. For more information, see Note (3). The
+impact of default on our trade receivables from individual
+customers is mitigated by our large customer base and its
+distribution across many different industries, company sizes,
+Consolidated Financial Statements IFRS Notes
+172
+Carrying
+Amount
+and countries worldwide. For more information about our trade
+receivables, see Note (13). For information about the maximum
+exposure to credit risk, see Note (24).
+Our liquidity is managed by our global treasury department with
+the primary aim of maintaining liquidity at a level that is
+adequate to meet our financial obligations.
+Generally, our primary source of liquidity is funds generated
+from our business operations. The majority of our subsidiaries
+pool their cash surplus to our global treasury department, which
+then arranges to fund other subsidiaries' requirements or invest
+any net surplus in the market. With this strategy we seek to
+optimize yields, while ensuring liquidity, by investing only with
+counterparties and issuers of high credit quality, as explained
+above. Hence, high levels of liquid assets and marketable
+securities provide a strategic reserve, helping keep SAP flexible,
+sound, and independent.
+Apart from effective working capital and cash management, we
+have reduced the liquidity risk inherent in managing our day-to-
+day operations and meeting our financing responsibilities by
+arranging an adequate volume of available credit facilities with
+various financial institutions on which we can draw if necessary.
+In order to retain high financial flexibility, on November 13, 2013,
+SAP SE entered into a €2.0 billion syndicated credit facility
+agreement with an initial term of five years plus two one-year
+extension options. In 2015, the original term of this facility was
+extended for an additional period of one year to November
+2020. The use of the facility is not restricted by any financial
+covenants. Borrowings under the facility bear interest of
+EURIBOR or LIBOR for the respective currency plus a margin of
+22.5 basis points. We are also required to pay a commitment fee
+of 7.88 basis points per annum on the unused available credit.
+We have never drawn on the facility.
+Additionally, as at December 31, 2015, and 2014, SAP SE had
+available lines of credit totaling €471 million and €471 million,
+respectively. As at December 31, 2015, and 2014, there were no
+borrowings outstanding under these lines of credit.
+(26) ADDITIONAL FAIR VALUE DISCLOSURES ON
+FINANCIAL INSTRUMENTS
+Fair Value of Financial Instruments
+We use various types of financial instrument in the ordinary
+course of business, which are classified as either: loans and
+receivables (L&R), available-for-sale (AFS), held-for-trading
+(HFT), or amortized cost (AC). For those financial instruments
+measured at fair value or for which fair value must be disclosed,
+we have categorized the financial instruments into a three-level
+fair value hierarchy depending on the inputs used to determine
+fair value and their significance for the valuation techniques.
+Consolidated Financial Statements IFRS Notes
+173
+Fair Values of Financial Instruments and Classification Within the Fair Value Hierarchy
+€ millions
+Assets
+Category
+Liquidity Risk Management
+-4,629
+2013
+2015
+3,073
+0
+1,656
+Currency derivatives designated as hedging instruments
+14
+10
+Cash outflows
+-266
+0
+-162
+Cash inflows
+275
+о
+163
+Interest-rate derivatives designated as hedging
+instruments
+100
+77
+Cash outflows
+-43
+-225
+-34
+-293
+Cash inflows
+77
+300
+62
+313
+Total of derivative financial assets
+183
+Cash inflows
+-1,236
+0
+-3,010
+0
+Cash inflows
+475
+о
+464
+0
+Interest-rate derivatives designated as hedging
+instruments
+0
+0
+0
+-7
+-24
+○
+0
+106
+9
+-128
+-76
+-58
+-333
+-295
+-49
+Cash outflows
+Cash inflows
+Total of derivative financial liabilities
+Derivative financial assets
+Currency derivatives not designated as hedging
+instruments
+69
+411
+Cash outflows
+19
+75
+498
+449
+2014
+1.0
+1.0
+1.1
+2.7
+1.2
+7.7
+1.0
+1.0
+During 2015, our sensitivity to foreign currency exchange rate
+fluctuations decreased compared to the year ended
+December 31, 2014, mainly due to the hedging transactions for
+the acquisition of Concur in 2014.
+Interest-Rate Risk Management
+The aim of our interest-rate risk management is to reduce profit
+or loss volatility and optimize our interest result by creating a
+balanced structure of fixed and variable cash flows. We
+therefore manage interest-rate risks by adding interest-rate-
+Consolidated Financial Statements IFRS Notes
+170
+2015
+related derivative instruments to a given portfolio of
+investments and debt financing.
+The majority of our investments are based on variable rates
+and/or short maturities (2015: 87%; 2014: 71%) while most of
+our financing transactions are based on fixed rates and long
+maturities (2015: 66%; 2014: 55%). To match the interest-rate
+risk from our financing transactions to our investments, we use
+receiver interest-rate swaps to convert certain fixed rate
+financial liabilities to floating, and by this means secure the fair
+value of the swapped financing transactions. The desired fix-
+floating mix of our net debt is set by the Treasury Committee.
+Including interest-rate swaps, 36% (2014: 30%) of our total
+interest-bearing financial liabilities outstanding as at December
+31, 2015, had a fixed interest rate.
+None of the fair value adjustment from the receiver swaps, the
+basis adjustment on the underlying hedged items held in fair
+value hedge relationships, and the difference between the two
+recognized in financial income, net is material in any of the years
+presented.
+Interest-Rate Exposure
+A sensitivity analysis is provided to show the impact of our
+interest-rate risk exposure on profit or loss and equity in
+accordance with IFRS 7, considering the following:
+Changes in interest rates only affect the accounting for non-
+derivative fixed rate financial instruments if they are
+recognized at fair value. Therefore, such interest-rate
+changes do not change the carrying amounts of our non-
+derivative fixed rate financial liabilities as we account for
+them at amortized cost. Investments in fixed rate financial
+assets classified as available-for-sale were not material at
+-
+each year end reported. Thus, we do not consider any fixed
+rate instruments in the equity-related sensitivity calculation.
+Income or expenses recorded in connection with non-
+derivative financial instruments with variable interest rates
+are subject to interest-rate risk if they are not hedged items in
+effective hedge relationship. Thus, we take into
+consideration interest-rate changes relating to our variable
+rate financing and our investments in money market
+instruments in the profit-related sensitivity calculation.
+an
+The designation of interest-rate receiver swaps in a fair value
+hedge relationship leads to interest-rate changes affecting
+financial income, net. The fair value movements related to the
+interest-rate swaps are not reflected in the sensitivity
+calculation, as they offset the fixed interest-rate payments for
+the bonds and private placements as hedged items. However,
+changes in market interest rates affect the amount of interest
+payments from the interest-rate swap. As a consequence, those
+effects of market interest rates on interest payments are
+included in the profit-related sensitivity calculation.
+Due to the different interest-rate expectations for the U.S. dollar
+and the euro area, we base our sensitivity analyses on a yield
+curve upward shift of +100/+50 basis points for the
+U.S. dollar/euro area (2014: +100/+50 basis points for the
+U.S. dollar/euro area; 2013: +100 bps) and a yield curve
+downward shift of -50 basis points for both the U.S. dollar/euro
+area (2014: -50 bps; 2013: -20 bps).
+If, on December 31, 2015, 2014, and 2013, interest rates had
+been higher/lower as described above, this would not have had
+a material effect on financial income, net for our variable
+interest-rate investments and would have had the following
+effects on financial income, net.
+Interest-Rate Sensitivity
+€ millions
+Effects on Financial Income, Net
+Derivatives Designated as Hedging Instruments (Fair Value
+Hedges)
+2014
+Year-end exposure toward all our major
+currencies
+Average exposure
+Highest exposure
+Lowest exposure
+Foreign Currency Exposure
+20
+Total of derivative financial liabilities and assets
+55
+30
+17
+165
+154
+-29
+(25) FINANCIAL RISK MANAGEMENT
+We manage market risks (including foreign currency exchange
+rate risk, interest-rate risk, and equity price risk), credit risk, and
+liquidity risk on a Group-wide basis through our global treasury
+department. Our risk management and hedging strategy is set
+by our treasury guideline and other internal guidelines, and is
+subject to continuous internal risk analysis. Derivative financial
+instruments are only purchased to reduce risks and not for
+speculation, which is defined as entering into derivative
+instruments without a corresponding underlying transaction.
+In the following sections we provide details on the management
+of each respective financial risk and our related risk exposure. In
+the sensitivity analyses that show the effects of hypothetical
+changes of relevant risk variables. on profit or other
+comprehensive income, we determine the periodic effects by
+relating the hypothetical changes in the risk variables to the
+balance of financial instruments at the reporting date.
+Foreign Currency Exchange Rate Risk Management
+We continually monitor our exposure to currency fluctuation
+risks based on monetary items and forecasted transactions and
+pursue a Group-wide strategy to manage foreign currency
+exchange rate risk, using derivative financial instruments,
+primarily foreign exchange forward contracts, as appropriate,
+with the primary aim of reducing profit or loss volatility.
+Currency Hedges Not Designated as Hedging Instruments
+The foreign exchange forward contracts we enter into to offset
+exposure relating to foreign-currency denominated monetary
+assets and liabilities are not designated as being in a hedge
+accounting relationship, see Note (3a).
+€ billions
+Consolidated Financial Statements IFRS Notes
+Currency hedges not designated as hedging instruments also
+include foreign currency derivatives embedded in non-derivative
+host contracts that are separated and accounted for as
+derivatives according to the requirements of IAS 39 (Financial
+Instruments: Recognition and Measurement).
+In addition, during 2014 we held foreign exchange forward
+contracts and foreign currency options to hedge the cash flow
+risk from the consideration paid in U.S. dollars for the
+acquisition of Concur.
+Currency Hedges Designated as Hedging Instruments
+(Cash Flow Hedges)
+We enter into derivative financial instruments, primarily foreign
+exchange forward contracts, to hedge significant forecasted
+cash flows (royalties) from foreign subsidiaries denominated in
+foreign currencies with a defined set of hedge ratios and a hedge
+horizon of up to 12 months. Specifically, we exclude the interest
+component and only designate the spot rate of the foreign
+exchange forward contracts as the hedging instrument to offset
+anticipated cash flows relating to the subsidiaries with
+significant operations. We generally use foreign exchange
+derivatives that have maturities of 12 months or less, which may
+be rolled over to provide continuous coverage until the
+applicable royalties are received.
+For the years ended December 31, 2015 and 2014, no previously
+highly probable transaction designated as a hedged item in a
+foreign currency cash flow hedge relationship ceased to be
+probable. Therefore, we did not discontinue any of our cash flow
+hedge relationships. Also, we identified no ineffectiveness in all
+years reported. Generally, the cash flows of the hedged
+forecasted transactions are expected to occur and to be
+recognized in profit or loss monthly within a time frame of
+12 months from the date of the statement of financial position.
+Foreign Currency Exchange Rate Exposure
+In line with our internal risk reporting process, we use the cash
+flow-at-risk method to quantify our risk positions with regard to
+our forecasted intercompany transactions and value-at-risk for
+our foreign-currency denominated financial instruments. In
+order not to provide two different methodologies, we have opted
+to disclose our risk exposure based on a sensitivity analysis
+considering the following:
+The SAP Group's entities generally operate in their functional
+currencies. In exceptional cases and limited economic
+environments, operating transactions are denominated in
+currencies other than the functional currency, leading to a
+foreign currency exchange rate risk for the related monetary
+instruments. Where material, this foreign currency exchange
+rate risk is hedged. Therefore, fluctuations in foreign
+currency exchange rates neither have a significant impact on
+profit nor on other comprehensive income with regard to our
+non-derivative monetary financial instruments and related
+income or expenses.
+-
+Our free-standing derivatives designed for hedging foreign
+currency exchange rate risks almost completely balance the
+changes in the fair values of the hedged item attributable to
+exchange rate movements in the Consolidated Income
+Statements in the same period. As a consequence, the
+hedged items and the hedging instruments are not exposed
+to foreign currency exchange rate risks, and thereby have no
+effect on profit.
+Consequently, we are only exposed to significant foreign
+currency exchange rate fluctuations with regard to the following:
+Derivatives held within a designated cash flow hedge
+relationship (excluding the interest element, which is not part
+of the assigned cash flow hedge relationships) affecting other
+comprehensive income
+Foreign currency embedded derivatives affecting other non-
+operating expense, net.
+We calculate our sensitivity on an upward/downward shift of
++/-25% of the foreign currency exchange rate between euro
+and Brazil real and +/-10% of the foreign currency exchange
+rate between euro and all other major currencies (2014: upward
+shift for Swiss franc +20%, all other major currencies +10%,
+downward shift for all major currencies -10%; 2013:
+upward/downward shift of +/-10% for all major currencies). If
+on December 31, 2015, 2014, and 2013, the foreign currency
+exchange rates had been higher/lower as described above, this
+would not have had a material effect on other non-operating
+expense, net and other comprehensive income.
+Our foreign currency exposure as at December 31 (and if year-
+end exposure is not representative, also our average/high/low
+exposure) was as follows:
+169
+-4,811
+188
+Private placements
+-11,991
+-11,991
+-310
+-310
+HFT
+AC
+7,906
+7,906
+-4,811
+L&R
+637
+637
+AFS
+467
+467
+HFT
+Determination of Fair Values
+It is our policy that transfers between the different levels of the
+fair value hierarchy are deemed to have occurred at the
+beginning of the period of the event or change in circumstances
+that caused the transfer. A description of the valuation
+techniques and the inputs used in the fair value measurement is
+given below:
+Financial Instruments Measured at Fair Value on a Recurring Basis
+Level 2
+ΝΑ
+NA
+Quoted prices in an active market
+Quoted prices in an active market
+Level 1
+Level 1
+investments
+Cost
+Listed equity
+Other financial assets
+Interrelationship Between
+Significant Unobservable
+Inputs and Fair Value
+Measurement
+Unobservable Inputs
+Significant
+Determination of Fair
+Value/Valuation Technique
+Fair Value
+Hierarchy
+Туре
+Debt investments
+At Fair Value
+At Amortized
+Carrying
+Amount
+Financial liabilities
+8,926
+8,926
+L&R
+Loans and receivables
+908
+908
+At fair value through profit or loss
+AFS
+169
+169
+HFT
+At fair value through profit or loss
+At Fair Value
+At Amortized
+Cost
+Carrying
+Amount
+Available-for-sale
+ΝΑ
+HFT
+-117
+December 31, 2014
+Category
+At amortized cost
+At fair value through profit or loss
+Financial liabilities
+Loans and receivables
+Available-for-sale
+-117
+At fair value through profit or loss
+€ millions
+176
+Consolidated Financial Statements IFRS Notes
+-10,288
+-10,288
+AC
+At amortized cost
+Financial assets
+333
+NA
+ΝΑ
+Financial Instruments Not Measured at Fair Value
+Discounted cash flow.
+Expected future cash flows are
+estimated based on forward
+interest rates from observable yield
+curves and contract interest rates,
+discounted at a rate that reflects
+the credit risk of the counterparty.
+Discounted cash flow using Par-
+Method.
+Expected future cash flows based
+on forward exchange rates are
+discounted over the respective
+remaining term of the contracts
+using the respective deposit
+interest rates and spot rates.
+Level 2
+Interest-rate swaps
+Level 2
+FX forward
+contracts
+The investees' EBITDA were
+higher (lower)
+Other financial assets/Financial liabilities
+would increase (decrease)
+if:
+The estimated fair value
+EBITDA multiples used
+EBITDA of the investee
+Market approach. Company
+valuation using EBITDA multiples
+based on actual results derived
+from the investee.
+Calculated considering risk-free
+interest rates, the remaining term
+of the derivatives, the dividend
+yields, the stock price, and the
+volatility of our share.
+Monte-Carlo Model.
+Level 3
+The EBITDA multiples were
+higher (lower)
+Call option on
+equity shares
+NA
+NA
+necessary were not material in all years presented, while
+transfers from Level 1 to Level 2 did not occur at all.
+Transfers of available-for-sale equity investments from Level 2
+to Level 1 which occurred because disposal restrictions lapsed
+and deducting a discount for such restriction was no longer
+Transfers Between Levels 1 and 2
+For other non-derivative financial assets/liabilities and variable
+rate financial debt, it is assumed that their carrying value
+reasonably approximates their fair values.
+Future cash outflows for fixed interest and principal are
+discounted over the term of the respective contracts using the
+market interest rates as of the reporting date.
+Discounted cash flows.
+Level 2
+ΝΑ
+Fixed rate private placements/
+loans (financial liabilities)
+Level 1
+Fixed rate bonds (financial
+liabilities)
+Financial liabilities
+Determination of Fair Value/Valuation Technique
+Fair Value Hierarchy
+Туре
+ΝΑ
+Quoted prices in an active market
+December 31, 2015
+Level 2
+ΝΑ
+Market approach. Venture capital
+method evaluating a variety of
+quantitative and qualitative factors
+such as actual and forecasted
+NA
+The liquidity discounts were
+lower (higher).
+The investees' revenues
+were higher (lower)
+The revenue multiples were
+higher (lower)
+if:
+The estimated fair value
+would increase (decrease)
+results, cash position, recent or
+ΝΑ
+Market approach. Comparable
+company valuation using revenue
+multiples derived from companies
+comparable to the investee.
+Quoted prices in an active market
+deducting a discount for the
+disposal restriction derived from
+the premium for a respective put
+option.
+Consolidated Financial Statements IFRS Notes
+investments
+Level 3
+Unlisted equity
+ΝΑ
+Peer companies used
+(revenue multiples
+range from 2.7 to 8.3)
+Revenues of investees;
+Discounts for lack of
+marketability (10% to
+30%)
+Call options for
+share-based
+payment plans
+planned transactions, and market
+Last financing round valuations
+Interrelationship Between
+Significant Unobservable
+Inputs and Fair Value
+Measurement
+NA
+Unobservable Inputs
+Significant
+Determination of Fair
+Value/Valuation Technique
+Fair Value
+Hierarchy
+Туре
+comparable companies.
+177
+ΝΑ
+Net asset value/Fair market value
+as reported by the respective funds
+ΝΑ
+ΝΑ
+Liquidation preferences
+ΝΑ
+ΝΑ
+ΝΑ
+Category
+178
+858 -4,663 -6,053
+-1
+Interest-rate swaps
+Not designated as hedging instrument
+FX forward contracts
+HFT
+-310
+-310
+-310
+-310
+-3,159
+-4,084
+400 -10,315
+1) We do not separately disclose the fair value for cash and cash equivalents, trade receivables, and accounts payable as their carrying amounts are a reasonable
+approximation of their fair values.
+2) Since the line items trade receivables, trade payables, and other financial assets contain both financial and non-financial assets or liabilities (such as other taxes
+or advance payments), the carrying amounts of non-financial assets or liabilities are shown to allow a reconciliation to the corresponding line items in the
+Consolidated Statements of Financial Position.
+Fair Values of Financial Instruments Classified According to IAS 39
+€ millions
+Financial assets
+-1
+-1
+Total financial instruments, net
+-22
+AC
+-2,195
+-2,195
+-2,301
+-1
+Other non-derivative financial liabilities
+AC
+-123
+-123
+-2,301
+-123
+Derivatives
+Designated as hedging instrument
+FX forward contracts
+-22
+-22
+-22
+-123
+Outstanding as at 12/31/2015
+Recognized Expense at Year End for SMP
+€ millions
+Expense recognized
+2015
+35
+2013
+36
+32
+Forfeited in 2015
+relating to discount
+2014
+Exercised in 2015
+1,427
+Outstanding as at 12/31/2014
+Forfeited in 2014
+Exercised in 2014
+Granted in 2014
+Outstanding as at 12/31/2013
+thousands
+Changes in Numbers of Outstanding Awards Under SMP
+183
+Consolidated Financial Statements IFRS Notes
+"For these awards, the fair value is calculated by subtracting the net present value of expected future dividend payments, if any, until maturity of the respective
+award from the prevailing share price as of the valuation date.
+1,559
+1,550
+Expense recognized
+Granted in 2015
+44
+The Applications, Technology & Services segment derives its
+revenue primarily from the sale of software licenses,
+subscriptions to our cloud applications, and related services
+(mainly support services and various professional services and
+premium support services, as well as implementation services of
+our software products and education services on the use of our
+products).
+relating to vesting of free
+Total Reportable Segments
+SAP Business Network
+Applications, Technology &
+€ millions
+Revenue and Results of Segments
+184
+Our Concur and Fieldglass acquisitions are included in the
+segment information since their respective acquisition dates
+(December 4, 2014, for Concur and May 2, 2014, for Fieldglass).
+The SAP Business Network segment emerged from combining
+all SAP network offerings into one network of networks that
+covers temporary workforce sourcing, other procurement, and
+end-to-end travel and business travel expense management.
+The SAP Business Network segment derives its revenues mainly
+from transaction fees charged for the use of SAP's cloud-based
+collaborative business network and from services relating to the
+SAP Business Network (including cloud applications,
+professional services, and education services). Within the SAP
+Business Network segment, we mainly market and sell the cloud
+offerings developed by Ariba, Fieldglass, and Concur.
+1,492
+Since fiscal year 2015 SAP thus has two reportable segments
+that are regularly reviewed by our Executive Board, which is
+responsible for assessing the performance of our Company and
+for making resource allocation decisions as our Chief Operating
+Decision Maker (CODM): the Applications, Technology &
+Services segment and the SAP Business Network segment.
+These two segments are largely organized and managed
+separately according to their product and service offerings,
+notably whether the products and services relate to our
+business network activities or cover other areas of our business.
+The SAP Business Network qualifies as an operating segment
+and as a reportable segment under IFRS 8.
+On December 4, 2014, we completed our acquisition of Concur
+and in the first quarter of 2015 we announced our intention to
+combine all SAP network offerings (that is, predominantly the
+activities of the purchased Concur business and the network
+activities of the Ariba and Fieldglass businesses acquired earlier)
+and launch the SAP Business Network, a network of networks
+which covers sourcing, procurement, and travel and expenses.
+54
+General Information
+51
+1,600
+-2,808
+-78
+3,986
+568
+-432
+-187
+3,935
+551
+SMP
+Consolidated Financial Statements IFRS Notes
+SMP
+83
+89
+80
+Total expense relating to
+matching shares
+(28) SEGMENT AND GEOGRAPHIC INFORMATION
+Number of investment shares purchased (in thousands)
+Fair value of granted awards
+0.9
+The terms for the members of the Senior Leadership
+Team/Global Executives are slightly different than those for the
+other employees. They do not receive a discount when
+purchasing the shares. However, after a three-year holding
+period, they receive two free matching SAP shares for every
+three SAP shares acquired. This plan is not open to members of
+the SAP Executive Board.
+Under the Share Matching Plan (SMP) implemented in 2010,
+SAP offers its employees the opportunity to purchase SAP SE
+shares at a discount of 40%. The number of SAP shares an
+eligible employee may purchase through the SMP is limited to a
+percentage of the employee's annual base salary. After a three-
+year holding period, such plan participants will receive one free
+matching share of SAP for every three SAP shares acquired.
+b) Equity-Settled Share-Based Payments: Share Matching
+Plan (SMP)
+The RSUs are paid out in cash upon vesting.
+Depending on performance, the number of RSUs vesting could
+have ranged between 50% and 150% of the number initially
+granted. Performance against the KPI targets was 112.96%
+(2014: 90.27%) in fiscal year 2015.
+Non-IFRS operating profit (50%).
+-
+The number of RSUs that could vest under the 2015 tranche
+with performance-based grants was mostly contingent upon a
+weighted achievement of the following performance milestones
+for the fiscal year ended on December 31, 2015:
+Non-IFRS total revenue (50%); and
+Over a one-to-three year service period and upon meeting
+certain key performance indicators (KPIs).
+Over a one-to-three year service period only, or
+Under the RSU Plan, we granted a certain number of RSUs
+between 2013 and 2015 representing a contingent right to
+receive a cash payment determined by the market value of the
+same number of SAP SE shares (or SAP SE American
+Depositary Receipts on the New York Stock Exchange) and the
+number of RSUs that ultimately vest. Granted RSUs will vest in
+different tranches, either:
+182
+The following table shows the parameters and assumptions
+used at grant date to determine the fair value of free matching
+shares, as well as the quantity of shares purchased and free
+matching shares granted through this program in 2015, 2014,
+and 2013:
+Consolidated Financial Statements IFRS Notes
+a.3) Restricted Stock Unit Plan (RSU Plan (2013-2015
+tranches))
+Monetary benefits will be capped at 100% of the exercise price
+(150% for members of the Executive Board).
+The exercise price is 110% of the grant base value (115% for
+members of the Executive Board) which is €39.03 (€40.80) for
+the 2010 tranche, €46.23 (€48.33) for the 2011 tranche, €49.28
+for the 2012 tranche, €59.85 for the 2013 tranche, €60.96 for
+the 2014 tranche, and €72.18 for the 2015 tranche.
+The virtual stock options granted under the SOP 2010 give the
+employees the right to receive a certain amount of money by
+exercising the options under the terms and conditions of this
+plan. After a three-year vesting period (four years for members
+of the Executive Board), the plan provides for 11 predetermined
+exercise dates every calendar year (one date per month except
+in April) until the rights lapse six years after the grant date
+(seven years for members of the Executive Board). Employees
+can exercise their virtual stock options only if they are employed
+by SAP; if they leave the Company, they forfeit them. Executive
+Board members' options are non-forfeitable once granted - if
+the service agreement ends in the grant year, the number of
+options is reduced pro rata temporis. Any options not exercised
+at the end of their term expire.
+The grant-base value is based on the average fair market value
+of one ordinary share over the five business days prior to the
+Executive Board resolution date.
+Under the SAP Stock Option Plan 2010, we granted members of
+the Senior Leadership Team/Global Executives, SAP's Top Re-
+wards (employees with an exceptional rating/high potentials)
+between 2010 and 2015 and only in 2010 and 2011 members of
+the Executive Board cash-based virtual stock options, the value
+of which depends on the multi-year performance of the SAP
+share.
+a.2) SAP Stock Option Plan 2010 (SOP 2010 (2010-2015
+Tranches))
+The final financial effect of each tranche of the EPP 2015 and the
+LTI Plan 2015 will depend on the number of vested RSUs and the
+SAP share price, which is set directly after the announcement of
+the preliminary fourth quarter and full-year results for the last
+financial year under the EPP 2015 (of the respective three-year
+holding period under the LTI Plan 2015), and thus may be
+significantly above or below the budgeted amounts.
+However, RSUs that were already fully vested in prior years did
+not forfeit.
+The LTI Plan 2015 includes a "look-back" provision, due to the
+fact that this plan is based on certain KPI targets in 2015. The
+number of RSUs vested under the 2015 tranche was adjusted to
+reflect the overall achievement for 2015 than represented by the
+number of RSUs vested from the 2012 to 2014 tranches.
+Under the EPP 2015, the RSUs are paid out in the first quarter of
+the year after the one-year performance period, whereas the
+RSUS for members of the Global Managing Board under the LTI
+Plan 2015 are subject to a three-year holding period before
+payout, which occurs starting in 2016.
+At the end of the given year, the number of RSUs that finally vest
+with plan participants depends on SAP's actual performance for
+the given year, and might be higher or lower than the number of
+RSUS originally granted. If performance against both KPI targets
+reaches at least the defined 60% (80% for 2012 and 2013
+tranches) threshold, the RSUs vest. Depending on performance,
+the vesting can reach a maximum of 150% of the budgeted
+amount. If performance against either or both of those KPI
+targets does not reach the defined threshold of 60% (80% for
+2012 and 2013 tranches), no RSUs vest and RSUs granted for
+that year will be forfeited. The adjustment to the threshold of
+those performance indicators was made to reflect our updated
+expectations due to the accelerated shift to the cloud. For the
+year 2015, the RSUs granted at the beginning of the year vested
+with 112.96% (2014: 77.89%) achievement of the KPI targets for
+the LTI Plan. For the EPP, the Executive Board set the
+achievement of the KPI targets at 120.00% (2014: 77.89%).
+We maintain share-based payment plans that allow for the
+issuance of restricted stock units (RSU) to retain and motivate
+executives and certain employees.
+1.6
+Fair Value and Parameters at Grant Date for SMP
+2015
+1.5
+Weighted average remaining contractual life of awards outstanding at year end
+(in years)
+1.92%
+1.87%
+1.67%
+Expected dividend yield
+0.43%
+0.13%
+-0.08%
+Risk-free interest rate
+€54.20
+€55.61
+Grant date
+€66.31
+Other¹)
+Option pricing model used
+Information how fair value was measured at grant date
+Services
+€51.09
+€52.49
+€62.98
+9/4/2013
+6/4/2014
+6/5/2015
+2013
+2014
+Share price
+2015
+585
+2015
+17,515
+19,241
+20,740
+644
+1,389
+1,614
+16,871
+17,852
+19,126
+Total segment revenue
+3,199
+3,248
+Cost of cloud
+3,517
+213
+247
+3,099
+3,035
+3,270
+Services
+14,316
+15,993
+17,223
+544
+1,176
+1,367
+101
+13,772
+-452
+-263
+-131
+-294
+-337
+-2,085
+-2,252
+-2,446
+Cost of cloud and
+licenses and support
+-1,826
+-1,831
+-1,994
+-3
+-421
+-1
+-1,823
+-1,831
+-1,994
+Cost of software
+support
+subscriptions and
+-390
+-715
+-788
+-128
+-293
+-336
+-1
+14,817
+15,856
+Cloud and software
+support
+1,101
+2,000
+2,297
+515
+1,151
+1,337
+The RSU allocation process took place at the beginning of each
+year based on SAP's share price after the publication of its
+preliminary annual results for the last financial year prior to the
+performance period.
+849
+961
+Cloud subscriptions and
+Actual
+Currency
+Software licenses
+Currency
+Actual Constant
+Actual
+Currency
+Currency
+Constant
+Actual
+Currency
+Actual
+Currency
+Constant
+Currency
+Currency
+Actual
+2014
+2015
+2014
+Currency
+4,835
+4,580
+4,381
+support
+13,216
+13,993
+14,926
+28
+25
+30
+13,187
+13,968
+14,896
+Software licenses and
+8,835
+9,414
+10,092
+29
+26
+31
+8,806
+9,388
+10,061
+Software support
+4,381
+4,579
+4,834
+0
+-1
+-1
+2014
+The RSUs were granted and allocated at the beginning of each
+year through 2015, with EPP 2015 RSUs subject to annual
+Executive Board approval. Participants in the LTI Plan 2015 have
+already been granted a budget for the years 2012 to 2015 (2015
+for new plan participants joining in 2015). All participants in the
+LTI Plan 2015 are members of the Global Managing Board.
+Total expense (in € millions) recognized in
+SAP implemented two share-based payments in 2012: an
+Employee Participation Plan (EPP) 2015 for employees and a
+Long-Term Incentive (LTI) Plan 2015 for members of the Global
+Managing Board.
+€54.09
+RSU
+(2013-2014
+tranches)
+SOP 2010
+(2010 - 2014
+tranches)
+€10.17
+€58.26
+€56.40
+tranches)
+tranche)
+LTI Plan 2015 EPP 2015 (2014
+(2012-2014
+12/31/2014 (in years)
+Weighted average remaining life of options outstanding as at
+Expected dividend yield SAP shares
+Expected volatility SAP shares
+Other¹)
+Risk-free interest rate (depending on maturity)
+Option pricing model used
+Information how fair value was measured at measurement date
+Weighted average fair value as at 12/31/2014
+Fair Value and Parameters Used at Year End 2014 for Cash-Settled Plans
+As at December 31, 2014, the valuation of our outstanding cash-
+settled plans was based on the following parameters and
+assumptions:
+"For these awards, the fair value is calculated by subtracting the net present value of expected future dividend payments, if any, until maturity of the respective
+award from the prevailing share price as of the valuation date.
+Weighted average remaining life of options outstanding as at
+12/31/2015 (in years)
+Expected dividend yield SAP shares
+1.2
+3.4
+0.1
+1.7
+Share price
+1.56%
+Other¹) Monte-Carlo
+€58.26
+LTI Plan 2015
+(2012 - 2015
+tranches)
+thousands
+Changes in Numbers of Outstanding Awards Under Our Cash-Settled Plans
+Expected remaining life of the options reflects both the
+contractual term and the expected, or historical, exercise
+behavior. The risk-free interest rate is derived from German
+government bonds with a similar duration. Dividend yield is
+based on expected future dividends.
+Expected volatility of the SAP share price is based on a blend of
+implied volatility from traded options with corresponding
+lifetimes and exercise prices as well as historical volatility with
+the same expected life as the options granted.
+180
+Consolidated Financial Statements IFRS Notes
+¹) For these awards, the fair value is calculated by subtracting the net present value of expected future dividend payments, if any, until maturity of the respective
+award from the prevailing share price as of the valuation date.
+1.1
+3.5
+1.76%
+1.74%
+Other¹)
+0.1
+1.8
+1.74%
+23.4%
+-0.01%
+NA
+19.9 % to
+ΝΑ
+ΝΑ
+-0.1% to
+-0.1% to
+0.02%
+NA
+-0.1%
+€57.37
+NA
+1.56%
+ΝΑ
+1.56%
+Fair Value and Parameters Used at Year End 2015 for Cash-Settled Plans
+As at December 31, 2015, the valuation of our outstanding cash-
+settled plans was based on the following parameters and
+assumptions:
+SAP's cash-settled share-based payments include the following
+programs: Employee Participation Plan (EPP) and Long-Term
+Incentive Plan (LTI Plan for the Global Managing Board) 2015,
+Stock Option Plan 2010 (SOP 2010 (2010-2015 tranches)),
+Restricted Stock Unit Plan (RSU (2013-2015 tranches)).
+a) Cash-Settled Share-Based Payments
+SAP has granted awards under various cash-settled and equity-
+settled share-based payments to its directors and employees.
+Most of these awards are described in detail below. SAP has
+other share-based payment plans not described below, which
+are individually and in aggregate, immaterial to our Consolidated
+Financial Statements.
+(27) SHARE-BASED PAYMENTS
+179
+Consolidated Financial Statements IFRS Notes
+Changing the unobservable inputs to reflect reasonably possible
+alternative assumptions would not have a material impact on the
+fair values of our unlisted equity investments held as available-
+for-sale as of the reporting date.
+0
+0
+Change in unrealized gains/losses in profit and loss for investments held at the end of the
+reporting period
+Weighted average fair value as at 12/31/2015
+400
+December 31
+37
+45
+Included in exchange differences in other comprehensive income
+21
+34
+Included in available-for-sale financial assets in other comprehensive income
+27
+9
+Included in financial income, net in profit and loss
+-36
+-22
+568
+Information how fair value was measured at measurement date
+Option pricing model used
+Share price
+41.9%
+NA
+22.0% to
+ΝΑ
+NA
+-0.39%
+-0.38%
+-0.39%
+-0.16% to
+NA
+-0.25% to
+€73.24
+€73.38
+Other¹)
+Monte-Carlo
+Other¹)
+Other¹)
+€71.90
+€16.06
+€73.38
+€71.45
+tranches)
+RSU
+SOP 2010
+(2010-2015 (2013-2015
+tranches)
+LTI Plan 2015 EPP 2015 (2015
+(2012 - 2015
+tranche)
+tranches)
+Expected volatility SAP shares
+Risk-free interest rate (depending on maturity)
+EPP 2015
+(2013-2015
+tranches)
+The plans are focused on SAP's share price and the
+achievement of two financial key performance indicators (KPIs):
+non-IFRS total revenue and non-IFRS operating profit, which are
+derived from the Company's 2015 financial KPIs. Under these
+plans, virtual shares, called restricted share units (RSUs), are
+granted to participants. Participants are paid out in cash based
+on the number of RSUs that vest.
+SOP 2010
+(2010-2015
+tranches)
+Weighted average share price (in €) for share options exercised
+110
+218
+76
+12/31/2015
+49
+94
+38
+12/31/2014
+Total intrinsic value of vested awards (in € millions) as at
+166
+283
+in
+205
+12/31/2015
+56
+167
+94
+45
+12/31/2014
+Total carrying amount (in € millions) of liabilities as at
+0
+4,120
+0
+0
+0
+74
+3,313
+2014
+57.48
+a.1) Employee Participation Plan (EPP) and Long-Term
+Incentive Plan (LTI Plan) 2015
+181
+Consolidated Financial Statements IFRS Notes
+193
+187
+200
+28
+2015
+58
+29
+82
+13
+54.96
+2014
+83
+118
+-11
+2013
+-2,783
+65.83
+66.20
+56.94
+NA
+2015
+56.62
+56.65
+34
+0
+0
+12/31/2015
+Outstanding as at 12/31/2014
+-378
+-1,619
+-104
+-55
+Forfeited in 2014
+-734
+-2,730
+-1,845
+-70
+Exercised in 2014
+-88
+591
+NA
+-41
+Adjustment based upon KPI target achievement in 2014
+2,001
+8,965
+2,177
+242
+Granted in 2014
+21,666
+1,845
+515
+Outstanding as at 12/31/2013
+(2013-2015
+tranches)
+-458
+1,615
+26,282
+2,228
+12/31/2014
+Outstanding awards exercisable as at
+5,577
+29,127
+2,970
+977
+Outstanding as at 12/31/2015
+-548
+-1,436
+-131
+○
+Forfeited in 2015
+-1,337
+-6,585
+-1,614
+0
+Exercised in 2015
+109
+ΝΑ
+495
+109
+Adjustment based upon KPI target achievement in 2015
+5,125
+10,866
+2,605
+277
+Granted in 2015
+RSU
+-2,546
+-5,451 -4,781
+software
+○
+0
+TomorrowNow and Versata litigation
+-70
+-126
+-126
+-621
+-621
+Restructuring
+-327
+-290
+-290
+-309
+-724
+Share-based payment expenses
+-555
+-562
+-562
+-738
+-738
+Acquisition-related charges
+-82
+-19
+-19
+-11
+-11
+-724
+Revenue under fair value accounting
+-309
+Operating profit
+187
+Consolidated Financial Statements IFRS Notes
+The amounts for revenue by region in the following tables are
+based on the location of customers. The regions in the following
+table are broken down into EMEA (Europe, Middle East, and
+Africa), Americas (North America and Latin America) and APJ
+(Asia Pacific Japan).
+We have aligned our revenue by region disclosures with the
+changes made to the structure of our income statement as
+outlined in Note (3b).
+Geographic Information
+4,396
+4,355
+4,355
+-66
+-25
+-25
+-5
+3,991
+31
+-5
+3,991
+Financial income, net
+-17
+49
+49
+-256
+-256
+Other non-operating income/expense, net
+4,479
+4,331
+4,331
+4,252
+4,252
+Profit before tax
+Revenue by Region
+Adjustment for
+0
+-142
+○
+1,505
+0
+Adjustment for currency impact
+51
+65
+64
+58
+64
+Other revenue
+Actual
+Currency
+16,846
+Adjustment of revenue under fair value accounting
+17,658
+19,241
+20,740
+Total segment revenue for reportable segments
+Actual Constant
+Currency Currency
+Constant
+Currency
+Currency
+Actual
+2013
+2014
+2015
+€ millions
+The segment information for prior periods has been restated to
+conform to the new two-segment structure.
+17,515
+-9
+−11
+-19
+443
+0
+-1,725
+-1,665
+-1,631
+-1,786
+-1,947
+51
+7,155
+7,229
+65
+64
+7,204
+-11
+7,631
+58
+Adjustment for currency impact
+Other expenses
+Other revenue
+Total segment profit for reportable segments
+16,815
+17,560
+17,560
+20,793
+20,793
+Total revenue
+-82
+-19
+8,231
+64
+€ millions
+EMEA
+Americas
+2015
+Cloud and Software Revenue
+Cloud Subscriptions
+and Support Revenue
+Consolidated Financial Statements IFRS Notes
+For information about the breakdown of our workforce by
+region, see Note (7).
+The table above shows non-current assets excluding financial
+instruments, deferred tax assets, post-employment benefits,
+and rights arising under insurance contracts.
+28,147
+29,832
+SAP Group
+518
+599
+APJ
+2014
+17,720
+Americas
+152
+139
+Rest of Americas
+17,568
+19,124
+United States
+9,909
+9,969
+EMEA
+2,477
+2,557
+19,264
+Rest of EMEA
+2013
+2014
+188
+13,950
+14,315
+17,214
+696
+1,087
+2,286
+2,237
+2,221
+2,663
+64
+101
+2015
+200
+5,276
+6,929
+457
+709
+1,579
+6,616
+6,819
+7,622
+176
+277
+507
+2013
+5,097
+2,116
+2,175
+France
+1,591
+1,678
+Rest of Americas
+4,487
+4,898
+6,750
+United States
+7,975
+8,383
+9,181
+EMEA
+5,462
+1,746
+5,813
+Rest of EMEA
+2,513
+2,570
+2,771
+Germany
+2013
+2014
+2015
+€ millions
+Total Revenue by Region
+SAP Group
+APJ
+6,409
+Americas
+8,428
+6,489
+2,917
+2,843
+The Netherlands
+2,399
+2,395
+Germany
+2014
+2015
+€ millions
+Non-Current Assets by Region
+16,815
+17,560
+20,793
+SAP Group
+2,606
+2,688
+3,185
+APJ
+1,975
+2,088
+2,517
+Rest of APJ
+631
+600
+667
+Japan
+6,233
+Certain corporate-level activities are not allocated to our
+segments, including finance, accounting, legal, human
+resources, and marketing. They are disclosed in the
+reconciliation under other expenses and other revenue
+respectively.
+Reconciliation of Revenue and Segment Results
+Restructuring expenses
+Share-based payment expenses
+8,915
+8,806
+Software support
+4,519
+4,381
+4,381
+0
+0
+0
+4,519
+4,381
+4,381
+8,280
+Software licenses
+757
+1,097
+1,101
+344
+512
+515
+413
+585
+585
+Cloud subscriptions and
+Actual
+Currency
+Constant
+Currency
+support
+Actual
+Currency
+29
+Software licenses and
+Services
+13,586
+14,422
+14,316
+375
+541
+544
+13,211
+13,881
+13,772
+Cloud and software
+support
+29
+12,829
+13,216
+31
+28
+8,310
+8,943
+8,835
+30
+22
+28
+12,799
+13,296
+13,187
+13,324
+Actual
+Currency
+Currency
+Constant
+Total segment expenses
+427
+924
+1,084
+12,307
+12,865
+13,784
+Segment gross profit
+141
+-5,873
+-217
+-465
+-5,865
+-530
+-5,343
+Total cost of revenue
+-2,565
+-2,905
+-3,090
+-87
+-171
+-193
+-2,479
+-2,735
+-2,897
+Cost of services
+-4,987 -4,564
+Segment profit
+7,918
+-5,484
+7,382
+Actual
+Currency
+2013
+2014
+2013
+2014
+2013
+Actual
+Currency
+Constant
+Currency
+Currency
+Actual
+2014
+Services
+Total Reportable Segments
+SAP Business Network
+Applications, Technology &
+€ millions
+Revenue and Results of Segments
+185
+Consolidated Financial Statements IFRS Notes
+14,868 13,790 12,734
+-6,637 -6,158 -5,530
+7,631 7,204
+8,231
+-322
+105
+250
+312
+7,099
+-675
+-771
+-5,207
+3,099
+-2,216
+3,136
+101
+-5,591
+-5,530
+-201
+-322
+-322
+-5,018
+-5,269
+-5,207
+Total segment expenses
+Segment profit
+12,374
+12,820
+12,734
+-5,218
+300
+427
+12,074
+12,397
+12,307
+Segment gross profit
+-4,837 -4,472
+-4,781
+-160
+-218
+-217
+-4,312
+-4,619
+423
+-4,564
+7,099
+7,056
+Expenses from the TomorrowNow litigation and the Versata
+litigation
+Acquisition-related third-party costs
+Settlements of pre-existing relationships in connection
+with a business combination
+stand-alone acquisitions of intellectual property (including
+purchased in-process research and development)
+"
+■
+186
+Consolidated Financial Statements IFRS Notes
+Amortization expense and impairment charges for
+intangibles acquired in business combinations and certain
+Acquisition-related charges
+-
+The expenses measured exclude:
+7,128
+The measurements of segment revenue and results include the
+recurring revenues that would have been recorded by acquired
+entities had they remained stand-alone entities but which are
+not recorded as revenue under IFRS due to fair value accounting
+for customer contracts in effect at the time of an acquisition.
+Reports based on actual currencies use the same currency rates
+as are used in our financial statements. Reports based on
+constant currencies report revenues and expenses using the
+average exchange rates from the previous year's corresponding
+period.
+Our management reporting system produces a variety of
+reports that differ by the currency exchange rates used in the
+accounting for foreign-currency transactions and operations.
+Most of our depreciation and amortization expense affecting
+segment profits is allocated to the segments as part of broader
+infrastructure allocations and is thus not tracked separately on
+the operating segment level. Depreciation and amortization
+expense that is directly allocated to the operating segments is
+immaterial in all operating segments presented.
+Our management reporting system reports our intersegment
+services as cost reductions and does not track them as internal
+revenue. Intersegment services mainly represent utilization of
+human resources of one segment by another segment on a
+project-by-project basis. Intersegment services are charged
+based on internal cost rates including certain indirect overhead
+costs, excluding a profit margin.
+Measurement and Presentation
+Segment asset/liability information is not regularly provided to
+our CODM. Goodwill by operating segment is disclosed in
+Note (15).
+7,155
+7,229
+7,204
+99
+101
+105
+We use an operating profit indicator to measure the
+performance of our operating segments. However, the
+accounting policies applied in the measurement of operating
+segment revenue and profit differ as follows from the IFRS
+accounting principles used to determine the operating profit
+measure in our income statement:
+Total cost of revenue
+-2,516
+-2,606
+subscriptions and
+-208
+-389
+-390
+-84
+-127
+-128
+-124
+-263
+-263
+Cost of cloud
+16,846
+support
+17,658
+460
+641
+644
+16,386
+17,017
+16,871
+Total segment revenue
+3,259
+3,236
+3,199
+85
+101
+17,515
+Cost of software
+-1,823
+-1,839
+-2,565
+-68
+-88
+-87
+-2,447
+-2,518
+-2,479
+Cost of services
+software
+-1,956
+-2,232
+-2,216
+-91
+-130
+-131
+-1,865
+-2,102
+-2,085
+Cost of cloud and
+licenses and support
+-1,749
+-1,842
+-1,826
+-8
+-3
+-3
+-1,741
+3,175
+170
+-0.03% to
+-80
+-29
+Level 3 Disclosures
+The following table shows the reconciliation from the opening to
+the closing balances for our unlisted equity investments and call
+options on equity shares classified as Level 3 fair values:
+Reconciliation of Level 3 Fair Values
+€ millions
+Transfers
+Into Level 3
+Out of Level 3
+Purchases
+January 1
+Gains/losses
+2015
+2014
+Unlisted Equity
+Investments and Call
+Options on Equity
+Shares
+Unlisted Equity
+Investments
+400
+239
+12
+Sales
+0
+The Code of Business Conduct expresses the high standards
+that we require from our employees and Executive Board
+members and sets out the main principles that guide our
+business conduct toward customers, business partners, and
+shareholders. We see our Code of Business Conduct as the
+standard for our dealings involving customers, business
+partners, vendors, shareholders, and competitors. By following
+our Code of Business Conduct, we demonstrate a commitment
+against all forms of unfair competitive practice, corruption, and
+misrepresentation. Our global compliance organization
+monitors worldwide compliance with the Code of Business
+Conduct and other policies applying within the Group. It
+regularly reviews these internal policies, revises them if
+necessary, and delivers related employee training.
+15
+To Our Stakeholders Corporate Governance Report
+SAP's corporate governance includes our Code of Business
+Conduct for employees and members of the Executive Board.
+The Executive Board currently has six male members. Pursuant
+to the above Act, the Supervisory Board adopted by resolution
+at its meeting on March 19, 2015, a target of one for the number
+of Executive Board seats to be held by women by June 30, 2017.
+The Executive Board continues to follow the recommendation in
+the Code that executive boards should generally have regard to
+diversity when appointing people to leadership positions, and in
+particular to employ appropriate numbers of women in such
+positions. In support of this, we maintain a diversity policy for
+company leadership appointments. SAP has set itself a target of
+increasing the overall percentage of positions in leadership held
+by women to 25% by 2017. It goes without saying that ability is
+still the primary selection criterion for any position at SAP.
+Globally, the percentage of leadership positions held by women
+at the end of 2015 was 23.6%.
+The first and second management levels below the Executive
+Board are the Global Executive Team (GET, without the Global
+Managing Board) and the Senior Executive Team (SET),
+respectively. In accordance with the requirements of the Act, the
+Executive Board resolved on September 30, 2015, that the
+percentage of positions held by women on the first two
+management levels below the Executive Board should remain
+unchanged at 23% and 17%, respectively, to June 30, 2017.
+Starting 2016, a fixed gender quota of 30% applies for new
+appointments to the Supervisory Board of SAP SE pursuant to
+the law on the equal participation of men and women in
+leadership positions (German Equal Leadership Opportunities
+for Women Act). As such, the Supervisory Board's previous
+voluntary objective for the composition of the Supervisory
+Board, based on an earlier Code recommendation, no longer
+applies. There are currently two women on the shareholder
+representatives' side of the Supervisory Board and two women
+on the employee representatives' side. The fixed quota applies
+to future appointments to the Supervisory Board; the current
+members of the Supervisory Board remain unaffected until the
+end of their term.
+APPLYING INTERNATIONAL CORPORATE GOVERNANCE
+STANDARDS
+CODE OF BUSINESS CONDUCT
+SAP is a NYSE-listed company and we are therefore subject to
+certain U.S. financial legislation (including the Sarbanes-Oxley
+Act of 2002, among others) and to the applicable SEC and NYSE
+regulations. Besides implementing the requirements of the U.S.
+Sarbanes-Oxley Act, section 404, and other Sarbanes-Oxley Act
+requirements, including conducting an annual audit of our
+internal control over financial reporting, we comply with those of
+the corporate governance standards codified in the NYSE Listed
+Company Manual, section 303A, which bind foreign private
+issuers. The section 303A standards that apply to SAP include
+the requirement to have an audit committee composed of
+members who are independent in the meaning of the Sarbanes-
+Oxley Act, and related reporting requirements. Erhard
+Schipporeit, the chairperson of the Audit Committee, is an audit
+committee financial expert in the meaning of the Sarbanes-
+Oxley Act.
+Section 6.3, sentence 2, of the Code recommends that all
+directors' shareholdings be reported in a corporate governance
+report, broken down by executive board and supervisory board
+memberships if the entire holdings exceed 1% of the shares
+issued by the Company. In fulfillment of this recommendation,
+see the Compensation Report in our combined management
+report for 2015, which contains the recommended information.
+Our shareholders exercise their rights, such as the rights to put
+questions to the management and to vote, at the Annual General
+Meeting of Shareholders. Shareholders and the public are able
+to watch a live broadcast of the entire Annual General Meeting of
+Shareholders on the Internet. They can vote their shares at the
+Meeting or instruct a proxy of their choice or one of the proxies
+provided for that purpose by SAP. Alternatively, they can
+participate online or vote by mail. The invitation to the Annual
+General Meeting of Shareholders includes full details and
+instructions. Every shareholder can access all of the paperwork
+on the SAP Web site in good time for the meeting.
+TRANSPARENCY, COMMUNICATION, AND SERVICE FOR
+SHAREHOLDERS
+Our shareholders can obtain full and timely information about
+SAP on our Web site and can access current and historical
+Company data. Among other information, we post all of our
+financial reports, all relevant news about the Company's
+governing bodies and their corporate governance docu-
+mentation, information requiring ad hoc (current) disclosure,
+press releases, and news of notifiable directors' dealings.
+FINANCIAL ACCOUNTING, RISK MANAGEMENT, AND
+INTERNAL CONTROL
+We prepare the SAP SE financial statements in accordance with
+the German Commercial Code and our consolidated financial
+statements in accordance with International Financial Reporting
+Standards (IFRSS). We prepare a management report, as
+required by the German Commercial Code, and the Form 20-F
+annual report in accordance with SEC requirements. The
+Executive Board is responsible for financial accounting. The
+Supervisory Board approves the SAP SE financial statements,
+the consolidated financial statements, and the combined
+management report. The SAP SE financial statements, the
+consolidated financial statements, and the combined
+management report are audited by KPMG AG Wirtschafts-
+prüfungsgesellschaft, the auditor elected for that purpose by the
+Annual General Meeting of Shareholders.
+In addition to our annual financial statements, we also prepare
+interim reports for the first, second, and third quarters. Our
+quarterly reports comply with the German Securities Trading
+Act and are submitted to the Audit Committee of the
+Supervisory Board before they are published.
+In German stock corporation and commercial law, there are
+special requirements for internal risk management that apply to
+SAP. To meet them, our global risk management system
+supports risk planning, identification, analysis, handling, and
+minimization. We maintain standard documentation of all our
+internal control structures, especially those that affect financial
+reporting, and continually evaluate their effectiveness. As a
+company listed on the NYSE, we instruct our auditor, KPMG, to
+conduct an annual audit of our internal control over financial
+reporting in accordance with the requirements of the U.S.
+Sarbanes-Oxley Act of 2002, section 404. The audit as of
+December 31, 2015, confirmed that our internal control is
+effective. In compliance with the reporting requirements in the
+German Commercial Code, sections 289 (5) and 315 (2)(5), the
+combined SAP SE and SAP Group management report contains
+full information about the principal features of the internal
+controls and risk management structure applying to SAP's
+consolidated financial reporting.
+EXECUTIVE BOARD AND SUPERVISORY BOARD
+SHAREHOLDINGS
+DIVERSITY IN THE COMPANY
+To Our Stakeholders Corporate Governance Report
+16
+ANNUAL GENERAL MEETING OF SHAREHOLDERS
+section 5.4.1, paragraph 2. The objective is five such members.
+At its meeting on October 8, 2015, the Supervisory Board
+determined that all of its shareholder representative members
+are independent in the meaning of the Code, section 5.4.2 and
+that the number of independent members is sufficient in the
+meaning of that section. The Audit Committee is chaired by
+Erhard Schipporeit, who for many years was the chief financial
+officer of a DAX company that is also listed on a U.S. stock
+exchange and therefore qualifies as an independent financial
+expert in the meaning of the German Stock Corporation Act,
+section 100 (5).
+COMPOSITION OF THE SUPERVISORY BOARD
+INDEPENDENCE OF THE SUPERVISORY BOARD
+We are a global company with an international shareholder base,
+so we need sound governance. Good corporate governance
+means managing the Company accountably and transparently
+to secure long-term value. We believe our shareholders,
+business partners, employees, and the financial markets reward
+good corporate governance with the increased trust they place
+in our Company.
+CORPORATE GOVERNANCE PRINCIPLES AT SAP
+SAP is an international firm with European roots, having the legal
+form of a European company (Societas Europaea, or SE). Being
+an SE headquartered in Germany, we are now subject to
+European and German law for SEs while remaining subject to
+German stock corporation law. Major characteristics of our
+governance structure remain in place since the conversion,
+notably our two-tier board comprising a Supervisory Board and
+an Executive Board, and parity for workforce representatives on
+the Supervisory Board. Because SAP SE is listed on a German
+stock exchange, our corporate governance is still based on the
+German Corporate Governance Code (the "Code" in this report).
+Every year, as required by the German Stock Corporation Act,
+section 161, the Executive Board and Supervisory Board issue a
+declaration stating whether SAP has implemented and is
+following the Code's recommendations, and identifying any
+recommendations that the Company has not followed - with a
+full explanation of why it has not done so. Our latest section 161
+declaration, published on October 29, 2015, is on the SAP Web
+site along with our declarations from previous years and links to
+the current and previous editions of the Code. As our 2015
+declaration shows, we currently follow all but seven of the 102
+recommendations and all of the suggestions in the current
+Code.
+Since SAP is also listed in the United States, we comply with the
+rules that apply to non-U.S. companies listed on the New York
+Stock Exchange (NYSE). These include the requirements, as
+they apply to foreign private issuers, of the NYSE Corporate
+Governance Standards, the U.S. Sarbanes-Oxley Act of 2002,
+and the U.S. Securities and Exchange Commission (SEC).
+CORPORATE GOVERNANCE STATEMENT
+On February 24, 2016, the Executive Board published a
+corporate governance statement for 2015 as required by the
+German Commercial Code, section 289a. The statement is on
+the SAP Web site. It comprises the current declaration pursuant
+to the German Stock Corporation Act, section 161, certain
+details of our corporate governance practices, and an account of
+how the Executive Board and the Supervisory Board work, who
+serves on which Supervisory Board committees, and how those
+committees work. It also sets out the targets for the percentage
+of women on the Executive Board and the two management
+levels below Executive Board level.
+EXECUTIVE BOARD
+The Executive Board currently has six members. It is solely
+responsible for managing the Company. It has a duty to exercise
+its management powers in the interest of the Company and in
+pursuit of the sustained growth of corporate value. It discusses
+and agrees its strategy for the Company with the Supervisory
+Board, ensures compliance with the requirements of the law
+throughout the Group, and maintains effective risk management
+structures and internal risk controls. There is information about
+each member's portfolio of responsibilities on the SAP Web site.
+GLOBAL MANAGING BOARD
+The Global Managing Board helps the Executive Board with its
+work. It currently comprises all of the Executive Board and four
+other global managers who play a part in directing large sections
+of the business. These additional members are appointed by the
+Executive Board with the Supervisory Board's consent. The
+Global Managing Board has a coordinating function, advises the
+Executive Board, and helps it make decisions, but the Executive
+Board retains overall responsibility for everything the Company
+does. The Global Managing Board will be dissolved on March 31,
+2016. Two of its members were appointed by the Supervisory
+Board to the Executive Board with effect from April 1, 2016.
+SUPERVISORY BOARD
+The size and composition of the Supervisory Board are
+governed not by the German Codetermination Act (which does
+not apply, because we are a European company) but by the
+To Our Stakeholders Corporate Governance Report
+14
+Articles of Incorporation and the SAP SE Employee Involvement
+Agreement. Both documents are available on the SAP Web site.
+The Supervisory Board has 18 members who, in equal numbers,
+represent the shareholders and the employees. It appoints,
+monitors, and advises the Executive Board. The Executive Board
+involves the Supervisory Board in decisions on matters of
+fundamental importance for the Company. The Supervisory
+Board has reserved to itself the approval of certain transactions
+of fundamental importance, as set out in the Articles of
+Incorporation and detailed in the Supervisory Board's list of
+reserved categories of transactions. The Executive Board
+regularly provides the Supervisory Board with full and timely
+reports on all material matters of strategy, business planning,
+and performance, including any deviations of actual business
+performance from plan, risks, risk management, and corporate
+compliance. We provide our shareholders with in-depth
+information about how the Executive Board and the Supervisory
+Board work, how the committees are composed, and how these
+committees work, in our corporate governance statement. For
+more information about the joint work of the Executive Board
+and the Supervisory Board and about the work of the
+Supervisory Board and its committees in 2015, see the Report
+from the Supervisory Board.
+Report from the
+Supervisory Board
+The Supervisory Board members as a group possess the
+knowledge, ability, and expert experience required to properly
+perform its duties in our global IT company. At least one
+independent member has financial reporting and auditing
+expertise. The Supervisory Board has defined the following
+objectives for its own composition:
+-
+There should never be fewer than three people from the
+international stage on the shareholder representatives' side
+of the Supervisory Board.
+No employee, consultant, or director of a significant SAP
+competitor should be a Supervisory Board member.
+At least five shareholder representatives on the Supervisory
+Board should be independent members in the meaning of
+section 5.4.2 of the Code.
+No member of the Supervisory Board should be older than 75
+years.
+We believe the current composition of the Supervisory Board
+fulfills all of these objectives. There is information about each
+member, the committees, and who serves on which committee,
+on the SAP Web site.
+We believe a sufficient degree of independence of our
+Supervisory Board members is essential for effective and
+responsible corporate management and control. Our
+Supervisory Board has a defined objective for its composition
+regarding the minimum number of independent members on the
+shareholder representative side, as recommended in the Code,
+Dear Shareholders,
+Executive Board Compensation
+We received regular, full, and timely reports, both in writing and
+from Executive Board members in person. They kept us up to
+date on the Company's strategy, plans, business performance,
+risks, risk management, compliance (in other words, adherence
+to laws, to the Company's Articles of Incorporation, and to
+internal policies), and transactions of special significance for
+SAP. The Executive Board advised us when business deviated
+from plan or target, and why.
+42,004
+40,543
+5 years
+10 years
+38,717
+REX General Bond - total return index
+DAX 30 Performance - total return index
+Performance comparators
+Average annual return
+Value at 12/31/2015¹) (in €)
+Period of investment
+Date of investment
+Initial investment €10,000
+Percent, unless otherwise stated
+Institutions in Ireland and the United Kingdom represented the
+largest regional group of shareholders, holding 17% of the stock
+in January 2016 (January 2015: 15%). Institutions in North
+America held around 16% of the stock in January 2016 (January
+2015: 16%), followed by continental European investors outside
+Germany, who held approximately 14% in January 2016
+(January 2015: 14%). Institutions in Germany held 8% (January
+2015: 7%) and investors from the rest of the world held 2%
+(January 2015: 3%) of the stock in January 2015. Of these
+institutional investors, 10% were classified as socially
+responsible investors (SRIs) in January 2016 (January 2015:
+10%). Private or unidentified investors held 18% (January 2015:
+19%) in January 2016. Also as of January 2016, SAP held 2.5%
+(January 2015: 2.7%) of the stock in treasury.
+The proportion of our stock in free float increased again slightly
+in 2015. Applying the definition accepted on the Frankfurt Stock
+Exchange, which excludes treasury stock from the free float, as
+at December 31, 2015, the free float stood at 77.5% (December
+31, 2014: 75.7%). In January 2016, approximately 20% (January
+2015: 22%) of the stock was under the control of SAP founders
+Hasso Plattner, Dietmar Hopp, the Klaus Tschira community of
+heirs, and their trusts and holding companies.
+SHAREHOLDER STRUCTURE
+Return on SAP Common Stock - WKN 716460/ISIN DE007164600
+SAP's capital stock as at December 31, 2015, was
+€1,228,504,232 (2014: €1,228,504,232). It is issued as
+1,228,504,232 no-par shares, each with an attribute value of €1
+in relation to capital stock.
+CAPITAL STOCK UNCHANGED
+At the start of October, hopes of a further central bank stimulus
+package temporarily lifted market sentiment. SAP stock also
+benefited from strong third-quarter results. After we presented
+our results, SAP stock rose to €66.50, while the DAX fell slightly.
+On October 27, our stock again passed the €70 mark and, on
+November 20, reached €74.85, its highest value for the year and
+an all-time high. In the first half of December, market sentiment
+was cautious following weak economic data from China and a
+strong euro before improving after the Federal Reserve raised
+interest rates. SAP stock ended the year at €73.38.
+second-quarter results on July 21, SAP stock fell to €67.80 in a
+weak market environment. The negative sentiment continued
+into August and dragged our stock down to below the €60 mark
+on August 21. In the second half of September, the Federal
+Reserve delayed its plans to raise interest rates, which unsettled
+investors primarily in Europe. The DAX moved back below the
+10,000-point mark. The Volkswagen crisis also weighed on
+market sentiment, and, on September 24, SAP stock slipped to
+€55.89, its lowest point of the quarter.
+11
+To Our Stakeholders Investor Relations
+The outcome of Greece's referendum and China's stock market
+crash weighed on markets in early July. After we announced our
+The stock markets continued their climb in early April. On April
+10, the DAX reached 12,374.73 points, an all-time high, and SAP
+stock surpassed €69. Shortly after, fears that Greece might
+leave the euro area weighed on stock markets for a time. After
+we published our first-quarter results on April 21, the price of
+SAP stock climbed to €68.94, and then to €70.72 on April 27,
+exceeding its record closing price from March 7, 2000. During
+the remainder of the second quarter, the price of SAP stock
+moved broadly in sympathy with general sentiment, which was
+disturbed by the crisis in Greece, weak economic data from the
+United States, and a strong euro.
+1 year
+In 2015, as every year, the Supervisory Board continuously
+discharged all of the duties imposed on it by the law and by the
+Company's Articles of Incorporation. We were consulted by the
+Executive Board throughout the year and kept the global
+management of the Company under continued observation and
+scrutiny for legal compliance, adherence to proper accounting
+principles, business focus, and efficiency. We agreed the
+Company's strategy with the Executive Board and regularly
+discussed with the Executive Board the Company's progress
+toward executing it. We were directly involved when the
+Executive Board made any decision of fundamental importance
+to SAP.
+22,317
+12,798
+The content and scope of the Executive Board's reports to us
+fully met our requirements for them. Whenever we asked for
+more information than was in the reports, the Executive Board
+gave us it. In particular, the Executive Board came to
+Supervisory Board meetings for discussion and to answer our
+questions. We questioned and probed the Executive Board to
+satisfy ourselves that the information it gave us was plausible.
+Section 11 (6) in the Articles of Incorporation lists certain
+transactions for which management must seek prior supervisory
+board approval. The Supervisory Board established a list of such
+transactions and other categories of transactions for which the
+Executive Board must obtain the Supervisory Board's consent,
+in accordance with the German SE Implementation Act, section
+19. The Supervisory Board carefully considered all transactions
+in the listed categories and discussed them with the Executive
+Board, focusing on the benefits, potential risks, and other effects
+of each transaction. The Supervisory Board agreed to all
+transactions for which its consent was sought by the Executive
+Board.
+The Executive Board also kept the chairperson of the
+Supervisory Board fully informed between meetings of the
+Supervisory Board and its committees. In particular, the CEO
+met regularly with the chairperson of the Supervisory Board to
+discuss SAP's strategy, planning, the Company's business
+performance, risks, risk management, compliance, and other
+key topics and decisions. The CEO informed the Supervisory
+Board chairperson without delay of all important events that
+were significant for assessing SAP's position and progress or for
+the management and governance of the Company.
+SUPERVISORY BOARD MEETINGS AND RESOLUTIONS
+In 2015, the Supervisory Board of SAP SE held four ordinary
+meetings and four extraordinary meetings at which we
+deliberated and resolved on all matters of relevance to the
+Company. We also adopted two resolutions by correspondence
+vote. It is customary practice at our meetings that the Executive
+Board withdraws while we deliberate on items that pertain to the
+Executive Board or require discussion among Supervisory Board
+members alone. This happened at three of our ordinary
+meetings in 2015. The Supervisory Board addressed the
+following key topics during the year:
+SAP Business Network and Cloud Business
+After dealing extensively with a number of major SAP
+acquisitions in 2013 and 2014, the Supervisory Board and the
+Finance and Investment Committee discussed the development
+and integration of the acquired entities on numerous occasions
+in 2015. The SAP Business Network segment, which combines
+the activities of the acquired Ariba, Concur, Fieldglass
+businesses, and the integration of these companies into the SAP
+Group, were key topics notably at the Supervisory Board
+meeting on February 12 and at the Finance and Investment
+Committee meetings in February, July, and December. Likewise
+in our line of focus were the development of the cloud business,
+and the cloud strategy. We explored these topics regularly,
+particularly in connection with the Executive Board's business
+reports and in the course of Technology and Strategy
+Committee meetings.
+To Our Stakeholders Report from the Supervisory Board
+17
+Report
+Prompted by, among other things, the unexpectedly strong
+growth in SAP's cloud business and the pending discontinuation
+of the RSU Milestone Plan 2015 at the end of the year, the
+Supervisory Board made a number of decisions about Executive
+Board compensation. Compensation was on the agenda of the
+ordinary Supervisory Board meetings in February, July, and
+October, and of the General and Compensation Committee
+meetings.
+At our ordinary Supervisory Board meeting on February 12, we
+received and discussed the recommendations of the General
+and Compensation Committee concerning Executive Board
+compensation for 2014. Exercising our discretionary powers
+under the terms of the short-term incentive (STI) plan 2014, we
+first determined performance against the defined targets. We
+also looked at target achievement within the so-called
+performance period for the 2014 tranche of the RSU Milestone
+Plan 2015. Introduced in 2012, the RSU Milestone Plan 2015 is a
+long-term variable compensation element for SAP SE Executive
+Board members in which the members are granted a number of
+virtual shares (called restricted share units, or RSUs) for a given
+year (or "tranche"); the quantity of RSUs ultimately allocable for
+a plan tranche depends on SAP's operating profit performance
+in the year it is allocated. In light of the unexpectedly strong
+growth in cloud business and its effects on SAP's revenue
+development, the Supervisory Board resolved a number of
+amendments to the RSU Milestone Plan 2015 to preserve its fair
+and equitable nature.
+We also deliberated on Executive Board compensation for 2015
+in the February meeting. We identified the key performance
+indicators (KPIs) and set the target numbers for each KPI in the
+STI 2015 plan and their relative weightings. We revised the
+revenue and operating profit performance targets for the 2015
+tranche of the RSU Milestone Plan 2015 to take account of the
+effects of the aforementioned cloud growth on the Company's
+sales and profit planning. We adopted a resolution on Executive
+Board members' individual allocation of rights under the RSU
+Milestone Plan 2015 (2015 tranche). The Supervisory Board, as
+required, evaluated the appropriateness of the Executive Board
+members' compensation for 2015, and in each case found it to
+be appropriate in terms of amount, structure, objective criteria,
+and for each member's responsibilities and tasks.
+On July 9, we deliberated on the new model for Executive Board
+compensation for 2016, which had been prepared and discussed
+by the General and Compensation Committee at several
+meetings on account of the pending discontinuation of the RSU
+Milestone Plan 2015. Ahead of the meeting, we had received a
+legal opinion from Allen & Overy and a certificate from Ernst &
+Young on the compensation's appropriateness. On this basis, we
+resolved to adopt the new Long-Term Incentive (LTI) Plan 2016
+and agreed that the amount and structure of the Executive
+Board's compensation for 2016 was appropriate. For more
+information about the LTI Plan 2016 and other elements of the
+compensation package for Executive Board members, see the
+Compensation Report.
+Other matters addressed at our meetings in 2015 included:
+Meeting in February
+The compensation issues discussed at our February meeting are
+covered in the preceding section. In view of the retroactive
+changes to the Executive Board compensation as described, we
+also resolved in our February meeting to update the Company's
+declaration of implementation of the German Corporate
+Governance Code (the "Code") pursuant to the German Stock
+Corporation Act, section 161, by filing jointly with the Executive
+Board a precautionary declaration of deviation from the
+recommendation contained in section 4.2.3 (second paragraph,
+eighth sentence) of the Code.
+The Executive Board gave us an overview of business in 2014
+and presented other management information, such as SAP's
+revenue growth in the individual business areas, regions, and
+product fields. It also explained SAP's current market position
+and growth plan for the next five years. We discussed in detail
+the annual plan for 2015 as presented to us by the Executive
+Board, and we decided to vote on the 2015 capital expenditure
+budget and liquidity plan in a subsequent extraordinary
+Supervisory Board meeting. In addition, the Executive Board
+updated us on the status and lessons learned from the "Simplify
+& Optimize" personnel restructuring project launched in
+2014/2015.
+Extraordinary Meeting in February
+The Supervisory Board held an extraordinary meeting on
+February 23 in which it continued its discussion from the
+preceding ordinary meeting and approved the annual plan and
+budget for 2015.
+Meeting in March (Meeting to Discuss the Financial
+Statements)
+At its March 19 meeting, the Supervisory Board turned its
+attention to SAP SE's 2014 financial statements and the
+consolidated financial statements, the audits conducted by
+KPMG AG Wirtschaftsprüfungsgesellschaft (KPMG), and the
+Executive Board's proposed resolution on the appropriation of
+retained earnings for 2014. The Audit Committee reported on all
+matters for which it is responsible in connection with the
+financial statements and the consolidated financial statements
+for 2014, particularly on the form and scope of its examination of
+the documents relating to the financial statements, and
+recommended that we approve them. The auditor attended the
+meeting and reported in detail on the audit and its findings for
+each of the focus areas the Audit Committee had selected. The
+auditor also related the discussions on those matters at the two
+preceding meetings of the Audit Committee. The auditor then
+discussed the results of the audit with the Supervisory Board
+and answered our questions. The Supervisory Board approved
+the audit. There were no findings from our own examination, so
+To Our Stakeholders Report from the Supervisory Board
+18
+16.0
+8.4
+21,002
+Corporate Governance
+1 year
+To Our Stakeholders Investor Relations
+PROVIDING TRANSPARENCY FOR INVESTORS
+Investor Relations Team and Senior Management at SAP
+Held More Than 360 Meetings
+In over 360 one-on-one meetings held during investor road
+shows worldwide, in virtual format over Telepresence or video
+conference, and at investor events, senior management at SAP
+and the Investor Relations (IR) team answered inquiries from
+institutional investors and analysts about SAP's business
+strategy. We also held telephone conferences and analyst
+meetings when we published our quarterly results. In addition,
+we continued our dialog with the debt investor community
+through regular calls on SAP's financial performance.
+SAP Capital Markets Day at the New York Stock Exchange
+A particular highlight of our global Investor Relations program in
+2015 was the Capital Markets Day in conjunction with the
+SAP S/4HANA product launch held at the New York Stock
+Exchange. At the Capital Markets Day, our customers BASF,
+Shell, and UnderAmour spoke about their relationship with SAP.
+In addition, our events for investors and financial analysts at the
+CeBIT fair in Hanover, Germany, and the SAPPHIRE NOW
+conference in Orlando, Florida, in the United States, were key
+elements of our IR program. SAP engages in regular dialog with
+social responsible investors (SRIs), providing insight into SAP's
+environmental, social, and corporate governance policies. SAP
+also speaks at various retail shareholder events.
+Communication Across Multiple Channels
+We provide a wide range of information for investors about SAP
+and SAP stock online, including social media information on the
+SAP Investor Relations Twitter feed @sapinvestor, the quarterly
+SAP INVESTOR magazine, which investors can subscribe to free
+of charge, and a text message service. Shareholders can reach
+the IR team directly through a hotline and e-mail at
+investor@sap.com. We also publish an overview of the latest
+analyst assessments in collaboration with Vara Research. All key
+investor events at which members of our Global Managing
+Board speak are broadcast live on the Internet, and we post the
+presentation materials on the investor relations area of our
+public Web site.
+REWARDING OUR INVESTORS - DIVIDEND PAYOUT OF
+€1.15 PER SHARE
+We believe our shareholders should benefit appropriately from
+the profit the Company made in 2015. In recent years, the
+payout has always been greater than 35% of profit after tax. We
+aim to continue our policy to pay a dividend totaling more than
+35% of profit after tax in the future.
+The Executive Board and the Supervisory Board will recommend
+to the Annual General Meeting of Shareholders that the total
+dividend will be increased by 5% to €1.15 per share (2014:
+€1.10). Based on this recommendation, the overall dividend
+payout ratio (which here means total distributed dividend as a
+percentage of profit) would be 45% (2014: 40%).
+To Our Stakeholders Investor Relations
+SAP's stock increased 26% in 2015 outperforming major indices
+such as the DAX. The market capitalization of SAP exceeded
+US$97 billion at the end of 2015. SAP is number 57 among the
+top 100 most valuable companies in the world.
+10
+Percent
+130
+125
+120
+12/31/2014
+115
+€58.26
+110
+105
+100
+95
+SAP Stock in Comparison to DAX 30, Dow Jones EURO STOXX 50, and S&P North American Technology Software Index
+December 31, 2014 (= 100%) to December 31, 2015
+In 2015, our conversations with the financial community were
+highly focused on the soaring adoption of SAP S/4HANA, our
+strategy in business networks and the powerful combination of
+our rapidly expanding cloud business and our growing core
+business. Investors were keen to understand SAP's position to
+capture the tremendous growth opportunities in the market.
+■ The market capitalization of SAP exceeded US$97 billion at the end of 2015.
+■ Recommended dividend payout is €1.15 per share.
+■SAP stock increased 26% in 2015.
+9.2
+9.6
+4.1
+4.0
+0.5
+S&P 500 Composite - total return index
+8.2
+17.4
+Gerhard Oswald
+Member of the Executive Board
+Product Quality & Enablement
+Ingrid-Helen Arnold
+Member of the Global Managing Board
+Chief Information Officer and Chief Process Officer
+Steve Singh
+Member of the Global Managing Board, CEO of Concur
+Technologies, and Head of Business Network Group
+Michael Kleinemeier
+Member of the Executive Board
+Global Service & Support
+Quentin Clark
+Member of the Global Managing Board
+Chief Business Officer
+Stefan Ries
+Member of the Global Managing Board
+Chief Human Resources Officer
+To Our Stakeholders Global Managing Board
+16
+9
+Investor Relations
+90
+13
+Миш
+12/31/2015
+€73.38
+Initial investment €10,000
+Date of investment
+Period of investment
+Value at 12/31/2015¹) (in US$)
+Average annual return
+Performance comparators
+S&P 500 Composite - total return index
+Assuming all dividends were reinvested
+Source: Datastream
+38,717
+10 years
+Percent, unless otherwise stated
+19,918
+40,543
+5 years
+42,004
+SAP Stock Outperforms the Indexes from the Second Quarter
+Our stock reached its lowest price for the year on January 9,
+when it traded at €54.53. It recovered after the announcement
+of our preliminary results for full-year 2014 before fluctuating in
+its low range following the announcement of further results,
+outlook guidance, and medium-term targets for 2015. However,
+on February 12 it passed the €60 mark. The European Central
+Bank's loose monetary policy and its announcement of a bond
+purchase program at the end of January buoyed the markets.
+This helped lift the DAX 30, which crossed the 12,000 point level
+on March 12. Successful participation at the CeBIT trade fair and
+the Company's proposal to increase the dividend also boosted
+the price of SAP stock.
+16,870
+11,561
+11.0
+15.6
+7.3
+12.6
+1.4
+7.1
+Return on SAP ADRS - 803054204 (CUSIP)
+12
+To Our Stakeholders Investor Relations
+01
+02
+03
+04
+05
+06
+07
+08
+09
+10
+11
+12
+SAP Share (Xetra) DAX 30 Performance Index (Xetra) S&P North American Technology Software Index Dow Jones EURO STOXX 50
+STOCK DEVELOPMENT AND COMPARISON TO PEER
+INDICES
+Key Facts About SAP Stock/SAP ADRs
+Listings
+Germany
+United States (ADRs)
+12.9
+S&P North American Technology Software Index
+11.4
+17.8
+25.3
+Assuming all dividends were reinvested
+Source: Datastream
+www
+Central Bank's commitment to its expansionary monetary policy
+lifted the markets and caused stocks to rally at the beginning
+and end of the year.
+7.1
+5.78
+6.07
+6.20
+2.02
+3.33
+28.0
+A Volatile Year on Stock Markets Worldwide
+Stock markets were volatile in 2015. The Greek debt crisis, fears
+over China's economy, the decision of the Federal Reserve to
+delay plans to increase interest rates, the migrant crisis, terror
+attacks, and falling oil prices negatively impacted share prices
+worldwide. A third loan program for Greece and the European
+IDs and symbols
+WKN/ISIN
+NYSE (ADRs)
+Reuters
+Bloomberg
+Weight (%) in indexes at 12/31/2015
+Berlin, Frankfurt, Stuttgart
+New York Stock Exchange
+Prime All Share
+CDAX
+HDAX
+Dow Jones STOXX 50
+Dow Jones EURO STOXX 50
+DAX 30
+7.80
+716460/DE0007164600
+803054204 (CUSIP)
+SAPG.For.DE
+SAP GR
+254,822
+1,800
+SAP Industries, Inc., Newtown Square, PA, United States
+100.0
+538,411
+40,492
+53,742
+385
+SAP Italia Sistemi Applicazioni Prodotti in Data Processing
+100.0
+601,898
+488,794
+1,427
+SAP India Private Limited, Bangalore, India
+464,458
+1,582,376
+218,454
+1,095,886
+100.0
+SAP France, Levallois Perret, France
+4,505 7).9)
+1,258,713
+466,454
+3,477,774
+100.0
+SAP Deutschland SE & Co. KG, Walldorf, Germany
+100.0
+20,554
+SAP Japan Co., Ltd., Tokyo, Japan
+601
+114,647
+100.0
+SAP Service and Support Centre (Ireland) Limited, Dublin,
+Ireland
+504 11)
+17,016
+21,096
+494,173
+100.0
+SAP Nederland B.V., 's-Hertogenbosch, the Netherlands
+1,924
+314,276
+10,367
+582,128
+100.0
+SAP Labs, LLC, Palo Alto, CA, United States
+5,947
+28,703
+26,359
+285,633
+100.0
+SAP Labs India Private Limited, Bangalore, India
+2,598
+515,703
+30,866
+681,109
+100.0
+S.p.A., Vimercate, Italy
+337,584
+994
+-15,176
+22,740
+3,728
+Total compensation
+2013
+2014
+2015
+€ thousands
+Supervisory Board Compensation
+The total annual compensation of the Supervisory Board
+members for 2015 is as follows:
+191
+Consolidated Financial Statements IFRS Notes
+452
+475
+427
+9,077
+11,273
+8,948
+DBO December 31
+Annual pension entitlement
+2013
+2014
+2015
+€ thousands
+Retirement Pension Plan for Executive Board Members
+The defined benefit obligation (DBO) for pensions to Executive
+Board members and the annual pension entitlement of the
+members of the Executive Board on reaching age 60 based on
+entitlements from performance-based and salary-linked plans
+were as follows:
+In the table above, the share-based payment expense is the
+amount recorded in profit or loss under IFRS 2 in the respective
+period.
+The Executive Board members already received, in 2012, the LTI
+grants for the years 2012 to 2015 subject to continuous service
+as member of the Executive Board in the respective years.
+Although these grants are linked to and thus, economically,
+compensation for the Executive Board members in the
+respective years, section 314 of the German Commercial Code
+(HGB) requires them to be included in the total compensation
+The share-based payment amounts disclosed above are based
+on the grant date fair value of the restricted share units (RSUs)
+issued to Executive Board members during the year.
+1) Portion of total executive compensation allocated to the respective year
+based on management view
+3,227
+2,966
+Thereof fixed
+3,250
+669,947
+100.0
+SAP Canada, Inc., Toronto, Canada
+1,481
+17,826
+6,430
+527,180
+100.0
+SAP Brasil Ltda, São Paulo, Brazil
+1,064
+187,392
+-7,537
+631,863
+455,322
+100.0
+The Supervisory Board members do not receive any share-
+based payment for their services. As far as members who are
+employee representatives on the Supervisory Board receive
+share-based payment, such compensation is for their services
+as employees only and is unrelated to their status as members
+of the Supervisory Board.
+1,680
+1,788
+NA
+Thereof variable
+compensation
+remuneration
+416
+515
+479
+Thereof committee
+compensation
+870
+924
+Payments to/DBO for Former Executive Board Members
+41,152
+1,104
+SuccessFactors, Inc., South San Francisco, CA, United States
+Sybase, Inc., Dublin, CA, United States
+100.0
+Business Objects Software (Shanghai) Co., Ltd.,
+100.0
+Crystal Decisions Holdings Limited, Dublin, Ireland
+United States
+100.0
+100.0
+100.0
+100.0 10)
+10)
+100.0
+100.0 10)
+ConTgo Limited, London, United Kingdom
+ConTgo MTA Limited, London, United Kingdom
+ConTgo Pty. Ltd., Sydney, Australia
+Crossgate UK Limited, Slough, United Kingdom
+Crystal Decisions (Ireland) Limited, Dublin, Ireland
+ConTgo Consulting Limited, London, United
+Kingdom
+100.0
+Business Objects Option LLC, Wilmington, DE,
+the Netherlands
+11)
+100.0
+Business Objects Holding B.V., 's-Hertogenbosch,
+Kingdom
+100.0
+Business Objects (UK) Limited, London, United
+100.0
+b-process, Paris, France
+Technology Co., Ltd., Beijing, China
+0 5)
+Shanghai, China
+Beijing Zhang Zhong Hu Dong Information
+Crystal Decisions UK Limited, London, United
+Kingdom
+Business Objects Software Limited, Dublin, Ireland
+CNQR Operations Mexico S. de. R.L. de. C.V., San
+100.0
+FreeMarkets International Holdings Inc. de Mexico,
+54.2
+Clear Trip Private Limited, Mumbai, India
+100.0
+Financial Fusion, Inc., Dublin, CA, United States
+Emirates
+10)
+100.0
+Fieldglass Europe Limited, London, United
+Kingdom
+54.2
+Cleartrip MEA FZ LLC, Dubai, United Arab
+54.2
+Clear Trip Inc., George Town, Cayman Islands
+100.0
+Fieldglass Asia Pac PTY Ltd, Brisbane, Australia
+54.2
+Clear Trip Inc. (Mauritius), Ebene, Mauritius
+100.0
+Extended Systems, Inc., Dublin, CA, United States
+Netherlands
+100.0
+EssCubed Procurement Pty. Ltd., Johannesburg,
+South Africa
+100.0
+Christie Partners Holding C.V., Utrecht, the
+100.0
+100.0
+10)
+100.0
+Concur Technologies (UK) Limited, London,
+United Kingdom
+Ariba International, Inc., Wilmington, DE, United
+States
+100.0
+110405, Inc., Newtown Square, PA, United States
+100.0
+Ariba International Singapore Pte Ltd, Singapore,
+Singapore
+100.0
+"SAP Kazakhstan" LLP, Almaty, Kazakhstan
+Other Subsidiaries ³)
+%
+%
+note
+ship
+ship note
+Foot-
+Owner
+Name and Location of Company
+Foot-
+Owner
+Name and Location of Company
+677
+34,655
+3,152,160
+5,897,666
+21,254
+390,137
+597,125
+100.0
+714,646
+100.0
+100.0
+Ambin Properties (Proprietary) Limited,
+100.0
+Johannesburg, South Africa
+100.0 11)
+Ariba Technologies Netherlands B.V., 's-
+Hertogenbosch, the Netherlands
+%
+Owner Foot-
+ship note
+note
+ship
+%
+Name and Location of Company
+Foot-
+Owner
+Name and Location of Company
+195
+Consolidated Financial Statements IFRS Notes
+Bangalore, India
+1,131
+100.0
+100.0
+Ariba International Holdings, Inc., Wilmington, DE,
+United States
+Co., Ltd., Shanghai, China
+100.0
+Ariba Software Technology Services (Shanghai)
+100.0
+Ariba India Private Limited, Gurgaon, India
+100.0
+Ariba Slovak Republic s.r.o., Košice, Slovakia
+100.0
+Ariba Czech s.r.o., Prague, Czech Republic
+100.0
+Ariba Investment Company, Inc., Wilmington, DE,
+United States
+Ariba Technologies India Private Limited,
+27,543
+288
+Total¹)
+podatkov d.o.o., Ljubljana, Slovenia
+Sybase Angola, LDA, Luanda, Angola
+100.0
+SAP Slovensko s.r.o., Bratislava, Slovakia
+100.0
+Sybase Iberia S.L., Madrid, Spain
+100.0
+SAP Software and Services LLC, Doha, Qatar
+49.0 4).5)
+Sybase India Ltd., Mumbai, India
+100.0
+SAP Svenska Aktiebolag, Stockholm, Sweden
+SAP Systems, Applications and Products in Data
+Processing (Thailand) Ltd., Bangkok, Thailand
+100.0
+100.0
+Sybase International Holdings Corporation, LLC,
+Dublin, CA, United States
+100.0
+Sybase Philippines, Inc., Makati City, Philippines
+100.0
+SAP Taiwan Co., Ltd., Taipei, Taiwan
+100.0
+Sybase Software (China) Co., Ltd., Beijing, China
+100.0
+SAP Technologies Inc., Palo Alto, CA, United
+States
+100.0
+Sybase Software (India) Private Ltd., Mumbai,
+India
+100.0
+SAP Training and Development Institute FZCO,
+100.0
+100.0
+Sybase 365, LLC, Dublin, CA, United States.
+2014
+Global Development Organization, Innovation & Cloud Delivery,
+Product Strategy, Development Services, SAP Global Security
+Chief Technology Officer
+Products & Innovation
+Bernd Leukert
+Global Consulting Delivery, Global and Regional Support and
+Premium Engagement Functions, Maintenance Go-to-Market,
+Global User Groups, Mobile Services
+Michael Kleinemeier (from November 1, 2015)
+Global Service & Support
+Global Sales, Industry & LoB Solutions Sales, Services Sales,
+Sales Operations, Global Customer Office
+Global Customer Operations
+Robert Enslin
+Board of Directors, ANSYS, Inc., Canonsburg, PA, United States
+Board of Directors, Under Armour, Inc., Baltimore, MD, United
+States
+Communications and Marketing, Human Resources,
+Business Network
+Chief Executive Officer, Labor Relations Director
+Strategy, Governance, Business Development,
+Corporate Development,
+Bill McDermott
+Memberships on supervisory boards and other comparable
+governing bodies of enterprises, other than subsidiaries of SAP
+on December 31, 2015
+Executive Board
+(29) BOARD OF DIRECTORS
+Number of SAP
+shares
+Shareholdings of Executive and Supervisory Board Members
+SAP did not grant any compensation advance or credit to, or
+enter into any commitment for the benefit of, any member of the
+Executive Board or Supervisory Board in 2015, 2014, or 2013.
+29,181
+33,764
+32,758
+DBO December 31
+1,387
+3,462
+1,580
+Payments
+2013
+2015
+Syclo International Limited, Leeds, United
+100.0
+Dubai, United Arab Emirates
+10)
+1,511
+15,358
+16,073
+1,132,753
+100.0
+SAP (UK) Limited, Feltham, United Kingdom
+611
+44,193
+45,934
+751,860
+100.0
+SAP (Schweiz) AG, Biel, Switzerland
+4,562
+-94,864
+-83,167
+759,818
+100.0
+SAP (Beijing) Software System Co., Ltd., Beijing, China
+Vermögensverwaltungs GmbH, Walldorf, Germany
+SAP West Balkans d.o.o., Belgrade, Serbia
+100.0
+Systems Applications Products South Africa
+(Proprietary) Limited, Johannesburg, South Africa
+TechniData GmbH, Markdorf, Germany
+89.5
+100.0
+Consolidated Financial Statements IFRS Notes
+198
+SAP America, Inc., Newtown Square, PA, United States
+100.0
+4,559,147
+-402,385
+Kingdom
+SAP Türkiye Yazilim Üretim ve Ticaret A.Ş.,
+100.0
+Systems Applications Products Africa
+100.0
+Istanbul, Turkey
+(Proprietary) Limited, Johannesburg, South Africa
+SAP UAB, Vilnius, Lithuania
+100.0
+Systems Applications Products Africa Region
+100.0
+SAP Ventures Investment GmbH, Walldorf,
+100.0 9)
+Supervisory Board, DFKI (Deutsches Forschungszentrum für
+Künstliche Intelligenz GmbH), Kaiserslautern, Germany (from
+October 13, 2015)
+(Proprietary) Limited, Johannesburg, South Africa
+SAP Vierte Beteiligungs- und
+100.0
+Systems Applications Products Nigeria Limited,
+Victoria Island, Nigeria
+100.0
+SAP Australia Pty Ltd, Sydney, Australia
+1,020
+34,567
+-35,614
+386,585
+100.0
+SAP Asia Pte Ltd, Singapore, Singapore
+6,114
+14,709,940
+Germany
+26,780
+Gerhard Oswald
+Quality Governance & Validation, Scale, Enablement &
+Transformation, Logistics Services
+2015
+€ thousands
+Share-Based Payment for Executive Board Members
+Considering the grant date fair value of the RSUs allocated
+during the year instead of the economically allocated amount of
+share-based payments in the table above, the sum of short-term
+employee benefits and share-based payment amounts to
+€15,400,400 (2014: €23,216,200) and the total Executive
+Board compensation amounts to €16,678,400 (2014:
+€26,464,700).
+The share-based payment as defined in section 314 of the
+German Commercial Code (HGB) amounts to €263,200 and
+4,622 RSUs respectively (2014: €8,720,200) based on the
+allocation for 2015 for Michael Kleinemeier, which was granted
+in 2015 in line with his appointment to the Executive Board. The
+prior-year amount includes the allocations for 2014 and 2015 for
+Robert Enslin, Bernd Leukert and Luka Mucic, which were
+granted in 2014 in line with their appointment to the Executive
+Board.
+number for the year of grant. Upon his appointment to the
+Executive Board in 2015, Michael Kleinemeier received a grant
+related to 2015. Vesting of the LTI grants is dependent on the
+respective Executive Board member's continuous service for the
+Company.
+Executive Board Compensation
+Allocating the fair value of the share-based payments to the
+respective years they are economically linked to the total
+compensation of the Executive Board members for the years
+2015, 2014, and 2013 was as follows:
+8) Member of the Company's People and Organization Committee
+7) Member of the Company's Special Committee
+6) Member of the Company's Nomination Committee
+5) Member of the Company's Finance and Investment Committee
+4) Member of the Company's Technology and Strategy Committee
+3) Member of the Company's Audit Committee
+2) Member of the Company's General and Compensation Committee
+1) Elected by the employees
+Information as at December 31, 2015
+Dr. h. c. Hartmut Mehdorn (until May 15, 2015)
+Dr. Kurt Reiner (until May 20, 2015)
+Mario Rosa-Bian (until May 20, 2015)
+Stefan Schulz (until May 20, 2015)
+Catherine Bordelon (until May 20, 2015)
+Christiane Kuntz-Mayr (until May 20, 2015)
+Steffen Leskovar (until May 20, 2015)
+Supervisory Board Members Who Left During 2015
+190
+Chairman of the Supervisory Board, Festo AG & Co. KG,
+Esslingen, Germany
+Deputy Chairman of the Supervisory Board, LEONI AG,
+Nuremberg, Germany
+Consolidated Financial Statements IFRS Notes
+Chief Product Expert
+Vice President User Experience
+1), 4), 8)
+Short-term employee
+Christine Regitz (from May 20, 2015) ¹).
+15,137
+2013
+24,728
+contribution
+8.603
+33,331
+1,324
+189
+1,135
+3,249
+2,276
+973
+990
+Thereof defined-
+100.0
+Thereof defined-benefit
+1,278
+Post-employment benefits
+24,294
+25,502
+Subtotal¹)
+8.098
+10,365
+Share-based payment¹)
+benefits
+-8,596
+11,133
+22,310
+Total expense in € thousands
+0
+0
+0
+2013
+152,159
+2014
+153,909
+2015
+192,345
+Number of RSUs granted
+Number of stock options
+granted
+2014
+16,196
+Supervisory Board, Dürr AG, Bietigheim-Bissingen, Germany
+(until December 31, 2015)
+Deputy Chairman of the Supervisory Board, HEITEC AG,
+Erlangen, Germany
+Prof. Dr.-Ing. Dr.-Ing. E. h. Klaus Wucherer 3)
+Managing Director of Dr. Klaus Wucherer Innovations- und
+Technologieberatung GmbH, Erlangen, Germany
+Attorney-at-law, certified public auditor, certified tax advisor
+Linklaters LLP, Rechtsanwälte, Notare, Steuerberater, Frankfurt
+am Main, Germany
+Prof. Dr. Wilhelm Haarmann 2), 5). 7), 8)
+189
+Professor at the Electrical Engineering and Computer Science
+Faculty at the Technische Universität Berlin
+Prof. Anja Feldmann 4), 8)
+Consolidated Financial Statements IFRS Notes
+Martin Duffek (from May 20, 2015) 1). 3
+Product Manager
+1), 3), 8)
+Global Finance and Administration including Investor Relations
+and Data Protection & Privacy, Process Office, Business
+Innovation & IT
+Chief Financial Officer, Chief Operating Officer
+Luka Mucic
+Support Expert
+Panagiotis Bissiritsas ¹). 3), 4), 5)
+Board of Directors, Sanoma Corporation, Helsinki, Finland
+Chairman of the Board of Directors, Blyk International Ltd.,
+London, United Kingdom
+Board of Directors, CVON Future Limited, London, United
+Kingdom
+Board of Directors, CVON Limited, London, United Kingdom
+Chairman of the Board of Directors, CVON Innovation Services
+Oy, Turku, Finland
+Chairman of the Board of Directors, CVON Group Limited,
+London, United Kingdom
+Board of Directors, Pöyry Plc, Vantaa, Finland
+Chairman of the Board of Directors, Solidium Oy, Helsinki,
+Finland (until April 22, 2015)
+Chairman of the Board of Directors, Huhtamäki Oyj,
+Espoo, Finland
+Pekka Ala-Pietilä 4). 5), 6). 7)
+Vice President, Head of SAP Alumni Relations
+Chairperson of the Spokespersons' Committee of Senior
+Managers of SAP SE
+Margret Klein-Magar ¹), 2), 4)
+Deputy Chairperson
+Prof. Dr. h.c. mult. Hasso Plattner 2), 4), 6). 7), 8)
+Chairman
+Memberships on supervisory boards and other comparable
+governing bodies of enterprises, other than subsidiaries of SAP
+on December 31, 2015
+Supervisory Board
+Supervisory Board, Celesio AG, Stuttgart, Germany (until
+March 1, 2015)
+Andreas Hahn (from May 20, 2015) 1). 2), 4)
+Product Expert, Industry Standards & Open Source
+Prof. Dr. Gesche Joost (from May 28, 2015) 4), 8)
+Pierre Thiollet (from May 20, 2015) 1.4
+Webmaster
+1), 4)
+Board of Directors, Bang & Olufsen A/S, Struer, Denmark
+Board of Directors, Danske Bank A/S, Copenhagen, Denmark
+Supervisory Board, Allianz SE, Munich, Germany
+Supervisory Board, Siemens AG, Munich, Germany
+Jim Hagemann Snabe 2). 5)
+Supervisory Board Member
+Dr. Sebastian Sick (from May 20, 2015) ¹), 2), 5). 7)
+Head of Company Law Unit, Hans Böckler Foundation
+Supervisory Board, Georgsmarienhütte GmbH,
+Georgsmarienhütte, Germany
+Board of Directors, Opbeat Inc., San Francisco,
+CA, United States
+NY, United States (until February 11, 2015)
+Board of Directors, Citymapper Ltd., London, United Kingdom
+Board of Directors, Sunrise Atelier, Inc., New York,
+CA, United States
+Board of Directors, Qubit Digital Ltd., London, United Kingdom
+Board of Directors, Stanford University, Stanford,
+Board of Directors, eWise Group, Inc., Redwood City,
+CA, United States
+Board of Directors, Dashlane, Inc., New York, NY, United States
+Board of Directors, Recorded Future, Inc., Cambridge, MA,
+United States
+Board of Directors, Vestiaire Collective SA, Levallois-Perret,
+France
+Product Quality & Enablement
+Board of Directors, Wonga Group Ltd., London, United Kingdom
+Board of Directors, SCYTL Secure Electronic Voting SA,
+Barcelona, Spain
+General Partner Balderton Capital, London, United Kingdom
+Bernard Liautaud 2), 4), 6)
+Managing Director, Rhein Neckar-Loewen GmbH,
+Kronau, Germany
+Head of Customer & Events GSS COO
+Lars Lamadé 1), 2), 7), 8)
+Robert Schuschnig-Fowler (from May 20, 2015) 1), 8)
+Account Manager, Senior Support Engineer
+Supervisory Board, Fuchs Petrolub SE, Mannheim, Germany
+Supervisory Board, BDO AG, Hamburg, Germany
+Board of Directors, Fidelity Funds SICAV, Luxembourg
+Supervisory Board, Rocket Internet AG, Berlin, Germany (until
+June 23, 2015)
+Supervisory Board, Hannover Rückversicherung SE, Hanover,
+Germany
+Supervisory Board, HDI V.a.G., Hanover, Germany
+Supervisory Board, Talanx AG, Hanover, Germany
+Supervisory Board, Deutsche Börse AG, Frankfurt am Main,
+Germany
+Independent Management Consultant
+Dr. Erhard Schipporeit 3). 7)
+Professor for Design Research and Head of the Design Research
+Lab, University of Arts Berlin
+Board of Directors, nlyte Software Ltd., London, United Kingdom
+Board of Directors, Talend SA, Suresnes, France
+de S. de R.L. de C.V., Mexico City, Mexico
+100.0
+FreeMarkets Ltda., São Paulo, Brazil
+SAP Romania SRL, Bucharest, Romania
+Cayman Islands
+mbH, Walldorf, Germany
+100.0
+SuccessFactors Cayman, Ltd., Grand Cayman,
+100.0
+SAP Retail Solutions Beteiligungsgesellschaft
+100.0
+SuccessFactors Australia Pty Limited, Brisbane,
+Australia
+9)
+100.0
+SAP Puerto Rico GmbH, Walldorf, Germany
+Brisbane, Australia
+100.0
+SAP Public Services, Inc., Washington, DC, United
+States
+100.0
+SuccessFactors Australia Holdings Pty Ltd,
+China
+100.0
+SAP Public Services Hungary Kft., Budapest,
+Hungary
+100.0
+SuccessFactors Asia Pacific Limited, Hong Kong,
+Walldorf, Germany
+Kingdom
+8)
+100.0
+SAP Projektverwaltungs- und Beteiligungs GmbH,
+100.0
+10)
+SuccessFactors Hong Kong Limited, Hong Kong,
+China
+Consolidated Financial Statements IFRS Notes
+Detailed information about the different elements of the
+compensation as well as the number of shares owned by
+members of the Executive Board and the Supervisory Board are
+disclosed in the Compensation Report, which is part of our
+Management Report and of our Annual Report on Form 20-F,
+both of which are available on SAP's Web site.
+107,467,372 119,316,444
+30,201
+36.426
+45,309
+90,262,686
+Supervisory Board
+Executive Board
+2013
+2014
+100.0
+SAP sistemi, aplikacije in produkti za obdelavo
+Vermögensverwaltungs GmbH, Walldorf, Germany
+100.0
+Sybase 365 Ltd., Tortola, British Virgin Islands
+9)
+100.0
+SAP Sechste Beteiligungs- und
+100.0
+Sybase (UK) Limited, Maidenhead, United
+Kingdom
+75.0
+SAP Saudi Arabia Software Trading Ltd, Riyadh,
+Kingdom of Saudi Arabia
+100.0
+SuccessFactors International Holdings, LLC, San
+Mateo, CA, United States
+Kingdom of Saudi Arabia
+100.0
+SAP Saudi Arabia Software Services Ltd, Riyadh,
+100.0
+100.0
+SuccessFactors (UK) Limited, London, United
+Salvo, Portugal
+6)
+0
+Sapphire Ventures Fund I, L.P., Wilmington, DE,
+United States
+100.0
+SAP Österreich GmbH, Vienna, Austria
+Wilmington, DE, United States
+4)
+100.0
+SAP North West Africa Ltd, Casablanca, Morocco
+6)
+0
+Sapphire SAP HANA Fund of Funds, L.P.,
+100.0
+SAP Norge AS, Lysaker, Norway
+Vermögensverwaltungs GmbH, Walldorf, Germany
+100.0 8).9)
+SAP Zweite Beteiligungs- und
+100.0
+SAP New Zealand Limited, Auckland, New Zealand
+%
+%
+ship note
+note
+ship
+Owner Foot-
+Name and Location of Company
+Foot-
+SAP PERU S.A.C., Lima, Peru
+100.0
+SAP Philippines, Inc., Makati, Philippines
+100.0
+Philippines
+100.0
+SuccessFactors (Philippines), Inc., Pasig City,
+100.0
+SAP Portugal - Sistemas, Aplicações e Produtos
+Informáticos, Sociedade Unipessoal, Lda., Porto
+100.0
+Shanghai SuccessFactors Software Technology
+Co., Ltd., Shanghai, China
+100.0
+SAP Portals Israel Ltd., Ra'anana, Israel
+Germany
+10)
+100.0
+SeeWhy (UK) Limited, Windsor, United Kingdom
+192
+100.0
+4)
+100.0
+SAS Financière Multiposting, Paris, France
+100.0
+SAP Portals Europe GmbH, Walldorf, Germany
+6)
+0
+SAPV (Mauritius), Ebene, Mauritius
+100.0
+SAP Polska Sp. z o.o., Warsaw, Poland
+6)
+0
+Sapphire Ventures Fund II, L.P., Wilmington, DE,
+United States
+SAP Portals Holding Beteiligungs GmbH, Walldorf,
+Owner
+(30) RELATED PARTY TRANSACTIONS
+Companies controlled by Hasso Plattner, chairman of our
+Supervisory Board and Chief Software Advisor of SAP, engaged
+in the following transactions with SAP: providing consulting
+services to SAP, receiving sport sponsoring from SAP, making
+purchases of SAP products and services.
+Name and Location of Company
+Subsidiaries
+(34) SUBSIDIARIES AND OTHER EQUITY INVESTMENTS
+194
+Consolidated Financial Statements IFRS Notes
+We are in the process of preparing the consolidation of
+intellectual property rights held by SAP's group company hybris
+AG at the level of SAP SE in Germany. Based on deviating
+applicable tax rates, the Group expects an overall positive
+income tax effect in a range between approximately €180 million
+and €220 million in 2016.
+After December 31, 2015, the following change took place:
+(33) EVENTS AFTER THE REPORTING PERIOD
+www.sap.com/corporate-en/investors/governance.
+In 2015 and 2014, our Executive Board and Supervisory Board
+issued the required declarations of implementation. The
+declaration for 2014 was modified in February 2015. The
+declaration for 2015 was issued on October 29, 2015. These
+statements are available on our Web site:
+The German federal government published the German Code of
+Corporate Governance in February 2002. The Code contains
+statutory requirements and a number of recommendations and
+suggestions. Only the legal requirements are binding for German
+companies. With regard to the recommendations, the German
+Stock Corporation Act, section 161, requires that every year
+listed companies publicly state the extent to which they have
+implemented them. Companies can deviate from the
+suggestions without having to make any public statements.
+(32) GERMAN CODE OF CORPORATE GOVERNANCE
+Audit fees are the aggregate fees charged by KPMG for auditing
+our consolidated financial statements and the statutory financial
+statements of SAP SE and its subsidiaries. Audit-related fees are
+fees charged by KPMG for assurance and related services that
+are reasonably related to the performance of the audit or review
+of our financial statements and are not reported under audit
+fees. Tax fees are fees for professional services rendered by
+KPMG for tax advice on transfer pricing, restructuring, and tax
+compliance on current, past, or contemplated transactions. The
+All other fees category includes other support services, such as
+training and advisory services on issues unrelated to accounting
+and taxes.
+10
+7
+3
+8
+6
+2
+9
+6
+3
+0
+0
+0
+○
+0
+Owner-
+ship
+○
+Total
+Revenue in
+2015¹)
+Total Equity
+659
+42,319
+-18,607
+356,480
+100.0
+LLC SAP CIS, Moscow, Russia
+2,741
+6,552,341
+-18,115
+638,122
+100.0
+Concur Technologies, Inc., Bellevue, WA, United States
+1,425
+3,697,333
+-145,271
+642,877
+100.0
+Ariba, Inc., Palo Alto, CA, United States
+Major Subsidiaries
+€ thousands
+€ thousands € thousands
+%
+12/31/2015²)
+as at
+Number of Foot-
+Employees note
+12/31/2015¹)
+as at
+Profit/Loss
+(-) after Tax
+for 2015¹)
+0
+0
+0
+Foreign
+KPMG AG
+(Germany)
+Total
+Foreign
+KPMG
+(Germany)
+KPMG AG
+Total
+Foreign
+KPMG
+KPMG AG
+(Germany)
+2013
+2014
+2015
+€ millions
+KPMG AG Wirtschaftsprüfungsgesellschaft and other firms in
+the global KPMG network charged the following fees to SAP for
+audit and other professional services related to 2015 and the
+previous years:
+Fees for Audit and Other Professional Services
+At the Annual General Meeting of Shareholders held on May 20,
+2015, our shareholders elected KPMG AG Wirtschafts-
+prüfungsgesellschaft as SAP's independent auditor for 2015.
+(31) PRINCIPAL ACCOUNTANT FEES AND SERVICES
+193
+Consolidated Financial Statements IFRS Notes
+For information about the compensation of our Executive Board
+and Supervisory Board members, see Note (29).
+employees of SAP) in the amount of €1 million (2014:
+€2 million). Amounts owed to Supervisory Board members from
+these transactions were €0 million as at December 31, 2015
+(2014: €0 million). All these balances are unsecured and interest
+free and settlement is expected to occur in cash.
+In total, we sold services to members of the Executive Board and
+the Supervisory Board in the amount of €2 million (2014:
+€0 million) and we received services from members of the
+Supervisory Board (including services from employee
+representatives on the Supervisory Board in their capacity as
+In total, we sold products and services to companies controlled
+by members of the Supervisory Board in the amount of
+€1 million (2014: €4 million), we bought products and services
+from such companies in the amount of €7 million (2014:
+€1 million), and we provided sponsoring and other financial
+support to such companies in the amount of €5 million (2014:
+€7 million). Outstanding balances at year end from transactions
+with such companies were €0 million (2014: €2 million) for
+amounts owed to such companies and €0 million (2014:
+€1 million) for amounts owed by such companies. All these
+balances are unsecured and interest free and settlement is
+expected to occur in cash. Commitments (the longest of which
+is for 10 years) made by us to purchase further goods or
+services from these companies and to provide further
+sponsoring and other financial support amount to €11 million as
+at December 31, 2015 (2014: €13 million).
+All amounts related to the abovementioned transactions were
+immaterial to SAP in all periods presented.
+Occasionally, members of the Executive Board of SAP SE obtain
+services from SAP for which they pay a consideration believed
+to be consistent with those negotiated at arm's length between
+unrelated parties.
+Wilhelm Haarmann practices as a partner in the law firm
+Linklaters LLP in Frankfurt am Main, Germany. SAP occasionally
+purchased and purchases legal and similar services from
+Linklaters.
+Christiane Kuntz-Mayr, vice chairperson and member of the
+SAP Supervisory Board until May 20, 2015, acted as a managing
+director of family & kids @ work gemeinnützige UG ("family &
+kids @work").
+Total
+KPMG
+Firms
+Firms
+All other fees
+Total
+0
+0
+0
+0
+0
+0
+0
+Tax fees
+0
+1
+0
+0
+Certain Executive Board and Supervisory Board members of
+SAP SE currently hold, or held within the last year, positions of
+significant responsibility with other entities, as presented in
+Note (29). We have relationships with certain of these entities in
+the ordinary course of business, whereby we buy and sell
+products, assets and services at prices believed to be consistent
+with those negotiated at arm's length between unrelated parties.
+0
+0
+Audit-related fees
+9
+7
+2
+8
+6
+2
+9
+6
+3
+Audit fees
+Firms
+○
+Name and Location of Company
+197
+Consolidated Financial Statements IFRS Notes
+Foot-
+Owner
+Name and Location of Company
+Foot-
+Owner
+Name and Location of Company
+196
+Consolidated Financial Statements IFRS Notes
+100.0
+Plateau Systems Australia Ltd, Brisbane, Australia
+100.0
+OutlookSoft Deutschland GmbH, Walldorf,
+Germany
+100.0
+Concur Technologies (Singapore) Pte Ltd,
+Singapore, Singapore
+Bangalore, India
+100.0
+4)
+100.0
+100.0 4)
+100.0
+100.0
+LLC "SAP Ukraine", Kiev, Ukraine
+Merlin Systems Oy, Espoo, Finland
+Multiposting SAS, Paris, France
+Multiposting Sp.z o.o., Warsaw, Poland
+Nihon Ariba K.K., Tokyo, Japan
+100.0
+Concur Technologies (India) Private Limited,
+Kong, China
+100.0
+Concur Technologies (Hong Kong) Limited, Hong
+ship
+Sydney, Australia
+note
+%
+100.0
+SAP Foreign Holdings GmbH, Walldorf, Germany
+100.0
+100.0
+SAP Finland Oy, Espoo, Finland
+100.0
+100.0
+SAP Financial, Inc., Toronto, Canada
+100.0
+Quadrem Australia Pty Ltd., Brisbane, Australia
+Quadrem Brazil Ltda., Rio de Janeiro, Brazil
+Quadrem Chile Ltda., Santiago de Chile, Chile
+Quadrem Colombia SAS, Bogotá, Colombia
+100.0
+SAP Estonia OÜ, Tallinn, Estonia
+100.0
+Quadrem Africa Pty. Ltd., Johannesburg, South
+Africa
+100.0
+SAP España - Sistemas, Aplicaciones y Productos
+en la Informática, S.A., Madrid, Spain
+100.0
+PT Sybase 365 Indonesia, Jakarta, Indonesia
+Vermögensverwaltungs GmbH, Walldorf, Germany
+99.0
+PT SAP Indonesia, Jakarta, Indonesia
+100.0 8).9)
+100.0
+SAP EMEA Inside Sales S.L., Barcelona, Spain
+SAP Erste Beteiligungs- und
+100.0
+Plateau Systems LLC, South San Francisco, CA,
+United States
+%
+ship note
+100.0
+Concur Technologies (Australia) Pty. Limited,
+Amsterdam, the Netherlands
+100.0
+H-G Intermediate Holdings, Inc., Wilmington, DE,
+United States
+100.0
+Concur (New Zealand) Limited, Wellington, New
+Zealand
+75.0
+Concur (Japan) Ltd., Bunkyo-ku, Japan
+100.0
+H-G Holdings, Inc., Wilmington, DE, United States
+100.0
+Concur (Italy) S.r.I., Milan, Italy
+Kingdom
+Germany
+10)
+100.0
+GlobalExpense (UK) Limited, London, United
+100.0
+Concur (Germany) GmbH, Frankfurt am Main,
+100.0
+GlobalExpense (Consulting) Limited, London,
+United Kingdom
+100.0
+Concur (France) SAS, Paris, France
+Gelco Information Network, Inc., Minneapolis, MN,
+United States
+100.0
+Concur (Canada), Inc., Toronto, Canada
+100.0
+Concur (Austria) GmbH, Vienna, Austria
+100.0
+hybris (US) Corp., Wilmington, DE, United States
+100.0
+Concur (Philippines) Inc., Makati City, Philippines
+100.0
+100.0
+Concur International Holdings (Netherlands) CV,
+100.0
+LLC "SAP Labs", Moscow, Russia
+100.0
+KXEN Limited, Feltham, United Kingdom
+100.0
+Concur Holdings (US) LLC, Wilmington, DE, United
+States
+100.0
+Inxight Federal Systems Group, Inc., Wilmington,
+DE, United States
+100.0 11)
+Concur Holdings (Netherlands) B.V., Amsterdam,
+the Netherlands
+100.0 10)
+100.0
+100.0
+100.0
+Concur Holdings (France) SAS, Paris, France
+100.0
+9)
+100.0
+hybris GmbH, Munich, Germany
+100.0
+100.0
+hybris Australia Pty Limited, Surry Hills, Australia
+100.0
+Concur (Switzerland) GmbH, Zurich, Switzerland
+Concur Czech (s.r.o.), Prague, Czech Republic
+Concur Denmark ApS, Frederiksberg, Denmark
+100.0
+hybris AG, Zug, Switzerland
+hybris Hong Kong Limited, Hong Kong, China
+hybris UK Limited, London, United Kingdom
+Quadrem International Ltd., Hamilton, Bermuda
+Quadrem Netherlands B.V., Amsterdam, the
+Netherlands
+100.0
+SAP France Holding, Levallois Perret, France
+SAP Fünfte Beteiligungs- und
+100.0
+SAP Commercial Services Ltd., Valletta, Malta
+100.0
+SAP Labs Israel Ltd., Ra'anana, Israel
+100.0
+SAP Colombia SAS., Bogotá, Colombia
+100.0
+SAP Labs France SAS, Mougins, France
+4)
+100.0
+SAP China Holding Co., Ltd., Beijing, China
+100.0
+SAP Labs Finland Oy, Espoo, Finland
+4)
+100.0
+SAP China Co., Ltd., Shanghai, China
+100.0
+SAP Labs Bulgaria EOOD, Sofia, Bulgaria
+100.0
+SAP Chile Limitada, Santiago, Chile
+100.0
+SAP Korea Ltd., Seoul, South Korea
+Hertogenbosch, the Netherlands
+11)
+100.0
+SAP Business Services Center Nederland B.V., 's-
+100.0
+SAP Labs Korea, Inc., Seoul, South Korea
+100.0
+SAP Costa Rica, S.A., San José, Costa Rica
+100.0
+100.0 11)
+100.0
+49.0 5)
+100.0
+SAP Nederland Holding B.V., 's-Hertogenbosch,
+the Netherlands
+SAP National Security Services, Inc., Newtown
+Square, PA, United States
+SAP México S.A. de C.V., Mexico City, Mexico
+SAP Middle East and North Africa L.L.C., Dubai,
+United Arab Emirates
+100.0
+SAP Egypt LLC, Cairo, Egypt
+100.0
+SAP East Africa Limited, Nairobi, Kenya
+Vermögensverwaltungs GmbH, Walldorf, Germany
+100.0 8).9)
+SAP Israel Ltd., Ra'anana, Israel
+SAP Dritte Beteiligungs- und
+SAP Danmark A/S, Copenhagen, Denmark
+100.0
+SAP d.o.o., Zagreb, Croatia
+100.0
+SAP Malta Investments Ltd., Valletta, Malta
+100.0
+SAP Cyprus Ltd, Nicosia, Cyprus
+100.0
+SAP Malaysia Sdn. Bhd., Kuala Lumpur, Malaysia
+100.0
+SAP ČR, spol. s r.o., Prague, Czech Republic
+100.0
+SAP Latvia SIA, Riga, Latvia
+100.0
+Pedro Garza Garcia, Mexico
+Prague, Czech Republic
+SAP Ireland-US Financial Services Ltd., Dublin,
+Ireland
+SAP Andina y del Caribe, C.A., Caracas, Venezuela
+SAP Argentina S.A., Buenos Aires, Argentina
+100.0
+SAP Hosting Beteiligungs GmbH, St. Leon-Rot,
+Germany
+100.0
+San Borja Partricipadoes LTDA, São Paulo, Brazil
+100.0
+SAP Hong Kong Co., Ltd., Hong Kong, China
+100.0
+Ruan Lian Technologies (Beijing) Co., Ltd., Beijing,
+China
+Kingdom
+10)
+100.0
+SAP Holdings (UK) Limited, Feltham, United
+100.0
+Quadrem Peru S.A.C., Lima, Peru
+100.0
+SAP Hellas S.A., Athens, Greece
+100.0
+Quadrem Overseas Cooperatief U.A., Amsterdam,
+the Netherlands
+100.0
+SAP Global Marketing, Inc., New York, NY, United
+States
+11)
+2015
+Vermögensverwaltungs GmbH, Walldorf, Germany
+9)
+100.0
+100.0
+€ thousands
+100.0
+100.0
+SAP Hungary Rendszerek, Alkalmazások és
+Termékek az Adatfeldolgozásban Informatikai Kft.,
+Budapest, Hungary
+100.0
+SAP Business Services Center Europe s.r.o.,
+Siegen, Germany
+100.0
+SAP Ireland Limited, Dublin, Ireland
+100.0
+SAP Business Compliance Services GmbH,
+100.0
+SAP Investments, Inc., Wilmington, DE, United
+States
+100.0
+SAP Bulgaria EOOD, Sofia, Bulgaria
+100.0
+SAP Beteiligungs GmbH, Walldorf, Germany
+100.0
+100.0
+100.0
+SAP Belgium NV/SA, Brussels, Belgium
+Panama
+100.0
+SAP International Panama, S.A., Panama City,
+4)
+100.0
+SAP Azerbaijan LLC, Baku, Azerbaijan
+100.0
+SAP India (Holding) Pte Ltd, Singapore, Singapore
+100.0
+SAP Asia (Vietnam) Co., Ltd., Ho Chi Minh City,
+Vietnam
+100.0
+SAP International, Inc., Miami, FL, United States
+100.0
+Key SAP Stock Facts
+3,280
+2,845
+Research and development (IFRS)
+4,036
+4,531
+4,543
+4,801
+2,331
+5,930
+-318
+-542
+-487
+-471
+-696
+4,354
+Total cost of revenue (non-IFRS)
+2,282
+2,261
+1,935
+4,304
+5,401
+Sales and marketing (IFRS)
+20.7
+18.6
+18.5
+17.6
+17.2
+Research and development (as a percentage of total operating expenses,
+IFRS)
+13.6
+13.9
+13.6
+13.3
+13.7
+Research and development (as a percentage of total revenue, IFRS)
+5,073
+5,031
+5,272
+6,626
+Cost of services (IFRS)
+1,663
+1,929
+2,011
+2,211
+2,797
+Cost of cloud and software (non-IFRS)
+-285
+-411
+-360
+-346
+-516
+Non-IFRS adjustments
+1,948
+2,339
+Non-IFRS adjustments
+4,131
+Cost of services (non-IFRS)
+Non-IFRS adjustments
+2,373
+2,602
+2,533
+2,590
+3,133
+-33
+-132
+-128
+-125
+-180
+2,406
+2,734
+2,660
+2,716
+3,313
+Total cost of revenue (IFRS)
+3,912
+3,083
+General and administration (IFRS)
+23.5
+20.2
+12.5
+24.9
+20.1
+19.6
+16.3
+7.4
+Services margin (as a percentage of corresponding revenue, IFRS)
+Services margin (as a percentage of corresponding revenue, non-IFRS)
+Total gross margin ( as a percentage of total revenue, IFRS)
+85.0
+85.0
+85.2
+84.6
+83.8
+Cloud and software margin (as a percentage of corresponding revenue,
+non-IFRS)
+23.9
+82.3
+25.9
+70.0
+4,884
+4,041
+4,479
+4,331
+4,252
+Operating profit (IFRS)
+71.7
+72.2
+73.1
+72.7
+71.5
+Total gross margin ( as a percentage of total revenue, non-IFRS)
+69.4
+68.7
+70.1
+68.1
+2,370
+81.7
+82.1
+2015
+€ millions, unless otherwise stated
+203
+Five-Year Summary
+724
+863
+951
+1,010
+1,289
+Depreciation and amortization (IFRS)
+715
+949
+866
+892
+1,048
+2014
+82.4
+2013
+2011
+80.8
+Cloud and software margin (as a percentage of corresponding revenue,
+IFRS)
+ΝΑ
+ΝΑ
+71.2
+64.3
+65.6
+Cloud subscriptions and support margin²) (as a percentage of
+corresponding revenue, non-IFRS)
+NA
+NA
+54.8
+55.8
+55.3
+Cloud subscriptions and support margin²) (as a percentage of
+corresponding revenue, IFRS)
+Profits and Margins
+2012
+Non-IFRS adjustments
+2,557
+Cost of cloud and software (IFRS)
+14,928
+Software licenses and support (IFRS)
+18
+343
+757
+1,101
+13,228
+2,296
+0
+73
+61
+14
+10
+Non-IFRS adjustments
+Cloud subscriptions and support (non-IFRS)
+12,809
+12,532
+11,012
+14,315
+17,214
+Cloud and software (IFRS)
+11,038
+12,540
+12,830
+13,233
+14,930
+Software licenses and support (non-IFRS)
+27
+9
+21
+5
+2
+Non-IFRS adjustments
+18
+270
+696
+1,087
+Financial Calendar
+.207
+Glossary..
+.203
+Five-Year Summary.
+Additional Information
+201
+Management's Annual Report on Internal Control over Financial Reporting in the Consolidated Financial Statements
+Consolidated Financial Statements IFRS
+KPMG AG Wirtschaftsprüfungsgesellschaft, our independent
+registered public accounting firm, has issued its attestation
+report on the effectiveness of SAP's internal control over
+financial reporting. It is included in the independent auditor's
+report on the Consolidated Financial Statements as at
+December 31, 2015.
+under these criteria, SAP
+management has concluded that, as at December 31, 2015, the
+Company's internal control over financial reporting was
+effective.
+Based on the assessment
+-
+SAP's management assessed the effectiveness of the
+Company's internal control over financial reporting as at
+December 31, 2015. In making this assessment, it used the
+criteria set forth by the Committee of Sponsoring Organizations
+of the Treadway Commission (COSO) in Internal Control
+Integrated Framework (2013).
+The management of SAP is responsible for establishing and
+maintaining adequate internal control over financial reporting as
+such term is defined in Rules 13a-15(f) and 15d-15(f) under the
+U.S. Securities Exchange Act of 1934. SAP's internal control
+over financial reporting is a process designed under the
+supervision of SAP's CEO and CFO to provide reasonable
+assurance regarding the reliability of financial reporting and the
+preparation of financial statements for external reporting
+purposes in accordance with International Financial Reporting
+Standards (IFRS) as issued by the International Accounting
+Standards Board (IASB).
+.220
+13,505
+Addresses.......
+Financial and Sustainability Publications.
+2,286
+Cloud subscriptions and support (IFRS)
+Revenues
+2011
+2012
+2013
+2014
+2015
+€ millions, unless otherwise stated
+SAP GROUP
+Five-Year Summary"
+202
+.223
+Publication Details.
+.222
+.221
+12,801
+11,030
+Non-IFRS adjustments
+NA
+218
+393
+789
+Cost of cloud subscriptions and support2) (non-IFRS)
+ΝΑ
+ΝΑ
+-97
+-88
+-232
+Non-IFRS adjustments²)
+NA
+NA
+314
+481
+NA
+1,022
+Cost of software licenses and support²) (IFRS)
+2,076
+ΝΑ
+NA
+1,793
+1,818
+2,008
+Cost of software licenses and support2) (non-IFRS)
+NA
+ΝΑ
+-263
+-258
+-283
+Non-IFRS adjustments²)
+NA
+ΝΑ
+2,056
+2,291
+3,313
+Cost of cloud subscriptions and support2) (IFRS)
+14,260
+3,310
+3,245
+3,579
+Services (IFRS = non-IFRS)
+11,057
+12,883
+13,587
+14,334
+17,226
+Cloud and software (non-IFRS)
+27
+81
+82
+19
+11
+3,421
+Operating expenses
+3,203
+Non-IFRS adjustments
+16,304
+16,897
+17,580
+20,805
+27
+81
+82
+19
+11
+14,233
+16,223
+16,815
+17,560
+20,793
+Total revenue (non-IFRS)
+Total revenue (IFRS)
+2,095
+1,307
+1,003
+Net liquidity
+3,965
+4,994
+4,308
+11,093
+9,174
+-5,615
+Financial debts (due to banks, private placements, bonds)
+5,601
+2,492
+2,841
+3,423
+3,559
+Group liquidity (cash and cash equivalents/short-term
+investments/restricted cash)
+-7,670
+-1,467
+-2,502
+Total current assets
+3,577
+4,006
+3,962
+4,443
+5,362
+Trade and other receivables
+Assets, equity and liabilities
+60
+59
+62
+65
+71
+Days' sales outstanding (DSO, in days)
+1,636
+636
+15
+93
+95
+Free cash flow as percentage of total revenue
+3,330
+3,281
+3,266
+2,762
+3,001
+Free cash flow
+-1,176
+-194
+-1,589
+4,298
+-3,356
+Net cash flows from financing activities
+-1,226
+-1,781 -5,964
+14
+9,739
+16
+20
+148
+Short-term investments
+4,965
+2,477
+2,748
+3,328
+3,411
+Cash and cash equivalents
+110
+136
+115
+107
+119
+Cash conversion rate (net cash flows from operating activities as a
+percentage of profit after tax)
+23
+19
+8,999
+7,351
+6,928
+Issued shares8) (in millions)
+657
+6,939
+1,813
+8,636
+676
+45
+46
+41
+49
+44
+Debt ratio (total liabilities³) as a percentage of total assets)
+Investments in goodwill, intangible assets or property, plant, and
+equipment (including capitalizations due to acquisitions)
+55
+54
+59
+1,229
+51
+1,229
+1,229
+1.15
+Dividend per share 4) (in €)
+2.89
+2.35
+2.78
+2.74
+2.56
+Earnings per share, diluted (in €)
+2.89
+2.35
+2.79
+2.75
+2.56
+Earnings per share, basic (in €)
+1,228
+1,229
+-7,240
+56
+22,941
+7,867
+Total current liabilities (including deferred income)
+Total non-current liabilities (including deferred income)
+4
+317
+443
+689
+957
+Deferred cloud subscriptions and support revenue (IFRS)
+13,313
+19,378
+19,739
+29,566
+31,651
+Total non-current assets
+9,628
+8,574
+Equity ratio (total equity as a percentage of total assets)
+6,347
+6,199
+26,306
+27,091
+38,565
+41,390
+12,689
+14,133
+16,048
+19,534
+23,295
+Total equity (including non-controlling interests)
+Total assets
+4,053
+5,627
+4,695
+10,457
+10,228
+6,546
+-334
+3,775
+3,822
+18
+14
+Return on equity (profit after tax in percentage of average equity)
+3,437
+2,803
+3,325
+0.85
+3,056
+Profit after tax
+-1,331
+-993
+-1,071
+-1,075
+-935
+Income tax expense
+22
+33
+21
+Non-IFRS Adjustments
+290
+724
+Adjustment for share-based payment expenses
+447
+537
+555
+562
+738
+Adjustment for acquisition-related charges
+27
+81
+82
+19
+11
+Revenue adjustments
+31
+327
+23
+25
+Operating margin (as a percentage of total revenue, non-IFRS)
+34.3
+24.9
+26.6
+24.7
+20.5
+Operating margin (as a percentage of total revenue, IFRS)
+4,713
+5,192
+5,482
+5,638
+6,348
+Operating profit (non-IFRS)
+-171
+1,150
+30.5
+26
+32.1
+31.8
+19
+PBT margin (as a percentage of revenues)
+4,767
+3,796
+4,396
+4,355
+3,991
+Profit before tax (PBT)
+-42
+-72
+-66
+-25
+-5
+Financial income, net
+33.1
+32.4
+U.S. law requires that management submit a report on the
+effectiveness of internal control over financial reporting in the
+consolidated financial statements. For 2015, that report is as
+follows:
+522
+Adjustment for restructuring
+ΝΑ
+NA
+99
+105
+312
+ΝΑ
+NA
+65
+66
+67
+Gross margin²) (as a percentage of corresponding revenue, IFRS)
+Segment profit²)
+NA
+NA
+460
+644
+Segment margin²) (Segment profit as a percentage of Segment revenue,
+IFRS)
+1,614
+19
+22
+3,832
+3,499
+3,638
+2011
+2012
+2013
+2014
+2015
+Net cash flows from investing activities
+Net cash flows from operating activities
+€ millions, unless otherwise stated
+Liquidity and cash flow
+204
+Five-Year Summary
+NA
+ΝΑ
+16
+68
+Segment revenue²)
+NA
+19,126
+Segment revenue²)
+Applications, Technology & Services Segment
+Segment results
+0
+0
+-31
+309
+0
+Adjustment for TomorrowNow and Versata litigation
+4
+8
+70
+126
+621
+Gross margin²) (as a percentage of corresponding revenue, IFRS)
+SAP Business Network Segment
+72
+7,918
+ΝΑ
+43
+42
+41
+Segment margin²) (Segment profit as a percentage of Segment revenue,
+IFRS)
+ΝΑ
+ΝΑ
+7,056
+NA
+ΝΑ
+74
+NA
+NA
+16,386
+16,871
+73
+7,099
+Segment profit²)
+Management's
+Annual Report on
+Internal Control over
+Financial Reporting in
+the Consolidated
+Financial Statements
+200
+Gerhard Oswald
+12) The 2015 Customer NPS is not fully comparable to the prior year's score.
+¹¹) Data center energy consumption normalized against € revenue combines a relative measure of required energy to develop and operate solution in internal and
+external data center.
+10) Due to the integration of cloud capacity of external non-SAP data centers normalizing energy consumption against SAP employees becomes meaningsless. KPI
+discontinued.
+In 2012, we adopted a new methodology for measuring customer loyalty: Net promoter score (NPS). There are therefore no comparable NPS values for years
+prior to 2012.
+9)
+8) Numbers based on year-end.
+Relates to different levels of management position.
+6) Full-time equivalents.
+5) Average Annual Return. Assuming all dividends are reinvested.
+13) The BHCI score for 2014 was recalculated from 70% to 72% based on two updated questions in the people survey concerning work-life balance.
+4) 2015 numbers are based on the proposed dividend for 2015 and on 2015 closing level of treasury stock.
+2) 2012 and 2011 amounts are not available.
+32
+51
+43
+100
+100
+ΝΑ
+ΝΑ
+ΝΑ
+3) As sum of current and non-current liability.
+Five-Year Summary
+206
+Glossary
+-
+cloud computing - Generic term for flexible, IT-related services
+available through, or hosted on, the Internet for consumers and
+business, including storage, computing power, software
+development environments, and applications, combined with
+service delivery. Accessed as needed "in the cloud," these
+services eliminate the need for in-house IT resources. See
+"cloud service model."
+carbon offset or greenhouse gas (GHG) offset A unit of
+carbon dioxide-equivalent (CO2 equivalent) that is reduced,
+avoided, or sequestered to compensate for emissions occurring
+elsewhere.
+-
+C
+business network - An online service that connects businesses
+and their systems to those of their trading partners and enables
+new processes and information and insight sharing only possible
+in a digital environment. See "Ariba Network."
+Business Health Culture Index A score for the general
+cultural conditions in an organization that enable employees to
+stay healthy and balanced. The index is calculated based on the
+results of regular employee surveys.
+Build A cloud-based, collaborative design tool from SAP that
+allows app designers and business experts to compose
+interactive prototypes, making it easier to capture more
+accurate user feedback and jump-start development.
+Big Data The large volume of data created by billions of
+connected devices and people generating a tremendous amount
+of information about their behavior, location, and activity. This
+availability of massive amounts of data requires companies to
+rethink technology architecture and database structures.
+-
+B
+Ariba Network
+Business commerce network where
+companies of all sizes can connect to their trading partners
+anywhere, at any time, from any application or device to buy,
+sell, and manage their cash more efficiently and effectively than
+ever before. Companies around the world use the Ariba Network
+to simplify interenterprise commerce and enhance the results
+they deliver. See "business network."
+Ariba See "SAP Ariba."
+analytics solutions from SAP - Category of software solutions
+that help customers achieve the power of collective insight in
+Big Data by empowering them with the right information at the
+right time to make insightful business decisions, anticipate
+change, and uncover new opportunities. Analytics solutions
+cover the areas of business intelligence, enterprise performance
+management, and governance, risk, and compliance.
+Americas' SAP Users' Group (ASUG) - Non-profit organization
+comprising customer companies dedicated to providing
+educational and networking opportunities in support of SAP
+software and implementation. User groups are established in
+regions around the world to share knowledge and influence SAP
+development efforts. ASUG is the largest user group with more
+than 140,000 individuals at 3,700 companies in more than 17
+industries across the SAP ecosystem.
+Africa Code Week SAP-led corporate social responsibility
+initiative initiated in 2015 in cooperation with partners. Planned
+as an annual event, children in African countries where SAP has
+a market are introduced to computer programming to increase
+awareness of, and interest in, the software development career
+field.
+-
+-
+-
+AA1000 AccountAbility Principles Standard (AA1000APS) -
+A framework for organizations to identify, prioritize, and
+respond to sustainability challenges. The other AA1000
+standards the Assurance Standard and the Stakeholder
+Engagement Standard are based on the APS principles and
+support their achievement.
+A
+10
+cloud deployment models The different infrastructure,
+software lifecycle management, and licensing models used for
+deploying software, that is, where the software is running and
+how much control and flexibility a customer has.
+12
+2,598
+34.4
+30.0
+32.4
+28.4
+21.9
+Greenhouse gas emissions per € revenue (in grams)
+9.0
+7.9
+8.3
+Total energy consumption (in GWh)
+7.3
+Greenhouse gas emissions per employee) (in tons)
+490
+485
+545
+500
+455
+Net Greenhouse gas emissions (in kilotons)
+Environment
+ΝΑ
+6.0
+965
+920
+910
+2,633
+ΝΑ
+ΝΑ
+154
+160
+173
+179
+249
+1) Amounts for 2011 to 2015 according to IFRS, unless otherwise stated.
+Renewable energy sourced (as a percentage)
+Data center energy per € revenue¹¹) (in kWh)
+Data center energy per employee 6). 10) (in kWh)
+Data center energy consumed (in GWh)
+15,700
+14,000
+13,900
+13,400
+12,500
+Energy consumed per employee) (in kWh)
+860
+860
+2,824
+cloud service model "As-a-service" offerings where cloud
+services are offered as infrastructure as a service (laaS),
+platform as a service (PaaS), or software as a service (SaaS).
+Additional Information Glossary
+207
+10)
+TRX Fulfillment Services, LLC, Atlanta, GA, United
+States
+100.0
+Greater Pacific Capital (Cayman) L.P., Grand Cayman,
+Cayman Islands
+5.35
+Nor1, Inc., Santa Clara, CA, United States
+18.64
+TRX Germany GmbH, Berlin, Germany
+100.0
+100.0
+Procurement Negócios Eletrônicos S/A, Rio de Janeiro,
+Brazil
+TRX Luxembourg, S.a.r.l., Luxembourg City,
+Luxembourg
+100.0
+SAP NOVABASE, A.C.E., Porto Salvo, Portugal
+66.66
+TRX Technologies India Private Limited, Raman
+Nagar, India
+100.0
+Stay NTouch Inc., Bethesda, MD, United States
+37.40
+TRX Technology Services, L.P., Atlanta, GA, United
+States
+17.00
+TRX Europe Limited, London, United Kingdom
+30.46
+Evature Technologies (2009) Ltd., Ramat Gan, Israel
+Name and Location of Company
+Owner Foot-
+ship note
+%
+Other Equity Investments
+Name and Location of Company
+Owner-
+ship
+Technology Licensing Company, LLC, Atlanta, GA,
+United States
+100.0
+%
+TomorrowNow, Inc., Bryan, TX, United States
+100.0
+Joint Arrangements and Investments in Associates
+Travel Technology, LLC, Atlanta, GA, United States
+100.0
+Triplt LLC, Wilmington, DE, United States
+100.0
+China DataCom Corporation Limited, Guangzhou, China
+Convercent, Inc., Denver, CO, United States
+28.30
+44.16
+TRX Data Service, Inc., Glen Allen, VA, United
+States
+100.0
+Visage Mobile Inc., San Francisco, CA, United States
+40.60
+100.0
+Yapta, Inc., Seattle, WA, United States
+E
+digital core - An integrated system that enables customers to
+predict, simulate, plan, and even anticipate future business
+outcomes in a digital economy. SAP offers the SAP S/4HANA
+suite as a digital core, providing the framework that allows
+customers to run an entire enterprise in the cloud such as
+finance, procurement, sales, inventory management, project
+system, and product lifecycle management. In this way,
+companies can achieve the real-time visibility they need into all
+mission-critical business processes and processes around their
+customers, suppliers, workforce, Big Data, and the Internet of
+Things.
+-
+Refers to reducing the total material that
+goes toward providing products or services to customers. SAP
+achieves this effect through greater efficiency in the usage of
+materials, such as default double-sided printing, or by increasing
+online conferencing to reduce business travel.
+-
+dematerialization
+data center energy - The amount of energy consumed in SAP's
+data centers related to the number of employees (expressed in
+full-time equivalents/FTEs).
+A physical facility used to house computer
+systems and associated components.
+-
+data center
+D
+Customer Net Promoter Score (NPS) Describes the
+willingness of customers to recommend or promote an
+organization or company to others. It is defined as the
+percentage of customers that are likely to recommend an
+organization or company to friends or colleagues (promoters)
+minus the percentage of customers that are unlikely to do so.
+-
+customer connection A simple process directed at
+incrementally enhancing and improving the products and
+solutions SAP customers are using today. It offers SAP
+customers the opportunity to suggest small enhancements to
+products and solutions in mainstream maintenance, for fast and
+non-disruptive delivery using notes and support packages.
+1.10
+corporate social responsibility SAP's corporate social
+responsibility (CSR) program is about how the company creates
+social impact for people, both inside and outside SAP, to help
+make society more sustainable and the world run better.
+-
+Concur Technologies - Acquired by SAP in 2014, this travel and
+expense management company helps customers manage
+business resources, processes, and spend through the world's
+largest business network in the cloud for comprehensive travel
+and expense management. The Concur platform offers an
+integrated system for expense, invoice, travel, and spend
+intelligence in the cloud.
+CO₂ equivalent A measure to compare the emissions of
+various greenhouse gases based upon their global warming
+potential. For example, the global warming potential for
+methane over 100 years is 21. This means that emissions of one
+million metric tons of methane are equivalent to emissions of 21
+million metric tons of carbon dioxide.
+-
+cloud solutions from SAP - Category used to communicate all
+of SAP offerings and efforts related to the cloud, including
+platform, managed services, solutions, technology, and
+infrastructure. It includes SAP and SAP SuccessFactors
+offerings.
+ecosystem Construct encompassing SAP and its customers
+and partners that extends the value SAP provides to its
+customers. By bringing together community-based insight,
+innovative partner solutions, and industry-leading collaboration
+and co-innovation, it enables customers to extract the greatest
+possible value from their SAP investments.
+8.9
+-
+-
+46.49
+TRX UK Limited, London, United Kingdom
+100.0
+10)
+TRX, Inc., Atlanta, GA, United States
+100.0
+1) These figures are based on our local IFRS financial statements prior to
+eliminations resulting from consolidation and therefore do not reflect the
+contribution of these companies included in the Consolidated Financial
+Statements. The translation of the equity into Group currency is based on
+period-end closing exchange rates, and on average exchange rates for
+revenue and net income/loss.
+2) As at December 31, 2015, including managing directors, in FTE.
+3) Figures for profit/loss after tax and total equity pursuant to HGB, section
+285 and section 313 are not disclosed if they are of minor significance for a
+fair presentation of the profitability, liquidity, capital resources and financial
+position of SAP SE, pursuant to HGB, section 313 (2) sentence 3 no. 4 and
+section 286 (3) sentence 1 no. 1.
+4) Consolidated for the first time in 2015.
+5) Agreements with the other shareholders provide that SAP SE fully controls
+208
+Additional Information Glossary
+end-to-end solution Software solution that drives strategic
+business outcomes and directly contributes to a business
+priority in an industry, line of business, or technology area.
+These solutions are structured into solution capabilities that
+comprise a number of individual software products, instances,
+and/or license materials. End-to-end solutions provide a
+business scope with a comprehensive value proposition. See
+"business priority."
+―
+Reduction of greenhouse gas emissions and
+increase of energy savings in the entire economy through
+innovative technology provided by the ICT sector.
+-
+enabler effect
+employee retention The ratio of the average headcount
+(expressed in full-time equivalents/FTEs) minus employee-
+initiated terminations (turnover) divided by the average
+headcount, taking into account the past 12 months.
+Employee Engagement Index A score for the level of
+employee commitment, pride, and loyalty, as well as the feeling
+of employees of being advocates for their company. The index is
+calculated based on the results of regular employee surveys.
+electronic waste (e-waste) Electronic products that are
+discarded by consumers or companies, such as computers,
+computer monitors, or mobile devices.
+Edge edition
+Version of existing SAP software product or
+solution designed for, and marketed to, small businesses and
+midsize companies. These offerings may be streamlined
+versions, limited scope, or customized functionality of existing
+software that is targeted to the business needs of small and
+midsize enterprises. The phrase "Edge edition" is added as a
+qualifier to indicate the nature of the offering. Examples: SAP
+Lumira, Edge edition; SAP Data Services, Edge edition.
+12.1
+-
+22.4
+61.43
+64.80
+62.55
+74.85
+SAP share price - peak (in €)
+40.85
+60.69
+62.31
+58.26
+45.90
+19.1
+SAP share price) (in €)
+38
+36
+36
+40
+45
+Total dividend distributed as a percentage of profit after tax4)
+1,310
+1,013
+73.38
+SAP share price - low (in €)
+54.53
+50.90
+6.72
+1.70
+13.10
+21.80
+13.90
+13.99
+8.70
+52.10
+4.20
+-4.80
+25.87
+Return on SAP shares 5) 1-year investment period (as a percentage)
+Return on SAP shares 5) 5-year investment period (as a percentage)
+Return on SAP shares 5) 10-year investment period (as a percentage)
+50.20
+74.70
+76.50
+71.60
+90.18
+Market capitalization³) (in € billions)
+34.26
+41.45
+52.20
+1,194
+1,315
+1,378
+Total dividend distributed 4)
+Narrative Science, Inc., Chicago, IL, United States
+Notation Capital, L.P., Brooklyn, NY, United States
+On Deck Capital, Inc., New York, NY, United States
+OpenX Software Limited, Pasadena, CA, United States
+Patent Quality, Inc., Bellevue, WA, United States
+Point Nine Capital Fund II GmbH & Co. KG, Berlin, Germany
+Point Nine Capital Fund III GmbH & Co. KG, Berlin, Germany
+Post for Systems, Cairo, Egypt
+PubNub, Inc., San Francisco, CA, United States
+Realize Corporation, Tokyo, Japan
+Name and Location of Company
+Return Path, Inc., New York, NY, United States
+Rome2rio Pty. Ltd., Albert Park, Australia
+Scytl, S.A., Barcelona, Spain
+Smart City Planning, Inc., Tokyo, Japan
+Socrata, Inc., Seattle, WA, United States
+Storm Ventures V, L.P., Menlo Park, CA, United States
+SV Angel IV L.P., San Francisco, CA, United States
+T3C Inc., Mountain View, CA, United States
+TableNow, Inc., San Francisco, CA, United States
+Technologie- und Gründerzentrum Walldorf Stiftung GmbH,
+Walldorf, Germany
+The Currency Cloud Group Limited, London, United Kingdom
+The SAVO Group Ltd., Chicago, IL, United States
+TidalScale, Inc., Santa Clara, CA, United States
+Upfront V, L.P., Santa Monica, CA, United States
+Walldorf, February 25, 2016
+SAP SE
+Walldorf, Baden
+The Executive Board
+Bill McDermott
+Robert Enslin
+Michael Kleinemeier
+Bernd Leukert
+Luka Mucic
+Consolidated Financial Statements IFRS Notes
+MVP Strategic Partnership Fund GmbH & Co. KG, Grünwald,
+Germany
+7.40
+Local Globe VII, L.P., St. Peter Port, Guernsey, Channel Islands
+Looker Data Sciences, Inc., Santa Cruz, CA, United States
+MuleSoft, Inc., San Francisco, CA, United States
+Name and Location of Company
+1.10
+the entity
+6) SAP SE does not hold any ownership interests in four structured entities,
+SAPV (Mauritius), Sapphire SAP HANA Fund of Funds, L.P., Sapphire
+Ventures Fund I, L.P. and Sapphire Ventures Fund II, L.P. However, based on
+the terms of limited partnership agreements under which these entities were
+established, SAP SE is exposed to the majority of the returns related to their
+operations and has the current ability to direct these entities' activities that
+affect these returns, in accordance with IFRS 10 (Consolidated Financial
+Statements). Accordingly, the results of operations are included in SAP's
+consolidated financial statements.
+"Entity whose personally liable partner is SAP SE.
+8) Entity with profit and loss transfer agreement.
+9) Pursuant to HGB, section 264 (3) or section 264b, the subsidiary is exempt
+from applying certain legal requirements to their statutory stand-alone
+financial statements including the requirement to prepare notes to the
+financial statements and a review of operations, the requirement of
+independent audit and the requirement of public disclosure.
+10) Pursuant to sections 479A to 479C of the UK Companies Act 2006, the
+entity is exempt from having its financial statements audited on the basis that
+SAP SE has provided a guarantee of the entity's liabilities in respect of its
+financial year ended 31 December 2015.
+11) Pursuant to article 2:403 of the Dutch Civil Code, the entity is exempt from
+applying certain legal requirements to their statutory stand-alone financial
+statements including the requirement to prepare the financial statements,
+the requirement of independent audit and the requirement of public
+disclosure on the basis that SAP SE has provided a guarantee of the entity's
+liabilities in respect of its financial year ended 31 December 2015.
+Name and Location of Company
+Equity Investments with Ownership of at Least 5%
+Alchemist Accelerator Fund I LLC, San Francisco, CA, United States
+All Tax Platform - Solucoes Tributarias S.A., São Paulo, Brazil
+Alteryx, Inc., Irvine, CA, United States
+Amplify Partners II L.P., Cambridge, MA, United States
+Amplify Partners L.P., Cambridge, MA, United States
+AP Opportunity Fund, LLC, Menlo Park, CA, United States
+Aris Global Holdings LLC, Stamford, CT, United States
+Char Software, Inc., Boston, MA, United States
+Costanoa Venture Capital II L.P., Palo Alto, CA, United States
+Costanoa Venture Capital QZ, LLC, Palo Alto, CA, United States
+Cyphort, Inc., Santa Clara, CA, United States
+Data Collective II L.P., San Francisco, CA, United States
+Data Collective III L.P., San Francisco, CA, United States
+EIT ICT Labs GmbH, Berlin, Germany
+FeedZai S.A., Lisbon, Portugal
+Follow Analytics, Inc., San Francisco, CA, United States
+GK Software AG, Schöneck, Germany
+IDG Ventures USA III, L.P., San Francisco, CA, United States
+Innovation Lab GmbH, Heidelberg, Germany
+Integral Ad Science, Inc., New York, NY, United States
+iYogi Holdings Pvt. Ltd., Port Louis, Mauritius
+Jibe, Inc., New York, NY, United States
+Kaltura, Inc., New York, NY, United States
+Krux Digital, Inc., San Francisco, CA, United States
+Consolidated Financial Statements IFRS Notes
+199
+Lavante, Inc., San Jose, CA, United States
+7.90
+1.00
+2.20
+20.5
+Employee Engagement Index (as a percentage)
+81
+79
+77
+79
+77
+Business Health Culture Index 13) (BHCI, as a percentage)
+75
+72
+67
+66
+65
+Employee retention (as a percentage)
+91.8
+93.5
+93.5
+94.0
+92.8
+Total turnover rate (as a percentage)
+11
+9
+8
+7
+9
+Customer
+Customer Net Promoter Score 9).12) (as a percentage)
+21.1
+21.7
+23.3
+25.3
+126
+Personnel expenses per employee - excluding share-based payments (in €
+thousands)
+5,812
+6,764
+7,162
+7,587
+111
+107
+Women working at SAP (as a percentage)
+31
+31
+31
+30
+9,446
+30
+23.6
+21.3
+21.2
+20.8
+13.80
+19.5
+Women managing managers'
+7). 8) (as a percentage)
+19.2
+15.9
+14.3
+14.5
+13.5
+Women managing teams 7). 8) (as a percentage)
+Women in management³) (total, as a percentage of total number of
+employees)
+111
+109
+15,861
+65,409
+61,134
+Number of employees in research and development6). 8)
+20,938
+18,908
+17,804
+68,343
+18,012
+10,170
+7,877
+7,489
+7,286
+5,880
+Personnel expenses - excluding share-based payments
+Personnel expenses
+75,180
+54,346
+55,765
+Five-Year Summary
+205
+€ millions, unless otherwise stated
+Employees and personnel expenses
+Number of employees, annual average)
+2015
+2014
+Number of employees 6). 8)
+2012
+2011
+76,986
+74,406
+66,572
+64,422
+2013
+-
+SAP HANA Cloud Integration Technology that integrates
+cloud applications with on-premise solutions from SAP and
+other vendors. Based on a multitenant cloud infrastructure, it
+allows customers to unite business processes and data in a
+secure, reliable environment.
+-
+HANA App Center
+One-stop shop
+(www.sapappcenter.com) where customers, partners, and
+developers can find, buy, and sell solutions developed on SAP
+HANA Cloud Platform. Provides links to SAP Store, where
+transactions take place. Formerly known as SAP HANA
+Marketplace.
+SAP Global Managing Board Extended management board
+established in May 2012 by the SAP Executive Board that allows
+SAP to appoint a broader range of global leaders to help steer
+the organization. It comprises members of the SAP Executive
+Board and selected additional executives, and has advisory and
+decision-supporting functions for the SAP Executive Board. Per
+definition, all members of the SAP Executive Board are
+members of the SAP Global Managing Board.
+SAP HANA Flexible, data-agnostic, in-memory platform that
+helps organizations analyze their business operations, using
+huge volumes of detailed transactional and analytic information
+from virtually any data source. The platform provides the
+foundation for innovative applications that take advantage of an
+in-memory database and calculation engine, allowing customers
+to conduct complex planning, forecasting, and simulation based
+on real-time data. Software products built for SAP HANA have
+been specifically designed or at least adapted to take advantage
+of the enhanced capabilities of the SAP HANA platform.
+-
+SAP HANA Cloud Platform - An open cloud platform that is the
+foundation for running applications and analytics today and
+allows developers to build custom applications in the cloud as
+either stand-alone or connected to on-premise solutions. It
+includes infrastructure, application, and database services in a
+subscription model. Separately licensed, SAP HANA Cloud
+Platform is part of SAP Cloud powered by SAP HANA.
+SAP
+SAP HANA Cloud Platform for the Internet of Things - A
+version of SAP HANA Cloud Platform that provides large-scale
+connectivity and integration between the SAP HANA platform
+and SAP solutions for the Internet of Things. It enables
+capabilities for device management and remote control, data
+and metrics, device modeling, and device and application
+development.
+SAP for Telecommunications - Solution portfolio that provides
+telecommunications enterprises of all types and sizes with a
+range of industry-specific capabilities, including support for
+convergent invoicing and contract accounting.
+SAP HANA Live Umbrella term for a group of analytics
+foundations for SAP HANA, specific to an industry or for a
+particular software (SAP HANA Live for Event Management,
+SAP HANA Live for SAP CRM), and so on, as well as SAP HANA
+Live Browser.
+-
+SAP HANA One Deployment of SAP HANA certified for
+productive use on the Amazon Web Services Cloud. SAP HANA
+One can be deployed for production use with small data sets, in
+minutes, opening a door to starter projects from customers,
+ISVs, and startups.
+SAP HANA Vora - An in-memory, massively distributed data
+processing engine for Hadoop that provides simple business-
+oriented scale-out processing of data. This engine allows
+distributed Hadoop data to be analyzed together with enterprise
+data using the SAP HANA platform.
+Additional Information Glossary
+215
+SAP Health Engagement - Solution that enables the interaction
+between individuals and doctors or healthcare providers in order
+to track their wellbeing.
+SAP Health Link - Cloud solution that enables doctors and life
+science companies to access and analyze patients' vital data,
+which is provided by patients through the SAP Health Link
+mobile app.
+SAP Future Cities - Umbrella term for an initiative that includes
+the strategy, solutions, and vision associated with smart urban
+management, targeting state and local governments worldwide.
+It represents a unified range of SAP offerings for government
+organizations that help them improve the lives of their citizens
+and make urban living sustainable. See "SAP City Connect."
+SAP HANA Enterprise Cloud - This service enables customers
+to access solutions in the cloud. It contains managed cloud
+applications, in-memory infrastructure, managed services, and
+through an additional license, SAP HANA Cloud Platform, to
+build custom applications in the cloud. On-premise applications
+from SAP can be delivered to customers via SAP HANA
+Enterprise Cloud.
+-
+own.
+SAP for Wholesale Distribution Solution portfolio that
+addresses the needs of midsize and large wholesale distribution
+businesses in a wide range of segments. Industry-specific
+capabilities support new business models and strategies that
+meet the needs of an important supply sector.
+SAP for Transportation & Logistics Solution portfolio that
+covers the unique business needs of postal services, railways,
+airlines, and toll collection companies, as well as logistics service
+providers, to optimize supply chain and planning.
+-
+SAP for Industrial Machinery & Components (SAP for IM&C)
+Solution portfolio that coordinates the entire scope of
+business activities (estimating, order entry, project
+management, and production planning) for the industrial sector
+and supports areas ranging from maintenance and services to
+billing and profitability analysis.
+SAP for Insurance - Solution portfolio that integrates steps in
+the insurance business process, including capabilities for
+customer contact, policy and product management, collections
+and disbursement, and claims management.
+SAP for Life Sciences Solution portfolio that meets the
+requirements of pharmaceutical, biotechnology, and diagnostics
+companies, as well as manufacturers of medical devices and
+products.
+-
+SAP for Media
+specific to the media industry with capabilities that include sales
+and distribution, advertising management, product
+development, and intellectual property management.
+Solution portfolio that supports processes
+SAP for Mill Products - Solution portfolio for manufacturers of
+building materials, the paper and timber industry, metal and
+primary metal producers, and textile and furniture
+manufacturers.
+SAP for Mining
+-
+SAP for High Tech - Solution portfolio that meets the demands
+of high-tech industries, including RosettaNet support.
+Solution portfolio that supports processes
+specific to the mining industry, including mining operations and
+asset performance; sales and supply chain management;
+operational risk and compliance; as well as human resources;
+finance; procurement; and IT management.
+-
+SAP for Professional Services Solution portfolio that delivers
+integrated tools, best practices, and support for automated
+processes designed specifically for the demands of the
+professional services industry, including management
+consultancies as well as accounting and legal firms.
+-
+SAP for Public Sector Solution portfolio for public
+administration, providing an electronic framework that enables
+online communication through various applications for the
+public, government authorities, and related entities.
+SAP for Retail Solution portfolio that offers multichannel
+applications designed specifically to provide the best retail
+services to a large customer base.
+SAP for Sports & Entertainment
+-
+Solution portfolio that
+comprises solutions for sports teams, leagues, and venues,
+designed to help them deepen fan engagement, drive on-field
+performance, and optimize business efficiency.
+Additional Information Glossary
+214
+SAP for Oil & Gas (SAP for O&G) - Solution portfolio that
+meets the demands of oil and gas companies of all sizes.
+SAP for Healthcare - Solution portfolio for hospitals and clinics
+to manage a variety of required administrative and clinical
+processes.
+SAP for Engineering, Construction & Operations (SAP for
+EC&O) Solution portfolio designed to meet the specific
+requirements of project-oriented enterprises that offers
+capabilities for industrial plant construction, construction of
+commercial and private buildings, and shipbuilding.
+SAP for Defense & Security Solution portfolio that offers a
+variety of capabilities that meet the critical needs of the defense
+and security sector. Key industry-specific capabilities include
+acquisition and materials management; force planning;
+maintenance, repair, and overhaul (MRO); personnel and
+organization; infrastructure management; planning and support
+for deployed operations; in-service support; and line
+maintenance.
+-
+SAP for Utilities Solution portfolio for all supply and energy
+industries, with capabilities ranging from call centers and
+Internet communications to consumption billing.
+SAP ERP Central Component (SAP ECC) Main software
+component in the SAP ERP application.
+SAP Exchange Media (SAP XM) A brand-new private
+premium media exchange (http://sapexchange.media/)
+powered by SAP HANA that is purpose-built to support real-time
+digital advertising and maximize return on media for advertisers,
+publishers, and consumers.
+-
+SAP Executive Board The official governing body of SAP,
+overseeing and deciding on the activities of the company.
+Subject to the requirements of stock corporation law, the SAP
+Executive Board is committed to the interests of SAP and bound
+by company policy. It provides the SAP Supervisory Board with
+regular, prompt, and comprehensive reports about all essential
+issues of business, corporate strategy, and potential risks.
+Membership in the SAP Executive Board is part of the official
+titles for these board members.
+SAP Fieldglass Category of offerings resulting from the
+acquisition of Fieldglass that help companies manage their
+entire workforce including contract workers and permanent
+staff. SAP Fieldglass solutions currently include SAP Fieldglass
+Approvals, SAP Fieldglass Contingent Workforce Management,
+SAP Fieldglass Services Procurement, SAP Fieldglass Vendor
+Management, and SAP Fieldglass Worker Profile Management.
+See "Fieldglass."
+SAP Financing - See "SAP Payment service."
+SAP Fiori - First developed as a set of extensible HTML5 apps
+specific to key user roles, offering a seamless user experience
+across devices using responsive design principles. SAP Fiori
+apps target all employees of existing SAP customers,
+addressing the most common business functions, such as
+workflow approvals, information lookups, and self-service tasks.
+A free launchpad allows users to access their SAP Fiori apps
+from one single entry point.
+SAP Fiori user experience (UX) - As of May 2014, SAP Fiori UX
+is the user experience for SAP software. Based on modern
+design principles, it represents a consumer-like, consistent
+experience across devices, including tablets and smartphones.
+-
+SAP for Aerospace & Defense (SAP for A&D) Solution
+portfolio specifically designed to meet the needs of the
+aerospace and defense industry. It offers capabilities for
+maintenance, repair and overhaul, airline operations, defense,
+manufacturing, contract and program management, and
+business acquisitions.
+-
+SAP for Automotive Solution portfolio designed to meet the
+specific needs of the automotive industry. Its capabilities help
+Additional Information Glossary
+213
+link complex business processes into a logical flow, maximizing
+profitability and satisfying customers'
+efficiency and
+expectations.
+-
+SAP for Banking Solution portfolio that enables banks to
+obtain all customer information at a glance and offers a full
+complement of high-performance capabilities for strategic
+planning, financial accounting, costing, and enterprise-wide
+control. It also features key industry-specific applications for
+profitability management, risk management, customer
+relationship management, and integrated customer account
+systems.
+SAP for Chemicals - Solution portfolio that delivers support for
+specific processes and tools that chemical companies require.
+Industry-specific capabilities include recipe management, batch
+management, and version control.
+-
+-
+SAP for Consumer Products Solution portfolio that supports
+the integration of every step of the consumer product value
+chain from suppliers to consumers. Key capabilities include
+mobile and Internet sales, trade promotion management,
+inventory management, brand and channel management, and
+demand signal management.
+-
+SAP Foundation for Health - A common database schema,
+functional libraries, and algorithms implemented in SAP HANA
+to meet the requirements of IT-supported personalized
+medicine. In combination with the SAP HANA platform
+(separate license required), healthcare providers can use this
+foundational software to help build a platform on which to run
+diverse health-association applications and even create their
+SAP for Higher Education and Research (SAP for HE&R)
+Solution portfolio that supports organizational processes and
+unique needs of public and private universities, multicampus
+institutions, research agencies, and medical colleges, including
+campus management, grants management, student lifecycle
+management, financials, operations, human capital
+management, procurement, analytics, research, and asset
+management.
+SAP Digital - Integrated digital business unit responsible for
+delivering e-commerce and digital native offerings to users who
+SAP ERP Application designed to optimize business and IT
+processes by reducing IT complexity, increasing adaptability,
+and delivering more IT value at a lower cost than traditional ERP
+solutions. It can support mission-critical, end-to-end business
+processes for finance, human capital management, asset
+management, sales, procurement, and other essential corporate
+functions. SAP ERP can also support industry-specific
+processes by providing industry-specific business functions that
+can be activated selectively via the switch framework, keeping
+in-memory computing A major advance in information
+technology that creates a dramatic change in computing,
+analytics, and data storage. Combining advances in multicore
+processing with more affordable servers, in-memory computing
+allows information to be stored in the main memory rather than
+in relational databases to greatly accelerate processing times. It
+disrupts the traditional IT stack comprised of hardware,
+middleware, and software, where disk-based relational
+databases can become bottlenecks.
+in-memory database - Database that keeps all active records in
+main memory rather than on disk. Accessing in-memory records
+is considerably faster than retrieving them from the disk,
+significantly increasing performance. SAP HANA is SAP's
+groundbreaking database that allows businesses to take
+advantage of in-memory computing. See "SAP HANA."
+ISO 14001 A standard for environmental management
+systems that provides practical tools for companies and
+organizations to identify and control their environmental impact
+and constantly improve their environmental performance.
+SAP for Marketing, SAP for R&D/Engineering, SAP for Sales,
+SAP for Service, SAP for Sourcing and Procurement, SAP for
+Supply Chain Management, and SAP for Sustainability.
+-
+Live Business SAP's campaign platform that refers to our
+vision of a seamless digital business that enables our customers
+to Run Simple by sensing, responding to, learning from,
+adapting to, and predicting business data in real time.
+M
+maintenance
+-
+Software support comprising support for legal
+changes and corrections delivered through the SAP Notes tool,
+support packages, problem support, and access to information
+and online service channels depending on the maintenance
+phase.
+maintenance strategy - Set of rules that determine the length
+and conditions of maintenance for SAP software product
+releases. Detailed rules can differ depending on the type of
+application.
+managed cloud - Deployment model that implies resources are
+dedicated to one customer and accessed through a virtual
+private network (VPN). The infrastructure is owned, managed,
+and operated by the cloud provider in the cloud provider's data
+center. SAP HANA Enterprise Cloud is SAP's managed cloud
+service.
+K
+key performance indicator (KPI) Performance figure for
+which threshold values are defined and against which validation
+is executed.
+L
+-
+Leadership Trust Score Based on the Net Promoter Score
+(NPS) methodology that results from a question in our annual
+global employee survey that gauges employees' trust in our
+leaders. It measures our collective effort to foster a work
+environment based on trust. We use this score to further
+enhance accountability for our leaders and executive
+management.
+line of business (LoB) - Internal organizational area or high-
+level business unit in a company (division) that combines all
+responsibilities for a particular product, group, or set of
+processes. Examples include sales, purchasing, human
+resources, finance, marketing, and so on.
+line-of-business portfolios - SAP offers software portfolios that
+address the needs of organizations in 12 lines of business, or
+functional areas. The following solution portfolios are currently
+available: SAP for Asset Management, SAP for Commerce, SAP
+for Finance, SAP for Human Resources, SAP for Manufacturing,
+materiality - Determines the relevance and significance of an
+issue to an organization and its stakeholders. A material issue is
+an issue that will influence the decisions, actions, and
+performance of an organization or its stakeholders.
+mobile solutions from SAP
+-
+Provide a foundation for
+enterprise mobility and seamless integration with the core
+enterprise applications of our customers. The portfolio of mobile
+solutions includes enterprise mobility management, including
+the SAP Afaria mobile device management solution and the SAP
+Mobile Documents solution; mobile apps; and SAP Mobile
+Platform.
+O
+-
+on premise A deployment model where a software license is
+purchased and deployed on the servers at the premises of the
+customer. The customer manages and controls the software.
+One4
+-
+-
+Launched in November 2015, the One4 project
+(www.sapsponsorships.com/categories/one4-project) is an
+initiative led by SAP that aims to support different social causes
+and charities. The first project is being conducted together
+with the band Imagine Dragons, Apple, and
+KIDinaKORNER/Interscope to help support the UN Refugee
+Agency (UNHCR).
+Processing, storage,
+network, other computing resources and typically a defined level
+of support for consumers to deploy software (such as operating
+systems and applications). IaaS consumers do not manage
+underlying cloud infrastructure but may control networking
+components (such as host firewalls).
+infrastructure as a service (laaS)
+SAP Hybris - Unified brand resulting from the acquisition of
+hybris in August 2013. All e-commerce solutions from SAP and
+hybris are now consolidated under the SAP Hybris brand. hybris,
+an SAP company, continues to operate as an independent
+business. SAP Hybris solutions help businesses sell more goods,
+services, and digital content through every touch point, channel,
+and device.
+enterprise resource planning - See "SAP ERP."
+environmental impact A positive or negative change to the
+natural environment.
+-
+EU Access from SAP This service allows customers to limit
+access when necessary to customer data during maintenance or
+delivery of SAP Service and Support from suppliers outside of
+the European Union to adhere to company guidelines, local
+statutory requirements, or industry regulation.
+F
+Fieldglass - Company acquired by SAP in May 2014 and fully
+integrated in SAP. Our solutions for contingent workforce
+management are marketed under the SAP Fieldglass brand. See
+"SAP Fieldglass."
+G
+Global Customer Reference Program SAP program offering
+detailed information about reference customers from around
+the world, using a database that channel partners can access to
+help close a deal with a new SAP customer. Reference
+customers have agreed to participate in one or more reference
+activities on behalf of SAP.
+Global Partner Operations (GPO) - Organization created in
+mid-2014 at SAP that is responsible for all SAP partner
+relationships. It includes the former SAP Ecosystem & Channels
+team and is responsible for managing strategic partnerships, as
+well as the SAP Business One channel and the growing OEM
+business.
+Global Reporting Initiative (GRI) - A non-profit organization
+that provides companies and organizations with a
+comprehensive sustainability reporting framework that is widely
+used around the world.
+Global Service & Support (GSS) Organization at SAP
+responsible for all global and regional service, support, and
+consulting delivery, as well as portfolio management,
+maintenance go-to-market activities, mobile services,
+development of service and solution best practices, learning
+content development, global customer centers of expertise,
+management of SAP user groups, and SAP University Alliances.
+It includes the former SAP Active Global Support organization.
+GSS advises and works in partnership with SAP customers to
+implement, run, optimize, and help them derive value from their
+SAP solutions through a comprehensive SAP Service and
+Support portfolio. See "SAP Service and Support"
+greenhouse gas footprint - The sum of all greenhouse gas
+emissions measured and reported, including renewable energy
+and third-party reductions, for example, offsets.
+Greenhouse Gas Protocol (GHG Protocol) - The most widely
+used international accounting tool to understand, quantify, and
+manage greenhouse gas emissions.
+H
+Hadoop - Part of the Apache project sponsored by the Apache
+Software Foundation, this open source, Java-based
+programming framework supports the processing of large data
+sets in a distributed computing environment. As open source
+technology, Hadoop is an efficient distributed file system that
+enables the analysis and processing of very large volumes of
+data from a great number of varied, structured, and
+unstructured sources. SAP Distribution for Hadoop software
+provides redistribution of Apache Hadoop developed by
+Hortonworks.
+-
+hybrid cloud Deployment model that uses resources
+comprised of a mix of two or more distinct cloud deployment
+models that are integrated by standardized or proprietary
+technology enabling data and application portability.
+hybrid cloud deployment model - Deployment model that uses
+resources comprised of a mix of two or more distinct cloud
+deployment models that are integrated by standardized or
+proprietary technology enabling data and application portability.
+hybrid landscape A mix of on-premise and any cloud
+deployment model(s). Alternatively referred to as an "on
+premise to cloud" or "hybrid environment."
+hybris - See "SAP Hybris."
+inclusivity - For an organization that accepts its accountability
+to those it impacts and who impact it: The participation of
+stakeholders in developing and achieving a strategic and
+accountable response to sustainability.
+industry - An economic sector characterized by a typical value
+chain, business processes, and set of products and services that
+the companies operating in it have in common. At SAP,
+"industries" is also used as a term to differentiate between lines-
+of-business functions such as marketing, procurement, and
+finance, and those functions specific to an industry.
+industry portfolios - Software portfolios from SAP that address
+the business needs of 25 different industries.
+industry segment
+-
+An economic subsector within an industry
+that is characterized by a typical value chain, business
+processes, and set of products and services that the companies
+operating in it have in common. Examples include agribusiness
+and paper and packaging.
+Additional Information Glossary
+209
+-
+Additional Information Glossary
+210
+P
+SAP Business Suite 4 SAP HANA - See "SAP S/4HANA."
+SAP Business Suite powered by SAP HANA - In January 2013,
+SAP launched SAP Business Suite powered by SAP HANA, a
+next-generation business suite that captures and analyzes data
+in real time on a single in-memory platform empowering
+customers to run their business in real time to transact, analyze,
+and predict instantly and proactively. The core applications in
+the suite now take advantage of SAP HANA for smarter
+innovations, faster business processes, and simpler
+interactions.
+SAP Business Warehouse (SAP BW) - An application of the
+SAP NetWeaver technology platform that provides a complete
+view of a company and the tools needed to make the right
+decisions, optimize processes, and measure strategic success,
+such as business-critical factors and benchmarks. Formerly
+called SAP NetWeaver Business Warehouse.
+-
+SAP City Connect Solution that helps urban organizations
+and small-business owners with tourism development, visitor
+and crowd management, business event subscriptions, and
+neighborhood development. Part of the SAP Future Cities
+initiative. See "SAP Future Cities."
+-
+SAP Cloud for Analytics Intuitive cloud solution for
+simplifying financial planning and analysis, featuring easy-to-use
+yet powerful modeling, analytics, and data integration. Includes
+built-in collaboration, mobile capabilities, and calendar-based
+event management. Formerly called SAP Cloud for Planning.
+-
+SAP Cloud for Customer A cloud-based offering of CRM
+applications and tools developed for sales, service, and
+marketing teams that provides an overview of your end-to-end
+business, as well as deep customer insight and personalized
+engagement, so that they can deliver a relevant experience at
+every step of your customer's journey. It also offers designed-in
+social collaboration to help transform social media
+conversations into business insight. The offering currently
+includes SAP Cloud for Sales, SAP Cloud for Service, SAP Cloud
+for Marketing, and SAP Cloud for Social Engagement solutions.
+An Edge edition is available for small and midsize enterprises.
+SAP Cloud for Planning -See "SAP Cloud for Analytics."
+SAP Cloud powered by SAP HANA - Term that refers to all of
+SAP and SAP SuccessFactors offerings related to the cloud,
+including platforms, services, applications, technology, and
+infrastructure. It is not the name of a single offering or a
+category of solutions. SAP Cloud powered by SAP HANA
+comprises public cloud applications, managed cloud
+applications delivered via SAP HANA Enterprise Cloud, and SAP
+HANA Cloud Platform. SAP Cloud always refers to more than
+just solutions or applications.
+-
+SAP Co-Innovation Lab SAP location featuring a simulated,
+heterogeneous data center that incorporates hardware and
+infrastructure software from various vendors. The lab provides a
+hands-on environment for SAP, customers, and partners to
+innovate, accelerate, and showcase new business solutions and
+technologies collaboratively. Customers and partners can visit
+the lab to evaluate the latest SAP and partner solutions in a
+simulated, real-world infrastructure.
+SAP Community Network
+-
+Online portal with nearly two
+million members in more than 200 countries, providing
+individuals with the opportunity to trade experience and
+insights, pursue business opportunities, and learn from each
+other. SAP offers distinct communities in the network that offer
+information, trusted resources, and co-innovation. See "SAP
+Developer Network" and "SAP University Alliances community."
+SAP Custom Development - SAP organization that specializes
+in building individual software solutions that address the unique
+needs of customers, and that fit seamlessly with existing SAP
+software. The organization draws on SAP innovations, especially
+SAP HANA, to deliver unmatched impact and value for specific
+customer use cases. See "custom development project."
+SAP Developer Network Part of SAP Community Network,
+this online community offers deep technical content and
+expertise for SAP developers, analysts, consultants, and
+administrators.
+Additional Information Glossary
+212
+can discover, try, buy, implement, use, and renew SAP solutions
+in a simple online interaction.
+SAP Digital Boardroom - Showcased at SAPPHIRE NOW in
+2015 as the "Boardroom Redefined," this offering contextualizes
+the boardroom, locations, and devices into a real-time
+enterprise experience. Powered by SAP HANA and experienced
+through the SAP S/4HANA suite and the SAP Cloud for
+Analytics solution, this next-generation solution empowers
+leaders to monitor, simulate, and drive change in a digital
+economy. See "SAP Cloud for Analytics."
+SAP Digital Customer Engagement A scalable, cloud
+subscription-based customer engagement solution purpose-
+built for individuals and small teams. It brings together sales,
+customer service, marketing, and reporting functions with
+integration, collaboration, and personalization options to help
+them sell smarter, work more efficiently, and collaborate more
+effectively.
+-
+-
+SAP EcoHub Online solution marketplace that centralizes
+information about SAP and partner solutions and includes
+features such as feedback, ratings, and demos to help discover,
+evaluate, and buy solutions to complement an investment in
+SAP software.
+SAP Ecosystem & Channels - See "Global Partner Operations."
+SAP Education An organization with more than 1,000
+resources on global scale that provides a complete and high-
+quality enablement offering across the entire customer lifecycle
+for all target audiences (business users, project teams,
+customers, partners, and so on). The comprehensive portfolio of
+educational products and services leverages a multimodal
+offering (on-site, e-learning, and virtual classrooms) to
+accelerate enablement and reduce cost and certifications paths
+to help ensure enablement quality.
+SAP Enterprise Support Services that provide proactive
+support in addition to all features of SAP Standard Support
+services. These proactive support services encompass tools,
+processes, and services that enable continuous improvement,
+holistic application lifecycle management for continuous
+innovation, business and operational process improvements,
+and levers to address the total cost of operation (TCO).
+SAP Business Suite - Software applications that help create a
+comprehensive business process platform for enterprises and
+enables them to execute and optimize their business and IT
+strategies. These applications give organizations the unique
+ability to perform their essential business processes with
+modular software that is designed to work with other SAP and
+non-SAP software. The main applications in the suite are SAP
+CRM, SAP ERP, SAP PLM, SAP SRM, and SAP SCM. SAP
+Business Suite, SAP CRM, and SAP ERP are now available
+powered by SAP HANA.
+SAP Business One - Application designed especially for small
+businesses with up to 100 employees, providing a single,
+integrated solution for managing the entire business across
+financials, sales, customer relationships, purchasing, inventory,
+analytics, and operations.
+corporations. It is a complete, integrated suite that can run an
+entire enterprise financials, human resources, sales,
+procurement, customer service, and supply chain. The latest
+versions enable partners and customers to extend the system
+capabilities or build cloud-based applications using SAP
+Business ByDesign Studio.
+-
+platform as a service (PaaS) - Cloud infrastructure, operating
+system, programming languages, libraries, services, tools and
+typically a defined level of support for consumers to deploy
+consumer-created or acquired applications. PaaS consumers do
+not manage underlying cloud infrastructure but have control
+over deployed applications.
+powered by SAP HANA - An SAP offering powered by SAP
+HANA runs on the SAP HANA platform. More than 100 SAP
+applications are currently "powered by SAP HANA." Partner
+solutions or applications that are powered by SAP HANA are
+certified by SAP to run on the SAP HANA platform. These
+applications take advantage of distinctive capabilities of SAP
+HANA to deliver key benefits, such as simpler administration,
+reduced overhead, and better business intelligence over
+conventional traditional technology platforms.
+-
+-
+product footprint The environmental impact of products,
+processes, or services by production, usage, and disposal.
+public cloud - Provides consumers access to a provider's
+software applications running on a cloud infrastructure. The
+resources are located on the premises of the cloud provider, not
+of the customer, and are shared by multiple customers
+accessing them through the Internet.
+R
+renewable energy - The shares and types of electricity obtained
+from renewable sources such as hydro, wind, solar, geothermal,
+and biomass. It is calculated by adding the amount of renewable
+energy specifically sourced, produced on-site by our own solar
+cells and covered by Renewable Energy Certificates (RECs).
+-
+road map
+Product timeline that has a variety of objectives,
+including communication to customers, users, or other parties
+interested in the timing of future product releases; the features
+planned for those releases; general prioritization of features;
+and in some cases, the requirements of features in enough detail
+that current and prospective customers can give feedback on
+the feature itself and the product's direction.
+S
+-
+SAP Activate Innovation adoption framework introduced for
+SAP S/4HANA that combines SAP Best Practices,
+methodology, and guided configuration delivered with a
+reference landscape. The SAP Activate methodology is the SAP
+guidance for implementation, enhancements, upgrades, or co-
+innovation of SAP solutions starting with SAP S/4HANA. It
+enables cost-effective, agile, and fast delivery of the SAP
+solution to the customer and supports deployments in the
+cloud, on premise, or in hybrid deployment.
+the application core stable and helping ensure maximum
+performance.
+SAP Active Global Support (SAP AGS) - See "Global Service &
+Support."
+SAP Anywhere - An HTML5 solution that runs in the cloud
+designed for smaller companies with up to 50 employees that
+need a seamless and affordable way to manage their customer
+interactions in a single front-office system. Accessible through a
+Web browser on a desktop, laptop, or mobile device, it delivers a
+consistent customer experience with the seamless integration
+of marketing, sales, and commerce activities. See also "SAP
+SME Solutions."
+-
+SAP API Management New cloud offering that helps
+customers manage their application programming interfaces; an
+on-premise edition is also available.
+SAP Ariba - Category of offerings resulting from the acquisition
+of Ariba in October 2012. All cloud-related supplier assets of
+SAP and Ariba are now consolidated under the SAP Ariba brand.
+Ariba, an SAP company, continues to operate as an independent
+business. Ariba solutions for procurement, financials, and
+sourcing, as well as the Ariba Network, keep their original Ariba
+offering names at present.
+-
+SAP Asset Intelligence Network A cloud subscription-based
+network hosted by SAP where manufacturers, asset owners,
+operators, regulators, and service providers can connect to each
+other. Maintenance and service applications can be delivered
+through the network.
+SAP Best Practices
+-
+Packages that provide proven methods
+and tools for organizations to implement best business
+practices in key areas and a range of industries using SAP
+software. The packages deliver methodology, documentation,
+and preconfiguration that enable rapid, reliable deployment with
+quick return on investment.
+-
+SAP Business All-in-One Comprehensive and flexible
+business management solution targeted to midsize companies
+with up to 2,500 employees that are looking for a
+comprehensive, integrated industry-specific ERP solution with
+built-in best practices.
+SAP Business ByDesign Adaptable, cloud-based business
+management solution delivered in the cloud, ideally suited for
+growing midsize companies as well as for subsidiaries of larger
+Additional Information Glossary
+211
+SAP ActiveEmbedded Enhanced engagement services for
+optimizing solutions and accelerating adoption of technologies
+without disrupting customer businesses.
+private cloud Deployment model that implies resources are
+dedicated to one customer and accessed through the Internet.
+The infrastructure is owned, managed and operated by the
+customer, a third-party, or both, and is on the premises of the
+customer, cloud provider, or a third party.
+SAP Jam Social software platform that enables sales teams
+and internal experts to socially connect and communicate with
+customers in the context of each opportunity. Customers can
+also easily provide feedback and share what is important to
+them to strengthen relationships. Available in two compatible
+elements, SAP Jam Collaboration and SAP Jam Communities.
+SAP SuccessFactors HCM Suite Suite of HR solutions for
+talent management, core HR, collaboration, and workforce
+analytics. The cloud-based suite provides solutions to bridge the
+gap between strategy and execution with tools to hire, reward,
+and develop the right people with the right skills to grow a
+business sustainably.
+SAP Solution Extensions - Category name of solutions that are
+developed by independent partners. Solution extensions
+integrate easily with SAP software, offering customers cross-
+solution and cross-industry functions that complement SAP
+software. These select third-party offerings are branded with
+"SAP," and sold and supported by SAP and partners.
+SAP SME Solutions - A subset of the portfolio of SAP solutions
+for small businesses and midsize companies. It is essentially a
+family name for four specific offerings: SAP Anywhere, SAP
+Business One, SAP Business By Design, and SAP Business All-in-
+One. By consolidating these four offerings under one umbrella
+name, we focus on a portfolio of SME offerings that helps our
+customers choose the best solution for their business size and
+needs. Cockpit dashboards that enable users to quickly
+aggregate data, perform analytics, and gain insights into KPIs
+related to various corporate functions. A variety of options are
+available for specific use cases/roles including accounts
+payable, event management, financial close, purchasing, and
+other corporate functions. An executive edition of SAP Smart
+Business uses SAP HANA extended application services to
+analyze Big Data at granular levels in real time for fast decision
+making by executive management.
+Business uses SAP HANA extended application services to
+analyze Big Data at granular levels in real time for fast decision
+making by executive management.
+Additional Information Glossary
+SAP Smart Business - Cockpit dashboards that enable users to
+quickly aggregate data, perform analytics, and gain insights into
+KPIs related to various corporate functions. A variety of options
+are available for specific use cases/roles including accounts
+payable, event management, financial close, purchasing, and
+other corporate functions. An executive edition of SAP Smart
+SAP Simple Finance - See "SAP S/4HANA Finance."
+SAP Service Marketplace Extranet platform that offers
+capabilities for collaboration between SAP, customers, and
+partners. The extranet provides central access and guided
+navigation to SAP's complete product listing with support,
+maintenance, and upgrade information.
+SAP Solution Manager - Application management solution that
+enables customers to manage their SAP and non-SAP
+applications better. With SAP Solution Manager, customers can
+centralize, enhance, automate, and improve the management of
+their entire system landscape, thus reducing total cost of
+ownership. The solution includes features such as diagnostics,
+testing, root cause analysis, and solution monitoring.
+-
+SAP Safeguarding Project-based support option that helps
+customers manage risks and enable the technical robustness of
+SAP solutions during implementation, upgrade, and operations.
+SAP S/4HANA Line-of-Business Solutions
+combine the core capabilities included in the SAP S/4HANA
+Enterprise Management solution with the solutions in the SAP
+portfolio (on premise and cloud) for a specific line of business.
+Solutions that
+SAP S/4HANA Finance - A global financial solution powered by
+SAP HANA offering a complete choice of deployment (cloud, on
+premise, hybrid). It is part of the modular SAP S/4HANA Line-
+of-Business (LoB) Solutions.
+SAP S/4HANA Enterprise Management – A core solution that
+covers all mission-critical business processes of an enterprise. It
+is natively built on the SAP HANA platform, designed with SAP
+Fiori user experience (UX), and delivered in the cloud and on
+premise. It is a core element of the new SAP S/4HANA Line-of-
+Business (LoB) Solutions.
+-
+SAP S/4HANA Launched in February 2015, SAP's next-
+generation business suite offered exclusively on the SAP HANA
+platform, with on-premise and cloud deployment editions,
+designed with the role-based user experience of SAP Fiori. Cloud
+editions are available for marketing, project services, and the
+enterprise. Also known by as SAP Business Suite 4 SAP HANA.
+SAP Service and Support - Portfolio that encompasses service
+and support offerings from SAP, which provide a simplified
+engagement, delivery, and overall experience with SAP.
+Delivered by Global Service & Support organization helps
+customers derive value from their SAP solutions in a fast, cost-
+effective, and predictable way. The SAP Service and Support
+portfolio includes a variety of named services and support
+offerings including SAP MaxAttention, SAP Safeguarding, SAP
+Enterprise Support, and others. See "Global Service & Support."
+-
+SAP solutions for customer engagement and commerce
+Category of solutions that help businesses create experiences
+that engage customers like never before and can lead to more
+effective marketing promotions, increased revenue share of new
+customers, reduced customer churn, increased revenue growth,
+and improved cart-to-order conversion rate.
+SAP Sports One Solution comprising a suite of Web
+applications (Match Insights, Player Fitness, Scouting Insights,
+Team Manager, and Training Planner) and mobile apps (SAP
+218
+Additional Information Glossary
+SAP University Alliances Program that introduces students
+to the exciting technologies shaping business today, and
+designed to connect students around the world interested in
+SAP solutions, careers, and research opportunities. Students
+participate in classroom sessions, app development, networking
+opportunities, events, and more. The SAP University Alliances
+-
+Annual technical education conference that
+encompasses a broad scope of topics and audience, focusing on
+technology with an emphasis on collaboration and hands-on
+workshops.
+-
+SAP TechEd
+SAP solutions for small businesses and midsize companies
+Category of solutions that combine business management and
+business intelligence software for small and midsize enterprises
+(SMEs). It currently includes SAP SME Solutions, SAP
+BusinessObjects Edge solutions, Edge editions or existing SAP
+software products, and other SME services. As with large
+enterprises, these firms seek to streamline business processes,
+cut costs, drive growth, and increase profitability by receiving
+the right information at the right time - across all operations.
+―
+-
+SAP SuccessFactors Unified brand resulting from the
+acquisition of SuccessFactors in August 2013. All cloud HR
+assets of SAP and SuccessFactors are now consolidated under
+the SAP SuccessFactors brand. SuccessFactors, an SAP
+company, continues to operate as an independent business.
+SAP SuccessFactors solutions help businesses sell more goods,
+services, and digital content through every touch point, channel,
+and device.
+-
+SAP Store - Public online store (www.sapstore.com) where you
+can discover, download, and buy SAP solutions, services, mobile
+apps, demos, and free trials from SAP and partners.
+SAP Startup Focus - Program that offers a variety of resources
+for young companies including technology, training, technical
+advice and valuable go-to-market support. It serves as a
+development and growth accelerator that provides an integrated
+approach for startups to innovate on the SAP HANA platform.
+SAP Standard Support Support option offering a reliable
+response to technical disruptions and for maintaining system
+health and integrity. This basic support offering features
+updates, problem resolution, knowledge transfer, quality
+management, and more to keep IT landscapes up to date and
+stable.
+Player Fitness, SAP Team One) built on SAP HANA Cloud
+Platform that gives sport clubs the team management tools they
+need to operate effectively.
+SAP SuccessFactors Employee Central The foundation of
+the SAP SuccessFactors HCM Suite of solutions, Employee
+Central is core HR software delivered securely as a service from
+the cloud. It offers one global system of record, complete
+workforce overview combining HR and talent data, powerful
+analytics, and social collaboration fine-tuned to meet local
+needs.
+SAP road maps Available for industries, lines of business, and
+technology, SAP road maps highlight the SAP solutions available
+today, planned innovation, and the SAP vision for the future.
+217
+SAP Rapid Deployment solutions - Packages of preconfigured
+software and predefined services with content including best
+practices, templates, tools, and business user enablement with
+predetermined scope, time, and costs. Because the solutions
+are installed quickly, customers can benefit from crucial
+software functionality within as little as 12 weeks, helping lower
+the total cost of implementation and giving customers
+immediate and tangible value.
+SAP ONE Support A program to simplify the delivery and
+consumption of support and maintenance for a growing
+portfolio of solutions from both SAP and acquired companies.
+The program provides customers with comprehensive and
+harmonized support, regardless of whether their SAP solutions
+operate on premise or in the cloud.
+-
+SAP ONE Service A single channel for SAP support and
+maintenance customers to access all SAP support delivery
+engagements that come with SAP MaxAttention and SAP
+ActiveEmbedded offerings.
+-
+SAP Month of Service Held in October, SAP's signature
+corporate volunteerism effort offers SAP employees around the
+world opportunities to come together to support social change
+in their communities.
+-
+SAP Mobile Secure A set of solutions that provide enterprise
+security for mobile devices, apps, content, and communications
+that include SAP Afaria, SAP Mobile Device Management, SAP
+Mobile Documents, SAP Mobile Place, SAP Enterprise Store,
+and SAP App Protection by Mocana.
+-
+SAP Mobile Platform A platform of mobile capabilities and
+technology that bundles three existing offerings under one name
+(Sybase Unwired Platform, Sybase Mobiliser, and a Syclo
+offering named Agentry). SAP Mobile Platform is offered in
+enterprise or consumer editions and each edition is available as
+either an on-premise or a cloud version.
+Platform), as well as solution extensions and rapid-deployment
+solutions.
+SAP Mobile - Category term used to communicate all SAP
+mobile offerings together. These include any type of mobile
+apps, solutions, technology, or platform (including SAP Mobile
+SAP Medical Research Insights A solution that helps
+researchers and clinicians to access and analyze patient data in
+real time and process it for clinical and life sciences research.
+-
+SAP MaxAttention - SAP's premium support offering, designed
+specifically for customers whose operations demand mission-
+critical customized support. The support option includes a full
+range of services for individual customer needs and covers all
+stages of an SAP solution's lifecycle.
+SAP Match Insights A showcase on-premise solution
+developed as part of a customer co-innovation project for the
+German Soccer Association (DFB). The solution was available
+for DFB coaches and players in a pilot trial during the
+preparation phase and throughout the 2014 FIFA World Cup in
+Brazil. The solution enables members across the DFB team to
+analyze players' and teams' performances in individual matches
+using streamed video from the match combined with analytics
+powered by SAP HANA.
+SAP Lumira Data visualization software that helps connect,
+access, and visualize data without a single line of code.
+SAP Learning Solution - Portfolio of learning tools including a
+learning portal, learning management system, authoring tools,
+and content management system. Individual training and
+strategic personnel development are supported in the solution.
+-
+SAP PartnerEdge Global, partner-to-partner business
+collaboration network where SAP partners can share expertise,
+development capabilities, solutions, and knowledge to extend
+their market reach. In late 2012, SAP's extranet for partners,
+SAP Channel Partner Portal, merged with SAP PartnerEdge. The
+combined site, available at www.sappartneredge.com, now gives
+partners access to information, product and business news,
+tools, training, and business resources to order products.
+Partners can also manage their relationship with SAP and
+collaborate with other SAP partners through SAP PartnerEdge.
+-
+SAP Payment service Service that helps companies invest in
+SAP solutions implemented by a strategic partner of SAP:
+Siemens Financial Services GmbH (SFS). SFS targets the
+financing service chiefly at midsize companies. Depending on
+local conditions, the SFS plan leases solutions to customers and
+provides loan finance. Formerly called SAP Financing service.
+-
+SAP Ramp-Up Program SAP uses to introduce new
+application releases on the market to selected customers during
+the restricted shipment phase.
+-
+Business software for mainframe computers
+launched by SAP in 1979; precursor to SAP R/3.
+SAP R/2
+SAP Premier Customer Network - Exclusive SAP community
+of top industry leaders representing some of the world's largest
+and best-run businesses. For these premier customers, SAP
+aims to simplify and tailor the partnership toward the unique
+needs of each customer by proactively assembling the best
+talent and synchronization across all SAP lines of business
+(product development, sales, services, support, and marketing)
+globally.
+SAP Predictive Analytics - Software that offers an intuitive tool
+for predictive model design and visualization for statistical
+analysis and data mining. Combining functionality from the
+retired offerings SAP Predictive Analysis and SAP InfiniteInsight
+in a single desktop installation, it helps uncover hidden insights
+and relationships in data so companies can make predictions
+about future events.
+Sapphire Ventures Name of independent venture firm spun
+off from SAP, providing the agility of a start-up while allowing
+companies to tap into SAP's global enterprise ecosystem of
+customers and partners. The firm partners with outstanding
+entrepreneurs and venture firms worldwide to build industry-
+leading businesses. Formerly called SAP Ventures.
+SAP R/3 Business software for client/server environments
+launched by SAP in 1992 with enterprise software components
+for human resources, logistics, financials, sales and distribution,
+and others; precursor to SAP ERP.
+annually in several locations around the globe. The global event
+in the United States is co-located with the Americas' SAP Users'
+Group (ASUG) annual conference. Attendees discover new
+initiatives, solutions, products, and services, as well as unique
+access to the latest business strategies and industry best
+practices from SAP customers, partners, executives, and
+industry experts to help them drive business results across all
+levels.
+216
+Additional Information Glossary
+SAPPHIRE NOW - SAP's signature business technology event
+and the largest SAP customer-driven conference is held
+Annual partner recognition awarded to
+SAP partners in various categories.
+-
+-
+SAP Pinnacle Award
+Information about the management of the company,
+including the directors on the governing bodies
+Details of the directors' dealings in SAP shares
+Shareholder meeting documents and ballot results
+Articles of Incorporation
+Agreement on the Involvement of Employees in SAP SE
+German Code of Corporate Governance
+Declaration of Implementation pursuant to the German Stock
+Corporation Act, Section 161
+Code of Business Conduct for Employees
+Additional SAP policies are made public at
+www.sap.com/corporate-en/sustainability:
+Corporate Governance Report
+-
+-
+SAP Global Health and Safety Management Policy
+SAP Environmental Policy
+Complete information on the governance of SAP is available at
+www.sap.com/corpgovernance. Materials include:
+SAP Code of Business Conduct for Employees
+SAP Human Rights Commitment
+Corporate Governance Statement pursuant to the German
+Commercial Code, Section 289a
+SAP INVESTOR, SAP's quarterly shareholder magazine
+(www.sap-investor.com, in English and German)
+Financial and
+Sustainability
+Publications
+Interim Reports (in English and German)
+SAP SE Statutory Financial Statements and Review of
+Operations (HGB, in German)
+SAP Group Annual Report (IFRS, in English and German)
+Annual Report on Form 20-F (IFRS, in English)
+-
+The following publications are available in English at
+www.sap.com/investor, or in German at www.sap.de/investor:
+The SAP Integrated Report is available online only at
+www.sapintegratedreport.com.
+We present our financial, social, and environmental performance
+in the SAP Integrated Report 2015, which is available at
+www.sapintegratedreport.com. This Annual Report 2015 is an
+extract from the SAP Integrated Report 2015. It comprises all of
+the information required by accounting and disclosure
+standards applicable to us.
+221
+Additional Information Addresses
+Web site www-sap.com/press
+E-mail press@sap.com
+Tel. +49 6227 74 63 15
+Press
+SAP Supplier Code of Conduct
+XBRL versions of the annual and interim reports
+SAP Partner Code of Conduct
+For more information about the matters discussed in the report,
+contact:
+Additional Information Financial and Sustainability Publications
+Web site www.sap.com/investor
+69190 Walldorf
+Dietmar-Hopp-Allee 16
+SAP SE
+GROUP HEADQUARTERS
+Additional Information Publication Details
+223
+see http://www.sap.com/about/legal/copyright.html
+for additional trademark information and notices.
+Please
+SAP and other SAP products and services mentioned herein as
+well as their respective logos are trademarks or registered
+trademarks of SAP SE or an SAP affiliate company in Germany
+and other countries.
+No part of this publication may be reproduced or transmitted in
+any form or for any purpose without the express permission of
+SAP SE or an SAP affiliate company.
+© 2016 SAP SE or an SAP affiliate company. All rights reserved.
+TRADEMARKS
+Germany
+222
+69190 Walldorf
+©2016 SAP SE
+COPYRIGHT
+ABC Druck, Heidelberg, Germany
+PRINTING
+Andreas Pohlmann, Munich, Germany
+PHOTOGRAPHY GLOBAL MANAGING BOARD
+SAP Disclosure Management
+This Annual Report was created with SAP S/4HANA and
+REALIZATION
+CONCEPT AND PRODUCTION SUPPORT
+Kammann Rossi, GmbH, Cologne, Germany
+Investor Relations
+SAP SE
+PUBLISHER
+Publication Details
+Dietmar-Hopp-Allee 16
+E-mail investor@sap.com
+May 12
+Tel. +49 6227 76 73 36
+Publication of SAP Integrated Report
+April 20
+Results for the first quarter of 2016
+Germany
+Annual General Meeting of Shareholders,
+Mannheim, Germany
+May 13
+Dividend Payment
+July 20
+Results for the second quarter of 2016
+October 21
+Results for the third quarter of 2016
+2017
+January 24
+Preliminary results for fiscal year 2016
+May 10
+Annual General Meeting of Shareholders,
+Mannheim, Germany
+E-mail info@sap.com
+May 11
+Dividend Payment
+Additional Information Financial Calendar
+220
+Addresses
+GROUP HEADQUARTERS
+SAP SE
+Dietmar-Hopp-Allee 16
+69190 Walldorf
+Germany
+March 29
+2016
+Financial Calendar
+219
+Investor Relations
+The addresses of all our international subsidiaries and sales
+partners are available on our public Web site at
+www.sap.com/directory/main.html.
+Web site www.sap.com
+community provides connections between university leaders
+and students, SAP customers and partners, and SAP internal
+experts.
+SAP Urban Matters - see "SAP Future Cities."
+―
+SAP User Group Executive Network (SUGEN) In 2007, SAP
+initiated a program that encouraged all SAP user groups to
+share their expertise and recommended practices with the wider
+user-group community. It kindled some valuable discussion,
+which, in the end, is good for all SAP stakeholders. An umbrella
+organization, SUGEN embraces 12 national SAP user groups
+with the shared aim of defining priorities and agreeing on plans
+of action to bring greater focus to the dialog between SAP and
+its user groups on the global plane.
+SAP Ventures - see "Sapphire Ventures."
+-
+Scope 1 (emissions) Direct greenhouse gas emissions from
+sources that are owned or controlled by the reporting company,
+for example, fuel burned in corporate cars.
+Scope 2 (emissions) - Indirect greenhouse gas emissions from
+consumption of purchased electricity, heat, or steam.
+Scope 3 (emissions)
+-
+Indirect emissions that are a
+Fax +49 6227 74 08 05
+consequence of the activities of the reporting company, but
+occur from sources owned or controlled by another company,
+such as business flights.
+Software that is provided
+software as a service (SaaS)
+literally "as a service." Software applications are delivered and
+managed remotely over a secure Internet connection and a
+standard Web browser. Access is charged on a subscription
+basis usually on a dedicated time basis and with expandable
+feature access options. Typically a defined level of support is
+included. See "cloud computing."
+solution - A solution enables a customer to meet a challenge or
+take advantage of an opportunity and are built or assembled by
+flexibly combining software products and technology. SAP
+solutions may include support for best business practices and
+be aided by consulting and ongoing support. They may also be
+enhanced or extended by applications and services from
+partners.
+SuccessFactors - See "SAP SuccessFactors."
+T
+-
+total energy consumed The sum of all energy consumed
+through SAP's own operations, including energy from renewable
+sources and energy consumed by external data centers
+delivering our cloud offerings.
+U
+A
+United Nations Global Compact (UN Global Compact)
+policy initiative for businesses that are committed to aligning
+their operations and strategies with ten universally accepted
+principles in the areas of human rights, labor standards,
+environment, and anti-corruption.
+W
+-
+women in management Phrase used to refer to the
+percentage of women in management positions (managing
+teams, managing managers, executive boards) as compared to
+the total number of managers, expressed by the number of
+individuals and not full-time equivalents (FTES).
+Additional Information Glossary
+SMB Solutions Group - Business unit created at SAP in 2014
+responsible for the go-to-market strategy and development of
+innovative solutions for the small and midsize business (SMB)
+market, comprising companies with <500 employees only.
+Includes all corporate areas (marketing, sales, and
+development) responsible for SAP Business ByDesign, SAP
+Business One, and SAP Anywhere. See "SAP SME Solutions."
+www.sap.com
+Fax +49 6227 75 75 75
+www.sap.com/investor
+Tel. +49 6227 74 74 74
+· Special Committee: Hasso Plattner (chairperson), Pekka
+Ala-Pietilä, Wilhelm Haarmann, Lars Lamadé, Erhard
+Schipporeit, Sebastian Sick
+Each of the committees was active in 2015 except the Special
+Committee and the Nomination Committee.
+For more information about the Supervisory Board committees
+and their duties, see SAP's corporate governance statement
+pursuant to the German Commercial Code, section 289a,
+published on SAP's Web site at: http://www.sap.com/investor.
+In 2015, the committees focused on the following topics:
+The General and Compensation Committee held six regular
+meetings. It prepared and recommended the Supervisory
+Board's resolutions, notably those on Executive Board
+compensation described above. It worked on the new model
+for Executive Board compensation for 2016 and frequently
+deliberated on Global Managing Board members'
+compensation. It reviewed the annual report it receives from
+the capital market compliance officer and gave its approval
+for Bill McDermott to accept a seat on the supervisory board
+of a U.S. company. At its first meeting in March, the
+Committee prepared the Supervisory Board's resolutions
+regarding the target for the percentage of women on the
+Executive Board. In a second meeting in March, the
+Committee received a report from the corporate governance
+officer and, in preparation for the upcoming Supervisory
+Board meeting, discussed the Government Commission for
+the German Corporate Governance Code's proposed
+changes to the Code recommendations. At its October
+To Our Stakeholders Report from the Supervisory Board
+20
+20
+-
+-
+meeting, the Committee discussed the Company's
+implementation of the Code recommendations and prepared
+the Supervisory Board's decisions with respect to the
+submission of the declaration of implementation of the Code
+and ascertaining the independence of Supervisory Board
+members. It also prepared the Supervisory Board's decision
+concerning Michael Kleinemeier's appointment to the
+Executive Board. The Committee also discussed succession
+planning for the Executive Board and the Global Managing
+Board.
+The Finance and Investment Committee held five physical
+meetings in 2015, one of which was a joint meeting with the
+Technology and Strategy Committee. At its January 27
+meeting, representatives from Sapphire Ventures presented
+detailed information about the investment activities of the
+three SAP venture capital funds. The Committee discussed
+SAP's process for mergers and acquisitions (M&A) and was
+given a comparison of standards with those of other IT
+companies. It learned about the standard clauses SAP uses in
+acquisition contracts, probed the tax treatment of past M&A
+transactions, and received a status report regarding the 2014
+acquisition of SeeWhy, a leader in cloud solutions for
+behavior-based marketing. The annual report on SAP's
+acquisitions was the focus of the meeting on February 11,
+during which the Committee discussed at length the
+employee feedback regarding past acquisitions. On July 8,
+the Finance and Investment Committee held a joint meeting
+with the Technology and Strategy Committee. Matters
+discussed included a comprehensive analysis of the major
+acquisitions in the past three years, SAP's strategic
+alignment, and an overview of product developments in the
+field of analytics and the Internet of Things. When it met in
+October, the Committee focused solely on the global project
+to consolidate SAP SE's IP rights. Focus topics at the
+December 16 meeting were an overview of the acquisition
+scene in Europe including startups, the acquisition of the HR
+software company Multiposting, and the adoption of the
+Committee's rules of procedure. The Committee was also
+given a status update on the IP rights consolidation project,
+notably as regards the final legal and tax analysis. The
+Executive Board explained the principles of goodwill
+recognition, as well the results of the impairment test
+performed on the recognized goodwill in accordance with the
+relevant IFRS regulations. The Committee's aim was to be
+able to better consider the subsequent accounting for
+goodwill arising from acquisitions when monitoring SAP's
+acquisition activities in the future.
+The Audit Committee held four meetings at which members
+attended in person ("physical meetings") and four telephone
+conference meetings. The telephone conference meetings
+were all ahead of the publication of interim reports for each
+quarter. At these meetings, the Committee primarily
+deliberated on the course of business over the quarter
+concerned, the process by which the quarterly financial
+reports were prepared, the interim report to be published,
+and insights gained from the auditor's quarterly review of
+Nomination Committee: Hasso Plattner (chairperson),
+Pekka Ala-Pietilä, Bernard Liautaud
+-
+The auditor attended all physical meetings and telephone
+conference meetings of the Audit Committee and reported in
+depth on its audit work and on its quarterly reviews of
+selected software agreements.
+The Technology and Strategy Committee held four
+meetings in 2015, one of which was a joint meeting with the
+Finance and Investment Committee. It discussed the key
+technology trends in the software industry in the years to
+come and SAP's corporate and product strategies. At the
+Committee's February 11 meeting, the Executive Board
+presented an overview of market development in 2014 and
+explained what it would mean for SAP's business in 2015. Key
+topics included the strategic road map for SAP S/4HANA, its
+deployment in the cloud, and its market launch. When the
+Committee met on March 18, it discussed SAP HANA Cloud
+Platform and SAP HANA Enterprise Cloud. As reported in the
+Finance and Investment Committee section above, the
+Technology and Strategy Committee held a joint meeting
+with the Finance and Investment Committee on July 8. On
+October 7, the Committee engaged in detailed discussions
+about SAP's user experience (UX) strategy, in other words,
+the planned measures to improve the user-friendliness of
+SAP software, taking a particular look at SAP Fiori UX and
+past successes. It also analyzed and discussed the outlook
+for the SAP Business Network segment.
+The People and Organization Committee held two meetings
+in 2015. In June, it was given an update on the current status
+of training and personal and professional development at
+SAP, with detailed information on the various training
+programs in each board area. The Committee also examined
+the current state of succession planning for the managers.
+The second meeting took place on September 10, at which
+the Committee reviewed the learning offerings available
+through SAP Development University, SAP's internal
+To Our Stakeholders Report from the Supervisory Board
+21
+academy for the professional training of its developers. In
+addition, the Committee discussed SAP's collaboration with
+academia to promote young talents in a digitalized working
+world.
+Regular reports from the committees ensured that we were kept
+fully informed of all matters covered by the committees and
+were able to discuss them thoroughly.
+CORPORATE GOVERNANCE
+SAP's corporate governance officer monitored our compliance
+with those recommendations in the Code with which in SAP SE's
+declaration we claim to comply, and reported in full to the
+General and Compensation Committee. For more information
+about Code compliance, see the Corporate Governance Report
+from the Executive Board and Supervisory Board.
+Members of the Executive Board and of the Supervisory Board
+had no conflicts of interest that sections 4.3.4 and 5.5.2 of the
+Code require to be disclosed to the Supervisory Board. The
+Supervisory Board consented to the mandating of a law firm
+with a legal opinion, and also approved cost calculations related
+to already authorized consulting services of that law firm, in
+which a Supervisory Board member is a partner. The member
+concerned was excluded from the deliberations and voting on
+the matter. In addition, there were a number of transactions
+involving members of the Executive Board in 2014, which were
+all consistent with industry standards and immaterial. These
+transactions were approved by the Executive and Compensation
+Committee during the year under review. The Company made
+no other contracts with members of the Executive Board or
+Supervisory Board that would have required a resolution of the
+Supervisory Board.
+The Supervisory Board closely examined the Executive Board's
+corporate governance statement pursuant to the German
+Commercial Code, section 289a. We approved the statement
+with the combined SAP Group and SAP SE management report.
+SAP SE AND CONSOLIDATED FINANCIAL REPORTS FOR
+2015
+KPMG audited the SAP SE and consolidated financial reports for
+2015. The Annual General Meeting of Shareholders elected
+KPMG as the SAP SE and SAP Group auditor on Wednesday,
+May 20, 2015. The Supervisory Board proposed the appoint-
+ment of KPMG on the recommendation of the Audit Committee.
+Before proposing KPMG to the Annual General Meeting of
+Shareholders as auditor for the year, the chairperson of the
+Supervisory Board and the Audit Committee obtained
+confirmation from KPMG that circumstances did not exist that
+might prejudice or raise any doubt concerning its independence
+as the Company's auditor. In that connection, KPMG informed
+us of the volume of the services that were not part of the audit
+that it had either provided to the Group in the past year or was
+engaged to provide in the year to come. The Supervisory Board
+has agreed with KPMG that the auditor should report to the
+Supervisory Board and record in the auditor's report any fact
+found during the audit that is inconsistent with the declaration
+given by the Executive Board and the Supervisory Board
+concerning implementation of the German Corporate
+Governance Code. KPMG examined the SAP SE financial
+statements prepared in accordance with the German
+Commercial Code, the consolidated financial statements
+prepared in accordance with International Financial Reporting
+Standards (IFRSS) as required by the German Commercial
+Code, section 315a, and the combined SAP Group and SAP SE
+management report, and certified them without qualification.
+The auditor thus confirmed that, in its opinion and based on its
+audit in accordance with the applicable accounting principles,
+the SAP SE and consolidated financial statements give a true
+and fair view of the net assets, financial position, and results of
+operations of SAP SE and the SAP Group. The auditor also
+confirmed that the combined SAP SE and SAP Group
+management report is consistent with the corresponding
+financial statements and as a whole gives a suitable view of the
+position of SAP SE and the SAP Group and of foreseeable
+opportunities and risks. KPMG had completed its audit of SAP'S
+internal control over financial reporting and certified without
+qualification that it complies with the applicable U.S. standards.
+The auditor states in its opinion that it considers SAP's internal
+controls over financial reporting to be effective in all material
+respects. All Audit Committee and Supervisory Board members
+received the documents concerning the financial statements
+mentioned above, the audit reports prepared by KPMG, and the
+Executive Board's proposal concerning the appropriation of
+retained earnings in good time.
+selected software agreements. The physical meetings in
+February and March concentrated on the SAP SE and
+consolidated financial reports for 2014 and the reporting
+process, the internal control structure for financial reporting,
+the most important accounting methods, and the audit. At
+the February meeting, the Committee also discussed the
+German Financial Reporting Enforcement Panel's criteria and
+the internal audit service's report for the previous year,
+organization and processes, and audit plan for 2015. At its
+meeting in March, the Committee did preparatory work on
+the Supervisory Board's recommendations to the Annual
+General Meeting of Shareholders concerning the election of
+an auditor and the appropriation of retained earnings and
+discussed the Company's compliance system. When it met in
+July, the Committee discussed the audit focus and fees with
+the auditor, dealt with the internal audit service's work in the
+first half of the year and audit planning for the second half-
+year, and reviewed the Company's internal controls. At its
+October meeting, the Committee discussed the report from
+the chief compliance officer and other compliance system
+matters and came to the conclusion that the compliance
+system was effective.
+On February 25, 2016, the Executive Board prepared the
+financial accounts of SAP SE and the Group for 2015,
+comprising the SAP SE financial statements, the consolidated
+financial statements, and the combined management report,
+and submitted them without delay to the Supervisory Board.
+Compen-
+General and Compensation Committee: Hasso Plattner
+(chairperson), Wilhelm Haarmann, Andreas Hahn, Margret
+Klein-Magar, Lars Lamadé, Bernard Liautaud, Sebastian Sick,
+Jim Hagemann Snabe
+we gave our consent to the SAP SE and consolidated financial
+statements for 2014. We checked and endorsed the Executive
+Board's proposal to appropriate retained earnings in
+accordance with the Audit Committee's recommendation. There
+were also a number of corporate governance matters on the
+meeting agenda. We discussed the impact of Germany's new
+gender quota law and set a target for the percentage of women
+on SAP's Executive Board. We decided on the resolutions we
+would propose for the agenda of the Annual General Meeting of
+Shareholders in May 2015. Among them was our
+recommendation to the shareholders concerning the auditor to
+elect for 2015; our recommendation followed that of the Audit
+Committee to us.
+The Executive Board reported on its forecast for the first quarter
+of 2015 and offered insights into the implementation of the end-
+to-end delivery model, using the example of cloud-based human
+capital management (HCM) software. This delivery model is
+based on a standardized concept for the management and
+organization of all activities in the product lifecycle, from
+product development to sales to service and support services.
+Finally, it gave us an update on the status of the SAP ONE
+Service program restructuring designed to merge the services
+and support areas into a single organization.
+Extraordinary Meeting in May
+Elections for new employee representatives on the Supervisory
+Board were held in the spring of 2015 in accordance with the
+terms of the SAP SE Employee Involvement Agreement that was
+concluded on March 10, 2014, in the course of SAP's conversion
+to an SE. Among other things, the SAP SE Employee
+Involvement Agreement governs the codetermination of
+employees on the Supervisory Board. The term of office of the
+elected employee representatives began after the Annual
+General Meeting of Shareholders on May 20, 2015. As a result,
+the Supervisory Board held an extraordinary meeting
+immediately following the Annual General Meeting. After
+welcoming the new members, the Supervisory Board
+chairperson introduced Gesche Joost, who was to be appointed
+as Hartmut Mehdorn's successor to the Supervisory Board
+through application to the court. We then elected the new
+employee representative members to the various committees.
+Margret Klein-Magar was elected deputy chairperson of the
+Supervisory Board by circular correspondence vote following in-
+depth discussion of all proposed candidates during the meeting.
+Meeting in July
+At our ordinary meeting on July 9, we discussed in detail the
+directors' and officers' group liability insurance policies that we
+take out from year to year, and approved an increase in the
+insurance limit. We resolved to revise the list of transactions for
+which the Executive Board must obtain the Supervisory Board's
+consent, in accordance with the German SE Implementation Act,
+section 19. We confirmed the appointment of Quentin Clark to
+the Global Managing Board. The Supervisory Board also
+resolved the appointments of new members to the committees,
+which became necessary following Hartmut Mehdorn's
+departure from and Gesche Joost's appointment to the
+Supervisory Board.
+The Executive Board then gave us an account of business in the
+second quarter of 2015 and performance in the first half-year.
+Members of the Executive Board told us about second-quarter
+growth in cloud, about the SAP Business Network segment's
+performance, and about SAP's competitive situation. We also
+received updates on the Global Service & Support board area,
+the market launch of SAP S/4HANA, and the Company's "Run
+Simple" campaign.
+Extraordinary Meeting in September
+In early July, we learned of Bill McDermott's serious accident.
+The Supervisory Board chairperson thereafter maintained close
+regular contact with the CEO to check on his recovery. Having
+already advised by telephone during a break at the ordinary
+meeting on July 9 that he had been released from hospital, Bill
+McDermott joined our extraordinary meeting on September 10
+personally to report in more detail about his accident, the
+injuries he suffered, and his recovery process. We were relieved
+to hear that despite the severe consequences of the accident, he
+now felt strong again and was able to continue devoting all of his
+energy to his work as CEO.
+Meeting in October
+At our ordinary meeting on October 8, we resolved, on the
+recommendation of the General and Compensation Committee,
+to appoint Michael Kleinemeier to the Executive Board effective
+on November 1, 2015, and we agreed the terms and conditions
+of his compensation.
+The Executive Board reported on business in the third quarter,
+using the new SAP Digital Boardroom solution to present the
+data and detailed views on multiple interactive computer
+screens. The SAP Digital Boardroom is an innovative, analytical
+software solution that allows analysts to generate impressive
+graphics for all business area metrics in real time. The "Global
+Consolidation of Intellectual Property Rights" (IP Rights) project
+for Group-wide bundling of SAP's IP rights was also presented to
+us. We consented to this project and its related planned
+measures. In agreement with the Executive Board, the
+Supervisory Board also adopted, for regular publication in
+October 2015, the annual declaration of implementation of the
+Code pursuant to the German Stock Corporation Act, section
+161. The Supervisory Board determined that it has a sufficient
+number of independent members. Some Supervisory Board
+members currently have business dealings with SAP or hold
+senior positions or material equity in companies that currently
+have business dealings with SAP, or had done so in the course of
+the year. SAP's business dealings with these persons or
+companies are or were at arm's length. In our view, especially
+given the limited scope and materiality of those dealings, they
+did not affect the independence of the Supervisory Board
+members concerned and do not give rise to any substantial and
+To Our Stakeholders Report from the Supervisory Board
+Audit Committee: Erhard Schipporeit (chairperson),
+Panagiotis Bissiritsas, Martin Duffek, Klaus Wucherer
+Finance and Investment Committee: Wilhelm Haarmann
+(chairperson), Pekka Ala-Pietilä (from July 9, 2015),
+Panagiotis Bissiritsas, Margret Klein-Magar, Sebastian Sick,
+Jim Hagemann Snabe
+19
+Extraordinary Meeting in December
+At the extraordinary meeting on December 11, which was held in
+the form of a telephone conference, we discussed with the
+Executive Board the status of the budget planning for 2016,
+which the Executive Board explained to us in detail. The final
+adoption of the budget will occur, as is customary, at the
+February meeting of the new year.
+THE WORK OF THE SUPERVISORY BOARD COMMITTEES
+The committees made a key contribution to the work of the
+Supervisory Board and reported on their work to us, including
+their preparatory work on the relevant agenda items of the full
+Supervisory Board. The following committees were in place in
+2015 before the term of office of the newly elected employee
+representatives began:
+-
+-
+-
+General and Compensation Committee: Hasso Plattner
+(chairperson), Panagiotis Bissiritsas, Wilhelm Haarmann, Jim
+Hagemann Snabe, Lars Lamadé, Bernard Liautaud, Margret
+Klein-Magar, Christiane Kuntz-Mayr
+Audit Committee: Erhard Schipporeit (chairperson), Steffen
+Leskovar, Stefan Schulz, Klaus Wucherer
+Finance and Investment Committee: Wilhelm Haarmann
+(chairperson), Panagiotis Bissiritsas, Hartmut Mehdorn, Kurt
+Reiner, Mario Rosa-Bian, Jim Hagemann Snabe
+Technology and Strategy Committee: Hasso Plattner
+(chairperson), Stefan Schulz (deputy chairperson), Pekka
+Ala-Pietilä, Anja Feldmann, Steffen Leskovar, Bernard
+Liautaud, Margret Klein-Magar, Kurt Reiner
+People and Organization Committee: Hasso Plattner
+(chairperson), Catherine Bordelon, Anja Feldmann, Wilhelm
+Haarmann, Christiane Kuntz-Mayr, Lars Lamadé, Hartmut
+Mehdorn, Mario Rosa-Bian
+Nomination Committee: Hasso Plattner (chairperson),
+Pekka Ala-Pietilä, Bernard Liautaud
+Special Committee: Hasso Plattner (chairperson), Pekka
+Ala-Pietilä, Wilhelm Haarmann, Margret Klein-Magar,
+Lars Lamadé, Erhard Schipporeit
+In the course of the election of new employee representatives to
+the Supervisory Board, we reconstituted the committees after
+the Annual General Meeting of Shareholders on May 20, 2015,
+as detailed below. The membership of the committees
+subsequently changed once more in July 2015 following the
+departure of Hartmut Mehdorn from and appointment of
+Gesche Joost to the Supervisory Board. Hartmut Mehdorn was
+succeeded by Pekka Ala-Pietilä on the Finance and Investment
+Committee, and by Gesche Joost on the People and
+Organization Committee. In addition, Gesche Joost and
+Panagiotis Bissiritsas joined the Technology and Strategy
+Committee, increasing the number of members on that
+committee from eight to 10.
+not merely temporary conflict of interest in the meaning of the
+Code. The Supervisory Board conducted its regular investigation
+into the efficiency of its own work. We then looked at the budget
+plan for the upcoming fiscal year and the Executive Board
+updated us on SAP's current marketing strategy.
+Technology and Strategy Committee: Hasso Plattner
+(chairperson), Christine Regitz (deputy chairperson), Pekka
+Ala-Pietilä, Panagiotis Bissiritsas (from July 9, 2015), Anja
+Feldmann, Andreas Hahn, Gesche Joost (from July 9, 2015),
+Margret Klein-Magar, Bernard Liautaud, Pierre Thiollet
+People and Organization Committee: Hasso Plattner
+(chairperson), Martin Duffek, Anja Feldmann, Wilhelm
+Haarmann, Gesche Joost (from July 9, 2015), Lars Lamadé,
+Christine Regitz, Robert Schuschnig-Fowler
+After the Executive Board had explained them, the Audit
+Committee and the Supervisory Board reviewed the financial
+statement documents in the light of KPMG's audit reports. The
+representatives of the auditor who attended presented full
+reports on the audit and the results of the audit to the Audit
+Committee and Supervisory Board meetings and explained the
+audit report. The auditor also reported that it had not identified
+any material weaknesses in our internal control and risk-
+management systems for financial reporting. Both the Audit
+Committee and the Supervisory Board asked detailed questions
+To Our Stakeholders Report from the Supervisory Board
+To Our Stakeholders Compensation Report
+24
+operating profit.
+After the end of each fiscal year, the Supervisory Board
+assesses the Company's performance against the objectives
+set for that year and determines the number of RSUs to be
+finally allocated and vested in each Executive Board member.
+No RSUs vest if minimum performance levels of 60%,
+predefined for each of the two KPIs, are not achieved. There is
+also a cap. Normally, the quantity of vested RSUs a member
+can attain in respect of a plan year is capped at 150% of their
+initial RSU allocation for that year.
+The Company strategy underlying the RSU Milestone Plan
+2015 focuses on where SAP aimed to be by the end of 2015,
+so the plan gave greater weight to performance against the
+KPI targets for 2015 (the final year of the plan) than against
+the targets for 2012 through 2014. Due to the adjustment
+factor, the number of vested RSUs a member of the Executive
+Board actually received for 2015 has been revised according
+to plan terms.
+All vested RSUs are subject to a three-year holding period.
+The holding period commences at the end of the year for
+which the RSUs were allocated. The amount an RSU
+eventually pays out depends on the SAP share price at the
+end of the holding period. A member who leaves the Executive
+Board before the end of the plan retains their vested RSUs for
+completed plan years but does not retain any allocated but
+unvested RSUs for the year during which they leave. If a
+member leaves the Executive Board before the beginning of
+the subsequent year, no RSUs are finally allocated.
+Each vested RSU entitles its holder to a (gross) payout
+corresponding to the price of one SAP share after the end of
+the three-year holding period. The applicable share price is
+measured over a reference period defined in the RSU
+Milestone Plan 2015 terms.
+For the terms and details of the RSU Milestone Plan 2015, see
+the Notes to Consolidated Financial Statements section, Note
+(27). The number of RSUs issued initially to each member of
+the Executive Board under the RSU Milestone Plan 2015 for
+2015 was decided by the Supervisory Board on February 12,
+2015. The number of RSUs allocated finally to each member
+of the Executive Board under the RSU Milestone Plan 2015 for
+2015 was determined by the Supervisory Board on February
+18, 2016.
+The contracts of Executive Board members Bill McDermott and
+Robert Enslin require that compensation payments are made in
+U.S. dollars. The contracts include clauses that determine the
+exchange rates for the translation of euro-denominated
+compensation into U.S. dollars.
+Changes to Compensation System in 2016
+As the RSU Milestone Plan 2015 expired at the end of 2015,
+the Supervisory Board developed a new LTI 2016 plan for the
+Executive Board effective January 1, 2016 with the first grant
+occurring in March 2016. The purpose of the LTI 2016 is to
+reflect the operating profit target achievement, to ensure
+long-term retention of our Executive Board members and to
+-
+-
+reward a share price outperformance by SAP as compared to
+a group of its peers (Peer Group).
+The LTI 2016 is an annual revolving remuneration element
+that is linked to the price of the SAP share. A grant amount
+determined by the Supervisory Board is converted into virtual
+shares, referred to as Share Units, by dividing the grant
+amount by the price of the SAP share (calculated on the basis
+of a defined average value). The grant amount is determined
+by the Supervisory Board in its discretion for each financial
+year at a level of between 80% and 120% of the contractual
+target amount; taking into account the achievement of the
+operating profit targets set for the preceding financial year.
+The Share Units granted comprise 40% Retention Share
+Units (RSUs) and 60% Performance Share Units (PSUs).
+Both types of Share Units have a vesting period of four years.
+Each share unit that finally vests entitles its holder to a
+(gross) payout corresponding to the price of one SAP share
+after the end of the four-year holding period, but capped at
+three times the SAP share price applied for the conversion of
+the grant amount into Share Units.
+The number of PSUs, that finally vests depends on the
+performance of the SAP share. If the increase of price of the
+SAP share over the four-year vesting period of the PSUs
+exceeds the increase of a defined Peer Group Index over the
+same period, the number of PSUs will be increased by a
+percentage equal to the outperformance expressed as
+percentage points. This percentage will be doubled if, in
+addition to the outperformance over the Peer Group Index,
+the price of the SAP share at the end of the vesting period of
+the PSUs is higher than the price at the start of this period.
+The number of vested PSUs a member can attain in respect
+of a plan year is capped at 150% of their initial PSU allocation
+for that year. Conversely, if the increase of price of the SAP
+share over the four-year vesting period of the PSUs
+underperforms the Peer Group Index, the number of PSUs
+will be reduced by a percentage equal to the under-
+performance expressed as percentage points. No PSUs vest
+if the underperformance exceeds 50%.
+Amount of Compensation for 2015
+We present separately Executive Board compensation
+disclosures under three different compensation disclosure
+approaches:
+-
+Compensation disclosures under a management view that
+follows the requirements of sections 314 and 315 of the
+German Commercial Code (Handelsgesetzbuch, or "HGB")
+as specified in the German Accounting Standards ("GAS 17")
+except that it allocates share-based compensation to the
+periods to which this compensation economically belongs
+Compensation disclosures fully in accordance the
+requirements of sections 314 and 315 of the HGB as specified
+in GAS 17
+Compensation
+disclosures in accordance with the
+recommendations of the German Corporate Governance
+Code ("Code")
+To Our Stakeholders Compensation Report
+25
+I. Executive Board Members' Compensation - Management View
+Executive Board Members' Compensation for 2015 - Management View
+€ thousands
+Fixed
+Elements
+Performance-
+Related Element
+The number of RSUs an Executive Board member actually
+earns in respect of a given year depends on the Company
+performance against the objectives for that year (a year is a
+"performance period" in the plan). The objectives derive from
+SAP's strategy for the period to 2015. The plan objectives
+relate to two KPIs: non-IFRS total revenue and non-IFRS
+The variable LTI element was determined under the RSU
+Milestone Plan 2015. "RSU” stands for "restricted share
+unit." This originally four-year plan was established in 2012
+and focuses on the SAP share price and on certain objectives
+derived from our Company strategy for the years through
+2015. For each of the four years, the members of the
+Executive Board are allocated a certain number of RSUs for
+the respective year based on a budget amount that was
+granted to each Executive Board member in 2012 already for
+each of the years 2012 through 2015. The number of RSUs
+allocated to each member for a given year is their target
+amount (an amount in euros) for that year divided by the SAP
+share price over a reference period (defined in the RSU
+Milestone Plan 2015 terms) at the beginning of the respective
+year.
+On February 18, 2016, the Supervisory Board assessed SAP's
+performance against the agreed targets and determined the
+amount of compensation payable under the STI 2015 plan.
+The STI 2015 plan pays out after the Annual General Meeting
+of Shareholders in May 2016.
+Moreover, if there has been any extraordinary and
+unforeseeable event, the Supervisory Board can, at its
+reasonable discretion, retroactively adjust payouts up or
+down in the interest of SAP. For 2014, this discretion was
+applied.
+22
+222
+about the form, scope, and results of the audit. The Audit
+Committee reported to the Supervisory Board on its own review
+of the financial statements of SAP SE and the SAP Group, its
+discussions with the Executive Board and with the auditor, and
+its supervision of the financial reporting process. It confirmed
+that as part of its supervisory work, it had addressed the
+effectiveness of the SAP Group internal control, risk
+management, and internal auditing systems and found the
+systems to be effective.
+The Committee also reported that KPMG had told it no
+circumstances had arisen that might give cause for concern
+about KPMG's impartiality, and informed us about the services
+KPMG had provided that were not part of the audit. The
+Committee reported that it had examined the auditor's
+independence, taking the non-audit services it had rendered into
+consideration, and stated that in the Committee's opinion the
+auditor possessed the required degree of independence.
+The Audit Committee and the Supervisory Board satisfied
+themselves that KPMG had conducted the audit properly. In
+particular, they concluded that both the audit reports and the
+audit itself fulfilled the legal requirements. On the basis of the
+report and the Audit Committee's recommendation, the
+Supervisory Board approved the audit and, since there were no
+findings from our own examination, we gave our consent to the
+SAP SE financial statements, the consolidated financial
+statements, and the combined management report (including
+the Executive Board's corporate governance statement
+pursuant to the German Commercial Code, section 289a). The
+financial statements and combined management report were
+thus formally adopted. The Supervisory Board's opinion of the
+Company and the Group coincided with that of the Executive
+Board as set out in the combined management report. The
+Supervisory Board considered the proposal presented by the
+Executive Board concerning the appropriation of retained
+earnings. We had regard to the requirements of dividends policy,
+the effects on the liquidity of the Group, and the interests of the
+shareholders. We also discussed these matters with the auditor.
+We then endorsed the Executive Board's proposal concerning
+the appropriation of retained earnings, in accordance with the
+Audit Committee's recommendation. Finally, we approved this
+present report.
+CHANGES ON THE SUPERVISORY AND EXECUTIVE
+BOARDS
+In 2015, we appointed Michael Kleinemeier to the Executive
+Board of SAP SE with effect from November 1, 2015. He had
+already been a member of the Global Managing Board since
+January 2015.
+The employee representatives Panagiotis Bissiritsas, Martin
+Duffek, Andreas Hahn, Margret Klein-Magar, Lars Lamade,
+Christine Regitz, Robert Schuschnig-Fowler, Sebastian Sick, and
+Pierre Thiollet took office as newly elected members of the
+Supervisory Board of SAP SE on May 20, 2015. The term of
+office of Catherine Bordelon, Christiane Kuntz-Mayr, Steffen
+Leskovar, Kurt Reiner, Mario Rosa-Bian, and Stefan Schulz
+expired on May 20, 2015, as the employee representatives on
+the first Supervisory Board of SAP SE had only been appointed
+for a term ending at the conclusion of the 2015 Annual General
+Meeting of Shareholders, in accordance with the SAP SE
+Employee Involvement Agreement. Hartmut Mehdorn resigned
+from the Supervisory Board in May 2015. Gesche Joost was
+appointed by the court to the Supervisory Board as shareholder
+representative on May 28, 2015.
+We thank the departing members of the Supervisory Board for
+their valued service to this body.
+The Supervisory Board also thanks the Executive Board and
+Global Managing Board, the managing directors of the Group
+companies, and all of the employees for their hard work and
+dedication in 2015. We would also like to thank our customers
+and partners. Without them, our Company's success would not
+be possible.
+For the Supervisory Board
+Professor Hasso Plattner
+(Chairperson)
+To Our Stakeholders Report from the Supervisory Board
+At the meeting of the Audit Committee on March 23, 2016, and
+at the meeting of the Supervisory Board on March 24, 2016, the
+Executive Board explained the financial statements of SAP SE
+and the SAP Group and its proposal concerning the
+appropriation of retained earnings. Members of the Executive
+Board answered questions from the Audit Committee and the
+Supervisory Board. At the Audit Committee meeting, they also
+explained the annual report on Form 20-F.
+23
+COMPENSATION FOR EXECUTIVE AND SUPERVISORY
+BOARD MEMBERS
+This compensation report outlines the criteria that we applied
+for the year 2015 to determine compensation for Executive
+Board and Supervisory Board members, discloses the amount
+of compensation paid, and describes the compensation
+systems. It also contains information about share-based
+payment plans for Executive Board members, shares held by
+Executive Board and Supervisory Board members, and the
+directors' dealings required to be disclosed in accordance with
+the German Securities Trading Act.
+COMPENSATION FOR EXECUTIVE BOARD MEMBERS
+Compensation System for 2015
+The compensation for 2015 for Executive Board members is
+intended to reflect SAP's company size and global presence as
+well as our economic and financial standing. The compensation
+level is internationally competitive to reward committed,
+successful work in a dynamic business environment.
+The Executive Board compensation package is performance-
+based. It has three elements:
+-
+A fixed annual salary element
+A variable short-term incentive (STI) element to reward
+performance in the plan year
+The Supervisory Board sets a compensation target for the sum
+of the fixed and the variable elements. It reviews, and if
+appropriate, revises, this compensation target every year. The
+review takes into account SAP's business performance and the
+compensation paid to board members at comparable
+companies on the international stage. The amount of variable
+compensation depends on SAP's performance against
+performance targets that the Supervisory Board sets for each
+plan year. The performance targets are key performance
+indicator (KPI) values aligned to the SAP budget for the plan
+year.
+The following criteria apply to the elements of Executive Board
+compensation for 2015:
+1) This compensation report is part of the audited management report
+The fixed annual salary element is paid as a monthly salary.
+The variable STI element was determined under the STI 2015
+plan. Under this plan, the STI compensation depends on the
+SAP Group's performance against the predefined target
+values for three KPIs: non-IFRS constant currency cloud and
+software growth; non-IFRS constant currency operating
+margin increase; and non-IFRS constant currency new and
+upsell bookings. In addition, the STI 2015 plan provides for a
+discretionary element that allows the Supervisory Board,
+after the end of the fiscal year 2015, to address not only an
+Executive Board member's individual performance, but also
+SAP's performance in terms of market position, innovative
+power, customer satisfaction, employee satisfaction,
+attractiveness as an employer and the performance in our
+Business Network Group.
+Compensation Report"
+A variable long-term incentive (LTI) element tied to the price
+of SAP shares to reward performance over multiple years
+88
+2015
+1) The allocations for Werner Brandt (27,396 RSUs), and Vishal Sikka (27,396 RSUs) were forfeited at the end of their contracts. Consequently, they are not
+disclosed in the table above.
+8,097.70
+153,909
+1,449.40
+52.90
+27,396
+II. Executive Board Members' Compensation According to
+HGB and GAS 17
+729.00
+13,811
+939.40
+51.72
+18,164
+939.40
+51.72
+52.78
+18.164
+Under the compensation disclosure rules of the German HGB
+and GAS 17, share-based compensation awards are to be
+included in the compensation of the year of grant, even if the
+awards are tied to future years. Accordingly, and in contrast to,
+the compensation amounts disclosed under the management
+view above, the Executive Board compensation amounts
+determined under HGB and GAS 17 for 2014 and 2015:
+2015 as these were already included in the 2012
+compensation
+German Corporate Governance Code (Benefits Granted in 2014 and 2015)
+In contrast to the disclosure rules stipulated in the German HGB
+and GAS 17, the Code includes the service cost according to
+IAS 19 in the Executive Board compensation and requires the
+additional disclosure of the target value for the one-year variable
+compensation and the maximum and minimum compensation
+amounts achievable for the variable compensation elements.
+However, due to the payouts under the RSU Milestone Plan 2015
+not being capped, there is no disclosure to be made for the
+maximum variable compensation amount achievable (marked
+as "NA" in the table below).
+Pursuant to the recommendations of the Code, the value of
+benefits granted for the year under review as well as the
+allocation, that is the amounts disbursed for the year under
+review, are disclosed below based on the reference tables
+recommended in the Code.
+III. Executive Board Members' Compensation According to
+the Code
+All amounts as determined under HGB and GAS 17, other than
+share-based compensation, are identical to the amounts
+disclosed under the management view above.
+Enslin
+Exclude the share-based compensation awards granted to
+Executive Board members in 2012 for the years 2014 and
+Including RSU Milestone Plan 2015 awards for 2014 and 2015
+granted in 2014 to Robert Enslin (€1,574,800 for each of the two
+years); Bernd Leukert (2014: €1,280,000; 2015: €1,574,800);
+and Luka Mucic (2014: €1,141,000; 2015: €1,574,800) upon their
+appointment to the Executive Board, the total Executive Board
+compensation for 2014 calculated as required under section 314
+of the German Commercial Code amounts to €23,216,200,
+thereof: Bill McDermott €4,048,100; Jim Hagemann Snabe
+€1,395,900; Werner Brandt €1,768,800; Robert
+€4,550,800; Bernd Leukert €4,147,200; Luka Mucic €3,691,500;
+Gerhard Oswald €1,954,700; and Vishal Sikka €1,659,200.
+27
+27
+To Our Stakeholders Compensation Report
+Including RSU Milestone Plan 2015 awards for 2015 granted in
+2015 to Michael Kleinemeier (€263,200) upon his appointment
+to the Executive Board, the total Executive Board compensation
+for 2015 calculated as required under section 314 of the German
+Include the grant for 2015 made to Michael Kleinemeier who
+was appointed to the Executive Board in 2015
+Include in full the grants for 2014 and 2015 made to Executive
+Board members appointed in 2014, that is, also including the
+grant for 2015
+Commercial Code amounts to €15,400,400, thereof: Bill
+McDermott €5,151,500; Robert Enslin €2,463,800; Michael
+Kleinemeier €657,400; Bernd Leukert €2,372,200; Luka Mucic
+€2,372,600; and Gerhard Oswald €2,382,900.
+€ thousands
+4,040.50
+76,374
+68.16
+4,622
+1,481
+53.53
+27,656
+4,128
+315
+53.53
+€ thousands
+€
+of Grant
+Total Grant
+Value at Time
+Grants for 2015
+per Unit at
+Time of Grant
+77,099
+52.90
+27,656
+1,481
+sation for
+€
+Total Grant
+Value at Time
+of Grant
+Grant Value
+per Unit at
+Time of Grant
+Quantity
+Grants for 2014
+53.53
+10,365
+1,481
+53.53
+27,656
+1,481
+53.53
+27,656
+192,345
+Grant Value
+Bill McDermott
+Robert Enslin
+Member of the Executive Board
+116.7
+619.8
+NA 2,269.7
+803.3
+NA 3,871.4 1,929.1
+646.8 308.0
+682.4
+NA
+4,268.0 2,408.0
+682.4
+Service cost
+Total
+ΝΑ
+0
+315.0
+939.4
+682.4
+NA
+308.0
+148.1
+28
+To Our Stakeholders Compensation Report
+NA
+116.7
+619.8
+2,417.8
+308.0
+NA
+NA 4,518.2 2,237.1
+4,950.4 3,090.4
+Total
+0
+○
+0
+1,111.3
+CEO
+0
+○
+116.7
+116.7
+2014
+2015 2015
+(Min) (Max)
+2015
+2014¹)
+116.7
+2015 2015
+(Min) (Max)
+700.0 700.0 462.9
+103.3
+103.3
+2014¹) 2015¹)
+2015 2015
+(Min) (Max)
+1,150.0 1,150.0 1,150.0 1,150.0 700.0
+1,258.0 1,258.0 1,258.0
+103.3
+2,408.0 2,408.0 2,408.0 2,011.4 803.3
+1,860.0
+0 3,371.3 1,860.0 1,125.8
+One-year variable
+compensation
+Fixed compensation
+Fringe benefits²)
+Total
+2015¹)
+Michael Kleinemeier
+Member of the Executive Board
+(from November 1, 2015)
+861.4
+ΝΑ
+121.0
+0
+RSU Milestone Plan
+2015
+Multiyear variable
+compensation
+340.9
+0
+188.1
+746.4
+0
+116.7
+116.7
+583.9
+803.3
+2,040.5
+○
+803.3
+0
+116.7
+Quantity
+€ thousands
+Dr. Vishal Sikka (until May 4, 2014)¹)
+Luka Mucic
+700.0
+12.1
+1,660.5
+1,480.6
+3,853.2
+Gerhard Oswald
+700.0
+22.4
+1,660.5
+1,480.6
+3,863.5
+Total
+4,066.7
+1,407.5
+9,663.0
+10,364.9
+STI
+Other¹)
+Salary
+Element
+Incentive
+Long-Term
+Total
+Short-Term
+Incentive
+Elements
+Compen-
+sation for
+Performance-
+Related Element
+Fixed
+Elements
+€ thousands
+Executive Board Members' Compensation for 2014 - Management View
+25,502.1
+2014¹)
+1,480.6
+1,660.5
+11.7
+1,150.0
+Bill McDermott (CEO)
+2015)²)
+Milestone Plan
+Payment (RSU
+Share-Based
+1,258.0
+STI
+Salary
+Element
+Incentive
+Incentive
+Element
+Long-Term
+Short-Term
+Other¹)
+Share-Based
+2,743.5
+9,279.0
+700.0
+Bernd Leukert
+709.2
+315.0
+277.5
+0
+4,127.5
+116.7
+3,944.4
+1,480.6
+1,660.5
+103.3
+700.0
+Robert Enslin
+Michael Kleinemeier (from November 1, 2015)
+Payment (RSU
+3,852.8
+2015)²)
+O Compensation attributable to Executive Board members for the respective year, including the respective year's plan tranche of LTI 2015 based on the grant
+value at time of grant.
+2)
+"Insurance contributions, benefits in kind, expenses for maintenance of two households, non-recurring payments, use of aircraft, tax, cash disbursement of
+short-term and long-term incentive elements, and discrete payments arising through application of the fixed exchange-rate clause.
+24,293.7
+8,097.7
+5,525.4
+26
+1,659.2
+1,449.4
+1,232.7
+22.0
+1,367.5
+6,454.3
+4,216.3
+291.7
+700.0
+3,404.1
+1,704.7
+The share-based payment amounts included in the 2015 and
+2014 compensation result from the following RSUs under the
+RSU Milestone Plan 2015.
+Bill McDermott (CEO)
+Gerhard Oswald
+Milestone Plan
+Luka Mucic (from July 1, 2014)
+Bernd Leukert (from May 4, 2014)
+Robert Enslin (from May 4, 2014)
+Dr. Werner Brandt (until June 30, 2014)¹)
+Share-Based Payment Under RSU Milestone Plan 2015 (Grants for 2015)
+Bill McDermott (CEO)
+Total
+Gerhard Oswald
+Luka Mucic
+Bernd Leukert
+Michael Kleinemeier (from November 1, 2015)
+Robert Enslin
+Share-Based Payment Under RSU Milestone Plan 2015 (Grants for 2014)
+729.0
+To Our Stakeholders Compensation Report
+4.3
+1,768.8
+1,418.8
+350.0
+Dr. Werner Brandt (until June 30, 2014)
+(co-CEO and member until May 21, 2014)
+2,647.1
+Robert Enslin (from May 4, 2014)
+448.8
+8,088.6
+4,040.5
+2,036.7
+861.4
+1,150.0
+621.4
+Jim Hagemann Snabe
+462.9
+3,095.9
+350.0
+121.0
+Total
+Dr. Vishal Sikka (until May 4, 2014)
+Gerhard Oswald
+Luka Mucic (from July 1, 2014)
+2,231.8
+939.4
+Bill McDermott (CEO)
+12.2
+462.9
+Bernd Leukert (from May 4, 2014)
+2,340.6
+939.4
+817.3
+817.3
+Hasso Plattner GmbH & Co. Beteiligungs-KG
+December 23, 2015
+HP Vermögensverwaltungs GmbH & Co. KG
+December 23, 2015
+Sabine Plattner GmbH & Co. Beteiligungs-KG
+November 25, 2015
+87,803,973
+2,444,816
+€72.9300
+1)
+87,803,973
+1)
+December 18, 2015
+Share purchase
+Compensation in kind
+(granting party)
+Compensation in kind
+(receiving party)
+Share sale
+480,000
+100
+120
+2)
+€67.4170
+August 5, 2015
+Share sale
+115
+€66.2200
+€66.2364
+October 28, 2015
+38
+€70.0100
+Margret Klein-Magar
+Hasso Plattner
+May 7, 2015
+Share sale
+Share sale
+Riitta Schuschnig-Fowler
+Share sale
+Ingrid van Skyhawk
+88
+38
+To Our Stakeholders Compensation Report
+As far as the law permits, we indemnify Supervisory Board
+members against, and hold them harmless from, claims brought
+by third parties. To this end, we maintain directors' and officers'
+(D&O) group liability insurance. The current D&O policy does
+not include an individual deductible for Supervisory Board
+members as envisaged in the German Corporate Governance
+Code.
+Hasso Plattner, the chairperson of the Supervisory Board,
+entered into a consulting contract with SAP after he joined the
+Supervisory Board in May 2003. The contract does not provide
+for any compensation. The only cost we incurred under the
+contract was the reimbursement of expenses.
+We did not grant any compensation advance or credit to, or
+enter into any commitment for the benefit of, any member of
+our Supervisory Board in 2015 or the previous year.
+SUPERVISORY BOARD: OTHER INFORMATION
+¹) Compensation in kind of 87,803,973 shares, hypothetical volume of the transaction €6,299,935,062.75.
+2) The notifying party concluded a contract with a bank acting as commission agent for the sale of 10,000 SAP shares per week. The sale will be carried out at the
+bank's own discretion in the stock market or over the counter in the months December 2015 through November 2016.
+€73.7700
+90
+Share sale
+November 18, 2015
+€65.6800
+122
+Share sale
+August 4, 2015
+75
+December 8, 2015
+Share sale
+50
+€72.4500
+December 8, 2015
+Share sale
+Robert Schuschnig-Fowler
+35
+May 28, 2015
+Share purchase
+11
+€57.3600
+June 2, 2015
+Share sale
+€72.6500
+June 2, 2015
+€67.4170
+12
+NA 3,297.2
+722.4
+1,848.2
+NA 1,650.8
+712.1
+NA 2,160.9
+711.7
+1,837.5
+0
+0
+0
+0
+0
+0
+0
+0
+0
+0
+3,297.2
+1) The value of the fixed and one-year variable elements is subject to a contractual exchange-rate clause applied at the end of the year, so the amounts actually
+paid may be greater.
+2) Insurance contributions, benefits in kind, expenses for maintenance of two households, use of aircraft, tax and discrete payments arising through application of
+the fixed exchange-rate clause.
+The total Executive Board compensation granted according to
+the Code amounted to €13,330,900 (2014: €23,302,200).
+1,258.0
+Fringe benefits¹)
+116.7
+462.9
+700.0
+1,150.0
+1,150.0
+Fixed compensation
+2014
+NA
+2015
+2015
+2014
+2015
+Michael Kleinemeier
+Member of the
+Executive Board
+(from November 1,
+2015)
+Robert Enslin
+Member of the
+Executive Board
+CEO
+Bill McDermott
+€ thousands
+German Corporate Governance Code (Allocation)
+2014
+861.4
+722.4
+1,650.8
+0
+1.125.8
+567.5
+722.0
+722.4
+722.4
+722.4
+354.3
+712.1
+2,040.5
+0
+1,125.8
+746.4
+0 2,040.5
+1,125.8
+One-year variable
+712.1
+712.1
+475.1
+711.7
+2,040.5
+Price on
+1,125.8
+compensation
+NA
+712.1
+NA 2,160.9 1,837.9
+711.7
+1,837.5
+1,837.9
+Total
+Service cost
+Total
+1,848.2
+1,449.4
+0
+729.0
+ΝΑ
+○
+ΝΑ 939.4
+0
+RSU Milestone Plan
+2015
+compensation
+Multiyear variable
+NA
+103.3
+121.0
+€57.3600
+26,290
+-1,848
+Dr. Vishal Sikka
+45,709
+26,290
+-1,848
+Total
+391,977
+225,448
+-15,849
+195,562
+0
+Holding on
+December
+31, 2013
+195,562
+70,151
+70,151
+70,151
+45,709
+Gerhard Oswald
+-1,848
+26,290
+Quantity of RSUs
+Holding on
+January 1,
+2013
+2013
+Grants in Performance-
+Related
+Adjustment
+Exercised
+Units
+Forfeited
+Units
+406,014
+Bill McDermott (co-CEO)
+73,289
+-5,152
+Jim Hagemann Snabe (co-CEO)¹)
+127,425
+73,289
+-5,152
+195,562
+Dr. Werner Brandt
+45,709
+127,425
+"According to the termination agreement with Jim Hagemann Snabe, the 2012 and 2013 grants were paid out after the close of the Annual General Meeting of
+Shareholders on May 21, 2014, based on a fixed share price of €52.96 for the 2012 grants and €58.69 for the 2013 grants.
+The holding of RSUs on December 31, 2013, which were issued
+and not forfeited in 2013, reflects the number of RSUs multiplied
+by the 92.97% target achievement.
+RSU Milestone Plan 2015 (2012 Tranche)
+45,709
+34,226
+11,483
+45,709
+293,506
+98,471
+391,977
+The holding on December 31, 2012, reflects the number of RSUS
+issued in 2012 multiplied by the 133.55% target achievement.
+SAP SOP 2010
+11,483
+The table below shows Executive Board members' holdings, on
+December 31, 2015, of virtual share options issued to them
+To Our Stakeholders Compensation Report
+34
+SAP SOP 2010 Virtual Share Options
+Year
+Granted
+Holding on
+January 1, 2015
+Strike
+Rights
+Total
+0
+under the SAP SOP 2010 since its inception. The strike price for
+an option is 115% of the base price. The issued options have a
+term of seven years and can only be exercised on specified
+dates after the vesting period. The options issued in 2010 were
+exercisable beginning in September 2014 and the options issued
+in 2011 were exercisable beginning in June 2015.
+711.7
+34,226
+11,483
+Quantity of RSUs
+Bill McDermott (co-CEO)
+Jim Hagemann Snabe (co-CEO)
+Dr. Werner Brandt
+Gerhard Oswald
+Dr. Vishal Sikka
+Total
+Holding on
+January 1,
+2012
+Grants in Performance-
+2012
+Related
+Adjustment
+45,709
+Exercised
+Units
+Holding on
+December
+31, 2012
+95,414
+32,011
+127,425
+95,414
+32,011
+127.425
+34,226
+Forfeited
+Units
+RSU Milestone Plan 2015 (2013 Tranche)
+711.7
+22.0
+1,145
+US$66.3099
+Share sale
+1,595
+€66.2364
+Share purchase
+830
+€63.7290
+May 20, 2015
+July 22, 2015
+Share purchase
+700
+€68.9990
+Share purchase
+930
+€66.7100
+EXECUTIVE BOARD: OTHER INFORMATION
+We did not grant any compensation advance or credit to, or
+enter into any commitment for the benefit of, any member of
+our Executive Board in 2015 or the previous year.
+As far as the law permits, SAP SE and its affiliated companies in
+Germany and elsewhere indemnify and hold harmless their
+respective directors and officers against and from the claims of
+third parties. To this end, we maintain directors' and officers'
+(D&O) group liability insurance. The policy is annual and is
+renewed from year to year. The insurance covers the personal
+To Our Stakeholders Compensation Report
+US$71.5845
+2,000
+Purchase of ADRs
+Purchase of ADRs
+August 26, 2015
+May 7, 2015
+August 13, 2015
+1,759.7
+1,577.2
+Gerhard Oswald
+3,445.6
+Total
+22,309.7
+1,891.1
+12,125.3
+The expense is recognized in accordance with IFRS 2 (Share-
+Based Payments) and consists exclusively of obligations arising
+from Executive Board activities.
+Shareholdings and Transactions of Executive Board
+Members
+No member of the Executive Board holds more than 1% of the
+ordinary shares of SAP SE. Members of the Executive Board
+held a total of 45,309 SAP shares on December 31, 2015 (2014:
+36,426 shares).
+35
+The table below shows transactions by Executive Board
+members and persons closely associated with them notified to
+SAP pursuant to the German Securities Trading Act, section 15a,
+in 2015.
+Bill McDermott (CEO)
+Robert Enslin
+Bernd Leukert
+Luka Mucic
+Gerhard Oswald
+Transaction Date
+August 11, 2015
+Transaction
+Quantity
+Unit Price
+Transactions in SAP Shares
+2.148.5
+56
+COMPENSATION FOR SUPERVISORY BOARD MEMBERS
+tee Work
+tee Work
+Prof. Dr. h.c. mult. Hasso Plattner (chairperson)
+275.0
+66.0
+341.0
+100.0
+100.0
+150.0
+350.0
+Margret Klein-Magar (deputy chairperson from May
+215.4
+29.3
+244.8
+50.0
+30.0
+100.0
+180.0
+20, 2015)
+sation
+Commit-
+sation
+sation Commit-
+Compensation System
+Supervisory Board members' compensation is governed by our
+Articles of Incorporation, section 16. By resolution of our
+May 20, 2015, Annual General Meeting of Shareholders the
+section was changed from the compensation with fixed and
+performance-related components to a fixed compensation plus
+fixed amounts for membership in and chairing of committees.
+Each member of the Supervisory Board receives, in addition to
+the reimbursement of their expenses, an annual basic
+compensation of €165,000. The chairperson receives €275,000
+and the deputy chairperson €220,000.
+For membership of the Audit Committee, Supervisory Board
+members receive additional fixed annual compensation of
+€16,500, and for membership of any other Supervisory Board
+committee €11,000, provided that the committee concerned
+has met in the year. The chairperson of the Audit Committee
+receives €27,500, and the chairpersons of the other
+committees receive €22,000. The fixed remuneration is payable
+after the end of the year.
+Any members of the Supervisory Board having served for less
+than the entire year receive one-twelfth of the annual
+remuneration for each month of service commenced. This also
+applies to the increased compensation of the chairperson and
+the deputy chairperson(s) and to the remuneration for the
+chairperson and the members of a committee.
+To Our Stakeholders Compensation Report
+36
+Supervisory Board Members' Compensation in 2015
+€ thousands
+liability of the insured group for financial loss caused by its
+managerial acts and omissions. The current D&O policy includes
+an individual deductible for Executive Board members of SAP SE
+as required by section 93 (2) of the German Stock Corporation
+Act.
+2015
+Fixed Compen-
+Compensation for
+Total
+Fixed
+Compen-
+Variable
+Total
+Compen-
+sation for
+Compen-
+2014
+Luka Mucic
+2,208.6
+Bernd Leukert
+2015
+2014
+2015 2015
+(Min) (Max)
+2015
+2014
+2015 2015
+(Min) (Max)
+2015
+Gerhard Oswald
+Member of the Executive Board
+Luka Mucic
+Member of the Executive Board
+Bernd Leukert
+Member of the Executive Board
+€ thousands
+German Corporate Governance Code (Benefits Granted in 2014 and 2015)
+462.9
+Price per
+Option
+Exer-
+cised in
+2015
+Exercise
+Date
+For Holding on December
+feited
+31, 2015
+2015 2015
+(Min) (Max)
+2014
+Fixed compensation
+700.0
+22.4
+22.4
+22.4
+4.3
+12.1
+12.1
+12.1
+12.2
+11.7
+Rights
+11.7
+Fringe benefits²)
+700.0 700.0 700.0
+700.0
+700.0 350.0
+700.0
+700.0
+462.9
+700.0
+700.0
+11.7
+Quantity of
+Remai-
+Options ning Term
+2011
+68,284
+48.33
+Total
+316,424
+68,284
+68,284
+64.83
+248,140
+Total Expense for Share-Based Payment
+0
+Total expense for the share-based payment plans of Executive
+Board members was recognized as follows.
+€ thousands
+Bill McDermott (CEO)
+2015
+12,291.1
+Robert Enslin
+1,851.2
+2014
+5,063.8
+1,833.5
+Michael Kleinemeier
+364.7
+(from November 1, 2015)
+Total Expense for Share-Based Payment
+Total
+0
+Gerhard Oswald
+€ Quantity of
+Options
+€ Quantity of Quantity of
+Options
+Options
+Remai-
+ning Term
+in Years
+in Years
+Bill McDermott
+2010
+135,714
+2010
+2.69
+135,714
+1.69
+(CEO)
+2011
+112,426
+3.44
+48.33
+112,426
+2.44
+40.80
+Pekka Ala-Pietilä
+33
+33
+3,505.1
+DBO change in 2015
+170.0
+29.7
+129.2
+129.9
+-171.2
+287.6
+Plan assets change in 2015
+25.4
+145.6
+138.0
+356.9
+665.9
+DBO December 31, 2015
+1,382.5
+29.7
+252.4
+232.7
+2,229.0
+35.0
+28.6
+1,212.5
+1,404.9
+1,800.7
+Plan assets change in 2014
+94.6
+67.8
+341.1
+503.5
+DBO December 31, 2014
+1,212.5
+7,050.2
+123.2
+7,221.4
+8,659.9
+Less plan assets market value
+94.6
+67.8
+4,992.4
+5,154.8
+December 31, 2014
+Accrued December 31, 2014
+102.8
+102.8
+8,947.5
+25.4
+3.5
+Luka Mucic
+7.8
+302.5
+2.6
+279.4
+Gerhard Oswald²)
+1) The rights shown here for Bill McDermott refer solely to rights under the
+pension plan for SAP America.
+2) Due to the extension of Gerhard Oswald's contract beyond June 30, 2014,
+these values represent the retirement pension entitlement that he would
+receive after his current Executive Board contract expires on December 31,
+2016, based on the entitlements vested on December 31, 2015 (December 31,
+2014).
+These are vested entitlements. To the extent that members
+continue to serve on the Executive Board and that therefore
+more contributions are made for them in the future, pensions
+actually payable at the scheduled retirement age will be higher
+than the amounts shown in the table.
+Postcontractual Non-Compete Provisions
+During the agreed 12-month postcontractual non-compete
+period, each Executive Board member receives abstention
+payments corresponding to 50% of the final average contractual
+compensation as agreed in the respective contract on an
+individual basis. Any other occupational income generated by
+the Executive Board member will be deducted from their
+compensation in accordance with section 74c of the German
+Commercial Code.
+To Our Stakeholders Compensation Report
+31
+The following table presents the net present values of the
+postcontractual non-compete abstention payments. The net
+present values in the table reflect the discounted present value
+of the amounts that would be paid in the fictitious scenario in
+which the Executive Board members leave SAP at the end of
+their respective current contract terms and their final average
+contractual compensation prior to their departure equals the
+compensation in 2015. Actual postcontractual non-compete
+payments will likely differ from these amounts depending on the
+time of departure and the compensation levels and target
+achievements at the time of departure.
+Net Present Values of the Postcontractual Non-Compete
+Abstention Payments
+€ thousands
+Contract Term
+Expires
+Net Present
+Value of
+Postcontractual
+Non-Compete
+Abstention
+Payment¹
+Bill McDermott (CEO)
+8.8
+Bernd Leukert
+(from November 1, 2015)
+Michael Kleinemeier
+240.2
+205.8
+5,349.3
+5,820.7
+December 31, 2015
+Accrued December 31, 2015
+1,382.5
+4.3
+12.2
+Less plan assets market value
+26.9
+3,126.8
+1) The values shown here only reflect the pension entitlements that Michael Kleinemeier, Bernd Leukert and Luka Mucic will receive from the retirement pension
+plan for Executive Board members.
+The table below shows the annual pension entitlement of each
+member of the Executive Board on reaching the scheduled
+retirement age (60 for Executive Board members initially
+appointed before 2012 and 62 for Executive Board members
+initially appointed after January 1, 2012) based on entitlements
+from SAP under performance-based and salary-linked plans
+vested on December 31, 2015.
+Annual Pension Entitlement
+€ thousands
+Vested on
+Vested on
+December 31, December 31,
+2015
+2014
+94.0
+106.9
+0.7
+Bill McDermott (CEO) ¹)
+1,700.9
+123.2
+169.8
+DBO change in 2014
+RSU Milestone Plan 2015
+MTI
+SAP SOP 2011
+SAP SOP 2010
+☐ ☐
+611.0
+1,126.7
+1,590.9
+SAP SOP 2009
+Other
+Total
+Service cost
+Total
+1,529.0
+0
+475.1
+0
+1,333.5
+354.3
+3,081.8
+Multi-year variable compensation
+1,051.5
+1,232.7
+621.4
+700.0
+350.0
+700.0
+700.0
+Fringe benefits¹)
+11.7
+12.2
+12.1
+4.3
+3,975.4
+22.4
+Total
+711.7
+475.1
+712.1
+354.3
+722.4
+722.0
+One-year variable compensation
+817.3
+22.0
+0
+0
+0
+Bill Mc
+Dermott
+Michael
+Kleinemeier
+Bernd
+Leukert¹)
+Luka Mucic¹)
+Gerhard
+Oswald
+Total
+(CEO)
+(from
+November 1,
+2015)¹)
+DBO January 1, 2014
+€ thousands
+1,042.7
+6,859.2
+Less plan assets market value
+4,651.3
+4,651.3
+January 1, 2014
+Accrued January 1, 2014
+1,042.7
+1,165.2
+2,207.9
+5,816.5
+June 30, 2017
+Total Defined Benefit Obligations (DBO) and the Total Accruals for Pension Obligations to Executive Board Members
+SAP made contributions to a third-party pension plan for Bill
+0
+1,529.0
+475.1
+1,333.5
+354.3
+3,081.8
+3,975.4
+1) Insurance contributions, benefits in kind, expenses for maintenance of two households, use of aircraft, tax and discrete payments arising through application of
+the fixed exchange-rate clause.
+The total Executive Board compensation allocated according to
+the Code amounted to €13,116,700 (2014: €32,687,400).
+McDermott (2015: €682,400; 2014: €646,800) and Robert
+Enslin (2015: €308,000; 2014: €148,100). SAP's
+contributions are based on payments by Bill McDermott and
+Robert Enslin into this pension plan.
+END-OF-SERVICE BENEFITS
+Retirement Pension Plan
+The following retirement pension agreements apply to the
+individual members of the Executive Board:
+Michael Kleinemeier, Bernd Leukert, Luka Mucic, and
+Gerhard Oswald receive a retirement pension when they
+reach the retirement age of 60 (62 for Board Members
+appointed after January 1, 2012) and retire from their
+Executive Board seat, or a disability pension if, before
+reaching the regular retirement age, they become subject to
+occupational disability or permanent incapacity. A surviving
+dependent's pension is paid on the death of a former member
+of the Executive Board. The disability pension is 100% of the
+vested retirement pension entitlement and is payable until
+the beneficiary's 60th birthday, after which it is replaced by a
+retirement pension. The surviving dependent's pension is
+60% of the retirement pension or vested disability pension
+entitlement at death. Entitlements are enforceable against
+SAP SE. Current pension payments are reviewed annually for
+adjustments and, if applicable, increased according to the
+surplus in the pension liability insurance. If service is ended
+before the retirement age of 60 (62 for Board Members
+-
+appointed after January 1, 2012), pension entitlement is
+reduced in proportion as the actual length of service stands in
+relation to the maximum possible length of service.
+The applied retirement pension plan is contributory. The
+contribution is 4% of applicable compensation up to the
+applicable income threshold plus 14% of applicable
+compensation above the applicable income threshold. For
+this purpose, applicable compensation is 180% of annual
+base salary. The applicable income threshold is the statutory
+annual income threshold for the state pension plan in
+Germany (West), as amended from time to time.
+Originally, Gerhard Oswald was under a performance-based
+retirement plan. This plan was discontinued when SAP
+introduced a contributory retirement pension plan in 2000.
+His pension benefits are derived from any accrued
+entitlements on December 31, 1999, under performance-
+based pension agreements and a salary-linked contribution
+for the period commencing January 1, 2000. Gerhard
+Oswald's rights to retirement pension benefits will increase
+by further annual contributions because he remains a
+member of the Executive Board after his 60th birthday until
+his scheduled retirement on December 31, 2016.
+Bill McDermott has rights to future benefits under the portion
+of the pension plan for SAP America classified as "Non-
+Qualified Retirement Plan" according to the U.S. Employee
+Retirement Income Security Act (ERISA). The "Non-
+Qualified" pension plan of SAP America is a cash balance plan
+that on retirement provides either monthly pension payments
+or a lump sum. The pension becomes available from the
+To Our Stakeholders Compensation Report
+30
+beneficiary's 65th birthday. Subject to certain conditions, the
+plan also provides earlier payment or invalidity benefits. The
+"Non-Qualified" pension plan closed with effect from
+January 1, 2009. Interest continues to be paid on the earned
+rights to benefits within this plan.
+Regular End-of-Service Undertakings
+To Our Stakeholders Compensation Report
+Robert Enslin
+Michael Kleinemeier
+1,620.6
+308.0
+1,928.6
+5,138.4
+646.9
+5,785.3
+682.4
+5,127.1
+4,444.7
+378.7
+To Our Stakeholders Compensation Report
+Total
+Service cost
+Total
+Other
+SAP SOP 2009
+SAP SOP 2010
+SAP SOP 2011
+1,011.1
+MTI
+RSU Milestone Plan 2015
+Multi-year variable compensation
+817.3
+1,737.2
+583.9
+116.7
+148.1
+0
+Bill McDermott (CEO)
+195,562
+76,374
+-16,886
+Fixed compensation
+2014
+2015
+2014
+2015
+2,036.7
+2014
+Member of the
+Executive Board
+Gerhard Oswald
+Luka Mucic
+Member of the
+Executive Board
+Bernd Leukert
+Member of the
+Executive Board
+€ thousands
+German Corporate Governance Code (Allocation)
+29
+116.7
+732.0
+2015
+Holding on
+December
+31, 2014
+One-year variable compensation
+583.9
+Bernd Leukert (from May 4, 2014)
+0
+18,164
+-4,016
+14,148
+Luka Mucic (from July 1, 2014)
+Total
+0
+13,811
+-3,054
+10,757
+406,014
+208,701
+-34,029
+70,151
+54,792
+455,743
+1) According to the termination agreement with Vishal Sikka, the 2012 grants will be paid out after the close of the Annual General Meeting of Shareholders in 2016,
+based on a fixed share price of €52.96. The 2013 grants will be paid out after the close of the Annual General Meeting of Shareholders in 2017 based on a fixed
+share price of €58.69.
+The holding of RSUs on December 31, 2014, which were issued
+and not forfeited in 2014, reflects the number of RSUs multiplied
+by the 77.89% target achievement.
+14,148
+-4,016
+18,164
+0
+803.3
+2,011.4
+2,408.0
+255,050
+Dr. Werner Brandt (until June 30, 2014)
+70,151
+27,396
+27,396
+70,151
+116.7
+Gerhard Oswald
+27,396
+-6,057
+91,490
+Dr. Vishal Sikka (until May 4, 2014)¹)
+70,151
+27,396
+70,151
+27,396
+Robert Enslin (from May 4, 2014)
+70,151
+Forfeited
+Units
+Exercised
+Units
+Grants in Performance-
+2014
+Related
+Adjustment
+In case of permanent disability, the contract will end at the end
+of the quarter in which the permanent inability to work was
+determined. The Executive Board member receives the monthly
+basic salary for a further 12 months starting from the date the
+permanent disability is determined.
+Payments to Former Executive Board Members
+In 2015, we paid pension benefits of €1,580,000 to Executive
+Board members who had retired before January 1, 2015 (2014:
+€1,425,000). At the end of the year, the DBO for former
+Executive Board members was €32,758,000 (2014:
+€33,764,000). Plan assets of €26,716,000 are available to meet
+these obligations (2014: €25,584,000).
+Executive Board Members' Holdings of Long-Term
+Incentives
+Members of the Executive Board hold or held share-based
+payment rights throughout the year under the RSU Milestone
+Plan 2015 and the SAP SOP 2010 (which were granted in
+previous years). For information about the terms and details of
+these programs, see the Notes to the Consolidated Financial
+Statements section, Note (27).
+RSU Milestone Plan 2015
+The table below shows Executive Board members' holdings, on
+December 31, 2015, of RSUs issued to them under the RSU
+Milestone Plan 2015. The plan is a cash-settled long-term
+incentive scheme with a payout subsequent to a performance
+period of one year and an additional holding period of three
+years. The RSU Milestone Plan 2015 consists of four plan
+tranches to be issued with respect to the calendar years 2012
+through 2015.
+To Our Stakeholders Compensation Report
+32
+32
+RSU Milestone Plan 2015 (2015 Tranche)
+Quantity of RSUs
+Holding on
+Grants in
+January 1,
+2015
+2015
+Performance
+- Related
+Permanent Disability
+Abstention compensation for the postcontractual non-compete
+period as described above is also payable on early contract
+termination.
+Postcontractual Non-Compete Provisions
+quence of, change or restructuring, or due to a change of
+control, SAP SE and each Executive Board member has the right
+to terminate the employment contract within eight weeks of the
+occurrence by giving six months' notice. A change of control is
+deemed to occur when a third party is required to make a
+mandatory takeover offer to the shareholders of SAP SE under
+the German Securities Acquisition and Takeover Act, when SAP
+SE merges with another company and becomes the subsumed
+entity, or when a control or profit transfer agreement is
+concluded with SAP SE as the dependent company. An
+Executive Board member's contract can also be terminated
+before full term if their appointment as an Executive Board
+member of SAP SE is revoked in connection with a change of
+control.
+October 31, 2018
+4,627.7
+1,967.2
+349.6
+(from November 1,
+2015)
+Bernd Leukert
+June 30, 2017
+1,921.5
+Luka Mucic
+June 30, 2017
+Adjustment
+1,921.7
+December 31, 2016
+1,928.9
+Total
+12,716.6
+1) For the purpose of this calculation, the following discount rates have been
+applied: Bill McDermott 0.18% (2014: 0.46%); Robert Enslin 0.18% (2014:
+0.46%); Michael Kleinemeier 0.50%; Bernd Leukert 0.18% (2014: 0.46%);
+Luka Mucic 0.18% (2014: 0.46%); Gerhard Oswald 0.15% (2014: 0.38%).
+Early End-of-Service Undertakings
+Severance Payments
+The standard contract for all Executive Board members
+provides that on termination before full term (for example,
+where the member's appointment is revoked, where the
+member becomes occupationally disabled, or in connection with
+a change of control), SAP SE will pay to the member the
+outstanding part of the compensation target for the entire
+remainder of the term, appropriately discounted for early
+payment. A member has no claim to that payment if they have
+not served SAP as a member of the Executive Board for at least
+one year or if they leave SAP SE for reasons for which they are
+responsible. Upon the appointment of Robert Enslin, Bernd
+Leukert, Luka Mucic, and Michael Kleinemeier to the Executive
+Board, the Supervisory Board abstained from the waiting period
+of one year due to their previous membership to the Global
+Managing Board.
+If an Executive Board member's appointment to the Executive
+Board expires or ceases to exist because of, or as a conse-
+Gerhard Oswald
+Bill McDermott (CEO)
+255,050
+77,099
+90,009
+Exercised
+Units
+Forfeited
+Units
+Holding on
+December
+31, 2015
+368,717
+54,133
+192,345
+5,221
+51,887
+132,263
+667,947
+The holding of RSUs on December 31, 2015, which were issued
+and not forfeited in 2015, reflects the number of RSUs multiplied
+by the total target achievement. The total target achievement
+consists of the addition of the target achievement of the
+financial KPIs of 112.96% and the adjustment factor based on
+RSU Milestone Plan 2015 (2014 Tranche)
+individual plan participation. The RSUs allocated in 2012 have a
+remaining term of 0.08 years; the RSUs allocated in 2013 have a
+remaining term of 1.08 years; the RSUs allocated in 2014 have a
+remaining term of 2.08 years; and the RSUs allocated in 2015
+have a remaining term of 3.08 years.
+Quantity of RSUs
+Holding on
+January 1,
+2014
+55,726
+June 30, 2017
+385,593
+13,117
+36,568
+Robert Enslin
+14,148
+27,656
+12,329
+Michael Kleinemeier (from November 1, 2015)
+○
+4,622
+599
+Total
+Bernd Leukert
+27,656
+13,922
+Luka Mucic
+10,757
+27,656
+13,474
+Gerhard Oswald
+91,490
+27,656
+14,148
+165.0
+700.0
+192.5
+80.2
+50.0
+30.8
+100.0
+180.8
+Robert Schuschnig-Fowler (from May 20, 2015)
+110.0
+7.3
+117.3
+27.5
+Inga Wiele (until July 6, 2014)
+NA
+NA
+NA
+ΝΑ
+Dr. Sebastian Sick (from May 20, 2015)
+110.0
+14.7
+124.7
+NA
+NA
+NA
+NA
+11.5
+Jim Hagemann Snabe
+68.8
+185.0
+Dr. Kurt Reiner (until May 20, 2015)
+68.8
+9.2
+77.9
+50.0
+20.0
+100.0
+170.0
+Mario Rosa-Bian (until May 20, 2015)
+68.8
+9.2
+77.9
+50.0
+15.0
+100.0
+165.0
+Dr. Erhard Schipporeit
+165.0
+27.5
+192.5
+50.0
+35.0
+100.0
+Stefan Schulz (until May 20, 2015)
+ΝΑ
+165.0
+187.0
+In addition, we reimburse members of the Supervisory Board for
+their expenses and the value-added tax payable on their
+compensation.
+3,227.0
+514.5 1,788.3
+924.2
+3,728.1
+478.5
+3,249.6
+Total
+170.8
+100.0
+20.8
+50.0
+181.5
+16.5
+165.0
+Prof. Dr.-Ing. Dr.-Ing. E.h. Klaus Wucherer
+102.1
+58.3
+14.6
+29.2
+NA
+NA
+NA
+In total, we received services from members of the Supervisory
+Board (including services from employee representatives on the
+Supervisory Board in their capacity as employees of SAP) in the
+amount of €1,282,800 (2014: €2,295,000). This amount
+includes fees paid to Linklaters LLP in Frankfurt am Main,
+22.0
+Germany (which Supervisory Board member Wilhelm Haarmann
+is a partner of) of €224,500 (2014: €1,001,700).
+To Our Stakeholders Compensation Report
+25.0
+10.0
+50.0
+85.0
+Pierre Thiollet (from May 20, 2015)
+110.0
+7.3
+117.3
+ΝΑ
+NA
+NA
+Share purchase
+May 28, 2015
+Andreas Hahn
+Unit Price
+Quantity
+Transaction
+Transaction Date
+The table below shows transactions by Supervisory Board
+members and persons closely associated with them notified to
+SAP pursuant to the German Securities Trading Act, section 15a,
+in 2015:
+previous year. Members of the Supervisory Board held a total of
+90,262,686 SAP shares on December 31, 2015 (December 31,
+2014: 107,467,372 SAP shares).
+Supervisory Board chairperson Hasso Plattner and the
+companies he controlled held 90,248,789 SAP shares on
+December 31, 2015 (December 31, 2014: 107,442,743 SAP
+shares), representing 7.346% (2014: 8.746%) of SAP's share
+capital. No other member of the Supervisory Board held more
+than 1% of the SAP SE share capital at the end of 2015 or of the
+Transactions in SAP Shares
+Shareholdings and Transactions of Supervisory Board
+Members
+37
+LONG-TERM INCENTIVES FOR THE SUPERVISORY BOARD
+We do not offer members share options or other share-based
+payment for their Supervisory Board work. Any share options or
+other share-based payment received by employee-elected
+members relate to their position as SAP employees and not to
+their work on the Supervisory Board.
+ΝΑ
+ΝΑ
+NA
+209.0
+44.0
+165.0
+Prof. Dr. Wilhelm Haarmann
+170.0
+100.0
+20.0
+50.0
+187.0
+22.0
+165.0
+Prof. Anja Feldmann
+ΝΑ
+NA
+NA
+NA
+128.3
+18.3
+110.0
+Martin Duffek (from May 20, 2015)
+80.0
+50.0
+5.0
+50.0
+68.8
+50.0
+200.0
+NA
+121.0
+11.0
+110.0
+Prof. Dr. Gesche Joost (from May 28, 2015)
+member until May 20, 2015)
+220.8
+130.0
+20.8
+70.0
+100.8
+9.2
+NA
+91.7
+Christiane Kuntz-Mayr (deputy chairperson and
+ΝΑ
+NA
+NA
+NA
+124.7
+14.7
+110.0
+Andreas Hahn (from May 20, 2015)
+100.0
+0
+25.0
+Catherine Bordelon (until May 20, 2015)
+68.8
+12.5
+50.0
+87.5
+Bernard Liautaud
+165.0
+22.0
+187.0
+50.0
+30.0
+100.0
+80.2
+180.0
+68.8
+9.2
+77.9
+50.0
+20.0
+100.0
+170.0
+Christine Regitz (from May 20, 2015)
+110.0
+14.7
+124.7
+Dr. h. c. Hartmut Mehdorn (until May 15, 2015)
+11.5
+25.0
+Steffen Leskovar (until May 20, 2015)
+170.0
+100.0
+20.0
+50.0
+197.1
+32.1
+165.0
+Panagiotis Bissiritsas
+68.8
+100.0
+30.0
+180.0
+50.0
+180.0
+NA
+30.0
+50.0
+187.0
+100.0
+165.0
+Lars Lamadé
+ΝΑ
+NA
+22.0
+Executive Board of SAP SE
+Responsibility
+Statement
+To the best of our knowledge, and in accordance with the
+applicable reporting principles, the Consolidated Financial
+Statements give a true and fair view of the assets, finances, and
+operating results of the SAP Group, and the management report
+of the Group and SAP SE includes a fair review of the
+development and performance of the business and the position
+of the Group and SAP SE, together with a description of the
+principal opportunities and risks associated with the expected
+development of the Group and SAP SE.
+Walldorf, February 25, 2016
+SAP SE
+Walldorf, Germany
+Bill McDermott, CEO
+Pursuant to Section 322 (3) sentence 1 HGB we state that our
+audit of the consolidated financial statements has not led to any
+reservations.
+Michael Kleinemeier
+[German Public Auditor]
+Wirtschaftsprüfer
+-
+Weise
+Dr. Böttcher
+Wirtschaftsprüfer
+[German Public Auditor]
+Wirtschaftsprüfungsgesellschaft
+To Our Stakeholders Auditor's Opinion
+KPMG AG
+In our opinion, SAP maintained effective internal control over
+consolidated financial reporting as at December 31, 2015 based
+on the criteria set out in the Internal Control Integrated
+Framework issued by COSO (in the version of 2013).
+Audit Opinion
+We believe that the audit evidence we have obtained is sufficient
+and appropriate to provide a basis for our audit opinion.
+Our responsibility is to express an opinion on the system of
+internal control over consolidated financial reporting based on
+our audit. We conducted our audit in accordance with the
+standards of the Public Company Accounting Oversight Board
+(United States). Those standards require that we plan and
+perform the audits to obtain reasonable assurance about
+whether effective internal control over consolidated financial
+reporting was maintained in all material respects. Our audit of
+internal control over consolidated financial reporting included
+obtaining an understanding of internal control over financial
+reporting, assessing the risk of material deficiencies in internal
+control, testing and evaluating the design and operating
+effectiveness of internal control based on this assessment, and
+performing such other procedures as we considered necessary
+in the circumstances.
+Auditor's Responsibility
+Because of its inherent limitations, internal control over financial
+reporting may not prevent or detect material misstatements.
+Also, projections of any evaluation of effectiveness to future
+periods are subject to the risk that controls may become
+inadequate because of changes in conditions, or that the degree
+of compliance with the policies or procedures may deteriorate.
+Mannheim, February 25, 2016
+41
+Combined Management
+Report
+59
+57
+Customers..
+55
+Partner Ecosystem
+54
+Acquisitions.....
+48
+Products, Research & Development, and Services.
+45
+Strategy and Business Model.
+.44
+Overview of the SAP Group..
+43
+General Information About This Management Report..
+of internal control over consolidated financial reporting includes
+policies and procedures to (1) ensure an accounting system that
+in reasonable detail accurately and fairly reflects the
+transactions and dispositions of the company's assets, (2)
+provide reasonable assurance that transactions are recorded as
+necessary to permit preparation of financial statements in
+accordance with generally accepted accounting principles, and
+(3) provide reasonable assurance regarding prevention or timely
+detection of unauthorized acquisition, use or disposition of the
+company's assets that could have a material effect on the
+financial statements.
+A company's system of internal control over consolidated
+financial reporting is a process designed to provide reasonable
+assurance regarding the reliability of financial reporting in the
+consolidated financial statements and the preparation of
+financial statements for external purposes in accordance with
+generally accepted accounting principles. A company's system
+SAP SE's Executive Board is responsible for maintaining an
+effective system of internal control over consolidated financial
+reporting and assessing its effectiveness, which is included in
+the Executive Board's report on the system of internal control
+over consolidated financial reporting.
+Executive Board's Responsibility for the Internal Control
+System
+financial statements. The selection of audit procedures depends
+on the auditor's professional judgment. This includes the
+assessment of the risks of material misstatement of the
+consolidated financial statements, whether due to fraud or error.
+In assessing those risks, the auditor considers the internal
+control relevant to the entity's preparation of the consolidated
+financial statements that give a true and fair view. The aim of
+this is to plan and perform audit procedures that are appropriate
+in the given circumstances. An audit also includes evaluating the
+appropriateness of accounting policies used and the
+reasonableness of accounting estimates made by the Executive
+Board, as well as evaluating the overall presentation of the
+consolidated financial statements.
+An audit involves performing procedures to obtain audit
+evidence about the amounts and disclosures in the consolidated
+Those standards require that we comply with ethical
+requirements and plan and perform the audit to obtain
+reasonable assurance about whether the consolidated financial
+statements are free from material misstatement.
+Our responsibility is to express an opinion on these consolidated
+financial statements based on our audit. We conducted our audit
+in accordance with Section 317 HGB and the generally accepted
+standards for the audit of financial statements promulgated by
+the German Institute of Public Auditors [IDW] and also in
+compliance with the International Standards on Auditing (ISA)
+and guidelines of the Public Company Accounting Oversight
+Board (United States).
+Auditor's Responsibility
+The Executive Board of SAP SE is responsible for the
+preparation of these consolidated financial statements. This
+responsibility includes preparing these consolidated financial
+statements in accordance with International Financial Reporting
+Standards (IFRS), as adopted by the EU, and the additional
+requirements of German commercial law pursuant to Section
+315a (1) of the German Commercial Code [HGB], as well as IFRS
+as adopted by the International Accounting Standards Board, to
+give a true and fair view of the consolidated financial position of
+the Group and of its financial performance and cash flows in
+accordance with these regulations. The Executive Board is also
+responsible for the internal controls that the Executive Board
+determines are necessary to enable the preparation of
+consolidated financial statements that are free from material
+misstatement, whether due to fraud or error.
+Executive Board's Responsibility for the Consolidated
+Financial Statements
+Report on the Consolidated Financial Statements
+We have audited the accompanying consolidated financial
+statements of SAP SE, Walldorf ('SAP' or 'the Company'), and
+its subsidiaries, which comprise the consolidated statement of
+financial position as at December 31, 2015, consolidated income
+statement, consolidated statement of comprehensive income,
+consolidated statement of changes in equity, consolidated
+statement of cash flows, and notes, for the year then ended.
+TO SAP SE
+Auditor's Opinion
+39
+Gerhard Oswald
+To Our Stakeholders Responsibility Statement
+Luka Mucic
+Bernd Leukert
+We believe that the audit evidence we have obtained is sufficient
+and appropriate to provide a basis for our audit opinion.
+Robert Enslin
+Audit Opinion
+Report on the Group Management Report
+We have audited the system of internal control over
+consolidated financial reporting of SAP SE and its subsidiaries in
+place as at December 31, 2015. This control system is based on
+criteria set out in the Internal Control - Integrated Framework of
+the Committee of Sponsoring Organizations of the Treadway
+Commission (COSO) (version of 2013).
+Report on the System of Internal Control over Consolidated
+Financial Reporting pursuant to PCAOB
+In our opinion, based on the findings of our audit of the
+consolidated financial statements and of the group
+management report, the group management report is
+consistent with the consolidated financial statements, and as a
+whole provides a suitable view of the Group's position and
+suitably presents the opportunities and risks of future
+development.
+Pursuant to Section 322 (3) sentence 1 HGB, we state that our
+audit of the Group Management Report has not led to any
+reservations.
+Audit Opinion
+We believe that the audit evidence we have obtained is sufficient
+and appropriate to provide a basis for our audit opinion.
+Our responsibility is to express an opinion on this Group
+Management Report based on our audit. We conducted our
+audit in accordance with Section 317 (2) HGB and the generally
+accepted standards for the audit of group management reports
+promulgated by the German Institute of Public Auditors.
+Accordingly, we are required to plan and perform the audit of the
+group management report to obtain reasonable assurance
+about whether the group management report is consistent with
+the consolidated financial statements and the audit findings, as
+a whole provides a suitable view of the Group's position and
+suitably presents the opportunities and risks of future
+development.
+Auditor's Responsibility
+the International Financial Reporting Standard (IFRS) Practice
+Statement Management Commentary.
+40
+40
+To Our Stakeholders Auditor's Opinion
+The Executive Board of SAP SE is responsible for the
+preparation and fair presentation of the Group Management
+Report. This responsibility includes preparing the Group
+Management Report in accordance with the provisions of
+German commercial law under Section 315a (1) HGB, German
+Accounting Standards number 17 and 20 (GAS 17, GAS 20) and
+Executive Board's Responsibility for the Group
+Management Report
+We have audited the accompanying Group Management Report
+of SAP SE combined with the Management Report of SAP SE
+('Group Management Report') for the financial year ended
+December 31, 2015.
+In our opinion, based on the findings of our audit, the
+consolidated financial statements comply in all material
+respects with IFRSS, as adopted by the EU, and the additional
+requirements of German commercial law pursuant to Section
+315a (1) HGB as well as IFRS as adopted by the International
+Accounting Standards Board and give a true and fair view of the
+consolidated financial position of the Group as at December 31,
+2015, and of its financial performance and cash flows in
+accordance with these regulations.
+Performance Management System.
+The report contains references to additional information in other
+parts of the SAP Integrated Report that is available online. This
+additional information is not part of the management report.
+.66
+Our organization must be as adaptable as our employees - and
+in recent years, we have made important shifts to our sales
+model to accommodate enormous changes in how companies
+use technology. In the past, our approach was focused on
+charging a one-time, upfront fee for a perpetual license to our
+software that is typically installed at the customer site. In
+addition, the customer usually concludes a support contract
+covering support, services, and software updates. As we have
+customer preferences evolve, we are increasingly
+delivering our solutions in the cloud through a software-as-a-
+service (SaaS) model. Depending on the solution, the customer
+To achieve our vision, SAP provides solutions and services to
+customers throughout the world based on our deep expertise in
+business processes across industries. As leader of the
+enterprise software market, we must continually adapt to new
+technology and business trends. For this reason, we rely on the
+people of SAP to drive our success - their intellectual and social
+capital provide us with key knowledge, expertise, and business
+relationships. Along with the financial capital of our investors, an
+engaged, highly skilled, and agile workforce is at the core of our
+business model.
+At the heart of realizing these possibilities is our ability to help
+our customers cut through complexity and direct their
+resources to the work that matters most: new innovations that
+help the world run better and improve people's lives. We work to
+create long-term value by addressing future needs as well as
+current ones, with the goal of helping to transform how people
+use software, conduct business, and live their lives.
+In addition, at SAP and within our ecosystem, we support job
+creation and economic prosperity through demand for highly
+qualified workers to develop, sell, implement, and enhance our
+software for our customers. As our customers grow their own
+businesses, they also create opportunities for others through
+new products and services as well as economic growth.
+As a software company that serves many of the world's leading
+organizations, we have enormous opportunity to impact people
+and society by helping our customers innovate, run more
+efficiently, improve their IT security, and offer new products and
+services. For example, when major manufacturers gain greater
+transparency into their energy usage and create more efficient
+supply chains, they create a more positive impact on society
+while minimizing impact on environment. When banks offer
+mobile banking services to people who lack opportunities, they
+address inequality and promote economic growth. When
+healthcare companies utilize data in new and faster ways, they
+help patients gain access to potentially life-saving treatments.
+Employees and Social Investments
+capitalize on the ways that technology and societal trends
+intersect, so that - along with SAP - they can not only become
+better organizations, but also help create a better world.
+With our broad portfolio of solutions, we are convinced that we
+can position our customers for greater success in the digital
+world. SAP can help our customers better serve their customers
+with the sophisticated experiences they have come to expect;
+reach new markets as the world's cities expand; find new
+customers as millions of people join the modern economy; and
+innovate in the face of resource scarcity and ever changing
+technologies. Most of all, we can help them understand and
+SAP has big ambitions. We measure our success across both
+financial and non-financial indicators: revenue growth,
+profitability, customer loyalty, and employee engagement. And
+we are creating value for our customers by helping them to
+navigate a changed world so that they can find business
+opportunities across social, environmental, and economic
+dimensions.
+Furthermore, we connect all of these realms to core business
+processes, such as finance and logistics, for a seamless and
+simplified customer experience. And we provide deep industry
+expertise to help our customers design an IT strategy that best
+supports their business strategy. While each of these
+capabilities would bring value on its own, together they set us
+apart - we are unique in our ability to guide customers on all
+essential elements of their digital transformation, enabling them
+to reimagine their business and then realize their vision for the
+future.
+With these capabilities, SAP partners with companies on every
+aspect of their digital transformation, helping them run better
+and improving people's lives. As they become digital businesses,
+our customers are becoming more sustainable organizations by
+improving how they serve their customers, engaging and
+developing their workforce, increasing transparency of their
+suppliers' social performance, using resources more efficiently,
+and interacting with local communities. Our global business
+networks expand the world that our customers operate in,
+connecting them with a vast ecosystem of partners that creates
+more efficient, powerful, and simpler ways of managing such key
+functions as procurement, travel, and workforce management.
+With the release of SAP S/4HANA in 2015, our next-generation
+business suite, we have brought a new level of performance and
+simplicity to core business processes. And SAP HANA Cloud
+Platform is facilitating the development of a much broader and
+richer landscape of applications to support our customers'
+needs.
+SAP Cloud powered by SAP HANA simplifies consumption and
+the user experience, while SAP HANA simplifies the IT
+landscape. SAP HANA enables business processes and analytics
+to run on the same platform, something that was simply not
+conceivable even five years ago.
+seen
+and
+just to our own transformation but that of our customers
+their customers.
+45
+Combined Management Report Strategy and Business Model
+Our digital approach is built on two critical elements - our SAP
+Cloud portfolio and the SAP HANA platform. And our strategy to
+become THE cloud company powered by SAP HANA refers not
+We enable organizations to tackle complexity by unlocking their
+ability to Run Simple. This principle guides everything we do and
+powers our customers' transformation into digital businesses.
+We offer what is required to support this transformation - our
+deep experience as a leader in enterprise software for more than
+40 years; our solutions and services; and our global reach, which
+includes a base of approximately 300,000 customers across 25
+distinct industries; and an ecosystem of thousands of partners.
+Omnichannel
+Customer Experience
+Business Networks
+Suppliers
+SAP HANA PLATFORM
+SAP S/4 HANA
+Digital Core
+Assets and the
+Internet of Things
+-
+Workforce
+Engagement
+Combined Management Report Strategy and Business Model
+46
+48
+Combined Management Report Products, Research & Development, and Services
+SAP HANA remains at the center of our strategy to help our
+customers transform their businesses. The SAP HANA platform
+combines database, data processing, integration, and
+application platform capabilities in-memory. By providing
+advanced capabilities such as predictive analytics on the same
+architecture, it further simplifies application development and
+processing across Big Data sources and structures.
+DRIVING SIMPLICITY AND INNOVATION THROUGH SAP
+HANA AND SAP HANA CLOUD PLATFORM
+After launching in February 2015, over 2,700 customers have
+chosen SAP S/4HANA, with approximately 100 customers live
+at the end of 2015.
+SAP S/4HANA creates unique opportunities to simplify the IT
+landscape, helps reduce total cost of ownership with SAP HANA,
+and provides a simple and role-based user experience.
+Enterprises can now reduce their data footprint and work with
+larger data sets in one system to save hardware costs,
+operational costs, and time as well as reduce complexity.
+creation of their own next-generation products and services so
+critical in the digital economy.
+In 2015, we unveiled one of the most important products in our
+history: SAP S/4HANA, our next-generation business suite,
+designed to provide the digital core our customers need to run
+their entire business in the new digital world. We expect
+SAP S/4HANA to drive our business for years to come, enabling
+companies to integrate their core business processes with
+running their key operations, from their supply chain to their
+workforce. With SAP S/4HANA, we provide companies a full
+business platform to reimagine their businesses and achieve the
+For leading companies, the question is no longer whether they
+need to become a digital business, but how. The role of software
+has moved beyond enabling the realization of business strategy
+to becoming an intrinsic part of that strategy. In an increasingly
+complex landscape - with the amount of stored data doubling
+every 18 months - speed, innovation, and agility are the new
+differentiators. It is not just about doing yesterday's work faster.
+Companies in every industry must take a unified approach to
+managing every aspect of their business, and they need
+solutions whose innovation matches their own ambitions to
+grow and win in the market.
+TRANSFORMATION
+UNLOCKING THE POTENTIAL OF DIGITAL
+■ Our Business Network Group includes SAP Ariba, Concur, and SAP Fieldglass
+solutions, all supporting the interaction of companies with the outside world.
+■ Our Global Service & Support organization guides companies at every stage of
+their digital transformation by accelerating innovation, driving simplification of
+business and IT, and ensuring business value is realized.
+■ In 2015, we unveiled SAP S/4HANA, a next-generation business suite
+designed to provide the digital core our customers need to run their entire
+business in a digitized world.
+46
+Products, Research &
+Development, and
+Services
+Combined Management Report Strategy and Business Model
+Our main objectives are presented with more detail throughout
+the report. For more information on our strategic goals, see the
+Performance Management System section; Expected
+Developments and Opportunities section; Customers section;
+and Employees and Social Investment section.
+In addition to primary KPIs, which directly measure our
+performance on our four goals, we manage a number of
+secondary performance indicators, which influence the primary
+KPIs in a variety of ways. You can read about some of these
+relationships, such as the link between our employee
+engagement and profitability, in the SAP Integrated Report
+online.
+These four corporate objectives affirm our commitment to
+innovation and sustainability, and help us deliver on our vision.
+Employee engagement: We use the employee engagement
+index to measure motivation and loyalty of our employees, how
+proud they are of our company, and how strongly they identify
+with SAP. We remain committed to achieving 82% employee
+engagement score in 2016 (2015: 81%).
+Customer loyalty: SAP uses the Customer Net Promoter Score
+(NPS) as a key performance indicator (KPI) to measure
+customer loyalty. We aim to achieve a Customer NPS score of
+25% in 2016 (2015: 22.4%). Due to changes in sampling,
+resulting from ongoing efforts to implement the survey process
+holistically in recently acquired entities, the 2015 score is not
+fully comparable with the prior year score.
+Profitability: SAP expects full-year 2016 non-IFRS operating
+profit to be in a range of €6.4 billion to €6.7 billion at constant
+currencies (2015: €6.35 billion). We expect non-IFRS operating
+profit to be in a range of €6.7 billion to €7.0 billion in 2017 and to
+be in a range of €8.0 billion to €9.0 billion in 2020.
+Growth: SAP uses various revenue metrics to measure growth.
+We expect full-year 2016 non-IFRS cloud subscriptions and
+support revenue to be in a range of €2.95 billion to €3.05 billion
+at constant currencies (2015: €2.30 billion). Further, we expect
+full-year 2016 non-IFRS cloud and software revenue to increase
+by 6% to 8% at constant currencies (2015: €17.23 billion).
+Looking beyond 2016, we have raised our 2017 ambition to
+reflect the current currency exchange rate environment and
+excellent business momentum. Assuming a stable exchange
+rate environment going forward, SAP now expects non-IFRS
+cloud subscriptions and support revenue in a range of
+€3.8 billion to €4.0 billion in 2017. By 2017, SAP continues to
+expect its rapidly growing cloud subscriptions and support
+revenue to be close to software license revenue and is expected
+to exceed software license revenue in 2018. Non-IFRS total
+revenue is expected to reach €23.0 billion to €23.5 billion in
+2017. Our high-level 2020 ambitions remain unchanged, with
+2020 non-IFRS cloud subscriptions and support revenue
+expected to reach €7.5 billion to €8.0 billion and total revenue is
+expected to be in a range of €26 billion to €28 billion.
+We have strong ambitions for sustainable business success,
+both for our company and for our customers. We believe the
+most important indicators to measure this success comprise
+both financial and non-financial indicators: growth, profitability,
+customer loyalty, and employee engagement.
+OUR GOALS FOR SUSTAINED BUSINESS SUCCESS
+Our business model aligns with and supports our business
+strategy and puts us in a strong position to drive future growth.
+By helping organizations transform into digital businesses, we
+see enormous potential to increase our share of their overall IT
+spend while providing them with greater value. As our
+technology unlocks simplicity for our customers, they, in turn,
+bring new advances to their customers in areas that directly
+impact people's lives.
+Despite these shifts, we still rely on the strengths of our direct
+sales organizations to drive most business development. As a
+global company, we set our sales go-to-market strategies at the
+global level, with our regional subsidiaries then adapting and
+executing them. Our customer-facing employees, in close
+collaboration with sales support and marketing, drive demand,
+build pipeline, and enhance relationships with customers. Our
+marketing efforts cover large enterprises as well as small and
+midsize enterprises, with our broad portfolio of solutions and
+services addressing the needs of customers of all sizes across
+industries. Additional e-commerce and digitally native offerings
+further enable a low-touch or no-touch customer journey.
+pays either usage-based or periodic fees to use our software,
+which is hosted in the cloud, and accesses it over the Internet.
+Further, we receive transaction fees from business conducted
+over our business networks.
+47
+Complexity has become a problem of staggering proportions
+and stands in the way of digital transformation and innovation. It
+is what keeps companies from turning the trends of our time -
+from the explosion of data to a rapidly growing middle class
+into business opportunities. Becoming a digital business means
+that companies must first cut through this complexity, as
+simplicity is a prerequisite for innovation. Companies must
+make their digital strategy a core part of their business strategy.
+CREATING SOCIETAL IMPACT BY ENABLING OUR
+CUSTOMERS TO INNOVATE
+To remain competitive - and create a sustainable competitive
+advantage businesses today must become sustainable digital
+businesses. In fact, experts across industries know that in the
+new digital economy, only the most adaptive businesses will
+prevail. SAP provides what is needed to become a digital
+business. Our enduring vision is to help the world run better and
+improve people's lives. Our vision is not just relevant in this time
+of change and disruption - it is essential.
+Combined Management Report General Information About This Management Report
+This report includes statistical data about the IT industry and
+global economic trends that comes from information published
+by sources including International Data Corporation (IDC), a
+provider of market information and advisory services for the
+information technology, telecommunications, and consumer
+technology markets; the European Central Bank (ECB); and the
+International Monetary Fund (IMF). This type of data represents
+only the estimates of IDC, ECB, IMF, and other sources of
+industry data. SAP does not adopt or endorse any of the
+statistical information provided by sources such as IDC, ECB,
+IMF, or other similar sources that is contained in this report. In
+addition, although we believe that data from these sources is
+generally reliable, this type of data is imprecise. We caution
+readers not to place undue reliance on this data.
+"estimate," "expect," "forecast," "future trends," "guidance,"
+"intend," "may," "might," "outlook," "plan," "project,” “predict,"
+"seek," "should," "strategy," "want," "will," "would," and similar
+expressions as they relate to us are intended to identify such
+forward-looking statements. Such statements include, for
+example, those made in the Operating Results section, our
+quantitative and qualitative disclosures about market risk
+pursuant to the International Financial Reporting Standards
+(IFRS), namely IFRS 7 and related statements in our Notes to the
+Consolidated Financial Statements section, Expected
+Developments and Opportunities section; Risk Management and
+Risks section; and other forward-looking information appearing
+in other parts of this report. To fully consider the factors that
+could affect our future financial results, both this report and our
+Annual Report on Form 20-F should be considered, as well as all
+of our other filings with the Securities and Exchange
+Commission (SEC). Readers are cautioned not to place undue
+reliance on these forward-looking statements, which speak only
+as of the date specified or the date of this report. We undertake
+no obligation to publicly update or revise any forward-looking
+statements as a result of new information that we receive about
+conditions that existed upon issuance of this report, future
+events, or otherwise unless we are required to do so by law.
+The words "aim," "anticipate,” “assume,” “believe,” “continue,'
+"could," "counting on," "is confident," "development,"
+This management report contains forward-looking statements
+and information based on the beliefs of, and assumptions made
+by, our management using information currently available to
+them. Any statements contained in this report that are not
+historical facts are forward-looking statements as defined in the
+U.S. Private Securities Litigation Reform Act of 1995. We have
+based these forward-looking statements on our current
+expectations, assumptions, and projections about future
+conditions and events. As a result, our forward-looking
+statements and information are subject to uncertainties and
+risks, many of which are beyond our control. If one or more of
+these uncertainties or risks materializes, or if management's
+underlying assumptions prove incorrect, our actual results could
+differ materially from those described in or inferred from our
+forward-looking statements and information. We describe these
+risks and uncertainties in the Risk Management and Risks
+section.
+FORWARD-LOOKING STATEMENTS
+All of the information in this report relates to the situation as at
+December 31, 2015, or the fiscal year ended on that date, unless
+otherwise stated.
+This combined group management report by the SAP Group
+(collectively, “we,” “us,” “our," "SAP,” “Group," or "Company")
+and the management report of SAP SE have been prepared in
+accordance with sections 289, 315, and 315a of the German
+Commercial Code and German Accounting Standards (GAS) No.
+17 and 20. The management report is also a management
+commentary complying with the International Financial
+Reporting Standards (IFRS) Practice Statement Management
+Commentary.
+BASIS OF PRESENTATION
+General Information
+About This
+Management Report
+43
+42
+Events after the Reporting Period.
+120
+Expected Developments and Opportunities
+95
+-
+.92
+Corporate Governance Fundamentals
+74
+Financial Performance: Review and Analysis...
+Environmental Performance: Energy and Emissions ........... 71
+.127
+Overview of the
+SAP Group
+Risk Management and Risks.
+and improve people's lives, and with Run Simple as our
+operating principle, we focus on helping our customers master
+complexity, and innovate and transform to become a
+sustainable digital business.
+Our subsidiaries perform tasks such as sales and marketing,
+consulting, research and development, cloud delivery, customer
+support, training, or administration. For a list of subsidiaries,
+associates, and other equity investments, see the Notes to the
+Consolidated Financial Statements section, Note (34).
+Our company culture puts our customers' success at the center
+of everything we do. With our vision to help the world run better
+SAP is headquartered in Walldorf, Germany; our legal corporate
+name is SAP SE. Our ordinary shares are listed on the Frankfurt
+Stock Exchange, the Berlin Stock Exchange and the Stuttgart
+Stock Exchange. The principal trading market for the ordinary
+shares is Xetra, the electronic dealing platform of Deutsche
+Börse AG. American Depositary Receipts (ADRs) representing
+SAP SE ordinary shares are listed on the New York Stock
+Exchange (NYSE), and currently each ADR represents one
+ordinary share. As at December 31, 2015, our market
+capitalization was €90.1 billion on the DAX and US$97.2 billion
+on the NYSE. SAP is a member of Germany's DAX, the Dow
+Jones EURO STOXX 50, and the Dow Jones Sustainability Index.
+Founded in 1972, SAP today is the global leader in business
+application and analytics software in terms of market share and
+the market leader in digital commerce. Further, SAP is the
+enterprise cloud company with the greatest number of users
+and the fastest-growing major database company. Our
+continued growth over more than four decades is attributable to
+relentless innovation, a diverse portfolio, our ability to anticipate
+everchanging customer requirements, and a broad ecosystem
+of partners. With approximately 300,000 customers in over 180
+countries, the SAP Group includes subsidiaries in all major
+countries and employs approximately 77,000 people.
+SAP is the global leader in business application and analytics software.
+■ SAP is the enterprise cloud company with the greatest number of users.
+■ The SAP Group includes subsidiaries in all major countries and employs
+approximately 77,000 people.
+Combined Management Report Overview of the SAP Group
+44
+Strategy and
+Business Model
+SAP offers a portfolio of solutions built around SAP HANA providing
+organizations with what they need to become sustainable digital businesses.
+■ Our business helps create long-term value by addressing customers' current
+and future needs.
+We use both financial and non-financial indicators to measure our success.
+HELPING OUR CUSTOMERS REIMAGINE THEIR
+BUSINESSES
+The world is experiencing unprecedented change that is
+transforming both our use of technology and society more
+broadly. People are connected in ways like never before. Entire
+industries have been disrupted by innovations that have brought
+the once unimaginable within reach. Technology trends such as
+hyperconnectivity, cloud computing, and Big Data go hand-in-
+hand with social and business trends that are changing how we
+live and work. Rapid urbanization, the sharing economy,
+enormous demographic change, and resource scarcity are
+demanding that leaders of tomorrow adapt to a world in which
+the pace of change continues to accelerate.
+As at December 31, 2015, SAP SE directly or indirectly
+controlled a worldwide group of 255 subsidiaries in more than
+180 countries to distribute our products, solutions, and services.
+Distributorship agreements are in place with independent
+resellers in many countries.
+We derive our revenue from fees charged to our customers for
+the use of our cloud solutions, for licensing of on-premise
+software products and solutions, and transaction fees for
+activity on our business networks. Additional sources of revenue
+are support, professional services, development, training, and
+other services.
+Partners also embed SAP technology within their offerings
+under an original equipment manufacturer (OEM) licensing
+agreement, giving customers SAP software functionality backed
+by partner industry knowledge and expertise.
+2015 was a seminal year for our partner managed cloud
+business, where our partner recruitment and enablement
+success has expanded the number of customers benefiting from
+the flexibility, rapid time to value, and pay-as-you-go economics
+of a managed cloud with enterprise-class SAP solutions.
+SAP will continue to drive business growth through partners in
+2016, continuing to identify and recruit key partners and develop
+the innovative programs and initiatives that fuel our mutual
+success.
+Combined Management Report Partner Ecosystem
+56
+56
+Customers
+■ SAP helps customers Run Simple for more sustainable business models.
+■ The Customer Engagement Initiative offers customers early insight into
+planned innovations, so they can influence new developments.
+■ We saw strong customer wins in every region.
+HELPING CUSTOMERS RUN SIMPLE
+When SAP customers Run Simple, it improves their ability
+ultimately to become best-run businesses that create more
+sustainable business models - which, in turn, help us ensure our
+own long-term viability. That is why we strive to provide more
+than just software and services; we continually engage with our
+customers at every stage not only during the sales and
+implementation phases, but also through the sharing of best
+practices and innovations.
+2015, encourages partners to build complementary solutions on
+top of our technology platforms and quickly monetize those
+solutions through SAP e-commerce channels.
+-
+-
+■ SAP has more than 13,000 partners worldwide.
+■ Partners engaged with nearly 90% of new SAP customers in 2015.
+WORKING TOGETHER TO EXTEND SAP'S REACH IN THE
+MARKETPLACE
+SAP proudly works with a network of more than 13,000 partners
+worldwide that helps companies of all sizes tackle complexity,
+grow their business, and Run Simple. SAP partners extend our
+reach in the marketplace and accelerate our Company's growth,
+reaching thousands of new companies and millions of users
+each year. Our partner community plays an important role in our
+success, delivering expertise through pioneering solutions to
+provide our mutual customers tools to succeed in the
+developing digital and services-based economy.
+Partners add tremendous value to both SAP and customers.
+develop
+They sell our software and cloud services,
+complementary software and solutions, and provide a broad
+portfolio of implementation and professional services that
+support customers across all geographies and industries.
+Last year we saw outstanding growth in SAP's partnerships. For
+example, partners were responsible for nearly 90% of new SAP
+software customers. SAP Business One, one of our core ERP
+solutions for small and midsize enterprises (SMEs) and sold
+exclusively through partners, reached its 50,000th customer.
+Nearly 55% of all SAP S/4HANA software license deals were
+won by partners and our cloud revenue through partners
+reported triple-digit growth. Together with our strategic
+technology and service partners, we created a number of
+powerful and compelling joint solutions and services that help
+customers transform and run their businesses simpler.
+In the past year, SAP made several transformational moves
+designed to increase our joint success in the market, including:
+SAP SME Solutions: More than 80% of SAP customers are
+small and midsize enterprises (SMEs), and we support the
+majority through our partner networks and other channels.
+To boost our reach, we introduced this SME-specific portfolio
+marketing approach and a Run Simple advertising and
+-
+-
+demand generation campaign around our core ERP solutions
+for SMES: SAP Business All-in-One, SAP Business ByDesign,
+and SAP Business One. As growing businesses transform in
+the digital economy, SAP has equipped partners with these
+and other tools, solutions, and programs they need to drive
+more demand in this important market.
+SAP Anywhere debut: Late in 2015, we launched SAP
+Anywhere, a revolutionary cloud solution that allows small
+businesses to connect with customers anytime, anywhere on
+any device. It is now available in China and is expected to be
+introduced in the United Kingdom and the United States in
+2016. SAP Anywhere represents a new opportunity for
+partners. With our commitment to "SAP Anywhere,
+Everywhere," our partners can resell a complete cloud-based
+solution that manages marketing, sales, and e-commerce
+activities in one complete front-office system using real-time
+analytics.
+SAP PartnerEdge program enhancements: To build
+stronger relationships and increased business opportunities,
+SAP introduced the next generation of its flagship partner
+program in 2015. Among the improvements, we reduced the
+number of partner engagement options from more than 30 to
+just four - Run, Build, Service, and Sell - making it easier for
+partners to engage with SAP. We streamlined processes and
+relaunched the SAP PartnerEdge Web site to give partners
+easier access to resources and real-time visibility into their
+SAP business.
+While reselling, implementation, and services are a large part of
+our ecosystem's effort, SAP partner innovation on our
+technology platforms is also essential to market penetration.
+Partners develop their own applications and solutions called
+SAP Solution Extensions, which can then be sold to customers
+and other partners. These partner-developed solutions are
+tested, validated, approved, and supported by SAP.
+In addition, the SAP PartnerEdge program for Application
+Development, which grew to more than 1,100 active members in
+Combined Management Report Partner Ecosystem
+55
+-
+One example of this strategy is our Customer Engagement
+Initiative. This program offers customers early insight into
+certain aspects of our planned innovations, so they can
+influence new developments. In addition, it offers customers the
+opportunity to network on topics of mutual interest. These
+networking opportunities take place at a variety of global events,
+including the SAPPHIRE NOW, SAP Select, SAP Forum, and SAP
+TechEd conferences, as well as virtual events.
+Some examples by region include the following customers:
+Customer loyalty is one of our four Company-wide strategic
+objectives, along with growth, profitability, and employee
+engagement. In 2015, our combined on-premise and cloud
+Customer NPS is 22.4% (2014: 19.1%). Due to changes in
+sampling, resulting from ongoing efforts to implement the
+survey process holistically in recently acquired entities, the 2015
+score is not fully comparable with the prior year's score.
+Stara, a leader in agricultural machinery headquartered in
+Brazil, selected SAP HANA Cloud Portal, as well as SAP Cloud
+for Customer, SAP SuccessFactors Employee Central, and
+SAP SuccessFactors Talent Management solutions. Stara
+expects to simplify its business processes while improving
+sales efficiency through greater control of critical company
+information.
+ASIA PACIFIC JAPAN (APJ) REGION
+-
+-
+-
+Bosch Group, a leading global supplier of technology and
+services, has chosen SAP S/4HANA to rebuild its IT
+infrastructure, seeking a simplified and harmonized
+landscape that helps them offer connected services to
+customers.
+internal foundational platform to support its digital
+transformation. With SAP S/4HANA, HPE aims to be better
+able to take advantage of real-time access to operational and
+financial data with the goal of improving the speed of decision
+making and operating more efficiently; reducing the time for
+financial close; and delivering actionable intelligence
+throughout its business. The aim is to ensure HPE becomes
+more competitive in the marketplace.
+-
+St Barbara, an Australian-based, ASX-listed gold producer
+and explorer, selected the SAP SuccessFactors Performance
+& Goals solution. The solution has enabled St Barbara to
+replace its paper-based performance management process
+with a cloud-based solution that also supports its offshore
+locations.
+PetroChina, China's largest oil producer, has implemented
+SAP Business Warehouse powered by SAP HANA and SAP
+BusinessObjects Business Intelligence solutions. Since the
+system went live in late July, HR reporting performance is
+three to ten times faster than before, which has empowered
+HR director-level management to make strategic decisions
+based on Big Data analysis.
+Lenovo Group, a multinational computer technology
+company, is expanding its HANA footprint by moving data
+from all systems to the SAP HANA platform.
+La Trobe University in Australia went live with SAP S/4HANA
+Finance. As one of the first organizations globally to adopt
+SAP S/4HANA Finance, La Trobe University aims to benefit
+from instant insight across financial and operational
+processes to drive value through planning, analysis,
+prediction and simulation. They have a term for it; they call it
+"Brilliant Basics".
+Boryung Pharmaceutical, one of the leading pharmaceutical
+manufacturers in South Korea, selected SAP S/4HANA
+Finance for its simple user experience, simple business
+solution, simple data model, and shorter go-live time.
+-
+EUROPE, MIDDLE EAST, AND AFRICA (EMEA) REGION
+ArcelorMittal, the world's leading steel and mining company,
+selected SAP S/4HANA to streamline business processes,
+improve productivity, and decrease costs. The company
+seeks to enhance its position by serving an increasingly
+strong innovation agenda around the world.
+57
+Combined Management Report Customers
+Hewlett Packard Enterprise Company (HPE) has
+committed to and invested in implementing one of the largest
+installations of the SAP S/4HANA Finance solution for their
+Our goal continues to be to best support our customers'
+success and the success of SAP. For example, we are expanding
+on the insights provided by our surveys through root cause
+analysis to gain a better understanding of customer problems,
+why they happened, and what needs to be done to prevent those
+problems from happening again.
+Our combined on-premise and cloud NPS target for 2016 is
+25%, 2.6 percentage points above our 2015 achievement.
+For more information about the Customer NPS, see the
+Performance Management System section and the Non-
+Financial Notes section of the SAP Integrated Report 2015
+online.
+STRONG CUSTOMER DEMAND
+Our strategy focuses on offering solutions and services to help
+customers Run Simple today and tomorrow. To do so, we offer a
+spectrum, from complete suites to applications that are lean,
+focused, quick to implement, and highly mobile. In 2015, we saw
+customers embrace this strategy by licensing or subscribing to
+the full range of SAP software, from comprehensive solutions for
+large enterprises to the latest mobile apps.
+-
+NORTH AMERICA AND LATIN AMERICA (AMERICAS)
+REGION
+-
+-
+Adobe, a multinational computer software company, has
+chosen the SAP Hybris Billing solution as its monetization
+and billing platform to support a new SaaS business model.
+Adobe seeks to support fast subscription-revenue growth on
+a flexible and scalable platform, while significantly reducing
+time to launch innovative and flexible offers and promotions.
+American Airlines, the world's largest airline, has selected
+several SAP SuccessFactors solutions, as well as the SAP
+HANA Enterprise Cloud service and SAP HANA Cloud
+Platform. The company's goal is to enhance service to its
+employees and reduce operating costs while remaining
+focused on its core business.
+E.ON Group has chosen the limited runtime edition of SAP
+HANA; SAP Mobile Platform; and SAP SuccessFactors HCM
+Suite. The company, which is splitting into two entities, seeks
+to streamline its system landscape, replace homegrown
+software, and reduce its on-premise footprint.
+City Football Group (CFG) is the owner of a number of
+soccer-related businesses including Manchester City Football
+Club and New York City Football Club. CFG and its clubs will
+implement a wide variety of cloud-based solutions powered
+by SAP HANA with the aim of simplifying their worldwide
+operations, scaling their business, increasing productivity,
+and enhancing the fan experience.
+-
+Eastman Kodak, a technology company focused on imaging,
+selected the SAP S/4HANA suite to help reduce total cost of
+IT ownership. In addition, Kodak plans to establish an IT
+infrastructure to position its organization for future growth
+and innovation.
+■ We work closely with partners to build, service, and sell SAP solutions for
+customers.
+CUSTOMER FOCUS REFLECTED IN CUSTOMER NET
+PROMOTER SCORE
+Partner Ecosystem
+Discrete manufacturing
+Combined Management Report Acquisitions
+Manufacturing
+Human Resources
+Commerce
+Finance
+Asset Management
+-
+-
+-
+-
+-
+Lines of Business
+49
+49
+Combined Management Report Products, Research & Development, and Services
+SAP for Sports & Entertainment
+SAP for Telecommunications
+SAP for Travel & Transportation
+SAP for Professional Services
+54
+R&D/Engineering
+Sales
+Service
+Today, our business network portfolio includes SAP Ariba,
+Concur, and SAP Fieldglass solutions. Each is a leading provider
+of cloud applications, services, and cloud networks through
+open platforms that connect internal business processes to a
+global ecosystem of partners.
+We recognize that business applications today must deliver an
+effortless user experience while ensuring that information and
+data flow back into the business and across networks in a secure
+way. These applications serve to maintain compliance while
+enabling choice. They are designed for a more digital, highly
+mobile, and interconnected world, and help drive greater value
+for employees, organizations, and the vast networks of partners
+and individuals they rely on.
+-
+In today's hyperconnected business landscape, how companies
+interact with the outside world is undergoing profound change.
+At SAP, we are helping to lead this transformation through our
+business networks, which are helping drive innovation in key
+areas that impact an organization's core operations. Our
+business network strategy is to bring the world's vast network of
+partners, suppliers, and services to best-in-class solutions that
+fulfill the needs of specific lines of business all within a few
+clicks. Moving far beyond basic automation, our network
+solutions are enabling new processes and outcomes for
+customers. They are also part of a new wave of solutions that
+are more consumer-friendly and business-ready than in the
+past.
+DELIVERING GREATER VALUE THROUGH THE POWER OF
+BUSINESS NETWORKS
+We were awarded the prestigious Red Dot Award for the SAP
+Fiori UX design concept in the Interaction Category in
+September 2015.
+interaction and action-oriented personal notifications. The
+updated design delivers improvements while staying consistent
+with our original UX principles of being role-based, responsive,
+simple, coherent, and delightful.
+SAP for Media
+Providing an elegant, intuitive user experience, SAP Fiori has
+evolved since its introduction in 2013 into the new user
+experience (UX) for SAP software. It reflects a broader shift in
+software design that puts as much focus on how people actually
+use technology as on specific features and functions. SAP Fiori
+offers innovative new features such as improved contextual
+-
+PROVIDING USERS WITH FREEDOM, FLEXIBILITY, AND
+ELEGANT DESIGN
+Customer engagement and commerce (CEC): Our CEC
+solutions comprise SAP and SAP Hybris software that serve the
+commerce, marketing, sales, and service lines of business,
+enabling business-to-business and business-to-consumer
+companies to provide real-time, consistent, contextual, and
+relevant experiences to their customers. Regardless of channel
+or device, these solutions deliver personalized engagement
+based on context and proven industry expertise and therefore
+go beyond traditional customer relationship management,
+which no longer meets the needs of today's consumer-driven
+market.
+Human capital management (HCM): Our HCM solutions,
+including SAP SuccessFactors solutions, help organizations
+increase the value of their total workforce by developing,
+managing, engaging, and empowering their people. These
+solutions address the full range of HR needs, from hiring the
+right people and managing contingent workers to simplifying the
+way people work. We focus on delivering a simple and intuitive
+user experience through mobile device or desktop.
+In addition, we are building other functional innovations that
+serve each line of business. For example:
+Sustainability
+Sourcing and Procurement
+Supply Chain
+We believe digital transformation must include a focus on the
+user experience, as expectations by our customers - and their
+customers have risen enormously in recent years. For many,
+mobile has become the technology of choice, providing simple,
+always-on access to information, processes, and services. To
+that end, key mobile services such as app creation and
+management, security, and extensibility are available as part of
+SAP HANA Cloud Platform, giving our customers simple access
+to the technologies that support new business models.
+& Operations
+SAP for Engineering, Construction
+SAP for Public Sector
+Industries
+INNOVATING FOR INDUSTRIES AND LINES OF BUSINESS
+As the market leader in enterprise application software, we offer
+end-to-end solutions specific to 25 industries and 12 lines of
+business, localized by country and for companies of any size.
+Beyond SAP S/4HANA Finance, the on-premise edition of SAP
+S/4HANA drives business value in other areas such as materials
+management as well as sales and distribution, among others,
+taking full advantage of a simplified data model and a responsive
+user experience.
+A prime example of our innovations is SAP S/4HANA Finance, a
+comprehensive solution for the office of the CFO. This solution
+brings enhanced functionality to a range of key areas from
+financial planning and analysis to collaborative finance
+operations. It also provides our customers with seamless
+flexibility, with deployment either on premise or in the cloud.
+-
+SAP S/4HANA represents a huge step forward in simplifying
+how applications are built, consumed, and deployed. It provides
+real-time, mission-critical industry-specific business processes
+across organizations and lines of business. As a basis,
+enterprises can now support end-to-end operations across key
+business functions through a fully digitized enterprise
+management solution named SAP S/4HANA Enterprise
+Management.
+LAUNCHING SAP S/4HANA
+Industry Sector
+Consumer
+The road to becoming a digital business is unique to every
+organization. Our portfolio supports our customers wherever
+they are on their journey. We want to offer the broadest
+integration in the industry, with customers seamlessly
+connecting SAP and third-party software across a range of
+environments to reduce IT complexity. At the same time, our
+user experience provides both elegance and ease-of-use across
+multiple devices and interfaces. Customers also have the
+benefits of efficiency and flexibility through a variety of
+deployment models.
+solutions.
+In addition to expanding our own portfolio, we are enabling
+others to develop a much broader landscape of applications
+through SAP HANA Cloud Platform, our strategic platform-as-a-
+service offering. Providing both ease and flexibility, this cloud
+platform allows our customers and partners to build, extend,
+run, and sell applications and services in the cloud. It includes
+infrastructure, data, and storage, as well as a toolbox of platform
+and application extension services. SAP HANA Cloud Platform
+also enables connectivity between SAP solutions, including on-
+premise software such as SAP Business Suite as well as
+software-as-a-service offerings such as SAP SuccessFactors
+The SAP HANA Vora engine adds a new dimension to these
+capabilities, allowing our customers to combine their business
+data with Big Data managed on Hadoop compute clusters. It
+simplifies ownership of Big Data and supports faster, interactive,
+and more precise decision making.
+HELPING CUSTOMERS INVEST
+To help companies invest in SAP solutions and associated
+services and hardware, SAP Payment services offers customers
+payment plans. SAP Payment services can help preserve
+liquidity, provide an alternative to credit from customers'
+existing banking relationships, and balance their budgetary
+priorities, while giving them the flexibility to choose their
+preferred solution.
+Combined Management Report Customers
+58
+Building on our experience, we are developing a suite of SAP
+solutions for the Internet of Things (IoT). The functionalities of
+our SAP HANA Cloud Platform loT services help accelerate
+development and deployment, as well as improve the ability to
+manage real-time loT and machine-to-machine applications. To
+support the development of these new innovations, we continue
+to leverage our customer co-innovation framework, which helps
+us address the evolving digitization needs of our customers.
+The Ariba Network is a leading marketplace used by
+approximately two million companies to discover, connect, and
+collaborate over US$740 billion in commerce every year. The
+network connects companies across the full commerce process
+· from sourcing through payment settlement. It also provides
+insights and technology to help companies improve their
+operations and to connect and collaborate in new ways that
+are only possible in a networked environment.
+Energy and natural resources
+Hydro, a global aluminium company based in Norway,
+selected SAP S/4HANA to "replatform" and renew its IT
+system landscape. With the suite, Hydro expects to have
+access to real time information, thereby running at optimal
+efficiency and safety, which are key elements of its strategic
+vision.
+SAP for Higher Education &
+Research
+SAP for Healthcare
+SAP for Defense & Security
+Services
+Public services
+SAP for Insurance
+SAP for Banking
+Industry Portfolio
+Financial services
+SAP for Oil & Gas
+SAP for Mining
+SAP for Mill Products
+SAP for Chemicals
+SAP for High Tech
+SAP for Industrial Machinery &
+Components
+SAP for Wholesale Distribution
+SAP for Aerospace & Defense
+SAP for Automotive
+SAP for Consumer Products
+SAP for Life Sciences
+SAP for Retail
+SAP for Utilities
+-
+Marketing
+Combined Management Report Products, Research & Development, and Services
+In mid-2015, we also introduced SAP Activate, an innovation
+adoption framework to further support the fast and effective
+implementation of SAP S/4HANA. Offering a unique
+combination of SAP Best Practices and guided configuration,
+the new methodology provides ready-to-run digitized business
+processes optimized for SAP S/4HANA. It allows customers to
+flexibly choose the approach for their business needs, from a
+new implementation to an integration to a migration scenario.
+New implementation: Customers migrating from a third-
+party legacy system or installation of SAP S/4HANA for a
+new customer
+Landscape transformation: Customers consolidating their
+landscape or carving out selected entities or processes into a
+system running SAP S/4HANA
+System conversion: Customers changing their current SAP
+system to SAP S/4HANA
+-
+We see enormous potential for our customers to simplify their
+own businesses and seize new opportunities through SAP
+HANA, with SAP S/4HANA as their new digital core. For this
+reason, adoption of these innovations is a key pillar in our
+service and support strategy. To ensure the expected customer
+outcomes, we offer high-value services tailored to the various
+customer scenarios supporting the adoption of SAP S/4HANA:
+In 2015, we radically simplified how we engage with our
+customers and deliver services, greatly harmonizing our
+portfolio. Under the new SAP ONE Service approach, we also
+introduced a new commercial model providing one service
+portfolio, out of one global organization, and under one contract.
+In addition to creating new solutions for the digital era, we
+recognize that we must partner with our customers to help them
+make the most of these innovations based on their unique needs
+and goals. Through our worldwide service and support, we guide
+companies at every stage of their digital transformation. We
+focus on creating and delivering strategies for our customers'
+digital journey, accelerating innovation, driving simplification of
+business and IT, and ensuring that expected business value is
+realized and continuously optimized.
+While our intellectual property is important to our success, we
+believe our business as a whole is not dependent on any
+particular patent.
+information. Our software innovations continue to strengthen
+our market position in business solutions and services. Our
+investment in R&D has resulted in numerous patents. As at
+December 31, 2015, SAP holds a total of more than 7,224
+validated patents worldwide. Of these, 893 were granted and
+validated in 2015.
+As a market leader in enterprise applications, SAP actively seeks
+intellectual property protection for innovations and proprietary
+Patents
+2015
+2014
+2013
+Combined Management Report Products, Research & Development, and Services
+52
+Concur Travel & Expense is the world's leading travel and
+expense management system, with more than 32 million users.
+The Concur system goes beyond the basic automation of
+expense reports and provides visibility and insights that support
+better decision making for employee travel and spend, helping
+businesses to focus on what matters most.
+42
+For more information about our consolidated investment funds,
+see the Notes to the Consolidated Financial Statements section,
+Note (34).
+SAP's total commitment to Sapphire Ventures is US$1.4 billion
+for use over the lifetime of its respective funds. Investments
+through the funds are currently ongoing.
+Sapphire Ventures aims to invest in the next generation of global
+category technology leaders as well as early-stage venture
+capital funds in enterprise and consumer technology.
+Specifically, Sapphire Ventures pursues opportunities in which it
+can help fuel growth by adding expertise, relationships,
+geographic reach, and capital. It invests globally with a particular
+focus on emerging companies and early stage funds in Europe,
+Israel, and the United States, as well as in Brazil, China, and
+India.
+build industry-leading businesses. Over the past 19 years,
+Sapphire Ventures has invested in more than 130 companies on
+five continents. Some of these companies have been acquired
+by third parties or have become publicly listed companies.
+INVESTING IN THE NEXT GENERATION OF TECHNOLOGY
+LEADERS THROUGH VENTURE ACTIVITIES
+Through investments in venture capital funds managed by
+Sapphire Ventures (formerly called SAP Ventures), which
+comprises our consolidated investments in venture funds, SAP
+supports investments in entrepreneurs worldwide that aspire to
+For more information about our acquisitions, see the Notes to
+the Consolidated Financial Statements section, Note (4).
+Organic growth is the primary driver of our growth strategy. We
+will invest in our own product development and technology
+innovation, improving the speed, number of projects, and
+innovations brought to market. We may also acquire targeted
+and "fill-in" technology and software to add to our broad
+solution offerings and improve coverage in key strategic
+markets. By doing so, we strive to best support our customers'
+needs for simplified operations. We do not anticipate significant
+acquisitions in 2016 or 2017.
+2012
+As SAP prepares itself for the new digital economy, we may
+make acquisitions that advance our strategic goals. In 2015, SAP
+acquired Multiposting, a French cloud-computing company with
+more than 80 employees that provides software for the
+automatic posting of jobs and internships on the Internet.
+Multiposting is based in Paris and a European leader in job
+posting solutions. With this acquisition, SAP plans to offer
+customers the best end-to-end cloud recruiting suite on the
+market, including the ability to efficiently post jobs to a global
+network of thousands of channels. The Multiposting solution will
+be available as part of the existing recruiting offering in our
+human capital management portfolio as well as in all its current
+forms - as a stand-alone product, as a Web service, and through
+import.
+■ Sapphire Ventures continues to invest in the potential next generation of
+technology leaders worldwide.
+■ We anticipate targeted and "fill-in" technology and software acquisitions, but
+no significant business combinations.
+Organic growth is the primary driver of our growth strategy.
+Acquisitions
+53
+Combined Management Report Products, Research & Development, and Services
+As they continue on their path to digitization, we work with large
+enterprise customers to forge a co-engineering and co-
+innovation relationship, so that they can influence and shape
+existing SAP solutions while gaining early access to product
+innovation. We help define future software solution standards
+together with our customers in comprehensive engagements
+and serve as a trusted advisor during delivery of innovative
+solutions for the future.
+FOCUSING ON ORGANIC GROWTH AND TARGETING "FILL-
+IN" TECHNOLOGY THROUGH ACQUISITIONS
+2011
+GUIDING OUR CUSTOMERS THROUGH EVERY STEP OF
+THEIR DIGITAL TRANSFORMATION
+2,845
++5%
+RESEARCH AND DEVELOPMENT
+Corporate performance management to set and track
+measurable performance objectives through planning,
+budgeting, forecasting, and financial consolidation tools
+Trusted data discovery and agile visualization to bring
+reliable data to life in real time through intuitive visualizations
+Advanced analytics to combine the power of predictive
+processing with intuitive modeling and advanced data
+visualization
+-
+Among other features, key analytics solutions from SAP support:
+-
+IIII
+With businesses shifting at an ever-accelerating pace towards
+digitalization and the cloud, leading our customers through
+change is more important than ever before. We do this every day
+by empowering our employees and collaborating with our
+customers to develop world-class software and next-generation
+solutions. SAP further strengthened our global research and
+development (R&D) efforts in 2015 by investing in our SAP Labs
+network and the new SAP Innovation Center Network.
+Based on SAP Cloud for Analytics, we also launched SAP Digital
+Boardroom, a multifaceted solution that offers executive
+decision makers new ease and elegance in accessing company
+data in real time, and the ability to engage in what-if queries and
+create visualizations. Designed to provide far greater
+transparency to board members, executives, and other decision
+makers, fully automated business intelligence capabilities in the
+solution not only improve the quality and speed of reporting, but
+also facilitate greater trust through more effective collaboration
+and decision making.
+The speed of the digital economy demands that companies
+make informed decisions faster than ever before, as data can
+become obsolete in a matter of seconds. SAP HANA has vastly
+increased the efficiency with which our customers can use
+analytics to drive decision making. With transactions and
+analytics combined into a single in-memory platform, our
+customers can access a "single source of truth" for real-time
+planning, execution, reporting, analysis, and predictive modeling
+on very large volumes of data.
+-
+PROVIDING REAL-TIME, ADVANCED ANALYTICS TO DRIVE
+BETTER DECISION MAKING
+Each of these three cloud network companies has made
+connecting to partners, suppliers, and services through an open
+platform a core part of their architecture and approach.
+Ultimately, we aim to go further, connecting all the world's
+networks. We are working to create platforms for networks and
+services that will further transform the business landscape
+with the purpose of creating new outcomes, services and
+experiences that make businesses run more simply and with
+greater opportunities for innovation.
+SAP Fieldglass solutions simplify the process of procuring and
+managing external workforce services. They provide visibility
+into service providers and non-employee workers and help
+improve compliance and cost control. As a centralized, single
+point of access to engage with more than 1.9 million external
+workers in approximately 130 countries, SAP Fieldglass
+solutions connect consultancies, staffing firms, independent
+contractors, and other service providers, so business users can
+procure services from anywhere in the world with just a few
+clicks. As an open platform, SAP Fieldglass also connects to
+financial, HR, payroll, and procurement systems.
+50
+50
+In 2015, we further simplified our offering with the introduction
+of the SAP Cloud for Analytics solution, a software as a service
+that aims to bring all analytics capabilities together for a richer
+user experience.
+Nearly all of our software products are developed at our 15 SAP
+Labs locations in 13 countries across the globe. This global reach
+means that we have access to leading talent worldwide; in
+addition, we can collaborate with top universities throughout the
+world and have access to major technology hubs as well as
+diverse and vibrant startup communities. By understanding
+trends in different regions, as well as the specific needs of our
+customers that operate there, SAP has a major strategic
+advantage in developing products and services for the future.
+Whether in the cloud, on premise, or a combination of the two,
+our analytics solutions enable our customers to access
+immediate, actionable intelligence. Even as data volumes grow
+exponentially, companies can simplify their business processes
+and gain insights to better manage every aspect of their
+organization from integrated planning to risk and compliance.
+We have identified several key markets and opportunities that
+hold significant revenue potential and allow us to apply our
+unique capabilities. Currently, areas include future enterprise
+applications, personalized medicine, and smart cities. We are
+tackling a range of challenges facing these areas, from designing
+the future of business software to developing new approaches
+to treating cancer and helping decrease traffic congestion.
+In addition to our SAP Labs, we also expanded from two SAP
+Innovation Center locations to an SAP Innovation Center
+Network of 10 locations across four continents. This network is a
+dedicated unit within our development organization that is
+responsible for identifying new markets for SAP and pioneering
+game-changing solutions using transformational technologies.
+Through the SAP Innovation Center Network, we can closely
+collaborate with customers, partners, and academia to explore
+trends such as machine learning and block chain, among others.
++1%
++17%
+2,282
+2,261
+1,935
++12%
+€ millions | change since previous year
+Research and Development (IFRS)
+2,331
++2%
+At the end of 2015, our total full-time equivalent (FTE) count in
+development work was 20,938 (2014: 18,908). Measured in
+FTEs, our R&D headcount was 27% of total headcount (2014:
+25%). Total R&D expense not only includes our own personnel
+costs but also the external cost of works and services from the
+providers and cooperation partners we work with to deliver and
+enhance our products. We also incur external costs for
+translating, localizing, and testing products, for obtaining
+certification for them in different markets, patent attorney
+services and fees, strategy consulting, and the professional
+development of our R&D workforce.
+Combined Management Report Products, Research & Development, and Services
+51
+Our innovation stems from many places, and we draw on the
+ideas of our customers, partners, startups, academia, and, most
+importantly, our own employees. Our overarching goal is to
+foster organic innovation and support the transformation of
+great ideas into profitable business. In support of this vision, we
+established a Company-wide "intrapreneurship" program that
+enables employees to develop their ideas in an internal
+incubator at SAP.
+Our revitalized research organization has become an applied
+research entity with its main focus on machine learning for
+enterprise applications, personalized medicine, in-memory data
+management, and security. Our new research approach focuses
+sharply on potential business impact while collaborating with the
+best research institutions worldwide for selected topics.
+R&D Investment
+SAP's strong commitment to R&D is reflected in our
+expenditures: In 2015, we increased our R&D expense (IFRS) by
+€515 million, to €2,845 million (2014: €2,331 million). We spent
+13.7% of total revenue on R&D in 2015 (2014: 13.3%). Our non-
+IFRS R&D expense as a portion of total operating expenses
+declined slightly from 18.5% to 18.3% year-over-year.
+In addition to our employees, our customers provide us with
+unique insights about their business models and digitization
+challenges. We also work with customers on co-innovation and
+custom development projects. Our partners and their solutions
+enhance these efforts in a range of ways, such as at our
+SAP Co-Innovation Lab locations, which support engagements
+ranging from strategic alliances to key proofs of concept.
+PROMOTING INCLUSION, WELL-BEING, AND SOCIAL
+INNOVATION
+CREATING AN ENVIRONMENT THAT DRIVES INNOVATION,
+PERFORMANCE, AND ENGAGEMENT
+As another example, SAP again sponsored “People Weeks," a
+two-week program designed for employees to learn from each
+other, exchange ideas, and cultivate a greater connection across
+cultures, genders, and generations. Under the motto "Shine
+through the Cloud," the event reached 25,000 employees in 75
+locations and 52 countries.
+With our "Accelerate Winning in HR" initiative, our HR
+organization helps support business goals with our domain
+and functional knowledge. In 2015, approximately 130 HR
+experts supported sales teams in HR deal engagements. We
+were able to convey a true "SAP Runs SAP" story to potential
+customers with our SAP expertise.
+To help make our employees' lives easier when dealing with
+people-related topics, we continue to transform our entire
+HR-IT landscape with the ongoing implementation of SAP
+SuccessFactors solutions.
+In 2015, SAP again offered a Share Matching Plan (SMP) that
+enables employees to purchase discounted shares and
+receive additional matching shares. Employees also received
+Restricted Stock Units (RSUs) under the Employee
+Participation Plan (EPP), as well as a Stock Option Plan (SOP)
+that rewards selected employees and executives.
+-
+It is our goal to create an environment and a workplace that
+drives innovation, high performance, and employee satisfaction;
+we do so by providing the following benefits and activities:
+In 2015, we also hosted many learning culture workshops as well
+as virtual and in-person coffee corner sessions worldwide as an
+opportunity to foster exchange with peers and managers.
+Professional development offerings (self-paced online programs
+that include language learning as well as technical and soft-skills
+training) are open to all employees. In addition to learning
+portfolios offered by board areas, virtual self-paced programs
+support employees building impactful development plans that
+meet their career goals. Our peer-to-peer learning portfolio
+includes coaching, mentoring, job shadowing, and facilitation
+opportunities. Our Global Coaching program received the 2015
+International Coaching Federation Prism Award. Similarly, our
+Global Customer Operations (GCO) University program won the
+Brandon Hall Gold Award for Excellence in Sales Performance.
+67
+Combined Management Report Employees and Social Investments
+Diversity and Inclusion
+Our learning culture supports employees at all levels and roles in
+their learning efforts. Building on our philosophy of "everyone is
+a talent," we want to maximize the skills of all our employees.
+2015 was a major year for learning at SAP, with a focus on
+stronger governance and increased transparency on how we
+spend our learning funds.
+MAKING LEARNING A COMPELLING EXPERIENCE FOR
+EVERYONE
+In July 2015, leaders and selected high-performing employees
+participated in a virtual leadership summit with a focus on
+cascading consistent messaging for SAP's digital business
+framework. This provided critical alignment for our strategy and
+the channels to communicate it throughout SAP. The summit
+included an in-depth financial update, positioning and
+messaging for the digital business framework and an aggregate
+report of the recently completed leadership assessments for the
+top 250 leaders.
+We need leaders at every level who internalize what it will take to
+achieve our strategy, have the mindset to amplify the
+intelligence and capabilities of everyone around them, and have
+the ability to accelerate business transformation. In 2015, we
+mandated a three-day program for all our top leaders that
+resulted in each leader creating an individual plan for how they
+will lead SAP's transformation. In 2015, we also launched a
+flagship program for first-level people leaders who are
+responsible for guiding 75% of SAP's workforce. Corresponding
+programs go live in the first quarter of 2016 for mid- and
+executive-level leaders. All programs are mandatory for people
+leaders who aspire to advance in their career.
+In 2015, we continued to move the needle of leadership trust
+measured by our People Survey 2015 that ran in October. In
+2015, the overall leadership trust score for people leaders, which
+uses the Net Promoter Score (NPS) methodology, was 52.3%
+compared to 46.8% for 2014 against a target of 51%. For 2016,
+we are committed to keep the 2015 leadership NPS value of
+more than 52%.
+52
+An inclusive culture inspires greater innovation, helps us better
+connect with and serve our customers, fosters employee
+engagement, and makes SAP a more attractive workplace. At
+SAP, our diversity and inclusion efforts focus on four key areas:
+right skills and digital mindset in a competitive market where
+digital skills are scarce.
+Gender intelligence
+68
+We invest in extensive employee benefits, programs, and
+services that truly make people's lives better:
+Health and Well-Being
+"Embrace differences"
+"Stay curious"
+"Keep the promise"
+"Build bridges, not silos"
+"Tell it like it is"
+In early 2015, our "How We Run" initiative was launched. Its
+outcome replaced the SAP passions by defining behaviors that
+describe what makes SAP unique. In a bottom-up approach,
+employees had the opportunity to define the behaviors that link
+SAP's culture to its strategy. The result was five distinct
+behaviors:
+SAP has also made great strides in other areas such as the
+advancement of lesbian, gay, bisexual, and transgender (LGBT)
+rights. The Global Pride@SAP employee network has grown to
+more than 5,000 members, sponsoring numerous activities and
+initiatives throughout the year. In April, SAP joined the Human
+Rights Campaign (HRC) Business Coalition for Workplace
+Fairness in the United States, supporting the U.S. Employment
+Non-Discrimination Act (ENDA). SAP earned top scores in the
+HRC Foundation's 2016 Corporate Equality Index.
+Our Autism at Work program, an initiative that enables people
+with Autism Spectrum Disorder (ASD), continues to gain
+momentum and recognition. In October 2015, we also launched
+the program in Australia. Now implemented in eight countries,
+the program has won numerous accolades including the
+Catalyst Award of the US organization The Arc, for people with
+intellectual and developmental disabilities, and others. SAP is
+committed to having 1% of our total workforce composed of
+individuals with ASD by 2020. As of today, SAP counts a total of
+approximately 100 ASD employees. These employees can add
+enormous value to our ability to innovate with their high
+attention to detail in development and data analysis and
+contribute to us as a diverse company.
+For our commitment to gender equality in the workplace SAP
+America was awarded with the Economic Dividends for Gender
+Equality (EDGE) certificate as the first technology company in
+the United States.
+Additional initiatives to support female careers at SAP include
+the Women's Professional Growth Webinar series, the Business
+Women's Network, and the Women@SAP online community.
+Excellence Acceleration Program (LEAP), a highly respected and
+award-winning development program that helps prepare high-
+potential women for leadership roles at SAP. In May 2015, SAP
+co-sponsored the first Women's Leadership Summit at the
+SAPPHIRE NOW conference.
+We offer executive sponsorships for women and strive for a
+qualified, equally distributed hiring shortlist that aligns with our
+corporate diversity targets. Additionally, we offer the Leadership
+SAP has publicly stated our commitment to achieve a workforce
+of 25% women in management by the end of 2017. We have
+made great strides toward our goal, with year-over-year growth
+from 21.3% in 2014 to 23.6% in 2015.
+Culture and identity
+-
+Cross-generational intelligence
+Differently-abled people
+-
+Our leadership principles (ensuring customer success, driving
+simplicity, developing amazing talent) remain the foundation for
+leadership at SAP. With the demands of digitization, our leaders
+must operate with a comprehensive end-to-end view that
+focuses on delivering both immediate and long-term value for
+customers while optimizing operations. However, our leaders
+also need to focus on attracting and retaining talent with the
+Combined Management Report Employees and Social Investments
+ENGAGING OUR PEOPLE THROUGH IMPACTFUL AND
+INSPIRATIONAL LEADERSHIP
+-2,797
+-2,557
+346
+-2,211
+Cost of services
+-3,313
+180
+-3,133
+-2,716
+125
+-2,590
+516
+Total cost of revenue
+696
+-5,930
+-5,272
+471
+-4,801
+Gross profit
+14,167
+707
+14,874
+12,288
+490
+-6,626
+12,778
+-3,313
+support
+Total revenue
+20,793
+11 20,805
+-1,505
+19,299
+17,560
+19
+17,580
+Operating expense measures
+Cost of cloud subscriptions and
+-1,022
+Cost of cloud and software
+232
+-481
+88
+-393
+support
+Cost of software licenses and
+-2,291
+283
+-2,008
+-2,076
+258
+-1,818
+-789
+Research and development
+-2,845
+202
+-309
+309
+0
+Other operating income/expense,
+net
+Total operating expenses
+Operating profit
+1
+0
+1
+4
+0
+0
+-16,541
+2,084
+-14,457
+1,062
+-13,395
+-13,230
+1,288
+-11,942
+4,252
+2,095
+6,348
+4
+0
+0
+TomorrowNow and Versata litigation
+-2,643
+-2,331
+127
+-2,204
+Sales and marketing
+-5,401
+449
+-4,952
+-4,304
+170
+-4,134
+General and administration
+-1,048
+116
+-932
+-892
+86
+-806
+Restructuring
+-621
+621
+0
+-126
+126
+0
+3,245
+-443
+0
+3,304
+Operating, investing, and financing cash flows and free
+cash flow: Our consolidated statement of cash flows
+provides insight as to how we generated and used cash and
+cash equivalents. When applied in conjunction with the other
+primary financial statements, it provides information that
+helps us evaluate the changes of our net assets, our financial
+structure (including our liquidity and solvency), and our
+ability to affect the amounts and timing of cash flows to adapt
+to changing circumstances and opportunities. We use our
+free cash flow measure to determine the cash flow remaining
+after all expenditures required to maintain or expand our
+organic business have been paid off. This measure provides
+management with supplemental information to assess our
+liquidity needs. We calculate free cash flow as net cash from
+operating activities minus purchases (other than purchases
+made in connection with business combinations) of
+intangible assets and property, plant, and equipment.
+MEASURES WE USE TO MANAGE OUR NON-FINANCIAL
+PERFORMANCE
+In 2015, we used the following key measures to manage our non-
+financial performance in the areas of employee engagement,
+customer loyalty and leadership trust:
+-
+-
+Employee Engagement Index: We use this index to measure
+the motivation and loyalty of our employees, how proud they
+are of our company, and how strongly they identify with SAP.
+The index is derived from surveys conducted among our
+employees. Applying this measure is recognition that our
+growth strategy depends on engaged employees.
+Customer Net Promoter Score (NPS): This score measures
+the willingness of our customers to recommend or promote
+SAP to others. It is derived from our annual customer survey
+that identifies, on a scale of 0-10, whether a customer is loyal
+and likely to recommend SAP to friends or colleagues, is
+neutral, or is unhappy. We introduced this measure in 2012,
+as we are convinced that we can achieve our financial goals
+only when our customers are loyal to, and satisfied with, SAP
+and our solutions. To derive the Customer NPS, we start with
+the percentage of "promoters" of SAP - those who give us a
+score of 9 or 10 on a scale of 0-10. We then subtract the
+percentage of "detractors" those who give us a score of 0
+-
+to 6. The method ignores "passives," who give us a score of 7
+or 8. Due to changes in sampling, resulting from ongoing
+efforts to implement the survey process holistically in
+recently acquired entities, the 2015 score is not fully
+comparable with the prior year's score.
+Leadership Trust Score: We use this score to further
+enhance accountability and to measure our collective effort
+to foster a work environment based on trust. It is derived
+from a question in our annual global employee survey that
+Combined Management Report Performance Management System
+60
+Effective tax rate: We define our effective tax rate as the
+ratio of income tax expense to profit before tax, expressed as
+a percentage.
+gauges employees' trust in our leaders. We measure
+leadership trust by using the Net Promoter Score (NPS)
+methodology.
+Our holistic view of the performance measures described above,
+together with our associated analyses, comprises the
+information we use for value-based management. We use
+planning and control processes to manage the compilation of
+these key measures and their availability to our decision makers
+across various management levels.
+SAP's long-term strategic plans are the point of reference for
+our other planning and controlling processes, including a
+multiyear plan through 2020. We identify future growth and
+profitability drivers at a highly aggregated level. This process is
+intended to identify the best areas in which to target sustained
+investment. Next, we evaluate our multiyear plans for our
+support and development functions and break down the
+customer-facing plans by sales region. Based on our detailed
+annual plans, we determine the budget for the respective year.
+We also have processes in place to forecast revenue and profit
+on a quarterly basis, to quantify whether we expect to realize our
+financial goals, and to identify any deviations from plan. We
+continuously monitor the concerned units in the Group to
+analyze these developments and define any appropriate actions.
+Our entire network of planning, control, and reporting processes
+is implemented in integrated planning and information systems,
+based on SAP software, across all organizational units so that
+we can conduct the evaluations and analyses needed to make
+informed decisions.
+NON-IFRS FINANCIAL MEASURES CITED IN THIS REPORT
+As in previous years, we provided our 2015 financial outlook on
+the basis of certain non-IFRS measures. Therefore, this report
+contains a non-IFRS based comparison of our actual
+performance in 2015 against our outlook in the Financial
+Performance: Review and Analysis section.
+Reconciliations of IFRS to Non-IFRS Financial Measures for
+2015 and 2014
+The following table reconciles our IFRS financial measures to the
+respective and most comparable non-IFRS financial measures
+of this report for each of 2015 and 2014. Due to rounding, the
+sum of the numbers presented in this table might not precisely
+equal the totals we provide.
+Combined Management Report Performance Management System
+61
+Reconciliation of IFRS to Non-IFRS Financial Measures for the Years Ended December 31
+€ millions, unless otherwise stated
+VALUE-BASED MANAGEMENT
+2015
+operating and non-operating business as well as income
+taxes but also by the number of shares outstanding.
+-
+Performance
+Management System
+■ In addition to our primary financial and non-financial measures, we use several
+other performance measures.
+■ We use planning and control processes to manage the compilation of our key
+measures.
+■ Our management additionally uses non-IFRS financial information to get more
+transparency on our past performance and our anticipated future results.
+We use various performance measures to help manage our
+performance with regard to our primary financial goals, which
+are growth and profitability, and our primary non-financial goals,
+which are customer loyalty and employee engagement. We view
+growth and profitability as indicators for our current
+performance, while customer loyalty and employee engagement
+are indicators for our future performance.
+MEASURES WE USE TO MANAGE OUR FINANCIAL
+PERFORMANCE
+Changes to Income Statement Structure
+Starting with the first quarter of 2015, we modified our overall
+income statement structure. We reclassified premium support
+revenue and related costs to the respective services line items
+to align our financial reporting with the changes in our services
+business. We further simplified and clarified the labeling of
+several income statement line items. For more information
+about the changes to our income statement structure, see the
+Notes to the Consolidated Financial Statements section, Note
+(3).
+Measures We Use to Manage Our Operating Financial
+Performance
+In 2015, we used the following key measures to manage our
+operating financial performance:
+-
+Cloud subscriptions and support revenue (non-IFRS): This
+revenue driver comprises the main revenues of our fast-
+growing cloud business. We generate cloud subscriptions and
+support revenue when we provide software functionality in a
+cloud-based infrastructure (SaaS) to our customers, when
+we provide our customers with access to a cloud-based
+infrastructure to develop, run, and manage applications
+(PaaS) and also when we provide hosting services for
+software hosted by SAP (laaS). Cloud subscriptions and
+support revenue is also generated when providing additional
+premium cloud subscription support beyond the regular
+support, which is embedded in the basic cloud subscription
+fees as well as business network services to our customers.
+We use the measure cloud subscriptions and support
+revenue (non-IFRS) both at actual currency and at constant
+currency.
+Cloud and software revenue (non-IFRS): We use cloud and
+software revenue (non-IFRS) and constant currency cloud
+and software revenue (non-IFRS) to measure our revenue
+growth. Our cloud and software revenue includes cloud
+subscriptions and support revenue plus software licenses
+and support revenue. Cloud subscriptions and support
+revenue and software revenue are our key revenue drivers
+because they tend to affect our other revenue streams.
+Generally, customers that buy software licenses also enter
+into related support contracts, and these generate recurring
+revenue in the form of support revenue after the software
+sale. Support contracts cover standardized support services
+that comprise unspecified future software updates and
+enhancements. Software licenses revenue as well as cloud
+subscriptions and support revenue also tend to stimulate
+services revenue earned from providing customers with
+professional services, premium support services, training
+services, messaging services, and payment services.
+Combined Management Report Performance Management System
+59
+New cloud bookings: For our cloud activities, we also look at
+new cloud bookings. This measure reflects the committed
+order entry from new customers and from incremental
+purchases by existing customers for offerings that generate
+cloud subscriptions and support revenue. In this way, it is an
+indicator for cloud-related sales success in a given period and
+for secured future cloud subscriptions and support revenue.
+We focus primarily on the average contract value variant of
+the new cloud bookings measure that takes into account
+annualized amounts for multiyear contracts. Additionally, we
+monitor the total contract value variant of the new cloud
+bookings measure that takes into account the total
+committed order entry amounts regardless of contract
+durations. There are no comparable IFRS measures for these
+bookings metrics.
+Operating profit (non-IFRS): We use operating profit (non-
+IFRS) and constant currency operating profit (non-IFRS) to
+measure our overall operational process efficiency and
+overall business performance. See below for more
+information on the IFRS and non-IFRS measures we use.
+Cloud subscriptions and support gross margin (non-IFRS):
+We use our cloud subscriptions and support gross margin
+(non-IFRS) to measure our process efficiency and our
+performance in our cloud business. Cloud subscriptions and
+support gross margin (non-IFRS) is the ratio of our cloud
+subscriptions and support gross profit (non-IFRS) to cloud
+subscriptions and support revenue (non-IFRS), expressed as
+a percentage.
+Measures We Use to Manage Our Non-Operating Financial
+Performance
+We use the following measures to manage our non-operating
+financial performance:
+Financial income, net: This measure provides insight into the
+return on liquid assets and capital investments and the cost
+of borrowed funds. To manage our financial income, net, we
+focus on cash flow, the composition of our liquid assets and
+capital investment portfolio, and the average rate of interest
+at which assets are invested. We also monitor average
+outstanding borrowings and associated finance costs.
+Days Sales Outstanding (DSO): We manage working capital
+by controlling the days sales outstanding (DSO) for operating
+receivables (defined as the average number of days from the
+raised invoice to cash receipt from the customer).
+Measures We Use to Manage Overall Financial Performance
+We use the following measures to manage our overall financial
+performance:
+Earnings per share (EPS): EPS measures our overall
+performance because it captures all operating and non-
+operating elements of profit as well as income tax expense. It
+represents the portion of profit after tax allocable to each
+SAP share outstanding. EPS is influenced not only by our
+-
+2014
+IFRS
+Adj. Non-IFRS Currency Non-IFRS
+Impact Constant
+8,834
+Software licenses and support
+14,928
+2
+14,930
+-933
+13,997
+13,228
+5
+13,233
+Cloud and software
+5
+17,214
+17,226
+-1,230
+15,996
+14,315
+19
+14,334
+Services
+3,579
+0
+3,579
+-276
+11
+9,416
+-678
+10,094
+IFRS
+Adj. Non-IFRS
+Currency
+Revenue measures
+Cloud subscriptions and support
+2,286
+10
+2,296
+-297
+1,999
+1,087
+14
+At SAP, we see leadership as a profession. We make leaders
+accountable, and create a consistent leadership culture across
+the organization to ensure the engagement and advancement of
+our people.
+Software licenses
+4,835
+1
+4,836
+-255
+4,581
+4,399
+0
+4,399
+Software support
+10,093
+0
+3,245
+5,904
+1,101
+1,307
+Free Cash Flow
+€ millions
+2015
+2014
+A in %
+Net cash flows from
+4,331
+3,638
+3,499
+4
+The following table shows our free cash flow measure. We use
+this measure among others to manage our overall financial
+performance.
+operating activities
+-636
+-737
+-14
+and property, plant, and
+equipment (without
+acquisitions)
+Free cash flow
+3,001
+2,762
+9
+Purchase of intangible assets
+Free Cash Flow
+63
+Combined Management Report Performance Management System
+62
+-
+-
+The variable components of our Executive Board members'
+and employees' remuneration are based on revenue (non-
+IFRS), operating profit (non-IFRS), as well as new cloud
+bookings measures rather than the respective IFRS
+measures.
+The annual budgeting process for all management units is
+based on revenue (non-IFRS) and operating profit (non-IFRS)
+numbers rather than the respective IFRS financial measures.
+All forecast and performance reviews with all senior
+managers globally are based on these non-IFRS measures,
+rather than the respective IFRS financial measures.
+Both our internal performance targets and the guidance we
+provided to the capital markets are based on revenue (non-
+IFRS) and profit (non-IFRS) measures rather than the
+respective IFRS financial measures.
+Our non-IFRS financial measures reflect adjustments based on
+the items below, as well as adjustments for the related income
+tax effects.
+Revenue (Non-IFRS)
+Revenue items identified as revenue (non-IFRS) have been
+adjusted from the respective IFRS financial measures by
+including the full amount of software support revenue, cloud
+subscriptions and support revenue, and other similarly recurring
+revenue that we are not permitted to record as revenue under
+IFRS due to fair value accounting for the contracts in effect at
+the time of the respective acquisitions.
+Under IFRS, we record at fair value the contracts in effect at the
+time entities were acquired. Consequently, our IFRS software
+support revenue, IFRS cloud subscriptions and support revenue,
+IFRS cloud and software revenue, and IFRS total revenue for
+periods subsequent to acquisitions do not reflect the full amount
+of revenue that would have been recorded by entities acquired
+by SAP had they remained stand-alone entities. Adjusting
+revenue numbers for this revenue impact provides additional
+insight into the comparability of our ongoing performance
+across periods.
+Operating Expense (Non-IFRS)
+Operating expense numbers that are identified as operating
+expenses (non-IFRS) have been adjusted by excluding the
+following expenses:
+Acquisition-related charges
+Amortization expense/impairment charges of intangibles
+acquired in business combinations and certain stand-
+alone acquisitions of intellectual property (including
+purchased in-process research and development)
+Settlements of preexisting business relationships in
+connection with a business combination
+■ Acquisition-related third-party expenses
+Expenses from the TomorrowNow litigation (formerly labeled
+as "discontinued activities") and the Versata litigation cases
+Share-based payment expenses
+Restructuring expenses
+We exclude certain acquisition-related expenses for the purpose
+of calculating operating profit (non-IFRS), operating margin
+(non-IFRS), and earnings per share (non-IFRS) when evaluating
+SAP's continuing operational performance because these
+expenses generally cannot be changed or influenced by
+management after the relevant acquisition other than by
+disposing of the acquired assets. Since management at levels
+below the Executive Board does not influence these expenses,
+we generally do not consider these expenses for the purpose of
+evaluating the performance of management units. Additionally,
+these non-IFRS measures have been adjusted from the
+respective IFRS measures for the results of the share-based
+payment expenses and restructuring expenses, as well as the
+TomorrowNow and Versata litigation expenses.
+Operating Profit (Non-IFRS), Operating Margin (Non-IFRS),
+and Earnings per Share (Non-IFRS)
+Operating profit, operating margin, and earnings per share
+identified as operating profit (non-IFRS), operating margin (non-
+IFRS), and earnings per share (non-IFRS) have been adjusted
+from the respective IFRS measures by adjusting for the
+aforementioned revenue (non-IFRS) and operating expenses
+(non-IFRS).
+Constant Currency Information
+We believe it is important for investors to have information that
+provides insight into our sales. Revenue measures determined
+under IFRS provide information that is useful in this regard.
+However, both sales volume and currency effects impact period-
+over-period changes in sales revenue. We do not sell
+standardized units of products and services, so we cannot
+provide relevant information on sales volume by providing data
+on the changes in product and service units sold. To provide
+additional information that may be useful to investors in
+breaking down and evaluating changes in sales volume, we
+present information about our revenue and various values and
+components relating to operating profit that are adjusted for
+foreign currency effects.
+We calculate constant currency revenue and operating profit
+measures by translating foreign currencies using the average
+exchange rates from the comparative period instead of the
+current period.
+Usefulness of Non-IFRS Measures
+62
+We believe that our non-IFRS measures are useful to investors
+for the following reasons:
+-
+▪ Our “How We Run" set of behaviors describes how we get things done and is at
+the very heart of our culture.
+OUR HR STRATEGY IS BUILT FOR OUR PEOPLE
+At SAP, we put our customers at the center of everything we do.
+It is our employees who are helping our customers succeed in
+the new digital economy and enabling us to become THE cloud
+company powered by SAP HANA. Therefore, we are fully
+committed to the people side of our business.
+As digital advances change customer expectations, they also
+fundamentally change the ability of our employees to have a
+greater share of voice in defining their own work experiences.
+Today's talents expect a diverse, agile, and yet highly
+personalized workplace that is in line with individual needs. They
+expect inspiring and caring leaders who can rethink how we
+collaborate to drive innovation. Similarly, they expect
+meaningful learning and career opportunities - all of which are
+powered by pervasive technology.
+-
+Our human resources (HR) strategy is to create a culture that is
+able to deal with the complexity, speed, and volume of a digital
+workplace a culture that inspires innovation, leads change,
+and creates ultimate employee satisfaction. We want employees
+to learn and grow, leaders to engage and develop amazing
+talent, and organizations to be simple and agile. With our three
+guiding principles of simplification, standardization, and
+customer satisfaction, we stay focused on our ultimate goal,
+which is a seamless, simple employee experience. Ultimately,
+our HR strategy supports the creation of an HR organization that
+is built on cloud technology to Run Simple.
+GETTING THE RIGHT TALENT IN THE RIGHT PLACE AT THE
+RIGHT TIME
+To support SAP's transformation to THE cloud company
+powered by SAP HANA, it is important to understand what it
+means to operate with a cloud mindset. Part of this
+transformation means not only changing the way we hire new
+talent, but also developing and retaining our employees.
+In 2015, approximately one quarter of all external hires are
+considered "early talents" (hires with professional experience of
+up to two years). This success is due to ambitious early talent
+hiring targets, increased hiring activities in areas of diversity,
+expanded use of the SAP SuccessFactors Recruiting solution as
+our recruitment management system as well as the continued
+recognition of SAP as an employer of choice. In fact, SAP was
+recognized in Brazil, Greater China, India, and Japan by the
+Great Place to Work Institute, and named by Forbes as a "Best
+Employer" in 2015.
+Once we hire new talent, we make sure that the onboarding
+experience is an engaging and inspiring one. To this end, we
+offer dedicated new-joiner programs. In addition, we closely
+collaborate with 2,300 universities on international events such
+as student meet-ups, info days, or coding events, such as
+InnoJams, and many other events through our SAP University
+Alliances program.
+■ We enable our people to perform at their best so they can help our customers
+succeed in the digital economy. At SAP, everyone is a talent.
+Another cornerstone in our efforts to recruit early talent is our
+vocational training program, which allows students to work
+towards their university degree while gaining valuable SAP
+business experience at the same time. The program has a clear
+66
+focus on IT related areas such as Development,
+Services/Consulting and IT. As of October 2015, 880 vocational
+training students were enrolled in the program that originally
+started in Germany. A few years ago, we extended the program
+into key markets such as China and India, and added Hungary,
+Ireland, and the United States recently. In 2015, 210 vocational
+training graduates around the world started their professional
+careers with an SAP contract. Overall, we measured a
+conversion rate for vocational training students of 63% in 2015
+(2014: 59%). The high-performance ratings of the students after
+graduating prove the success of the program.
+In the area of people development, we continue with our
+philosophy of "everyone is a talent" that came to life in 2013.
+Major achievements are:
+-
+-
+Simplifications to our performance management process and
+tools to further improve the overall employee experience in
+our cloud-based Success Map tool
+Development offerings for specific groups such as early
+talents, experts, and fast-track employees
+Introduction of Career Success Centers around the world
+that provide dedicated career development support
+Introduction of a globally consistent succession management
+approach for executive roles
+To fund our continued investments in growth areas including
+cloud, SAP HANA, and business networks we scaled back in
+areas where we see no significant growth in the future. As part of
+this program, roughly 3,000 employees moved into new jobs or
+left SAP. To manage these transitions while remaining people-
+centric, we use a mix of measures, including voluntary and early
+retirement programs that have proven very successful.
+The overall retention rate in 2015 was 91.8% (2014: 93.5%). We
+define retention as the ratio of average number of employees
+minus voluntary attrition to the average number of employees
+(in full-time equivalents). High retention is something we are
+aiming for as reflected in all our activities to drive high employee
+engagement.
+Combined Management Report Employees and Social Investments
+we can master the challenges of a digital and global workplace.
+■ At SAP, we encourage the well-being of our employees and our organization so
+Employees and
+Social Investments
+Our revenue (non-IFRS), expense (non-IFRS), and profit
+(non-IFRS) measures provide investors with insight into
+management's decision making because management uses
+these non-IFRS measures to run our business and make
+financial, strategic, and operating decisions. We include the
+revenue adjustments outlined above and exclude the expense
+adjustments outlined above when making decisions to
+allocate resources. In addition, we use these non-IFRS
+measures to gain a better understanding of SAP's operating
+performance from period to period.
+The non-IFRS measures provide investors with additional
+information that enables a comparison of year-over-year
+operating performance by eliminating certain direct effects of
+acquisitions, share-based compensation plans, restructuring
+plans, and the TomorrowNow and Versata litigation cases.
+Non-IFRS and non-GAAP measures are widely used in the
+software industry. In many cases, inclusion of our non-IFRS
+measures may facilitate comparison with our competitors'
+corresponding non-IFRS and non-GAAP measures.
+Limitations of Non-IFRS Measures
+We believe that our non-IFRS financial measures described
+above have limitations, including but not limited to, the
+following:
+The eliminated amounts could be material to us.
+Without being analyzed in conjunction with the
+corresponding IFRS measures, the non-IFRS measures are
+not indicative of our present and future performance,
+foremost for the following reasons:
+While our profit (non-IFRS) numbers reflect the
+elimination of certain acquisition-related expenses, no
+eliminations are made for the additional revenue or other
+income that results from the acquisitions.
+■ While we adjust for the fair value accounting of the
+acquired entities' recurring revenue contracts, we do not
+adjust for the fair value accounting of deferred
+compensation items that result from commissions paid to
+the acquired company's sales force and third parties for
+closing the respective customer contracts.
+"
+The acquisition-related charges that we eliminate in
+deriving our profit (non-IFRS) numbers are likely to recur
+should SAP enter into material business combinations in
+the future. Similarly, the restructuring expenses that we
+eliminate in deriving our profit (non-IFRS) numbers are
+likely to recur should SAP perform restructurings in the
+future.
+The acquisition-related amortization expense that we
+eliminate in deriving our profit (non-IFRS) numbers is a
+recurring expense that will impact our financial
+performance in future years.
+The revenue adjustment for the fair value accounting of
+the acquired entities' contracts and the expense
+adjustment for acquisition-related charges do not arise
+from a common conceptual basis. This is because the
+revenue adjustment aims to improve the comparability of
+the initial post-acquisition period with future post-
+acquisition periods, while the expense adjustment aims to
+improve the comparability between post-acquisition
+periods and pre-acquisition periods. This should
+particularly be considered when evaluating our operating
+profit (non-IFRS) and operating margin (non-IFRS)
+numbers as these combine our revenue (non-IFRS) and
+expenses (non-IFRS) despite the absence of a common
+conceptual basis.
+Our restructuring charges could result in significant cash
+outflows. The same applies to our share-based payment
+expense because most of our share-based payments are
+settled in cash rather than shares.
+The valuation of our cash-settled share-based payments
+could vary significantly from period to period due to the
+fluctuation of our share price and other parameters used
+in the valuation of these plans.
+In the past, we have issued share-based payment awards
+to our employees every year and we intend to continue
+doing so in the future. Thus, our share-based payment
+expenses are recurring although the amounts usually
+change from period to period.
+We believe that constant currency measures have limitations,
+particularly as the currency effects that are eliminated
+constitute a significant element of our revenue and expenses
+and could materially impact our performance. Therefore, we
+limit our use of constant currency measures to the analysis of
+changes in volume as one element of the full change in a
+financial measure. We do not evaluate our results and
+performance without considering both constant currency
+measures in revenue (non-IFRS) and operating profit (non-IFRS)
+measures on the one hand, and changes in revenue, operating
+expenses, operating profit, or other measures of financial
+Combined Management Report Performance Management System
+64
+...
+performance prepared in accordance with IFRS on the other. We
+caution the readers of our financial reports to follow a similar
+approach by considering constant currency measures only in
+addition to, and not as a substitute for or superior to, changes in
+revenue, operating expenses, operating profit, or other
+measures of financial performance prepared in accordance with
+IFRS.
+Despite these limitations, we believe that the presentation of the
+non-IFRS measures and the corresponding IFRS measures,
+together with the relevant reconciliations, provide useful
+information to management and investors regarding present
+and future business trends relating to our financial condition and
+results of operations. We do not evaluate our growth and
+performance without considering both non-IFRS measures and
+the comparable IFRS measures. We caution the readers of our
+financial reports to follow a similar approach by considering our
+non-IFRS measures only in addition to, and not as a substitute
+for or superior to, revenue or other measures of our financial
+performance prepared in accordance with IFRS.
+Combined Management Report Performance Management System
+65
+69
+-
+Combined Management Report Performance Management System
+8,829
+5,638
+Explanation of Non-IFRS Measures
+We disclose certain financial measures, such as revenue (non-
+IFRS), operating expenses (non-IFRS), operating profit (non-
+IFRS), operating margin (non-IFRS), and earnings per share
+(non-IFRS), as well as constant currency revenue, expense, and
+profit that are not prepared in accordance with IFRS and are
+therefore considered non-IFRS financial measures. Our non-
+IFRS financial measures may not correspond to non-IFRS
+financial measures that other companies report. The non-IFRS
+financial measures that we report should only be considered in
+addition to, and not as substitutes for or superior to, our IFRS
+financial measures.
+We believe that the disclosed supplemental historical and
+prospective non-IFRS financial information provides useful
+information to investors because management uses this
+information, in addition to financial data prepared in accordance
+with IFRS, to attain a more transparent understanding of our
+past performance and our anticipated future results. We use the
+revenue (non-IFRS) and profit (non-IFRS) measures
+consistently in our internal planning and forecasting, reporting,
+and compensation, as well as in our external communications,
+as follows:
+-
+Our management primarily uses these non-IFRS measures
+rather than IFRS measures as the basis for making financial,
+strategic, and operating decisions.
+We made substantial progress in transforming our Company by
+shifting investments from non-core activities to strategic growth
+areas, enabling us to capture the tremendous growth
+opportunities in the market. The completeness of vision in the
+cloud combined with a soaring adoption of SAP S/4HANA gives
+us confidence in our business in 2016 and beyond, which is
+reflected in an increase of our 2017 ambition. We exceeded our
+targets for cloud and software revenues and operating income
+and we are ever confident that SAP will remain a profitable
+growth business well into the future.
+73
+Financial
+Performance:
+Review and Analysis
+Exceptional growth in cloud business, an overall strong top-line result
+generated highest non-IFRS operating profit in SAP's history
+■ Completeness of vision in the cloud combined with a soaring adoption of SAP
+S/4HANA gives us confidence for 2016 and beyond, reflected in an increase of
+our 2017 ambition
+■ Stable total group liquidity despite repaying significant debt
+ECONOMY AND THE MARKET
+Global Economic Trends
+In its most recent report, the European Central Bank (ECB)
+concludes that the global economy grew gradually and unevenly
+in 2015. The ECB finds that low oil prices, favorable financing
+conditions, and improving labor markets helped advanced
+economies perform better than in previous years. However,
+growth in emerging markets and developing economies
+remained relatively weak, according to the ECB. It cites tight
+global financing conditions and declining commodity prices as
+the causes.
+For the Europe, Middle East, and Africa (EMEA) region, the ECB
+reports contrasting developments. According to its calculations,
+the gross domestic product of the euro area grew 1.5% in 2015.
+It finds that this recovery was mainly due to increasing domestic
+demand. The economies of Central and Eastern European
+countries were robust, according to the ECB, while Russia was in
+significant recession.
+economy in 2015, easing its monetary policy and introducing a
+new exchange rate regime in the summer, the ECB reports. This
+increased political uncertainty and economic growth slowed.
+The ECB writes that business-friendly reforms in India boosted
+investment and, after a temporary decline in the second quarter,
+led to an increase in economic growth from mid-year onwards.
+In the Asia Pacific Japan (APJ) region, Japan's economy
+struggled to gain momentum in 2015, the ECB notes. However,
+the ECB also points to a slight recovery in the third quarter and
+signs of growth at the end of the year. China refocused its
+Combined Management Report Environental Performance: Energy and Emissions
+The IT Market
+Growth in the global IT market slowed from the second quarter
+of 2015, U.S. market research firm International Data
+Corporation (IDC) reports. It attributes this development to the
+contracting PC market, the encroachment on traditional IT
+business by cloud services, and weak economic performance in
+countries such as Brazil, China, and Russia. IDC lowered its
+forecast for IT market growth in 2015, and at the end of the year
+it expected the global IT market to have grown 4.9% year over
+year still ahead of the economy as a whole.
+However, according to IDC, IT spending did not grow evenly
+across the segments. It pointed to strong growth in cloud,
+mobile, and Big Data, with service providers increasing
+investment in server and data storage hardware. IDC reports
+that smartphone market expansion, which had been rapid in the
+previous year, slowed significantly in 2015 due to saturation. In
+2015, the rate of smartphone market growth was closer to that
+of the IT market as a whole. Even the tablet market was unable
+to make up for this loss of momentum, IDC notes.
+By contrast, worldwide spending on business software
+increased significantly, at 6.8% in 2015, according to IDC. The
+share of investment in cloud, mobile, and Big Data solutions
+Combined Management Report Financial Performance: Review and Analysis
+74
+The economic performance of the countries in the Americas
+region was also uneven. According to the ECB, the United States
+economy firmed in 2015, and weakened slightly only in the third
+quarter. However, a number of countries in Latin America
+slipped into recession; notably Brazil, where the downturn was
+mainly due to political uncertainty.
+In 2015, SAP joined the green initiative RE100 and is now one of
+the global corporations that have signed on to the RE100
+initiative. RE100 is led by The Climate Group in partnership with
+CDP (formerly Carbon Disclosure Project) and the goal of the
+campaign is to have 100 of the world's most influential
+businesses committed to 100% renewable electricity.
+72
+greenhouse gas emissions. At the same time, with our energy
+consumption rising as more of our business moves to the cloud,
+data centers have become a primary focus of our carbon
+reduction efforts and the adoption of our technology innovations
+and solutions towards our customers. We continue to drive
+efficiency and innovation around buildings, data center
+operations, and infrastructure. For example, in one of our largest
+data centers in St. Leon-Rot, Germany, we received an energy
+efficiency certificate from TÜV Rheinland, a leading provider of
+technical, safety, and certification services, with an efficiency
+score of 98.7%. One hundred percent of our energy usage that
+provides internal and external computation power comes from
+renewable sources. Our total data center electricity
+consumption at both our internal and external sites increased
+from 179 in 2014 to 249 GWh in 2015. In recognition of the
+exemplary actions SAP has taken to improve our data centers,
+we were awarded the European Datacentre Sustainability Award
+in 2015.
+Since the beginning of 2008, our focus on carbon emissions has
+generated a cumulative cost avoidance of €346 million,
+compared to a business-as-usual scenario. This leads to an
+avoidance of €124 million in the past three years, with
+€39.8 million avoided in 2015 alone.
+Combined Management Report Environental Performance: Energy and Emissions
+71
+INVESTING IN ENVIRONMENTAL INNOVATIONS
+We are pursuing new strategies to contend with the ongoing
+tension between growth in our business and our goal to reduce
+our emissions. One such approach is the introduction of carbon
+emission offsets for business flights in 2015. In addition to
+avoiding and reducing overall business flights, we began, in the
+second half of 2015, to offset selected business flights in the
+United States, as this is the country with the greatest number of
+business flights. This offset effort resulted in a compensation of
+35 kilotons of CO2.
+SAP continues to invest in technology that enables virtual
+collaboration, supporting our efforts to reduce the need for
+employees to travel. In addition to our TelePresence and video
+conferencing platforms, new collaboration rooms based on the
+Skype for Business communications platform bring new
+features that enable teamwork across borders and time zones.
+More than 100 collaboration rooms have been installed
+throughout SAP with more planned for 2016. Because more
+employees adopt video chat as their preferred method of
+communication, more than 1,200 meeting spaces have been
+equipped with 360-degree cameras - giving remote participants
+a more interactive experience. Skype for Business also enables
+each employee to video chat from their computer.
+To further decrease car-related emissions, we plan to increase
+the portion of electric vehicles (or alternatives) in our company
+car fleet from the current 1% to 20% by 2020. At the end of
+2015, we have 57 charging stations and 55 pure electric vehicles
+in our company car fleet at our headquarters in Walldorf, and
+approximately 300 e-cars globally. Our company car initiatives
+address a dilemma that has grown in recent years. As a result of
+our business expansion, the number of SAP employees eligible
+for a company car has increased annually. We want to ensure
+that we do not undo our efficiency gains with our growing car
+fleet.
+In keeping with our existing policy for office buildings and data
+centers, all our electric company cars charged at SAP are
+powered with 100% renewable sources. In Germany, for
+example, we provide employees with an incentive to switch to
+electric alternatives by offering a battery subsidy that offsets the
+costs of using an electric vehicle. We believe that our electric car
+initiative will play a critical role in helping achieve our 2020
+carbon reduction goal.
+REINFORCING OUR RENEWABLE ELECTRICITY STRATEGY
+Our commitment to 100% renewable electricity in all of our
+internal and external data centers and facilities is one of the
+most significant steps toward making our operations more
+sustainable. In 2015, we mainly focused on wind and, to a lesser
+extent, on biomass. While we produce a small amount of
+renewable electricity through solar panels in some locations, we
+rely primarily on the purchase of renewable electricity
+certificates (RECs) to increase the renewable electricity in our
+energy mix. We procure RECS regionally that add value and drive
+change in the electricity market, adopting high-quality standards
+in our procurement guidelines that are aligned with two non-
+governmental organizations (NGOs). For example, we consider
+renewable electricity from biomass only if it is disconnected
+from coal or other fossil power plants and if the biomass itself is
+not related to deforestation. In addition, we require that power
+plants must be no more than 10 years old, as we aim to foster
+new innovation in the production of renewable electricity.
+Furthermore, SAP is not considering RECs from power plants
+that are currently supported by governments. As a vintage
+requirement, we define that renewable electricity must be
+produced in the same year or the year before the reporting
+period will be applied.
+In 2015, emissions caused by SAP products in use at the sites of
+more than 300,000 customers were almost 15 times larger than
+SAP's own footprint, meaning these products caused
+approximately 6,800 kilotons of CO2. By using 100% renewable
+electricity, we dramatically broaden our sustainability efforts
+and align them with our cloud strategy, reducing the carbon
+emissions of our cloud solutions to zero.
+consist of high-quality carbon credits. Several years ago, we
+made a commitment to investing €3 million covering a 20-year
+participation in the fund, which supports the sustainability of
+agricultural and rural communities worldwide. Projects of this
+fund focus on ecosystem restoration, agriculture, agroforestry,
+and rural energy. In eastern India, for example, the fund helped
+communities plant fruit trees to diversify food sources and
+address the overcultivation of soil. Instead of a charitable
+donation, we have made a long-term investment that brings
+benefits to society, the environment, and SAP. In 2015, we
+received carbon credits from the fund, which helped us to offset
+our carbon footprint by 23 kilotons.
+Another important program in 2015 was the further
+implementation of ISO 14001 in SAP locations throughout the
+world. This well-accepted environmental management system is
+now in place at 32 of our locations worldwide, including our
+North America headquarters in Newtown Square, Pennsylvania,
+as well as in Palo Alto, San Francisco, Sunnyvale, and Dublin,
+California, both in the United States; and other countries
+including Austria, Canada, Czech Republic, France, Germany,
+Israel, Italy, and South Africa. New sites in Singapore and
+Switzerland, as well as Rio de Janeiro and São Paulo in Brazil,
+were certified in 2015. To act more quickly and achieve
+consistency, we created a template to roll out in other sites,
+enabling us to efficiently build a large global network where
+different sites interact and share best practices. Our goal is to
+continually increase the number of certified locations; we aim for
+total full-time equivalent (FTE) coverage of 70% by 2018. By end
+of 2015, SAP had an environmental management system (ISO
+14001) in place in 15 countries and 32 single sites. This
+represents a total FTE coverage of 22.2%.
+MEASURING OUR TOTAL ENERGY CONSUMED
+Because our energy usage drives emissions, one of the most
+important measures for us is total energy consumed. This
+includes all energy that SAP generates or purchases to run our
+facilities, data centers, company cars, and corporate jets. Our
+total energy consumption increased to 965 gigawatt hours
+(GWh) in 2015, compared to 920 GWh in 2014.
+This increase is due to growth in our workforce and business. In
+addition, as software usage shifts to the cloud, we are operating
+more of our customers' systems in our data centers, as well as
+other locations where we supplement our servers. This
+additional cloud operation, along with accompanying servers
+and facilities, consumes more energy. At the same time, we
+believe this shift has the opposite effect for our customers that
+are now able to simplify their technology and save energy
+through our shared infrastructure. This reduces overall IT-
+related energy consumption through our highly energy-efficient
+cloud provisioning.
+OPTIMIZING EFFICIENCY IN OUR DATA CENTERS
+Data centers are at the heart of how SAP provides solutions to
+our customers and represents a significant part of our total
+Combined Management Report Environental Performance: Energy and Emissions
+14
+We continued to realize the benefits of our investment in the
+Livelihoods Fund, a unique investment fund whose returns
+continued to increase. However, according to IDC, this had an
+adverse effect on services, which grew only 2.8%.
+In the Asia Pacific Japan (APJ) region, IDC reports that the IT
+market there grew almost 6% in 2015. The IT markets in
+individual countries performed very differently. In Japan, IT
+spending remained constant year over year. In China, growth in
+the IT market slowed to 8% (2014: 12%). In India, however, in
+2015 IT spending grew very strongly at 11%, according to IDC.
+In the Americas region, the IT market grew 4.6% according to
+IDC. In its view, the U.S. market remained largely stable. It grew
+3% overall, somewhat less than in the previous year, mainly due
+to the weakening market for smartphones and tablets. Software,
+on the other hand, grew strongly at 7% in the United States,
+according to IDC. In Brazil, IT investment increased 11% in 2015,
+though this increase has to be seen in the context of high
+inflation. IDC put growth in the Mexican IT market at almost
+13%.
+Forecast for
+2015
+Cloud subscriptions and support
+revenue
+(non-IFRS, at constant
+€ 1.95 billion
+to €
+2.05 billion
+currencies)
+Cloud and software revenue
+(non-IFRS, at constant
+Comparison of Forecast and Results for 2015
+currencies)
+to +10%
+Results for
+2015
+€ 2.00 billion
++12%
+€5.90 billion
+Operating profit
+(non-IFRS, at constant
+currencies)
++8%
+IDC reports that IT spending in the Europe, Middle East, and
+Africa region (EMEA) increased 1.5% in 2015, and by as much as
+5% in Western Europe due to the economic recovery there. In
+Germany, the IT market grew even more strongly at over 6%. In
+Russia, though, low oil prices, depreciation of the ruble, and
+economic sanctions had a significant negative impact, IDC
+reports. It expects the Russian IT market declined 15% in 2015.
+We achieved or exceeded the amended outlook guidance for
+revenue and operating profit we published at the beginning of
+the year.
+At the beginning of 2015, we projected, based on the strong
+momentum in our cloud business, that our non-IFRS cloud
+subscriptions and support revenue would end between
+€1.95 billion and €2.05 billion at constant currencies (2014:
+€1.10 billion). The upper end of this range represents a growth
+rate of 86% at constant currencies. The acquired companies
+Concur and Fieldglass were expected to contribute
+approximately 50 percentage points to this growth. SAP
+expected full-year 2015 non-IFRS cloud and software revenue to
+increase by 8% to 10% at constant currencies (2014:
+€14.33 billion). We also expected our full-year operating profit
+(non-IFRS) for 2015 to end between €5.6 billion and €5.9 billion
+(2014: €5.64 billion) at constant currencies. We anticipated an
+effective tax rate (IFRS) of between 25.0% and 26.0% (2014:
+24.7%) and an effective tax rate (non-IFRS) of between 26.5%
+and 27.5% (2014: 26.1%).
+In addition to our long-term commitment for 2020, we have
+derived annual targets for our internal operational steering.
+Despite integrating new acquisitions in 2015, our total net
+emissions decreased to 455 kilotons CO2 (2014: 500 kilotons).
+This decrease stems primarily from a reduction of business
+flights and compensation with carbon emission offsets. We are
+effectively compensating the emissions from those customer
+systems that have moved into our green cloud. Given the large
+size of our customers' CO2 footprints and our growth strategy in
+the cloud, we see significant potential to reduce both our own
+and our customers' environmental impact.
+Impact on SAP
+Once again, growth in the overall global economy and in the IT
+industry was relatively slow in a volatile market environment in
+2015. This confronted SAP with considerable challenges. But
+our tremendous 2015 results validate our strategy of innovating
+across the core, the cloud, and business networks to help our
+customers become true digital enterprises. We once again
+succeeded in significantly expanding our business and
+outperformed the overall global economy and IT industry in all
+regions in 2015 with regards to revenue growth.
+Our non-IFRS cloud and software revenue increased 12% at
+constant currencies in 2015. Both our core business and our
+cloud business contributed substantially to the increase. Our
+core business grew with non-IFRS software and support revenue
+increasing 6% at constant currencies. This was driven by a 4%
+year-over-year increase in our non-IFRS software revenue at
+constant currencies, while our resilient constant currency non-
+IFRS support revenue grew 7%. Support revenue is a robust
+feature of our core business model because a maintenance
+contract generally continues for as long as the customer uses
+the software. Our cloud business growth was strong as well.
+Non-IFRS cloud subscriptions and support revenue grew 82%
+over the year at constant currencies.
+For more details about our regional performance, see the
+Revenue by Region section below.
+-
+In 2015, we again demonstrated that we are consistently
+pursuing our strategy for innovation and growth and that
+globally we are able to generate growth that few other IT
+companies can match.
+OVERALL FINANCIAL POSITION
+Actual Performance Compared to Guidance 2015
+(Non-IFRS)
+Executive Board's Assessment
+The exceptional strong cloud growth is driven by a broad cloud
+portfolio, the largest cloud business network in the world (SAP
+Ariba, Concur, and SAP Fieldglass solutions), and the SAP HANA
+Enterprise Cloud service.
+Influence of Accounting Policies on Our Financial Position
+For more information about our accounting policies, see the
+Notes to the Consolidated Financial Statements section, Note
+(3).
+There are no off-balance sheet financial instruments, such as
+sale-and-lease-back transactions, asset-backed securities, and
+liabilities related to structured entities, which are not disclosed
+in our Consolidated Financial Statements.
+PERFORMANCE AGAINST OUTLOOK FOR 2015 (NON-IFRS)
+Our 2015 operating profit-related internal management goals
+and published outlook were based on our non-IFRS financial
+measures. For this reason, in the next section we discuss
+performance against our outlook only in terms of non-IFRS
+numbers derived from IFRS measures. The subsequent section
+about IFRS operating results discusses numbers only in terms of
+the International Financial Reporting Standards (IFRSS). So the
+numbers in that section are not expressly identified as IFRS
+numbers.
+We acquired Concur Technologies in December 2014, so Concur
+results are incorporated in our 2014 results only for December.
+We acquired Fieldglass in May 2014, so Fieldglass results are
+incorporated in our 2014 results only from May to December.
+Combined Management Report Financial Performance: Review and Analysis
+75
+Guidance for 2015 (Non-IFRS)
+In 2015, SAP saw exceptional growth in its cloud business. Its
+core on-premise license business performed strongly as well,
+growing 10%. With the strong top line result we generated the
+highest non-IFRS operating profit in SAP's history.
+Specifically, we are working to reduce our emissions through
+three primary approaches: increasing our operational efficiency
+combined with innovative approaches to the way we do things;
+purchasing high-quality renewable electricity certificates; and
+investing in high-quality carbon credits.
+We see that energy consumption in data centers is closely
+related to innovation and customer adoption of our solutions. As
+we accelerate our shift to the cloud, we have tied our business
+strategy to our environmental strategy by creating a completely
+"green cloud" at SAP, referring to carbon neutrality, by
+purchasing 100% renewable electricity certificates and
+compensation by CO₂ offsets. In assessing our environmental
+impact, we focus on energy usage throughout SAP, as well as
+greenhouse gas emissions across our value chain.
+Our goal is to reduce the net greenhouse gas (GHG) emissions
+from our operations to levels of the year 2000 by 2020. This
+target includes all direct and indirect emissions from running our
+business (GHG Protocol Scopes 1 and 2), as well as a selected
+subset of other indirect (Scope 3) emissions. We do not include
+all of our Scope 3 emissions in our target because we choose to
+The 2015 People Survey results are extraordinarily positive. The
+Employee Engagement Index shows a steady increasing trend
+(81%, up by 2pp). This is the highest EEI score since 2010. The
+employee satisfaction went up in nearly all aspects and
+questionnaire items.
+As a company that sets out to make the world run better and
+improve people lives, we cannot stop here. Based on the survey
+results, we decided to focus, in particular, on two areas in 2016:
+our efforts to simplify our processes and our ability to innovate.
+Employee engagement will remain one of our Company-wide
+strategic goals, and thus we remain committed to achieving
+82% in 2016. This is an ambitious goal since in comparison to
+external norms as the current level of engagement is already in
+the top 10%. Similarly, we focus on the simplification of HR
+service offerings with our internal HR Run Simple program. The
+measurement of our internal HR customer satisfaction delivers
+actionable insights for prioritizing the strategic investments and
+deployment of resources as well as for creating efficiency
+through continuous improvements or decommissioning of
+services.
+HEADCOUNT
+On December 31, 2015, we had 76,986 full-time equivalent (FTE)
+employees worldwide (December 31, 2014: 74,406). This
+represents an increase in headcount of 2,579 FTEs in
+comparison to 2014. The average number of employees in 2015
+was 75,180 (2014: 68,343).
+We define FTE headcount as the number of people we would
+employ if we only employed people on full-time employment
+contracts. Students employed part-time and certain individuals
+employed by SAP but who, for various reasons, are not currently
+working, are excluded from our figures. Also, temporary
+employees are not included in the above figures. The number of
+temporary employees is not material.
+On December 31, 2015, the largest number of SAP employees
+(44%) were employed in the Europe, Middle East, and Africa
+(EMEA) region (including 23% in Germany and 21% in other
+countries of the region), while 29% were employed in the North
+America and Latin America (Americas) region (including 21% in
+the United States and 8% in other countries of the region) and
+27% in the Asia Pacific Japan (APJ) region.
+Our worldwide headcount in the field of cloud and software
+decreased less than 1% to 14,991 FTEs (2014: 15,074). Services
+counted 15,085 FTEs at the end of 2015 - an increase of 3%
+(2014: 14,639). Our R&D headcount saw a year-over-year
+increase of 11% to 20,938 FTEs (2014: 18,908). Sales and
+marketing headcount grew by 1% to 18,206 FTEs at the end of
+the year (2014: 17,969). General and administration headcount
+stayed constant at 5,024 FTEs at the end of the year (2014:
+5,023). Our infrastructure employees numbered 2,743 FTES - a
+decrease of 2% (2014: 2,794).
+Employee Engagement Index (EEI) would have an impact of
+€40 million to €50 million on SAP's operating profit. For more
+information, see the Integrated Performance Analysis section of
+the SAP Integrated Report online. Employee engagement
+remains one of SAP's corporate objectives, along with growth,
+profitability, and customer loyalty.
+In the Americas region, headcount (FTEs) increased by 95, or
+less than 1%; in the EMEA region, the increase was 566, or 2%;
+and in the APJ region, it was 1,919, or 10%.
+Number of Employees
+Full-Time Equivalents (FTEs)
+55,756
+64,422
+66,572
+74.406
+76,986
+18,995
+Our personnel expense per employee increased to
+approximately €135,000 in 2015 (2014: approximately
+€115,000). This rise in expense is primarily attributable to an
+increase in salaries, employee-related restructuring expenses,
+share-based payments, and a significant rise in the share price
+in 2015. The personnel expense per employee is defined as the
+personnel expense divided by the average number of
+employees. For more information about employee
+compensation and a detailed overview of the number of people
+we employ, see the Notes to the Consolidated Financial
+Statements section, Note (7).
+20,914
+69
+To measure the achievements of these respective initiatives, we
+conducted our People Survey from October to November. We
+are able to link our financial and non-financial performance to
+employee engagement. A change by one percentage point of the
+-
+-
+-
+Corporate Oncology Program for Employees (COPE) is
+available in Canada, Germany, and the United States, COPE
+offers employees facing cancer an individual, cost-free tumor
+analysis and interpretation based on TreatmentMAP™ by our
+external partner Molecular Health.
+Health Checkup for Executives is a one-day, one-on-one
+health checkup program for executives.
+Take Charge of Your Health and Well-Being program
+empowers employees to make the right decisions for their
+health and well-being.
+Health Ambassador Network is a global network that
+strengthens our focus on health in office locations and helps
+identify best practices.
+Local offerings, such as skin screening, on-site gyms and
+activity classes, mindfulness practice, eyesight testing, and
+health awareness sessions, are available to employees.
+Combined Management Report Employees and Social Investments
+Our Business Health Culture Index (BHCI), based on our People
+Survey, assesses the degree to which our workplace culture
+supports people's well-being, work-life balance, and
+organizational health.
+Engaging in Social Investments
+One of the major challenges for SAP and our customers on the
+digital transformation journey will be ensuring there is enough
+skilled talent around the world. The demographics are daunting
+with more than one billion young people on the planet, 85%
+living in developing countries, and more than 90 million
+unemployed. At the same time the global economy will be facing
+a shortage of 40 million highly-skilled workers by 2020. To help
+bridge this skills gap and support economic development, SAP's
+social investments focus on equipping the world's youth with the
+skills they need to tackle society's problems and thrive in the
+digital economy.
+Our corporate social responsibility (CSR) programs do this in
+two main focus areas: building the capacity of innovative social
+enterprises that put young people on the path to successful
+careers, and building a skilled workforce for the IT sector with
+skills, training or workforce development programs.
+A core component of our CSR approach is pro-bono
+volunteering activities that use employees' core skills for social
+good. These programs help strengthen leadership
+competencies while delivering needed services to communities
+and individuals worldwide. Now in its fourth year, the SAP Social
+Sabbatical is a short-term assignment for key talents who work
+in diverse teams to solve business challenges for the education
+and social entrepreneurship sector in emerging markets. In
+2015, the program was expanded to include work with local
+organizations in an employee's region. As of 2015, more than
+40,000 pro-bono service hours were attributed to 163
+employees for 57 organizations. These include Ahoodoo Tec, a
+tech startup in Addis Ababa, Ethiopia, that develops Web
+applications and mobile apps for secondary school education,
+and Livox, a Brazilian startup that makes accessibility software
+to help people with disabilities speak and learn.
+SAP launched the very successful Africa Code Week, which
+trained nearly 90,000 children on coding in one week in October
+2015. Young people from 17 African countries took part in the
+more than 3,000 free coding workshops.
+In 2015, the world's eyes were opened to the breadth of the
+global refugee crisis. SAP's leaders and employees felt strongly
+that SAP could make an important contribution and committed
+to a broad holistic approach. The program covered internship
+opportunities for at least 100 refugees as well as humanitarian
+assistance. Through employees giving more than €200,000 and
+CSR commitments, SAP pledged more than €900,000 to
+immediate relief, long-term education, and integration projects
+to assist refugees. In addition, SAP joined forces with the
+Grammy-award winning band Imagine Dragons to launch the
+One4 project under the hashtag #One4. Imagine Dragons
+donated the proceeds from their song "I Was Me" to the UN
+Refugee Agency (UNHCR). Further, SAP is donating 10 U.S.
+cents for every download up to the first five million downloads
+from iTunes.
+Listening to Our People
+Our past People Survey scores revealed that our employees
+were committed to executing the strategy but needed support
+to translate the strategic direction into their daily lives.
+Subsequently, we decided to continue our focus on this key
+topic in 2015. Across the five waves of our quarterly strategy
+checkpoint survey in 2014 and 2015, there was a steady
+increase in strategy adoption. By the end of September, more
+than 8 out of 10 employees say they are aware of the strategy,
+understand it, and are committed to executing it. We continue to
+measure the success of strategy adoption in 2016, along with
+the adoption of the key cultural elements that are the How We
+Run behaviors and leadership principles.
+The positive trend of the BHCI continued, achieving 75%
+compared to 72% in 2014. The BHCI for 2014 was recalculated
+from 70% to 72% based on two questions in the People Survey
+concerning work-life balance. The changes were done to simplify
+the questionnaire and to achieve better comparability against
+external benchmarks. With the very positive result in 2015, we
+see the first indications that a health-focused culture has a
+significantly positive impact on employees. In an ever-changing
+environment and with SAP's transition into the cloud, we firmly
+believe that the very good financial results of SAP for 2015 were
+supported by the BHCI results. Based on 2015 data, a change by
+one percentage point of the BHCI would have an impact of
+€75 million to €85 million on SAP's operating profit. For more
+information, see the Integrated Performance Analysis section of
+the SAP Integrated Report online.
+15,542
+16,011
+12,592
+Total
+76,986
+Services
+15,085
+Sales and Marketing
+18,206
+Americas APJ
+EMEA
+Combined Management Report Employees and Social Investments
+10
+Cloud and Software
+14,991
+70
+Energy and Emissions
+■ We continued to procure 100% renewable electricity in 2015.
+■ Carbon emission offsets were introduced for business flights.
+■ We continued to drive the expansion of the environmental management
+system (ISO 14001).
+In 2015, we made significant progress toward our goals for the
+reduction of greenhouse gas emissions, taking advantage of the
+digitalization and green technology trends that are driving
+transformational changes across the global economy. These
+trends can have a significant impact on energy consumption and
+greenhouse gas emissions. We are applying these trends to our
+own business and helping our customers apply them to their
+businesses. For example, by enabling business model
+transformation, using advances such as smart grids and the
+Internet of Things, SAP is helping connected digital business
+networks reduce overall carbon footprints.
+STRENGTHENING OUR "GREEN CLOUD"
+€5.6 billion
+to €5.9 billion
+REDUCING GREENHOUSE GAS EMISSIONS
+Environmental
+Performance:
+Research and
+Development
+20.938
+2,743
+Infrastructure
+22,071
+22,166
+19,123
+19,568
+15,473
+27,700
+29,757
+30,993
+33,340
+33,906
+2011
+2012
+2013
+2014
+2015
+Employees by Functional Area
+Full-Time Equivalents (FTEs)
+General and
+Administration
+5,024
+focus on those emissions over which we have direct control or
+ability to influence. However, we are increasingly addressing
+both our upstream and downstream emissions to support a
+comprehensive carbon strategy for SAP.
+Effective tax rate (IFRS)
+margin (Non-IFRS) in our business network segment resulted in
+-75% for 2015, already close to our long-term ambition of
+~80%. This good result is based on an overall improved
+profitability as well as related to positive effects of the Concur
+acquisition. The revenue growth of our private cloud offering
+was more positive than expected. At the same time, the
+profitability of our private cloud offering could also be improved
+further; it is still negative but based on the good progress we
+saw throughout 2015, we expect break even in the course of
+2016. Profitability in our public cloud offering was -70% for
+2015 compared to our long-term ambition of ~80%. Our overall
+cloud gross margin improved year over year from 64.3% in 2014
+to 65.6% in 2015, despite incremental investments in the cloud
+infrastructure. These investments were necessary so as to be
+able in future periods to satisfy the increased customer demand
+that can be seen in the significantly higher cloud backlog as well
+as the increased cloud bookings.
+Effective tax rate (non-IFRS)
+Revenue by Region and Industry
+Revenue from other services increased €112 million, or 18%, to
+€723 million in 2015 (2014: €611 million). This reflects a 9%
+increase from new business and a 10% increase from currency
+changes.
+A solid market demand led to an 8% increase of €222 million in
+consulting revenue and premium support revenue from
+€2,634 million in 2014 to €2,856 million in 2015. This increase
+reflects a 0% increase from new business and an 8% increase
+from currency effects. Consulting and premium support revenue
+contributed 80% of the total service revenue (2014: 81%).
+Consulting and premium support revenue contributed 14% of
+total revenue in 2015 (2014: 15%).
+Services revenue increased €334 million, or 10%, from
+€3,245 million in 2014 to €3,579 million in 2015. This increase
+reflects a 2% increase from new services business and an 8%
+increase from currency effects.
+delivered in connection with our travel and expense
+management offerings.
+Services Revenue combines revenue from professional services,
+premium support services, training services, messaging
+services and payment services. Professional services primarily
+relate to the installation and configuration of our cloud
+subscriptions and on-premise software products. Our premium
+support offering consists of high-end support services tailored
+to customer requirements. Messaging services are primarily
+transmission of electronic text messages from one mobile
+phone provider to another. Payment services are primarily
+Services Revenue
+Cloud and software revenue grew from €14,315 million in 2014
+to €17,214 million in 2015, an increase of 20%. This reflects a
+12% increase from new cloud and software business and a 9%
+increase from currency effects.
+Software licenses and software support revenue rose
+€1,700 million, or 13%, from €13,228 million in 2014 to
+€14,928 million in 2015. This growth breaks down into a 6%
+increase from new software licenses and software support
+business and a 7% increase from currency effects.
+Our stable customer relations and continued investment in new
+software licenses by customers throughout 2015 and the
+previous year resulted in an increase in software support
+revenue from €8,829 million in 2014 to €10,093 million in 2015.
+The SAP Enterprise Support offering was the largest contributor
+to our software support revenue. The €1,264 million, or 14%,
+growth in software support revenue reflects a 7% increase from
+new support business and an 8% increase from currency
+effects. This growth is primarily attributable to SAP Product
+Support for Large Enterprises and SAP Enterprise Support. The
+acceptance rate for SAP Enterprise Support among new
+customers slightly increased to 99% in 2015 (2014: 98%).
+Our customer base continued to expand in 2015. Based on the
+number of contracts concluded, 13% of the orders we received
+for software in 2015 were from new customers (2014: 12%). The
+total value of software orders received increased 16% year-over-
+year. The total number of software license contracts increased
+6% to 57,439 (2014: 54,120 contracts), while the average order
+value increased by 9%. Of all our software orders received in
+2015, 27% were attributable to deals worth more than €5 million
+(2014: 22%), while 40% were attributable to deals worth less
+than €1 million (2014: 44%).
+Despite a combination of a challenging macroeconomic and
+political environment and the accelerating industry shift to the
+cloud, we achieved a €436 million increase in software license
+revenue. This increase, from €4,399 million in 2014 to
+€4,835 million in 2015, reflects a 4% increase from new license
+business and a 6% increase from currency effects.
+Cloud subscriptions and support revenue increased from
+€1,087 million in 2014 to €2,286 million in 2015.
+77
+Revenue by Region
+Combined Management Report Financial Performance: Review and Analysis
+Americas APJ
+2015
+2014
+2013
+2012
+2011
+7,622
+6,819
+6,428
+5,968
+5,395
+Total revenue increased from €17,560 million in 2014 to
+€20,793 million in 2015, representing an increase of
+€3,233 million, or 18%. This growth reflects a 10% increase
+Total Revenue
+3,846
+EMEA
+4,645
+Revenue by Region (based on customer location)
+14,233
+78
+Combined Management Report Financial Performance: Review and Analysis
+In 2015, the EMEA region generated €9,181 million in revenue,
+which was 44% of total revenue (2014: €8,383 million; 48%).
+This represents a year-over-year increase of 10%. Revenue in
+Germany increased 8% to €2,771 million in 2015 (2014:
+€2,570 million). Germany contributed 30% (2014: 31%) of all
+EMEA region revenue. The remaining revenue in the EMEA
+region was primarily generated in France, Italy, the Netherlands,
+Russia, Switzerland, and the United Kingdom. Cloud and
+software revenue generated in the EMEA region in 2015 totaled
+€7,622 million (2014: €6,819 million). Cloud and software
+revenue represented 83% of all revenue in the region in 2015
+(2014: 81%). Cloud subscriptions revenue rose 83% to
+€507 million in 2015 (2014: €277 million). This growth reflects a
+Americas APJ
+EMEA
+EMEA Region
+2015
+2014
+2013
+2012
+2011
+25.0 %
+to 26.0%
+8,383
+7,975
+€ millions
+7,512
+5,091
+6,489
+6,233
+6,060
+8,428
+2,151
+2,688
+2,606
+2,650
+3,185
+20,793
+17,560
+16,815
+16,223
+6,991
+4,922
+9.181
+1,789
+270
+18
+€ millions
+Cloud Subscriptions and Support Revenue by Region
+(based on customer location)
+from new business and a 9% increase from currency effects.
+The growth in revenue resulted primarily from a €1,264 million
+rise in support revenue, a €1,199 million increase in cloud
+subscriptions and support revenue, software license revenue
+increased €436 million and services revenue grew by
+€334 million. Cloud and software revenue climbed to
+€17,214 million in 2015, an increase of 20%. Cloud and software
+revenue represented 83% of total revenue in 2015 (2014: 82%).
+Service revenue increased 10% from €3,245 million in 2014 to
+€3,579 million, which was 17% of total revenue, in 2015.
+We break our operations down into three regions: the Europe,
+Middle East, and Africa (EMEA) region, the Americas region, and
+the Asia Pacific Japan (APJ) region. We allocate revenue
+amounts to each region based on where the customer is located.
+For more information about revenue by geographic region, see
+the Notes to the Consolidated Financial Statements section,
+Note (28).
+This section on operating results (IFRS) discusses results only in
+terms of IFRS measures, so the IFRS numbers are not expressly
+identified as such.
+OPERATING RESULTS (IFRS)
+We achieved an effective tax rate (IFRS) of 23.4% and an
+effective tax rate (non-IFRS) of 26.1%, which is below the
+outlook of 25.0% to 26.0% (IFRS) and 26.5% to 27.5% (non-
+IFRS). The reduction mainly results from taxes for prior years.
+Efficiency improvements in both our core and our cloud
+business drove absolute operating profit growth. Non-IFRS
+operating profit in 2015 was €5.904 billion, an increase of 5% at
+constant currencies. The growth in our operating profit in 2015
+reflects the continued success of our business transformation in
+combination with the strong top-line growth. In 2015, we had a
+positive impact from our Company-wide transformation
+program in the triple-digit million euro range. On the other hand,
+we had a net increase of more than 2,500 employees in 2015 as
+we continued to invest in innovation and growth markets. Thus,
+constant currency non-IFRS operating profit amounting to
+€5.904 billion slightly exceeded the range (€5.6 billion to
+€5.9 billion) we had expected in our outlook.
+76
+Combined Management Report Financial Performance: Review and Analysis
+Our expense base in 2015 was impacted by the transformation
+to a fast-growing cloud business resulting in a significant higher
+share of more predictable revenue. The gross margins of our
+cloud offerings made good progress throughout 2015. Our gross
+Operating expenses (non-IFRS) in 2015 were €14.5 billion (2014:
+€11.9 billion), an increase of 21%. On a constant currency basis
+the increase was 12%.
+Our total revenue (non-IFRS) rose 18% in 2015 to €20.8 billion
+(2014: €17.6 billion). On a constant currency basis, the increase
+was 10%.
+Besides the cloud business also our core on-premise business
+showed an exceptional growth in 2015. Cloud and software
+revenue (non-IFRS) was €17.2 billion (2014: €14.3 billion). On a
+constant currency basis, the increase was 12% and based on
+that result significantly above the forecast for 2015.
+Thus, the new cloud bookings measure is an indicator for our
+cloud-related sales success in a given period and for future
+cloud subscriptions revenue. New cloud bookings increased
+100% in 2015 to €874 million (2014: €436 million). Concur
+contributed €169 million to new cloud bookings. In addition to
+the strong growth of the new cloud bookings the combination of
+our cloud backlog (unbilled future revenue based on existing
+customer contracts) and deferred cloud revenue that together
+reflect the committed future cloud subscriptions and support
+revenue climbed by 53% to €4.6 billion (2014: €3.0 billion). This
+committed business will drive cloud growth in 2016 and beyond.
+Amounts are annualized. That is, for contracts with durations
+of more than one year, the average annual order entry
+amount is included in the number.
+The order amount is contractually committed (that is,
+variable amounts from pay-per-use and similar arrangements
+are not included). Consequently, due to their uncommitted
+pay-per-use nature, transaction-based fees from SAP Ariba
+and SAP Fieldglass solutions are not reflected in the new
+cloud bookings metric.
+It results from purchases by new customers and incremental
+purchases by existing customers. Consequently, orders to
+renew existing contracts are not included.
+The revenue from the orders is expected to be classified as
+cloud subscriptions and support revenue.
+-
+these positive acquisition effects our cloud line of business also
+continued to benefit from strong organic growth (32% at
+constant currencies), which surpassed our long-term growth
+expectations for 2015.
+At constant currencies, non-IFRS cloud subscriptions and
+support revenue grew from €1.1 billion in 2014 to €2.0 billion in
+2015. That represents an increase of 82% at constant
+currencies. The increase includes effects relating to acquisitions
+not included, or not included in full, in the 2014 amount. Besides
+Despite ongoing economic uncertainty throughout 2015, our
+new and existing customers continued to show a strong
+willingness to invest in our solutions.
+23.4%
+26.1%
+26.5%
+to 27.5%
+5,276
+696
+1,087
+Starting with the reporting for the first quarter of 2015, SAP
+reports a new cloud related measure called "new cloud
+bookings." This measure is an order entry measure that is
+determined by including all order entry of a given period that
+meets all of the following conditions:
+200 공
+Software licenses revenue results from the fees earned from
+selling or licensing software to customers. Revenue from cloud
+subscriptions and support refers to the income earned from
+contracts that permit the customer to access specific software
+solutions hosted by SAP during the term of its contract with
+SAP. Support revenue represents fees earned from providing
+technical support services and unspecified software upgrades,
+updates, and enhancements to customers.
+Cloud and Software Revenue by Region
+(based on customer location)
+€ millions
+11,030
+12,801
+13,505
+Cloud and Software Revenue
+14,315
+2,221
+2,155
+2,188
+Revenue
+2,286
+6,929
+17,214
+For more information about the breakdown of total revenue by
+region and industry, see the Revenue by Region and Industry
+section below.
+2,663
+EMEA
+Americas
+709
+457
+161
+277
+176
+507
+2012
+2013
+2014
+1,579
+2011
+2015
+(Non-IFRS)
+General and administration expense increased 17% from
+€892 million in 2014 to €1,048 million in 2015. That this expense
+grew less rapidly than revenue is primarily the result of careful
+cost management. Consequently, the ratio of general and
+administration expense to total revenue dropped slightly in 2015
+to 5.0% (2014: 5.1%).
+Segment Information (Non-IFRS)
+The financial data presented for 2015 contain all revenues and
+expenses from Concur and Fieldglass, whereas the prior year's
+comparison figures only include their financial data as of their
+respective acquisition dates. Fieldglass was acquired on May 2,
+2014; Concur on December 4, 2014.
+Revenue and profit figures for each of our operating segments
+are calculated in line with our internal management reporting
+and therefore differ from the corresponding revenue and profit
+in our Consolidated Statements of Income prepared according
+to IFRS. For more information about our segment reporting, the
+activities that our two segments derive their revenues from,
+financial performance measures, and reconciliation from our
+internal management reporting to our external IFRS reporting,
+see the Notes to the Consolidated Financial Statements section,
+Note (28), and the Performance Management System section.
+Applications, Technology & Services Segment
+Our general and administration expense consists mainly of
+personnel costs to support our finance and administration
+functions.
+€ millions, unless otherwise stated
+In 2015, SAP had two reportable segments: the Applications,
+Technology, and Services segment; and the SAP Business
+Network segment. These are the components of SAP that our
+Executive Board regularly reviews to assess the performance of
+our Company and to make resource allocation decisions.
+General and Administration Expense
+80
+Our sales and marketing expense rose 25% from €4,304 million
+in 2014 to €5,401 million in 2015. The increase was mainly the
+result of greater personnel costs as we expanded our global
+sales force, and of increased expenditure for bonus payments
+prompted by the strong revenue growth. The ratio of sales and
+marketing expense to total revenue, expressed as a percentage,
+increased to 26.0% year-over-year (2014: 24.5%), an increase
+of 1.5 percentage points.
+Sales and marketing expense consists mainly of personnel
+costs, direct sales costs, and the cost of marketing our products
+and services.
+Sales and Marketing Expense
+information, see the Products, Research & Development, and
+Services section.
+88
+Combined Management Report Financial Performance: Review and Analysis
+revenue
+Due to growing personnel costs because of the 11% increase in
+our headcount by the end of the year, and the revenue-related
+year-over-year increase in compensation payments, our R&D
+expense increased by 22% to €2,845 million in 2015 from
+€2,331 million in 2014. R&D expense as a percentage of total
+increased to 13.7% (2014: 13.3%). For more
+Our research and development (R&D) expense consists
+primarily of the personnel cost of our R&D employees, costs
+incurred for independent contractors we retain to assist in our
+R&D activities, and amortization of the computer hardware and
+software we use for our R&D activities.
+Segment revenue
+Research and Development Expense
+Although we were able to increase our service revenue by 10%
+year-over-year to €3,579 million in 2015 (2014: €3,245 million),
+our service business continues to be greatly affected as we
+trend away from classic software licensing and consulting
+revenue toward more subscription revenue from cloud
+solutions. We are also investing in our SAP ONE Service
+organization. As a result, cost of service rose 22% to
+€3,313 million (2014: €2,716 million). Our gross margin on
+services, defined as services profit as a percentage of services
+revenue, narrowed to 7.4% (2014: 16.3%).
+Cost of services consists primarily of the cost of consulting,
+premium services and training personnel and the cost of
+bought-in consulting and training resources. This item also
+includes sales and marketing expenses for our services resulting
+from sales and marketing efforts where those efforts cannot be
+clearly distinguished from providing the services.
+2015
+55
+A in %
+Financial Services
+1,881
+3,298
+Cost of Services
+Services
+Consumer
+4,934
+€ millions
+Revenue by Industry
+4
+12
+7,099
+7,918
+-5pp
+-2pp
+53
+Cloud subscription and support margin (in %)
+-1pp
+-1pp
+Gross margin (in %)
+73
+72
+6
+13
+16,871
+19,126
+A in %
+(Constant
+Currency)
+2014
+The gross margin on cloud and software, defined as cloud and
+software profit as a percentage of cloud and software revenue,
+narrowed to 80.8% in 2015 (2014: 82.1%). This change is driven
+by the revenue mix effect with a rising cloud subscriptions and
+support revenue share while both cloud subscriptions and
+support margin as well as software license and support margin
+only changed marginally.
+4,884
+In 2015, the cost of cloud and software increased 30% to
+€3,313 million (2014: €2,557 million).
+€ millions | change since previous year
+4,041
+4.479
+4,331
++89%
+-17%
++11%
+-3%
+4,252
+-2%
+2011
+2012
+2013
+2014
+2015
+Operating Margin
+Percent change since previous year
+34.3
+24.9
+26.6
+24.7
++13.5 pp
+-9.4 pp
++1.7 pp
+-2.0 pp
+3,672
+Operating Profit
+Significant costs included an additional €539 million year-over-
+year to extend our cloud business in response to the sustained
+strength of customer demand, with an associated increase in
+the expense of delivering and operating cloud applications, a
+€164 million revenue-related increase in the license fees we pay
+to third parties, and a €74 million rise in the cost of providing
+custom development projects. These investments contributed
+to revenue growth. Our margin on cloud subscriptions and
+support narrowed 0.4 percentage points to 55.3% (2014:
+55.8%). This decrease was primarily due to increasing expenses
+related to the extension of our cloud infrastructure. These
+expenses represent an investment in our fast-growing cloud
+business of the future, and were in part already offset by a
+significant increase in cloud subscriptions and support revenue.
+79
+The effect of acquisition-related expenses, which were
+€738 million (2014: €562 million), of restructuring expenses,
+which were €621 million (2014: €126 million), and of a
+€724 million expense for share-based payments (2014:
+€290 million) weighed more heavily on operating profit than in
+the previous year. The record revenue generated increased the
+cost of bonus payments, and the improving performance of the
+share price in 2015 pushed share-based payment expenses
+higher. Continuing investment in the cloud infrastructure, in
+sales activities around the world, and in research and
+development also affected operating profit. Our employee
+headcount (measured in full-time equivalents, or FTEs)
+increased by 2,579 year-over-year.
+Cost of cloud and software consists primarily of customer
+support costs, cost of developing custom solutions that address
+customers' specific business requirements, costs for deploying
+and operating cloud solutions, amortization expenses relating to
+intangibles, and license fees and commissions paid to third
+parties for databases and the other complementary third-party
+products sublicensed by us to our customers.
+Cost of Cloud and Software
+Changes to the individual elements in our cost of revenue were
+as follows:
+The overall result of these effects on operating profit was a 4.2
+percentage point narrowing of our operating margin in 2015 to
+20.5 % (2014: 24.7%).
+These short-term, negative effects on operating profit largely
+represent investments in the future and were in part offset by
+the increase in revenue.
+2015
+2014
+2013
+2012
+2011
+20.5
+-4.2 pp
+We allocate our customers to one of our industries at the outset
+of an initial arrangement. All subsequent revenue from a
+particular customer is recorded under that industry sector.
+Revenue by Industry
+In 2015, 15% (2014: 15%) of our total revenue was generated in
+the APJ region, with the strongest revenue growth being
+achieved in India. Total revenue in the APJ region increased 18%
+to €3,185 million. In Japan, revenue increased 11% to
+€667 million. Revenue from Japan was 21% (2014: 22%) of all
+revenue generated in the APJ region. The revenue growth in
+Japan was attributable to a 6% increase from new business and
+a 5% increase from currency effects. In the remaining countries
+of the APJ region, revenue increased 21%. Revenue in the
+remaining countries of the APJ region was generated primarily
+in Australia, China, and India. Cloud and software revenue in the
+APJ region totaled €2,663 million in 2015 (2014: €2,221 million).
+That was 84% of all revenue from the region (2014: 83%). Cloud
+subscriptions revenue grew 98% to €200 million in 2015 (2014:
+€101 million). This growth reflects an 82% increase from new
+cloud business and a 17% increase from currency effects.
+Software licenses and software support revenue increased 16%
+to €2,463 million in 2015 (2014: €2,120 million). This increase
+reflects an 8% increase from new business and an 8% increase
+from currency effects.
+APJ Region
+In 2015, 41% of our total revenue was generated in the Americas
+region (2014: 37%). Total revenue in the Americas region
+increased 30% to €8,428 million; revenue generated in the
+United States increased 38% to €6,750 million. This growth
+reflects a 16% increase from new business and a 22% increase
+from currency effects. The United States contributed 80%
+(2014: 75%) of all revenue generated in the Americas region. In
+the remaining countries of the Americas region, revenue
+increased 5% to €1,678 million. This reflects a 3% increase from
+new business and a 2% increase from currency effects. This
+revenue was primarily generated in Brazil, Canada, and Mexico.
+Cloud and software revenue generated in the Americas region in
+2015 totaled €6,929 million (2014: €5,276 million). Cloud and
+software revenue represented 82% of all revenue in the
+Americas region in 2015 (2014: 81%). Cloud subscriptions
+revenue rose by 123% to €1,579 million in 2015 (2014:
+€709 million); currency effects were 34%, growth in new cloud
+business was 89%. Software licenses and software support
+revenue rose 17% to €5,350 million in 2015 (2014:
+€4,566 million). This growth reflects a 2% increase from new
+business; currency effects were 15%.
+Americas Region
+69% increase from new cloud business and a 14% increase from
+currency effects. Software licenses and software support
+revenue rose 9% to €7,115 million in 2015 (2014:
+€6,542 million). This growth reflects an 8% increase from new
+software license and software support business and a 1%
+increase from currency effects.
+Public Services
+2,174
+Discrete
+Manufacturing
+Energy and Natural
+Resources
+4,834
+In 2015, we achieved above-average growth in the following
+industry sectors, measured by changes in total revenue: Public
+Services (€2,174 million, at a growth rate of 22%); Consumer
+(€4,934 million, at a growth rate of 22%); and Discrete
+Manufacturing (€3,672 million, at a growth rate of 20%).
+Revenue from the other industry sectors was Services
+(€3,298 million, at a growth rate of 17%); Energy & Natural
+Resources (€4,834 million, at a growth rate of 16%); and
+Financial Services (€1,881 million, at a growth rate of 11%).
+Operating Profit and Operating Margin
+SAP continued to invest in innovation and its cloud business and
+generated record turnover in 2015. The strong growth in
+revenue, however, also led to an increase in compensation
+payments to our employees, while the climbing stock price
+translated into higher share-based payment expenses. As a
+result, our operating profit declined slightly by 2% to
+€4,252 million (2014: €4,331 million).
+In 2015, our operating expenses increased €3,311 million or 25%
+to €16,541 million (2014: €13,230 million). The main
+contributors to that increase were our acquisition of Concur in
+December 2014, our greater investment- and revenue-related
+cloud subscriptions and support costs, our continued
+investment in sales activities, and higher restructuring
+expenses.
+Combined Management Report Financial Performance: Review and Analysis
+Total
+20,793
+83
+Net liquidity is Group liquidity less total financial debt as defined
+above.
+-3,852
+3,559
+329
+-1,316
+-636
+1,748
+226
+Group Liquidity
+12/31/2014
+3,638
+€ millions
+Group Liquidity Development
+55
+85
+Combined Management Report Financial Performance: Review and Analysis
+Group liquidity consists of cash and cash equivalents (for
+example, cash at banks, money market funds, and time deposits
+with original maturity of three months or less) and current
+investments (for example, investments with original maturities
+of greater than three months and remaining maturities of less
+than one year) as reported in our Consolidated Financial
+Statements.
+2,055
+3,423
+-7,670
+Operating Cashflow
+Acquisitions
+3,499
+3,638
+Net cash flows from operating
+activities
+A in %
+2014
+2015
+€ millions
+Proceeds from
+Borrowings
+4
+For information about the impact of cash, cash equivalents,
+current investments, and our financial liabilities on our income
+statements, see the analysis of our financial income, net, in the
+Operating Results (IFRS) section.
+The increase in Group liquidity compared to 2014 was mainly
+due to cash inflows from our operations and financing activities
+in issuing bonds. They were offset by cash outflows for dividend
+payments and repayments of borrowings.
+Group Liquidity
+12/31/2015
+Other
+Repayments of
+Borrowings
+Dividends
+Paid
+Capital Expenditure
+Analysis of Consolidated Statements of Cash Flow
+-5,615
+329
+-8,936
+2014
+2015
+€ millions
+Group Liquidity of SAP Group
+Group liquidity on December 31, 2015, primarily comprised
+amounts in euros and U.S. dollars. Current investments are
+included in other financial assets in the statement of financial
+position. Financial debts are included within financial liabilities in
+the statement of financial position.
+CASH FLOWS AND LIQUIDITY
+For more information about financial and non-financial liabilities,
+see the Notes to the Consolidated Financial Statements section,
+Note (18).
+Δ
+Total liabilities on December 31, 2015, mainly comprised
+financial liabilities of €9,522 million (of which €8,681 million are
+non-current). Financial liabilities on December 31, 2015,
+consisted largely of financial debt, which included amounts in
+euros (€6,994 million) and U.S. dollars (€2,202 million). On
+December 31, 2015, approximately 64% of financial debt was
+held at variable interest rates, partially swapped from fixed into
+variable using interest rate swaps. Total liabilities on December
+31, 2015, also comprised non-financial liabilities. Most of these
+non-financial liabilities result from employee-related obligations.
+Total financial debt consists of current and non-current bank
+loans, bonds, and private placements. For more information
+about our financial debt, see the Notes to the Consolidated
+Financial Statements section, Note (17).
+liabilities decreased by 7 percentage points to 22% at the end of
+2015 (29% as at December 31, 2014).
+84
+Combined Management Report Financial Performance: Review and Analysis
+years. We also repaid a €550 million Eurobond and a
+US$300 million U.S. private placement tranche at their
+maturity. Thus, the ratio of total financial debt to total equity and
+In 2015, we repaid €1,270 million in bank loans that we had
+taken to finance the Concur acquisition and refinanced another
+part of this loan through the issuance of a three-tranche
+Eurobond of €1.75 billion in total with maturities of two to ten
+7
+As part of our financing activities in 2016, the Company intends
+to repay a US$600 million U.S. private placement tranche when
+it matures and a further substantial portion of our outstanding
+bank loan.
+Cash and cash equivalents
+Current investments
+3,411
+3,328
+-8,607
+Non-current financial debt
+Net liquidity 2
+1,726
+1,266
+2,992
+Net liquidity 1
+1,590
+-2,157
+-567
+Current financial debt
+136
+3,423
+3,559
+Group liquidity
+53
+95
+148
+Net cash flows from investing
+activities
+-334
+-1pp
+-7,240
+Shareholder's
+equity
+2015
+2014
+Equity Ratio
+Thus, the equity ratio (that is, the ratio of shareholders' equity to
+total assets) improved to 56% (prior year: 51%).
+For more information about financing activities in 2015, see the
+Finances (IFRS) section.
+Total non-current liabilities decreased slightly by €229 million in
+2015 to €10,228 million compared to the previous year figure of
+€10,457 million.
+51
+Current liabilities decreased by 8% to €7,867 million in 2015 as
+compared to the prior year (€8,574 million) which is mainly due
+to repayments of a short-term bank loan we took to finance the
+Concur acquisition.
+2014
+2013
+2012
+2011
+-92%
++377%
+676
+2015
+56
+2014
+2015
+2014
+2013
+2012
+2011
+Total non-current assets increased by 7% in 2015 to
+€31,651 million compared to the previous year's figure of
+€29,566 million. This change was mainly due to foreign
+exchange related revaluations.
+Total current assets increased by 8% in 2015 from
+€8,999 million to €9,739 million. This was mainly due to an
+increase in trade and other receivables to €5,275 million (2014:
+€4,342 million) stemming from strong business in the last
+quarter of 2015.
++5 pp
+-8 pp
++5 pp
+-1 pp
++8 pp
+55
+54
+59
+51
+56
+Percent change since previous year
+8,636
+100
+1,812
+-74%
+657
+-88%
+As at December 31, 2015, SAP SE had additional available credit
+facilities totaling €471 million. Several of our foreign subsidiaries
+have credit facilities available that allow them to borrow funds at
+prevailing interest rates. As at December 31, 2015, approxi-
+mately €49 million was available through such arrangements.
+There were immaterial borrowings outstanding under these
+credit facilities from our foreign subsidiaries as at December 31,
+2015.
+bear interest at the Euro Interbank Offered Rate (EURIBOR) or
+London Interbank Offered Rate (LIBOR) for the respective
+optional currency plus a margin ranging from 0.3% to 0.525%.
+We pay a commitment fee of 0.079% per annum on unused
+amounts of the available credit facility. So far, we have not used
+and do not currently foresee any need to use, this credit facility.
+86
+Combined Management Report Financial Performance: Review and Analysis
+We are party to a revolving €2.0 billion credit facility contract
+with maturity in November 2020. The credit line may be used for
+general corporate purposes. A possible future withdrawal is not
+subject to any financial covenants. Borrowings under the facility
+Other sources of capital are available to us through various
+credit facilities, if required.
+Credit Facilities
+ASSETS (IFRS)
+The dividend payment of €1,316 million made in 2015 exceeded
+the amount of €1,194 million in the prior year resulting from the
+increased dividend paid per share from €1.00 to €1.10.
+Cash outflows from investment activities decreased significantly
+to €334 million in 2015 (2014: €7,240 million). Cash outflows
+from purchase of intangible assets and property, plant, and
+equipment remained stable. Cash outflows in 2014 had resulted
+mainly from business combinations of Concur and Fieldglass.
+For more information about current and planned capital
+expenditures, see the Assets section and the Investment Goals
+section.
+Net cash provided by operating activities increased 4% year-
+over-year to €3,638 million in 2015 (2014: €3,499 million).
+Payments in connection with the restructuring of €204 million
+to employees and €272 million to insurance policies have offset
+partly the non-recurring effect from litigations in 2014. In 2015,
+days' sales outstanding (DSO) for receivables, defined as the
+average number of days from the raised invoice to cash receipt
+from the customer, increased six days to 71 days (2014:
+65 days).
+<-100
+4,298
+-3,356
+Net cash flows from financing
+activities
+-95
+Net cash outflows from financing activities were €3,356 million
+in 2015, compared to net cash inflows of €4,298 million in 2014.
+The 2015 cash outflows had resulted from repayments of
+€1,270 million bank loans, €550 million Eurobonds and
+US$300 million private placements. We refinanced another part
+of the bank loan through the issuance of a three-tranche
+Eurobond of €1,750 million in total. Cash inflows in 2014 were
+the result of issuing a €2,750 million Eurobond and drawing two
+tranches (of €1,270 million and €3,000 million) of a bank loan.
+Cash outflows in 2014 arose chiefly from repayments of
+€1,086 million borrowings and US$1,160 million convertible
+bonds that we assumed in connection with our acquisition of
+Concur.
+Analysis of Consolidated Statements of Financial Position
+Total assets increased by 7% year-over-year to €41,390 million.
+Breakdown of Consolidated Statements of
+Financial Position
+Percent
+€ millions | change since previous year
+(incl. Capitalizations due to Acquisitions)
+Investment in Goodwill, Intangible Assets or Property,
+Plant, and Equipment
+25
+25
+27
+Long term
+76
+77
+19
+22
+Liabilities
+22
+Short term
+24
+23
+Assets
+6,859
++944%
+2015
+38,565
+41,390
+Dividend per Share
+If the shareholders approve this recommendation and if treasury
+shares remain at the 2015 closing level, the total amount
+distributed in dividends would be €1,378 million. The actual
+amount distributed may be different from this total because the
+number of shares held in treasury may change before the
+Annual General Meeting of Shareholders. In 2015, we distributed
+€1,316 million in dividends from our 2014 profit. In 2015 and
+2014, we did not repurchase any SAP treasury shares.
+dividend will be increased by 5% to €1.15 per share (2014:
+€1.10). Based on this recommendation, the overall dividend
+payout ratio (which here means total distributed dividend as a
+percentage of profit) would be 45% (2014: 40 %).
+€ millions | change since previous year
+Profit After Tax
+Profit after tax decreased to €3,056 million in 2015 (2014:
+€3,280 million).
+Profit After Tax and Earnings per Share
+3,437
++90%
+Our effective tax rate decreased to 23.4% in 2015 (2014:
+24.7%). The year-over-year decrease in the effective tax rate
+mainly resulted from changes in taxes for prior years. For more
+information on income taxes, see the Notes to the Consolidated
+Financial Statements section, Note (10).
+82
+88
+Combined Management Report Financial Performance: Review and Analysis
+Finance costs mainly consist of interest expense on financial
+liabilities (€135 million in 2015 compared to €93 million in 2014)
+due to higher average indebtedness and negative effects from
+derivatives (€72 million in 2015 compared to €28 million in
+2014). For more information about financing instruments, see
+the Notes to the Consolidated Financial Statements section,
+Note (17b).
+Finance income mainly consists of gains from disposal of equity
+securities and interest income from loans and receivables,
+financial assets (cash, cash equivalents, and current
+investments), and income of derivatives.
+Financial income, net, changed to -€5 million (2014:
+-€25 million). Our finance income was €241 million (2014:
+€127 million) and our finance costs were €246 million (2014:
+€152 million).
+Financial Income, Net
+Income Tax
+€105 million), resulting in an increase in the segment margin of
++3.1 percentage points to 19.4% (18.0% at constant currencies).
+2,803
+3,280
+III
++5%
++10%
++18%
+-23%
+1.15
+1.10
+3,325
+1.00
+1.10
++83%
+€ | change since previous year
+-7%
+-1%
++19%
+-18%
+3,056
+0.85
+The segment's cost of revenue increased 144% in 2015 (114% at
+constant currencies) to €530 million (2014: €217 million), of
+which €299 million in expenses are attributable to Concur and
+SAP Fieldglass (2014: €28 million). The cloud subscriptions and
+support margin for the segment decreased by 0.4 percentage
+points to 74.9% (74.5% at constant currencies). The SAP
+Business Network segment achieved a segment gross profit of
+€1,084 million in 2015 (2014: €427 million), an increase of 154%
+(117% at constant currencies). This resulted in an increase of
+the segment gross margin from 66.3% to 67.2% (66.5% at
+constant currencies). Segment profit increased 199% year on
+year (139% at constant currencies) to €312 million (2014:
+In 2015, revenue from the SAP Business Network segment,
+which combines all of our business network solutions, increased
+150% (116% at constant currencies) to €1,614 million (2014:
+€644 million). Concur and Fieldglass, which were acquired in
+2014, together contributed €909 million (2014: €107 million) to
+the segment's revenue. SAP internal analyses show that more
+than US$740 billion in commerce is conducted on the network
+annually.
+2pp
+A in %
+2014
+2015
+Segment margin (in %)
+Cloud subscription and support margin (in %)
+Segment profit
+Gross margin (in %)
+Segment revenue
+A in %
+(Constant
+(Non-IFRS)
+SAP Business Network Segment
+The segment's cost of revenue during the same time period
+increased 17% (9% at constant currencies) to €5,343 million
+(2014: €4,564 million). This increase in expenses was primarily
+the result of greater investment in expanding our cloud
+infrastructure and in providing and operating our cloud
+applications, as well as additional personnel expenses to
+support the growth of the SAP HANA Enterprise Cloud service.
+The cloud subscriptions and support margin for the segment,
+therefore, decreased by 2.2 percentage points to 52.9% (50.4%
+at constant currencies). Segment gross profit increased 12% in
+2015 (5% at constant currencies) to €13,784 million (2014:
+€12,307 million), which resulted in a decrease of the segment
+gross margin from 72.9% to 72.1% (72.1% at constant
+currencies). Segment profit increased 12% (4% at constant
+currencies) to €7,918 million (2014: €7,099 million), while the
+segment margin decreased by 0.7 percentage points to 41.4%
+(41.3% at constant currencies).
+The increase of cloud subscriptions and support revenue and
+software support revenue results in an increasing revenue share
+of more predictable revenue streams in this segment of 2
+percentage points from 56% in 2014 to 58% in 2015. Software
+license revenue attributable to this segment increased 10% (5%
+at constant currencies) to €4,835 million (2014: €4,381 million).
+In 2015, the Applications, Technology & Services segment
+revenue increased 13% (6% at constant currencies) to €19,126
+million (2014: €16,871 million). This increase was driven mainly
+by strong growth in software support revenue, which increased
+14% (7% at constant currencies) to €10,061 million and a 10%
+increase in software licenses (5% at constant currencies) to
+€4,836 million. As a consequence of continuous strong demand
+in the human capital management, customer engagement and
+commerce, and SAP HANA Enterprise Cloud business, cloud
+subscriptions and support revenue in the Applications,
+Technology & Services segment grew 64% (45% at constant
+currencies) to €961 million.
+81
+Combined Management Report Financial Performance: Review and Analysis
+-1pp
+€ millions, unless otherwise stated
+Currency)
+1,614
+644
+3pp
+16
+19
+139
+199
+105
+312
+-1pp
+-Opp
+75
+75
+Opp
+1pp
+66
+67
+116
+150
+2011
+2012
+2013
+2014
+and liabilities
+A in %
+2014
+% of
+Total equity
+€ millions
+% of
+Total equity
+€ millions
+2015
+and liabilities
+Total equity and liabilities
+Non-current liabilities
+Current liabilities
+Equity
+Our general intention is to remain in a position to return liquidity
+to our shareholders by distributing annual dividends totaling
+more than 35% of our profit after tax. There are currently no
+plans for future share buybacks.
+The long-term credit rating for SAP SE is "A" by Standard and
+Poor's and "A2" by Moody's, both with stable outlook. Since
+their initial assignment in September 2014, the ratings and
+outlooks have not changed.
+The primary objective of our capital structure management is to
+maintain a strong financial profile for investor, creditor, and
+customer confidence, and to support the growth of our
+business. We seek to maintain a capital structure that will allow
+us to cover our funding requirements through the capital
+markets at reasonable conditions, and in so doing, ensure a high
+level of independence, confidence, and financial flexibility.
+Capital Structure Management
+Liabilities
+23,295
+56
+19,534
+-5
+49
+19,031
+44
+18,095
+-2
+27
+10,457
+25
+10,228
+-8
+22
+8,574
+19
+7,867
+19
+51
+To expand our business, we have made acquisitions of
+businesses, products, and technologies. Depending on our
+future cash position and future market conditions, we might
+issue additional debt instruments to fund acquisitions, maintain
+financial flexibility, and limit repayment risk. Therefore, we
+continuously monitor funding options available in the capital
+markets and trends in the availability of funds, as well as the
+cost of such funding. In recent years, we were able to repay
+additional debt within a short period of time due to our
+persistently strong free cash flow. For more information about
+the financial debt, see the Cash Flows and Liquidity section.
+100
+Capital Structure
+Our primary source of cash, cash equivalents, and current
+investments is funds generated from our business operations.
+Over the past several years, our principal use of cash has been
+to support operations and our capital expenditure requirements
+resulting from our growth, to quickly repay financial debt, to
+acquire businesses, to pay dividends on our shares, and to buy
+back SAP shares on the open market. On December 31, 2015,
+our cash, cash equivalents, and current investments were
+primarily held in euros and U.S. dollars. We generally invest only
+in the financial assets of issuers or funds with a minimum credit
+rating of BBB, and pursue a policy of cautious investment
+characterized by wide portfolio diversification with a variety of
+counterparties, predominantly short-term investments, and
+standard investment instruments. We rarely invest in the
+financial assets of issuers with a credit rating lower than BBB,
+and such investments were not material in 2015.
+2.56
+2.75
+2.79
+2.35
+2.89
++90%
+FINANCES (IFRS)
+In 2011, in addition to the regular dividend of €0.75 per share, we
+rewarded our shareholders with a special dividend of €0.35 per
+share to celebrate our 40th anniversary.
+Overview
+2015
+2013
+2012
+2011
+€ | change since previous year
+Earnings per Share
+Basic earnings per share decreased to €2.56 (2014: €2.75). The
+number of shares outstanding increased to 1,197 million in 2015
+(2014: 1,195 million).
+2015
+2014
+-19%
++18%
+-2%
+Liquidity Management
+instrument for which we do not have a corresponding underlying
+transaction. The rules for the use of derivatives and other rules
+and processes concerning the management of financial risks are
+collected in our treasury guideline document, which applies
+globally to all companies in the Group. For more information
+about the management of each financial risk and about our risk
+exposure, see the Notes to the Consolidated Financial
+Statements section, Notes (24) to (26).
+33
+83
+Combined Management Report Financial Performance: Review and Analysis
+We manage credit, liquidity, interest rate, equity price, and
+foreign exchange rate risks on a Group-wide basis. We use
+selected derivatives exclusively for this purpose and not for
+speculation, which is defined as entering into a derivative
+We use global centralized financial management to control liquid
+assets and monitor exposure to interest rates and currencies.
+The primary aim of our financial management is to maintain
+liquidity in the Group at a level that is adequate to meet our
+obligations. Most SAP companies have their liquidity managed
+centrally by the Group, so that liquid assets across the Group
+can be consolidated, monitored, and invested in accordance
+with Group policy. High levels of liquid assets help keep SAP
+flexible, sound, and independent. In addition, various credit
+facilities are currently available for additional liquidity, if
+required. For more information about these facilities, see the
+Credit Facilities section.
+Global Financial Management
+The Executive Board and the Supervisory Board will recommend
+to the Annual General Meeting of Shareholders that the total
+We believe our shareholders should benefit appropriately from
+the profit the Company made in 2015. In recent years, the
+payout has always been greater than 35% of profit after tax. We
+aim to continue our policy to pay a dividend totaling more than
+35% of profit after tax in the future.
+Dividend
+2015
+2014
+2013
+2012
+2011
+-7%
+We believe that our liquid assets combined with our undrawn
+credit facilities are sufficient to meet our present operating
+needs and, together with expected cash flows from operations,
+will support debt repayments and our currently planned capital
+expenditure requirements over the near term and medium term.
+It may also be necessary to enter into financing transactions
+when additional funds are required that cannot be wholly
+sourced from free cash flow (for example, to finance large
+acquisitions).
+Principal Capital Expenditures and Divestitures Currently in
+Progress
+Segment margin (in %)
+Combined Management Report Financial Performance: Review and Analysis
+office move. We estimate the total cost of this move to be
+approximately €22 million. We expect to complete this
+project in 2017.
+In Shanghai, China, we started an expansion of our office
+building. We estimate the total cost to be approximately
+€15 million, of which we had paid approximately €2 million as
+at December 31, 2015. We expect to complete the
+construction in 2016.
+For more information about planned capital expenditures, see
+the Investment Goals section. There were no material
+divestitures within the reporting period.
+COMPETITIVE INTANGIBLES
+The resources that are the basis for our current as well as future
+success do not appear on the Consolidated Statements of
+Financial Position. This is apparent from a comparison of the
+market capitalization of SAP SE (based on all outstanding
+shares), which was €90.1 billion at the end of 2015 (2014:
+€71.6 billion), with the book value of our equity on the
+Consolidated Statements of Financial Position, which was
+€23.3 billion (2014: €19.5 billion). This means that the market
+capitalization of our equity is nearly four times higher than the
+book value. The difference is mainly due to certain internally
+generated intangible resources that the applicable accounting
+standards do not allow to be recorded (at all or at fair value) on
+the Consolidated Statements of Financial Position. They include
+customer capital (our customer base and customer relations),
+employees and their knowledge and skills, our ecosystem of
+partners, software we developed ourselves, our ability to
+innovate, the brands we have built up in particular, the SAP
+brand itself and our organization.
+As of December 31, 2015, SAP was the second most valuable
+companies in Germany in terms of market capitalization based
+on all outstanding shares.
+In San Ramon, California, in the United States, we began an
+42
+The results of our current and past investment in research and
+development are also a significant element in our competitive
+intangibles.
+Our customer capital continued to grow in 2015. At the end of
+2015 we had approx. 300,000 customers (2014: 282,000) in
+various market segments. The U.S. magazine Forbes revealed in
+its World's Most Valuable Brands report that 98% of the 100
+most valued brands, 87% of the Forbes Global 2000 companies,
+and 100% of the Dow Jones top scoring sustainability
+88
+41
+In 2015, we continued with various construction projects and
+started new construction activities in several locations. The
+expansion of our data centers is again an important aspect of
+our investments planned for 2016. We aim to extend our office
+space to be able to cover future growth. We plan to cover all of
+these projects in full from operating cash flow. Our most
+important projects are:
+Segment profit
+According to the Interbrand “Best Global Brands" annual survey,
+SAP ranked as the 26th most valued brand in the world (2014:
+25th). Against other German brands, the SAP brand ranks third
+behind Mercedes-Benz and BMW, and 9th globally against other
+IT brands. Interbrand determined our brand value as
+US$ 18.8 billion, an increase of 8% compared to the previous
+year (2014: US$17.3 billion).
+-
+Combined Management Report Financial Performance: Review and Analysis
+In Prague, Czech Republic, we started the expansion of an
+office building and began an office move. We estimate the
+total capital expenditures for this project to be approximately
+€19 million. We expect to complete the project in 2016.
+In Colorado Springs, Colorado, in the United States, we
+started construction on a new data center in 2015. We
+estimate the total cost of this project to be approximately
+€75 million. We expect to complete the construction of this
+data center in 2017.
+-
+87
+-
+89
+-
+In Bangalore, India, we want to add additional capacity of
+roughly 2,500 employees. We estimate the total cost to be
+approximately €50 million, of which we had paid approx-
+imately €7 million as at December 31, 2015. We expect to
+complete the construction of this office building in 2017.
+-
+In our research center in Potsdam, Germany, we started a
+third construction phase to realize additional capacity for
+approximately 150 employees. With the extension of our
+research center, we aim to create the general conditions for
+further teams contributing innovations to SAP products in
+miscellaneous fields. We estimate the total cost to be
+approximately €16 million, of which we had paid
+approximately €11 million as at December 31, 2015. We
+expect to complete the construction of this office building in
+2016.
+In New York, New York, in the United States, we continued
+executing the leasehold improvements for our new office
+space. The project includes the consolidation of our New York
+City offices for approximately 450 employees. We estimate
+the total capital expenditures for this project to be
+approximately €34 million, of which we had paid approx-
+imately €3.5 million as at December 31, 2015. We expect to
+complete the leasehold improvements in 2016.
+In Dubai, United Arab Emirates, we continued with our office
+consolidation project including an expansion of office space
+adding additional capacity for 100 employees. We estimate
+the total cost to be approximately €11 million, of which we
+had paid approximately €0.9 million as at December 31,
+2015. We expect to complete the leasehold improvements in
+2016.
+In Walldorf, Germany, we started construction on a new office
+building for about 700 employees. We estimate the total cost
+to be approximately €71 million, of which we had paid
+approximately €0.5 million as of December 31, 2015. We
+expect to complete the construction in 2018.
+In Walldorf, Germany, we also started construction on a new
+data center as well as a new power station. We estimate the
+total cost to be approximately €58 million, of which we had
+paid approximately €0.7 million as at December 31, 2015. We
+expect to complete the construction for both projects in
+2017.
+In Ra'anana, Israel, we continued with the construction of a
+new building. We estimate the total cost of this project to be
+approximately €60 million, of which we had paid approx-
+imately €25 million as at December 31, 2015. We expect to
+complete the construction of this office building in 2016.
+-
+-1,944
+Total cost of revenue (IFRS)
+Total cost of revenue (non-IFRS)
+-2,797
+-3
+-3,495
+-3,313
+5
+-3,010
+-6,583 -6,245
+8
+-2,008
+Cost of cloud and software (non-IFRS)
+-2,182
+Cost of software licenses and support (non-IFRS)
+-5
+-2,291
+Cost of software licenses and support (IFRS)
+35
+-789
+-1,066
+Cost of cloud subscriptions and support (non-IFRS)
+29
+-1,022
+5
+Cost of cloud and software (IFRS)
+-5,985
+85.9
+8
+83.7
+Cloud and software margin (in % of corresponding revenue, non-IFRS)
+○
+80.8
+81.0
+Cloud and software margin (in % of corresponding revenue, IFRS)
+1
+86.6
+87.4
+Software and support gross margin (non-IFRS, in %)
+1
+84.7
+-5,562
+-1,313
+-2
+65.6
+64.4
+1
+55.3
+56.1
+Cloud subscriptions and support margin (in % of corresponding revenue, IFRS)
+Cloud subscriptions and support margin (in % of corresponding revenue, non-IFRS)
+Profits and Margins
+Research and development (IFRS)
+7
+-2,845
+-3,044
+Software and support gross margin (IFRS, in %)
+Cost of cloud subscriptions and support (IFRS)
+18,963
+3
+Cloud and software (IFRS)
+5
+10,094
+10,572
+Software support (non-IFRS)
+5
+10,093
+10,571
+Software support (IFRS)
+1
+4,836
+4,862
+Software licenses (non-IFRS)
+1
+4,835
+4,860
+Software licenses (IFRS)
+30
+2,296
+2,995
+Cloud subscriptions and support (non-IFRS)
+31
+2,286
+82
+2,993
+18,424
+Operating expenses
+17,214
+Cloud and software (non-IFRS)
+60
+61
+Share of predictable revenue (non-IFRS, in %)
+3
+60
+61
+Share of predictable revenue (IFRS, in %)
+19
+1,616
+1,925
+SAP Business Network Segment revenue
+5
+83.8
+19,920
+Applications, Technology & Services Segment revenue
+6
+20,805
+22,067
+Total revenue (non-IFRS)
+6
+22,062 20,793
+Total revenue (IFRS)
+7
+17,226
+18,428
+7
+Total gross margin (in % of total revenue, IFRS)
+4,252
+70.0
+19
+2.56
+3.04
+Dividend per share²)(in €)
+Earnings per share, basic (non-IFRS, in €)
+Earnings per share, basic (in €)
+Key SAP Stock Facts
+-5
+40
+38
+7
+27
+29
+Share of software orders greater than € 5 million (in % of total software order entry)
+Share of software orders less than € 1 million (in % of total software order entry)
+0
+57.439
+57,291
+Orders - Number of on-premise software deals (in transactions)
+33
+957
+1,271
+Deferred cloud subscriptions and support revenue (IFRS)¹)
+31
+874
+1,147
+3.90
+New cloud bookings
+3.77
+1.25
+85
+Employee Engagement Index (in %)
+4
+23.6
+24.5
+Women in management¹) (total, in % of total number of employees)
+5
+31
+32
+Women working at SAP (in %)
+-7
+126
+117
+Personnel expenses per employee - excluding share-based payments (in € thousands)
+9
+76,986
+84,183
+Number of employees¹), 3)
+Employees and personnel expenses
+Market capitalization¹) (in € billions)
+13
+90.18
+101.73
+9
+1.15
+3
+3
+26.1
+26.8
+Equity ratio (total equity in % of total assets)
+Days' sales outstanding (DSO, in days)
+Net liquidity
+Free cash flow
+Operating margin (in % of total revenue, non-IFRS)
+Operating margin (in % of total revenue, IFRS)
+4
+6,348
+6,633
+Operating profit (non-IFRS)
+21
+Cloud subscriptions and support (IFRS)
+5,135
+Operating profit (IFRS)
+-1
+68
+67
+-1
+74
+74
+Applications, Technology & Services Segment gross margin (in % of corresponding revenue)
+SAP Business Network Segment gross margin (in % of corresponding revenue)
+73.3
+72.9
+Total gross margin (in % of total revenue, non-IFRS)
+0
+23.3
+20.5
+14
+30.1
+8
+23.4
+25.3
+A in %
+2015
+2016
+Order Entry
+Effective tax rate (non-IFRS, in %)
+Effective tax rate (IFRS, in %)
+€ millions, unless otherwise stated
+5
+Key Facts
+70.2
+6
+60
+4
+71
+74
+-44
+-5,615
+-3,153
+21
+3,001
+3,627
+-1
+30.5
+56
+Revenues
+Bernd Leukert
+Products & Innovation
+2015
+Financial Performance: Review and Analysis.
+Corporate Governance Fundamentals.
+Risk Management and Risks
+Expected Developments and Opportunities.
+Events After the Reporting Period......
+.67
+.74
+.81
+.84
+103
+106
+131
+138
+Consolidated Financial Statements IFRS and Notes
+139
+Consolidated Financial Statements IFRS.
+140
+Notes..
+146
+Management's Annual Report on Internal Control over Financial Reporting
+in the Consolidated Financial Statements........
+213
+Additional Information on Economic, Environmental and
+Social Performance
+214
+Connectivity of Financial and Non-Financial Indicators ¹).
+Energy and Emissions.....
+Employees and Social Investments.
+Performance Management System..
+65
+45
+7
+ས
+16
+80262222
+10
+.12
+19
+25
+.42
+43
+Independent Auditor's Report..
+215
+Combined Management Report
+Overview of the SAP Group.
+48
+Strategy and Business Model..
+Products, Research & Development, and Services.
+Security, Privacy, and Data Protection...
+Customers.
+49
+50
+.51
+55
+.63
+56
+General Information About This Management Report.
+Responsibility Statement
+Materiality.
+Stakeholder Engagement.
+Financial Calendar and Addresses.
+Glossary.
+Five-Year Summary
+Additional Information
+.257
+.256
+Independent Assurance Report.
+Management's Acknowledgement of the SAP Integrated Report 2016.
+251
+.246
+.244
+.243
+GRI Index and UN Global Compact Communication on Progress.
+Non-Financial Notes: Environmental Performance.
+Non-Financial Notes: Social Performance.
+Memberships.
+.242
+241
+.239
+.237
+.235
+.232
+.229
+227
+Recognition...
+Financial and Sustainability Publications.
+Publication Details
+260
+261
+Business Conduct.
+Sustainability Management and Policies
+Human Rights and Labor Standards
+Sustainable Procurement......
+Waste and Water.
+Public Policy.
+Independent Audit and Assurance
+The reporting period is fiscal year 2016. The report
+encompasses SAP SE and all subsidiaries of the SAP Group. To
+make this report as current as possible, we have included
+relevant information available up to the auditor's opinion and the
+responsibility statement dated February 22, 2017. The report is
+available in English and German.
+All financial and non-financial data and information for the
+reporting period is reported utilizing SAP software solutions and
+sourced from the responsible business units.
+Data
+Greenhouse gas data is prepared based on the Greenhouse Gas
+Protocol.
+are still developing methodologies to reliably quantify our
+impact through our solutions. In addition, the non-financial
+information is prepared by applying the principles of
+inclusiveness, materiality, and responsiveness.
+KPMG AG Wirtschaftsprüfungsgesellschaft has audited our
+Consolidated Financial Statements and our Combined
+Management Report (see the Independent Auditor's Report).
+Additionally, KPMG has provided assurance on selected non-
+financial data and information in accordance with the
+International Standard on Assurance Engagements (ISAE) 3000
+and 3410 ("Assurance Engagements on Greenhouse Gas
+Statements"), two pertinent standards for the assurance of
+sustainability reporting. Where our SAP Integrated Report
+makes reference to SAP's public Web site, that Web site
+information is unaudited. Both the Independent Auditor's Report
+and the Independent Assurance Report for non-financial
+information are available in the Independent Auditor's Report
+section and the Independent Assurance Report section.
+The social and environmental data and information included in
+the SAP Integrated Report is prepared in accordance with the
+core option of the G4 Sustainability Reporting Guidelines of the
+Global Reporting Initiative (GRI). We apply the GRI principles for
+defining report content (sustainability context, stakeholder
+inclusiveness, materiality, and completeness). We consider the
+principle of sustainability context in a number of ways, such as
+by looking at global issues or trends including climate change
+and demographic shifts. For example, we assess our
+greenhouse gas emissions in the context of the emissions of the
+entire information and communications technology landscape,
+with particular focus on the abatement potential of the industry.
+When it comes to completeness, we recognize that while we
+comply with this principle in reporting on our own operations, we
+Our Combined Management Report is prepared in accordance
+with sections 315 and 315a of the German Commercial Code and
+German Accounting Standards No. 17 and 20. The Combined
+Management Report is also a management commentary
+complying with the International Financial Reporting Standards
+(IFRS) Practice Statement Management Commentary.
+Basis of Presentation
+The SAP Integrated Report is aligned with the content elements
+suggested in the International Integrated Reporting Framework
+of the International Integrated Reporting Council (IIRC).
+The financial reporting presented in the SAP Integrated Report
+includes our Consolidated Financial Statements, our Combined
+Management Report, and certain financial measures derived
+from our management reporting. The non-financial information
+relates to topics derived from our materiality assessment
+including business conduct, climate and energy, human and
+digital rights, human capital, impact on society, and innovation.
+Since 2012, we have reported on our full-year financial, social,
+and environmental performance in one integrated report ("SAP
+Integrated Report") available at www.sapintegratedreport.com.
+The SAP Integrated Report 2016 contains a comprehensive and
+integrated presentation of our performance in 2016 based on
+both financial and non-financial measures and is available
+online.
+Content
+About This Report
+3
+.278
+277
+.276
+.265
+Our Consolidated Financial Statements are prepared in
+accordance with IFRS. Internal control over financial reporting
+ensures the reliability of the information presented in the
+Consolidated Financial Statements. Our executive management
+has confirmed the effectiveness of our internal controls over
+financial reporting.
+A in %
+Compensation Report..
+Corporate Governance Report...
+Businesses in every industry are confronting digital
+transformation. 55% of the companies listed in Fortune
+magazine's 500 list actually lost money as they faced
+disruptive competition. On every topic, from customer
+engagement to finance and supply chain, businesses are
+immersed in a period of complex change.
+Technology is evolving faster than ever, challenging
+businesses to adopt early or risk inevitable decline.
+People are nervous about the implications of a new digital
+economy. As a result of this anxiety, the public debate has
+become more emotionally charged and intense than ever
+before.
+Consider the following about the state of the world:
+So why did we make a bold move for "simple"? We did it
+because reducing complexity is the defining priority of this
+young century, while handling complexity is SAP's 45-year core
+competency.
+When we introduced a new operating principle in 2014 - Run
+Simple - many observers challenged us. SAP software, they
+said, is not particularly simple. This is true. SAP software is the
+most sophisticated software in the information technology
+industry. It runs the largest enterprises in business, healthcare,
+public services agencies and beyond. 76% of the world's
+financial transactions touch an SAP system and nearly one
+trillion U.S. dollars in commerce is transacted across our cloud
+business networks. This is truly innovation at scale on a global
+basis.
+A Statement About Our Challenges
+and Opportunities
+In the true spirit of our founders, especially our chairman Hasso
+Plattner, SAP is never content to rest on past success. We
+continue to pursue an aggressive innovation agenda and remain
+confident in our long-term ability to continue delivering
+profitable growth.
+dedicating more time to serving their communities through our
+social sabbatical program and month of service. We beat our
+CO2 reduction target and continue to power data centers and
+facilities with 100% renewable energy. These factors have led
+us, for the 10th year in a row, to be the number one software
+company in the Dow Jones Sustainability Index. Our
+commitment to diversity and inclusion has also never been
+stronger, which led us to become the first global IT company to
+earn EDGE certification for our focus on gender equality.
+To Our Stakeholders | Letter from the CEO
+8
+Our business is healthy and our company is happy. As a truly
+integrated report, we also showcase non-financial indicators and
+their financial impact. For example, employee engagement is at
+an all-time high. Our employees are healthier than ever based on
+our Business Health Culture Index. Our colleagues are
+We continued our momentum in 2016. We again delivered a
+trifecta of strong software sales, fast cloud growth and
+operating income expansion. Non-IFRS cloud revenue powered
+to 31% growth. Cloud and software grew 8%, IFRS operating
+profit was up 20%, while non-IFRS operating profit expanded to
+a record 6.6 billion euros. New cloud bookings surged 31% in the
+full year, which means that we have a three billion euro business
+growing more than 30%. The road ahead looks equally strong,
+as cloud backlog soared 47% to 5.4 billion euros, greatly
+enhancing the predictability of our future cloud revenue.
+significantly, we have scaled a once-in-a-generation new data
+architecture with SAP HANA.
+Since 2010, we have worked hard to earn results that speak for
+themselves. Our revenue, operating income, and market value
+have all more than doubled. Our customer count has tripled. We
+have progressed from a nascent cloud business to having the
+most cloud users in the business software industry. And most
+SAP's Results
+On behalf of the 84,000 employees of SAP, it is my distinct
+privilege to present the SAP Integrated Report 2016. Backed by
+a strong financial, social and environmental performance, we
+have never been more committed to our customers, colleagues,
+vision and strategy. As the platform company for digital
+business, we are focused on Impact Through Innovation. As a
+purpose driven company, we are focused on strengthening the
+economy, society and the environment for all people. Driven by
+our ambition and guided by our values, we believe that SAP's
+best days are truly yet to come.
+Dear Stakeholders of SAP,
+Letter from the CEO
+To Our Stakeholders
+7
+43
+42
+25
+.19
+80262222
+.16
+Taken together, this is an intense maze of circumstances. The
+challenge to SAP is therefore unmistakable. We must design and
+deliver technology that eliminates the wrath of complexity from
+the experiences of end users:
+For consumers, who expect businesses to know them, to
+understand their preferences, and to personalize their
+experience;
+For employees, who want to understand the connection of
+their work to the results of their company, and;
+2016
+€ millions, unless otherwise stated
+Key Facts
+About This Report
+4
+This report was designed by SAP and created with
+SAP S/4HANA software and the SAP BusinessObjects
+Disclosure Management application.
+Concept and Realization
+For more information about our materiality assessment and
+related stakeholder engagement, see the Materiality section and
+Stakeholder Engagement section.
+To Our Stakeholders | SAP Executive Board
+President, Global Customer Operations
+Robert Enslin
+10
+.12
+10
+Chief Executive Officer
+Luka Mucic
+Bill McDermott
+SAP Executive Board
+9
+To Our Stakeholders | Letter from the CEO
+Bill McDermott
+CEO
+SAP SE
+Very truly yours,
+If our business results continue on the positive trajectory of the
+past seven years, you will know that we have kept these
+promises. Equally critical, if our social results such as employee
+engagement, diversity and sustainability continue, you will know
+that we stayed true to our vision to help the world run better and
+improve people's lives. We remain ever grateful for your
+confidence, your trust, and your support.
+To the stakeholders of SAP, we respectfully request that you
+hold us accountable for our ability to remain a customer-driven
+growth company. Measure us on the success of our SAP Cloud
+Platform, our SAP S/4HANA digital ERP, our cloud business
+networks, and applications. Measure us on the high quality of
+our user experience and our commitment to design thinking and
+innovation. Measure us on modern services and support,
+hallmarks of our hard-earned reputation for customer loyalty.
+Measure us on our advocacy for human rights, environmental
+sustainability, and corporate social responsibility.
+To the customers of SAP, we enthusiastically redouble our
+commitment to your success. We believe that addressing your
+complexity requires heightened empathy, intellectual curiosity
+and above all humility. Please measure us on our ability to
+understand your business strategy and challenges. Measure us
+on the clarity with which we guide your digital transformation
+and your innovation road map. Measure us on our ability to
+make you early adopters of machine learning, the Internet of
+Things, blockchain and other breakthrough innovations.
+For citizens, who now more than ever want transparency and
+highly responsive public services.
+Chief Financial Officer
+Report by the Supervisory Board
+10
+Report by the Supervisory Board.
+93.7
+10
+52
+57
+Employee retention (in %)
+Leadership Trust Index (LTI, in %)
+4
+75
+78
+Business Health Culture Index (in %)
+Impact
+Through
+Innovation
+SAP Integrated Report 2016
+SAP
+B
+Society
+III
+Economy
+Environment
+Contents
+About This Report.
+Key Facts
+To Our Stakeholders
+Letter from the CEO.
+SAP Executive Board
+Investor Relations
+91.8
+2
+Customer
+Customer Net Promoter Score (in %)
+Corporate Governance Report.
+Investor Relations..
+SAP Executive Board..
+Letter from the CEO
+To Our Stakeholders
+Key Facts
+-2
+249
+243
+-2
+965
+950
+Compensation Report¹).
+Responsibility Statement
+Independent Auditor's Report...
+-16
+380
+-14
+22.4
+19.2
+3) Full-time equivalents.
+6
+2) Numbers are based on the proposed dividend and on level of treasury stock at year-end.
+1) Numbers based on at year-end.
+Data center energy consumed (in GWh)
+Total energy consumption (in GWh)
+Net Greenhouse gas emissions (in kilotons)
+Environment
+455
+.224
+4
+-1,799
+10
+10,866
+Other operating income
+1,218
+1,709
+-10
+1,719
+Cost of services and materials
+-7,337
+-5,263
+-1,232
+-4,031
+Personnel expenses
+-1,838
+-1,763
+0
+-1,763
+Depreciation and amortization
+-263
+-263
+0
+10,876
+12,578
+2015
+Reconciliation
+Our customer capital continued to grow in 2016. At the end of
+2016, we had more than 345,000 customers (2015: 300,000) in
+various market segments. The U.S. magazine Forbes revealed in
+its World's Most Valuable Brands report that 98% of the 100
+most valued brands, 87% of the Forbes Global 2000 companies,
+and 100% of the Dow Jones top-scoring sustainability
+companies are SAP customers. To help us improve insight into
+our customers' view of SAP, in 2012, we began measuring our
+Customer Net Promoter Score (NPS), a metric that gives a more
+complete picture of customer loyalty as it answers the question
+of how likely our customers would be to recommend SAP. For
+more information about our new customers and the Customer
+NPS, see the Customers section.
+Employee-related activities increased the value of our employee
+base and our own software. For more information, see the
+Employees and Social Investment section, and the Products,
+Research & Development, and Services section.
+According to the Interbrand "Best Global Brands" annual survey, Report on the Economic Position of
+SAP ranked as the 22nd most valued brand in the world (2015:
+26th). We went from number 26 to 22 on the list in just one year.
+Against other German brands, the SAP brand ranks third behind
+Mercedes-Benz and BMW, and ninth globally against other IT
+brands. The SAP brand grew faster than major competitors.
+Interbrand determined our brand value to be US$ 21.3 billion, an
+increase of 13% compared to the previous year (2015: US$18.8
+billion).
+SAP SE
+SAP SE is headquartered in Walldorf, Germany, and is the
+parent company of the SAP Group, which comprises 246
+companies. SAP SE is the Group holding company and employs
+most of the Group's Germany-based development and service
+and support personnel.
+Combined Management Report | Financial Performance: Review and Analysis
+99
+99
+As the owner of the intellectual property in most SAP software,
+SAP SE derives its revenue mainly from software license fees
+paid by its subsidiaries for the right to market SAP solutions and
+bears the group-wide research and development expenses for
+the most part.
+-263
+The SAP SE annual financial statements are prepared in
+accordance with the reporting standards in the German
+Commercial Code in the amended version of the Accounting
+Directive Implementation Act BilRUG and the German Stock
+Corporation Act. The full SAP SE annual financial report and
+unqualified audit report are submitted to the operator of the
+Elektronischer Bundesanzeiger (Online German Federal Gazette)
+for publication and inclusion in the Unternehmensregister
+(German Business Register). It is available from SAP SE on
+request.
+Intercompany royalty reimbursement claims from subsidiaries
+from the years 2012 to 2015 in the amount of €153 million
+reduced in the current year both, receivables from affiliated
+companies and revenue, but relate to other fiscal periods.
+Resulting taxes of €37 million reduced tax provisions and tax
+expenses.
+In order to improve the presentation of the income situation,
+expenses for licenses and commissions are no longer shown as
+other operating expenses. Due to the predominantly revenue-
+generating nature of these expenses a separate disclosure
+under cost of services and materials is applied.
+Income
+The income statement uses the nature of expense method and
+presents amounts in millions of euros.
+The following income statement shows the reconciliation of
+prior-year figures shown in the financial statements 2015 to the
+adjusted previous-year figures, taking into account the
+disclosure changes described above. The comments to income
+refers to the changes in relation to the adjusted previous-year
+figures.
+SAP SE Income Statement - German Commercial Code (Short Version)
+€ millions
+Total revenue
+2016
+2015 adjusted
+The first time adoption of changed reporting standards
+according to BilRUG led to disclosure changes in our income
+statement. The definition of revenues has been expanded such
+that the recognition of income under revenues no longer
+requires that the income results from sales of the products and
+goods or from the provision of services that are typical of the
+company's line of business. So income formerly shown as other
+operating income is now shown as revenue.
+The results of our current and past investment in research and
+development are also a significant element in our competitive
+intangibles.
+Other operating expenses
+-2,723
+O
+2,678
+-15
+2,595
+-14
+0
+-14
+2,664
+0
+2,664
+The total revenue of SAP SE in 2016 was €12,578 million
+(2015: €10,876 million), an increase of 16%. Product revenue
+increased 26% to €10,157 million (2015: €8,051 million). As in
+previous years, product revenue was primarily generated from
+license fees paid by subsidiaries of SAP SE.
+The disproportionate rise of SAP SE product revenue compared
+to SAP Group's increase of cloud and software revenues, is
+mainly due to license fees paid for distribution and utilization
+rights of IP held by affiliated companies. In December 2015, SAP
+SE concluded license agreements granting SAP SE as of January
+2016 world-wide distribution and utilization rights of those IP.
+This mainly concerns the IP rights of our acquisitions from the
+past years: Ariba, Concur, Fieldglass, SuccessFactors, and
+Sybase.
+100
+Combined Management Report | Financial Performance: Review and Analysis
+Net cash flows from investing
+2013
+2012
+5%
+9%
+10%
+18%
+2,678
+2,610
+-824
+0
+1,232
+-3,955
+Operating profit
+2,215
+0
+2,573
+Finance income
+1,155
+929
+0
+-2,143
+929
+3,370
+3,502
+0
+3,502
+Income taxes
+Income after taxes
+Other taxes
+Net income
+-760
+-824
+Income before taxes
+-23%
+As of December 31, 2016, SAP was the most valuable company
+in Germany in terms of market capitalization based on all
+outstanding shares.
+Competitive Intangibles
+69%
+-92%
+5pp
+5pp
+4pp
+-1pp
+-8pp
+1,145
+676
+2012
+2013
+2014
+2015
+2016
+2012
+2013
+2014
+2015
+2016
+Total non-current assets increased by 3% in 2016 to €32,713
+million compared to the previous year's figure of €31,651 million.
+This change was mainly due to foreign exchange related
+revaluations.
+Principal Capital Expenditures and
+Divestitures Currently in Progress
+60
+51
+54
+56
+74
+26
+2015
+76
+24
+Total current assets increased by 19% in 2016 from €9,739
+million to €11,564 million. This was mainly due to an increase in
+trade and other receivables to €5,924 million (2015: €5,274
+million) on the one hand, which stemmed from our strong
+business in the last quarter of 2016. On the other hand it was
+due to investments in financial assets (2016: €1,124 million;
+2015: €351 million).
+Investment in Goodwill, Intangible Assets or
+Property, Plant, and Equipment
+(incl. Capitalizations Due to Acquisitions)
+€ | change since previous year
+956%
+Current liabilities increased by 23% to €9,674 million in 2016 as
+compared to the prior year (€7,867 million) which was mainly
+due to reclassifications from non-current to current financial
+liabilities to reflect the respective maturity profile.
+In 2016, we continued with various construction projects and
+started new construction activities in several locations. The
+expansion of our data centers is an important aspect of our
+investments planned for 2017. We aim to extend our office
+space to cover future growth. We plan to cover all of these
+projects in full from operating cash flow. Our most important
+projects are listed below:
+Total non-current liabilities decreased by €2,023 million in 2016
+to €8,205 million compared to the previous year figure of
+€10,228 million, which was (beside of the aforementioned
+reclassification on financial liabilities) mainly due to a repayment
+of our outstanding bank loan.
+Thus, the equity ratio (that is, the ratio of shareholders' equity to
+total assets) improved to 60% (prior year: 56%).
+Equity Ratio
+Percent change since previous year
+6,939
+74%
+1,813
+8,636
+377%
+59
+56
+For more information about financing activities in 2016, see the
+Finances (IFRS) section.
+The resources that are the basis for our current as well as future
+success do not appear on the Consolidated Financial
+Statements. This is apparent from a comparison of the market
+capitalization of SAP SE (based on all outstanding shares),
+which was €101.7 billion at the end of 2016 (2015: €90.1 billion),
+with the book value of our equity on the Consolidated Financial
+Statements, which was €26.4 billion (2015: €23.3 billion). This
+means that the market capitalization of our equity is nearly four
+times higher than the book value. The difference is mainly due to
+certain internally generated intangible resources that the
+applicable accounting standards do not allow to be recorded (at
+all or at fair value) in the Consolidated Financial Statements.
+They include customer capital (our customer base and
+customer relations); employees and their knowledge and skills;
+our ecosystem of partners; software we developed ourselves;
+our ability to innovate; the brands we have built up, in particular,
+the SAP brand itself; and our organization.
+98
+Construction Projects
+Israel
+Ra'anana
+New office building for approx.
+63
+48
+April 2017
+800 employees
+United States
+New York City
+Execution of leasehold
+52
+33
+March 2017
+improvements and
+consolidation of offices for
+approx. 450 employees
+United States
+Colorado Springs, CO New data center
+122
+21
+January 2018
+For more information about planned capital expenditures, see the Investment Goals section. There were no material divestitures
+within the reporting period.
+2,500 employees
+July 2017
+23
+60
+€ millions
+Country
+Location of Facility
+Short Description
+Estimated
+Total Cost
+Cost incurred by
+December 31, 2016
+Estimated
+Completion Date
+Germany
+Walldorf
+Combined Management Report | Financial Performance: Review and Analysis
+New office building for approx.
+700 employees
+8
+October 2018
+Germany
+India
+Walldorf
+New data center
+65
+9
+March 2018
+Bangalore
+New office building for approx.
+71
+2016
+0.85
+1.10
+Gross margin (in %)
+Segment revenue
+Cloud subscriptions and support margin (in %)
+Cloud subscriptions and support revenue
+(Non-IFRS)
+€ millions, unless otherwise stated
+Applications, Technology & Services Segment
+For more information about our segment reporting, see the
+Notes to the Consolidated Financial Statements, Note (28), and
+the Performance Management System section.
+In 2016, SAP had two reportable segments: the Applications,
+Technology & Services segment; and the SAP Business Network
+segment.
+Segment Information
+General and administration expense decreased 4% from €1,048
+million in 2015 to €1,005 million in 2016. This decline in costs is
+primarily the result of careful cost management. Consequently,
+the ratio of general and administration expense to total revenue
+decreased in 2016 to 4.6% (2015: 5.0%).
+Our general and administration expense consists mainly of
+personnel costs to support our finance and administration
+functions.
+General and Administration Expense
+increased to 28.4% year-over-year (2015: 27.8%), an increase
+of 0.6pp.
+Our sales and marketing expense rose 8% from €5,782 million
+in 2015 to €6,265 million in 2016. The increase was mainly the
+result of greater personnel costs as we expanded our global
+sales force, and of increased expenditure for bonus payments
+prompted by the strong revenue growth. The ratio of sales and
+marketing expense to total revenue, expressed as a percentage,
+Sales and marketing expense consists mainly of personnel
+costs, direct sales costs, and the cost of marketing our products
+and services.
+Sales and Marketing Expense
+Due to growing personnel costs driven by a 12% increase in our
+R&D headcount by the end of the year, our R&D expense
+increased by 7% to €3,044 million in 2016 from €2,845 million
+in 2015. R&D expense as a percentage of total revenue thus
+increased to 13.8% in 2016 (2015: 13.7%). For more information,
+see the Products, Research & Development, and Services
+section.
+R&D activities, and amortization of the computer hardware and
+software we use for our R&D activities.
+91
+Combined Management Report | Financial Performance: Review and Analysis
+Segment profit
+Segment margin (in %)
+2016
+2015
+41
+4
+4
+7,723
+8,031
+40
+-Opp
+-Opp
+74
+74
+6
+Research and Development Expense
+Our research and development (R&D) expense consists
+primarily of the personnel cost of our R&D employees, costs
+incurred for independent contractors we retain to assist in our
+5
+19,920
+-1pp
+-2pp
+52
+47
+45
+932
+1,353
+51
+A in %
+(Constant
+Currency)
+A in %
+18,963
+-Opp
+Although we were able to increase our service revenue by 2%
+year over year to €3,638 million in 2016 (2015: €3,579 million),
+our service business continues to be greatly affected as we
+trend away from classic software licensing and consulting
+revenue toward more subscription revenue from cloud
+solutions. In addition, we continue to invest in our ONE Service
+organization and in our customer co-innovation projects. As a
+result, cost of services rose 5% to €3,089 million (2015: €2,932
+million). Our gross margin on services, defined as services profit
+as a percentage of services revenue, narrowed to 15.1% (2015:
+18.1%).
+Cost of services consists primarily of the cost of consulting,
+premium services and training personnel and the cost of
+bought-in consulting and training resources.
+26.6
+Percent change since previous year
+Operating Margin
+2016
+2015
+2014
+2013
+2012
+-2%
+-3%
+-17%
+11%
+4,041
+21%
+4,252
+4,331
+4,479
+5,135
+€ millions | change since previous year
+Operating Profit
+payments to employees and share-based compensation higher.
+Our employee headcount (measured in full-time equivalents, or
+FTES) increased by 7,197 year-over-year.
+24.9
+24.7
+23.3
+20.5
+Cost of Services
+The gross margin on cloud and software, defined as cloud and
+software profit as a percentage of cloud and software revenue,
+widened to 81.0% in 2016 (2015: 80.8%). This change was
+mainly driven by the improved software license and support
+margin, which increased 1.2pp to 85.9% (2015; 84.7%).
+While software licenses and support revenue increased, savings
+in customer support, in the cost of developing custom solutions,
+and in license fees, enabled us to reduce our software and
+support costs by a total of €109 million year over year.
+Main impact on costs was an additional €291 million year-over-
+year to extend our cloud business in response to the sustained
+strength of customer demand, with an associated increase in
+the expense of delivering and operating cloud applications.
+These investments contributed to revenue growth. Our margin
+on cloud subscriptions and support increased 0.8pp to 56.1%
+(2015: 55.3%). This improvement in margin was achieved
+primarily through strong growth in revenue. The investments in
+our cloud business were offset by the significant increase in
+cloud subscriptions and support revenue.
+In 2016, the cost of cloud and software increased 5% to €3,495
+million (2015: €3,313 million).
+parties for databases and the other complementary third-party
+products sublicensed by us to our customers.
+Cost of cloud and software consists primarily of customer
+support costs, cost of developing custom solutions that address
+customers' specific business requirements, costs for deploying
+and operating cloud solutions, amortization expenses relating to
+intangibles, and license fees and commissions paid to third
+Cost of Cloud and Software
+Changes to the individual elements in our cost of revenue were
+as follows:
+As an overall result of these effects on operating profit, our
+operating margin widened 2.8pp to 23.3% in 2016 (2015:
+20.5%).
+As of the second quarter of 2016, we changed the way sales and
+marketing expenses related to our service activities are
+classified in our income statement. For more information see
+the Notes to the Consolidated Financial Statements section,
+Note (3b).
+revenue.
+2016
+2015
+2014
+2013
+2012
+-9.4pp
+-4.2pp
+-2.0pp
+1.7pp
+2.8pp
+The increased operating expenses largely represent
+investments in the future and were offset by the increase in
+1.00
+-1pp
+The increase of cloud subscriptions and support revenue and
+software support revenue resulted in an increase in the revenue
+share of more predictable revenue streams in this segment of
+€ | change since previous year
+Earnings per Share
+Basic earnings per share increased to €3.04 (2015: €2.56). The
+number of shares outstanding increased to 1,198 million in 2016
+(2015: 1,197 million).
+2016
+2015
+2014
+2013
+2012
+-7%
+-1%
+19%
+19%
+-18%
+2,803
+3,056
+3,280
+3,325
+3,634
+€ millions | change since previous year
+Profit after Tax
+Profit after tax increased to €3,634 million in 2016 (2015:
+€3,056 million).
+Our effective tax rate increased to 25.3% in 2016 (2015: 23.4%).
+The increase in the effective tax rate mainly resulted from
+changes in taxes for prior years and the increase in the profit
+before taxes. For more information on income taxes, see the
+Notes to the Consolidated Financial Statements section, Note
+(10).
+3.04
+2.79
+2.75
+1.15
+1.25
+€ | change since previous year
+Dividend per Share
+If the shareholders approve this recommendation and if treasury
+shares remain at the 2016 closing level, the total amount
+distributed in dividends would be €1,498 million. The actual
+amount distributed may be different from this total because the
+number of shares held in treasury may change before the
+Annual General Meeting of Shareholders. In 2016, we distributed
+€1,378 million in dividends from our 2015 profit after tax. In 2016
+and 2015, we did not repurchase any SAP treasury shares.
+The Executive Board and the Supervisory Board will recommend
+to the Annual General Meeting of Shareholders that the total
+dividend will be increased by 9% to €1.25 per share (2015:
+€1.15). Based on this recommendation, the overall dividend
+payout ratio (which here means total distributed dividend as a
+percentage of profit) would be 41% (2015: 45%).
+We believe our shareholders should benefit appropriately from
+the profit the Company made in 2016. In recent years, the
+payout has always been greater than 35% of profit after tax. We
+aim to continue our policy to pay a dividend totaling more than
+35% of profit after tax in the future.
+Dividend
+93
+Combined Management Report | Financial Performance: Review and Analysis
+Profit After Tax and Earnings per Share
+2016
+2014
+2013
+2012
+-19%
+19%
+-7%
+-2%
+18%
+2.35
+2.56
+2015
+In 2016, the revenue increase in the Applications, Technology &
+Services segment was driven mainly by strong growth in
+software support revenue, which increased 5% (6% at constant
+currencies) to €10,464 million. As a consequence of continuous
+strong demand for our human capital management, customer
+engagement and commerce, and SAP HANA Enterprise Cloud
+offerings, cloud subscriptions and support revenue in the
+Applications, Technology & Services segment grew 45% (47%
+at constant currencies) to €1,353 million.
+Income Tax
+Finance income mainly consists of gains from disposal of equity
+securities totaling €164 million (2015: €176 million), interest
+income from loans and receivables, and other financial assets
+(cash, cash equivalents, and current investments) totaling €40
+million (2015: €41 million), and income from derivatives totaling
+€29 million (2015: €30 million).
+76
+Cloud subscriptions and support margin (in %)
+19
+19
+1,337
+1,595
+Cloud subscriptions and support revenue
+Currency)
+(Constant
+A in %
+A in %
+2015
+2016
+(Non-IFRS)
+€ millions, unless otherwise stated
+SAP Business Network Segment
+Combined Management Report | Financial Performance: Review and Analysis
+22
+92
+The segment's cost of revenue during the same time period
+increased 7% (8% at constant currencies) to €5,279 million
+(2015: €4,954 million). This increase in expenses was primarily
+the result of greater investment in expanding our cloud
+infrastructure and in providing and operating our cloud
+applications, as well as additional personnel expenses to
+support the growth of the cloud business.
+2pp at constant currencies from 58% in 2015 to 59% in 2016.
+Software license revenue attributable to this segment increased
+1% at constant currencies to €4,814 million (2015: €4,770
+million).
+75
+1pp
+1pp
+Segment revenue
+Financial income, net, changed to -€38 million (2015: -€5
+million). Our finance income was €230 million (2015: €241
+million) and our finance costs were €268 million (2015: €246
+million).
+Financial Income, Net
+The segment's cost of revenue increased 21% in 2016 (22% at
+constant currencies) to €631 million (2015: €520 million). The
+SAP Business Network segment achieved a segment gross
+profit of €1,295 million in 2016 (2015: €1,095 million), an
+increase of 18% (17% at constant currencies).
+-3pp
+-2pp
+20
+18
+0
+7
+317
+Finance costs mainly consist of interest expense on financial
+liabilities amounting to €108 million (2015: €135 million) and
+negative effects from derivatives amounting to €114 million
+(2015: €72 million). The decrease in finance costs is mainly due
+to lower average indebtedness. For more information about
+financing instruments, see the Notes to the Consolidated
+Financial Statements section, Note (17b).
+338
+Segment profit
+-1pp
+-1pp
+68
+67
+Gross margin (in %)
+19
+19
+1,616
+1,925
+Segment margin (in %)
+Short term
+2,573
+2018
+In 2017, the Company intends to repay two Eurobond tranches
+of €1,000 million in total as well as two U.S. private placement
+tranches of US$442.5 million in total when they mature.
+In August 2016 we issued a €400 million Eurobond with a
+maturity of two years and variable interest rates (3-month
+EURIBOR plus 0.30%).
+Financial debt on December 31, 2016 included amounts in euros
+(€6,150 million) and U.S. dollars (€1,660 million).
+Approximately 58% of financial debt was held at variable
+interest rates, partially swapped from fixed into variable using
+interest rate swaps.
+2027
+2025
+2024
+2023
+2022
+Combined Management Report | Financial Performance: Review and Analysis
+2020
+2017
+212
+211
+43
+126
+95
+600
+211
+2019
+750
+95
+Bonds
+3,702
+Cash and cash equivalents
+Δ
+2015
+2016
+€ millions
+For information about the impact of cash, cash equivalents,
+current investments, and our financial liabilities on our income
+statements, see the analysis of our financial income, net, in the
+Operating Results (IFRS) section.
+The increase in Group liquidity compared to 2015 was mainly
+due to cash inflows from our operations. They were offset by
+cash outflows for dividend payments and repayments of
+borrowings.
+96
+Group liquidity on December 31, 2016, primarily comprised
+amounts in euros and U.S. dollars.
+Group Liquidity
+Cash Flows and Liquidity
+For more information about our financial debt, see the Notes to
+the Consolidated Financial Statements section, Note (17).
+6,150
+1,660
+Private Placement
+€ millions
+Financial Debt
+Group liquidity consists of cash and cash equivalents (for
+example, cash at banks, money market funds, and time deposits
+with original maturity of three months or less) and current
+investments (for example, investments with original maturities
+of greater than three months and remaining maturities of less
+than one year included in other financial assets) as reported in
+our Consolidated Financial Statements. Net liquidity is Group
+liquidity less total financial debt as defined above.
+307
+1,000
+925
+For more information about the capital structure and its
+analysis, see the Analysis of Consolidated Statement of
+Financial Position section and Notes to the Consolidated
+Financial Statements section, Note (21).
+The primary objective of our capital structure management is to
+maintain a strong financial profile for investor, creditor, and
+customer confidence, and to support the growth of our
+business. We seek to maintain a capital structure that will allow
+us to cover our funding requirements through the capital
+markets at reasonable conditions, and in so doing, ensure a high
+level of independence, confidence, and financial flexibility.
+Capital Structure Management
+Combined Management Report | Financial Performance: Review and Analysis
+94
+To expand our business, we have made acquisitions of
+businesses, products, and technologies. Depending on our
+future cash position and future market conditions, we might
+issue additional debt instruments to fund acquisitions, maintain
+financial flexibility, and limit repayment risk. Therefore, we
+continuously monitor funding options available in the capital
+markets and trends in the availability of funds, as well as the
+cost of such funding. In recent years, we were able to repay
+additional debt within a short period of time due to our
+persistently strong free cash flow. For more information about
+the financial debt, see the Cash Flows and Liquidity section.
+We believe that our liquid assets combined with our undrawn
+credit facilities are sufficient to meet our present operating
+needs and, together with expected cash flows from operations,
+will support debt repayments and our currently planned capital
+expenditure requirements over the near term and medium term.
+It may also be necessary to enter into financing transactions
+when additional funds are required that cannot be wholly
+sourced from free cash flow (for example, to finance large
+acquisitions).
+Our primary source of cash, cash equivalents, and current
+investments is funds generated from our business operations.
+Over the past several years, our principal use of cash has been
+to support operations and our capital expenditure requirements
+resulting from our growth, to quickly repay financial debt, to
+acquire businesses, to pay dividends on our shares, and to buy
+back SAP shares on the open market. On December 31, 2016,
+our cash, cash equivalents, and current investments were
+primarily held in euros and U.S. dollars. We generally invest only
+in the financial assets of issuers or funds with a minimum credit
+rating of BBB, and pursue a policy of cautious investment
+characterized by wide portfolio diversification with a variety of
+counterparties, predominantly short-term investments, and
+standard investment instruments. Investments in financial
+assets of issuers with a credit rating lower than BBB were not
+material in 2016.
+The long-term credit rating for SAP SE is "A2" by Moody's with
+stable outlook and "A" by Standard & Poor's with positive
+outlook. Standard & Poor's raised the outlook from stable to
+positive on August 12, 2016.
+Liquidity Management
+required. For more information about these facilities, see the
+Credit Facilities section.
+We use global centralized financial management to control liquid
+assets and monitor exposure to interest rates and currencies.
+The primary aim of our financial management is to maintain
+liquidity in the Group at a level that is adequate to meet our
+obligations. Most SAP companies have their liquidity managed
+centrally by the Group, so that liquid assets across the Group
+can be consolidated, monitored, and invested in accordance
+with Group policy. High levels of liquid assets help keep SAP
+flexible, sound, and independent. In addition, various credit
+facilities are currently available for additional liquidity, if
+Global Financial Management
+Overview
+Finances (IFRS)
+2016
+2015
+2014
+We manage credit, liquidity, interest rate, equity price, and
+foreign exchange rate risks on a Group-wide basis. We use
+selected derivatives exclusively for this purpose and not for
+speculation, which is defined as entering into a derivative
+instrument for which we do not have corresponding underlying
+transactions. The rules for the use of derivatives and other rules
+and processes concerning the management of financial risks are
+documented in our treasury guideline, which applies globally to
+all companies in the Group. For more information about the
+management of each financial risk and about our risk exposure,
+see the Notes to the Consolidated Financial Statements section,
+Notes (24) to (26).
+Our general intention is to remain in a position to return liquidity
+to our shareholders by distributing annual dividends totaling
+more than 35% of our profit after tax as well as repurchasing
+treasury shares in future. In absence of large acquisitions, our
+strong operating cash flow will generate excess cash in the next
+6-12 months. Based on the actual acquisition volume and
+liquidity development we would consider a potential share
+buyback in the second half of 2017.
+Credit Facilities
+422
+1,095
+600
+لنيلينيلا
+1,310
+925
+750
+1,250
+1,292
+1,436
+1,000
+1,095
+■ Variable
+■Fixed
+Maturity Profile of Financial Debts
+€ millions
+Financial Debts
+As at December 31, 2016, SAP SE had additional available credit
+facilities totaling €474 million. Several of our foreign
+subsidiaries have credit facilities available that allow them to
+borrow funds at prevailing interest rates. As at December 31,
+2016, approximately €25 million was available through such
+arrangements. There were immaterial borrowings outstanding
+under these credit facilities from our foreign subsidiaries as at
+December 31, 2016.
+We are party to a committed €2.0 billion revolving credit facility
+contract which matures in November 2020. The credit facility
+may be used for general corporate purposes. A possible future
+utilization is not subject to any financial covenants. So far, we
+have not used and do not currently foresee any need to use, this
+credit facility.
+Other sources of capital are available to us through various
+credit facilities, if required.
+3,411
+291
+Bank Loan 16
+971
+Short term
+18
+■Shareholder's equity
+60
+Current investments
+222
+22
+25
+Long term
+19
+Long term
+operating activities
+A in %
+27
+3,638
+4,628
+Net cash flows from
+2015
+2016
+Assets
+Percent
+Percent
+Liabilities
+2015
+-334
+>100
+activities
+-2,705
+-3,356
+-19
+Net cash flows from
+financing activities
+In 2016 cash inflows from operating activities increased by
+€990 million to €4,628 million (2015: €3,638 million). This
+result is primarily due to our revenue increase and higher
+profitability as well as €161 million lower payments to employees
+related to restructuring (2015: €476 million).
+In 2016, days' sales outstanding (DSO) for receivables, defined
+as the average number of days from the raised invoice to cash
+receipt from the customer, increased three days to 74 days
+(2015: 71 days).
+Cash outflows from investment activities increased to
+€1,799 million in 2016 (2015: €334 million). The increase
+resulted from lower proceeds from sale of equity or debt
+instruments of other entities of €793 million in 2016 (2015:
+€1,880 million). Cash outflows from purchase of intangible
+assets and property, plant, and equipment increased by
+€365 million to €1,001 million in 2016. For more information
+about current and planned capital expenditures, see the Assets
+section and the Investment Goals section.
+Net cash outflows from financing activities were €2,705 million
+in 2016, compared to net cash outflows of €3,356 million in
+2015. The 2016 cash outflows resulted from repayments of
+€1,250 million bank loan that we had taken to finance the
+Concur acquisition. The repayment was partly refinanced
+through the issuance of a €400 million Eurobond. We also
+repaid a US$600 million U.S. private placements. Cash outflows
+in 2015 arose mainly from repayments of €1,270 million bank
+loan that we assumed in connection with our acquisition of
+Concur, €550 million Eurobonds and US$300 million U.S.
+private placements. We refinanced another portion of the bank
+loan through the issuance of a three-tranche Eurobond of
+€1,750 million in total.
+The dividend payment of €1,378 million made in 2016 exceeded
+the amount of €1,316 million from the prior year resulting from
+the increased dividend paid per share from €1.10 to €1.15.
+Combined Management Report | Financial Performance: Review and Analysis
+97
+Assets (IFRS)
+Analysis of Consolidated Statements of
+Financial Position
+2016
+Total assets increased by 7% year-over-year to €44,277 million.
+€ millions
+Analysis of Consolidated Statements of Cash Flow
+56
+Combined Management Report | Financial Performance: Review and Analysis
+Net liquidity 2
+2,217
+-6,390 -8,607
+Non-current financial debt
+246
+2,992
+3,238
+Net liquidity 1
+-3,153
+-868
+-1,435
+Current financial debt
+Analysis of Consolidated Statements of
+Cash Flow
+3,559
+4,673
+Group liquidity
+823
+148
+-567
+-5,615
+1,114
+3,559
+2,462
+96
+12/31/2016
+Group Liquidity
+Paid
+Proceeds from Capital Acquisitions Dividends
+Borrowings Expenditure
+Cash Flow
+Group Liquidity Operating
+12/31/2015
+-371
+Repayments of Other
+Borrowings
+4,673
+-1,378
+-106
+-1,001
+€ millions
+Group Liquidity Development
+4,628
+-1,800
+400
+Fixed assets
+Intangible assets
+Assets
+€ millions
+Market Risks
+In 2016, SAP SE total assets closed at €32,706 million
+(2015: €30,953 million).
+Assets and Financial Position
+Finance income was €1,155 million (2015: €929 million), an
+increase of €226 million compared with the previous year. The
+increase is primarily due to a €230 million higher income from
+profit transfer agreements and an increase of €5 million in net
+interest income. These were partly offset by an increase of
+€7 million in write-downs of financial assets.
+SAP SE income before taxes decreased €132 million to
+€3,370 million (2015: €3,502 million). Income taxes decreased
+8% to €760 million (2015: €824 million). After deducting taxes,
+the resultant net income is €2,595 million
+SAP SE personnel expenses, mainly the labor cost of software
+developers, service and support employees, and administration
+staff employed by SAP SE, increased 4% to €1,838 million
+(2015: €1,763 million). Other operating expenses decreased
+21% to €2,143 million (2015: €2,723 million). This decrease is
+mainly attributable to €402 million lower losses from currency
+effects and a €247 million decrease in restructuring costs. The
+effect was partly offset by a €39 million increase in costs for
+maintenance and service.
+(2015: €1,232 million) and mainly IP-related research and
+development costs resulted in a rise of services received by
+€1,130 million to €5,137 million (2015: €4,007 million).
+Marketable securities
+granted the right to further develop the existing technology, too.
+As a result, the volume of IP-related SAP SE services, which had
+previously been charged to the former IP distributers,
+decreased, leading to a decrease of other revenues by 15% to
+€1,927 million (2015: €2.280 million).
+SAP SE operating profit decreased 14% to €2,215 million
+(2015: €2,573 million). Other operating income decreased
+€491 million to €1,218 million (2015: €1,709 million). The year-
+over-year decrease is primarily due to a decrease in gains from
+currency effects. SAP SE cost of services and materials
+increased 39% to €7,337 million (2015: €5,263 million). The
+granted IP rights led to an increase in expenses for licenses and
+commissions by €947 million to €2.179 million
+(2015: €2,664 million), a decrease of €69 million year-over-
+year.
+12/31/2016
+26,596
+147
+Within the scope of these license agreements, SAP SE was
+4,637
+Accounts receivable and other
+assets
+2
+2
+Inventories
+12/31/2015
+26,439
+25,338
+Financial assets
+998
+1,111
+Property, plant, and equipment
+184
+25,257
+Gerhard Oswald retired from his position as Executive Board
+member upon the end of his term on December 31, 2016.
+Information Concerning Takeovers
+Market Development for Cloud
+unlikely
+major
+medium
+Human Capital Risks
+Managing the Geographically Dispersed Workforce
+remote
+Relationships with Partners
+major
+Attract, Develop, and Retain People
+unlikely
+major
+medium
+→>
+3,872
+low
+business critical medium
+remote
+Cloud Business Model
+Market Share and Profit
+unlikely
+business critical
+medium
+unlikely
+business critical
+medium
+unlikely
+major
+medium
+Business Strategy Risks
+Demand for New and Existing Solutions
+remote
+business critical
+medium
+Maintenance Business and Support
+150
+SAP SE Balance Sheet – German Commercial
+Code (Short Version)
+Liquid assets
+major
+unlikely
+Corporate Governance Laws and Regulations
+Organizational and Governance-Related Risks
+M
+M
+H
+L
+M
+M
+L
+L
+L
+L
+M
+Impact
+L = Low Risk
+M = Medium Risk
+H = High Risk
+Risk analysis is followed by risk response and risk monitoring.
+The risk exposure and the risk description, as well as the
+appropriateness of agreed responses, are validated by the
+accountable management. Our risk managers work in close
+cooperation with the business owners, ensuring that effective
+strategies are implemented to address risks. Business owners
+are responsible for continuously monitoring the risks and the
+effectiveness of mitigation strategies, with support from the
+respective risk managers. Risks might be reduced by taking
+active steps based on risk approval. To provide greater risk
+transparency and enable appropriate decision-making for
+business owners, we have established a risk delegation of
+authority (RDOA) for relevant parts of the organization as
+deemed appropriate. RDOA is a risk management decision-
+making hierarchy that helps business owners gain timely insight
+into projects and processes with the greatest risk, so they are
+better able to review the relevant information, understand the
+risk profile and associated mitigation strategies, and determine
+if their approval is warranted. Depending on the exposure,
+approval is required at different levels of the Company, up to
+and including the Executive Board.
+All identified and relevant risks are reported at the local,
+regional, and global levels in accordance with our risk
+management policy. At local, regional, and global levels, we have
+established executive risk councils that regularly discuss risks
+and countermeasures and that monitor the success of risk
+mitigation. In addition, the Executive Board is informed quarterly
+Combined Management Report | Risk Management and Risks
+107
+about individual risks based on clearly defined qualitative
+reporting criteria. Newly identified or existing significant risks
+that are above a defined threshold, a qualitative criteria or with a
+potential significant impact are also reported to the chairperson
+of the Supervisory Board and to the Audit Committee of the
+Supervisory Board. This includes any risks to the ability to
+continue as a going concern.
+We also have a process in place that analyzes those risks with
+respect to potential effects on liquidity, excessive indebtedness,
+and insolvency, which could be possible threats to the Group's
+ability to continue as a going concern.
+Risk Management Organization
+medium
+Our global risk management organization (Global GRC) ensures
+the Group-wide systematic identification, assessment,
+management, and monitoring of operational, financial,
+compliance, and strategic risks as well as opportunities. In
+addition, the Global GRC function is responsible for the
+standardized internal risk reporting to risk committees on
+different levels within the Company in line with the internal GRC
+Risk Reporting Standard, including the Executive Board, the
+chairperson of the Supervisory Board and the Audit Committee
+of the Supervisory Board, along with the external risk reporting.
+Furthermore, Global GRC is responsible for the regular
+maintenance and implementation of our risk management
+policy.
+Data Protection and Privacy
+business critical
+low
+moderate
+unlikely
+Management Use of Estimates
+low
+major
+remote
+Liquidity
+low
+moderate
+unlikely
+Quarterly Sales Fluctuations
+Financial Risks
+business critical medium
+remote
+Unauthorized Disclosure of Information
+Communication and Information Risks
+7
+medium
+major
+unlikely
+Ethical Behavior
+low
+moderate
+unlikely
+Climate Change, Energy, and Emissions
+medium
+unlikely
+110
+Operational, financial, and strategic risk management is
+uniformly implemented at SAP. Independent GRC risk managers
+are assigned to each of SAP's important business units and
+business activities and to selected strategic initiatives. All GRC
+risk managers, together with assigned risk contacts in the
+business units, continuously identify and assess risks
+associated with material business operations using a uniform
+approach and monitor the implementation and effectiveness of
+the measures chosen to mitigate risks. Further financial risk
+management activities are performed by our global treasury
+function, and risk management of compliance risks is performed
+by our Legal Compliance & Integrity Office.
+Risk managers are responsible for supporting and monitoring
+the implementation of risk management across the Group that
+is both effective and compliant with regulatory requirements
+and SAP's global risk management policy. Based on our risk
+management policy, all risks and risk-related matters must be
+reported to the Global GRC organization.
+business critical
+high
+International Business Activities
+unlikely
+major
+medium
+Environmental, Social, and Political Instability
+unlikely
+101
+business critical
+medium
+The Global Managing Board was dissolved on March 31, 2016.
+Changes in Management
+For more information about the corporate governance of SAP,
+see the Corporate Governance Report section.
+The German Commercial Code, section 315 (5) in connection
+with section 289a, requires that as a listed company, SAP SE
+publish a corporate governance statement either as part of our
+management report or on our Web site. The Executive Board of
+SAP SE filed the corporate governance statement on February
+21, 2017, and published it on our public Web site at
+www.sap.com/corporate-en/investors/governance.
+Corporate Governance Statement
+Corporate Governance
+Fundamentals
+Combined Management Report | Financial Performance: Review and Analysis
+102
+as the SAP Group. For more information, see the Risk
+Management and Risks section as well as the Expected
+Developments and Opportunities section.
+SAP SE is subject to materially the same opportunities and risks
+Opportunities and Risks
+Liabilities increased €390 million to €16,069 million
+(2015: €15,679 million). This increase is mainly attributable to
+contrasting effects: On the one hand, SAP SE issued new debt in
+the amount of €400 million and liabilities to affiliated companies
+increased €1.130 million, primarily due to increased cash
+contributions by subsidiaries through SAP SE centralized
+management of finance and liquidity; on the other hand, SAP SE
+repaid €1,250 million in liabilities to banks.
+(2015: €1,247 million). Other provisions increased €110 million
+to €953 million (2015: €843 million) primarily as a result of
+additions to the other employee-related liabilities and provision
+for losses from derivative forward contracts. Reserves for tax
+decreased €17 million to €381 million (2015: €398 million).
+Provisions increased €92 million to €1,339 million
+€50 million from the issuance of shares to service the share-
+based payments of employees. The equity ratio (that is, the ratio
+of shareholders' equity to total assets) increased from 45% in
+2015 to 47% in 2016.
+0
+likely
+During the merger and acquisition and post-merger integration
+phase, newly acquired companies are subject to risk
+management performed by our Corporate Development M&A
+function. Furthermore, as long as they are not integrated,
+existing risk management structures are maintained or
+enhanced within the acquired companies for purposes of
+compliance with legal requirements.
+Global Economy
+Risk Level Evolution¹)
+The head of Global GRC, who reports to the Group CFO, is
+responsible for SAP's internal control and risk management
+program, and provides regular updates to the Audit Committee
+of the Supervisory Board. The overall risk profile of the Group is
+consolidated by the head of Global GRC,
+Internal Control and Risk Management
+System for Financial Reporting
+The purpose of our system of internal control over financial
+reporting is to provide reasonable assurance that our financial
+reporting is reliable and in compliance with applicable generally
+accepted accounting principles. Because of the inherent
+limitations of internal control over financial reporting, it might
+not prevent or bring to light all potential misstatements in our
+financial statements.
+SAP's internal control and risk management system for financial
+reporting (ICRMSFR) is based on our Group-wide risk
+management methodology. The ICRMSFR includes
+organizational, control, and monitoring structures designed to
+ensure that data and information concerning our business are
+collected, compiled, and analyzed in accordance with applicable
+laws and properly reflected in the IFRS Consolidated Financial
+Statements.
+As of April 1, 2016, Stefan Ries and Steve Singh were appointed
+to the Executive Board. Stefan Ries continued in his role as Chief
+Human Resources Officer and also took on the position of SAP
+Labor Relations Director. Steve Singh continued to lead the
+Business Networks & Applications group. In addition, he took
+over responsibility for SAP's solutions for small-to-medium-
+sized businesses, the SAP Connected Health strategy and
+solutions, and the Data-as-a-Service (DaaS) business.
+Our ICRMSFR also includes policies, procedures, and measures
+designed to ensure compliance of SAP's financial reports with
+applicable laws and standards. We analyze new statutes,
+standards, and other pronouncements concerning IFRS
+accounting and its impact on our financial statements and
+ICRMSFR. Failure to adhere to these new statutes, standards,
+and other pronouncements would present a substantial risk to
+the compliance of our financial reporting. Finally, the ICRMSFR
+has both preventive and detective controls, including, for
+example, automated and non-automated reconciliations,
+segregated duties with two-person responsibility, authorization
+concepts in our software systems, and corresponding
+monitoring measures.
+Our Corporate Financial Reporting (CFR) department codifies all
+accounting policies in our global group accounting and revenue
+recognition guidelines. These policies, the corporate closing
+schedule, and our process handbooks together define the
+closing process. Under this closing process, we prepare,
+predominately through centralized and outsourced services, the
+financial statements of all SAP legal entities for consolidation by
+our CFR department. The CFR department and other corporate
+departments assist in the efforts to comply with Group
+accounting policies and monitor the accounting work. The
+department also conducts reviews of our accounting processes
+and books.
+We have outsourced some work, such as valuing projected
+benefit obligations and share-based payment obligations,
+quarterly tax calculations for most entities, and purchase price
+108
+Combined Management Report | Risk Management and Risks
+allocations in the context of asset acquisitions and business
+combinations. We have also outsourced the preparation of the
+local statutory financial statements for most of our subsidiaries.
+The employees who work on SAP's financial reporting receive
+training in the respective policies and processes.
+Based on an analysis of the design and operating effectiveness
+of our respective internal controls over financial reporting, a
+committee presents the results of the assessment on the
+ICRMSFR effectiveness with respect to our IFRS Consolidated
+Financial Statements as at December 31 each year to the Group
+CFO. The committee meets regularly to set the annual scope for
+the test of effectiveness, to evaluate any possible weaknesses in
+the controls, and to determine measures to address them
+adequately. During its own meetings, the Audit Committee of
+the Supervisory Board regularly scrutinizes the resulting
+assessments of the effectiveness of the internal controls over
+financial reporting with respect to the IFRS consolidated
+financial statements.
+The assessment of the effectiveness of the ICRMSFR related to
+our IFRS consolidated financial statements was that on
+December 31, 2016, the Group had an effective internal control
+system over financial reporting in place.
+Additionally, and in compliance with German commercial law
+requirements in Germany, SAP maintains an effective internal
+control system beyond financial reporting. This is supported
+through automated controls (continuous control monitoring) as
+part of our business processes.
+Risk Management and Internal Control
+Governance
+Our Executive Board is responsible for ensuring the
+effectiveness of the risk management and internal control
+system. The effectiveness of both systems and their
+implementation in the different Executive Board areas is
+monitored by each board member. We regularly provide a status
+on the risk management and the internal control system to the
+Audit Committee. Key risks are reported quarterly to the
+chairperson of the Supervisory Board and to the Audit
+Committee of the Supervisory Board. The Audit Committee of
+the Supervisory Board regularly monitors the effectiveness of
+SAP's risk management and internal control system. At the
+direction of our Audit Committee, the Corporate Audit
+department regularly audits various aspects of the risk
+management system and its effectiveness. Additional
+reassurance is obtained through the external audit of the
+effectiveness of our internal control system over financial
+reporting and the early warning system.
+Software Solution Deployed
+We use our own risk management software, SAP solutions for
+GRC powered by SAP HANA, to effectively support the
+governance process. Risk managers record and address
+identified risks using our risk management software to help
+create transparency across all known risks that exist in the
+Group, as well as to facilitate risk management and the
+associated risk reporting. Our continuous controls monitoring
+activities are performed utilizing our GRC software as well. This
+information is available to managers through a mobile app as
+well as regularly issued reports, and is consolidated and
+aggregated for the quarterly risk report to the Executive Board.
+The solution also supports the risk-based approach of the
+ICRMSFR.
+Combined Management Report | Risk Management and Risks
+109
+Risk Factors
+The following sections outline risk factors that we have identified
+and track using our risk management software (SAP solutions
+for GRC) powered by SAP HANA. They are presented below at a
+more aggregated level as compared to their use in internal
+Overview Risk Factors
+controlling, but are broken down by the same risk categories we
+use in our internal risk management system reporting structure.
+An overview of the risk factors presented below is outlined in the
+following table. It categorizes the risk factors according to our
+framework detailed in the Risk Management Methodology and
+Reporting section.
+Probability Impact
+Economic, Political, Social, and Regulatory Risk
+Combined Management Report | Risk Management and Risks
+20-39%
+1-19%
+L
+SAP SE shareholders' equity rose 9% to €15,291 million
+(2015: €14,024 million). Against outflows of €1,378 million
+associated with the payment of the 2015 dividend, there was a
+€2,595 million increase in net income and an inflow of
+Combined Management Report | Financial Performance: Review and Analysis
+Information required under the German Commercial Code,
+sections 289 (4) and 315 (4), with an explanatory report:
+Composition of share capital: For information about the
+composition of SAP SE share capital as at December 31, 2016,
+see the Notes to the Consolidated Financial Statements, Note
+(20). Each share entitles the bearer to one vote. American
+depositary receipts (ADRs) representing our shares are listed on
+the New York Stock Exchange in the United States. ADRs are
+certificates representing non-U.S. shares and are traded on U.S.
+stock exchanges instead of the underlying shares. One SAP ADR
+corresponds to one SAP share.
+Restrictions applying to share voting rights or transfers: SAP
+shares are not subject to transfer restrictions except the lock-up
+period under the SAP Share Matching Plan (SMP), described
+below. SAP held 29,880,390 treasury shares as at December 31,
+2016, see the Notes to the Consolidated Financial Statements,
+Note (20). Treasury shares do not carry voting rights or dividend
+rights or other rights. Shares issued under the employee SMP
+are partly subject to contractual transfer restrictions for a three-
+year lock-up period unless the plan member's employment with
+SAP is ended under certain circumstances during that period.
+Until that lock-up period has expired, participating employees
+are not ordinarily allowed to dispose of the shares they have
+acquired under the plan. We are not aware of any other
+restrictions applying to share voting rights or to share transfers.
+Shareholdings that exceed 10% of the voting rights: We are
+not aware of any direct or indirect SAP SE shareholdings that
+exceed 10% of the voting rights.
+Shares with special rights conferring powers of control: No
+SAP shareholder has special rights conferring powers of control.
+Type of control over voting rights applying to employee
+shareholders who do not directly exercise their control rights:
+As with other shareholders, employee holders of SAP shares
+exercise their control rights in accordance with the law and the
+Articles of Incorporation. In votes on the formal approval of their
+acts at the Annual General Meeting of Shareholders, employee
+representatives on the Supervisory Board, as all other members
+of the Supervisory Board, are prohibited from exercising the
+voting rights associated with their shares.
+Requirements concerning appointments and dismissals of
+members of the Executive Board and amendments to the
+Articles of Incorporation:
+Conditions for the appointment and dismissal of members of the
+Executive Board and amendment to the Articles of Incorporation
+reflect the relevant provisions of applicable European and
+German law, including Council Regulation (EC) No. 2157/2001
+on the Statute for a European Company ("SE Regulation") and
+the German Stock Corporation Act. Under the Articles of
+Incorporation, the Executive Board consists of at least two
+members who are appointed for a period of not more than five
+years by the Supervisory Board in accordance with the SE
+Regulation, articles 39 and 46. The number of members of the
+Executive Board is decided by the Supervisory Board. Executive
+Board members may be reappointed for, or their term of office
+extended by, a maximum of five years. A simple majority of the
+Supervisory Board membership is required for Executive Board
+Combined Management Report | Corporate Governance Fundamentals
+103
+appointments. In the event of a tie, the chairperson of the
+Supervisory Board has the deciding vote. The Supervisory
+Board can appoint a chairperson of the Executive Board and one
+or more deputy chairpersons from among the members of the
+Executive Board. The Supervisory Board can revoke
+appointments to the Executive Board in accordance with the SE
+Regulation, article 9, and the German Stock Corporation Act,
+section 84, if compelling reasons exist, such as gross negligence
+on the part of the Executive Board member. If the Executive
+Board is short of a required member, one may be appointed in
+urgent cases by a court in accordance with the SE Regulation,
+article 9, and the German Stock Corporation Act, section 85. In
+accordance with the SE Regulation, article 59, and the German
+Stock Corporation Act, section 179, an amendment of the
+Articles of Incorporation requires a resolution of the General
+Meeting of Shareholders with a majority of at least three-
+quarters of the valid votes cast. For any amendments of the
+Articles of Incorporation that require a simple majority for stock
+corporations established under German law, however, the
+simple majority of the valid votes cast is sufficient if at least half
+of the subscribed capital is represented or, in the absence of
+such quorum, the majority prescribed by law (that is, two-thirds
+of the votes cast, pursuant to article 59 of the SE Regulation) is
+sufficient. Section 11 (2) of the Articles of Incorporation
+authorizes the Supervisory Board to amend the Articles of
+Incorporation where such amendments only concern the
+wording.
+Power to issue and repurchase shares: The Annual General
+Meeting of Shareholders on May 12, 2016, granted powers to the
+Executive Board, subject to the consent of the Supervisory
+Board, to issue convertible and/or warrant-linked bonds, profit-
+sharing rights and/or income bonds (or combinations of these
+instruments), and to grant conversion or option rights in respect
+of SAP SE shares representing a total attributable portion of the
+share capital of not more than €100 million secured by a
+corresponding amount of contingent capital. These powers will
+expire on May 11, 2021. The Executive Board is also authorized
+until May 19, 2020, to increase the share capital by not more
+than €250 million by issuing new shares against contributions in
+cash and to increase the share capital by not more than €250
+million by issuing new shares against contributions in cash or in
+kind. For more information about the different tranches of
+authorized capital and the aforementioned contingent capital,
+see the Articles of Incorporation, section 4. The Annual General
+Meeting of Shareholders on June 4, 2013, granted a power to
+the Executive Board in accordance with the German Stock
+Corporation Act, section 71 (1)(8), to buy back for treasury on or
+before June 3, 2018, SAP SE shares attributable in total to not
+more than €120 million of the share capital. The power is subject
+to the proviso that the shares repurchased, together with any
+shares that were previously acquired and are still held by SAP in
+treasury and any other shares controlled by SAP, must not in
+total exceed 10% of SAP's share capital. Executive Board
+powers, such as those described to issue and repurchase stock
+and to grant rights of conversion and subscription to shares of
+SAP, are widely followed common practice among German
+companies such as SAP. They give the Executive Board the
+flexibility it needs, in particular, the option to use SAP shares as
+consideration in equity investments, raise funds on the financial
+markets at short notice on favorable terms, or return value to
+shareholders during the course of the year.
+Material agreements with change of control provisions:
+SAP SE has concluded the following material agreements with
+provisions that take effect in the event of a change of control,
+whether following a takeover bid or otherwise:
+The terms of SAP's syndicated €2 billion revolving credit facility
+include a change-of-control clause. For more information about
+this syndicated credit facility, see the Notes to the Consolidated
+Financial Statements, Note (25). This clause obliges SAP SE to
+notify the banks in case of a change of control. If, on receiving
+the notification, banks that represent at least two-thirds of the
+credit volume so require, the banks have the right to cancel the
+credit facility and demand complete repayment of the
+outstanding debt. If no continuation agreement is reached, the
+credit facility would end and the obligation to repay would
+become effective at an ascertainable time.
+In agreements between SAP SE and various banks for bilateral
+credit facilities that totaled €474 million as at December 31,
+2016, we have agreed to termination rights of the banks in
+certain cases including a change of control. We believe that in
+view of our current liquidity situation, termination of these credit
+facilities would not have a material adverse effect, at least in the
+near term.
+Of SAP's total amount of Eurobonds of €6.15 billion outstanding
+as of December 31, 2016, €5.25 billion were issued under a debt
+issuance program. For more information about SAP's
+Eurobonds, see the Notes to the Consolidated Financial
+Statements, Note (17b). Under the terms agreed with the
+buyers, we are required to notify the buyers of any change of
+control without delay. If there is a change of control and SAP is
+consequently assigned a lower credit rating within a defined
+period, buyers are entitled to demand repayment.
+Under the terms of our U.S. private placements totaling US$1.75
+billion, we are required to offer lenders repayment of
+outstanding debt if there is a change of control and SAP is
+consequently assigned a lower credit rating within a defined
+period. For more information about these private placements,
+see the Notes to the Consolidated Financial Statements section,
+Note (17b). Lenders would have at least 30 days to accept the
+offer.
+We have entered into relationships with other companies to
+jointly develop and market new software products. These
+relationships are governed by development and marketing
+agreements with the respective companies. Some of the
+agreements include provisions that, in the event of a change of
+104
+Combined Management Report | Corporate Governance Fundamentals
+control over one of the parties, give the other party a right to
+consent to the assignment of the agreement or to terminate it.
+Change of control provisions in Executive Board
+compensation agreements: Agreements have been concluded
+with the members of the Executive Board concerning
+compensation in the event of a change of control. These
+agreements, which are customary in Germany and elsewhere,
+are described in the compensation report, which is an integral
+part of this management report. We have no analogous
+compensation agreements with our other employees.
+Combined Management Report | Corporate Governance Fundamentals
+The increase of €765 million in accounts receivable and other
+assets was principally the result of higher receivables from
+affiliated companies mainly due to higher product revenue and
+higher tax receivables. Liquid assets and marketable securities
+increased by €760 million to €1.120 million (2015: €360 million).
+(2015: €25,257 million), due mainly to capital contributions and
+loans to subsidiaries.
+(2015: €998 million). Financial assets increased €81 million
+compared with the previous year to €25,338 million
+Owing to investments in IT infrastructure property, plant and
+equipment rose by €113 million to €1,111 million
+970
+360
+Short-term assets
+5,759
+4,234
+Prepaid expenses and deferred
+charges
+205
+173
+Deferred taxes
+144
+106
+Surplus arising from offsetting
+Total assets
+2
+105
+1
+30,953
+Equity and liabilities
+Shareholders' equity
+Provisions
+15,291
+1,339
+16,069
+14,024
+1,247
+L
+7
+3
+32,706
+30,953
+Liabilities
+Deferred income
+Total shareholders' equity and
+liabilities
+32,706
+Risk Management and
+15,679
+Our Risk Management
+Major
+Business Critical
+Impact Definition
+Negligible negative impact on
+business, financial position, profit,
+and cash flows
+Limited negative impact on
+business, financial position, profit,
+and cash flows
+Some potential negative impact
+on business, financial position,
+profit, and cash flows
+Considerable negative impact on
+business, financial position, profit,
+and cash flows
+Detrimental negative impact on
+business, financial position, profit,
+and cash flows
+In this framework, we define a remote risk as one that will occur
+only under exceptional circumstances and a near certain risk as
+one that can be expected to occur within the specified time
+horizon. The period for analyzing our risks correlates with the
+Based on the combination of the likelihood that a risk will occur
+and its impact on SAP's reputation, business, financial position,
+profit, and cash flow, we classify the risks as "high," "medium,"
+or "low."
+Probability
+Insignificant
+Minor
+Moderate
+80-99%
+M
+Major
+H
+Business Critical
+H
+60-79%
+L
+M
+M
+H
+H
+Risks
+40-59%
+Moderate
+Minor
+H
+Impact Level
+As a global company, SAP is exposed to a broad range of risks
+across our business operations. As a consequence, our
+Executive Board has established comprehensive internal control
+and risk management structures that enable us to identify and
+analyze risks early and take appropriate action. Our risk
+management and internal control system is designed to identify
+potential events that could negatively impact the Company and
+to provide reasonable assurance regarding the operating
+effectiveness over our financial reporting while ensuring the
+achievement of the Company objectives, specifically our ability
+to achieve our financial, operational, or strategic goals as
+planned.
+Insignificant
+This system comprises numerous control mechanisms and is an
+important element of our corporate decision-making process; it
+is therefore implemented as an integral part of SAP's business
+processes across the entire Group. We have adopted an
+integrated risk management and internal control approach to
+ensure that our global risk management efforts are effective
+while also enabling us to aggregate risks and report on them
+transparently,
+Due to our public listings in both Germany and the United
+States, we are subject to both German and U.S. regulatory
+requirements that relate to risk management and internal
+controls over financial reporting, such as provisions in the
+German Stock Corporation Act, section 91 (2) and the U.S.
+Sarbanes-Oxley Act (SOX) of 2002, specifically sections 302
+and 404. Hence, our Executive Board has established an early
+warning system (risk management system) to ensure
+compliance with applicable regulations and an effective
+management of risks.
+Our risk management system is based on three pillars, which
+include a dedicated risk management policy and a standardized
+risk management methodology as well as a global risk
+management organization. Our internal control system consists
+of the internal control and risk management system for financial
+reporting (ICRMSFR) that also covers the broader business
+environment. In 2016, we adjusted existing control designs to
+adequately address the changed risk environment and
+continued to automate our internal control landscape leveraging
+continuous control monitoring and continuous auditing activities
+in selected business areas. Using the current Committee of
+Sponsoring Organizations of the Treadway Commission (COSO)
+framework of 2013, we define and implement internal controls
+along the value chain on a process and subprocess level to
+ensure that sound business objectives are set in line with the
+organization's strategic, operational, financial, and compliance
+goals. In addition, we have a governance model in place across
+risk management and the internal control system to ensure both
+systems are effective, as well as a central software solution to
+store, maintain, and report all risk-relevant information.
+Risk Management Methodology and
+Reporting
+The following describes the key elements of the risk
+management process as part of SAP's risk management policy:
+risk planning, identification, analysis, response, monitoring, and
+reporting.
+Risk planning and risk identification for both internal and
+external risks are conducted in cooperation between risk
+managers and the business units or subsidiaries across the
+Group. We use various techniques to identify risks. For example,
+we have identified risk indicators and developed a
+comprehensive risk catalog that includes risk mitigation
+strategies for known product, solution, and project risks. Risk
+106
+Combined Management Report | Risk Management and Risks
+identification takes place at various levels of our organization to
+ensure that common risk trends are identified and end-to-end
+risk management across organizational borders is enabled. We
+apply both a qualitative and quantitative risk analysis as well as
+other risk analysis methods such as sensitivity analyses and
+simulation techniques.
+To determine which risks pose the highest threat to the viability
+of the SAP Group, we classify them as "high," "medium," or
+"low" based on the likelihood that a risk will occur within the
+assessment horizon as well as the impact the risk would have on
+SAP's business objectives if it were to occur. The scales for
+measuring these two indicators are given in the following tables.
+Risk Management Policy and Framework
+The risk management policy issued by our Executive Board
+governs how we handle risk in line with the Company's risk
+appetite and defines a methodology that is applied uniformly
+across all parts of the Group. The policy is regularly updated and
+stipulates who is responsible for conducting risk management
+activities and defines reporting and monitoring structures. Our
+global corporate audit function conducts regular audits to
+assess the effectiveness of our risk management system. Every
+year, SAP's external auditor assesses if the SAP SE early risk
+identification system is adequate to identify risks that might
+endanger our ability to continue as a going concern. SAP's
+enterprise risk management covers risks in the areas of
+strategy, operational business, financial reporting, and
+compliance. As of today, the risk management system analyzes
+risks and only assesses or analyzes opportunities where it is
+deemed appropriate.
+Description
+respectively associated business activities considering a
+relevant forecast horizon of up to one year, and up to 2020
+where applicable. The period for analyzing the risks that could
+be possible threats to the Group's ability to continue as a going
+concern is eight rolling quarters.
+Highly Likely
+Near Certainty
+Probability/Likelihood of
+80% to 99%
+60% to 79%
+Likely
+40% to 59%
+Internal Control and Risk Management
+System
+Unlikely
+20% to 39%
+Remote
+Occurrence
+1% to 19%
+Combined Management Report | Risk Management and Risks
+Human Capital Risks
+If we do not effectively manage our geographically dispersed
+workforce, we might not be able to run our business
+efficiently and successfully.
+Our success is dependent on appropriate alignment of our
+internal and external workforce planning processes, adequate
+resource allocation and our location strategy with our general
+strategy. It is critical that we manage our internationally
+dispersed workforce effectively, taking short- and long-term
+workforce and skill requirements into consideration. This applies
+to the management of our internal as well as our external
+workforce. Changes in headcount and infrastructure needs as
+well as local legal or tax regulations could result in a mismatch
+between our expenses and revenue. Failure to manage our
+geographically dispersed workforce effectively could hinder our
+ability to run our business efficiently and successfully and could
+have an adverse effect on our business, financial position, profit,
+and cash flows.
+We focus on mitigating this risk through a range of activities
+including succession management; workforce planning (which
+aims to achieve diversity and the right mix of talent and to take
+account of demographic changes); outsourcing; external short-
+term staffing; employer branding; career management (such as
+offering opportunities for short-term assignments and
+opportunities to improve skills, competencies, and
+qualifications); and extended benefit programs - for example, a
+performance-oriented remuneration system, an employer-
+financed pension plan in certain countries, and long-term
+incentive plans.
+We estimate this risk to be a remote possibility, but we cannot
+completely exclude the possibility of this risk to have a major
+impact on our business, financial position, profit, and cash flows,
+or cause a negative deviation from our revenue and operating
+profit target. We classify this risk as a low risk.
+If we are unable to attract, develop, and retain leaders and
+employees with specialized knowledge and technology skills,
+or are unable to achieve internal diversity and inclusion
+objectives, we might not be able to manage our operations
+effectively and successfully, or develop successful new
+solutions and services.
+such personnel as well as business experts is limited and, as a
+result, competition in our industry is intense and could expose
+us to claims by other companies seeking to prevent their
+employees from working for a competitor. If we are unable to
+identify, attract, develop, motivate, adequately compensate, and
+retain well-qualified and engaged personnel, or if existing highly
+skilled and specialized personnel leave SAP and ready
+successors or adequate replacements are not available or we
+cannot allocate our workforce as required due to local
+regulations and associated restrictions, we might not be able to
+manage our operations effectively, which could have an adverse
+effect on our reputation, business, financial position, profit, and
+cash flows. Furthermore, we might not be able to develop, sell,
+or implement successful new solutions and services as planned.
+This is particularly true as we continue to introduce new and
+innovative technology offerings and expand our business in
+emerging markets. The lack of appropriate or inadequately
+executed benefit and compensation programs could limit SAP's
+ability to attract or retain qualified employees and lead to
+financial losses. In addition, we might not be able to achieve our
+internal gender diversity objectives to increase the number of
+women in management from 18% in 2010 to 25% by end of
+2017.
+116
+These risks notwithstanding, we continue to believe our leading
+market position, employer brand, and extended benefit
+programs will enable us to hire top talent internationally with the
+potential to contribute to SAP's growing business success in the
+future. We address the risk of an adverse effect on our business
+operations from a failure to recruit the employees we need or
+from the loss of leaders and employees by seeking to build
+employee and leadership strengths through a range of targeted
+professional development, mentoring, and coaching programs,
+a gender diversity program, in September 2016, globally
+awarded with the Economic Dividends for Gender Equality
+(EDGE) certificate in recognition for commitment to gender
+equality in the workplace, and a special focus on accelerated
+high-potential employee development that aims to develop
+talent as well as leadership talent, in particular. A strong focus
+on succession planning for leadership and key positions seeks to
+ensure sustainable leadership and to safeguard the business
+from disruption caused by staff turnover.
+Although the risks related to failure to attract, develop, and
+retain talent could materialize, we believe that this is unlikely
+and that the impact on our reputation, business, financial
+position, profit, and cash flows, or potential negative deviation
+from our revenue and operating profit target would be major. We
+classify this risk as a medium risk.
+Combined Management Report | Risk Management and Risks
+Laws and regulatory requirements in Germany, the United
+States, and elsewhere continue to be very stringent.
+Organizational and Governance-Related
+Risks
+As a European company domiciled in Germany with securities
+listed in Germany and the United States, we are subject to
+European, German, U.S., and other governance-related
+regulatory requirements. Changes in laws and regulations and
+related interpretations, including changes in accounting
+standards and taxation requirements, and increased
+enforcement actions, sanctions, for example United States
+sanction requirements for Iran, and penalties might alter the
+business environment in which we operate. Regulatory
+requirements have become significantly more stringent in
+recent years, and some legislation, such as the anticorruption
+legislation in Germany, the U.S. Foreign Corrupt Practices Act,
+the UK Bribery Act, and other local laws prohibiting corrupt
+payments by employees, vendors, distributors, or agents, is
+being applied more rigorously. Emerging markets are a
+significant focus of our international growth strategy. The nature
+of these markets presents a number of inherent risks. A failure
+by SAP to comply with applicable laws and regulations, or any
+related allegations of wrongdoing against us, whether merited or
+not, could have an adverse effect on our business, financial
+position, profit, cash flows and reputation.
+Our highly qualified workforce is the foundation for our
+continued success. In certain regions and specific technology
+and solution areas, we continue to set very high growth targets,
+specifically in countries and regions such as Africa, China, Latin
+America, and the Middle East. In the execution of SAP's
+strategic priorities, we depend on highly skilled and specialized
+personnel and leaders, both male and female. Successful
+maintenance and expansion of our highly skilled and specialized
+workforce in the area of cloud is a key success factor for our
+transition to be the leading cloud company. The availability of
+117
+-
+If one or more of these risks materialize, this might have an
+adverse effect on the demand for our products and services as
+well as the partner's loyalty and ability to deliver. As a result, we
+might not be able to scale our business to compete successfully
+with other software vendors, which could have an adverse effect
+on our reputation, business, financial position, profit, and cash
+flows.
+If we are unable to scale and enhance an effective partner
+ecosystem, revenue might not increase as expected.
+It is difficult to assess the precise potential risk, because there is
+a wide variety of complex legal and regulatory requirements that
+apply, and therefore an equally wide variety of potential non-
+compliance scenarios exist.
+An open and vibrant partner ecosystem is a fundamental pillar
+of our success and growth strategy. We have entered into
+partnership agreements that drive co-innovation on our
+platforms, profitably expand all our routes to market to optimize
+market coverage, optimize cloud delivery, and provide high-
+quality services capacity in all market segments. Partners play a
+key role in driving market adoption of our entire solutions
+portfolio, by co-innovating on our platforms, embedding our
+technology, and reselling and/or implementing our software.
+If partners consider our products or services model less
+strategic and/or financially less attractive compared to our
+competition and/or less appropriate for their respective channel
+and target market, if partners fear direct competition by SAP or
+if SAP fails to establish and enable a network of qualified
+partners meeting our quality requirements and the
+requirements of our customers, then, among other things,
+partners might not:
+-
+-
+SAP continues to invest in long-term, mutually beneficial
+relationships and agreements with partners. We continue to
+develop and enhance a wide range of partner programs to retain
+existing and attract new partners of all types. We offer training
+opportunities to a wide range of resources for our partners and
+additionally provide demo solutions to enable partners to lead
+business value discussions on cloud and on-premise solutions
+with customers. A thorough certification process for third-party
+solutions has been designed and established to ensure
+consistent high-quality and seamless integration.
+-
+Develop a sufficient number of new solutions and content on
+our platforms
+Provide high-quality products and services to meet customer
+expectations
+Drive growth of references by creating customer use cases
+and demo systems
+Embed our solutions sufficiently enough to profitably drive
+product adoption, especially with innovations such as SAP
+S/4HANA and SAP Cloud Platform (formerly called SAP
+HANA Cloud Platform)
+Enable and train sufficient resources to promote, sell, and
+support to scale to targeted markets
+Comply with applicable quality requirements expected by our
+customers, resulting in delayed, disrupted, or terminated
+sales and services
+Transform their business model in accordance with the
+transformation of SAP's business model in a timely manner
+Renew their existing agreements with us or enter into new
+agreements on terms acceptable to us or at all
+Provide ability and capacity to meet customer expectations
+regarding service provisioning.
+-
+However, we continuously monitor new and increased
+regulatory requirements, updated or new enforcement trends,
+and publicly available information on compliance issues in the
+computer software industry, the emerging markets where we
+invest our resources, and in the business environment in general
+to cope with an increase in regulation enforcement efforts of
+certain countries or state-driven protectionism. Based on this
+information and any other available sources, we continuously
+update and refresh our compliance programs to improve our
+effectiveness and to ensure that our employees understand and
+comply with the SAP Code of Business Conduct. This process is
+coordinated by our Legal Compliance and Integrity Office, a
+team of dedicated resources who are tasked with managing our
+policy-related compliance measures. Our chief compliance
+officer coordinates policy implementation, training, and
+enforcement efforts throughout SAP. Those efforts are
+monitored and tracked to allow trending and risk analysis and to
+ensure consistent policy application throughout the SAP Group.
+Despite our comprehensive compliance programs and
+established internal controls, intentional efforts of individuals to
+circumvent controls or engage in fraud for personal gains
+cannot always be prevented.
+To help prevent this, we instituted a comprehensive compliance
+management system (CMS), which is based on the three pillars
+of prevention, detection, and reaction. Our CMS program
+comprises several educational, counseling, control, and
+investigative instruments. The objective is to minimize and
+mitigate the risk of unethical behavior, whether intentional or
+negligent.
+Non-compliance with applicable data protection and privacy
+laws or failure to adequately meet the requirements of SAP's
+customers with respect to our products and services could
+lead to civil liabilities and fines, as well as loss of customers
+and damage to SAP's reputation.
+119
+behavior could seriously harm our business, financial
+position, profit, and reputation.
+SAP's leadership position in the global market is founded on the
+long-term and sustainable trust of our stakeholders worldwide.
+Our heritage is one of corporate transparency, open
+communication with financial markets, and adherence to
+recognized standards of business integrity. The SAP Code of
+Business Conduct, adopted by the Executive Board on January
+29, 2003, and updated as necessary since then, memorialized
+and supplemented the already existing guidelines and
+expectations for the business behavior practiced at SAP.
+However, we might encounter unethical behavior and non-
+compliance with our integrity standards due to intentional and
+fraudulent behavior of individual employees, possibly in
+collusion with external third parties. In addition to intentional
+behavior, problems could also arise due to negligence in the
+adherence to rules and regulations, especially in countries with a
+high Corruption Perceptions Index and continuously increasing
+business activities in profoundly regulated industries such as
+public sector, healthcare, banking or insurance. Unethical
+behavior and misconduct attributable to SAP could not only lead
+to criminal charges, fines, and claims by injured parties, but also
+to financial loss, and severe reputational damage. This could
+have an adverse effect on our business, financial position, profit,
+and cash flows.
+The SAP Code of Business Conduct is mandatory and applies to
+every SAP employee. It provides legal compliance guidance on
+how to avoid unethical behavior and solve dilemma situations.
+On an annual basis, the SAP Code of Business Conduct is re-
+confirmed by SAP's workforce (except where disallowed by local
+legal regulations). We also rolled out and enforced various
+additional compliance policies aimed at managing third parties
+and preventing misuse of third-party payments for illegal
+purposes; ensuring controls around travel, entertainment, gift,
+and expense policies; and promoting a commitment to business
+with integrity through our partner and vendor ecosystems.
+These efforts are flanked by continuous education including e-
+learning and classroom training to target audiences as identified
+by compliance risk assessment. The overall CMS approach by
+SAP is continuously monitored internally and externally, and
+adapted accordingly, if needed.
+Although we estimate the probability of occurrence of
+intentional or negligent major unethical conduct to be unlikely,
+we cannot exclude the possibility that this risk could materialize.
+In that event, this risk could have a major impact on our
+reputation, business, financial position, profit, and cash flows
+and could cause a negative deviation from our operating profit
+target. We classify this risk as a medium risk.
+Communication and Information Risks
+Our controls and efforts to prevent the unauthorized
+disclosure of confidential information might not be effective.
+Confidential information and internal information related to
+topics such as our strategy, new technologies, mergers and
+acquisitions, unpublished financial results, customer data or
+personal data, could be prematurely or inadvertently disclosed
+and subsequently lead to market misperception and volatility.
+This could require us to notify multiple regulatory agencies and
+comply with applicable regulatory requirements and, where
+appropriate, the data owner, which could result in a loss of
+reputation for SAP. For example, leaked information during a
+merger or acquisition deal could cause the loss of our deal
+target, or our share price could react significantly in case of
+prematurely published financial results. This could have an
+adverse effect on our market position and lead to fines and
+penalties. In addition, this could have an adverse effect on our
+business, financial position, profit, and cash flows.
+We take a wide range of actions to prevent unauthorized
+disclosure of information, including procedural and
+organizational measures. These measures include mandatory
+compliance base line trainings for all employees (including
+fundamentals within security awareness, data privacy and data
+protection, compliance and communication), social engineering
+tests, standards for safe internal and external communication,
+and technical security features in our IT hardware and
+communication channels, such as mandatory encryption of
+sensitive data.
+Additionally, we combined organizationally all security groups
+into one global security unit. This combined organization
+strengthens the security capabilities and offers a wide range of
+policies, guidelines and support on executing the success of
+SAP's security measures.
+With the digital transformation, the increased use of cloud
+solutions and social media by employees, a continual adoption
+of internal security measures is meaningful to achieve and
+maintain an effective and appropriate level of data protection
+and privacy and to reinforce the position of SAP as a trusted
+partner for its customers.
+Although we estimate the likelihood of occurrence of this risk to
+be remote, we cannot completely exclude the possibility that
+this risk could have a business-critical impact on our reputation,
+business, financial position, profit, and cash flows, or cause a
+negative deviation from our operating profit target. We classify
+this risk as a medium risk.
+120
+Combined Management Report | Risk Management and Risks
+Although we estimate the probability of occurrence of this risk
+to be remote, we cannot completely exclude the possibility that
+this risk could have a business-critical impact on our business,
+financial position, profit, and cash flows, or cause a negative
+deviation from our revenue and operating profit target. We
+classify this risk as a medium risk.
+Combined Management Report | Risk Management and Risks
+Unethical behavior and non-compliance with our integrity
+standards due to intentional and fraudulent employee
+We believe that the risk of failing to meet expectations regarding
+our energy and emission strategy is unlikely to occur and that if
+the risk were to occur, it would only have a moderate impact on
+our reputation, business, financial position, profit, and cash
+flows, as well as on the achievement of our revenue and
+operating profit target. We classify this risk as a low risk.
+In recent years, SAP has shown that it is possible to take a
+proactive position on social and environmental issues while
+delivering robust financial growth. As a result, we received great
+recognition for our sustainability efforts. As a proof point for
+SAP's sustainability performance, we continue to be listed in the
+most prominent and recognized sustainability indexes, such as
+the Dow Jones Sustainability Indices and the CDP Climate
+Performance and Disclosure Leadership Indices. In 2016, SAP's
+greenhouse gas emissions added up to 380 kilotons CO2, which
+means we did meet our greenhouse gas emissions target of 400
+kilotons by 20 kilotons. If we do not meet our greenhouse gas
+emissions target for 2020, we might fail to meet expectations
+regarding our energy and emission performance.
+As a global software and service provider, SAP is required to
+comply with local laws wherever SAP does business.
+Consequently, we must ensure that any legal requirements in
+connection with the provision of products and services are
+properly implemented. With regard to data protection
+requirements, in May 2016, the EU enacted a "General Data
+Protection Regulation" (GDPR), as a successor to the Data
+Protection Directive of 1995, with the aim of further harmonizing
+data protection laws across the EU. The GDPR will be directly
+applicable law in all EU and EEA member states as of May 25,
+2018 after a two-year transition period. Within limits, member
+states can supplement the GDPR with additional national rules.
+Overall, the GDPR does not introduce substantial new concepts.
+It rather focuses on stronger compliance requirements and
+enforces them vigorously on every business that processes
+personal data of individuals in the EU/EEA, regardless of where
+that business is established. Some of the new rules are subject
+to further definition by the authorities, though, and others leave
+room for interpretation.
+Risks for SAP include:
+Violations of the GDPR might be punished with financial
+penalties of up to the higher of €20 million or 4% of the
+responsible company's annual global turnover. Further
+administrative measures include mandatory instructions by
+the data protection supervisory authorities relating to
+specific processing activities, up to their prohibition. Non-
+compliance might further lead to legal claims from affected
+individuals and consumer protection organizations. Where
+SAP processes data on behalf of its customers, violations
+might lead to damage claims from customers. Non-
+compliance further bears the risk of reputational losses if
+violations become publically known.
+Where member states can supplement the GDPR with
+additional national rules, there is a risk that data protection
+law will not be fully harmonized across Europe. As a
+consequence, SAP would have to continue to adapt its
+products and services to the individual national
+requirements.
+118
+Combined Management Report | Risk Management and Risks
+The data protection concepts of the GDPR do not adequately
+reflect the latest technological developments, such as big
+data and machine learning. If the GDPR cannot be interpreted
+in a way that allows for such technologies, or revised as
+necessary, SAP might not be able to use and offer products
+and services that implement such technologies in the
+EU/EEA.
+Overall, these laws and regulations amend and supplement
+existing requirements regarding the processing of personal data
+that SAP and SAP customers must fulfill and which we must
+consequently address with our products and services, including
+cloud delivery. Failure to comply with applicable laws or to
+adequately address privacy concerns of customers, even if
+unfounded, could lead to investigations by supervisory
+authorities, civil liability, fines, (in the future, potentially
+calculated based on the Company's annual revenue), loss of
+customers, damage to our reputation, and could have an
+adverse effect on our business, financial position, profit, and
+cash flows.
+With regards to the increase of regulation enforcement efforts
+we have already experienced and continue to expect as well as
+state-driven protectionism, we estimate the likelihood of this
+risk to be unlikely. We cannot completely exclude the possibility
+that this risk could have a major impact on our reputation,
+business, financial position, profit, and cash flows, or cause a
+negative deviation from our revenue and operating profit target.
+We classify this risk as a medium risk.
+To mitigate risks due to legal non-compliance, SAP actively
+monitors changes to applicable laws and regulations so that we
+can take adequate measures and certify our existing standards
+and policies on an ongoing basis. We have implemented a wide
+range of measures to protect data controlled by SAP and our
+customers from unauthorized access and processing, as well as
+from accidental loss or destruction. This includes, among
+others, a continuous enhancement of our data center operations
+worldwide, also taking into account local and/or sector-specific
+market and legal requirements. We have implemented a
+certified data protection management system in areas critical to
+data protection, such as digital business services, human
+resources (HR), marketing, products and innovation, and
+custom development, whereby implementation is audited
+internally as well as externally by the British Standard
+Institutions on an annual basis. Furthermore, customers are
+provided with security certifications (such as ISO/IEC 27001),
+security white papers, and reports from our independent
+auditors and certification bodies.
+We estimate this risk to be unlikely, and cannot rule out the
+possibility of it having a business-critical impact on our
+business, financial position, profit, and cash flows, and causing
+damage to our reputation, or causing a negative deviation from
+our revenue and operating profit target. We classify this risk as a
+medium risk.
+Failure to meet customer, partner, or other stakeholder
+expectations or generally accepted standards on climate
+change, energy constraints, and our social investment
+strategy could negatively impact SAP's business, results of
+operations, and reputation.
+Energy and emissions management are an integral component
+of our holistic management of social, environmental, and
+economic risks and opportunities. We have identified risks in
+these major areas:
+-
+Our solutions
+Our own operations - energy management and other
+environmental issues such as carbon management, water
+use, and waste
+Because our customers, employees, and investors expect a
+reliable energy and carbon strategy, we have reemphasized our
+environmental policy and our previously communicated targets,
+especially our 2020 target for greenhouse gas emissions. In
+case these targets cannot be achieved, our customers might no
+longer recognize SAP for our environmental leadership and
+might buy other vendors' products and services. Consequently,
+we could fail to achieve our revenue target. If we do not meet
+stakeholder expectations in the areas identified, our rating in
+sustainable investment indexes might decrease, which could
+have an adverse effect on our reputation, profit, and share price.
+With regard to the GDPR, the Data Protection & Privacy (DPP)
+team initiated a project that established a working group across
+all board areas. The aim of this project is to constructively assist
+all SAP business units to ensure compliance with the GDPR. DPP
+and Government Relations (GR) teams continue to work
+together and actively voice our opinion through industry-
+recognized associations. This is in addition to DPP's direct
+involvement with the European Commission and data protection
+authorities of member states. Such actions intend to achieve a
+use-oriented and forward-looking interpretation of the law while
+balancing protection of personal privacy as well as aiming to
+enhance European competitiveness.
+Furthermore, we are continuously improving and adapting cloud
+services delivery and license models to local and/or specific
+market requirements (such as local or regional data centers,
+customer expectations, and in accordance with legal and
+regulatory requirements).
+We estimate the probability of occurrence of this risk to be
+unlikely, and we cannot exclude the possibility that this risk
+could have a major impact on our reputation, business, financial
+position, profit, and cash flows, or cause a negative deviation
+from our revenue and operating profit target if it were to
+materialize. We classify this risk as a medium risk.
+If our customers do not renew their subscriptions, if they renew
+on terms less favorable to us, or do not purchase additional
+modules or users, our revenue and billings might decline, and
+our operating results could be negatively impacted. This could
+have an adverse effect on our business, financial position, profit,
+and cash flows.
+remote
+Venture Capital
+medium
+business critical
+remote
+Insurance
+medium
+major
+unlikely
+Business Operations
+medium
+business critical
+unlikely
+Cybersecurity
+high
+business critical
+likely
+Enforcement of Intellectual Property
+medium
+business critical
+unlikely
+minor
+low
+1) Evolution: Risk Level compared with previous year.
+Icon:
+Increased default risk, which might lead to significant
+-
+business partners, and key suppliers
+Increased number of bankruptcies among customers,
+-
+Higher credit barriers for customers, reducing their ability to
+finance software purchases
+Potential lawsuits from customers due to denied provision of
+service as a result of sanctioned-party lists or export control
+issues
+Delays in purchases, decreased deal size, or cancellations of
+proposed investments
+-
+These events could reduce the demand for SAP software and
+services, and lead to:
+Mergers and Acquisitions
+Macroeconomic developments, such as financial market
+volatility episodes, global economic crises, chronic fiscal
+imbalances, slowing economic conditions, or disruptions in
+emerging markets, could limit our customers' ability and
+willingness to invest in our solutions or delay purchases. In
+addition, changes in the euro conversion rates for particular
+currencies might have an adverse effect on business activities
+with local customers and partners. Furthermore, political
+instability in regions such as Africa and the Middle East, political
+crises (including Brazil, Great Britain, Greece, Syria, Turkey,
+Ukraine, or Venezuela), sanctions (such as those placed on
+Russia), natural disasters, pandemic diseases (such as Ebola in
+West Africa) and terrorist attacks (including the attacks in
+Brussels, Belgium, in March 2016, or in Nice, France, in July
+2016) could contribute to economic and political uncertainty.
+111
+Combined Management Report | Risk Management and Risks
+Our business is influenced by multiple risk factors that are both
+difficult to predict and beyond our influence and control. These
+factors include global economic and business conditions, and
+fluctuations in national currencies. Other examples are political
+Economic, Political, Social, and Regulatory
+Risk
+SAP SE is the parent company of the SAP Group. Consequently,
+the risks described below also apply, directly or indirectly, to
+SAP SE.
+All described risks are applicable to a different extent to our
+reportable segments (Applications, Technology & Services and
+SAP Business Network) unless otherwise noted.
+7
+increased
+unchanged
+decreased
+developments and general regulations as well as budgetary
+constraints or shifts in spending priorities of national
+governments.
+high
+business critical
+likely
+Undectected Defects in Products
+medium
+business critical
+unlikely
+Product Security
+Product and Technology Risks
+medium
+major
+unlikely
+Implementation Projects
+unlikely
+Project Risks
+major
+remote
+Currency, Interest Rate and Share Price Fluctuations
+medium
+major
+unlikely
+Compliance with Accounting Pronouncements
+Evolution¹)
+Risk Level
+Probability Impact
+low
+-
+business critical
+Third-Party Licensing
+Lawsuits
+high
+business critical
+likely
+Infringement of Intellectual Property
+Operational Risks
+→
+medium
+business critical
+unlikely
+medium
+Operation of SAP Cloud Data Centers
+business critical
+unlikely
+Technology and Product Strategy
+We share our overall long-term cloud strategy and our
+integration road map with our customers and continuously
+implement improvements to enhance our cloud solutions,
+including instant provisioning, a consumer-grade user
+experience, and a fast time to value, among others. To
+continuously improve our services, we closely monitor all issues
+and work together with customers to perform a root-cause
+analysis and provide solutions to identified problems. We have a
+strong focus on providing our cloud services efficiently and
+according to customer expectations, including service
+provisioning, quality, and security as well as data protection and
+privacy.
+business critical
+remote
+Innovation
+medium
+major
+likely
+medium
+impairment charges in the future
+medium
+Uncertainty in the global economy, financial markets, or
+political conditions could have a negative impact on our
+business, financial position, profit, as well as cash flows, and
+put pressure on our operating profit.
+-
+-
+-
+Other factors that could affect the market acceptance, adoption
+and extension of cloud solutions and services include:
+The market for cloud computing is increasing and shows strong
+growth relative to the market for our on-premise solutions. To
+offer a broad cloud service portfolio and generate the associated
+business value for our customers, we continue to invest in
+innovation and acquisitions. Due to ongoing contracts and
+previous substantial investments to integrate traditional on-
+premise enterprise software into their businesses, as well as
+concerns about data protection, total cost of ownership,
+functional capacities, migration, security and integration
+capabilities, and reliability, customers and partners might be
+reluctant or unwilling to migrate to the cloud.
+The success of our cloud computing strategy depends on
+positive market perception and increasing market adoption
+of our cloud solutions and managed cloud services.
+Insufficient adoption of our solutions and services could lead
+to a loss of SAP's position as a leading cloud company.
+With regards to our volume in cloud business as well as the
+conversion of traditional on-premise licenses to cloud
+subscriptions licenses, we estimate the probability of this risk
+materializing to be unlikely. However, we cannot completely
+exclude the possibility that it could have a business-critical
+impact on our business, financial position, profit, and cash flows,
+or cause a negative deviation from our revenue. We classify this
+risk as a medium risk.
+The SAP Digital Business Services organization is combining
+responsibility for services and support in regards to the
+Applications, Technology & Services segment. This organization
+offers a wide range of support, including premium support
+services (SAP MaxAttention and SAP ActiveEmbedded), and
+professional services to increase business benefit for our
+customers. For the SAP Business Network segment, we
+continue the established service and support models.
+Working closely with SAP user groups, we continuously
+demonstrate the business value and the benefits of our solution,
+service and support portfolio in terms of innovation, quality, and
+high service level as well as through customer references and
+success stories. Additionally, we continuously monitor the
+performance and the perceived value of our services and the
+satisfaction of our customers. We implement mitigating steps
+where required and deliberately invest into alignments and
+improvements in order to benefit our customers.
+increasing volume in our cloud business as well as the
+conversion of traditional on-premise licenses to cloud
+subscriptions licenses and an increased complexity in our
+maintenance and support cycle across our diverse solutions and
+offerings could have a potential negative impact on our software
+and maintenance revenue streams. This could have an adverse
+effect on our business, financial position, profit, and cash flows.
+113
+Combined Management Report | Risk Management and Risks
+In 2016, we continued to depend materially on the success of
+our support portfolio and on our ability to deliver high-quality
+services. Traditionally, our large installed customer base
+generates additional new software, maintenance, consulting,
+and training revenue. Despite the high quality and service level
+of our transformed and expanded service offering in the area of
+premium support services, we might be unable to meet
+customer expectations with regards to delivery and value
+proposition. This might lead to a potentially adverse impact on
+customer experience. Existing customers might cancel or not
+renew their maintenance contracts, decide not to buy additional
+products and services, not subscribe to our cloud offerings, or
+accept alternative offerings from other vendors. In addition, the
+Our established customers might not buy additional software
+solutions, subscribe to our cloud offerings, renew
+maintenance agreements, purchase additional professional
+services, or they might switch to other products or service
+offerings (including competitive products).
+Market Risks
+With regards to the relevance of current and anticipated political
+crisis situations and acts of violence impacting SAP's business,
+we believe that the likelihood of this risk materializing is unlikely;
+however, we cannot exclude the possibility of such a risk
+occurring and having a business-critical impact on our
+reputation, business, financial position, profit, and cash flows, or
+causing a negative deviation from our revenue and operating
+profit target. We classify this risk as a medium risk.
+To protect our key IT infrastructure (especially our data
+centers), critical business systems, and processes from material
+adverse effects in crisis situations, disaster recovery and
+business continuity plans have been developed that include
+implementation of data redundancies and daily data backup
+strategies. To verify and improve our approach, our IT-related
+organizations have been certified to the internationally
+recognized ISO 22301:2013 (Business Continuity Management)
+standard with regards to the Applications, Technology &
+Services segment. In addition, our corporate headquarters,
+which houses certain critical business functions, is located in the
+German state of Baden-Württemberg. This area has historically
+been free of natural disasters.
+Our mitigation measures have been designed and implemented
+to minimize such adverse effects. In an effort to ensure
+continuous operations of all business processes, we have been
+implementing and operating a worldwide business continuity
+management and crisis management system. To enable
+effective response and minimize possible losses in case of crisis
+situations, we have installed local crisis management teams at
+our main locations, supplemented by regional crisis
+management teams for the Americas (including Latin America
+and North America), APJ (including Greater China), and EMEA
+regions, and a global crisis management team.
+Terrorist attacks (such as in Turkey, in March, June, August, and
+December 2016) as well as other acts of violence or war, civil,
+religious, and political unrest (such as in Turkey, Ukraine, and
+Venezuela; Israel, Libya, Syria, and in other parts of the Middle
+East; and parts of Africa); natural disasters (such as hurricanes,
+flooding, or similar events); or pandemic diseases (such as
+Ebola in West Africa) could have a significant adverse effect on
+the local economy and beyond. Such an event could lead, for
+example, to the loss of a significant number of our employees, or
+to the disruption or disablement of operations at our locations,
+and could affect our ability to provide business services and
+maintain effective business operations. Furthermore, this could
+have a significant adverse effect on our partners as well as our
+customers and their investment decisions, which could have an
+adverse effect on our reputation, business, financial position,
+profit, and cash flows.
+Social and political instability caused by state-based
+conflicts, terrorist attacks, civil unrest, war, or international
+hostilities might disrupt SAP's business operations.
+Although we estimate the probability of occurrence of this risk
+to be unlikely, we cannot completely exclude the possibility that
+this risk could have a major impact on our business, financial
+position, profit, and cash flows, or cause a negative deviation
+from our revenue and operating profit target. We classify this
+risk as a medium risk.
+We address these risks with various measures depending on the
+circumstances on which SAP will not compromise, including, for
+example, a strong legal and compliance office presence in the
+main countries, compliance safeguards supported and
+monitored by SAP legal teams and the Legal Compliance &
+Integrity Office, maintaining an effective data protection and
+privacy office and associated policy, receiving guidance from
+external economics consultants, law firms, tax advisors, and
+authorities in the concerned countries, and taking legal actions
+when necessary.
+regulations to our business is sometimes unclear, subject to
+change over time, and often conflicting among jurisdictions.
+Additionally, these laws and government approaches to
+enforcement are continuing to change and evolve, just as our
+products and services continually evolve. Compliance with these
+varying laws and regulations could involve significant costs or
+require changes in products or business practices. Non-
+compliance could result in the imposition of penalties or
+cessation of orders due to alleged non-compliant activity. We do
+not believe we have engaged in any activities sanctionable under
+these laws and regulations, but governmental authorities could
+use considerable discretion in applying these statutes and any
+imposition of sanctions against us could be material. One or
+more of these factors could have an adverse effect on our
+operations globally or in one or more countries or regions, which
+could have an adverse effect on our business, financial position,
+profit, and cash flows.
+Combined Management Report | Risk Management and Risks
+112
+Concerns with entrusting a third-party to store and manage
+critical employee or company confidential data
+Inadequate level of configurability or customizability of the
+software
+Missing integration scenarios between on-premise products
+and cloud-to-cloud solutions
+Failure to securely and successfully deliver cloud services by
+any cloud service provider could have a negative impact on
+customer trust in cloud solutions
+and on-premise solutions); our customer support; concerns
+regarding stable, efficient, and secure cloud operations and
+compliance with legal and regulatory requirements; our pricing;
+the pricing of competing products or services; mergers and
+acquisitions affecting our customer base; global economic
+conditions; and reductions in our customers' spending levels.
+115
+Combined Management Report | Risk Management and Risks
+To maintain or improve our operating results in the cloud
+business, it is important that our customers renew their
+agreements with us when the initial contract term expires and
+purchase additional modules or additional capacity. Our
+customers have no obligation to renew their subscriptions after
+the initial subscription period, and we cannot assure that
+customers will renew subscriptions at the same or at a higher
+level of service, or at all. Our customers' renewal rates might
+decline or fluctuate as a result of various factors, including their
+satisfaction or dissatisfaction with our cloud solution and
+services portfolio; our ability to efficiently provide cloud services
+according to customer expectations and meeting the service
+level agreements, service availability and provisioning, the
+integration capabilities of our cloud solutions into their existing
+IT environment (including hybrid solutions combining both cloud
+We recognize cloud subscriptions revenue as we provide the
+respective services, which typically range from one-to-three
+years with some up to five years. This revenue recognition and
+our increasing subscription revenues could have a temporary
+adverse effect on our financial position, profit, and cash flows.
+Though downturns or upturns in cloud sales might not be
+immediately reflected in our operating results, any decline in
+our customer renewals would harm the future operating
+results of our cloud business.
+We estimate the probability of occurrence of this risk to be
+remote, but cannot completely exclude the possibility that this
+risk could have a business-critical impact on our business,
+financial position, profit, and cash flows, or cause a negative
+deviation from our revenue and operating profit target.
+Furthermore, unsuccessful launches of flagship
+products/offerings could negatively affect market perception.
+We classify this risk as a medium risk.
+To mitigate this risk, SAP is balancing the distribution of our
+strategic investments by evolving and protecting our core
+businesses and simultaneously developing new solutions,
+technologies, and business models for markets, such as those in
+analytics, applications, and database and technology.
+Furthermore, we continuously demonstrate the benefits of our
+solution and services portfolio through end-to-end integration
+scenarios, homogeneous and compelling user interfaces,
+customer references and success stories as well as the
+provision of support excellence to ensure customer satisfaction
+with and after the implementation of our solution.
+maps. There is a risk that such uncertainties might lead
+customers to wait for proof of concepts or holistic integration
+scenarios through reference customers or more mature
+versions first, which might result in a lower level of adoption of
+our new solutions, technologies, business models, and flexible
+consumption models, or no adoption at all, possibly impacting
+customer satisfaction and retention. This could have an adverse
+effect on our business, financial position, profit, and cash flows.
+Our business consists of new software licenses, software license
+updates, Services and maintenance fees as well as of cloud
+subscriptions. Our customers are expecting to take advantage
+of technological breakthroughs from SAP without compromising
+their previous IT investments. However, the introduction of new
+SAP solutions, technologies, and business models as well as
+delivery and consumption models is subject to uncertainties as
+to whether customers will be able to perceive the additional
+value and realize the expected benefits we deliver along our road
+Demand for our new solutions might not develop as planned
+and our strategy on new business models and flexible
+consumption models might not be successful.
+Business Strategy Risks
+As we expand into new countries and markets, these risks could
+intensify. The application of the respective local laws and
+Although we estimate the probability of this risk unlikely with
+major impact, we cannot completely exclude the possibility that
+this risk could have a major impact on our business, financial
+position, profit, and cash flows, or cause a negative deviation
+from our revenue and operating profit target. We classify this
+risk as a medium risk.
+Additionally, related to our Applications, Technology & Services
+segment, customers could change their buying behavior by
+accelerating their acceptance of cloud solutions to reduce their
+investments, which might have a temporary adverse effect on
+our operating results. Furthermore, the trend in the market to
+invest more in cloud solutions might lead to a risk of the
+potential loss of existing on-premise customers. It might also
+have a temporary adverse effect on our revenue due to the
+number of conversions from on-premise licenses to cloud
+subscriptions from existing SAP customers in our installed base,
+as we recognize cloud subscriptions revenue over the respective
+service provision, and that typically ranges from one-to-three
+years with some up to five years.
+companies tend to create new markets organically, large
+traditional IT vendors tend to enter such markets mostly
+through acquisitions. SAP faces increased competition in its
+business environment from traditional, new and in particular
+cooperating competitors. This competition could cause price
+pressure, cost increases, and loss of market share, which could
+have an adverse effect on our business, financial position, profit,
+and cash flows.
+Combined Management Report | Risk Management and Risks
+114
+The software industry continues to evolve rapidly and is
+currently undergoing a significant shift due to innovations in the
+areas of enterprise mobility, machine learning, augmented and
+virtual reality, cybersecurity, Big Data, hyperconnectivity, the
+Internet of Things, digitization, supercomputing, cloud
+computing, and social media. While smaller innovative
+Our market share and profit could decline due to increased
+competition, market consolidation and technological
+innovation as well as new business models in the software
+industry.
+Although we estimate the probability of occurrence of this risk
+to be unlikely, we cannot completely exclude the possibility that
+this risk could have a business-critical impact on our reputation,
+business, financial position, profit, and cash flows, or cause a
+negative deviation from our revenue and operating profit target.
+We classify the risk as a medium risk.
+In addition to measures to communicate the business value of
+our cloud solutions to the market, we invest significantly in
+infrastructure and processes in an effort to ensure secure
+operations of our cloud solutions including the adaption of cloud
+service delivery to local and/or specific market requirements
+(such as local or regional data centers) and compliance with all
+local legal regulations regarding data protection and privacy as
+well as data security.
+If organizations do not perceive the benefits of cloud computing,
+the market for cloud business might not develop further, or it
+might develop more slowly than we expect, either of which could
+have an adverse effect on our business, competitiveness,
+financial position, profit, reputation and cash flows.
+Challenge in defining adequate solution packages and scope
+for all customer segments
+Failure to comply with increasing governance on data privacy
+and data residence
+Strategic alliances among our competitors and/or their
+growth-related efficiency gains in the cloud area could lead to
+significantly increased competition in the market with
+regards to pricing and ability to integrate solutions
+Failure to get the full commitment of our partners might
+reduce speed and impact in market reach
+We believe we will be able to protect our leadership in the
+market by continuing to execute successfully on our customer-
+centric innovation strategy, which is driven by a mix of organic
+growth, targeted acquisitions, and attractive cloud solution
+offerings. To compete successfully in the market, we
+continuously enhance our global processes and adjust our
+organizational structures. Furthermore, in the Application,
+Technology, and Services segment, we have policies in place to
+effectively manage conversions from on-premise software
+arrangements to cloud arrangements.
+Compliance with various industry standards (such as
+Payment Card Industry Data Security Standard)
+Market volatilities or workforce restrictions due to changing
+laws and regulations resulting from political decisions (e.g.
+Brexit, government elections)
+Customer concerns about security capabilities and reliability
+Customer concerns about the ability to scale operations for
+large enterprise customers
+Country-specific software certification requirements
+Challenges with effectively managing a large distribution
+network of third-party companies
+acquisitions, or business practices
+Increased price competition and demand for cheaper
+products and services
+Any one or more of these developments could reduce our ability
+to sell and deliver our software and services which could have an
+adverse effect on our business, financial position, profit, and
+cash flows.
+SAP has established measures and conducted scenario
+analyses to address and mitigate the described risks and
+adverse effects to the extent possible. We offer our customers
+standard software and product packages that are fast and easy
+to install, as well as financially attractive financing, software
+licensing, and subscription models. Our ongoing shift to a higher
+share of cloud subscriptions and software support revenue
+streams will lead to more predictable streams over time
+providing increased stability against financial volatility.
+Furthermore, we continue to apply cost discipline internally and
+have a conservative financial planning policy. Additionally, SAP
+is continuously reshaping its organizational structure and
+processes to increase efficiency.
+We estimate the probability of occurrence of this risk to be likely.
+Therefore, we cannot completely exclude the possibility that it
+will have a business-critical impact on our business, financial
+position, profit, and cash flows. This could exacerbate the other
+risks we describe in this report or cause a negative deviation
+from our revenue and operating profit target. We classify this
+risk as a high risk.
+Our international business activities and processes expose us
+to numerous, sometimes even conflicting laws and
+regulations, policies, standards or other requirements, and to
+risks that could harm our business, financial position, profit,
+and cash flows.
+We are a global company and currently market our products and
+services in more than 180 countries and territories in the
+Americas (Latin America and North America); Asia Pacific Japan
+(APJ); and Europe, Middle East, and Africa (EMEA) regions. Our
+business in these countries is subject to numerous risks
+inherent in international business operations. Among others,
+these risks include:
+-
+-
+Market disruption from aggressive competitive behavior,
+Data protection and privacy regulations regarding access by
+government authorities to customer, partner, or employee
+data
+Data residency requirements (the requirement to store
+certain data only in and, in some cases, also to access such
+data only from within a certain jurisdiction)
+Conflict and overlap among tax regimes
+Possible tax constraints impeding business operations in
+certain countries
+Expenses associated with the localization of our products and
+compliance with local regulatory requirements
+Discriminatory or conflicting fiscal policies
+- Operational difficulties in countries with a high corruption
+perception index
+Protectionist trade policies, import and export regulations,
+and trade sanctions and embargoes
+Works councils, labor unions, and immigration laws in
+different countries
+Difficulties enforcing intellectual property and contractual
+rights in certain jurisdictions
+-
+Decreased software sales that could have an adverse effect
+on related maintenance and services revenue
+The timing, size, and length of customers' services projects
+Deployment models that require the recognition of revenue
+over an extended period of time
+Adoption of, and conversion to, new business models leading
+to changed or delayed payment terms
+We use a "pipeline" system for forecasting sales and trends in
+our business. Pipeline analysis informs and guides our business
+planning, budgeting, and forecasting, but pipeline estimates do
+not necessarily consistently correlate to revenue in a particular
+quarter, potentially due to one or more of the reasons outlined
+above. The reliability of our plans, budgets, and forecasts might
+therefore be compromised. Because our operating expenses are
+Other general economic, social, environmental, and market
+conditions, such as a global economic crisis and difficulties
+for countries with large debt
+Since many of our customers make their IT purchasing
+decisions near the end of calendar quarters, and with a
+significant percentage of those decisions being made during our
+fourth quarter, even a small delay in purchasing decisions for
+our on-premise software could have an adverse effect on our
+revenue results for a given year. Our dependence on large
+transactions has decreased in recent years with a trend towards
+an increased number of transactions while the average deal size
+is more or less constant.
+However, the loss or delay of one or a few large opportunities
+could have an adverse effect on our business, financial position,
+profit, and cash flows.
+Seasonality of a customers' technology purchases
+Limited visibility during the ongoing integration of acquired
+companies into their ability to accurately predict their sales
+pipelines and the likelihood that the projected pipeline will
+convert favorably into sales
+Changes in customer budgets
+-
+The introduction of licensing and deployment models such as
+cloud subscription models
+The large size, complexity, and extended timing of individual
+customer transactions
+The relatively long sales cycles for our products
+-
+-
+-
+-
+-
+based upon anticipated revenue levels and a high percentage of
+our expenses are relatively fixed in the near term, any shortfall in
+anticipated revenue or delay in revenue recognition could result
+in significant variations in our operating results from quarter to
+quarter or year to year. Continued deterioration in global
+economic conditions would make it increasingly difficult for us
+to accurately forecast demand for our products and services,
+and could cause our revenue, operating results, and cash flows
+to fall short of our expectations and public forecasts. This could
+have an adverse effect on our stock price. To the extent any
+future expenditure fails to generate the anticipated increase in
+revenue, our quarterly or annual operating results might be
+subject to an adverse effect and might vary significantly
+compared to preceding or subsequent periods. As we recognize
+cloud subscriptions and support revenue over the respective
+service period that typically ranges from one-to-three years with
+some up to five years, the relevance and impact of sales
+fluctuations decrease along with the growing importance of
+these revenues.
+The timing of the introduction of new products and services
+or product and service enhancements by SAP or our
+competitors
+Although we estimate the probability of occurrence of this risk
+to be unlikely, we cannot completely exclude the possibility that
+this risk could have a moderate impact on our business, financial
+position, profit, and cash flows, or cause a negative deviation
+from our revenue and operating profit target. We classify this
+risk as a low risk.
+Although we estimate the probability of occurrence of the risk to
+be unlikely, we cannot completely exclude the possibility of a
+moderate impact on our business, financial position, profit, and
+cash flows, or a negative deviation from our revenue and
+operating profit target. We classify this risk as a low risk.
+Macroeconomic factors such as an economic downturn could
+have an adverse effect on our future liquidity. We use a globally
+centralized financial management to control financial risk, such
+as liquidity, exchange rate, interest rate, counterparty, and
+equity price risks. The primary aim is to maintain liquidity in the
+SAP Group at a level that is adequate to meet our obligations at
+any time. Our total Group liquidity is supported by our strong
+operating cash flows, of which a large part is recurring, and by
+credit facilities from which we can draw if necessary. However,
+adverse macroeconomic factors could increase the default risk
+associated with the investment of our total Group liquidity
+including possible liquidity shortages limiting SAP's ability to
+repay financial debt. This could have an impact on the value of
+our financial assets, which could have an adverse effect on our
+business, financial position, profit, and cash flows.
+A core element of our business is the successful implementation
+of software and service solutions to enable our customers to
+master complexity and help our customers' business run at their
+best. The implementation of SAP software and cloud-based
+service deliveries is led by SAP, by partners, by customers, or by
+a combination thereof. Depending on various factors, such as
+the complexity of solutions, the customer's implementation,
+integration and migration needs, or the resources required, SAP
+Implementation of SAP software and cloud-based service
+deliveries often involves a significant commitment of
+resources by our customers and is subject to a number of
+significant risks over which we often have no control.
+Project Risks
+For more information about risks arising from financial
+instruments, including our currency and interest rate risks and
+our related hedging activity, see the Notes to the Consolidated
+Financial Statements section, Notes (24) to (25).
+Nevertheless, financial risks could negatively impact our
+business, financial position, profit, and cash flows. We believe
+the likelihood of such a risk with a material adverse effect on our
+financial results is remote and if the risk were to occur, its
+impact on our business, financial position, profit, and cash flows
+could be major. We classify this risk as a low risk
+We continuously monitor our exposure to all of these financial
+risks and have implemented adequate procedures to mitigate
+them. For example, we pursue a group-wide foreign exchange
+risk management strategy to hedge balance sheet items and
+expected cash flows in foreign currencies by using derivative
+financial instruments as appropriate. We have a balanced
+maturity profile and mixture of fixed and floating interest rate
+arrangements in place to hedge against interest rate risk and
+use derivative instruments to reduce the impact of our share-
+based compensation plans on our income statement and cash
+flow.
+Because we are operating throughout the world, a significant
+portion of our business is conducted in foreign currencies. In
+2016, approximately 73% of our revenue was attributable to
+operations in foreign currencies and therefore gets translated
+into our reporting currency, the euro. Consequently, period-
+over-period fluctuations can significantly impact our financial
+results. In general, an appreciation of the euro has an adverse
+effect while a depreciation has a positive effect. In addition to
+exchange rate risks, we are exposed to interest rate and share
+price fluctuations due to variable interest bearing assets and
+liabilities and share-based compensation plans for our
+employees and executives.
+As a globally operating company, SAP is subject to various
+financial risks, which could negatively impact our business,
+financial position, profit, and cash flows.
+Although we estimate the probability of occurrence of the risk to
+be unlikely, we cannot completely exclude the possibility of a
+major impact. We classify this risk as a medium risk.
+External factors could impact our liquidity and increase the
+default risk associated with, and the valuation of, our
+financial assets.
+We regularly monitor our compliance with applicable financial
+reporting standards and review new pronouncements and drafts
+thereof that are relevant to us. As a result of new standards,
+changes to existing standards (including the new IFRS 15 on
+revenue from contracts with customers that we will need to
+adopt in 2018) and changes in their interpretation, we might be
+required to change our accounting policies, particularly
+concerning revenue recognition, to alter our operational policies
+so that they reflect new or amended financial reporting
+standards, or to restate our published financial statements.
+Such changes might have an adverse effect on our reputation,
+business, financial position, and profit, or cause an adverse
+deviation from our revenue and operating profit target.
+-
+We have a number of control procedures in place to make sure
+that our estimates and judgments are adequate. For example,
+we apply two-person verification to significant estimating.
+To comply with IFRS, management is required to make
+numerous judgments, estimates, and assumptions that affect
+the reported financial figures. The facts and circumstances, as
+well as assumptions on which management bases these
+estimates and judgments and management's judgment
+regarding the facts and circumstances, might change over time
+and this could result in significant changes in the estimates and
+judgments and, consequently, in the reported financials. There
+is a risk that such changes could have an adverse effect on our
+business, financial position, profit and cash flows.
+Management use of estimates could negatively affect our
+business, financial position, profit, and cash flows.
+Although we estimate the probability of occurrence of this risk
+to be remote, there can be no assurance that the prescribed
+measures will be successful or that uncertainty in global
+economic conditions could not have a major impact on our
+business, financial position, profit, cash flows, or operating profit
+target. We classify this decreased risk as a low risk.
+diversification with a variety of counterparties, predominantly
+short-term investments, and standard investment instruments.
+121
+Combined Management Report | Risk Management and Risks
+SAP's investment policy with regards to total Group liquidity is
+set out in our internal treasury guideline, which is a collection of
+uniform rules that apply globally to all companies in the SAP
+Group. Amongst others, it requires that we invest, with limited
+exceptions, only in assets and funds rated BBB flat or better.
+The weighted average rating of the investments of our total
+Group liquidity is in the area of A-. We continue to pursue a
+policy of cautious investment characterized by wide portfolio
+Current and future accounting pronouncements and other
+financial reporting standards, especially but not only
+concerning revenue recognition, might negatively impact our
+financial results.
+Our revenue and operating results can vary and have varied in
+the past, sometimes substantially, from quarter to quarter. Our
+revenue in general, and our software revenue in particular, is
+difficult to forecast for a number of reasons, including:
+We might not be able to obtain adequate title to, or licenses
+in, or to enforce, intellectual property.
+Financial Risks
+strategic transformation into cloud business operations, we
+classify this risk as a medium risk.
+129
+Combined Management Report | Risk Management and Risks
+Although we estimate the probability of occurrence of this risk
+to be unlikely, we cannot completely exclude the possibility that
+any misuse, theft, or breach of security could have a major
+impact on our business, financial position, profit, and cash flows
+as well as on our revenue and operating profit target. Due to our
+To minimize these risks, we have implemented several technical
+and organizational measures designed to safeguard our
+information, IT and facility infrastructure, and other assets.
+These measures include, for example, physical access control
+systems at facilities, multilevel access controls, closed-circuit
+television surveillance, security personnel in all critical areas,
+and recurring social engineering tests for SAP premises and
+data centers. Access to information and information systems is
+controlled using authorization concepts. Managers and
+employees are regularly sensitized to the issues and given
+mandatory security and compliance training. We keep these
+measures under continuous review to mitigate current threats.
+SAP is highly dependent on the exchange of a wide range of
+information across our global operations and on the availability
+of our infrastructure. With regards to our physical environment,
+we face several key security risks such as industrial and/or
+economic espionage, serious and organized crime, and other
+illegal activities, as well as violent extremism and terrorism. We
+might be endangered by threats including, but not limited to,
+social engineering, misuse, or theft of information or assets, or
+damage to assets by trespassers in our facilities or by people
+who have gained unauthorized physical access to our facilities,
+systems, or information. These could have an adverse effect on
+our business, financial profile, profit, and cash flows.
+We might not be able to protect our critical information and
+assets or to safeguard our business operations against
+disruption.
+Although we still consider the occurrence of this risk to be
+unlikely, we cannot completely exclude the possibility that this
+risk could have a business-critical impact on our business,
+financial position, profit, cash flows, and reputation as well as
+revenue and operating profit target. We classify this risk as a
+medium risk.
+To address the increasing cybersecurity threats, we are
+continuously adapting and modifying our security procedures.
+We have multiple security measures in place, such as technical
+IT security measures, identity and access management, and
+mandatory security and compliance training. In addition, our
+security governance model clearly defines security management
+accountabilities for all security areas regarding product security
+and corporate security, which enables us to respond quickly to
+identified cybersecurity risks. We have a global security function
+as well as an independent security audit department within the
+Corporate Audit organization in place appropriately addressing
+potential security threats.
+Our insurance coverage might not be sufficient and we might
+be subject to uninsured losses.
+The key cybersecurity risks currently applicable to us include
+state-driven economic espionage as well as competitor-driven
+industrial espionage, and criminal activities including, but not
+limited to, cyberattacks and "mega breaches" against cloud
+services and hosted on-premise software. This might result in,
+for example, disclosure of confidential information and
+intellectual property, defective products, production downtimes,
+supply shortages, and compromised data (including personal
+data). A failure of our cybersecurity measures could impact our
+compliance with legal demands (for example, Sarbanes-Oxley
+Act, Payment Card Industry Data Security Standard, data
+privacy) and expose our business operations as well as service
+delivery to the described risks, for example, virtual attack,
+disruption, damage, and/or unauthorized access. Additionally,
+we could be subject to recovery costs, for example, as well as
+significant contractual and legal claims by customers, partners,
+authorities, and third-party service providers for damages
+against us, which could have an adverse effect on our
+reputation, business, financial position, profit, and cash flows.
+We estimate the probability of this risk occurring as likely, and
+that it could have a business-critical impact on our reputation,
+business, financial position, profit, cash flows, and revenue and
+operating profit target. We classify this risk as a high risk.
+We are party to certain patent cross-license agreements with
+third parties.
+We might be dependent in the aggregate on technology that we
+license from third parties that is embedded in our products or
+that we resell to our customers. We have licensed and will
+continue to license numerous third-party software products that
+we incorporate into and/or distribute with our existing products.
+We endeavor to protect ourselves in the respective agreements
+by obtaining certain rights in case such agreements are
+terminated.
+122
+We rely on a combination of the protections provided by
+applicable statutory and common law rights, including trade
+secret, copyright, patent, and trademark laws, license and non-
+disclosure agreements, and technical measures to establish and
+protect our proprietary rights in our products. We have
+established various internal programs, such as internal policies,
+processes, and monitoring, to assess and manage the risks
+associated with standards organizations, open source, and
+third-party intellectual property.
+our reputation, business, financial position, profit, and cash
+flows.
+Combined Management Report | Risk Management and Risks
+128
+Protecting and defending our intellectual property is crucial to
+our success. We use a variety of means to identify and monitor
+potential risks and to protect our intellectual property. These
+include applying for patents, registering trademarks and other
+marks and copyrights, implementing measures to stop
+copyright and trademark infringement, entering into licensing,
+confidentiality, and non-disclosure agreements, and deploying
+protection technology. Despite our efforts, we might not be able
+to prevent third parties from obtaining, using, or selling without
+authorization what we regard as our proprietary technology and
+information. All of these measures afford only limited protection,
+and our proprietary rights could be challenged, invalidated, held
+unenforceable, or otherwise affected. Some intellectual property
+might be vulnerable to disclosure or misappropriation by
+employees, partners, or other third parties. Third parties might
+develop technologies that are substantially equivalent or
+superior to our technology. Finally, third parties might reverse-
+engineer or otherwise obtain and use technology and
+information that we regard as proprietary. Accordingly, we
+might not be able to protect our proprietary rights against
+unauthorized third-party copying or utilization, which could have
+an adverse effect on our competitive and financial positions, and
+result in reduced sales. Any legal action we bring to enforce our
+proprietary rights could also involve enforcement against a
+partner or other third party, which might have an adverse effect
+on our ability, and our customers' ability, to use that partner's or
+other third parties' products. In addition, the laws and courts of
+certain countries might not offer effective means to enforce our
+intellectual property rights. This could have an adverse effect on
+SAP's business strategy focuses on certain business models
+that are highly dependent on a working cyberspace. A
+cybersecurity breach could have an adverse effect on our
+customers, our reputation, and our business.
+Our sales are subject to quarterly fluctuations and our sales
+forecasts might not be accurate.
+We maintain insurance coverage to protect us against a broad
+range of risks, at levels we believe are appropriate and
+consistent with current industry practice. Our objective is to
+exclude or minimize risk of financial loss at reasonable cost.
+However, we might incur losses that might be beyond the limits,
+or outside the scope, of coverage of our insurance and that
+might limit or prevent indemnification under our insurance
+policies. In addition, we might not be able to maintain adequate
+insurance coverage on commercially reasonable terms in the
+future. Further, certain categories of risks are currently not
+insurable at reasonable cost, which could have an adverse effect
+on our business, financial position, profit, and cash flows. Finally,
+there can be no assurance of the financial ability of the
+insurance companies to meet their claim payment obligations.
+However, we cannot exclude the possibility of a business-critical
+impact on our business, financial position, profit, cash flows, and
+operating profit target if the risk were to occur. We classify this
+risk as a medium risk.
+Legal and regulatory constraints (such as contract
+obligations, privacy frameworks, and agreements)
+Difficulties in implementing, restoring, or maintaining internal
+controls, procedures, and policies
+Practices or policies of the acquired company that might be
+incompatible with our compliance requirements
+An adverse effect on relationships with existing customers,
+partners, or third-party providers of technology or products
+Difficulties in integrating the acquired company's accounting,
+HR, and other administrative systems and coordination of the
+acquired company's research and development (R&D), sales,
+and marketing functions
+Debt incurrence or significant cash expenditures
+Constraints in enforcing acquired companies' compliance
+with existing SAP security standards in a timely manner
+Difficulties in customer implementation projects combining
+technologies and solutions from both SAP and the acquired
+company
+In addition, acquired businesses might not perform as
+anticipated, resulting in charges for the impairment of goodwill
+and other intangible assets on our statements of financial
+position. Such charges might have an adverse effect on our
+business, financial position, profit, and cash flows. We have
+entered into, and expect to continue to enter into, alliance
+arrangements for a variety of purposes, including the
+development of new products and services. There can be no
+assurance that any such products or services will be
+successfully developed or that we will not incur significant
+unanticipated liabilities in connection with such arrangements.
+We might not be successful in overcoming these risks and we
+might therefore not benefit as anticipated from acquisitions or
+alliances.
+We counter these acquisition-related risks with many different
+methodological and organizational measures. These include
+technical, operational, financial, and legal due diligence on the
+company or assets to be acquired and a holistic evaluation of
+material transaction and integration risks. The methods we use
+depend on the integration scenario. Our integration planning is
+detailed and standardized, and carried out by a dedicated
+integration team. We therefore believe we have minimized this
+risk.
+Although we estimate this risk to be unlikely, we cannot
+completely exclude the possibility that this risk could have a
+business-critical impact on our business, financial position,
+profit, cash flows, and revenue and operating profit target. We
+classify this risk as a medium risk.
+In view of the scope of our insurance coverage and our selection
+of insurers, and because we keep our insurance programs under
+constant review, we believe that the likelihood of this risk
+materializing is remote.
+Combined Management Report | Risk Management and Risks
+In our view, considering their likelihood of occurrence and
+impact level, the risks described in our aggregated Risk Report
+do not individually or cumulatively threaten our ability to
+continue as a going concern. Management remains confident
+that the Group's earnings strength forms a solid basis for our
+future business development and provides the necessary
+resource to pursue the opportunities available to the Group.
+Because of our strong position in the market, our technological
+leadership, our highly motivated employees, and our structured
+processes for early risk identification, we are confident that we
+can continue to successfully counter the challenges arising from
+the risks in our risk profile in 2017.
+In 2016, we recognized only minor changes in the percentages
+of all reported risks categorized as "high" or "medium" in our
+risk-level matrix. The number of risks categorized as "high"
+accounted for 11% (2015: 11%) of all reported risks, while the
+risks categorized as "medium" accounted for 67% (2015: 68%)
+of all risks reported in the Risk Factors section.
+SAP consolidates and aggregates all risks reported by the
+different business units and functions following our risk
+management policy, monitored by a Group-wide risk
+management governance function.
+Consolidated Risk Profile
+business, financial position, profit, cash flows, and operating
+profit target would be minor. We classify this risk as a low risk.
+We believe that the likelihood of this risk materializing is remote
+and that if the risk were to occur, its potential impact on our
+To address this risk, Sapphire Ventures diversifies its portfolio
+and manages our investments actively. In addition, our venture
+capital activities have a limited scope.
+Through Sapphire Ventures (formerly SAP Ventures), our
+consolidated venture investment funds, we plan to continue
+investing in new and promising technology businesses. Many
+such investments initially generate net losses and require
+additional expenditures from their investors. Changes to
+planned business operations have, in the past affected, and
+might in the future affect, the performance of companies in
+which Sapphire Ventures holds investments, and that could
+have an adverse effect on the value of our investments in
+Sapphire Ventures, which could have an adverse effect on our
+business, financial position, profit, and cash flows. Furthermore,
+tax deductibility of capital losses and impairment in connection
+with equity securities are often restricted and could therefore
+have an adverse effect on our effective tax rate.
+We could incur significant losses in connection with venture
+capital investments.
+130
+Combined Management Report | Risk Management and Risks
+and integration of acquired businesses, products, or
+technologies demands time, focus, and resources of
+management and of the workforce. Acquisitions of companies,
+businesses, and technology expose us to unpredictable
+operational difficulties, expenditures, and risks. These risks
+include, among others:
+Other aspects that could potentially affect our projects and
+deliveries, especially during the transition to the Cloud are
+security breaches or unauthorized access to confidential data,
+operational data center and infrastructure disruptions as well as
+local legislation with regards to data privacy.
+We consider the probability of this risk materializing to be likely,
+and that any claims concerning intellectual property rights of
+third parties, open source requirements, or certain standards
+could have a business-critical impact on our business, financial
+position, profit, cash flows and reputation, as well as on the
+achievement of our revenue and operating profit target, and
+could also exacerbate the other risks we describe in this report.
+We classify this risk as a high risk.
+reporting of potential risks associated with third-party
+intellectual property.
+Our Legal Compliance & Integrity Office sets and manages
+internal policies related to our Code of Business Conduct
+including the handling of third-party intellectual property.
+Corporate Audit monitors compliance with these policies
+through various investigations. Our Global GRC organization
+works closely with both the Legal Compliance & Integrity Office
+and Corporate Audit and is responsible for the management and
+SAP continues to participate in standards organizations and
+increases the use of such standards in its products.
+Participation in standards organizations might require the
+licensing of SAP's intellectual property to contributors to the
+standard and to all standards implementers, including
+competitors, on a non-discriminatory basis in accordance with
+licensing terms defined by standards organizations. Within the
+software-related standards field, there is a trend toward
+expanding the scope of licensing obligations and narrowing an
+intellectual property owner's right to revoke a license if sued by
+a licensee. In certain situations, limitations on SAP's rights to
+revoke a license could reduce SAP's ability to assert a patent
+infringement claim against a third-party. Assertion of patents
+inadvertently licensed through standards could expose SAP to
+third-party claims.
+The software industry is making increasing use of open source
+software in its development work on solutions. We also integrate
+certain open source software components from third parties
+into our software. Open source licenses might require that the
+software code in those components or the software into which
+they are integrated be freely accessible under open source
+terms. Third-party claims might require us to make freely
+accessible under open source terms one of our products or
+third-party (not SAP) software upon which we depend.
+Software includes many components or modules that provide
+different features and perform different functions. Some of
+these features or functions might be subject to third-party
+intellectual property rights. The rights of another party could
+encompass technical aspects that are similar to one or more
+technologies in one or more of our products. Intellectual
+property rights of third parties could preclude us from using
+certain technologies in our products or require us to enter into
+royalty and licensing arrangements on unfavorable or expensive
+terms.
+technologies in our products, be time-consuming, result in
+costly litigation, and require us to pay damages to third parties,
+stop selling or reconfigure our products and, under certain
+circumstances, pay fines and indemnify our customers, which
+could have an adverse effect on our business, financial profile,
+profit, cash flows, and reputation. They could also require us to
+enter into royalty and licensing arrangements on terms that are
+not favorable to us, cause product shipment delays, subject our
+products to injunctions, require a complete or partial redesign of
+products, result in delays to our customers' investment
+decisions, and damage our reputation.
+Combined Management Report | Risk Management and Risks
+126
+We are named as a defendant in various legal proceedings for
+alleged intellectual property infringements. For more
+information and a more detailed report relating to certain of
+these legal proceedings, see the Notes to the Consolidated
+Financial Statements, Note (23).
+Any claims, with or without merit, and negotiations or litigation
+relating to such claims, could preclude us from utilizing certain
+Third parties have claimed, and might claim in the future,
+that we infringe their intellectual property rights, which could
+lead to damages being awarded against us and limit our
+ability to use certain technologies in the future.
+Operational Risks
+Although we estimate the probability of occurrence of this risk
+to be unlikely, we cannot completely exclude the possibility that
+any disruption of our cloud operations could result in a business-
+critical impact on our reputation, business, financial position,
+profit, cash flows, and revenue and operating profit target. We
+classify this risk as a medium risk.
+Our mitigation measures have been designed and implemented
+to minimize such adverse effects. We continuously invest in
+protecting the integrity and security of our products and
+services as well as internal and external data that is managed
+within our data centers. We are consolidating and harmonizing
+our data centers and our data protection measures, including
+implementing security information and event management
+solutions as well as network access control enforcement and we
+monitor and invest to continuously improve our disaster
+recovery and business continuity capabilities, to run a
+homogeneous landscape that supports the complex
+infrastructure, application, and security requirements so that we
+can deliver the required service level for cloud services.
+In addition, our insurance coverage might not cover claims
+against us for loss or security breach of data or other indirect or
+consequential damages. Moreover, defending a suit, regardless
+of its merit, could be costly and time-consuming. In addition to
+potential liability, if we experience interruptions in the availability
+of our cloud applications, our reputation could be harmed and
+we could lose customers.
+if these security measures are breached as a result of third-
+party action, employee error or malfeasance, or otherwise, and
+if, as a result, someone obtains unauthorized access to our
+customers' data, which might include personally identifiable
+information regarding users, our reputation could be damaged,
+our business might suffer, local data protection and privacy laws
+or regulations might be breached, and we could incur significant
+liability.
+We have administrative, technical, and physical security
+measures in place as well as contracts that require third-party
+data centers to have appropriate security and data protection
+and privacy measures in place. In this context, customers might
+demand to use only specific and/or local data centers. However,
+The costs incurred in correcting any defects or errors might be
+substantial and could have an adverse effect on our reputation,
+business, financial position, profit, and cash flows. The
+availability of our cloud applications could be interrupted by a
+number of factors, resulting in customers' inability to access
+their cloud applications or receive their service level, system
+outages or downtimes, failure of our network due to human or
+other errors, security breaches, or variability in user traffic for
+our cloud applications. Because of the large amount of data that
+we collect and manage, hardware failures, defects in our
+software, or errors in our systems could result in data loss or
+corruption, or cause the information that we collect to be
+incomplete or contain inaccuracies that our customers regard
+as significant. Additionally, any loss of the right to use hardware
+purchased or leased from third parties could result in delays in
+our ability to provide our cloud applications until equivalent
+technology is either developed by us or, if available, identified.
+Furthermore, our cooperation with partners in the area of cloud
+includes the co-location of data centers that might expose SAP
+to additional risks in the area of security and data protection, as
+well as the potential for breached service-level agreements by
+partners.
+Loss of customer satisfaction and brand reputation
+We believe that we will continuously be subject to intellectual
+property infringement claims as our solution portfolio grows; as
+we acquire companies with increased use of third-party code
+including open source code; as we expand into new industries
+with our offerings, resulting in greater overlap in the functional
+scope of offerings; and as non-practicing entities that do not
+design, manufacture, or distribute products increasingly assert
+intellectual property infringement claims.
+Diversion of development and customer service resources
+Breach of data protection and privacy laws and regulations
+Customers considering competitive cloud offerings
+Claims and lawsuits against us could have an adverse effect
+on our business, financial position, profit, cash flows, and
+reputation.
+The outcome of litigation and other claims or lawsuits is
+intrinsically uncertain. Management's view of the litigation might
+also change in the future. Actual outcomes of litigation and other
+claims or lawsuits could differ from the assessments made by
+management in prior periods, which are the basis for our
+accounting for these litigations and claims under IFRS.
+-
+-
+-
+-
+-
+-
+-
+-
+Selection of the wrong integration model for the acquired
+company and/or technology
+Claims and lawsuits are brought against us, including claims and
+lawsuits involving businesses we have acquired. Adverse
+outcomes to some or all of the claims and lawsuits pending
+against us might result in the award of significant damages or
+injunctive relief against us that could hinder our ability to
+conduct our business and could have an adverse effect on our
+reputation, business, financial position, profit, and cash flows.
+Failure to properly evaluate the acquired business and its
+different business and licensing models
+Failure to integrate the acquired company's operations
+across SAP's different cultures, languages, and local
+protocols, all within the constraints of applicable local laws
+Failure to meet the needs of the acquired company's
+customers and partners in the combined company
+The diversion of management's time and attention from daily
+operations
+Loss of key personnel of the acquired business
+Material unknown liabilities and contingent liabilities of
+acquired companies, including legal, tax, accounting,
+intellectual property, or other significant liabilities that might
+not be detected through the acquisition due diligence
+process
+Combined Management Report | Risk Management and Risks
+To expand our business, we acquire businesses, products, and
+technologies, and we expect to continue to make acquisitions in
+the future. Over time certain of these acquisitions have
+increased in size and in strategic importance for SAP,
+Management negotiation of potential acquisitions and alliances
+We might not acquire and integrate companies effectively or
+successfully and our strategic alliances might not be
+successful.
+For more information and a more detailed report relating to
+certain of these legal proceedings, see the Notes to the
+Consolidated Financial Statements, Note (23).
+We consider the probability of occurrence of this risk to be likely,
+and cannot exclude its business-critical impact on our
+reputation, business, financial position, profit, cash flows, and
+revenue and operating profit target if it were to materialize. We
+classify this risk as a high risk.
+Incorrect assumptions during due diligence process leading
+to negative contribution with regards to an acquired company
+Failure to successfully integrate acquired technologies or
+solutions into SAP's solution portfolio and strategy in a timely
+and profitable manner
+faces a number of different risks. For example, functional
+requirement changes, delays in timeline, or deviation from
+recommended best practices might occur during the course of a
+project. These scenarios have a direct impact on the project
+resource model and on securing adequate internal personnel or
+consultants in a timely manner and could therefore prove
+challenging.
+Sales credits or refunds to our customers or partners
+Loss of customers and/or partners
+-
+Changes in our rights to use software, cloud services, and
+technologies we license from third parties that are an integral
+part of SAP's products and services could slow down time to
+market and influence our license pricing and therefore the
+competitiveness with other software vendors. Furthermore, it
+could diminish our software's or cloud functional capabilities
+and therefore could jeopardize the stability of our solution
+portfolio offering.
+With regards to the increased volume of open source software
+components used in our software products and services as well
+as in the products and services of our acquired companies, we
+see a probability of this risk to materialize but rate the
+probability as unlikely. We cannot completely exclude the
+possibility that this risk, if it were to occur, could have a
+business-critical impact on our reputation, business, financial
+position, profit, and cash flows, or cause a negative deviation
+from our revenue and operating profit target. We classify this
+risk as a medium risk.
+We counter these risks using a broad range of techniques,
+including project management, project monitoring, product
+standards and governance, and rigid and regular quality
+assurance measures certified to ISO 9001:2008, applicable to
+the Applications, Technology & Services segment. Additionally,
+we are introducing a new and improved risk-based secure
+software development lifecycle with all the trainings, tools, and
+processes in place to develop secure software. This spans from
+specific security training curriculums for our developers, threat
+modelling at the beginning of every development project to
+identify potential risks early on to centrally provided security
+tools (for example, static and dynamic analysis tools), a holistic
+security testing strategy to validate the state of security for
+every product before market introduction. In addition, direct
+customer feedback is considered in the market release decision
+process. Delivering high-quality software products is a priority
+and part of our core business. Our strong investment and
+permanent efforts lead to a generally high level of quality of our
+products, which is made transparent in the defined quality
+perception and support index and confirmed by our constantly
+high customer satisfaction ratings as measured by customer
+quality perception reporting.
+Although our contracts generally contain provisions designed to
+limit our exposure due to actual or alleged defects in SAP
+software products or in our provision of services, these
+provisions might not cover every eventuality or be effective
+under the applicable law. Regardless of its merits, any claim
+could entail substantial expense and require the devotion of
+significant time and attention by key management personnel.
+Publicity surrounding such claims could affect our reputation
+and the demand for our software.
+The use of existing SAP software products by customers in
+business-critical solutions and processes and the relative
+complexity and technical interdependency of our software
+products and services create a risk that customers or third
+parties might pursue warranty, performance, or other claims
+against us for actual or alleged defects in SAP software
+products, in our provision of services, or in our application
+hosting services. We have in the past been, and might in the
+future be, subject to warranty, performance, or other similar
+claims.
+In addition, new products and cloud offerings, including third-
+party technologies we have licensed and open source software
+components we use in those products, could contain
+undetected defects or they are detected, or not be mature
+enough from the customer's point of view for business-critical
+solutions after shipment in spite of all due diligence SAP puts
+into quality and security. The detection and correction of any
+defects especially after delivery could be expensive and time-
+consuming and in some cases we might not be able to meet the
+expectations of customers regarding time and quality in the
+defect resolution process. In some circumstances, we might not
+be in a position to rectify such defects or entirely meet the
+expectations of customers, specifically as we are expanding our
+product portfolio into additional markets. As a result, we might
+have to fix defects in our software after shipment (so called
+security response) or in some cases even face customer claims
+for cash refunds, damages, replacement software, or other
+concessions. The risk of defects and their adverse
+consequences could increase as we seek to introduce a variety
+of new software products and product enhancements at a
+higher innovation rate. This is especially relevant for cloud
+products as delivery cycles are even shorter (up to daily
+deliveries) and our complete cloud product customer base could
+receive undetected defects simultaneously. Furthermore, for
+products that use third-party (not SAP) cloud services, we might
+not always be able to detect defects in advance. Significant
+undetected defects or delays in introducing new products or
+product enhancements could affect market acceptance of SAP
+software products and could have an adverse effect on our
+reputation, business, financial position, profit, and cash flows.
+quickly and successfully as expected. Therefore, market
+launches, entering new markets, or the introduction of new
+innovations could be delayed or not be successful.
+123
+Combined Management Report | Risk Management and Risks
+The numerous third-party solutions we have licensed and
+certain open source software components we use have become
+an integral part of our product and service portfolio. We depend
+on those solutions for the functionality of our software and cloud
+services. Changes to, or the loss of, third-party licenses as well
+as open source licenses being construed could significantly
+increase the cost of these licenses and significantly reduce
+software or cloud functionality and/or usability or availability of
+SAP's software or cloud offerings. As a result, we might incur
+additional development or license costs to ensure the continued
+functionality of our products, experience delays in our ability to
+offer or have to stop offering our products for sale, which could
+have an adverse effect on our business, financial position, profit,
+Our development investment, including new product launches
+and enhancements, is subject to risks. For example, software
+products and services might not completely meet our high-
+quality standards, including security standards; might not fulfill
+market needs or customer expectations; or might not comply
+with local standards and requirements. Furthermore, this risk
+also exists with respect to acquired companies' technologies
+and products where we might not be able to manage these as
+We cannot completely exclude the possibility of a negative
+impact on our customers' and partners' or our own operations
+globally or in one or more countries or regions. We estimate the
+probability of occurrence of the risk of severe damages to
+customers and SAP to be unlikely. If such an occurrence
+happens, it could have a business-critical impact on our
+reputation, business, financial position, profit, and cash flows as
+well as on the achievement of our revenue and operating profit
+target. We classify this risk as a medium risk.
+SAP has a software security response process in place to rapidly
+react to detected vulnerabilities and provide fixes. We have also
+improved the roll-out procedures for security-relevant notes,
+patches, and service packs to ensure easy and fast consumption
+on the customer side. However, with regards to the Applications,
+Technology & Services segment, there is a risk that customers
+do not upgrade or patch their business systems on a timely
+basis according to SAP's recommendations.
+We have implemented a software security development lifecycle
+as a mandatory integral part of our software development
+process. For the Applications, Technology & Services segment
+we systematically align our software security development
+lifecycle to the recommendations of ISO/IEC 27034, applying
+methods to develop secure software in all development phases
+starting early in the design phase. This includes industry best
+practices such as security risk identification, threat modeling, a
+comprehensive security testing strategy, mandatory security
+training for all developers, and security validation of our
+products, patches, and services before shipment.
+Customer systems or systems operated by SAP itself to provide
+services could potentially be compromised by vulnerabilities if
+they are exploited by hackers. This could lead to theft,
+destruction, or abuse of data, or systems could be rendered
+unusable (for example, due to distributed denial of service
+attacks). The detection of security vulnerabilities in our
+software, our customers' systems, or SAP systems used in the
+provision of services, especially in case of exploitation, could
+prevent us from meeting our contractual obligations and
+subsequently might lead to customer claims and reputational
+damage, which might have an adverse effect on our business,
+financial position, profit, and cash flows.
+Undetected security vulnerabilities shipped and deployed
+within our products might cause damage to SAP and our
+customers, and partners.
+Product and Technology Risks
+We estimate the probability of this risk to be unlikely, but we
+cannot completely exclude the possibility that this risk could
+have a major negative impact on our reputation, business,
+financial position, profit, and cash flows, or cause a negative
+deviation from our revenue and operating profit target. We
+classify this risk as a medium risk.
+Our customers continue to follow project approaches to
+optimize their IT solutions in a non-disruptive manner. Our
+projects also include risk management processes that are
+integrated into SAP project management methods intended to
+safeguard implementations with coordinated risk and quality
+management programs. As part of our processes, we make
+adequate financial planning provisions for the remaining
+individual risks.
+As a result of these and other risks, SAP and/or some of our
+customers have incurred significant implementation costs in
+connection with the purchase and installation of SAP software
+products and solutions. Some customer implementations have
+taken longer than planned and failed to generate the profit
+originally expected. We cannot guarantee that we can reduce or
+eliminate protracted installation or significant third-party
+consulting costs, for example, that trained consultants will be
+readily available, that our costs will not exceed the fees agreed in
+fixed-price contracts, or that customers will be satisfied with the
+implementation of our software and solutions. Unsuccessful,
+lengthy, or costly customer implementation and integration
+projects could result in claims from customers, harm SAP's
+reputation, and could have an adverse effect on our business,
+financial position, profit, and cash flows. Additionally, potentially
+new contracting models based on subscription models for
+services, support, and application management might lead to
+challenges from a financial position perspective including profit
+and cash flow.
+Undetected defects in the introduction of new products,
+product enhancements and cloud offerings could increase
+our costs, and reduce customer demand.
+Lost or delayed market acceptance and sales
+Breach of warranty or other contract breach or
+misrepresentation claims
+124
+and cash flows. This risk increases with each of our acquisitions
+of a company or a company's intellectual property assets that
+had been subject to third-party solution licensing, open source
+software and product standards less rigorous than our own.
+-
+-
+-
+-
+127
+Our cloud offerings and related infrastructure might be
+subject to a security attack, become unavailable, or fail to
+perform properly.
+We believe that the likelihood of this risk materializing is unlikely.
+If this risk were to occur, its impact on our reputation, business,
+financial position, profit, cash flows, and revenue and operating
+profit target would be business-critical. We classify this risk as a
+medium risk.
+comprehensive certification program designed to ensure that
+relevant third-party solutions are of consistently high quality.
+125
+Combined Management Report | Risk Management and Risks
+Combined Management Report | Risk Management and Risks
+We might not be successful in integrating our platforms and
+solutions, enabling the complete product and cloud service
+portfolio, harmonizing our user interface design and technology,
+integrating acquired technologies, or bringing new solutions
+based on the SAP HANA platform as well as SAP HANA Cloud
+Platform to the market as fast as expected, in particular,
+innovative applications such as SAP S/4HANA or new
+technologies such as Internet of Things or machine learning. In
+addition, we might not be able to compete or partner effectively
+in the area of cloud services and our new applications and
+services might not meet customer expectations possibly
+impacting customer satisfaction and retention. As a result, our
+partner organizations and customers might not adopt our
+technology platforms, applications, or cloud services quickly
+enough or they might consider other competitive solutions in
+the market. This could have an adverse effect on our reputation,
+business, financial position, profit, and cash flows.
+Our technology and/or product strategy might not be
+successful or our customers and partners might not adopt
+our technology platforms and other innovations as expected.
+We believe that the likelihood of this risk materializing is remote;
+however, we cannot exclude the business-critical impact this
+risk would have on our reputation, business, financial position,
+profit, and cash flows, or the potential negative deviation from
+our revenue and operating profit target if it were to materialize.
+We classify this risk as a medium risk.
+We will continue to align our organization, processes, products,
+delivery and consumption models, and services to changing
+markets and customer and partner demands. We develop new
+technology and new solutions such as the next-generation suite
+SAP S/4HANA or the next-generation business warehouse
+BW/4HANA. Furthermore, we explore future trends as well as
+the latest technologies e.g. through our network of innovation
+centers under the leadership of our chief innovation officer and
+adopt it if there is a clear business opportunity for SAP and if it
+provides value to our customers. To ensure that we remain
+competitive in the future, we conduct wide-ranging market and
+technology analyses and research projects, often in close
+cooperation with our customers and partners. We strive for
+strategic acquisitions with the potential to drive innovation and
+contribute to achieving our growth target.
+We might not be successful in bringing new business models,
+solutions, solution enhancements, and/or services to market
+before our competitors or at equally favorable conditions. We
+might also face increasing competition from open source
+software initiatives, or comparable models in which competitors
+might provide software and intellectual property free and/or
+under terms and conditions unfavorable for SAP. In addition, we
+might not be able to generate enough revenue to offset the
+significant research and development costs we incur to deliver
+technological innovations or to offset the required infrastructure
+costs to deliver our solutions and services as part of our new
+business models. Moreover, we might not anticipate and
+develop technological improvements or succeed in adapting our
+products, services, processes, and business models to
+technological change, changing regulatory requirements,
+emerging industry standards, and changing requirements of our
+customers and partners. Finally, we might not succeed in
+producing high-quality products, enhancements, and releases in
+a timely and cost-effective manner to compete with our
+competitors, which could have an adverse effect on our
+reputation, business, financial position, profit, and cash flows.
+Our future success depends upon our ability to keep pace with
+technological and process innovations and new business
+models, as well as our ability to develop new products and
+services, enhance and expand our existing products and
+services portfolio, and integrate products and services we obtain
+through acquisitions. To be successful, we are required to adapt
+our products and our go-to-market approach to a cloud-based
+delivery and consumption model to satisfy changing customer
+demand and to ensure an appropriate level of adoption,
+customer satisfaction and retention.
+If we are unable to keep up with rapid technological, process
+and service innovations, and new business models as well as
+changing market expectations, we might not be able to
+compete effectively.
+We believe that the probability of occurrence of this risk is likely
+and we cannot exclude the possibility of a major impact on our
+business, financial position, profit, and cash flows, or the
+possibility of a negative deviation from our revenue and
+operating profit target. We classify this risk as a medium risk.
+We strive to execute appropriate due diligence and contract
+management processes and to continuously monitor
+development projects through our product implementation
+lifecycle process and monitoring as part of our cloud
+deployment.
+We believe that we will be able to deliver additional business
+value with minimum disruption to our customers if we can
+successfully drive the integration and convergence of our
+technology platform offerings, SAP S/4HANA, as well as
+acquired technologies, enable our current product portfolio for
+SAP HANA, develop new solutions based on SAP HANA, and
+offer comprehensive cloud-based services, extendable with SAP
+HANA Cloud Platform. We enable and encourage partners to
+leverage SAP technology by providing guidance about business
+opportunities, architecture, and technology, as well as a
+The software used in our cloud portfolio is inherently complex
+and any defects in product functionality, data center operations,
+or system stability that cause interruptions in the availability of
+our application portfolio could result in the following:
+2.6
+Consolidated Financial Statements IFRS and Notes | Consolidated Financial Statements IFRS
+2.6
+2.9
+4.4
+Services
+9.4
+9.3
+Emerging Asia/Pacific
+12.4
+3.0
+1.4
+4.9
+Total IT
+(w/o Japan)
+Mature Asia/Pacific
+Software
+(w/o China)
+Total IT
+7.3
+2016p
+2015e
+%
+Combined Management Report | Expected Developments and Opportunities
+132
+9.7
+9.6
+7.5
+Services
+11.1
+10.8
+11.4
+Software
+5.9
+2.9
+6.9
+6.7
+6.9
+Services
+3.0
+Total IT
+North America
+5.4
+5.3
+5.2
+Services
+11.4
+11.4
+13.2
+Software
+5.2
+1.6
+7.3
+Total IT
+1.5
+2017p
+2.6
+8.2
+8.1
+7.4
+11.0
+Software
+2.1
+-2.6
+4.7
+Total IT
+Latin America
+5.3
+5.3
+6.0
+Services
+6.9
+7.2
+Software
+Sub-Saharan Africa
+Japan
+0.4
+770 to 1,020
+Share-based payment expenses
+5
+<20
+Revenue adjustments
+Actual
+Amounts
+for 2016
+785
+2017
+€ millions
+Non-IFRS Measures
+The following table shows the estimates of the items that
+represent the differences between our non-IFRS financial
+measures and our IFRS financial measures.
+We continuously strive for profit expansion in all our reportable
+segments leading to a SAP Group profit expansion as outlined in
+the given 2017 outlook. For SAP's managed-cloud offerings, we
+expect a positive gross margin result in 2017 according to
+outlined long-term 2020 planning.
+We expect that non-IFRS total revenue will continue to depend
+largely on the revenue from cloud and software. However, the
+revenue growth we expect from this is below the outlook
+provided for non-IFRS cloud subscriptions and support revenue.
+We expect the software license revenue in 2017 to decline by low
+to mid-single digit compared to 2016. However we will
+continuing to gain market share against our main on-premise
+license competitors.
+While our full-year 2017 business outlook is at constant
+currencies, actual currency reported figures are expected to
+continue to be impacted by currency exchange rate fluctuations.
+Estimated
+Amounts for
+Acquisition-related charges
+Restructuring
+620 to 650
+30 to 50
+and 2018 but will rather focus on organic growth, complemented
+by minor acquisitions. In 2017, we intend to spend up to €1.0
+billion for smaller acquisitions.
+SAP is not currently planning any significant acquisitions in 2017
+Our planned capital expenditures for 2017 and 2018, other than
+from business combinations, mainly comprise the construction
+activities described in the Assets (IFRS) section of this report.
+We expect investments from these activities of approximately
+€365 million in 2017 (an increase of 20% compared to the
+previous year), and approximately €250 million in 2018. These
+investments can be covered in full by operating cash flow.
+Investment Goals
+In the absence of large acquisitions, we expect our strong
+operating cash flow will generate excess cash in the next 6-12
+months. Based on the actual acquisition volume and liquidity
+development we would consider a potential share buyback in the
+second half of 2017.
+We intend to repay €1 billion Eurobonds when they mature in
+April 2017 as well as US$443 million U.S. private placements in
+October and November 2017.
+In 2017, we expect a positive development of our operating cash
+flow, which we anticipate will reach up to €5.0 billion.
+On December 31, 2016, we had a negative net liquidity. We
+believe that our liquid assets combined with our undrawn credit
+facilities are sufficient to meet our present operating financing
+needs also in 2017 and, together with expected cash flows from
+operations, will support debt repayments and our currently
+planned capital expenditure requirements over the near term
+and medium term.
+Goals for Liquidity and Finance
+The Company expects a full-year 2017 effective tax rate (IFRS)
+of 26.0% to 27.0% (2016: 25.3%) and an effective tax rate (non-
+IFRS) of 27.0% to 28.0% (2016: 26.8%).
+133
+Combined Management Report | Expected Developments and Opportunities
+We do not expect any Company-wide restructuring programs in
+2017.
+28
+680
+We expect our headcount to increase at a slightly lower pace
+than in 2016.
+The Company expects full year 2017 non-IFRS total revenue
+in a range of €23.2 billion to €23.6 billion at constant
+currencies (2016: €22.07 billion). This is above the previous
+2017 ambition which was raised at the beginning of 2016.
+The Company expects full-year 2017 non-IFRS operating
+profit to be in a range of €6.8 billion - €7.0 billion at constant
+currencies (2016: €6.63 billion). This is above the previous
+2017 ambition which was raised at the beginning of 2016.
+billion), in line with the previous 2017 ambition which was
+raised at the beginning of 2016. The upper end of this range
+represents a growth rate of 34% at constant currencies.
+The Company expects full year 2017 non-IFRS cloud &
+software revenue to increase by 6% - 8% at constant
+currencies (2016: €18.43 billion).
+-
+0.4
+4.8
+Total IT
+Taiwan/Hong Kong)
+Greater China (China/
+1.7
+2.2
+3.1
+Services
+5.5
+5.2
+7.4
+Software
+1.9
+0.3
+5.1
+Total IT
+Software
+8.4
+Based on the continued strong momentum in SAP's cloud
+business the Company expects full year 2017 non-IFRS cloud
+subscriptions and support revenue to be in a range of €3.8
+billion - €4.0 billion at constant currencies (2016: €2.99
+Revenue and Operating Profit Outlook
+The Company is providing the following 2017 outlook:
+Operational Targets for 2017 (Non-
+IFRS)
+A comparison of our business outlook with forecasts for the
+global economy and IT industry shows that we can be successful
+even in a tough economic environment and increased
+geopolitical uncertainty, and will further strengthen our position
+as the market leader of enterprise application software.
+On this basis, we consider ourselves well-prepared for the future
+and expect profitable growth in 2017 as well. As such, we are
+raising our ambitious goals for 2020. Balanced in terms of
+regions as well as industries, we remain well-positioned with our
+product offering to offset individual fluctuations in the global
+economy and IT market.
+As last year, our 2016 results validate our strategy of innovating
+across the core, the cloud, and business networks to help our
+customers become true digital enterprises. Our innovation cycle
+for SAP S/4HANA is well underway and the completeness of our
+vision in the cloud continues to distinguish SAP from both legacy
+players and providers of cloud-based point solutions. We
+achieved all key performance indicators raised in our business
+outlook in October.
+SAP expects to outperform the global economy and the IT
+industry again in 2017 in terms of revenue growth.
+Impact on SAP
+Table created by SAP based on: Gartner Market Databook, 4Q16 Update, 21
+December 2016, Table 2-1 "Regional End-User Spending on IT Products and
+Services in Constant U.S. Dollars, 2014-2020 (Millions of Dollars)".
+e estimate, p = projection
+Services
+8.1
+7.7
+5.7
+9.3
+7.8
+4.7
+4.0
+5.8
+1.2
+-0.7
+0.1
+Central and South America,
+Caribbean
+1.9
+1.3
+Asia Pacific Japan (APJ)
+Japan
+0.9
+Expected Developments
+and Opportunities
+Future Trends in the Global Economy
+In its latest economic bulletin report, the European Central Bank
+(ECB) predicts that the global economy will continue to
+accelerate in 2017 although remain below its pre-crisis pace. It
+also expects the pace of expansion will remain relatively stable
+in 2017 in the advanced economies and improve slightly in the
+emerging economies. Adverse effects of low commodity prices
+on the commodity-exporting countries, the sustained
+realignment of the Chinese economy, and political and economic
+uncertainty in the United States could, however, dampen global
+prospects in 2017, the ECB warns.
+Looking at the Europe, Middle East, and Africa (EMEA) region,
+the ECB believes that the euro area economy will continue to
+recover further in 2017. It suggests that increased investment by
+enterprises benefiting from favorable borrowing conditions and
+improved earnings could be key factors in this growth. The
+experts even forecast a surge in investment activity in the
+Central and Eastern European countries in 2017 and dynamic
+consumer spending, both of which should help drive economic
+development there. Russia's economy should begin to expand
+again in 2017, for the first time since coming out of its recession,
+the ECB says.
+With regards to the North America and Latin America
+(Americas) region, the ECB writes that while uncertainty about
+the future political and economic course of the United States
+following the inauguration of the new president is currently very
+high, it nevertheless anticipates a moderate increase in US
+economic growth in 2017. As for Brazil, it should be able to leave
+its recession behind it in 2017, the ECB says, though large fiscal
+consolidation needs will continue to weigh on the country.
+In the Asia Pacific Japan (APJ) region, Japan's economy is
+projected to continue to expand at the same restrained pace as
+the preceding year. The ECB predicts that the underlying
+economic momentum in Japan will remain weak. Lastly,
+economic growth in China is likely to continue to decelerate in
+2017, primarily due a renewed slowdown in investment growth
+as Chinese enterprises cut back overcapacity, the ECB says.
+2.3
+1.2
+0.9
+0.8
+131
+Combined Management Report | Expected Developments and Opportunities
+The IT Market: The Outlook for 2017
+"Worldwide IT spending is projected to total $3.5 trillion in 2017,
+a 2.7 percent increase from 2016," according to a January 2017
+Gartner Press Release by Gartner, a market research firm.
+"However, this growth rate is down from earlier projections of 3
+percent.2017 was poised to be a rebound year in IT spending.
+Some major trends have converged, including cloud, blockchain,
+digital business, and artificial intelligence. Normally, this would
+have pushed IT spending much higher than 2.7 percent growth.
+[...] However, some of the political uncertainty in global markets
+has fostered a wait-and-see approach causing many enterprises
+to forestall IT investments. The range of spending growth from
+the high to low is much larger in 2017 than in past years.
+Normally, the economic environment causes some level of
+Source: International Monetary Fund (IMF), World Economic Outlook
+Update, A Shifting Global Economic Landscape, as of January 2017, p. 7.
+2.8
+1.6
+3.4
+e estimate; p = projection
+6.5
+6.7
+6.9
+6.4
+6.3
+6.7
+Asian developing economies
+China
+Economic Trends -Year-Over-Year GDP Growth
+%
+World
+2015e
+1.5
+1.7
+1.5
+Central and Eastern Europe
+3.7
+2.9
+3.1
+Middle East and
+2.5
+3.8
+3.1
+North Africa
+Sub-Saharan Africa
+Americas
+United States
+Canada
+Germany
+division, however, in 2017 this is compounded by the increased
+levels of uncertainty. [...] The result of that uncertainty is a
+division between individuals and corporations that will spend
+more due to opportunities arising - and those that will retract
+or pause IT spending."
+1.6
+2.0
+2016e
+2017p
+3.2
+3.1
+3.4
+Advanced economies
+2.1
+1.6
+1.9
+Developing and emerging
+economies
+4.1
+4.1
+4.5
+Europe, Middle East, and
+Africa (EMEA)
+Euro area
+1.7
+Gartner data indicate software will be the best-performing
+segment with software spending increasing by 7.2% (see table
+below). "Buyer investments in digital business, intelligent
+automation, and services optimization and innovation continue
+to drive growth in the market, but buyer caution, fueled by broad
+economic challenges, remains a counter-balance to faster
+growth," says Gartner.
+Within the Europe, Middle East, and Africa (EMEA) region, the
+table below shows that IT spending in Western European
+countries will grow 1.5% in 2017, whereas Western European
+software spending will increase considerably by 6.2%.
+According to the table below, IT spending in the Americas region
+will expand in 2017 by 2.6% in North America and 2.1% in Latin
+America.
+-2.4
+2.0
+Total IT
+Eurasia
+3.9
+3.5
+3.4
+Services
+8.8
+9.0
+10.8
+Software
+0.8
+1.8
+15.8
+0.9
+Total IT
+Software
+6.5
+Services
+10.1
+9.9
+11.4
+Software
+3.0
+-0.2
+6.2
+Total IT
+Middle East and North
+Africa
+1.4
+0.9
+3.2
+Services
+7.9
+14.1
+Proposed Dividend
+Eastern Europe
+3.8
+2.7
+0.5
+4.0
+2017p
+2016p
+Total IT
+World
+%
+Trends in the IT Market - Increased IT Spending
+Year-Over-Year
+The Gartner Reports described herein, (the “Gartner Reports") represent
+research opinion or viewpoints published, as part of a syndicated subscription
+service, by Gartner, Inc. ("Gartner"), and are not representations of fact. Each
+Gartner Report speaks as of its original publication date (and not as of the
+date of this Annual Report) and the opinions expressed in the Gartner Reports
+are subject to change without notice.
+(http://www.gartner.com/newsroom/id/3568917).
+2) Gartner Says Worldwide IT Spending Forecast to Grow 2.7 Percent in 2017,
+Press Release, January 12, 2017
+1) Gartner Market Databook, 4Q16 Update, 21 December 2016.
+Sources:
+IT spending in the Asia Pacific Japan (APJ) region is expected to
+expand by 3.0% (Mature Asia/Pacific without Japan) and 5.9%
+(Emerging Asia/Pacific without China) in 2017 (see table below).
+IT spending in Greater China is expected to grow 5.1% in 2017
+(see table below).
+Software
+4.1
+9.1
+7.2
+4.4
+Services
+6.2
+5.3
+9.6
+Software
+1.5
+-0.1
+3.6
+Total IT
+Western Europe
+4.6
+4.5
+5.1
+Services
+6.9
+1.6
+We intend to continue our dividend policy in 2017 as well, which
+is to pay a dividend totaling more than 35% of the prior year's
+profit after tax.
+In preparing our outlook, we have taken into account all events
+known to us at the time we prepared this report that could
+influence SAP's business going forward.
+-2,076
+-2,291
+-2,182
+-481
+-1,022
+-1,313
+-3,495
+General and administration
+Research and development
+Gross profit
+Total cost of revenue
+Cost of services
+Cost of cloud and software
+Cost of software licenses and support
+Sales and marketing
+-3,313
+-2,557
+-3,089 -2,932 -2,426
+-621
+-28
+(6)
+Restructuring
+-892
+-1,048
+-1,005
+-5,782 -4,593
+-6,265
+12,578
+-2,331
+-2,845
+-3,044
+14,548
+15,479
+-6,583 -6,245 -4,983
+Cost of cloud subscriptions and support
+17,560
+20,793
+22,062
+2,993
+Services
+Cloud and software
+Software licenses and support
+Software support
+Software licenses
+Cloud subscriptions and support
+2014
+2015
+2016
+Notes
+€ millions, unless otherwise stated
+Consolidated Income Statements of SAP Group for the Years Ended December 31
+Consolidated Financial
+Statements IFRS
+139
+2,286
+-126
+1,087
+4,835
+(5)
+Total revenue
+3,245
+3,579
+3,638
+14,315
+17,214
+18,424
+13,228
+14,928
+15,431
+8,829
+10,093
+10,571
+4,399
+4,860
+213
+TomorrowNow and Versata litigation
+0
+Attributable to owners of parent
+3,280
+3,056
+3,634
+Profit after tax
+-1,075
+3,646
+-935
+(10)
+Income tax expense
+-1,161
+-935
+-1,229
+Other income tax expense
+-1,229
+3,064
+3,280
+Attributable to non-controlling interests
+140
+The accompanying Notes are an integral part of these Consolidated Financial Statements.
+2.74
+2.56
+3.04
+(11)
+Earnings per share, diluted (in €)
+2.75
+2.56
+3.04
+(11)
+Earnings per share, basic (in €)
+0
+-8
+-13
+86
+0
+0
+Income tax Tomorrow Now and Versata litigation
+4,331
+4,252
+-13,230
+-16,541
+-16,928
+5,135
+Finance income
+Other non-operating income/expense, net
+Operating profit
+Total operating expenses
+4
+1
+-3
+Other operating income/expense, net
+-309
+0
+-234
+(23)
+-256
+230
+4,355
+3,991
+4,863
+-25
+-5
+-38
+(9)
+-152
+-246
+-268
+Profit before tax
+Financial income, net
+Finance costs
+127
+241
+49
+Consolidated Financial Statements IFRS and Notes
+in the Consolidated Financial Statements......
+Management's Annual Report on Internal Control over Financial Reporting
+transformation which is key to our strategy. In addition to
+organic developments and tuck-in acquisitions, large strategic
+acquisitions in particular may boost our revenue and profits
+significantly. Furthermore, SAP seeks to establish new business
+models and leverage our expanding ecosystem of partners to
+achieve scale and maximize opportunities.
+We see opportunities in growing product and market areas, such
+as in-memory computing, cloud, mobile, business networks,
+social media, Big Data, the Internet of Things, machine learning,
+artificial intelligence, predictive analytics and especially all
+business developments that are targeted at the digital business
+SAP strives to generate profitable growth across our portfolio of
+products, solutions, and services to keep or improve its market
+position. Our aim is to continue to expand our addressable
+market to €320 billion in 2020, based on new assets in our SAP
+Business Network Segment, our new technologies and
+innovations, and the extension of our cloud portfolio.
+Opportunities from Our Strategy for
+Profitable Growth
+For more information about future opportunities in research and
+development for SAP, see the Products, Research and
+Development, and Services section as well as the Expected
+Developments and Opportunities section.
+While speed is a key strength, we also focus on ease of adoption
+and providing compelling returns. This allows our customers to
+easily consume technologies and software applications with
+immediate benefits for their businesses. If we make innovations
+available faster than currently anticipated, or if customers adopt
+the innovations faster than currently expected, for example,
+shifting faster to managed clouds for enterprise resource
+planning, or shifting faster to our new SAP S/4HANA solutions,
+this could positively impact our revenue, profit, and cash flows,
+and result in their exceeding our stated outlook and medium-
+term prospects.
+Our strong assets in applications and analytics, as well as
+database and technology, continue to offer solid multiyear
+growth opportunities as we bring innovative technologies with
+simplified consumption to our installed base and continue to
+add net-new customers. Unexpected portfolio growth may
+positively impact our revenue, profit, and cash flows, and result
+in their exceeding our stated outlook and medium-term
+prospects. Specifically, SAP HANA, cloud offerings, and
+SAP S/4HANA solutions, could create even more demand than
+is reflected in our stated outlook and medium-term prospects.
+Further upside potential is possible by higher than expected
+renewal rates of our cloud solutions.
+Our continued growth through innovation is based on our ability
+to leverage research and development (R&D) resources
+effectively. We continue to improve our development processes
+through design thinking and lean methodologies. We are
+accelerating innovation cycles especially in the area of cloud
+solutions and engaging more closely with our customers to
+ensure accuracy and success. In addition, we have generated a
+new structure that enables innovations in a startup-like
+environment and ecosystem.
+For more information about future trends in the global economy
+and the IT market outlook as well as their potential influence on
+SAP, see the Expected Developments and Opportunities section.
+Our midterm planning is based on unchanged market conditions
+in emerging markets. Should their stability increase again, this
+would be an upside to our midterm planning.
+in our plans today, our revenue and profit may exceed our
+current outlook and medium-term prospects.
+135
+Combined Management Report | Expected Developments and Opportunities
+Economic conditions have a clear influence on our business,
+financial position, profit, and cash flows. Should the global
+economy experience a more sustained growth than is reflected
+Opportunities from Research and
+Development Traction
+For more information about future opportunities for SAP, see
+the Strategy and Business Model section as well as the Expected
+Developments and Opportunities section.
+Opportunities from Our Partner Ecosystem
+SAP continues to grow and develop a global partner ecosystem.
+To increase market coverage, we want to enhance our portfolio
+and spur innovation with the specified objective of increasing the
+partner revenue contribution to SAP's overall revenue target. In
+addition to strengthening our core, we leverage our entire
+ecosystem to drive adoption of SAP HANA, cloud solutions,
+SAP S/4HANA, and SAP Cloud Platform (formerly called SAP
+HANA Cloud Platform). This includes strategic partnerships
+across all areas: third-party software vendors, systems
+integrators, service providers, and infrastructure providers. As a
+result, we are creating an ever-stronger setup, where SAP, along
+with our customers and partners, co-innovate and develop new
+innovative solutions on and with SAP HANA. Should the
+business of our partners develop better than currently expected,
+our indirect sales (partner revenue) could grow stronger than
+reflected in our outlook and medium-term prospects. This may
+positively impact our revenue, profit, and cash flows, and result
+in their exceeding our stated medium-term prospects.
+For information about events after the reporting period see the
+Notes to the Consolidated Financial Statements section,
+Note (33).
+Events After the
+Reporting Period
+137
+Combined Management Report | Expected Developments and Opportunities
+In general, our outlook and medium-term prospects are based
+on certain assumptions regarding the success of our go-to-
+market approaches. If the actual go-to-market success exceeds
+these assumptions, this could positively impact our revenue,
+profit, and cash flows, and result in their exceeding our stated
+medium-term prospects.
+We offer unique services that support a significant return on
+investment, and continue to actively look at new opportunities to
+increase the value we deliver to our customers.
+SAP goes to market by region, customer segments, line of
+business, and industry. We evolve and invest in our go-to-
+market coverage model to effectively sell industry-specific
+solutions while increasing our engagement with customers. We
+focus on the dynamic and fast-changing landscape each
+industry faces as technology evolves.
+Opportunities from Our Customer
+Engagement
+For more information about future opportunities from our
+employees, see the Employees and Social Performance section.
+Our outlook and medium-term prospects are based on certain
+assumptions regarding employee turnover and our Business
+Health Culture Index (as defined in the Employees and Social
+Investment section). Should these develop better than expected
+there might be an upside to employee productivity and
+engagement. In turn, this might positively impact our revenue,
+profit, and cash flows, and result in their exceeding our stated
+medium-term prospects.
+To ensure continuous innovation and sustained business
+success, we need to continuously tap into the global talent pool
+and bring the best and brightest talent to SAP. To do so, we aim
+to further strengthen our brand perception in the market and
+optimize our recruiting experience to emphasize our mission to
+help the world run better and improve people's lives.
+Furthermore, we will maximize mobile channels and innovative
+talent strategies to tap into new talent pools.
+Combined Management Report | Expected Developments and Opportunities
+136
+Our employees drive our innovation, provide the value to our
+customers, and consistently promote our growth and
+profitability. In 2016, we significantly increased the number of
+full-time employees in key strategic areas to support our growth
+ambitions. We anticipate improvements in employee
+productivity as a result of our continued endeavors in design-
+thinking principles. As described in the Employees and Social
+Investment section, we continuously invest in our talents to
+increase engagement, collaboration, social innovation, and
+health.
+Opportunities from Our Employees
+Opportunities from Economic Conditions
+SAP SE is the parent company of the SAP Group and earns most
+of its revenue from software license fees, subscriptions fees,
+and dividends paid by affiliates. Consequently, the opportunities
+described below also apply - directly or indirectly - to SAP SE.
+As far as opportunities are likely to occur, we have incorporated
+them into our business plans, our outlook for 2017, and our
+medium-term prospects outlined in this report. Therefore, the
+following section focuses on future trends or events that might
+result in an uplift of our outlook and medium-term prospects, if
+they develop better than we have anticipated in our forecasts.
+We have established a framework for opportunity management
+by evaluating and analyzing four key areas: current markets,
+competitive landscapes, external scenarios, and technological
+trends. Additionally, we have delved into customer and product
+segmentation, growth drivers, and industry-specific success
+factors. Based on these combined insights, our Executive Board
+defines our market strategies. Our shareholder value relies
+heavily upon a fine balance of risk mitigation and value-driven
+opportunities. Therefore, our strong governance model ensures
+that decisions are based on return, investment required, and
+risk mitigation. We rely on the talent and resources within SAP
+and our entire ecosystem.
+€8.0 billion to €8.5 billion cloud subscriptions and support
+revenue (previously €7.5 billion to €8.0 billion)
+We raised our 2020 ambition to reflect the Company's
+consistent fast growth in the cloud, solid software momentum,
+and operating profit expansion as well as the exchange rate
+development. Assuming an exchange rate environment
+comparable to 2016, SAP strives to reach the following in 2020:
+We expect to grow our more predictable revenue business while
+steadily increasing operating profit. Our strategic objectives are
+focused primarily on the following financial and non-financial
+objectives: growth, profitability, customer loyalty, and employee
+engagement.
+In this section, all numbers are based exclusively on non-IFRS
+measures.
+Medium-Term Prospects
+Among the assumptions underlying this outlook are those
+presented above concerning the economy and our expectations
+for the performance of the SAP Group.
+The outlook projections for the SAP Group in respect of liquidity,
+finance, investment, and dividend are equally applicable to SAP
+SE.
+We believe SAP SE, the parent company of the SAP Group, will
+receive investment income in the form of profit transfers and
+dividends again in the future. The growth we expect from the
+SAP Group should have a positive effect on SAP SE investment
+income.
+Provided the SAP Group continues to hit its revenue and profit
+targets, we expect SAP SE to sustain revenue and operating
+income growth into the medium term.
+Assuming there are no special effects relating to acquisitions or
+internal corporate restructuring measures in 2017, we also
+expect the operating profit of SAP SE to increase slightly.
+We expect SAP SE product revenue to increase at constant
+currencies generally in line with the 6% to 8% constant-
+currency rise in non-IFRS cloud and software revenue
+anticipated for the SAP Group in 2017.
+The primary source of revenue for SAP SE is the license fees it
+charges subsidiaries for the right to market and maintain SAP
+software solutions. Consequently, the performance of SAP SE in
+operating terms is closely tied to the cloud and software revenue
+of the SAP Group.
+Outlook for SAP SE
+assumption that there will be no effects from major acquisitions
+in 2017 and 2018.
+Among the premises on which this outlook is based are those
+presented concerning economic development and the
+134
+138
+Combined Management Report | Expected Developments and Opportunities
+€28 billion to €29 billion total revenue (previously €26 billion
+to €28 billion)
+Our customers rely on SAP as the trusted partner in their digital
+business transformation, not only for providing in-memory
+technology, standardized on-premise and cloud solutions, and
+access to business networks, but also for helping them drive
+new business outcomes and enabling business model
+innovations. To meet these expectations, we must grow
+consistently and accelerate the pace of our own business
+transformation by exploiting new opportunities.
+Opportunities
+We measure customer loyalty using the Customer Net Promoter
+Score (NPS). In 2017, we target achieving a combined Customer
+NPS of 21% to 23%, with our medium-term goal of reaching a
+combined Customer NPS of 35% to 40% by 2020 (2016:
+19.2%).
+For 2017 through to 2020, we aim to reach an Employee
+Engagement Index between 84% and 86% (2016: 85%).
+In addition to our financial goals, we also focus on two non-
+financial targets: customer loyalty and employee engagement.
+Ambitions for 2020
+Non-Financial Goals 2017 and
+As we look to increase our profitability through 2020, our cost
+ratios (cost as a % of total revenue) are expected to develop as
+follows through 2020: Research and development is expected to
+decline slightly, Sales and marketing is expected to follow the
+growth of the business and General and administration is
+expected to remain stable.
+In addition, we expect our services gross margin to reach
+approximately 20% (2016: 18.2%) in 2020.
+We also aim at further improving the profitability of our on-
+premise software business. The gross margin for our software
+licenses and support is expected to remain at least stable at
+approximately 88% (2016: 87.4%) in 2020.
+We also strive for significantly improving, over the next few
+years, the profitability of our cloud business. In 2017, we will
+continue the investment phase of our cloud business. As of
+2018, we expect to see the benefits from those efficiency-based
+investments and increasing cloud gross margin. We expect
+these improvements to continue in the following years to reach
+our envisioned long-term cloud subscriptions and support
+margin targets in 2020. These will continue to increase at
+different rates per cloud operations model: We expect the gross
+margin from our public cloud to reach approximately 80%
+(2016: 62.0%) in 2020. Likewise, we expect our business
+network gross margin to reach approximately 80% (2016:
+75.9%) in 2020. The gross margin for our private cloud is
+expected to reach about 40% (2016: -5.4%) in 2020. The
+combined cloud gross margin is expected to be approximately
+73% in 2020.
+Our revenue growth trajectory through 2020 is expected to be
+driven by continued strong growth in the cloud, low to mid-
+single-digit declines in software revenue and continued growth
+in our software support revenue. This is all expected to drive
+high single-digit growth in cloud and software revenue through
+2020.
+By 2020, we expect our business network and public cloud
+offerings to generate approximately the same portion of cloud
+subscriptions and support revenue. Both of these offerings are
+expected to each generate, in 2020, cloud subscriptions and
+support revenues that are significantly higher than the cloud
+subscriptions and support revenue generated from our private
+cloud offerings.
+We continue to expect the share of more predictable revenue
+(defined as the total of cloud subscriptions & support revenue
+and software support revenue) to reach 70% to 75% in 2020.
+€8.5 billion to €9.0 billion operating profit (previously €8.0
+billion to €9.0 billion)
+-
+Combined Management Report | Events After the Reporting Period
+Consolidated Financial Statements
+IFRS and Notes
+(25) Financial Risk Management..
+179
+(24) Financial Risk Factors
+.178
+(23) Litigation and Claims
+.177
+(22) Other Financial Commitments.
+176
+(21) Additional Capital Disclosures.
+.175
+(20) Total Equity..
+..174
+(19) Deferred Income.
+171
+(18) Provisions.
+.181
+168
+(26) Additional Fair Value Disclosures on Financial Instruments.
+(27) Share-Based Payments.
+(34) Subsidiaries and Other Equity Investments...
+.207
+.206
+(33) Events After the Reporting Period.
+.205
+(32) German Code of Corporate Governance..
+.205
+(31) Principal Accountant Fees and Services.
+.204
+(30) Related Party Transactions...
+201
+(29) Board of Directors.
+196
+(28) Segment and Geographic Information.
+.191
+185
+Premises on Which Our Outlook Is Based
+(17) Trade and Other Payables, Financial Liabilities, and Other Non-Financial Liabilities
+(16) Property, Plant, and Equipment.
+(6) Restructuring.
+158
+(5) Revenue.
+158
+(4) Business Combinations
+146
+146
+146
+.146
+_
+140
+(3) Summary of Significant Accounting Policies.
+(1) General Information About Consolidated Financial Statements.
+(2) Scope of Consolidation.
+Notes........
+Consolidated Financial Statements IFRS..
+158
+168
+(7) Employee Benefits Expense and Headcount
+(8) Other Non-Operating Income/Expense, Net.
+165
+(15) Goodwill and Intangible Assets..
+164
+(14) Other Non-Financial Assets
+163
+163
+162
+160
+(13) Trade and Other Receivables..
+(12) Other Financial Assets...
+(11) Earnings per Share.
+(10) Income Tax......
+.160
+(9) Financial Income, Net...
+159
+158
+2015e
+-910
+3,328
+785
+4,423
+-13
+4,410
+16
+16
+16
+-1,378
+-1,378
+-1,378
+Reissuance of treasury shares
+under share-based payments
+Other changes
+3,638
+December 31, 2016
+25
+50
+50
+-2
+-2
+6
+4
+1,229
+599
+22,302
+3,346
+-1,099
+26,376
+25
+777
+777
+785
+Other changes
+December 31, 2015
+80
+100
+180
+180
+-4
+-4
+2
+-2
+1,229
+558
+20,044
+2,561
+-1,124
+23,267
+28
+23,295
+Profit after tax
+3,646
+3,646
+-13
+3,634
+Other comprehensive
+income
+Comprehensive income
+Share-based payments
+Dividends
+-8
+21
+26,397
+The accompanying Notes are an integral part of these Consolidated Financial Statements.
+144
+-2
+70
+Decrease/increase in trade and other receivables
+-675
+-844
+-286
+Decrease/increase in other assets
+-248
+-313
+-329
+Decrease/increase in trade payables, provisions, and other liabilities
+513
+757
+573
+Decrease/increase in deferred income
+368
+218
+16
+Cash outflows due to TomorrowNow and Versata litigation
+0
+0
+-555
+Interest paid
+Interest received
+-190
+-172
+-130
+79
+82
+39
+under share-based payments
+Other adjustments for non-cash items
+45
+Consolidated Financial Statements IFRS and Notes | Consolidated Financial Statements IFRS
+€ millions
+Profit after tax
+Consolidated Statements of Cash Flows of SAP Group for the Years Ended December 31
+Notes
+2016
+2015
+2014
+3,634
+3,056
+3,280
+Adjustments to reconcile profit after taxes to net cash provided by operating activities:
+Depreciation and amortization
+(15)
+1,268
+1,289
+1,010
+Income tax expense
+(10)
+1,229
+935
+1,075
+Financial income, net
+(9)
+38
+5
+25
+Decrease/increase in sales and bad debt allowances on trade receivables
+51
+47
+59
+Reissuance of treasury shares
+-1,316
+Equity Attributable to Owners of Parent
+Share Retained
+Premium
+Earnings
+Other
+Compo-
+nents of
+Treasury
+Shares
+Total
+Non-
+Controlling
+Interests
+Total
+Equity
+Equity
+Notes
+(20)
+€ millions
+(20)
+(20)
+January 1, 2014
+1,229
+551
+16,258
+-718
+-1,280
+16,040
+8
+16,048
+Profit after tax
+3,280
+3,280
+(20)
+Consolidated Statements of Changes in Equity of SAP Group for the Years Ended December 31
+143
+41,390
+18,095
+1,229
+1,229
+Share premium
+599
+558
+Retained earnings
+Other components of equity
+Treasury shares
+Equity attributable to owners of parent
+22,302
+20,044
+3,346
+2,561
+-1,099
+-1,124
+26,376
+23,267
+Non-controlling interests
+Total equity
+Total equity and liabilities
+The accompanying Notes are an integral part of these Consolidated Financial Statements.
+Consolidated Financial Statements IFRS and Notes | Consolidated Financial Statements IFRS
+21
+28
+(20)
+26,397
+23,295
+44,277
+3,280
+Other comprehensive
+income
+Comprehensive income
+18,317
+564
+-1,224
+19,499
+34
+19,534
+Profit after tax
+3,064
+3,064
+-8
+3,056
+Other comprehensive
+income
+Comprehensive income
+Share-based payments
+-17
+1,997
+1,980
+1,980
+3,047
+1,997
+5,044
+-8
+5,036
+-136
+-136
+-136
+Dividends
+-1,316
+614
+-1,316
+1,229
+-4
+Share-based payments
+-23
+1,282
+1,259
+1,259
+3,257
+1,282
+4,539
+4,539
+34
+34
+34
+Dividends
+-1,194
+-1,194
+-1,194
+Reissuance of treasury shares
+29
+56
+85
+85
+under share-based payments
+Additions from business
+26
+26
+combinations
+Other changes
+-4
+-4
+December 31, 2014
+17,880
+Income taxes paid, net of refunds
+-1,420
+1.4227
+1.4645
+Australian dollar
+AUD
+1.4596
+1.4897
+1.4850
+1.4753
+1.4650
+Revenue Recognition
+Classes of Revenue
+We derive our revenue from fees charged to our customers for
+(a) the use of our hosted cloud offerings, (b) licenses to our on-
+premise software products, and (c) standardized and premium
+support services, consulting, customer-specific on-premise
+software development agreements, training, and other services.
+Cloud and software revenue, as presented in our Consolidated
+Income Statements, is the sum of our cloud subscriptions and
+support revenue, our software licenses revenue, and our
+software support revenue.
+1.4606
+Revenue from cloud subscriptions and support represents
+fees earned from providing customers with the following:
+Software-as-a-Service (SaaS), that is, a right to use
+software functionality in a cloud-based-infrastructure
+(hosting) provided by SAP, where the customer does not
+have the right to terminate the hosting contract and take
+possession of the software to run it on the customer's own
+IT infrastructure or by a third-party hosting provider
+without significant penalty, or
+Platform-as-a-Service (PaaS), that is, access to a cloud-
+based infrastructure to develop, run, and manage
+applications, or
+■ Infrastructure-as-a-Service (laaS), that is, hosting services
+for software hosted by SAP, where the customer has the
+right to terminate the hosting contract and take
+possession of the software at any time without significant
+penalty and related application management services, or
+Additional premium cloud subscription support beyond
+the regular support that is embedded in the basic cloud
+subscription fees, or
+■
+Business Network Services, that is, connecting companies
+in a cloud-based-environment to perform business
+processes between the connected companies.
+Software licenses revenue represents fees earned from the
+sale or license of software to customers for use on the
+customer's premises, in other words, where the customer
+has the right to take possession of the software for
+installation on the customer's premises (on-premise
+software). Software licenses revenue includes revenue from
+both the sale of our standard software products and
+customer-specific on-premise software development
+agreements.
+Software support revenue represents fees earned from
+providing customers with standardized support services
+which comprise unspecified future software updates,
+upgrades, enhancements, and technical product support
+services for on-premise software products. We do not sell
+separately technical product support or unspecified software
+upgrades, updates, and enhancements. Accordingly, we do
+not distinguish within software support revenue or within cost
+of software support the amounts attributable to technical
+support services and unspecified software upgrades,
+updates, and enhancements.
+Services revenue as presented in our Consolidated Income
+Statements represents fees earned from providing customers
+with the following:
+-
+Professional services, that is, consulting services that
+primarily relate to the installation and configuration of our
+cloud subscriptions and on-premise software products
+Premium support services, that is, high-end support services
+tailored to customer requirements
+Training services
+· Messaging services (primarily transmission of electronic text
+messages from one mobile phone provider to another)
+Payment services in connection with our travel and expense
+management offerings.
+Consolidated Financial Statements IFRS and Notes | Notes
+•
+1.5116
+1.4188
+CAD
+U.S. dollar
+USD
+1.0541
+1.0887
+1.1045
+1.1071
+1.3198
+Pound sterling
+GBP
+0.8562
+0.7340
+0.8206
+0.7255
+0.8037
+Japanese yen
+JPY
+123.40
+131.07
+119.77
+134.12
+140.61
+Swiss franc
+CHF
+1.0739
+1.0835
+1.0886
+1.0688
+1.2132
+Canadian dollar
+147
+We account for out-of-pocket expenses invoiced by SAP and
+reimbursed by customers as cloud subscriptions and support,
+software support, or services revenue, depending on the nature
+of the service for which the out-of-pocket expenses were
+incurred.
+Timing of Revenue Recognition
+We do not start recognizing revenue from customer
+arrangements before evidence of an arrangement exists, the
+amount of revenue and associated costs can be measured
+reliably, collection of the related receivable is probable and the
+delivery has occurred, respectively the services have been
+rendered. If, for any of our product or service offerings, we
+determine at the outset of an arrangement that the amount of
+revenue cannot be measured reliably, we conclude that the
+inflow of economic benefits associated with the transaction is
+not probable, and we defer revenue recognition until the
+arrangement fee becomes due and payable by the customer. If,
+at the outset of an arrangement, we determine that collectability
+is not probable, we conclude that the inflow of economic
+benefits associated with the transaction is not probable, and we
+defer revenue recognition until the earlier of when collectability
+becomes probable or payment is received. If a customer is
+specifically identified as a bad debtor at a later point in time, we
+stop recognizing revenue from the customer except to the
+extent of the fees that have already been collected.
+Cost of cloud and software includes the costs incurred in
+producing the goods and providing the services that generate
+cloud and software revenue. Consequently, this line item
+primarily includes employee expenses relating to these services,
+amortization of acquired intangibles, fees for third-party
+licenses, shipping, ramp-up cost, and depreciation of our
+property, plant, and equipment.
+Cost of Services
+Cost of services includes the costs incurred in providing the
+services that generate service revenue, such as consulting and
+Consolidated Financial Statements IFRS and Notes | Notes
+149
+training activities, messaging, as well as certain forms of hosting
+solutions for our customers and our partners.
+Research and Development
+Research and development includes the costs incurred by
+activities related to the development of software solutions (new
+products, updates, and enhancements) including resource and
+hardware costs for the development systems.
+We have determined that the conditions for recognizing
+internally generated intangible assets from our software
+development activities are not met until shortly before the
+products are available for sale. Development costs incurred
+after the recognition criteria are met have not been material.
+Consequently, research and development costs are expensed as
+incurred.
+Sales and Marketing
+Sales and marketing includes costs incurred for the selling and
+marketing activities related to our software and cloud solutions
+as well as our service portfolio.
+General and Administration
+General and administration includes costs related to finance and
+administrative functions, human resources, and general
+management as long as they are not directly attributable to one
+of the other operating expense line items.
+Accounting for Uncertainties in Income Taxes
+We measure current and deferred tax liabilities and assets for
+uncertainties in income taxes based on our best estimate of the
+most likely amount payable to or recoverable from the tax
+authorities, assuming that the tax authorities will examine the
+amounts reported to them and have full knowledge of all
+relevant information.
+Share-Based Payments
+Share-based payments cover cash-settled and equity-settled
+awards issued to our employees. The respective expenses are
+recognized as employee benefits expenses and classified in our
+Consolidated Income Statements according to the activities that
+the employees owning the awards perform.
+Under certain programs, we grant our employees discounts on
+purchases of SAP shares. Since those discounts are not
+dependent on future services to be provided by our employees,
+the discount is recognized as an expense when the discounts
+are granted.
+Where we hedge our exposure to cash-settled awards, changes
+in the fair value of the respective hedging instruments are also
+recognized as employee benefits expenses in profit or loss. The
+fair values of hedging instruments are based on market data
+reflecting current market expectations.
+For more information about our share-based payments, see
+Note (27).
+Financial Assets
+Our financial assets comprise cash and cash equivalents (highly
+liquid investments with original maturities of three months or
+less), loans and receivables, acquired equity and debt
+investments, and derivative financial instruments (derivatives)
+with positive fair values. Financial assets are only classified as
+financial assets at fair value through profit or loss if they are held
+for trading, as we do not designate financial assets at fair value
+through profit or loss. All other financial assets are classified as
+loans and receivables if we do not designate them as available-
+for-sale financial assets.
+Regular-way purchases and sales of financial assets are
+recorded as at the trade date.
+Among the other impairment indicators in IAS 39 (Financial
+Instruments: Recognition and Measurement), for an investment
+in an equity security, objective evidence of impairment includes
+a significant (more than 20%) or prolonged (a period of more
+than nine months) decline in its fair value. Impairment losses on
+financial assets are recognized in financial income, net. For
+available-for-sale financial assets, which are non-derivative
+financial assets that are not assigned to loans and receivables or
+financial assets at fair value through profit or loss, impairment
+losses directly reduce an asset's carrying amount, while
+impairments on loans and receivables are recorded using
+allowance accounts. Such allowance accounts are always
+presented together with the accounts containing the asset's
+cost in other financial assets. Account balances are charged off
+against the respective allowance after all collection efforts have
+been exhausted and the likelihood of recovery is considered
+remote.
+Derivatives
+Derivatives Not Designated as Hedging Instruments
+Many transactions constitute economic hedges, and therefore
+contribute effectively to the securing of financial risks but do not
+qualify for hedge accounting under IAS 39. To hedge currency
+risks inherent in foreign-currency denominated and recognized
+monetary assets and liabilities, we do not designate our held-for-
+trading derivative financial instruments as accounting hedges,
+because the profits and losses from the underlying transactions
+are recognized in profit or loss in the same periods as the profits
+or losses from the derivatives.
+In addition, we occasionally have contracts that contain foreign
+currency embedded derivatives that are required to be
+accounted for separately.
+Derivatives Designated as Hedging Instruments
+We use derivatives to hedge foreign currency risk or interest
+rate risk and designate them as cash flow or fair value hedges if
+150
+Consolidated Financial Statements IFRS and Notes | Notes
+Cost of Cloud and Software
+2014
+We also consider FASB ASC 985-605 in our accounting for
+options that entitle the customer to purchase, in the future,
+additional on-premise software or services. We allocate revenue
+to future incremental discounts whenever customers are
+granted a material right, that is, the right to license additional
+on-premise software at a higher discount than the one given
+within the initial software license arrangement, or to purchase or
+renew services at rates below the fair values established for
+these services. We also consider whether future purchase
+options included in arrangements for cloud subscription
+deliverables constitute a material right.
+Gross margin expectations and expected internal costs of
+the respective cloud business model.
+In general, we invoice fees for standard software upon contract
+closure and delivery. Periodical fixed fees for cloud subscription
+services and software support services are mostly invoiced
+yearly or quarterly in advance. Fees based on actual transaction
+volumes for cloud subscriptions and fees charged for non-
+periodical services are invoiced as the services are delivered.
+Cloud subscriptions and support revenue is recognized as the
+services are performed. Where a periodical fixed fee is agreed
+for the right to continuously access and use a cloud offering for
+a certain term, the fee is recognized ratably over the term
+covered by the fixed fee. Fees that are based on actual
+transaction volumes are recognized as the transactions occur.
+In general, our cloud subscriptions and support contracts
+include certain set-up activities. If these set-up activities have
+stand-alone value, they are accounted for as distinct
+deliverables with the respective revenue being classified as
+service revenue and recognized as the set-up activity is
+performed. If we conclude that such set-up activities are not
+distinct deliverables, we do not account for them separately.
+Revenue from the sale of perpetual licenses of our standard on-
+premise software products is recognized upon delivery of the
+software, that is, when the customer has access to the software.
+Occasionally, we license on-premise software for a specified
+period of time. Revenue from short-term time-based licenses,
+which usually include support services during the license period,
+is recognized ratably over the license term. Revenue from multi-
+year time-based licenses that include support services, whether
+separately priced or not, is recognized ratably over the license
+term unless a substantive support service renewal rate exists; if
+this is the case, the amount allocated to the delivered software
+is recognized as software licenses revenue based on the residual
+method once the basic criteria described above have been met.
+In general, our on-premise software license agreements include
+neither acceptance-testing provisions nor rights to return the
+software. If an arrangement allows for customer acceptance-
+testing of the software, we defer revenue until the earlier of
+customer acceptance or when the acceptance right lapses. If an
+arrangement allows for returning the software, we defer
+recognition of software revenue until the right to return expires.
+We usually recognize revenue from on-premise software
+arrangements involving resellers on evidence of sell-through by
+the reseller to the end customer, because the inflow of the
+economic benefits associated with the arrangements to us is not
+probable before sell-through has occurred.
+Software licenses revenue from customer-specific on-premise
+software development agreements that qualify for revenue
+recognition by reference to the stage of completion of the
+contract activity is recognized using the percentage-of-
+completion method based on contract costs incurred to date as
+a percentage of total estimated contract costs required to
+complete the development work.
+Under our standardized support services, our performance
+obligation is to stand ready to provide technical product support
+and unspecified updates, upgrades, and enhancements on a
+when-and-if-available basis. Consequently, we recognize
+support revenue ratably over the term of the support
+arrangement.
+We recognize services revenue as the services are rendered.
+Usually, our professional services contracts and premium
+support services contracts do not involve significant production,
+modification, or customization of software, and the related
+revenue is recognized as the services are provided using the
+percentage-of-completion method of accounting. For
+messaging services, we measure the progress of service
+rendering based on the number of messages successfully
+processed and delivered except for fixed-price messaging
+arrangements, for which revenue is recognized ratably over the
+contractual term of the arrangement. Revenue from our training
+services is recognized when the customer consumes the
+respective classroom training. For on-demand training services,
+whereby our performance obligation is to stand ready and
+provide the customer with access to the training courses and
+learning content services, revenue is recognized ratably over the
+contractual term of the arrangement.
+Measurement of Revenue
+Revenue is recognized net of returns and allowances, trade
+discounts, and volume rebates.
+148
+Consolidated Financial Statements IFRS and Notes | Notes
+Our contributions to resellers that allow our resellers to execute
+qualified and approved marketing activities are recognized as an
+offset to revenue, unless we obtain a separate identifiable
+benefit for the contribution and the fair value of that benefit is
+reasonably estimable.
+Multiple-Element Arrangements
+We combine two or more customer contracts with the same
+customer and account for the contracts as a single arrangement
+if the contracts are negotiated as a package or otherwise linked.
+We account for the different goods and services promised under
+our customer contracts as separate units of account (distinct
+deliverables) unless:
+-
+The contract involves significant production, modification, or
+customization of the cloud subscription or on-premise
+software; and
+The services are not available from third-party vendors and
+are therefore deemed essential to the cloud subscription or
+on-premise software.
+Goods and services that do not qualify as distinct deliverables
+are combined into one unit of account (combined deliverables).
+The portion of the transaction fee allocated to one distinct
+deliverable is recognized in revenue separately under the
+policies applicable to the respective deliverable. For combined
+deliverables consisting of cloud offerings or on-premise
+software and other services, the allocated portion of the
+transaction fee is recognized using the percentage-of-
+completion method, as outlined above, or over the cloud
+subscription term, if applicable, depending on which service
+term is longer.
+We allocate the total transaction fee of a customer contract to
+the distinct deliverables under the contract based on their fair
+values. The allocation is done relative to the distinct
+deliverables' individual fair values unless the residual method is
+applied as outlined below. Fair value is determined by company-
+specific objective evidence of fair value, which is the price
+charged consistently when that element is sold separately or, for
+elements not yet sold separately, the price established by our
+management if it is probable that the price will not change
+before the element is sold separately. Where company-specific
+objective evidence of fair value and third-party evidence of
+selling price cannot be established due to lacking stand-alone
+sales or lacking pricing consistency, we determine the fair value
+of a distinct deliverable by estimating its stand-alone selling
+price. Company-specific objective evidence of fair value and
+estimated stand-alone selling prices (ESP) for our major
+products and services are determined as follows:
+We derive the company-specific objective evidence of fair
+value for our renewable support services from the rates
+charged to renew the support services annually after an initial
+period. Such renewal rates generally represent a fixed
+percentage of the discounted software license fee charged to
+-
+the customer. The majority of our customers renew their
+annual support service contracts at these rates.
+Company-specific objective evidence of fair value for our
+service offerings is derived from our consistently priced
+historic sales.
+Company-specific objective evidence of fair value can
+generally not be established for our cloud subscriptions. ESP
+for these offerings is determined based on the rates agreed
+with the individual customers to apply if and when the
+subscription arrangement renews. We determine ESP by
+considering multiple factors which include, but are not limited
+to, the following:
+■
+Substantive renewal rates stipulated in the cloud
+arrangement; and
+For our on-premise software offerings, company-specific
+objective evidence of fair value can generally not be
+established and representative stand-alone selling prices are
+not discernible from past transactions. We therefore apply
+the residual method to multiple-element arrangements that
+include on-premise software. Under this method, the
+transaction fee is allocated to all undelivered elements in the
+amount of their respective fair values and the remaining
+amount of the arrangement fee is allocated to the delivered
+element. With this policy, we have considered the guidance
+provided by Financial Accounting Standards Board (FASB)
+Accounting Standards Codification (ASC) Subtopic 985-605
+(Software Revenue Recognition), where applicable, as
+authorized by IAS 8 (Accounting Policies, Changes in
+Accounting Estimates and Errors).
+-1,477
+2015
+2015
+-7,240
+Dividends paid
+Proceeds from reissuance of treasury shares
+Proceeds from borrowings
+Cash receipts from swap contracts
+Total cash flows from proceeds from borrowings
+Repayments of borrowings
+Transactions with non-controlling interests
+Net cash flows from financing activities
+Effect of foreign currency rates on cash and cash equivalents
+Net decrease/increase in cash and cash equivalents
+Cash and cash equivalents at the beginning of the period
+(21)
+-334
+-1,378
+-1,194
+27
+64
+400
+1,748
+51
+7,503
+43
+443
+-1,800
+0
+1,748
+-3,852
+0
+7,503
+-2,062
+3
+0
+-1,316
+833
+1,880
+793
+-1,799
+-1,356
+Net cash flows from operating activities
+4,628
+3,638
+3,499
+Business combinations, net of cash and cash equivalents acquired
+-106
+-39
+-6,360
+Cash receipts from derivative financial instruments related to business combinations
+Total cash flows for business combinations, net of cash and cash equivalents acquired
+0
+266
+-111
+-106
+226
+-6,472
+Purchase of intangible assets and property, plant, and equipment
+-1,001
+-636
+-737
+Proceeds from sales of intangible assets or property, plant, and equipment
+63
+68
+46
+Purchase of equity or debt instruments of other entities
+-1,549
+-1,871
+Proceeds from sales of equity or debt instruments of other entities
+Net cash flows from investing activities
+0
+-2,705
+167
+291
+-40
+255
+8
+-18
+245
+The additions relate to legal entities added in connection with
+acquisitions and foundations. The disposals are mainly due to
+mergers and liquidations of legal entities.
+(3) Summary of Significant
+Accounting Policies
+(3a) Bases of Measurement
+The Consolidated Financial Statements have been prepared on
+the historical cost basis except for the following:
+Derivative financial instruments, available-for-sale financial
+assets, and liabilities for cash-settled share-based payments
+are measured at fair value.
+Monetary assets and liabilities denominated in foreign
+currencies are translated at period-end exchange rates.
+Post-employment benefits are measured according to IAS 19
+(Employee Benefits) as described in Note (18a).
+Where applicable, information about the methods and
+assumptions used in determining the respective measurement
+bases is disclosed in the Notes specific to that asset or liability.
+(3b) Relevant Accounting Policies
+Reclassifications
+Under the ONE Service approach, we combined premium
+support services and professional services under one
+comprehensive service offering. This combination triggered
+changes in our service go-to-market methodology and setup,
+resulting in an organizational separation of services sales and
+services delivery. As a result of these changes, we now classify
+all sales expenses relating to our services offering, which were
+previously recognized as cost of services, as sales and
+marketing expenses. We take the view that this policy provides
+more reliable and more relevant information because it
+classifies sales and marketing expenses consistently across our
+product and services portfolio.
+The new policy has been applied retrospectively to the prior
+periods presented. The effect on the financial year 2015 was an
+increase in sales and marketing expenses and a respective
+decrease in cost of services totalling €381 million
+(2014: €290 million).
+Business Combinations and Goodwill
+We decide on a transaction-by-transaction basis whether to
+measure the non-controlling interest in the acquiree at fair value
+or at the proportionate share of the acquiree's identifiable net
+assets. Acquisition-related costs are accounted as expense in
+the periods in which the costs are incurred and the services are
+received, with the expense being classified as general and
+administration expense.
+146
+Consolidated Financial Statements IFRS and Notes | Notes
+Foreign Currencies
+Income and expenses and operating cash flows of our foreign
+subsidiaries that use a functional currency other than the euro
+are translated at average rates of foreign exchange (FX)
+computed on a monthly basis. Exchange differences resulting
+Exchange Rates
+Equivalent to €1
+from foreign currency transactions are recognized in other non-
+operating income/expense, net.
+The exchange rates of key currencies affecting the Company
+were as follows:
+Middle Rate as at December 31
+Annual Average Exchange Rate
+2016
+8
+2016
+287
+December 31, 2016
+-3,356
+135
+83
+4,298
+23
+580
+(21)
+3,411
+2,748
+Cash and cash equivalents at the end of the period
+(21)
+3,702
+3,411
+3,328
+The accompanying Notes are an integral part of these Consolidated Financial Statements.
+Consolidated Financial Statements IFRS and Notes | Consolidated Financial Statements IFRS
+145
+Notes
+(1) General Information About
+Consolidated Financial Statements
+The accompanying Consolidated Financial Statements for 2016
+of SAP SE and its subsidiaries (collectively, "we," "us," "our,"
+"SAP," "Group," and "Company") have been prepared in
+accordance with International Financial Reporting Standards
+(IFRS).
+We have applied all standards and interpretations that were
+effective on and endorsed by the European Union (EU) as at
+December 31, 2016. There were no standards or interpretations
+impacting our Consolidated Financial Statements for the years
+ended December 31, 2016, 2015, and 2014, that were effective
+but not yet endorsed. Therefore, our Consolidated Financial
+Statements comply with both IFRS as issued by the
+International Accounting Standards Board (IASB) and with IFRS
+as endorsed by the EU.
+Our Executive Board approved the Consolidated Financial
+Statements on February 22, 2017, for submission to our
+Supervisory Board.
+All amounts included in the Consolidated Financial Statements
+are reported in millions of euros (€ millions) except where
+otherwise stated. Due to rounding, numbers presented
+throughout this document may not add up precisely to the totals
+we provide and percentages may not precisely reflect the
+absolute figures.
+(2) Scope of Consolidation
+Entities Consolidated in the Financial Statements
+December 31, 2014
+Additions
+Disposals
+December 31, 2015
+Additions
+Disposals
+Total
+10,228
+Issued
+Capital
+106
+The accompanying Notes are an integral part of these Consolidated Financial Statements.
+Consolidated Financial Statements IFRS and Notes | Consolidated Financial Statements IFRS
+141
+Consolidated Statements of Financial Position of SAP Group as at December 31
+€ millions
+Cash and cash equivalents
+Other financial assets
+Notes
+2016
+2015
+3,702
+3,411
+(12)
+1,124
+351
+Trade and other receivables
+Other non-financial assets
+Tax assets
+Total current assets
+Attributable to non-controlling interests
+(13)
+0
+-13
+-11
+11
+-28
+Other comprehensive income for items that will be reclassified to profit or loss, net of
+tax
+785
+1,997
+1,282
+Other comprehensive income, net of tax
+Total comprehensive income
+Attributable to owners of parent
+777
+1,980
+1,259
+4,410
+5,036
+4,539
+4,423
+5,044
+4,539
+-8
+5,924
+5,274
+(14)
+126
+87
+Other non-financial assets
+(14)
+532
+332
+Tax assets
+450
+282
+Deferred tax assets
+(10)
+570
+453
+Total non-current assets
+Total assets
+32,713
+31,651
+44,277
+41,390
+(13)
+Trade and other receivables
+1,336
+1,358
+581
+468
+233
+235
+11,564
+9,739
+Goodwill
+(15)
+23,311
+(20)
+22,689
+(15)
+3,786
+4,280
+Property, plant, and equipment
+(16)
+2,580
+2,192
+Other financial assets
+(12)
+Intangible assets
+142
+Cash flow hedges, net of tax
+-4
+-17
+-23
+-8
+-17
+-23
+Gains (losses) on exchange differences on translation, before tax
+865
+1,845
+1.161
+Reclassification adjustments on exchange differences on translation, before tax
+-1
+0
+0
+Exchange differences, before tax
+864
+1,845
+1,161
+Income tax relating to exchange differences on translation
+(10)
+-8
+-25
+7
+2
+Consolidated Statements of Comprehensive Income of SAP Group for the Years Ended December 31
+€ millions
+Profit after tax
+Items that will not be reclassified to profit or loss
+Remeasurements on defined benefit pension plans, before tax
+Income tax relating to remeasurements on defined benefit pension plans
+Remeasurements on defined benefit pension plans, net of tax
+Other comprehensive income for items that will not be reclassified to profit or loss,
+net of tax
+Items that will be reclassified subsequently to profit or loss
+Notes
+2016
+2015
+2014
+3,634
+3,056
+3,280
+-10
+-19
+-30
+(10)
+2
+16
+21
+Exchange differences, net of tax
+-43
+125
+8,205
+Gains (losses) on cash flow hedges, before tax
+-24
+-59
+-41
+Reclassification adjustments on cash flow hedges, before tax
+8
+74
+3
+Cash flow hedges, before tax
+(25)
+-15
+15
+-38
+Income tax relating to cash flow hedges
+(10)
+4
+(20)
+Available-for-sale financial assets, net of tax
+0
+-2
+(20)
+839
+1,861
+1,182
+Gains (losses) on remeasuring available-for-sale financial assets, before tax
+-18
+181
+130
+Reclassification adjustments on available-for-sale financial assets, before tax
+10
+-26
+-2
+Available-for-sale financial assets, before tax
+(26)
+-44
+128
+128
+Income tax relating to available-for-sale financial assets
+(10)
+1
+-53
+Consolidated Financial Statements IFRS and Notes | Consolidated Financial Statements IFRS
+128
+€ millions
+127
+81
+Tax liabilities
+365
+402
+Financial liabilities
+(17)
+6,481
+8,681
+Other non-financial liabilities
+(17)
+461
+331
+Provisions
+(18)
+143
+180
+Deferred tax liabilities
+(10)
+Consolidated Statements of Financial Position of SAP Group as at December 31
+411
+448
+Deferred income
+Total non-current liabilities
+Total liabilities
+Issued capital
+(19)
+(17)
+Trade and other payables
+217
+9,674
+1,088
+7,867
+1,281
+(17)
+2015
+2016
+Notes
+Tax liabilities
+316
+230
+Financial liabilities
+Other non-financial liabilities
+Provisions
+Trade and other payables
+Total current liabilities
+2,001
+Deferred income
+(19)
+299
+183
+2,383
+(18)
+3,699
+(17)
+841
+1,813
+(17)
+3,407
+Sales and marketing
+for-sale financial assets
+71
+166
+Thereof from available-
+Research and development
+0
+-1
+−1
+292
+190
+260
+Thereof from financial
+Thereof from loans and
+49
+678
+Thereof cash-settled
+liabilities at amortized
+290
+724
+785
+Share-based payments
+226
+-2
+-174
+receivables
+62
+111
+113
+General and administration
+-219
+-213
+26
+80
+loss
+2015
+113
+2016
+€ millions
+Other Non-Operating Income/Expense, Net
+(8) Other Non-Operating
+Income/Expense, Net
+The allocation of expense for share-based payments, net of the
+effects from hedging these instruments, to the various
+functional areas is as follows:
+Allocation of Share-Based Payment
+Expense
+2,890 1,831 5,535
+19,797 16,725 68,343
+814
+0
+0
+209
+73
+23,532 22,145 80,609 33,561 21,832 19,788 75,180 31,821
+SAP Group (months' end 34,932
+average)
+73
+0
+172
+37
+Thereof acquisitions
+31)
+879 373 2,794
+22,071 18,995 74,406
+-256
+49
+2014
+Foreign currency exchange
+gain/loss, net
+101
+Cost of services
+value through profit or
+28
+74
+89
+Cost of cloud and software
+assets/liabilities at fair
+83
+-12
+-38
+Thereof from financial
+2014
+2015
+2016
+€ millions
+71
+-230
+-210
+Share-Based Payments
+-234
+Total income tax expense
+For more information about our share-based payments, see
+Note (27).
+84
+-201
+-117
+1,075
+935
+1,229
+Total income tax expense
+-332
+-161
+Total deferred tax income
+-258
+-123
+Foreign
+-74
+-38
+Germany
+expense/income
+Deferred tax
+1,192
+1,267
+1,390
+Total current tax expense
+2016
+422
+2015
+3,109
+€ millions
+2016
+2015
+2014
+customers
+Salaries
+7,969
+7,483
+Consolidated Financial Statements IFRS and Notes | Notes
+160
+The following table reconciles the expected income tax expense,
+computed by applying our combined German tax rate of 26.4%
+(2015: 26.4%; 2014: 26.4%), to the actual income tax expense.
+Our 2016 combined German tax rate includes a corporate
+income tax rate of 15.0% (2015: 15.0%; 2014: 15.0%), plus a
+solidarity surcharge of 5.5% (2015: 5.5%; 2014: 5.5%) thereon,
+and trade taxes of 10.6% (2015: 10.6%; 2014: 10.6%).
+4,355
+3,991
+4,863
+1,017
+830
+1,754
+3,338
+3,161
+2014
+408
+537
+Foreign
+cost
+share-based payments
+Thereof equity-settled
+107
+87
+96
+Thereof from non-financial
+assets/liabilities
+-17
+-3
+-13
+share-based payments
+Miscellaneous income
+3
+1
+3
+Miscellaneous expense
+-27
+-27
+-25
+Total deferred tax income
+-161
+-332
+-117
+Total
+770
+859
+853
+Germany
+Foreign
+Current tax expense
+Germany
+2014
+Other non-operating
+income/expense, net
+2015
+€ millions
+€ millions
+Profit Before Tax
+Tax Expense According to Region
+(10) Income Tax
+1,075
+935
+1,229
+2,827 1,535 783 425 2,743 1,542
+84,183 33,906 22,166 20,914 76,986 33,340
+2016
+1,584
+788 454
+36,222 24,696 23,265
+6,535
+Infrastructure
+159
+Consolidated Financial Statements IFRS and Notes | Notes
+6,319
+Social security expense
+1,135
+1,067
+-5
+916
+(9) Financial Income, Net
+Recognized loss stated for 2016 predominantly resulted from
+(6) Restructuring
+Restructuring Expenses
+Share-based payment
+785
+724
+290
+expense
+Pension expense
+strategic customer co-innovation projects.
+270
+Financial Income, Net
+€ millions
+Taxes for prior years
+127
+241
+230
+Finance income
+1,168
+1,278
+1,412
+Major Components of Tax Expense
+Tax expense for current year
+2015
+expense/income
+2016
+€ millions
+Current tax
+2014
+2015
+2016
+2014
+-22
+258
+Employee-related
+Onerous contract-related
+-5
+11
+7
+restructuring expenses
+Restructuring expenses
+28
+621
+restructuring expenses
+126
+restructuring plan executed in 2015, no significant new
+restructuring activities occurred.
+Pension expense includes the amounts recorded for our defined
+benefit and defined contribution plans as described in
+Note (18a). Expenses for local state pension plans are included
+in social security expense.
+The number of employees in the following table is broken down
+by function and by the regions EMEA (Europe, Middle East, and
+Africa), Americas (North America and Latin America), and APJ
+(Asia Pacific Japan). The information for prior periods has been
+restated to conform to current year presentation.
+158
+Consolidated Financial Statements IFRS and Notes | Notes
+Number of Employees
+Full-time equivalents
+In 2016, except for limited close-out activities under our global
+211
+119
+33
+33
+610
+119
+restructuring expense
+Termination benefits outside
+37
+28
+22
+610
+of restructuring plans
+10,229
+10,170
+7,877
+€ millions
+2016
+2015
+2014
+Employee-related
+Employee benefits expense
+-11
+24
+Thereof available-for-sale
+3,812
+6,482
+4,119 3,967 14,621
+4,860 7,977 23,363 9,676
+10,525
+Research and
+Services
+Total
+APJ
+3,574 13,868
+Ame-
+ricas
+3,983 5,138 15,074
+EMEA
+APJ Total
+Ame-
+ricas
+3,920 4,976 14,991
+6,095
+4,184 5,412 16,002
+6,406
+Cloud and software
+EMEA
+5,953
+APJ Total
+4,233
+6,649
+9,049
+administration
+1.643 944 5,023
+2,436
+1,653 937 5,024
+1,746 1,018 5,393 2,434
+2,629
+General and
+7,758 3,776 19,246
+7,029 20,938
+7,712
+7,766
+7,683
+21,977
+8,999 4,435
+8,542
+Sales and marketing
+development
+3,834 2,879 13,361
+3,974 5,885 18,908
+3,974 19,422
+Ame-
+ricas
+EMEA
+December 31, 2014
+-135
+-108
+Thereof interest expense from
+Deferred tax
+-152
+-25
+-246
+30
+-93
+-268
+1,192
+1,267
+1,390
+Total current tax expense
+financial assets (equity)
+30
+176
+164
+Finance costs
+expense/income
+financial liabilities at
+Origination and reversal of
+December 31, 2015
+December 31, 2016
+-38
+Financial income, net
+and development tax credits,
+and foreign tax credits
+derivatives
+9
+96
+242
+Unused tax losses, research
+-28
+-72
+-114
+Thereof interest expense from
+temporary differences
+amortized cost
+-126
+-428
+-403
+SAP Group (December
+78
+41
+637
+Under a multiple-element arrangement including a cloud
+subscription, or on-premise software, and other deliverables, we
+do not account for the cloud subscription, or on-premise
+software, and the other deliverables separately if one of the
+other deliverables (such as consulting services) is deemed to be
+essential to the functionality of the cloud subscription or on-
+premise software. The determination whether an undelivered
+element is essential to the functionality of the delivered element
+requires the use of judgment. The timing and amount of revenue
+recognition can vary depending on how that judgment is
+exercised, because revenue may be recognized over a longer
+service term.
+The determination of whether different contracts with the same
+customer are to be accounted for as one arrangement involves
+the use of judgment as it requires us to evaluate whether the
+contracts are negotiated together or linked in any other way.
+The timing and amount of revenue recognition can vary
+depending on whether two contracts are accounted for
+separately or as one single arrangement.
+How to allocate the total arrangement fee to the distinct
+deliverables
+Which deliverables under one contract are distinct and thus
+to be accounted for separately
+In the accounting for our multiple-element arrangements, we
+have to determine the following:
+assumptions, estimates, and uncertainties inherent in
+determining the stage of completion affect the timing and
+amounts of revenue recognized.
+The application of the percentage-of-completion method
+requires us to make estimates about total revenue, total cost to
+complete the project, and the stage of completion. The
+As described in the Revenue Recognition section of Note (3b),
+we do not recognize revenue before the amount of revenue can
+be measured reliably, collection of the related receivable is
+probable, and the delivery has occurred or the services have
+been rendered. The determination of whether the amount of
+revenue can be measured reliably or whether the fees are
+collectible is inherently judgmental, as it requires estimates as
+to whether and to what extent subsequent concessions may be
+granted to customers and whether the customer is expected to
+pay the contractual fees. The timing and amount of revenue
+recognition can vary depending on what assessments have been
+made.
+Revenue Recognition
+Our management periodically discusses these critical
+accounting policies with the Audit Committee of the Supervisory
+Board.
+Recognition of internally generated intangible assets from
+development
+In the area of allocating the transaction fee to the different
+deliverables under the respective customer contract, judgment
+is required in the determination of an appropriate fair value
+measurement which may impact the timing and amount of
+revenue recognized depending on the following:
+Subsequent accounting for goodwill and intangible assets
+Accounting for legal contingencies
+Accounting for income tax
+-
+Accounting for share-based payments
+Valuation of trade receivables
+Revenue recognition
+The accounting policies that most frequently require us to make
+judgments, estimates, and assumptions, and therefore are
+critical to understanding our results of operations, include the
+following:
+We base our judgments, estimates, and assumptions on
+historical and forecast information, as well as on regional and
+industry economic conditions in which we or our customers
+operate, changes to which could adversely affect our estimates.
+Although we believe we have made reasonable estimates about
+the ultimate resolution of the underlying uncertainties, no
+assurance can be given that the final outcome of these matters
+will be consistent with what is reflected in our assets, liabilities,
+revenues, and expenses. Actual results could differ from original
+estimates.
+The preparation of the Consolidated Financial Statements in
+conformity with IFRS requires management to make judgments,
+estimates, and assumptions that affect the application of
+accounting policies and the reported amounts of assets,
+liabilities, revenues, and expenses, as well as disclosure of
+contingent assets and liabilities.
+(3c) Management Judgments and Sources
+of Estimation Uncertainty
+Consolidated Financial Statements IFRS and Notes | Notes
+152
+Accounting for business combinations
+Whether an appropriate measurement of fair value can be
+demonstrated for undelivered elements
+The approaches used to establish fair value
+Additionally, our revenue for on-premise software contracts
+would be significantly different if we applied a revenue allocation
+policy other than the residual method.
+Consolidated Financial Statements IFRS and Notes | Notes
+154
+In making impairment assessments for our goodwill and
+intangible assets, the outcome of these tests is highly
+dependent on management's assumptions regarding future
+cash flow projections and economic risks, which require
+significant judgment and assumptions about future
+Both the amortization period and the amortization method have
+an impact on the amortization expense that is recorded in each
+period.
+The useful life of an intangible asset, as this is based on our
+estimates regarding the period over which the intangible
+asset is expected to produce economic benefits to us
+The amortization method, as IFRS requires the straight-line
+method to be used unless we can reliably determine the
+pattern in which the asset's future economic benefits are
+expected to be consumed by us
+Judgment is required in determining the following:
+Subsequent Accounting for Goodwill and
+Intangible Assets
+Subsequent changes in the estimated fair values of liabilities
+and provisions may result in additional expense (if increasing
+the estimated fair value) or additional income (if decreasing
+the estimated fair value).
+Subsequent negative changes in the estimated fair values of
+assets may result in additional expense from impairment
+charges.
+Fair values assigned to assets subject to depreciation and
+amortization affect the amounts of depreciation and
+amortization to be recorded in operating profit in the periods
+following the acquisition.
+In our accounting for business combinations, judgment is
+required in determining whether an intangible asset is
+identifiable, and should be recorded separately from goodwill.
+Additionally, estimating the acquisition date fair values of the
+identifiable assets acquired and liabilities assumed involves
+considerable management judgment. The necessary
+measurements are based on information available on the
+acquisition date and are based on expectations and
+assumptions that have been deemed reasonable by
+management. These judgments, estimates, and assumptions
+can materially affect our financial position and profit for several
+reasons, including the following:
+Accounting for Business Combinations
+For more information about our income tax, see Note (10).
+income and projections for future taxable income over the
+periods in which the deferred tax assets are recoverable. Our
+judgment regarding future taxable income is based on
+assumptions about future market conditions and future profits
+of SAP. Changes to these assumptions and outcomes that differ
+from these assumptions could require material adjustments to
+the carrying amount of our deferred tax assets.
+The assessment whether a deferred tax asset is impaired
+requires management judgment, as we need to estimate future
+taxable profits to determine whether the utilization of the
+deferred tax asset is probable. In evaluating our ability to utilize
+our deferred tax assets, we consider all available positive and
+negative evidence, including the level of historical taxable
+We are subject to changing tax laws in multiple jurisdictions
+within the countries in which we operate. Our ordinary business
+activities also include transactions where the ultimate tax
+outcome is uncertain due to different interpretation of tax laws,
+such as those involving revenue sharing and cost
+reimbursement arrangements between SAP Group entities. In
+addition, the amount of income tax we pay is generally subject
+to ongoing audits by domestic and foreign tax authorities. As a
+result, judgment is necessary in determining our worldwide
+income tax provisions. We make our estimates about the
+ultimate resolution of our tax uncertainties based on current tax
+laws and our interpretation thereof. Changes to the assumptions
+underlying these estimates and outcomes that differ from these
+assumptions could require material adjustments to the carrying
+amount of our income tax provisions.
+Accounting for Income Tax
+For the purpose of determining the estimated fair value of our
+share options, we believe expected volatility is the most
+sensitive assumption. Regarding future payout under our cash-
+settled plans, the SAP share price is the most relevant factor.
+Changes in these factors could significantly affect the estimated
+fair values as calculated by the option-pricing model, and the
+future payout. For more information, see Note (27).
+We use certain assumptions in estimating the fair values for our
+share-based payments, including expected share price volatility
+and expected option life (which represents our estimate of the
+average amount of time remaining until the options are
+exercised or expire unexercised). In addition, the final payout for
+plans may also depend on the achievement of performance
+indicators and on our share price on the respective exercise
+dates. Changes to these assumptions and outcomes that differ
+from these assumptions could require material adjustments to
+the carrying amount of the liabilities we have recognized for
+these share-based payments.
+Accounting for Share-Based Payments
+information about a particular customer's financial situation to
+determine whether it is probable that a credit loss will occur and
+the amount of such loss is reasonably estimable and thus an
+allowance for that specific account is necessary. Basing the
+general allowance for the remaining receivables on our historical
+loss experience likewise requires the use of judgment, as history
+may not be indicative of future development. Changes in our
+estimates about the allowance for doubtful accounts could
+materially impact reported assets and expenses, and our profit
+could be adversely affected if actual credit losses exceed our
+estimates.
+153
+Consolidated Financial Statements IFRS and Notes | Notes
+As described in the Trade and Other Receivables section in
+Note (3b), we account for impairments of trade receivables by
+recording sales allowances and allowances for doubtful
+accounts on an individual receivable basis and on a portfolio
+basis. The assessment of whether a receivable is collectible
+involves the use of judgment and requires the use of
+assumptions about customer defaults that could change
+significantly. Judgment is required when we evaluate available
+Valuation of Trade Receivables
+Deferred income is recognized as cloud subscriptions and
+support revenue, software licenses revenue, software support
+revenue, or services revenue, depending on the reason for the
+deferral, once the basic applicable revenue recognition criteria
+have been met. These criteria are met, for example, when the
+services are performed or when the discounts that relate to a
+material right granted in a purchase option are applied.
+Deferred Income
+Since our domestic defined benefit pension plans primarily
+consist of an employee-financed post-retirement plan that is
+fully financed with qualifying insurance policies, current service
+cost may become a credit as a result of adjusting the defined
+benefit liability's carrying amount to the fair value of the
+qualifying plan assets. Such adjustments are recorded in service
+cost.
+The discount rates used in measuring our post-employment
+benefit assets and liabilities are derived from rates available on
+high-quality corporate bonds and government bonds for which
+the timing and amounts of payments match the timing and the
+amounts of our projected pension payments. The assumptions
+used to calculate pension liabilities and costs are disclosed in
+Note (18a). Net interest expense and other expenses related to
+defined benefit plans are recognized as employee benefits
+expenses and classified in our Consolidated Income Statements
+according to the activities that the employees owning the
+awards perform.
+Goodwill and Intangible Assets
+Other non-financial assets are recorded at amortized cost. The
+capitalized contract cost mainly results from the capitalization
+of direct and incremental cost incurred when obtaining a
+customer cloud subscription contract. We amortize these
+assets on a straight-line basis over the period of providing the
+cloud subscriptions to which the assets relate.
+Other Non-Financial Assets
+Included in trade receivables are unbilled receivables related to
+fixed-fee and time-and-material consulting arrangements for
+contract work performed to date.
+In our Consolidated Income Statements, expenses from
+recording bad debt allowances for a portfolio of trade
+receivables are classified as other operating income/expense,
+net, whereas expenses from recording bad debt allowances for
+specific customer balances are classified as cost of cloud and
+software or cost of services, depending on the transaction from
+which the respective trade receivable results. Sales allowances
+are recorded as an offset to the respective revenue item.
+Account balances are written off, that is, charged off against the
+allowance after all collection efforts have been exhausted and
+the likelihood of recovery is considered remote.
+First, we consider the financial solvency of specific customers
+and record an allowance for specific customer balances when
+we believe it is probable that we will not collect the amount
+due according to the contractual terms of the arrangement.
+Second, we evaluate homogenous portfolios of trade
+receivables according to their default risk primarily based on
+the age of the receivable and historical loss experience, but
+also taking into consideration general market factors that
+might impact our trade receivable portfolio. We record a
+general bad debt allowance to record impairment losses for a
+portfolio of trade receivables when we believe that the age of
+the receivables indicates that it is probable that a loss has
+occurred and we will not collect some or all of the amounts
+due.
+Trade receivables are recorded at invoiced amounts less sales
+allowances and allowances for doubtful accounts. We record
+these allowances based on a specific review of all significant
+outstanding invoices. When analyzing the recoverability of our
+trade receivables, we consider the following factors:
+Trade and Other Receivables
+determined. The hedge is deemed highly effective if the
+determination coefficient between the hedged items and the
+hedging instruments exceeds 0.8 and the slope coefficient lies
+within a range of -0.8 to -1.25.
+Retrospectively, effectiveness is tested using statistical
+methods in the form of a regression analysis, by which the
+validity and extent of the relationship between the change in
+value of the hedged items as the independent variable and the
+fair value change of the derivatives as the dependent variable is
+b) Fair Value Hedge
+Retrospectively, effectiveness is tested on a cumulative basis
+applying the dollar offset method by using the hypothetical
+derivative method. Under this approach, the change in fair value
+of a constructed hypothetical derivative with terms reflecting
+the relevant terms of the hedged item is compared to the
+change in the fair value of the hedging instrument employing its
+relevant terms. The hedge is deemed highly effective if the
+results are within the range 80% to 125%.
+a) Cash Flow Hedge
+The method of testing effectiveness retrospectively depends on
+the type of the hedge as described further below:
+The effectiveness of the hedging relationship is tested
+prospectively and retrospectively. Prospectively, we apply the
+critical terms match for our foreign currency hedges, as
+currencies, maturities, and the amounts are identical for the
+forecasted transactions and the spot element of the forward
+exchange rate contract or intrinsic value of the currency options,
+respectively. For interest rate swaps, we also apply the critical
+terms match, as the notional amounts, currencies, maturities,
+basis of the variable legs or fixed legs, respectively, reset dates,
+and the dates of the interest and principal payments are
+identical for the debt instrument and the corresponding interest
+rate swaps. Therefore, over the life of the hedging instrument,
+the changes in the designated components of the hedging
+instrument will offset the impact of fluctuations of the
+underlying hedged items.
+Valuation and Testing of Effectiveness
+We apply fair value hedge accounting for certain of our fixed rate
+financial liabilities.
+b) Fair Value Hedge
+occur.
+With regard to foreign currency risk, hedge accounting relates to
+the spot price and the intrinsic values of the derivatives
+designated and qualifying as cash flow hedges, while gains and
+losses on the interest element and on those time values
+excluded from the hedging relationship as well as the ineffective
+portion of gains or losses are recognized in profit or loss as they
+In general, we apply cash flow hedge accounting to the foreign
+currency risk of highly probable forecasted transactions and
+interest rate risk on variable rate financial liabilities.
+a) Cash Flow Hedge
+they qualify for hedge accounting under IAS 39. For more
+information about our hedges, see Note (25).
+193
+We classify intangible assets according to their nature and use in
+our operation. Software and database licenses consist primarily
+of technology for internal use, whereas acquired technology
+consists primarily of purchased software to be incorporated into
+developments. They can be affected by a variety of factors,
+including:
+Consolidated Financial Statements IFRS and Notes | Notes
+our product offerings and in-process research and development.
+Customer relationship and other intangibles consist primarily of
+customer contracts and acquired trademark licenses.
+Post-Employment Benefits
+The employee-related provisions include, amongst others, long-
+term employee benefits. They are secured by pledged
+reinsurance coverage and are offset against the settlement
+amount of the secured commitment.
+Provisions
+Expenses and gains/losses on financial liabilities mainly consist
+of interest expense, which is recognized based on the effective
+interest method.
+Customer funding liabilities are funds we draw from and make
+payments on behalf of our customers for customers' employee
+expense reimbursements, related credit card payments, and
+vendor payments. We present these funds in cash and cash
+equivalents and record our obligation to make these expense
+reimbursements and payments on behalf of our customers as
+customer funding liabilities.
+fair value through profit or loss. The latter include only those
+financial liabilities that are held for trading, as we do not
+designate financial liabilities at fair value through profit or loss.
+They are classified as financial liabilities at amortized cost and at
+Financial liabilities include trade and other payables, bank loans,
+issued bonds, private placements, and other financial liabilities
+that comprise derivative and non-derivative financial liabilities.
+Financial Liabilities
+Liabilities
+Impairment of Goodwill and Non-Current Assets
+Impairment losses, if any, are presented in other operating
+income/expense, net in profit or loss.
+4 to 20 years
+4 to 5 years
+Predominantly 25 to 50 years
+Based on the term of the lease
+contract
+3 to 5 years
+Automobiles
+Office furniture
+Information technology
+equipment
+Buildings
+Leasehold improvements
+Useful Lives of Property, Plant, and Equipment
+Property, plant, and equipment are depreciated over their
+expected useful lives, generally using the straight-line method.
+Property, plant, and equipment are carried at acquisition cost
+plus the fair value of related asset retirement costs if any and if
+reasonably estimable, less accumulated depreciation.
+Property, Plant, and Equipment
+The annual goodwill impairment test is performed at the level of
+our operating segments since there are no lower levels in SAP at
+which goodwill is monitored for internal management purposes.
+The test is performed at the same time for all operating
+segments.
+Amortization expenses of intangible assets are classified as cost
+of cloud and software, cost of services, research and
+development, sales and marketing, and general and
+administration, depending on the use of the respective
+intangible assets.
+Amortization for acquired in-process research and development
+project assets starts when the projects are complete and the
+developed software is taken to the market. We typically
+amortize these intangibles over five to seven years.
+All our purchased intangible assets other than goodwill have
+finite useful lives. They are initially measured at acquisition cost
+and subsequently amortized either based on expected
+consumption of economic benefits or on a straight-line basis
+over their estimated useful lives ranging from two to 20 years.
+151
+-
+Which contracts with the same customer are to be accounted
+for as one single arrangement
+Internal forecasts
+156
+7
+Research and development
+Sales and marketing
+24
+218
+7
+9
+80
+3
+Cost of cloud and software
+Cost of services
+2014
+24
+2015
+€ millions
+Restructuring Expenses by Functional Area
+If not presented separately in our income statement,
+restructuring expenses would break down by functional area as
+follows:
+Restructuring provisions primarily include personnel costs that
+result from severance payments for employee terminations and
+onerous contract costs. Prior-year restructuring provisions
+relate to restructuring activities incurred in connection with
+organizational changes and the integration of employees of our
+acquisitions in previous years.
+Construction Contracts in Progress
+Revenue from construction contracts (contract revenue) is
+mainly included in software revenue and services revenue
+depending on the type of contract. In 2016, contract revenue of
+€280 million was recognized for all our construction contracts
+(2015: €292 million, 2014: €285 million). The status of our
+construction contracts in progress at the end of the reporting
+period accounted for under IAS 11 (Construction Contracts) was
+as follows:
+For revenue information by geographic region, see Note (28).
+For detailed information about our revenue recognition policies,
+see Note (3).
+(5) Revenue
+In 2016 and 2015, we did not conclude any significant business
+combinations.
+(4) Business Combinations
+2016
+10
+147
+41
+Gross amounts due to
+multi-year)
+Employee Benefits Expense
+(+ profit/ loss;
+92
+20
+-174
+Recognized result
+(multi-year)
+(7) Employee Benefits Expense and
+Headcount
+201
+294
+527
+Aggregate cost recognized
+2014
+2015
+2016
+€ millions
+126
+621
+Changes in business strategy
+28
+20
+1
+General and administration
+Restructuring expenses
+157
+Consolidated Financial Statements IFRS and Notes | Notes
+28
+(d) Hedge accounting
+On May 28, 2014, the IASB issued IFRS 15 (Revenue from
+Contracts with Customers). The new revenue recognition
+standard will be effective for us starting January 1, 2018. We
+do not plan to adopt IFRS 15 early. The standard permits two
+possible transition methods for the adoption of the new
+guidance: (1) retrospectively to each prior reporting period
+presented in accordance with IAS 8 (Accounting Policies,
+Changes in Accounting Estimates and Errors), or (2)
+retrospectively with the cumulative effect of initially applying
+the standard recognized on the date of the initial application
+-
+The standards and interpretations (relevant to the Group) that
+are issued, but not yet effective, up to the date of issuance of the
+Group's financial statements are disclosed below. The Group
+intends to adopt these standards, if applicable, when they
+become effective:
+(3e) New Accounting Standards Not Yet
+Adopted
+No new accounting standards adopted in 2016 had a material
+impact on our Consolidated Financial Statements. We have early
+adopted the amendments to IAS 7 (Statement of Cash Flows),
+which are aimed at improving the information provided to users
+of financial statements about an entity's financing activities, as
+well as expanding the disclosures on net debt.
+(3d) New Accounting Standards Adopted in
+the Current Period
+These judgments impact the total amount of intangible assets
+that we present in our balance sheet as well as the timing of
+recognizing development expenses in profit or loss.
+Determining the future ability to use or sell the intangible
+asset arising from the development and the determination of
+the probability of future benefits from sale or use.
+Determining whether a cost is directly or indirectly
+attributable to an intangible asset and whether a cost is
+necessary for completing a development.
+The term "technical feasibility" is not defined in IFRS, and
+therefore determining whether the completion of an asset is
+technically feasible requires judgment and a company-
+specific approach.
+· Determining whether the conditions for recognizing an
+intangible asset are met requires assumptions about future
+market conditions, customer demand, and other develop-
+ments.
+Determining whether activities should be considered
+research activities or development activities.
+We believe that determining whether internally generated
+intangible assets from development are to be recognized as
+intangible assets requires significant judgment, particularly in
+the following areas:
+Recognition of Internally Generated Intangible
+Assets from Development
+Due to uncertainties relating to these matters, provisions are
+based on the best information available at the time.
+Estimating the amount of the expenditure required to settle
+the present obligation
+Determining the probability of outflow of economic benefits
+Determining whether the amount of an obligation is reliably
+estimable
+Determining whether an obligation exists
+-
+As described in Note (23), we are currently involved in various
+claims and legal proceedings. We review the status of each
+significant matter at least quarterly and assess our potential
+financial and business exposures related to such matters.
+Significant judgment is required in the determination of whether
+a provision is to be recorded and what the appropriate amount
+for such provision should be. Notably, judgment is required in
+the following:
+Accounting for Legal Contingencies
+For more information about goodwill and intangible assets, see
+Note (15).
+The outcome of goodwill impairment tests may also depend on
+the allocation of goodwill to our operating segments. This
+allocation involves judgment as it is based on our estimates
+regarding which operating segments are expected to benefit
+from the synergies of business combinations.
+Changes to the assumptions underlying our goodwill and
+intangible assets impairment assessments could require
+material adjustments to the carrying amount of our recognized
+goodwill and intangible assets as well as the amounts of
+impairment charges recognized in profit or loss.
+We believe that all existing hedge relationships that we have
+currently designated in effective hedging relationships will
+still qualify for hedge accounting in the future, and thus we do
+not expect a significant impact as a result of applying IFRS 9.
+In contrast to IAS 39, where fair value changes related to the
+interest element are recognized in profit or loss immediately,
+IFRS 9 allows recording these costs of hedging in OCI. We
+have not yet made a decision related to the accounting for
+the interest element. Only after having made that decision will
+we be able to reasonably estimate the impact of these new
+requirements on our financial statements.
+Estimation of weighted-average cost of capital
+Consolidated Financial Statements IFRS and Notes | Notes
+155
+At the end of each reporting period, we reassess the potential
+obligations related to our pending claims and litigation and
+adjust our respective provisions to reflect the current best
+estimate. In addition, we monitor and evaluate new information
+that we receive after the end of the respective reporting period
+but before the Consolidated Financial Statements are
+authorized for issue to determine whether this provides
+additional information regarding conditions that existed at the
+end of the reporting period. Changes to the estimates and
+assumptions underlying our accounting for legal contingencies
+and outcomes that differ from these estimates and assumptions
+could require material adjustments to the carrying amounts of
+the respective provisions recorded as well as additional
+provisions. For more information about legal contingencies, see
+Notes (18b) and (23).
+(cumulative catch-up approach). We currently plan to adopt
+the new standard using the cumulative catch-up approach.
+We are in the process of developing our future IFRS 15
+revenue recognition policies and adjusting the relevant
+business processes to adopt these new policies. We have
+established a project across SAP's operating segments. This
+project covers the implementation of a new SAP-based
+revenue accounting and reporting solution as well as the
+development of new revenue recognition policies. Besides
+this, we have established a global roll-out and training
+approach for all of the relevant stakeholders within the
+organization. As part of this effort, we have identified several
+differences between our current accounting policies and the
+future IFRS 15-based policies (as far as these have already
+been developed). Based on our analyses performed so far,
+these differences include:
+We have never designated any financial liabilities at FVTPL
+and have no current intention to do so. Thus, we believe that
+we will not have a material impact with regards to financial
+liabilities, considering that the only significant change that
+IFRS 9 brings to the accounting for financial liabilities is that
+for liabilities designated as at FVTPL, changes in the fair value
+attributable to changes in the credit risk of the liability must
+be presented in other comprehensive income (OCI).
+(c) Impairment
+156
+Loans, trade, and other financial receivables and contract
+assets are held to collect contractual cash flows and are
+expected to give rise to cash flows solely representing
+payments of principal and interest. Thus, we expect that
+these will continue to be measured at amortized cost.
+Derivatives will continue to be measured at FVTPL.
+However, we will continue to analyze the contractual cash
+flow characteristics of all instruments approved to be used
+and the related business model in more detail before
+reaching a final conclusion on the classification for IFRS 9.
+(b) Financial liabilities
+Under our current policies, we classify most of our debt and
+equity investments as available-for-sale financial assets. We
+expect that the majority of our debt investments will be
+measured at amortized cost under IFRS 9, as we hold them to
+collect contractual cash flows which solely represent
+payments of principal and interest. Equity investments can
+be classified as either fair value through other comprehensive
+income (FVOCI) or fair value through profit or loss (FVTPL),
+and we have not yet made a decision in this regard.
+Consequently, we are unable to reasonably estimate the
+impact of the introduction of IFRS 9 on the accounting for our
+equity investments.
+(a) Classification of financial assets
+On July 24, 2014, the IASB issued the fourth and final version
+of IFRS 9 (Financial Instruments), which will be applicable in
+fiscal year 2018 with earlier application permitted. We plan to
+adopt the new standard on the required effective date.
+Our preliminary assessment may be subject to changes, as
+we have not yet finalized our analysis and thus have not
+completed the determination of the impact on our
+Consolidated Financial Statements.
+be material. We are also currently evaluating to what extent
+we want to make use of the practical expedients included in
+the standard. The financial impact of the new standard will
+depend on the lease agreements in effect at the time of
+adoption. It is expected that operating profit will increase, as
+costs that were treated as rental expenses in the past will
+now be recorded as interest expense. It is also expected that
+total assets / liabilities will increase, as right-of-use assets/
+lease liabilities will have to be recorded for those items that
+were previously "off balance sheet." Based on the limited
+assessment of the impact of IFRS 16 performed to date, we
+currently do not know and are not able to reasonably
+estimate the impact on our financial statements.
+On January 13, 2016, the IASB issued IFRS 16 (Leases). The
+standard becomes effective in fiscal year 2019, with earlier
+application permitted for those companies that also apply
+IFRS 15. The new standard is a major revision of lease
+accounting; whereas the accounting by lessors remains
+substantially unchanged, the lease accounting by lessees will
+change significantly as all leases need to be recognized on a
+company's balance sheet as assets and liabilities. For SAP,
+the vast majority of the impact is expected to come from our
+facility leases, and we are currently analyzing the effects of
+adopting the standard and whether or not those effects will
+We will continue to assess all of the impacts that the
+application of IFRS 15 will have on our financial statements in
+the period of initial application, which will also significantly
+depend on our business and go-to-market strategy in 2017.
+The impacts - if material – will be disclosed, including
+statements on if and how we apply any of the practical
+expedients available in the standard.
+Finalized our accounting policy regarding the cost
+components to be included into the cost to fulfill a
+contract under IFRS 15.
+Completed the identification of those contracts that will
+not be completed by the end of 2017 and thus have to be
+restated under the cumulative catch-up approach that we
+intend to use for transition to the new policies
+Performed estimates of the potential changes in business
+practices that may result from the adoption of the new
+policies
+Consolidated Financial Statements IFRS and Notes | Notes
+We currently plan to apply the simplified impairment
+approach of IFRS 9 and record lifetime expected losses on all
+trade receivables and contract assets. The financial impact of
+the new standard will depend on the financial instruments
+recorded at the time of adoption. Based on the current status
+of our analysis, we are expecting offsetting effects, that is,
+increases and decreases in impairment under IFRS 9 and
+thus no material impact. This assessment might change
+based on the result of the more detailed analysis performed
+that considers all reasonable and supportable information,
+including forward-looking elements.
+"
+Completed the analysis of the volume of contracts that will
+be affected by the different policy changes stemming from
+IFRS 15 upon adoption
+Currently, if for any of our product or service offerings, we
+determine at the outset of an arrangement that the
+amount of revenue cannot be measured reliably, we
+conclude that the inflow of economic benefits associated
+with the transaction is not probable, and we defer revenue
+recognition until the arrangement fee becomes due and
+payable by the customer. Under our draft IFRS 15-based
+policies, we need to estimate, at the outset of an
+arrangement, the potential impact on the transaction price
+from both uncertainties in the measurement of revenue
+and from collection uncertainties and recognize the
+remaining revenue earlier.
+IFRS 15 requires changes to the way we allocate a
+transaction price to individual performance obligations,
+which can impact both the classification and the timing of
+revenues. Among these differences are changes in the
+application of the residual approach under IFRS 15 and the
+residual method which we currently apply. While the
+residual method we currently use aims at allocating the
+transaction price between deliverables, the residual
+approach under IFRS 15 is used for estimating the
+standalone selling price of a promised good or service and
+generally would not allow an allocation of little or no
+portion of the transaction price to a performance
+obligation. This difference may result in higher transaction
+price allocations to on-premise software performance
+obligations and thus in an earlier recognition of certain
+portions of the transaction price.
+■
+Under our current policies, we do not account for options
+that allow the customer to purchase additional copies of
+an already-licensed on-premise software product as a
+We expect a revised recognition pattern for on-premise
+software subscription contracts, which combine the
+delivery of software and support service and the obligation
+to deliver, in the future, unspecified software products.
+Under our current policies, we recognize the entire fee
+ratably over the subscription term. In contrast, under IFRS
+15-, we would recognize a portion of the transaction price
+upon delivery of the initial software at the outset of the
+arrangement.
+separate element of an arrangement. In contrast, IFRS 15
+provides that such options are accounted for as a separate
+performance obligation if they represent a material right.
+In such circumstancesIFRS 15 will result in allocating a
+portion of the transaction price to such options giving rise
+to the material right. This portion will be recognized upon
+exercise or forfeiture of the options, which may be later
+than the current revenue recognition timing.
+■ We are currently already capitalizing the cost to obtain a
+contract. We expect the capitalization amount to increase
+under IFRS 15 due to a broader definition of what is
+capitalizable as cost to obtain a contract.
+In addition to the effects on our Consolidated Statements of
+Income, we expect changes to our Consolidated Statements
+of Financial Position (in particular due to no separate balance
+sheet items for deferred revenues being presented anymore,
+the recognition of contract assets/contract liabilities, the
+differentiation between contract assets and trade
+receivables, and an impact in retained earnings from the
+initial adoption of IFRS 15) and changes in quantitative and
+qualitative disclosure to be added. The quantitative impact of
+IFRS 15 on our 2018 financial statements is currently neither
+known to us nor reasonably estimable, as we have not yet
+done the following:
+■
+Concur Acquired technologies
+Concur Customer relationships
+Fieldglass - Acquired technologies
+Fieldglass Customer relationships
+hybris - Customer relationships
+483
+Total significant intangible assets
+Acquired technologies
+9
+hybris
+4
+137
+Acquired technologies
+397
+530
+Ariba
+Ariba Customer relationships
+97
+69
+62
+5
+1,281
+353
+387
+296
+11
+74
+6
+89
+73
+1 to 11
+127
+106
+4
+100
+2 to 11
+SuccessFactors - Customer relationships
+2,863
+148
+165
+Consolidated Financial Statements IFRS and Notes | Notes
+2015 were individually acquired from third parties and include
+cross-license agreements and patents.
+Other additions to software and database licenses in 2016 and
+27,097
+721
+202
+23,311
+26,969
+3,095
+984
+201
+22,689
+1,299
+2014
+Significant Intangible Assets
+3
+€ millions, unless otherwise stated
+Remaining
+99
+SuccessFactors - Acquired technologies
+5 to 7
+400
+325
+- Customer relationships
+Sybase
+1 to 7
+104
+84
+Business Objects - Customer relationships
+(in years)
+2015
+2016
+Useful Life
+Carrying Amount
+Services
+2016
+3,792
+127
+247
+85
+81
+166
+1,281
+120
+127
+1,088
+81
+1,169
+Miscellaneous other liabilities mainly include deferral amounts
+for free rent periods and liabilities related to government grants.
+168
+Consolidated Financial Statements IFRS and Notes | Notes
+1,408
+110
+0
+110
+Current
+Non-Current
+Total
+Current
+Non-Current
+Total
+1,015
+0
+1,016
+893
+0
+893
+145
+0
+145
+(17b) Financial Liabilities
+Financial Liabilities
+€ millions
+2016
+996
+5,151
+6,147
+0
+5,750
+0
+SAP Business
+Network
+5,733
+5,733
+Private placement
+420
+1,240
+418
+1,298
+1,717
+5,150
+2015
+1,000
+Current
+2015
+Nominal Volume
+Carrying Amount
+Nominal Volume
+Carrying Amount
+Current
+Non-
+Current
+Current
+Non-
+Current
+Total
+Current
+Non- Current
+Non-
+Total
+Current
+Bonds
+551
+2016
+Miscellaneous other liabilities
+We believe that any reasonably possible change in any of the
+above key assumptions would not cause the carrying amount of
+our Applications, Technology & Services segment to exceed the
+recoverable amount.
+SAP Business Network
+The recoverable amount of the segment has been determined
+based on fair value less costs of disposal calculation. The fair
+value measurement was categorized as a level 3 fair value based
+on the inputs used in the valuation technique. The cash flow
+projections are based on actual operating results and specific
+estimates covering a nine-year (2015: nine-year) planning period
+and the terminal growth rate thereafter. The projected results
+were determined based on management's estimates and are
+consistent with the assumptions a market participant would
+make. The segment operates in a relatively immature area with
+significant growth rates projected for the near future. We
+therefore have a longer and more detailed planning period than
+one would apply in a more mature segment.
+We are using a target operating margin of 34% (2015: 33%) for
+the segment at the end of the budgeted period as a key
+assumption, which is within the range of expectations of market
+participants (for example, industry analysts).
+The recoverable amount exceeds the carrying amount by
+€6,404 million (2015: €1,764 million).
+The recoverable amount of the segment has been determined
+based on a value-in-use calculation. The calculation uses cash
+flow projections based on actual operating results and a group-
+wide four-year (2015: five-year) business plan approved by
+management.
+The following table shows amounts by which the key
+assumptions would need to change individually for the
+recoverable amount to be equal to the carrying amount:
+Percentage points
+SAP Business Network
+2016
+2015
+-6.9
+-2.1
+Sensitivity to Change in Assumptions
+Applications, Technology & Services
+3.0
+3.0
+2015
+Budgeted revenue
+growth (average of
+the budgeted period)
+6.7
+4.5
+2016
+15.0
+2015
+16.2
+Pre-tax discount rate
+10.4
+11.7
+11.7
+13.0
+Terminal growth rate
+2.0
+3.0
+Budgeted revenue growth (average
+of the budgeted period)
+Pre-tax discount rate
+4.4
+1.4
+1,073
+66
+2,192
+1,137
+1,297
+146
+2,580
+Total additions (other than from business combinations)
+amounted to €933 million (2015: €580 million) and relate
+primarily to the replacement and purchase of computer
+hardware and vehicles acquired in the normal course of
+business and investments in data centers.
+(17) Trade and Other Payables,
+Financial Liabilities, and Other Non-
+Financial Liabilities
+(17a) Trade and Other Payables
+Trade and Other Payables
+€ millions
+Trade payables
+Advance payments received
+1,053
+Trade and other payables
+Total
+Payments and
+Construction
+Target operating margin at the end of
+the budgeted period
+-15
+1)
+1) The recoverable amount would equal the carrying amount if a margin of
+only 27% was achieved by 2022.
+Consolidated Financial Statements IFRS and Notes | Notes
+167
+(16) Property, Plant, and Equipment
+Property, Plant, and Equipment
+€ millions
+Historical cost
+December 31, 2015
+December 31, 2016
+Land and
+Buildings
+Other
+Property,
+Plant, and
+Equipment
+Advance
+in Progress
+1,607
+551
+1,651
+1.125% (fix)
+1.24%
+Applications,
+Technology &
+Percent
+Key Assumptions
+Our estimated cash flow projections for periods beyond the business plan were
+extrapolated using segment-specific terminal growth rates. These growth rates do
+not exceed the long-term average growth rates for the markets in which our
+segments operate.
+99.478%
+Our estimated cash flow projections are discounted to present value using pre-tax
+discount rates. Pre-tax discount rates are based on the weighted average cost of
+capital (WACC) approach.
+Revenue growth rate achieved in the current fiscal year, adjusted for an expected
+increase in SAP's addressable cloud, mobility, and database markets; expected
+growth in the established software applications and analytics markets. Values
+assigned reflect our past experience and our expectations regarding an increase in
+the addressable markets.
+Basis for Determining Values Assigned to Key Assumption
+Terminal growth rate
+Pre-tax discount rates
+Budgeted operating margin
+Budgeted revenue growth
+Operating margin budgeted for a given budget period equals the operating margin
+achieved in the current fiscal year, increased by expected efficiency gains. Values
+assigned reflect past experience, except for efficiency gains.
+2023
+Eurobond 8 - 2014
+749
+€500
+496
+488
+2.125% (fix)
+2.29%
+€750
+776
+774
+Eurobond 7 - 2014
+2018
+100.000%
+0.000% (var.)
+0.08%
+€750
+749
+Key Assumption
+Consolidated Financial Statements IFRS and Notes | Notes
+166
+23,311
+Total
+Other
+SAP Business
+Network
+Applications,
+Technology &
+Services
+The key assumptions on which management based its cash flow
+projections for the period covered by the underlying business
+plans are as follows:
+December 31, 2016
+Foreign currency exchange differences
+Additions from business combinations
+Reallocation due to changes in segment composition
+January 1, 2016
+€ millions
+Goodwill by Reportable Operating Segment
+The carrying amount of goodwill has been allocated for
+impairment testing purposes to those operating segments
+expected to benefit from goodwill. Allocated goodwill to non-
+reportable segments is not material and disclosed under
+"Other" - the carrying amount did not exceed the recoverable
+amount.
+SAP had four operating segments in 2016, of which two are
+reportable segments. For more information about our segments,
+see Note (28).
+Goodwill Impairment Testing
+15,497
+3.59%
+7,191
+22,689
+34
+7,439
+15,839
+566
+1
+216
+349
+57
+0
+31
+25
+0
+33
+0
+-33
+0
+3.50% (fix)
+99.780%
+99.307%
+2019
+567
+8,607
+567
+8,628
+9,195
+Derivatives
+ΝΑ
+ΝΑ
+152
+43
+194
+NA
+ΝΑ
+70
+58
+7,880
+128
+6,450
+6,390
+2,202
+transactions
+Bank loans
+16
+0
+16
+0
+16
+16
+1,250
+16
+1,245
+1,261
+Financial debt
+1,435
+1,430
+3,328
+Other financial liabilities
+ΝΑ
+2015
+Maturity
+Issue Price
+Coupon Rate
+Effective
+Interest Rate
+Nominal
+Volume
+Carrying
+Amount
+Carrying
+Amount
+(in respective (in € millions)
+currency in
+(in €
+millions)
+millions)
+Eurobond 2 - 2010
+2017
+Eurobond 6 - 2012
+2016
+ΝΑ
+Bonds
+Financial liabilities are unsecured, except for the retention of
+title and similar rights customary in our industry. Effective
+interest rates on our financial debt (including the effects from
+interest rate swaps) were 1.25% in 2016, 1.30% in 2015, and
+1.77% in 2014.
+231
+-12
+219
+ΝΑ
+NA
+204
+-5
+199
+Financial liabilities
+1,813
+6,481
+8,294
+841
+8,681
+9,522
+For an analysis of the contractual cash flows of our financial
+liabilities based on maturity, see Note (24). For information
+about the risk associated with our financial liabilities, see
+Note (25). For information about fair values, see Note (26).
+14 to 18
+2015
+994
+2.56
+3.04
+Earnings per share, diluted, attributable to equity holders
+of SAP SE (in €)
+2.75
+2.56
+3.04
+Earnings per share, basic, attributable to equity holders of
+SAP SE (in €)
+1,197
+1,198
+2.74
+1,199
+3
+2
+1
+Dilutive effect of share-based payments¹)
+1,195
+1,197
+1,198
+Weighted average shares outstanding, basic¹)
+-34
+Weighted average shares outstanding, diluted¹)
+1) Number of shares in millions
+162
+Consolidated Financial Statements IFRS and Notes | Notes
+0
+195
+Debt investments
+437
+243
+195
+1,100
+266
+834
+Loans and other financial receivables
+Total
+Non-Current
+Current
+Total
+Non-Current
+Current
+2015
+2016
+€ millions
+Other Financial Assets
+(12) Other Financial Assets
+-32
+-30
+Effect of treasury shares¹)
+1,229
+assets
+Relationship Between Tax Expense and Profit
+Recognized Deferred Tax Assets and Liabilities
+Before Tax
+€ millions, unless otherwise
+stated
+2016
+2015
+2014
+€ millions
+2016
+2015
+Deferred tax liabilities
+Profit before tax
+4,863
+3,991
+4,355
+Intangible assets
+1,162
+1,234
+Tax expense at applicable tax
+1,284
+Cash flow hedges
+195
+-4
+-10
+1,229
+1,229
+Issued ordinary shares¹)
+3,280
+3,064
+3,646
+Profit attributable to equity holders of SAP SE
+2014
+2015
+2016
+€ millions, unless otherwise stated
+Earnings per Share
+(11) Earnings per Share
+1,034
+909
+1,242
+Total
+-21
+-16
+25
+Exchange differences
+4
+26
+0
+26
+5,274
+6,050
+126
+5,924
+163
+86
+77
+225
+124
+101
+5,199
+2
+Total
+Non-Current
+Current
+5,198
+5,825
+2
+5,823
+Total
+Current Non-Current
+2015
+87
+2016
+5,362
+163
+-89
+Allowance for doubtful accounts charged
+Past due but not individually impaired
+-153
+-200
+Sales allowances charged to revenue
+impaired
+3,918
+4,313
+Not past due and not individually
+5,428
+6,114
+Gross carrying amount
+2015
+2016
+€ millions
+2015
+2016
+€ millions
+Aging of Trade Receivables
+Carrying Amounts of Trade Receivables
+Consolidated Financial Statements IFRS and Notes | Notes
+1,055
+Total
+Trade receivables, net
+283
+154
+129
+196
+102
+94
+Derivatives
+908
+881
+27
+1,148
+952
+196
+Available-for-sale financial assets
+882
+881
+1
+953
+952
+1
+Equity investments
+Investments in associates
+Other receivables
+0
+38
+€ millions
+Trade and Other Receivables
+Detailed information about our derivative financial instruments
+is presented in Note (25).
+Derivatives
+For more information about fair value measurement with regard
+to our equity investments, see Note (26).
+Our available-for-sale financial assets consist of debt
+investments in bonds of mainly financial and non-financial
+corporations and municipalities and equity investments in listed
+and unlisted securities, mainly held in U.S. dollars.
+Available-for-Sale Financial Assets
+(13) Trade and Other Receivables
+As at December 31, 2016, there were no loans and other
+financial receivables past due but not impaired. We have no
+indications of impairments of loans and other financial
+receivables that are not past due and not impaired as at the
+reporting date. For general information about financial risk and
+the nature of risk, see Note (24).
+Loans and other financial receivables mainly consist of time
+deposits, investments in pension assets for which the
+corresponding liability is included in employee-related
+obligations (see Note (18b)), other receivables, and loans to
+employees and third parties. The majority of our loans and other
+financial receivables are concentrated in Germany.
+Loans and Other Financial Receivables
+1,687
+1,336
+351
+2,482
+1,358
+1,124
+Total
+58
+58
+0
+38
+1,151
+rate of 26.4% (2015: 26.4%;
+Property, plant, and equipment
+64
+Expiring in the following year
+1
+0
+0
+Pension provisions
+108
+98
+Expiring after the following
+30
+20
+22
+Share-based payments
+207
+163
+year
+Total unused tax credits
+64
+54
+54
+Other provisions and obligations
+72
+517
+Trade and other receivables
+34
+2015
+Deductible temporary
+33
+122
+96
+Deferred tax assets
+differences
+Intangible assets
+81
+99
+Unused research and
+development and foreign
+Property, plant, and equipment
+32
+24
+tax credits
+Other financial assets
+18
+15
+Not expiring
+33
+32
+2016
+431
+118
+Available-for-sale financial
+and loss
+will be reclassified to profit
+Income tax recorded in other
+comprehensive income that
+plans
+defined benefit pension
+-7
+-2
+-2
+Remeasurements on
+We are subject to ongoing tax audits by domestic and foreign tax
+authorities. Currently, we are in dispute mainly with the German
+and only a few foreign tax authorities. The German dispute is in
+respect of intercompany financing matters and certain secured
+capital investments, while the few foreign disputes are in respect
+of intercompany financing matters and the deductibility of
+license fees and intercompany services. In all cases, we expect
+that a favorable outcome can only be achieved through
+litigation. For all of these matters, we have not recorded a
+provision as we believe that the tax authorities' claims have no
+merit and that no adjustment is warranted. If, contrary to our
+view, the tax authorities were to prevail in their arguments
+before the court, we would expect to have an additional tax
+expense (including related interest expenses and penalties) of
+approximately €1,749 million (2015: €1,045 million) in total.
+-3
+comprehensive income that
+will not be reclassified to
+profit and loss
+Income tax recorded in other
+-14
+-5
+Income tax recorded in share
+premium
+1,075
+935
+1,229
+Income tax recorded in profit
+-1
+Deferred income
+2
+2016
+104
+Carryforwards of unused tax losses
+377
+621
+Research and development and foreign
+tax credits
+235
+187
+Other
+Total deferred tax assets
+102
+149
+1,867
+1,955
+€309 million (2015: €429 million; 2014: €441 million) of the
+unused tax losses relate to U.S. state tax loss carryforwards.
+In 2016, subsidiaries that suffered a tax loss in either the current
+or the preceding period recognized deferred tax assets in excess
+of deferred tax liabilities amounting to €189 million (2015:
+€129 million; 2014: €73 million), because it is probable that
+sufficient future taxable profit will be available to allow the
+benefit of the deferred tax assets to be utilized.
+We have not recognized a deferred tax liability on approximately
+€10.81 billion (2015: €9.95 billion) for undistributed profits of
+Consolidated Financial Statements IFRS and Notes | Notes
+161
+our subsidiaries, because we are in a position to control the
+timing of the reversal of the temporary difference and it is
+probable that such differences will not reverse in the foreseeable
+future.
+Total Income Tax
+€ millions
+0
+-75
+€ millions
+1,078
+-106
+-103
+-86
+Other provisions and obligations
+122
+112
+Withholding taxes
+112
+115
+111
+Deferred income
+39
+40
+Research and
+-36
+-31
+-41
+Other
+26
+11
+development and foreign
+Tax exempt income
+tax credits
+4
+Share-based payments
+66
+62
+2014: 26.4%)
+Other financial assets
+158
+389
+Tax effect of:
+Trade and other receivables
+125
+93
+Foreign tax rates
+-105
+-126
+-117
+Pension provisions
+7
+5
+Non-deductible expenses
+78
+61
+63
+3
+875
+Total deferred tax liabilities
+1,950
+Unused tax losses
+Effective tax rate (in %)
+25.3
+23.4
+24.7
+Not expiring
+338
+279
+140
+Expiring in the following year
+32
+95
+63
+Recognized Deferred Tax Assets and Liabilities
+Expiring after the following
+649
+704
+672
+year
+Total unused tax losses
+1,019
+1,075
+1,708
+935
+Total income tax expense
+Prior-year taxes
+-43
+-55
+-10
+Total deferred tax assets/liabilities, net
+159
+5
+Reassessment of deferred
+43
+43
+41
+tax assets, research and
+development tax credits,
+and foreign tax credits
+Other
+Items Not Resulting in a Deferred Tax Asset
+2
+-24
+-37
+€ millions
+2016
+2015
+2014
+1,229
+€1,000
+to expense
+541
+2016
+Carrying
+Amount
+(in respective (in € millions)
+2015
+Carrying
+Amount
+(in € millions)
+currency in
+millions)
+Concur term loan - Facility B
+2017
+Volume
+NA
+€0
+0
+Other loans
+INR 1,051
+16
+1,245
+16
+Bank loans
+16
+1,261
+ΝΑ
+Nominal
+Effective
+Interest Rate
+Maturity Coupon Rate
+439
+426
+Tranche 8-2012
+2024
+3.33% (fix)
+3.37%
+US$323
+334
+318
+Tranche 9-2012
+2027
+3.53% (fix)
+3.57%
+US$100
+107
+100
+Private placements
+1,717
+2,202
+The U.S. private placement notes were issued by one of our
+subsidiaries that has the U.S. dollar as its functional currency.
+Bank Loans
+(17c) Other Non-Financial Liabilities
+Other Non-Financial Liabilities
+€ millions
+2016
+597
+0
+597
+Other non-financial liabilities
+3,699
+461
+4,160
+3,407
+331
+3,739
+For more information about our share-based payments, see
+Note (27).
+170
+Consolidated Financial Statements IFRS and Notes | Notes
+December 31, 2016
+December 31, 2015
+Carrying amount
+5,135
+2,256
+2,186
+589
+104
+552
+US$444.5
+0
+Other taxes
+2015
+Current
+Non-Current
+Total
+Current
+Non-Current
+Total
+Share-based payment liabilities
+602
+309
+911
+555
+205
+760
+Other employee-related liabilities
+2,545
+152
+2,697
+2,255
+126
+2,381
+552
+3.22%
+3.18% (fix)
+2022
+Eurobond 12 - 2015
+2025
+Eurobond 13 - 2016
+2018
+99.264%
+100.000%
+1.00% (fix)
+0.000% (var.)
+1.13%
+€600
+594
+593
+0.03%
+€400
+400
+Eurobonds
+6,147
+5,733
+All of our Eurobonds are listed for trading on the Luxembourg
+Stock Exchange.
+Consolidated Financial Statements IFRS and Notes | Notes
+169
+Private Placement Transactions
+Maturity
+648
+Coupon Rate
+648
+0.07%
+993
+Eurobond 9 - 2014
+2027
+99.284%
+1.75% (fix)
+1.86%
+€1,000
+990
+989
+Eurobond 10 - 2015
+2017
+100.000%
+0.000% (var.)
+0.11%
+€500
+500
+499
+Eurobond 11 - 2015
+2020
+100.000%
+0.000% (var.)
+€650
+December 31, 2016
+Effective
+Interest Rate
+Nominal
+2018
+3.43% (fix)
+3.50%
+US$150
+141
+135
+Tranche 5- 2012
+2017
+2.13% (fix)
+2.16%
+US$242.5
+229
+221
+Tranche 6 - 2012
+2020
+2.82% (fix)
+2.86%
+US$290
+278
+271
+Tranche 7 - 2012
+Tranche 4 - 2011
+2016
+551
+US$600
+Carrying
+Volume
+Amount
+2015
+Carrying
+Amount
+(in respective (in € millions)
+(in € millions)
+currency in
+millions)
+U.S. private placements
+Tranche 2- 2010
+2017
+2.95% (fix)
+3.03%
+US$200
+189
+180
+Tranche 3- 2011
+2016
+2.77% (fix)
+2.82%
+0
+-109
+-92
+-1
+Prepaid expenses primarily consist of prepayments for
+operating leases, support services, and software royalties.
+800
+332
+468
+1,113
+532
+581
+46
+0
+46
+62
+0
+62
+327
+250
+77
+563
+424
+139
+113
+0
+164
+113
+Consolidated Financial Statements IFRS and Notes | Notes
+Goodwill and Intangible Assets
+2,264
+379
+204
+15
+1,666
+Foreign currency exchange differences
+4,644
+2,587
+667
+21,099
+January 1, 2015
+Historical cost
+Total
+and Other
+Intangibles
+Customer
+Relationship
+IPRD
+Acquired
+Technology/
+Database
+Licenses
+Software and
+Goodwill
+€ millions
+(15) Goodwill and Intangible Assets
+Additions from business combinations
+123
+123
+Carrying amount of trade receivables,
+net
+85
+90
+Individually impaired, net of allowances
+1,196
+1,422
+Total past due but not individually
+impaired
+The changes in the allowance for doubtful accounts charged to
+expense were immaterial in all periods presented.
+38
+84
+Past due over 365 days
+257
+305
+Past due 121 to 365 days
+428
+493
+Past due 31 to 120 days
+5,199
+5,825
+Carrying amount trade receivables, net
+473
+5,825
+0
+5,199
+For more information about financial risk and how we manage it,
+see Notes (24) and (25).
+315
+83
+232
+364
+107
+257
+Total
+Non-Current
+Current
+Total
+Non-Current
+Current
+2015
+2016
+Total
+Miscellaneous other assets
+Capitalized contract cost
+Other tax assets
+Prepaid expenses
+€ millions
+Other Non-Financial Assets
+(14) Other Non-Financial Assets
+Past due 1 to 30 days
+27
+6
+0
+Retirements/disposals
+809
+361
+372
+76
+0
+Additions amortization
+187
+89
+84
+10
+4
+Foreign currency exchange differences
+3,393
+1,489
+1,357
+448
+99
+January 1, 2015
+Accumulated amortization
+-8
+32,232
+−1
+-10
+-16
+0
+Retirements/disposals
+746
+351
+321
+74
+0
+Additions amortization
+119
+59
+54
+5
+1
+Foreign currency exchange differences
+4,379
+1,938
+1,812
+526
+103
+December 31, 2015
+−1
+0
+5,119
+791
+Foreign currency exchange differences
+31,348
+5,033
+2,796
+727
+22,792
+December 31, 2015
+-10
+-1
+-1
+-8
+0
+59
+6
+0
+53
+0
+Retirements/disposals
+Other additions
+38
+5
+566
+2,907
+7
+135
+23,415
+December 31, 2016
+-110
+-92
+-1
+-17
+0
+95
+21
+0
+74
+0
+Retirements/disposals
+Other additions
+120
+22
+41
+0
+57
+Additions from business combinations
+779
+71
+28,997
+Total
+180
+93
+79
+44 1,237
+1,068 1,028
+basis points higher
+Discount rate was 50
+913
+775
+840
+398
+359
+296
+259
+101
+49
+1,412 1,221 1,185
+basis points lower
+Total Expense of Defined Benefit Pension Plans
+€ millions
+Domestic Plans
+Foreign Plans
+Other Post-Employment
+Total
+Plans
+2016
+2015 2014
+87
+2016
+311
+725
+1.1
+1.0
+1.3
+The sensitivity analysis table shows how the present value of all
+defined benefit obligations would have been influenced by
+reasonably possible changes to above actuarial assumptions.
+The sensitivity analysis table presented below considers change
+in one actuarial assumption at a time, holding all other actuarial
+assumptions constant. A reasonably possible change in
+actuarial assumptions of 50 basis points in either direction,
+except for the discount rate assumption, would not materially
+influence the present value of all defined benefit obligations.
+Sensitivity Analysis
+€ millions
+Domestic Plans
+Foreign Plans
+Other Post-Employment
+Total
+2016
+344
+2015
+2016
+2015 2014
+2016
+Plans
+2015 2014
+2016 2015
+2014
+Present value of all
+defined benefit
+obligations if:
+Discount rate was 50
+800
+678
+2014
+1.3
+2015 2014
+2015 2014 2016
+-17
+-23
+-2
+-3
+-5
+-1
+-2
+-1
+-23
+-22
+-29
+Past service cost
+-20
+0
+0
+0
+0
+0
+0
+0
+0
+0
+0
+0
+Total expense
+6
+0
+2016
+Interest income
+23
+2015 2014
+Current service cost
+7
+10
+3
+21
+21
+16
+10
+9
+6
+38
+29
+40
+Interest expense
+19
+17
+22
+3
+Non-
+Current
+106
+3
+5
+3
+3
+2
+25
+25
+10
+1.4
+0
+79
+69
+50
+40
+140
+117
+Amounts recognized in the Consolidated
+Statement of Financial Position:
+Non-current provisions
+Total
+-11
+-8
+8
+-79
+-50
+-40
+-140
+-117
+−11
+-8
+-79
+-69
+-50
+-40
+-140
+-117
+-69
+€789 million (2015: €664 million) of the present value of the
+DBO of our domestic plans relate to plans that provide for lump-
+sum payments not based on final salary, and €316 million (2015:
+€287 million) of the present value of the DBO of our foreign
+plans relate to plans that provide for annuity payments not
+based on final salary.
+11
+1,023
+Thereof fully or partially funded plans
+854
+724
+324
+293
+74
+61
+1,252
+1,078
+Thereof unfunded plans
+0
+0
+Net defined benefit liability (asset)
+45
+24
+21
+69
+61
+Fair value of the plan assets
+843
+716
+290
+265
+48
+42
+1,181
+40
+1.4
+The following weighted average assumptions were used for the
+actuarial valuation of our domestic and foreign pension liabilities
+as well as other post-employment benefit obligations as at the
+respective measurement date:
+171
+1.7
+6.0
+6.3
+3.8
+Future pension increases
+2.0
+2.0
+2.0
+0
+0
+0.0
+0.0
+1.7
+0
+2.0
+2.0
+2.0
+10.3
+10.3
+10.1
+8.6
+8.7
+1.3
+Inflation
+2.0
+2.0
+Employee turnover
+Consolidated Financial Statements IFRS and Notes | Notes
+1.7
+2.5
+Actuarial Assumptions
+Percent
+Domestic Plans
+Foreign Plans
+Other Post-Employment Plans
+2016
+2015
+2014
+2016
+2015
+2014
+2016
+2.5
+2015
+Discount rate
+2.1
+2.7
+2.2
+0.6
+0.7
+1.1
+4.0
+4.0
+4.2
+Future salary increases
+2.5
+2014
+3
+22
+21
+12/31/
+Impact
+2016
+Employee-related provisions
+58
+57
+0
+-39
+-2
+0
+74
+Customer-related provisions
+Currency
+61
+0
+-10
+-1
+3
+87
+Intellectual property-related provisions
+11
+7
+0
+-10
+0
+1
+34
+9
+Release
+Addition
+86
+40
+Total Expense of Defined Contribution Plans and
+State Plans
+Defined Contribution Plans/State Plans
+We also maintain domestic and foreign defined contribution
+plans. Amounts contributed by us under such plans are based
+on a percentage of the employees' salaries or the amount of
+contributions made by employees. Furthermore, in Germany
+and some other countries, we make contributions to public
+pension plans that are operated by national or local government
+or a similar institution.
+Total expense
+Consolidated Financial Statements IFRS and Notes | Notes
+€ millions
+2016
+2015
+2014
+Defined contribution plans
+234
+Accretion Utilization
+218
+State plans
+484
+429
+360
+718
+647
+548
+173
+(18b) Other Provisions
+Other Provisions
+€ millions
+1/1/
+2016
+188
+355
+Restructuring provisions
+41
+Thereof non-current
+299
+183
+63
+77
+Customer-related provisions include, among others, disputes
+with individual customers. Intellectual property-related
+provisions relate to litigation matters. Both classes of provisions
+are described in Note (23).
+For more information about our restructuring plans, see
+Note (6).
+The cash outflows associated with employee-related
+restructuring costs are substantially short-term in nature.
+Onerous contract provisions (other than from customer
+contracts) and other provisions comprise facility-related and
+supplier-related provisions. The timing of the associated cash
+outflows is dependent on the remaining term of the underlying
+lease and of the supplier contract.
+(19) Deferred Income
+Deferred income consists mainly of prepayments made by our
+customers for cloud subscriptions and support; software
+support and services; fees from multiple-element arrangements
+allocated to undelivered elements; and amounts recorded in
+purchase accounting at fair value for obligations to perform
+under acquired customer contracts in connection with
+acquisitions
+Thereof current
+Deferred Income
+2016
+2015
+Current
+Deferred Income
+2,383
+Thereof deferred revenue from cloud subscriptions and
+support
+1,271
+Non-
+Current
+143
+0
+Total
+Current
+2,526
+1,271
+2,001
+€ millions
+184
+260
+-18
+0
+-163
+-13
+0
+49
+Onerous contract provisions (other than
+15
+0
+1
+-14
+0
+2
+4
+from customer contracts)
+33
+8
+0
+0
+-2
+0
+39
+Total other provisions
+362
+147
+1
+-236
+Other provisions
+372
+1,037
+1,125
+Government bonds
+Real estate
+Insurance policies
+Cash and cash equivalents
+Others
+Total
+Quoted in an
+Active Market
+2016
+Not Quoted in
+an Active
+Market
+Quoted in an
+Active Market
+2015
+Corporate bonds
+Not Quoted in
+118
+0
+93
+90
+0
+101
+0
+5
+0
+5
+0
+49
+an Active
+Market
+0
+Asset category
+Equity investments
+Plan Asset Allocation
+16
+12
+10
+7
+40
+41
+26
+Actual return on plan
+assets
+97
+-76
+133
+1
+€ millions
+0
+2
+2
+1
+100
+-74
+144
+Our investment strategy on domestic benefit plans is to invest
+all contributions in stable insurance policies.
+Our investment strategies for foreign benefit plans vary
+according to the conditions in the country in which the
+respective benefit plans are situated. Generally, a long-term
+investment horizon has been adopted for all major foreign
+benefit plans. Although our policy is to invest in a risk-diversified
+portfolio consisting of a mix of assets, both the defined benefit
+obligation and plan assets can fluctuate over time, which
+exposes the Group to actuarial and market (investment) risks.
+Depending on the statutory requirements in each country, it
+172
+Consolidated Financial Statements IFRS and Notes | Notes
+might be necessary to reduce any underfunding by addition of
+liquid assets.
+10
+43
+0
+○
+2016
+2015
+25
+19
+26
+26
+8
+2
+21
+18
+45
+43
+2015
+7
+70
+65
+69
+63
+20
+8
+1,009
+935
+232
+223
+51
+28
+2
+2016
+2015
+2016
+864
+0
+736
+11
+0
+9
+0
+44
+0
+36
+0
+317
+864
+287
+736
+Our expected contribution in 2017 to our domestic and foreign
+defined benefit pension plans is immaterial. The weighted
+duration of our defined benefit plans amounted to 14 years as at
+December 31, 2016, and 14 years as at December 31, 2015.
+Maturity Analysis
+€ millions
+Total future benefit payments from our defined benefit plans as
+at December 31, 2016, are expected to be €1,583 million (2015:
+€1,432 million). Eighty-two percent of this amount has
+maturities of over five years.
+Domestic Plans
+Less than a year
+Between 1 and 2 years
+Between 2 and 5
+Over 5 years
+Total
+years
+Foreign Plans
+Other Post-
+Employment Plans
+1,139
+Consolidated Financial Statements IFRS and Notes | Notes
+1,321
+98
+Total
+2,217
+-8,607
+111
+167
+Capital contribution commitments
+-6,390
+Non-current financial debt
+246
+2,992
+3,238
+872
+2,568
+823
+Net liquidity 1
+710
+596
+Other purchase obligations
+-868
+-567
+-1,435
+Current financial debt
+1,114
+intangible assets
+3,559
+4,673
+Purchase obligations
+Group liquidity
+2,330
+-3,153
+266
+790
+167
+436
+316
+December 31, 2016
+Capital Contribution
+Commitments
+Purchase Obligations
+Operating Leases
+Total
+Due thereafter
+Due 2018 to 2021
+Due 2017
+Net liquidity 2
+€ millions
+Our maximum exposure to loss is the amount invested plus
+unavoidable future capital contributions.
+which €141 million had been drawn (2015: €86 million). By
+investing in such equity investments, we are exposed to the risks
+inherent in the business areas in which these entities operate.
+177
+Consolidated Financial Statements IFRS and Notes | Notes
+SAP invests and holds interests in other entities. On
+December 31, 2016, total commitments to make such equity
+investments amounted to €308 million (2015: €197 million), of
+Our operating leases relate primarily to the lease of office space,
+hardware, and vehicles, with remaining non-cancelable lease
+terms between less than one year and 32 years. On a limited
+scale, the operating lease contracts include escalation clauses
+(based, for example, on the consumer price index) and renewal
+options. The contractual obligations for acquisition of property,
+plant, and equipment and intangible assets relate primarily to
+the construction of new and existing facilities and to the
+purchase of hardware, software, patents, office equipment, and
+vehicles. The remaining obligations relate mainly to marketing,
+consulting, maintenance, license agreements, and other third-
+party agreements. Historically, the majority of such purchase
+obligations have been realized.
+As a result of our equity-settled share-based payments
+transactions (as described in Note (27)), we have commitments
+to grant SAP shares to employees. We intend to meet these
+commitments by reissuing treasury shares or to fulfill these
+In 2016, we distributed €1,378 million in dividends from our 2015
+profit (compared to €1,316 million in 2015 and €1,194 million in
+2014 related to 2014 and 2013 profit, respectively), representing
+€1.15
+per share.
+Our general intention is to remain in a position to return liquidity
+to our shareholders by distributing annual dividends totaling
+more than 35% of our profit after tax as well as by repurchasing
+treasury shares in future periods.
+Distribution Policy
+2,462
+-5,615
+Other Financial Commitments
+0
+823
+971
+Total liabilities from financing
+activities
+47
+0
+-6
+-3
+0
+-43
+100
+Assets held to hedge financial debt
+-45
+-1
+0
+-9,141
+1
+0
+-45
+Accrued interest
+-7,880
+−11
+-27
+-37
+-8
+1,400
+-9,195
+Financial debt (carrying amount)
+32
+0
+148
+1,357
+-40
+Current investments
+162
+227
+Contractual obligations for acquisition of
+291
+3,411
+3,702
+Cash and cash equivalents
+1,347
+1,578
+Operating leases
+2015
+-8
+2016
+Δ
+2015
+2016
+Other Financial Commitments
+(22) Other Financial Commitments
+obligations through an agent who administers the equity-settled
+programs and therefor purchases shares on the open market.
+€ millions
+Group Liquidity
+While we continuously monitor the ratios presented in and below
+the capital structure table above, we actively manage our
+liquidity and structure of our financial indebtedness based on
+the ratios group liquidity and net liquidity.
+-7,878
+-12
+-33
+€ millions
+-11
+471
+1,578
+-3,639
+-3,639
+0
+0
+-62
+-62
+-995
+-835
+-1,371
+-2,755
+-9,115
+Total of non-derivative financial liabilities
+-995
+-835
+-1,371
+€ millions
+-1,739
+Financial liabilities
+0
+0
+0
+-1,016
+-1,016
+Trade payables
+2021 Thereafter
+2020
+2019
+2018
+2017
+-8,099
+12/31/2016
+Carrying
+Amount
+-3,683
+-3,683
+-986
+-986
+-836
+-980
+-836
+-980
+-2,778
+-2,778
+-1,756
+-10,288
+Total of non-derivative financial liabilities
+-863
+Contractual Cash Flows
+-9,395
+Thereafter
+2020
+0
+2019
+0
+0
+0
+-893
+-893
+Trade payables
+2018
+2017
+2016
+12/31/2015
+Financial liabilities
+121
+Amount
+Carrying
+a) Foreign Currency Exchange Rate Risk
+Market Risk
+We are exposed to various financial risks, such as market risks
+(including foreign currency exchange rate risk, interest rate risk,
+and equity price risk), credit risk, and liquidity risk.
+(24) Financial Risk Factors
+For information about income tax-related litigation, see
+Note (10).
+We are subject to ongoing audits by domestic and foreign tax
+authorities. In respect of non-income taxes, we, like many other
+companies operating in Brazil, are involved in various
+proceedings with Brazilian tax authorities regarding
+assessments and litigation matters on intercompany royalty
+payments and intercompany services. The total potential
+amount in dispute related to these matters for all applicable
+years is approximately €106 million (2015: €75 million). We
+have not recorded a provision for these matters, as we believe
+that we will prevail.
+Tax-Related Litigation and Claims
+Contingent liabilities exist from customer-related litigation and
+claims for which no provision has been recognized. Generally, it
+is not practicable to estimate the financial impact of these
+contingent liabilities due to the uncertainties around these
+lawsuits and claims outlined above.
+The carrying amount of the provisions recorded for customer-
+related litigation and claims and the development of the carrying
+amount in the reporting period are disclosed in Note (18b). The
+expected timing or amounts of any resulting outflows of
+economic benefits from these lawsuits and claims is uncertain
+and not estimable as they generally depend on the duration of
+the legal proceedings and settlement negotiations required to
+resolve the litigation and claims and the unpredictability of the
+outcomes of legal disputes in several jurisdictions. For more
+information, see Note (3c).
+Customer-Related Litigation and Claims
+Customer-related litigation and claims include cases in which we
+indemnify our customers against liabilities arising from a claim
+that our products infringe a third party's patent, copyright, trade
+secret, or other proprietary rights. Occasionally, consulting or
+software implementation projects result in disputes with
+customers. Where customers are dissatisfied with the products
+and services that we have delivered to them in routine
+consulting contracts or development arrangements, we may
+grant functions or performance guarantees.
+In April 2010, SAP instituted legal proceedings (a declaratory
+judgment action) in the United States against Wellogix, Inc. and
+Wellogix Technology Licensing, LLC (Wellogix). The lawsuit
+sought a declaratory judgment that six patents owned by
+Wellogix were invalid or not infringed by SAP. The legal
+proceedings were stayed pending the outcome of six
+reexaminations filed by SAP with the United States Patent and
+Trademark Office (USPTO). In response to SAP's patent
+Declaratory Judgment action, Wellogix re-asserted trade secret
+misappropriation claims against SAP. The court granted SAP's
+motion to dismiss based on improper venue for litigating the
+trade secret claims in the U.S. and Wellogix appealed that
+decision. In February 2015, SAP filed a declaratory judgment
+action in Frankfurt/Main, Germany, asking the German court to
+rule that SAP did not misappropriate any Wellogix trade secrets.
+In early 2016, the appeals court rejected Wellogix's appeal. In
+mid-2016, SAP's patent declaratory judgment and
+reexaminations resulted in a final judgment invalidating all of
+Wellogix's six asserted patents and the litigation was dismissed.
+The German trade secrets litigation remains pending.
+In February 2010, United States-based TecSec, Inc. (TecSec)
+instituted legal proceedings in the United States against SAP
+(including its subsidiary Sybase) and many other defendants.
+TecSec alleged that SAP's and Sybase's products infringe one
+or more of the claims in five patents held by TecSec. In its
+complaint, TecSec seeks unspecified monetary damages and
+permanent injunctive relief. The lawsuit is proceeding but only
+with respect to one defendant. The trial for SAP (including its
+subsidiary Sybase) has not yet been scheduled - the lawsuit for
+SAP (including its subsidiary Sybase) remains stayed.
+As we are active worldwide, our ordinary operations are subject
+to risks associated with fluctuations in foreign currencies. Since
+the Group's entities mainly conduct their operating business in
+their own functional currencies, our risk of exchange rate
+fluctuations from ongoing ordinary operations is not considered
+significant. However, we occasionally generate foreign currency-
+denominated receivables, payables, and other monetary items
+by transacting in a currency other than the functional currency.
+To mitigate the extent of the associated foreign currency
+exchange rate risk, the majority of these transactions are
+hedged as described in Note (25).
+Consolidated Financial Statements IFRS and Notes | Notes
+Individual cases of intellectual property-related litigation and
+claims include the following:
+Contingent liabilities exist from intellectual property-related
+litigation and claims for which no provision has been recognized.
+Generally, it is not practicable to estimate the financial impact of
+these contingent liabilities due to the uncertainties around the
+litigation and claims, as outlined above. The total amounts
+claimed by plaintiffs in those intellectual property-related
+lawsuits or claims in which a claim has been quantified were not
+material to us as of December 31, 2016 and 2015. Based on our
+past experience, most of the intellectual property-related
+litigation and claims tend to be either dismissed in court or
+settled out of court for amounts significantly below the originally
+claimed amounts and not material to our consolidated financial
+statements.
+The carrying amount of the provisions recognized for intellectual
+property-related litigation and claims and the change in the
+carrying amount in the reporting period are disclosed in
+Note (18b). The expected timing of any resulting outflows of
+economic benefits from these lawsuits and claims is uncertain
+and not estimable as it depends generally on the duration of the
+legal proceedings and settlement negotiations required to
+resolve them. Uncertainties about the amounts result primarily
+from the unpredictability of the outcomes of legal disputes in
+several jurisdictions. For more information, see Note (3c).
+Intellectual property-related litigation and claims are cases in
+which third parties have threatened or initiated litigation
+claiming that SAP violates one or more intellectual property
+rights that they possess. Such intellectual property rights may
+include patents, copyrights, and other similar rights.
+Intellectual Property-Related Litigation and
+Claims
+Among the claims and lawsuits are the following classes:
+However, the outcome of litigation and claims is intrinsically
+subject to considerable uncertainty. Management's view of the
+litigation may also change in the future. Actual outcomes of
+litigation and claims may differ from the assessments made by
+management in prior periods, which could result in a material
+impact on our business, financial position, profit, cash flows, or
+reputation. Most of the lawsuits and claims are of a very
+individual nature and claims are either not quantified by the
+claimants or claim amounts quantified are, based on historical
+evidence, not expected to be a good proxy for the expenditure
+that would be required to settle the case concerned. The
+specifics of the jurisdictions where most of the claims are
+located further impair the predictability of the outcome of the
+cases. Therefore, it is not practicable to reliably estimate the
+financial effect that these lawsuits and claims would have if SAP
+were to incur expenditure for these cases.
+We are subject to a variety of claims and lawsuits that arise from
+time to time in the ordinary course of our business, including
+proceedings and claims that relate to companies we have
+acquired, claims that relate to customers demanding
+indemnification for proceedings initiated against them based on
+their use of SAP software, and claims that relate to customers
+being dissatisfied with the products and services that we have
+delivered to them. We will continue to vigorously defend against
+all claims and lawsuits against us. We currently believe that
+resolving the claims and lawsuits pending as of December 31,
+2016, will neither individually nor in the aggregate have a
+material adverse effect on our business, financial position,
+profit, or cash flows. Consequently, the provisions recorded for
+these claims and lawsuits as of December 31, 2016, are neither
+individually nor in the aggregate material to SAP.
+(23) Litigation and Claims
+Our rental and operating lease expenses were €458 million,
+€386 million, and €291 million for the years 2016, 2015, and
+2014, respectively.
+0
+167
+823
+178
+Contractual Cash Flows
+In rare circumstances, transacting in a currency other than the
+functional currency also leads to embedded foreign currency
+derivatives being separated and measured at fair value through
+profit or loss.
+Consolidated Financial Statements IFRS and Notes | Notes
+€ millions
+Contractual Maturities of Non-Derivative Financial Liabilities
+For more information about the cash flows for unrecognized but
+contractually agreed financial commitments, see Note (22).
+The table below is an analysis of the remaining contractual
+maturities of all our financial liabilities held as at December 31,
+2016. Financial liabilities for which repayment can be requested
+by the contract partner at any time are assigned to the earliest
+possible period. Variable interest payments were calculated
+using the latest relevant interest rate fixed as at December 31,
+2016. As we generally settle our derivative contracts gross, we
+show the pay and receive legs separately for all our currency and
+interest rate derivatives, whether or not the fair value of the
+derivative is negative. The cash outflows for the currency
+derivatives are translated using the applicable forward rate.
+Liquidity Risk
+To reduce the credit risk in investments, we arrange to receive
+rights to collateral for certain investing activities in the full
+amount of the investment volume, which we would be allowed to
+make use of only in the case of default of the counterparty to the
+investment. In the absence of other significant agreements to
+reduce our credit risk exposure, the total amounts recognized as
+cash and cash equivalents, current investments, loans and other
+financial receivables, trade receivables, and derivative financial
+assets represent our maximum exposure to credit risks, except
+for the agreements mentioned above.
+Credit Risk
+We are exposed to equity price risk with regard to our
+investments in equity securities (2016: €952 million; 2015:
+€882 million) and our share-based payments (for the exposure
+from these plans, see Note (27)).
+c) Equity Price Risk
+480
+6,038
+3,078
+3,157
+1,364
+5,567
+In addition, the intellectual property (IP) holders in the SAP
+Group are exposed to risks associated with forecasted
+intercompany cash flows in foreign currencies. These cash flows
+arise out of royalty payments from subsidiaries to the respective
+IP holder. The royalties are linked to the subsidiaries' external
+revenue. This arrangement leads to a concentration of the
+foreign currency exchange rate risk with the IP holders, as the
+royalties are mostly denominated in the subsidiaries' local
+3,308
+2,313
+2015
+2016
+Financing activities
+Investing activities
+€ millions
+We are exposed to interest rate risk as a result of our investing
+and financing activities mainly in euros and U.S. dollars:
+b) Interest Rate Risk
+the functional currency of the investing or borrowing entity. For
+more information, see Note (25).
+financing activities, as such activities are normally conducted in
+Generally, we are not exposed to any significant foreign
+currency exchange rate risk with regard to our investing and
+currencies, while the functional currency of the IP holders with
+the highest royalty volume is the euro. The highest foreign
+currency exchange rate exposure of this kind relates to the
+currencies of subsidiaries with significant operations, for
+example the U.S. dollar, the pound sterling, the Japanese yen,
+the Swiss franc, the Brazilian real, and the Australian dollar.
+179
+Cash Flow Risk Fair Value Risk Cash Flow Risk Fair Value Risk
+0
+0
+0
+based payments
+1
+0
+Reissuance of treasury shares under share-
+-31
+1,229
+December 31, 2015
+2
+Reissuance of treasury shares under share-
+based payments
+-33
+1,229
+December 31, 2014
+December 31, 2016
+2
+Reissuance of treasury shares under share-
+based payments
+-35
+Issued Treasury
+Capital Shares
+1,229
+January 1, 2014
+millions
+Number of Shares
+SAP SE has issued no-par value bearer shares with a calculated
+nominal value of €1 per share. All of the shares issued are fully
+paid.
+Issued Capital
+(20) Total Equity
+Consolidated Financial Statements IFRS and Notes | Notes
+174
+957
+0
+○
+1,229
+Authorized Shares
+564
+-8
+211
+362
+December 31, 2014
+1,282
+-28
+128
+1,182
+Other comprehensive income for items that will be reclassified to profit
+or loss, net of tax
+-718
+20
+-30
+82
+January 1, 2014
+Total
+Cash Flow
+Hedges
+Sale Financial
+Assets
+Available-for-
+Exchange
+Differences
+€ millions
+Other Components of Equity
+SAP SE's share capital is subject to a contingent capital increase
+which may be effected only to the extent that the holders or
+creditors of convertible bonds or stock options issued or
+guaranteed by SAP SE or any of its directly or indirectly
+controlled subsidiaries under certain share-based payments
+exercise their conversion or subscription rights, and no other
+methods for servicing these rights are used. As at December 31,
+2016, €100 million, representing 100 million shares, was still
+available for issuance (2015: €100 million).
+Contingent Shares
+By up to a total amount of €250 million by issuing new no-par
+value bearer shares against contributions in cash until
+May 19, 2020 (Authorized Capital I). The issuance is subject
+to the statutory subscription rights of existing shareholders.
+By up to a total amount of €250 million by issuing new no-par
+value bearer shares against contributions in cash or in kind
+until May 19, 2020 (Authorized Capital II). Subject to the
+consent of the Supervisory Board, the Executive Board is
+authorized to exclude the shareholders' statutory
+subscription rights in certain cases.
+The Articles of Incorporation authorize the Executive Board to
+increase the issued capital as follows:
+-820
+Other comprehensive income for items that will be reclassified to profit
+or loss, net of tax
+957
+Other employee-related liabilities mainly relate to vacation
+obligations, bonus and sales commission obligations, as well as
+employee-related social security obligations.
+400
+299
+180
+479
+(18a) Pension Plans and Similar Obligations
+Defined Benefit Plans
+The measurement dates for our domestic and foreign benefit
+plans are December 31.
+Present Value of the Defined Benefit Obligations (DBO) and the Fair Value of the Plan Assets
+€ millions
+Domestic Plans
+Foreign Plans
+Other Post-
+Employment Plans
+217
+Total
+2015
+2016
+2015
+2016
+2015
+2016
+2015
+Present value of the DBO
+854
+724
+369
+333
+2016
+2,107
+183
+362
+(18) Provisions
+Provisions
+Other taxes mainly comprise payroll tax liabilities and value-
+added tax liabilities.
+€ millions
+2016
+2015
+Current
+Non-
+Current
+Total
+Current
+Non-
+Total
+Total
+Current
+0
+140
+140
+0
+117
+117
+Other provisions (see Note (18b))
+183
+77
+260
+299
+63
+Pension plans and similar obligations (see Note (18a))
+1,861
+125
+11
+4
+-6
+547
+-567
+Current financial debt
+Changes
+Combi- Currency
+nations
+Other 12/31/2016
+Fair Value
+Foreign
+Business
+Cash Flows
+0
+12/31/2015
+Reconciliation of Liabilities Arising from Financing Activities
+Consolidated Financial Statements IFRS and Notes | Notes
+176
+Total financial debt consists of current and non-current bank
+loans, bonds, and private placements. The changes in our
+financial debts are reconciled to the cash flows from liabilities
+arising from financing activities below. For more information
+about our financial debt, see Note (17).
+In 2016, we repaid €1,250 million in bank loans that we had
+taken to finance the Concur acquisition. The repayment was
+partly refinanced through the issuance of a €400 million
+Eurobond with a maturity of two years. We also repaid a
+US$600 million U.S. private placement tranche at maturity.
+Thus, the ratio of total financial debt to total equity and liabilities
+decreased by four percentage points to 18% at the end of 2016
+(22% as at December 31, 2015).
+7
+100
+41,390
+100
+44,277
+-1
+44
+€ millions
+18,095
+-1,413
+Non-current financial debt
+○
+44
+Transaction costs
+-86
+0
+-27
+5
+0
+0
+-64
+Basis adjustment
+-7,826
+-1,435
+0
+-42
+-8
+1,400
+-9,175
+Financial debt (nominal volume)
+-6,390
+1,413
+0
+-46
+-2
+852
+-8,607
+0
+40
+17,880
+-20
+Capital Structure Management
+(21) Additional Capital Disclosures
+Dividends per share for 2015 and 2014 were €1.15 and €1.10
+respectively and were paid in the succeeding year.
+The total dividend available for distribution to SAP SE
+shareholders is based on the profits of SAP SE as reported in its
+statutory financial statements prepared under the accounting
+rules in the German Commercial Code (Handelsgesetzbuch). For
+the year ended December 31, 2016, the Executive Board intends
+to propose that a dividend of €1.25 per share (that is, an
+estimated total dividend of €1,498 million), be paid from the
+profits of SAP SE.
+Dividends
+175
+Consolidated Financial Statements IFRS and Notes | Notes
+acquired and held by, or attributable to, SAP SE do not account
+for more than 10% of SAP SE's issued share capital. Although
+treasury shares are legally considered outstanding, there are no
+dividend or voting rights associated with shares held in treasury.
+We may redeem or resell shares held in treasury, or we may use
+treasury shares for the purpose of servicing option or
+conversion rights under the Company's share-based payment
+plans. Also, we may use shares held in treasury as consideration
+in connection with mergers with, or acquisitions of, other
+companies.
+By resolution of SAP SE's General Meeting of Shareholders held
+on June 4, 2013, the authorization granted by the General
+Meeting of Shareholders on June 8, 2010, regarding the
+acquisition of treasury shares was revoked to the extent it had
+not been exercised at that time, and replaced by a new
+authorization of the Executive Board of SAP SE to acquire, on or
+before June 3, 2018, shares of SAP SE representing a pro rata
+amount of capital stock of up to €120 million in aggregate,
+provided that the shares purchased under the authorization,
+together with any other shares in the Company previously
+Treasury Shares
+3,345
+-8
+The primary objective of our capital structure management is to
+maintain a strong financial profile for investor, creditor, and
+customer confidence, and to support the growth of our
+business. We seek to maintain a capital structure that will allow
+us to cover our funding requirements through the capital
+markets at reasonable conditions, and in so doing, ensure a high
+level of independence, confidence, and financial flexibility.
+292
+December 31, 2016
+785
+-11
+-43
+839
+Other comprehensive income for items that will be reclassified to profit
+or loss, net of tax
+2,561
+3
+336
+2,222
+December 31, 2015
+1,997
+3,062
+SAP SE's long-term credit rating is "A2" by Moody's with stable
+outlook, and "A" by Standard & Poor's with positive outlook.
+Standard & Poor's raised the outlook to positive in 2016.
+Capital Structure
+Equity
+25
+10,228
+19
+8,205
+23
+19
+7,867
+22
+9,674
+13
+56
+23,295
+60
+26,397
+% of
+Total Equity
+and Liabilities
+and Liabilities
+Total Equity
+€ millions
+% of
+€ millions
+A in %
+12/31/2015
+12/31/2016
+Total equity and liabilities
+Liabilities
+Non-current liabilities
+Current liabilities
+82
+property, plant, and equipment and
+NA
+953
+€ millions
+December 31, 2015
+Assets
+Category
+Carrying
+Amount
+At
+Amortized
+Cost
+Measurement
+Categories
+At Fair
+Value
+Fair Value
+Level 1
+Level 2
+Level 3
+Total
+Cash and cash equivalents¹)
+L&R
+3,411
+3.411
+Trade and other receivables
+5,362
+Trade receivables¹)
+L&R
+5,199
+5,199
+Other receivables²)
+163
+Fair Values of Financial Instruments and Classification Within the Fair Value Hierarchy
+Other financial assets
+Consolidated Financial Statements IFRS and Notes | Notes
+-6,248
+-219
+-219
+-219
+Derivatives
+Designated as hedging instrument
+FX forward contracts
+Interest rate swaps
+Not designated as hedging instrument
+-24
+-24
+-24
+-24
+0
+0
+FX forward contracts
+Total financial instruments, net
+HFT
+-170
+-170
+-170
+-170
+2,533
+1,369
+1,149 -6,026 -944
+723
+186
+-219
+1,687
+Debt investments
+Interest rate swaps
+14
+14
+14
+14
+100
+100
+100
+100
+Not designated as hedging instrument
+FX forward contracts
+HFT
+69
+69
+69
+Call options for share-based
+HFT
+94
+94
+[5
+94
+payments
+Call option on equity shares
+HFT
+6
+FX forward contracts
+Available-for-sale financial assets
+Designated as hedging instrument
+receivables
+AFS
+26
+26
+26
+26
+Equity investments
+AFS
+882
+882
+299
+21
+562
+882
+Investments in associates²)
+58
+Loans and other financial receivables
+Financial instruments related to
+121
+employee benefit plans²)
+Other loans and other financial
+L&R
+316
+316
+316
+316
+Derivative assets
+AC
+Other non-derivative financial liabilities
+-1,744
+Other loans and other financial
+L&R
+956
+956
+956
+956
+receivables
+Derivative assets
+Designated as hedging instrument
+FX forward contracts
+Interest rate swaps
+Not designated as hedging instrument
+22
+12
+12
+12
+12
+47
+47
+47
+47
+FX forward contracts
+Call options for share-based
+HFT
+35
+employee benefit plans²)
+35
+144
+Loans and other financial receivables
+3,702
+Trade receivables¹)
+L&R
+5,825
+5,825
+Other receivables²)
+225
+Other financial assets
+2,482
+Available-for-sale financial assets
+Debt investments
+AFS
+195
+195
+195
+195
+Equity investments
+AFS
+Future cash outflows for fixed interest and principal are
+discounted over the term of the respective contracts using the
+market interest rates as of the reporting date.
+153
+94
+706
+953
+Investments in associates²)
+38
+Financial instruments related to
+35
+HFT
+84
+Financial liabilities
+-1,408
+AC
+-1,016
+-1,016
+-392
+-8,294
+Non-derivative financial liabilities
+Loans
+AC
+-16
+-16
+-16
+-16
+Bonds
+AC
+-6,147
+-6,147
+-6,374
+-6,374
+Private placements
+AC
+-1,717
+-1,717
+-1,744
+Other payables²)
+Trade payables¹)
+Trade and other payables
+Liabilities
+84
+84
+payments
+Call option on equity shares
+HFT
+17
+17
+Consolidated Financial Statements IFRS and Notes | Notes
+35
+84
+17
+17
+6
+185
+€ millions
+December 31, 2016
+Category
+Carrying
+Amount
+At
+Amortized
+Cost
+Measurement
+Categories
+At Fair
+Value
+Fair Value
+Level 1
+Level 2
+Level 3
+Total
+Fair Values of Financial Instruments and Classification Within the Fair Value Hierarchy
+3,702
+6,050
+Consolidated Financial Statements IFRS and Notes | Notes
+94
+Interrelationship Between
+Significant Unobservable
+Inputs and Fair Value
+Measurement
+Other financial assets
+Debt investments
+Level 1
+Listed equity
+investments
+Level 1
+Level 2
+Quoted prices in an active market
+Quoted prices in an active market
+Quoted prices in an active market
+deducting a discount for the
+disposal restriction derived from
+the premium for a respective put
+option.
+ΝΑ
+NA
+ΝΑ
+ΝΑ
+ΝΑ
+ΝΑ
+Unlisted equity
+investments
+Level 3
+Market approach. Comparable
+company valuation using revenue
+multiples derived from companies
+comparable to the investee.
+Peer companies used
+(revenue multiples
+range from 3.9 to 8.3)
+Revenues of investees
+Discounts for lack of
+marketability (10% to
+30%)
+The estimated fair value
+would increase (decrease)
+if:
+The revenue multiples were
+higher (lower)
+The investees' revenues
+were higher (lower)
+The liquidity discounts
+were lower (higher).
+Market approach. Venture capital
+method evaluating a variety of
+quantitative and qualitative
+Unobservable Inputs
+factors such as actual and
+Significant
+Fair Value
+Hierarchy
+HFT
+169
+169
+Available-for-sale
+AFS
+908
+908
+Loans and receivables
+L&R
+8,926
+8,926
+Financial liabilities
+At fair value through profit or loss
+HFT
+-117
+-117
+At amortized cost
+AC
+-10,288
+-10,288
+Determination of Fair Values
+It is our policy that transfers between the different levels of the
+fair value hierarchy are deemed to have occurred at the
+beginning of the period of the event or change in circumstances
+that caused the transfer. A description of the valuation
+techniques and the inputs used in the fair value measurement is
+given below:
+Financial Instruments Measured at Fair Value on a Recurring Basis
+Туре
+Determination of Fair
+Value/Valuation Technique
+At fair value through profit or loss
+forecasted results, cash position,
+NA
+The EBITDA multiples were
+Other financial assets/ Financial liabilities
+FX forward
+contracts
+Level 2
+Interest-rate swaps Level 2
+Discounted cash flow using Par-
+Method.
+Expected future cash flows based
+on forward exchange rates are
+discounted over the respective
+remaining term of the contracts
+using the respective deposit
+interest rates and spot rates.
+Discounted cash flow.
+Expected future cash flows are
+estimated based on forward
+interest rates from observable
+yield curves and contract interest
+rates, discounted at a rate that
+reflects the credit risk of the
+counterparty.
+Financial Instruments Not Measured at Fair Value
+higher (lower)
+The investees' EBITDA
+were higher (lower)
+NA
+ΝΑ
+NA
+ΝΑ
+Fair Value Hierarchy
+Determination of Fair Value/Valuation Technique
+Quoted prices in an active market
+Туре
+Financial liabilities
+Fixed rate bonds (financial
+liabilities)
+Level 1
+Fixed rate private placements/
+loans (financial liabilities)
+Level 2
+190
+Discounted cash flows.
+The estimated fair value
+would increase (decrease)
+if:
+recent or planned transactions,
+and market comparable
+companies.
+EBITDA multiples used
+EBITDA of the investee
+Calculated considering risk-free
+interest rates, the remaining term
+of the derivatives, the dividend
+yields, the stock price, and the
+volatility of our share.
+ΝΑ
+Last financing round valuations
+NA
+Consolidated Financial Statements IFRS and Notes | Notes
+189
+Туре
+Fair Value
+Hierarchy
+Determination of Fair
+Value/Valuation Technique
+Significant
+Unobservable Inputs
+Interrelationship Between
+Significant Unobservable
+Inputs and Fair Value
+Measurement
+Liquidation preferences
+NA
+ΝΑ
+Net asset value/Fair market value
+as reported by the respective
+funds
+ΝΑ
+NA
+Call options for
+share-based
+payment plans
+Level 2
+ΝΑ
+ΝΑ
+Call option on
+equity shares
+Level 3
+Monte-Carlo Model.
+Market approach. Company
+valuation using EBITDA multiples
+based on actual results derived
+from the investee.
+Financial assets
+At Fair Value
+December 31, 2015
+-1,261
+-1,261
+-1,261
+-1,261
+Bonds
+AC
+-5,733
+-5,733
+-5,825
+-5,825
+Private placements
+AC
+-2,202
+-2,202
+-2,288
+-2,288
+Other non-derivative financial liabilities
+AC
+-199
+-199
+-199
+-199
+Derivatives
+Designated as hedging instrument
+FX forward contracts
+AC
+Interest rate swaps
+Loans
+-9,522
+6
+6
+187
+Fair Values of Financial Instruments and Classification Within the Fair Value Hierarchy
+€ millions
+Category
+Carrying
+Amount
+December 31, 2015
+Fair Value
+At
+Amortized
+Cost
+Measurement
+Categories
+At Fair
+Value
+Level 1
+Level 2
+Level 3
+Total
+Liabilities
+Trade and other payables
+Trade payables¹)
+Other payables²)
+Financial liabilities
+-1,169
+AC
+-893
+-893
+-276
+Non-derivative financial liabilities
+-10
+-10
+-10
+HFT
+136
+136
+Available-for-sale
+AFS
+1,148
+1,148
+Loans and receivables
+L&R
+10,484
+10,484
+Financial liabilities
+At fair value through profit or loss
+HFT
+At amortized cost
+AC
+-170
+-9,115
+-170
+-9,115
+188
+Consolidated Financial Statements IFRS and Notes | Notes
+€ millions
+Category
+Carrying Amount
+At Amortized Cost
+At fair value through profit or loss
+Financial assets
+At Fair Value
+At Amortized Cost
+-10
+0
+0
+0
+0
+Not designated as hedging instrument
+FX forward contracts
+HFT
+-117
+Total financial instruments, net
+-232
+-1,361
+69
+-117
+-117
+-3,261
+568
+-117
+-8,192
+"We do not separately disclose the fair value for cash and cash equivalents, trade receivables, and accounts payable as their carrying amounts are a reasonable
+approximation of their fair values.
+2) Since the line items trade receivables, trade payables, and other financial assets contain both financial and non-financial assets or liabilities (such as other taxes
+or advance payments), the carrying amounts of non-financial assets or liabilities are shown to allow a reconciliation to the corresponding line items in the
+Consolidated Statements of Financial Position.
+Fair Values of Financial Instruments Classified According to IAS 39
+€ millions
+Category
+December 31, 2016
+Carrying Amount
+1,064 -5,500
+Trade and other receivables
+953
+Cash and cash equivalents¹)
+17
+(25) Financial Risk Management
+We manage market risks (including foreign currency exchange
+rate risk, interest rate risk, and equity price risk), credit risk, and
+liquidity risk on a Group-wide basis through our global treasury
+department. Our risk management and hedging strategy is set
+by our treasury guideline and other internal guidelines, and is
+subject to continuous internal risk analysis. Derivative financial
+instruments are only purchased to reduce risks and not for
+speculation, which is defined as entering into derivative
+instruments without a corresponding underlying transaction.
+Foreign Currency Exchange Rate Risk
+Management
+We continuously monitor our exposure to currency fluctuation
+risks based on monetary items and forecasted transactions and
+pursue a Group-wide strategy to manage foreign currency
+exchange rate risk, using derivative financial instruments,
+primarily foreign exchange forward contracts, as appropriate,
+with the primary aim of reducing profit or loss volatility. Most of
+the hedging instruments are not designated as being in a hedge
+accounting relationship. For more information, see Note (3a).
+30
+Currency Hedges Designated as Hedging
+Instruments (Cash Flow Hedges)
+For all years presented, no previously highly-probable
+transaction designated as a hedged item in a foreign currency
+cash flow hedge relationship ceased to be probable. Therefore,
+we did not discontinue any of our cash flow hedge relationships.
+Also, we identified no ineffectiveness in all years reported.
+Generally, the cash flows of the hedged forecasted transactions
+are expected to occur and to be recognized in profit or loss
+Consolidated Financial Statements IFRS and Notes | Notes
+181
+monthly within a time frame of 12 months from the date of the
+statement of financial position.
+Foreign Currency Exchange Rate Exposure
+Our risk exposure is based on a sensitivity analysis considering
+the following:
+We enter into derivative financial instruments, primarily foreign
+exchange forward contracts, to hedge significant forecasted
+cash flows (royalties) from foreign subsidiaries denominated in
+foreign currencies with a defined set of hedge ratios and a hedge
+horizon of up to 12 months, which is also the maximum maturity
+of the foreign exchange derivatives we use.
+55
+-14
+-97
+-43
+-225
+62
+112
+77
+300
+Total of derivative financial assets
+95
+71
+29
+183
+106
+75
+Total of derivative financial liabilities and assets
+-99
+-
+-83
+The SAP Group's entities generally operate in their functional
+currencies. In exceptional cases and limited economic
+environments, operating transactions are denominated in
+currencies other than the functional currency, leading to a
+foreign currency exchange rate risk for the related monetary
+instruments. Where material, this foreign currency exchange
+rate risk is hedged. Therefore, fluctuations in foreign
+currency exchange rates neither have a significant impact on
+profit nor on other comprehensive income with regard to our
+non-derivative monetary financial instruments and related
+income or expenses.
+Consequently, we are only exposed to significant foreign
+currency exchange rate fluctuations with regard to the following:
+Derivatives held within a designated cash flow hedge
+relationship (excluding the interest element, which is not part
+of the assigned cash flow hedge relationships) affecting other
+comprehensive income
+Interest Rate Risk Management
+The aim of our interest rate risk management is to reduce profit
+or loss volatility and optimize our interest result by creating a
+balanced structure of fixed and variable cash flows. We
+therefore manage interest rate risks by adding interest rate-
+related derivative instruments to a given portfolio of
+investments and debt financing.
+Derivatives Designated as Hedging Instruments
+(Fair Value Hedges)
+The majority of our investments are based on variable rates
+and/or short maturities (2016: 71%; 2015: 87%) while most of
+our financing transactions are based on fixed rates and long
+maturities (2016: 71%; 2015: 66%). To match the interest rate
+risk from our financing transactions to our investments, we use
+receiver interest rate swaps to convert certain fixed-rate
+financial liabilities to floating, and by this means secure the fair
+value of the swapped financing transactions. The desired fixed-
+floating mix of our net debt is set by the Treasury Committee.
+Including interest rate swaps, 42% (2015: 36%) of our total
+interest-bearing financial liabilities outstanding as at December
+31, 2016, had a fixed interest rate.
+None of the fair value adjustment from the receiver swaps, the
+basis adjustment on the underlying hedged items held in fair
+value hedge relationships, and the difference between the two
+recognized in financial income, net is material in any of the years
+presented.
+Interest Rate Exposure
+Lowest exposure
+A sensitivity analysis is provided to show the impact of our
+interest rate risk exposure on profit or loss and equity in
+accordance with IFRS 7, considering the following:
+Changes in interest rates only affect the accounting for non-
+derivative fixed-rate financial instruments if they are
+recognized at fair value. Therefore, such interest rate
+changes do not change the carrying amounts of our non-
+derivative fixed-rate financial liabilities as we account for
+them at amortized cost. Investments in fixed-rate financial
+assets classified as available-for-sale were not material at
+each year-end reported. Thus, we do not consider any fixed-
+rate instruments in the equity-related sensitivity calculation.
+Income or expenses recorded in connection with non-
+derivative financial instruments with variable interest rates
+182
+Consolidated Financial Statements IFRS and Notes | Notes
+are subject to interest rate risk if they are not hedged items in
+an effective hedge relationship. Thus, we take into
+consideration interest rate changes relating to our variable-
+rate financing and our investments in money market
+instruments in the profit-related sensitivity calculation.
+The designation of interest rate receiver swaps in a fair value
+hedge relationship leads to interest rate changes affecting
+financial income, net. The fair value movements related to the
+interest rate swaps are not reflected in the sensitivity
+calculation, as they offset the fixed interest rate payments for
+the bonds and private placements as hedged items. However,
+changes in market interest rates affect the amount of interest
+payments from the interest rate swap. As a consequence,
+those effects of market interest rates on interest payments
+are included in the profit-related sensitivity calculation.
+Interest Rate Sensitivity
+Due to the different interest rate expectations for the U.S. dollar
+and the euro area, we base our sensitivity analyses on a yield
+curve upward shift of +100/+50 basis points (bps) for the U.S.
+dollar/euro area (2015 and 2014: +100/+50 bps for the U.S.
+dollar/euro area) and a yield curve downward shift of -50 bps
+for both the U.S. dollar/euro area (2015: -50 bps; 2014: -50
+bps).
+If, on December 31, 2016, 2015, and 2014, interest rates had
+been higher/lower as described above, this would not have had
+a material effect on financial income, net for our variable interest
+rate investments and would have had the following effects on
+financial income, net.
+-
+Highest exposure
+1.0
+0.8
+Foreign currency embedded derivatives affecting other non-
+operating expense, net.
+We calculate our sensitivity on an upward/downward shift of
++/-25% of the foreign currency exchange rate between euro
+and Brazilian real and +/-10% of the foreign currency exchange
+rate between euro and all other major currencies (2015:
+upward/downward shift of +/-25% of the foreign currency
+exchange rate between euro and Brazilian real; +/-10% of the
+foreign currency exchange rate between euro and all other
+major currencies; 2014: upward shift for Swiss franc +20%, all
+other major currencies +10%, downward shift for all major
+currencies -10%). If on December 31, 2016, 2015, and 2014, the
+foreign currency exchange rates had been higher/lower as
+described above, this would not have had a material effect on
+other non-operating expense, net and other comprehensive
+income.
+Our foreign currency exposure as at December 31 (and if year-
+|
+end exposure is not representative, also our average/high/low
+exposure) was as follows:
+Foreign Currency Exposure
+€ billions
+2016
+2015
+Year-end exposure toward all our major
+currencies
+0.9
+1.0
+Average exposure
+0.9
+1.1
+1.0
+1.2
+Our free-standing derivatives designed for hedging foreign
+currency exchange rate risks almost completely balance the
+changes in the fair values of the hedged item attributable to
+exchange rate movements in the Consolidated Income
+Statements in the same period. As a consequence, the
+hedged items and the hedging instruments are not exposed
+to foreign currency exchange rate risks, and thereby have no
+effect on profit.
+-38
+Cash inflows
+Cash outflows
+3,025
+0
+-2,896
+2,834
+-58
+Currency derivatives designated as hedging
+-24
+Cash inflows
+-10
+Cash outflows
+Cash inflows
+Total of derivative financial liabilities
+-475
+0
+-489
+instruments
+-43
+-3,160
+Cash outflows
+Contractual Maturities of Derivative Financial Liabilities and Financial Assets
+€ millions
+Carrying
+Amount
+Contractual Cash
+Flows
+Carrying
+12/31/2016
+2017 Thereafter
+Amount
+12/31/2015
+Contractual Cash
+Flows
+2016 Thereafter
+Derivative financial liabilities
+Currency derivatives not designated as hedging
+instruments
+-170
+-117
+0
+442
+0
+475
+12
+14
+instruments
+Cash outflows
+-241
+0
+-266
+0
+Cash inflows
+252
+0
+275
+Interest-rate derivatives designated as hedging
+instruments
+47
+100
+Currency derivatives designated as hedging
+€ millions
+-3,010
+3,073
+1,938
+0
+-194
+-168
+-43
+-128
+-76
+L&R
+Derivative financial assets
+Currency derivatives not designated as hedging
+instruments
+35
+69
+Cash outflows
+-1,902
+0
+Cash inflows
+0
+Effects on Financial Income, Net
+-58
+2015
+The default risk of our trade receivables is managed separately,
+mainly based on assessing the creditworthiness of customers
+through external ratings and our past experience with the
+customers concerned. Outstanding receivables are continuously
+monitored locally. For more information, see Note (3). The
+impact of default on our trade receivables from individual
+customers is mitigated by our large customer base and its
+distribution across many different industries, company sizes,
+and countries worldwide. For more information about our trade
+receivables, see Note (13). For information about the maximum
+exposure to credit risk, see Note (24).
+a debtor, we also closely observe the development of credit
+default swap spreads in the market to evaluate probable risk
+developments to timely react to changes if these should
+manifest.
+In addition, the concentration of credit risk that exists when
+counterparties are involved in similar activities by instrument,
+sector, or geographic area is further mitigated by diversification
+of counterparties throughout the world and adherence to an
+internal limit system for each counterparty. This internal limit
+system stipulates that the business volume with individual
+counterparties is restricted to a defined limit, which depends on
+the lowest official long-term credit rating available by at least
+one of the major rating agencies, the Tier 1 capital of the
+respective financial institution, or participation in the German
+Depositors' Guarantee Fund or similar protection schemes. We
+continuously monitor strict compliance with these counterparty
+limits. As the premium for credit default swaps mainly depends
+on market participants' assessments of the creditworthiness of
+To further reduce our credit risk, we require collateral for certain
+investments in the full amount of the investment volume which
+we would be allowed to make use of in the case of default of the
+counterparty to the investment. As such collateral, we only
+accept bonds with at least investment grade rating level.
+To mitigate the credit risk from our investing activities and
+derivative financial assets, we conduct all our activities only with
+approved major financial institutions and issuers that carry high
+external ratings, as required by our internal treasury guideline.
+Among its stipulations, the guideline requires that we invest only
+in assets from issuers with a minimum rating of at least "BBB
+flat". We only make investments in issuers with a lower rating in
+exceptional cases. Such investments were not material in 2016
+and 2015. The weighted average rating of our financial assets is
+in the range A- to BBB+. We pursue a policy of cautious
+investments characterized by predominantly current
+investments, standard investment instruments, as well as a wide
+portfolio diversification by doing business with a variety of
+counterparties.
+Credit Risk Management
+We are exposed to equity price risk with regard to our share-
+based payments. In order to reduce resulting profit or loss
+volatility, we hedge certain cash flow exposures associated with
+these plans through the purchase of derivative instruments, but
+do not establish a designated hedge relationship. In our
+sensitivity analysis, we include the underlying share-based
+payments and the hedging instruments. Thus, we base the
+calculation on our net exposure to equity prices, as we believe
+that taking only the derivative instrument into account would not
+properly reflect our equity price risk exposure. An assumed 20%
+increase (decrease) in equity prices as at December 31, 2016,
+would have increased (decreased) our share-based payment
+expenses by €281 million (€252 million) (2015: increased by
+€200 million (decreased by €198 million); 2014: increased by
+€158 million (decreased by €80 million)).
+million (€81 million) (2015: increased by €87 million (decreased
+by €84 million)).
+183
+Consolidated Financial Statements IFRS and Notes | Notes
+depends on the equity prices, while the fair value of the unlisted
+equity investments is influenced by various unobservable input
+factors. An assumed 10% increase (decrease) in equity prices
+and respective unobservable inputs as at December 31, 2016,
+would have increased (decreased) the value of our marketable
+equity investments and other comprehensive income by €84
+Liquidity Risk Management
+Our listed equity investments are monitored based on the
+current market value that is affected by the fluctuations in the
+volatile stock markets worldwide. Unlisted equity investments
+are monitored based on detailed financial information provided
+by the investees. The fair value of our listed equity investments
+2.64
+2.74
+2.67
+2.69
+2.22
+2.69
+2.59
+2.22
+From interest rate swaps
+3.16
+4.63
+Equity Price Risk Management
+3.73
+Our liquidity is managed by our global treasury department with
+the primary aim of maintaining liquidity at a level that is
+adequate to meet our financial obligations.
+Apart from effective working capital and cash management, we
+have reduced the liquidity risk inherent in managing our day-to-
+day operations and meeting our financing responsibilities by
+arranging an adequate volume of available credit facilities with
+various financial institutions on which we can draw if necessary.
+2016
+Total
+Level 3
+Level 2
+Level 1
+Fair Value
+December 31, 2016
+Measurement
+Categories
+At Fair
+Value
+Amortized
+Cost
+At
+Carrying
+Amount
+Generally, our primary source of liquidity is funds generated
+from our business operations. Our global treasury department
+manages liquidity centrally for all subsidiaries. Where possible,
+we pool their cash surplus so that we can use liquidity centrally
+for our business operation, for subsidiaries' funding
+requirements, or to invest any net surplus in the market. With
+this strategy, we seek to optimize yields, while ensuring liquidity,
+by investing only with counterparties and issuers of high credit
+quality, as explained before. Hence, high levels of liquid assets
+and marketable securities provide a strategic reserve, helping
+keep SAP flexible, sound, and independent.
+Category
+€ millions
+Fair Values of Financial Instruments and Classification Within the Fair Value Hierarchy
+measured at fair value or for which fair value must be disclosed,
+we have categorized the financial instruments into a three-level
+fair value hierarchy depending on the inputs used to determine
+fair value and their significance for the valuation techniques.
+We use various types of financial instruments in the ordinary
+course of business, which are classified as either: loans and
+receivables (L&R), available-for-sale (AFS), held-for-trading
+(HFT), or amortized cost (AC). For those financial instruments
+Fair Value of Financial Instruments
+(26) Additional Fair Value
+Disclosures on Financial
+Instruments.
+respectively. There were immaterial borrowings outstanding
+under these lines of credit in all years presented.
+Consolidated Financial Statements IFRS and Notes | Notes
+184
+Additionally, as at December 31, 2016, and 2015, we had
+available lines of credit totaling €499 million and €520 million,
+In order to retain high financial flexibility, on November 13, 2013,
+SAP SE entered into a €2.0 billion syndicated credit facility
+agreement with an initial term of five years plus two one-year
+extension options. In 2015, the original term of this facility was
+extended for an additional period of one year to November
+2020. The use of the facility is not restricted by any financial
+covenants. Borrowings under the facility bear interest of
+EURIBOR or LIBOR for the respective currency plus a margin of
+22.5 basis points. We are also required to pay a commitment fee
+of 7.88 basis points per annum on the unused available credit.
+We have never drawn on the facility.
+Assets
+3.16
+Consolidated Financial Statements IFRS and Notes | Notes
+3.31
+Average
+Year-End
+2015
+2016
+€ billion
+Interest Rate Risk Exposure
+Our interest rate exposure as at December 31 (and if year-end
+exposure is not representative, also our average/high/low
+exposure) was as follows:
+65
+19
+0
+-65
+High
+-39
+Interest rates -50 bps in euro area
+Interest rates +50 bps in euro area
+Variable rate financing
+70
+62
+29
+-105
+-46
+Derivatives held within a designated fair value hedge relationship
+Interest rates +100 bps in U.S. dollar area/+50 bps in euro area
+Interest rates -50 bps in U.S. dollar/euro area
+2014
+2.31
+-21
+Low Year-End
+-116
+High
+Fair value interest rate risk
+0.20
+0.08
+0.20
+0.03
+0.03
+0.05
+0.07
+0.03
+Cash flow interest rate risk
+Low
+From investments (including cash)
+3.59
+4.38
+3.03
+3.08
+3.09
+3.37
+2.62
+From financing
+Average
+2.31
+3.31
+2.94
+From investments
+12/31/2011
+5 years
+Applying the definition accepted on the Frankfurt Stock
+Exchange, which excludes treasury stock from the free float, as
+of December 31, 2016, the free float stood at 78.8% (December
+31, 2015: 77.5%).
+14
+Return on SAP ADRS.
+To Our Stakeholders | Investor Relations
+Treasury
+3%
+Shareholder Distribution
+Source: Datastream
+"Assuming all dividends were reinvested
+9.4
+20.9
+12.5
+S&P North American Technology Software Index
+Shareholder structure
+15.3
+9.4
+2.3
+Retail/
+Unidentified
+22%
+2.8
+4.3
+Founders
+6.9
+14.2
+5.7
+14.7
+17.3
+9.2
+19.5
+12/31/2015
+1 year
+SAP's capital stock as of December 31, 2016, was
+€1,228,504,232 (2015: €1,228,504,232). It is issued as
+1,228,504,232 no-par shares, each with an attribute value of €1
+in relation to capital stock.
+At the Annual General Meeting of Shareholders, the Executive
+Board and the Supervisory Board will recommend increasing the
+total dividend for fiscal year 2016 by 9% to €1.25
+per share
+(2015: €1.15)
+12/31/2006
+10 years
+Source: Datastream
+1) Assuming all dividends were reinvested
+S&P 500 Composite - total return index
+Performance comparators
+Average annual return
+Value at 12/31/2016¹) (in US$)
+Period of investment
+Date of investment
+Initial investment US$10,000
+Percent, unless otherwise stated
+· 803054204 (CUSIP)
+Capital stock unchanged
+-
+18,642
+11,475
+6.4
+17,657
+12.0
+11.0
+6.9
+14.7
+12.0
+Rewarding our investors -
+Dividend payout of €1.25 per share
+We believe our shareholders should benefit appropriately from
+the profit the company made in 2016. In recent years, the
+payout has always been greater than 35% of profit after tax. We
+aim to continue our policy to pay a dividend totaling more than
+35% of profit after tax in the future.
+11,100
+1 year
+Average annual return
+22,162
+Prime All Share
+CDAX
+Weight (%) in indexes at 12/31/2016
+DAX 30
+Bloomberg
+United States (ADRs)
+IDs and symbols
+WKN/ISIN
+NYSE (ADRs)
+Reuters
+Germany
+Listings
+Key Facts About SAP Stock/SAP ADRs
+We webcast all key investor events at which members of our
+Executive Board speak, and we post all relevant presentations
+on the Investor Relations Web site.
+Twitter feed @sapinvestor, the quarterly SAP INVESTOR
+magazine, and a text message service. Shareholders can reach
+the IR team directly through a telephone hotline and through an
+e-mail at investor@sap.com. We also publish an overview of the
+latest analyst assessments in collaboration with Vara Research.
+Investors can access a wide range of information about SAP and
+its shares online. Our channels of communication include our
+A particular highlight of our global IR program in 2016 was the
+Capital Markets Day held in New York City. At this exciting event,
+attended by more than 75 financial analysts and investors, the
+SAP Executive Board discussed the details of the strong
+strategic position of SAP in the market. The Executive Board
+also discussed the future outlook of the company and shared
+insights about the innovations that the company planned to
+bring into the market in 2016. Two SAP customers, Swiss
+Property and HP Enterprises also presented how SAP is helping
+them in their digital transformation journey. In addition, we
+hosted events for buy-side analysts in Walldorf. We also held
+events for investors and financial analysts at the CeBIT fair in
+Hanover, Germany and at the SAPPHIRE NOW conference in
+Orlando, Florida. Furthermore, we maintained regular dialog
+with socially responsible investors (SRI), providing them with
+insights into our environmental, social, and corporate
+governance policies. SAP representatives spoke at various retail
+shareholder events. The Investor Relations team and the
+Treasury teams also maintained regular communication with the
+debt investor community.
+We are continuously engaged with the investment community
+through a number of channels. Over the course of the year,
+senior management at SAP and the Investor Relations (IR) team
+discussed our strategy and business development with
+institutional investors and analysts worldwide.
+Providing transparency to investors
+In SAP Share (Xetra) n DAX 30 Performance Index (Xetra) n S&P North American Technology Software Index m Dow Jones EURO STOXX 50
+12
+11
+10
+09
+08
+07
+06
+05
+04
+03
+02
+01
+€82.81
+Berlin, Frankfurt, Stuttgart
+New York Stock Exchange
+716460/DE0007164600
+803054204 (CUSIP)
+SAPG.F or .DE
+SAP GR
+8.65
+5 years
+12/31/2011
+24,153
+12/31/2006
+10 years
+S&P 500 Composite - total return index
+REX General Bond - total return index
+80
+DAX 30 Performance — total return index
+Performance comparators
+Value at 12/31/2016¹) (in €)
+Period of investment
+Date of investment
+WKN 716460/ISIN DE007164600
+12/31/2015
+-
+Percent, unless otherwise stated
+Return on SAP Common Stock
+13
+To Our Stakeholders | Investor Relations
+19%
+3.75
+Dow Jones EURO STOXX 50
+2.38
+Dow Jones STOXX 50
+6.89
+HDAX
+6.81
+6.50
+Initial investment €10,000
+Institutional
+Investors*
+56%
+No employee, consultant, or director of a significant SAP
+competitor should be a Supervisory Board member.
+To Our Stakeholders | Investor Relations
+Gerhard Oswald
+To Our Stakeholders | SAP Executive Board
+Business Networks & Applications
+Steve Singh
+Digital Business Services
+Michael Kleinemeier
+Chief Human Resources Officer
+Stefan Ries
+To Our Stakeholders | Report by the Supervisory Board
+20
+20
+At its ordinary meeting on March 24, the Supervisory Board
+turned its attention to SAP SE financial statements and the
+consolidated financial statements for 2015, the audits
+conducted by KPMG AG Wirtschaftsprüfungsgesellschaft
+(KPMG), and the Executive Board's proposed resolution on the
+appropriation of retained earnings for 2015. The Audit
+Committee comprehensively prepared all topics for which it is
+responsible in connection with the financial statements and the
+Meeting in March (Meeting to Discuss the
+Financial Statements)
+At our February 18 meeting, the Executive Board gave us an
+overview of business in 2015 and presented information on
+SAP's revenue growth in the individual business areas, regions,
+and product fields. It also explained SAP's current market
+position. We discussed in detail the annual budget for 2016 as
+presented to us by the Executive Board, and approved same. In
+addition, we reviewed the results of the employee survey.
+Meeting in February
+Other matters addressed at our meetings in 2016 included:
+In our opinion, the complex transition to the cloud initiated by
+the Executive Board can only be successfully implemented with
+the long-term commitment of the Executive Board members to
+the Company. This is why we also agreed in our March meeting
+to prematurely reappoint Bill McDermott, Robert Enslin, Bernd
+Leukert, and Luka Mucic as members of the Executive Board for
+a term of five years. In August and November, the General and
+Compensation Committee prepared an amendment to the
+Executive Board appointment contracts with regards to the
+leaver provisions (that is, the provisions for when an Executive
+Board member steps down) under the LTI plan, which we
+adopted in an extraordinary telephone conference in December.
+We referred in both meetings to the aforementioned
+appropriateness certificate from Ernst & Young.
+Compensation Committee proposed a number of measures for
+consideration by the full Supervisory Board. The Supervisory
+Board, in turn, resolved at its March meeting to increase certain
+Executive Board members' long-term incentive (LTI) plan based
+on their roles, and to generally pay fixed compensation and STI
+compensation elements in the currency of the Executive Board
+member's home country. It subsequently approved the
+individual Executive Board compensation packages. The
+Supervisory Board, as required, evaluated the appropriateness
+of the Executive Board members' compensation, and in each
+case found it to be appropriate in terms of amount, structure,
+objective criteria, and for each member's responsibilities and
+tasks. Ahead of the meeting, we had received a certificate from
+Ernst & Young on the compensation's appropriateness. For
+more information about the LTI Plan 2016 and other elements of
+the compensation package for Executive Board members, see
+the Compensation Report.
+We also discussed Executive Board compensation for 2015 at
+the February meeting. Exercising our discretionary powers
+under the terms of the short-term incentive (STI) plan 2015, we
+determined performance against the defined targets. As well, we
+determined target achievement within the so-called
+performance period for the 2015 tranche of the RSU Milestone
+Plan 2015. Introduced in 2012, the RSU Milestone Plan 2015 is a
+long-term variable compensation element for SAP SE Executive
+Board members in which the members were granted a number
+of virtual shares (called restricted share units, or RSUs) for a
+given year (or "tranche"); the quantity of RSUs ultimately
+allocable for a plan tranche depends on SAP's operating profit
+performance in the year it is allocated. When we met in
+February, we also deliberated on Executive Board compensation
+for 2016. We identified the key performance indicators (KPIs)
+and set the target numbers for each KPI in the STI 2016 plan and
+their relative weightings. In addition, we decided that, as of 2016,
+there should be greater differentiation in Executive Board
+members' compensation based on the function and role of the
+individual Executive Board member. We therefore requested
+Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft, the
+Company's external compensation consultants, to carry out a
+benchmark analysis of the Executive Board appointment
+contracts based on a peer group of companies predefined by us.
+After comprehensive evaluation of this analysis, the General and
+At our ordinary meeting in February, we resolved the
+appointment of Stefan Ries and Steve Singh to the Executive
+Board effective April 1, 2016. The Executive Board explained its
+concept to dissolve the Global Managing Board and instead have
+various managers in global key roles more directly involved in
+crucial management tasks in the future. We acknowledged and
+endorsed this decision.
+The Supervisory Board dealt with human resources (HR)
+matters and Executive Board compensation notably in its first
+two meetings of 2016. All HR and compensation topics were
+extensively prepared by the General and Compensation
+Committee and subsequently adopted by the full Supervisory
+Board.
+HR Topics and Executive Board
+Compensation
+year. When we met in July, the Executive Board reported on
+some of the results achieved thus far in SAP's controlling,
+internal reporting, and other financial processes. As part of its
+simplification efforts, the Company also streamlined and
+optimized the process by which the SAP SE financial
+statements, the consolidated financial statements, and the
+integrated report are prepared, thus enabling SAP to publish our
+integrated report as early as February of the new year from now
+on. To accommodate this new timeline, the Supervisory Board
+adjusted its meeting schedule as of the new year and brought
+forward discussion of balance sheet-related topics from the
+March meeting to the February meeting.
+19
+To Our Stakeholders | Report by the Supervisory Board
+The 2020 strategy, which has the goal to make SAP the world's
+leading cloud company in terms of market share, market
+capitalization, and revenue, was discussed at length with the
+Executive Board at meetings of the Technology and Strategy
+Committee meetings and of the full Supervisory Board. At our
+meetings in February and July, the Executive Board apprised us
+of the various initiatives and projects for implementing this
+strategy. In July, we also heard an Executive Board report on the
+total cost of ownership (TCO) in the cloud area, and gave our
+constructive feedback on the plans presented. Likewise in our
+line of focus was the Run Simple initiative, SAP's project for
+simplifying our internal processes and reducing complexity. We
+continuously monitored progress of this initiative throughout the
+Simplification of Processes, and the
+Company's 2020 Strategy
+Product, Quality & Enablement (retired December 31, 2016)
+year:
+11
+12.9%
+85
+90
+95
+100
+105
+12/31/2015
+€73.38
+110
+115
+Percent
+SAP Stock in Comparison to DAX 30, Dow Jones EURO STOXX 50, and S&P North American Technology Software Index
+December 31, 2015 (= 100%) to December 31, 2016
+To Our Stakeholders | Investor Relations
+12
+Our stock continued to hover above the €80 mark during the
+first few days of October before a weak start to the reporting
+season and concerns about the Chinese economy depressed the
+markets anew. Publication of our strong third-quarter results on
+October 21 and an upward revision in our forecast, however, saw
+the SAP share price rise 3.7% to €81.98. In early November,
+uncertainty over the outcome of the presidential election in the
+USA determined the mood on global stock markets. SAP stock
+closed at €78.52 on November 1 in a somber market
+environment. Following the surprising election results on
+November 8, global stock markets reacted with initial panic but
+recovered quickly. At the beginning of December the decision
+against constitutional reform in Italy put further pressure on
+stocks. The promise of continued lose monetary policy from the
+ECB, however, subsequently pushed stocks higher. During this
+positive trend at the end of the year, the SAP stock closed the
+year on December 30 at a new all-time high of €82.81.
+Fear of the consequences of the Brexit continued to weigh on
+the markets until early July, when encouraging data on the US
+labor market and hopes of a further central bank stimulus
+package lifted market sentiment again. After publication of
+strong financial results for the second quarter on July 20, the
+price of SAP stock surged 5.7% to €75.72, its highest closing
+price ever at that point. Positive analyst estimates buoyed the
+SAP share price even higher, propelling it past the €80 mark for
+the first time ever in the Company's history to close at €80.40
+on September 2. At the end of September, the Federal Reserve's
+decision not to raise interest rates had a positive impact on the
+overall market situation, pushing SAP stock to €82.36 on
+September 22.
+The share price ultimately reached €72.96 on May 31, in the
+wake of a market recovery triggered by a falling euro and rising
+commodity prices. On June 23, however, the markets collapsed
+following Britain's shocking vote to leave the EU - and SAP
+stock tumbled, falling to €66.40 on June 28, its lowest level
+since February.
+SAP stock recovered after the announcement of our preliminary
+first-quarter results on April 20, climbing to €71.09. At the
+beginning of May, however, weak company results, a solid euro,
+and increasing concerns about a Brexit put the stock markets
+under renewed pressure and drove the DAX below the 10,000-
+point mark again. By contrast, the price of SAP stock remained
+stable. On May 13, the day after the Annual General Meeting of
+Shareholders, it finished at €68.49, despite the €1.15 ex-
+dividend effect.
+The DAX fell below 10,000 points at the beginning of the year as
+a result of China's stock market crash and declining oil prices.
+SAP stock, meanwhile, reached its quarter peak of €74.25 on
+January 12 following publication of our preliminary full-year
+results for 2015. At the end of January, a strong euro and
+uncertainty about US interest rate policies strained the market
+further, pushing the DAX below 9,000 points. This in turn
+caused our share price to drop to €64.90, the lowest point of the
+year, on February 11.
+SAP Stock Reaches New All-Time
+High
+International stock markets endured another rollercoaster year
+in 2016, prompted, among other things, by China's faltering
+economy, the UK vote to leave the EU, the presidential election
+in the United States, the referendum in Italy, the Federal
+Reserve's interest rate decisions, strong exchange rate
+fluctuations, and low oil prices. SAP stock nevertheless held up
+well, crossing the €80 mark for the first time in its history. With
+an increase of 12.9% during the year, the stock outperformed
+major indices for the second year in a row. In comparison, the
+DAX 30 increased 6.9% and the EURO STOXX 50 increased
+around 0.7%.
+International Stock Markets
+An Up and Down Year for
+Market capitalization
+at end of 2016
+€101.7 bn
+Recommended dividend
+per share
+€1.25
+in 2016
+Increase in SAP stock
+Investor Relations
+*11% of these investors are classified as socially responsible investors (SRIs)
+In 2016, the Supervisory Board of SAP SE held four ordinary
+meetings and one extraordinary meeting at which we
+deliberated and resolved on all matters of relevance to the
+Company. We also adopted two resolutions by correspondence
+vote. No Supervisory Board member attended only half or less
+of the meetings of the Supervisory Board and of the committees
+to which the member belonged in the fiscal year. The average
+attendance rate for the Supervisory Board and committee
+meetings was 95%. The Supervisory Board and its committees
+also convened wholly or partly without the Executive Board as
+necessary to deliberate on items that pertained to the Executive
+Board or required internal discussion among Supervisory Board
+members alone. On this basis, the Executive Board withdrew
+temporarily from three of the plenary sessions, in particular. The
+Supervisory Board addressed the following key topics during the
+The CEO informed the Supervisory Board chairperson without
+delay of all important events that were significant for assessing
+SAP's position and progress or for the management and
+governance of the Company. Moreover, the chairperson of the
+Supervisory Board met regularly with the CEO to discuss SAP's
+strategy, planning, the Company's business performance, risks,
+risk management, compliance, and other key topics and
+decisions. In this way, the chairperson of the Supervisory Board
+was also kept fully informed between meetings of the
+Supervisory Board and its committees.
+We believe the current composition of the Supervisory Board
+fulfills all of these objectives. There is information about each
+member, the committees, and who serves on which committee,
+on the SAP Web site.
+No member of the Supervisory Board should be older than 75
+years.
+At least five shareholder representatives on the Supervisory
+Board should be independent members in the meaning of
+section 5.4.2 of the Code.
+There should never be fewer than three people from the
+international stage on the shareholder representatives' side
+of the Supervisory Board.
+-
+-
+The Supervisory Board members as a group possess the
+knowledge, ability, and expert experience required to properly
+perform its duties in our global IT company. At least one
+independent member has financial reporting and auditing
+expertise. The Supervisory Board has defined the following
+objectives for its own composition:
+Composition of the Supervisory
+Board
+and the Supervisory Board and about the work of the
+Supervisory Board and its committees in 2016, see the Report
+by the Supervisory Board.
+To Our Stakeholders | Corporate Governance Report
+16
+The Supervisory Board has 18 members who, in equal numbers,
+represent the shareholders and the employees. It appoints,
+monitors, and advises the Executive Board. The Executive Board
+involves the Supervisory Board in decisions on matters of
+fundamental importance for the Company. The Supervisory
+Board has reserved to itself the approval of certain transactions
+of fundamental importance, as set out in the Articles of
+Incorporation and detailed in the Supervisory Board's list of
+reserved categories of transactions. The Executive Board
+regularly provides the Supervisory Board with full and timely
+reports on all material matters of strategy, business planning,
+and performance, including any deviations of actual business
+performance from plan, risks, risk management, and corporate
+compliance. We provide our shareholders with in-depth
+information about how the Executive Board and the Supervisory
+Board work, how the committees are composed, and how these
+committees work, in our corporate governance statement. For
+more information about the joint work of the Executive Board
+The size and composition of the Supervisory Board are
+governed not by the German Codetermination Act (which does
+not apply, because we are a European company) but by the
+Articles of Incorporation and the SAP SE Employee Involvement
+Agreement. Both documents are available on the SAP Web site.
+Supervisory Board
+The Executive Board currently has seven members. It is solely
+responsible for managing the Company. It has a duty to exercise
+its management powers in the interest of the Company and in
+pursuit of the sustained growth of corporate value. It discusses
+and agrees its strategy for the Company with the Supervisory
+Board, ensures compliance with the requirements of the law
+throughout the Group, and maintains effective risk management
+structures and internal risk controls. There is information about
+each member's portfolio of responsibilities on the SAP Web site.
+Executive Board
+statement is on the SAP Web site. It comprises the current
+declaration pursuant to the German Stock Corporation Act,
+section 161, certain details of our corporate governance
+practices, and an account of how the Executive Board and the
+Supervisory Board work, who serves on which Supervisory
+Board committees, and how those committees work. It also sets
+out the targets for the percentage of women on the Executive
+Board and the two management levels below Executive Board
+level.
+On February 21, 2017, the Executive Board published a
+corporate governance statement for 2016 pursuant to sections
+315 (5) and 289a of the German Commercial Code. The
+Corporate Governance Statement
+Since SAP is also listed in the United States, we comply with the
+rules that apply to non-U.S. companies listed on the New York
+Stock Exchange (NYSE). These include the requirements, as
+they apply to foreign private issuers, of the NYSE Corporate
+Governance Standards, the U.S. Sarbanes-Oxley Act of 2002,
+and the U.S. Securities and Exchange Commission (SEC).
+Code.
+SAP is an international firm with European roots, having the legal
+form of a European company (Societas Europaea, or SE). Being
+an SE headquartered in Germany, we are now subject to
+European and German law for SEs while remaining subject to
+German stock corporation law. Major characteristics of our
+governance structure remain in place since the conversion,
+notably our two-tier board comprising a Supervisory Board and
+an Executive Board, and parity for workforce representatives on
+the Supervisory Board. Because SAP SE is listed on a German
+stock exchange, our corporate governance is still based on the
+German Corporate Governance Code (the "Code" in this report).
+Every year, as required by the German Stock Corporation Act,
+section 161, the Executive Board and Supervisory Board issue a
+declaration stating whether SAP has implemented and is
+following the Code's recommendations, and identifying any
+recommendations that the Company has not followed - with a
+full explanation of why it has not done so. Our latest section 161
+declaration, published on October 29, 2016, is on the SAP Web
+site along with our declarations from previous years and links to
+the current and previous editions of the Code. As our 2016
+declaration shows, we currently follow all but five of the 102
+recommendations and all of the suggestions in the current
+Corporate Governance Principles at
+SAP
+We are a global company with an international shareholder base,
+so we need sound governance. Good corporate governance
+means managing the Company accountably and transparently
+to secure long-term value. We believe our shareholders,
+business partners, employees, and the financial markets reward
+good corporate governance with the increased trust they place
+in our Company.
+Report
+Corporate Governance
+15
+Independence of the Supervisory
+Supervisory Board Meetings and
+Resolutions
+Board
+Diversity in the Company
+The content and scope of the Executive Board's reports to us
+fully met our requirements for them. In addition, the Executive
+Board came to Supervisory Board meetings for discussion of the
+agenda items and to answer our questions. To ensure optimal
+performance of its duties, the Supervisory Board also deploys
+the latest SAP technologies. At our meetings, for example, we
+used the SAP Digital Boardroom, an innovative, analytical
+software solution that allows analysts to generate impressive
+graphics for all business area metrics in real time across
+multiple interactive computer screens. Thanks to this solution,
+we were always able to draw on current data and in-depth
+analyses during our discussions. We questioned and probed the
+Executive Board to satisfy ourselves that the information it gave
+to us was plausible. All transactions requiring approval by the
+Supervisory Board, whether by law, the Articles of Incorporation,
+or the Supervisory Board's list of transactions requiring consent
+within the meaning of the German SE Implementation Act (SE-
+Ausführungsgesetz), section 19, were carefully examined and
+discussed with the Executive Board, focusing on the benefits,
+potential risks, and other effects of each transaction. The
+Supervisory Board agreed to all transactions for which its
+consent was sought by the Executive Board.
+We regularly received full and timely reports from the Executive
+Board, both from members in person and in written documents.
+They kept us up to date on the Company's strategy, plans,
+business performance, risks, risk management, compliance (in
+other words, adherence to laws, to the Company's Articles of
+Incorporation, and to internal policies), and on transactions of
+special significance for SAP. The Executive Board advised us
+when business deviated from plan or target, and why.
+In 2016, we dealt extensively with the status and the
+development of the Company and discharged the duties
+imposed on us by the law and by the Company's Articles of
+Incorporation. We were consulted by the Executive Board
+throughout the year and kept the global management of the
+Company under continued observation and scrutiny for legal
+compliance, adherence to proper accounting principles,
+business focus, and efficiency. We agreed to the Company's
+strategy with the Executive Board and regularly discussed with
+the Executive Board the Company's progress toward executing
+it. We were directly involved when the Executive Board made
+any decision of fundamental importance to SAP.
+Dear Shareholders,
+Report by the
+Supervisory Board
+To Our Stakeholders | Corporate Governance Report
+18
+Executive Board and Supervisory
+Board Shareholdings
+In German stock corporation and commercial law, there are
+special requirements for internal risk management that apply to
+SAP. To meet them, our global risk management system
+supports risk planning, identification, analysis, handling, and
+minimization. We maintain standard documentation of all our
+internal control structures, especially those that affect financial
+reporting, and continually evaluate their effectiveness. As a
+company listed on the NYSE, we instruct our auditor, KPMG, to
+conduct an annual audit of our internal control over financial
+reporting in accordance with the requirements of the U.S.
+Sarbanes-Oxley Act of 2002, section 404. The audit as of
+December 31, 2016, confirmed that our internal control is
+effective. In compliance with the reporting requirements in the
+German Commercial Code, sections 289 (5) and 315 (2)(5), the
+combined SAP SE and SAP Group management report contains
+full information about the principal features of the internal
+controls and risk management structure applying to SAP's
+consolidated financial reporting.
+In addition to our annual financial statements, we also prepare
+quarterly statements for all four quarters in accordance with the
+rules and regulations of the Frankfurt Stock Exchange, as well a
+half-year financial report on June 30 pursuant to the legal
+requirements of the German Securities Trading Act. Our
+quarterly statements and half-year financial report are
+submitted to the Audit Committee of the Supervisory Board
+before they are published.
+the consolidated financial statements, and the combined
+management report. The SAP SE financial statements, the
+consolidated financial statements, and the combined
+management report are audited by KPMG AG
+Wirtschaftsprüfungsgesellschaft, the auditor elected for that
+purpose by the Annual General Meeting of Shareholders.
+Financial Accounting, Risk
+Management, and Internal Control
+We prepare the SAP SE financial statements in accordance with
+the German Commercial Code and our consolidated financial
+statements in accordance with International Financial Reporting
+Standards (IFRSS). We prepare a management report, as
+required by the German Commercial Code, and the Form 20-F
+annual report in accordance with SEC requirements. The
+Executive Board is responsible for financial accounting. The
+Supervisory Board approves the SAP SE financial statements,
+Our shareholders can obtain full and timely information about
+SAP on our Web site and can access current and historical
+Company data. Among other information, we post all of our
+financial reports, all relevant news about the Company's
+governing bodies and their corporate governance docu-
+mentation, information requiring ad hoc (current) disclosure,
+press releases, and news of notifiable directors' dealings.
+Transparency, Communication, and
+Service for Shareholders
+Our shareholders exercise their rights, such as the rights to put
+questions to the management and to vote, at the Annual General
+Meeting of Shareholders. Shareholders and the public are able
+to watch a live broadcast of the entire Annual General Meeting of
+Shareholders on the Internet. They can vote their shares at the
+Meeting or instruct a proxy of their choice or one of the proxies
+provided for that purpose by SAP. Alternatively, they can
+participate online or vote by mail. The invitation to the Annual
+General Meeting of Shareholders includes full details and
+instructions. Every shareholder can access all of the paperwork
+on the SAP Web site in good time for the meeting.
+Annual General Meeting of
+Shareholders
+SAP is a NYSE-listed company and we are therefore subject to
+certain U.S. financial legislation (including the Sarbanes-Oxley
+Act of 2002, among others) and to the applicable SEC and NYSE
+regulations. Besides implementing the requirements of the U.S.
+Sarbanes-Oxley Act, section 404, and other Sarbanes-Oxley Act
+requirements, including conducting an annual audit of our
+internal control over financial reporting, we comply with those of
+the corporate governance standards codified in the NYSE Listed
+Company Manual, section 303A, which bind foreign private
+issuers. The section 303A standards that apply to SAP include
+the requirement to have an audit committee composed of
+members who are independent in the meaning of the Sarbanes-
+Oxley Act, and related reporting requirements. Erhard
+Schipporeit, the chairperson of the Audit Committee, is an audit
+committee financial expert in the meaning of the Sarbanes-
+Oxley Act.
+Applying International Corporate
+Governance Standards
+17
+To Our Stakeholders | Corporate Governance Report
+SAP's corporate governance includes our Code of Business
+Conduct for employees and members of the Executive Board.
+The Code of Business Conduct expresses the high standards
+that we require from our employees and Executive Board
+members and sets out the main principles that guide our
+business conduct toward customers, business partners, and
+shareholders. We see our Code of Business Conduct as the
+standard for our dealings involving customers, business
+partners, vendors, shareholders, and competitors. By following
+our Code of Business Conduct, we demonstrate a commitment
+against all forms of unfair competitive practice, corruption, and
+misrepresentation. Our global compliance organization
+monitors worldwide compliance with the Code of Business
+Conduct and other policies applying within the Group. It
+regularly reviews these internal policies, revises them if
+necessary, and delivers related employee training.
+Code of Business Conduct
+The Executive Board continues to follow the recommendation in
+the Code that executive boards should generally have regard to
+diversity when appointing people to leadership positions, and in
+particular to employ appropriate numbers of women in such
+positions. In support of this, we maintain a diversity policy for
+company leadership appointments. SAP has set itself a target of
+increasing the overall percentage of positions in leadership held
+by women to 25% by 2017. It goes without saying that ability is
+still the primary selection criterion for any position at SAP.
+Globally, the percentage of leadership positions held by women
+at the end of 2016 was 24.5%.
+The first and second management levels below the Executive
+Board are the Global Executive Team (GET) and the Senior
+Executive Team (SET), respectively. In accordance with the
+requirements of the Act, the Executive Board resolved on
+September 30, 2015, that the percentage of positions held by
+women on the first two management levels below the Executive
+Board should remain unchanged at 23% and 17%, respectively,
+to June 30, 2017.
+The Executive Board currently has seven male members.
+Pursuant to the above Act, the Supervisory Board adopted by
+resolution at its meeting on March 19, 2015, a target of one for
+the number of Executive Board seats to be held by women by
+June 30, 2017.
+for Women Act). There are currently two women on the
+shareholder representatives' side of the Supervisory Board and
+two women on the employee representatives' side. The
+mandatory quota applies to future appointments to the
+Supervisory Board; the mandates of the current members of the
+Supervisory Board remain unaffected until the end of their term.
+Starting 2016, a mandatory gender quota of 30% applies for
+new appointments to the Supervisory Board of SAP SE pursuant
+to the law on the equal participation of men and women in
+leadership positions (German Equal Leadership Opportunities
+We believe a sufficient degree of independence of our
+Supervisory Board members is essential for effective and
+responsible corporate management and control. Our
+Supervisory Board has a defined objective for its composition
+regarding the minimum number of independent members on the
+shareholder representative side, as recommended in the Code,
+section 5.4.1, paragraph 2. The objective is five such members.
+At its meeting on October 28, 2016, the Supervisory Board
+determined that all of its shareholder representative members
+are independent in the meaning of the Code, section 5.4.2 and
+that the number of independent members is sufficient in the
+meaning of that section. The Audit Committee is chaired by
+Erhard Schipporeit, who for many years was the chief financial
+officer of a DAX company that is also listed on a U.S. stock
+exchange and therefore qualifies as an independent financial
+expert in the meaning of the German Stock Corporation Act,
+section 100 (5).
+Section 6.2, sentence 2, of the Code recommends that all
+directors' shareholdings be reported in a corporate governance
+report, broken down by executive board and supervisory board
+memberships if the entire holdings exceed 1% of the shares
+issued by the Company. In fulfillment of this recommendation,
+see the Compensation Report in our combined management
+report for 2016, which contains the recommended information.
+12/31/2016
+Reconciliation of Level 3 Fair Values
+SMP
+0
+0
+77
+Own
+2014
+2015
+2016
+€ millions
+Recognized Expense for Equity-Settled Plans
+1,051
+-105
+24
+-444
+1,600
+-78
+-2,808
+551
+3,935
+SMP
+12/31/2016
+Forfeited
+Exercised
+Granted
+12/31/2015
+Forfeited
+0
+80
+89
+Others
+Currency
+Currency
+Actual Constant
+2016
+Services
+Total Reportable Segments
+SAP Business Network
+Applications, Technology &
+€ millions
+Revenue and Results of Segments
+Consolidated Financial Statements IFRS and Notes | Notes
+196
+In addition, we established a further operating segment
+comprising SAP's healthcare strategy and solutions, which also
+does not qualify as a reportable segment due to its size. Since
+this segment represents a new business area to SAP, no
+significant adjustments to prior-year figures of other segments
+were made. Revenue and expenses of both non-reportable
+segments are included in the reconciliation of segment revenue
+and results.
+On April 1, 2016, we split the Applications, Technology &
+Services segment. The solutions SAP Anywhere, SAP Business
+One, and SAP Business By Design were combined into one
+organization, as together they provide complete front-office and
+back-office solutions for small and medium-sized customers.
+This reallocation resulted in a new operating but non-reportable
+segment since it does not exceed the quantitative thresholds in
+IFRS 8.13. We have retrospectively adjusted our revenue and
+results for the Applications, Technology & Services segment to
+reflect this change.
+collaborative business networks and from services relating to
+the SAP Business Network (including cloud applications,
+professional services, and education services). Within the SAP
+Business Network segment, we mainly market and sell the cloud
+offerings developed by SAP Ariba, SAP Fieldglass, and Concur.
+The SAP Business Network segment derives its revenues mainly
+from transaction fees charged for the use of SAP's cloud-based
+The Applications, Technology & Services segment derives its
+revenues primarily from the sale of software licenses,
+subscriptions to our cloud applications, and related services
+(mainly support services and various professional services and
+premium support services, as well as implementation services
+for our software products and education services on the use of
+our products).
+SAP has two reportable segments that are regularly reviewed by
+the Executive Board, which is responsible for assessing the
+performance of the Company and for making resource
+allocation decisions as the Chief Operating Decision Maker
+(CODM). One is the Applications, Technology & Services
+segment and the other is the SAP Business Network segment.
+The segments are largely organized and managed separately
+according to their product and service offerings.
+General Information
+(28) Segment and Geographic
+Information
+96
+87
+107
+Total
+7
+7
+6
+Exercised
+2015
+Actual
+Currency
+Granted
+thousands
+Fair Value and Parameters at Grant Date for SMP
+The weighted average remaining life of free matching shares
+outstanding is 0.9 years at year end 2016. The following table
+shows the parameters and assumptions used at grant date to
+determine the fair value of free matching shares, as well as the
+quantity of shares purchased and free matching shares:
+The terms for the members of the Senior Leadership Team and
+Global Executives were slightly different than those for the other
+employees. They did not receive a discount when purchasing the
+shares. However, after a three-year holding period, they receive
+two free matching SAP shares for every three SAP shares
+acquired. This plan was not open to members of the SAP
+Executive Board.
+Under the Share Matching Plan (SMP), SAP offered its
+employees the opportunity to purchase SAP shares at a
+discount of 40% between 2010 and 2015. The number of SAP
+shares an eligible employee could purchase through the SMP
+was limited to a percentage of the employee's annual base
+salary. After a three-year holding period, the plan participants
+receive, from SAP, one free matching share for every three SAP
+shares acquired.
+b.2) Share Matching Plan (SMP)
+The number of shares purchased under this plan was 1.4 million
+in 2016.
+shares without any holding period. Each eligible employee's
+investment is limited to a percentage of the employee's monthly
+base salary. SAP matches the employee investment by 40% and
+adds a subsidy of €20 per month for non-executives. For the
+participation in 2016, employees receive a double matching
+contribution as well as a double subsidy. This plan is not open to
+members of the SAP Executive Board.
+Under the Own SAP Plan (Own) implemented in 2016, SAP
+offers its employees the opportunity to purchase, monthly, SAP
+b) Equity-Settled Share-Based Payments
+b.1) Own SAP Plan (Own)
+The number of RSUs that will vest under the 2016 tranche with
+performance-based grants was mostly contingent upon
+achievement of the non-IFRS operating profit performance
+milestones in 2016. Depending on performance, the number of
+RSUS vesting ranges between 0% and 200% of the number
+initially granted. Performance against the KPI targets was
+85.13% (2015: 112.96%) in 2016. The RSUs are paid out in cash
+upon vesting.
+Over a one-to-three-year service period and upon meeting
+certain key performance indicators (KPIs).
+Over a one-to-three-year service period only, or
+Grant date
+-
+a.4) Restricted Stock Unit Plan Including Move
+SAP Plan (RSU Plan (2013-2016 Tranches))
+Monetary benefits will be capped at 100% of the exercise price
+(150% for members of the SAP Executive Board).
+The exercise price is 110% of the grant base value (115% for
+members of the Executive Board), which is €39.03 (€40.80) for
+the 2010 tranche, €46.23 (€48.33) for the 2011 tranche, €49.28
+for the 2012 tranche, €59.85 for the 2013 tranche, €60.96 for
+the 2014 tranche, and €72.18 for the 2015 tranche.
+Consolidated Financial Statements IFRS and Notes | Notes
+194
+The virtual stock options granted under the SOP 2010 give the
+employees the right to receive a certain amount of money by
+exercising the options under the terms and conditions of this
+plan. After a three-year vesting period (four years for members
+of the Executive Board), the plan provides for 11 predetermined
+exercise dates every calendar year (one date per month except
+in April) until the rights lapse six years after the grant date
+(seven years for members of the Executive Board). Employees
+can exercise their virtual stock options only if they are employed
+by SAP; if they leave the Company, they forfeit. Executive Board
+members' options are non-forfeitable once granted - if the
+service agreement ends in the grant year, the number of options
+is reduced pro rata temporis. Any options not exercised at the
+end of their term expire.
+The grant-base value was based on the average fair market
+value of one ordinary share over the five business days prior to
+the Executive Board resolution date.
+Under the SAP Stock Option Plan 2010, we granted members of
+the Senior Leadership Team/Global Executives and employees
+with an exceptional rating as well as high potentials between
+2010 and 2015, and only in 2010 and 2011 members of the
+Executive Board, cash-based virtual stock options, the value of
+which depends on the multi-year performance of the SAP share.
+a.3) SAP Stock Option Plan 2010 (SOP 2010
+(2010-2015 Tranches))
+The final financial effect of each tranche of the LTI 2015 Plan will
+depend on the number of vested share units and the SAP share
+price, which is set directly after the announcement of the
+preliminary fourth-quarter and full-year results for the last
+financial year of the respective three-year holding period under
+the LTI 2015 Plan, and thus may be significantly above or below
+the budgeted amounts.
+The LTI 2015 Plan includes a "look-back" provision, due to the
+fact that this plan is based on certain KPI targets in 2015. The
+number of share units vested under the 2015 tranche was
+adjusted to reflect the overall achievement for 2015, which
+differed from the value represented by the number of share
+units vested from the 2012 to 2014 tranches. However, share
+units that were already fully vested in prior years did not forfeit.
+The share units for members of the Global Managing Board
+under the LTI 2015 Plan are subject to a three-year holding
+period before payout, which started in 2016.
+To retain and motivate executives and certain employees, we
+granted RSUs representing a contingent right to receive a cash
+payment determined by the market value of the same number of
+SAP SE shares (or SAP SE American Depositary Receipts on the
+New York Stock Exchange) and the number of RSUs that
+ultimately vest. Granted RSUs will vest in different tranches,
+either:
+Fair value of granted awards
+Information how fair value was measured at grant date
+Option pricing model used
+Equity-Settled Plans
+Changes in Numbers of Outstanding Awards for
+195
+Consolidated Financial Statements IFRS and Notes | Notes
+"For these awards, the fair value is calculated by subtracting the net present value of expected future dividend payments, if any, until maturity of the respective
+award from the prevailing share price as of the valuation date.
+1,550
+1,492
+Number of investment shares purchased (in thousands)
+0.9
+1.5
+Weighted average remaining life of awards outstanding at year end (in years)
+1.87%
+1.67%
+Expected dividend yield
+0.13%
+-0.08%
+Risk-free interest rate
+€55.61
+€66.31
+Other¹)
+Other¹)
+€52.49
+6/4/2014
+6/5/2015
+€62.98
+2014
+2015
+Share price
+12/31/2014
+2016
+2015
+2016
+-336
+-385
+-384
+-444
+-669
+-667
+Cost of cloud
+20,579
+22,007
+21,845
+1,616
+1,920
+-1,051
+1,925
+20,087
+19,920
+Total segment revenue
+3,520
+3,661
+3.622
+249
+304
+303
+3,271
+3,358
+3,319
+18,963
+-1,055
+-781
+subscriptions and
+-18
+-2,718 -2,539
+-2,669
+Cost of services
+software
+-2,753
+-3,012
+-2,994
+-337
+-386
+-385
+-2,416
+-2,626
+-2,610
+Cost of cloud and
+licenses and support
+-1,972
+-1,957
+-1,943
+-1
+-1
+−1
+-1,971
+-1,956
+-1,942
+Cost of software
+support
+Services
+17,059
+18,346
+18,223
+-1
+0
+0
+4,770
+4,814
+4,784
+Software licenses
+and support
+2,268
+2,960
+2,948
+1,337
+1,589
+1,595
+932
+1,371
+1,353
+Cloud subscriptions
+Currency Currency
+Actual
+Constant
+Actual
+Currency
+Actual
+Currency
+Currency
+Constant
+Actual
+Currency
+2015
+4,783
+against either or both of those KPI targets does not reach the
+defined threshold of 60% (80% for 2013 tranches), no share
+units vest and share units granted for that year will be forfeited.
+The adjustment to the threshold of those performance
+indicators was made to reflect our updated expectations due to
+the accelerated shift to the cloud. For the year 2015, the RSUs
+granted at the beginning of the year vested with 112.96%
+achievement of the KPI targets for the LTI 2015 Plan.
+4,813
+Software support
+1,367
+1,617
+1,622
+15,692
+16,729
+16,600
+Cloud and software
+support
+14,790
+15,385
+15,275
+30
+27
+27
+14,760
+15,358
+15,247
+Software licenses and
+10,021
+10,572
+10,492
+31
+28
+28
+9,990
+10,544
+10,464
+4,770
+At the end of a given year, the number of share units that finally
+vest with plan participants depends on SAP's actual
+performance for the given year, and might be higher or lower
+than the number of share units originally granted. If
+performance against both KPI targets reaches at least the
+defined threshold of 60% (80% for 2013 tranches), the share
+units vest. Depending on performance, the vesting can reach a
+maximum of 150% of the budgeted amount. If performance
+The share unit allocation process took place at the beginning of
+each year based on SAP's share price after the publication of its
+preliminary annual results for the last financial year prior to the
+performance period.
+a.2) Long-Term Incentive Plan (LTI 2015 Plan)
+The LTI 2015 Plan is linked to the SAP share price performance
+and the achievement of two financial key performance
+indicators (KPIs): non-IFRS total revenue and non-IFRS
+operating profit, which are derived from SAP's 2015 financial
+KPIs. Under this plan, virtual shares, referred to as share units,
+were granted to participants. Participants are paid out in cash
+based on the number of share units that vest. All participants in
+the LTI 2015 Plan were members of our Global Managing Board.
+€73.24
+€73.38
+€73.38
+€73.38
+Share price
+Other¹)
+Monte Carlo
+Other¹)
+Other¹)
+Option pricing model used
+Information how fair value was measured at measurement date
+Weighted average fair value as at 12/31/2015
+Risk-free interest rate (depending on maturity)
+€71.90
+€73.38
+€71.45
+RSU
+(2013-2015
+Tranches)
+SOP 2010
+(2010-2015
+Tranches)
+EPP 2015
+(2012-2015 (2015 Tranche)
+Tranches)
+LTI Plan 2015
+Fair Value and Parameters Used at Year End 2015 for Cash-Settled Plans
+"For these awards, the fair value is calculated by subtracting the net present value of expected future dividend payments, if any, until maturity of the respective
+award from the prevailing share price as of the valuation date.
+1.2
+1.45%
+1.46%
+2.4
+1.4
+€16.06
+-0.25% to
+ΝΑ
+-0.03% to
+thousands
+Changes in Numbers of Outstanding Awards Under Our Cash-Settled Plans
+Consolidated Financial Statements IFRS and Notes | Notes
+192
+Expected remaining life of the options reflects both the
+contractual term and the expected, or historical, exercise
+behavior. The risk-free interest rate is derived from German
+government bonds with a similar duration. The SAP dividend
+yield is based on expected future dividends.
+of 39% are based on the historical data of SAP share price and
+the index price.
+For SOP 2010, expected volatility of the SAP share price is
+based on a blend of implied volatility from traded options with
+corresponding lifetimes and exercise prices as well as historical
+volatility with the same expected life as the options granted. For
+LTI 2016 Plan valuation, the Peer Group Index price at year end
+was US$179.57; the expected dividend yield of the index of
+1.24% and the expected volatility of the index of 18%, and the
+expected correlation of the SAP share price and the index price
+"For these awards, the fair value is calculated by subtracting the net present value of expected future dividend payments, if any, until maturity of the respective
+award from the prevailing share price as of the valuation date.
+1.2
+3.4
+0.1
+1.7
+Weighted average remaining life of options outstanding as at
+12/31/2015 (in years)
+1.56%
+1.56%
+ΝΑ
+1.56%
+Expected dividend yield
+41.9%
+-0.39%
+NA
+22.0% to
+ΝΑ
+NA
+Expected volatility
+-0.38%
+-0.39%
+-0.16% to
+1.45%
+1.45%
+3.0
+12/31/2016 (in years)
+Weighted average remaining life of awards outstanding as at
+LTI Plan 2015
+(2012-2015
+Tranches)
+LTI Plan 2016
+(2016 Tranche)
+Weighted average fair value as at 12/31/2016
+Fair Value and Parameters Used at Year End 2016 for Cash-Settled Plans
+191
+Consolidated Financial Statements IFRS and Notes | Notes
+The valuation of our outstanding cash-settled plans was based
+on the following parameters and assumptions:
+SAP has made cash-settled share-based payments under the
+following plans: Long-Term Incentive Plan (LTI) for the Executive
+Board 2015 and 2016, Stock Option Plan 2010 (SOP 2010
+(2010-2015 tranches)), and Restricted Stock Unit Plan
+including Move SAP Plan (RSU (2013-2016 tranches)).
+a) Cash-Settled Share-Based Payments
+below, which are individually and in aggregate, immaterial to our
+Consolidated Financial Statements.
+SAP has granted awards under various cash-settled and equity-
+settled share-based payment plans to employees and
+executives. Most of these awards are described in detail below.
+SAP has further share-based payment plans not described
+(27) Share-Based Payments
+Changing the unobservable inputs to reflect reasonably possible
+alternative assumptions would not have a material impact on the
+fair values of our unlisted equity investments held as available-
+for-sale as of the reporting date.
+0
+0
+568
+722
+45
+22
+34
+48
+9
+96
+-22
+-168
+170
+156
+SOP 2010
+(2010-2015
+Tranches)
+LTI 2016 Plan
+(2016 Tranche)
+RSU
+€74.54
+51.0%
+NA
+22.3% to
+NA
+21.2%
+-0.84%
+-0.83%
+-0.36% to
+-0.51% to
+-0.80% to
+-0.84%
+€82.77
+€82.81
+€82.81
+€82.81
+-0.76%
+Expected dividend yield
+Expected volatility
+Risk-free interest rate (depending on maturity)
+Share price
+Other¹)
+Monte Carlo
+Other¹)
+Binomial
+Option pricing model used
+Information how fair value was measured at measurement date
+€81.34
+€20.94
+€81.10
+(2013-2016
+Tranches)
+-246
+LTI 2015 Plan
+(2012-2015
+SOP 2010
+(2010-2015
+Tranches)
+154
+58
+2
+12/31/2016
+€ millions
+110
+76
+0
+12/31/2015
+Total intrinsic value of vested awards (in € millions) as at
+436
+385
+Weighted average share price (in €) for share options exercised in
+58
+166
+283
+74
+0
+O
+5,472
+0
+0
+0
+4,120
+0
+0
+7
+2015
+2016
+Total expense (in € millions) recognized in
+The number of PSUs that finally vest depends on the absolute
+and relative performance of the SAP share. If the increase of the
+SAP share price over the vesting period of the PSUs exceeds the
+increase of the Peer Group Index over the same period, the
+number of PSUs increases by a percentage equal to the
+outperformance expressed as percentage points. This
+percentage will be doubled if, in addition to the outperformance
+against the Peer Group Index, the SAP share price at the end of
+the vesting period of the PSUs is higher than the price at the
+start of this period. The number of vested PSUs is capped at
+150% of the initial PSU allocation for that year. Conversely, if the
+performance of the SAP share over the vesting period of the
+PSUs is below the performance of the Peer Group Index, the
+number of PSUs will be reduced by a percentage equal to the
+difference expressed as percentage points. All PSUs lapse if the
+difference exceeds 50%. If the service contract for the Executive
+Board member is terminated before the end of the third year
+following the year in which the Share Units were granted, the
+share units are forfeited in whole or in part, depending on the
+circumstances of the relevant resignation from office or
+termination of the service contract.
+The share units granted comprise 40% retention share units
+and 60% performance share units (PSUs). Both types of share
+units have a vesting period of (approximately) four years. Each
+share unit that finally vests entitles its holder to a (gross) payout
+corresponding to the price of one SAP share after the end of the
+holding period, but capped at three times the SAP share price
+applied for the conversion of the grant amount into share units.
+taking into account the achievement of the operating profit
+target set for the preceding financial year.
+193
+Consolidated Financial Statements IFRS and Notes | Notes
+determined by the Supervisory Board is converted into virtual
+shares, referred to as share units, by dividing the grant amount
+by the SAP share price (calculated on the basis of a defined
+average value). The grant amount is determined by the
+Supervisory Board in its discretion for each financial year at a
+level between 80% and 120% of the contractual target amount,
+a.1) Long-Term Incentive Plan (LTI 2016 Plan)
+SAP implemented a new Long-Term Incentive (LTI) 2016 Plan
+for members of the Executive Board in 2016. The plan is linked
+to the absolute performance of the SAP share and its relative
+performance as indicated by the SAP share price compared to a
+group of peer companies (Peer Group Index). A grant amount
+458
+183
+7
+7
+193
+187
+28
+0
+58
+29
+13
+0
+74.74
+65.83
+66.20
+78.74
+72.55
+NA
+ΝΑ
+NA
+2014
+2015
+2016
+12/31/2016
+12/31/2015
+Total carrying amount (in € millions) of liabilities as at
+12/31/2016
+12/31/2015
+-548
+-1,436
+0
+0
+Forfeited
+-1,337
+-6,585
+0
+0
+Exercised
+109
+ΝΑ
+109
+0
+Adjustment based upon KPI target achievement
+5,125
+10,866
+277
+0
+2,228
+26,282
+591
+0
+Granted
+12/31/2014
+RSU
+(2013-2016
+Tranches)
+0
+Tranches)
+977
+5,577
+12/31/2015
+Outstanding awards exercisable as at
+10,901
+23,375
+684
+377
+12/31/2016
+-1,055
+-1,059
+0
+-12
+Forfeited
+-2,659
+-4,693
+-294
+0
+Exercised
+-66
+NA
+0
+0
+Adjustment based upon KPI target achievement
+9,104
+0
+0
+389
+Granted
+29,127
+-249
+-80
+-2,915
+2015
+2014
+703
+507
+277
+8,193
+7,622
+6,819
+2,000
+1,579
+709
+7,366
+2016
+6,929
+290
+200
+101
+2,865
+2,663
+2,221
+2,993
+2,286
+1,087
+18,424
+17,214
+14,315
+5,276
+2014
+2015
+2016
+2016
+2015
+Germany
+2,655
+2.395
+Rest of EMEA
+5,281
+7,574
+EMEA
+7,936
+9,969
+United States
+21,911
+19,124
+Rest of Americas
+165
+139
+Americas
+22,076
+APJ
+SAP Group
+685
+30,696
+19,264
+599
+29,832
+200
+Cloud Subscriptions
+and Support Revenue
+Cloud and Software Revenue
+The table above shows non-current assets excluding financial
+instruments, deferred tax assets, post-employment benefit
+assets, and rights arising under insurance contracts.
+€ millions
+For information about the breakdown of our workforce by
+region, see Note (7).
+12
+20,793
+20,793
+22,062
+22,062
+Total revenue
+-19
+-11
+−11
+-5
+-5
+Adjustment of revenue under fair value accounting
+0
+17,560
+1,505
+-164
+○
+199
+209
+226
+224
+222
+17,381
+Actual
+Currency
+Constant
+Currency
+19,090
+Actual
+Currency
+20,579
+22,007
+0
+Total segment profit for reportable segments
+Other revenue
+Other expenses
+18
+Unlisted Equity Investments and
+Call Options on Equity Shares
+400
+568
+Unlisted Equity Investments and
+Call Options on Equity Shares
+2015
+2016
+Change in unrealized gains/losses in profit and loss for investments
+held at the end of the reporting period
+Included in exchange differences in other comprehensive income
+December 31
+Included in available-for-sale financial assets in other
+comprehensive income
+Included in financial income, net in profit and loss
+Gains/losses
+Sales
+Purchases
+Out of Level 3
+Into Level 3
+Transfers
+January 1
+For other non-derivative financial assets/liabilities and variable
+rate financial debt, it is assumed that their carrying value
+reasonably approximates their fair values.
+Transfers Between Levels 1 and 2
+Transfers of available-for-sale equity investments from Level 2
+to Level 1 which occurred because disposal restrictions lapsed
+and deducting a discount for such restriction was no longer
+necessary were not material in all years presented, while
+transfers from Level 1 to Level 2 did not occur at all.
+Level 3 Disclosures
+The following table shows the reconciliation from the opening to
+the closing balances for our unlisted equity investments and call
+options on equity shares classified as Level 3 fair values:
+222
+8,356
+8,369
+Adjustment for currency impact
+Consolidated Financial Statements IFRS and Notes | Notes
+Non-Current Assets by Region
+17,560
+20,793
+-290
+Restructuring
+-28
+-28
+-621
+-621
+-126
+TomorrowNow and Versata litigation
+0
+0
+0
+0
+-724
+-309
+5,135
+5,135
+4,252
+4,252
+4,331
+Other non-operating income/expense, net
+-234
+-256
+-256
+49
+Financial income, net
+-38
+Operating profit
+-724
+-785
+-785
+-183
+224
+8,040
+226
+-1,957
+-1,975
+-1,918
+28
+0
+7,453
+209
+-1,759
+443
+7,050
+199
+-1,611
+0
+Adjustment for
+Revenue under fair value accounting
+-5
+-5
+-11
+-11
+-19
+Acquisition-related charges
+-680
+-680
+-738
+-738
+-562
+Share-based payment expenses
+-38
+Profit before tax
+4,863
+4,863
+8,383
+United States
+7,167
+6,750
+4,898
+Rest of Americas
+1,763
+1,678
+1,591
+Americas
+8,931
+8,428
+6,489
+Japan
+825
+667
+600
+Rest of APJ
+2,552
+2,517
+2,088
+APJ
+3,377
+3,185
+2,688
+SAP Group
+22,062
+9,181
+21,845
+9,755
+5,813
+-5
+3,991
+-5
+3,991
+-25
+4,355
+Consolidated Financial Statements IFRS and Notes | Notes
+199
+Geographic Information
+The amounts for revenue by region in the following tables are
+based on the location of customers. The regions in the following
+table are broken down into the regions EMEA (Europe, Middle
+East, and Africa), Americas (North America and Latin America),
+and APJ (Asia Pacific Japan).
+Revenue by Region
+€ millions
+EMEA
+Americas
+APJ
+SAP Group
+Total Revenue by Region
+€ millions
+2016
+2015
+2014
+Germany
+3,034
+2,771
+2,570
+Rest of EMEA
+6,721
+6,409
+EMEA
+Adjustment for currency impact
+-234
+Actual Constant
+Currency Currency
+9,321
+9,990
+Software support
+4,324
+4,519
+4,770
+○
+-1
+-1
+4,324
+4,520
+4,770
+8,748
+Software licenses
+1,080
+1,974
+2,268
+515
+1,151
+1,337
+564
+822
+932
+Cloud subscriptions
+Actual
+Currency
+Constant
+Currency
+and support
+31
+Software licenses and
+14,760
+3,271
+Services
+14,180
+15,839
+17,059
+544
+1,176
+1,367
+13,636
+14,663
+15,692
+Cloud and software
+support
+13,100
+13,866
+14,790
+28
+25
+8,777
+9,347
+10,021
+29
+26
+22
+30
+13,072
+13,841
+Actual
+Currency
+Actual
+Currency
+Currency
+Constant
+-6,704 -6,286
+8,039
+8,031
+Segment profit
+-6,610
+Other segment expenses
+15,104
+16,028
+15,936
+1,095
+1,285
+1,295
+14,009
+14,743
+14,641
+Segment gross profit
+-5,474
+-5,979
+-5,909
+-520
+-635
+-631
+-4,954
+-5,344
+-5,279
+Total cost of revenue
+Total segment revenue for reportable segments
+Other revenue
+-2,967 -2,722
+-968
+3,036
+-779
+-7,672
+Actual
+Currency
+Actual
+Currency
+Currency
+Currency
+Actual Constant
+2014
+2015
+2014
+2015
+2014
+2015
+Services
+Total Reportable Segments
+SAP Business Network
+Applications, Technology &
+€ millions
+Revenue and Results of Segments
+197
+Consolidated Financial Statements IFRS and Notes | Notes
+8,040
+8,356
+8,369
+317
+317
+338
+7,723
+-7,064
+-7,567
+3,098
+-957
+214
+14,010
+-6,556
+7,453
+15,104
+-7,064
+8,040
+105
+253
+317
+6,946
+7,200
+7,723
+Segment profit
+-330
+-682
+-779
+12,911
+-5,531
+-6,286
+Other segment expenses
+434
+935
+1,095
+12,477
+13,075
+14,009
+Segment gross profit
+-2,280
+-2,563
+-5,080 -4,470
+-5,474
+-5,875
+-5,861
+7,050
+Information about assets and liabilities and additions to non-
+current assets by segment are not regularly provided to our
+Executive Board. Goodwill by reportable segment is disclosed in
+Note (15).
+2015
+2014
+249
+2016
+€ millions
+Reconciliation of Revenue and Segment Results
+The segment information for prior periods has been restated to
+conform to the current year's presentation.
+In addition, certain corporate-level activities are not allocated to
+our segments, including finance, accounting, legal, human
+resources, and marketing. They are disclosed in the
+reconciliation under other revenue and other expenses
+respectively.
+Revenues and expenses of our new operating but non-
+reportable segments are included in the reconciliation under the
+positions other revenue and other expenses, respectively.
+Expenses from the TomorrowNow litigation and the Versata
+litigation
+Restructuring expenses
+Share-based payment expenses
+Acquisition-related third-party costs
+stand-alone acquisitions of intellectual property (including
+purchased in-process research and development)
+Settlements of pre-existing relationships in connection
+with a business combination
+■
+Consolidated Financial Statements IFRS and Notes | Notes
+198
+■ Amortization expense and impairment charges for
+intangibles acquired in business combinations and certain
+Acquisition-related charges
+The expenses measures exclude:
+The measurements of segment revenue and results include the
+recurring revenues that would have been recorded by acquired
+entities had they remained stand-alone entities but which are
+not recorded as revenue under IFRS due to fair value accounting
+for customer contracts in effect at the time of an acquisition.
+We use an operating profit indicator to measure the
+performance of our operating segments. However, the
+accounting policies applied in the measurement of operating
+segment revenue and profit differ as follows from the IFRS
+accounting principles used to determine the operating profit
+measure in our income statement:
+Reports based on actual currencies use the same currency rates
+as are used in our financial statements. Reports based on
+constant currencies report revenues and expenses using the
+average exchange rates from the previous year's corresponding
+period.
+Our management reporting system produces a variety of
+reports that differ by the currency exchange rates used in the
+accounting for foreign-currency transactions and operations.
+Most of our depreciation and amortization expense affecting
+segment profits is allocated to the segments as part of broader
+infrastructure allocations and is thus not tracked separately on
+the operating segment level. Depreciation and amortization
+expense that is directly allocated to the operating segments is
+immaterial in all segments presented.
+Our management reporting system reports our intersegment
+services as cost reductions and does not track them as internal
+revenue. Intersegment services mainly represent utilization of
+human resources of one segment by another segment on a
+project-by-project basis. Intersegment services are charged
+based on internal cost rates including certain indirect overhead
+costs, excluding a profit margin.
+Measurement and Presentation
+-213
+-456
+■
+-4,257
+Cost of software
+support
+subscriptions and
+-386
+-707
+-781
+-128
+-293
+-336
+-258
+-414
+-444
+Cost of cloud
+17,381
+19,090
+20,579
+647
+1,616
+16,734
+17,699
+18,963
+Total segment revenue
+3,201
+-520
+103
+3,250
+3,520
+-1,971
+-1,809
+1,391
+-1
+-2,722
+-1,801
+-4,954
+-82
+-162
+Total cost of revenue
+-2,198
+-2,401
+-4,624
+-2,539
+Cost of services
+software
+-2,190
+-2,517
+-183
+-2,753
+-1
+-1,972
+-1,810
+-1,804
+licenses and support
+-3
+-2,416
+-2,223 -2,059
+-337
+-294
+-131
+Cost of cloud and
+€1 million). Amounts owed to Supervisory Board members from
+these transactions were €0 million as at December 31, 2016
+(2015: €0 million). All of these balances are unsecured and
+interest-free and settlement is expected to occur in cash.
+representatives on the Supervisory Board in their capacity as
+employees of SAP) in the amount of €1 million (2015:
+In total, we sold services to members of the Executive Board and
+the Supervisory Board in the amount of €0 million (2015: €2
+million), and we received services from members of the
+Supervisory Board (including services from employee
+In total, we sold products and services to companies controlled
+by members of the Supervisory Board in the amount of
+€1 million (2015: €1 million), we bought products and services
+from such companies in the amount of €3 million (2015:
+€7 million), and we provided sponsoring and other financial
+support to such companies in the amount of €4 million (2015:
+€5 million). Outstanding balances at year end from transactions
+with such companies were €0 million (2015: €0 million) for
+amounts owed to such companies and €0 million (2015:
+€0 million) for amounts owed by such companies. All of these
+balances are unsecured and interest-free and settlement is
+expected to occur in cash. Commitments (the longest of which
+is for two years) made by us to purchase further goods or
+services from these companies and to provide further
+sponsoring and other financial support amount to €6 million as
+at December 31, 2016 (2015: €11 million).
+In 2016, we entered into a consulting contract with Gerhard
+Oswald which applies from 2017 onwards. Compensation
+thereunder occurs if and when consulting services are rendered.
+No transactions occurred in all periods presented.
+Consolidated Financial Statements IFRS and Notes | Notes
+204
+All amounts related to the abovementioned transactions were
+immaterial to SAP in all periods presented.
+Wilhelm Haarmann practices as a partner in the law firm
+Linklaters LLP in Frankfurt am Main, Germany. SAP occasionally
+purchased and purchases legal and similar services from
+Linklaters.
+Thereof variable
+compensation
+Companies controlled by Hasso Plattner, chairman of our
+Supervisory Board and Chief Software Advisor of SAP, engaged
+in the following transactions with SAP: providing consulting
+services to SAP, receiving sport sponsoring from SAP, making
+purchases of SAP products and services.
+Certain Supervisory Board members of SAP SE currently hold,
+or held within the last year, positions of significant responsibility
+with other entities. We have relationships with certain of these
+entities in the ordinary course of business, whereby we buy and
+sell products, assets, and services at prices believed to be
+consistent with those negotiated at arm's length between
+unrelated parties.
+NA
+(30) Related Party Transactions
+Detailed information about the different elements of the
+compensation as well as the number of shares owned by
+members of the Executive Board and the Supervisory Board are
+disclosed in the Compensation Report, which is part of our
+Management Report and of our Annual Report on Form 20-F,
+both of which are available on SAP's Web site.
+The Supervisory Board members do not receive any share-
+based payment for their services. As far as members who are
+employee representatives on the Supervisory Board receive
+share-based payment, such compensation is for their services
+as employees only and is unrelated to their status as members
+of the Supervisory Board.
+1,788
+ΝΑ
+Occasionally, members of the Executive Board of SAP SE obtain
+services from SAP for which they pay a consideration consistent
+with those negotiated at arm's length between unrelated parties.
+For information about the compensation of our Executive Board
+and Supervisory Board members, see Note (29).
+Foreign
+KPMG
+At the Annual General Meeting of Shareholders held on May 12,
+2016, our shareholders elected KPMG AG Wirtschafts-
+prüfungsgesellschaft as SAP's independent auditor for 2016.
+KPMG AG Wirtschaftsprüfungsgesellschaft has been the
+company's principal auditor since the fiscal year 2002. Dr.
+Böttcher has signed as auditor responsible for the audit since
+the fiscal year 2013, and Ms. Herold has signed as auditor since
+the fiscal year 2016. KPMG AG Wirtschaftsprüfungsgesellschaft
+and other firms in the global KPMG network charged the
+following fees to SAP for audit and other professional services
+related to 2016 and the previous years:
+9
+6
+remuneration
+3
+3
+Audit fees
+Firms
+Firms
+Total
+Foreign
+KPMG
+KPMG AG
+(Germany)
+Total
+KPMG AG
+(Germany)
+KPMG
+Firms
+Total
+KPMG AG Foreign
+(Germany)
+2014
+2015
+2016
+€ millions
+Fees for Audit and Other Professional Services
+(31) Principal Accountant Fees and
+Services
+515
+€ thousands
+517
+107,467,372
+36,426
+45,309
+90,262,686
+87,875,732
+85,985
+Executive Board
+Supervisory Board
+2014
+2015
+2016
+2016
+Number of SAP
+shares
+SAP did not grant any compensation advance or credit to, or
+enter into any commitment for the benefit of, any member of the
+Executive Board or Supervisory Board in 2016, 2015, or 2014.
+Retirement Pension Plan for Executive Board
+Members
+The defined benefit obligation (DBO) for pensions to Executive
+Board members and the annual pension entitlement of the
+members of the Executive Board on reaching age 60 based on
+entitlements from performance-based and salary-linked plans
+were as follows:
+In the table above, the share-based payment expense is the
+amount recorded in profit or loss under IFRS 2 in the respective
+period.
+11,133
+22,310
+6
+14,233
+Total expense in € thousands
+Shareholdings of Executive and Supervisory Board
+Members
+2015
+DBO December 31
+10,739
+Thereof committee
+compensation
+924
+3,250
+3,135
+Thereof fixed
+3,227
+3,728
+3,652
+Total compensation
+2014
+2015
+2016
+€ thousands
+Supervisory Board Compensation
+The total annual compensation of the Supervisory Board
+members for 2016 is as follows:
+475
+2014
+11,273
+8,948
+427
+470
+Annual pension entitlement
+479
+9
+Total
+6
+Major Subsidiaries
+€ thousands
+€ thousands
+€ thousands
+%
+12/31/2016²)
+Number of Foot-
+Employees note
+as at
+as at
+12/31/2016¹)
+Total Equity
+Ariba, Inc., Palo Alto, CA, United States
+(-) After Tax
+for 2016¹)
+ship
+Profit/Loss
+Owner-
+Name and Location of Company
+Subsidiaries
+Investments
+(34) Subsidiaries and Other Equity
+Consolidated Financial Statements IFRS and Notes | Notes
+206
+Revenue in
+2016¹)
+No events that have occurred since December 31, 2016, have a
+material impact on the Company's Consolidated Financial
+Statements.
+100.0
+54,307
+647
+granted
+69,965
+67,996
+786,847
+100.0
+SAP (Schweiz) AG, Biel, Switzerland
+793
+46,862
+1,023,469
+-5,498
+100.0
+LLC SAP CIS, Moscow, Russia
+3,183
+7,902,404
+1,153,819
+1,234,313
+100.0
+1,622
+3,873,318
+355,700
+(33) Events After the Reporting
+Period
+www.sap.com/corporate-en/investors/governance.
+In 2016 and 2015, our Executive Board and Supervisory Board
+issued the required declarations of implementation. The
+declaration for 2016 was issued on October 29, 2016. These
+statements are available on our Web site:
+0
+0
+0
+0
+0
+0
+0
+0
+0
+All other fees
+Total
+Tax fees
+0
+0
+0
+0
+1
+1
+0
+Audit-related fees
+8
+0
+0
+0
+0
+deviate from the suggestions without having to make any public
+statements.
+205
+Consolidated Financial Statements IFRS and Notes | Notes
+The German federal government published the German Code of
+Corporate Governance in February 2002 and introduced a
+commission that amends the Code from time to time. The Code
+contains statutory requirements and a number of
+recommendations and suggestions. Only the legal requirements
+are binding for German companies. With regard to the
+recommendations, the German Stock Corporation Act, section
+161, requires that every year listed companies publicly state the
+extent to which they have implemented them. Companies can
+(32) German Code of Corporate
+Governance
+Audit fees are the aggregate fees charged by KPMG for auditing
+our consolidated financial statements and the statutory financial
+statements of SAP SE and its subsidiaries. Audit-related fees are
+fees charged by KPMG for assurance and related services that
+are reasonably related to the performance of the audit or review
+of our financial statements and are not reported under audit
+fees. Tax fees are fees for professional services rendered by
+KPMG for tax advice on transfer pricing, restructuring, and tax
+compliance on current, past, or contemplated transactions. The
+All other fees category includes other support services, such as
+training and advisory services on issues unrelated to accounting
+and taxes.
+8
+6
+2
+9
+6
+3
+10
+7
+3
+0
+0
+0
+0
+0
+0
+2
+○
+Board of Directors, Opbeat Inc., San Francisco,
+0
+CA, United States
+Board of Directors, eWise Group, Inc., Redwood City,
+Board of Directors, Dashlane, Inc., New York, NY, United States
+Board of Directors, Recorded Future, Inc., Cambridge, MA,
+United States
+Board of Directors, Vestiaire Collective SA, Levallois-Perret,
+France
+Board of Directors, Wonga Group Ltd., London, United Kingdom
+Board of Directors, SCYTL Secure Electronic Voting SA,
+Barcelona, Spain
+Board of Directors, nlyte Software Ltd., London, United Kingdom
+Board of Directors, Talend SA, Suresnes, France
+Managing Partner Balderton Capital, London, United Kingdom
+Bernard Liautaud 2), 4), 6)
+Supervisory Board, Rhein-Neckar Loewen GmbH, Kronau,
+Germany (from August 30, 2016)
+Board of Directors, Qubit Digital Ltd., London, United Kingdom
+Managing Director, Rhein-Neckar Loewen GmbH,
+Kronau, Germany (until June 30, 2016)
+Lars Lamadé ¹), 2), 7), 8)
+Professor at the Electrical Engineering and Computer Science
+Faculty at the Technische Universität Berlin
+Prof. Anja Feldmann 4), 8)
+Product Manager
+Martin Duffek ¹), 3), 8)
+Support Expert
+Panagiotis Bissiritsas ¹), 3), 4), 5)
+Chairman of the Board of Directors, Sanoma Corporation,
+Helsinki, Finland
+Chairman of the Board of Directors, BMA Platform International
+Ltd., London, United Kingdom
+Head of Sponsorships
+Board of Directors, CVON Future Limited, London, United
+Kingdom
+Board of Directors, Stanford University, Stanford,
+CA, United States
+202
+Board of Directors, Fidelity Funds SICAV, Luxembourg (until
+February 26, 2016)
+Supervisory Board, Fuchs Petrolub SE, Mannheim, Germany
+Supervisory Board, BDO AG, Hamburg, Germany
+Supervisory Board, RWE AG, Essen, Germany (from April 20,
+2016)
+Supervisory Board, Hannover Rückversicherung SE, Hanover,
+Germany
+Supervisory Board, HDI V.a.G., Hanover, Germany
+Supervisory Board, Deutsche Börse AG, Frankfurt am Main,
+Germany
+Supervisory Board, Talanx AG, Hanover, Germany
+Independent Management Consultant
+Dr. Erhard Schipporeit ³). 7)
+CA, United States
+Supervisory Board, ClearVAT Aktiengesellschaft, Berlin,
+Germany (from March 31, 2016)
+Prof. Dr. Gesche Joost 4), 8)
+Product Expert, IoT Standards
+Andreas Hahn ¹), 2), 4)
+Vice President User Experience
+Chief Product Expert
+1), 4), 8)
+Christine Regitz
+Attorney-at-Law, Certified Public Auditor, Certified Tax Advisor
+Linklaters LLP, Rechtsanwälte, Notare, Steuerberater, Frankfurt
+am Main, Germany
+Prof. Dr. Wilhelm Haarmann 2), 5), 7), 8)
+Board of Directors, Aircall.io, New York City, NY, United States
+Professor for Design Research and Head of the Design Research
+Lab, University of Arts Berlin
+Board of Directors, CVON Limited, London, United Kingdom
+Chairman of the Board of Directors, CVON Innovation Services
+Oy, Turku, Finland
+Chairman of the Board of Directors, CVON Group Limited,
+London, United Kingdom
+Board of Directors, Pöyry Plc, Vantaa, Finland
+Chairman of the Board of Directors, Center ID, Bellevue, WA,
+United States
+Including Concur, SAP Ariba, SAP Fieldglass, SAP's Data
+Network Business, SAP Health, as well as Front-Office and Back-
+Office Solutions for Small and Midsize Businesses that currently
+include SAP Anywhere, SAP Business One and SAP Business
+ByDesign
+Business Networks and Applications
+Steve Singh (from April 1, 2016)
+Global Sales, Industry & LoB Solutions Sales, Services Sales,
+Sales Operations
+Global Customer Operations
+Robert Enslin
+Board of Directors, Dell Secure Works, Atlanta, GA, United
+States (from April 21, 2016)
+Board of Directors, ANSYS, Inc., Canonsburg, PA, United States
+Board of Directors, Under Armour, Inc., Baltimore, MD, United
+States
+Board of Directors, ModuMetal, Inc., Seattle, WA, United States
+Board of Directors, Talend, Redwood City, CA, United States
+(from October 4, 2016)
+Corporate Development, Global Corporate Affairs, Corporate
+Audit and Global Marketing
+Chief Executive Officer
+Bill McDermott
+Supervisory Board, Rhein-Neckar Loewen GmbH, Kronau,
+Germany
+Chief Human Resources Officer, Labor Relations Director
+HR Strategy, Business Transformation, Leadership
+Development, Talent Development
+Stefan Ries (from April 1, 2016)
+Memberships on supervisory boards and other comparable
+governing bodies of enterprises, other than subsidiaries of SAP
+on December 31, 2016
+Executive Board
+(29) Board of Directors
+SAP (UK) Limited, Feltham, United Kingdom
+Strategy, Governance, Business Development,
+Chairman of the Board of Directors, Docker, Inc., San Francisco,
+CA, United States (from November 3, 2016)
+Michael Kleinemeier
+Digital Business Services
+Chairman of the Board of Directors, Huhtamäki Oyj,
+Espoo, Finland
+Pekka Ala-Pietilä 4), 5), 6), 7)
+201
+Consolidated Financial Statements IFRS and Notes | Notes
+Vice President, Head of SAP Alumni Relations
+Chairperson of the Spokespersons' Committee of Senior
+Managers of SAP SE
+Deputy Chairperson
+Margret Klein-Magar ¹), 2), 4), 5)
+Prof. Dr. h.c. mult. Hasso Plattner 2), 4), 6), 7), 8)
+Chairman
+Global Finance and Administration including Investor Relations
+and Data Protection & Privacy, Corporate IT and Processes
+Chief Financial Officer
+Luka Mucic
+Supervisory Board, DFKI (Deutsches Forschungszentrum für
+Künstliche Intelligenz GmbH), Kaiserslautern, Germany
+Global Development Organization, Innovation & Cloud Delivery,
+Product Strategy, Development Services, SAP Global Security
+Products & Innovation
+Chief Technology Officer
+Bernd Leukert
+Memberships on supervisory boards and other comparable
+governing bodies of enterprises, other than subsidiaries of SAP
+on December 31, 2016
+Supervisory Board
+Executive Board Members Who Left During 2016
+Gerhard Oswald (until December 31, 2016)
+Supervisory Board, innogy SE, Essen, Germany (from
+September 1, 2016)
+Global Consulting Delivery, Global and Regional Support and
+Premium Engagement Functions, Maintenance Go-to-Market,
+Global User Groups, Mobile Services
+Consolidated Financial Statements IFRS and Notes | Notes
+0
+Robert Schuschnig-Fowler 1), 8)
+Deputy Chairman of SAP SE Works Council Europe
+Member of Works Council SAP SE
+Members
+Members
+Payments to/DBO for Former Executive Board
+Share-Based Payment for Executive Board
+203
+Consolidated Financial Statements IFRS and Notes | Notes
+Considering the grant date fair value of the RSUs allocated in
+2015 instead of the economically allocated amount of share-
+based payments in the table above, the sum of short-term
+employee benefits and share-based payment amounts to
+€15,400,400 and the total Executive Board compensation
+amounts to €16,678,400.
+The share-based payment for 2015 as defined in section 314 of
+the German Commercial Code (HGB) amounts to €263,200 and
+4,622 RSUs, respectively, based on the allocation for 2015 for
+Michael Kleinemeier, which was granted in 2015 in line with his
+appointment to the Executive Board.
+The Executive Board members already received, in 2012, the LTI
+grants for the years 2012 to 2015 subject to continuous service
+as member of the Executive Board in the respective years.
+Although these grants are linked to and thus, economically,
+compensation for the Executive Board members in the
+respective years, section 314 of the German Commercial Code
+(HGB) requires them to be included in the total compensation
+number for the year of grant. Upon his appointment to the
+Executive Board in 2015, Michael Kleinemeier received a grant
+related to 2015. Vesting of the LTI grants is dependent on the
+respective Executive Board member's continuous service for the
+Company.
+2016
+The share-based payment amounts disclosed above for 2016
+are based on the grant date fair value of the restricted share
+units (RSUs) and performance share units (PSUs), respectively,
+issued to Executive Board members during the year under the
+new LTI Plan 2016, effective January 1, 2016.
+27,543
+26,780
+45,546
+Total¹)
+contribution
+973
+990
+606
+Thereof defined-
+"Portion of total executive compensation allocated to the respective year
+2,276
+2015
+€ thousands
+Number of stock options
+33.764
+32,758
+33,935
+DBO December 31
+ΝΑ
+NA
+220,561
+Number of PSUs granted
+2014
+3,462
+1,667
+Payments
+153,909
+192,345
+147,041
+Number of RSUs granted
+2014
+2015
+2016
+1,580
+288
+1,792
+Thereof defined-benefit
+2) Member of the Company's General and Compensation Committee
+3) Member of the Company's Audit Committee
+"Elected by the employees
+Information as at December 31, 2016
+Chairman of the Supervisory Board, Festo AG & Co. KG,
+Esslingen, Germany
+Deputy Chairman of the Supervisory Board, LEONI AG,
+Nuremberg, Germany
+Deputy Chairman of the Supervisory Board, HEITEC AG,
+Erlangen, Germany
+Prof. Dr.-Ing. Dr.-Ing. E. h. Klaus Wucherer ³)
+Managing Director of Dr. Klaus Wucherer Innovations- und
+Technologieberatung GmbH, Erlangen, Germany
+Secretary of CHSCT (Hygiene, Security and Work Conditions
+Committee)
+Member of the SAP France Works Council
+4) Member of the Company's Technology and Strategy Committee
+Webmaster (P&I)
+Supervisory Board, Allianz SE, Munich, Germany
+Supervisory Board, Siemens AG, Munich, Germany
+Board of Directors, A. P. Moller-Maersk A/S, Copenhagen,
+Denmark (from April 12, 2016)
+Board of Directors, Bang & Olufsen A/S, Struer, Denmark
+Board of Directors, Danske Bank A/S, Copenhagen, Denmark
+(until March 17, 2016)
+Jim Hagemann Snabe 2), 5)
+Supervisory Board Member
+Supervisory Board, Georgsmarienhütte GmbH,
+Georgsmarienhütte, Germany
+Head of Company Law Unit, Hans Böckler Foundation
+Dr. Sebastian Sick ¹), 2), 5), 7)
+Executive Board Compensation
+Allocating the fair value of the share-based payments to the
+respective years they are economically linked to, the total
+compensation of the Executive Board members for the years
+2016, 2015, and 2014 was as follows:
+Pierre Thiollet ¹), 4)
+5) Member of the Company's Finance and Investment Committee
+6) Member of the Company's Nomination Committee
+7) Member of the Company's Special Committee
+3,249
+1,278
+2,398
+Post-employment benefits
+24,294
+25,502
+43,148
+Subtotal¹)
+8,098
+10,365
+23,942
+Share-based payment¹)
+16,196
+15,137
+19,206
+Short-term employee
+benefits
+2014
+2015
+2016
+€ thousands
+8) Member of the Company's People and Organization Committee
+Account Manager, Senior Support Engineer
+100.0
+Concur (New Zealand) Limited, Wellington, New
+Zealand
+-35,297
+100.0
+SAP International, Inc., Miami, FL, United States
+100.0
+SAP Azerbaijan LLC, Baku, Azerbaijan
+100.0
+SAP Investments, Inc., Wilmington, DE, United
+States
+SAP Asia (Vietnam) Co., Ltd., Ho Chi Minh City,
+Vietnam
+100.0
+100.0
+SAP Ireland Limited, Dublin, Ireland
+100.0
+SAP Beteiligungs GmbH, Walldorf, Germany
+100.0
+SAP Ireland US - Financial Services Designed
+SAP Belgium NV/SA, Brussels, Belgium
+Panama
+100.0
+SAP International Panama, S.A., Panama City,
+San Borja Partricipadoes LTDA, São Paulo, Brazil
+100.0
+SAP Hong Kong Co., Ltd., Hong Kong, China
+100.0
+SAP (Beijing) Software System Co., Ltd., Beijing,
+China
+100.0
+SAP Hosting Beteiligungs GmbH, St. Leon-Rot,
+100.0
+SAP Andina y del Caribe, C.A., Caracas,
+100.0
+Germany
+Venezuela
+100.0
+SAP Argentina S.A., Buenos Aires, Argentina
+100.0
+100.0
+10)
+SAP Bulgaria EOOD, Sofia, Bulgaria
+Activity Company, Dublin, Ireland
+100.0
+SAP Colombia S.A.S., Bogotá, Colombia
+100.0
+SAP Commercial Services Ltd., Valletta, Malta
+100.0
+SAP Labs Israel Ltd., Ra'anana, Israel
+SAP Labs Korea, Inc., Seoul, South Korea
+SAP Labs France SAS, Mougins, France
+100.0
+Consolidated Financial Statements IFRS and Notes | Notes
+209
+Name and Location of Company
+Owner Foot-
+ship note
+Name and Location of Company
+Owner Foot-
+ship note
+100.0
+100.0
+SAP China Holding Co., Ltd., Beijing, China
+100.0
+SAP Business Compliance Services GmbH,
+100.0
+SAP Israel Ltd., Ra'anana, Israel
+100.0
+Siegen, Germany
+SAP Korea Ltd., Seoul, South Korea
+100.0
+SAP Business Services Center Nederland B.V.,
+100.0
+11)
+'s-Hertogenbosch, the Netherlands
+SAP Chile Limitada, Santiago, Chile
+100.0
+SAP Labs Bulgaria EOOD, Sofia, Bulgaria
+SAP Labs Finland Oy, Espoo, Finland
+100.0
+100.0
+%
+100.0
+Beijing, China
+100.0
+Australia
+SAP EMEA Inside Sales S.L., Barcelona, Spain
+100.0
+Plateau Systems LLC, South San Francisco, CA,
+United States
+100.0
+SAP Egypt LLC, Cairo, Egypt
+SAP Erste Beteiligungs- und
+Vermögensverwaltungs GmbH, Walldorf,
+PT SAP Indonesia, Jakarta, Indonesia
+99.0
+Germany
+PT Sybase 365 Indonesia, Jakarta, Indonesia
+100.0
+100.0 8).9)
+100.0
+Plateau Systems Australia Ltd, Brisbane,
+100.0
+Nihon Ariba K.K., Tokyo, Japan
+100.0
+SAP Danmark A/S, Copenhagen, Denmark
+100.0
+OutlookSoft Deutschland GmbH, Walldorf,
+Germany
+100.0
+SAP Dritte Beteiligungs- und
+100.0
+Vermögensverwaltungs GmbH, Walldorf,
+Plat.One Inc., Palo Alto, CA, United States
+100.0 4)
+Germany
+Plat. One Lab Srl, Bogliasco, Italy
+100.0 4)
+SAP East Africa Limited, Nairobi, Kenya
+SAP España - Sistemas, Aplicaciones y
+SAP Holdings (UK) Limited, Feltham, United
+Kingdom
+100.0
+Quadrem Africa Pty. Ltd., Johannesburg, South
+Africa
+SAP Fünfte Beteiligungs- und
+100.0 8).9)
+Vermögensverwaltungs GmbH, Walldorf,
+Germany
+Quadrem Overseas Cooperatief U.A., Amsterdam,
+the Netherlands
+100.0
+11)
+SAP Global Marketing, Inc., New York, NY, United
+States
+Quadrem Peru S.A.C., Lima, Peru
+100.0
+SAP Hellas S.A., Athens, Greece
+100.0
+Ruan Lian Technologies (Beijing) Co., Ltd.,
+100.0
+100.0
+100.0
+Quadrem Netherlands B.V., Amsterdam, the
+Netherlands
+100.0
+100.0
+SAP Estonia OÜ, Tallinn, Estonia
+100.0
+Quadrem Brazil Ltda., Rio de Janeiro, Brazil
+Quadrem Chile Ltda., Santiago de Chile, Chile
+Quadrem Colombia SAS, Bogotá, Colombia
+Quadrem International Ltd., Hamilton, Bermuda
+100.0
+SAP Financial, Inc., Toronto, Canada
+100.0
+100.0
+SAP Finland Oy, Espoo, Finland
+100.0
+100.0
+SAP Foreign Holdings GmbH, Walldorf, Germany
+100.0
+100.0
+SAP France Holding, Levallois Perret, France
+Productos en la Informática, S.A., Madrid, Spain
+100.0
+%
+100.0
+SAP Romania SRL, Bucharest, Romania
+100.0
+SuccessFactors Australia Pty Limited, Brisbane,
+Australia
+100.0
+SAP Saudi Arabia Software Services Ltd, Riyadh,
+100.0
+Brisbane, Australia
+Kingdom of Saudi Arabia
+100.0
+SAP Saudi Arabia Software Trading Ltd, Riyadh,
+Kingdom of Saudi Arabia
+Cayman Islands
+75.0
+SAP Sechste Beteiligungs- und
+100.0 8).9)
+SuccessFactors Cayman, Ltd., Grand Cayman,
+mbH, Walldorf, Germany
+100.0
+SuccessFactors Australia Holdings Pty Ltd,
+SAP Public Services Hungary Kft., Budapest,
+Hungary
+100.0
+Shanghai SuccessFactors Software Technology
+Co., Ltd., Shanghai, China
+100.0
+SAP Public Services, Inc., Washington, DC, United
+States
+100.0
+SuccessFactors (Philippines), Inc., Pasig City,
+Philippines
+100.0
+SuccessFactors Asia Pacific Limited, Hong Kong,
+100.0
+SAP Puerto Rico GmbH, Walldorf, Germany
+100.0 8).9)
+China
+SAP Retail Solutions Beteiligungsgesellschaft
+100.0
+SuccessFactors International Holdings, LLC, San
+Mateo, CA, United States
+Walldorf, Germany
+100.0
+Sybase (UK) Limited, Maidenhead, United
+100.0
+Sybase India Ltd., Mumbai, India
+100.0
+SAP Slovensko s.r.o., Bratislava, Slovakia
+100.0
+Sybase International Holdings Corporation, LLC,
+Dublin, CA, United States
+SAP sistemi, aplikacije in produkti za obdelavo
+podatkov d.o.o., Ljubljana, Slovenia
+100.0
+49.0
+5)
+Sybase Philippines, Inc., Makati City, Philippines
+100.0
+210
+Consolidated Financial Statements IFRS and Notes | Notes
+SAP Software and Services LLC, Doha, Qatar
+100.0
+Sybase Iberia S.L., Madrid, Spain
+Germany
+100.0
+Germany
+Kingdom
+SAP Services s.r.o., Prague, Czech Republic
+100.0
+Sybase 365 Ltd., Tortola, British Virgin Islands
+100.0
+SAP Siebte Beteiligungs- und
+100.0
+4)
+Sybase 365, LLC, Dublin, CA, United States
+100.0
+Vermögensverwaltungs GmbH, Walldorf,
+Sybase Angola, LDA, Luanda, Angola
+100.0
+Vermögensverwaltungs GmbH, Walldorf,
+SAP Latvia SIA, Riga, Latvia
+100.0
+8)
+11)
+SAP Türkiye Yazilim Üretim ve Ticaret A.Ş.,
+Istanbul, Turkey
+100.0
+'s-Hertogenbosch, the Netherlands
+SAP UAB, Vilnius, Lithuania
+100.0
+100.0
+SAP New Zealand Limited, Auckland, New
+Zealand
+SAP Ventures Investment GmbH, Walldorf,
+Germany
+100.0 8).9)
+SAP Norge AS, Lysaker, Norway
+100.0
+SAP Vierte Beteiligungs- und
+100.0
+SAP Nederland Holding B.V.,
+100.0
+SAP Training and Development Institute FZCO,
+Dubai, United Arab Emirates
+SAP Svenska Aktiebolag, Stockholm, Sweden
+100.0
+SAP Malaysia Sdn. Bhd., Kuala Lumpur, Malaysia
+SAP Malta Investments Ltd., Valletta, Malta
+100.0
+100.0
+SAP Systems, Applications and Products in Data
+Processing (Thailand) Ltd., Bangkok, Thailand
+SAP Taiwan Co., Ltd., Taipei, Taiwan
+100.0
+100.0
+SAP MENA FZ L.L.C., Dubai, United Arab Emirates
+SAP Middle East and North Africa L.L.C., Dubai,
+United Arab Emirates
+100.0 4)
+49.0 5)
+SAP Technologies Inc., Palo Alto, CA, United
+States
+100.0
+SAP National Security Services, Inc., Newtown
+Square, PA, United States
+100.0
+100.0
+SeeWhy (UK) Limited, Windsor, United Kingdom
+SAP North West Africa Ltd, Casablanca, Morocco
+Vermögensverwaltungs GmbH, Walldorf,
+100.0
+Sapphire Ventures Fund I, L.P., Wilmington, DE,
+United States
+Walldorf, Germany
+SAP Portals Israel Ltd., Ra'anana, Israel
+100.0
+Sapphire Ventures Fund II, L.P., Wilmington, DE,
+United States
+SAP Portals Holding Beteiligungs GmbH,
+6)
+100.0
+SAPV (Mauritius), Ebene, Mauritius
+SAS Financière Multiposting, Paris, France
+100.0
+SAP Projektverwaltungs- und Beteiligungs GmbH,
+100.0
+SAP Portugal - Sistemas, Aplicações e Produtos
+Informáticos, Sociedade Unipessoal, Lda., Porto
+Salvo, Portugal
+0 6)
+Sapphire SAP HANA Fund of Funds, L.P.,
+Wilmington, DE, United States
+100.0
+SAP Österreich GmbH, Vienna, Austria
+100.0
+Germany
+SAP PERU S.A.C., Lima, Peru
+100.0
+SAP West Balkans d.o.o., Belgrade, Serbia
+100.0
+SAP Zweite Beteiligungs- und
+100.0 8).9)
+SAP Philippines, Inc., Makati, Philippines
+100.0
+Vermögensverwaltungs GmbH, Walldorf,
+SAP Polska Sp. z o.o., Warsaw, Poland
+100.0
+SAP Portals Europe GmbH, Walldorf, Germany
+100.0
+SAP d.o.o., Zagreb, Croatia
+100.0
+Multiposting Sp.z o.o., Warsaw, Poland
+2,017
+SAP México S.A. de C.V., Mexico City, Mexico
+100.0
+367,521
+6,490
+-9,492
+346,403
+722
+100.0
+542,135
+37,085
+53,967
+557
+11)
+SAP Nederland B.V., 's-Hertogenbosch, the Netherlands
+22,505
+600,069
+100.0
+645
+S.p.A., Vimercate, Italy
+SAP Japan Co., Ltd., Tokyo, Japan
+100.0
+834,955
+58,228
+603,097
+1,048
+SAP Labs India Private Limited, Bangalore, India
+100.0
+353,016
+25,579
+54,091
+6,935
+SAP Labs, LLC, Palo Alto, CA, United States
+SAP Service and Support Centre (Ireland) Limited, Dublin,
+Ireland
+359,818
+100.0
+6,800
+Name and Location of Company
+Owner Foot-
+ship note
+ship note
+%
+%
+Owner Foot-
+Other Subsidiaries ³)
+100.0
+100.0
+100.0
+100.0 4)
+100.0
+Concur (Philippines) Inc., Makati City, Philippines
+Concur (Switzerland) GmbH, Zurich, Switzerland
+Concur Czech (s.r.o.), Prague, Czech Republic
+Concur Holdings (France) SAS, Paris, France
+"SAP Kazakhstan“ LLP, Almaty, Kazakhstan
+110405, Inc., Newtown Square, PA, United States
+Name and Location of Company
+100.0
+Ariba India Private Limited, Gurgaon, India
+37,917
+1,322
+SuccessFactors, Inc., South San Francisco, CA, United
+100.0
+1,004,094
+137,358
+3,402,419
+1,069
+States
+Consolidated Financial Statements IFRS and Notes | Notes
+207
+Altiscale, Inc., Palo Alto, CA, United States
+Ambin Properties (Proprietary) Limited,
+Johannesburg, South Africa
+Ariba Czech s.r.o., Prague, Czech Republic
+100.0
+128,234
+100.0
+22,544
+100.0
+160,155
+1,193
+SAP Brasil Ltda, São Paulo, Brazil
+SAP Canada, Inc., Toronto, Canada
+100.0
+525,837
+-29,880
+-18,051
+1,646
+100.0
+729,874
+46,015
+491,067
+2,814
+1,201
+607,333
+100.0
+SAP Australia Pty Ltd, Sydney, Australia
+-49,774
+1,618
+10)
+SAP America, Inc., Newtown Square, PA, United States
+100.0
+4,956,907
+-328,262
+14,846,116
+7,188
+SAP Asia Pte Ltd, Singapore, Singapore
+100.0
+417,768
+-32,727
+1,100
+1,084
+SAP China Co., Ltd., Shanghai, China
+510,042
+100.0
+19,735
+771
+SAP India Private Limited, Bangalore, India
+100.0
+517,116
+17,410
+235,904
+15,431
+1,769
+100.0
+651,352
+18,853
+576,370
+391
+SAP Italia Sistemi Applicazioni Prodotti in Data Processing
+SAP Industries, Inc., Newtown Square, PA, United States
+3,322
+74,569
+100.0
+-50,993
+5,449
+SAP Deutschland SE & Co. KG, Walldorf, Germany
+100.0
+3,540,233
+591,502
+1,394,437
+4,414 7).9)
+SAP France, Levallois Perret, France
+100.0
+1,115,631
+167,281
+1,578,559
+1,413
+SAP Hungary Rendszerek, Alkalmazások és Termékek az
+Adatfeldolgozásban Informatikai Kft., Budapest, Hungary
+928,530
+100.0
+100.0
+100.0
+100.0 10)
+Pedro Garza Garcia, Mexico
+Hipmunk, Inc., San Francisco, CA, United States
+100.0 4)
+Concur (Austria) GmbH, Vienna, Austria
+100.0
+GlobalExpense (UK) Limited, London, United
+Kingdom
+hybris (US) Corp., Wilmington, DE, United States
+Concur (Canada), Inc., Toronto, Canada
+100.0
+hybris AG, Zug, Switzerland
+100.0
+Concur (France) SAS, Paris, France
+100.0
+100.0
+100.0
+CNQR Operations Mexico S. de. R.L. de. C.V., San
+100.0
+100.0 10)
+ClearTrip Inc. (Mauritius), Ebene, Mauritius
+54.2
+Financial Fusion, Inc., Dublin, CA, United States
+100.0
+ClearTrip Inc., George Town, Cayman Islands
+54.2
+FreeMarkets Ltda., São Paulo, Brazil
+100.0
+Cleartrip MEA FZ LLC, Dubai, United Arab
+54.2
+Emirates
+ClearTrip Private Limited, Mumbai, India
+54.2
+GlobalExpense (Consulting) Limited, London,
+United Kingdom
+hybris GmbH, Munich, Germany
+100.0
+100.0 8).9)
+100.0
+%
+%
+LLC "SAP Ukraine", Kiev, Ukraine
+100.0
+SAP Costa Rica, S.A., San José, Costa Rica
+100.0
+ship note
+Merlin Systems Oy, Espoo, Finland
+SAP ČR, spol. s r.o., Prague, Czech Republic
+100.0
+Multiposting SAS, Paris, France
+100.0
+SAP Cyprus Limited, Nicosia, Cyprus
+100.0
+100.0
+Foot-
+Owner
+Name and Location of Company
+Germany
+hybris UK Limited, London, United Kingdom
+100.0 10)
+Concur (Italy) S.r.l., Milan, Italy
+100.0
+Inxight Federal Systems Group, Inc., Wilmington,
+DE, United States
+100.0
+Concur (Japan) Ltd., Bunkyo-ku, Japan
+75.0
+LLC "SAP Labs", Moscow, Russia
+100.0
+208
+Consolidated Financial Statements IFRS and Notes | Notes
+Name and Location of Company
+Owner Foot-
+ship note
+Concur (Germany) GmbH, Frankfurt am Main,
+100.0 4)
+100.0
+Extended Systems, Inc., Dublin, CA, United States
+Fedem Technology AS, Trondheim, Norway
+Fieldglass Asia Pac Pty Ltd, Brisbane, Australia
+Fieldglass Europe Limited, London, United
+Kingdom
+100.0
+United States
+Ariba Slovak Republic s.r.o., Košice, Slovakia
+100.0
+Concur Technologies (UK) Limited, London,
+United Kingdom
+100.0
+Concur Technologies (Singapore) Pte Ltd,
+Singapore, Singapore
+10)
+100.0
+Co., Ltd., Shanghai, China
+ConTgo Consulting Limited, London, United
+Kingdom
+100.0 10)
+Ariba Technologies India Private Limited,
+100.0
+Ariba Software Technology Services (Shanghai)
+100.0
+Ariba Investment Company, Inc., Wilmington, DE,
+Bangalore, India
+Concur Holdings (Netherlands) B.V., Amsterdam,
+the Netherlands
+100.0 11)
+100.0
+Ariba International Holdings, Inc., Wilmington, DE,
+United States
+100.0
+Concur Technologies (Australia) Pty. Limited,
+Sydney, Australia
+Ariba International Singapore Pte Ltd, Singapore,
+100.0
+Concur Technologies (Hong Kong) Limited, Hong
+Kong, China
+100.0
+Singapore
+Concur Technologies (India) Private Limited,
+100.0
+Ariba International, Inc., Wilmington, DE, United
+States
+100.0
+Bangalore, India
+Ariba Technologies Netherlands B.V.,
+100.0
+11)
+100.0
+Business Objects Option LLC, Wilmington, DE,
+100.0
+United States
+EssCubed Procurement Pty. Ltd., Johannesburg,
+South Africa
+100.0
+Business Objects Software (Shanghai) Co., Ltd.,
+100.0
+Shanghai, China
+Business Objects Software Limited, Dublin,
+100.0
+Ireland
+Christie Partners Holding C.V., Utrecht, the
+100.0
+Netherlands
+Crystal Decisions UK Limited, London, United
+Kingdom
+1,105,221
+'s-Hertogenbosch, the Netherlands
+Business Objects Holding B.V.,
+'s-Hertogenbosch, the Netherlands
+ConTgo Limited, London, United Kingdom
+ConTgo MTA Limited, London, United Kingdom
+ConTgo Pty. Ltd., Sydney, Australia
+100.0
+10)
+100.0 10)
+100.0
+Beijing Zhang Zhong Hu Dong Information
+0 5)
+Technology Co., Ltd., Beijing, China
+Crystal Decisions (Ireland) Limited, Dublin,
+Ireland
+100.0
+b-process, Paris, France
+100.0
+Crystal Decisions Holdings Limited, Dublin,
+Ireland
+100.0
+100.0 11)
+SAP India (Holding) Pte Ltd, Singapore, Singapore
+Concur Technologies, Inc., Bellevue, WA, United States
+Sybase Software (India) Private Ltd., Mumbai,
+India
+Employee Engagement > Profitability
+Social Investment > Employee Engagement
+Mueller et al. (2012) have found that employees' perception of a
+company's commitment to corporate social responsibility is
+positively linked to their own commitment to the organization.4
+Capability Building > Employee Engagement
+Because it is closely linked to how much a company develops its
+employees and supports their careers, internal hiring to
+management and expert positions positively affects employees'
+commitment and loyalty. This hypothesis was confirmed by a
+study by Bedarkar & Pandita (2014), which identified "career
+opportunities" as the key driver of employee engagement.³
+Employee engagement is the level of employee commitment,
+pride, and loyalty, as well as the feeling of employees of being
+advocates for their company.
+Employee Engagement
+Details: How Our Non-Financial and
+Financial Performance Indicators Are
+Interconnected
+reality: enabling our customers to use our technology to make
+the world a better place.
+Using the connectivity model, we have been able to embed non-
+financial key performance indicators into our solutions. We see
+this in our SAP Digital Boardroom offering built on the SAP
+BusinessObjects Cloud solution, for example. By incorporating
+this connection into our software, the integrated approach to
+financial and non-financial performance not only helps SAP but
+also our customers. In this way, we can turn our vision into
+Currently, our connectivity model focuses predominantly on
+internal issues within SAP. However, we are working to enhance
+our model to include the social, environmental, and economic
+impacts of SAP software and services when they are used by our
+customers.
+Since 2014, we have used real data from SAP to analyze and
+proof the financial impact of employee engagement. Now we
+can show what a change by one percentage point of employee
+engagement would mean for SAP's operating profit, as detailed
+in the Documenting Financial Impact section.
+We continue to share our methodology with our customers to
+help them win in the marketplace. We know that companies
+achieve higher operating profit - resulting from both greater
+cost efficiency as well as revenue growth - by addressing
+economic, social, and environmental considerations. More
+importantly, these companies are better equipped to lead in the
+future, as they navigate the world's most pressing challenges
+and help to bring about long-term sustainable change.
+Moving forward, we are promoting the use of sustainability
+measures as a way to improve financial performance, both
+inside and outside of SAP. By embedding this approach into our
+decision making and quarterly business reviews, our
+sustainability performance steers our business along with
+factors such as revenue and cost. Our goal is for all senior
+business leaders at SAP to recognize - and be held accountable
+for - the fact that improving such measures as employee
+engagement also boosts financial performance.
+Our findings help us to shift the conversation for business
+leaders, investors, employees, and other key stakeholders, and
+firmly establish non-financial indicators as playing a crucial role
+in our financial success. As a result, engaging employees or
+reducing our emissions is no longer seen as a nice-to-have, but
+rather as essential to carrying out a successful business
+strategy.
+Documenting the financial impact of non-financial indicators
+helps us move closer to achieving our sustainability goals.
+Rather than simply stating the business case for social or
+environmental change, we now have the numbers to back it up.
+Performance
+Promoting Sustainability Measures
+as a Way to Boost Financial
+Additional Information on Economic, Environmental and Social Performance
+Connectivity of Financial and Non-Financial Indicators
+216
+single indicator includes interdependencies with other indicators, hence our results do not allow for a
+cumulative effect across all indicators included in this report. All calculations are based on non-IFRS figures
+(as shown in our Integrated Report 2016).
+⚫ These results reflect the quantification of a gross effect related to a change in a particular key performance
+indicator. They do not allow for any net impact measurement. The evaluation of required investment to
+change the non-financial indicator is excluded from the scope of analysis. The economic gross impact of a
+Embedding Non-Financial
+Performance Indicators into Our
+Solutions
+impact of the program on employees' work-life balance as well
+as its impact on the BHCI. In 2015, the program resulted in an
+ROI of 3.9 for the year of the investment. This means that
+operating profit increased €3.90 for every €1 invested during
+that year.
+Profitability > Employee Engagement
+Business Health Culture Index (BHCI) > Employee
+Engagement
+McKinsey (2013) found that different elements of the BHCI,
+such as flexible working hours, the ability to work from home,
+BHCI > Women in Management
+We believe that a balance of men and women in management
+roles helps create a more balanced working environment, one in
+which diversity is valued and people feel free to express their
+individual styles. It is our expectation that such an environment
+will positively affect our BHCI.
+Women in Management > BHCI
+The BHCI is a score for readiness of employees to accept
+change, in particular, their perception of affiliation and purpose,
+leadership, recognition, empowerment, reward, stress level, and
+life balance at SAP.
+Business Health Culture Index (BHCI)
+We believe that higher revenue has a positive impact on a
+company's work environment, thereby increasing employee
+pride and loyalty. This is also stated in a study of Harter et al.
+(2010), which states that improving financial performance
+appears to increase general satisfaction and some specific work
+perceptions.5
+Growth > Employee Engagement
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of employee engagement. We
+have been able to prove a significant positive correlation
+between employee engagement and revenue.
+In our view, a high operating profit, as great business news, can
+raise employee morale, encourage identification with our vision,
+and thus drive employee engagement. On the other hand, we
+believe that a high profit can also have a negative impact on
+employee engagement. For example, if cost savings and budget
+cuts were implemented to reach an ambitious profit target,
+employees might feel constrained and dissatisfied.
+Employee Engagement > Growth
+Employee Engagement > GHG Footprint
+We believe that lowering SAP's GHG footprint can have a
+positive impact on employee engagement because loyalty
+should rise as employees see their company act responsibly
+towards the environment. However, because lowering emissions
+also brings certain restrictions, such as on business travel, it
+may also have a negative impact on employee engagement.
+Greenhouse Gas (GHG) Footprint > Employee
+Engagement
+Employee Engagement > Employee Retention
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of employee engagement. We
+have been able to prove a significant positive correlation
+between employee engagement and employee retention.
+217
+Additional Information on Economic, Environmental and Social Performance
+Connectivity of Financial and Non-Financial Indicators
+Mueller, K., Hattrup, K., Spiess, S., Lin-Hi, N. (2012): The effects of corporate social responsibility on
+employees' affective commitment: A cross-cultural investigation. In: Journal of Applied Psychology, Vol.
+97(6), pp. 1186-1200.
+* Bedarkar, M., Pandita, D. (2014): A Study on the drivers of employee engagement impacting employee
+performance. In: Procedia - Social and Behavioral Sciences, Vol. 133, pp. 106-115.
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of the BHCI. We have been able to
+prove a significant positive correlation between the BHCI and
+employee engagement. (The BHCI positively influences the
+Leadership Trust Index, which positively influences the
+Employee Engagement Index; all correlations are significant).
+We believe that engaged employees are likely to want to help
+SAP achieve our own target in lowering GHG emissions. Yet
+another possible outcome is that a higher level of employee
+engagement may lead to more business activity requiring travel
+and therefore could lead to an increase in GHG emissions.
+and career flexibility, can make it easier for employees to
+balance work and family life.6 This leads us to conclude that the
+higher our BHCI, the more attractive SAP becomes to women
+who are also seeking management positions.
+Before and after the launch of the program, we mapped direct
+and indirect costs related to this activity. We also measured the
+Figure 2: Impact Pathway of the Business Health Culture Index
+Case Study: Calculating ROI for Our
+"Join In - Stay Fit!" Health Initiative
+Non-Financial Performance
+Cause-and-Effect Chain for the Business Health Culture Index (BHCI)
+Our Business Health Culture Index assesses the health of both
+our organizational culture and our employees. Figure 2 shows
+how activities that support health at SAP strengthen our
+organizational culture and help our employees perform at their
+best. For example, we see that flexibility improves stress
+resilience and enhances the work-life balance. This leads to
+greater productivity, resulting in a higher operating profit.
+Financial Impact of a Healthy Work
+Culture
+Case Study: Documenting the
+5 (for a reduction by 1%)
+Carbon emissions
+50 to 60 (for a change by 1 pp)
+45 to 55 (for a change by 1 pp)
+Employees
+80 to 90 (for a change by 1 pp)
+Retention
+| Employee engagement
+Business Health Culture
+Index
+Non-Financial Indicator
+for our operating profit. The results for 2016² are below:
+215
+Additional Information on Economic, Environmental and Social Performance
+Connectivity of Financial and Non-Financial Indicators
+1) The information in the section Connectivity of Financial and Non-Financial
+Indicators is not in scope of the Independent Assurance Report from KPMG.
+Since 2014, SAP has used techniques such as linear regression
+analysis to document the financial impact of four non-financial
+indicators. We assess each indicator to see what a change of
+one percentage point (or 1% for carbon emissions) would mean
+Increase in Operating Profit (€
+million, non-IFRS)
+As part of the "Join In - Stay Fit!" program at SAP Germany, we
+implemented a number of measures to improve the work-life
+balance of our staff. These include workshops that raise health
+awareness and provide tips for employees on how to change
+unhealthy behavior.
+Financial Impact
+Drive leadership
+Economic indicators
+Productivity and innovation indicators
+Social indicators
+Revenue
+Increased customer loyalty
+Increased employee retention
+Increased employee engagement
+AKPIs of the Business Health Culture Index (BHCI):
+Increased innovation
+Activities that support
+health at SAP...
+Profit
+...and influence the
+financial KPIs.
+have an impact on the
+company....
+Improved individual health,
+stress resilience and
+Strengthened leadership and
+reward culture
+Increased leadership skills
+... change behavior and
+perception, ...
+Customers
+Foster work flexibility
+Run health campaigns
+Increased productivity
+Documenting Financial Impact
+BHCI > Profitability
+Social Investment > BHCI
+assume that internal promotions will increase the percentage of
+women in management positions.
+Capability Building > Women in Management
+Like many of our IT industry peers, SAP has less women than
+men in senior positions. Given our significant pool of talent, we
+Capability Building > Employee Engagement
+Because it is closely linked to how much a company develops its
+employees and supports their careers, internal hiring to
+management and expert positions positively affects employees'
+commitment and loyalty. This hypothesis was confirmed by a
+study by Bedarkar & Pandita (2014), which identified "career
+opportunities" as the key driver of employee engagement.17
+Capability Building > Employee Retention
+According to the Global Workforce Study (2012) the "chances to
+advance the career" is the second-most important driver of
+employee retention. 16 By promoting and thus growing from
+within, SAP creates career opportunities for our employees. In
+turn, it is our expectation that this opportunity leads to an
+increase in employee retention.
+Capability building is the internal hiring rate (promotions only)
+into management or expert positions as compared to the
+external hiring rate into such positions.
+Capability Building
+It is a common best practice for companies to invest a certain
+percentage of their annual profits in programs and activities that
+create a positive social impact. We believe that higher profit is
+therefore likely to lead SAP to make greater social investments.
+Profitability > Social Investment
+A study by Muritala (2013) suggests that corporate social
+responsibility (or what we characterize as social investment) is
+likely to have a positive impact on an organization's financial
+performance. 15 In our experience, social investments do, in fact,
+have a positive impact on our ability to acquire new customers,
+especially in emerging markets.
+Growth
+Social Investment > Growth
+This sense of purpose helps create a richer and more rewarding
+work environment that reduces stress and promotes
+satisfaction and well-being.
+219
+Additional Information on Economic, Environmental and Social Performance
+Connectivity of Financial and Non-Financial Indicators
+men%20matter/Women_matter_oct2007_english.ashx [Accessed 16 Dec. 2016].
+http://www.mckinsey.com/-/media/McKinsey/Business%20Functions/Organization/Our%20Insights/Wo
+at:
+"Catalyst Information Center (2013): Why Diversity Matters. Available at:
+http://www.catalyst.org/system/files/why_diversity_matters_catalyst_0.pdf [Accessed 16 Dec. 2016].
+"Catalyst Information Center (2013): Why Diversity Matters. Available at:
+http://www.catalyst.org/system/files/why_diversity_matters_catalyst_0.pdf [Accessed 16 Dec. 2016].
+McKinsey & Company (2007): Women Matter. Gender diversity, a corporate performance driver. Available
+http://www.mckinsey.com/-/media/McKinsey/Global%20Themes/Women%20matter/WomenMatter%2
+02013%20Report%20(8).ashx [Accessed 16 Dec. 2016].
+• Koys, D. (2001): The effects of employee satisfaction, organizational citizenship behavior, and turnover on
+organizational effectiveness: A unit-level, longitudinal study. In: Personnel Psychology, Vol. 54(1), pp. 101-114.
+McKinsey & Company (2013): Women Matter. Gender diversity in top management: Moving corporate
+culture, moving boundaries. Available at:
+Social Investment > Employee Engagement
+Mueller et al. (2012) have found that employees' perception of a
+company's commitment to corporate social responsibility is
+positively linked to their own commitment to the organization. 14
+* Meifert, M. (2005): Mitarbeiterbindung: eine empirische Analyse betrieblicher Weiterbildner in deutschen
+Großunternehmen. München and Mering: Hampp Verlag.
+Growth is one of our strategic objectives. We measure it through
+several KPIs, for example total revenue that SAP receives from
+the sale of our products and services.
+A study by Muritala (2013) suggests that corporate social
+responsibility (or what we characterize as social investment) is
+likely to have a positive impact on an organization's financial
+performance. 18 In our experience, social investments do, in fact,
+have a positive impact on our ability to acquire new customers,
+especially in emerging markets.
+Dec. 2016].
+PwC (2013): Busting the carbon budget - Low Carbon Economy Index 2013. Available at: https://www.pwc-
+wissen.de/pwc/de/shop/publikationen/Low+Carbon+Economy+Index+2013/?card=12994 [Accessed 16
+"Muritala, T. (2013): Does CSR Improve Organization Financial Performance? Evidence from Nigeria Using
+Triangulation Analysis. In: Economics and Applied Informatics, Issue 3, pp. 41-46.
+"Catalyst Information Center (2013): Why Diversity Matters. Available at:
+http://www.catalyst.org/system/files/why_diversity_matters_catalyst_0.pdf [Accessed 16 Dec. 2016].
+*Meifert, M. (2005): Mitarbeiterbindung: eine empirische Analyse betrieblicher Weiterbildner in deutschen
+Großunternehmen. München and Mering: Hampp Verlag.
+Bedarkar, M., Pandita, D. (2014): A Study on the drivers of employee engagement impacting employee
+performance. In: Procedia - Social and Behavioral Sciences, Vol. 133, pp. 106-115.
+[Accessed 16 Dec. 2016].
+Research-Results/2012/07/Towers-Watson-Global-Workforce-Study-2012-Deutschlandergebnisse
+* Towers Watson (2012): Global Workforce Study. Geld, Karriere, Sicherheit? Was Mitarbeiter motiviert und in
+ihrem Unternehmen hält. Available at: https://www.towerswatson.com/de-AT/Insights/IC-Types/Survey-
+* Muritala, T. (2013): Does CSR Improve Organization Financial Performance? Evidence from Nigeria Using
+Triangulation Analysis. In: Economics and Applied Informatics, Issue 3, pp. 41-46.
+Mueller, K., Hattrup, K., Spiess, S., Lin-Hi, N. (2012): The effects of corporate social responsibility on
+employees' affective commitment: A cross-cultural investigation. In: Journal of Applied Psychology, Vol.
+97(6), pp. 1186-1200.
+Social Investment > Growth
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of employee engagement. We
+have been able to prove a significant positive correlation
+between employee engagement and revenue.
+Lowering SAP's GHG footprint could have a positive impact on
+SAP's revenue because customers increasingly ask their
+suppliers to act sustainably. This reasoning is supported by a
+study by PwC (2013) confirming the existence of a positive
+correlation between a company's environmental performance
+and financial performance.21
+GHG Footprint > Growth
+Meifert (2005) stated a clear relationship between employee
+retention and the company's revenue and margin.20
+Employee Retention > Growth
+revenue.
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of the BHCI. We have been able to
+prove a significant positive correlation between the BHCI and
+BHCI > Growth
+Studies show that companies with a relatively high percentage
+of women in upper management ranks or as board members
+achieve stronger financial performance compared to those with
+a relatively low percentage (Catalyst, 2013). 19 We believe that
+having more women in management positions will increase our
+revenue as it helps us to better serve our diverse customer base.
+Women in Management > Growth
+Employee Engagement > Growth
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of the BHCI. Now we can show
+what a change by one percentage point of the BHCI would mean
+for SAP's operating profit, as detailed in the Documenting
+Financial Impact section.
+[Accessed 16 Dec. 2016].
+> Towers Watson (2012): Global Workforce Study. Geld, Karriere, Sicherheit? Was Mitarbeiter motiviert und in
+ihrem Unternehmen hält. Available at: https://www.towerswatson.com/de-AT/Insights/IC-Types/Survey-
+Employee Engagement > Employee Retention
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of employee engagement. We
+have been able to prove a significant positive correlation
+between employee engagement and employee retention.
+Capability Building > Employee Retention
+According to the Global Workforce Study (2012) the "chances to
+advance the career" is the second-most important driver of
+employee retention 7 By promoting and thus growing from
+within, SAP creates career opportunities for our employees. In
+turn, it is our expectation that this opportunity leads to an
+increase in employee retention.
+Employee retention is the ratio of the average headcount
+(expressed in full-time equivalents), minus employee-initiated
+terminations (turnover), divided by the average headcount,
+taking into account the past 12 months.
+Employee Retention
+Connectivity of Financial and Non-Financial Indicators
+Additional Information on Economic, Environmental and Social Performance
+218
+http://www.mckinsey.com/-/media/McKinsey/Global%20Themes/Women%20matter/WomenMatter%2
+02013%20Report%20(8).ashx [Accessed 16 Dec. 2016].
+• McKinsey & Company (2013): Women Matter. Gender diversity in top management: Moving corporate
+culture, moving boundaries. Available at:
+Employee Retention > Growth
+Harter, J., Schmidt, F., Asplund, J., Kilham, E., Agrawal, S. (2010): Causal Impact of Employee Work
+Perceptions on the Bottom Line of Organizations. In: Perspectives on Psychological Science, Vol. 5(4), pp.
+378-389.
+BHCI > Customer Loyalty
+Many of SAP's GHG emissions are caused by business travel
+and commuting, which we believe can have both negative and
+positive impacts on employee health. Some people may
+experience greater stress from more travel because they have
+less time to spend at home, suffer from jetlag, or lose valuable
+working time; others may enjoy travel, enabling them to
+experience other places and cultures as well as meet new
+people.
+GHG Footprint > BHCI
+revenue.
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of the BHCI. We have been able to
+prove a significant positive correlation between the BHCI and
+BHCI > Growth
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of the BHCI. We have been able to
+prove a significant positive correlation between the BHCI and
+employee engagement. (The BHCI positively influences the
+Leadership Trust Index, which positively influences the
+Employee Engagement Index; all correlations are significant).
+BHCI > Employee Engagement
+We believe that by supporting our employees in engaging in
+activities with a positive social impact, such as skills-based
+volunteering, we are enhancing the meaning they find in work.
+This sense of purpose can help create a richer and more
+rewarding work environment that reduces stress and promotes
+satisfaction and well-being.
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of the BHCI. We have been able to
+prove a significant positive correlation between the BHCI and
+customer loyalty.
+Research-Results/2012/07/Towers-Watson-Global-Workforce-Study-2012-Deutschlandergebnisse
+Meifert (2005) stated a clear relationship between employee
+retention and a company's revenue and margin.
+Employee Retention > Customer Loyalty
+We believe that by supporting our employees in engaging in
+activities with a positive social impact, such as skills-based
+volunteering, we are enhancing the meaning they find in work.
+Social Investment > BHCI
+Social investment reflects SAP's activities in volunteering and
+technology as well as cash donations.
+Social Investment
+Studies show that companies with a high level of gender
+diversity outperform companies with an average level in terms
+of return on equity (11.4% versus an average 10.3%); operating
+results (EBIT 11.1% versus 5.8%); and stock price increases
+(64% versus 47% over the period 2005-2007) (McKinsey,
+2007).13 It is therefore likely that a higher share of women in
+management positions will result in a higher profit for SAP.
+Women in Management > Profitability
+Women in Management > Customer Loyalty
+Diversity programs - including those focused on the promotion
+of women to management positions - have a direct and positive
+impact on customer satisfaction (Catalyst, 2013).12
+Studies show that companies with a relatively high percentage
+of women in upper management or as board members achieve
+stronger financial performance compared to those with a
+relatively low percentage (Catalyst, 2013)." We believe that
+having more women in management positions will increase our
+revenue as it helps us better serve our diverse customer base.
+Women in Management > Growth
+8
+McKinsey (2013) found that different elements of the BHCI,
+such as flexible working hours, the ability to work from home,
+and career flexibility, can make it easier for employees to
+balance work and family life. 10 This leads us to conclude that the
+higher our BHCI, the more attractive SAP becomes to women
+who are also seeking management positions.
+We believe that a balance of men and women in management
+helps create a more balanced working environment, one in
+which diversity is valued and people feel free to express their
+individual styles. It is our expectation that such an environment
+will positively affect our BHCI.
+Women in Management > BHCI
+assume that internal promotions will increase the percentage of
+women in management positions.
+Capability Building > Women in Management
+Like many of our IT industry peers, SAP has less women than
+men in senior positions. Given our significant pool of talent, we
+"Women in Management" means the share of women in
+management positions (managing teams, managing managers,
+board members) as compared to the total number of managers.
+Women in Management
+We have been using real data from SAP to analyze and prove the
+financial impact of employee retention. Now we can show what a
+change by one percentage point of employee retention would
+mean for SAP's operating profit, as detailed in the Documenting
+Financial Impact section.
+Employee Retention > Profitability
+Koys (2001) has found evidence that employee turnover has a
+negative impact on customer satisfaction. 9 We believe this
+effect stems from the fact that experienced employees work
+more efficiently, have better product knowledge, and can build
+trusting relationships with colleagues and customers, so
+therefore have the ability to better serve customers' needs.
+BHCI > Women in Management
+profit.
+Next, we conferred with external stakeholders, including
+academics, financial investors, and industry peers, to vet our
+findings. Finally, we used real data from SAP to translate our
+cause-and-effect chains into a quantified impact on operating
+To create and validate these chains of cause and effect, we
+turned to both internal and external stakeholders. We started
+with those inside SAP, meeting in small groups that rigorously
+examined the impacts of activities related to each of our non-
+financial indicators.
+Equity Investments with Ownership of at Least 5%
+4)
+100.0
+Name and Location of Company
+100.0
+TRX, Inc., Bellevue, WA, United States
+Volume Integration, Inc., VA, United States
+10)
+100.0
+TRX UK Limited, London, United Kingdom
+1) These figures are based on our local IFRS financial statements prior to
+eliminations resulting from consolidation and therefore do not reflect the
+contribution of these companies included in the Consolidated Financial
+Statements. The translation of the equity into Group currency is based on
+period-end closing exchange rates, and on average exchange rates for
+revenue and net income/loss.
+United States
+40.62
+Visage Mobile, Inc., San Francisco, CA, United States
+Yapta, Inc., Seattle, WA, United States
+100.0
+TRX Technology Services, L.P., Atlanta, GA,
+Nagar, India
+46.77
+Stay NTouch Inc., Bethesda, MD, United States
+100.0
+TRX Technologies India Private Limited, Raman
+47.10
+17.00
+2) As at December 31, 2016, including managing directors, in FTE.
+4) Consolidated for the first time in 2016.
+Integral Ad Science, Inc., New York, NY, United States
+innoWerft Technologie- und Gründerzentrum Walldorf Stiftung
+GmbH, Walldorf, Germany
+InnovationLab GmbH, Heidelberg, Germany
+Inkling Systems, Inc., San Francisco, CA, United States
+IDG Ventures USA III, L.P., San Francisco, CA, United States
+IEX Group, Inc., New York, NY, United States
+Greater Pacific Capital (Cayman) L.P., Grand Cayman, Cayman
+Islands
+GK Software AG, Schöneck, Germany
+Follow Analytics, Inc., San Francisco, CA, United States
+FeedZai S.A., Lisbon, Portugal
+3) Figures for profit/loss after tax and total equity pursuant to HGB, section
+285 and section 313 are not disclosed if they are of minor significance for a
+fair presentation of the profitability, liquidity, capital resources and financial
+position of SAP SE, pursuant to HGB, section 313 (2) sentence 3 no. 4 and
+section 286 (3) sentence 1 no. 1.
+Data Collective II L.P., San Francisco, CA, United States
+Data Collective III L.P., San Francisco, CA, United States
+Data Collective IV, L.P., San Francisco, CA, United States
+Dharma Platform, Inc., Florida Ave NW, WA, United States
+EIT ICT Labs GmbH, Berlin, Germany
+211
+Consolidated Financial Statements IFRS and Notes | Notes
+Cloudhealth Technologies, Inc., Boston, MA, United States
+Costanoa Venture Capital II L.P., Palo Alto, CA, United States
+Costanoa Venture Capital QZ, LLC, Palo Alto, CA, United States
+Cyphort, Inc., Santa Clara, CA, United States
+BY Capital 1 GmbH & Co. KG, Berlin, Germany
+Canvas II, L.P., Portola Valley, CA, United States
+Catchpoint Systems, Inc., New York, NY, United States
+Char Software, Inc., Boston, MA, United States
+Amplify Partners II L.P., Cambridge, MA, United States
+Amplify Partners L.P., Cambridge, MA, United States
+AP Opportunity Fund, LLC, Menlo Park, CA, United States
+All Tax Platform - Solucoes Tributarias S.A., São Paulo, Brazil
+Alteryx, Inc., Irvine, CA, United States
+Alchemist Accelerator Fund I LLC, San Francisco, CA, United
+States
+6) SAP SE does not hold any ownership interests in four structured entities,
+SAPV (Mauritius), Sapphire SAP HANA Fund of Funds, L.P., Sapphire
+Ventures Fund I, L.P. and Sapphire Ventures Fund II, L.P. However, based on
+the terms of limited partnership agreements under which these entities were
+established, SAP SE is exposed to the majority of the returns related to their
+operations and has the current ability to direct these entities' activities that
+affect these returns, in accordance with IFRS 10 (Consolidated Financial
+Statements). Accordingly, the results of operations are included in SAP's
+consolidated financial statements.
+5) Agreements with the other shareholders provide that SAP SE fully controls
+the entity.
+Name and Location of Company
+Iron.io, Inc., San Francisco, CA, United States
+30.46
+100.0
+100.0
+Systems Applications Products (Africa Region)
+Proprietary Limited, Johannesburg, South Africa
+Systems Applications Products (Africa)
+Proprietary Limited, Johannesburg, South Africa
+Systems Applications Products (South Africa)
+Proprietary Limited, Johannesburg, South Africa
+Systems Applications Products Nigeria Limited,
+Victoria Island, Nigeria
+100.0
+100.0
+70.0
+Entity whose personally liable partner is SAP SE.
+Entity with (profit and) loss transfer agreement.
+9) Pursuant to HGB, section 264 (3) or section 264b, the subsidiary is exempt
+from applying certain legal requirements to their statutory stand-alone
+financial statements including the requirement to prepare notes to the
+financial statements and a review of operations, the requirement of
+independent audit and the requirement of public disclosure.
+10) Pursuant to sections 479A to 479C of the UK Companies Act 2006, the
+entity is exempt from having its financial statements audited on the basis that
+SAP SE has provided a guarantee of the entity's liabilities in respect of its
+financial year ended December 31, 2016.
+Sybase, Inc., Dublin, CA, United States
+11) Pursuant to article 2:403 of the Dutch Civil Code, the entity is exempt from
+applying certain legal requirements to their statutory stand-alone financial
+statements including the requirement to prepare the financial statements,
+the requirement of independent audit and the requirement of public
+disclosure on the basis that SAP SE has provided a guarantee of the entity's
+liabilities in respect of its financial year ended December 31, 2016.
+TechniData GmbH, Markdorf, Germany
+100.0
+Other Equity Investments
+Technology Licensing Company, LLC, Atlanta, GA,
+United States
+100.0
+Name and Location of Company
+TomorrowNow, Inc., Bryan, TX, United States
+100.0
+Owner-
+ship
+100.0
+Evature Technologies (2009) Ltd., Ramat Gan, Israel
+Procurement Negócios Eletrônicos S/A, Rio de Janeiro,
+Brazil
+100.0
+100.0
+TRX Luxembourg, S.a.r.I., Luxembourg City,
+Luxembourg
+100.0
+TRX Fulfillment Services, LLC, Atlanta, GA, United
+States
+39.06
+28.30
+China DataCom Corporation Limited, Guangzhou, China
+Convercent, Inc., Denver, CO, United States
+100.0 10)
+TRX Europe Limited, London, United Kingdom
+100.0
+100.0
+TRX Data Service, Inc., Glen Allen, VA, United
+States
+%
+7)
+Name and Location of Company
+Owner
+Foot-
+ship note
+8)
+%
+Sybase Software (China) Co., Ltd., Beijing, China
+Joint Arrangements and Investments in Associates
+Jfrog, Ltd., Netanya, Israel
+Jibe, Inc., New York, NY, United States
+Kaltura, Inc., New York, NY, United States
+.256
+251
+GRI Index and UN Global Compact Communication on Progress
+Management's Acknowledgement of the SAP Integrated Report 2016.
+Independent Assurance Report..
+.246
+.244
+.243
+Non-Financial Notes: Environmental Performance.
+Non-Financial Notes: Social Performance
+Memberships.
+257
+.242
+.239
+.237
+235
+232
+.229
+Recognition.
+Public Policy.
+Waste and Water
+Sustainable Procurement.
+.241
+Human Rights and Labor Standards
+214
+Connectivity of Financial
+and Non-Financial
+Using Cause-and-Effect Analysis
+Such analysis establishes more than just a correlation between
+non-financial indicators and financial impact. It also reveals why
+and how something such as employee engagement ultimately
+leads to gains or losses in business performance. We believe
+that such insights are a prerequisite for fully modeling the
+financial impact of non-financial performance.
+To achieve this quantification, we created cause-and-effect
+chains that show how specific actions we take at SAP lead to
+shifts in behavior. This behavior impacts on our business and
+has a financial consequence.
+At SAP, we put a monetary value on how our operating profit is
+affected by selected non-financial indicators that measure, for
+example, how well we engage with our employees and inspire
+them to commit to our vision and strategy, support a healthy
+business culture, and succeed in reducing our carbon emissions.
+Putting a Value on Non-Financial
+Performance Indicators
+Figure 1: Connectivity between Social, Environmental, and
+Economic Performance
+Total Energy
+Consumed
+GHG Footprint
+Social
+Investment
+Additional Information on Economic, Environmental and Social Performance
+Capability
+Building
+Customer
+Loyalty
+Profitability
+Growth
+Employee
+Retention
+Employee
+Engagement
+BHCI
+€
+Integrated reporting is based on the idea that social,
+environmental, and economic performance are interrelated,
+with each creating tangible impacts on the others. To achieve a
+truly integrated strategy, we must understand these
+connections and work to support them throughout SAP. Figure 1
+below shows how different elements connect.
+Gaining a Holistic View of Our
+Performance
+Indicators¹)
+Women in
+Management
+Sustainability Management and Policies.
+Business Conduct..
+227
+Bill McDermott
+The Executive Board
+Walldorf, Baden
+SAP SE
+Walldorf, February 22, 2017
+Spring Mobile Solutions, Inc., Reston, VA, United States
+Storm Ventures V, L.P., Menlo Park, CA, United States
+SV Angel IV, L.P., San Francisco, CA, United States
+T3C Inc., Mountain View, CA, United States
+TableNow, Inc., San Francisco, CA, United States
+The Currency Cloud Group Limited, London, United Kingdom
+The SAVO Group Ltd., Chicago, IL, United States
+TidalScale, Inc., Santa Clara, CA, United States
+USV 2016, L.P., New York, NY, United States
+Socrata, Inc., Seattle, WA, United States
+Shasta Ventures V, L.P., Menlo Park, CA, United States
+Smart City Planning, Inc., Tokyo, Japan
+Return Path, Inc., New York, NY, United States
+Rome2rio Pty. Ltd., Albert Park, Australia
+SaaStr Fund I, L.P., Palo Alto, CA, United States
+Scytl, S.A., Barcelona, Spain
+Robert Enslin
+PubNub, Inc., San Francisco, CA, United States
+Realize Corporation, Tokyo, Japan
+Point Nine Capital Fund III GmbH & Co. KG, Berlin, Germany
+Portworx Inc., Los Altos, CA, United States
+Point Nine Capital Fund II GmbH & Co. KG, Berlin, Germany
+Point Nine Annex GmbH & Co. KG, Berlin, Germany
+Nor1, Inc., Santa Clara, CA, United States
+Notation Capital, L.P., Brooklyn, NY, United States
+On Deck Capital, Inc., New York, NY, United States
+OpenX Software Limited, Pasadena, CA, United States
+Patent Quality, Inc., Bellevue, WA, United States
+Name and Location of Company
+Narrative Science, Inc., Chicago, IL, United States
+MVP Strategic Partnership Fund GmbH & Co. KG, Grünwald,
+Germany
+Local Globe VII, L.P., St. Peter Port, Guernsey, Channel Islands
+Local Globe VIII, L.P., St. Peter Port, Guernsey, Channel Islands
+Looker Data Sciences, Inc., Santa Cruz, CA, United States
+MuleSoft, Inc., San Francisco, CA, United States
+LeanData, Inc., Sunnyvale, CA, United States
+Post for Systems, Cairo, Egypt
+Michael Kleinemeier
+Bernd Leukert
+Luka Mucic
+Stakeholder Engagement
+.224
+Materiality.
+215
+Connectivity of Financial and Non-Financial Indicators..
+Additional Information on
+Economic, Environmental and
+Social Performance
+213
+Management's Annual Report on Internal Control over Financial Reporting in the Consolidated Financial Statements
+Consolidated Financial Statements IFRS and Notes
+KPMG AG Wirtschaftsprüfungsgesellschaft, our independent
+registered public accounting firm, has issued its attestation
+report on the effectiveness of SAP's internal control over
+financial reporting. It is included in the independent auditor's
+report on the Consolidated Financial Statements as at
+December 31, 2016.
+Company's internal control over financial reporting was
+effective.
+management has concluded that, as at December 31, 2016, the
+Based on the assessment under these criteria, SAP
+SAP's management assessed the effectiveness of the
+Company's internal control over financial reporting as at
+December 31, 2016. In making this assessment, it used the
+criteria set forth by the Committee of Sponsoring Organizations
+of the Treadway Commission (COSO) in Internal Control -
+Integrated Framework (2013).
+The management of SAP is responsible for establishing and
+maintaining adequate internal control over financial reporting as
+such term is defined in Rules 13a-15(f) and 15d-15(f) under the
+U.S. Securities Exchange Act of 1934. SAP's internal control
+over financial reporting is a process designed under the
+supervision of SAP's CEO and CFO to provide reasonable
+assurance regarding the reliability of financial reporting and the
+preparation of financial statements for external reporting
+purposes in accordance with International Financial Reporting
+Standards (IFRS) as issued by the International Accounting
+Standards Board (IASB).
+U.S. law requires that management submit a report on the
+effectiveness of internal control over financial reporting in the
+consolidated financial statements. For 2016, that report is as
+follows:
+Management's
+Annual Report on
+Internal Control over
+Financial Reporting in the
+Consolidated
+Financial Statements
+Consolidated Financial Statements IFRS and Notes | Notes
+212
+Steve Singh
+Stefan Ries
+220
+Additional Information on Economic, Environmental and Social Performance
+Connectivity of Financial and Non-Financial Indicators
+Travel Technology, LLC, Atlanta, GA, United
+States
+Reichheld, F. (2003): The One Number You Need to Grow. In: Harvard Business Review, Vol. 81(12), pp. 46-
+For more information, see the Business Conduct section.
+Business Conduct
+Understanding the Relevance of Our
+The climate and energy category had the lowest response
+rates. In response to this, we have reduced the volume of our
+reporting on this category. We have only included a short
+description of our environmental targets and our progress in
+achieving them.
+SDG 4 Quality education
+■
+SDG 12 Responsible consumption and production
+■
+SDG 17 Global partnerships
+■
+SDG 13 Climate action
+"
+SDG 8 Decent work and economic growth
+•
+SDG 3 Good health and well-being
+"
+SDG 9 Industry, innovation, and infrastructure
+We believe that positive experiences among our customers can
+significantly increase business with existing customers, as well
+as help attract new customers. Both results can lower the cost
+of sales, thereby increasing our profit.
+Customer Loyalty > Profitability
+Reichheld (2003) found a strong correlation between
+companies' Net Promoter Score results and their revenue
+growth rates.27 We support this view as we believe that loyal SAP
+customers are likely to recommend SAP products to other
+companies, which is likely to result in increased sales and
+stronger revenue.
+Customer Loyalty > Growth
+We believe that lowering SAP's carbon emissions has a positive
+reputational effect, thereby enhancing SAP's standing with its
+customers.
+GHG Footprint > Customer Loyalty
+Climate and Energy
+Employee Retention > Customer Loyalty
+Koys (2001) has found evidence that employee turnover has a
+negative impact on customer satisfaction. 26 We believe this
+effect stems from the fact that experienced employees work
+more efficiently, have better product knowledge, and can build
+trusting relationships with colleagues and customers, so
+therefore have the ability to better serve customers' needs.
+221
+Additional Information on Economic, Environmental and Social Performance
+Connectivity of Financial and Non-Financial Indicators
+54.
+men%20matter/Women_matter_oct2007_english.ashx [Accessed 16 Dec. 2016].
+http://www.mckinsey.com/-/media/McKinsey/Business%20Functions/Organization/Our%20Insights/Wo
+•
+Women in Management > Customer Loyalty
+Diversity programs - including those focused on the promotion
+of women to management positions - have a direct and positive
+impact on customer satisfaction (Catalyst, 2013).25
+For more information, see the Energy and Emissions section.
+Financial Performance
+Not only do we create financial value for SAP and our
+shareholders, we also create wealth for a broad range of
+stakeholders. We do this through employee wages and benefits,
+payments to our value chain and ecosystem, and tax payments
+to local governments and economies, for example.
+Stakeholder Engagement
+For SAP, stakeholder engagement and collaboration are deeply
+embedded into our process of innovation and the development
+of our products and services. Before we can design a new
+solution, we must first understand the issue we are addressing.
+For this reason, design thinking and co-innovation are essential.
+To be able to innovate, we regularly engage with the stakeholder
+groups described in the table below, including our sustainability
+advisory panel. We selected these groups as they are critical to
+our value creation.
+For the materiality assessment conducted in 2016, we
+specifically spoke to stakeholder representatives of academia,
+auditors, customers, employees, and investors. For the results
+of this dialog, see the Materiality section.
+Stakeholder Group
+Customers
+Materiality
+Employees
+Governments
+How We Engage
+Our customer-facing organizations, such as sales, consulting,
+education, and support, have multiple touch points with customers
+on a daily basis. In addition to the sales engagement cycle, we
+engage customers through industry value networks, co-innovation
+projects, customer councils, and customer-organized user groups
+throughout the world. Our Customer Engagement Initiative provides
+early insight into SAP product planning, allowing our customers to
+influence and collaborate around our product development cycle.
+We also gather customer feedback regularly through our "SAP
+Listens" customer and partner feedback program.
+We survey employees annually, conducting pulse checks throughout
+the year.
+The Supervisory Board comprises 50% employee representation,
+and management regularly engages with employee works councils.
+In addition, the Executive Board answers employees' questions in
+all-hands meetings that take place every quarter. In quarterly coffee
+corner sessions, senior executives explain our strategy to
+employees and answer their questions directly. Through topic-
+related discussion blogs, executives engage regularly with
+employees, foster open discussion, and receive focused feedback
+globally.
+Financial analysts
+and investors
+BHCI > Customer Loyalty
+226
+Our future business success, specifically in the cloud business,
+depends on customer loyalty. We view customer loyalty as being
+so critical to our own success that we have made it one of our
+four company-wide strategic goals, in addition to employee
+engagement, growth, and profitability.
+Human and Digital Rights
+For more information, see the Security and Privacy section and
+the Human Rights and Labor Standards section.
+Human Capital
+Nothing has a greater impact on our long-term success than the
+creativity, talent, and commitment of our people. Their ability to
+innovate and understand the needs of our customers delivers
+sustainable value to our company and our society. Successful
+strategies to attract, retain, develop, lead, and engage our
+employees are therefore critical to driving a diverse culture of
+innovation, sustained growth, and profitability.
+Impact on Society
+We believe that digital technologies will enable companies and
+organizations to tackle some of the world's most complex,
+intractable problems. These include issues that are highlighted
+within the United Nations' 17 SDGs, such as abolishing poverty
+and reducing global carbon emissions. Through our solutions,
+we provide customers, partners, and consumers with the tools
+that help them make a difference. This may be through
+empowering those disadvantaged in society through financial
+services, providing personalized medicine, building
+infrastructure, or combating climate change.
+Additional Information on Economic, Environmental and Social Performance
+As well as creating positive impacts through our solutions, we
+are equipping young people all over the world with the skills they
+need to tackle society's problems and thrive in the digital
+economy. By engaging talent, leveraging technology, and
+building strong partnerships, we can build the workforce of the
+future.
+Material and Other Reported Aspects improving people's lives, we help our customers operate more
+Each of our material aspects has significant impact on the
+business success of SAP as described below.
+efficiently, protect the safety of their products, manage their
+employees, and become more effective overall. Our customers
+inspire everything we do, from the first spark of innovation to the
+Additional Information on Economic, Environmental and Social Performance
+Materiality
+225
+design and completion of new products, as well as to how we
+serve their needs over time. Innovation throughout the company
+helps us realize our vision and serve our customers' needs.
+Innovation and Customer Loyalty
+Our Investor Relations team and the Executive Board conduct one-
+to-one briefings with financial analysts and institutional investors, as
+well as hold investor road shows, quarterly earnings calls, a Capital
+Market Day, and the Annual General Meeting of Shareholders. Our
+Investor Relations team also engages with the sustainable
+investment community in close cooperation with the Sustainability
+team, and the Global Treasury team interacts regularly with debt
+investors.
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of the BHCI. We have been able to
+prove a significant positive correlation between the BHCI and
+customer loyalty.
+Our GHG footprint is the sum of all greenhouse gas emissions
+measured and reported, including renewable energy and third-
+party reductions, for example, offsets.
+Innovation
+Impact on society
+Next, we conducted semi-structured interviews with selected
+stakeholders to validate the shortlisted topics. We asked
+stakeholders to rate topics on a scale from 0 to 5 (where 0 is not
+important at all and 5 is very important) based on the following
+questions for the first six categories:
+To what degree does this topic influence SAP's ability to
+create value?
+How important is that topic for you to engage into a business
+relationship with SAP?
+To assess the category "impact on society," we asked
+stakeholders the following questions:
+How high is the potential of SAP to enable our customers to
+achieve the SDGs?
+How important is our ability to help achieve the SDGs for you
+to engage in a business relationship with SAP?
+We have included in our materiality matrix all topics with
+stakeholder ratings in the upper 50% for both questions.
+Validation
+The results of the materiality analysis were reviewed and
+confirmed by our steering committee for integrated reporting
+and our sustainability advisory panel. It was also reviewed by our
+chief financial officer, who is the board sponsor for sustainability
+and integrated reporting.
+Review
+Feedback on and analysis of the SAP Integrated Report 2016 will
+serve as an input for future materiality assessments.
+224
+Additional Information on Economic, Environmental and Social Performance
+Materiality
+Results
+Financial performance was seen as a mandatory part of
+reporting and was often not expressly discussed as a result.
+However, this category received high individual scores.
+The innovation, business conduct, and human capital
+categories received the highest scores and response rates.
+In evaluating our impact on society through the SAP portfolio,
+our stakeholders identified the following seven SDGs as
+material:
+-
+Key points of our results include:
+Materiality Matrix (in Addition to Financial Performance)
+Influence on SAP's ability to create value
+(as an organization or through SAP solutions)
+Very High
+Business conduct
+Climate and energy
+Financial performance
+Human and digital rights
+Human capital
+Human capital
+Business
+conduct
+Impact on
+society
+Human and
+digital rights
+High
+Very High
+Importance to the business relationship with SAP
+Innovation
+During the prioritization stage we looked at the extent to which
+each individual topic affects our ability to create value at SAP.
+We assessed whether this value was financial, operational,
+strategic, reputational, or regulatory. All topics that were
+identified as delivering value in three or more areas were then
+included on our short list of seven categories, as follows:
+Prioritization
+When identifying our key topics and their boundaries, we looked
+first at areas related to our operations and supply chain. Second,
+we looked at topics related to how our software can help our
+customers contribute to the achievement of the SDGs.
+Total energy consumed is the sum of all energy consumed
+through SAP's own operations, including energy from renewable
+sources.
+Total Energy Consumed
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of the GHG footprint. Now we can
+show what a reduction of SAP's carbon emissions by one
+percentage would mean for SAP's operating profit, as detailed in
+the Documenting Financial Impact section.
+GHG Footprint > Profitability
+The emissions caused by SAP's energy consumption add
+directly to the corporate carbon footprint if they are not reduced
+through offsets or - for electricity consumption - renewable
+energy certificates (RECs).
+Total Energy Consumed > GHG Footprint
+* Catalyst Information Center (2013): Why Diversity Matters. Available at:
+http://www.catalyst.org/system/files/why_diversity_matters_catalyst_0.pdf [Accessed 16 Dec. 2016].
+*Koys, D. (2001): The effects of employee satisfaction, organizational citizenship behavior, and turnover on
+organizational effectiveness: A unit-level, longitudinal study. In: Personnel Psychology, Vol. 54(1), pp. 101-114.
+We believe that lowering SAP's carbon emissions has a positive
+effect on our reputation, thereby enhancing SAP's standing with
+our customers.
+Lowering SAP's GHG footprint could have a positive impact on
+SAP's revenue because customers increasingly ask their
+suppliers to act sustainably. This reasoning is supported by a
+study by PwC (2013) confirming the existence of a positive
+correlation between a company's environmental performance
+and financial performance.28
+GHG Footprint > Growth
+GHG Footprint > Employee Engagement
+We believe that lowering SAP's GHG footprint can have a
+positive impact on employee engagement because loyalty
+should rise as employees see their company act responsibly
+towards the environment. However, because lowering emissions
+also brings certain restrictions, such as on business travel, it
+may also have a negative impact on employee engagement.
+Employee Engagement > GHG Footprint
+We believe that engaged employees are likely to want to help
+SAP achieve our target in lowering GHG emissions. Yet another
+possible outcome is that a higher level of employee engagement
+may lead to more business activity requiring travel and therefore
+could lead to an increase in GHG emissions.
+experience other places and cultures as well as meet new
+people.
+Many of SAP's GHG emissions are caused by business travel
+and commuting, which we believe can have both negative and
+positive impacts on employee health. Some people may
+experience greater stress from more travel because they have
+less time to spend at home, suffer from jetlag, or lose valuable
+working time; others may enjoy travel, enabling them to
+GHG Footprint > BHCI
+GHG Footprint > Customer Loyalty
+GHG Footprint
+54.
+222
+During this stage, we drew up a long list of potential topics based
+on guidance from GRI G4 and the Sustainability Accounting
+Standards Board (SASB), as well as our existing material
+aspects. We also considered a materiality assessment for the
+ICT industry by the Global E-Sustainability Initiative (GeSI) as
+well as the United Nations' Sustainable Development Goals
+(SDGs).
+Identification
+Our new process combines the GRI G4 standards for
+sustainability reporting and the International Integrated
+Reporting Framework. Key stages are detailed below.
+By understanding which environmental, social, and governance
+issues are key priorities for our stakeholders, we are better able
+to allocate time, budget, and resources accordingly within our
+integrated reporting and efforts towards realizing our corporate
+vision. Based on our existing material aspects, in 2016, we
+completed a new materiality assessment to help identify and
+validate those topics which are the most relevant to our
+stakeholders such as employees, investors, and customers. The
+assessment also highlights those topics which contribute most
+to value creation both in our own operations and in those of our
+customers.
+Reporting
+Defining Key Priorities for Our
+» Reichheld, F. (2003): The One Number You Need to Grow. In: Harvard Business Review, Vol. 81(12), pp. 46-
+PwC (2013): Busting the carbon budget - Low Carbon Economy Index 2013. Available at: https://www.pwc-
+wissen.de/pwc/de/shop/publikationen/Low+Carbon+Economy+Index+2013/?card=12994 [Accessed 16
+Dec. 2016].
+Materiality
+Connectivity of Financial and Non-Financial Indicators
+Additional Information on Economic, Environmental and Social Performance
+Total Energy Consumed > GHG Footprint
+The emissions caused by SAP's energy consumption add
+directly to the corporate carbon footprint if they are not reduced
+through offsets or - for electricity consumption - renewable
+energy certificates (RECs).
+We have found that reduced energy consumption is strongly
+correlated with a reduction in costs. The thus achieved cost
+avoidance has a positive impact on our profit.
+Total Energy Consumed > Profitability
+Additional Information on Economic, Environmental and Social Performance
+Connectivity of Financial and Non-Financial Indicators
+223
+We advise certain governments and administrations worldwide on
+critical IT topics, such as digitalization, cloud computing, and Big
+Data, which play a key role in creating efficiencies and spurring
+economic growth.
+To realize our vision of helping the world run better and
+For more information about our
+customer surveys, see the
+Customers section.
+On an ongoing basis, we review SAP business units for potential
+bribery or corruption. For example, in 2016, we collected
+quantitative data about 154 SAP entities supporting 142
+countries. This data includes revenue information, number of
+employees, percentage of public sector business, number of
+fraud allegations or incidents, changes or updates to relevant
+laws, and other quantitative information. Based on this
+information and management input, we determine a risk ranking
+for each country.
+Our assessment also helps us create a general risk profile for
+subsidiary locations. Through analysis of our quantitative data,
+we determine which countries require our highest attention.
+Our legal compliance and integrity office works closely with our
+global governance, risk, and compliance organization to identify
+areas where a risk assessment is needed. We then drive
+compliance mitigation programs if necessary. Generally, we find
+that our primary compliance risks are related to corruption,
+antitrust issues, export controls, and intellectual property. For
+more information, see our Risk Report section.
+Enforcing Policies
+SAP is committed to ensuring that our compliance policies are
+strictly enforced, and that any infringements are quickly flagged
+and acted upon. To achieve this, we have built an effective
+global network of compliance professionals who act as our
+ambassadors at country level for business conduct.
+The legal compliance and integrity office oversees the
+development of our code of business conduct, as well as all
+other related policies and our anti-corruption program. Global
+compliance officers are based at SAP headquarters and in our
+most important markets, especially where there are local
+language needs. In addition, compliance officers at local
+subsidiaries assess issues and escalate them to the global level
+if necessary.
+At SAP, we want to address issues before they become
+problems. For this reason, we believe that analysis of
+compliance risk is key to maintaining the highest standards of
+business conduct.
+Additional Information
+Facilitating Reporting and
+Remediation
+If employees are concerned that our code of business conduct
+has been breached, or if they need advice on a compliance
+issue, they can access support in a number of ways. They can:
+-
+-
+Call our governance hotline at +49 6227 7-40022
+E-mail the legal compliance and integrity office at global-
+compliance-office@sap.com
+Employees at all levels of the organization are required to
+disclose conflicts of interest to the legal compliance and
+integrity office. Disclosures are then followed up with guidance
+or mitigation if necessary.
+Contact with local compliance officers via e-mail or telephone
+Use the anonymous online whistleblower tool
+Analyzing Compliance Risk
+We ask business ethics and compliance-related questions in our
+annual People Survey. Through the SAP Corporate Portal, we
+run company-wide polls on a variety of compliance-related
+questions throughout the year. In addition, employees can use
+the portal at any time for quick and easy access to all global
+policies along with guidelines and additional information.
+APJ
+89
+20,778
+Key areas covered by the code of business conduct include:
+EMEA
+96
+Colleagues within the legal compliance and integrity office carry
+out ongoing programs of calls and meetings to raise awareness
+of business conduct issues throughout the organization.
+Meanwhile, regular e-mail communications with subsidiaries
+and the availability of information in local languages help to
+promote leading standards of business conduct across every
+part of the SAP ecosystem.
+35,578
+Additional Information on Economic, Environmental and Social Performance
+Business Conduct
+229
+Our training program covers a wide range of topics around
+business conduct. These include guidelines on anti-corruption,
+competition law, governance for customer commitments,
+intellectual property, and information security.
+E-learning modules are available in nine different languages. In
+addition, our legal compliance and integrity office also holds
+classroom training sessions. Employees from across the SAP
+organization take part, from customer-facing staff to individuals
+in supporting roles such as corporate affairs and marketing. In
+addition, general compliance information on relevant policies is
+included in the onboarding sessions for new hired run by our HR
+organization.
+Communicating Our Standards
+Quarterly newsletters provide employees with information on a
+range of compliance-related topics. These communications
+include details of cases that have recently been highlighted in
+the media as well as presenting hypothetical scenarios that
+provide people with opportunities for self-reflection. In addition,
+the newsletters provide links to other relevant sources of
+information such as our whistleblower reporting system, legal
+compliance and integrity office, corporate audit department,
+and SAP global policies.
+Approved by the Executive Board at SAP, the code sets the
+standard for our dealings with customers, partners,
+competitors, and vendors. It is adapted locally and translated
+into local languages.
+22,882
+Employees can find information on how to report compliance
+issues in SAP Corporate Portal, and new hires are informed of
+reporting channels during the new hire process. External
+Additional Information on Economic, Environmental and Social Performance
+Business Conduct
+In our view, high profits, as great business news, can raise
+employee morale, encourage identification with our vision, and
+help increase employee engagement. On the other hand, we
+believe that a high profit expectation can also have a negative
+impact on employee engagement. If cost savings and budget
+cuts are implemented to reach an ambitious profit target,
+employees might feel constrained and dissatisfied.
+Profitability > Employee Engagement
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of employee engagement. Now
+we can show what a change by one percentage point of
+employee engagement would mean for SAP's operating profit,
+as detailed in the Documenting Financial Impact section.
+Employee Engagement > Profitability
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of the BHCI. Now we can show
+what a change by one percentage point of the BHCI would mean
+for SAP's operating profit, as detailed in the Documenting
+Financial Impact section.
+BHCI > Profitability
+Women in Management > Profitability
+Profitability is one of our strategic objectives. We measure it
+through operating profit. Profit (or loss) is the total of income
+less expenses.
+Profit (or loss) is the total of income less expenses; if revenue as
+the main part of total income grows at a higher rate than costs, it
+will lead to greater profit.
+Growth > Profitability
+Reichheld (2003) found a strong correlation between
+companies' Net Promoter Score results and their revenue
+growth rates. 23 We support this view as we believe that loyal SAP
+customers are likely to recommend SAP products to other
+companies, which is likely to result in increased sales and
+stronger revenue.
+Customer Loyalty > Growth
+We believe that a higher revenue will have a positive impact on a
+company's work environment, thereby increasing employee
+pride and loyalty. This is also stated in a study of Harter et al.
+(2010), stating that improving financial performance appears to
+increase general satisfaction and some specific work
+perceptions.22
+Growth > Employee Engagement
+Profitability
+230
+Studies show that companies with a high level of gender
+diversity outperform companies with an average level in terms
+of return on equity (11.4% versus an average 10.3%); operating
+results (EBIT 11.1% versus 5.8%); and stock price increases
+(64% versus 47% over the period 2005-2007) (McKinsey,
+2007). 24 It is therefore likely that a higher share of women in
+management positions will result in a higher profit for SAP.
+It is a common best practice for companies to invest a certain
+percentage of their annual profits in programs and activities that
+create a positive social impact. We believe that a higher profit is
+therefore likely to lead SAP to make greater social investments.
+> McKinsey & Company (2007): Women Matter. Gender diversity, a corporate performance driver. Available
+at:
+"Harter, J., Schmidt, F., Asplund, J., Kilham, E., Agrawal, S. (2010): Causal Impact of Employee Work
+Perceptions on the Bottom Line of Organizations. In: Perspectives on Psychological Science, Vol. 5(4), pp.
+378-389.
+Customer loyalty is measured with the Net Promoter Score:
+Percentage of customers that are likely to recommend SAP to
+friends or colleagues minus the percentage of customers that
+are unlikely to do so.
+Customer Loyalty
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of our GHG footprint. Now we can
+show what a reduction of SAP's carbon emissions by one
+percentage point would mean for SAP's operating profit, as
+detailed in the Documenting Financial Impact section.
+GHG Footprint > Profitability
+Profitability > Social Investment
+We believe that positive experiences among our customers can
+significantly increase business with existing customers, as well
+as help attract new customers. Both results can lower the cost
+of sales, thereby increasing our profit.
+Profit (or loss) is the total of income less expenses; if revenue as
+the main part of total income grows at a higher rate than costs, it
+will lead to greater profit.
+Growth > Profitability
+We have found that reduced energy consumption is strongly
+correlated with a reduction in costs. Therefore, any cost
+avoidance achieved has a positive impact on our profit.
+Total Energy Consumed > Profitability
+We have been using real data from SAP to analyze and prove the
+financial impact of employee retention. Now we can show what a
+change by one percentage point of employee retention would
+mean for SAP's operating profit, as detailed in the Documenting
+Financial Impact section.
+Employee Retention > Profitability
+Customer Loyalty > Profitability
+93
+In addition to making regular reports to the CFO and the
+Executive Board, the chief global compliance officer provides at
+the least annual reports to the audit committee of the
+Supervisory Board. Matters of significance are brought to the
+attention of the Executive Board and the audit committee of the
+Supervisory Board when required.
+headcount
+Championing Excellence in Business
+Conduct
+Business Conduct
+Additional Information on Economic, Environmental and Social Performance
+Stakeholder Engagement
+228
+Members of the sustainability
+advisory panel provided input
+into our materiality assessment
+and reviewed the results.
+especially important role in
+creating a sustainable future.
+digitalization strategy can play an
+the key areas in which our
+business transformations, and
+of sustainability into SAP
+solutions, ways to support
+discussed the further integration
+Our sustainability advisory panel
+met in 2016 with SAP senior
+executives from the areas of
+strategy, solutions, finance, and
+administration, including Luka
+Mucic, our chief financial officer
+(CFO) and board sponsor for
+sustainability, and Michael
+Kleinemeier, member of the
+Executive Board. The group
+As with customers, we also
+gather partner feedback
+regularly through our "SAP
+Listens" customer and partner
+feedback program.
+We work extensively with
+academia through the SAP
+University Alliances program,
+providing students at more than
+3,100 universities with hands-on
+experience in working with SAP
+software and solutions.
+positioning material integrates
+economic, social, and
+environmental impact creation.
+We updated IT analysts on topics
+such as SAP HANA, enterprise
+applications, industry solutions,
+cloud solutions, ecosystem, and
+services. The latest industry
+Additional Information
+For the results of our latest
+employee survey and action
+items resulting from it, see the
+Listening to Our Employees
+section.
+For more information about our
+dialog with investors, see the
+Investor Relations section.
+Additional Information on Economic, Environmental and Social Performance
+Stakeholder Engagement
+227
+Stakeholder Group
+Industry analysts
+In our business, trust is everything. We know that to engage with
+SAP fully, our customers must first trust that our business
+practices adhere to the highest standards of compliance and
+integrity.
+Non-governmental
+organizations
+(NGOs) and
+academia
+Sustainability
+advisory panel
+How We Engage
+Our Analyst Relations team, the Executive Board, and executives
+interact with IT analysts on a frequent basis.
+Our dialog with NGOs, not-for-profit organizations, and academic
+institutions helps us understand how we can help address today's
+most pressing issues with our solutions and what is expected from
+us as a corporation.
+Our partners are also key to our growth, as they co-innovate
+solutions with us, and sell and implement solutions at customer
+sites. The spirit of cooperation and engagement is exemplified by
+the online SAP Community.
+Our sustainability advisory panel consists of expert representatives
+from our customers, investors, partners, NGOs, and academia.
+Americas
+All too often we see the impact of poor business conduct in the
+wider business community. Corrupt and unethical practices
+irreparably damage brand reputations and lead to punitive
+financial penalties for the organizations involved. Such behavior
+undermines the rule of international law and is also linked to
+poverty and irreversible environmental damage across the
+globe.
+Partners
+Establishing Clear and
+Comprehensive Standards
+Global intellectual property
+Group accounting and revenue recognition
+Segregation of duty
+- Export control and sanctions laws
+-
+Data protection and privacy
+Charitable and political donations
+Additional policies or commitments related to sustainability are
+under the responsibility of the respective lines of business and
+can be found at sap.com.
+A code of business conduct is only effective if everyone knows
+about it. That is why we strive to make sure all of our employees
+receive full training on the standards that we expect.
+Region
+Training sessions
+completed by
+employees, in %
+Training sessions
+completed by
+employees, in
+New fraud and corruption schemes are discovered all the time
+in an ever-changing business environment. Therefore, SAP
+must constantly adapt our approach to compliance to
+incorporate new best practices and meet new challenges.
+Providing Comprehensive Training
+Regulation of the appointment and remuneration of sales
+agents
+In 2016, we introduced mandatory online training for all
+employees worldwide. In total, more than 79,200 employees
+(93% of SAP staff) received this training. Here is a full
+breakdown of our training activities is presented in the table
+below.
+SAP has established a number of policies to maintain the
+highest standards of business conduct including in the following
+areas:
+Audited regularly, the system encompasses all aspects of
+compliance management. From the analysis of compliance risks
+and defining objectives to running compliance programs as well
+as ongoing monitoring, this comprehensive framework enables
+us to maintain a responsible compliance organization.
+Fostering a Culture of Compliance
+We have developed a compliance management system for
+enforcing ethical business conduct. This includes detailed
+policies and procedures to ensure that SAP does business the
+right way.
+-
+-
+Prohibition of bribery and corruption in all its forms, including
+facilitation or "grease payments"
+To help foster a corporate culture where compliance is taken
+seriously, we needed to establish a common understanding of
+what we mean by compliance. We did this by creating a code of
+business conduct that summarizes our standards. The code
+contains guidelines for all SAP employees worldwide as they
+perform their daily work.
+Gifts and business entertainment limits
+Full, fair, and accurate accounting
+Conflicts of interest
+Confidentiality
+Anti-competitive practices
+Data protection and privacy rights
+Setting High Expectations Across All
+Business Activities
+Innovation and Customer Loyalty
+All of our major CSR programs are monitored for social impact.
+For example, in our global SAP Social Sabbatical program, we
+survey the non-profit organization or social business involved to
+determine whether our team has met the agreed deliverables.
+To capture long-term impact, the evaluation is also repeated six
+months after our team's departure. As with every volunteering
+initiative, we adjust our CSR offerings according to the feedback
+we receive. For more information, see the Engaging in Social
+Investments section.
+There is a global governance committee that guides the
+strategic direction of our overall CSR strategy. In addition, every
+SAP region has a CSR governance committee that approves all
+major CSR partnerships, as well as advising the regional CSR
+leadership. On a group level, we ensure that donations are made
+in an appropriate manner through financial and compliance
+control processes. Led by our head of global CSR, our global
+CSR team is part of the Office of the CEO and corporate affairs
+organization. To ensure meaningful and relevant execution of
+our companywide CSR strategy, we appoint a regional CSR lead
+for each of our six major SAP market units.
+Our contribution to the SDGs is coordinated by our corporate
+strategy, sustainability, and marketing professionals and teams.
+We have started to map our existing engagement with
+customers to the SDGs in the How Our Vision Comes to Life
+brochure.
+This aspect covers two key areas. The first is the contribution we
+make towards the fulfilment of the United Nations Sustainable
+Development Goals (SDGs) through our software solutions and
+our social investments. The second is our efforts to make the
+world a better place through our corporate social responsibility
+(CSR) programs.
+For more information about our management approach, see the
+Employees and Social Investment section.
+The diversity and inclusion policy provides a framework for
+diversity and inclusion at SAP. As such, it supports our business
+goals and our "how we run" philosophy by helping employees
+flourish in an inclusive and authentic working environment.
+Additional Information on Economic, Environmental and Social Performance
+Sustainability Management and Policies
+232
+Impact on Society
+Our Customer Experience Council regularly reviews and
+prioritizes our activities related to driving improvements in
+We also keep our employees updated on global trends such as
+the ratification of the SDGs in 2016. Employees can explore how
+SAP contributes to the SDGs through our customers and our
+own operations through the new interactive Web book SAP and
+the UN Global Goals and a related iPad app, as well as the online
+course "Sustainability Through Digital Transformation."
+As innovation happens everywhere at SAP, each Executive
+Board member is responsible for innovation in their area. For
+example, our Executive Board member responsible for products
+and innovation oversees our software innovation efforts. We
+have a team of development and solution management
+professionals who create SAP solutions specifically for
+sustainability. In addition, another team of experts designs and
+integrates sustainability into new or existing industry or line-of-
+business (LoB) solutions. For more information about our latest
+innovations, see the Products, Research & Development, and
+Services section.
+Changing Our Behavior and Culture
+In our efforts to become a more sustainable organization, SAP is
+focusing on two key areas: our processes and our people. To
+achieve our goals, we need to challenge behavior and find new
+ways of thinking.
+The engagement of our employees is essential, as their ideas
+and commitment help drive change throughout SAP. SAP runs a
+number of programs to help employees understand how
+sustainability is connected to our vision to help the world run
+better and improve people's lives.
+In 2016, we encouraged open dialog through coffee corner
+sessions, virtual all-hands meetings, and social media. During
+these sessions, employees also heard about specific customer
+impact stories and role models within the SAP organization. In
+addition, SAP now includes sustainability in its onboarding
+training for new hires as well as management training.
+Focusing on Transparency and Building
+Awareness
+Change starts with transparency and awareness. Since 2016,
+our Executive and Supervisory Boards have access to our own
+SAP Digital Boardroom solution. It provides access to key
+financial and non-financial data, including human capital
+indicators, that gives a holistic and detailed overview of our
+performance.
+In addition, every employee can access a dashboard detailing
+our environmental and social performance. For example, data
+on employee retention and women in management helps create
+transparency on the social performance of our company. The
+My SAP Footprint app also provides employees with statistics
+Additional Information on Economic, Environmental and Social Performance
+Sustainability Management and Policies
+Our key policies include a global health and safety management
+policy and a diversity and inclusion policy. The global health and
+safety management policy is an integral part of our long-term
+commitment to sustainability. It provides a framework that
+supports business processes, leadership behavior, and culture
+by addressing, integrating, and leveraging health, occupational
+safety, well-being, and stress management topics. The objective
+is to nurture our employees' long-term employability,
+engagement, and creativity in developing sustainable value for
+our organization, for our customers, and for themselves.
+233
+customer experience. For more information about our customer
+loyalty goals, see the Customers section.
+Overall global responsibility for our human resources strategy
+lies with our chief human resources officer who is a member of
+the Executive Board.
+Putting Sustainability at the Heart of
+Our Strategy
+Climate and Energy
+about their personal impact through activities such as driving a
+company car or using electronic equipment.
+stakeholders without access to SAP Corporate Portal can find
+the hotline number and e-mail address on SAP.com. In addition,
+reporting channels are described in our codes of conduct for
+partners and suppliers. Most of these reporting mechanisms are
+available 24x7, and concerns are treated as confidentially as
+possible in light of subsequent investigation.
+All concerns are investigated, and remedial action is taken if
+necessary. This may include termination of employment.
+Taking a Proactive Stance Against
+Corruption
+SAP is proactively working in collaboration with the wider
+business community to fight against corruption and the
+negative impacts it creates. SAP is a member of the German
+chapter of Transparency International, a non-profit, non-
+partisan organization that combats corruption in government
+and international business and development.
+In addition, we are active in the Alliance for Integrity (Afln). Afln
+is a business-driven, multistakeholder initiative promoting
+economic integrity and compliance in business. It was initiated
+by a number of multinational companies, business associations,
+the German Federal Ministry for Economic Cooperation and
+Development (BMZ), the Society for International Cooperation
+(GIZ), the German Global Compact Network and sequa, a non-
+profit development organization. The focus of the initiative is on
+implementing collective action on the ground.
+Additional Information on Economic, Environmental and Social Performance
+Business Conduct
+231
+Sustainability
+Management and Policies
+At SAP, we strive to promote sustainability in everything we do.
+We believe that it is not enough to simply have a sustainability
+strategy but that, instead, our overall corporate strategy must
+itself be sustainable. Only by achieving this can we fulfill our
+vision to help the world run better and improve people's lives.
+To address this, we have integrated sustainability management
+efforts across our entire business.
+Led by our chief sustainability officer, a dedicated team
+responsible for our sustainability performance works to embed
+sustainability into our corporate strategy and promotes new
+sustainability initiatives across the organization. Our chief
+financial officer (CFO) is the sponsor for sustainability on the
+Executive Board and we also have a dedicated sustainability
+contact for each area of the business. These contacts are
+responsible for embedding sustainability in their business
+practices, for example, by setting relevant targets and
+implementing related programs. They are held accountable for
+their achievements in review meetings with the CFO and the
+chief sustainability officer that take place twice a year.
+Managing Our Response to Our
+Our chief sustainability officer and their dedicated sustainability
+organization coordinate our response to climate change.
+Facilities management staff design and operate our facilities
+based on robust environmental standards. In addition, our IT
+operations personnel are continuously looking at issues around
+the working environment and the amount of energy consumed
+in our data centers. We assess our environmental performance
+in quarterly management reviews.
+This year, we continued to roll out our global environmental
+management system based on the ISO 14001 standard. We plan
+that the system will cover operations affecting about 70% of
+employees globally by 2018. At the end of 2016, 46 sites in 26
+countries (49% of employees) have implemented ISO 14001.
+Financial Performance
+The Executive Board retains ultimate responsibility for revenue
+growth, profitability, and the financial stability of SAP. For more
+information, see the Corporate Governance Report section and
+the Report by the Supervisory Board section.
+Human and Digital Rights
+For information about our management approach, see the
+Security and Privacy section and the Human Rights section.
+Material and Other Reported Aspects Human Capital
+SAP has dedicated personnel addressing the material aspects
+identified in our materiality analysis with staff remuneration
+linked to each aspect. For each topic, we look at ways that we
+can manage our response, and how we can evaluate whether
+our approach is effective.
+Business Conduct
+For information about our management approach, see the
+Business Conduct section.
+Our global environmental policy promotes a more productive
+use of resources by providing transparency in environmental
+issues, driving efficiency, and leveraging transformational
+strategies. It also outlines our environmental goals that are
+described in the Energy and Emissions section.
+We measure the success of our initiatives through our annual
+People Survey. In 2016, 92% of our employees agreed with the
+statement "It is important for SAP to pursue sustainability"
+compared to 90% in 2015 and 77% in 2009. Furthermore, 82%
+of our employees stated, "I actively contribute to sustainability
+goals at SAP." This is up from 80% in 2015 and 46% in 2009.
+Our global CSR policy offers all SAP employees the opportunity
+to volunteer for up to eight working hours at a CSR event. In
+2016, our goal was to impact 1.5 million lives through our global
+CSR programs. We set a target of 250,000 volunteering hours,
+with 40% based on skills and professional expertise. We
+overachieved these targets with almost 339,000 volunteering
+hours (thereof 57% skills-based) and about 3.2 million lives
+impacted.
+While sustainability requires strong leadership, it cannot be
+mandated from the top. To help drive progress with
+10
+12
+12
+kilotons
+Municipal Waste (non-recycled)
+In addition, we support the reuse of “gently used" IT equipment
+internally through used-equipment shops in some country
+locations. A sustainable procurement program complements
+our waste reduction efforts by offering sustainably produced IT
+equipment. Besides e-waste, we estimate that we generated
+approximately 3 kilotons (kt) of waste in our offices, cafeterias,
+and product packaging worldwide in 2016. The vast decrease
+compared to 2015 stems primarily from adjusting our
+extrapolation factor which is used to calculate waste quantities
+from sites where actual data is not available.
+Our single largest source of waste comes from the data center
+servers, IT equipment, PCs, peripherals, and range of mobile
+devices that we use to develop our software. Our servers and IT
+equipment are either resold or recycled in an environmentally
+friendly manner depending on their condition. In 2016, we
+continued our engagement with one of the world's most
+sustainable companies as our e-waste disposal partner. This
+partner adheres to ISO 14001 standards and ensures that we
+have one uniform disposal process for e-waste. This way we
+were able to recycle 160 tons of e-waste this year. We plan to
+expand this recycling process for our servers to our Americas
+region in 2017.
+Managing Our E-Waste
+Taking steps to recycle our waste and save water also
+contributes to our business performance. Through ongoing
+initiatives at SAP sites, we reduce our operational costs while
+engaging our employees in our efforts.
+Our waste and water strategy ensures that we minimize the
+impact SAP has on our environment. By promoting company-
+wide initiatives, we keep waste out of landfills and reduce the
+amount of water we use in locations worldwide. A global
+approach combined with local targets and initiatives ensures
+that we optimize our environmental performance.
+Taking a Global Approach
+in water consumption
+municipal waste
+(non-recycled)
+ca. 1.05 m m³
+e-waste recycled
+3 kt
+160 tons
+Additional Information on Economic, Environmental and Social Performance
+Sustainable Procurement
+237
+supply networks becoming more complex, companies face even
+greater challenges in ensuring their suppliers uphold high ethical
+standards.
+To help address this, we are developing an innovative SAP Ariba
+solution for supplier risk management that enables companies
+to identify and manage their response to a range of supplier-
+related risks. Our GPO is collaborating with the SAP Ariba
+product development teams to finalize and implement this cloud
+solution. With the SAP Ariba Supplier Risk Insights solution,
+organizations can establish due diligence, ongoing monitoring,
+and remediation processes to proactively address risks across
+the source-to-pay process and the full supplier base.
+This innovative solution provides buyers with a command center
+that helps them monitor all relevant risk information. It also
+offers daily alerts and notifications to buyers based on their
+preferences. Sustainability risks covered by the solution include
+unethical practice, workplace discrimination, workplace safety
+neglect, the use of child labor, human trafficking, and
+environmental disasters such as oil spills and radioactive
+contamination.
+In addition, our GPO worked on a pilot project with the SAP Ariba
+team and the Made in a Free World organization to identify the
+areas of greatest risk of forced and child labor in our supply
+chain. As part of this project, we requested information about
+our suppliers' supply chains and analysis of this data is helping
+us to pinpoint potential risk areas for further investigation.
+18
+We are also strengthening the enforceability of the code of
+conduct for suppliers and it is now an integral part of our
+standard contracts. It is also included in our global terms and
+conditions.
+SAP works closely with suppliers to find new ways to make our
+supply chain more sustainable. We have a number of ongoing
+projects that minimize our impact on the environment in areas
+such as enterprise mobility, catering, office supplies, and SAP
+events.
+Our chief procurement officer and chief sustainability officer
+meet each quarter to discuss progress and challenges related to
+embedding sustainability in our procurement practices.
+238
+Additional Information on Economic, Environmental and Social Performance
+Sustainable Procurement
+Waste and Water
+Driving Innovative Sustainability
+Projects
+3
+2012
+2013
+924.5
+1,269.0
+1,049.0
+970.0
+2012
+2013
+Thousand cubic meters
+2014
+2016
+A few of our offices are located in areas with significant water
+scarcity. In locations such as Ra'anana, Israel, or in Bangalore,
+we have been addressing this issue with dedicated water
+management efforts. These range from the reuse of treated
+sewage water to employee awareness campaigns.
+240
+Additional Information on Economic, Environmental and Social Performance
+Waste and Water
+Nurturing a Network of Sustainability
+Champions
+2015
+Today's digital networks help us connect with an increasing
+number of global suppliers, quickly and easily. However, with
+Global Water Usage
+Using Water Efficiently
+2014
+2015
+2016
+Composting Food Waste
+SAP also runs comprehensive recycling programs for cafeterias
+at its sites worldwide. For example, we process leftover food
+from our headquarters in Walldorf, Germany, in an external
+composting plant.
+Our SAP Labs location in Bangalore, India, has installed an
+"organic waste converter." This recycles organic waste from
+cafeteria operations into odor-free, homogenized compost. Our
+cafeterias in Palo Alto, CA, and Newtown Square, PA, in the
+United States have comprehensive composting programs in
+place with the byproducts used to fertilize the on-site gardens.
+While our operations are not water-intensive, we continue to use
+water as efficiently as possible. As part of our efficiency efforts,
+we use rain and run-off water for irrigation and toilets in
+Walldorf, Germany, and other office locations.
+Cutting Down on Landfill Waste
+Additional Information on Economic, Environmental and Social Performance
+Waste and Water
+239
+We reduced our paper usage by almost 30% since 2009
+through our global printing optimization initiative. Among other
+improvements, this sets printers to produce double-sided,
+black-and-white printouts as a default. This year we have also
+made significant advances in paperless contracting. By using
+the SAP Signature Management application from DocuSign to
+enable electronic signatures, we have been able to handle
+31,472 pages of contract, cutting down on paper contracts
+significantly.
+Changing Working Behavior
+We have also successfully changed working behavior to
+significantly reduce the amount of pages that our employees
+print. A secure pull-printing system requires that employees
+bring their ID badges to a printing device to activate a job. This
+makes people think about whether the printout is really needed.
+With more than 76,000 employees currently using this system,
+our printing volume has reduced by 15.4 million pages in total
+since 2014.
+SAP employees can access a printing dashboard that shows the
+company's progress in reducing paper consumption at global,
+regional, and country levels.
+In 2016, we continued to roll out zero waste diversion programs
+at offices across the globe as part of our ISO 14001 program
+with specific targets to achieve and maintain landfill diversion at
+or above 90%. This approach focuses on eliminating the need to
+send waste to landfill, by changing processes or promoting the
+reuse of materials.
+Our Supply Chain
+1,060.0
+Minority Supplier Development U.K. (MSDUK)
+WeConnect International
+We expect all of our business partners to respect human rights
+and to avoid complicity in human rights abuses. Our codes of
+conduct for suppliers and partners require them to uphold labor
+rights and to provide a safe and healthy work environment for all
+employees.
+Maintaining High Standards Across
+Our Supply Chain
+employees are represented by works councils, an independent
+trade union, or are covered by collective bargaining agreements.
+235
+Additional Information on Economic, Environmental and Social Performance
+Human Rights and Labor Standards
+Collective bargaining agreements with unions are only made in
+countries where legally required. Overall, about 50% of
+These councils consist of both elected union members and non-
+union members, and are consulted by SAP management on
+topics that define the work environment and work processes.
+These include HR initiatives, talent development, payment and
+benefits, equal opportunities, changes in work or IT processes,
+privacy protection, and health and safety protection.
+At SAP, we strive for constructive labor relations across the
+world, working within each country's requirements. We currently
+have works councils in place in Belgium, Germany, Ireland, Italy,
+the Netherlands, Slovenia, Spain, and the United Kingdom. In
+addition, we have a European works council that represents
+employees from all SAP subsidiaries in Europe.
+Further Measures to Ensuring Fair
+Labor Practices
+In addition, our global ombudsperson investigates employee
+complaints and mediates fair settlements. The ombudsperson
+also helps the Executive Board analyze HR-related complaints
+and consider ways to address potential issues before they
+occur.
+We encourage any employees who feel they are subjected to
+conduct that violates our antidiscrimination policies to report it.
+They can reach out confidentially to their managers, HR officers,
+a compliance office, or colleagues who are trained to be part of
+our internal mediation pool.
+We have a long-standing policy of nondiscrimination in our
+dealings with employees and provide training on human rights
+issues that are most relevant to our business. These include
+security, privacy, and antidiscrimination.
+Respecting the Rights of Our
+Employees
+our standards and to check internal compliance with this policy.
+In 2016, we conducted a labor audit at our SAP India and SAP
+Labs India locations in Bangalore. There were no material
+findings within the audit. However, areas for improvement were
+identified and include improvement of security escorts,
+comprehensive distribution of access cards, as well as
+improvement in air-conditioning.
+To assess our human rights measures, we consider external
+benchmarks, performance ratings, audit results, and
+stakeholder feedback. In addition, since 2012, we conduct
+regular internal audits to verify that our subsidiaries adhere to
+Our sustainability organization is responsible for making sure
+that we fulfil our human rights commitments across the
+business. The team works with colleagues from human
+resources (HR), procurement, and product development to
+manage an integrated approach.
+Enforcing Our Standards
+sustainability initiatives, we need the support of employees in
+every part of SAP.
+Upholding High Standards Across
+To address this, we have a global internal network of more than
+100 sustainability champions who represent different regions
+and lines of business at SAP. They dedicate 10% of their work
+time to promoting sustainability. Not only do they act as role
+models, but they also tailor sustainability to local and LoB needs
+and interests as well as share best practices.
+234
+Additional Information on Economic, Environmental and Social Performance
+Sustainability Management and Policies
+We work collaboratively with our suppliers and partners on the
+implementation of these codes. In addition, we may carry out
+on-site audits to assess performance.
+Human Rights and Labor
+At SAP, we believe that we have a responsibility to respect
+human rights throughout all our business operations. Upholding
+high labor standards supports diversity and helps us to attract
+and keep top talent. Providing fair, ethical conditions for our
+employees also results in greater innovation and productivity.
+SAP is a signatory of the United Nations Global Compact. This is
+a voluntary undertaking to align our strategies and operations
+with universal principles on human rights, labor, the
+environment, and anticorruption.
+By integrating human rights considerations into our standard
+business practices, we also support the values of the Universal
+Declaration of Human Rights, the OECD Guidelines for
+Multinational Enterprises, and the International Labor
+Organization Declaration on Fundamental Principles and Rights
+at Work. To ensure that our commitment to human rights
+translates into practice, we take guidance from the United
+Nations "Protect, Respect and Remedy" framework.
+Making a Commitment
+The SAP Global Human Rights Commitment Statement details
+our response to the international standards mentioned above.
+Based on the SAP Code of Business Conduct and approved by
+our Executive Board, the statement focuses on three main
+areas: our employees, our ecosystem of partners and suppliers,
+and our solutions.
+Our commitment statement applies to all our operations and
+subsidiaries globally and is reviewed on a regular basis. It also
+contains references to our other guidelines such as health and
+safety management, and data protection and privacy.
+Standards
+Respecting Human Rights
+Upholding High Standards
+As a business software company, we are committed to
+respecting and protecting human rights throughout the lifecycle
+of our products - from design through development to use. We
+develop innovative solutions that help customers embed human
+rights standards into their business and supply chain strategies.
+We also develop solutions that help to advance human rights in
+areas such as healthcare, education, and public services. For
+example, our healthcare solution SAP Medical Research Insights
+delivers software that addresses the areas of patient care,
+cancer research and cancer prevention.
+Facility and Office
+15%
+22%
+29%
+Supplier Locations by Region
+Percent of total spend
+APJ
+16%
+13%
+EMEA
+50%
+Promoting Supplier Diversity
+Including more diverse businesses - that is, minority enterprises
+defined by gender, ethnicity, disability, sexual orientation, age,
+religion, and other characteristics - into our supplier base has
+become a key priority for SAP. We believe that our commitment
+to an inclusive, bias-free culture in our workplace should be
+mirrored in our approach to our supplier base. In addition,
+through their flexibility and a high innovation potential, we
+believe that diverse businesses bring significant added value to
+SAP.
+Demonstrating our commitment to supplier diversity, SAP
+became a corporate member of the following minority supplier
+organizations in 2016:
+Throughout Our Product Lifecycle
+To address this, we developed a supplier diversity program this
+year. Driven by our Global Procurement Organization (GPO), the
+program is an integral part of our supplier management
+program. It strives to ensure that diverse businesses have a fair
+chance at competing for contracts and are treated equally with
+other SAP suppliers. Targeted to reach a 5% spend ratio for
+diversity suppliers in selected countries by 2020, the GPO will
+proactively involve diversity suppliers in selected categories in
+defined countries into our sourcing process.
+O
+Marketing
+Americas
+37%
+Making Our Supply Chain More
+Sustainable
+Enterprise Mobility
+236
+Additional Information on Economic, Environmental and Social Performance
+Human Rights and Labor Standards
+Sustainable Procurement
+A significant part of our social and environmental impact is
+delivered through our supply chain. That is why we work hard to
+find new ways to ensure that our procurement activities meet
+high sustainability standards.
+This year, we have looked at the way we recruit our supplier
+base in order to increase opportunities for a wide range of
+businesses to compete for supply of products and services to
+SAP. We have also engaged with our suppliers to define higher
+standards of conduct, and to encourage new thinking when it
+comes to sustainability.
+When designing any solution, our development teams ensure
+that the product complies with human rights standards. For
+example, accessibility is a key area of focus and we follow Web
+content accessibility guidelines such as Section 508 to ensure
+inclusive design in all our software.
+The protection of personal information is another key area of
+focus for our development teams. To help ensure that our
+products enable our customers to respect digital rights, we
+adhere to robust privacy and security standards. These are
+defined in our global product development, quality, product
+standards, and data protection and privacy policies.
+At SAP, we consider our suppliers to be key partners in our
+business success. In 2016, we spent €4.8 billion in transactions
+with more nearly 19,000 suppliers worldwide.
+Suppliers by Category
+Percent of total spend
+Services and HR
+18%
+What We Buy and Where We Buy It
+From
+IT and Telecommunications
+Non-Financial Notes: Environmental Performance
+Additional Information on Economic, Environmental and Social Performance
+250
+By waste, we mean non-recyclable waste produced in our offices
+and data centers. Data on municipal waste was provided
+(estimated) for about 50% of the total space.
+By water, we mean total freshwater withdrawn for our facilities.
+Data is based on estimations from sites and is largely
+extrapolated. Data was provided (estimated) for 60% of the
+total space; remaining data is extrapolated based on square
+meter footage.
+Water
+We define total energy consumed as the sum of all energy
+consumed through SAP-own operations, including energy from
+renewable sources. It is calculated based on the consumption
+data obtained through our measurements for the GHG footprint
+and is the sum of energy consumption from stationary
+combustion facilities, mobile combustion corporate cars, mobile
+combustion corporate jets, electricity offices, electricity data
+centers, and purchased chilled water, purchased hot water, and
+purchased steam.
+We will continuously improve data quality of energy
+consumption of external data centers.
+Additional Information on Economic, Environmental and Social Performance
+Non-Financial Notes: Social Performance
+Total Energy Consumed
+Waste
+-
+We define employee engagement as a score for the level of
+employee commitment, pride, and loyalty, as well as our
+employees' feeling of advocacy for SAP.
+The Customer NPS is calculated using the following formula:
+NPS=% of Promoters - % of Detractors. Passives are not
+We measure customer loyalty using the Customer Net Promoter
+Score (NPS). The NPS is derived from the following survey
+question "How likely would you be to recommend SAP to friends
+or colleagues?" Customers choose from a range of 0 to 10.
+Customers that choose a 9 or 10 are considered Promoters.
+Passives answer the question with a rating of 7 or 8, and
+Detractors with a rating of 6 or less.
+Customer Loyalty
+In 2015, we simplified our Employee Engagement Index and
+recalculated our score for 2015 from 81% to 82%. This
+calculation method has been applied moving forward.
+It is calculated based on the results of an employee survey that
+is conducted annually (see BHCI).
+Employee Engagement
+The BHCI score for 2014 was recalculated from 70% to 72%
+based on two updated questions in the people survey
+concerning work-life balance. The changes were carried out to
+simplify the questionnaire and to better compare with against
+external benchmarks.
+The BHCI is calculated based on the results of an employee
+survey ("People Survey") conducted annually. All employees
+were invited to take part in the 2016 People Survey and 64,889
+employees participated (response rate: 76%).
+The Business Health Culture Index (BHCI) measures the general
+cultural conditions in an organization that enable employees to
+stay healthy and balanced. The index covers questions
+concerning how employees rate their personal well-being and
+the working conditions at SAP, including our leadership culture.
+The BHCI is an indicator as to what extent SAP successfully
+offers employees a working environment that promotes health
+supporting their long-term employability and their active
+engagement in reaching our ambitious corporate goals.
+Data center energy consumption per euro is calculated by
+dividing the electricity consumption of all internal and external
+data centers measured for the calculation of our GHG footprint.
+Business Health Culture Index
+Board members
+244
+(location with any number of server units) that is part of our
+global IT infrastructure strategy. In 2016, we continued
+analyzing and reporting internal and external data center energy
+consumption intensity against our non-IFRS revenue.
+Non-Financial Notes: Environmental Performance
+Data Center Energy
+Offsets: Purchased offsets are reported separately based on
+the carbon reduction amount purchased. SAP ensures that
+the GHG emission reductions from offsets are credible and
+that they meet four key accounting principles:
+"
+Managers managing managers: Refers to managing
+managers that manage teams
+•
+Real: The quantified GHG reductions will represent actual
+emission reductions that have already occurred.
+Additional: The GHG reductions will be surplus to
+regulation and beyond what would have happened in the
+absence of the project or in a business-as-usual scenario
+based on a performance standard methodology.
+Permanent: The GHG reductions will be permanent or
+have guarantees to ensure that any losses are replaced in
+the future.
+■ Verifiable: The GHG reductions will result from projects
+whose performance can be readily and accurately
+quantified, monitored, and verified.
+A requirement for offsets is that the minimum standard
+(Voluntary Carbon Standard, or VCS) is applied. In 2016, our
+strategic investment in the Livelihoods Funds has provided us
+with 21 kilotons of offsets which are included in our overall net
+carbon footprint.
+CO2 Emission Factors
+The calculation of the above emissions is based on factors for
+conversion and extrapolation provided, among others, by IEA,
+WRI, US EPA, UK DEFRA, DEHSt, Environment Canada, GHG
+Protocol, and SAP's own measurements.
+Where relevant, our CO2 emission factors consider all CO2
+equivalents (CO2e) for all greenhouse gases. Global Warming
+Potential factors are based on the Fifth Assessment Report of
+the Intergovernmental Panel on Climate Change (IPCC).
+Comparability
+SAP uses a significance threshold of 5% for structural or
+organizational changes and 1% for methodology changes of
+total current year emissions. A structural or organizational
+change that increases or decreases the total inventory by 5% or
+more will trigger an adjustment of historic years. A structural or
+organizational change that increases or decreases the total
+inventory by less than 5% will be considered insignificant and
+thus no adjustment will be made.
+We define data center energy as the sum of electricity
+consumed to provide internal and external computation power
+in SAP data centers and contracted third party data centers. A
+data center is any global, regional, or local computing center
+Additionally, we annually measure the cumulative cost
+avoidance of our carbon emissions, compared to a business-as-
+usual scenario. In 2015, we introduced a cumulative cost
+avoidance calculation based on a triennial rolling method. This
+leads to additional comparability and we will continue to
+calculate our cumulative cost avoidance with the triennial rolling
+approach.
+249
+Error Correction
+If a significant error is found in the base year inventory, it will be
+corrected. If a significant error is found which does not affect the
+base year but has an impact on this year's or last year's
+emissions, it will be corrected. An error is significant if it affects
+SAP's gross carbon footprint by more than 1%. No restatement
+due to error correction of historical data was necessary in 2016.
+Renewable Energy
+We define renewable energy as electricity coming from
+renewable energy sources such as wind, solar, hydro, and
+geothermal. The shares of renewable energy used by SAP are
+calculated by adding the amount of renewable energy
+specifically sourced, produced onsite by our own solar cells, and
+covered by Renewable Energy Certificates (RECs). We have
+developed a quality standard that defines key criteria for the
+procurement of RECs to drive change in the electricity market
+and to avoid the risk caused by low-quality products. The key
+characteristics of our renewable energy purchasing guidelines
+are as follows:
+-
+-
+Type of renewable electricity: SAP considers solar, wind,
+biogas, geothermal, and hydro power as renewable
+electricity.
+Installation: The power plant producing the renewable
+energy shall not be older than 10 years. In case of a
+renovation of an old power plant, the 10-year rule applies only
+to the additional electricity output due to efficiency increase.
+Furthermore, SAP does not consider RECs from government
+supported power plants.
+Vintage: The renewable electricity must be produced in the
+same year or the year before with regard to the reporting
+period it will be applied.
+Accounting: To calculate the carbon reduction achieved by
+the RECS, SAP will use the grid-specific emissions factor. As
+RECs are considered independently to the electricity
+delivered physically to our facilities, the carbon reduction
+achieved through their procurement can be allocated to any
+location globally.
+All energy outside the aforementioned categories falls within
+conventional energy. We define conventional energy as
+electricity coming from the standard electricity grid. The
+electricity grid provides a country-specific energy mix including
+all available sources, either fossil, nuclear, or renewable. Energy
+from renewable sources as part of the local grid is calculated as
+conventional energy and not displayed as part of renewable
+energy.
+Additional Information on Economic, Environmental and Social Performance
+Managers managing teams: Refers to managing teams of at
+least one employee or vacant positions
+National Defense Industrial Association
+At SAP, we differentiate between the following categories of
+managers:
+Organization for International Investment
+Mechanical Engineering Industry Association
+-
+-
+-
+-
+International Integrated Reporting Council
+-
+Information Technology Industry Council
+Financial Women's Association
+Federation of German Industries
+European Roundtable of Industrialists
+Plattform Industrie 4.0
+European Centre for Women and Technology
+Dublin Chamber of Commerce
+DIGITALEUROPE
+Deutschland sicher im Netz e. V.
+Cellular Telephone Industries Association
+CEB Inc.
+Business for Social Responsibility
+Bitkom e. V.
+Association of Climate Change Officers
+Alliance for Integrity
+-
+electricity; data is only valid with an official certificate or
+written confirmation of the electricity supplier (100% data
+coverage).
+-
+econsense
+-
+Russian-German Chamber of Commerce
+The Business Council
+We define "women in management" as the share of women in
+management positions as compared to the total number of
+managers.
+Women in Management
+We do not differentiate between gender when we analyze
+retention and turnover rates.
+We define employee retention as a ratio that puts emphasis on
+employee-initiated turnover - in other words, we seek to
+measure how many employees choose to stay with SAP. We
+derive our retention rate by starting with our average number of
+employees expressed in full-time equivalents (FTEs) in a given
+year and subtracting employee-initiated turnover. We then
+divide this figure by our average number of employees in that
+year to obtain our retention rate. As opposed to keeping a low
+turnover rate - which companies generally seek to do – we aim
+to keep our retention rate high. A higher retention rate signifies
+that fewer employees are choosing to leave SAP.
+Employee Retention
+Data for our social indicators is collected and reported on a
+quarterly or annual basis and is subject to external assurance for
+annual reporting.
+Social Indicators
+Our boundaries take two different perspectives: SAP as a
+company, which includes all our legal entities and operations
+and supply chain, and SAP as a solution provider enabling our
+customers. These boundaries are listed in detail in the GRI G4
+Content Index.
+Boundaries
+General Information About Social
+Indicators
+243
+Memberships
+Schmalenbach-Gesellschaft für Betriebswirtschaft e. V.
+Additional Information on Economic, Environmental and Social Performance
+U.S. Chamber of Commerce
+-
+United Nations Global Compact (since 2000)
+-
+Transparency International Germany
+Transatlantic Business Council
+The Wall Street Journal CEO Council
+-
+-
+The Sustainability Consortium
+-
+The Conference Board, Inc.
+World Economic Forum
+-
+RECS
+External Reduction
+Non-Financial Notes: Social Performance
+Additional Information on Economic, Environmental and Social Performance
+Our Customer NPS accounting policy helps ensure that SAP
+achieves a trustworthy consolidated NPS for our on-premise
+and cloud-based services.
+In 2015, customers who purchased SAP Hybris and Concur
+solutions were included for the first time; in 2016, we also added
+customers of Fieldglass and Ariba to our global process. As we
+further harmonize processes in acquired entities, the customer
+segments used for customer surveys has not yet been
+completely harmonized across the SAP Group. Specifically, due
+to the nature of the business, the Concur customer sample
+includes a higher proportion of general business customers in
+comparison to other Group entities. As a result, Concur
+responses make up a large proportion of the total customer
+sample.
+CHA
+N₂O
+HFCs
+Scope 2
+indirect
+Purchased electricity
+for own use
+Scope 3
+lindirect
+245
+Employee
+business travel
+Outsourced
+activities
+Product
+use
+Production
+of purchased
+materials
+PCFs
+Offsets
+Waste
+disposal
+Scope 3
+External
+reductions
+Emissions from purchased
+energy/utilities
+Indirect emissions from
+supply chain or services
+Scope 2
+Contractor-
+owned vehicles
+General Information About
+Environmental Non-Financial
+Indicators
+Non-Financial Notes:
+Performance
+-
+SF6
+on-site sources
+Scope 1
+Emissions from direct
+Fuel combustion
+Company-owned
+vehicles
+Scope 1
+direct
+CO₂
+We continued offsetting carbon emissions for business flights in
+2016. In addition to avoiding overall business flights, we began
+to offset selected business flights in the second half of 2015.
+This offset effort resulted in a compensation of 90 kilotons of
+CO₂e in 2016.
+Our investment in Livelihoods Funds has provided us with 21
+kilotons of high-quality carbon credits, which we used to
+compensate Scope 3 emissions in 2016.
+Offsets
+Additional Information on Economic, Environmental and Social Performance
+Non-Financial Notes: Environmental Performance
+Environmental
+246
+Downstream Emissions (Scope 3)
+As it is expected that the emissions from external data centers
+(co-locations) will continue to grow in the future, SAP
+committed to a green cloud strategy, to compensate the
+emissions with renewable electricity certificates.
+Only selected upstream emissions such as business flights,
+paper consumption, and co-locations of data centers are
+directly measured and hence included in our corporate target.
+The additional upstream emissions products and services or
+grey energy of our buildings are based on an estimate. Together,
+our upstream emissions including these estimates are
+responsible for about 15% of SAP's total carbon footprint.
+Upstream Emissions (Scope 3)
+We are one of the global corporations that have signed on to the
+RE100 initiative. Led by The Climate Group in partnership with
+CDP (formerly Carbon Disclosure Project), the goal of the RE100
+campaign is to have 100 of the world's most influential
+businesses committed to 100% renewable electricity.
+refer to our green cloud, we mean our cloud is carbon neutral
+due to purchasing 100% renewable electricity certificates and
+compensation by offsets, at SAP. We continued a wide range of
+efficiency projects to reduce our energy usage, including facility
+upgrades and new LEED certifications. We also expanded the
+management of our environmental performance through ISO
+14001.
+Our purchased electricity powers everything from our data
+centers to our buildings throughout the world. Whenever we
+Indirect Emissions (Scope 2)
+Consumption of fuel for our company cars remains the single
+greatest contributor to our Scope 1 emissions. In 2016, we
+continued to enhance our car policy by linking emissions caps to
+efficiency improvements of the automotive industry. In addition,
+we focused on greater shifts in commuting habits. We continued
+the global rollout of TwoGo by SAP, our car-sharing solution,
+which is now available in 110 SAP locations worldwide. To
+increase the scale and attractiveness of TwoGo, we make the
+solution available to the public free of charge. As part of our
+initiative to increase the proportion of electric vehicles in our car
+fleet to 20% by 2020, we continue to offer incentives to our
+employees to purchase electrical cars. As an example of
+additional transportation alternatives for our employees, we
+established a company bike program in Germany, where
+employees have the opportunity to select between using a
+bicycle or a company car to commute to work. A further
+commuting alternative to a company car in Germany is
+participation in a national reduced train fare program called
+"BahnCard 100."
+Direct Emissions (Scope 1)
+Our gross carbon footprint for 2016 was 682 kilotons CO2e (704
+kilotons CO2e in 2015). Our gross carbon footprint includes all
+GHG emission categories in Scope 1, 2, as well as selected
+categories of 3 as outlined in figure 1. Our net carbon footprint is
+calculated by reducing purchased renewable energy certificates
+and carbon offsets from our gross carbon footprint in the
+respective reporting period.
+A Detailed View of Our Emissions
+We look at our energy usage and emissions throughout our
+entire value chain, gaining insights to help us manage our
+environmental performance and, in turn, help our customers do
+the same. The activities and trends behind our results for 2016
+are detailed below. This includes information about the areas in
+which we consume the most purchased electricity, as well as the
+impact caused by the use of our products.
+The vast majority of our overall emissions stem from the use of
+our software. When SAP software runs on our customers'
+hardware and on their premises, the resulting carbon footprint is
+about 20 times the size of our own net carbon footprint. Given
+that we cannot control our customers' IT landscapes because
+they usually contain many elements not related to SAP software,
+we share this responsibility with others.
+Renewable Electricity: Purchased renewable electricity is
+already deducted from our Scope 2 emissions in the net
+carbon footprint; CO2, CH4, and N2O conversions are based
+on grid specific factors from the origin of renewable
+Boundaries
+Environmental Indicators
+-
+Electricity Office: Updated CO2 conversion factors and
+inclusion of CH4 and N2O based on country specific grid
+factors; stable values (kWh/m²) instead of actual average
+consumption are used for the extrapolation of buildings
+where no measured data is available (70% data coverage).
+The stable values are based on SAP's 2015 carbon footprint
+data.
+Electricity Data Centers: Updated CO2 conversion factors
+and inclusion of CH4 and N2O based on country specific grid
+factors; electricity consumption for internal data centers is
+extrapolated based on the number of server units (80% data
+coverage). The stable values are based on SAP's 2015 carbon
+footprint data.
+Purchased Chilled and Hot Water, Steam: Inclusion of CH4
+and N2O based on global emission grid factors (45% data
+coverage).
+Scope 3
+The following scope 3 GHG emissions are included in our
+corporate GHG target:
+-
+Business Flights: Average emission factors for business
+flights are calculated based on short, medium, and long-haul
+flights; extrapolation of CO2 is based on the actual distance
+travelled and the net (excluding tax) costs (55% data
+coverage), emission factors for business flights do not
+consider the radiative forcing factors.
+Rental Cars: Average emission factors from rental cars are
+calculated based on actual distance traveled and these
+factors are used for extrapolation based on the costs (90%
+data coverage).
+Train Travel: Average emission factors from train travel are
+calculated based on an actual distance traveled and these
+factors are used for extrapolation based on the costs (30%
+data coverage).
+Business Trips with Private Cars: Carbon calculation is
+based on distance traveled with a private car, extrapolation is
+based on FTE. Train and company car trips are excluded from
+this activity type (60% data coverage).
+Employee Commuting: A system-integrated commuting
+survey about the distance to work and the mode of transport
+is conducted annually for SAP globally. The survey responses
+are the basis for carbon calculation of employee commuting
+in the following year. More than 30,000 employees
+responded to the survey in 2016. Commuting for non-
+responding employees and quarterly updates are
+extrapolated based on the number of FTEs excluding those
+employees who own a company car.
+Scope 2
+Electricity External Data Centers: Updated CO2 conversion
+factors and inclusion of CH4 and N2O based on country
+specific grid factors; electricity consumption for external data
+centers is extrapolated based on the data center capacity, a
+utilization and power usage effectiveness (PUE) factor. As
+the utilization and PUE factor is not available for all external
+data centers, the average of all provided factors is used as
+estimate for external data centers with missing information.
+Logistics: Calculation is based on the actual number of
+parcels and mail sent from our logistics center in Germany
+and is extrapolated globally.
+248
+Additional Information on Economic, Environmental and Social Performance
+Non-Financial Notes: Environmental Performance
+Paper Consumption: Calculation for emissions caused by
+the consumption of printing paper is based on printer tracker
+data (100% data coverage).
+An external data center is a local computing center with server
+units running SAP software that is operated by an external
+partner. Those emissions are classified as Scope 3. SAP-owned
+and SAP-managed data centers, coming from acquisitions are
+classified as Scope 2 GHG emissions.
+Additionally, we annually measure and publish the following
+Scope 3 GHG emissions based on the GHG Protocol's Corporate
+Value Chain (Scope 3) Accounting and Reporting Standard.
+These GHG emissions are not included in our corporate target
+and are meant to be for indicative purpose only.
+Upstream
+Due to the link of our upstream emissions to operating
+expenses, for 2016, we extrapolated our upstream figures by
+multiplying our four key contributors to our upstream emissions
+from 2015 with the year-over-year increase of operating
+expenses between 2015 and 2016.
+Downstream
+-
+Use of Sold Products: Resource need per year is determined
+using a landscape simulation. It is extrapolated globally based
+on the number of productive installations and power usage
+effectiveness (PUE). We use a PUE factor of 1.9, representing
+a commonly used global average. Emissions are calculated
+using a global electricity emission factor. Due to the special
+characteristics of software products, an assessment of
+resource need per year was chosen. This deviates from the
+minimum boundaries as defined by the GHG Protocol's
+Corporate Value Chain (Scope 3) Accounting and Reporting
+Standard, which requires assessment and disclosure of
+"direct use-phase emissions of sold products over their
+expected lifetime." The calculation covers all of our major
+solutions, including on-premise software. Cloud solutions are
+not included, as they are part of our Scope 2 emissions.
+Mobile solutions (e.g. SAP apps running on customer IT
+equipment) are also not included. Calculation parameters will
+be adapted when significant technology changes occur.
+Not included: Upstream Transportation and Distribution (due to
+data complexity and de minimis); Upstream Leased Assets (not
+applicable); Processing of Sold Products (not applicable); End-
+of-Life Treatment of Sold Products (not applicable);
+Downstream Leased Assets (not applicable); Franchises (not
+applicable); and Investments (not applicable).
+Data Download: Carbon calculation is based on the data
+volume downloaded by our customers globally (100% data
+coverage).
+Our boundaries take two different perspectives: SAP as a
+company, which includes all our legal entities and operations
+and supply chain, and SAP as a solution provider enabling our
+customers. These boundaries are listed in detail in the GRI G4
+Content Index.
+Mobile Combustion Corporate Jets: Inclusion of CH4 and
+N20 (100% data coverage)
+Mobile Combustion Corporate Cars: Inclusion of CH4 and
+N20; in 2016, 31 countries reported actual fuel data (90%
+data coverage); for other countries stable values (liters/car)
+are used for extrapolation based on the number of corporate
+cars reported. The stable values for extrapolation are based
+on SAP's 2015 carbon footprint data.
+Data for our environmental indicators is collected and reported
+on a quarterly basis and is subject to external assurance for
+annual reporting.
+Reporting on total energy consumed, data center energy, and
+renewable energy is based on the data collected for the
+calculation of our greenhouse gas (GHG) footprint. Therefore,
+the same reporting principles apply as for the GHG footprint.
+All numbers are based on the metric system. Whenever we state
+"tons," we mean metric tons.
+The indicators greenhouse gas emissions per employee and
+total energy consumed per employee are calculated on the basis
+of an average number of employees. This average is calculated
+by adding the FTEs at the end of each quarter and then dividing
+the result by four.
+Greenhouse Gas Footprint
+We define the GHG footprint or carbon footprint as the sum of all
+greenhouse gas emissions measured and reported for SAP,
+including the compensation with renewable energy or offsets.
+SAP's preparation of the GHG footprint is based on the
+Corporate Accounting and Reporting Standard (Scope 1 and 2)
+and the Corporate Value Chain (Scope 3) Standard of the World
+Resources Institute/World Business Council for Sustainable
+Development. This approach conforms with the requirements of
+GRI G4 indicators EN3, EN4, EN15, EN16, and EN17.
+Reporting Principles
+SAP reports our net greenhouse gas emissions according to the
+GHG Protocol Scope 2 and the location-based method. The
+recently introduced market-based method is an amendment to
+the GHG Protocol Scope 2 and will be considered starting 2017.
+For 2016 we continue to apply the location-based emissions
+instead of a dual reporting (location and market based).
+In 2016 we updated our emissions and extrapolation factors for
+the categories stationary combustion facilities, corporate cars,
+corporate jets, business flights, rental cars, train travel, business
+trips with private cars, employee commuting as well as paper
+consumption, leading to a 10% downward impact on SAP's 2016
+gross CO2 emissions.
+Organizational Boundaries
+SAP defines our organizational boundaries by applying the
+operational control approach as set out in the GHG Protocol.
+Operational control is established when SAP has the full
+authority to introduce and implement its operating policies. The
+emissions of all operations over which the company has
+operational control and all owned, leased facilities, co-location
+data centers, and vehicles that the company occupies or
+operates are accounted for in the GHG footprint, being based on
+either measurements or, where no measured data is available,
+on estimations and extrapolations.
+Refrigerants Corporate Cars: Refrigerant emissions are
+based on a rough estimate of HFC emissions per car and are
+extrapolated based on the number of corporate cars reported
+(0% measured data).
+A portion of SAP's leased facilities operates under full-service or
+multitenant leases, where the building owner or manager pays
+for the utilities directly and SAP does not have access to actual
+energy consumption information. SAP includes these facilities in
+our definition of operational control and accounts for them by
+estimating related energy consumption.
+247
+To support the growing demand for SAP's cloud offerings, we
+subcontract computation power in local third-party data
+centers. Carbon emissions are approximated and included
+based on the consumed computation power.
+In most instances, however, SAP has 100% ownership of our
+subsidiaries. Accordingly, the difference between applying the
+control versus the equity approach is about 0.6% based on SAP
+revenue. If additional investments in associates were included,
+the difference would be even smaller, about 0.5%.
+Methodology
+We are reporting all our GHG emissions in CO2 equivalents
+(CO2e), including the impact from CH4, N2O, and HFCs in our
+Scope 1 and 2 emissions. As SF6 and PFCs mainly occur in
+chemical processes, they are not relevant for us.
+Below you will find the different parameters contributing to our
+carbon footprint:
+Scope 1
+-
+-
+-
+Stationary Combustion Facilities: Inclusion of CH4 and
+N20; stable values (kWh/m²) instead of actual average
+consumption are used for extrapolation of buildings where no
+measured data is available (60% measured data). In cases
+where no specific information is available, natural gas
+reported by local sites is assumed to be reported in Lower
+Heating Value.
+Refrigerants Facilities: Refrigerant data is reported for
+completeness of our carbon footprint, but HFC emissions are
+fully estimated (0% measured data) based on the number of
+server units and office space with an A/C system; all
+refrigerants are assumed to be HFC134a.
+Additional Information on Economic, Environmental and Social Performance
+Non-Financial Notes: Environmental Performance
+-
+Non-Financial Notes:
+Social Performance
+-
+Good Company Ranking
+SAP ranks third among DAX30 companies.
+Building Public Trust Award for Innovation in Integrated
+Reporting
+-
+oekom Prime Rating
+-
+CDP A-rating
+SAP is the sector leader for IT and telecommunication
+-
+services in the DACH (Germany, Austria, and Switzerland)
+region.
+AAA ranking by MSCI
+MIT Inclusive Innovation Competition
+SAP received this top corporate honor for our Africa Code
+Week initiative.
+C4F award ("Education of the Future" category)
+SAP received this award from the World Communications
+Forum in Davos for our work on Africa Code Week.
+In addition, SAP received numerous awards for being a globally
+recognized employer of choice:
+-
+-
+-
+Ethibel Sustainability Index (ESI) Excellence Global
+Ethibel Sustainability Index (ESI) Excellence Europe and
+NASDAQ OMX CRD Global Sustainability 50 Index
+Newsweek Global 500 Green Ranking
+We aim to include at least 70% of all eligible direct customers
+from all regions and industries in the annual survey. From each
+company, multiple roles (decision makers, influencers, end
+users) are invited to provide feedback. In 2016, approximately
+29% of invited customers (accounts) participated in the survey.
+-
+Public Policy
+SAP has developed trusting relationships with governments
+worldwide by exploring the potential for information and
+communications technology (ICT) to spur economic growth,
+create jobs, and address societal challenges.
+SAP engages with governments around the globe on a number
+of public policy issues, including the creation of reasonable
+framework conditions for new technologies or business models
+such as cloud computing, the Internet of Things, and Big Data.
+SAP supports global best practices to ensure cybersecurity and
+the protection of personal data to build trust in digital
+technologies. SAP favors global policy frameworks and
+international standards that enable the free flow of data across
+borders and the free trade of digital products and services.
+SAP believes in transparency in the political process.
+Accordingly, we are registered in the European Transparency
+Register for interest representatives. In the United States, our
+company is registered and reports in compliance with the
+Lobbying Disclosure Act.
+Political Contributions
+SAP does not support any political parties. Under the laws of the
+United States, a number of SAP employees continue to exercise
+their right to create a political action committee (PAC). The SAP
+America PAC is an independent, registered, and strictly
+regulated organization that allows eligible employees in the
+United States to support political candidates at the state and
+federal level. Consistent with U.S. law, SAP SE exercises no
+control over or influence on the SAP America PAC. SAP America
+PAC expenditures are transparent and available on the U.S.
+Federal Election Commission Web site.
+Additional Information on Economic, Environmental and Social Performance
+Public Policy
+241
+Recognition
+In 2016, we received the following awards and recognition for
+our performance and efforts related to sustainability:
+-
+-
+Dow Jones Sustainability Indices
+SAP ranked as software sector lead for the 10th consecutive
+year.
+FTSE4GOOD
+Global EDGE certificate
+HRC Foundation's 2016 Corporate Equality Index
+included in the calculation. The NPS can range from -100% to
+100%.
+Fortune magazine ranked SAP #41 on their 2016 list of 50
+Best Workplaces for Diversity
+"
+"
+Gold: Innovation in Employer Branding, Autism at Work
+Program
+"
+Silver: Best Digital Campaign
+Silver: Best Communication of the Employer Brand to an
+External Audience
+"
+Bronze: Best Ongoing Commitment to Employer Brand
+■
+Bronze: Innovation in Employer Branding, Employment
+Brand Menu
+#1 in Online Social Media and Talent Communication in
+Europe by Potentialpark
+10 Great Place to Work Awards
+Among best companies for graduates (in multiple countries)
+by trendence
+242
+Recognition
+Memberships
+Glassdoor Best Places to Work (4x) as well as Highest Rated
+CEO (2x)
+-
+To better understand and enable sustainable performance on a
+global level, both for our company and customers, SAP
+subscribes to and routinely engages in a range of third-party
+organizations, including:
+The Employer Brand Management Awards 2016 winners:
+Gold: Best Diversity Branding
+Highly Commended: Innovation in Recruitment, Autism At
+Work
+Additional Information on Economic, Environmental and Social Performance
+"
+Winner: Most Effective Employer Brand Development
+Highly Commended: Best Candidate Experience, Autism
+At Work
+Forbes list of America's Best Large Employers of 2016
+BrandZ top 100 most valuable brand and top 20 most
+valuable B2B brand
+Top Employer regional certificate for Middle East, Europe,
+and China (12 Top Employer wins)
+First for Best Companies to Start Your Career; Você S/A
+magazine
+Asia Recruitment Awards (14 wins)
+The Firm Awards winner:
+Our social investment programs were recognized with the
+following awards:
+"Germany - Land of Ideas" initiative
+SAP was recognized as the "Public Favorite" for the
+development of a free massive open online course (MOOC)
+on the openSAP platform to help volunteers teach German
+language classes to refugees. Developed in partnership with
+Germany's largest welfare organization Der Paritätische
+Wohlfahrtsverband, the "You Can Do It Too! German for
+Asylum Seekers" course helped guide nearly 10,000
+volunteers in their efforts to set up or teach German classes
+in their community.
+Top Companies Leadership Index for Women in Tech; Anita
+Borg Institute
+SAP America was recognized for its strong commitment to
+employee volunteerism and community, earned in part for
+our Early College High Schools initiative. This gives high-need
+students the opportunity to earn both a high school and post-
+secondary degree in a business-related or technology-related
+field. Students receive academic and real-world job training,
+as well as access to mentoring, which provides them with a
+simpler path to jobs in the technology sector.
+International Association for Volunteer Effort (IAVE)
+Inspiring Practice Award
+Every two years, IAVE recognizes a global company that has
+created a high impact volunteer initiative. In November, SAP
+received this award for our SAP Social Sabbatical program.
+-
+•
+Best Diversity and Inclusion Recruitment Strategy
+■
+Best Emerging Talent Recruitment Programme
+Civic 50 listing
+The Recruiter Awards: SAP was honored as a winner and as
+"highly commended" for three categories:
+We conducted our work in accordance with the International
+Standard on Assurance Engagements (ISAE) 3000 (Revised):
+"Assurance Engagements other than Audits or Reviews of
+Historical Financial Information" and the International Standard
+on Assurance Engagements (ISAE) 3410: "Assurance
+Engagements on Greenhouse Gas Statements" of the
+International Auditing and Assurance Standards Board (IAASB).
+These standards require that we comply with our professional
+duties and plan and perform the assurance engagement to
+obtain a reasonable level of assurance to conclude that the
+above mentioned performance indicators are prepared, in all
+material respects, in accordance with the aforementioned
+Reporting Criteria respectively to obtain a limited level of
+assurance to preclude that the above mentioned qualitative and
+quantitative sustainability disclosures are not prepared, in all
+material respects, in accordance with the aforementioned
+Reporting Criteria. In a limited assurance engagement the
+evidence gathering procedures are more limited than in a
+reasonable assurance engagement and therefore less
+assurance is obtained than in a reasonable assurance
+engagement. The choice of audit procedures is subject to the
+auditor's own judgement. This includes the assessment of the
+risk of material misstatement in the Report under consideration
+of the Reporting Criteria.
+Within the scope of our engagement, we performed amongst
+others the following procedures when conducting the limited
+assurance:
+-
+-
+-
+An evaluation of the approach to determining material
+sustainability topics and respective boundaries, including
+results of stakeholder engagement.
+Inquiries of personnel on corporate level responsible for
+providing the data and information, carrying out internal
+control procedures and consolidating the data and
+information,
+Reviewing the suitability of the internally developed
+definitions.
+Evaluation of the design and implementation of the systems
+and processes for the collection, processing and control of
+the qualitative and quantitative sustainability disclosures
+included in the scope of this engagement, including the
+consolidation of the data.
+Evaluation of internal and external documentation, to
+determine whether the qualitative and quantitative
+sustainability disclosures are supported by sufficient
+evidence.
+Nature and extent of the assurance
+engagement
+An analytical review of the data and trend explanations
+submitted by all sites for consolidation at corporate level.
+A risk analysis, including a media search, to identify relevant
+information on SAP's sustainability performance in the
+reporting period.
+257
+This responsibility includes the selection and application of
+appropriate methods to prepare the Report and the use of
+assumptions and estimates for individual qualitative and
+quantitative sustainability disclosures which are reasonable
+under the circumstances. Furthermore, this responsibility
+includes designing, implementing and maintaining systems and
+processes relevant for the preparation of the Report in a way
+that is free of - intended or unintended - material
+misstatements.
+Report
+-
+To the executive board of SAP SE,
+Walldorf
+We have performed an independent assurance engagement on
+selected qualitative and quantitative sustainability disclosures of
+the Integrated Report 2016 (further: "the Report") of SAP SE,
+Walldorf (further "SAP"), published under
+http://www.sap.com/integrated-reports/2016/en.html.
+For the performance indicators Business Health Culture Index,
+Employee Engagement, Employee Retention, Women in
+Management, Customer Net Promoter Score, Greenhouse Gas
+Emissions (Scope 1 and 2 as well as selected Scope 3 emissions
+including business flights and employee commuting),
+Renewable Energy and Total Energy Consumed, including the
+explanatory notes thereto, a reasonable assurance engagement
+was performed.
+For the disclosures on materiality and stakeholder engagement,
+the disclosures on management approaches for the material
+aspects Business Conduct, Climate and Energy, Human and
+Digital Rights, Human Capital, Innovation and Customer Loyalty,
+as well as for the other qualitative and quantitative sustainability
+disclosures in relation to these material aspects, a limited
+assurance engagement was performed.
+The qualitative and quantitative sustainability disclosures
+included in the scope of our assurance engagement are marked
+in the GRI G4 Content Index, published online under
+http://www.sap.com/integrated-reports/2016/en/about/gri-
+Additional Information on Economic, Environmental and Social Performance
+Independent Assurance Report
+index-and-united-nations-global-compact.html with the
+following symbol: √
+Resources Institute / World Business Council for Sustainable
+Development, as well as internally developed definitions, as
+described in the 'Non-Financial Notes: Social Performance' and
+the 'Non-Financial Notes: Environmental Performance' as
+Reporting Criteria.
+Independence and quality assurance
+on the part of the auditing firm
+We have complied with the independence and other ethical
+requirements of the Code of Ethics for Professional Accountants
+issued by the International Ethics Standards Board for
+Accountants (IESBA-Code), which is founded on fundamental
+principles of integrity, objectivity, professional competence and
+due care, confidentiality and professional behavior.
+The quality assurance system of the KPMG AG
+Wirtschaftsprüfungsgesellschaft is based on the International
+Standard on Quality Control 1 "Quality Control for Audit,
+Assurance and Related Service Practices" (ISQC 1) and, in
+addition on national statutory requirements and professional
+standards, especially the Professional Code for Certified
+Accountants as well as the joint statement of WPK (Chamber of
+Public Accountants) and IDW (Institute of Public Auditors in
+Germany): Requirements for quality assurance in the auditing
+practice (VO 1/2006).
+Management's Responsibility for the Practitioner's Responsibility
+Report
+The legal representatives of SAP are responsible for the
+preparation of the Report in accordance with the Reporting
+Criteria. SAP applies the principles and standard disclosures of
+the G4 Sustainability Reporting Guidelines of the Global
+Reporting Initiative in combination with the Corporate
+Accounting and Reporting Standard (Scope 1 and 2) and the
+Corporate Value Chain (Scope 3) Standard of the World
+Our responsibility is to express a conclusion based on our work
+performed and the evidence obtained on the qualitative and
+quantitative sustainability disclosures marked in the GRI G4
+Content Index with the following symbol: √
+It was not part of our engagement to review product or service
+related information, references to external information sources,
+expert opinions and future-related statements in the Report.
+Reviewing the consistency of GRI G4 in-accordance option
+'Core' as declared by SAP with the qualitative and
+quantitative sustainability disclosures presented in the
+Report.
+Frankfurt am Main, February 22, 2017
+In addition, we conducted the following procedures to obtain
+reasonable assurance:
+(German Public Auditor)
+ppa. Thea Renner
+Additional Information on Economic, Environmental and Social Performance
+Independent Assurance Report
+259
+Additional Information
+Five-Year Summary..
+Glossary
+Financial Calendar and Addresses.
+261
+.265
+.276
+Financial and Sustainability Publications.
+277
+Publication Details..
+.278
+Wirtschaftsprüferin
+Simone Fischer
+KPMG AG Wirtschaftsprüfungsgesellschaft
+Independent Assurance
+An evaluation of the design and implementation, and tests of
+the operating effectiveness of the systems and methods used
+to collect and process the data, including the aggregation of
+these data into the performance indicators as presented in
+the Report.
+Auditing internal and external documentation in order to
+determine in detail whether the performance indicators for
+the business year 2016 correspond with the underlying
+sources, and whether all the relevant information contained
+in such underlying sources has been included in the Report.
+Location visits to Walldorf and St. Leon Rot (both Germany)
+and a remote visit to Palo Alto (USA) to assess the quality of
+information management systems and the reliability of the
+data as reported to corporate level.
+Conclusions
+Based on the procedures performed and evidence received to
+obtain reasonable assurance, the performance indicators
+Business Health Culture Index, Employee Engagement,
+Employee Retention, Women in Management, Customer Net
+Promoter Score, Greenhouse Gas Emissions (Scope 1 and 2 as
+well as selected Scope 3 emissions including business flights
+and employee commuting), Renewable Energy and Total Energy
+Consumed, published in the SAP Integrated Report 2016,
+including the explanatory notes thereto, are, in all material
+respects, presented in accordance with the Reporting Criteria.
+Based on the procedures performed and evidence received to
+obtain limited assurance, nothing has come to our attention that
+causes us to believe that the disclosures on materiality and
+stakeholder engagement, the disclosures on management
+approaches for the material aspects Business Conduct, Climate
+and Energy, Human and Digital Rights, Customer Loyalty and
+Innovation, as well as the other qualitative and quantitative
+sustainability disclosures in relation to these material aspects,
+published in the SAP Integrated Report 2016, are, in all material
+respects, not prepared in accordance with the Reporting
+Criteria.
+Purpose of the assurance report
+This assurance report is issued based on an assurance
+engagement agreed upon with SAP. The assurance engagement
+to obtain reasonable respectively limited assurance is
+conducted on behalf of SAP and the assurance report is solely
+Evaluation of the overall presentation of the selected
+qualitative and quantitative sustainability disclosures in the
+Report.
+258
+Independent Assurance Report
+for information purposes of SAP on the results of the assurance
+engagement.
+Limited liability
+This assurance report must not be used as basis for (financial)
+decision-making by third parties of any kind. We have
+responsibility only towards SAP. We do not assume any
+responsibility towards third parties.
+Additional Information on Economic, Environmental and Social Performance
+Additional Information on Economic, Environmental and Social Performance
+Management's Acknowledgement of the SAP Integrated Report 2016
+Sustainable
+Our Executive Board believes that the integrated report is
+presented in accordance with the <IR> Framework as far as
+possible given the aforementioned restrictions. Should the
+aforementioned restrictions ever cease to apply, we will
+continue to strive for further alignment with the <IR>
+Framework in future reports.
+V
+SAP
+V
+SAP
+V
+SAP
+Material Aspect: Human and Digital Rights
+DMA
+Security and Privacy;
+V
+PR8
+Human Rights and Labor Standards
+Security and Privacy
+HR4
+HR5
+Human Rights and Labor Standards;
+We are not aware of any operations or
+suppliers in which the right to exercise
+freedom of association and collective
+bargaining may be at significant risk.
+Human Rights and Labor Standards;
+We are not aware of any operations or
+suppliers as having significant risk for
+incidents of child labor.
+SAP
+✓
+Compact
+Principles
+UN Global
+Sustainability Management and Policies;
+Non-Financial Notes: Social Performance
+Our learning strategy is also based on the
+principle that much of employee learning
+and development happens outside formal
+training through peer-based interaction such
+as coaching, mentoring, rotational programs
+and on-the-job-guided development
+experiences. As a result, we have decided to
+no longer report on the number of formal
+training hours per employee because it does
+not provide meaningful insights.
+V
+✓
+SAP
+254
+Additional Information on Economic, Environmental and Social Performance
+GRI Index and UN Global Compact Communication on Progress
+DMA and
+Indicators
+Human Rights and Labor Standards;
+We are not aware of any operations or
+suppliers as having significant risk for
+incidents of forced or compulsory labor.
+LA10
+PR5
+Links and Content
+Employees and Social Investments;
+For continued employability and managing
+career endings, SAP has dedicated staff to
+support generational intelligence. These
+experts work on continuously improving
+processes and designing programs for
+sustaining employability as long as possible;
+providing training for cross-generation
+collaboration; managing career endings in a
+flexible way (for example, part-time options);
+and keeping employees connected with the
+company after retirement. SAP also
+participates in external research studies and
+networks on workforce demographics to
+share and learn about best practices in this
+field.
+Employees and Social Investments
+Customers
+R&D and Local Products, R&D, and Services
+Innovation
+Omissions
+External Boundaries
+Assurance
+LA11
+256
+Material Aspect: Impact on Society
+DMA
+UN
+SAP and
+Social
+Employees and Social Investments
+Investments
+V
+SAP and
+external
+parties
+Additional Information on Economic, Environmental and Social Performance
+GRI Index and UN Global Compact Communication on Progress
+255
+Management's
+Acknowledgement of the
+SAP Integrated Report
+2016
+The International Integrated Reporting (<IR>) Framework
+launched by the International Integrated Reporting Council in
+December 2013 has a provision that an integrated report should
+include a statement in which management acknowledges its
+responsibility for the report. Our respective statement for 2016
+is as follows:
+The SAP Integrated Report 2016 is only available online. The
+Executive Board is aware of its responsibility to ensure the
+integrity of our integrated report. The members of the Executive
+Board have applied their collective mind to the preparation and
+presentation of our integrated report.
+Similar to previous reports, our SAP Integrated Report 2016 is
+structured along the content elements suggested in the <IR>
+Framework. We have applied the Guiding Principles of the <IR>
+Framework, but we also must ensure our compliance with legal
+requirements, such as the provisions regarding financial
+reporting in the German Commercial Code as set out in detail in
+the German Accounting Standard 20 Group Management
+Report, while balancing other reporting standards such as the
+G4 guidelines of the Global Reporting Initiative (GRI), with the
+<IR> Framework.
+Our Executive Board has reviewed the SAP Integrated Report
+2016, including the consolidated financial statements, the
+combined management report, as well as the other additional
+content related to the GRI G4 Content Index.
+Goals
+Development
+parties
+External
+1
+external
+parties
+SAP and
+3
+external
+parties
+V
+V
+5
+V
+SAP and
+external
+parties
+4
+Sustainability Management and Policies
+Strategy and Business Model
+V
+V
+SAP and
+external
+parties
+HR6
+Material Aspect: Climate and Energy
+on Progress
+SAP
+V
+Energy and Emissions;
+Performance
+EN16
+7,8
+SAP
+V
+7,8
+SAP
+V
+Our operations are not
+water-intensive. Therefore,
+we do not report on the
+sources of water
+withdrawal.
+8
+SAP
+V
+7,8
+Chart Generator;
+Non-Financial Notes: Environmental
+Performance
+EN23
+Non-Financial Notes: Environmental
+Performance
+Chart Generator;
+Energy and Emissions;
+EN19
+Chart Generator
+EN18
+8
+Performance
+parties
+Chart Generator;
+7,8
+External
+V
+Energy and Emissions;
+EN17
+Non-Financial Notes: Environmental
+SAP
+V
+7,8
+EN5
+Performance
+Non-Financial Notes: Environmental
+Chart Generator;
+Energy and Emissions;
+EN3
+through the CDP (www.cdp.net)
+Energy and Emissions;
+opportunities related to climate change
+EC2
+Links and Content
+DMA and
+Indicators
+Additional Information on Economic, Environmental and Social Performance
+GRI Index and UN Global Compact Communication on Progress
+8
+V
+Sustainability Management and Policies;
+Energy and Emissions
+SAP provides details on risks and
+Waste and Water
+Chart Generator;
+Performance
+SAP
+V
+parties
+7
+SAP and
+external
+UN Global
+Compact
+Principles
+External Boundaries
+Assurance
+Non-Financial Notes: Environmental
+Omissions
+Chart Generator;
+Energy and Emissions;
+EN15
+Waste and Water
+EN8
+Energy and Emissions
+EN6
+Non-Financial Notes: Environmental
+DMA
+Material Aspect: Financial Performance
+Sustainability Management and Policies;
+Expected Developments and Opportunities;
+Report by the Supervisory Board
+V
+1,2,6
+SAP
+V
+SAP
+V
+Compact
+Principles
+UN Global
+External Boundaries
+Assurance
+Omissions
+LA6
+Employees and Social Investments
+Employees and Social Investments;
+Chart Generator
+LA1
+Leadership
+Health Culture
+Index
+SAP
+A breakdown of new
+✓
+SAP
+6
+SAP
+V
+SAP does not tolerate discrimination on any
+basis, which includes our commitment to
+equal pay for men and women for work of
+equal value.
+LA13
+6
+SAP
+Employees and Social Investments
+V
+LA12
+SAP
+Injuries, diseases, lost days,
+or absenteeism are not a
+material issue for SAP as
+we track our Business
+Health Culture Index on a
+global basis.
+In Germany, we measure the accident rate
+with a "1000-Mann-Quote" (TMQ). This is
+calculated as the number of reportable
+accidents x 1000 employees/number of full-
+time equivalents. Reportable accidents are
+work-related and include commuting
+accidents that result in more than three days
+of absence from work. In 2016, the TMQ was
+3.6 (3.4 in 2015). We also measure the
+accident rate per one million working hours.
+In 2016, this value slightly increased to 2.3
+reportable accidents per one million working
+hours (2.2 in 2015).
+group and gender as well as
+total numbers is proprietary
+information for SAP.
+employee hires by age
+6
+Employees and Social Investments;
+Chart Generator
+Business
+Engagement
+Sustainability Management and Policies;
+Human Rights and Labor Standards
+Employees and Social Investments
+waste-intensive. Therefore,
+we do not report on the
+different types of waste and
+disposal methods.
+8
+SAP
+V
+Our operations are not
+parties
+external
+V
+8,9
+V
+parties
+external
+8
+SAP and
+our solutions have on our customers'
+success and document this in case studies.
+SAP does not conduct community
+assessment programs.
+We are working on understanding the impact
+SAP and
+DMA
+Growth and
+Profitability
+V
+Employee
+DMA
+Links and Content
+DMA and
+Indicators
+253
+GRI Index and UN Global Compact Communication on Progress
+Additional Information on Economic, Environmental and Social Performance
+Financial Performance: Review and Analysis
+Material Aspect: Human Capital Management
+9
+External
+V
+www.sap.com/purpose
+Strategy and Business Model;
+EC8
+SAP
+parties
+252
+260
+SAP
+G4-17
+Identified Material Aspects and Boundaries
+Memberships
+Memberships
+G4-16
+G4-15
+7
+V
+We support a precautionary approach towards environmental
+management. While we see little apparent risk for our own
+operations, we do see an opportunity to help our customers
+anticipate and manage this risk in a more agile and responsive
+fashion through effective product lifecycle management and
+sustainable design.
+G4-14
+V
+There were no changes with significant impacts regarding our own
+organization or our supply chain.
+G4-13
+V
+Sustainable Procurement
+G4-18
+G4-19
+Subsidiaries and Other Equity Investments;
+All entities are covered by the report.
+Materiality;
+G4-23
+Non-Financial Notes: Environmental Performance;
+Non-Financial Notes: Social Performance
+Non-Financial Notes: Environmental Performance;
+Non-Financial Notes: Social Performance
+Non-Financial Notes: Environmental Performance;
+Non-Financial Notes: Social Performance
+G4-22
+GRI Content Index;
+G4-21
+Non-Financial Notes: Environmental Performance;
+Non-Financial Notes: Social Performance
+G4-12
+GRI Content Index;
+Links and Content
+General Standard
+Disclosures
+251
+V
+V
+Additional Information on Economic, Environmental and Social Performance
+GRI Index and UN Global Compact Communication on Progress
+About This Report
+Materiality
+G4-20
+3
+V
+Human Rights and Labor Standards
+Overview of the SAP Group
+G4-6
+Overview of the SAP Group
+G4-5
+Products, R&D, and Services
+G4-4
+Overview of the SAP Group
+V
+G4-3
+G4-1
+Organizational Profile
+UN Global Compact
+Principles
+External
+Assurance
+Strategy and Analysis
+Links and Content
+General Standard
+Disclosures
+The social and environmental data and information included in the SAP Integrated Report 2016 is prepared in accordance with the
+core option of the international guidelines G4 of the Global Reporting Initiative (GRI).
+Letter from the CEO
+Stakeholder Engagement
+V
+V
+G4-11
+Headcount and Personnel Expense
+6
+Chart Generator;
+G4-10
+Financial Performance: Review and Analysis
+Consolidated Financial Statements IFRS;
+V
+Subsidiaries and Other Equity Investments;
+G4-9
+Customers
+V
+Overview of the SAP Group;
+G4-8
+Overview of the SAP Group
+G4-7
+Headcount and Personnel Expense;
+G4-24
+Stakeholder Engagement
+G4-25
+10
+SAP
+V
+Business Conduct
+S03
+Business Conduct
+10
+SO4
+V
+DMA
+Material Aspect: Business Conduct
+UN Global
+Compact
+Principles
+Boundaries
+External
+Assurance
+Omissions
+Links and Content
+Sustainability Management and Policies;
+DMA and
+Indicators
+Business Conduct
+SAP
+V
+Litigation and Claims
+S07
+Business Conduct
+10
+SAP
+V
+V
+Public Policy;
+corruption in 2016.
+10
+SAP
+V
+There were no confirmed incidents of
+SO5
+10
+S06
+GRI Index and UN Global
+Compact Communication
+10
+UN Global Compact
+Principles
+About This Report;
+G4-32
+Investor Services
+Annual Reporting Cycle
+March 20, 2016
+About This Report
+G4-31
+GRI Content Index;
+G4-30
+G4-28
+Report Profile
+Stakeholder Engagement
+G4-27
+Stakeholder Engagement
+G4-26
+Stakeholder Engagement
+G4-29
+V
+Independent Assurance Report
+Governance
+V
+V
+V
+V
+V
+V
+V
+G4-33
+External
+Assurance
+G4-56
+Ethics and Integrity
+Sustainability Management and Policies
+Report by the Supervisory Board;
+G4-34
+Management's Acknowledgement of the SAP Integrated Report 2016
+Independent Assurance Report;
+Business Conduct
+Additional Information
+LA9
+Material Aspect: Innovation
+DMA
+19.6
+1,229
+Issued shares) (in millions)
+Key SAP Stock Facts
+6,939
+1,813
+8,636
+676
+1,145
+Investments in goodwill, intangible assets or property, plant, and
+equipment (including capitalizations due to acquisitions)
+46
+41
+49
+44
+40
+1,229
+1,229
+1,229
+1,229
+3.04
+Earnings per share, diluted (in €)
+3.01
+3.35
+3.50
+3.77
+Debt ratio (total liabilities²) in % of total assets)
+3.90
+2.35
+2.79
+2.75
+2.56
+3.04
+Earnings per share, basic (in €)
+Earnings per share, basic (non-IFRS, in €)
+54
+59
+51
+8,205
+Total non-current liabilities (including deferred income)
+6,546
+6,347
+8,574
+7,867
+10,228
+9,674
+19,378
+19,739
+29,566
+31,651
+32,713
+Total non-current assets
+Total current liabilities (including deferred income)
+10,457
+4,695
+5,627
+56
+60
+Equity ratio (total equity in % of total assets)
+26,306
+27,091
+38,565
+41,390
+44,277
+Total assets
+14,133
+16,048
+19,534
+23,295
+26,397
+Total equity (including non-controlling interests)
+2.56
+2.74
+2.78
+2.35
+13.90
+13.99
+17.30
+Return on SAP shares 4) 5-year investment period (in %)
+Return on SAP shares 4) 10-year investment period (in %)
+52.10
+4.20
+21.80
+-4.80
+14.70
+Return on SAP shares 4) 1-year investment period (in %)
+74.70
+76.50
+71.60
+90.18
+25.87
+13.10
+9.20
+6.72
+76,986
+84,183
+Number of employees 5). 7)
+Employees and personnel expenses
+2012
+2013
+2014
+2015
+2016
+€ millions, unless otherwise stated
+263
+Additional Information | Five-Year Summary
+13.80
+7.90
+7.40
+101.73
+Market capitalization") (in € billions)
+41.45
+52.20
+45
+41
+Total dividend distributed in % of profit after tax³)
+1,013
+1,194
+1,315
+1,378
+1,498
+Total dividend distributed³)
+0.85
+1.00
+1.10
+1.15
+1.25
+Dividend per share³)(in €)
+40
+13,192
+36
+SAP share price) (in €)
+50.90
+54.53
+64.90
+SAP share price - low (in €)
+61.43
+64.80
+62.55
+74.85
+82.81
+SAP share price – peak (in €)
+60.69
+62.31
+58.26
+73.38
+82.81
+36
+13,690
+21,000
+23,311 22,689
+Segment margin (Segment profit in % of Segment revenue)
+NA
+NA
+105
+317
+338
+18
+Segment profit
+2013
+2014
+2015
+2016
+€ millions, unless otherwise stated
+Additional Information | Five-Year Summary
+2012
+20
+16
+NA
+Net cash flows from financing activities
+-5,964
+-1,781
+-7,240
+-334
+-1,799
+Net cash flows from investing activities
+3,822
+3,832
+3,499
+3,638
+4,628
+Net cash flows from operating activities
+Liquidity and cash flow
+NA
+262
+-2,705
+ΝΑ
+67
+20.1
+75
+74
+7,723
+8,031
+Segment profit
+74
+ΝΑ
+Gross margin (in % of corresponding revenue)
+ΝΑ
+16,734
+18,963
+19,920
+Segment revenue
+Applications, Technology & Services Segment
+NA
+6,946
+ΝΑ
+ΝΑ
+68
+67
+Gross margin (in % of corresponding revenue)
+ΝΑ
+ΝΑ
+647
+1,616
+1,925
+Segment revenue
+ΝΑ
+NA
+42
+41
+40
+Segment margin (Segment profit in % of Segment revenue)
+SAP Business Network Segment
+ΝΑ
+74,406
+-3,356
+-1,589
+Days' sales outstanding (DSO, in days)
+-2,502
+-1,467
+-7,670
+-5,615
+-3,153
+74
+Net liquidity
+4,308
+11,093
+9,174
+7,826
+Financial debts (due to banks, private placements, bonds)
+investments/restricted cash)
+4,994
+71
+65
+62
+Goodwill
+6.928
+7,351
+8,999
+9,739
+11,564
+4,006
+3,962
+4,443
+5,362
+6,050
+Total current assets
+Trade and other receivables
+Assets, equity and liabilities
+59
+2,492
+4,298
+2,841
+3,559
+Cash conversion rate (net cash flows from operating activities in % of
+profit after tax)
+20
+19
+16
+14
+16
+127
+Free cash flow in % of total revenue
+3,266
+2,762
+3,001
+3,627
+Free cash flow
+-194
+3,281
+119
+107
+115
+4,673
+Group liquidity (cash and cash equivalents/short-term
+15
+93
+95
+148
+971
+Short-term investments
+2,477
+2,748
+3,328
+3,411
+3,702
+Cash and cash equivalents
+136
+3,423
+66,572
+64,422
+Number of employees, annual average 5)
+ecosystem - Construct encompassing SAP and its customers
+and partners that extends the value SAP provides to its
+customers. By bringing together community-based insight,
+innovative partner solutions, and industry-leading collaboration
+and co-innovation, it enables customers to extract the greatest
+possible value from their SAP investments.
+E
+digital transformation - Concept that refers to the changes
+associated with the application of digital technology in all
+aspects of society. Digital technologies empower customers and
+consumers in a way they never could before, transforming their
+relationship with brands and products. Businesses need to meet
+these new challenges or will miss the potential business success
+to be realized in the digital economy.
+digital core - An integrated system that enables customers to
+predict, simulate, plan, and even anticipate future business
+outcomes in a digital economy. This digital core is realized by
+SAP through SAP S/4HANA, providing the framework that
+allows customers to run an entire enterprise in the cloud - such
+as finance, procurement, sales, inventory management, project
+system, and product lifecycle management. In this way,
+companies can achieve the real-time visibility they need into all
+mission-critical business processes and processes around their
+customers, suppliers, workforce, Big Data, and the Internet of
+Things.
+design thinking - A methodology for routine innovation that
+brings together the right side of the brain (creative) with the left
+side of the brain (analytical).
+data warehouse - An electronic collection of information
+organized for easy access by computer programs.
+266
+data center energy - The amount of energy consumed in SAP's
+own and external data centers. An external data center is a local
+computing center with server units running SAP software that is
+operated by an external partner.
+D
+Customer Net Promoter Score (NPS) - Describes the
+willingness of customers to recommend or promote an
+organization or company to others. It is defined as the
+percentage of customers that are likely to recommend an
+organization or company to friends or colleagues (promoters)
+minus the percentage of customers that are unlikely to do so.
+customer engagement lifecycle - Model that provides an
+integrated framework of practices to help create and deliver
+customer value. The phases of the customer engagement
+lifecycle represent the common route followed by the SAP and
+the customer teams in the process of identifying, delivering,
+operating, and managing solutions that best fit the customer's
+needs.
+corporate social responsibility - SAP's corporate social
+responsibility (CSR) program is about how the company creates
+social impact for people, both inside and outside SAP, to help
+make society more sustainable and the world run better.
+connectivity - A framework which describes the
+interrelatedness of SAP's social, environmental, and economic
+performance. Based on statistical analysis, it allows us to
+quantify the impact of non-financial measures on the operating
+profit offering a holistic understanding of SAP's value creation.
+Concur Technologies - Acquired by SAP in 2014, this travel and
+expense management company helps customers manage
+business resources, processes, and spend through the world's
+largest business network in the cloud for comprehensive travel
+and expense management. The Concur platform offers an
+integrated system for expense, invoice, travel, and spend
+intelligence in the cloud.
+data center - A physical facility used to house computer
+systems and associated components.
+Additional Information | Glossary
+electronic waste (e-waste) - Electronic products that are
+discarded by consumers or companies, such as computers,
+computer monitors, or mobile devices.
+Employee Engagement Index - A score for the level of
+employee commitment, pride, and loyalty, as well as the feeling
+of employees of being advocates for their company. The index is
+calculated based on the results of regular employee surveys.
+-
+Hasso Plattner Founders' Award - Introduced in 2014, an
+employee award that signifies the highest employee recognition
+at SAP, awarded annually by the CEO to an individual or a team.
+sets in a distributed computing environment. As open source
+technology, Hadoop is an efficient distributed file system that
+enables the analysis and processing of very large volumes of
+data from a great number of varied, structured, and
+unstructured sources. SAP Distribution for Hadoop software
+provides redistribution of Apache Hadoop developed by
+Hortonworks.
+Hadoop - Part of the Apache project sponsored by the Apache
+Software Foundation, this open source, Java-based
+programming framework supports the processing of large data
+H
+greenhouse gas footprint - The sum of all greenhouse gas
+emissions measured and reported, including renewable energy
+and third-party reductions, for example, offsets.
+G
+Fieldglass - Company acquired by SAP in May 2014 and fully
+integrated in SAP. Our solutions for contingent workforce
+management are marketed under the SAP Fieldglass brand. See
+"SAP Fieldglass."
+F
+environmental impact - A positive or negative change to the
+natural environment.
+enterprise resource planning - See "SAP ERP."
+enterprise mobility - Term used in business and industry to
+refer to the concept and approach to making a business mobile
+where employees can perform business-related tasks through
+mobile devices. At SAP, we use "enterprise mobility" as our
+umbrella term for an overall mobile strategy.
+end-to-end solution - Software solution that drives strategic
+business outcomes and directly contribute to a business priority
+in an industry, line of business, or technology area. These
+solutions are structured into solution capabilities that comprise
+a number of individual software products, instances, and/or
+license materials. End-to-end solutions provide a business
+scope with a comprehensive value proposition.
+end-to-end process - Set of activities supporting defined
+management, core, or support processes. Customers can use
+these activities as a reference to map their own processes.
+employee retention - The ratio of the average headcount
+(expressed in full-time equivalents/FTEs) minus employee-
+initiated terminations (turnover) divided by the average
+headcount, taking into account the past 12 months.
+component - Modular piece of software offering functions
+accessible via interfaces.
+How We Run SAP's set of corporate values that sets
+behaviors that describe what makes SAP unique.
+cloud solutions from SAP - Category used to communicate all
+of cloud software related to the cloud, including platform,
+managed services, solutions, technology, and infrastructure,
+public cloud applications, managed cloud applications delivered
+via SAP HANA Enterprise Cloud, and SAP Cloud Platform. It
+includes offerings branded with SAP, SAP SuccessFactors, and
+SAP Ariba solutions, among others. It can be used in conjunction
+with the messaging statement "SAP Cloud powered by SAP
+HANA."
+cloud deployment models The different infrastructure,
+software lifecycle management, and licensing models used for
+deploying software, that is, where the software is running and
+how much control and flexibility a customer has.
+Ariba See "SAP Ariba."
+application - Software that enables organizations to address
+specific business needs and to perform certain business
+processes or activities. An application may comprise one
+software product or multiple software products, components, or
+instances.
+analytics solutions from SAP - See "SAP BusinessObjects
+Analytics."
+analytics - Discovery and communication of meaningful
+patterns in data. It is applied to business data to describe,
+predict, and improve business performance; recommend action;
+and guide decision making across all organizations and
+functions in a company. Analytics helps companies gain new
+insight and understanding of their business performance based
+on data and statistical methods. See "analytics solutions from
+SAP."
+Africa Code Week - SAP-led corporate social responsibility
+initiative initiated in 2015 in cooperation with partners. Planned
+as an annual event, children in African countries where SAP has
+a market are introduced to computer programming to increase
+awareness of, and interest in, the software development career
+field. The initiative has been extended to other participant
+groups, including an innovative Refugee Code Week in 2016.
+A
+-
+Glossary
+264
+10) The BHCI score for 2014 was recalculated from 70% to 72% based on two updated questions in the people survey concerning work-life balance.
+9) Due to changes in sampling, the 2015 Customer NPS is not fully comparable to the prior year's score.
+8) Data center energy consumption normalized against € revenue combines a relative measure of required energy to develop and operate solution in internal and
+external data center.
+"Numbers based on at year-end.
+6) Relates to different levels of management position.
+Additional Information | Five-Year Summary
+Ariba Network Business commerce network where
+companies of all sizes can connect to their trading partners
+anywhere, at any time from any application or device to buy, sell,
+and manage their cash more efficiently and effectively than ever
+before. Companies around the world use the Ariba Network to
+simplify interenterprise commerce and enhance the results they
+deliver. See “business network."
+B
+best practice - A management concept that involves devising a
+method of process that most effectively produces a desired
+outcome. SAP applications use business best practices to help
+customers automate common business processes through
+software and technology. See "SAP Best Practices."
+-
+cloud computing - Generic term for flexible, IT-related services
+available through, or hosted on, the Internet for consumers and
+business, including storage, computing power, software
+development environments, and applications, combined with
+service delivery. Accessed as needed "in the cloud," these
+services eliminate the need for in-house IT resources. See
+"cloud service model."
+265
+Additional Information | Glossary
+carbon offset or greenhouse gas (GHG) offset - A unit of
+carbon dioxide-equivalent (CO2 equivalent) that is reduced,
+avoided, or sequestered to compensate for emissions occurring
+elsewhere.
+carbon neutral - A goal or state of emitting net zero
+greenhouse gases for certain activities. This includes reducing
+emissions, but also using renewable electricity certificates or
+carbon credits.
+carbon credit - A tradable certificate that allows the holder to
+emit one ton of CO2 or the respective equivalent of any other
+greenhouse gas.
+C
+business user - Employees who spend significant time finding
+and sharing information, collaborating with others, coordinating
+projects, devising strategy or operational tactics, and coming up
+with new ideas based on information gathered from multiple
+sources. Also called knowledge or information workers or
+business consumers.
+business process - Set of logically related activities performed
+within an organization to complete a defined business task. SAP
+provides software and technology that enable and support
+business processes. Order processing and payroll are typical
+examples.
+business network - An online service that connects businesses
+and their systems to those of their trading partners and enables
+new processes and information and insight sharing only possible
+in a digital environment. See "Ariba Network."
+business intelligence (BI) - Software that enables users to
+analyze an organization's raw data and make fact-based
+decisions. Bl-related processes include data mining, analytical
+processing, querying, and reporting. Business intelligence
+offerings from SAP include SAP BusinessObjects BI solutions,
+SAP Crystal Reports, SAP BusinessObjects Dashboards, and
+SAP BusinessObjects Lumira, as well as the SAP
+BusinessObjects BI platform.
+Business Health Culture Index - A score for the general
+cultural conditions in an organization that enable employees to
+stay healthy and balanced. The index is calculated based on the
+results of regular employee surveys.
+availability of massive amounts of data requires companies to
+rethink technology architecture and database structures.
+Big Data - The large volume of data created by billions of
+connected devices and people generating a tremendous amount
+of information about their behavior, location, and activity. This
+cloud service model - "As-a-service" offerings where cloud
+services are offered as infrastructure as a service (laaS),
+platform as a service (PaaS), or software as a service (SaaS).
+-
+hybrid cloud – Deployment model that uses resources
+comprised of a mix of two or more distinct cloud deployment
+models that are integrated by standardized or proprietary
+technology enabling data and application portability. Also called
+"hybrid cloud deployment model."
+hybrid landscape - A mix of on-premise and any cloud
+deployment model(s). Alternatively referred to as an "on
+premise to cloud" or "hybrid environment."
+269
+Additional Information | Glossary
+SAP BusinessObjects Analytics - Connotes all of SAP's on-
+premise software solutions that help customers achieve the
+power of collective insight in Big Data by empowering them with
+the right information at the right time to make insightful
+business decisions, anticipate change, and uncover new
+opportunities. SAP BusinessObjects Analytics solutions cover
+the areas of business intelligence, enterprise performance
+SAP Business ByDesign - Adaptable, cloud-based business
+management solution delivered in the cloud, ideally suited for
+growing midsize companies as well as for subsidiaries of larger
+corporations. It is a complete, integrated suite that can run an
+entire enterprise – financials, human resources, sales,
+procurement, customer service, and supply chain. The latest
+versions enable partners and customers to extend the system
+capabilities or build cloud-based applications using SAP
+Business ByDesign Studio.
+-
+SAP Best Practices - Packages that provide proven methods
+and tools for organizations to implement best business
+practices in key areas and a range of industries using SAP
+software. The packages deliver methodology, documentation,
+and preconfiguration that enable rapid, reliable deployment with
+quick return on investment.
+management, and governance, risk, and compliance. Formerly
+called analytics solutions from SAP.
+SAP Ariba - Category of offerings resulting from the acquisition
+of Ariba in October 2012. All cloud-related supplier assets of
+SAP and Ariba are now consolidated under the SAP Ariba brand.
+SAP Ariba solutions include those for procurement, financials,
+and sourcing, as well as the Ariba Network.
+SAP ActiveEmbedded - Enhanced engagement services for
+optimizing solutions and accelerating adoption of technologies
+without disrupting customer businesses
+SAP Activate - Innovation adoption framework introduced for
+SAP S/4HANA that combines SAP Best Practices,
+methodology, and guided configuration delivered with a
+reference landscape. The SAP Activate methodology is the SAP
+guidance for implementation, enhancements, upgrades, or co-
+innovation of SAP solutions starting with SAP S/4HANA. It
+enables cost-effective, agile, and fast delivery of the SAP
+solution to the customer and supports deployments in the
+cloud, on premise, or in hybrid deployment.
+S
+Run Simple - SAP's operating principle that refers to how SAP
+solutions and services help SAP customers run at their best by
+addressing complexity and innovating for future growth as well
+as how SAP can radically simplify the way business is
+conducted.
+road map - Product timeline that has a variety of objectives,
+including communication to customers, users, or other parties
+interested in the timing of future product releases; the features
+planned for those releases; general prioritization of features;
+and in some cases, the requirements of features in enough detail
+that current and prospective customers can give feedback on
+the feature itself and the product's direction.
+renewable energy - The shares and types of electricity obtained
+from renewable sources such as hydro, wind, solar, geothermal,
+and biomass. It is calculated by adding the amount of renewable
+energy specifically sourced, produced on-site by our own solar
+cells and covered by Renewable Energy Certificates (RECs).
+SAP Anywhere - An HTML5 solution that runs in the cloud
+designed for smaller companies with up to 50 employees that
+need a seamless and affordable way to manage their customer
+interactions in a single front-office system. Accessible through a
+Web browser on a desktop, laptop, or mobile device, it delivers a
+consistent customer experience with the seamless integration
+of marketing, sales, and commerce activities. See also "SAP
+SME Solutions."
+SAP BusinessObjects Cloud - A single solution encompassing
+analytics capabilities offered by SAP in the cloud including what
+was previously available in SAP Cloud for Planning. These
+capabilities, together with additional planning and analysis
+capabilities, have been integrated into this offering. SAP
+BusinessObjects Cloud is software as a service (SaaS) built
+natively on SAP Cloud Platform that provides all analytics
+capabilities for all users in one product. Customers are able to
+subscribe to SAP BusinessObjects Cloud as a single solution
+with specific capabilities that can be licensed separately or
+together. Formerly called SAP Cloud for Analytics.
+SAP Business One - Application designed especially for small
+businesses with up to 100 employees, providing a single,
+integrated solution for managing the entire business across
+financials, sales, customer relationships, purchasing, inventory,
+analytics, and operations.
+SAP BW/4HANA - SAP's next-generation data warehouse
+solution built entirely on SAP HANA. It provides a simple set of
+objects that is well suited for modelling an agile and flexible
+layered architecture of a modern data warehouse. SAP
+BW/4HANA manages data from SAP applications or other
+systems, structured or unstructured, and allows accessing all
+models through an open SQL interface. SAP BW/4HANA comes
+with state-of-the-art user interfaces for administrators,
+developers, and end users as well as processes optimized for
+SAP HANA that leverages huge amounts of data in real time for
+competitive advantage. It is not a legal successor of any SAP BW
+solution.
+Additional Information | Glossary
+270
+SAP for Aerospace & Defense (SAP for A&D) - Solution
+portfolio specifically designed to meet the needs of the
+SAP Fiori user experience (UX) - As of May 2014, SAP Fiori UX
+is the user experience for SAP software. Based on modern
+design principles, it represents a consumer-like, consistent
+experience across devices, including tablets and smartphones.
+SAP ERP - Application designed to optimize business and IT
+processes by reducing IT complexity, increasing adaptability,
+and delivering more IT value at a lower cost than traditional ERP
+solutions. It can support mission-critical, end-to-end business
+processes for finance, human capital management, asset
+management, sales, procurement, and other essential corporate
+functions. SAP ERP can also support industry-specific
+processes by providing industry-specific business functions that
+can be activated selectively via the switch framework, keeping
+the application core stable and helping ensure maximum
+performance.
+SAP Enterprise Support - Services that provide proactive
+support in addition to all features of SAP Standard Support
+services. These proactive support services encompass tools,
+processes, and services that enable continuous improvement,
+holistic application lifecycle management for continuous
+innovation, business and operational process improvements,
+and levers to address the total cost of operation (TCO).
+SAP Community Network - Online portal with nearly two
+million members in more than 200 countries, providing
+individuals with the opportunity to trade experience and
+insights, pursue business opportunities, and learn from each
+other. SAP offers distinct communities in the network that offer
+information, trusted resources, and co-innovation.
+SAP Cloud powered by SAP HANA - Messaging statement that
+refers to all of SAP offerings related to the cloud, including
+platforms, services, applications, technology, and infrastructure.
+It is not the name of a single offering or a category of solutions.
+SAP Cloud always refers to more than just the software and
+technology, but our approach to become "the innovative cloud
+company powered by SAP HANA." See "cloud solutions from
+SAP."
+SAP Cloud Platform Integration - Technology that integrates
+cloud applications with on-premise solutions from SAP and
+other vendors. Based on a multitenant cloud infrastructure, it
+allows customers to unite business processes and data in a
+secure, reliable environment. Formerly SAP HANA Cloud
+Integration.
+configured for performance, reliability, and security to ease the
+process of procuring and provisioning hardware, installing and
+configuring Hadoop, integrating in other tools, and managing
+clusters in production. Formerly called Altiscale Data Cloud
+before SAP acquired the company Altiscale.
+SAP Cloud Platform Big Data Service - Standalone Big Data
+solution that combines SAP Cloud Platform technology with
+Apache Hadoop, Apache Spark, Apache Hive, and Apache Pig.
+The offering provides servers, networking, and software
+SAP Cloud Platform – An open cloud platform that is the
+foundation for running applications and analytics today and
+allows developers to build custom applications in the cloud as
+either stand-alone or connected to on-premise solutions. It
+includes infrastructure, application, and database services in a
+subscription model. Separately licensed, it is part of SAP Cloud
+powered by SAP HANA. Formerly called SAP HANA Cloud
+Platform.
+-
+SAP Cloud for Planning - See "SAP BusinessObjects Cloud."
+SAP Clea - The new name and solution/technology brand for
+the SAP portfolio of offerings that include machine learning
+technology. Current applications include SAP Clea for Resume
+Matching; SAP Clea for Cash Application; SAP Clea for Service
+Ticket Intelligence; SAP Clea for Brand Intelligence; and SAP
+Clea for Customer Management Insights.
+release - SAP software product that has a version number, is
+shipped at a particular time, and has defined maintenance
+phases.
+R
+public cloud - Provides consumers access to a provider's
+software applications running on a cloud infrastructure. The
+resources are located on the premises of the cloud provider, not
+of the customer, and are shared by multiple customers
+accessing them through the Internet.
+product footprint - The environmental impact of products,
+processes, or services by production, usage, and disposal.
+lean - Set of manufacturing principles that first defines
+customer value, then reorganizes every step required to design,
+order, build, deliver, and maintain this value across all the
+organizations and units. As a result, firms can do more with less,
+respond more quickly to customer needs, create jobs that are
+more rewarding for employees, and reduce their impact on the
+environment.
+Leadership Trust Score – Based on the Net Promoter Score
+(NPS) methodology that results from a question in our annual
+global employee survey that gauges employees' trust in our
+leaders. It measures our collective effort to foster a work
+environment based on trust. We use this score to further
+enhance accountability for our leaders and executive
+management.
+-
+L
+key performance indicator (KPI) – Performance figure for
+which threshold values are defined and against which validation
+is executed.
+-
+K
+in-memory database - Database that keeps all active records in
+main memory rather than on disk. Accessing in-memory records
+is considerably faster than retrieving them from the disk,
+significantly increasing performance. SAP HANA is SAP's
+groundbreaking database that allows businesses to take
+advantage of in-memory computing. See "SAP HANA.".
+267
+Additional Information | Glossary
+in-memory computing – A major advance in information
+technology that creates a dramatic change in computing,
+analytics, and data storage. Combining advances in multicore
+processing with more affordable servers, in-memory computing
+allows information to be stored in the main memory rather than
+in relational databases to greatly accelerate processing times. It
+disrupts the traditional IT stack comprised of hardware,
+middleware, and software, where disk-based relational
+databases can become bottlenecks.
+infrastructure as a service (laaS) - Processing, storage,
+network, other computing resources and typically a defined level
+of support for consumers to deploy software (such as operating
+systems and applications). IaaS consumers do not manage
+underlying cloud infrastructure but may control networking
+components (such as host firewalls).
+industry portfolios - Software portfolios that address the
+business needs of 25 different industries.
+industry - An economic sector characterized by a typical value
+chain, business processes, and set of products and services that
+the companies operating in it have in common. At SAP,
+"industries" is also used as a term to differentiate between lines-
+of-business functions such as marketing, procurement, and
+finance, and those functions specific to an industry.
+hybris See "SAP Hybris. "
+line of business (LoB) - Internal organizational area or
+business unit in a company (division) that combines all
+responsibilities for a particular product, group, or set of
+processes. Examples include sales, purchasing, human
+resources, finance, marketing, and so on. A line of business is a
+typical high-level business capability in a company.
+5) Full-time equivalents.
+line-of-business portfolios - SAP offers software portfolios that
+address the needs of organizations in 12 lines of business, or
+functional areas. The following solution portfolios are currently
+available: SAP for Asset Management, SAP for Commerce, SAP
+for Finance, SAP for Human Resources, SAP for Manufacturing,
+SAP for Marketing, SAP for R&D/Engineering, SAP for Sales,
+SAP for Service, SAP for Sourcing and Procurement, SAP for
+Supply Chain Management, and SAP for Sustainability.
+M
+product - A high-level non-versioned software offering that
+contains functionality and business logic to address a business
+need. An individual software product comprises software
+product versions.
+private cloud - Deployment model that implies resources are
+dedicated to one customer and accessed through the Internet.
+The infrastructure is owned, managed and operated by the
+customer, a third-party, or both, and is on the premises of the
+customer, cloud provider, or a third party. SAP indicates private
+cloud deployments using the term "private option."
+solutions or applications that are powered by SAP HANA are
+certified by SAP to run on the SAP HANA platform. These
+applications take advantage of distinctive capabilities of SAP
+HANA to deliver key benefits, such as simpler administration,
+reduced overhead, and better business intelligence over
+conventional traditional technology platforms.
+Additional Information | Glossary
+268
+powered by SAP HANA - An SAP offering powered by SAP
+HANA runs on the SAP HANA platform. More than 100 SAP
+applications are currently "powered by SAP HANA." Partner
+platform as a service (PaaS) - Cloud infrastructure, operating
+system, programming languages, libraries, services, tools and
+typically a defined level of support for consumers to deploy
+consumer-created or acquired applications. PaaS consumers do
+not manage underlying cloud infrastructure but have control
+over deployed applications.
+People Survey - SAP's annual employee survey that allows
+employees to provide feedback about issues that impact them.
+P
+open source - Software based on the concept of software
+developers coming together to build a virtual community and
+solving a common problem by developing working software that
+everyone has a right to change. Successful development
+projects under the open source model include Linux - a free
+operating system supported by SAP.
+on premise - A deployment model where a software license is
+purchased and deployed on the servers at the premises of the
+customer. The customer manages and controls the software.
+mobile apps - Applications for mobile devices available for
+download, demo, and purchase on SAP Store, App Store, and
+other online stores. Mobile apps are categorized as either
+business/product in focus or as consumer-focused. At SAP, our
+mobile apps are task-oriented or allow access to existing on-
+premise software.
+managed cloud - Deployment model that implies resources are
+dedicated to one customer and accessed through a VPN. The
+infrastructure is owned, managed, and operated by the cloud
+provider in the cloud provider's data center. SAP HANA
+Enterprise Cloud is SAP's managed cloud service.
+maintenance - Software support comprising support for legal
+changes and corrections delivered through the SAP Notes tool,
+support packages, problem support, and access to information
+and online service channels - depending on the maintenance
+phase.
+machine learning - Technology that enables computers to
+learn from large amounts of data without being explicitly
+programmed. SAP Clea is the new name given to the SAP
+portfolio of offerings including machine learning technology. See
+"SAP Clea."
+Live Business - SAP's campaign platform that refers to our
+vision of a seamless digital business that enables our customers
+to Run Simple by sensing, responding to, learning from,
+adapting to, and predicting business data in real time.
+Segment results
+4) Average Annual Return. Assuming all dividends are reinvested.
+2) As sum of current and non-current liability.
+14.3
+15.9
+19.2
+20.8
+Women managing managers 6), 7) (in %)
+20.8
+14.5
+21.2
+23.6
+24.5
+Women in management) (total, in % of total number of employees)
+30
+31
+31
+21.3
+Women managing teams6). 7) (in %)
+25.9
+25.3
+66
+67
+72
+75
+78
+Business Health Culture Index 10) (BHCI, in %)
+79
+77
+79
+82
+85
+Employee Engagement Index (in %)
+21.1
+21.7
+23.3
+31
+Leadership Trust Index (LTI, in %)
+32
+66
+7,877
+10,170
+10,229
+Personnel expenses
+18,012
+17,804
+7,489
+18,908
+Number of employees in research and development5), 7)
+61,134
+65,409
+68,343
+75,180
+80,609
+23,363 20,938
+7,286
+Personnel expenses - excluding share-based payments
+9,444
+68
+63
+57
+64
+Operating profit per employee (in € thousands)
+111
+109
+111
+126
+117
+Personnel expenses per employee - excluding share-based payments (in
+€ thousands)
+6,764
+7,162
+7,587
+9,446
+Women working at SAP (in %)
+57
+52
+47
+14,000
+13,900
+13,400
+12,500
+11,800
+Energy consumed per employee5) (in kWh)
+Data center energy consumed (in GWh)
+860
+920
+965
+950
+Total energy consumption (in GWh)
+30.0
+32.4
+910
+243
+249
+179
+¹) SAP Group. Amounts for 2012 to 2016 according to IFRS, unless otherwise stated.
+51
+43
+100
+100
+100
+Renewable energy sourced (in %)
+NA
+NA
+10
+12
+11
+Data center energy per € revenue) (in kWh)
+160
+173
+28.4
+21.9
+17.3
+Greenhouse gas emissions per € revenue (in grams)
+Customer
+7
+8
+9
+11
+8
+94.0
+93.5
+93.5
+91.8
+93.7
+Total turnover rate (in %)
+Employee retention (in %)
+ΝΑ
+29
+Customer Net Promoter Score⁹) (in %)
+3) Numbers are based on the proposed dividend and on level of treasury stock at year-end.
+19.2
+19.1
+7.9
+8.3
+7.3
+6.0
+4.7
+Greenhouse gas emissions per employee 5) (in tons)
+485
+545
+500
+455
+380
+Net Greenhouse gas emissions (in kilotons)
+Environment
+8.9
+12.1
+22.4
+0
+ΝΑ
+309
+Share of predictable revenue (non-IFRS, in %)
+ΝΑ
+NA
+57
+60
+61
+NA
+NA
+56
+60
+Operating expenses
+61
+16,304
+16,897
+17,580
+20,805
+22,067
+81
+82
+19
+11
+16,223
+Share of predictable revenue (IFRS, in %)
+16,815
+Cost of cloud subscriptions and support (IFRS)
+Non-IFRS adjustments
+-1,022
+ΝΑ
+-2,056
+ΝΑ
+-218
+-393
+-2,076
+258
+-1,818
+-2,291
+283
+-2,008
+-1,944
+Cost of software licenses and support (non-IFRS)
+238
+Non-IFRS adjustments
+-1,313
+-2,182
+-1,066
+Cost of cloud subscriptions and support (non-IFRS)
+Cost of software licenses and support (IFRS)
+NA
+97
+88
+232
+247
+NA
+-314
+-481
+-789
+263
+17,560
+3,421
+5
+0
+1
+ΝΑ
+NA
+8,829
+10,093
+10,571
+Total revenue (non-IFRS)
+Non-IFRS adjustments
+NA
+Total revenue (IFRS)
+Cloud and software (non-IFRS)
+Non-IFRS adjustments
+Cloud and software (IFRS)
+Software support (non-IFRS)
+Non-IFRS adjustments
+Software support (IFRS)
+NA
+ΝΑ
+4,399
+4,836
+Services (IFRS = non-IFRS)
+20,793
+ΝΑ
+10,094
+3,310
+3,245
+3,579
+3,638
+22,062
+5
+12,883
+13,587
+14,334
+17,226
+18,428
+81
+10,572
+82
+11
+5
+12,801
+13,505
+14,315
+17,214
+18,424
+ΝΑ
+NA
+8,834
+19
+4,862
+ΝΑ
+-31
+Cloud subscriptions and support margin (in % of corresponding revenue,
+IFRS)
+Profits and Margins
+2012
+2013
+2014
+2015
+2016
+€ millions, unless otherwise stated
+261
+Additional Information | Five-Year Summary
+56.1
+-863
+-1,010
+-949
+-866
+-892
+-3,912
+-4,131
+-4,593
+-5,782
+-1,005 -1,048
+-1,268 -1,289
+-6,265
+Depreciation and amortization (IFRS)
+-951
+General and administration (IFRS)
+55.3
+54.8
+25.2
+18.1
+15.1
+85.0
+85.2
+84.6
+83.8
+83.7
+Cloud and software margin (in % of corresponding revenue, non-IFRS)
+Services margin (in % of corresponding revenue, IFRS)
+81.7
+55.8
+82.4
+80.8
+81.0
+Cloud and software margin (in % of corresponding revenue, IFRS)
+NA
+71.2
+64.3
+65.6
+64.4
+Cloud subscriptions and support margin (in % of corresponding revenue,
+non-IFRS)
+NA
+82.1
+-1,793
+Sales and marketing (IFRS)
+18.5
+-6,583
+132
+-2,602
+-2,533
+-2,734
+411
+-1,929
+-2,339
+-2,370
+360
+-2,011
+-2,660
+128
+-2,557
+346
+-2,211
+-2,426
+122
+-2,304
+-2,932
+167
+-2,765
+113
+-2,976
+598
+-3,089
+Total cost of revenue (IFRS)
+Cost of services (non-IFRS)
+Non-IFRS adjustments
+Cost of services (IFRS)
+-3,313
+516
+-2,797
+485
+-3,010
+Cost of cloud and software (non-IFRS)
+Non-IFRS adjustments
+-3,495
+Cost of cloud and software (IFRS)
+Non-IFRS adjustments
+18.6
+Total cost of revenue (non-IFRS)
+Research and development (in % of total revenue, IFRS)
+17.6
+17.2
+18.0
+Research and development (in % of total operating expenses, IFRS)
+13.9
+13.6
+13.3
+13.7
+13.8
+-2,261
+Research and development (IFRS)
+-2,282
+-2,845
+-3,044
+542
+-4,531
+-4,543
+487
+-5,073
+-5,031
+-4,983
+467
+-4,515
+-6,245
+683
+-5,562
+-5,985
+-2,331
+Software licenses (non-IFRS)
+ΝΑ
+NA
+26.2
+NA
+Effective tax rate (non-IFRS, in %)
+26.8
+26.1
+26.1
+25.9
+27.5
+Return on equity (profit after tax in percentage of average equity)
+15
+24.4
+14
+22
+21
+Order Entry
+New cloud bookings
+1,147
+874
+436
+ΝΑ
+ΝΑ
+Deferred cloud subscriptions and support revenue (IFRS)")
+18
+1,271
+24.7
+25.3
+4,355
+4,396
+3,796
+PBT margin (in % of revenues)
+22
+19
+25
+26
+23
+Income tax expense
+23.4
+-1,229
+-1,075
+-1,071
+-993
+Profit after tax
+3,634
+3,056
+3,280
+3,325
+2,803
+Effective tax rate (IFRS, in %)
+-935
+3,991
+957
+443
+81
+Adjustment for acquisition-related charges
+680
+738
+562
+555
+537
+Adjustment for share-based payment expenses
+785
+724
+82
+290
+522
+Adjustment for restructuring
+28
+621
+126
+70
+8
+Adjustment for TomorrowNow and Versata litigation
+0
+0
+327
+689
+19
+5
+317
+Orders - Number of on-premise software deals (in transactions)
+57,291
+57,439
+54,120
+55,909
+59,289
+Share of software orders greater than € 5 million (in % of total software
+order entry)
+29
+27
+11
+22
+28
+Share of software orders less than € 1 million (in % of total software order
+entry)
+38
+40
+40
+44
+44
+43
+Non-IFRS Adjustments
+Revenue adjustments
+24
+4,863
+73.3
+-72
+Total gross margin (in % of total revenue, IFRS)
+Software and support gross margin (non-IFRS, in %)
+Software and support gross margin (IFRS, in %)
+Services margin (in % of corresponding revenue, non-IFRS)
+Five-Year Summary¹)
+€ millions, unless otherwise stated
+Revenues
+2016
+2015
+2014
+2013
+2012
+Cloud subscriptions and support (IFRS)
+2,993
+18.2
+2,286
+270
+Non-IFRS adjustments
+2
+10
+14
+61
+73
+Cloud subscriptions and support (non-IFRS)
+2,995
+2,296
+1,101
+757
+343
+Software licenses (IFRS)
+696
+4,860
+22.7
+23.5
+Profit before tax (PBT)
+Non-IFRS adjustments
+4,041
+4,479
+4,331
+4,252
+5,135
+Operating profit (IFRS)
+72.2
+73.1
+74.3
+72.9
+Total gross margin (in % of total revenue, non-IFRS)
+68.7
+29.0
+70.1
+70.0
+70.2
+ΝΑ
+NA
+86.3
+86.6
+87.4
+ΝΑ
+NA
+84.3
+84.7
+85.9
+23.9
+1,498
+71.6
+4,835
+1,087
+ΝΑ
+1,003
+1,150
+Operating profit (non-IFRS)
+6,633
+6,348
+5,638
+5,482
+5,192
+Operating margin (in % of total revenue, IFRS)
+4,399
+20.5
+24.7
+26.6
+24.9
+Operating margin (in % of total revenue, non-IFRS)
+30.1
+30.5
+32.1
+32.4
+31.8
+Financial income, net
+-38
+-5
+-25
+-66
+1,307
+2,095
+23.3
+Non-IFRS adjustments
+2
+1
+0
+ΝΑ
+Please see www.sap.com/about/legal/copyright.html for
+additional trademark information and notices.
+SAP for Life Sciences - Solution portfolio that meets the
+requirements of pharmaceutical, biotechnology, and diagnostics
+companies, as well as manufacturers of medical devices and
+products.
+SAP for Insurance - Solution portfolio that integrates steps in
+the insurance business process, including capabilities for
+customer contact, policy and product management, collections
+and disbursement, and claims management.
+SAP for Industrial Machinery & Components (SAP for IM&C)
+· Solution portfolio that coordinates the entire scope of
+business activities (estimating, order entry, project
+management, and production planning) for the industrial sector
+and supports areas ranging from maintenance and services to
+billing and profitability analysis.
+-
+SAP for High Tech - Solution portfolio that meets the demands
+of high-tech industries, including RosettaNet support.
+SAP for Higher Education and Research (SAP for HE&R) -
+Solution portfolio that supports organizational processes and
+unique needs of public and private universities, multicampus
+institutions, research agencies, and medical colleges, including
+campus management, grants management, student lifecycle
+SAP for Media - Solution portfolio that supports processes
+specific to the media industry with capabilities that include sales
+and distribution, advertising management, product
+development, and intellectual property management.
+SAP for Healthcare - Solution portfolio for hospitals and clinics
+to manage a variety of required administrative and clinical
+processes.
+SAP for Engineering, Construction & Operations (SAP for
+EC&O) Solution portfolio designed to meet the specific
+requirements of project-oriented enterprises that offers
+capabilities for industrial plant construction, construction of
+commercial and private buildings, and shipbuilding.
+SAP for Defense & Security - Solution portfolio that offers a
+variety of capabilities that meet the critical needs of the defense
+and security sector. Key industry-specific capabilities include
+acquisition and materials management; force planning;
+maintenance, repair, and overhaul (MRO); personnel and
+organization; infrastructure management; planning and support
+for deployed operations; in-service support; and line
+maintenance.
+SAP for Consumer Products - Solution portfolio that supports
+the integration of every step of the consumer product value
+chain - from suppliers to consumers. Key capabilities include
+mobile and Internet sales, trade promotion management,
+inventory management, brand and channel management, and
+demand signal management.
+management, financials, operations, human capital
+management, procurement, analytics, research, and asset
+management.
+SAP for Mill Products - Solution portfolio for manufacturers of
+building materials, the paper and timber industry, metal and
+primary metal producers, and textile and furniture
+manufacturers.
+SAP for Mining - Solution portfolio that supports processes
+specific to the mining industry, including mining operations and
+asset performance; sales and supply chain management;
+operational risk and compliance; as well as human resources;
+finance; procurement; and IT management.
+SAP for Oil & Gas (SAP for O&G) - Solution portfolio that
+meets the demands of oil and gas companies of all sizes.
+hybris are now consolidated under the SAP Hybris brand. SAP
+Hybris solutions help businesses sell more goods, services, and
+digital content through every touch point, channel, and device.
+SAP Hybris - Unified brand resulting from the acquisition of
+hybris in August 2013. All e-commerce solutions from SAP and
+SAP HANA Vora – An in-memory, massively distributed data
+processing engine for Hadoop that provides simple business-
+oriented scale-out processing of data. This engine allows
+distributed Hadoop data to be analyzed together with enterprise
+data using the SAP HANA platform.
+SAP HANA Enterprise Cloud - This service enables customers
+to access solutions in the cloud. It contains managed cloud
+applications, in-memory infrastructure, managed services, and
+SAP Cloud Platform through an additional license, to build
+custom applications in the cloud. On-premise applications from
+SAP can be delivered to customers via SAP HANA Enterprise
+Cloud.
+SAP HANA-Flexible, data-agnostic, in-memory platform that
+helps organizations analyze their business operations, using
+huge volumes of detailed transactional and analytic information
+from virtually any data source. The platform provides the
+foundation for innovative applications that take advantage of an
+in-memory database and calculation engine, allowing customers
+to conduct complex planning, forecasting, and simulation based
+on real-time data. Software products built for SAP HANA have
+been specifically designed or at least adapted to take advantage
+of the enhanced capabilities of the SAP HANA platform.
+SAP for Wholesale Distribution - Solution portfolio that
+addresses the needs of midsize and large wholesale distribution
+businesses in a wide range of segments. Industry-specific
+capabilities support new business models and strategies that
+meet the needs of an important supply sector.
+SAP for Utilities - Solution portfolio for all supply and energy
+industries, with capabilities ranging from call centers and
+Internet communications to consumption billing.
+SAP for Transportation & Logistics - Solution portfolio that
+covers the unique business needs of postal services, railways,
+airlines, and toll collection companies, as well as logistics service
+providers, to optimize supply chain and planning.
+SAP for Telecommunications - Solution portfolio that provides
+telecommunications enterprises of all types and sizes a range of
+industry-specific capabilities, including support for convergent
+invoicing and contract accounting.
+SAP for Sports & Entertainment - Solution portfolio that
+comprises solutions for sports teams, leagues, and venues,
+designed to help them deepen fan engagement, drive on-field
+performance, and optimize business efficiency.
+SAP for Retail - Solution portfolio that offers multichannel
+applications designed specifically to provide the best retail
+services to a large customer base.
+271
+Additional Information | Glossary
+SAP for Public Sector - Solution portfolio for public
+administration, providing an electronic framework that enables
+online communication through various applications for the
+public, government authorities, and related entities.
+SAP for Professional Services - Solution portfolio that delivers
+integrated tools, best practices, and support for automated
+processes designed specifically for the demands of the
+professional services industry, including management
+consultancies as well as accounting and legal firms.
+SAP for Chemicals - Solution portfolio that delivers support for
+specific processes and tools that chemical companies require.
+Industry-specific capabilities include recipe management, batch
+management, and version control.
+SAP for Banking - Solution portfolio that enables banks to
+obtain all customer information at a glance and offers a full
+complement of high-performance capabilities for strategic
+planning, financial accounting, costing, and enterprise-wide
+control. It also features key industry-specific applications for
+profitability management, risk management, customer
+relationship management, and integrated customer account
+systems.
+aerospace and defense industry. It offers capabilities for
+maintenance, repair and overhaul, airline operations, defense,
+manufacturing, contract and program management, and
+business acquisitions.
+SAP and other SAP products and services mentioned herein as
+well as their respective logos are trademarks or registered
+trademarks of SAP SE or an SAP affiliate company in Germany
+and other countries.
+278
+Additional Information | Publication Details
+Group Headquarters
+SAP SE
+Dietmar-Hopp-Allee 16
+69190 Walldorf
+Germany
+www.sap.com
+www.sap.com/investor
+No part of this publication may be reproduced or transmitted in
+any form or for any purpose without the express permission of
+SAP SE or an SAP affiliate company.
+© 2017 SAP SE or an SAP affiliate company. All rights reserved.
+Germany
+69190 Walldorf
+Dietmar-Hopp-Allee 16
+SAP SE
+Copyright
+ABC Druck, Heidelberg, Germany
+SAP Supplier Code of Conduct
+SAP Partner Code of Conduct
+Additional Information | Financial Calendar and Addresses
+277
+Publication Details
+Publisher
+SAP for Automotive - Solution portfolio designed to meet the
+specific needs of the automotive industry. Its capabilities help
+link complex business processes into a logical flow, maximizing
+efficiency and profitability and satisfying customers'
+expectations.
+SAP SE
+Concept and Realization
+SAP Integrated Report project team with the support of
+SAP software
+SAP Hybris Cloud for Customer - A cloud-based offering of
+CRM applications and tools developed for sales, service, and
+marketing teams that provides an overview of your end-to-end
+business, as well as deep customer insight and personalized
+engagement, so that they can deliver a relevant experience at
+every step of your customer's journey. It also offers designed-in
+social collaboration to help transform social media
+conversations into business insight. The offering currently
+includes SAP Hybris Cloud for Sales, SAP Hybris Cloud for
+Service, SAP Hybris Marketing Cloud, and SAP Hybris Cloud for
+Social Engagement solutions. An Edge edition is available for
+small and midsize enterprises.
+Photography Executive Board
+Andreas Pohlmann, Munich, Germany
+Printing
+Investor Relations
+SAP Hybris Commerce - A solution that offers customers a
+platform enabled for the cloud that supports product content
+management and unified commerce processes. It gives a
+business a single view of its customers, products, and orders,
+and its customers a single view of the business. It combines
+functionality. Formerly available in two separate solutions, SAP
+hybris B2B Commerce and SAP hybris B2C Commerce, which
+were combined in April 2015.
+SAP S/4HANA Enterprise Management - A core solution that
+covers all mission-critical business processes of an enterprise. It
+is natively built on the SAP HANA platform, designed with SAP
+Fiori user experience (UX), and delivered in the cloud and on
+premise. It is a core element of the new SAP S/4HANA Line-of-
+Business (LoB) Solutions.
+SAP Leonardo - The new SAP brand for our new innovative
+portfolio for Internet of Things (IoT) solutions. SAP Leonardo loT
+solutions enable companies to not only realize a digital
+transformation of existing end-to-end business processes, but
+also allows them to adopt new business models to run digitally.
+It extends digital core with adaptive applications, Big Data
+applications, and connectivity to enable new business
+processes, new business models, and new work environments.
+-
+The following publications are available in English at
+www.sap.com/investor, or in German at www.sap.de/investor:
+We present our financial, social, and environmental performance
+in the 2016 SAP Integrated Report, which is available at
+www.sapintegratedreport.com. This Excerpt from the Integrated
+Report 2016 comprises all of the information required by
+accounting and disclosure standards applicable to us.
+Financial and
+Sustainability
+Publications
+Additional Information | Financial Calendar and Addresses
+276
+Web site www-sap.com/press
+E-mail press@sap.com
+Tel. +49 6227 74 63 15
+Press
+Web site www.sap.com/investor
+E-mail investor@sap.com
+Fax +49 6227 74 08 05
+Tel. +49 6227 76 73 36
+Investor Relations
+Dividend Payment
+May 22
+SAP SE
+Dietmar-Hopp-Allee 16
+69190 Walldorf
+Germany
+Tel. +49 6227 74 74 74
+Fax +49 6227 75 75 75
+E-mail info@sap.com
+-
+Web site www.sap.com
+For more information about the matters discussed in the report,
+contact:
+2018
+January 30
+Preliminary results for fiscal year 2017
+May 17
+Annual General Meeting of Shareholders, Mannheim, Germany
+The addresses of all our international subsidiaries and sales
+partners are available on our public Web site at
+www.sap.com/directory/main.html.
+-
+-
+-
+Agreement on the Involvement of Employees in SAP SE
+German Code of Corporate Governance
+Declaration of Implementation pursuant to the German Stock
+Corporation Act, Section 161
+Code of Business Conduct for Employees
+Corporate Governance Statement pursuant to the German
+Articles of Incorporation
+Commercial Code, Section 289a
+Additional SAP policies are made public at
+www.sap.com/corporate-sustainability:
+-
+-
+-
+SAP Human Rights Commitment
+SAP Global Health and Safety Management Policy
+SAP Environmental Policy
+Corporate Governance Report
+Group Headquarters
+Shareholder meeting documents and ballot results
+including the directors on the governing bodies
+-
+SAP Group Annual Report (IFRS, in English and German)
+Annual Report on Form 20-F (IFRS, in English)
+SAP Integrated Report in PDF format
+SAP SE Statutory Financial Statements and Review of
+Operations (HGB, in German)
+Interim Reports (in English and German)
+Details of the directors' dealings in SAP shares
+Quarterly Statements (in English and German)
+SAP INVESTOR, SAP's quarterly shareholder magazine
+(German only)
+Complete information on the governance of SAP is available at
+www.sap.com/corpgovernance. Materials include:
+-
+-
+-
+Information about the management of the company,
+XBRL versions of the annual and interim reports
+Addresses
+Results for the third quarter of 2017
+October 19
+SAP solutions for small businesses and midsize companies
+Category of solutions that combine business management and
+business intelligence software for small and midsize enterprises
+(SMEs). It currently includes SAP SME Solutions, SAP
+BusinessObjects Edge solutions, Edge editions or existing SAP
+software products, and other SME services. As with large
+enterprises, these firms seek to streamline business processes,
+cut costs, drive growth, and increase profitability by receiving
+the right information at the right time - across all operations.
+SAP solutions for sustainability - Category of solutions that
+helps companies measure sustainability key performance
+indicators; energy and carbon management; and environment,
+health, and safety. SAP solutions for sustainability help
+organizations tackle energy consumption and greenhouse gas
+Additional Information | Glossary
+273
+emissions, as well as support efforts in product safety,
+healthcare, and sustainability performance management.
+SAP Store - Public online store (www.sapstore.com) where you
+can discover, download, and buy SAP solutions, services, mobile
+apps, demos, and free trials from SAP and partners.
+SAP solutions for customer engagement and commerce -
+Category of solutions that help businesses create experiences
+that engage customers like never before and can lead to more
+effective marketing promotions, increased revenue share of new
+customers, reduced customer churn, increased revenue growth,
+and improved cart-to-order conversion rate.
+SAP SuccessFactors - Unified brand resulting from the
+acquisition of SuccessFactors in August 2013. All cloud HR
+assets of SAP and SuccessFactors are now consolidated under
+the SAP SuccessFactors brand. SAP SuccessFactors solutions
+help businesses sell more goods, services, and digital content
+through every touch point, channel, and device.
+SAP SuccessFactors Employee Central Payroll - A cloud
+solution that extends the SAP SuccessFactors HCM suite to
+include payroll accounting and management.
+SAP SuccessFactors HCM Suite - Suite of HR solutions for
+talent management, core HR, collaboration, and workforce
+analytics. The cloud-based suite provides solutions to bridge the
+gap between strategy and execution with tools to hire, reward,
+and develop the right people with the right skills to grow a
+business sustainably.
+SAP University Alliances - Program that introduces students
+to the exciting technologies shaping business today, and
+designed to connect students around the world interested in
+SAP solutions, careers, and research opportunities. Students
+participate in classroom sessions, app development, networking
+opportunities, events, and more. The SAP University Alliances
+community provides connections between university leaders
+and students, SAP customers and partners, and SAP internal
+experts.
+SAP Ventures - see "Sapphire Ventures."
+Scope 1 (emissions) - Direct greenhouse gas emissions from
+sources that are owned or controlled by the reporting company,
+for example, fuel burned in corporate cars.
+Scope 2 (emissions) - Indirect greenhouse gas emissions from
+consumption of purchased electricity, heat, or steam.
+SAP SuccessFactors Employee Central - The foundation of
+the SAP SuccessFactors HCM Suite of solutions, The offering is
+core HR software delivered securely as a service from the cloud.
+It offers one global system of record, complete workforce
+overview combining HR and talent data, powerful analytics, and
+social collaboration fine-tuned to meet local needs.
+Scope 3 (emissions) - Indirect emissions that are a
+consequence of the activities of the reporting company, but
+occur from sources owned or controlled by another company,
+such as business flights.
+SAP Solution Manager - Application management solution that
+enables customers to manage their SAP and non-SAP
+applications better. With SAP Solution Manager, customers can
+centralize, enhance, automate, and improve the management of
+their entire system landscape, thus reducing total cost of
+ownership. The solution includes features such as diagnostics,
+testing, root cause analysis, and solution monitoring.
+-
+SAP Month of Service - Held annually in October, SAP's
+signature corporate volunteerism effort offers SAP employees
+around the world opportunities to come together to support
+social change in their communities.
+SAP NetWeaver - A comprehensive technology platform
+designed to efficiently develop, run, and extend business
+applications. SAP NetWeaver provides foundation and
+enterprise software, including the SAP Business Warehouse
+application, and the SAP NetWeaver Application Server, SAP
+Enterprise Portal, and SAP Process Orchestration components.
+It facilitates the easy integration of SAP software with
+heterogeneous system environments, third-party solutions, and
+external business partners. See "technology platform."
+272
+Additional Information | Glossary
+SAP PartnerEdge - Global, partner-to-partner business
+collaboration network where SAP partners can share expertise,
+development capabilities, solutions, and knowledge to extend
+their market reach. In late 2012, SAP's extranet for partners,
+SAP Channel Partner Portal, merged with SAP PartnerEdge. The
+combined site, available at www.sappartneredge.com now gives
+partners access to information, product and business news,
+tools, training, and business resources to order products.
+Partners can also manage their relationship with SAP and
+collaborate with other SAP partners through SAP PartnerEdge.
+SAP SME Solutions A subset of the portfolio of SAP solutions
+for small businesses and midsize companies. It is essentially a
+family name for four specific offerings: SAP Anywhere, SAP
+Business One, SAP Business ByDesign, and SAP Business All-in-
+One. By consolidating these four offerings under one umbrella
+name, we focus on a portfolio of SME offerings that helps our
+customers choose the best solution for their business size and
+needs.
+SAP Payment service - Service that helps companies invest in
+SAP solutions implemented by a strategic partner of SAP:
+Siemens Financial Services GmbH (SFS). SFS targets the
+financing service chiefly at midsize companies. Depending on
+local conditions, the SFS plan leases solutions to customers and
+provides loan finance. Formerly called SAP Financing service.
+Sapphire Ventures - Name of independent venture firm spun
+off from SAP, providing the agility of a start-up while allowing
+companies to tap into SAP's global enterprise ecosystem of
+customers and partners. The firm partners with outstanding
+entrepreneurs and venture firms worldwide to build industry-
+leading businesses. Formerly called SAP Ventures.
+SAP Rapid Deployment solutions - Packages of preconfigured
+software and predefined services with content including best
+practices, templates, tools, and business user enablement with
+predetermined scope, time, and costs. Because the solutions
+are installed quickly, customers can benefit from crucial
+software functionality within as little as 12 weeks, helping lower
+the total cost of implementation and giving customers
+immediate and tangible value.
+SAP road maps - Available for industries, lines of business, and
+technology, SAP road maps highlight the SAP solutions available
+today, planned innovation, and the SAP vision for the future.
+SAP S/4HANA - Launched in February 2015, SAP's next-
+generation business suite offered exclusively on the SAP HANA
+platform, with on-premise and cloud deployment editions,
+designed with the role-based user experience of SAP Fiori. Cloud
+editions are available for marketing, project services, and the
+enterprise.
+SAP S/4HANA Finance - A global financial solution powered by
+SAP HANA offering a complete choice of deployment (cloud, on
+premise, hybrid). It is part of the modular SAP S/4HANA Line-
+of-Business (LoB) Solutions.
+SAP S/4HANA Line-of-Business Solutions - Solutions that
+combine the core capabilities included in the SAP S/4HANA
+Enterprise Management solution with the solutions in the SAP
+portfolio (on premise and cloud) for a specific line of business.
+SAPPHIRE NOW - SAP's signature business technology event
+and the largest SAP customer-driven conference is held
+annually in several locations around the globe. The global event
+in the United States is co-located with the Americas' SAP Users'
+Group (ASUG) annual conference. Attendees discover new
+initiatives, solutions, products, and services, as well as unique
+access to the latest business strategies and industry best
+practices from SAP customers, partners, executives, and
+industry experts to help them drive business results across all
+levels.
+SAP.io SAP's startup incubation engine and related program
+that helps innovators inside and outside of SAP build products,
+find customers, and ultimately change industries. The SAP.io
+team works with the best entrepreneurs, developers, designers,
+and data scientists to upend how business works.
+service - A service provided to a customer by SAP (or SAP
+partners). Examples: education consulting; data management
+services
+software as a service (SaaS) - Software that is provided
+literally "as a service." Software applications are delivered and
+managed remotely over a secure Internet connection and a
+standard Web browser. Access is charged on a subscription
+basis usually on a dedicated time basis and with expandable
+feature access options. Typically a defined level of support is
+included. See "cloud computing."
+Additional Information | Glossary
+275
+Financial Calendar
+and Addresses
+Financial Calendar
+2017
+February 28
+works council – As dictated by the German Works Council
+Constitution Act, a works council is a legal body for representing
+employees' interests to the employer and codetermining the
+works in private companies. On June 21, 2006, the SAP AG
+employees working in Germany elected its first works council. A
+European works council was created in the spring of 2012. The
+SAP AG works council evolved to become the SAP SE works
+council in 2014 to reflect the legal entity of SAP SE.
+Publication of SAP Integrated Report
+Results for the first quarter of 2017
+Annual General Meeting of Shareholder, Mannheim, Germany
+May 15
+Dividend Payment
+July 20
+Results for the second quarter of 2017
+April 25
+social enterprise - An organization with an aim to achieve wider
+social, environmental, or community objectives through its
+business activities
+women in management - Phrase used to refer to the
+percentage of women in management positions (managing
+teams, managing managers, executive boards) as compared to
+the total number of managers, expressed by the number of
+individuals and not full-time equivalents (FTES).
+version - Variant of a software product that is specific to
+audience, operating system, device, or database. Depending on
+context, may also refer to a specific product release.
+solution - A solution enables a customer to meet a challenge or
+take advantage of an opportunity and are built or assembled by
+flexibly combining software products and technology. SAP
+solutions may include support for best business practices and
+be aided by consulting and ongoing support. They may also be
+enhanced or extended by applications and services from
+partners.
+SuccessFactors - See "SAP SuccessFactors."
+sustainability - A method of creating social, environmental, and
+economic value for long-term business success and responsible
+global development.
+T
+technology platform - The technical foundation for a business-
+driven software architecture that increases the adaptability,
+flexibility, openness, and cost-efficiency of IT operations and
+enables organizations to become more agile in responding to
+change. See "SAP NetWeaver."
+total energy consumed - The sum of all energy consumed
+through SAP's own operations, including energy from renewable
+sources and energy consumed by external data centers
+delivering our cloud offerings.
+W
+U
+UN Sustainable Development Goals - A set of 17 global
+development goals by the United Nations which are aimed to
+ensure an environmentally, socially and economically
+274
+Additional Information | Glossary
+sustainable future by tackling adverse challenges to humanity
+like poverty, hunger and inequality.
+user experience (UX) - In general terms, UX represents the
+quality of a user's interaction with and perceptions of a system.
+At SAP, our UX is a characteristic of solutions or products that
+use SAP Fiori UX technology and follow SAP Fiori UX guidelines
+to offer a next-generation experience to our users.
+V
+United Nations Global Compact (UN Global Compact) - A
+policy initiative for businesses that are committed to aligning
+their operations and strategies with ten universally accepted
+principles in the areas of human rights, labor standards,
+environment, and anti-corruption.
+May 10
+(Max)
+0
+-845.9
+target compensation
+Plus allocated actual annual
+883.1
+variable compensation
+Less difference in measuring
+grant value4)
+Less service cost
+Total compensation
+○
+2,953.7
+-1,083.3
+1.131.0
+0
+Less granted annual variable
+3,716.8
+10,707.4
+9,663.0
+0
+-51.8
+-606.0
+-990.4
+43,147.9 15,400.4
+1) The value of the fixed and one-year variable elements is granted in U.S. dollars. For conversion purposes from U.S. dollars into euro, for fixed compensation the
+2016 average exchange rate applies and for the one-year variable element the 2016 year-end exchange rate applies.
+2) The value of the fixed and one-year variable elements is subject to a contractual exchange-rate clause applied at the end of the year, so the amounts actually
+paid may be greater.
+3) Insurance contributions, benefits in kind, expenses for maintenance of two households, use of aircraft as well as tax and discrete payments arising through
+application of the fixed exchange-rate clause in 2016 for 2015.
+4) Total grant value at time of grant according to GCGC (€315.000) deducted by the grant value calculated as required under section 314 of the German
+Commercial Code (€263.200).
+The total Executive Board compensation for 2016 calculated as
+required under section 314 of the German Commercial Code
+amounted to €43,147,900. Including RSU Milestone Plan 2015
+awards for 2015 granted in 2015 to Michael Kleinemeier
+(€263,200) upon his appointment to the Executive Board, the
+total Executive Board compensation for 2015 calculated as
+required under section 314 of the German Commercial Code
+amounted to €15,400,400.
+-10,256.3 -6,551.3
+To Our Stakeholders | Compensation Report
+Reconciliation reporting of total compensation pursuant to Section 314(1)(6a) HGB in connection with GAS 17
+43,302.8
+Nomination Committee: Hasso Plattner (chairperson),
+People and Organization Committee: Hasso Plattner
+(chairperson), Martin Duffek, Anja Feldmann, Wilhelm
+Haarmann, Gesche Joost, Lars Lamade, Christine Regitz,
+Robert Schuschnig-Fowler
+Audit Committee: Erhard Schipporeit (chairperson),
+Panagiotis Bissiritsas, Martin Duffek, Klaus Wucherer
+Finance and Investment Committee: Wilhelm Haarmann
+(chairperson), Pekka Ala-Pietilä, Panagiotis Bissiritsas,
+Margret Klein-Magar, Sebastian Sick, Jim Hagemann Snabe
+Technology and Strategy Committee: Hasso Plattner
+(chairperson), Christine Regitz (deputy chairperson), Pekka
+Ala-Pietilä, Panagiotis Bissiritsas, Anja Feldmann, Andreas
+Hahn, Gesche Joost, Margret Klein-Magar, Bernard Liautaud,
+Pierre Thiollet
+General and Compensation Committee: Hasso Plattner
+(chairperson), Wilhelm Haarmann, Andreas Hahn, Margret
+Klein-Magar, Lars Lamade, Bernard Liautaud, Sebastian Sick,
+Jim Hagemann Snabe
+-
+The committees made a key contribution to the work of the
+Supervisory Board and reported on their work to us, including
+their preparatory work on the relevant agenda items of the full
+Supervisory Board. The following committees were in place in
+2016:
+The Work of the Supervisory Board
+Committees
+Board members the opportunity to tour the facility, learn about
+the latest development projects, and gain insight into how SAP
+collaborates with its customers, other research institutes, and
+universities. At the meeting, the Executive Board reported on
+business and updated us on SAP's current HR strategy. In
+agreement with the Executive Board, the Supervisory Board also
+adopted, for regular publication in October 2016, the annual
+declaration of implementation of the German Corporate
+Governance Code (the "Code") pursuant to the German Stock
+Corporation Act, section 161. The Supervisory Board determined
+that it has a sufficient number of independent members. We
+were then given a comprehensive overview of SAP's product
+strategy in the small business and midmarket segments. Finally,
+the Executive Board informed us about the organizational setup
+and work performed by SAP's internal data protection
+department, explained how SAP is preparing for the new EU
+General Data Projection Regulation, and reported on other legal
+developments relevant for SAP in the area of data protection.
+Our October 28 meeting was held at the SAP Innovation Center
+in Potsdam, SAP's development center for new software
+technologies that opened in 2014. This gave the Supervisory
+Meeting in October
+The Executive Board then gave us an account of business in the
+second quarter of 2016 and performance in the first half-year,
+reporting at our request particularly on revenue development in
+the various regions, on SAP's competitive position in its core
+business and in the cloud, and on the progress in healthcare
+solutions. We also received updates on the business activities in
+the SAP Business Network operating segment and in the
+Internet of Things space.
+At our ordinary meeting on July 14, we discussed the
+aforementioned strategy topics as well as the directors' and
+officers' (D&O) group liability insurance policies that we take out
+from year to year. We also agreed that deliberations on the
+budget process be made the subject of joint meetings between
+the Financial and Investment Committee and the Audit
+Committee from now on.
+Meeting in July
+13,330.9
+We regularly reviewed and updated the list of transactions for
+which the Executive Board must obtain the Supervisory Board's
+consent in accordance with the German SE Implementation Act,
+section 19. The Executive Board presented detailed information
+about the investment activities of SAP's venture capital funds.
+The Supervisory Board approved the financing of two further
+venture capital funds with a total volume of US$1 billion, for
+investment in the respective funds by 2022 and 2023
+respectively.
+0
+0
+0
+0
+0
+606.0
+990.4
+Total according to GCGC
+2,916.5
+538.5 8,563.0
+3,669.1
+646.1
+10,827.6
+consolidated financial statements for 2015, and reported
+particularly on the form and scope of its examination of the
+documents relating to the financial statements, which it
+recommended we approve. The auditor attended the meeting
+and reported in detail on the audit and its findings for each of the
+focus areas that had been agreed between the auditor and the
+Audit Committee. The auditor also related the discussions on
+those matters at the preceding meetings of the Audit
+Committee. The auditor then discussed the results of the audit
+with the Supervisory Board and answered our questions. The
+Supervisory Board approved the audit. There were no findings
+from our own examination, so we gave our consent to the SAP
+SE and consolidated financial statements for 2015. We checked
+and endorsed the Executive Board's proposal to appropriate
+retained earnings in accordance with the Audit Committee's
+recommendation. There were also a number of corporate
+governance matters on the meeting agenda. We decided on the
+resolutions we would propose for the agenda of the Annual
+General Meeting of Shareholders in May 2016. Our
+recommendation to the Annual General Meeting of
+Shareholders concerning the auditor to elect for 2016 followed
+the recommendation of the Audit Committee to us.
+Fixed compensation
+Fringe benefits³)
+Total
+3,028.7
+LTI 2016 Plan
+8,000.3
+0 33,129.7
+2,641.3
+0
+10,937.5
+2,476.6
+0
+RSU Milestone
+Plan 2015
+---......--- 315.0
+Total
+Service cost
+571.3
+compensation
+13,411.1 3,028.7 40,476.0 4,268.0 5,411.1 1,328.0
+571.3 571.3
+682.4
+34.7
+34.7
+14,878.8 1,929.1
+308.0
+4,329.3 726.9 13,023.3 619.8
+0
+0
+0
+0
+Total according to
+GCGC
+13,982.4 3,600.0 41,047.3 4,950.4 5,445.8 1,362.7
+14,913.5 2,237.1 4,329.3 726.9 13,023.3 619.8
+Reconciliation reporting of total compensation pursuant to Section 314(1)(6a) HGB in connection with GAS 17
+Less granted annual
+-2,382.1
+34.7
+compensation
+Multiyear variable
+2,040.5 188.1
+0
+1,403.0 1,403.0
+1,625.7 1,625.7
+3,028.7
+1,403.0 1,150.0
+854.0
+854.0
+854.0
+1,625.7 1,258.0
+474.0
+474.0
+3,028.7 2,408.0
+1,328.0
+1,328.0
+700.0
+474.0 103.3
+1,328.0 803.3
+2016
+(Min
+700.0 700.0
+2016
+(Max)
+700.0 116.7
+2015
+26.9 26.9
+26.9
+0
+726.9 726.9
+726.9
+116.7
+One-year variable
+2,382.1
+0
+4,317.6 1,860.0 1,441.8
+0
+2,613.3
+1,125.8
+1,125.8
+Pekka Ala-Pietilä, Bernard Liautaud
+-1,860.0
+Special Committee: Hasso Plattner (chairperson), Pekka
+Ala-Pietilä, Wilhelm Haarmann, Lars Lamade, Erhard
+Schipporeit, Sebastian Sick
+To Our Stakeholders | Report by the Supervisory Board
+A portion of the RSUs and PSUs are forfeited, if the
+Executive Board member has resigned from office without
+cause, but does not start working for a competitor of SAP
+prior to the end of the initial vesting period of the Share
+Units, or the Service Contract of the Executive Board
+member expires by mutual consent, is terminated by
+mutual consent, is terminated by the Executive Board
+member for cause or the Executive Board member retires.
+Expiration by mutual consent or termination by mutual
+consent occurs if the Executive Board member is not re-
+appointed or does not accept the reappointment or an
+extraordinary expiration is provided by the Service
+Contract of the Executive Board member, that is, in the
+case of a permanent inability to work. The portion of the
+RSUS and PSUs which forfeit equal the proportion of plan
+participation to the vesting period (for example, if the
+Executive Board member leaves with effect from
+December 31, 2016, three quarters of the Share Units
+granted in 2016 would be forfeited). The remaining Share
+Units will continue to be in effect. In addition, the number
+■ If the Executive Board member has resigned from office
+without cause and starts working for a competitor of SAP,
+whether on a free-lance basis or as an employee or
+otherwise prior to the end of the initial vesting period of
+the Share Units or the Supervisory Board terminates the
+Executive Board member's service contract for cause, all
+Share Units are forfeited.
+types of Share Units have a vesting period of (approximately)
+four years. Each Share Unit that finally vests entitles its
+holder to a (gross) payout corresponding to the price of one
+SAP share after the end of the holding period, but capped at
+three times the SAP share price applied for the conversion of
+the grant amount into Share Units. The number of PSUs that
+finally vests depends on the performance of the SAP share. If
+the increase of price of the SAP share over the vesting period
+of the PSUs exceeds the increase of a defined Peer Group
+Index over the same period, the number of PSUs is increased
+by a percentage equal to the outperformance expressed as
+percentage points. This percentage will be doubled if, in
+addition to the outperformance over the Peer Group Index,
+the price of the SAP share at the end of the vesting period of
+the PSUs is higher than the price at the start of this period.
+The number of vested PSUs a member can attain in respect
+to a plan year is capped at 150% of their initial PSU allocation
+for that year. Conversely, if the increase of price of the SAP
+share over the vesting period of the PSUs is below the
+increase in the Peer Group Index, the number of PSUs is
+reduced by a percentage equal to the difference expressed as
+percentage points. All PSUs lapse if the difference exceeds
+50%. If the service contract for the Executive Board member
+is terminated before the end of the third year following the
+year in which the Share Units were granted, both the RSUs
+and PSUs are forfeited in whole or in part, depending on the
+circumstances of the relevant resignation from office or
+termination of the service contract, as follows:
+The Share Units granted comprise 60% Performance Share
+Units (PSUs) and 40% Retention Share Units (RSUs). Both
+The LTI 2016 plan is an annual revolving remuneration
+element that is linked to the price of the SAP share. A grant
+amount determined by the Supervisory Board is converted
+into virtual shares, referred to as Share Units, by dividing the
+grant amount by the price of the SAP share (calculated on
+the basis of a defined average value). The grant amount is
+determined by the Supervisory Board in its discretion for
+each financial year at a level of between 80% and 120% of
+the contractual target amount; taking into account the
+achievement of the operating profit targets set for the
+preceding financial year.
+Payout
+=
+SAP share price
+X
+Number of vested share units after 4 years
+4-year term
+Retention Share Units
+subject to the
+employment duration
+during the vesting period
+40%
+26
+Performance Share
+Units subject to the
+performance of SAP's
+share price in relation to
+the Peer Group Index
+and the employment
+duration during the
+vesting period
+based on the achievement of operating income
+Grant ranging between a minimum floor of 80%
+and a maximum of 120%
+■
+■
+Yearly grant of Share Units
+The variable LTI element was determined under the
+LTI 2016 plan effective January 1, 2016, however, the grant
+date of the tranche 2016 is March 24, 2016. The purpose of
+the LTI 2016 plan is to reflect the operating profit target
+achievement, to ensure long-term retention of our Executive
+Board members, and to reward a share price outperformance
+by SAP as compared to a group of its peers (Peer Group).
+On February 22, 2017, the Supervisory Board assessed SAP's
+performance against the agreed targets and determined the
+amount of compensation payable under the STI 2016 plan.
+The STI 2016 plan will be paid out after the Annual General
+Meeting of Shareholders in May 2017.
+-
+25
+To Our Stakeholders | Compensation Report
+The fixed annual salary element is paid as a monthly salary.
+The variable STI element was determined under the STI 2016
+plan. Under this plan, the STI compensation depends on the
+performance of the SAP Group against the predefined target
+values for three KPIs: non-IFRS constant currency cloud and
+software revenue growth; non-IFRS constant currency
+operating margin increase; and constant currency new cloud
+bookings. In addition, the STI 2016 plan provides for a
+discretionary element that allows the Supervisory Board,
+after the end of the fiscal year 2016, to address not only an
+Executive Board member's individual performance, but also
+SAP's performance in terms of market position, innovative
+power, customer satisfaction, employee satisfaction (taking
+innovative HR strategy, HR excellence, leadership
+development and social partnership into consideration), and
+attractiveness as an employer. A threshold of 75% for the
+total target achievement level applies for the financial KPIs: if
+the sum of the weighted individual target achievements for
+the financial KPIs is below 75% (threshold), there is no
+payout for the pro rata target bonus. A cap of 175% applies
+for each financial KPI, and a cap of 200% applies for the
+discretionary KPI. Moreover, if there has been any
+extraordinary and unforeseeable event, the Supervisory
+Board can, at its reasonable discretion, retroactively adjust
+payouts up or down in the interest of SAP.
+The following criteria apply to the elements of Executive Board
+compensation for 2016:
+The amount of variable compensation depends on SAP's
+performance against performance targets that the Supervisory
+Board sets for each plan year. The performance targets are key
+performance indicator (KPI) values aligned to the SAP budget
+for the plan year.
+Executive Board
+(other than CEO)
+60%
+CEO
+To Our Stakeholders | Compensation Report
+"
+2016
+2015²)
+Michael Kleinemeier
+Member of the Executive Board
+Robert Enslin
+Member of the Executive Board
+2016
+(Max)
+(Min)
+2016¹)
+2015²)
+2016
+2016
+(Max)
+(Min)
+2016¹)
+2016
+CEO
+■
+Bill McDermott
+German Corporate Governance Code (Benefits Granted in 2015 and 2016)
+Executive Board Members' Compensation
+To Our Stakeholders | Compensation Report
+27
+In contrast to the disclosure rules stipulated in the German HGB
+and GAS 17, the GCGC includes the service cost according to
+IAS 19 in the Executive Board compensation and requires the
+additional disclosure of the target value for the one-year variable
+compensation and the maximum and minimum compensation
+amounts achievable for the variable compensation elements.
+Pursuant to the recommendations of the GCGC, the value of
+benefits granted for the year under review as well as the
+allocation, that is, the amounts disbursed for the year under
+review, are disclosed below based on the reference tables
+recommended in the GCGC.
+We present the Executive Board compensation disclosures in
+accordance with the recommendations of the German
+Corporate Governance Code ("GCGC"). Furthermore, the table
+below provides a reconciliation statement following the
+requirements of sections 314 and 315 of the German
+Commercial Code (Handelsgesetzbuch, or "HGB") as specified
+in the German Accounting Standards ("GAS 17").
+Amount of Compensation for 2016
+which would otherwise be forfeited in the event of
+termination of the service contract for the Executive Board
+member will not be forfeited to the extent of this
+calculated amount. If the PSUs which would be forfeited in
+the termination year is lower than the equalization
+amount, PSUs from the preceding financial year and, if
+required, from earlier years which would otherwise be
+forfeited, will become non-forfeitable.
+To compensate for disadvantages resulting from leaver
+rules under the LTI 2016 plan in comparison to the
+previous RSU Milestone Plan, all current Executive Board
+members will receive an individual equalization amount as
+an amendment to the leaver rules of the LTI 2016 plan.
+The equalization amount is the sum of partial amounts
+applicable for the years 2016 and 2017 and, in one case,
+also for the year 2018. The respective annual partial
+amount is subject to a target achievement of at least 60%
+of the operating profit target and an ongoing employment
+relationship of the respective year. In the event of
+termination, PSUs equal to this amount based on the then-
+applicable reference share price will be granted. PSUs
+The Share Units are paid out without undue delay within
+90 days on a pro rata temporis basis, plus 50% of the
+Share Units (which otherwise, under mere pro rata
+aspects, would be forfeited), on the basis of the then
+current SAP share price. In addition, the number -
+reduced on a pro rata temporis basis - of PSUs paid out
+may change with the relevant outperformance of the SAP
+share compared to the Peer Group Index as determined on
+the day the change of control event is effective. The
+remaining Share Units are forfeited.
+In the event of a change of control as defined in the service
+contract of the Executive Board member, the following
+generally applies:
+of remaining PSUs is adjusted subject to the performance
+of SAP's share price in relation to the Peer Group Index.
+The same applies if the Executive Board member dies,
+however the Share Units are paid out pro rata temporis
+within 90 days after death on the basis of the then current
+SAP share price.
+Benefits Granted
+€ thousands
+12%
+16-18%
+20%
+On February 20, 2017, the Executive Board prepared the
+financial accounts of SAP SE and the Group for 2016,
+comprising the SAP SE financial statements, the consolidated
+financial statements, and the combined management report,
+and submitted them without delay to the Supervisory Board.
+of foreseeable opportunities and risks. KPMG had completed its
+audit of SAP's internal control over financial reporting and
+certified without qualification that it complies with the applicable
+U.S. standards. The auditor stated in its opinion that it considers
+SAP's internal controls over financial reporting to be effective in
+all material respects. All Audit Committee and Supervisory
+Board members received the documents concerning the
+financial statements mentioned above, the audit reports
+prepared by KPMG, and the Executive Board's proposal
+concerning the appropriation of retained earnings in good time.
+23
+23
+To Our Stakeholders | Report by the Supervisory Board
+KPMG audited the SAP SE and consolidated financial reports for
+2016. The Annual General Meeting of Shareholders elected
+KPMG as the SAP SE and SAP Group auditor on Thursday, May
+12, 2016. The Supervisory Board proposed the appointment of
+KPMG on the recommendation of the Audit Committee. Before
+proposing KPMG to the Annual General Meeting of Shareholders
+as auditor for the year, the chairperson of the Supervisory Board
+and the Audit Committee obtained confirmation from KPMG
+that circumstances did not exist that might prejudice or raise
+any doubt concerning its independence as the Company's
+auditor. In that connection, KPMG informed us of the volume of
+the services that were not part of the audit which it had either
+provided to the Group in the past year or was engaged to
+provide in the year to come. The Supervisory Board has agreed
+with KPMG that the auditor should report to the Supervisory
+Board and record in the auditor's report any fact found during
+the audit that is inconsistent with the declaration given by the
+Executive Board and the Supervisory Board concerning
+implementation of the German Corporate Governance Code.
+KPMG examined the SAP SE financial statements prepared in
+accordance with the German Commercial Code, the
+consolidated financial statements prepared in accordance with
+International Financial Reporting Standards (IFRSS) as required
+by the German Commercial Code, section 315a, and the
+combined SAP Group and SAP SE management report, and
+certified them without qualification. The auditor thus confirmed
+that, in its opinion and based on its audit in accordance with the
+applicable accounting principles, the SAP SE and consolidated
+financial statements give a true and fair view of the net assets,
+financial position, and results of operations of SAP SE and the
+SAP Group. The auditor also confirmed that the combined SAP
+SE and SAP Group management report is consistent with the
+corresponding financial statements and as a whole gives a
+suitable view of the position of SAP SE and the SAP Group and
+SAP SE and Consolidated Financial
+Reports for 2016
+The Supervisory Board closely examined the Executive Board's
+corporate governance statement pursuant to the German
+Commercial Code, section 289a. We approved the statement
+with the combined SAP Group and SAP SE management report.
+those dealings, they did not affect the independence of the
+Supervisory Board members concerned and do not give rise to
+any substantial and not merely temporary conflict of interest in
+the meaning of the Code. There were a number of transactions
+involving members of the Executive Board in 2015 which were all
+consistent with industry standards and immaterial. These
+transactions were approved by the General and Compensation
+Committee during the year under review. The General and
+Compensation Committee also approved a consulting contract
+for Gerhard Oswald for after his retirement from the Company.
+The Company made no other contracts with members of the
+Executive Board or Supervisory Board that would have required
+a resolution of the Supervisory Board.
+Members of the Executive Board and of the Supervisory Board
+had no conflicts of interest that sections 4.3.4 and 5.5.2 of the
+Code require to be disclosed to the Supervisory Board. Some
+Supervisory Board members currently have business dealings
+with SAP or hold senior positions or material equity in
+companies that currently have business dealings with SAP, or
+had done so in the course of the year. SAP's business dealings
+with these persons or companies are or were at arm's length. In
+our view, especially given the limited scope and materiality of
+SAP's corporate governance officer monitored our compliance
+with those recommendations in the Code with which we claim to
+comply in SAP SE's declaration, and reported in full to the
+General and Compensation Committee. For more information
+about compliance with the Code, see the Corporate Governance
+Report from the Executive Board and Supervisory Board.
+Corporate Governance
+Regular reports from the committees ensured that we were kept
+fully informed of all matters covered by the committees and
+were able to discuss them thoroughly.
+At the meeting of the Audit Committee on February 21, 2017,
+and at the meeting of the Supervisory Board on February 22,
+2017, the Executive Board explained the financial statements of
+SAP SE and the SAP Group and its proposal concerning the
+appropriation of retained earnings. Members of the Executive
+Board answered questions from the Audit Committee and the
+Supervisory Board. At the Audit Committee meeting, they also
+explained the Annual Report on Form 20-F.
+The People and Organization Committee held two meetings
+in 2016. In September, it engaged in detailed discussions
+about the measures to recruit top talents, and asked
+management for an update on the current status of training
+and personal and professional development at SAP, so that it
+could see whether the Committee's suggestions from the
+year before had been implemented. To this end, the
+Committee reviewed the technical learning offerings available
+through SAP Development University, SAP's internal
+academy for the professional training of our software
+developers. The second meeting was held on December 6.
+The Committee was presented with the results of the SAP
+Strategy Survey, an employee survey conducted in the
+summer of 2016 regarding the implementation and
+employees' understanding of the strategy. The Committee
+was also given an update on SAP's collaboration with
+academia to promote young talents in a digitalized working
+world. Further topics at this meeting included the new
+employee stock plan and the expert career path at SAP.
+The Nomination Committee is composed exclusively of
+shareholder representatives. It met once, in March 2016, to
+prepare the Supervisory Board's recommendation to the
+Annual General Meeting of Shareholders that Gesche Joost
+be elected shareholder representative on the Supervisory
+Board. It also reviewed its process for seeking suitable
+candidates for the Supervisory Board.
+-
+To Our Stakeholders | Report by the Supervisory Board
+22
+22
+The Finance and Investment Committee held five physical
+meetings in 2016, of which one was a joint meeting with the
+Technology and Strategy Committee and one a joint meeting
+with the Audit Committee. At its February 17 meeting,
+representatives from Sapphire Ventures presented detailed
+information about the investment activities of the three SAP
+venture capital funds. The Committee recommended that the
+Supervisory Board approve the financing of two further
+venture capital funds totaling US$1 billion. It also discussed
+the annual report on SAP's acquisitions. When it met on July
+13, the Committee focused solely on a comprehensive
+evaluation of SAP by external analysts. It also held a joint
+meeting with the Technology and Strategy Committee on the
+same day. Matters discussed included a multiyear overview
+of the development of SAP's major acquisitions, SAP's
+strategic alignment and competitive environment, and the
+results of an analysis of SAP's product portfolio. The
+Committee also approved by correspondence the Executive
+Board's planned financing transactions. At its October
+meeting, the Committee examined the organizational
+structure, business environment, and equity investments of
+an SAP subsidiary that provides professional services to
+national security authorities, and were given an update on
+other equity investments and acquisition-related activities
+carried out by SAP in 2016. The focus of the joint meeting
+with the Audit Committee on October 25 was the
+presentation of and discussion on the preliminary Group
+annual plan for 2017, in preparation for the Supervisory
+Board meeting in February 2017, at which the full Supervisory
+Board resolved to approve the 2017 Group annual plan.
+The Technology and Strategy Committee held four
+meetings in 2016, one of which was a joint meeting with the
+Finance and Investment Committee. It discussed the key
+technology trends in the software industry in the years to
+come and SAP's corporate and product strategies. At the
+Committee's February 17 meeting, the Executive Board
+presented an overview of market development in 2015 and
+explained what it would mean for SAP's business in 2016. Key
+topics included the strategic road map, development
+priorities, and market launch of our human capital
+management (HCM) software. The Committee also learned
+The auditor attended all physical meetings and telephone
+conference meetings of the Audit Committee and reported in
+depth on its audit work and on its quarterly reviews of
+selected software agreements.
+the auditor, dealt with the internal audit service's work in the
+first half of the year and audit planning for the second half-
+year, and reviewed the Company's internal controls. At its
+October meeting, the Committee discussed the report from
+the chief compliance officer and other compliance system
+matters and came to the conclusion that the compliance
+system was effective. As reported in more detail below, the
+Committee also held a joint meeting with the Finance and
+Investment Committee on the same day, to prepare the
+Supervisory Board's February 2017 resolution concerning the
+Group annual plan.
+The Audit Committee held five physical meetings and four
+meetings by telephone conference. The telephone
+conference meetings were all ahead of the publication of
+quarterly financial reports for each quarter. At these
+meetings, the Committee primarily deliberated on the course
+of business over the quarter concerned, the process by which
+the quarterly financial reports were prepared, the quarterly
+reports to be published, and insights gained from the
+auditor's quarterly review of selected revenue-generating
+software agreements. The physical meetings in February and
+March concentrated on the SAP SE and consolidated
+financial reports for 2015 and the reporting process, the
+internal control structure for financial reporting, the most
+important accounting methods, and the audit. At the
+February meeting, the Committee also discussed the German
+Financial Reporting Enforcement Panel's criteria and the
+internal audit service's report for the previous year,
+organization and processes, and audit plan for 2016. At its
+meeting in March, the Committee did preparatory work on
+the Supervisory Board's recommendations to the Annual
+General Meeting of Shareholders concerning the election of
+an auditor and the appropriation of retained earnings and
+discussed the Company's compliance system. When it met in
+July, the Committee discussed the audit focus and fees with
+The General and Compensation Committee held six
+meetings at which members attended in person ("physical
+meetings") and one meeting by telephone conference. During
+its meetings, it prepared and recommended the Supervisory
+Board's resolutions, notably those on Executive Board
+compensation and HR decisions described above. It also
+focused on the following matters: At the beginning of the
+year, it deliberated on the annual report it receives from the
+Company's capital market compliance officer, including an
+overview of the changes to the rules on insider trading and
+directors' dealings notifications under the new EU Market
+Abuse Regulation, which came into force on July 3, 2016. At
+the meeting in March, the Committee received a report from
+the corporate governance officer and adopted an update to
+its rules of procedure. In June, the Committee approved the
+conclusion of a consulting contract between the Company
+and the retiring Executive Board member Gerhard Oswald. In
+October, it prepared the Supervisory Board's resolutions with
+respect to the submission of the declaration of
+implementation of the Code and ascertaining the
+independence of Supervisory Board members. It also
+discussed succession planning for the Executive Board. In the
+fiscal year ended, the Committee also approved the
+acceptance of outside supervisory board seats by three
+Executive Board members.
+-
+In 2016, the committees focused on the following topics:
+For more information about the Supervisory Board committees
+and their duties, see SAP's corporate governance statement
+pursuant to the German Commercial Code, section 289a,
+published on the SAP public Web site at www.sap.de/investor.
+21
+more about the SAP Startup Focus program, SAP's initiative
+to support startups. The focus topics of the March 23
+meeting were TCO of SAP S/4HANA, SAP's strategy for
+analytics, and a status report on the Sybase acquisition.
+When the Committee met on October 27, it deliberated on the
+measures to position SAP Ariba products and learned more
+about the road map and platform architecture for machine
+learning.
+After the Executive Board had explained them, the Audit
+Committee and the Supervisory Board reviewed the financial
+statement documents in the light of KPMG's audit reports. The
+representatives of the auditor who attended presented full
+reports on the audit and the results of the audit to the Audit
+Committee and Supervisory Board meetings and explained the
+audit report. The auditor also reported that it had not identified
+any material weaknesses in our internal control and risk-
+management systems for financial reporting. Both the Audit
+Committee and the Supervisory Board asked detailed questions
+about the form, scope, and results of the audit. The Audit
+Committee reported to the Supervisory Board on its own review
+of the financial statements of SAP SE and the SAP Group, its
+discussions with the Executive Board and with the auditor, and
+its supervision of the financial reporting process. It confirmed
+that as part of its supervisory work, it had addressed the
+effectiveness of the SAP Group internal control, risk
+management, and internal auditing systems, and found the
+systems to be effective.
+The Committee also reported that KPMG had told it that no
+circumstances had arisen that might give cause for concern
+about KPMG's impartiality, and informed us about the services
+KPMG had provided that were not part of the audit. The
+Committee reported that it had examined the auditor's
+independence, taking the non-audit services it had rendered into
+consideration, and stated that in the Committee's opinion the
+auditor possessed the required degree of independence.
+The Audit Committee and the Supervisory Board satisfied
+themselves that KPMG had conducted the audit properly. In
+particular, they concluded that both the audit reports and the
+audit itself fulfilled the legal requirements. On the basis of the
+report and the Audit Committee's recommendation, the
+Supervisory Board approved the audit and, since there were no
+findings from our own examination, we gave our consent to the
+SAP SE financial statements, the consolidated financial
+statements, and the combined management report (including
+the Executive Board's corporate governance statement
+pursuant to the German Commercial Code, section 289a). The
+financial statements and combined management report were
+thus formally adopted. The Supervisory Board's opinion of the
+Company and the Group coincided with that of the Executive
+Board as set out in the combined management report. The
+Supervisory Board considered the proposal presented by the
+Executive Board concerning the appropriation of retained
+earnings. We had regard to the requirements of dividends policy,
+the effects on the liquidity of the Group, and the interests of the
+shareholders. We also discussed these matters with the auditor.
+We then endorsed the Executive Board's proposal concerning
+the appropriation of retained earnings, in accordance with the
+Audit Committee's recommendation. Finally, we approved this
+present report.
+25-29%
+1) This compensation report is part of the audited management report
+The Supervisory Board sets a compensation target for the sum
+of the fixed and the two variable elements. It reviews, and if
+appropriate, revises this compensation target every year. The
+review takes into account SAP's business performance and the
+compensation paid to board members at comparable
+companies on the international stage. The following charts
+visualize the relation of the fixed and the variable compensation
+targets for the Executive Board members for 2016:
+The fixed annual salary and STI elements are paid in the
+currency of the Executive Board member's home country,
+whereas compensation for the LTI element is paid in euros.
+A variable long-term incentive (LTI) element tied to the price
+of SAP shares to reward performance over multiple years
+A variable short-term incentive (STI) element to reward
+performance in the plan year
+A fixed annual salary element
+-
+The compensation package for each Executive Board member is
+determined based on their individual role and performance. The
+package has three elements:
+The 2016 compensation for Executive Board members is
+intended to reflect SAP's company size and global presence as
+well as our economic and financial standing. The compensation
+level is internationally competitive to reward committed,
+successful work in a dynamic business environment.
+Compensation System for 2016
+Compensation for Executive Board
+Members
+52-59%
+■Base Salary ■STI ■LTI
+68%
+This compensation report outlines the criteria that we applied
+for the year 2016 to determine compensation for Executive
+Board and Supervisory Board members, discloses the amount
+of compensation paid, and describes the compensation
+systems. It also contains information about share-based
+payment plans for Executive Board members and shares held by
+Executive Board and Supervisory Board members.
+Compensation Scheme
+Compensation for Executive and
+Supervisory Board Members
+Compensation Report¹)
+To Our Stakeholders | Report by the Supervisory Board
+24
+24
+Professor Hasso Plattner
+(Chairperson)
+For the Supervisory Board
+The Supervisory Board thanks the Executive Board, the
+managing directors of the Group companies, and all of our
+employees for their hard work and dedication in 2016. We would
+also like to thank our customers and partners. Without them,
+our Company's success would not be possible.
+Gesche Joost, who was initially appointed by the court as interim
+member of the Supervisory Board at the end of May 2015, was
+elected to the Supervisory Board as shareholder representative
+on May 12, 2016, by the Annual General Meeting of
+Shareholders.
+After 36 years at SAP - 21 of which as member of the Executive
+Board - Gerhard Oswald retired from the Company and the
+Executive Board on December 31, 2016. He remains associated
+with SAP as a consultant so that SAP is still able to benefit from
+his experience and expertise. We thank Gerhard Oswald for his
+many years of valuable and constructive service to SAP.
+Stefan Ries and Steve Singh were appointed members of the
+Executive Board with effect from April 1, 2016.
+Changes on the Supervisory and
+Executive Boards
+Each of the committees was active in 2016 except the Special
+Committee.
+-1,441.8
+10,255.9
+-1,125.8
+1,660.5 1,175.3
+1.660.5
+annual variable
+compensation
+Less difference in
+measuring grant
+value
+Less service cost
+0
+○
+0
+0
+0
+0
+Total compensation
+4,677.3
+2,372.2 4,364.0
+Total Executive
+Steve Singh
+Member of the Executive Board
+(from April 1, 2016)
+(from April 1, 2016)
+Member of the Executive Board
+Stefan Ries
+€ thousands
+1,175.3
+Benefits Granted
+30
+30
+29
+To Our Stakeholders | Compensation Report
+2,382.9
+2,372.6 4,066.9
+German Corporate Governance Code (Benefits Granted in 2015 and 2016)
+Board
+1,660.5
+Plus allocated actual
+4,017.4
+805.4
+11,485.2 1,848.2
+Service cost
+0
+0
+0
+0
+-1,125.8
+0
+0
+0
+0
+0
+0
+O
+Total according to
+GCGC
+compensation
+variable target
+-1,125.8
+-1,125.8 -1,125.8
+-1,125.8
+-1,125.8
+1,175.3
+-1,125.8
+Reconciliation reporting of total compensation pursuant to Section 314(1)(6a) HGB in connection with GAS 17
+11,485.2 1,848.2
+805.4
+712.1 13,008.5 1,837.9 4,017.4
+712.4 14,304.7 1,837.5 4,314.5
+4,627.8
+Less granted annual
+Compensation
+2016
+2016
+5,474.2
+One-year variable
+845.9
+0
+1,533.2
+1,083.3
+0
+1,963.5
+10,256.3
+6,551.3
+compensation
+Multiyear variable
+compensation
+LTI 2016 Plan
+1,532.1
+0
+6,491.3
+Service cost
+42,696.8 12,340.5
+10,827.6
+646.1
+3,669.1
+538.5 8,563.0
+8,498.1
+2,916.5
+315.0
+RSU Milestone Plan 2015
+23,942.4
+8,218.0
+0
+1,939.7
+Total
+646.1
+646.1
+646.1
+525.0
+525.0
+Fixed compensation
+(Min)
+(Max)
+(Min)
+525.0
+2015
+2015
+2016¹)
+2015
+2016
+2016
+2016
+2016
+712.1 13,008.5 1,837.9
+640.0
+640.0
+538.5
+538.5
+538.5
+Total
+1,407.5
+2,276.1
+640.0
+6.1
+6.1
+13.5
+13.5
+13.5
+Fringe benefits³)
+6,222.0 4,066.7
+6.1
+4,314.5
+0
+14,304.7
+2016
+2016
+2016
+2016
+2015
+2016
+(Min)
+(Max)
+(Min)
+2016
+(Max)
+2015
+2016
+2016 2016
+(Min) (Max)
+2015
+Fixed compensation
+700.0
+700.0
+11.7
+12.4
+12.4
+12.4
+Fringe benefits³)
+700.0
+Gerhard Oswald
+Member of the Executive Board
+(until December 31, 2016)
+700.0
+1,837.5
+700.0 700.0
+700.0
+700.0
+700.0
+700.0
+700.0
+12.1
+Luka Mucic
+Member of the Executive Board
+Bernd Leukert
+-188.1
+variable target
+compensation
+Plus allocated actual
+2,486.9
+2,743.5 1,505.2
+1,660.5
+1,175.3
+277.5
+annual variable
+compensation
+Less difference in
+-51.8
+measuring grant
+value4)
+Less service cost
+-571.3
+€ thousands
+Benefits Granted
+German Corporate Governance Code (Benefits Granted in 2015 and 2016)
+To Our Stakeholders | Compensation Report
+28
+657.4
+Member of the Executive Board
+4,378.8
+5,151.5 5,474.5
+Total compensation 13,515.9
+0
+-308.0
+-34.7
+-682.4
+2,463.8
+12.1
+700.0
+12.1
+2,040.5
+1,125.8
+compensation
+Multiyear variable
+compensation
+LTI 2016 Plan
+2,789.6
+0
+4,627.8
+2,476.6
+0
+10,255.9
+2,086.2
+0
+8,639.3
+RSU Milestone
+Plan 2015
+12.1
+712.4
+0
+1,125.8
+11,551.8
+1,125.8
+105.4
+105.4
+○ 2,040.5 1,125.8
+105.4
+22.4
+Total
+712.4
+712.4
+712.4
+711.7
+Total
+712.1
+712.1
+0
+2,040.5 1,125.8
+One-year variable
+1,125.8
+805.4
+805.4
+805.4
+712.1 712.1
+722.4
+27,656
+Luka Mucic
+55,726
+55,726
+13,922
+14,148 27,656
+10,757
+91,490 27,656
+385,593 192,345
+Total
+Gerhard Oswald
+Bernd Leukert
+4,622
+5,221
+5,221
+599
+0
+Michael Kleinemeier (from
+54,133
+54,133
+27,656
+14,148
+November 1, 2015)
+12,329
+195,562
+51,887
+255,050
+-16,886
+76,374
+Bill McDermott (CEO)
+Robert Enslin
+31, 2014
+Holding on
+December
+Forfeited
+Units
+Exercised
+Units
+Grants in Performance-
+Related
+Adjustment
+2014
+2014
+Holding on
+January 1,
+Quantity of RSUs
+consists of the addition of the target achievement of the
+financial KPIs of 112.96% and the adjustment factor based on
+individual plan participation.
+RSU Milestone Plan 2015 - Rollforward 2014/2015
+The RSUs held as of December 31, 2015, which were issued and
+not forfeited in 2015, reflect the number of RSUs multiplied by
+the total target achievement. The total target achievement
+132,263 -45,709 86,554
+667,947 -173,134 494,813
+90,009
+13,117
+51,887
+13,474
+241.292
+value December 31, 2016
+Units
+Tranche
+2012
+-127,425
+1,477.2
+March 31, 2019
+Stefan Ries
+2,711.8
+2,190.4
+2,316.9
+2,161.7
+March 31, 2021
+March 31, 2021
+Bernd Leukert
+October 31, 2018
+Michael Kleinemeier
+(from April 1, 2016)
+March 31, 2021
+6,695.1
+March 31, 2021
+Bill McDermott (CEO)
+Payment¹)
+Abstention
+Non-Compete
+Postcontractual
+Net Present
+Value of
+Contract Term
+Expires
+Robert Enslin
+Luka Mucic
+Steve Singh
+1,858.8
+In 2016, we paid pension benefits of €1,667,000 to Executive
+Board members who had retired before January 1, 2016 (2015:
+€1,580,000). At the end of the year, the DBO for former
+Executive Board members was €33.935.000 (2015:
+€32,758,000). Plan assets of €26.053.000 are available to
+meet these obligations (2015: €26,716,000).
+Payments to Former Executive Board
+Members
+We have entered into a consulting contract with Gerhard
+Oswald. Based on this contract, he will be available to the
+Executive Board and to the Chairman of the Supervisory
+Board as a strategic advisor especially for customer-specific
+topics and events for SAP customers until the end of
+December 2018.
+For a period of 12 months following his retirement, he
+receives monthly abstention compensation for the
+postcontractual non-compete period totaling € 1,922,193.
+Upon termination of his employment contract, Gerhard
+Oswald received compensation for unused leave totaling
+€151,061.12.
+-
+Gerhard Oswald retired from his position as Executive Board
+member upon the end of his current term on December 31,
+2016. He received the following payments in connection with his
+retirement:
+Payments to Executive Board Members Retiring
+in 2016
+In case of permanent disability, the contract will end at the end
+of the quarter in which the permanent inability to work was
+determined. The Executive Board member receives the monthly
+basic salary for a further 12 months starting from the date the
+permanent disability is determined.
+Permanent Disability
+March 31, 2019
+Abstention compensation for the postcontractual non-compete
+period as described above is also payable on early contract
+termination.
+member of SAP SE is revoked in connection with a change of
+control.
+If an Executive Board member's appointment to the Executive
+Board expires or ceases to exist because of, or as a
+consequence of, change or restructuring, or due to a change of
+control, SAP SE and each Executive Board member has the right
+to terminate the employment contract within eight weeks of the
+occurrence by giving six months' notice. A change of control is
+deemed to occur when a third party is required to make a
+mandatory takeover offer to the shareholders of SAP SE under
+the German Securities Acquisition and Takeover Act, when SAP
+SE merges with another company and becomes the subsumed
+entity, or when a control or profit transfer agreement is
+concluded with SAP SE as the dependent company. An
+Executive Board member's contract can also be terminated
+before full term if their appointment as an Executive Board
+The standard contract for all Executive Board members
+provides that on termination before full term (for example,
+where the member's appointment is revoked, where the
+member becomes occupationally disabled, or in connection with
+a change of control), SAP SE will pay to the member the
+outstanding part of the compensation target for the entire
+remainder of the term, appropriately discounted for early
+payment. A member has no claim to that payment if they have
+not served SAP as a member of the Executive Board for at least
+one year or if they leave SAP SE for reasons for which they are
+responsible. Upon the appointment of Stefan Ries and Steve
+Singh to the Executive Board, the Supervisory Board abstained
+from the waiting period of one year.
+Severance Payments
+Early End-of-Service Undertakings
+1) For the purpose of this calculation, the following discount rates have been
+applied: Bill McDermott 0.22% (2015: 0.18%); Robert Enslin 0.22% (2015:
+0.18%); Michael Kleinemeier -0.026% (2015: 0.50%); Bernd Leukert 0.22%
+(2015: 0.18%); Luka Mucic 0.22% (2015: 0.18%); Stefan Ries -0.01%; Steve
+Singh -0.01%.
+19,411.9
+Total
+(from April 1, 2016)
+Postcontractual Non-Compete Provisions
+Executive Board Members' Holdings of
+Long-Term Incentives
+€ thousands
+To Our Stakeholders | Compensation Report
+Vested on
+December 31, December 31,
+2016
+2015
+Vested on
+€ thousands
+Annual Pension Entitlement
+The table below shows the annual pension entitlement earned
+during Executive Board membership of each member of the
+Executive Board on reaching the scheduled retirement age (60
+for Executive Board members initially appointed before 2012
+and 62 for Executive Board members initially appointed after
+January 1, 2012) based on entitlements from SAP under
+performance-based and salary-linked plans vested on
+December 31, 2016.
+1) The values shown here only reflect the pension entitlements that Michael Kleinemeier, Bernd Leukert, Luka Mucic, and Stefan Ries will receive from the
+retirement pension plan for Executive Board members.
+3,975.8
+141.2
+2,243.0
+Bill McDermott (CEO) ¹)
+97.0
+-26.5
+1,459.2
+Accrued December 31, 2016
+Dr. Werner Brandt (until June 30, 2014)
+6,763.3
+116.7
+5,727.9
+347.6
+389.7
+61.9
+Net Present Values of the Postcontractual Non-
+Compete Abstention Payments
+106.5
+Michael Kleinemeier
+34
+The following table presents the net present values of the
+postcontractual non-compete abstention payments. The net
+present values in the table reflect the discounted present value
+of the amounts that would be paid in the fictitious scenario in
+which the Executive Board members leave SAP at the end of
+their respective current contract terms and their final average
+contractual compensation prior to their departure equals the
+compensation in 2016. Actual postcontractual non-compete
+payments will likely differ from these amounts depending on the
+time of departure and the compensation levels and target
+achievements at the time of departure.
+Postcontractual Non-Compete Provisions
+During the agreed 12-month postcontractual non-compete
+period, each Executive Board member receives abstention
+payments corresponding to 50% of the final average
+contractual compensation as agreed in the respective contract
+on an individual basis. Any other occupational income generated
+by the Executive Board member is deducted from their
+compensation in accordance with section 74c of the German
+Commercial Code.
+These are vested entitlements. To the extent that members
+continue to serve on the Executive Board and that therefore
+more contributions are made for them in the future, pensions
+actually payable at the scheduled retirement age will be higher
+than the amounts shown in the table.
+2) Due to the extension of Gerhard Oswald's contract beyond June 30, 2014,
+these values represent the retirement pension entitlement that he receives
+after his current Executive Board contract expired on December 31, 2016,
+based on the entitlements vested on December 31, 2016 (December 31,
+2015).
+1) The rights shown here for Bill McDermott refer solely to rights under the
+pension plan for SAP America.
+(from April 1, 2016)
+3.6
+Stefan Ries
+106.9
+302.5
+Gerhard Oswald²)
+7.8
+12.9
+Luka Mucic
+8.8
+14.0
+Bernd Leukert
+0.7
+5.2
+327.4
+Members of the Executive Board hold or held share-based
+payment rights throughout the year under the RSU Milestone
+Plan 2015 and the SAP SOP 2010 (which were granted in
+previous years). For information about the terms and details of
+these programs, see the Notes to the Consolidated Financial
+Statements section, Note (27).
+To Our Stakeholders | Compensation Report
+35
+(from April 1, 2016)
+30,368
+18,221
+12,147
+30,368
+Steve Singh
+(from April 1, 2016)
+23,987
+14,392
+Total
+9,595
+Stefan Ries
+December 31, 2016)
+25,035
+17,038
+-23,927
+19,154
+12,770
+31,924
+Gerhard Oswald (until
+23,987
+37,898
+367,602
+220,561
+368,717
+36,568
+77,099
+255,050
+Bill McDermott (CEO)
+Holding on Exercised Holding on
+December
+December
+31, 2015
+Holding on Grants in Performance- Exercised Forfeited
+January 1,
+2015
+Related
+Units Units
+Adjustment
+2015
+147,041
+Quantity of RSUs
+To Our Stakeholders | Compensation Report
+tranches to be issued with respect to the calendar years 2012
+through 2015. The RSUs allocated in 2013 have a remaining
+term of 0.08 years; the RSUs allocated in 2014 have a remaining
+term of 1.08 years; and the RSUs allocated in 2015 have a
+remaining term of 2.08 years.
+The table below shows Executive Board members' holdings, on
+December 31, 2016 and 2015, of RSUs issued to them under the
+RSU Milestone Plan 2015. The plan is a cash-settled long-term
+incentive scheme with a payout subsequent to a performance
+period of one year and an additional holding period of three
+years. The RSU Milestone Plan 2015 consists of four plan
+RSU Milestone Plan 2015
+2) To balance disadvantages from leaver rules under the LTI 2016 Plan
+1) Forfeiture according to leaver rules
+360,713
+17,038
+-23,927
+RSU Milestone Plan 2015 - Rollforward 2015/2016
+22,739
+15,159
+37,898
+2016
+Holding on
+December
+Units ¹) Performance
+Units
+Share Units
+Share Units
+2016
+Balanced
+Forfeited
+(40%)
+Exercised
+Retention
+Grants in
+Holding on
+January 1,
+Quantity of Share
+Units
+LTI 2016 Plan (2016 Tranche)
+The table below shows Executive Board members' holdings, on
+December 31, 2016, of Share Units issued to them under the LTI
+2016 plan. The plan is an annual revolving cash-settled long-
+term incentive scheme with a payout after the vesting period.
+LTI 2016 Plan
+36
+36
+Performance
+(60%)
+Share Units²)
+31, 2016
+Luka Mucic
+42,687
+25,612
+17,075
+42,687
+Bernd Leukert
+37,898
+22,739
+15,159
+37,898
+Michael Kleinemeier
+40,417
+24,250
+16,167
+40,417
+Robert Enslin
+122,423
+73,454
+48,969
+122,423
+Bill McDermott (CEO)
+31, 2016
+70,151
+34,226
+27,396
+112,426
+2.44
+40.80
+48.33
+Total
+248,140
+135,714
+0.69
+112,426
+1.44
+248,140
+Total Expense for Share-Based Payment
+Total expense for the share-based payment plans of Executive
+Board members was recognized as follows.
+Total Expense for Share-Based Payment
+2011
+€ thousands
+Robert Enslin
+Michael Kleinemeier
+Bernd Leukert
+Luka Mucic
+Gerhard Oswald
+(until December 31, 2016)
+2016
+6,525.3
+1,185.8
+635.2
+2015
+12,291.1
+1,851.2
+364.7
+1,237.2 2,208.6
+1,123.5 2,148.5
+2,693.6 3,445.6
+Stefan Ries (from April 1, 2016)
+Bill McDermott (CEO)
+367.5
+1.69
+2010
+To Our Stakeholders | Compensation Report
+SAP SOP 2010 Virtual Share Options
+Year
+Granted
+Holding on
+January 1, 2016
+Strike
+Price per
+Rights
+Price on
+Exercised
+Exercise
+For-
+feited
+Holding on December
+31, 2016
+Option
+135,714
+in 2016
+Rights
+Quantity Remaining
+€
+Quantity
+€
+of Options
+Term in
+Years
+of Options
+Quantity Quantity Remaining
+of Options of Options
+Term in
+Years
+Bill McDermott
+(CEO)
+Date
+38
+Steve Singh (from April 1, 2016)
+Total
+14,233.4 22,309.7
+sation
+Commit-
+tee Work
+tee Work
+Prof. Dr. h.c. mult. Hasso Plattner (chairperson)
+275.0
+88.0
+363.0
+275.0
+66.0
+341.0
+Margret Klein-Magar (deputy chairperson)
+Commit-
+220.0
+253.0
+215.4
+29.3
+244.8
+Pekka Ala-Pietilä
+165.0
+33.0
+198.0
+165.0
+27.5
+192.5
+Panagiotis Bissiritsas
+33.0
+465.3
+sation
+Compen-
+The expense is recognized in accordance with IFRS 2 (Share-
+Based Payments) and consists exclusively of obligations arising
+from Executive Board activities.
+Shareholdings of Executive Board
+Members
+No member of the Executive Board holds more than 1% of the
+ordinary shares of SAP SE. Members of the Executive Board
+held a total of 85,985 SAP shares on December 31, 2016 (2015:
+45,309 shares).
+Executive Board: Other Information
+We did not grant any compensation advance or credit to, or
+enter into any commitment for the benefit of, any member of
+our Executive Board in 2016 or the previous year.
+As far as the law permits, SAP SE and its affiliated companies in
+Germany and elsewhere indemnify and hold harmless their
+respective directors and officers against and from the claims of
+third parties. To this end, we maintain directors' and officers'
+(D&O) group liability insurance. The policy is annual and is
+renewed from year to year. The insurance covers the personal
+liability of the insured group for financial loss caused by its
+managerial acts and omissions. The current D&O policy includes
+an individual deductible for Executive Board members of SAP SE
+as required by section 93 (2) of the German Stock Corporation
+Act.
+Compensation for Supervisory Board
+Members
+Compensation System
+Supervisory Board members' compensation is governed by our
+Articles of Incorporation, section 16.
+Each member of the Supervisory Board receives, in addition to
+the reimbursement of their expenses, an annual basic
+compensation of €165,000. The chairperson receives €275,000
+and the deputy chairperson €220,000.
+For membership of the Audit Committee, Supervisory Board
+members receive an additional fixed annual compensation of
+€16,500, and for membership of any other Supervisory Board
+committee €11,000, provided that the committee concerned
+has met in the year. The chairperson of the Audit Committee
+receives €27,500, and the chairpersons of the other
+committees receive €22,000. The fixed remuneration is payable
+after the end of the year.
+Any members of the Supervisory Board having served for less
+than the entire year receive one-twelfth of the annual
+remuneration for each month of service commenced. This also
+applies to the increased compensation of the chairperson and
+the deputy chairperson(s) and to the remuneration for the
+chairperson and the members of a committee.
+sation for
+To Our Stakeholders | Compensation Report
+Supervisory Board Members' Compensation in 2016
+€ thousands
+2016
+2015
+Fixed
+Compen-
+Total
+Fixed
+Compen-
+Total
+Compen-
+sation for
+39
+under the SAP SOP 2010 since its inception. The strike price for
+an option is 115% of the base price. The issued options have a
+term of seven years and can only be exercised on specified
+dates after the vesting period. The options issued in 2010 were
+exercisable beginning in September 2014 and the options issued
+in 2011 were exercisable beginning in June 2015.
+The table below shows Executive Board members' holdings, on
+December 31, 2016, of virtual share options issued to them
+SAP SOP 2010
+54,792
+455,743
+1) According to the termination agreement with Vishal Sikka, the 2012 grants were paid out after the close of the Annual General Meeting of Shareholders in 2016,
+based on a fixed share price of €52.96. The 2013 grants will be paid out after the close of the Annual General Meeting of Shareholders in 2017 based on a fixed
+share price of €58.69.
+The RSUs held as of December 31, 2014, which were issued and
+not forfeited in 2014, reflect the number of RSUs multiplied by
+the 77.89% target achievement.
+To Our Stakeholders | Compensation Report
+37
+RSU Milestone Plan 2015 - Rollforward 2013/2014
+Quantity of RSUs
+Holding on
+January 1,
+2013
+2013
+Grants in Performance-
+Related
+Adjustment
+70,151
+Exercised
+Units
+Holding on
+Units
+December
+31, 2013
+Bill McDermott (co-CEO)
+127,425
+73,289
+-5,152
+195,562
+Jim Hagemann Snabe (co-CEO) ¹)
+127,425
+73,289
+Forfeited
+-5,152
+-34,029
+406,014
+70,151
+Gerhard Oswald
+70,151
+27,396
+-6,057
+91,490
+Dr. Vishal Sikka (until May 4, 2014)¹)
+70,151
+27,396
+70,151
+27,396
+Robert Enslin (from May 4, 2014)
+208,701
+0
+-4,016
+14,148
+Bernd Leukert (from May 4, 2014)
+18,164
+-4,016
+14,148
+Luka Mucic (from July 1, 2014)
+0
+13,811
+-3,054
+10,757
+Total
+18,164
+195,562
+Dr. Werner Brandt
+45,709
+Grants in
+2012
+2012
+Performance-
+Related
+Adjustment
+Exercised
+Units
+Forfeited
+Units
+Holding on
+December
+31, 2012
+95,414
+32,011
+127,425
+95,414
+32,011
+Holding on
+January 1,
+127,425
+11,483
+45,709
+34,226
+11,483
+45,709
+181.4
+11,483
+45,709
+293,506
+98,471
+391,977
+The RSUs held as of December 31, 2012, reflect the number of
+RSUs issued in 2012 multiplied by the 133.55% target
+achievement.
+34,226
+Total
+Dr. Vishal Sikka
+Gerhard Oswald
+26,290
+-1,848
+Gerhard Oswald
+45,709
+26,290
+-1,848
+Dr. Vishal Sikka
+45,709
+26,290
+-1,848
+Total
+391,977
+225,448
+-15,849
+195,562
+0
+70,151
+70,151
+70,151
+406,014
+According to the termination agreement with Jim Hagemann Snabe, the 2012 and 2013 grants were paid out after the close of the Annual General Meeting of
+Shareholders on May 21, 2014, based on a fixed share price of €52.96 for the 2012 grants and €58.69 for the 2013 grants.
+The RSUs held as of December 31, 2013, which were issued and
+not forfeited in 2013, reflect the number of RSUs multiplied by
+the 92.97% target achievement.
+RSU Milestone Plan 2015 - Rollforward 2012/2013
+Quantity of RSUs
+Bill McDermott (co-CEO)
+Jim Hagemann Snabe (co-CEO)
+Dr. Werner Brandt
+27,396
+Less plan assets market
+2016
+257.9
+Robert Enslin
+Michael Kleinemeier
+122,423
+48,969
+73,454
+66.52
+64.57
+8,000
+40,417
+16,167
+24,250
+66.52
+Bill McDermott (CEO)
+64.57
+37,898
+15,159
+22,739
+66.52
+64.57
+2,477
+Bernd Leukert
+42,687
+17,075
+25,612
+66.52
+64.57
+2,641
+2,790
+thousand
+€
+Martin Duffek (from May 20, 2015)
+197.1
+32.1
+165.0
+203.5
+The share-based payment amounts included in the 2016 compensation result from the following RSUs and PSUs under the LTI 2016
+Plan.
+Share-Based Payment Under LTI 2016 Plan (Grants for 2016)
+Quantity
+(RSU)
+Retention
+Share Units
+(40%)
+(PSU)
+Performance
+Share Units
+Grant
+Value per
+Grants for 2016
+Grant
+€
+Total
+Grant
+RSU at
+PSU at
+Value at
+(60%)
+Time of
+Time of
+Time of
+Grant
+Grant
+Grant
+€
+Value per
+165.0
+Luka Mucic
+15,159
+German Corporate Governance Code (Allocation)
+Allocation
+€ thousands
+Bill McDermott
+CEO
+Robert Enslin
+Member of the
+Executive Board
+Michael Kleinemeier
+Member of the
+Executive Board
+Fixed compensation
+2016¹)
+1,403.0
+2015
+2016¹)
+2015
+23,942
+38.5
+1,150.0
+854.0
+700.0
+700.0
+116.7
+Fringe benefits²)
+1,625.7 1,258.0
+474.0
+103.3
+26.9
+0
+Total
+2015
+37,898
+220,561
+367,602
+22,739
+66.52
+64.57
+2,477
+Gerhard Oswald (until December 31, 2016)
+31,924
+12,770
+19,154
+66.52
+64.57
+2,086
+Stefan Ries (from April 1, 2016)
+147,041
+23,987
+14,392
+65.77
+62.61
+1,532
+Steve Singh (from April 1, 2016)
+30,368
+12,147
+18,221
+65.77
+62.61
+1,940
+Total
+9,595
+27.5
+192.5
+110.0
+Prof. Dr.-Ing. Dr.-Ing. E.h. Klaus Wucherer
+117.3
+7.3
+110.0
+176.0
+11.0
+165.0
+Pierre Thiollet (from May 20, 2015)
+187.0
+22.0
+165.0
+187.0
+165.0
+22.0
+Jim Hagemann Snabe
+124.7
+14.7
+110.0
+187.0
+22.0
+165.0
+Dr. Sebastian Sick (from May 20, 2015)
+117.3
+7.3
+110.0
+176.0
+165.0
+11.0
+16.5
+165.0
+To Our Stakeholders | Compensation Report
+40
+40
+Supervisory Board chairperson Hasso Plattner and the
+companies he controlled held 87,860,661 SAP shares on
+December 31, 2016 (December 31, 2015: 90,248,789 SAP
+shares), representing 7.152% (2015: 7.346%) of SAP's share
+capital. No other member of the Supervisory Board held more
+than 1% of the SAP SE share capital at the end of 2016 or of the
+previous year. Members of the Supervisory Board held a total of
+Shareholdings of Supervisory Board
+Members
+We do not offer members of the Supervisory Board share-based
+payment for their Supervisory Board work. Any share-based
+payment awards received by employee-elected members relate
+to their position as SAP employees and not to their work on the
+Supervisory Board.
+Supervisory Board
+In total, we received services from members of the Supervisory
+Board (including services from employee representatives on the
+Supervisory Board in their capacity as employees of SAP) in the
+amount of €1,040,400 (2015: €1,282,800). This amount
+includes fees paid to Linklaters LLP in Frankfurt am Main,
+Germany (of which Supervisory Board member Wilhelm
+Haarmann is a partner), of €0 (2015: €224,500).
+their expenses and the value-added tax payable on their
+compensation.
+In addition, we reimburse members of the Supervisory Board for Long-Term Incentives for the
+3,728.1
+478.5
+181.5
+3,249.6
+517.0
+3,135.0
+Total
+563.8
+59.6
+504.2
+ΝΑ
+NA
+ΝΑ
+Former Supervisory Board members
+181.5
+16.5
+3,652.0
+165.0
+Robert Schuschnig-Fowler (from May 20, 2015)
+192.5
+22.0
+165.0
+Prof. Dr. Gesche Joost (from May 28, 2015)
+124.7
+14.7
+110.0
+187.0
+22.0
+165.0
+Andreas Hahn (from May 20, 2015)
+209.0
+44.0
+187.0
+165.0
+44.0
+165.0
+Prof. Dr. Wilhelm Haarmann
+187.0
+22.0
+165.0
+187.0
+22.0
+165.0
+Prof. Anja Feldmann
+128.3
+18.3
+209.0
+110.0
+11.0
+121.0
+27.5
+165.0
+192.5
+27.5
+165.0
+Dr. Erhard Schipporeit
+124.7
+14.7
+110.0
+187.0
+22.0
+165.0
+Christine Regitz (from May 20, 2015)
+187.0
+22.0
+165.0
+198.0
+33.0
+165.0
+Bernard Liautaud
+187.0
+22.0
+165.0
+187.0
+22.0
+165.0
+Lars Lamadé
+3,028.7 2,408.0
+1,328.0
+803.3
+726.9
+base salary. The applicable income threshold is the statutory
+annual income threshold for the state pension plan in
+Germany (West), as amended from time to time.
+Originally, Gerhard Oswald was under a performance-based
+retirement plan. This plan was discontinued when SAP
+introduced a contributory retirement pension plan in 2000.
+His pension benefits are derived from any accrued
+entitlements on December 31, 1999, under performance-
+based pension agreements and a salary-linked contribution
+for the period commencing January 1, 2000. Gerhard
+Oswald's rights to retirement pension benefits increased by
+further annual contributions because he remained a member
+of the Executive Board after his 60th birthday until his
+retirement on December 31, 2016.
+Bill McDermott has rights to future benefits under the portion
+of the pension plan for SAP America classified as "Non-
+Qualified Retirement Plan" according to the U.S. Employee
+Retirement Income Security Act (ERISA). The "Non-
+Qualified" pension plan of SAP America is a cash balance plan
+that provides either monthly pension payments or a lump
+sum on retirement. The pension becomes available from the
+beneficiary's 65th birthday. Subject to certain conditions, the
+plan also provides earlier payment or invalidity benefits. The
+"Non-Qualified" pension plan closed with effect from
+January 1, 2009. Interest continues to be paid on the earned
+rights to benefits within this plan.
+SAP made contributions to a third-party pension plan for Bill
+McDermott (2016: €571,300; 2015: €682,400) and Robert
+Enslin (2016: €34,700; 2015: €308,000). SAP's
+contributions are based on payments by Bill McDermott and
+Robert Enslin into this pension plan.
+Steve Singh has no entitlements under the pension plan for
+Executive Board members. SAP made no retirement pension
+plan contributions to a third-party pension plan with respect
+to Steve Singh in 2016.
+To Our Stakeholders | Compensation Report
+33
+Total Defined Benefit Obligations (DBO) and the Total Accruals for Pension Obligations to Executive
+Board Members
+€ thousands
+Bill
+Michael
+McDermott Kleinemeier¹)
+Bernd Luka Mucic¹)
+Leukert¹)
+Michael Kleinemeier, Bernd Leukert, Luka Mucic, Gerhard
+Oswald, and Stefan Ries receive a retirement pension when
+they reach the retirement age of 60 (62 for Board members
+appointed after January 1, 2012) and retire from their
+Executive Board seat; or a disability pension depending on
+health examination if, before reaching the regular retirement
+age, they become subject to occupational disability or
+permanent incapacity. A surviving dependent's pension is
+paid on the death of a former member of the Executive
+Board. The disability pension is 100% of the vested
+retirement pension entitlement and is payable until the
+beneficiary's 60th birthday, after which it is replaced by a
+retirement pension. The surviving dependent's pension is
+60% of the retirement pension or vested disability pension
+entitlement at death. Entitlements are enforceable against
+SAP SE. Current pension payments are reviewed annually for
+adjustments and, if applicable, increased according to the
+surplus in the pension liability insurance. If service is ended
+before the retirement age of 60 (62 for Board members
+appointed after January 1, 2012), pension entitlement is
+reduced in proportion as the actual length of service stands in
+relation to the maximum possible length of service. The
+applied retirement pension plan is contributory. The
+contribution is 4% of applicable compensation up to the
+applicable income threshold plus 14% of applicable
+compensation above the applicable income threshold. For
+this purpose, applicable compensation is 180% of annual
+Gerhard
+Stefan Ries¹)
+Oswald (from April 1,
+2016)
+Total
+DBO January 1, 2015
+1,212.5
+123.2
+102.8
+7,221.4
+8,659.9
+Less plan assets market
+94.6
+67.8
+4,992.4
+(CEO)
+5,154.8
+The following retirement pension agreements apply to the
+individual members of the Executive Board:
+Regular End-of-Service Undertakings
+0
+646.1
+0
+2,276.1
+8,498.1 5,474.2
+1,407.5
+9,663.0 5,525.4
+12,560.9
+1,126.7
+538.5
+0
+646.1
+0
+Retirement Pension Plan
+30,722.0 12,126.3
+0
+606.0
+990.4
+538.5
+0
+646.1
+0 31,328.0 13,116.7
+1) The value of the fixed and one-year variable elements is granted in U.S. dollars. For conversion purposes from U.S. dollars into euro, for fixed compensation the
+2016 average exchange rate applies and for the one-year variable element the 2016 year-end exchange rate applies.
+2) Insurance contributions, benefits in kind, expenses for maintenance of two households, use of aircraft as well as tax and discrete payments arising through
+application of the fixed exchange-rate clause in 2016 for 2015.
+32
+To Our Stakeholders | Compensation Report
+End-of-Service Benefits
+0
+value January 1, 2015
+Accrued January 1, 2015
+DBO change in 2015
+Plan assets change in 2015
+Accrued December 31, 2015
+1,382.5
+4.3
+12.2
+26.9
+1,700.9
+3,126.8
+DBO change in 2016
+Plan assets change in 2016
+DBO December 31, 2016
+76.7
+125.2
+199.2
+211.9
+5,820.7
+920.7
+1,791.6
+156.0
+149.5
+141.8
+378.6
+116.7
+942.6
+1,459.2
+154.9
+451.6
+444.6
+7,970.9
+257.9
+5,349.3
+205.8
+240.2
+DBO December 31, 2015
+Less plan assets market
+value December 31, 2015
+1,212.5
+170.0
+28.6
+35.0
+2,229.0
+3,505.1
+29.7
+129.2
+129.9
+-171.2
+287.6
+-
+25.4
+145.6
+138.0
+356.9
+665.9
+1,382.5
+29.7
+252.4
+232.7
+7,050.2
+8,947.5
+25.4
+538.5
+10,739.1
+6.1
+2016
+2015
+6,222.0 4,066.7
+Luka Mucic
+Member of the
+Executive Board
+Gerhard Oswald
+Member of the
+Executive Board
+(until December 31,
+2016)
+2016
+2015
+2016
+2015
+2016
+2015
+Fixed compensation
+Bernd Leukert
+Member of the
+Executive Board
+700.0
+700.0
+700.0
+700.0
+700.0
+Fringe benefits²)
+12.4
+11.7
+12.1
+12.1
+105.4
+22.4
+Total
+700.0
+712.4
+€ thousands
+German Corporate Governance Code (Allocation)
+116.7
+One-year variable compensation
+2,743.5
+2,036.7
+1,660.5
+817.3
+277.5
+Multiyear variable compensation
+RSU Milestone Plan 2015
+9,244.7
+SAP SOP 2011
+Other
+Allocation
+Total
+Total
+15,016.9
+571.3
+15,588.2
+4,444.7
+682.4
+5,127.1
+34.7
+2,988.5 1,620.6 1,004.4
+308.0
+3,023.2 1,928.6
+116.7
+0
+1,004.4
+116.7
+To Our Stakeholders | Compensation Report
+31
+Service cost
+711.7
+712.1
+712.1
+1,126.7
+2,372.9
+1,529.0
+2,372.6
+1,333.5
+5,782.1
+3,081.8
+0
+0
+0
+0
+2,372.9
+3,316.2
+1,529.0
+1,333.5
+5,782.1
+3,081.8
+Stefan Ries
+Member of the
+Executive Board
+(from April 1, 2016)
+Steve Singh
+Member of the
+Executive Board
+(from April 1, 2016)
+Total Executive
+Board Compensation
+2016
+2015
+525.0
+2016¹)
+640.0
+2015
+2,372.6
+Total
+Service cost
+Total
+805.4
+722.4
+One-year variable compensation
+1,660.5
+817.3
+1,660.5
+621.4
+1,660.5
+1,232.7
+Multiyear variable compensation
+RSU Milestone Plan 2015
+SAP SOP 2011
+Other
+Total
+Service cost
+Total
+German Corporate Governance Code (Allocation)
+Allocation
+€ thousands
+Fixed compensation
+Fringe benefits²)
+Total
+One-year variable compensation
+Multiyear variable compensation
+RSU Milestone Plan 2015
+SAP SOP 2011
+Other
+13.5
+165.0
+50
+We also provide the Supervisory Board with a statement that we
+have complied with relevant ethical requirements regarding
+independence, and to communicate with them all relationships
+and other matters that may reasonably be thought to bear on
+our independence, and where applicable, related safeguards.
+Responsible Auditor
+The engagement partner on the audit resulting in this
+independent auditor's report is Dr. Bert Böttcher.
+Mannheim, February 22, 2017
+KPMG AG
+Wirtschaftsprüfungsgesellschaft
+Dr. Böttcher
+Wirtschaftsprüfer
+German Public Auditor
+Herold
+Wirtschaftsprüferin
+German Public Auditor
+To Our Stakeholders | Independent Auditor's Report
+We believe that the audit evidence we have obtained is sufficient
+and appropriate to provide a basis for our opinion.
+47
+General Information About This Management Report..
+Overview of the SAP Group
+Strategy and Business Model...
+Products, Research & Development, and Services.
+Security, Privacy, and Data Protection......
+Customers...
+Performance Management System....
+49
+50
+Combined Management Report
+Our responsibility is to express an opinion on the system of
+internal control over consolidated financial reporting based on
+our audit. We conducted our audit in accordance with the
+standards of the Public Company Accounting Oversight Board
+(United States). Those standards require that we plan and
+perform the audits to obtain reasonable assurance about
+whether effective internal control over consolidated financial
+reporting was maintained in all material respects. Our audit of
+internal control over consolidated financial reporting included
+obtaining an understanding of internal control over financial
+reporting, assessing the risk of material deficiencies in internal
+control, testing and evaluating the design and operating
+effectiveness of internal control based on this assessment, and
+performing such other procedures as we considered necessary
+in the circumstances.
+Auditor's Responsibility for the System of
+Internal Control over Consolidated
+Financial Reporting
+The Supervisory Board is responsible for overseeing the
+Group's system of internal control over consolidated financial
+reporting.
+We have audited the combined group management report by
+the SAP Group and the management report of SAP SE, Walldorf
+("Group Management Report"), for the fiscal year from January
+1, 2016 to December 31, 2016.
+In our opinion, based on our knowledge obtained in the audit,
+the accompanying Group Management Report as a whole
+provides a suitable view of the Group's position. In all material
+respects, the Group Management Report is consistent with the
+consolidated financial statements, complies with the German
+statutory requirements and suitably presents the opportunities
+and risks of future development.
+Pursuant to Section 322 (3) sentence 1 HGB, we state that our
+audit has not led to any reservations with respect to the
+propriety of the Group Management Report.
+Basis for Opinion on the Group
+Management Report
+We conducted our audit in accordance with Section 317 (2) HGB
+and German generally accepted standards for the audit of
+management reports promulgated by the German Institute of
+Public Auditors [IDW]. We believe that the audit evidence we
+have obtained is sufficient and appropriate to provide a basis for
+our opinion
+Responsibilities of the Executive Board and
+the Supervisory Board for the Group
+Management Report
+The Executive Board of SAP SE is responsible for the
+preparation of the Group Management Report, which as a whole
+provides a suitable view of the Group's position, is consistent
+with the consolidated financial statements, complies with the
+German statutory requirements and suitably presents the
+opportunities and risks of future development. Furthermore, the
+Executive Board is responsible for such arrangements and
+measures (systems) as the Executive Board determines are
+necessary to enable the preparation of the Group Management
+Report in compliance with the requirements of German
+commercial law applicable pursuant to Section 315a (1) HGB,
+German Accounting Standards number 17 and 20 (GAS 17, GAS
+20) and the International Financial Reporting Standard (IFRS)
+Practice Statement Management Commentary and for
+providing sufficient and appropriate evidence for the
+statements in the Group Management Report.
+46
+46
+To Our Stakeholders | Independent Auditor's Report
+The Supervisory Board is responsible for overseeing the
+Group's financial reporting process for the preparation of the
+Group Management Report.
+Auditor's Responsibilities for the Audit of
+the Group Management Report
+Our objectives are to obtain reasonable assurance whether the
+Group Management Report as a whole provides a suitable view
+of the Group's position, as well as, in all material respects, is
+consistent with the consolidated financial statements and our
+knowledge obtained in the audit, complies with the German
+statutory requirements, and suitably presents the opportunities
+and risks of future development and to issue an auditor's report
+that includes our opinion on the Group Management Report.
+Report on the System of Internal
+Control over Consolidated Financial
+Reporting pursuant to PCAOB
+Opinion on the System of Internal Control
+over Consolidated Financial Reporting
+We have audited the system of internal control over
+consolidated financial reporting of SAP SE, Walldorf, and its
+subsidiaries in place as at December 31, 2016. This control
+system is based on criteria set out in the Internal Control -
+Integrated Framework of the Committee of Sponsoring
+Organizations of the Treadway Commission (COSO) (version of
+2013).
+In our opinion, SAP maintained effective internal control over
+consolidated financial reporting as at December 31, 2016 based
+on the criteria set out in the Internal Control - Integrated
+Framework issued by COSO (in the version of 2013).
+Executive Board's and Supervisory Board's
+Responsibility for the System of Internal
+Control over Consolidated Financial
+Reporting
+SAP SE's Executive Board is responsible for maintaining an
+effective system of internal control over consolidated financial
+reporting and assessing its effectiveness, which is included in
+the Executive Board's report on the system of internal control
+over consolidated financial reporting.
+A company's system of internal control over consolidated
+financial reporting is a process designed to provide reasonable
+assurance regarding the reliability of financial reporting in the
+consolidated financial statements and the preparation of
+financial statements for external purposes in accordance with
+generally accepted accounting principles. A company's system
+of internal control over consolidated financial reporting includes
+policies and procedures to (1) ensure an accounting system that
+in reasonable detail accurately and fairly reflects the
+transactions and dispositions of the company's assets, (2)
+provide reasonable assurance that transactions are recorded as
+necessary to permit preparation of financial statements in
+accordance with generally accepted accounting principles, and
+(3) provide reasonable assurance regarding prevention or
+timely detection of unauthorized acquisition, use or disposition
+of the company's assets that could have a material effect on the
+financial statements.
+Because of its inherent limitations, internal control over financial
+reporting may not prevent or detect material misstatements.
+Also, projections of any evaluation of effectiveness to future
+periods are subject to the risk that controls may become
+inadequate because of changes in conditions, or that the degree
+of compliance with the policies or procedures may deteriorate.
+.51
+55
+63
+65
+The words "aim," "anticipate," "assume,” “believe,” “continue,"
+"could," "counting on,” “is confident," "development,"
+"estimate," "expect," "forecast," "future trends," "guidance,"
+"intend," "may," "might," "outlook,” “plan,” “project,” “predict,"
+"seek," "should," "strategy," "want,” “will,” “would," and similar
+expressions as they relate to us are intended to identify such
+forward-looking statements. Such statements include, for
+example, those made in the Operating Results section, our
+quantitative and qualitative disclosures about market risk
+pursuant to the International Financial Reporting Standards
+(IFRS), namely IFRS 7 and related statements in our Notes to
+the Consolidated Financial Statements; Expected Developments
+and Opportunities section; Risk Management and Risks section;
+and other forward-looking information appearing in other parts
+of this report. To fully consider the factors that could affect our
+future financial results, both this report and our Annual Report
+on Form 20-F should be considered, as well as all of our other
+filings with the Securities and Exchange Commission (SEC).
+Readers are cautioned not to place undue reliance on these
+forward-looking statements, which speak only as of the date
+specified or the date of this report. We undertake no obligation
+to publicly update or revise any forward-looking statements as a
+result of new information that we receive about conditions that
+existed upon issuance of this report, future events, or otherwise
+unless we are required to do so by law.
+This report includes statistical data about the IT industry and
+global economic trends that comes from information published
+by sources including Gartner, the European Central Bank (ECB);
+and the International Monetary Fund (IMF). This type of data
+represents only the estimates of Gartner, ECB, IMF, and other
+sources of industry data. SAP does not adopt or endorse any of
+the statistical information provided by sources such as Gartner,
+ECB, IMF, or other similar sources that is contained in this
+report. The data from these sources is subject to risks and
+uncertainties, and subject to change based on various factors,
+including those described above, in the Risk Management and
+Risks section, and elsewhere in this report. These and other
+factors could cause our results to differ materially from those
+expressed in the estimates made by third parties and SAP. We
+caution readers not to place undue reliance on this data.
+Combined Management Report | General Information About This Management Report
+49
+49
+Overview of the SAP
+Group
+>76%
+of worldwide transactions
+touch an SAP system
+>345,000
+customers worldwide
+>180
+countries where SAP
+customers are located
+Our vision is to help the world run better and improve people's
+lives. Together with our broad ecosystem of partners, this
+comes to life as we help our customers master complexity and
+innovate and transform to become sustainable digital
+businesses. SAP is involved in driving innovation in all fields of
+the digital economy, such as the Internet of Things, machine
+learning, and artificial intelligence. For more information on our
+vision and strategy, see the Strategy and Business Model
+section.
+Founded in 1972, SAP is a global company headquartered in
+Walldorf, Germany. Our legal corporate name is SAP SE. SAP is
+the market leader in enterprise application software¹. The
+company is also the fastest-growing major database company.
+Globally, more than 76% of all business transactions worldwide
+touch an SAP software system. With more than 345,000
+customers in more than 180 countries, the SAP Group includes
+subsidiaries in all major countries and employs more than
+84,100 people.
+Our ordinary shares are listed on the Frankfurt Stock Exchange.
+American Depositary Receipts (ADRs) representing SAP SE
+ordinary shares are listed on the New York Stock Exchange
+(NYSE). SAP is a member of Germany's DAX, the Dow Jones
+EURO STOXX 50, and the Dow Jones Sustainability Indexes. As
+at December 31, 2016, SAP was the most valuable company in
+the DAX based on market capitalization. For additional
+information regarding our stock, see the Investor Relations
+section.
+As at December 31, 2016, SAP SE directly or indirectly
+controlled a worldwide group of 245 subsidiaries to develop,
+distribute, and provide our products, solutions, and services. For
+a list of our subsidiaries, associates, and other equity
+investments, see the Notes to the Consolidated Financial
+Statements, Note (34).
+Enterprise application software is computer software specifically developed to support and automate
+business processes
+50
+This management report contains forward-looking statements
+and information based on the beliefs of, and assumptions made
+by, our management using information currently available to
+them. Any statements contained in this report that are not
+historical facts are forward-looking statements as defined in the
+U.S. Private Securities Litigation Reform Act of 1995. We have
+based these forward-looking statements on our current
+expectations, assumptions, and projections about future
+conditions and events. As a result, our forward-looking
+statements and information are subject to uncertainties and
+risks, many of which are beyond our control. If one or more of
+these uncertainties or risks materializes, or if management's
+underlying assumptions prove incorrect, our actual results could
+differ materially from those described in or inferred from our
+forward-looking statements and information. We describe these
+risks and uncertainties in the Risk Management and Risks
+section.
+Opinion on the Group Management Report
+Forward-Looking Statements
+Basis of Presentation
+67
+Employees and Social Investments.
+74
+Energy and Emissions.
+.81
+Financial Performance: Review and Analysis..
+84
+Corporate Governance Fundamentals
+.103
+Risk Management and Risks....
+106
+Expected Developments and Opportunities.
+131
+Events After the Reporting Period.
+138
+48
+Combined Management Report
+General
+Information
+About This Management
+Report
+This combined group management report by the SAP Group
+(collectively, “we,” “us,” “our," "SAP," "Group," or "Company")
+and the management report of SAP SE have been prepared in
+accordance with sections 289, 315, and 315a of the German
+Commercial Code and German Accounting Standards (GAS)
+No. 17 and 20. The management report is also a management
+commentary complying with the International Financial
+Reporting Standards (IFRS) Practice Statement Management
+Commentary. All of the information in this report relates to the
+situation as at December 31, 2016, or the fiscal year ended on
+that date, unless otherwise stated. The report contains
+references to additional information in other parts of the SAP
+Integrated Report that is available online. This additional
+information is not part of the management report.
+Combined Management Report | Overview of the SAP Group
+Report on the Audit of the Group
+Management Report
+From the matters communicated with the Supervisory Board,
+we determine those matters that were of most significance in
+the audit of the consolidated financial statements of the current
+period and are therefore the key audit matters. We describe
+these matters in our report on the audit of the consolidated
+financial statements unless law or regulation precludes public
+disclosure about the matter.
+Report on the Audit of Consolidated
+Financial Statements
+Opinion on the Consolidated Financial
+Statements
+We have audited the consolidated financial statements of SAP
+SE, Walldorf, and its subsidiaries (the Group), which comprise
+the consolidated statements of financial position as at
+December 31, 2016, consolidated income statements,
+consolidated statements of comprehensive income,
+consolidated statements of changes in equity and consolidated
+statements of cash flows for the fiscal year from January 1,
+2016, to December 31, 2016, and notes to the consolidated
+financial statements, including a summary of significant
+accounting policies.
+Pursuant to Section 322 (3) sentence 1 half sentence 2 HGB
+("Handelsgesetzbuch": German Commercial Code), we state
+that, in our opinion, based on our knowledge obtained in the
+audit, the accompanying consolidated financial statements
+comply in all material respects with IFRS as adopted by the EU
+and the supplementary requirements of German commercial
+law pursuant to Section 315a (1) of the German Commercial
+Code [HGB], as well as IFRS as adopted by the International
+Accounting Standards Board and give a true and fair view of the
+net assets and financial position of the Group as at December
+31, 2016 as well as the results of operations for the fiscal year
+from January 1, 2016, to December 31, 2016, in accordance with
+these requirements.
+Pursuant to Section 322 (3) sentence 1 HGB, we state that our
+audit of the consolidated financial statements has not led to any
+reservations with respect to the propriety of the consolidated
+financial statements.
+Basis for Opinion on the Consolidated
+Financial Statements
+We conducted our audit in accordance with Section 317 HGB
+and German generally accepted standards for the audit of
+financial statements promulgated by the German Institute of
+Public Auditors [IDW] as well as in supplementary compliance
+with International Standards on Auditing (ISA) and guidelines of
+the Public Company Accounting Oversight Board (United
+States). Our responsibilities under those standards and
+additional guidelines are further described in the "Auditor's
+Responsibilities for the Audit of the Consolidated Financial
+Statements" section of our report. We are independent of the
+Group in accordance with the requirements of German
+commercial law and the rules of professional conduct, and we
+have fulfilled our other ethical responsibilities applicable in
+Germany in accordance with these requirements. We believe
+that the audit evidence we have obtained is sufficient and
+appropriate to provide a basis for our opinion.
+Key Audit Matters
+TO SAP SE, Walldorf
+Key audit matters are those matters that, in our professional
+judgment, were of most significance in our audit of the
+consolidated financial statements for the fiscal year from
+January 1, 2016 to December 31, 2016. These matters were
+addressed in the context of our audit of the consolidated
+financial statements as a whole, and in forming our opinion
+thereon, but we do not provide a separate opinion on these
+matters.
+The Financial Statement Risk
+IFRS do not provide specific guidance on recognizing revenue
+for sales of software and software-related products and
+services. SAP defined detailed policies, procedures and
+processes to manage the accounting for its software
+arrangements. SAP's revenue generating transactions and,
+consequently, SAP's revenue recognition policies are complex.
+Applying them often requires significant judgment.
+Significant judgments include the allocation of revenue from
+customer contracts to multiple deliverables and the application
+of the revenue recognition criteria under IAS 18, e.g., assessing
+whether the significant risks and rewards have been transferred
+to the buyer and whether the amount of revenue can be
+measured reliably.
+Our Response
+We evaluated the compliance of SAP's accounting policies on
+software revenue recognition with the IFRS Framework and the
+To Our Stakeholders | Independent Auditor's Report
+43
+individual applicable IFRSs. We considered the design and
+tested the operating effectiveness of the key controls
+implemented by SAP on the identification of multiple-element
+arrangements, the identification of deliverables and separate
+units of accounting, the identification of fair value for all relevant
+deliverables other than on-premise software (due to the residual
+method being applied). For all software arrangements we
+considered to be individually substantial and for a sample of the
+remaining software arrangements, we also:
+obtained an understanding of the transaction through
+inspection of the underlying contractual agreements and
+other related documents as well as discussions with SAP's
+accounting and/or sales representatives;
+Recognition of software licenses revenue
+Refer to Note (3b) - Relevant Accounting Policies, Note (3c) -
+Management Judgments and Sources of Estimation
+Uncertainty, and Note (5) - Revenue.
+Report
+Independent Auditor's
+To Our Stakeholders | Responsibility Statement
+Information
+We did not grant any compensation advance or credit to, or
+enter into any commitment for the benefit of, any member of
+our Supervisory Board in 2016 or the previous year.
+Hasso Plattner, the chairperson of the Supervisory Board,
+entered into a consulting contract with SAP after joining the
+Supervisory Board in May 2003. The contract does not provide
+for any compensation. The only cost we incurred under the
+contract was the reimbursement of expenses.
+As far as the law permits, we indemnify Supervisory Board
+members against, and hold them harmless from, claims brought
+by third parties. To this end, we maintain directors' and officers'
+(D&O) group liability insurance. The current D&O policy does
+not include an individual deductible for Supervisory Board
+members as envisaged in the German Corporate Governance
+Code.
+41
+To Our Stakeholders | Compensation Report
+Responsibility Statement
+To the best of our knowledge, and in accordance with the
+applicable reporting principles, the Consolidated Financial
+Statements give a true and fair view of the assets, finances, and
+operating results of the SAP Group, and the management report
+of the Group and SAP SE includes a fair review of the
+development and performance of the business and the position
+of the Group and SAP SE, together with a description of the
+principal opportunities and risks associated with the expected
+development of the Group and SAP SE.
+Walldorf, February 22, 2017
+SAP SE
+Walldorf, Germany
+Executive Board of SAP SE
+Bill McDermott
+Robert Enslin
+Michael Kleinemeier
+Bernd Leukert
+Luka Mucic
+Stefan Ries
+Steve Singh
+42
+22
+obtained external confirmations of the key terms and
+conditions from the respective customers to corroborate the
+information relevant for the accounting that we received
+from SAP;
+assessed whether SAP appropriately identified all separate
+units of accounting and allocated the transaction price to
+such units based on either the relative fair value method or
+the residual method, as applicable, using the established fair
+values (see next paragraph); and
+evaluated whether the revenue recognition policies
+applicable to each separate unit of accounting were applied
+appropriately to ensure that revenue is recognized in the
+appropriate period.
+We evaluated the fair value assumptions for each deliverable
+that typically qualifies as a separate unit of accounting in SAP's
+multiple-element arrangements by assessing the
+appropriateness of the methodology applied, testing
+mathematical accuracy of the underlying calculations and
+testing selections to corroborate the data underlying SAP's
+calculations. We also assessed the appropriateness of the
+related disclosures in the consolidated financial statements.
+In connection with our audit of the consolidated financial
+statements, our responsibility is to read the other information,
+and doing so, consider whether the other information is
+materially inconsistent with the consolidated financial
+statements or our knowledge obtained in the audit or otherwise
+appears to be materially misstated. If, based on the work we
+have performed, we conclude that there is a material
+misstatement of this other information, we are required to
+report that fact. We have nothing to report in this regard.
+Responsibilities of the Executive Board and
+the Supervisory Board for the Consolidated
+Financial Statements
+The Executive Board of SAP SE is responsible for the
+preparation of the consolidated financial statements which
+comply with IFRS as adopted by the EU and the supplementary
+requirements of German commercial law pursuant to Section
+315a (1) HGB as well as IFRS as adopted by the International
+Accounting Standards Board and give a true and fair view of the
+net assets, financial position and results of operations of the
+Group in accordance with these requirements. Furthermore, the
+Executive Board is responsible for such internal control as the
+Executive Board determines is necessary to enable the
+preparation of consolidated financial statements that are free
+from material misstatement, whether due to fraud or error.
+In preparing the consolidated financial statements, the
+Executive Board is responsible for assessing the Group's ability
+to continue as a going concern, disclosing, as applicable,
+matters related to going concern and using the going concern
+basis of accounting unless the Executive Board either intends to
+liquidate the Group or to cease operations, or has no realistic
+alternative but to do so.
+The Supervisory Board is responsible for overseeing the
+Group's financial reporting process for the preparation of the
+consolidated financial statements.
+Auditor's Responsibilities for the Audit of
+the Consolidated Financial Statements
+Our objectives are to obtain reasonable assurance about
+whether the consolidated financial statements as a whole are
+free from material misstatement, whether due to fraud or error,
+and to issue an auditor's report that includes our opinion on the
+consolidated financial statements. Reasonable assurance is a
+high level of assurance, but is not a guarantee that an audit
+conducted in accordance with Section 317 HGB and German
+generally accepted standards for the audit of financial
+statements promulgated by the German Institute of Public
+Auditors [IDW] as well as in supplementary compliance with ISA
+and guidelines of the Public Company Accounting Oversight
+Board (United States) will always detect a material
+misstatement when it exists. Misstatements can arise from
+fraud or error and are considered material if, individually or in
+the aggregate, they could reasonably be expected to influence
+the economic decisions of users taken on the basis of these
+consolidated financial statements.
+As part of an audit in accordance with Section 317 HGB and
+German generally accepted standards for the audit of financial
+statements promulgated by the German Institute of Public
+Auditors [IDW] as well as in supplementary compliance with ISA
+and guidelines of the Public Company Accounting Oversight
+Board (United States), we exercise professional judgment and
+maintain professional skepticism throughout the audit. We also:
+-
+Identify and assess the risks of material misstatement of the
+consolidated financial statements, whether due to fraud or
+error, design and perform audit procedures responsive to
+those risks, and obtain audit evidence that is sufficient and
+appropriate to provide a basis for our opinion. The risk of not
+detecting a material misstatement resulting from fraud is
+higher than for one resulting from error, as fraud may involve
+collusion, forgery, intentional omissions, misrepresentations,
+or the override of internal control.
+To Our Stakeholders | Independent Auditor's Report
+45
+445
+-
+Obtain an understanding of internal control relevant to the
+audit in order to design audit procedures that are appropriate
+in the circumstances.
+Evaluate the appropriateness of accounting policies used and
+the reasonableness of accounting estimates and related
+disclosures made by the Executive Board.
+Conclude on the appropriateness of the Executive Board's
+use of the going concern basis of accounting and, based on
+the audit evidence obtained, whether a material uncertainty
+exists related to events or conditions that may cast
+significant doubt on the Group's ability to continue as a going
+concern. If we conclude that a material uncertainty exists, we
+are required to draw attention in our auditor's report to the
+related disclosures in the consolidated financial statements
+or, if such disclosures are inadequate, to modify our opinion.
+Our conclusions are based on the audit evidence obtained up
+to the date of our auditor's report. However, future events or
+conditions may cause the Group to cease to continue as a
+going concern.
+Evaluate the overall presentation, structure and content of
+the consolidated financial statements, including the
+disclosures, and whether the consolidated financial
+statements represent the underlying transactions and events
+in a manner that the consolidated financial statements give a
+true and fair view of the net assets and financial position as
+well as the results of operations of the Group in accordance
+with IFRS as adopted by the EU and the supplementary
+requirements of German commercial law pursuant to Section
+315a (1) HGB as well as IFRS as adopted by the International
+Accounting Standards Board.
+Obtain sufficient and appropriate audit evidence regarding
+the financial information of the entities or business activities
+within the Group to express an opinion on the consolidated
+financial statements. We are responsible for the direction,
+supervision and performance of the group audit. We remain
+solely responsible for our audit opinion.
+We communicate with those charged with governance
+regarding, among other matters, the planned scope and timing
+of the audit and significant audit findings, including any
+significant deficiencies in internal control that we identify during
+our audit.
+Our audit opinion on the consolidated financial statements does
+not cover the other information and we do not express, any form
+of assurance conclusion thereon, except for selected qualitative
+and quantitative sustainability disclosures for which we
+performed an independent assurance engagement and issued
+an Independent Assurance Report.
+Other Legal and Regulatory
+Requirements
+The Executive Board of SAP SE is responsible for the
+information other than the consolidated financial statements
+and auditor's report thereon (the other information). The other
+information comprises the Integrated Report published on the
+website of SAP SE, including the Annual Report on Form 20-F,
+except for the annual and consolidated financial statements, the
+combined group management report by the SAP Group and the
+management report of SAP SE and our auditor's report thereon.
+Our testing did not identify any significant exceptions in the
+operation of controls. Based on our performed sensitivity
+analysis we concluded that SAP applied a balanced set of
+assumptions in determining the recoverable amount (fair value
+less cost of disposal). The valuation results for the goodwill of
+SAP Business Network are consistent with our internal
+projections. We did not identify any material errors in valuation
+methodologies applied or in the calculations made.
+Our Observations
+SAP has developed an adequate framework for determining the
+accounting treatment for its software licenses revenue. Our
+testing did not identify any significant exceptions in the
+operation of controls. The disclosures appropriately describe
+this framework. For the vast majority of the software
+arrangements entered into during 2016, it was clear which of
+SAP's revenue policies should apply. Where there was room for
+interpretation, SAP's judgment was balanced and appropriate.
+We did not identify any material errors in calculations.
+Income tax exposures
+Refer to note (3b) - Relevant Accounting Policies, note (3c) -
+Management Judgments and Sources of Estimation Uncertainty,
+and note (10) - Income Tax.
+The Financial Statement Risk
+SAP operates in multiple tax jurisdictions with complexities of
+transfer pricing, changing tax laws, and intercompany financing
+transactions. The determination of provisions for tax
+contingencies requires SAP to make judgments on tax issues
+and develop estimates regarding SAP's exposure to tax risks.
+Our Response
+SAP regularly engages external experts to provide tax opinions
+to support their own risk assessment. We involved our tax
+specialists to evaluate these tax opinions. Our specialists also
+assessed the correspondence with the relevant tax authorities
+and analyzed and evaluated the assumptions used to determine
+tax provisions based on our knowledge and experiences of the
+current application of the relevant legislation by authorities and
+courts. Through our international network we involved tax
+specialists with the appropriate knowledge on the respective
+local tax rules and regulations who reported the results of their
+assessment to us. We also assessed the adequacy of SAP's
+disclosures about income taxes and uncertain tax positions.
+Our Observations
+SAP's judgments as to the amounts recognized as tax expense
+and provisions for tax contingencies as at December 31, 2016
+are appropriate. The disclosures provide a balanced description
+of the current status of tax claims and risks.
+Goodwill impairment test for SAP Business
+Network
+Refer to Note (3c) - Management Judgments and Sources of
+Estimation Uncertainty, Note (15) - Goodwill and Intangible
+Assets
+The Financial Statement Risk
+SAP performed the annual goodwill impairment test at the level
+of its operating segments as there are no lower levels within
+SAP at which goodwill is monitored for internal management
+purposes. SAP's acquisitions led to a material goodwill in the
+SAP Business Network Segment in which SAP mainly markets
+and sells the cloud offering developed by SAP Ariba, SAP
+Fieldglass and Concur. Goodwill allocated to the SAP Business
+Network is material as of December 31, 2016 (16,8% of
+consolidated balance sheet total) and the impairment test
+involves significant judgment. The key assumptions relate to the
+determination of the peer group, budgeted revenue growth,
+budgeted operating margins, pre-tax discount rates and
+terminal growth rates.
+Our Response
+SAP has implanted controls designed to ensure that the
+calculation of the recoverable amount (in the specific case fair
+value less cost of disposal) for SAP Business Network is
+appropriate. We tested the design and operating effectiveness
+of these controls. We involved our valuation specialists to
+assess the valuation methodologies applied and key
+assumptions used in measuring the fair value less cost to
+disposal and to test the mathematical accuracy of the
+discounted cash flow and other valuation models. We evaluated
+SAP's assumptions by comparing the fair value estimates to our
+44
+To Our Stakeholders | Independent Auditor's Report
+own expectations and performed independent sensitivity
+analysis for each key assumption.
+Our Observations
+Information Other than the Consolidated
+Financial Statements and Auditor's Report
+thereon
+Supervisory Board: Other
+87,875,732 SAP shares on December 31, 2016 (December 31,
+2015: 90,262,686 SAP shares).
+R&D expense in 2016 (IFRS)
+Additional features in the Concur Invoice solution to help
+ensure a three-way match between purchase, receipt, and
+invoicing
+Expansion of global tax capabilities
+Quickbooks solutions
+Integration with the SAP ERP Financials and Intuit
+User interface improvements and the addition of many
+region-specific partners to our ecosystem
+-
+New innovations for travel, expense, and accounts payable
+automation in Concur solutions include:
+With more than 45 million users worldwide, our acquired
+company Concur is the world leader in travel and expense
+management solutions. In 2016, Concur continued to deliver on
+our vision of an open cloud platform for travel and expense
+management that enables an effortless experience for end users
+as well as finance departments. It provides total transparency
+into employee travel and spending, wherever and whenever it
+happens.
+Light enablement - This interactive e-mail service eliminates
+the complexity that buyers face in onboarding and
+connecting suppliers, letting them send purchase orders and
+receive order confirmations and invoices in just a few clicks.
+Open platform - Ariba Network offers an open application-
+programming interface (API) capability that allows partners
+to add functionality and extend solutions for all industries and
+business needs.
+Guided buying - A new buying experience automatically
+leads employees to goods and services they need to do their
+jobs and execute purchases in compliance with company
+policies.
+Ariba Network is the world's largest business network, with
+more than 2.5 million connected companies trading over
+US$885 billion of commerce on the network, which has grown
+its commerce volume close to 20% year-over-year. In 2016, we
+unveiled innovations that help businesses achieve efficient,
+intelligent connections and frictionless transactions across the
+entire source-to-pay process:
+Included in the business networks portfolio are SAP's market-
+leading Concur, SAP Ariba, and SAP Fieldglass solutions, which
+are at the center of our business network strategy.
+Connecting Companies with Business Networks
+Our business networks are best-in-class cloud applications that
+connect a global ecosystem of customers, suppliers, and
+partners. The products and services go beyond the four walls of
+a business to integrate and connect systems, services, partners,
+and data - creating more efficient, more powerful, and far
+simpler ways to manage key business functions. They provide
+the outcomes and experiences business users need through
+open and connected platforms.
+By providing leading omnichannel customer engagement and
+commerce solutions across any touch point and channel, we
+enable organizations (both business-to-consumer and business-
+to-business) to deliver contextual, consistent, and relevant
+experiences - regardless of channel or device - throughout the
+customer journey.
+Customer Engagement and Commerce (CEC)
+Today's customers are digitally connected, socially networked,
+and individually empowered, changing the rules of engagement.
+Our integrated front-office suite encompasses a holistic offering
+across customer experience, commerce, marketing, sales,
+billing, and services.
+We focus on delivering a simple and intuitive UX for our HCM
+suite through mobile device or desktop.
+Talent management - Our suite comprises solutions for all
+pillars of talent management, recruiting (marketing and
+management), onboarding, performance management,
+development, succession planning, compensation planning
+and administration, learning, and workforce analytics.
+Core human resources - SAP SuccessFactors Employee
+Central and SAP SuccessFactors Employee Central Payroll
+solutions cover the administrative tasks required to manage
+an organization's workforce. More specifically, this includes
+HR administration, payroll, position management, global
+benefits, time and attendance, shared services, and
+employee and manager self-service capabilities. The
+solutions act as the key source of employee and worker data
+and typically integrate with hundreds of external and internal
+systems, including SAP S/4HANA. At the end of 2016,
+customers for SAP SuccessFactors Employee Central
+numbered more than 1,580.
+Our human capital management (HCM) offerings, including SAP
+SuccessFactors solutions, help organizations increase the value
+of their total workforce by developing, managing, engaging, and
+empowering their people. SAP SuccessFactors HCM Suite
+addresses a full range of HR needs and encompasses the
+following:
+Human Capital Management
+In addition, we are building other functional innovations that
+serve specific lines of business, for example:
+Combined Management Report | Products, Research & Development, and Services
+56
+Sustainability
+Supply Chain
+Sourcing and Procurement
+Service
+SAP Fieldglass solutions help simplify procuring and managing
+external workforce services, connecting businesses in real time.
+In 2016, more than 3.1 million workers in approximately 135
+countries were connected using the solution.
+Market changes, including globalization and access to talent,
+have led many organizations to increasingly rely on contingent
+workers and service providers to achieve business goals. SAP
+Fieldglass cloud-based solutions also help companies engage
+and optimize all forms of talent. The software dynamically
+Combined Management Report | Products, Research & Development, and Services
+57
+Combined Management Report | Products, Research & Development, and Services
+58
+SAP Cloud Platform is a digital enterprise platform offering the
+following:
+With SAP Cloud Platform, our in-memory platform-as-a-service,
+companies can rapidly build, run, and extend modern business
+applications. It offers comprehensive capabilities to help
+business users and developers create better, more agile
+applications in less time. Customers can apply, among other
+things, mobile services, advanced analytic tools, state-of-the-art
+authentication mechanisms, and social functionality. For
+maximum flexibility, portability, and agility, we use open
+technologies.
+- Integrate cloud and on-premise SAP applications
+Extend cloud and on-premise SAP applications
+Build new applications for differentiating LoB processes
+SAP Cloud Platform - Differentiating
+Business with a Digital Enterprise Platform
+In the digital economy, in addition to standard applications,
+companies need a highly flexible platform that allows them to do
+the following:
+At the same time, our UX strategy focuses on empowering our
+customers and partners to design their own UX journey and
+execute on it - through a rich portfolio of services, educational
+offerings, and tools and technologies to design, develop, and
+deliver a simplified UX.
+Support in deciding what needs to be done next
+Ability to perform quick and informed actions
+- Transparency on items needing attention and timely
+notifications
+Direct access to relevant information and apps
+With SAP Fiori 2.0, users can get their work done faster and
+more effectively, with:
+User experience (UX) is about meeting the user's needs in the
+most effective and enjoyable way. Our understanding of how to
+create true innovation manifests itself in the award-winning SAP
+Fiori UX. The concept and design principles are key components
+in our design-led development process, which helps ensure the
+delivery of SAP Fiori innovations through all SAP applications.
+Sales
+Keeping User Experience in Focus
+SAP Business One: Our integrated ERP application is
+available on premise or through a partner-hosted cloud.
+Today, more than 2,000 SAP Business One customers run
+the application on SAP HANA.
+SAP Business ByDesign: Our ERP cloud solution is targeted
+to the midmarket and subsidiaries of large enterprises. At the
+end of 2016, 99% of SAP Business By Design customers ran
+the solution on SAP HANA.
+SAP Anywhere: Our front-office solution for small businesses
+has been on the market for just over a year in China, the
+United Kingdom, and the United States. Currently, more than
+185 customers are running SAP Anywhere.
+-
+We offer a portfolio that extends the power of SAP HANA to
+support SMEs with their digital transformation that includes the
+followings solutions:
+Building Better Solutions for Small and
+Midsize Enterprises
+Building on many years of work in the healthcare and life
+sciences industries, SAP has deepened its investment in these
+areas. In 2016, we launched a SAP Connected Health platform
+with trusted partners. The platform supports new developments
+such as using very large data sets to conduct in-depth analysis
+of the human genome, proteome, and other biological data. It
+also enables a broad ecosystem of partners - including
+developers, researchers, and healthcare organizations - to
+accelerate the development and delivery of innovative, patient-
+centered solutions for improving health outcomes, reducing
+costs, and delivering connected healthcare services.
+SAP Connected Health
+Our business data network offers a comprehensive, people-first
+data-as-a-service solution that provides real-time, industry-
+specific, and data-driven benchmarks built on the world's
+largest repository of networked business data and enriched by
+key industrial and economic indicators. In 2016, we produced a
+beta version of the first data-driven service based on contingent
+workforce data. The highly personalized user experience helps
+customers discover their standing in the market so that they can
+take advantage of live recommendations and collaboration
+workflows that turn insights into action. Using data strategically
+in this way, customers can operate more efficiently and create
+new data-driven business models.
+Data Network
+In 2016, we continued to redefine how work gets done in the
+enterprise, with innovations in SAP Fieldglass solutions
+including streamlined services procurement templates and
+extended flexible talent-sourcing capabilities.
+matches business needs with the right combination of resources
+while helping to ensure visibility, compliance, and cost control.
+85%
+Our focus for SMEs, as with larger enterprises, is on cloud
+technology and simplified business processes for end users and
+partners. End-to-end accountability and increased investments
+in these core cloud ERP, on-premise ERP, and front-office
+solutions helps foster innovation and growth for the digital
+economy. Customers using SME solutions include small
+businesses and midsize companies in more than 100 countries.
+R&D/Engineering
+Marketing
+Manufacturing
+SAP for Retail
+SAP for Life Sciences
+SAP for Consumer Products
+Industry Portfolio
+Discrete manufacturing
+Industry Sector
+Consumer
+SAP covers 25 industries grouped in six industry sectors and 12
+lines of business:
+In addition to our on-premise suite SAP S/4HANA, we further
+strengthened our SAP S/4HANA Cloud offering, delivering the
+power of a digital core with the key benefits expected from a
+software-as-a-service solution. It provides the scalability, ease
+of management, and security required in today's digital
+economy. A quarterly release cycle helps ensure that customers
+can benefit from regularly delivered innovations with minimum
+disruption to their business.
+SAP S/4HANA Cloud - Delivering the Power of
+the Digital Core
+Customers recognize the benefits and power of SAP S/4HANA
+and, at the end of 2016, more than 5,400 customers had chosen
+the suite to support their digital transformation.
+into a full digital-age ERP system. It enables insight and
+understanding so businesses can predict outcomes and use that
+data to make decisions live, which helps companies stay
+competitive in the digital economy. SAP S/4HANA can replace a
+traditional ERP solution across all lines of business (LoBs), such
+as finance, human resources, sales, service, procurement,
+manufacturing, asset management, supply chain, and research
+and development (R&D).
+55
+Combined Management Report | Products, Research & Development, and Services
+SAP for Wholesale Distribution
+SAP for Aerospace & Defense
+Available in the cloud, on premise, or as a hybrid deployment, in
+2016, SAP S/4HANA evolved from a finance-focused offering
+Integrated Connecting not only customer functions but
+also people, things, and businesses
+Intelligent - Going beyond automation to provide predictive
+suggestions
+Immediate - Empowering business users with insights to act
+in the moment
+SAP S/4HANA, our next-generation business suite, allows our
+customers to embrace the digital economy. The digital core is
+the foundation for running a Live Business:
+SAP S/4HANA - Reimagining the Business Suite
+for the Digital Age
+Running Business with Modern Business
+Applications and Business Networks
+Our cloud-first strategy requires a very strong offering to handle
+Big Data in the cloud. With SAP Cloud Platform Big Data Service,
+which is powered by SAP HANA, we run multitenant-aware
+Hadoop systems and provide end-to-end capabilities to
+efficiently manage and scale Big Data initiatives.
+applications that leverage advanced analytic processing and
+empowers all users with deeper insight into any data from
+anywhere.
+With our second version of SAP HANA, we launched a truly next-
+generation platform. It enables the reduction of time-consuming
+database and data management tasks and delivers intelligent
+SAP HANA is our in-memory computing platform that lets
+companies accelerate business processes, deliver more
+business intelligence, and simplify their IT environment.
+SAP HANA removes the burden of maintaining separate legacy
+systems and siloed data, so companies can run live and
+business people can make better business decisions in the new
+digital economy. Emphasizing our cloud-first strategy,
+SAP HANA can be deployed on several public cloud
+infrastructures.
+SAP HANA - Enabling Business with a
+Digital Data Foundation
+Making companies' digital transformations possible with SAP
+Digital Business Services
+Reinventing business with machine learning and the
+Internet of Things
+Based on SAP HANA, SAP S/4HANA software can store and
+process huge amounts of data while significantly reducing an
+organization's data footprint. This means our customers can
+save time and cost.
+Analytical capabilities
+SAP for Automotive
+SAP for Industrial Machinery &
+Components
+Human Resources
+Finance
+SAP for Sports & Entertainment
+SAP for Telecommunications
+SAP for Travel & Transportation
+Asset Management
+Commerce
+SAP for Professional Services
+SAP for Media
+& Operations
+SAP for Engineering, Construction
+SAP for Public Sector
+SAP for Higher Education &
+Research
+SAP for Healthcare
+Lines of Business
+Services
+As a modular integrated suite, SAP S/4HANA is the backbone of
+a company. And, at the same time, we are building functional
+innovations for LoBs and industries to address our customers'
+specific and evolving needs.
+SAP for High Tech
+Innovating for LoBs and Industries
+SAP S/4HANA Cloud was developed to co-exist in a
+heterogeneous system landscape with native integration to
+other SAP solutions and open interfaces for further integration
+and extensions using SAP Cloud Platform (formerly called SAP
+HANA Cloud Platform). The solution also supports specific
+industry and LoB requirements with preconfigured content from
+SAP Best Practices packages and uses the award-winning SAP
+Fiori user experience (UX) to provide simplified, role-based
+usability.
+SAP S/4HANA Enterprise Management Cloud solution provides
+a next-generation ERP suite in the cloud with integrated, end-to-
+end processes.
+SAP S/4HANA Cloud is comprised of various solutions targeted
+to meet the specific business needs of our customers and
+enable their journey to the cloud. For example, the
+SAP for Defense & Security
+Public services
+SAP for Insurance
+SAP for Banking
+Financial services
+SAP for Utilities
+SAP for Oil & Gas
+SAP for Mining
+SAP for Mill Products
+Energy and natural resources SAP for Chemicals
+Extending Our Reach Through a Broad Ecosystem
+SAP's ecosystem and partners extend our reach in the
+marketplace. We work closely with more than 15,000 partners
+worldwide to provide SAP solutions for our customers. Partners
+continue to drive SAP S/4HANA and our solutions for small
+businesses and midsize enterprises (SMEs) - SAP Business
+ByDesign and SAP Business One - to prospects on behalf of
+SAP, accounting for more than 88% of all new SAP customers.
+-
+Access to SAP applications, processes, and data
+-
+Share of more predictable
+Total revenue
+Growth
++6% to +8%
+€18.43bn
+Cloud and software revenue
+€8.0bn to €8.5bn
+€3.8bn to €4.Obn
+€2.99bn
+Cloud subscriptions and
+support revenue
+Enabling business with a digital data foundation
+Ambition
+(non-IFRS)
+2020
+61%
+constant currencies)
+(non-IFRS)
+2016
+ΚΡΙ
+Strategic Objective
+Outlook for 2017 and Ambitions for 2020
+53
+53
+Combined Management Report | Strategy and Business Model
+Combined Management Report | Products, Research & Development, and Services
+60
+60
+- On-premise, cloud, and hybrid deployment options
+New implementations
+2017 Outlook
+(non-IFRS, at
+Landscape transformation
+€22.07bn
+€28bn to €29bn
+connected companies using
+Ariba Network
+€3,044 m
+>2.5 m
+SAP S/4HANA customers
+>5,400
+Services
+Products, Research &
+Development, and
+Combined Management Report | Strategy and Business Model
+54
+54
+* Support and cloud subscriptions - share of total revenue
+84% to 86%
+84% to 86%
+€23.2 to €23.6bn
+85%
+Employee Engagement
+35% to 40%
+21% to 23%
+19.2%
+Customer Net Promoter Score
+€8.5bn to €9.0bn
+€6.8bn to €7.0bn
+€6.63bn
+Operating profit
+Customer Loyalty
+Profitability
+In 2016, we continued to give top priority to supporting our
+customers on their individual paths into the digital economy,
+defining our strategy around the following cornerstones:
+70% to 75%
+Employee Engagement Index
+Empowering Our Customers to
+Become Digital Businesses
+System conversion
+SAP Value Assurance Service Packages
+2,282
+2,261
+2,845
+3,044
+Research and Development (IFRS)
+€ millions | change since previous year
+SAP's strong commitment to R&D is reflected in our
+expenditures (see figure below).
+Investing in Research and
+Development
+We draw on the ideas of customers, partners, startups,
+academia, and, most importantly, our own employees. We want
+to foster organic innovation and support the transformation of
+great ideas into profitable business.
+Future enterprise applications - Enabling companies to
+successfully lead the next economic revolution by developing
+game-changing business applications to process intangible
+assets, provide contextual user assistance, and manage new
+business models.
+59
+Combined Management Report | Products, Research & Development, and Services
+the future and its impact on existing products and innovation
+potential of blockchain across industries.
+Machine learning - Making all existing SAP solutions
+intelligent, bringing machine-learning services and APIs to
+our platform, and building intelligent business solutions in
+new and adjacent markets. To emphasize the importance of
+this topic, we have introduced the new brand SAP Clea that
+represents our entire machine learning portfolio.
+Blockchain - Exploring the potential of digital finance to
+radically change how business transactions are conducted in
+2,331
+Through the SAP Innovation Center concept, we explore
+unconventional ideas and develop inspiring proofs of concept in
+a startup-like environment. We strive to open up new markets
+for SAP software and accelerate the integration of emerging
+technologies into our core products. Some of these innovations
+include:
+Research and Innovation - Innovating for Future
+Growth
+Our loT solutions, now marketed under the new SAP Leonardo
+brand, help companies digitally transform their manufacturing,
+logistics, and asset management processes and respond to the
+needs of a digital business in a highly individualized, consumer-
+driven economy. We strive to become a trusted partner for loT
+that helps our customers link sensor data with business
+processes and thereby add value. With our end-to-end SAP
+Leonardo solutions for connected logistics, connected
+manufacturing, and connected assets, for example, we offer a
+comprehensive portfolio of standard loT software, both cross-
+industry and industry specific. Furthermore, in November 2016,
+we announced the SAP IoT Application Enablement toolkit,
+providing services that allow our customers to build their own
+IoT applications.
+-
+There is no topic that typifies the digital transformation more
+than the Internet of Things (IoT). The loT is a network of physical
+objects with embedded sensors to detect their environment and
+interact with business processes and systems. This builds a
+foundation for entirely new business models and completely
+digitized, connected businesses. Intelligent sensors, ubiquitous
+connectivity, and unlimited data storage are driving innovation
+and leading to a deeper integration of people, processes, data,
+and things in one connected world.
+Reinventing Business with the Internet of
+Things and Machine Learning
+For the SAP Digital Boardroom solution, which offers executive
+decision makers ease and elegance in accessing company data
+in real time, we released new industry-specific and LoB-specific
+content for consumer products, chemicals, engineering,
+construction, operations, and public sector, as well as HR,
+finance, and marketing LoBs.
+We consolidated analytical functionalities across our product
+portfolio in one cloud analytics solution - SAP BusinessObjects
+Cloud. Built on SAP Cloud Platform, it helps companies
+overcome the challenge of point solutions and data silos spread
+throughout the organization with enterprise-wide access to
+analytics delivered through a public cloud experience.
+With SAP BW/4HANA, we launched next-generation data
+warehouse software, delivering a simpler and more powerful
+way to achieve real-time analytics by connecting historical data
+with live data stored in SAP and third-party software
+environments. This integrated data warehouse solution is
+optimized to fully leverage the SAP HANA platform and
+simplifies development, administration, and the user interface,
+resulting in enhanced business agility.
+Business leaders need to be able to discover and communicate
+meaningful and actionable insights in data so they can make
+decisions in real time. Our analytics offerings help companies to
+apply analytics to business data to describe, predict, and
+improve business performance, recommend action, and guide
+decision making.
+Close partnerships with customers and other leading technology
+companies are key to providing best-in-class solutions. In 2016,
+we announced a strategic partnership with Apple Inc. to build a
+SAP Cloud Platform software development kit for iOS that
+enables businesses, designers, and developers to quickly and
+efficiently build their own native iOS apps for iPhones and iPads.
+Steering Business with Real-Time Analytics
+SAP Cloud Platform the center of gravity for a modular suite of
+business applications.
+Furthermore, we are positioning the SAP Cloud Platform
+Integration service as the default integration infrastructure for
+SAP solutions, whether in the cloud or on premise. We deliver
+content to support end-to-end integration scenarios. Being able
+to connect and integrate all best-of-breed applications to our
+digital core and to any custom-built solution makes
+Robust business services that customers and independent
+software vendors can consume to build solutions
+With businesses shifting, leading our customers through change
+is more important than ever before. We do this every day by
+empowering our employees and collaborating with our
+customers to develop world-class software and next-generation
+solutions. We further strengthened our global research and
+development (R&D) efforts in 2016 by investing in our SAP Labs
+network and expanding our SAP Innovation Center locations in
+India, Israel, and the United States.
+Our SAP Value Assurance service packages for SAP S/4HANA
+cover all project phases and scenarios to help customers
+migrate from SAP ERP to SAP S/4HANA. This includes:
+17%
+5%
+SAP Digital: Expanding the reach of SAP Store and
+messaging services
+Next-generation support
+SAP Value Assurance service packages for SAP S/4HANA
+Latest generation of SAP Solution Manager and SAP Model
+Company
+-
+-
+SAP Digital Business Services offers an entire portfolio of
+services. Some of our top innovations in 2016 to help customers
+transform to a digital business include:
+Innovations from SAP Digital Business
+Services
+We are accelerating the realization of the digital enterprise with
+game-changing engagements for predictive maintenance and
+warranty, analytics to manage Big Data, and connected
+intelligent manufacturing, among others.
+Through our SAP Digital Business Services unit, SAP aims to
+standardize services, not recreate them each time - helping
+companies and organizations reimagine their businesses in the
+new economy using a digital business framework.
+SAP offers a comprehensive portfolio of services and support
+designed to help our customers deploy their software faster and
+more efficiently - so they can focus more on innovations and
+realize faster, greater ROI. We provide tailored support to our
+customers to help them run live in the digital economy.
+Making Digital Transformation
+Possible with SAP Digital Business
+Services
+While our intellectual property is important to our success, we
+believe our business as a whole is not dependent on one
+particular or a combination of patents.
+SAP actively seeks intellectual property protection for
+innovations and proprietary information. Our software
+innovations continue to strengthen our market position in
+business solutions and services. Our investment in R&D has
+resulted in numerous patents. As at December 31, 2016, SAP
+held a total of more than 8,000 validated patents worldwide. Of
+these, 841 were granted and validated in 2016.
+7%
+Patents
+Strategy consulting
+Obtaining certification for products in different markets
+Patent attorney services and fees
+Translating, localizing, and testing products
+Total R&D expense not only includes our own personnel costs
+but also the external cost of work and services from the
+providers and cooperation partners we work with to deliver and
+enhance our products. We also incur external costs for the
+following:
+In 2016, our non-IFRS R&D expense as a portion of total
+operating expenses increased from 18.3% to 18.4% year over
+year. Our IFRS R&D expense ratio increased from 17.2% to
+18.0%. At the end of 2016, our total full-time equivalent (FTE)
+headcount in development work was 23,363 (2015: 20,938).
+Measured in FTEs, our R&D headcount was 28% of total
+headcount (2015: 27%).
+2016
+2015
+2014
+* The outlook was communicated in January 2016 and raised in October 2016.
+2013
+2012
+1%
+2%
+Professional development of our R&D workforce
+revenue*
+We will continue to deliver transformational innovations in the
+platform, database, and analytics space. We want developers in
+our entire ecosystem and our customers to turn to SAP as their
+reference cloud platform and API hub. Finally, we want to ensure
+that security remains a trusted feature of all SAP platforms and
+applications.
+82%
+鱼
+The United Nations has defined 17 Sustainable Development
+Goals (SDGs) to transform the world's economy, society, and
+environment. These goals are a universal call to action to end
+poverty, protect the planet, and ensure that all people enjoy
+peace and prosperity. We consider the most relevant of these
+goals in the context of our own vision and higher purpose and
+they inspire us to achieve this vision.
+Environment: Climate change touches everyone and will
+impact the lives of future generations. SAP software and
+technology is helping our customers make the world more
+energy efficient, and drive more sustainable supply chains
+around the world.
+Society: Health, education, and public safety are critical for a
+vibrant society. SAP software and technology is addressing
+complex challenges around disease prevention and
+detection, as well as providing solutions for smarter
+government and smarter cities.
+Economy: Economic empowerment comes from purpose-
+driven work. SAP software and technology enables
+customers to innovate and build strong industries and
+infrastructure and to protect the privacy of individuals and
+organizations.
+-
+We execute on our vision by empowering our customers to
+become digital businesses through SAP technology, so they can
+address the challenges facing our world today and have an
+impact in three vital areas:
+SAP's vision is to help the world run better and improve people's
+lives. We strive to make our world a better, more sustainable
+place and help solve some of its most complex problems. Our
+innovations give us the power to help tackle these issues by
+giving our customers, partners, and consumers the tools they
+need to have an impact.
+Impact Through Innovation
+Strategy and Business
+Model
+Economy
+Differentiating business with a digital enterprise platform
+Steering business with real-time analytics
+Invest in disruptive technologies
+To enable sustainable success, we must prepare for the future.
+We will continue to incubate disruptive technologies across a
+number of initiatives. We have begun incubating new businesses
+using an "open innovation" approach under the umbrella of the
+SAP.io program with focus on both internal and external
+startups. We are aggressively investing in making our business
+applications "intelligent" with machine learning. We are
+investing in delivering personalized medicine through a
+connected health platform - aligned with our vision of improving
+society and healthcare. At the same time, we continue to create
+reliable security solutions across all of our products.
+For more information about these investments, see the
+Products, Research & Development, and Services section.
+Recruit and retain the right talent
+We cannot bring innovations to our customers without capable,
+driven employees. As we strive to be the best place to work in
+the enterprise software industry, we look to a diverse and
+engaged workforce to drive innovation and value for our
+customers. Recruiting the right talent and unleashing their
+innovative power is as crucial for SAP as continuing to develop
+the talent of existing employees to allow them to realize their full
+potential.
+For more information, see the Employees and Social
+Investments section.
+52
+62
+Combined Management Report | Strategy and Business Model
+Keeping a balanced focus on growth
+We built an open cloud platform with cloud application
+programming interfaces (APIs), which means the platform can
+communicate with multiple sources to support a strong
+ecosystem - allowing developers from companies of all sizes to
+extend our applications or create new solutions for the digital
+economy. Moreover, as the rapidly growing data management
+and database market moves to the cloud, our cloud platform
+offers companies planning, predictive, visualization, and mobile
+capabilities.
+We take a balanced approach on how to grow. We will continue
+to focus on organic investments in technology and innovations
+to drive our short-term and midterm growth ambitions. We will
+continue to look at unleashing the full potential of our
+employees' talent as well as strategic partnerships with our
+ecosystem to foster innovation.
+T
+Achieving the Vision
+Scale our platform as the innovation platform for
+our ecosystem partners
+develop best-in class, line-of-business (LoB) cloud applications
+combined with real-time analytics, loT capabilities, and industry
+add-ons. Finally, we will leverage our expertise to deliver
+solutions to help small businesses and midsize companies be
+successful.
+We will continue to deliver market-leading applications for ERP,
+whether in the cloud or on premise. Further, we will continue to
+Continue to develop market-leading applications
+Our core ERP software is the historic foundation of our strength.
+To maintain our market leadership position as this market
+rapidly shifts to the cloud, we will continue to innovate and offer
+the agility and flexibility our customers require.
+Invest in disruptive technologies
+Recruit and retain the right talent
+Scale our platform as the innovation platform for our
+ecosystem partners
+Continue to develop market-leading applications
+-
+-
+In 2016, we have increased our focus on innovation as it is the
+key to long-term success. Our strategy to be the most
+innovative cloud company powered by SAP HANA, will help us
+deliver the digital innovation that our customers need. To
+execute on this strategy, we are focusing our efforts on the
+following key areas:
+Society
+In the past years, we have built our success in the business
+applications market by expanding our product portfolio to help
+companies meet the needs of the digital economy. We have
+organically innovated with groundbreaking technology such as
+SAP HANA and software such as SAP S/4HANA. We have also
+expanded our portfolio through acquisitions by integrating
+valuable assets in the cloud and business network spaces.
+We want to build on the trust of our existing customers and earn
+the trust of new customers. For more information, see the
+Customers section.
+Our platform leverages existing SAP assets that are
+complemented by new cloud capabilities and the real-time
+applications available in our next-generation business suite
+SAP S/4HANA. Our solutions and services - combined with the
+talent and expertise of more than 84,100 colleagues and a broad
+global ecosystem of partners - puts us in a unique position to
+enable our more than 345,000 customers to fulfill their goals.
+By providing a technology platform for innovation and
+digitalization, we help our customers with the challenges of
+digital transformation. Our solutions enable businesses,
+governments, and non-profit organizations in more than 180
+countries to become data-driven "live" businesses.
+Organizations need to digitally transform their business
+processes and business models to be able to succeed in today's
+marketplace. They need to become agile organizations that are
+laser focused on driving customer value. They also must
+become data-driven and run their business on real-time
+information to react to market and customer demands.
+51
+Combined Management Report | Strategy and Business Model
+Technology is transforming both our society and the way we do
+business. People and things are connected like never before.
+Entire industries are being disrupted by innovations that seemed
+unimaginable only a few years ago. Technology trends such as
+cloud computing, Big Data, the Internet of Things (IoT), and
+artificial intelligence go hand in hand with social trends that are
+changing how we live and work.
+To execute our vision, we are helping customers meet the
+challenges of today's changing world, and at the same time,
+enabling them to have a positive impact across the economy,
+society, and the environment.
+Supporting our customers' digital
+transformation
+Environment
+Executing on our strategy
+Additionally, we may also acquire targeted "tuck-in"
+Running business with modern business applications and
+business networks
+-
+(non-IFRS, at constant currencies)
+Achievement
+(non-IFRS, at constant currencies)
+2016
+2016
+Outlook*
+ΚΡΙ
+Strategic Objective
+Outlook and Results for 2016
+The table below provides an overview of the specific key
+performance indicators (KPIs) used to measure performance,
+as well as our goals and actual performance.
+Employee engagement
+Cloud subscriptions and
+support revenue
+Customer loyalty
+Growth
+-
+We believe the most important indicators to measure our
+success comprise both financial and non-financial indicators:
+Measuring Our Success
+Activity in our business networks
+Licensing of on-premise software products and solutions
+Use of our cloud solutions
+Support, professional services, development, training, and
+other services
+We derive our revenue from fees charged to our customers for:
+Financial Business Model
+technologies to add to our broad solution offerings and improve
+coverage in key strategic markets. In 2016, SAP made the
+following smaller tuck-in acquisitions:
+Profitability
+€3.00bn to €3.05bn
+For more information about our consolidated investment funds,
+see the Notes to the Consolidated Financial Statements, Note
+(34).
+Growth
+€3.01bn
+-
+Altiscale, a company providing high-performance, scalable
+Big Data-as-a-service (BDaaS) solutions, will help SAP
+accelerate and operationalize the deployment of Big Data in
+the enterprise.
+Fedem Technology, a forward-thinking loT company, will
+help SAP build next-generation, end-to-end loT solutions that
+not only support predictive maintenance but also Industry
+4.0 scenarios.
+Hipmunk, a leader in innovative travel search, will bring a
+consumer-like experience for business travelers.
+PLAT.ONE, a leading enterprise-grade loT provider, will help
+SAP enhance complex loT capabilities in SAP Cloud Platform
+(formerly called SAP HANA Cloud Platform).
+Investing in the next generation of
+technology leaders
+For 20 years, through venture capital funds managed by
+Sapphire Ventures, SAP has supported entrepreneurs that
+aspire to build industry-leading businesses. Sapphire Ventures
+currently has over US$2 billion under management and has
+invested in more than 130 companies on five continents - in
+growth-stage technology companies as well as early-stage
+venture capital funds. Sapphire Ventures pursues opportunities
+in which it can help fuel growth by adding expertise,
+relationships, geographic reach, and capital. It places a
+particular focus on companies in Europe, Israel, and the United
+States.
+Additionally, we launched a new SAP.io Fund to focus on
+strategic, early stage investments aligned with our SAP.io
+innovation initiatives. This US$35 million fund will focus on
+"catalyzing" a startup ecosystem that can leverage or enrich
+SAP data sets, platform technologies, or business workflows. It
+is operated in partnership with Sapphire Ventures.
+Employee Engagement Employee Engagement Index
+-
+25%
+Customer Net Promoter Score
+Customer Loyalty
+€6.60bn
+Operating profit
+€6.5bn to €6.7bn
+Profitability
++8%
+19.2%
+Cloud and software revenue
++6.5% to +8.5%
+-932
+116
+-1,048
+-886
+General and administration
+-1,005
+Restructuring
+-5,320
+462
+-5,782
+119
+-28
+Other operating income/expense, net
+0
+-621
+621
+-3
+0
+-3
+1
+0
+1
+Total operating expenses
+-16,928
+1,494
+28
+-5,716
+15,242
+-6,265
+Cost of services
+-2,976
+-2,932
+167
+-2,765
+Total cost of revenue
+-15,434
+-6,583
+598
+-5,985
+-6,245
+683
+-5,562
+Gross profit
+15,479
+603
+16,081
+14,548
+694
+Research and development
+-3,044
+201
+-2,843
+-2,845
+202
+-2,643
+Sales and marketing
+549
+-192
+5,135
+-16,541
+0
+-13
+Attributable to non-controlling
+4,509
+1,445
+3,064
+4,671
+1,024
+3,646
+-13
+Attributable to owners of parent
+1,445
+3,056
+4,658
+1,024
+3,634
+Profit after tax
+-1,586
+-935
+-1,703
+4,501
+-474
+-8
+-8
+Combined Management Report | Performance Management System
+70
+3.77
+2.56
+3.90
+3.04
+Earnings per share, basic (in €)
+26.1
+23.4
+0
+26.8
+Effective tax rate (in %)
+30.5
+20.5
+29.7
+30.1
+23.3
+Operating margin (in %)
+Key ratios
+interests
+25.3
+-15,626
+-1,229
+6,087
+230
+Finance income
+net
+-256
+0
+6,348
+2,095
+4,252
+-256
+-234
+○
+O
+Other non-operating income/expense,
+6,605
+-28
+6,633
+1,498
+Operating profit
+Profit numbers
+-14,457
+2,084
+-234
+Income tax expense
+230
+0
+2,095
+3,991
+6,361
+1,498
+4,863
+Profit before tax
+-5
+0
+-5
+241
+-38
+-38
+Financial income, net
+-246
+0
+-268
+0
+-268
+Finance costs
+241
+0
+-246
+-3,089
+-651
+In 2016, we used the following key measures to manage our
+operating financial performance:
+Cloud subscriptions and support revenue (non-IFRS): This
+revenue driver comprises the main revenues of our fast-growing
+cloud business. We generate cloud subscriptions and support
+revenue when we provide software functionality in a cloud-
+based infrastructure (software as a service, or SaaS) to our
+customers; when we provide our customers with access to a
+cloud-based infrastructure to develop, run, and manage
+applications (platform as a service, or PaaS); and also when we
+provide hosting services for software hosted by SAP
+(infrastructure as a service, or laaS). Cloud subscriptions and
+support revenue are also generated when providing additional
+premium cloud subscription support beyond the regular
+support, which is embedded in the basic cloud subscription fees
+as well as business network services to our customers. We use
+the cloud subscriptions and support revenue (non-IFRS)
+measure both at actual currency and at constant currency.
+Cloud and software revenue (non-IFRS): We use cloud and
+software revenue (non-IFRS) and constant currency cloud and
+software revenue (non-IFRS) to measure our revenue growth.
+Our cloud and software revenue includes cloud subscriptions
+and support revenue plus software licenses and support
+revenue. Cloud subscriptions and support revenue and software
+revenue are our key revenue drivers because they tend to affect
+our other revenue streams. Generally, customers that buy
+software licenses also enter into related support contracts, and
+these generate recurring revenue in the form of support revenue
+provides additional insight into our sustained business success.
+New cloud bookings: For our cloud activities, we also look at
+new cloud bookings. This measure reflects the committed order
+entry from new customers and from incremental purchases by
+existing customers for offerings that generate cloud
+subscriptions and support revenue. In this way, it is an indicator
+for cloud-related sales success in a given period and for secured
+future cloud subscriptions and support revenue. We focus
+primarily on the average contract value variant of the new cloud
+bookings measure that takes into account annualized amounts
+for multiyear contracts. Additionally, we internally monitor the
+total contract value variant of the new cloud bookings measure
+that takes into account the total committed order entry
+amounts regardless of contract durations. There are no
+comparable IFRS measures for these bookings metrics. In
+addition to new cloud bookings, we use the measure "cloud
+backlog" to evaluate our sales success in the cloud business. We
+define cloud backlog as a measure that represents the volume of
+business that, as of period end, is contracted but not yet billed.
+Operating profit (non-IFRS): We use operating profit (non-
+IFRS) and constant currency operating profit (non-IFRS) to
+measure our overall operational process efficiency and overall
+business performance. See below for more information on the
+IFRS and non-IFRS measures we use.
+Cloud subscriptions and support gross margin (non-IFRS):
+We use our cloud subscriptions and support gross margin (non-
+IFRS) to measure our process efficiency in our cloud business.
+Cloud subscriptions and support gross margin (non-IFRS) is the
+Combined Management Report | Performance Management System
+67
+ratio of our cloud subscriptions and support gross profit (non-
+IFRS) to cloud subscriptions and support revenue (non-IFRS),
+expressed as a percentage.
+Measures We Use to Manage Our Non-
+Operating Financial Performance
+We use the following measures to manage our non-operating
+financial performance.
+Financial income, net: This measure provides insight into the
+return on liquid assets and capital investments and the cost of
+borrowed funds. To manage our financial income, net, we focus
+on cash flow, the composition of our liquid assets and capital
+investment portfolio, and the average rate of interest at which
+assets are invested. We also monitor average outstanding
+borrowings and associated finance costs.
+Days Sales Outstanding (DSO): We manage working capital by
+controlling the days sales outstanding (DSO) for operating
+receivables (defined as the average number of days from the
+raised invoice to cash receipt from the customer).
+Measures We Use to Manage Our Operating revenue is the share of more predictable revenue. This measure
+Financial Performance
+Measures We Use to Manage Overall
+Financial Performance
+Earnings per share (EPS) (IFRS and non-IFRS): EPS measures
+our overall performance because it captures all operating and
+non-operating elements of profit as well as income tax expense.
+It represents the portion of profit after tax allocable to each SAP
+share outstanding. EPS is influenced not only by our operating
+and non-operating business as well as income taxes but also by
+the number of shares outstanding.
+Effective tax rate (IFRS and non-IFRS): We define our effective
+tax rate as the ratio of income tax expense to profit before tax,
+expressed as a percentage.
+Operating, investing, and financing cash flows and free cash
+flow: Our consolidated statement of cash flows provides insight
+as to how we generated and used cash and cash equivalents.
+When applied in conjunction with the other primary financial
+statements, it provides information that helps us evaluate the
+changes of our net assets, our financial structure (including our
+liquidity and solvency), and our ability to affect the amounts and
+timing of cash flows to adapt to changing circumstances and
+opportunities. We use our free cash flow measure to determine
+the cash flow remaining after all expenditures required to
+maintain or expand our organic business have been paid off.
+This measure provides management with supplemental
+information to assess our liquidity needs. We calculate free cash
+flow as net cash from operating activities minus purchases
+(other than purchases made in connection with business
+combinations) of intangible assets and property, plant, and
+equipment.
+Measures We Use to Manage Our
+Non-Financial Performance
+In 2016, we used the following key measures to manage our non-
+financial performance in the areas of employee engagement,
+customer loyalty, and leadership trust:
+Employee Engagement Index: We use this index to measure the
+motivation and loyalty of our employees, how proud they are of
+our company, and how strongly they identify with SAP. The
+index is derived from surveys conducted among our employees.
+Applying this measure is recognition that our growth strategy
+depends on engaged employees.
+Customer Net Promoter Score (NPS): This score measures the
+willingness of our customers to recommend or promote SAP to
+others. It is derived from our annual customer survey that
+identifies, on a scale of 0-10, whether a customer is loyal and
+likely to recommend SAP to friends or colleagues, is neutral, or
+is unhappy. We introduced this measure in 2012, as we are
+convinced that we can achieve our financial goals only when our
+customers are loyal to, and satisfied with, SAP and our
+solutions. To derive the Customer NPS, we start with the
+percentage of "promoters" of SAP - those who give us a score
+of 9 or 10 on a scale of 0-10. We then subtract the percentage of
+"detractors" those who give us a score of 0 to 6. The method
+ignores "passives," who give us a score of 7 or 8.
+Leadership Trust Score: We use this score to further enhance
+accountability and to measure our collective effort to foster a
+work environment based on trust. It is derived from a question in
+our annual global employee survey that gauges employees' trust
+in our leaders. We measure leadership trust by using the same
+methodology as we do determining the Net Promoter Score
+(NPS).
+Value-Based Management
+Our holistic view of the performance measures described above,
+together with our associated analyses, comprises the
+information we use for value-based management. We use
+planning and control processes to manage the compilation of
+these key measures and their availability to our decision makers
+across various management levels.
+SAP's long-term strategic plans, including a multiyear financial
+plan through 2020, are the point of reference for our short-term
+and midterm planning and controlling processes. We initially
+identify future growth and profitability drivers at a highly
+aggregated level. In a first step, the resulting financial plan is
+broken down to (i) our deployment models “On Premise,"
+"Software as a Service/Platform as a Service," "Infrastructure
+as a Service," and "Business Networks", and (ii) functions such
+as development, sales, or administration. In a second step, the
+68
+Combined Management Report | Performance Management System
+We use the following measures to manage our overall financial
+performance:
+Total revenue (non-IFRS): We use nominal total revenue (non-
+IFRS) and constant currency total revenue (non-IFRS) to
+measure our growth. The total of cloud subscriptions and
+support revenue and software support revenue divided by total
+after the software sale. Support contracts cover standardized
+support services that comprise unspecified future software
+updates and enhancements. Software licenses revenue as well
+as cloud subscriptions and support revenue also tend to
+stimulate services revenue earned from providing customers
+with professional services, premium engagement services,
+training services, messaging services, and payment services.
+Measures We Use to Manage Our
+Financial Performance
+North America and Latin America
+(Americas) Region
+-
+The Dow Chemical Company, based in the United States,
+has decided to deepen their relationship in SAP through the
+investment in SAP HANA, including a future state vision
+around SAP S/4HANA in support of their business objectives
+Hershey, headquartered in the United States, is upgrading to
+the SAP S/4HANA suite to achieve enterprise connectivity
+through access to actionable information at the right time for
+everyone, anywhere. The large chocolate manufacturer will
+gain real-time insights from both operational and other data
+and can simplify global business processes to drive
+efficiencies and scale.
+Itaú Unibanco Holding, based in Brazil and one of the top 20
+banks in the world by market value, is currently using the SAP
+HANA platform. It recently added Ariba Network, through
+which Itaú joins the SAP marketplace for business-to-
+business transactions.
+Live Nation, the global leader for live entertainment based in
+the United States, has purchased Concur Travel & Expense to
+meet the needs for an end-to-end travel solution from travel
+request, to online and agent assisted travel planning through
+to trip reimbursement. Important in the selection process
+was a full-featured mobile app, exceptional end-user
+experience, robust analytics and reporting, the ability to
+integrate with existing Live Nation systems, and the flexibility
+to configure to their travel policy and business practices.
+Mexico Proyectos Y Desarollos chose SAP Ariba Buying,
+advanced edition, SAP Ariba Strategic Sourcing, and the
+SAP HANA platform to standardize operative, strategic
+sourcing, and management processes while achieving better
+corporate negotiations and reducing maverick purchases.
+The construction infrastructure company expects to
+transform procurement processes by leveraging
+Combined Management Report | Customers
+65
+99
+66
+technological innovation and fully achieve its functional and
+automatization needs.
+Asia Pacific Japan (APJ) Region
+-
+-
+Cathay Pacific, based in Hong Kong, chose SAP S/4HANA
+and the SAP HANA platform to simplify its business process,
+enable operational-level reporting directly from the airline
+company's operational system, and provide the foundation
+for further system migrations.
+China National Chemical Corporation (ChemChina),
+China's biggest chemical group and a Fortune Global 500
+company, has invested heavily in overseas acquisitions. It
+chose SAP S/4HANA, the SAP HANA platform, the SAP
+NetWeaver Master Data Management component, and the
+SAP BusinessObjects Planning and Consolidation application
+to keep pace with rapid organizational expansion. Through
+this partnership, ChemChina is leveraging SAP's leading
+technology to redefine its IT strategy, optimize IT
+infrastructure, improve efficiency and business insights, and
+prepare for a transition to Industry 4.0.
+NTUC Fairprice, one of Singapore's largest retailers, chose
+the SAP HANA platform, SAP Payroll Processing, and SAP
+SuccessFactors Recruiting Posting solutions to improve
+employee productivity and engagement. As a customer-
+oriented retailer, the company also strives to boost
+productivity and raise overall customer-satisfaction levels by
+simplifying processes, automating manual practices, and
+obtaining detailed insights from integrated analytics.
+Rockland Distilleries in Sri Lanka has chosen the SAP Hybris
+Cloud for Customer solution over competitors to lead the
+company through its digital transformation journey. The
+solution will help increase the productivity of its salespeople
+and gather business insights that will enable it to make
+strategic and transformational decisions.
+Roy Hill Mining Operation is an independent iron ore
+operation with a project to become the largest single ore
+mine in Australia. The project is turning to SAP software,
+including SAP S/4HANA, the SAP Multiresource Scheduling
+application, and the SAP Integrated Business Planning
+solution, to view its inventory in real time, make informed
+decisions on maintenance activities, and manage its supply
+chain costs more effectively.
+We use various performance measures to help manage our
+performance with regard to our primary financial objectives,
+which are growth and profitability, and our primary non-financial
+objectives, which are customer loyalty and employee
+engagement. We view growth and profitability as indicators for
+our current performance, while customer loyalty and employee
+engagement are indicators for our future performance.
+Management System
+Performance
+Combined Management Report | Customers
+To help companies invest in SAP solutions and associated
+services and hardware, SAP Payment services offers customers
+payment plans. SAP Payment services can help preserve
+liquidity, provide an alternative to credit from customers'
+existing banking relationships, and balance their budgetary
+priorities, while giving them the flexibility to choose their
+preferred solution.
+Helping Customers Invest
+planned total revenues and total expenses are allocated to the
+individual board areas. Budget administration and control,
+including budget adjustments applied during the year to reflect
+changes in priorities, to achieve efficiency targets and to reflect
+endogenous and exogenous factors, are handled at board area
+level. It is then the individual board member's responsibility to
+break down, in their board area, the allocated budgets and
+budget adjustments. The Executive Board's efforts to assess the
+performance of the company and components thereof is also
+done on the level of the board areas. Based on an integrated
+portfolio process running in parallel to the budgeting process we
+ensure aligned investment behavior across board areas with
+regards to specific solutions or solution areas. In a final step,
+customer-facing revenue targets and cost of sales and
+marketing targets are broken down into sales regions.
+·Targin, a large Russian multiproduct integrated oilfield
+service holding, will implement SAP S/4HANA as an
+introduction to the next generation of SAP software. SAP
+S/4HANA will support Targin in transforming its business
+enterprises and increasing the efficiency of its business
+processes to reduce downtime and increase inventory
+turnover and the company's market share.
+Inter Cars, the largest importer and distributor of automotive
+spare parts in Poland, chose the SAP Hybris Commerce
+Cloud solution to establish a full omnichannel platform that
+will address the business strategy and help the company
+achieve its goal to double its revenue within the next few
+years.
+Bilfinger, a German industrial services provider, selected
+SAP SuccessFactors HCM Suite, including the SAP
+SuccessFactors Employee Central solution, to standardize
+HR processes and increase workforce transparency. A
+further aim is to establish a global talent management model
+and increase workforce performance. The solutions will help
+Bilfinger drive its strategic objectives for productivity,
+consolidation, and compliance.
+and desktop access to important data immediately to help
+simplify and digitalize business processes.
+Barry Callebaut, based in Switzerland, is one of the world's
+leading suppliers of high-quality chocolate and cocoa
+products. It has implemented SAP solutions to integrate
+65,000 small-scale cocoa farmers in Côte d'Ivoire, enable
+sustainable cocoa farming, and improve the livelihood of
+farmers, their families, and their communities. The company
+recently went live with the SAP Rural Sourcing Management
+solution, an integrated, cloud-based solution running on SAP
+Cloud Platform. It provides farming organizations with mobile
+-
+Europe, Middle East, and Africa
+(EMEA) Region
+L'OCCITANE, a French natural and organic ingredient-based
+cosmetics and well-being retailer, chose the SAP
+SuccessFactors Employee Central and SAP SuccessFactors
+Recruiting solutions to streamline human resources
+processes and gain global visibility into its workforce. It also
+expects to attract and hire top talents and develop a
+workforce that helps to support the company's digital
+transformation and growth strategy.
+Based on our detailed annual plans, we determine the budget for
+the respective year. We also have processes in place to forecast
+revenue and profit on a quarterly basis, to quantify whether we
+expect to realize our financial goals, and to identify any
+deviations from plan. We continuously monitor the concerned
+units in the Group to analyze these developments and define any
+appropriate actions. Our entire network of planning, control, and
+reporting processes is implemented in integrated planning and
+information systems, based on SAP software, across all
+organizational units so that we can conduct the evaluations and
+analyses needed to make informed decisions.
+Non-IFRS Financial Measures Cited
+in This Report
+1
+10,572
+82
+10,654
+10,093
+0
+10,094
+Software licenses and support
+15,431
+3
+15,434
+113
+15,546
+14,928
+2
+14,930
+Cloud and software
+3,678
+39
+3,638
+O
+3,638
+Services
+10,571
+17,226
+17,214
+18,553
+125
+18,428
+5
+18,424
+11
+Some examples by region include the following customers:
+Software support
+1
+As in previous years, we provided our 2016 financial outlook on
+the basis of certain non-IFRS measures. Therefore, this report
+contains a non-IFRS based comparison of our actual
+performance in 2016 against our outlook in the Financial
+Performance: Review and Analysis section.
+Reconciliations of IFRS to Non-IFRS
+Financial Measures for 2016 and 2015
+Due to rounding, the sum of the numbers presented in the
+following table might not precisely equal the totals we provide.
+Combined Management Report | Performance Management System
+69
+69
+Reconciliation of IFRS to Non-IFRS Financial Measures for the Years Ended December 31
+€ millions, unless otherwise stated
+2016
+2015
+IFRS
+Adj. Non-IFRS Currency Non-IFRS
+Impact Constant
+IFRS
+Adj. Non-IFRS
+Currency
+Revenue measures
+2,993
+4,835
+4,893
+31
+4,862
+2
+4,860
+4,836
+Software licenses
+10
+2,286
+3,007
+12
+2,995
+2
+2,296
+We help companies transform into digital businesses. In 2016,
+we saw customers do so by licensing or subscribing to the full
+range of SAP software, from comprehensive solutions for large
+enterprises to the latest mobile apps.
+Cloud subscriptions and support
+For more information about the Customer NPS, see the
+Performance Management System section.
+22,067
+5
+Total revenue
+3,579
+0
+3,579
+113
+The approach consolidates services and embedded support in
+four distinct phases:
+-
+-
+Plan and safeguard - Defining the implementation strategy,
+including dependencies and prerequisites for the target
+architecture
+-
+Technical implementation – Focusing on the technical
+aspects of implementation, including data and system
+migration, high availability, and disaster recovery
+Migrate and implement - Implementing functions with
+preconfigured setup and ready-to-use business process
+templates, and analyzing operational impact
+Innovate and optimize - Expanding the context of innovation
+beyond the digital core to reimagine business models across
+the enterprise
+The packages utilize the SAP Activate methodology, an
+innovation adoption framework that combines SAP Best
+Practices packages, implementation methodology, and guided
+configuration to help streamline deployment.
+Partners also play a key role in innovation adoption. Our open
+engagement approach has motivated many of our larger
+services partners to focus more on establishing SAP S/4HANA
+as the digital core.
+SAP Solution Manager and SAP Model Company
+SAP Solution Manager manages SAP software implementations
+from cloud to on premise and hybrid, and is currently rolled out
+as the delivery platform for SAP Digital Business Services. It
+addresses both IT and business needs.
+The solution gives customers real-time transparency,
+automation, and control to adopt and manage innovations.
+Process experts and solution architects can explore new
+industry models earlier, accessing all SAP Best Practices
+packages.
+We also offer a new modeling environment. SAP Model
+Company is an accelerator service that helps simplify innovation
+adoption. It combines standard SAP software, SAP Best
+Practices packages, SAP Rapid Deployment solutions, and
+content from SAP Activate. Customers can develop repeatable
+implementation scenarios and access the latest innovations for
+their future projects. It helps to decrease effort and ensure
+project success on time and within budget. The service enables
+customers to accelerate implementations, reduce total cost of
+ownership, and get up and running quickly.
+It is a ready-to-use solution that supports critical decision
+phases such as discovery and prototype. We provide the full
+system landscape with detailed business content and
+documentation and help lower time to value with versions
+specific to industries and lines of business.
+Next-Generation Support
+Traditional businesses are becoming digital enterprises. With
+more business processes “running live," product support must
+be less reactive and much more proactive, predictive, and
+available at any moment; in other words, live support.
+Our product support has implemented a next-generation
+support approach that includes real-time support. Named
+Expert Chat, this live support channel offers direct access to our
+experts, available for the majority of our solutions. Moreover, a
+universal, toll-free phone number harmonizes interaction with
+support across almost all of our products. We also offer
+customers a way to search for answers to product-related
+questions, by making knowledge located within SAP searchable
+using Google. Automating tasks with intelligent, context-
+sensitive tools provides customers with solutions proactively.
+Customers also demand a seamless, omnichannel support
+experience. We plan to address this by implementing functions
+such as built-in, mobile, and social media-enabled support.
+164
+22,231
+20,793
+11
+Continuing Strong Customer
+Demand
+-2,797
+516
+-3,313
+-3,010
+485
+-3,495
+Cost of cloud and software
+support
+-2,008
+283
+-2,291
+In addition, we launched an SAP Preferred Care offering as a
+premium support option for on-premise customers transitioning
+to digital business models. It complements the already existing
+SAP Preferred Care Cloud offering. The offering is an
+enhancement to our foundation support offerings, namely
+SAP Enterprise Support, and includes:
+-1,944
+-2,182
+Cost of software licenses and
+support
+-789
+232
+-1,022
+-1,066
+247
+-1,313
+Cost of cloud subscriptions and
+Operating expense measures
+20,805
+238
+Advanced service-level agreements
+Additional services
+Dedicated contacts
+22,062
+End users can buy both SAP and partner offerings using one-
+click contracts and digital payments by credit card or PayPal.
+Customers can discover, try, buy, use, and renew solutions in a
+simple online interaction. In 2016, customers from 95 different
+countries placed more than 55,000 orders digitally.
+-
+At SAP, we take a holistic approach to the security of our
+company, encompassing processes, technology, and
+employees. At the heart of our secure company strategy is an
+efficient information security management system and a
+security governance model that brings together all of the
+different aspects of security. These include the following three
+main areas:
+Secure Company Strategy: Taking a Holistic Approach to
+the Security of Our Business
+Industry best-practice certifications are key success factors for
+our secure operations strategy. Many of our cloud solutions
+undergo Service Organization Control (SOC) audits ISAE3402,
+SSAE16 SOCI Type II, and SSAE16 SOC II Type II. The SOC
+standards are harmonized with a number of ISO certifications
+including ISO 9001, 27001, and 22301.
+through a combination of automated and manual reviews.
+Performed by third parties as well as by SAP colleagues, these
+reviews verify compliance with international standards and SAP
+global security standards.
+64
+149
+83
+63
+Combined Management Report | Security, Privacy, and Data Protection
+Furthermore, our secure operations approach concentrates on
+the early identification of any deviations from the standards
+defined in our security framework. Deviations are identified
+Secure Operations Strategy: Running Secure Operations
+Our secure operations strategy focuses on the security
+principles of "confidentiality, integrity, and availability" to ensure
+overall protection of our business, as well as our customers'
+businesses. Our mission is to provide a comprehensive end-to-
+end cloud and IT operations security framework - from system
+and data access and system hardening to security patch
+management, security monitoring, and end-to-end incident
+handling. This involves the implementation of key security
+measures across all layers including physical assets as well as
+process-integrated controls.
+This approach conforms to the ISO/IEC 27034 standard for
+application security and is closely embedded into our ISO 9001-
+certified process framework for developing standard software.
+Our secure software development lifecycle is at the heart of this
+strategy. This provides a comprehensive methodological
+approach for incorporating security features into our
+applications. Before a release decision is made, our software is
+validated by independent IT security experts. This team then
+addresses any recommendations made before we release the
+application.
+Secure Products Strategy: Champion Product Security
+Businesses use SAP applications to process mission-critical
+transactional data which can be highly attractive to cyber
+attackers. Our secure products strategy focuses on
+incorporating security features into our applications to minimize
+the risk of a security breach.
+-
+Several of our security measures extend across all sectors of
+our company and thus to all of our products and services. These
+measures include, among other things, the regular training of
+employees on the subject of IT security and data protection,
+including the handling of confidential information and ensuring
+controlled and restrictive access to customer information. In
+addition, we have developed a three-pronged strategy focusing
+on the security of our products, operations, and organization:
+Security culture: Awareness and compliance with our
+security policy and standards are fostered through regular
+mandatory training, assessments, and reporting.
+Business continuity: A corporate continuity framework
+aimed at having robust governance in place at all times is
+reviewed on an annual basis to adapt to new or changed
+business needs.
+While we continue to have a positive Customer NPS, we did not
+reach our target of 25% in 2016. As a response to the feedback
+received from our customers throughout 2016, we have focused
+on improving the quality of our follow-up process to ensure a
+timely resolution of customer issues. We have provided more
+insight into how customers can migrate to our innovations
+without disrupting their business processes. With a sustained
+emphasis on follow-up, we are targeting a combined Customer
+NPS of 21% to 23% in 2017, with our medium-term goal of
+reaching a combined Customer NPS of 35% to 40% by 2020.
+Customer loyalty is one of our four corporate objectives, along
+with growth, profitability, and employee engagement. In 2016,
+our combined on-premise and cloud Customer Net Promoter
+Score (Customer NPS) was 19.2% (2015: 22.4%). As we further
+harmonize processes in acquired entities, the customer
+segments used for customer surveys has not yet been
+completely harmonized across the SAP Group. Specifically, due
+to the nature of the business, the Concur customer sample
+includes a higher proportion of general business customers in
+comparison to other Group entities. As a result, Concur
+responses make up a large proportion of the total customer
+sample.
+SAP Digital
+Customer Net Promoter Score 2016
+19.2%
+customers around the world
+>345,000
+Customers
+Combined Management Report | Security, Privacy, and Data Protection
+In 2016, SAP did not experience any significant incidents
+regarding breaches of customer privacy or losses of customer
+data. There were no incidents reported subject to the provisions
+of the German Federal Data Protection Act.
+destruction. These include, among others, the implementation
+of our data protection management system in areas critical to
+data protection. This system is certified on a yearly basis by the
+British Standards Institute.
+We have also implemented a wide range of measures to protect
+data controlled by SAP and SAP customers from unauthorized
+access and processing, as well as from accidental loss or
+To comply with applicable data protection laws, SAP has
+adopted a global data protection and privacy policy. It outlines a
+Group-wide minimum standard for handling personal data in
+compliance with data protection and privacy laws. The policy
+defines requirements for all operational processes that affect
+the processing of or access to personal data, as well as
+providing clear responsibilities and organizational structures.
+We actively monitor changes to applicable laws and regulations
+so that we can update our standards on an ongoing basis.
+When processing data about employees, applicants, customers,
+suppliers, and partners, SAP respects and protects their right to
+data protection and privacy while implementing appropriate
+security measures. We develop and support our data protection
+and privacy strategy in accordance with our business strategy.
+Complying with Data Protection and
+Privacy Legislation
+Secure environments: Comprehensive physical security
+measures are in place to ensure the security of our data
+centers and development sites so that we can protect
+buildings and facilities effectively.
+security consulting. They help our customers build security and
+privacy protection capabilities into their businesses.
+Continuing to Build Strong Customer
+Relationships
+Combined Management Report | Products, Research & Development, and Services
+At SAP, we want our customers and employees to be able to use
+our software and services anywhere, from any device, at any
+time, with confidence and trust. However, the growing risk and
+occurrence of cyberattacks reinforces the need to keep critical
+information systems secure.
+Establishing a Comprehensive
+Security Vision
+Data now proliferates outside the four walls of businesses with
+multiple endpoints exposed and vulnerable to attack. Moreover,
+the sheer number of and the sophistication of attacks facing
+businesses are at an all-time high. We are seeing the
+"commercialization of hacking" while new advanced persistent
+threats can bypass many traditional security protection
+techniques.
+Safeguarding data is an increasingly challenging task today.
+Companies are collecting and storing more data than ever
+before from more and more sources. No longer is data locked
+away in an on-premise mainframe requiring physical security.
+Facing Increasing Risks in IT Security
+For this reason, data protection and security is of paramount
+importance to us. We have implemented safeguards to help
+enable the privacy rights of everyone whose data is processed
+by SAP, whether they are our customers, prospects, employees,
+or partners. In addition, we work towards compliance with all
+relevant legal requirements for data protection. Our global
+security officer and data protection and privacy officer report to
+our Executive Board and regularly monitor the compliance of all
+activities in these areas.
+Consequently, for SAP and for our customers, security means
+more than just meeting compliance demands. To secure the
+SAP software landscape, we offer a comprehensive portfolio of
+security products, services, and secure support as well as
+Every day, organizations all around the world trust SAP with
+their data - either in their own premises, in the cloud, or on the
+move using mobile devices. Our customers need to know that
+we will keep that data safe, process it in a manner that complies
+with local legislation, and protect it from malicious use.
+Security, Privacy, and
+Data Protection
+662
+providing world-class software, we empower businesses to
+continue to succeed in the new digital economy. Together, we
+are a force that helps further economic development, social
+progress, and minimizes environmental impact - and makes the
+world run better.
+61
+Combined Management Report | Products, Research & Development, and Services
+SAP will continue to support our customers' digital
+transformation through innovative software, ongoing R&D, and
+proactive services. By reimagining our business suite and
+Meeting Today's Data Protection
+Challenges
+A Partner on the Journey to Digital
+Transformation
+We are incubating several new initiatives to more rapidly grow
+our digital business and expand into new areas - for example,
+integrating messaging services into our own applications.
+At the same time, SAP also provides a wide variety of intelligent,
+interconnected messaging and communication services that
+reach 97% of the world's mobile subscribers and connect
+billions of things. Top social media companies rely on SAP
+solutions to reach their customers worldwide. In 2016, more
+than 350 billion messages passed through our networks.
+present information about our revenue and various values and
+components relating to operating profit that are adjusted for
+foreign currency effects.
+-636
+-1,001
+Purchase of intangible assets
+and property, plant, and
+operating activities
+27
+We exclude certain acquisition-related expenses for the purpose
+of calculating operating profit (non-IFRS), operating margin
+(non-IFRS), and earnings per share (non-IFRS) when evaluating
+SAP's continuing operational performance because these
+expenses generally cannot be changed or influenced by
+management after the relevant acquisition other than by
+disposing of the acquired assets. Since management at levels
+below the Executive Board does not influence these expenses,
+we generally do not consider these expenses for the purpose of
+evaluating the performance of management units. For similar
+reasons we eliminate share-based payment expenses as these
+costs are impacted by share price developments and other
+factors outside our control. We also eliminate restructuring
+expenses because they are volatile and mostly cannot be
+influenced by management at levels below the Executive Board.
+3,638
+4,628
+We calculate constant currency revenue and operating profit
+measures by translating foreign currencies using the average
+exchange rates from the comparative period instead of the
+current period.
+Net cash flows from
+2015
+2016
+€ millions
+Free Cash Flow
+Among others we use the measure free cash flow to manage our
+overall financial performance.
+Operating Profit (Non-IFRS), Operating Margin
+(Non-IFRS), Effective Tax Rate (Non-IFRS), and
+Earnings per Share (Non-IFRS)
+Operating profit, operating margin, effective tax rate, and
+earnings per share identified as operating profit (non-IFRS),
+operating margin (non-IFRS), effective tax rate (non-IFRS), and
+earnings per share (non-IFRS) have been adjusted from the
+respective IFRS measures by adjusting for the aforementioned
+revenue (non-IFRS) and operating expenses (non-IFRS) and the
+income tax effects thereon.
+Free Cash Flow
+We believe it is important for investors to have information that
+provides insight into our sales. Revenue measures determined
+under IFRS provide information that is useful in this regard.
+However, both sales volume and currency effects impact period-
+over-period changes in sales revenue. We do not sell
+standardized units of products and services, so we cannot
+provide relevant information on sales volume by providing data
+on the changes in product and service units sold. To provide
+additional information that may be useful to investors in
+breaking down and evaluating changes in sales volume, we
+A in %
+Constant Currency Information
+Our restructuring charges resulted in significant cash
+outflows in the past and could do so in the future. The
+same applies to our share-based payment expense
+because most of our share-based payments are settled in
+cash rather than shares.
+57
+1) Share-based payments (SBP)
+We disclose certain financial measures, such as revenue (non-
+IFRS), operating expenses (non-IFRS), operating profit (non-
+IFRS), operating margin (non-IFRS), and earnings per share
+(non-IFRS), as well as constant currency revenue, expense, and
+profit that are not prepared in accordance with IFRS and are
+therefore considered non-IFRS financial measures. Our non-
+IFRS financial measures may not correspond to non-IFRS
+financial measures that other companies report. The non-IFRS
+financial measures that we report should only be considered in
+addition to, and not as substitutes for, or superior to, our IFRS
+financial measures.
+We believe that the disclosed supplemental historical and
+prospective non-IFRS financial information provides useful
+information to investors because management uses this
+information, in addition to financial data prepared in accordance
+with IFRS, to attain a more transparent understanding of our
+past performance and our anticipated future results. We use the
+revenue (non-IFRS) and profit (non-IFRS) measures
+consistently in our internal planning and forecasting, reporting,
+and compensation, as well as in our external communications,
+as follows:
+-
+Our management primarily uses these non-IFRS measures
+rather than IFRS measures as the basis for making financial,
+strategic, and operating decisions.
+The variable components of our Executive Board members'
+and employees' remuneration are based on revenue (non-
+IFRS), operating profit (non-IFRS), as well as new cloud
+bookings measures rather than the respective IFRS
+measures.
+The annual budgeting process for all management units is
+based on revenue (non-IFRS) and operating profit (non-IFRS)
+numbers rather than the respective IFRS financial measures.
+All forecast and performance reviews with all senior
+managers globally are based on these non-IFRS measures,
+rather than the respective IFRS financial measures.
+Both our internal performance targets and the guidance we
+provided to the capital markets are based on revenue (non-
+IFRS) and profit (non-IFRS) measures rather than the
+respective IFRS financial measures.
+Our non-IFRS financial measures reflect adjustments based on
+the items below, as well as adjustments for the related income
+tax effects.
+Revenue (Non-IFRS)
+Restructuring expenses, that is, expenses resulting from
+measures which comply with the definition of restructuring
+according to IFRS
+Revenue items identified as revenue (non-IFRS) have been
+adjusted from the respective IFRS financial measures by
+including the full amount of software support revenue, cloud
+subscriptions and support revenue, and other similarly recurring
+revenue that we are not permitted to record as revenue under
+IFRS due to fair value accounting for the contracts in effect at
+the time of the respective acquisitions.
+Combined Management Report | Performance Management System
+71
+Operating Expense (Non-IFRS)
+Operating expense numbers that are identified as operating
+expenses (non-IFRS) have been adjusted by excluding the
+following expenses:
+-
+Acquisition-related charges
+■
+Amortization expense/impairment charges of intangibles
+acquired in business combinations and certain stand-
+alone acquisitions of intellectual property (including
+purchased in-process research and development)
+Settlements of preexisting business relationships in
+connection with a business combination
+■ Acquisition-related third-party expenses
+Share-based payment expenses
+Under IFRS, we record at fair value the contracts in effect at the
+time entities were acquired. Consequently, our IFRS software
+support revenue, IFRS cloud subscriptions and support revenue,
+IFRS cloud and software revenue, and IFRS total revenue for
+periods subsequent to acquisitions do not reflect the full amount
+of revenue that would have been recorded by entities acquired
+by SAP had they remained stand-alone entities. Adjusting
+revenue numbers for this revenue impact provides additional
+insight into the comparability of our ongoing performance
+across periods.
+equipment (without
+Our revenue (non-IFRS), expense (non-IFRS), and profit
+(non-IFRS) measures as well as the measures “new cloud
+bookings" and "cloud backlog" (see above) provide investors
+with insight into management's decision making because
+management uses these measures to run our business and
+make financial, strategic, and operating decisions. We include
+the revenue adjustments outlined above and exclude the
+expense adjustments outlined above when making decisions
+to allocate resources. In addition, we use these non-IFRS
+measures to facilitate comparisons of SAP's operating
+performance from period to period.
+Free cash flow
+We believe that by providing an environment where our people
+can engage, develop their skills, and draw on the support they
+need to create and innovate, SAP can help to make the world run
+better. For this reason, we are fully committed to nurturing our
+people at every stage of their career at SAP.
+Our employees play a pivotal role in helping our customers
+succeed in the new digital economy. Our employees empower
+our customers to Run Simple and work more innovatively. At the
+same time, they enable SAP to become "the most innovative
+cloud company powered by SAP HANA."
+Supporting Customers by Nurturing
+Our Employees
+Employee Engagement
+Index
+85%
+Business Health
+Culture Index
+78%
+employees at SAP
+(in FTEs)
+84,183
+Investments
+Employees and Social
+73
+total operating expenses
+Combined Management Report | Performance Management System
+Despite these limitations, we believe that the presentation of our
+non-IFRS measures and the corresponding IFRS measures,
+together with the relevant reconciliations, provide useful
+information to management and investors regarding present
+and future business trends relating to our financial condition and
+results of operations.
+We believe that constant currency measures have limitations,
+particularly as the currency effects that are eliminated
+constitute a significant element of our revenue and expenses
+and could materially impact our performance. Therefore, we
+limit our use of constant currency measures to the analysis of
+changes in volume as one element of the full change in a
+financial measure. We do not evaluate our results and
+performance without considering both constant currency and
+nominal measures in revenue (non-IFRS) and operating profit
+(non-IFRS) measures on the one hand, and changes in revenue,
+operating expenses, operating profit, or other measures of
+financial performance prepared in accordance with IFRS on the
+other. We caution the readers of our financial reports to follow a
+similar approach by considering nominal and constant currency
+non-IFRS measures only in addition to, and not as a substitute
+for or superior to, changes in revenue, operating expenses,
+operating profit, or other measures of financial performance
+prepared in accordance with IFRS.
+In the past, we have issued share-based payment awards
+to our employees every year and we intend to continue
+doing so in the future. Thus, our share-based payment
+expenses are recurring although the amounts usually
+change from period to period.
+While we adjust for the fair value accounting of the
+acquired entities' recurring revenue contracts, we do not
+adjust for the fair value accounting of deferred
+compensation items that result from commissions paid to
+the acquired company's sales force and third parties for
+closing the respective customer contracts.
+The acquisition-related amortization expense that we
+eliminate in deriving our profit (non-IFRS) numbers is a
+recurring expense that will impact our financial
+performance in future years.
+The remaining acquisition-related charges that we
+eliminate in deriving our profit (non-IFRS) numbers are
+likely to recur should SAP enter into material business
+combinations in the future. Similarly, the restructuring
+expenses that we eliminate in deriving our profit (non-
+IFRS) numbers are likely to recur should SAP perform
+restructurings in the future.
+The revenue adjustment for the fair value accounting of
+the acquired entities' contracts and the expense
+adjustment for acquisition-related charges do not arise
+from a common conceptual basis. This is because the
+revenue adjustment aims to improve the comparability of
+the initial post-acquisition period with future post-
+acquisition periods, while the expense adjustment aims to
+improve the comparability between post-acquisition
+periods and pre-acquisition periods. This should
+particularly be considered when evaluating our operating
+profit (non-IFRS) and operating margin (non-IFRS)
+numbers as these combine our revenue (non-IFRS) and
+expenses (non-IFRS) despite the absence of a common
+conceptual basis.
+An HR Strategy Designed Specifically for
+Our People
+acquisitions)
+While our profit (non-IFRS) numbers reflect the
+elimination of certain acquisition-related expenses, no
+eliminations are made for the additional revenue or other
+income that results from the acquisitions.
+"
+3,627
+3,001
+21
+Usefulness of Non-IFRS Measures
+We believe that our non-IFRS measures are useful to investors
+for the following reasons:
+-
+The valuation of our cash-settled share-based payments
+could vary significantly from period to period due to the
+fluctuation of our share price and other parameters used
+in the valuation of these plans.
+The non-IFRS measures provide investors with additional
+information that enables a comparison of year-over-year
+operating performance by eliminating certain direct effects of
+acquisitions, share-based compensation plans, and
+restructuring plans.
+Non-IFRS and non-GAAP measures are widely used in the
+software industry. In many cases, inclusion of our non-IFRS
+measures may facilitate comparison with our competitors'
+corresponding non-IFRS and non-GAAP measures.
+Limitations of Non-IFRS Measures
+We believe that our non-IFRS financial measures described
+above have limitations, including but not limited to, the
+following:
+72
+12
+Combined Management Report | Performance Management System
+-
+The eliminated amounts could be material to us.
+Without being analyzed in conjunction with the
+corresponding IFRS measures, the non-IFRS measures are
+not indicative of our present and future performance,
+foremost for the following reasons:
+■
+■
+■
+■
+"
+-14,457
+Non-
+724
+0
+74
+441
+-3,313
+-3,010
+0
+89
+395
+-3,495
+Cost of cloud and software
+IFRS
+turing
+Non-
+IFRS Acqui- SBP¹) Restruc-
+sition-rel.
+IFRS
+turing
+SBP¹) Restruc-
+Acqui-
+sition-rel.
+IFRS
+2015
+2016
+-2,797
+€ millions
+Cost of services
+Sales and marketing
+-3,089
+12
+101
+0
+-2,976
+-2,932
+54
+113
+Our human resources (HR) strategy uses cloud technology to
+help us Run Simple. It helps us change the way we hire new
+talent, and to transform the way we develop and retain our
+employees. At the same time, it allows us to create a culture at
+SAP that is able to deal with the complexity, speed, and scope of
+a digital workplace. This culture inspires innovation, leads
+change, and ultimately creates employee satisfaction. Our HR
+team stays focused on delivering a seamless, simple employee
+experience by following three guiding principles: customer
+satisfaction, simplification, and standardization.
+0
+-2,765
+Research and
+-3,044
+10
+190
+0
+-2,843
+-2,845
+36
+166
+-2,643
+-6,265
+621
+Non-IFRS Adjustments by Functional Areas
+0
+621
+0
+Other operating
+-3
+0
+0
+0
+-3
+1
+0
+0
+0
+1
+income/expense, net
+Adjustments of
+-16,928
+680
+785
+28
+-15,434 -16,541
+738
+0
+Explanation of Non-IFRS Measures
+0
+0
+-5,716
+-5,782
+202
+260
+-5,320
+General and administration
+-1,005
+6
+113
+0
+-886
+-1,048
+4
+111
+0
+-932
+Restructuring
+-28
+0
+0
+28
+-621
+Listening to Our Employees
+Our strategy is based on two main focus areas. We aim to
+increase the capacity of innovative social enterprises that put
+young people on the path to successful careers. In addition, we
+aim to build a skilled workforce for the IT sector through training
+and workforce development programs. In 2016, we donated
+€22.3 million to charitable organizations.
+(EEI). In 2016, we see a significant increase of the EEI by three
+percentage points to 85%.
+Improving Lives, Sharing Experience
+As part of our social investment commitment, SAP encourages
+its employees to contribute their time and talent to support
+social causes. Whether by offering individual hands-on support,
+or business coaching and mentoring, we run a number of
+initiatives that help make a real difference to people's lives in the
+communities in which they live and work.
+An annual highlight is our “Month of Service" program. This
+year, more than 22,000 employees in 42 countries volunteered
+almost 142,000 hours to this program alone. While passing on
+valuable skills and helping the world to run better, employees
+taking part in these programs benefit from what can be an
+incredibly rewarding experience. In addition to making a positive
+social impact, they develop leadership skills, learn about new
+markets, and grow their professional network.
+Extending Code Week Initiatives
+In 2016, SAP extended our successful Code Week initiatives to
+bring digital literacy to thousands of young people who may not
+otherwise have the opportunities to learn software coding skills.
+Now in its second year, Africa Code Week saw thousands of
+coding activities organized across 30 African countries and
+through openSAP coursework. Africa Code Week demonstrates
+the power of public-private partnerships: Hundreds of schools,
+teachers, ministers, community centers, businesses, and non-
+profit organizations work together towards the common goal of
+ensuring Africa's children are not left out of the digital economy.
+In 2016, the program reached 426,000 children in Africa.
+Supporting Our Social Sabbatical Portfolio
+With four unique programs across the award-winning social
+sabbatical portfolio, we offer employees at all levels the
+opportunity to extend their skills, expertise, and know-how.
+Participation in the program challenges employees to solve
+concrete business challenges for non-profit organizations and
+social enterprises in either their home or emerging markets.
+By volunteering their time and talent for assignments that last
+between two and six weeks, our employees strengthen their
+leadership competencies, cross-industry know-how, and
+intercultural sensitivity. They achieve all this while ensuring their
+"client" is better able to deliver on their social mission.
+Recent projects include building strategic plans for social
+entrepreneurship incubators and strengthening the internal
+capabilities of non-profit organizations focused on STEM
+education and digital literacy. As such, we worked with the
+Dreamoval Foundation in Accra, Ghana, to support the
+development of a growth strategy to strengthen the IT skills of
+170,000 teachers to help improve educational outcomes across
+the country.
+In 2016, we also extended our social sabbatical portfolio to joint
+projects with SAP customers. In July, a joint team of volunteers
+from SAP and GlaxoSmithKline plc designed and implemented
+an integrated database for Partners in Health, a non-profit
+organization based in Kigali, Rwanda. Additional social
+sabbatical collaboration with customers is planned for 2017.
+Through our social sabbatical portfolio, 213 SAP employees
+provided 58,808 hours of pro bono service to 71 organizations in
+15 countries in 2016.
+Changing the Game for Underprivileged
+Youths with the KickApp Cup
+To ignite passion for IT, we need to be creative about how to
+reach young people. We developed a creative approach,
+harnessing the power of soccer to bring people together while
+spreading a passion for IT.
+78
+Combined Management Report | Employees and Social Investments
+The first annual KickApp Cup brought together 200 young
+community leaders from disadvantaged backgrounds to work
+closely with 180 SAP developers and coaches. Their aim: to
+develop a prototype app that would help non-profit
+organizations tackle issues such as monitoring attendance or
+tracking social impact.
+Regional competitions took place at SAP Labs locations
+worldwide including Brazil, Germany, Hungary, India, Israel, and
+the United States. The teams coded together, played soccer and
+had fun, while competing to attend the finals in Lyon, France,
+and Heidelberg, Germany, to present their app prototypes.
+The event was organized in collaboration with
+streetfootballworld, a non-governmental organization (NGO)
+whose mission is to use soccer as a tool to drive social change.
+The best ideas from each team were then combined to create a
+final app that was presented during the 16th streetfootballworld
+Festival at the European soccer championships (UEFA EURO
+2016).
+Gaining International Recognition for
+Award-Winning Programs
+SAP received significant recognition in 2016 for the innovative
+nature of its social investment programs. For more information,
+see the Recognition section of the SAP Integrated Report online.
+Headcount and Personnel Expense
+257
+On December 31, 2016, we had 84,183 full-time equivalent (FTE)
+employees worldwide (December 31, 2015: 76,986). This
+represents an increase in headcount of 7,197 FTEs in
+comparison to 2015. The average number of employees in 2016
+was 80,609 (2015: 75,180).
+As our vision to help the world run better and improve people's
+lives shows, we are passionate about making a positive impact
+on people's lives, both in our communities and in the wider
+world. As SAP guides our customers through digital
+transformation, our social investments focus on ensuring that
+today's young people - regardless of background - get the skills
+they need to thrive and lead in this digital economy.
+Local health and well-being offerings: Services such as skin
+screening, on-site fitness centers and activity classes,
+mindfulness practice, eyesight testing, and health awareness
+sessions are also available to employees in various office
+locations.
+Throughout 2016, SAP sponsored and hosted numerous events
+focused on attracting, developing, and supporting women.
+These included major events in China, Colombia, Germany,
+Saudi Arabia, the United States and other countries. Additional
+ongoing initiatives supporting women at SAP include the
+Women's Professional Growth Webinar series, the Business
+Women's Network, and the Women@SAP online community. In
+addition, we offer executive sponsorships for women at SAP and
+the Leadership Excellence Acceleration Program (LEAP), a
+highly respected and award-winning development program that
+helps prepare high-potential women for leadership roles at SAP.
+Creating an Inclusive Environment
+Working closely with ethnicity-based employee network groups
+such as the Black Employee Network (BEN), and Latinos@SAP,
+SAP launched several important initiatives in 2016 in the United
+States. An example is Project Propel, a program designed to
+enable U.S. educational institutions that have historically served
+minorities to build the next generation of technology talent. The
+program focuses on providing students with critical digital
+enterprise skills that are in demand in the SAP ecosystem.
+In addition, we participate in a wide range of activities to create a
+more inclusive environment throughout the organization,
+including:
+Focus on Insight - Diversity and Inclusion curriculum: A
+global learning curriculum launched for all employees in
+September 2016 to ensure that everyone at SAP understands
+the importance and benefits of a diverse workplace.
+Business Beyond Bias: Launched in August 2016, this
+initiative includes significant investment in programs and
+technology that support greater diversity. This helps
+eliminate bias not only at SAP but also in customer and
+partner organizations.
+White House Tech Inclusion Pledge: SAP is one of the
+largest global technology companies to participate in this
+pledge, announced during former President Obama's Global
+Entrepreneurship Innovation Summit 2016 in Silicon Valley.
+Autism at Work program: 107 employees with Autism
+Spectrum Disorder currently work at SAP. Launched in
+Argentina this year, we have implemented the Autism at
+Work program in nine countries.
+Global Pride@SAP employee network: This network has
+grown to more than 8,000 members, sponsoring numerous
+activities and initiatives that support lesbian, gay, bisexual,
+and transgender (LGBT) people and their allies.
+Caring for the Health and Well-Being
+of Our Employees
+We believe that the way we care for our people is closely linked
+to our business success. When people feel healthy, respected,
+and cared for, it results in higher productivity, engagement,
+innovation, and customer satisfaction.
+A caring culture enables our employees to live to their full
+potential and accelerates our ability to achieve our goals.
+Consequently, we invest in extensive employee benefits,
+programs, and services that truly make people's lives better.
+These include:
+Combined Management Report | Employees and Social Investments
+77
+-
+-
+-
+-
+Employee Assistance Program (EAP): This program helps
+employees to deal better with life's challenges by providing
+free, confidential, and impartial expert advice and support, 24
+hours a day, seven days a week.
+Corporate Oncology Program (COPE): Available in Canada,
+Germany, United Kingdom, and the United States, the
+program provides SAP employees facing cancer with access
+to an individual molecular genetic tumor analysis and
+interpretation.
+Health checkup: A one-day, one-on-one health checkup
+program for executives.
+Take Charge of Your Health and Well-Being program: This
+program empowers employees to take better care of their
+health and well-being.
+Health Ambassador Network: This global network
+strengthens our focus on health in SAP office locations and
+helps identify best practices.
+Engaging in Social Investments
+As the first multinational technology company, SAP was
+awarded the Economic Dividends for Gender Equality (EDGE)
+certificate in 2016. It recognizes our global commitment to
+gender diversity and equality in the workplace and reinforces
+SAP's publicly stated goal to fill 25% of its management
+positions with women by the end of 2017. We have made great
+strides toward our goal, increasing the proportion of female
+managers from 23.6% in 2015 to 24.5% in 2016.
+We define headcount in FTE as the number of people on
+permanent employment contract considering their staffing
+percentage. Students, individuals employed by SAP who are
+currently not working due to various reasons (such as maternity
+leave), and temporary employees with limited contracts of less
+than six months are excluded from our figures. The number of
+temporary employees is not material.
+Number of Employees
+Full-Time Equivalents
+2014
+2015
+2016
+Combined Management Report | Employees and Social Investments
+79
+Research and Development
+Sales and Marketing
+Cloud and Software
+Services
+General and Administration
+Employees by Functional Area
+Full-Time Equivalents
+Infrastructure
+2,827
+23,363
+21,977
+16,002
+14,621
+5,393
+80
+Combined Management Report | Employees and Social Investments
+2013
+Our personnel expense per employee decreased to
+approximately €127,000 in 2016 (2015: approximately
+€135,000). This decrease in expense is primarily attributable to
+a significant decrease of employee-related restructuring
+expenses in 2016 compared to the previous year. The personnel
+expense per employee is defined as the overall personnel
+expense divided by the average number of employees. For more
+information about employee compensation and a detailed
+overview of the number of people we employ, see the Notes to
+the Consolidated Financial Statements section, Note (7).
+2012
+36,222
+84,183
+76,986
+74,406
+23,265
+66,572
+64,422
+20,914
+18,995
+16,011
+15,542
+■APJ
+Americas
+24,696
+22,071
+22,166
+19,568
+19,123
+29,757
+30,993
+33,340
+33,906
+■ EMEA
+Closing the Gender Gap
+An inclusive, bias-free culture inspires greater innovation and
+helps us to better connect with and serve our customers. It also
+fosters employee engagement, and makes SAP a more
+attractive workplace.
+Promoting Inclusion, Well-Being, and
+Social Innovation
+20
+67
+Percent
+72
+78
+75
+2012
+2013
+2014*
+2015
+2016
+*The BHCI score for 2014 was recalculated based on two
+updated questions. This calculation method has been applied
+moving forward.
+Getting the Right Talent in the Right
+Place at the Right Time
+While we increased our overall hiring volume successfully in
+2016, increasing the number of "early talent” hires (people with
+professional experience of up to two years) has also been a key
+priority for us. In 2016, approximately one third of all external
+hires fell into this category.
+At the same time, continued recognition of SAP as an employer
+of choice contributed to our success in meeting our hiring
+targets in 2016. SAP won many awards across the globe in the
+areas of diversity, inclusion, employer attractiveness, and
+people satisfaction. For a comprehensive list of awards given to
+SAP in 2016, see the Recognition section of the SAP Integrated
+Report online.
+GREAT
+PLACE
+ΤΟ
+WORK
+Oglassdoor
+UALITY
+ASSESS
+Business Health Culture Index
+EDG
+66
+In 2016, the positive trend of the BHCI continued with a score of
+78% compared to 75% in 2015. This encouraging result shows
+that a health-focused culture has impacted employees in a
+positive way.
+Employee Engagement Index
+Percent
+79
+79
+77
+80
+82
+85
+2012
+2013
+2014
+2015*
+2016
+*The EEI score for 2015 was recalculated from 81% to 82%
+based on updated questions. This calculation method has been
+applied moving forward.
+Ensuring that our employees are highly engaged remains one of
+our company-wide strategic goals. For 2017 through to 2020,
+we aim to reach an Employee Engagement Index between 84%
+and 86%.
+A change by one percentage point of the EEI would have an
+impact of €45 million to €55 million on SAP's operating profit.
+For more information on how we calculate this impact, see the
+Connectivity of Financial and Non-Financial Indicators section of
+the SAP Integrated Report online.
+74
+Combined Management Report | Employees and Social Investments
+The People Survey 2015 results revealed two focus areas for
+2016: simplification and innovation. In 2016, we started a
+company-wide "Run Simple at SAP" initiative to help the
+business improve processes and services, as well as numerous
+efforts to boost and promote innovation initiatives. Conducted
+from October to November, our People Survey 2016 revealed
+moderate improvements in both simplification and innovation.
+We will continue with simplification and innovation as our
+company-wide focus areas in 2017.
+In the second half of 2016, we also conducted a strategy dialog
+survey to assess the degree to which employees understand
+and believe in our strategy, our culture, and our leadership, as
+well as the capability to drive innovation. This survey revealed
+that while we already have the right innovation mindset, many of
+the internal innovation tools available are not yet widely known
+within the company.
+In addition, we also measure our Business Health Culture Index
+(BHCI) based on our People Survey. The BHCI assesses the
+degree to which our workplace culture supports people's well-
+being, work-life balance, and organizational health.
+99
+CERTIFIED
+THE GU
+HUMAN
+mentoring, rotational programs, and on-the-job-guided
+development experiences. This is why we are transitioning to a
+continuous learning model with a strong focus on more informal
+learning activities.
+To achieve this, we make high-quality learning opportunities
+easily accessible to all employees through our cloud-based
+learning management system (SAP SuccessFactors solution). In
+2016, we provisioned 1.3 million courses to 90.7% of our
+employees. We also initiated a new tuition assistance program
+to help employees as they pursue additional educational and
+professional certification opportunities.
+Self-paced online programs that include language learning as
+well as technical and soft-skills training courses are open to all
+employees. In addition, the online programs enable employees
+to build impactful development plans that meet their career
+goals. Our innovative peer-to-peer learning portfolio includes
+coaching, mentoring, job shadowing, and facilitation
+opportunities. In 2016, we hosted many live and virtual “learning
+culture" workshops throughout the world, as an opportunity to
+foster the exchange of ideas between peers and managers.
+Creating an Environment That Drives
+Innovation, Performance, and
+Engagement
+SAP aims to create a working environment that helps drive
+innovation, high performance, and employee satisfaction. We do
+so by providing, among others, the following benefits and
+activities:
+-
+SAP Shares program: Introduced in 2016, this equity
+program consists of two different plans, ensuring closer
+market alignment. The "Own SAP" plan enables employees to
+purchase shares with preferred conditions and build value by
+becoming an SAP shareholder. The "Move SAP" plan is a
+restricted stock unit plan that rewards selected employees
+and executives for their contribution to the success of the
+company. For more information, see the Notes to the
+Consolidated Financial Statements section, Note (27).
+Hasso Plattner Founders' Award: In its third year, this
+prestigious award provides the highest internal employee
+recognition at SAP for delivering on our vision and strategy. In
+2016, the award went to the "Skills for Africa" initiative, which
+helps fill the skills gap in the IT sector in Africa.
+Intrapreneurship program: Open to all global employees,
+this program attracted more than 830 entries from over
+1,500 employees in 2016. It enables employees to act as
+entrepreneurs and transform innovative ideas into profitable
+businesses in new markets.
+SAP SuccessFactors solutions: To make our employees'
+lives easier when dealing with HR matters, we continue to
+transform and simplify our entire HR IT landscape by
+implementing SAP SuccessFactors solutions. In this context,
+approximately 160 HR experts supported sales teams in
+76
+Combined Management Report | Employees and Social Investments
+-
+deals related to our own human capital management
+solutions. Also in 2016, we announced the Klaus Tschira
+Human Resources Innovation Award, an annual program for
+SAP partners and customers that have contributed a unique
+and innovative solution in the field of human resources.
+People Weeks: In 2016, SAP again sponsored a two-week
+event designed for employees to exchange ideas and
+cultivate a greater connection across cultures, genders, and
+generations. Under the motto “You in the Digital Workplace,"
+the event reached over 27,000 employees in 124 locations
+and 58 countries.
+"How We Run": Launched in 2015 to showcase the
+behavioral values that provide the foundation to SAP's
+corporate culture, our "How We Run" behaviors initiative has
+received widespread support and adoption among SAP
+employees worldwide.
+Our "How We Run" Behaviors
+Tell it like it is
+Stay curious
+Embrace
+differences
+Keep the
+promise
+How We Run
+SAP
+Build bridges,
+not silos
+We support employees at all levels and roles as they strive to
+achieve their long-term career aspirations. Our learning strategy
+is based on the principle that much of employee learning and
+development happens outside formal training such as coaching,
+Making Learning a Compelling
+Experience for Everyone
+Ensure Customer Success
+Develop Amazing Talent
+BEST
+KONT! PLACES TO WORK
+2016 for LGBT Equality
+100% CORPORATE EQUALITY INDEX
+Selection of employer branding awards SAP received in 2016
+Collaborating with Educational Institutions
+Our collaboration with educational institutions is key to
+recruiting early talent. SAP works closely with over 3,100
+universities on international events such as student meet-ups
+and info days. In addition, we run a number of coding events
+such as SAP InnoJam, as well as a broad variety of activities and
+events through our SAP University Alliances program.
+SAP also runs a vocational training program that allows students
+to work towards their university degree while gaining valuable
+business experience at the same time. As of the end of 2016,
+more than 1,000 vocational training students were enrolled in
+the program. Overall, we measured a conversion rate (number
+of these types of students who stayed with SAP after completing
+their dual studies) for vocational training students of 82% in
+2016.
+Connecting with Refugee Communities
+As a company with employees of approximately 80 different
+nationalities working in Germany alone, we are open to talented
+people from all communities. As part of our “Engaging with
+Refugees" program, we are working on a number of initiatives
+that promote cultural integration through training and
+recruitment. For example, SAP joined Germany's "Wir
+zusammen" ("We together") initiative, which provides an
+Internet platform to support the efforts of participating
+companies to integrate refugees into the German labor market.
+In 2016, SAP offered 100 internships and 14 vocational training
+positions to refugees in Germany. In 2017, SAP will again offer
+up to 100 additional internships and 10 vocational training
+positions to candidates who are refugees.
+In addition, 2016 saw the launch of Refugee Code Week,
+empowering young people and inspiring refugee communities
+with job-relevant coding skills. In collaboration with the United
+Nations Refugee Agency (UNHCR), the event introduced more
+than 10,000 refugees and nationals in Egypt, Jordan, Lebanon,
+Combined Management Report | Employees and Social Investments
+The People Survey 2016 results are extraordinarily positive.
+Employee satisfaction went up in nearly all aspects and
+questionnaire topics. This especially holds true for one of our
+most important dimensions, the Employee Engagement Index
+75
+Investing in Talent Development
+At SAP, we believe that everyone is a talent and we invest in the
+professional development of all our employees. We continue to
+build development offerings for specific groups such as early
+talents, experts, and fast-track employees. To provide career
+development support, we also introduced career counselling
+sessions that are delivered either in person or virtually.
+In addition, we launched SAP Talk to 8,100 early-adopter
+employees in 2016. This approach provides a new, state-of-the-
+art way of managing performance at SAP, helping foster a
+continuous dialog on professional development between
+managers and employees. We plan to roll out SAP Talk to all
+SAP employees in 2017.
+Our overall retention rate in 2016 was 93.7% compared with
+91.8% in 2015. We define retention as the ratio of the average
+number of employees minus voluntary attrition to the average
+number of employees (in full-time equivalents, or FTEs). High
+retention is something we are aiming for as reflected in all our
+activities to drive high employee engagement.
+Engaging Our People Through
+Impactful and Inspirational
+Leadership
+Our investment in developing our leaders is delivering results
+according to our People Survey. Living up to our SAP leadership
+principles and building trust with employees has become a key
+ingredient of successful leadership performance. By the end of
+2016, 57.6% of leaders at SAP completed our flagship
+leadership development program. Leaders who completed this
+had higher employee engagement and leadership trust scores.
+In 2016, leadership trust reached 57% (2015: 52%) and we are
+committed to keep this high score moving forward.
+Our Leadership Principles:
+-
+Drive Simplicity
+-
+and Turkey to coding basics, Web development, and software
+skills in the SAP Business One application. The most promising
+students are referred to SAP partner ReBootKAMP (RBK.org)
+for an intensive 16-week training program and assistance in
+securing job placements.
+292
+5,350
+4,646
+161
+2015
+2016
+* We started reporting our external data center energy
+consumption in 2014.
+Helping Our Customers Run Greener
+Operations
+The vast majority of our overall emissions result from the use of
+our software. When our customers run SAP software on their
+hardware and on their premises, the resulting carbon footprint is
+about 20 times the size of our own net carbon footprint. To
+address this, we have developed a downstream emissions
+strategy to help our customers, hardware providers, and others
+run greener operations. One of the most important ways we help
+our customers reduce their energy usage and emissions is by
+managing their SAP systems through cloud services provided by
+our carbon-neutral green cloud offerings. In addition, the
+solutions in our portfolio help enable our customers manage
+their resources, such as electricity, in an efficient manner.
+The SAP HANA platform also plays a vital role in helping our
+customers to cut their carbon emissions. By combining the
+worlds of analytic and transactional data into one real-time, in-
+memory platform, it can help create much leaner operations,
+further simplifying the system landscape and reducing energy
+consumption.
+SAP also works with customers to optimize their on-premise
+landscapes so that they consume less energy. We achieve this
+by helping them to decommission legacy systems, archive
+unused data, and consolidate business applications, as well as
+virtualizing their system landscape.
+Driving Environmental Initiatives
+Throughout SAP
+We continuously pursue strategies to help us achieve our goal of
+reducing emissions at a time of ongoing growth in our business.
+Key initiatives for 2016 included the following:
+2014
+-
+Sustainable programming sessions
+In a new online training module, software developers and
+architects learn how to make a positive contribution to SAP's
+sustainability goals in their daily programming work.
+Performance and sustainability go hand in hand as
+performance-optimized programming usually equates to
+energy-efficient programming. It also helps improve end-to-
+end response time and creates a great user experience for
+our customers.
+Electric vehicles
+As a result of our business expansion, the number of SAP
+employees eligible for a company car has increased annually.
+We want to ensure that the resulting growth in our car fleet
+does not undo our successes in cutting emissions. To help
+address this, SAP aims to increase the number of electric
+vehicles in our company car fleet to 20% by 2020.
+All electric company cars charged at SAP are powered with
+100% renewable electricity. In addition, in Germany, we
+provide employees with an incentive to switch to electric
+alternatives by offering a battery subsidy that offsets the
+costs of purchasing an electric vehicle.
+Internal carbon pricing for business flights
+As first introduced in 2015, we continue with our program to
+reduce the impact of air travel by SAP employees. In addition
+to avoiding business flights, we invest in carbon emission
+offsets for air travel in nine countries by charging an internal
+carbon price. This offset effort resulted in a compensation of
+90 kt in 2016.
+Investment in carbon credits
+In 2016, we continued to realize the benefits of our
+investment in the Livelihoods Fund, a unique investment fund
+whose returns consist of high-quality carbon credits. Several
+years ago, we made a commitment to invest €3 million
+covering a 20-year participation in the fund that supports the
+sustainability of agricultural and rural communities
+worldwide. Livelihoods Funds have been designated the "Best
+82
+-
+Combined Management Report | Energy and Emissions
+2013*
+161
+2016
+81
+Strengthening Our "Green Cloud"
+As more business moves to the cloud, data centers are a key
+part of how SAP provides solutions to our customers. By using
+our green cloud services, customers can significantly reduce
+their carbon footprint. However, data centers represent a
+significant part of our total GHG with energy consumption
+increasing as a growing number of customers sign up to our
+cloud services. For this reason, our data centers have become a
+primary focus of our carbon reduction efforts. We have
+introduced initiatives to drive efficiency and innovation around
+buildings, data center operations, and infrastructure. For
+example, in 2016, one of our main data centers in Rot, Germany,
+had a very efficient power usage effectiveness (PUE) of 1.35. In
+addition, we have tied our business strategy to our
+environmental strategy by creating a completely "green cloud"
+powered by 100% renewable electricity at SAP. Carbon
+neutrality is achieved by purchasing renewable electricity
+certificates and carbon emission offsets.
+Total Data Center Electricity
+GWh
+■Internal External
+249
+243
+2012*
+60
+173
+179
+160
+18
+173
+160
+189
+178
+161
+65
+2015
+Corporate Offsetting Program 2016" in voluntary carbon
+Combined Management Report | Energy and Emissions
+Source: Gartner Market Databook, 4Q16 Update, 21 December 2016.
+The Gartner Report described herein, (the "Gartner Report") represents
+research opinion or viewpoints published, as part of a syndicated subscription
+service, by Gartner, Inc. ("Gartner"), and are not representations of fact. Each
+Gartner Report speaks as of its original publication date (and not as of the
+date of this Annual Report) and the opinions expressed in the Gartner Report
+are subject to change without notice.
+Impact on SAP
+In 2016, we once again succeeded in significantly expanding our
+business and outperformed the overall global economy and IT
+industry in 2016 with regards to revenue growth. Our good 2016
+results are further evidence that our strategy of innovating
+across the core, the cloud, and business networks to help our
+customers become true digital enterprises is the right way
+forward.
+In 2016, we again demonstrated that we are consistently
+pursuing our strategy for innovation and growth - and that
+globally, we are able to generate growth that few other IT
+companies can match – in three respects: in revenue from core
+business and cloud business, and in operating profit.
+Overall Financial Position
+Executive Board's Assessment
+In 2016, we delivered strong software sales, fast cloud growth,
+and operating profit expansion. We saw exceptional growth in
+our cloud and software business and reached above the
+midpoint of the full year outlook which we raised in October.
+SAP's rapidly expanding cloud business combined with solid
+growth in support revenue continued to drive the share of more
+predictable revenue.
+The strong cloud growth was driven throughout our broad cloud
+portfolio. Mainly due to our strong top line result, we generated
+an operating profit which was at the midpoint of our raised
+guidance range.
+Combined Management Report | Financial Performance: Review and Analysis
+We made substantial progress in transforming our Company by
+shifting investments from non-core activities to strategic growth
+areas, enabling us to capture the tremendous growth
+opportunities in the market. We expanded our addressable
+market, acquired best in class assets, and innovated a new
+generation of ERP with SAP S/4HANA. Our strong cloud backlog
+and the high software support renewal rates combined with our
+robust pipeline positions us for yet another year of growth in
+2017 and allowed us to confidently raise our high-level 2020
+ambition.
+For more information about our accounting policies, see the
+Notes to the Consolidated Financial Statements section, Note
+(3).
+There are no off-balance sheet financial instruments, such as
+sale-and-lease-back transactions, asset-backed securities, and
+liabilities related to structured entities, which are not disclosed
+in our Consolidated Financial Statements.
+Performance Against Our Outlook for
+2016 (Non-IFRS)
+Our 2016 operating profit-related internal management goals
+and published outlook were based on our non-IFRS financial
+measures. For this reason, in the following section we discuss
+performance against our outlook only in terms of non-IFRS
+numbers derived from IFRS measures. The subsequent section
+about IFRS operating results discusses numbers only in terms of
+the International Financial Reporting Standards (IFRSS), so the
+numbers in that section are not expressly identified as IFRS
+numbers.
+Outlook for 2016 (Non-IFRS)
+At the beginning of 2016, we projected that our 2016 non-IFRS
+cloud subscriptions and support revenue would be between
+€2.95 billion and €3.05 billion at constant currencies (2015:
+€2.30 billion). We expected full-year 2016 non-IFRS cloud and
+software revenue to increase by 6% to 8% at constant
+currencies (2015: €17.23 billion). We also expected our full-year
+operating profit (non-IFRS) for 2016 to end between €6.4 billion
+and €6.7 billion (2015: €6.35 billion) at constant currencies. We
+anticipated an effective tax rate (IFRS) of between 22.5% and
+23.5% (2015: 23.4%) and an effective tax rate (non-IFRS) of
+between 24.5% and 25.5% (2015: 26.1%).
+In July 2016, we adjusted our outlook for the effective tax rate
+(IFRS) to between 27.0% and 28.0% and for the effective tax
+rate (non-IFRS) to between 28.0% and 29.0%. The increase in
+comparison to the previous outlook mainly resulted from tax
+effects relating to changes in foreign currency exchange rates in
+Venezuela and the fact that the execution of the originally
+planned consolidation of intellectual property rights held by SAP
+Group company hybris AG at the level of SAP SE in Germany
+could no longer be achieved at this point of time.
+In October, based on the strong momentum in our cloud
+business, we raised our outlook for 2016 non-IFRS cloud
+subscriptions and support revenue to a range of €3.00 billion to
+€3.05 billion at constant currencies. The upper end of this range
+represents a growth rate of 33% at constant currencies. Thanks
+to continued growth in our software license business, we were
+also able to increase our growth outlook for full-year 2016 non-
+Combined Management Report | Financial Performance: Review and Analysis
+Influence of Accounting Policies on Our
+Financial Position
+markets by the Environmental Finance magazine. In 2016, we
+received carbon credits from the fund, which helped us to
+offset our carbon footprint by 21 kt.
+84
+The Americas region likewise recorded lower growth rates in IT
+spending than the previous year as can be seen in the table
+mentioned above. According to the same table, software
+spending nevertheless significantly outperformed IT spending
+as a whole.
+83
+Financial
+Performance:
+Review and Analysis
+Up 20%
+Up 7%
+cloud and software revenue
+(IFRS)
+operating profit (IFRS)
+Up 31%
+In the Asia Pacific Japan (APJ) region, software spending grew
+faster than all other submarkets in the IT industry as well,
+documented in the table mentioned above.
+new cloud bookings
+Global Economic Trends
+In its latest economic bulletin, the European Central Bank (ECB)
+concludes that the global economy grew steadily in 2016 at a
+similar pace as the year before, with relatively stable expansion
+in advanced economies and a slight improvement in emerging
+market economies. According to the ECB, acute uncertainty
+about the political and economic impact of the presidential
+election in the United States shaped global sentiment at the end
+of the year.
+For the Europe, Middle East, and Africa (EMEA) region, the ECB
+reports that economic recovery in the euro area continued
+throughout 2016, supported by the ECB's own monetary policy
+measures which it finds helped revitalize domestic demand in
+the euro area and reduce debt. According to its calculations, the
+real gross domestic product of the euro area countries grew
+1.7% in 2016. The economies of many of the Central and Eastern
+Europe countries also performed well in 2016, the ECB writes.
+There were even signs of an economic rebound in Russia, but
+expansion there stayed slightly negative for the year as a whole.
+In the North America and Latin America (Americas) region,
+continued low interest rate policies and improving labor markets
+stimulated the U.S. economy in 2016, the ECB reports, with
+economic activity in the United States improving markedly in the
+second half of 2016, following modest growth in the first half. In
+Brazil, the recession is believed to have slowly bottomed out in
+the second half of the year.
+In the Asia Pacific Japan (APJ) region, soft foreign demand and
+weak private consumption caused Japan's economy to advance
+at only a very modest pace, the ECB notes. In China, meanwhile,
+economic growth continued to slow in 2016 but, according to
+the ECB, eventually stabilized in the second half-year, supported
+by strong consumption and infrastructure spending.
+The IT Market
+According to Gartner Market Databook December 2016 by
+Gartner, a market research firm, "worldwide IT spending is
+forecast to grow 0.5% in 2016 on a constant-currency basis.
+However, currency rate changes will limit market growth to
+negative 0.6%. Software is the best-performing segment, with
+6.9% growth in 2016 constant currency, while Emerging
+Asia/Pacific is the fastest-growing region/country, at 2.9%."
+In the Europe, Middle East, and Africa (EMEA) region, growth
+declined year-over-year in the Western European IT market from
+3.6% to -0.1% and the Eastern European IT market declined
+from 15.8% to 1.8% (see table in paragraph "Expected
+Developments and Opportunities”: "Trends in the IT Market - IT
+spending Year-on-Year", created by SAP on the basis of Gartner
+Market Databook, 4Q16 Update, 21 December 2016). According
+to the same table, software spending grew significantly faster
+than all other submarkets throughout the region.
+Economy and the Market
+2014
+2013
+2012
+2,189
+27
+2,155
+64
+2,221
+101
+2,463
+2,575
+2,162
+2,091
+2,120
+290
+2012
+2014
+2015
+2016
+Cloud subscriptions revenue grew 45% to €290 million in 2016
+(2015: €200 million). This growth reflects a 43% increase from
+Consumer
+Energy and Natural Resources
+Discrete Manufacturing
+3,880
+Services
+2013
+3,632
+2,663
+200
+Cloud
+5,366
+4,485
+4,465
+4,566
+changes in volumes and prices and a 1% increase from currency
+effects. Software licenses and software support revenue
+increased 5% to €2,575 million in 2016 (2015: €2,463 million).
+This growth reflects a 3% increase from changes in volumes and
+prices and a 1% increase from currency effects.
+Revenue by Industry
+We allocate our customers to one of our industries at the outset
+of an initial arrangement. All subsequent revenue from a
+particular customer is recorded under that industry sector.
+Revenue by Industry
+€ millions
+2,865
+2012
+2014
+2015
+2016
+Cloud subscriptions revenue rose by 27% to €2,000 million in
+2016 (2015: €1,579 million); currency effects were 0%. Software
+licenses and software support revenue in 2016 of €5,366 million
+was virtually unchanged compared to the prior year (2015:
+€5,350 million).
+APJ Region
+In 2016, 15% (2015: 15%) of our total revenue was generated in
+the APJ region. Total revenue in the APJ region increased 6% to
+€3,377 million. In Japan, revenue increased 24% to €825
+million. Revenue from Japan was 24% (2015: 21%) of all revenue
+generated in the APJ region. The revenue growth in Japan was
+attributable to a 10% increase from changes in volumes and
+prices and a 13% increase from currency effects. In the
+remaining countries of the APJ region, revenue increased 1%.
+Revenue in the remaining countries of the APJ region was
+generated primarily in Australia, India and China. Cloud and
+software revenue in the APJ region totaled €2,865 million in
+2016 (2015: €2,663 million). That was 85% of all revenue from
+the region (2015: 84%).
+APJ: Cloud and Software Revenue
+€ millions
+On Premise
+2013
+Public Services
+2,137
+Financial Services
+Our commitment to 100% renewable electricity is crucial to
+making our operations more sustainable. While SAP produces a
+small amount of renewable electricity through solar panels in
+some locations, we rely primarily on the purchase of renewable
+energy certificates (RECs) to achieve our target of 100%
+renewable electricity. We follow robust procurement guidelines
+for RECS to ensure that we only invest in environmentally
+friendly schemes.
+Total Energy Consumption
+GWh
+545
+500
+485
+455
+965
+950
+Committing to 100% Renewable
+Electricity
+380
+920
+860
+2012
+2013
+2014
+2015
+2016*
+*For more information on the calculation method of the 2016
+CO2 emissions, see our Notes to Environmental Performance
+Reporting section on the GHG footprint in the SAP Integrated
+Report online.
+Combined Management Report | Energy and Emissions
+910
+In addition to our long-term commitment for 2020, we have
+derived annual targets for our internal operational steering. In
+2016, we outperformed our annual target to reduce our
+emissions to less than 400 kilotons (kt) of CO2. This result
+stems primarily from updating our emission factors as well as
+compensation with carbon emission offsets. Our focus on
+carbon emissions has contributed to a cumulative cost
+avoidance of €155 million in the past three years, compared to a
+business-as-usual scenario based on 2007. We avoided €73.6
+million of this cost in 2016.
+kilotons CO2
+Total Net Emissions
+1,928
+5.520
+4,966
+In 2016, we achieved above-average growth in the following
+industry sectors, measured by changes in total revenue:
+Consumer (€5,520 million, growing 12%); Services (€3,632
+million, growing 10%); and Discrete Manufacturing (€3,880
+million, growing 6%). Revenue from the other industry sectors
+was Financial Services (€1,928 million, growing 3%); Energy and
+Natural Resources (€4,966 million, growing 3%); and Public
+Services (€2,137 million, decreasing 2%).
+Operating Profit and Operating Margin
+SAP continued to invest in innovation and its cloud business and
+achieved a record revenue in 2016. Thanks to strong revenue
+growth and lower restructuring costs, our operating profit
+improved 21% to €5,135 million (2015: €4,252 million).
+In 2016, our operating expenses increased €387 million or 2% to
+€16,928 million (2015: €16,541 million). The main contributors
+to that increase were our continued investment in sales
+activities and our greater revenue-related and investment-
+related cloud subscriptions and support costs.
+The record revenue generated and significantly lower
+restructuring costs had a positive impact on our operating
+profit. Continuing investment in cloud infrastructure, in sales
+activities around the world, and in research and development
+also affected the results in 2016. The increased operating profit
+and the higher share price in 2016 pushed the cost of bonus
+90
+Combined Management Report | Financial Performance: Review and Analysis
+Energy and Emissions
+380 kt
+carbon emissions
+950 GWh
+energy consumption
+100%
+renewable electricity
+Being a Front-Runner of a Greener
+Way of Working
+As a role model for sustainable business operations, SAP takes
+its environmental responsibilities seriously. We believe that by
+running cleaner, greener operations, we can make a difference
+to our planet. In addition, we aim to enable our customers to
+reduce their overall carbon footprint through our software.
+One of our goals is to reduce net greenhouse gas (GHG)
+emissions from our operations to levels of the year 2000 by
+2020. This target includes all direct emissions from running our
+business as well as a selected subset of indirect emissions from
+supply chains and services.
+A number of initiatives harness innovative technologies to help
+us run our operations in a way that minimizes our impact on the
+environment. In addition, our investment in renewable electricity
+certificates and carbon credits enables us to support
+sustainability projects across the globe.
+85
+709
+IFRS cloud and software revenue to 6.5% to 8.5% at constant
+currencies. In view of the greater revenues expected, we also
+adjusted our outlook for full-year operating profit (non-IFRS) for
+2016 upward to range between €6.5 billion and €6.7 billion at
+constant currencies.
+We achieved or exceeded the raised outlook for revenue and
+operating profit we published in October.
+Our customer base continued to expand in 2016. Based on the
+number of contracts concluded, 16% of the orders we received
+for software in 2016 were from new customers (2015: 13%). The
+total value of software orders received was stable year-over-
+year. The total number of software license contracts remained
+at the same level with 57,291 (2015: 57,439), while the average
+order value remained unchanged year-over-year. 29% of our
+software order entry in 2016 resulted from deals worth more
+10,093
+10,571
+7,873
+8,293
+8,829
+2012
+2013
+2014
+Despite a combination of a challenging macroeconomic and
+political environment and the accelerating industry shift to the
+cloud, we achieved a €25 million increase in software license
+revenue. This increase, from €4,835 million in 2015 to €4,860
+million in 2016, reflects a 1% increase from changes in volumes
+and prices and a 1% decrease from currency effects.
+2015
+Cloud and software revenue grew from €17,214 million in 2015
+to €18,424 million in 2016, an increase of 7%. This reflects an
+8% increase from changes in volumes and prices and a 1%
+decrease from currency effects.
+Services Revenue
+Services revenue combines revenue from professional services,
+premium support services, training services, messaging
+services and payment services. Professional services primarily
+relate to the installation and configuration of our cloud
+88
+Combined Management Report | Financial Performance: Review and Analysis
+subscriptions and on-premise software products. Our premium
+support offering consists of high-end support services tailored
+to customer requirements. Messaging services are primarily
+transmission of electronic text messages from one mobile
+phone provider to another. Payment services are primarily
+delivered in connection with our travel and expense
+management offerings.
+Services revenue increased €59 million, or 2%, from €3,579
+million in 2015 to €3,638 million in 2016. This increase reflects a
+3% increase from changes in volumes and prices and a 1%
+decrease from currency effects.
+A solid market demand led to a 1% increase of €26 million in
+consulting revenue and premium support revenue from €2,856
+million in 2015 to €2,883 million in 2016. This increase reflects a
+2% increase from changes in volumes and prices and a 1%
+decrease from currency effects. Consulting and premium
+support revenue contributed 79% of the total service revenue
+(2015: 80%). Consulting and premium support revenue
+contributed 13% of total revenue in 2016 (2015: 14%).
+Revenue from other services increased €33 million, or 5%, to
+€756 million in 2016 (2015: €723 million). This reflects a 6%
+increase from changes in volumes and prices and a 1% decrease
+from currency changes.
+2016
+Revenue by Region and Industry
+2016
+270
+2,993
+Predictable Revenue
+€ millions
+■Software Support
+■Cloud
+1,087
+696
+270
+13,564
+2015
+12,379
+9,916
+2,286
+8,989
+8,143
+1,087
+696
+2012
+2013
+2014
+457
+2,286
+Revenue by Region
+(based on customer location)
+2012
+2013
+2014
+2015
+2016
+Cloud subscriptions revenue rose 39% to €703 million in 2016
+(2015: €507 million). This growth reflects a 41% increase from
+changes in volumes and prices and a 3% decrease from
+currency effects. Software licenses and software support
+revenue rose 5% to €7,489 million in 2016 (2015: €7,115
+million). This increase reflects a 7% increase from changes in
+volumes and prices and a 2% decrease from currency effects.
+Americas Region
+In 2016, 40% of our total revenue was generated in the
+Americas region (2015: 41%). Total revenue in the Americas
+region increased 6% to €8,931 million; revenue generated in the
+United States increased 6% to €7,167 million. This growth
+reflects a 6% increase from changes in volumes and prices and
+currency effect of 0%. The United States contributed 80%
+(2015: 80%) of all revenue generated in the Americas region. In
+the remaining countries of the Americas region, revenue
+increased 5% to €1,763 million. This increase reflects a 7%
+increase from changes in volumes and prices and a 2%
+decrease from currency effects. Revenue in the remaining
+countries of the Americas region was generated primarily in
+Mexico, Brazil and Canada. Cloud and software revenue
+generated in the Americas region in 2016 totaled €7,366 million
+(2015: €6,929 million). Cloud and software revenue represented
+82% of all revenue in the Americas region in 2016 (2015: 82%).
+Combined Management Report | Financial Performance: Review and Analysis
+6,542
+89
+€ millions
+■On Premise
+■Cloud
+7,366
+6,929
+2,000
+5,275
+1,579
+4,922
+Americas: Cloud and Software Revenue
+Revenue by Region
+6,252
+7,489
+EMEA Region
+€ millions
+APJ
+3,377
+Americas
+8,931
+EMEA
+9,755
+22,062
+In 2016, the EMEA region generated €9,755 million in revenue
+(2015: €9,181 million), which was 44% of total revenue (2015:
+44%). This represents a year-over-year increase of 6%.
+Revenue in Germany increased 9% to €3,034 million in 2016
+(2015: €2,771 million). Germany contributed 31% (2015: 30%)
+of all EMEA region revenue. The remaining revenue in the EMEA
+region was primarily generated in the United Kingdom, France,
+Switzerland, the Netherlands and Italy. Cloud and software
+revenue generated in the EMEA region in 2016 totaled €8,193
+million (2015: €7,622 million). Cloud and software revenue
+represented 84% of all revenue in the region in 2016 (2015:
+83%).
+EMEA: Cloud and Software Revenue
+€ millions
+5,885
+■On Premise
+8,192
+7,622
+703
+6,428
+5,967
+82
+6,819
+277
+507
+176
+7,115
+■Cloud
+We define predictable revenue as the sum of our software
+support revenue and our cloud subscriptions and support
+revenue. Compared to the previous year, our predictable
+revenue increased 10%, from €12,379 million to €13,564 million
+in 2016. Predictable revenue accounted for 61% of our total
+revenue in 2016 (2015: 60%).
+Software licenses and software support revenue rose €503
+million, or 3%, from €14,928 million in 2015 to €15,431 million in
+2016. This increase reflects a 4% increase from changes in
+volumes and prices and a 1% decrease from currency effects.
+Our stable customer base, continued investment in new
+software licenses by customers throughout 2016 and the
+previous year, and the continued interest in our support
+offerings resulted in an increase in software support revenue
+from €10,093 million in 2015 to €10,571 million in 2016. The SAP
+Enterprise Support offering was the largest contributor to our
+software support revenue. The €478 million, or 5%, growth in
+software support revenue reflects a 6% increase from new
+support business and a 1% decrease from currency effects. This
+growth is primarily attributable to SAP Product Support for
+Large Enterprises and SAP Enterprise Support. The acceptance
+rate for SAP Enterprise Support among new customers reached
+100% in 2016 (2015: 99%).
+Despite ongoing economic uncertainty throughout 2016,
+especially in Latin America, coupled with fears about the
+possible effects of the Brexit vote and the presidential election in
+the United States, our new and existing customers continued to
+show a strong willingness to invest in our solutions.
+On a constant currency basis, non-IFRS cloud subscriptions and
+support revenue grew from €2.30 billion in 2015 to €3.01 billion
+in 2016. That represents an increase of 31% on a constant
+currency basis. We thus achieved our refined outlook range of
+€3.00 billion to €3.05 billion that we predicted in October.
+Our new cloud bookings, which is the main measure for our
+cloud-related sales success and for future cloud subscriptions
+revenue, increased 31% in 2016 to €1.15 billion (2015: €874
+million). In addition to this strong growth, our cloud backlog
+(unbilled future revenue based on existing customer contracts)
+climbed by 47% to €5.4 billion (2015: €3.7 billion). This reflects
+the unbilled committed future cloud subscriptions and support
+revenue that will drive strong cloud growth in 2017 and beyond.
+Besides the cloud business, our traditional on-premise business
+also showed a remarkable growth in 2016. Cloud and software
+revenue (non-IFRS) was €18.43 billion (2015: €17.23 billion). On
+a constant currency basis, the increase was 8% and therefore
+well above the midpoint of the increased outlook.
+Our total revenue (non-IFRS) rose 6% in 2016 to €22.07 billion
+(2015: €20.81 billion). On a constant currency basis, the
+increase was 7%.
+Operating expenses (non-IFRS) in 2016 were €15.43 billion
+(2015: €14.46 billion), an increase of 7%. On a constant
+currency basis, the increase was 8%.
+Our expense base in 2016 continued to be impacted by the
+transformation to a fast-growing cloud business. In our outlook
+we expected the cloud subscriptions and support gross margin
+to be at least stable or to slightly increase compared to 2015.
+The cloud subscriptions gross margin for 2016 was 64.4%, a
+decrease of 1.2pp on a constant currency basis and with that
+below our expectations. The decrease is primarily due to the
+change in the cloud subscription revenue mix; the share of our
+infrastructure-as-a-service cloud offering (IaaS) that has a lower
+margin than the other cloud offerings, grew at above-average
+rates and thus impacted the overall gross margin. The cloud
+subscriptions gross margins of our cloud offerings developed
+heterogeneously in 2016:
+Our cloud subscriptions gross margin (non-IFRS) in our
+business network business increased by 1% and resulted in
+approximately 76% for 2016, already close to our long-term
+ambition of approximately 80%. This excellent result is
+attributable to the continued positive gross margin development
+within the Concur and SAP Ariba portfolios.
+The cloud subscriptions gross margin (non-IFRS) of our
+infrastructure-as-a-service cloud offering (IaaS) performed much
+better in 2016 than in 2015. In 2016 our cloud subscription gross
+margin is -5% which reflects an improvement of more than
+104pp on a constant currency basis. In the last two quarters
+break-even was already reached, we are therefore in line with
+our expectations. Profitability in our software-as-a-
+service/platform-as-a-service cloud offering (Saas/PaaS) was
+26.8%
+86
+approximately 62% for 2016 compared to our long-term
+ambition of approximately 80%. Affected by the incremental
+investments in our cloud infrastructure, cloud profitability fell by
+8pp on a constant currency basis, mainly due to significant
+investments in the expansion of our data center and IT
+infrastructure as well as in the harmonization of our various
+public cloud offerings into one platform.
+Efficiency improvements in both our cloud and traditional on-
+premise business drove continued operating profit expansion.
+Non-IFRS operating profit in 2016 was €6.61 billion on a
+constant currency basis, reflecting an increase of 4%. As a
+result, we were able to surpass our excellent results from 2015,
+despite our continued investment in our business
+transformation during the reporting year. The positive
+development of our operating profit was influenced by the
+effects of our global transformation program carried out in 2015
+as well as by the cost-conscious hiring of highly educated young
+talents in our fast growth areas and locations that enabled us to
+increase our overall headcount by 7,197 full-time equivalents in
+2016. With these additional resources, we continued to invest in
+our innovation and growth markets. Thus, constant currency
+non-IFRS operating profit amounting to €6.61 billion was at the
+midpoint of our raised outlook range (€6.5 billion to €6.7
+billion).
+We achieved an effective tax rate (IFRS) of 25.3% and an
+effective tax rate (non-IFRS) of 26.8%, which is below the
+adjusted outlook of 27.0% to 28.0% (IFRS) and 28.0% to 29.0%
+(non-IFRS). This mainly results from taxes for prior years and
+from the regional allocation of income.
+Operating Results (IFRS)
+This section on operating results (IFRS) discusses results only in
+terms of IFRS measures, so the IFRS numbers are not expressly
+identified as such.
+We break our operations down into three regions: the Europe,
+Middle East, and Africa (EMEA) region, the Americas region, and
+the Asia Pacific Japan (APJ) region. We allocate revenue
+amounts to each region based on where the customer is located.
+For more information about revenue by geographic region, see
+the Notes to the Consolidated Financial Statements section,
+Note (28).
+Revenue
+Total Revenue
+Total revenue increased from €20,793 million in 2015 to
+€22,062 million in 2016, representing an increase of €1,269
+million, or 6%.
+Combined Management Report | Financial Performance: Review and Analysis
+Total Revenue
+25.3%
+€6.61 billion
+Comparison of Outlook and Results for 2016
+Cloud subscriptions and support revenue (non-IFRS, at
+constant currencies)
+Cloud and software revenue
+(non-IFRS, at constant currencies)
+Operating profit
+(non-IFRS, at constant currencies)
+Effective tax rate (IFRS)
+Effective tax rate (non-IFRS)
+Outlook for 2016
+(as reported in Integrated
+Report 2015)
+27.0% to 28.0%
+28.0% to 29.0%
+Revised Outlook
+Results
+for 2016
+€ 2.95 billion
+to € 3.05 billion
+€ 3.00 billion
+to € 3.05 billion
+€ 3.01 billion
++6.0% to +8.0%
++6.5% to +8.5%
++8%
+€6.40 billion
+to €6.70 billion
+22.5% to 23.5%
+24.5% to 25.5%
+€6.50 billion
+to €6.70 billion
+for 2016
+€ millions | change since previous year
+22,062
+20,793
+Software licenses revenue results from the fees earned from
+selling or licensing software to customers. Revenue from cloud
+subscriptions and support refers to the income earned from
+contracts that permit the customer to access specific software
+solutions hosted by SAP during the term of its contract with
+Combined Management Report | Financial Performance: Review and Analysis
+87
+SAP. Support revenue represents fees earned from providing
+technical support services and unspecified software upgrades,
+updates, and enhancements to customers.
+Cloud and Software
+€ millions
+18,424
+17,214
+14,315
+Cloud and Software Revenue
+13,505
+2012
+2013
+2014
+2015
+2016
+Cloud subscriptions and support revenue increased from
+€2,286 million in 2015 to €2,993 million in 2016.
+Cloud Subscriptions and Support
+€ millions
+than €5 million (2015: 27%), while 38% resulted from deals
+worth less than €1 million (2015: 40%).
+12,801
+For more information about the breakdown of total revenue by
+region and industry, see Revenue by Region and Revenue by
+Industry below.
+10,571
+3,638
+17,560
+16,223
+16,815
+14%
+4%
+4%
+18%
+6%
+2012
+2013
+2014
+2015
+2016
+This increase reflects a 7% increase from changes in volumes
+and prices and a 1% decrease from currency effects. The growth
+in revenue resulted primarily from a €707 million increase in
+cloud subscriptions and support revenue. Furthermore,
+software support revenue rose €478 million. This growth is a
+result of continuously high software license revenue, which
+increased €25 million in 2016. Cloud and software revenue
+climbed to €18,424 million in 2016, an increase of 7%. Cloud and
+software revenue represented 84% of total revenue in 2016
+(2015: 83%). Service revenue increased 2% from €3,579 million
+in 2015 to €3,638 million, which was 16% of total revenue, in
+2016.
+Revenue by Line Item
+€ millions
+Cloud Subscriptions & Support
+2,993
+Software Licenses
+4,860
+Software Support
+Services
+2016 Actual Performance Compared to
+Outlook (Non-IFRS)
+2,993
+9
+114.80
+Data center energy consumed (in GWh)
+Total energy consumption (in GWh)
+Net Greenhouse gas emissions (in kilotons)
+Environment
+Customer Net Promoter Score (in %)
+Customer
+0
+93.7
+94.6
+7
+57
+61
+Employee retention (in %)
+Leadership Trust Index (LTI, in %)
+0
+78
+79
+Business Health Culture Index (in %)
+0
+85
+85
+Employee Engagement Index (in %)
+4
+24.5
+25.4
+1) Numbers based on at year-end.
+Women in management¹) (total, in % of total number of employees)
+2)
+Key Facts
+2
+Compensation Report¹).
+Report by the Supervisory Board.
+Corporate Governance Report..
+Investor Relations.
+SAP Executive Board..
+Letter from the CEO
+To Our Stakeholders
+Key Facts...
+About This Report..
+Contents
+6
+5
+9
+243
+265
+-3
+950
+920
+-14
+380
+325
+-7
+19.2
+17.8
+O Numbers are based on the proposed dividend and on level of treasury stock at year-end.
+3) Full-time equivalents.
+4
+0
+33
+Share of software orders less than € 1 million (in % of total software order entry)
+29
+30
+Share of software orders greater than € 5 million (in % of total software order entry)
+3
+57.291
+59,147
+Orders - Number of on-premise software deals (in transactions)
+16
+2,383
+2,771
+Deferred cloud subscriptions and support revenue (IFRS)¹)
+26
+1,147
+1,448
+New cloud bookings
+-16
+26.8
+22.6
+-24
+25.3
+19.3
+A in %
+2016
+2017
+40
+32
+38
+Key SAP Stock Facts
+Women working at SAP (in %)
+3
+117
+121
+Personnel expenses per employee - excluding share-based payments (in € thousands)
+5
+84,183
+88,543
+Number of employees¹). 3)
+Employees and personnel expenses
+13
+101.73
+12
+1.25
+1.40
+14
+3.90
+4.44
+10
+3.04
+3.36
+Market capitalization1) (in € billions)
+Dividend per share²) (in €)
+Earnings per share, basic (non-IFRS, in €)
+Earnings per share, basic (in €)
+35
+80
+9
+.12
+Further Information on Economic, Environmental, and Social Performance
+221
+About This Further Information on Economic, Environmental, and Social Performance
+Connectivity of Financial and Non-Financial Indicators¹.
+222
+223
+Materiality
+232
+Stakeholder Engagement.
+Sustainability Management and Policies.
+Human Rights and Labor Standards.
+Sustainable Procurement.
+Waste and Water
+235
+237
+239
+241
+.243
+Public Policy.
+Memberships.
+.245
+.246
+Non-Financial Notes: Social Performance..
+247
+Non-Financial Notes: Environmental Performance
+.248
+.220
+GRI Index and UN Global Compact Communication on Progress..
+Management's Annual Report on Internal Control over Financial Reporting in the Consolidated
+Financial Statements....
+Notes
+65
+Security, Privacy, and Data Protection....
+72
+Customers..
+Performance Management System.
+Employees and Social Investments
+Energy and Emissions.
+Financial Performance: Review and Analysis.....
+Corporate Governance Fundamentals
+Business Conduct..
+.74
+77
+.84
+.90
+.93
+112
+.114
+Risk Management and Risks.
+116
+Expected Developments and Opportunities
+.137
+Consolidated Financial Statements IFRS and Notes
+144
+Consolidated Financial Statements IFRS
+145
+150
+.254
+Management's Acknowledgement of the SAP Integrated Report 2017
+.260
+8
+To Our Stakeholders
+Letter from the CEO
+Dear Stakeholders of SAP,
+On behalf of the 88,543 employees of SAP, it is my honor to
+present the SAP Integrated Report 2017. We are proud of our
+strong financial, social, and environmental performance. We are
+a humble company, continuously fighting to earn the trust of our
+customers. We are also a hungry company, unafraid to embrace
+bold dreams for big opportunities ahead.
+As we discuss our past, present, and future, the enduring
+constant is our vision to help the world run better and improve
+people's lives. Through this purposeful mission, we deliver
+leading solutions to make every customer an intelligent
+enterprise. We do this all in service to the best-run businesses,
+universities, and governments in the world - because now as
+ever The Best Run SAP.
+Keeping Our Promises
+Since we adopted our growth strategy in 2010, our revenues,
+profits, market value, and customer count have all doubled or
+tripled. Please consider the following:
+We set out to reshape the database industry. Our goal was to
+deliver new levels of operational efficiency and business
+insight at mass scale. Forrester has now defined this new
+frontier as the market for “Translytical Data Platforms." They
+ranked SAP HANA the clear #1 in both strategy and market
+presence. SAP HANA supports volumes of data in-memory,
+up to a petabyte, returning results in under a second. Already
+with 21,000 customers, its market-making potential as a full-
+use database has only just begun.
+We reinvented enterprise resource planning (ERP) software on
+an in-memory architecture. Today, with nearly 8,000 SAP
+S/4HANA customers, we are leading the market to
+"Intelligent ERP.”
+To Our Stakeholders | Letter from the CEO
+.60
+Overview of the SAP Group
+58
+General Information About This Management Report.
+57
+Combined Management Report
+.50
+Independent Auditor's Report¹)
+.49
+Responsibility Statement..
+.31
+.22
+.18
+.14
+.50
+49
+.31
+22
+Assurance Report of the Independent Auditor
+Strategy and Business Model..
+261
+Additional Information
+264
+Five-Year Summary¹).
+Glossary.
+Financial Calendar and Addresses.
+Financial and Sustainability Publications.
+Publication Details.
+.265
+.269
+Order Entry
+279
+281
+7
+To Our Stakeholders
+Letter from the CEO
+SAP Executive Board.
+Investor Relations...
+Corporate Governance Report..
+Report by the Supervisory Board.
+Compensation Report¹).
+Responsibility Statement...
+Independent Auditor's Report¹).
+9
+12
+.14
+..18
+.280
+.61
+Effective tax rate (non-IFRS, in %)
+€ millions, unless otherwise stated
+23,464
+Total revenue (non-IFRS)
+6
+22,062
+23,461
+Total revenue (IFRS)
+6
+18,428
+19,552
+Cloud and software (non-IFRS)
+6
+18,424
+19,549
+Cloud and software (IFRS)
+3
+10,572
+10,908
+Software support (non-IFRS)
+3
+10,571
+10,908
+22,067
+6
+Applications, Technology & Services Segment revenue
+21,141
+-1,066
+-1,427
+Cost of cloud subscriptions and support (non-IFRS)
+26
+-1,313
+-1,660
+Cost of cloud subscriptions and support (IFRS)
+Operating expenses
+2
+61
+Software support (IFRS)
+63
+Effective tax rate (IFRS, in %)
+61
+63
+Share of predictable revenue (IFRS, in %)
+17
+1.925
+2,261
+SAP Business Network Segment revenue
+5
+20,130
+Share of predictable revenue (non-IFRS, in %)
+34
+0
+4,872
+2
+KPMG AG Wirtschaftsprüfungsgesellschaft has audited our
+Consolidated Financial Statements and our Combined
+Management Report (including the information that our Non-
+Financial Report references to). Additionally, KPMG has
+provided assurance on selected non-financial data and
+information in accordance with the International Standard on
+Assurance Engagements (ISAE) 3000 and 3410 ("Assurance
+Engagements on Greenhouse Gas Statements"), two pertinent
+standards for the assurance of sustainability reporting. Where
+our SAP Integrated Report makes reference to SAP's public
+Web site, that Web site information is unaudited. Both the
+Independent Audit and
+Assurance
+The reporting period is fiscal year 2017. The report
+encompasses SAP SE and all subsidiaries of the SAP Group. To
+make this report as current as possible, we have included
+relevant information available up to the auditor's opinion and the
+responsibility statement dated February 21, 2018. The report is
+available in English and German.
+All financial and non-financial data and information for the
+reporting period is reported utilizing SAP software solutions and
+sourced from the responsible business units.
+Our Non-Financial Report is prepared in accordance with
+sections 289b and 315b of the German Commercial Code, which
+require us to report, for both, SAP SE and SAP Group, on social,
+environmental, and other non-financial matters. All non-financial
+information stipulated in the German Commercial Code,
+sections 315c and 289c that is relevant to understand SAP's
+development, performance of the business, and the position of
+the Group and SAP SE is included in our Combined Management
+Report. Rather than repeating this information, our Non-
+Financial Report (which is part of this integrated report at
+http://www.sap.com/investors/sap-2017-combined-non-
+financial-report) provides references to the sections of our
+Combined Management Report that provide the required
+disclosures.
+Our Consolidated Financial Statements are prepared in
+accordance with IFRS. Our executive management has
+confirmed the effectiveness of our internal controls over
+financial reporting.
+Commercial Code and German Accounting Standards No. 17
+and 20. The Combined Management Report is also a
+management commentary complying with the International
+Financial Reporting Standards (IFRS) Practice Statement
+Management Commentary.
+Our Combined Management Report is prepared in accordance
+with sections 289, 289a, 289f, 315, 315a and 315d of the German Data
+Greenhouse gas data is prepared based on the Greenhouse Gas
+Protocol.
+The social and environmental data and information included in
+the SAP Integrated Report has been prepared in accordance
+with the GRI Standards: Core option. This GRI option indicates
+that a report contains the minimum information needed to
+understand the nature of the organization, its material topics
+and related impacts, and how these are managed. We apply the
+GRI principles for defining report content (sustainability context,
+stakeholder inclusiveness, materiality, and completeness). We
+consider the principle of sustainability context in a number of
+ways, such as by looking at global issues or trends including
+climate change and demographic shifts. For example, we assess
+our greenhouse gas emissions in the context of the emissions of
+the entire information and communications technology
+landscape, with particular focus on the abatement potential of
+the industry. When it comes to completeness, we recognize that
+while we comply with this principle in reporting on our own
+operations, we are still developing methodologies to reliably
+quantify our impact through our solutions.
+Basis of Presentation
+The financial reporting presented in the SAP Integrated Report
+includes our Consolidated Financial Statements and our
+Combined Management Report. Following our integrated
+reporting approach the Combined Management Report also
+provides non-financial information. This non-financial
+information relates to topics derived from our materiality
+assessment including innovation, impact on society, human
+capital, business conduct, human and digital rights, and climate
+and energy. For more information about our materiality
+assessment, see the Materiality section.
+http://www.sapintegratedreport.com. The SAP Integrated
+Report 2017 takes into consideration the recommendations
+from the International Integrated Reporting Framework.
+Since 2012, we have reported on our full-year financial, social,
+and environmental performance in one integrated report ("SAP
+Integrated Report") available at
+Content
+About This Report
+R
+SAP
+Intelligent Enterprise
+SAP Integrated Report 2017
+About This Report
+Independent Auditor's Report and the Independent Assurance
+Report for non-financial information are available in the
+Independent Auditor's Report section and the Independent
+Assurance Report section.
+Concept and Realization
+This report was designed by SAP and created with
+SAP S/4HANA software and the SAP Disclosure Management
+application.
+Software licenses (non-IFRS)
+0
+4,860
+4,872
+Software licenses (IFRS)
+26
+2,995
+3,771
+Cloud subscriptions and support (non-IFRS)
+26
+4,862
+2,993
+Cloud subscriptions and support (IFRS)
+Revenues
+A in %
+2016
+2017
+€ millions, unless otherwise stated
+Key Facts
+4
+About This Report
+3
+3,769
+Cost of software licenses and support (IFRS)
+2
+-2,182
+6,633
+6,769
+Operating profit (non-IFRS)
+-5
+5,135
+4,877
+Operating profit (IFRS)
+1
+-2,234
+68
+SAP Business Network Segment gross margin (in % of corresponding revenue)
+-1
+74
+73
+Applications, Technology & Services Segment gross margin (in % of corresponding revenue)
+-1
+72.9
+72.5
+Total gross margin (in % of total revenue, non-IFRS)
+0
+70.2
+2
+Operating margin (in % of total revenue, IFRS)
+Operating margin (in % of total revenue, non-IFRS)
+Free cash flow
+Key Facts
+0
+60
+60
+-5
+74
+70
+-53
+-3,153
+-1,479
+69.9
+4
+3,770
+-4
+30.1
+28.9
+-11
+23.3
+20.8
+Equity ratio (total equity in % of total assets)
+Days' sales outstanding (DSO, in days)
+Net liquidity
+3,627
+Total gross margin (in % of total revenue, IFRS)
+67
+83.7
+8
+-5,985
+-6.462
+7
+-6,583
+-7,051
+15
+-3,010
+-3,471
+11
+-3,495
+-3,893
+-2
+Total cost of revenue (IFRS)
+Cost of cloud and software (non-IFRS)
+Cost of cloud and software (IFRS)
+5
+-1.944
+-2,044
+Cost of software licenses and support (non-IFRS)
+2
+Research and development (IFRS)
+-3,352
+Total cost of revenue (non-IFRS)
+10
+-3,044
+82.2
+Cloud and software margin (in % of corresponding revenue, non-IFRS)
+-1
+81.0
+80.1
+Cloud and software margin (in % of corresponding revenue, IFRS)
+0
+87.4
+87.0
+Software and support gross margin (non-IFRS, in %)
+Products, Research & Development, and Services
+85.9
+Profits and Margins
+0
+Cloud subscriptions and support margin (in % of corresponding revenue, IFRS)
+Cloud subscriptions and support margin (in % of corresponding revenue, non-IFRS)
+56.1
+○
+56.0
+64.4
+-3
+Software and support gross margin (IFRS, in %)
+85.8
+62.2
+290
+200
+2,221
+2,155
+64
+419
+■Cloud
+2,865
+3,124
+101
+On Premise
+90
+2,663
+2,091
+2014
+2,575
+2,705
+2,120
+2013
+2015
+2016
+2017
+Cloud subscriptions revenue in the APJ region rose 45% to
+€419 million in 2017 (2016: €290 million). This increase reflects
+a 47% increase from changes in volumes and prices and a 2%
+decrease from currency effects. Software licenses and software
+support revenue rose 5% to €2,705 million in 2017 (2016:
+€2,575 million). This increase reflects an 8% increase from
+changes in volumes and prices and a 3% decrease from
+currency effects.
+Operating Profit and Operating
+Margin
+SAP posted record revenues in 2017, particularly in Cloud and
+Services. Our revenue from cloud subscriptions and support
+increased 26% while our services revenue improved 8%. In
+2017, total revenue grew 6% to €23,461 million (2016:
+€22,062 million), representing an increase of €1,399 million.
+Overall, the increase in expenses exceeded our growth in
+revenue, leading to a 5% decrease in operating profit to
+€4,877 million (2016: €5,135 million).
+Combined Management Report | Financial Performance: Review and Analysis
+99
+2,463
+On the other hand, our operating expenses increased
+€1,656 million or 10% to €18,584 million (2016:
+€16,928 million). The main contributors to that increase were
+our continued investment in sales and research and
+development activities as well as our higher revenue-related and
+investment-related cloud subscriptions and support costs. The
+higher share price in 2017 lead to increased costs of share-
+based compensation of €1,120 million (2016: €785 million). Our
+employee headcount (measured in full-time equivalents, or
+FTES) increased by 4,361 FTEs year over year to 88,543.
+90
+APJ: Cloud and Software Revenue
+Combined Management Report | Financial Performance: Review and Analysis
+93
+93
+integrated, and collectively managed 4. The second largest
+percentage featured managed and professional services around
+cloud adoption, accounting for one third of all cloud-related
+spending, says IDC.
+Over the past months, IDC monitored cloud services suppliers
+introducing a steady stream of innovative IT services, including
+Internet of Things back-end services, data services, blockchain
+services, and artificial intelligence-related services. Therefore,
+IDC calls the cloud the "launch pad" for virtually all IT
+innovation4.
+For example, asset-intensive industry segments in 2017 rapidly
+expanded their investments in loT equipment and connected
+processes as well as connected finished products and services 5.
+At the same time, according to IDC, more enterprises began to
+view data as an asset and invested more in technology, helping
+them to gain greater awareness of their data and to assess its
+value. Accordingly, nearly 50% of large enterprises generated
+revenue from data as a service, sale of raw data, derived
+metrics, insights, and recommendations in 20176, reports IDC.
+Furthermore, the blockchain technology as a foundation for
+digital trust became more important in 2017, observes IDC:
+While security concerns used to keep enterprises from moving
+to the cloud in earlier years, enhanced security capabilities
+available from service providers turned out to be a major
+incentive to move to the cloud in 20174. Finally, IDC saw
+"artificial intelligence everywhere"6 in 2017 and finds this
+technology demonstrating its potential in smartphones,
+automobiles, aircrafts, cybersecurity, digital warfare, and on the
+Internet². According to IDC, worldwide revenue for cognitive and
+artificial intelligence systems reached US$12.5 billion in 2017, an
+increase of 59.3% over 20165.
+Sources:
+¹ European Central Bank, Economic Bulletin, Issue 8/2017, Publication Date: December 28,
+2017 (http://www.ecb.europa.eu/pub/pdf/ecbu/eb201708.en.pdf)
+Under these circumstances, software spending rebounded
+strongly to US$301.6 billion in 2017 (services spending to
+US$513.2 billion)², estimates IDC. In this calculation, a "hybrid"
+management of complex environments represented the largest
+percentage with multiple public clouds, private clouds, and
+traditional systems that needed to be interconnected,
+2 IDC FutureScape: Worldwide Digital Transformation 2018 Predictions, Doc #US43154617,
+October 2017
+4 IDC Worldwide Whole Cloud Forecast, 2017-2021, Doc #US43215817, December 2017
+5 IDC FutureScape, Worldwide Cloud 2018 Predictions, Doc # US42014717, October 2017
+6 IDC FutureScape: Worldwide IT Industry 2018 Predictions, #US43171317, October 2017
+Impact on SAP
+The global trend of digital transformation has been a major
+business driver for SAP, and the broad adoption of cloud
+solutions drove our success. Our consistent strategy of
+innovation and growth and our investments into new
+technologies to help our customers become "intelligent
+enterprises" paid off.
+We saw strong momentum across our entire portfolio and in all
+regions, and the growth of our more predictable revenue share
+signaled trust in SAP.
+Overall Financial Position
+Executive Board's Assessment
+In 2017, we again met all our financial targets and now have
+consistently either met or exceeded our targets since we
+announced our mid-term ambition three years ago. In fact, we
+have hit all guidance metrics even where in some cases those
+metrics were raised multiple times.
+3 IDC Market Forecast: Software License, Maintenance & Subscription Forecast, 2017-2021,
+Doc #US42825517, July 2017
+Migrating or expanding existing on-premises and new workloads
+to the cloud was in most cases accompanied by an immediate or
+eventual reduction in capital expenditure for data center
+updates or expansion as well as a decline in on-premises
+operational expenses 5, says IDC. Hence, IT spending was
+increasingly transferred from hardware to software in 2017, and
+most providers with perpetually licensed software were
+undergoing a major transition toward subscription and cloud³.
+In 2017, IDC (International Data Corporation), a U.S.-based
+market research firm, observed “tremendous" momentum and
+influence of digital transformation on technology spending
+worldwide, spanning all geographies and industries². Digital
+transformation became the source of innovation and creativity
+for new business models, many of which were
+subscription/cloud based³. Therefore, in 2017, the growing
+enterprise focus on digital transformation brought about
+expanding demand for cloud services, surrounding technologies
+as well as professional and management services, explains IDC.
+Additionally, it states that the cloud delivery and consumption
+model has by now revolutionized the entire IT industry, shifting
+many traditional IT apps and workloads to the "as a service"
+model over the past year as organizations looked to become
+more productive, improve collaboration, and drive continuous
+innovation5.
+The IT Market
+In 2017, we continued to realize the benefits of our
+investment in the Livelihoods Fund. Several years ago, we
+made a commitment to invest €3 million covering a 20-year
+participation in a fund that supports social causes as well as
+the sustainability of agricultural and rural communities
+worldwide. The returns from this unique investment in the
+Livelihoods Fund consist of high-quality carbon credits.
+Following the success of this scheme, we plan to invest in a
+second Livelihoods Fund in 2018, increasing our commitment
+to sustainable initiatives. In 2017, the carbon credits we
+received helped us to offset our carbon footprint by 21.4 kt.
+92
+92
+Combined Management Report | Energy and Emissions
+Financial Performance:
+Review and Analysis
++6%
++12%
+cloud and software revenue (IFRS)
+profit after tax (IFRS)
++26%
+new cloud bookings
+Economy and the Market
+Global Economic Trends
+The global economy continued to expand at a solid rate in 2017,
+and the recovery showed signs of worldwide synchronization.
+This conclusion was drawn by the European Central Bank (ECB)
+in its December 2017 Economic Bulletin¹. The document
+describes the sustained pace of expansion of the global
+economy, which became more broad-based throughout the
+year. However, it elaborates that in advanced economies, rates
+of investment fell in the wake of the financial crisis, driven by the
+ensuing weakened expectations of demand prospects together
+with tighter financial conditions and heightened uncertainty.
+According to the ECB, investment was also lower in emerging
+market economies in 2017, in particular in commodity-exporting
+countries.
+In the Europe, Middle East, and Africa (EMEA) region, the ECB
+found a strong pace of economic expansion in the euro area in
+2017, supported by growth in private consumption as well as
+exports benefiting from the global recovery. Also, according to
+the ECB's December 2017 Economic Bulletin, economic activity
+in central and eastern European countries accelerated in 2017,
+driven by a rebound in investment and strong private
+consumption. Even Russia, after its previous deep recession,
+managed an economic recovery in 2017, states the ECB.
+As for the North America and Latin America (Americas) region,
+U.S. economic activity expanded at a solid pace in 2017, despite
+the impact of recent hurricanes, reports the ECB. Growth in
+investment and consumption strengthened domestic demand in
+the United States. Brazil was also in recovery throughout the
+year, even though political uncertainties continuously weighed
+on its business investments and consumer spending.
+The Asia Pacific Japan (APJ) region produced a robust real GDP
+growth in Japan in 2017. This was due to strengthening foreign
+demand, growing private investments, and easing financing
+conditions. In China, economic activity expanded at a significant
+pace, supported by resilient consumption and a still stable
+housing market, finds the ECB. Finally, world economic activity
+was also supported by India.
+We delivered robust top line growth and continued to expand
+our operating profit. On top of that, our cash generation and EPS
+growth remained strong.
+Even with fast growth in the cloud, our software revenue grew
+again. SAP's rapidly expanding cloud business together with
+solid growth in support revenue continued to drive the share of
+more predictable revenue. Our investments in the cloud are
+paying off. This, together with continuing improvements in
+efficiency and cost ratios, paves the way for the strong growth
+and margin expansion we expect in 2018 and beyond.
+The rapid customer adoption of SAP S/4HANA and our other
+cloud solutions give us enormous confidence to carry this
+momentum into 2018. Our performance, our portfolio, and our
+pipeline make us confident that we will deliver on our mid-term
+ambitions.
+Performance Against Our
+Outlook for 2017 (Non-IFRS)
+Revised Outlook
+for 2017
+(Q2 Quarterly Statement)
+Revised Outlook
+for 2017
+(Q3 Quarterly Statement)
+Results
+for 2017
+€3.80 billion
+to €4.00 billion
+€3.83 billion
++6.0% to +8.0%
++6.5% to +8.5%
++7.0% to +8.5%
++8%
+€23.30 billion
+to €23.70 billion
+€23.40 billion
+to €23.80 billion
+€23.77 billion
+€6.85 billion
+to €7.00 billion
+23.0% to 24.0%*
+25.0% to 26.0%*
+€6.92 billion
+19.3%
+22.6%
+* In the Q3 Quarterly Statement we disclosed our expectation to be below the previous outlook; we adjusted these rates in December for the full-year 2017.
+Despite diplomatic tensions, particularly in the Middle East,
+Turkey, and North Korea, coupled with uncertainties regarding
+the possible outcome and effects of the Brexit negotiations, our
+new and existing customers continued to show a strong
+willingness to invest in our solutions.
+€23.20 billion
+to €23.60 billion
+€6.80 billion
+to €7.00 billion
+26.0% to 27.0%
+27.0% to 28.0%
+We continue with our program introduced in 2015 to reduce
+the impact of air travel by SAP employees. In addition to
+avoiding business flights by investing in virtual collaboration
+and communication technologies, we invest in carbon
+emission offsets for air travel in the majority of countries we
+travel from by charging an internal carbon price. This offset
+effort resulted in a compensation of 135 kt in 2017.
+Investment in carbon credits
+(as reported in
+Integrated Report 2016)
+Effective tax rate (non-IFRS)
+Our 2017 operating profit-related goals and published outlook
+were based on our non-IFRS financial measures. For this reason,
+in the following section we discuss performance against our
+outlook only in terms of non-IFRS numbers derived from IFRS
+measures. The subsequent section about IFRS operating results
+discusses numbers only in terms of the International Financial
+Reporting Standards (IFRSS), so the numbers in that section are
+not expressly identified as IFRS numbers.
+Outlook for 2017 (Non-IFRS)
+At the beginning of 2017, we projected that our 2017 non-IFRS
+cloud subscriptions and support revenue would be between
+€3.8 billion and €4.0 billion at constant currencies (2016:
+€2.99 billion). We expected full-year 2017 non-IFRS cloud and
+software revenue to increase by 6% to 8% at constant
+currencies (2016: €18.43 billion). In addition, we aimed for non-
+IFRS total revenue in a range of €23.2 billion to €23.6 billion at
+constant currencies (2016: €22.67 billion). We also projected
+our full-year non-IFRS operating profit for 2017 would end
+between €6.8 billion and €7.0 billion (2016: €6.63 billion) at
+constant currencies. We anticipated an effective tax rate (IFRS)
+of 26.0% to 27.0% (2016: 25.3%) and an effective tax rate (non-
+IFRS) of 27.0% to 28.0% (2016: 26.8%).
+94
+Combined Management Report | Financial Performance: Review and Analysis
+In July 2017, we raised our forecast for the non-IFRS cloud and
+software revenue growth rate to between 6.5% and 8.5% at
+constant currencies. We also raised our outlook for non-IFRS
+total revenue to a range of €23.3 billion to €23.7 billion at
+constant currencies. These increases in comparison to our
+original outlook were based on a strong pipeline as well as a
+strong first half, which, in light of an 8% growth at constant
+currencies in non-IFRS cloud and software revenue, already lay
+at the upper end of our full-year expectations.
+In October 2017, based on the continued high volume of orders,
+particularly for SAP S/4HANA, we raised our outlook for the
+2017 non-IFRS cloud and software revenue growth rates to
+range between 7.0% and 8.5% at constant currencies. We
+consequently also raised our forecast for non-IFRS total revenue
+to range between €23.4 billion to €23.8 billion at constant
+currencies. In view of the greater revenues expected, we also
+narrowed our outlook for full-year operating profit (non-IFRS)
+for 2017 upward to range between €6.85 billion and €7.0 billion
+at constant currencies. We also announced that the Company
+expected its full-year 2017 effective tax rates (IFRS and non-
+IFRS) to be below the previous outlook for the effective tax rate
+(IFRS) of 26.0% to 27.0% and for the effective tax rate (non-
+IFRS) of 27.0% to 28.0%. The decrease in comparison to the
+previous outlook mainly resulted from a one-time tax benefit
+relating to an intra-group transfer of intellectual property rights
+to SAP SE which was expected to be executed in the fourth
+quarter. SAP committed to update its effective tax rate outlook
+once the effect is quantifiable.
+In December 2017, considering the estimated one-time benefit
+and updated expectations for the full year, SAP adjusted its full-
+year 2017 effective tax rate (IFRS) to 23.0% to 24.0% and its
+full-year 2017 effective tax rate (non-IFRS) to 25.0% to 26.0%
+after the intra-group transfer of intellectual property rights to
+SAP SE was completed in the fourth quarter. This outlook did
+not consider any impact from a potential U.S. tax reform.
+2017 Actual Performance Compared
+to Outlook (Non-IFRS)
+We hit the raised outlook for all our guidance parameters we
+published in July, October and December.
+Comparison of Outlook and Results for 2017
+Cloud subscriptions and support revenue
+(non-IFRS, at constant currencies)
+Cloud and software revenue
+(non-IFRS, at constant currencies)
+Total revenue
+(non-IFRS, at constant currencies)
+Operating profit
+(non-IFRS, at constant currencies)
+Effective tax rate (IFRS)
+Outlook for 2017
+Internal carbon pricing for business flights
+All electric company cars charged at SAP are powered with
+100% renewable electricity. In addition, in Germany, we
+provide employees with an incentive to switch to electric
+alternatives by offering a battery subsidy that partially offsets
+the higher costs of an electric vehicle.
+As a result of our business expansion, the number of SAP
+employees eligible for a company car has increased annually.
+We want to ensure that the resulting growth in our car fleet
+does not undo our successes in cutting emissions. To help
+address this, SAP aims to increase the number of electric
+vehicles (battery electric vehicles and plug-in hybrid electric
+vehicles) in our company car fleet from 5% at the end of 2017
+to 20% by 2020.
+325
+2013
+2014
+2015
+2016
+2017
+In addition to our long-term commitment for 2025, we have
+derived annual targets for our internal operational steering. In
+2017, we outperformed our annual target to reduce our
+emissions to 380 kilotons (kt) of CO2 by 55 kt, thus already
+fulfilling our 2020 target. This result stems primarily from a
+decrease in company car emissions as well as compensation
+with carbon emission offsets. Our focus on carbon emissions
+has contributed to a cumulative cost avoidance of €206 million
+in the past three years, compared to a business-as-usual
+scenario based on 2007. We achieved 45% of this cost
+avoidance in 2017.
+Combined Management Report | Energy and Emissions
+Total Energy Consumption
+GWh
+965
+950
+910
+920
+920
+2013
+2014
+2015
+2016
+380
+€ millions
+455
+545
+Energy and Emissions
+-14%
+carbon emissions compared to
+last year
+-3%
+energy consumption compared to
+last year
+Being a Front-Runner for a
+Greener Way of Working
+As a role model for sustainable business operations, SAP takes
+its environmental responsibilities seriously. We believe that by
+running cleaner, greener operations, we can make a difference
+to our planet. In addition, we aim to enable our customers to
+reduce their overall carbon footprint through our software.
+Our global environmental policy promotes a more productive
+use of resources by providing transparency in environmental
+issues, driving efficiency, and leveraging transformational
+strategies. It also outlines our environmental goals.
+Our chief sustainability officer and our dedicated sustainability
+organization coordinate our response to climate change.
+Facilities management staff design and operate our facilities
+based on robust environmental standards. In addition, our IT
+operations personnel is committed to optimizing energy
+consumption in our data centers. We assess our environmental
+performance in quarterly management reviews.
+This year, we continued to roll out our global environmental
+management system based on the ISO 14001 standard. We plan
+for the system to cover operations of about 70% of employees
+globally by 2018. At the end of 2017, 48 SAP sites in 28 countries
+(49% of employees) have been certified and have implemented
+ISO 14001.
+Cutting Carbon Emissions
+In 2017, we announced a commitment to making our operations
+carbon neutral by 2025. This is the next logical step in our long-
+term greenhouse gas (GHG) avoidance strategy, which also
+includes an undertaking to reduce GHG emissions to levels of
+the year 2000 by 2020. This year, we met our 2020 target and
+are now well on track to becoming carbon neutral. The target
+includes all direct emissions from running our business as well
+as a selected subset of indirect emissions from supply chains
+and services.
+In 2017, SAP also became the first German company to be
+approved for the Science-Based Targets Initiative. As a member
+100%
+renewable electricity
+of this initiative, our science-based climate targets reflect the
+level of decarbonization required to keep the global temperature
+increase below two degrees Celsius compared to pre-industrial
+temperatures. This represents a reduction in emissions by SAP
+of 85% of our 2016 emissions by 2050, including energy
+consumption of our products in use at our customers.
+A number of initiatives harness innovative technologies to help
+us run our operations in a way that minimizes our impact on the
+environment. In addition, our investment in renewable electricity
+certificates and carbon credits enables us to support
+sustainability projects across the globe.
+Total Net Emissions
+kilotons CO2
+500
+At constant currencies, non-IFRS cloud subscriptions and
+support revenue grew from €2.99 billion in 2016 to €3.83 billion
+in 2017 and therewith ended in our guidance range of
+€3.80 billion to €4.00 billion. That represents an increase of
+28% on a constant currency basis.
+Total Data Center Electricity
+■Internal External
+At SAP, we have tied our business strategy to our environmental Helping Our Customers Run
+strategy by creating a "green cloud" powered by 100%
+renewable electricity. As more business moves to the cloud,
+data centers are a key part of how SAP provides solutions to our
+customers. By using our green cloud services, customers can
+significantly reduce their carbon footprint. Given the increasing
+data center capacity and an increasing energy consumption, our
+data centers have become a primary focus of our carbon
+reduction efforts.
+We have introduced initiatives to drive efficiency and innovation
+with respect to our buildings, data center operations, and
+infrastructure. For example, in 2017, one of our main data
+centers in Rot, Germany, had a very efficient power usage
+effectiveness (PUE) of 1.36.
+Committing to 100% Renewable
+Electricity
+Our commitment to 100% renewable electricity is crucial to
+making our operations more sustainable. While SAP produces a
+small amount of renewable electricity through solar panels in
+some locations, we rely primarily on the purchase of renewable
+energy certificates (RECs) to achieve our target of 100%
+renewable electricity. We only invest in Gold Standard RECs,
+which support renewable energy projects that meet robust
+criteria in terms of environmental integrity, stakeholder
+inclusivity, safeguards, and reporting and verification.
+Greener Operations
+The vast majority of our overall emissions result from the use of
+our software. When our customers run SAP software on their
+hardware and on their premises, the resulting carbon footprint is
+about 30 times the size of our own net carbon footprint. To
+address this, we have developed a downstream emissions
+strategy to help our customers, hardware providers, and others
+run greener operations. One of the most important ways we help
+our customers reduce their energy usage and emissions is by
+managing their SAP systems through cloud services provided by
+our carbon-neutral green cloud offerings. In addition, the
+solutions in our portfolio enable our customers to manage their
+resources, such as electricity, in an efficient manner.
+The SAP HANA platform also plays a vital role in helping our
+customers cut their carbon emissions. By combining the worlds
+of analytic and transactional data into one real-time, in-memory
+platform, it can help create much leaner operations, further
+simplifying the system landscape and reducing energy
+consumption.
+SAP also works with customers to optimize their on-premise
+landscapes so that they consume less energy. We achieve this
+by helping them decommission legacy systems, archive unused
+data, and consolidate business applications, as well as virtualize
+their system landscape.
+Combined Management Report | Energy and Emissions
+91
+==
+Driving Environmental Initiatives
+Throughout SAP
+We continuously pursue strategies to help us achieve our goal of
+reducing emissions at a time of ongoing growth in our business.
+Key initiatives for 2017 included the following:
+EKOenergy certification
+Most of our renewable electricity is purchased on the
+electricity market and is not produced by SAP. As
+recommended by the Greenhouse Gas Protocol and CDP, we
+actively look for the best available quality. Therefore, all of
+our purchased renewable electricity is EKOenergy certified.
+EKOenergy is the international not-for-profit ecolabel for
+energy. It certifies electricity from renewable energy
+installations that fulfil additional sustainability criteria.
+Through the purchase of EKOenergy, we also contribute to
+EKOenergy's Climate Fund, used to finance solar projects
+tackling energy poverty.
+-
+Electric vehicles
+-
+*We started reporting our external data center energy
+consumption in 2014.
+GWh
+Cloud"
+2017
+173
+179
+18
+265
+249
+243
+09
+60
+86
+65
+173
+189
+178
+179
+161
+2013*
+2014
+2015
+2016
+Strengthening Our "Green
+Our new cloud bookings, which is the main measure for our
+cloud-related sales success and for future cloud subscriptions
+2017
+Besides the cloud business, our traditional on-premise business
+again showed remarkable growth in 2017. On a constant
+currency basis, cloud and software revenue (non-IFRS) was
+€19.82 billion in 2017 (2016: €18.43 billion), representing an
+increase of 8%, and as such reached the upper end of our
+increased outlook in July and October.
+2017
+Services Revenue
+Services revenue combines revenue from professional services,
+premium support services, and other services such as training
+services, messaging services, and payment services.
+Professional services primarily relate to the implementation of
+our cloud subscriptions and on-premise software products. Our
+premium support offering consists of high-end support services
+tailored to customer requirements. Messaging services are
+primarily transmissions of electronic text messages from one
+mobile phone provider to another. Payment services are
+delivered in connection with our travel and expense
+management offerings.
+EMEA Region
+In 2017, the EMEA region generated €10,415 million in revenue
+(2016: €9,755 million), which was 44% of total revenue (2016:
+44%). This represents a year-over-year increase of 7%. Revenue
+in Germany increased 10% to €3,352 million in 2017 (2016:
+€3,034 million). Germany contributed 32% (2016: 31%) of all
+EMEA region revenue. The remaining revenue in the EMEA
+region was primarily generated in the United Kingdom, France,
+Switzerland, the Netherlands, and Italy. Cloud and software
+revenue generated in the EMEA region totaled €8,759 million
+(2016: €8,193 million). That was 84% of all revenue from the
+region (2016: 84%).
+EMEA: Cloud and Software Revenue
+€ millions
+On Premise
+■Cloud
+2016
+8,759
+Services revenue increased €273 million, or 8%, from
+6,819
+€3,638 million in 2016 to €3,911 million in 2017. This increase
+reflects an 8% increase from changes in volumes and prices and
+a 1% decrease from currency effects.
+6,428
+176
+7,622
+507
+1,029
+703
+277
+8,193
+2015
+2014
+2013
+€ millions
+■Software Support
+■Cloud
+14,677
+13,564
+Americas
+9,347
+EMEA
+10,415
+12,379
+3,769
+2,993
+9,916
+2,286
+8,989
+696
+1,087
+10.093
+10,571
+10,908
+8,293
+8,829
+Solid market demand for service projects led to a 12% increase
+of €332 million in consulting revenue and premium support
+revenue from €2,883 million in 2016 to €3,215 million in 2017.
+This growth reflects a 12% increase from changes in volumes
+98
+98
+7.115
+2,321
+457
+709
+5,350
+5,366
+5,345
+4,465
+4,566
+2013
+2014
+2015
+2016
+2017
+Cloud subscriptions revenue in the Americas region rose 16% to
+€2,321 million in 2017 (2016: €2,000 million); this includes a
+negative currency effect of 2%. Software licenses and software
+support revenue was €5,345 million in 2017 (2016: €5,366
+million).
+APJ Region
+In 2017, 16% (2016: 15%) of our total revenue was generated in
+the APJ region. Total revenue in the APJ region increased 10%
+to €3,699 million. This growth reflects a 12% increase from
+changes in volumes and prices and a 2% decrease from
+currency effects. In Japan, revenue increased 7% to
+€885 million. Revenue from Japan was 24% (2016: 24%) of all
+revenue generated in the APJ region. The revenue growth in
+revenue, increased 30% on a constant currency basis in 2017 to
+€1.50 billion (2016: €1.15 billion). In addition to this strong
+growth, our cloud backlog (unbilled future revenue based on
+existing customer contracts) climbed by 38% to €7.5 billion
+(2016: €5.4 billion). This committed business will contribute to
+our cloud growth in 2018 and beyond.
+Japan was attributable to a 13% increase from changes in
+volumes and prices and a 6% decrease from currency effects. In
+the remaining countries of the APJ region, revenue increased
+10%. Revenue in the remaining countries of the APJ region was
+generated primarily in Australia, India, and China. Cloud and
+software revenue in the APJ region totaled €3,124 million in
+2017 (2016: €2,865 million). That was 84% of all revenue from
+the region (2016: 85%).
+2,000
+Predictable Revenue
+1,579
+6,929
+7,489
+7,731
+6,252
+6,542
+2013
+2014
+2015
+2016
+2017
+Combined Management Report | Financial Performance: Review and Analysis
+Cloud subscriptions revenue in the EMEA region rose 46% to
+€1,029 million in 2017 (2016: €703 million). This increase
+reflects a 48% increase from changes in volumes and prices and
+a 2% decrease from currency effects. Software licenses and
+software support revenue rose 3% to €7,731 million in 2017
+(2016: €7,489 million). This growth reflects a 3% increase from
+changes in volumes and prices and a currency effect of 0%.
+Americas Region
+In 2017, 40% of our total revenue was generated in the
+Americas region (2016: 40%). Total revenue in the Americas
+region increased 5% to €9,347 million; revenue generated in the
+United States increased 4% to €7,436 million. The revenue
+growth in the United States reflects a 6% increase from changes
+in volumes and prices and a negative currency effect of 2%. The
+United States contributed 80% (2016: 80%) of all revenue
+generated in the Americas region. In the remaining countries of
+the Americas region, revenue increased 8% to €1,911 million.
+This increase reflects a 9% increase from changes in volumes
+and prices and a 1% decrease from currency effects. Revenue in
+the remaining countries of the Americas region was generated
+primarily in Canada, Brazil, and Mexico. Cloud and software
+revenue generated in the Americas region totaled €7,666 million
+(2016: €7,366 million). That was 82% of all revenue from the
+region (2016: 82%).
+Americas: Cloud and Software Revenue
+€ millions
+■On Premise
+■Cloud
+7,366
+7,666
+4,922
+APJ
+3,699
+5,275
+Revenue by Region
+20,793
+17,560
+16,815
+4%
+4%
+23,461
+22,062
+18%
+6%
+6%
+2013
+2014
+2015
+2016
+2017
+Combined Management Report | Financial Performance: Review and Analysis
+This increase reflects an 8% increase from changes in volumes
+and prices and a 1% decrease from currency effects. The growth
+in revenue resulted primarily from a €776 million increase in
+cloud subscriptions and support revenue. Furthermore,
+software support revenue rose €337 million. This growth is a
+result of continuously high software license revenue, which
+increased €12 million in 2017. Cloud and software revenue
+climbed to €19,549 million in 2017, an increase of 6%. Cloud and
+software revenue represented 83% of total revenue in 2017
+(2016: 84%). Service revenue increased 8% from €3,638 million
+in 2016 to €3,911 million in 2017, which was 17% of total
+Cloud and Software
+€ millions
+19,549
+€ millions | change since previous year
+18,424
+Total Revenue
+Total Revenue
+95
+Revenue by Region
+(based on customer location)
+€ millions
+Combined Management Report | Financial Performance: Review and Analysis
+95
+96
+96
+Our total revenue (non-IFRS) on a constant currency basis rose
+8% in 2017 to €23.77 billion (2016: €22.07 billion) and therefore
+achieved the upper end of our twice increased outlook, which we
+last predicted to range between €23.40 billion and
+€23.80 billion.
+Operating expenses (non-IFRS) in 2017 on a constant currency
+basis were €16.84 billion (2016: €15.43 billion), an increase of
+9%.
+Our expense base in 2017 continued to be impacted by the
+transformation to a fast-growing cloud business. In our outlook,
+we expected the cloud subscriptions and support gross margin
+to be at least stable or to slightly increase compared to 2016.
+The cloud subscriptions gross margin for 2017 was 62.4%, a
+decrease of 2.Opp on a constant currency basis, and as such,
+below our expectations. The decrease is primarily due to
+ongoing investments in our cloud business as well as the change
+in the cloud subscription revenue mix. In order to further
+increase the efficiency and performance of our cloud services,
+we continued to invest heavily in our Software as a
+Service/Platform as a Service (SaaS/PaaS) and Infrastructure-
+as a Service (IaaS) cloud services, which are currently growing
+at an above-average rate. However, since these two service
+offerings have a lower gross margin than our network business,
+the overall margin decreased.
+The cloud subscriptions and support gross margins of our cloud
+offerings developed heterogeneously in 2017:
+Our cloud subscriptions gross margin (non-IFRS) in our
+business network business increased by 0.8pp (on a constant
+currency basis) and resulted in 76.8% for 2017, already close to
+our long-term ambition of 80%. This excellent result is
+attributable to the continued positive gross margin development
+within the Concur and SAP Ariba portfolio.
+The cloud subscriptions gross margin (non-IFRS) of our
+Infrastructure as a Service (laaS) cloud offering continued to
+develop very well in 2017. Our cloud subscription gross margin
+(non-IFRS) was 6.6% in 2017, which reflects an improvement of
+12.7pp on a constant currency basis.
+Profitability in our Software as a Service/Platform as a Service
+(SaaS/PaaS) cloud offering was 57.4% at constant currency for
+2017 compared to our long-term ambition of 80%. Affected by
+the incremental investments in our cloud infrastructure, cloud
+profitability fell by 3.8pp on a constant currency basis, mainly
+due to significant investments in the expansion of our data
+center and IT infrastructure as well as in the harmonization of
+our various public cloud offerings onto one platform.
+€6.63 billion), reflecting an increase of 4%. As a result, we were
+able to surpass our excellent results from 2016, despite our
+continued investment in our business transformation during the
+reporting year. The positive development of our operating profit
+was influenced by careful investment decisions focused on
+customers and products which, among other things, resulted in
+an increase in our overall headcount by 4,361 full-time
+equivalents, primarily in research & development, cloud, and
+sales. With these additional resources, we continued to make
+targeted investments in our innovation areas and growth
+markets. Thus, constant currency non-IFRS operating profit
+amounting to €6.92 billion was at the midpoint of our outlook
+range raised in October (€6.85 billion to €7.00 billion).
+We achieved an effective tax rate (IFRS) of 19.3% and an
+effective tax rate (non-IFRS) of 22.6%, which is significantly
+below the adjusted outlook in December of 23.0% to 24.0%
+(IFRS) and 25.0% to 26.0% (non-IFRS). This mainly resulted
+from a one-time tax benefit due to the U.S. tax reform.
+Operating Results (IFRS)
+This section on operating results (IFRS) discusses results only in
+terms of IFRS measures, so the IFRS numbers are not expressly
+identified as such.
+We break our operations down into three regions: the Europe,
+Middle East, and Africa (EMEA) region, the Americas region, and
+the Asia Pacific Japan (APJ) region. We allocate revenue
+amounts to each region based on where the customer is located.
+For more information about revenue by geographic region, see
+the Notes to the Consolidated Financial Statements, Note (28).
+Revenue
+Total revenue increased from €22,062 million in 2016 to
+€23,461 million in 2017, representing an increase of
+€1,399 million or 6%.
+17,214
+Despite these investments, we saw efficiency improvements in
+both our cloud and traditional on-premise business, which drove
+continued operating profit expansion. Non-IFRS operating profit
+in 2017 was €6.92 billion on a constant currency basis (2016:
+13,505
+For more information about our regional performance, see the
+Revenue by Region section below.
+Cloud and Software Revenue
+Revenue from cloud subscriptions and support refers to the
+income earned from contracts that permit the customer to
+access specific software solutions hosted by SAP during the
+term of its contract with SAP. Software revenue results from the
+fees earned from selling or licensing software to customers.
+Support revenue represents fees earned from providing
+technical support services and unspecified software upgrades,
+updates, and enhancements to customers.
+Cloud and software revenue grew from €18,424 million in 2016
+to €19,549 million in 2017, an increase of 6%. This reflects an
+8% increase from changes in volumes and prices and a 1%
+decrease from currency effects.
+2013
+2014
+2015
+2016
+2017
+Despite a combination of a partly challenging macroeconomic
+and political environment and the accelerating industry shift to
+the cloud, we achieved a €12 million increase in software
+revenue. This increase, from €4,860 million in 2016 to
+€4,872 million in 2017, reflects a 3% increase from changes in
+volumes and prices and a 2% decrease from currency effects.
+Our customer base continued to expand in 2017. Based on the
+number of contracts concluded, 15% of the orders we received
+for software in 2017 (2016: 16%) were from new customers. The
+total value of software orders received increased 1% year over
+year. The total number of contracts signed for new software
+increased 3% to 59,147 (2016: 57,291 contracts), with an
+average order value of €89 thousand in 2017 (2016:
+€91 thousand). In 2017, 30% (2016: 29%) of our software order
+entry resulted from deals worth more than €5 million, while 40%
+(2016: 38%) resulted from deals worth less than €1 million.
+Our stable customer base, the continued demand for our
+software throughout 2017 and the previous years, and the
+continued interest in our support offerings resulted in an
+increase in support revenue from €10,571 million in 2016 to
+€10,908 million in 2017. The SAP Enterprise Support offering
+was the largest contributor to our support revenue. The
+€337 million, or 3%, growth in support revenue reflects a 4%
+97
+increase from changes in volumes and prices and a 1% decrease
+from currency effects. This growth is primarily attributable to
+SAP Product Support for Large Enterprises and SAP Enterprise
+Support. The acceptance rate for SAP Enterprise Support
+among new customers remained very high in 2017 at 99%
+(2016: 100%).
+Software and support revenue rose €350 million, or 2%, from
+€15,431 million in 2016 to €15,780 million in 2017. This growth
+reflects a 4% increase from changes in volumes and prices and
+a 1% decrease from currency effects.
+We define predictable revenue as the sum of our software
+support revenue and our cloud subscriptions and support
+revenue. Compared to the previous year, our predictable
+revenue increased from €13,564 million in 2016 to €14,677
+million in 2017. This reflects a rise of 8%. Predictable revenue
+accounted for 63% of our total revenue in 2017 (2016: 61%).
+and prices and a 1% decrease from currency effects. Consulting
+and premium support revenue contributed 82% of total service
+revenue (2016: 79%). Consulting and premium support revenue
+contributed 14% of total revenue in 2017 (2016: 13%).
+14,315
+Revenue by Region
+Revenue from other services decreased €59 million, or 8%, to
+€697 million in 2017 (2016: €756 million). This reflects a 7%
+decrease from changes in volumes and prices and a 1%
+decrease from currency changes.
+2,286
+2,993
+Combined Management Report | Financial Performance: Review and Analysis
+3,769
+Cloud Subscriptions & Support
+revenue.
+3,769
+Software Licenses
+Software Support
+Services
+3,911
+10,908
+2013
+4,872
+Revenue by Line Item
+€ millions
+2015
+2016
+696
+2017
+Cloud subscriptions and support revenue increased from
+€2,993 million in 2016 to €3,769 million in 2017.
+Cloud Subscriptions and Support
+€ millions
+2014
+1,087
+-6,390
+1,425
+5,150
+Net liquidity 2
+-1,479
+Group liquidity on December 31, 2017, primarily comprised
+amounts in euros and U.S. dollars.
+1,673
+Bank Loan 24
+Group liquidity consists of cash and cash equivalents (for
+example, cash at banks, money market funds, and time deposits
+with original maturity of three months or less) and current
+investments (for example, investments with original maturities
+of greater than three months and remaining maturities of less
+than one year included in other financial assets) as reported in
+our Consolidated Financial Statements. Net liquidity is Group
+liquidity less total financial debt as defined above.
+106
+-4,965
+Combined Management Report | Financial Performance: Review and Analysis
+-3,153
+For more information about our financial debt, see the Notes to
+the Consolidated Financial Statements, Note (17).
+-1,299
+248
+971
+The increase in Group liquidity compared to 2016 was mainly
+due to cash inflows from our operations. They were offset by
+cash outflows for dividend payments, purchase of treasury
+shares, and repayments of borrowings.
+-196
+Group liquidity
+4,785
+4,673
+Non-current financial debt
+112
+774
+-1,435
+136
+Net liquidity 1
+3,486
+3,238
+Current financial debt
+For information about the impact of cash, cash equivalents,
+current investments, and our financial liabilities on our income
+statements, see the analysis of our financial income, net, in the
+Operating Results (IFRS) section.
+9
+5,045
+-3,406
+Current investments
+Net cash flows from financing
+activities
+-38
+-1,799
+-1,112
+Net cash flows from investing
+activities
+4,628
+5,045
+Net cash flows from operating
+activities
+A in %
+2016
+2017
+€ millions
+Analysis of Consolidated Statements of Cash Flow
+Analysis of Consolidated Statements
+of Cash Flow
+Group Liquidity
+12/31/2017
+Group Liquidity Development
+€ millions
+-1,275
+-291
+-1,499
+23
+4,673
+-2,705
+-1,391
+-500
+Operating
+Group Liquidity
+Capital Acquisitions Dividends
+12/31/2016 Cash Flow Expenditure
+Paid
+Repayments of Purchase of
+Borrowings Treasury
+Shares
+Other
+4,785
+309
+■Fixed
+4,011
+750
+892
+1,085
+1,000
+■ Variable
+€ millions
+Maturity Profile of Financial Debts
+1,298
+Financial Debts
+borrow funds at prevailing interest rates. As at December 31,
+2017, approximately €36 million was available through such
+arrangements. There were immaterial borrowings outstanding
+under these credit facilities from our foreign subsidiaries as at
+December 31, 2017.
+As at December 31, 2017, SAP SE had additional available credit
+facilities totaling €474 million. Several of our foreign
+subsidiaries have credit facilities available that allow them to
+we have not used, and do not currently foresee any need to use,
+this credit facility.
+105
+Combined Management Report | Financial Performance: Review and Analysis
+To retain high financial flexibility, on November 20, 2017, SAP
+SE entered into a €2.5 billion syndicated credit facility
+agreement with an initial term of five years plus two one-year
+extension options, replacing its previous credit facility of €2.0
+billion from 2013. The credit facility may be used for general
+corporate purposes. A possible future utilization is not subject to
+any financial covenants. Borrowings under the facility bear
+interest of EURIBOR or LIBOR for the respective currency plus a
+margin of 0.17%. We are also required to pay a commitment fee
+of 0.0595% per annum on the unused available credit. So far,
+Other sources of capital are available to us through various
+credit facilities, if required.
+Credit Facilities
+Overview
+26
+Global Financial Management
+We use global centralized financial management to control liquid
+assets and monitor exposure to interest rates and currencies.
+The primary aim of our financial management is to maintain
+liquidity in the Group at a level that is adequate to meet our
+obligations. Most SAP companies have their liquidity managed
+centrally by the Group, so that liquid assets across the Group
+can be consolidated, monitored, and invested in accordance
+with Group policy. High levels of liquid assets help keep SAP
+flexible, sound, and independent. In addition, various credit
+facilities are currently available for additional liquidity, if
+required. For more information about these facilities, see the
+Credit Facilities section.
+We manage credit, liquidity, interest rate, equity price, and
+foreign exchange rate risks on a Group-wide basis. We use
+selected derivatives exclusively for this purpose and not for
+speculation, which is defined as entering into a derivative
+instrument for which we do not have corresponding underlying
+transactions. The rules for the use of derivatives and other rules
+and processes concerning the management of financial risks are
+documented in our treasury guideline, which applies globally to
+all companies in the Group. For more information about the
+management of each financial risk and about our risk exposure,
+see the Notes to the Consolidated Financial Statements, Notes
+(24) to (26).
+Liquidity Management
+1,260
+Our primary source of cash, cash equivalents, and current
+investments is funds generated from our business operations.
+Over the past several years, our principal use of cash has been
+to support operations and our capital expenditure requirements
+resulting from our growth, to quickly repay financial debt, to
+acquire businesses, to pay dividends on our shares, and to buy
+back SAP shares on the open market. On December 31, 2017,
+our cash, cash equivalents, and current investments were
+primarily held in euros and U.S. dollars. We generally invest only
+in the financial assets of issuers or funds with a minimum credit
+rating of BBB, and pursue a policy of cautious investment
+characterized by wide portfolio diversification with a variety of
+counterparties, predominantly short-term investments, and
+standard investment instruments. Investments in financial
+assets of issuers with a credit rating lower than BBB were not
+material in 2017.
+planned capital expenditure requirements over the near term
+and medium term. It may also be necessary to enter into
+financing transactions when additional funds are required that
+cannot be wholly sourced from free cash flow (for example, to
+finance large acquisitions).
+To expand our business, we have made acquisitions of
+businesses, products, and technologies. Depending on our
+future cash position and future market conditions, we might
+issue additional debt instruments to fund acquisitions, maintain
+financial flexibility, and limit repayment risk. Therefore, we
+continuously monitor funding options available in the capital
+markets and trends in the availability of funds, as well as the
+cost of such funding. In recent years, we were able to repay
+additional debt within a short period of time due to our
+persistently strong free cash flow. For more information about
+the financial debt, see the Cash Flows and Liquidity section.
+Capital Structure Management
+The primary objective of our capital structure management is to
+maintain a strong financial profile for investor, creditor, and
+customer confidence, and to support the growth of our
+business. We seek to maintain a capital structure that will allow
+us to cover our funding requirements through the capital
+markets at reasonable conditions, and in so doing, ensure a high
+level of independence, confidence, and financial flexibility.
+For more information about the capital structure and its
+analysis, see the Analysis of Consolidated Statement of
+Financial Position section and the Notes to the Consolidated
+Financial Statements, Note (21).
+The long-term credit rating for SAP SE is "A2" by Moody's with
+stable outlook, and "A" by Standard & Poor's with positive
+outlook.
+Our general intention is to remain in a position to return liquidity
+to our shareholders by distributing annual dividends totaling
+more than 40% of our profit after tax and potentially
+repurchasing treasury shares in future.
+We believe that our liquid assets combined with our undrawn
+credit facilities are sufficient to meet our operating financing
+needs in 2018 and, together with expected cash flows from
+operations, will support debt repayments and our currently
+600
+1,085
+370
+Nominal volume of financial debt on December 31, 2017,
+included amounts in euros (€5,150 million) and U.S. dollars
+(€1,090 million). Approximately 50% of the financial debt was
+held at variable interest rates, partially swapped from fixed into
+variable using interest rate swaps.
+In 2018, the Company intends to repay two Eurobond tranches
+of €1,150 million in total as well as a U.S. private placement
+tranche of US$150 million in total when they mature.
+Cash Flows and Liquidity
+Group Liquidity
+€ millions
+2017
+2027
+2016
+Bonds
+Private Placement
+Financial Debt
+€ millions
+1,090
+Cash and cash equivalents
+Δ
+3,702
+2025
+2023
+1,000
+892
+269
+750
+185
+600
+2024
+80
+185
+189
+2018
+2019
+2020
+2022
+38
+In 2017, cash inflows from operating activities increased by
+€417 million to €5,045 million (2016: €4,628 million). This result
+is due to a €145 million decrease in income tax payments
+compared to the prior year and improved working capital
+management, which can be shown in decreased days' sales
+outstanding (DSO) for receivables, defined as the average
+number of days from the raised invoice to cash receipt from the
+customer, which went down four days in 2017 to 70 days (2016:
+74 days).
+New data center
+cash inflows from sales and purchases of equity or debt
+instruments of other entities, totaling €358 million in 2017
+compared to a net cash outflow €756 million in 2016. Cash
+outflows from the purchases of intangible assets and property,
+plant, and equipment increased by €274 million to
+€1,275 million in 2017, while cash outflows from business
+combinations increased by €185 million to €291 million in 2017.
+For more information about current and planned capital
+expenditures, see the Assets section and the Investment Goals
+section.
+New data center phase 2
+Walldorf
+Germany
+November 2018
+5
+37
+New office building for approx. 450
+employees
+Walldorf
+Germany
+April 2018
+April 2018
+Completion Date
+Estimated
+68
+108
+Colorado Springs, CO
+United States
+Combined Management Report | Financial Performance: Review and Analysis
+Construction Projects
+€ millions
+Country
+Location of Facility
+Short Description
+52
+Estimated Total
+Costs Incurred as at
+December 31, 2017
+Germany
+Walldorf
+New data center phase 1
+65
+46
+Cost
+108
+January 2019
+St. Leon-Rot
+Finances (IFRS)
+109
+Combined Management Report | Financial Performance: Review and Analysis
+As the owner of the intellectual property in most SAP software,
+SAP SE derives its revenue mainly from software license fees
+paid by its subsidiaries for the right to market SAP solutions and
+bears the group-wide research and development expenses for
+the most part.
+SAP SE is headquartered in Walldorf, Germany, and is the
+parent company of the SAP Group, which comprises 228
+companies. SAP SE is the Group holding company and employs
+most of the Group's Germany-based development and service
+and support personnel.
+Position of SAP SE
+In 2017, SAP's brand value again increased. According to the
+Interbrand "Best Global Brands" annual survey, SAP ranked as
+the 21st most valued brand in the world (2016: 22nd). Against
+other German brands, the SAP brand ranks third behind
+Mercedes-Benz and BMW, and ninth globally against other
+brands in the technology sector. Interbrand determined our
+brand value to be US$22.6 billion, an increase of 6% compared
+to the previous year (2016: US$21.3 billion).
+As of December 31, 2017, SAP was the most valuable company
+in Germany in terms of market capitalization based on all issued
+shares.
+the SAP brand itself; and our organization.
+our ability to innovate; the brands we have built up, in particular, Report on the Economic
+Employee-related activities increased the value of our employee
+base and our own software. For more information, see the
+Employees and Social Investment section, and the Products.
+Research & Development, and Services section.
+Our customer capital continued to grow in 2017. At the end of
+2017, we had more than 378,000 customers (2016: 345,000) in
+various market segments. We serve customers in more than 180
+countries. In addition, 98% of the 100 most valued brands, 87%
+of the Forbes Global 2000 companies, and 100% of the Dow
+Jones top-scoring sustainability companies are SAP customers.
+For more information about our customers, see the Customers
+section.
+The results of our current and past investment in research and
+development are also a significant element in our competitive
+intangibles.
+The resources that are the basis for our current as well as future
+success do not appear in the Consolidated Financial
+Statements. This is apparent from a comparison of the market
+capitalization of SAP SE (based on all issued shares), which was
+€114.8 billion at the end of 2017 (2016: €101.7 billion), with the
+book value of our equity in the Consolidated Financial
+Statements, which was €25.5 billion (2016: €26.4 billion). This
+means that the market capitalization of our equity is nearly five
+times higher than the book value. The difference is mainly due to
+certain internally generated intangible resources that the
+applicable accounting standards do not allow to be recorded (at
+all or at fair value) in the Consolidated Financial Statements.
+They include customer capital (our customer base and
+customer relations); employees and their knowledge and skills;
+our ecosystem of partners; software we developed ourselves;
+Competitive Intangibles
+For more information about planned capital expenditures, see the Investment Goals section. There were no material divestitures
+within the reporting period.
+April 2021
+New office building for approx. 450
+employees
+37
+January 2019
+Germany
+Walldorf
+New office building for approx. 700
+employees
+Germany
+74
+February 2019
+Germany
+Munich
+New office building for approx. 850
+employees
+95
+0
+37
+22
+18
+60
+56
+59
+60
+60
+60
+8.636
+€ millions | change since previous year
+Investment in Goodwill, Intangible Assets, and
+Property, Plant, and Equipment
+Total current assets increased slightly by 3% in 2017 from
+€11,564 million to €11,930 million. This was mainly due to an
+increase in cash and cash equivalents based on the cash inflows
+from our operating activities.
+Percent change since previous year
+Equity Ratio
+The equity ratio (that is, the ratio of shareholders' equity to total
+assets) remained stable at 60% (prior year: 60%).
+For more information about financing activities in 2017, see the
+Finances (IFRS) section.
+Total non-current liabilities decreased by €1,458 million in 2017
+to €6,747 million compared to the previous year's figure of
+€8,205 million. This is due to reclassifications from non-current
+to current financial liabilities to reflect the respective maturity
+profile.
+Current liabilities increased by 6% to €10,210 million in 2017 as
+compared to the prior year (€9,674 million), which was mainly
+due to an increase of income tax liabilities as well as accruals for
+our share-based payments.
+26
+26
+Net cash outflows from financing activities were €3,406 million
+in 2017, compared to €2,705 million in 2016. The 2017 cash
+outflows resulted from repayments of €1,000 million in
+Eurobonds and US$442.5 million in U.S. private placements
+when they matured. Cash outflows in 2016 resulted from
+repayments of a €1,250 million bank loan that we had taken to
+finance the Concur acquisition. The repayment was partly
+refinanced through the issuance of a €400 million Eurobond. We
+also repaid a US$600 million U.S. private placement in 2016.
+The dividend payment of €1,499 million made in 2017 exceeded
+the amount of €1,378 million from the prior year, as a result of
+the increased dividend paid per share from €1.15 to €1.25. In
+2017, we repurchased shares in the amount of €500 million
+(2016: €0).
+Combined Management Report | Financial Performance: Review and Analysis
+107
+Assets (IFRS)
+Analysis of Consolidated Statements
+of Financial Position
+51
+Total assets decreased by 4% year over year to €42,497 million.
+■Non-current Current
+2017
+72
+2016
+74
+28
+Assets
+Percent
+5pp
+4pp
+5pp
+2016
+2017
+Total non-current assets decreased by 7% in 2017 to
+€30,567 million compared to the previous year's figure of
+€32,713 million. This change was mainly due to foreign-
+exchange related revaluations.
+Principal Capital Expenditures and
+Divestitures Currently in Progress
+In 2017, we continued various construction projects and started
+new construction activities in several locations. Except for one
+new office building in Walldorf, which is intended to be partially
+financed by a promotional loan, we plan to finance all of these
+projects from operating cash flow. Our most important projects
+are listed below:
+2017
+2015
+Liabilities
+Percent
+Current
+16
+24
+■Shareholder's equity
+60
+2016
+Non-current
+Cash outflows from investment activities were €1,112 million in
+2017 (2016: €1,799 million). The decrease was caused by net
+2014
+676
+Opp
+-8pp
+2013
+2014
+2015
+2016
+2013
+2017
+1,813
+69%
+42%
+-92%
+1,630
+1,145
+-74%
+Combined Management Report | Financial Performance: Review and Analysis
+377%
+2016
+Gross margin (in %)
+Segment profit
+Segment margin (in %)
+1) Software as a Service/Platform as a Service
+2) Infrastructure as a Service
+21,141
+20,130
+Segment revenue
+5
+73
+74
+-1pp
+-Opp
+8,102
+38
+8,051
+1
+6
+2
+-3pp
+52
+Cloud subscriptions and support revenue - laas²)
+328
+209
+57
+Cloud subscriptions and support gross margin – laas²) (in %)
+6
+-6
+-3pp
+12pp
+1,932
+1,400
+38
+40
+Cloud subscriptions and support revenue
+Cloud subscriptions and support gross margin (in %)
+49
+13pp
+-4pp
+40
+-1pp
+76
+1pp
+1pp
+Cloud subscriptions and support revenue
+1,840
+1,595
+15
+77
+17
+77
+76
+1pp
+1pp
+2,261
+1,925
+17
+Cloud subscriptions and support gross margin (in %)
+-2pp
+Cloud subscriptions and support gross margin - SaaS/PaaS¹) (in %)
+15
+The Applications, Technology & Services segment recorded a
+strong increase in cloud subscriptions and support revenue in
+2017. As a consequence of continuous strong demand in our
+Human Capital Management solutions, and growing success of
+our SAP Cloud Platform in the market, SaaS/PaaS revenue
+increased 34.6% (36.6% at constant currencies). We also saw
+SAP S/4HANA cloud and SAP Leonardo, our strategic offers for
+the future, develop very positively, with high growth rates.
+Our software support revenue further increased in 2017. It rose
+3.3% (4.2% at constant currencies) to €10,890 million.
+Including software licenses revenue, which remained at the
+same level year over year (increased 2.4% at constant
+currencies), we achieved a total software licenses and support
+revenue of €15,762 million in 2017.
+Overall, the revenue share of more predictable revenue streams
+in this segment increased 1.3pp from 59.3% in 2016 to 60.7% in
+2017.
+The segment's cost of revenue during the same time period
+increased 7.4% (8.2% at constant currencies) to €5,703 million
+(2016: €5,311 million). This increase in expenses was primarily
+the result of higher investment in expanding our cloud
+infrastructure and in providing and operating our cloud
+applications. This impacted particularly the SaaS/PaaS
+business, whose margin consequently declined 4.3pp compared
+to the year before. These costs were partially offset by our laas
+business that with an increasing level of maturity achieved
+significant increases in efficiency. It ended the fiscal year with a
+margin growth of 11.8pp (12.7pp at constant currencies).
+102
+Combined Management Report | Financial Performance: Review and Analysis
+SAP Business Network Segment
+17
+€ millions, unless otherwise stated
+2017
+2016
+A in %
+A in %
+(Constant
+Currency)
+Cloud subscriptions and support revenue - SaaS/PaaS¹)
+1,840
+1,595
+(Non-IFRS)
+19
+-4pp
+57
+Operating Margin
+2017
+2016
+2015
+2014
+2013
+-5%
+Percent change since previous year
+4,877
+-2%
+11%
+21%
+4,252
+4,331
+4,479
+5,135
+-3%
+€ millions | change since previous year
+26.6
+23.3
+2017
+Changes to the individual elements in our cost of revenue were
+as follows:
+As an overall result of these effects on operating profit, our
+operating margin narrowed 2.5pp to 20.8% in 2017 (2016:
+23.3%).
+We see the increased operating expenses largely as investments
+in the future that help to secure long-term sales growth.
+2017
+2016
+2015
+24.7
+2014
+-4.2pp
+-2.Opp
+1.7pp
+-2.5pp
+2.8pp
+20.5
+20.8
+2013
+62
+Operating Profit
+Cost of cloud and software consists primarily of customer
+support costs, costs of developing custom solutions that
+address customers' specific business requirements, costs for
+deploying and operating cloud solutions, amortization expenses
+relating to intangibles, and license fees and commissions paid to
+third parties for databases and the other complementary third-
+party products sublicensed by us to our customers.
+101
+Segment Information
+At the end of 2017, SAP had two operating segments: the
+Applications, Technology & Services segment and the SAP
+Business Network segment.
+For more information about our segment reporting, see the
+Notes to the Consolidated Financial Statements, Note (28), and
+the Performance Management System section.
+Applications, Technology & Services Segment
+2017
+2016
+Combined Management Report | Financial Performance: Review and Analysis
+A in %
+A in %
+(Constant
+Currency)
+Cloud subscriptions and support revenue - SaaS/PaaS¹)
+1,604
+1,191
+35
+37
+Cloud subscriptions and support gross margin – SaaS/PaaS) (in %)
+€ millions, unless otherwise stated
+(Non-IFRS)
+Cost of Cloud and Software
+General and administration expense increased 7% from €1,005
+million in 2016 to €1,075 million in 2017. This increase is
+primarily the result of higher personnel costs related to job
+creation in administrative areas, based on the increased
+business volume related to our growth. Thanks to strong
+operating results, the ratio of general and administration
+expense to total revenue remained stable year over year at 4.6%
+(2016: 4.6%).
+General and Administration Expense
+In 2017, the cost of cloud and software increased 11% to
+€3,893 million (2016: €3,495 million).
+Main impact on costs was an additional €347 million year over
+year for delivering and operating cloud applications in response
+to the sustained strength of customer demand. These
+investments contributed to revenue growth. Our margin on
+cloud subscriptions and support narrowed from 56.1% in 2016
+to 56.0% in 2017. This margin decline is attributable to
+investments in our cloud business, which offset the strong
+growth in cloud subscriptions and support revenue.
+A 2% increase in software license and support revenue led to a
+corresponding 2% increase in customer support costs to
+€2,234 million, and enabled us to keep our software license and
+support margin stable at 85.8% (2016: 85.9%). The gross
+margin on cloud and software, defined as cloud and software
+profit as a percentage of cloud and software revenue, narrowed
+by 1pp in 2017 to 80.1% (2016: 81.0%). This decline was mainly
+driven by the change in the Cloud and Software revenue mix,
+which now has a higher proportion of cloud subscriptions and
+support revenues. Due to infrastructure costs, these revenues
+currently deliver a lower margin and a declining proportion of
+higher-margin software and support revenues.
+Cost of Services
+Cost of services consists primarily of the cost of consulting,
+premium services and training personnel and the cost of
+bought-in consulting and training resources.
+Although we were able to increase our service revenue by 8%
+year over year to €3,911 million in 2017 (2016: €3,638 million),
+our service business continues to be greatly affected as we
+trend away from classic software licensing and consulting
+revenue toward more subscription revenue from cloud
+solutions. In addition, we continue to invest in our SAP ONE
+Service organization and in our customer co-innovation
+projects. As a result, cost of services rose 2% to €3,158 million
+(2016: €3,089 million). Our gross margin on services, defined as
+services profit as a percentage of services revenue, increased
+4.2pp to 19.3% (2016: 15.1%).
+Our general and administration expense consists mainly of
+personnel costs to support our finance and administration
+functions.
+Research and Development Expense
+Due to growing personnel costs driven by a 10% increase in our
+yearly average R&D headcount, our R&D expense increased by
+10% to €3,352 million in 2017 from €3,044 million in 2016. R&D
+expense as a percentage of total revenue thus increased to
+14.3% in 2017 (2016: 13.8%). For more information, see the
+Products, Research & Development, and Services section.
+Sales and Marketing Expense
+Sales and marketing expense consists mainly of personnel
+costs, direct sales costs, and the cost of marketing our products
+and services.
+Our sales and marketing expense rose 11% from €6,265 million
+in 2016 to €6,924 million in 2017. The increase was mainly the
+result of greater personnel costs as we expanded our global
+100
+Combined Management Report | Financial Performance: Review and Analysis
+sales force, and of increased expenditure for bonus payments
+prompted by the strong revenue growth. The ratio of sales and
+marketing expense to total revenue, expressed as a percentage,
+increased to 29.5% year over year (2016: 28.4%), an increase of
+1.1pp.
+Our research and development (R&D) expense consists
+primarily of the personnel cost of our R&D employees, costs
+incurred for independent contractors we retain to assist in our
+R&D activities, and amortization of the computer hardware and
+software we use for our R&D activities.
+Segment revenue
+60
+Segment profit
+2.75
+2.56
+Finance income mainly consists of gains from disposal of equity
+securities totaling €382 million (2016: €164 million), interest
+income from loans and receivables, and other financial assets
+(cash, cash equivalents, and current investments) totaling
+€49 million (2016: €40 million), and income from derivatives
+totaling €44 million (2016: €29 million).
+Finance costs mainly consist of interest expense on financial
+liabilities amounting to €90 million (2016: €108 million) and
+negative effects from derivatives amounting to €116 million
+(2016: €114 million). The decrease in finance costs is mainly due
+to lower average indebtedness. For more information about
+financing instruments, see the Notes to the Consolidated
+Financial Statements, Note (17b).
+Income Taxes
+The effective tax rate in 2017 was 19.3% (2016: 25.3%). The
+year-over-year decrease in the effective tax rate mainly resulted
+from one-time tax benefits relating to an intra-group transfer of
+intellectual property rights to SAP SE and the U.S. tax reform
+which were partly compensated by valuation allowances on
+deferred tax assets and changes in the regional allocation of
+income. For more information about income taxes, see the
+Notes to the Consolidated Financial Statements, Note (10).
+Profit After Tax and Earnings per
+Share
+2.79
+Profit after tax increased to €4,056 million in 2017 (2016:
+€3,634 million).
+€ millions | change since previous year
+18%
+-2%
+-7%
+19%
+10%
+2013
+Profit after Tax
+2014
+3.04
+Earnings per Share
+€ | change since previous year
+-6
+12pp
+13pp
+Cloud subscriptions and support gross
+margin (in %)
+62
+62
+62
+3.36
+64
+-2pp
+1) Software as a Service/Platform as a Service
+2) Infrastructure as a Service
+Combined Management Report | Financial Performance: Review and Analysis
+103
+Financial Income, Net
+Financial income increased to €185 million (2016: -€38 million).
+Our finance income was €463 million (2016: €230 million) and
+our finance costs were €278 million (2016: €268 million).
+-2pp
+7
+2015
+2017
+1.00
+18%
+12%
+10%
+9%
+5%
+2013
+-7%
+2014
+2016
+2017
+Gross margin (in %)
+104
+2013
+2014
+2015
+2015
+2016
+1.10
+1.15
+Dividend
+We believe our shareholders should benefit appropriately from
+the profit the Company made in 2017. Until 2017, our policy was
+to distribute more than 35% of profit after tax in dividend. After
+the actual payout exceeded 40% of profit after tax in all of the
+recent years we are amending our dividend policy. Our new
+policy is to pay a dividend totaling 40% or more of profit after
+tax.
+The Executive Board and the Supervisory Board will recommend
+to the Annual General Meeting of Shareholders that the total
+dividend be increased by 12% to €1.40 per share (2016: €1.25).
+Based on this recommendation, the overall dividend payout ratio
+(which here means total distributed dividend as a percentage of
+profit) would be 41% (2016: 41%).
+If the shareholders approve this recommendation and if treasury
+shares remain at the 2017 closing level, the total amount
+distributed in dividends would be €1,671 million. The actual
+amount distributed may be different from this total because the
+number of shares held in treasury may change before the
+Annual General Meeting of Shareholders. In 2017, we distributed
+€1,499 million in dividends from our 2016 profit after tax and
+repurchased SAP treasury shares for €500 million. There was
+no share buyback in 2016.
+4,056
+3,634
+3,325
+-1%
+3,280
+€ | change since previous year
+3.056
+1.40
+19%
+19%
+1.25
+12%
+Dividend per Share
+6
+Basic earnings per share increased to €3.36 (2016: €3.04). The
+number of shares outstanding decreased to 1,197 million in 2017
+(2016: 1,198 million).
+-2pp
+A in %
+A in %
+Actual
+Currency
+Constant
+Currency
+Actual
+Currency
+Actual
+Currency
+Constant
+Currency
+2016
+SAP Business Network
+segment
+1,870
+1,595
+15
+17
+Cloud subscriptions and support revenue
+SaaS/PaaS¹)
+Other
+Total
+1,840
+Cloud subscriptions and support revenue - laas²)
+2017
+Reconciliation of Cloud Subscription Revenues and Margins
+Cloud subscriptions and support gross margin -
+laaS²) (in %)
+Segment margin (in %)
+1) Software as a Service/Platform as a Service
+67
+1pp
+1pp
+385
+€ millions, unless otherwise stated
+341
+16
+17
+18
+-1pp
+-1pp
+The SAP Business Network segment was able to increase its
+cloud subscriptions and support gross margin in 2017 (0.8pp) to
+76.7%. This improvement is mainly attributable to increased
+efficiency in operating costs. The segment's cost of revenue
+increased 15.0% in 2017 (16.8% at constant currencies) to €725
+million (2016: €631 million).
+The revenue increased by 17.4% (19.4% at constant currencies)
+to €2,261 million. As a result, the SAP Business Network
+segment achieved a segment gross profit of €1,536 million in
+2017 (2016: €1,295 million), an increase of 18.6% (20.7% at
+constant currencies).
+13
+1,604
+68
+1,191
+77
+76
+1pp
+1pp
+Cloud subscriptions and support gross margin -
+SaaS/PaaS) (in %)
+Other
+57
+57
+61
+-4pp
+-4pp
+Total
+68
+70
+1,627
+77
+SAP Business Network
+segment
+68
+26
+35
+28
+37
+3,443
+3,497
+2,786
+24
+26
+-2pp
+334
+328
+3,831
+3,771
+Cloud subscriptions and support revenue
+2,995
+209
+60
+57
+As a global company, SAP is exposed to a broad range of risks
+across our business operations. As a consequence, our
+Executive Board has established comprehensive internal control
+and risk management structures that enable us to identify and
+analyze risks early and take appropriate action. Our risk
+management and internal control system is designed to identify
+potential events that could negatively impact the Company and
+to provide reasonable assurance regarding the operating
+effectiveness over our financial reporting while ensuring the
+achievement of the Company objectives, specifically our ability
+to achieve our financial, operational, or strategic goals as
+planned.
+Probability/Likelihood of
+"low" based on the likelihood that a risk will occur within the
+assessment horizon as well as the impact the risk would have on
+SAP's business objectives if it were to occur. The scales for
+measuring these two indicators are given in the following tables.
+Risk Planning
+The following describes the key elements of the risk
+management process as part of SAP's risk management policy:
+Risk Management Methodology and
+Reporting
+Combined Management Report | Risk Management and Risks
+116
+The risk management policy issued by our Executive Board
+governs how we handle risk in line with the Company's risk
+appetite and defines a methodology that is applied uniformly
+across all parts of the Group. The policy, updated and rolled out
+in 2017, stipulates who is responsible for conducting risk
+management activities and defines reporting and monitoring
+structures. Along with the policy, we introduced a new system-
+based Risk Management Policy Cockpit, describing all business
+process specifics associated with the risk management lifecycle.
+Our global corporate audit function conducts regular audits to
+assess the effectiveness of our risk management system. Every
+year, SAP's external auditor assesses if the SAP SE early risk
+identification system is adequate to identify risks that might
+endanger our ability to continue as a going concern. SAP's
+enterprise risk management covers risks in the areas of
+strategy, operational business, financial reporting, and
+compliance. As of today, the risk management system analyzes
+risks and only assesses or analyzes opportunities where it is
+deemed appropriate.
+Occurrence
+1% to 19%
+automate our internal control landscape, leveraging continuous
+control monitoring and continuous auditing activities in selected
+business areas. Using the current COSO Internal Control -
+Integrated Framework of 2013, we have defined and
+implemented internal controls along the value chain on a
+process and subprocess level to ensure that sound business
+objectives are set in line with the organization's strategic,
+operational, financial, and compliance goals. In addition, we have
+a governance model in place across risk management and the
+internal control system to ensure both systems are effective, as
+well as a central software solution to store, maintain, and report
+all risk-relevant information.
+Our risk management system based upon the Committee of
+Sponsoring Organizations of the Treadway Commission (COSO)
+Enterprise Risk Management - Integrating with Strategy and
+Performance, updated in 2017, is founded on three pillars, which
+include a dedicated risk management policy, a standardized risk
+management methodology, and a global risk management
+organization. Our internal control system consists of the internal
+control and risk management system for financial reporting
+(ICRMSFR) that also covers the broader business environment.
+In 2017, we adjusted existing control designs to adequately
+address the evolving risk environment and continued to
+Due to our public listings in both Germany and the United
+States, we are subject to both German and U.S. regulatory
+requirements that relate to risk management and internal
+controls over financial reporting, such as provisions in the
+German Stock Corporation Act, section 91 (2) and the U.S.
+Sarbanes-Oxley Act (SOX) of 2002, specifically sections 302
+and 404. Hence, our Executive Board has established an early
+warning system (risk management system) to ensure
+compliance with applicable regulations and an effective
+management of risks.
+This system comprises numerous control mechanisms and is an
+important element of our corporate decision-making process; it
+is therefore implemented as an integral part of SAP's business
+processes across the entire Group. We have adopted an
+integrated risk management and internal control approach to
+help maintain effective global risk management while also
+enabling us to aggregate risks and report on them transparently.
+Internal Control and Risk
+Management System
+Risk Management Policy and
+Framework
+20% to 39%
+Unlikely
+In this framework, we define a remote risk as one that will occur
+only under exceptional circumstances and a near certain risk as
+one that can be expected to occur within the specified time
+horizon. The period for analyzing our risks correlates with the
+respectively associated business activities considering a
+relevant forecast horizon of up to one year, and up to 2020
+where applicable. The period for analyzing the risks that could
+be possible threats to the Group's ability to continue as a going
+concern is eight rolling quarters.
+To determine which risks pose the highest threat to the viability
+of the SAP Group, we classify them as “high,” “medium," or
+Our Risk Management
+Risk planning and risk identification for both internal and
+external risks are conducted in cooperation between risk
+managers and the business units or subsidiaries across the
+Group. We use various techniques to identify risks. For example,
+we have identified risk indicators and developed a
+comprehensive risk catalog that includes risk mitigation
+strategies. Risk identification takes place at various levels of our
+organization to ensure that common risk trends are identified
+and end-to-end risk management across organizational borders
+is enabled. We apply both a qualitative and quantitative risk
+analysis as well as other risk analysis methods such as
+sensitivity analyses and simulation techniques.
+Risk Reporting
+Monitoring
+Risk Validation and
+Description
+Response
+Analysis
+Near Certainty
+Likely
+80% to 99%
+60% to 79%
+40% to 59%
+Identification
+Risk Assessment
+Highly Likely
+SAP is committed to ensuring that compliance policies are
+strictly enforced, and that any infringements are quickly flagged
+and acted upon. To achieve this, we have an effective global
+network of compliance officers who act as business conduct
+ambassadors.
+115
+In 2016, SAP introduced its partner integrity initiative, a global
+audit program. This initiative assesses whether our partners are
+operating in compliance with our partner code of conduct,
+especially in the area of anti-bribery and corruption law
+compliance. The initiative also provides partners with
+opportunities to enhance their own compliance management
+systems.
+The LCIO conducts ongoing programs of calls and meetings to
+raise awareness of business conduct issues. Meanwhile, regular
+e-mail communications with subsidiaries and the availability of
+information in local languages help to promote leading
+standards of business conduct across every part of the SAP
+ecosystem.
+Quarterly newsletters provide employees with information on a
+range of compliance-related topics. We ask business ethics and
+compliance-related questions in our annual People Survey and
+in company-wide polls throughout the year. In addition,
+employees can use our Corporate Portal at any time for quick
+and easy access to all global policies along with guidelines and
+additional information.
+Communicating Our Standards
+Combined Management Report | Business Conduct
+114
+In addition, our legal compliance and integrity office (LCIO)
+holds classroom training sessions for employees across the
+organization - from customer-facing staff to individuals in
+supporting roles such as corporate affairs and marketing.
+Furthermore, information about our compliance policies is
+included in onboarding sessions.
+37,104
+20,719
+23,697
+Training sessions
+completed by employees,
+in headcount
+Breakdown of our training activities
+88
+Impact Level
+91
+Analyzing Compliance Risk
+Risk Management and Risks
+At SAP, we have mechanisms in place to prevent issues as well
+as means to address issues, should they arise. We review SAP
+business units for potential bribery or corruption risk on an
+ongoing basis. For example, in 2017, we analyzed quantitative
+data about SAP entities supporting 138 countries. This data
+includes revenue information, number of employees,
+percentage of public sector business, number of fraud
+allegations or incidents, changes or updates to relevant laws,
+and other quantitative information.
+Enforcing Policies
+Combined Management Report | Business Conduct
+SAP received communications alleging conduct that may violate
+anti-bribery laws. Furthermore, we are investigating allegations
+regarding conduct that certain independent SAP partners
+violated SAP contractual terms and sold SAP products and
+services in embargoed countries. We are also investigating
+allegations regarding direct sales between SAP and certain
+customers who may have engaged in unauthorized activities in
+embargoed countries. For more information on the allegations
+and our reaction to them, see Note 23.
+Investigating Misconduct
+Reporting channels are published on SAP Corporate Portal,
+SAP.com, and in our codes of conduct for partners and
+suppliers. Most of these reporting mechanisms are available day
+and night, and concerns are treated as confidentially as possible
+in light of subsequent investigation. All concerns are
+investigated, and remedial action is taken if necessary. This may
+include termination of employment.
+Contact local compliance officers by e-mail or telephone
+Use the anonymous online whistleblower tool
+compliance-office@sap.com
+Call our governance helpline at +49 6227 7-40022
+E-mail the legal compliance and integrity office at global-
+-
+can:
+If employees are concerned that our code of business conduct
+has been breached, or if they need advice on a compliance issue,
+they can access support in a number of ways. For example, they
+Employees at all levels of the organization must disclose
+conflicts of interest to the LCIO. Disclosures are then followed
+up with guidance or mitigation if necessary.
+Facilitating Reporting and
+Remediation
+In addition to making regular reports to the CFO and the
+Executive Board, the chief global compliance officer reports to
+the Audit Committee of the Supervisory Board at least once a
+year. Matters of significance are brought to the attention of the
+Executive Board and the Audit Committee of the Supervisory
+Board when required.
+addition, compliance officers at local subsidiaries assess issues
+and escalate them when necessary.
+The LCIO oversees the development and implementation of our
+code of business conduct, as well as other related policies and
+our anti-corruption compliance program. Global compliance
+officers are based at SAP headquarters and in important
+markets, especially where there are local language needs. In
+Based on this information and local management input, we
+determine a risk ranking for each country and a general risk
+profile for subsidiary locations. Generally, we find that our
+primary compliance risks are related to corruption, occupational
+fraud, export controls, and intellectual property. For more
+information, see our Risk Report section.
+Insignificant
+M
+Moderate
+During the merger and acquisition and post-merger integration
+phase, newly acquired companies are subject to risk
+management performed by our Corporate Development M&A
+function. Furthermore, for as long as the newly acquired
+companies are not integrated, existing risk management
+structures are maintained or enhanced within the acquired
+companies for purposes of compliance with legal requirements.
+Operational, financial, and strategic risk management is
+uniformly implemented at SAP. Independent GRC risk managers
+are assigned to each of SAP's important business units and
+business activities and to selected strategic initiatives. All GRC
+risk managers, together with assigned risk contacts in the
+business units, continuously identify and assess risks associated
+with material business operations using a uniform approach and
+monitor the implementation and effectiveness of the measures
+chosen to mitigate risks. Further financial risk management
+activities are performed by our global treasury and our global
+tax function. Risk management of compliance risks such as
+corruption, conflict of interest, and fraud is performed by our
+Legal Compliance & Integrity Office (LCIO) and general legal
+risks by Global Legal. Sanction and embargo-related risks are
+managed by the Export Control team, harassment and other
+HR-related issues by our Global Labor & Employee Relations
+Office, and IP risks by our Global IP Office and our LCIO.
+Our global risk management organization (Global GRC)
+oversees the Group-wide systematic identification, assessment,
+management, and monitoring of operational, financial,
+compliance, and strategic risks as well as opportunities. In
+addition, the Global GRC function is responsible for the
+standardized internal risk reporting to risk committees on
+different levels within the Company in line with the internal GRC
+Risk Reporting Standard, including the Executive Board, the
+chairperson of the Supervisory Board, and the Audit Committee
+of the Supervisory Board, along with the external risk reporting.
+Furthermore, Global GRC is responsible for the regular
+maintenance and implementation of our risk management
+policy.
+Risk Management Organization
+All identified and relevant risks are reported at the local,
+regional, and global levels in accordance with our risk
+management policy. At local, regional, and global levels, we have
+established executive risk councils that regularly discuss risks
+and countermeasures and that monitor the success of risk
+mitigation. In addition, the Executive Board is informed quarterly
+about individual risks based on clearly defined qualitative
+reporting criteria. Newly identified or existing significant risks
+that are above a defined threshold, meet a qualitative criterion,
+or with a potential significant impact are also reported to the
+chairperson of the Supervisory Board and to the Audit
+Committee of the Supervisory Board. This includes risks along
+our strategic growth drivers as well as any risks to our ability to
+continue as a going concern, the latter supported by a process
+that analyzes those risks with respect to potential effects on
+liquidity, excessive indebtedness, and insolvency.
+Risk analysis is followed by risk response and risk monitoring.
+The risk exposure and the risk description, as well as the
+appropriateness of agreed responses, are validated by the
+accountable management. Our risk managers work in close
+cooperation with the business owners, ensuring that effective
+strategies are implemented to address risks. Business owners
+are responsible for continuously monitoring the risks and the
+effectiveness of mitigation strategies, with support from the
+respective risk managers. Risks might be reduced by taking
+active steps based on risk approval. To provide greater risk
+transparency and enable appropriate decision-making for
+business owners, we have established a risk delegation of
+authority (RDOA) for relevant parts of the organization as
+deemed appropriate. RDOA is a risk management decision-
+making hierarchy that helps business owners gain timely insight
+into business transactions with the greatest risk, so they are
+better able to review the relevant information, understand the
+risk profile and associated mitigation strategies, and determine
+if their approval is warranted. Depending on the exposure,
+approval is required at different levels of the Company, up to
+and including the Executive Board.
+H = High Risk
+M = Medium Risk
+L = Low Risk
+Impact
+M
+L
+L
+L
+L
+118
+1% to 19%
+Combined Management Report | Risk Management and Risks
+The head of Global GRC, who reports to the Group Chief
+Financial Officer (CFO), is responsible for SAP's internal control
+and risk management program, and provides regular updates to
+the Audit Committee of the Supervisory Board. The overall risk
+profile of the Group is consolidated by the head of Global GRC.
+89
+119
+Combined Management Report | Risk Management and Risks
+Our Executive Board is responsible for ensuring the
+effectiveness of the risk management and internal control
+system. The effectiveness of both systems and their
+implementation in the different Executive Board areas is
+monitored by each board member. We regularly provide a status
+on the risk management and the internal control system to the
+Audit Committee of the Supervisory Board. Key risks are
+reported quarterly to the chairperson of the Supervisory Board
+and to the Audit Committee of the Supervisory Board. The Audit
+Committee of the Supervisory Board regularly monitors the
+effectiveness of SAP's risk management and internal control
+system. At the direction of our Audit Committee, the Corporate
+Risk Management and Internal
+Control Governance
+Additionally, and in compliance with German commercial law
+requirements, SAP maintains an effective internal control
+system beyond financial reporting. This is supported through
+automated controls (continuous control monitoring) as part of
+our business processes.
+The assessment of the effectiveness of the ICRMSFR related to
+our IFRS consolidated financial statements was that on
+December 31, 2017, the Group had an effective internal control
+system over financial reporting in place.
+Based on an analysis of the design and operating effectiveness
+of our respective internal controls over financial reporting, a
+committee presents the results of the assessment on the
+ICRMSFR effectiveness with respect to our IFRS consolidated
+financial statements as at December 31 each year to the Group
+CFO. The committee meets regularly to set the annual scope for
+the test of effectiveness, to evaluate any possible weaknesses in
+the controls, and to determine measures to address them
+adequately. During its own meetings, the Audit Committee of
+the Supervisory Board regularly scrutinizes the resulting
+assessments of the effectiveness of the internal controls over
+financial reporting with respect to the IFRS consolidated
+financial statements.
+We have outsourced some work, such as valuing projected
+benefit obligations and share-based payment obligations,
+quarterly tax calculations for most entities, and purchase price
+allocations in the context of asset acquisitions and business
+combinations. We have also outsourced the preparation of the
+local statutory financial statements for a number of our
+subsidiaries. The employees who work on SAP's financial
+reporting receive training in the respective policies and
+processes.
+CFR. CFR and other corporate departments are responsible for
+ensuring compliance with Group accounting policies and
+monitor the accounting work. CFR also conducts reviews of our
+accounting processes and books.
+Our Corporate Financial Reporting (CFR) department codifies all
+accounting policies in our global group accounting and revenue
+recognition guidelines. These policies, the corporate closing
+schedule, and our process handbooks together define the
+closing process. Under this closing process, we prepare,
+predominately through centralized or external services, the
+financial statements of all SAP legal entities for consolidation by
+Our ICRMSFR also includes policies, procedures, and measures
+designed to ensure compliance of SAP's financial reports with
+applicable laws and standards. We analyze new statutes,
+standards, and other pronouncements concerning IFRS
+accounting and its impact on our financial statements and
+ICRMSFR. Failure to adhere to these new statutes, standards,
+and other pronouncements would present a substantial risk to
+the compliance of our financial reporting. Finally, the ICRMSFR
+has both preventive and detective controls, including, for
+example, automated and non-automated reconciliations,
+segregated duties with two-person responsibility, authorization
+concepts in our software systems, and corresponding
+monitoring measures.
+SAP's internal control and risk management system for financial
+reporting (ICRMSFR) is based on our Group-wide risk
+management methodology. The ICRMSFR includes
+organizational, control, and monitoring structures designed to
+ensure that data and information concerning our business are
+collected, compiled, and analyzed in accordance with applicable
+laws and properly reflected in the IFRS Consolidated Financial
+Statements.
+The purpose of our system of internal control over financial
+reporting is to provide reasonable assurance that our financial
+reporting is reliable and in compliance with applicable generally
+accepted accounting principles. Because of the inherent
+limitations of internal control over financial reporting, it might
+not prevent or bring to light all potential misstatements in our
+financial statements.
+Internal Control and Risk
+Management System for Financial
+Reporting
+Risk managers are responsible for supporting and monitoring
+the implementation of risk management across the Group that
+is both effective and compliant with regulatory requirements
+and SAP's global risk management policy. Based on our risk
+management policy, all relevant risks and risk-related matters
+must be reported to the Global GRC organization.
+Minor
+M
+20% to 39%
+Moderate
+Minor
+Insignificant
+Probability
+117
+Combined Management Report | Risk Management and Risks
+Based on the combination of the likelihood that a risk will occur
+and its impact on SAP's reputation, business, financial position,
+profit, and cash flow, we classify the risks as "high," "medium,"
+or "low."
+Detrimental negative impact on
+business, financial position, profit,
+and cash flows
+Considerable negative impact on
+business, financial position, profit,
+and cash flows
+Some potential negative impact
+on business, financial position,
+profit, and cash flows
+Limited negative impact on
+business, financial position, profit,
+and cash flows
+Negligible negative impact on
+business, financial position, profit,
+and cash flows
+Impact Definition
+Business-Critical
+Major
+Major
+L
+Business-Critical
+M
+H
+M
+M
+L
+L
+40% to 59%
+H
+H
+M
+M
+L
+60% to 79%
+H
+H
+H
+80% to99%
+Training sessions
+completed by employees,
+in %
+Remote
+APJ
+25,939
+Financial assets
+1,111
+1,282
+Property, plant, and equipment
+147
+2,146
+Intangible assets
+Assets
+25,338
+€ millions
+2017
+SAP SE Balance Sheet as at December 31-
+German Commercial Code
+(Short Version)
+In 2017, SAP SE total assets closed at €34,770 million
+(2016: €32,706 million).
+Assets and Financial Position
+Combined Management Report | Financial Performance: Review and Analysis
+110
+(2016: €2,215 million). Other operating income decreased
+SAP SE operating profit increased 1% to €2,246 million
+Service revenue increased 7% to €529 million in 2017 (2016:
+€493 million), other revenue increased by 13% to €2,176 million
+(2016: €1,927 million).
+2016
+The total revenue of SAP SE in 2017 was €13,634 million
+(2016: €12,578 million), an increase of 8 %. Product revenue
+increased 8% to €10,928 million (2016: €10,157 million). As in
+previous years, product revenue was primarily generated from
+license fees paid by subsidiaries of SAP SE.
+Fixed assets
+26,596
+Surplus arising from offsetting
+144
+227
+Deferred taxes
+205
+226
+Prepaid expenses and deferred charges
+5,759
+4,947
+29,367
+Short-term assets
+1,120
+731
+Marketable securities and Liquid
+4,637
+4,215
+Accounts receivable and other assets
+2
+1
+Inventories
+assets
+3
+SAP SE income before taxes increased €621 million to
+€3,991 million (2016: €3,370 million). Income taxes increased
+by €364 million to €1,124 million (2016: €760 million). After
+deducting taxes, the resulting net income is €2,856 million
+(2016: €2,595 million), an increase of €261 million year over
+year.
+SAP SE personnel expenses, mainly the labor cost of software
+developers, service and support employees, and administration
+staff employed by SAP SE, increased 11% to €2,035 million
+(2016: €1,838 million). This increase was mainly driven by an
+increase in headcount and higher costs related to share-based
+compensation. Other operating expenses decreased by €90
+million to €2,053 million (2016: €2,143 million). This decrease is
+mainly attributable to a €192 million decrease in losses from
+currency effects and a €31 million decrease in the impairment of
+receivables. The decreases were partly offset by higher rental
+costs, an increase in expenses for other services, and an
+increase in restructuring costs.
+-295
+Other operating expenses
+-2,053
+Operating profit
+2,246
+-263
+-2,143
+2,215
+Finance income
+1,745
+1,155
+Depreciation and amortization
+Income before taxes
+3,370
+Income taxes
+-1,124
+-760
+Income after taxes
+2,867
+2,610
+Other taxes
+EMEA
+3,991
+Finance income was €1,745 million (2016: €1,155 million), a
+year-over-year increase of €590 million. This increase is
+primarily due to a €797 million higher income from investments
+in associates, an increase of €24 million in the net interest
+income, and a decrease of €16 million in write-downs of financial
+assets. These were partly offset by a €257 million decrease in
+results from profit and loss transfer agreements.
+-1,838
+Personnel expenses
+144€ million to €1,074 million (2016: €1,218 million). The year-
+over-year increase is primarily due to a decrease in gains from
+currency effects. SAP SE cost of services and materials
+increased 10% to €8,079 million (2016: €7,337 million).
+Services received increased €781 million to €5,918 million
+(2016: €5,137 million), mainly due to increased services
+received in the context of intra-group cost allocations. The main
+contributors to that increase were continued group-wide
+investments in research and development activities as well as
+greater revenue-related and investment-related cloud
+subscriptions and support costs.
+2,595
+2,856
+Net income
+-15
+-11
+By way of an intragroup transaction, SAP SE acquired, in
+December 2017, the former hybris business from SAP (Schweiz)
+AG, Switzerland. The acquired business includes all intellectual
+property rights related to SAP Hybris solutions and the shares in
+hybris GmbH, Germany, and hybris (US) Corp., USA. In return,
+SAP SE paid €172 million in cash and assumed a liability of SAP
+(Schweiz) AG against SAP Holdings (UK), United Kingdom, in
+the amount of €2,012 million.
+Income
+SAP SE's income statement is classified following the nature of
+expense method and presents amounts in millions of euros.
+-2,035
+SAP SE Income Statement - German Commercial
+Code (Short Version)
+2017
+Total revenue
+13,634
+2016
+12,578
+Other operating income
+1,074
+Cost of services and materials
+-8,079
+1,218
+-7,337
+€ millions
+Total assets
+The SAP SE annual financial statements are prepared in
+accordance with the reporting standards in the German
+Commercial Code in the version of the Accounting Directive
+Implementation Act BilRUG and the German Stock Corporation
+Act. The full SAP SE annual financial report and unqualified audit
+report are submitted to the operator of the Elektronischer
+Bundesanzeiger (Online German Federal Gazette) for
+publication and inclusion in the Unternehmensregister (German
+Business Register). It is available from SAP SE on request.
+Equity and liabilities
+Gifts and business entertainment limits
+-
+Prohibition of bribery and corruption in all its forms, including
+facilitation or "grease payments"
+Key areas covered by the code of business conduct include:
+To help foster a corporate culture where compliance is taken
+seriously, we have a code of business conduct. Approved by the
+SAP Executive Board, the code sets the standard for our
+dealings with customers, partners, competitors, and vendors. It
+is adapted locally and translated into local languages.
+As with all governance protocols, the compliance management
+system cannot completely eliminate attempted misconduct. We
+focus on preventive measures as the most effective way to
+mitigate compliance risks, supported by detective and reactive
+activities.
+SAP has developed a compliance management system that
+includes detailed policies and procedures that enable SAP to do
+business the right way. Audited regularly internally, the system
+encompasses all aspects of compliance management - from the
+analysis of compliance risks and defining objectives to running
+compliance programs as well as ongoing monitoring.
+Doing Business the Right Way
+New fraud and corruption schemes are discovered frequently.
+We must therefore constantly adapt our compliance approach
+to incorporate new best practices and meet new challenges.
+-
+In our business, trust is everything. We know that to engage with
+SAP fully, our customers must first trust that our business
+practices adhere to the highest standards of compliance and
+integrity. However, all too often we see the impact of poor
+business conduct in the wider business community. Corrupt and
+unethical practices irreparably damage brand reputations and
+lead to punitive financial penalties for the organizations involved.
+Such behavior undermines the rule of international law and is
+also linked to poverty and irreversible environmental damage
+across the globe.
+113
+Combined Management Report | Corporate Governance Fundamentals
+We have entered into relationships with other companies to
+jointly develop and market new software products. These
+relationships are governed by development and marketing
+agreements with the respective companies. Some of the
+agreements include provisions that, in the event of a change of
+control over one of the parties, give the other party a right to
+consent to the assignment of the agreement or to terminate it.
+Change of control provisions in Executive Board
+compensation agreements: Agreements have been concluded
+with the members of the Executive Board concerning
+compensation in the event of a change of control. These
+agreements, which are customary in Germany and elsewhere,
+are described in the compensation report, which is an integral
+part of this management report. We have no analogous
+compensation agreements with our other employees.
+The terms of SAP's syndicated €2.5 billion revolving credit
+facility include a change-of-control clause. For more information
+about this syndicated credit facility, see the Notes to the
+Consolidated Financial Statements, Note (25). This clause
+obliges SAP SE to notify the banks in case of a change of control.
+If, on receiving the notification, banks that represent at least
+two-thirds of the credit volume so require, the banks have the
+right to cancel the credit facility and demand complete
+repayment of the outstanding debt. If no continuation agree-
+ment is reached, the credit facility would end and the obligation
+to repay would become effective at an ascertainable time.
+SAP has Eurobonds totaling €5.15 billion outstanding as of
+December 31, 2017. For more information about SAP's
+Eurobonds, see the Notes to the Consolidated Financial
+Statements, Note (17b). Under the terms agreed with the
+buyers, we are required to notify the buyers of any change of
+control without delay. If there is a change of control and SAP is
+consequently assigned a lower credit rating within a defined
+period, buyers are entitled to demand repayment.
+Under the terms of our U.S. private placements totaling
+approximately US$1.3 billion, we are required to offer lenders
+repayment of outstanding debt if there is a change of control
+and SAP is consequently assigned a lower credit rating within a
+defined period. For more information about these private
+placements, see the Notes to the Consolidated Financial
+Statements, Note (17b). Lenders would have at least 30 days to
+accept the offer.
+Material agreements with change of control provisions:
+SAP SE has concluded the following material agreements with
+provisions that take effect in the event of a change of control,
+whether following a takeover bid or otherwise:
+SAP, are widely followed common practice among German
+companies such as SAP. They give the Executive Board the
+flexibility it needs, in particular, the option to use SAP shares as
+consideration in equity investments, raise funds on the financial
+markets at short notice on favorable terms, or return value to
+shareholders during the course of the year.
+Power to issue and repurchase shares: The Annual General
+Meeting of Shareholders on May 12, 2016, granted powers to the
+Executive Board, subject to the consent of the Supervisory
+Board, to issue convertible and/or warrant-linked bonds, profit-
+sharing rights and/or income bonds (or combinations of these
+instruments), and to grant conversion or option rights in respect
+of SAP SE shares representing a total attributable portion of the
+share capital of not more than €100 million secured by a
+corresponding amount of contingent capital. These powers will
+expire on May 11, 2021. The Executive Board is also authorized
+until May 19, 2020, to increase the share capital by not more
+than €250 million by issuing new shares against contributions in
+cash and to increase the share capital by not more than
+€250 million by issuing new shares against contributions in cash
+or in kind. For more information about the different tranches of
+authorized capital and the aforementioned contingent capital,
+see the Articles of Incorporation, section 4. The Annual General
+Meeting of Shareholders on June 4, 2013, granted a power to the
+Executive Board in accordance with the German Stock
+Corporation Act, section 71 (1)(8), to buy back for treasury on or
+before June 3, 2018, SAP SE shares attributable in total to not
+more than €120 million of the share capital. The power is subject
+to the proviso that the shares repurchased, together with any
+shares that were previously acquired and are still held by SAP in
+treasury and any other shares controlled by SAP, must not in
+total exceed 10% of SAP's share capital. Executive Board
+powers, such as those described to issue and repurchase stock
+and to grant rights of conversion and subscription to shares of
+can appoint a chairperson of the Executive Board and one or
+more deputy chairpersons from among the members of the
+Executive Board. The Supervisory Board can revoke
+appointments to the Executive Board in accordance with the SE
+Regulation, article 9, and the German Stock Corporation Act,
+section 84, if compelling reasons exist, such as gross negligence
+on the part of the Executive Board member. If the Executive
+Board is short of a required member, one may be appointed in
+urgent cases by a court in accordance with the SE Regulation,
+article 9, and the German Stock Corporation Act, section 85. In
+accordance with the SE Regulation, article 59, and the German
+Stock Corporation Act, section 179, an amendment of the
+Articles of Incorporation requires a resolution of the General
+Meeting of Shareholders with a majority of at least three-
+quarters of the valid votes cast. For any amendments of the
+Articles of Incorporation that require a simple majority for stock
+corporations established under German law, however, the
+simple majority of the valid votes cast is sufficient if at least half
+of the subscribed capital is represented or, in the absence of
+such quorum, the majority prescribed by law (that is, two-thirds
+of the votes cast, pursuant to article 59 of the SE Regulation) is
+sufficient. Section 11 (2) of the Articles of Incorporation
+authorizes the Supervisory Board to amend the Articles of
+Incorporation where such amendments only concern the
+wording.
+Combined Management Report | Corporate Governance Fundamentals
+Championing Excellence in
+Business Conduct
+112
+Full, fair, and accurate accounting
+-
+Americas
+Region
+34,770
+In 2016, we introduced mandatory online training for all
+employees worldwide. In total, more than 81,500 employees
+(90% of SAP staff) received this training by the end of 2017.
+A code of business conduct is only effective if everyone knows
+about it. That is why our employees receive full training on the
+standards that we expect. Our training programs cover, for
+example, guidelines on anti-corruption, competition law,
+governance for customer commitments, intellectual property,
+and information security.
+Providing Comprehensive
+Training
+In addition, we expect our partners and suppliers to commit to
+meeting our high standards of integrity and sustainability. For
+this reason, we have in place the SAP Partner Code of Conduct
+and the SAP Supplier Code of Conduct so that partners and
+suppliers understand what is expected of them.
+Data protection and privacy
+Sustainability
+Export control and sanctions laws
+-
+Accounting and financial reporting
+Charitable and political donations
+Regulation of the appointment and remuneration of sales
+agents
+-
+-
+SAP has also established policies to maintain high standards
+within the following areas:
+Data protection and privacy rights
+Anti-competitive practices
+Confidentiality
+Conflicts of interest
+Intellectual property
+Conditions for the appointment and dismissal of members of the
+Executive Board and amendment to the Articles of Incorporation
+reflect the relevant provisions of applicable European and
+German law, including Council Regulation (EC) No. 2157/2001
+on the Statute for a European Company ("SE Regulation") and
+the German Stock Corporation Act. Under the Articles of
+Incorporation, the Executive Board consists of at least two
+members, who are appointed for a period of not more than five
+years by the Supervisory Board in accordance with the SE
+Regulation, articles 39 and 46. The number of members of the
+Executive Board is decided by the Supervisory Board. Executive
+Board members may be reappointed for, or their term of office
+extended by, a maximum of five years. A simple majority of the
+Supervisory Board membership is required for Executive Board
+appointments. In the event of a tie, the chairperson of the
+Supervisory Board has the deciding vote. The Supervisory Board
+Business Conduct
+Shares with special rights conferring powers of control: No
+SAP shareholder has special rights conferring powers of control.
+Type of control over voting rights applying to employee
+shareholders who do not directly exercise their control rights:
+As with other shareholders, employee holders of SAP shares
+exercise their control rights in accordance with the law and the
+Articles of Incorporation. In votes on the formal approval of their
+acts at the Annual General Meeting of Shareholders, employee
+representatives on the Supervisory Board, as all other members
+of the Supervisory Board, are prohibited from exercising the
+voting rights associated with their shares.
+Liabilities increased €848 million to €16,917 million
+(2016: €16,069 million). This increase is the net amount from
+two effects: On the one hand, liabilities to affiliated companies
+increased by €1,917 million, thereof €1,755 million relate to still-
+outstanding labilities assumed in the course of the hybris
+transfer. On the other hand, SAP SE made a scheduled
+repayment of two bonds of €500 million each.
+Opportunities and Risks
+SAP SE is subject to essentially the same opportunities and risks
+as the SAP Group. For more information, see the Risk
+Management and Risks section as well as the Expected
+Developments and Opportunities section.
+Intangible assets increased by €1,999 million to €2,146 million.
+This significant increase was caused by net additions of
+€1,355 million in goodwill and of €651 million in intellectual
+property and other similar rights in connection with the hybris
+business transfer. Due to investments in IT infrastructure,
+property, plant and equipment rose by €171 million to
+€1,282 million (2016: €1,111 million). Financial assets increased
+€601 million year over year to €25,939 million
+(2016: €25,338 million), mainly due to capital contributions to
+subsidiaries and the acquisition of hybris GmbH, Germany, and
+hybris (US) Corp.
+The decrease of €422 million in accounts receivable and other
+assets was primarily the result of €229 million lower tax
+receivables and €191 million lower receivables from affiliated
+companies. Marketable securities and liquid assets decreased
+by €389 million to €731 million (2016: €1,120 million).
+SAP SE shareholders' equity rose 6% to €16,171 million
+(2016: €15,291 million). Against outflows of €1,499 million
+associated with the payment of the 2016 dividend and
+Combined Management Report | Financial Performance: Review and Analysis
+111
+Corporate Governance Fundamentals
+Corporate Governance
+Statement
+The German Commercial Code, section 315d in connection with
+section 289f, requires that, as a listed company, SAP SE
+publishes a corporate governance statement either as part of
+our management report or on our Web site. The Executive Board
+of SAP SE filed the corporate governance statement on
+February 20, 2018, and published it on our public Web site at
+www.sap.com/corporate-en/investors/governance.
+For more information about the corporate governance of SAP,
+see the Corporate Governance Report section.
+Changes in Management
+Provisions increased €332 million to €1,671 million
+(2016: €1,339 million). Other provisions increased €97 million to
+€1,050 million (2016: €953 million), primarily as a result of
+higher additions to other employee-related liabilities and
+provisions for outstanding invoices on goods and services. In
+contrast, provisions for losses from derivative forward contracts
+decreased. Reserves for tax increased €234 million to
+€615 million (2016: €381 million).
+Steve Singh, the Executive Board member responsible for
+Business Networks and Applications, left SAP on April 30, 2017.
+€22 million from the issuance of shares to service the share-
+based payments of employees. The equity ratio (that is, the ratio
+of shareholders' equity to total assets) remained unchanged at
+47%.
+32,706
+Shareholders' equity
+Provisions
+Liabilities
+2
+32,706
+16,171
+15,291
+1,671
+16,917
+1,339
+16,069
+Deferred income
+Requirements concerning appointments and dismissals of
+members of the Executive Board and amendments to the
+Articles of Incorporation:
+7
+Total shareholders' equity and liabilities
+34,770
+€500 million for the repurchase of stock in treasury, there was a
+€2,856 million increase in net income and an inflow of
+The Supervisory Board decided to expand the responsibilities of
+the Executive Board members Robert Enslin and Bernd Leukert
+as of May 1, 2017. Further, Adaire Fox-Martin and Jennifer
+Morgan were appointed to the Executive Board effective May 1,
+2017. They assumed global responsibility for SAP's sales
+organization.
+12
+Restrictions applying to share voting rights or transfers: SAP
+shares are not subject to transfer restrictions except the lock-up
+period under the SAP Share Matching Plan (SMP), described
+below. SAP held 35,098,989 treasury shares as at December 31,
+2017, see the Notes to the Consolidated Financial Statements,
+Note (20). Treasury shares do not carry voting rights or dividend
+rights or other rights. Shares issued under the employee SMP
+are partly subject to contractual transfer restrictions for a three-
+year lock-up period unless the plan member's employment with
+SAP is ended under certain circumstances during that period.
+Until that lock-up period has expired, participating employees
+are not ordinarily allowed to dispose of the shares they have
+acquired under the plan. We are not aware of any other
+restrictions applying to share voting rights or to share transfers.
+Information Concerning
+Takeovers
+Shareholdings that exceed 10% of the voting rights: We are
+not aware of any direct or indirect SAP SE shareholdings that
+exceed 10% of the voting rights.
+Information required under the German Commercial Code,
+sections 289a (1) and 315a (1), with an explanatory report:
+Composition of share capital: For information about the
+composition of SAP SE share capital as at December 31, 2017,
+see the Notes to the Consolidated Financial Statements,
+Note (20). Each share entitles the bearer to one vote. American
+depositary receipts (ADRs) representing our shares are listed on
+the New York Stock Exchange in the United States. ADRs are
+certificates representing non-U.S. shares and are traded on U.S.
+stock exchanges instead of the underlying shares. One SAP ADR
+corresponds to one SAP share.
+In October 2017, Christian Klein, Chief Operating Officer, was
+appointed to the Executive Board effective January 1, 2018. He
+leads the new board area Global Business Operations.
+Additionally, the Supervisory Board extended the Executive
+Board contract of Michael Kleinemeier until December 31, 2019.
+Discontinued engagement of sales agents as well as the
+payment of sales commissions on public sector deals in high-
+risk countries
+As a reaction to preliminary findings in the alleged anti-
+bribery law violations, we are implementing enhancements to
+our anti-corruption compliance program, including guidance
+and policy changes as well as additional internal controls
+related to compliance with international anti-bribery laws and
+additional compliance staff.
+Promoting a commitment to business with integrity through
+our partner and vendor ecosystems
+Controls in our travel, entertainment, gift, and expense
+policies
+preventing misuse of third-party payments for illegal
+purposes
+Compliance policies aimed at managing third parties and
+SAP's workforce (except where disallowed by local legal
+regulations)
+Root cause analysis of all deviations related to unethical or
+fraudulent behavior to improve associated business
+processes and prevent further violations
+-
+-
+Despite our comprehensive compliance programs and
+established internal controls, intentional efforts of individuals to
+circumvent controls or engage in fraud for personal gains
+cannot always be prevented.
+Annual reconfirmation of SAP Code of Business Conduct by
+every SAP employee, providing legal compliance guidance on
+how to avoid unethical behavior and solve dilemma situations
+Mandatory SAP Code of Business Conduct applicable to
+Several educational, counseling, control, and investigative
+instruments
+Internal monitoring of our CMS approach
+-
+We cannot exclude the possibility that if the risk were to occur, it
+could have a business-critical impact on our operations,
+financial position, profit, and cash flows. We estimate the
+probability of occurrence of this risk to be likely. We classify this
+increased risk as a high risk.
+Non-compliance with our integrity standards and violation of
+compliance related rules, regulations, and legal requirements
+including, but not limited to, anticorruption and bribery
+legislation in Germany, the U.S. Foreign Corrupt Practices
+Act, the UK Bribery Act, and other local laws prohibiting
+corrupt payments by employees, vendors, distributors, or
+agents
+Energy and emissions management are an integral component
+of our holistic management of social, environmental, and
+economic risks and opportunities.
+Timing issues with respect to the introduction of new
+products and services or product and service enhancements
+by SAP or our competitors
+Long sales cycles for many of our products
+Challenges in pipeline development and realization
+-
+Our revenue and operating results can vary and have varied in
+the past, sometimes substantially, from quarter to quarter. Our
+revenue in general, and our software revenue in particular, is
+difficult to forecast for a number of reasons, and could lead to
+risks related to the following, among others:
+Our sales and revenue conditions are subject to market
+fluctuations and our forecasts might not be accurate.
+Financial Risks
+We cannot exclude the possibility that if the risk were to occur, it
+could have a moderate impact on our operations, financial
+position, profit, and cash flows. However, we estimate the
+probability of occurrence of this risk to be unlikely. We classify
+this risk as a low risk.
+We met our greenhouse gas emissions target of 380 kilotons
+by 55 kilotons
+-
+Ongoing efforts and activities to maintain our listing in the
+most prominent and recognized sustainability indexes, such
+as the Dow Jones Sustainability Indices and the CDP Climate
+Performance and Disclosure Leadership Indices
+Proactive identification and addressing of social and
+environmental issues
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent
+possible, such as:
+If we do not meet stakeholder expectations in the areas
+identified, our rating in sustainable investment indexes might
+decrease, which could have an adverse effect on our reputation,
+profit, and share price.
+Failure to maintain rating in sustainable investment indexes
+(Dow Jones Sustainability Indices and the CDP Climate
+Performance and Disclosure Leadership Indices)
+Failure to achieve communicated (2020 and 2025) targets
+for greenhouse gas emissions
+change, energy constraints, and our social investment
+strategy
+Failure to meet customer, partner, or other stakeholder
+expectations or generally accepted standards on climate
+-
+We have identified risks in this context, including, but not limited
+to, the following:
+Recognition for our sustainability efforts is shared with the
+market
+Failure to meet customer, partner, or other stakeholder
+expectations or generally accepted standards on climate
+change, energy constraints, and our social investment
+strategy could negatively impact SAP's business, results of
+operations, and reputation.
+-
+-
+-
+Disclosure of confidential information and intellectual
+property, defective products, production downtimes, supply
+shortages, and compromised data (including personal data)
+through, for example, inappropriate usage of social media by
+employees
+Requirement to notify multiple regulatory agencies and
+comply with applicable regulatory requirements and, where
+appropriate, the data owner
+Any one or more of these events could have an adverse effect on
+our market position and lead to fines and penalties. In addition,
+this could have an adverse effect on our business, reputation,
+financial position, profit, and cash flows.
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent
+possible, such as:
+-
+Mandatory compliance baseline training for all employees
+(security awareness, data privacy and data protection,
+compliance, and communication)
+Confidential information and internal information related to
+topics such as our strategy, new technologies, mergers and
+acquisitions, unpublished financial results, customer data, or
+personal data, could be disclosed prematurely or inadvertently
+and subsequently lead to market misperception and volatility.
+Such disclosure could lead to risks in the following areas, among
+others:
+Social engineering tests
+All security groups have been combined organizationally into
+one global security unit to strengthen the security capabilities
+Continuous adoption of internal security measures
+We cannot exclude the possibility that if the risk were to occur, it
+could have a business-critical impact on our operations,
+financial position, profit, and cash flows. However, we estimate
+the probability of occurrence of this risk to be remote. We
+classify this risk as a medium risk.
+Unethical behavior and non-compliance with our integrity
+standards due to intentional and fraudulent employee
+behavior could seriously harm our business, financial
+position, profit, and reputation.
+SAP's leadership position in the global market is founded on the
+long-term and sustainable trust of our stakeholders worldwide.
+Our overarching approach is one of corporate transparency,
+open communication with financial markets, and adherence to
+recognized standards of business integrity. The SAP Code of
+Business Conduct, adopted by the Executive Board on January
+29, 2003, and updated as necessary since then, memorialized
+and supplemented the already existing guidelines and
+expectations for the business behavior practiced at SAP.
+However, we might for instance encounter the following risks
+associated with:
+Large size, complexity, and extended settlement of individual
+customer transactions
+-
+Any one or more of these events could have an adverse effect on
+our business, financial position, profit, and cash flows.
+Standards for safe internal and external communication
+Technical security features in our IT hardware and
+communication channels, such as mandatory encryption of
+sensitive data
+Our controls and efforts to prevent the unauthorized
+disclosure of confidential information might not be effective.
+Corporate Governance and
+Compliance Risks
+We cannot exclude the possibility that if the risk were to occur, it
+could have a business-critical impact on our operations,
+financial position, profit, and cash flows. However, we estimate
+the probability of occurrence of this risk to be unlikely. We
+classify this risk as a medium risk.
+125
+Combined Management Report | Risk Management and Risks
+Comprehensive compliance management system (CMS)
+based on the three pillars of prevention, detection, and
+reaction
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent
+possible, such as:
+In 2017, SAP encountered situations that required clear
+messaging and strong action on non-compliance in the context
+of ethical behavior with the potential to harm our business. In
+South Africa, SAP is investigating its dealings with the public
+sector. For more information relating to the alleged anti-bribery
+law violations noted above, see the Notes to the Consolidated
+Financial Statements, Note (23).
+Any one or more of these events could have an adverse effect on
+our business, reputation, financial position, share price, profit,
+and cash flows.
+Impact on business activities in regulated industries such as
+public sector, healthcare, banking, or insurance
+Fraud and corruption together with operational difficulties,
+especially in countries with a high Corruption Perceptions
+Index
+Unethical and fraudulent behavior of individual employees or
+partners leading to criminal charges, fines, and claims by
+injured parties also considering the ongoing investigations for
+example in South Africa, the Middle East, and North Africa
+Collusion with external third parties, for example providing
+assistance in securing contracts
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent
+possible. For example:
+-
+-
+-
+-
+We launched initiatives across all board areas to assess the
+compliance of SAP's products and services, as well as SAP's
+internal data processing operations with the GDPR, and to
+mitigate identified compliance gaps
+Data protection and privacy is reflected in the mandatory
+product standards of SAP's product development lifecycle
+We continuously review SAP's existing standards and policies
+to include changes to applicable laws and regulations
+We continuous enhance our data center operations
+worldwide, also taking into account local and sector-specific
+market and legal requirements
+We have a data protection management system in place in
+the following areas where data protection is critical: Digital
+Business Services (Product and Cloud Support, Enterprise
+Support and Premium Engagements, Global Consulting
+Delivery, CoE), Products & Innovation (Cloud Operations,
+Maintenance Support, Software Development), Marketing,
+HR, Global Customer Operations (Region MEE and EMEA).
+We actively monitor legal developments and engage with
+political stakeholders and government authorities, directly or
+through industry associations, to clarify questions relevant to
+SAP and SAP's business
+124
+Combined Management Report | Risk Management and Risks
+-
+Introduction/adaptation of licensing and deployment models
+such as cloud subscription models
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent
+possible, such as:
+126
+Period-over-period fluctuations
+-
+-
+-
+This could lead to the following risks, among others:
+Because we operate throughout the world, a significant portion
+of our business is conducted in foreign currencies. In 2017,
+approximately 72.4% of our revenue was attributable to
+operations in foreign currencies. This foreign currency business
+therefore gets translated into our reporting currency, the euro.
+price fluctuations, which could negatively impact our
+business, financial position, profit, and cash flows.
+As a globally operating company, SAP is subject to various
+financial risks related to currencies, interest rates, and share
+Exchange rate risks with currency appreciation or
+depreciation
+Harm to SAP's reputation
+Review of new pronouncements and drafts that are relevant
+to us
+Regular monitoring of our compliance with applicable
+financial reporting standards in order to perceive changes at
+an early stage
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent
+possible, such as:
+Any one or more of these events could have an adverse effect on
+our business, financial position, and profit.
+Unpredictable changes in interpretation of standards
+Not being able to react in a timely manner to new accounting
+pronouncements and financial reporting standards
+concerning revenue recognition (including the new IFRS 15 on
+revenue from contracts with customers that we will need to
+adopt in 2018)
+This could lead to risks in the following areas, among others:
+We regularly monitor our compliance with applicable financial
+reporting standards and review new pronouncements and drafts
+thereof that are relevant to us. As a result of new standards,
+changes to existing standards, and changes in their
+interpretation, we might be required to change our accounting
+policies.
+We cannot exclude the possibility that if the risk were to occur, it
+could have a major impact on our operations, financial position,
+profit, and cash flows. However, we estimate the probability of
+occurrence of this risk to be unlikely. We classify this risk as a
+medium risk.
+Interest rate fluctuation
+Share price fluctuation impacting cash outflows for share
+based compensation payments
+Any one or more of these events could have an adverse effect on
+our business, financial position, profit, and cash flows.
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent
+possible, such as:
+Any one or more of these events could have an adverse effect on
+our business, financial position, profit, and cash flows.
+No assurance of the financial ability of the insurance
+companies to meet their claim payment obligations
+Certain categories of risks are currently not insurable at
+reasonable cost
+Losses that might be beyond the limits, or outside the
+scope, of coverage of our insurance and that may limit or
+prevent indemnification under our insurance policies
+Inability to maintain adequate insurance coverage on
+commercially reasonable terms in the future
+-
+-
+-
+Combined Management Report | Risk Management and Risks
+128
+Nevertheless, we could still be subject to risks in the following
+areas, among others:
+We maintain insurance coverage to protect us against a broad
+range of risks, at levels we believe are appropriate and
+consistent with current industry practice. Our objective is to
+exclude or minimize risk of financial loss at reasonable cost.
+Our insurance coverage might not be sufficient and
+uninsured losses may occur.
+For more information about risks arising from financial
+instruments, including our currency and interest rate risks and
+our related hedging activity, see the Notes to the Consolidated
+Financial Statements section, Notes (24) and (25).
+We cannot exclude the possibility that if the risk were to occur, it
+could have a major impact on our operations, financial position,
+profit, and cash flows. However, we estimate the probability of
+occurrence of this risk to be remote. We classify this risk as a
+low risk.
+Balanced maturity profile and mixture of fixed and floating
+interest rate arrangements to hedge against interest rate risk
+Use of derivative instruments to reduce the impact of our
+share-based compensation plans on our income statement
+and cash flow
+Group-wide foreign exchange risk management strategy to
+hedge balance sheet items and expected cash flows in
+foreign currencies by using derivative financial instruments
+as appropriate
+Continuous monitoring of our exposure to all these financial
+risks
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent
+possible, such as:
+Current and future accounting pronouncements and other
+financial reporting standards, might negatively impact our
+financial results.
+Adoption of, and conversion to, new business models, leading
+from upfront payment models to an increase in pay-per-use
+We cannot exclude the possibility that if the risk were to occur, it
+could have a moderate impact on our operations, financial
+position, profit, and cash flows. However, we estimate the
+probability of occurrence of this risk to be unlikely. We classify
+this risk as a low risk.
+could have an adverse effect on our business, financial position,
+profit, and cash flows.
+Constant monitoring of our revenues, costs, and operational
+KPIs utilizing system-based, real-time reporting to
+continuously improve our business performance
+Ongoing analysis and monitoring of demands, supplies, and
+our competitive environment
+Pipeline analyses based on our business planning, budgeting,
+and forecasting
+- Implementation of methodologies and metrics for continuous
+forecasting and trend analysis in our business
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent
+possible, such as:
+In recent years, the trend has been towards an increased
+number of sales transactions, with the average deal size
+remaining more or less constant. However, the loss or delay of
+one or a few large opportunities could have an adverse effect on
+our business, financial position, profit, and cash flows.
+High operating expenses or insufficient revenue generation to
+offset the significant research and development costs
+Inability of acquired companies to accurately predict their
+sales pipelines
+We cannot exclude the possibility that if the risk were to occur, it
+could have a moderate impact on our operations, financial
+position, profit, and cash flows. However, we estimate the
+probability of occurrence of this risk to be unlikely. We classify
+this risk as a low risk.
+Shortfall in anticipated revenue or delay in revenue
+recognition or deployment models that require revenue to be
+recognized over an extended period of time
+Decreased software sales that could have an adverse effect
+Changes in customer budgets or seasonality of technology
+purchases by customers
+Existing customers might cancel or not renew their
+maintenance contracts, or decide not to buy additional
+products and services
+or subscription-based payment models, thus the respective
+service period can typically range from one to three years,
+and in some cases, up to five years
+-
+-
+-
+Combined Management Report | Risk Management and Risks
+on related maintenance and services revenue
+External factors could impact our liquidity and increase the
+default risk associated with, and the valuation of, our
+financial assets.
+Macroeconomic factors such as an economic downturn could
+have an adverse effect on our future liquidity. We use a globally
+centralized financial management approach to control financial
+risk, such as liquidity, exchange rate, interest rate, counterparty,
+and equity price risks. The primary aim is to maintain liquidity in
+the SAP Group at a level that is adequate to meet our obligations
+at any time.
+However, adverse macroeconomic factors could increase the
+default risk associated with the investment of our total Group
+liquidity, and could lead to the following risks, among others:
+127
+Combined Management Report | Risk Management and Risks
+This could result in significant changes in the estimates and
+judgments and, consequently, in the reported financials, and
+The facts and circumstances, as well as assumptions on
+which management bases these estimates and judgments
+and management's judgment regarding the facts and
+circumstances, might change over time
+These management decisions could lead to risks in the following
+areas, among others:
+To comply with IFRS, management is required to make
+numerous judgments, estimates, and assumptions that affect
+the reported financial figures.
+Management use of estimates could negatively affect our
+business, financial position, profit, and cash flows.
+We cannot exclude the possibility that if the risk were to occur, it
+could have a major impact on our operations, financial position,
+profit, and cash flows. However, we estimate the probability of
+occurrence of this risk to be remote. We classify this risk as a
+low risk.
+We pursue a policy of cautious investment characterized by
+wide portfolio diversification with a variety of counterparties,
+predominantly short-term investments, and standard
+investment instruments
+The weighted average rating of the investments of our total
+Group liquidity is in the area of A-
+SAP's investment policy with regards to total Group liquidity
+is described in our internal treasury guidelines, which is a
+collection of uniform rules that apply globally to all
+companies in the SAP Group. Among other things, it requires
+that investments, with limited exceptions, are only executed
+in assets and funds rated BBB flat or better
+We have policies and measures in place to support strong
+operating cash flow
+-
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent
+possible, such as:
+Any one or more of these events could have an impact on the
+value of our financial assets, which could have an adverse effect
+on our business, financial position, profit, and cash flows.
+Increased default risk of financial investments, which might
+lead to significant impairment charges in the future
+Limitation of operating and/or strategic financial flexibility
+Inability to repay financial debt
+Group liquidity shortages
+-
+Control procedures to make sure that our estimates and
+judgments are adequate, such as two-person verification to
+significant estimating
+Fines of up to 4% of SAP's annual Group turnover
+Damage claims by customers
+-
+-
+Evolution¹)
+Risk Level
+Probability Impact
+Venture Capital
+Insurance
+Overview of Risk Factors (Aggregated Statement for 2017)
+Combined Management Report | Risk Management and Risks
+→>
+low
+major
+remote
+→
+medium
+major
+unlikely
+→>
+low
+moderate
+unlikely
+→
+low
+major
+remote
+remote
+>>
+business-critical
+→
+unlikely
+Cloud Operations
+→
+medium
+major
+unlikely
+Partner Ecosystem
+→
+medium
+major
+unlikely
+Sales and Services
+Operational Business Risks
+→
+medium
+major
+unlikely
+Human Workforce
+Human Capital Risks
+→
+low
+minor
+remote
+medium
+business-critical medium
+low
+unlikely
+Liquidity
+Sales and Revenue Conditions
+120
+Financial Risks
+Environment and Sustainability
+Ethical Behavior
+Unauthorized Disclosure of Information
+Corporate Governance and Compliance Risks
+Data Protection and Privacy
+Legal and IP
+International Laws and Regulations
+Global Economic and Political Environment
+Economic, Political, Social, and Regulatory Risks
+Overview of Risk Factors (Aggregated Statement for 2017)
+An overview of the risk categories and the corresponding risk
+factors is outlined in the table below, where the risk factors are
+categorized according to our framework detailed in the Risk
+Management Methodology and Reporting section.
+In pursuance of increased transparency and clarity of our risk
+reporting, we also consolidated the risk factors (for example
+Infringement of Intellectual Property, Third-Party Licensing and
+Lawsuits into Legal and IP), regrouped risk factors within the
+categories (for example all strategic risk factors are now
+associated with the category 'Strategic Risks'), and made
+certain reallocations between risk categories (for example, Data
+Protection and Privacy to Economic, Political, Social and
+Regulatory Risks) together with a consequent rephrasing of risk
+factors for improved risk description. The following sections
+outline our revised risk factors that we have identified and
+continuously track. Compared to our internal risk reporting, we
+externally present our risk factors on an aggregated level.
+structure, including the risk categories and risk factors. We
+aimed to reduce the complexity of the risk report while at the
+same time increase transparency and avoid redundancies. We
+therefore simplified and standardized the structure of all risk
+factors to improve the risk report's readability. As a result, this
+led to a reduction of risk categories from 10 to 6 and a reduction
+of risk factors from 36 to 23.
+SAP's transition to the cloud led to an adaptation of operations,
+business models, and processes. Subsequently, this required an
+adaptation of our risk profile and a revision of the risk reporting
+Risk Factors
+We use our own risk management software, SAP solutions for
+GRC powered by SAP HANA, to effectively support the
+governance process. Risk managers record and address
+identified risks using our risk management software to help
+create transparency across all known risks that exist in the
+Group, as well as to facilitate risk management and the
+associated risk reporting. Our continuous controls monitoring
+activities are performed utilizing our GRC software as well. This
+information is available to managers by means of a mobile app,
+through direct access to our SAP Fiori application for enterprise
+risk reporting, and in regularly issued reports, and is
+consolidated and aggregated for the quarterly risk report to the
+Executive Board. The solution also supports the risk-based
+approach of the ICRMSFR.
+Software Solution Deployed
+Audit department regularly audits various aspects of the risk
+management system and its effectiveness. Additional
+reassurance is obtained through the external audit of the
+effectiveness of our internal control system over financial
+reporting and the early warning system.
+Maintaining a scope of insurance coverage that is as broad as
+possible
+Management Use of Estimates
+moderate
+Accounting Pronouncements
+Probability Impact
+←
+low
+moderate
+unlikely
+7
+business-critical high
+likely
+→
+business-critical medium
+remote
+business-critical medium
+unlikely
+←
+business-critical high
+likely
+7
+business-critical high
+likely
+←
+business-critical high
+likely
+Evolution¹)
+Risk Level
+Currency, Interest Rate, and Share Price Fluctuations
+←
+Security
+unlikely
+Claims and lawsuits against us, such as for IP infringements,
+or our inability to obtain or maintain adequate licenses for
+third-party technology, could have an adverse effect on our
+business, financial position, profit, cash flows, and
+reputation. Moreover, similar adverse effects could result if
+we are unable to adequately protect or enforce our own
+intellectual property.
+We cannot exclude the possibility that if the risk were to occur, it
+could have a business-critical impact on our operations,
+financial position, profit, and cash flows. We estimate the
+probability of occurrence of this risk to be likely. We classify this
+increased risk as a high risk.
+Our LCIO team coordinates or provides guidance on policy
+implementation, training, and enforcement efforts
+throughout SAP. Those efforts are monitored and tracked to
+allow trending and risk analysis and to ensure consistent
+policy application throughout the SAP Group
+We continuously update and refresh our compliance
+programs to improve our effectiveness and to ensure that our
+employees understand and comply with the SAP Code of
+Business Conduct. This process is coordinated by our LCIO, a
+team of dedicated resources who are tasked with managing
+our policy-related compliance measures
+We initiated efforts to strengthen the Export Control
+Compliance team and we increased our resources in high-risk
+countries
+As a reaction to preliminary findings in the investigations into
+the alleged export restriction violations, SAP has taken
+actions to terminate access to SAP products and services for
+certain end users and to block additional business activities
+with these end users through SAP or SAP partners
+We receive guidance from external economics consultants,
+law firms, tax advisors, and authorities in the concerned
+countries, and take legal actions when necessary
+We have a strong legal and compliance office presence in
+various countries, with compliance safeguards supported and
+monitored by SAP legal teams and LCIO, maintaining an
+effective data protection and privacy office and associated
+policy
+we invest our resources, and in the business environment in
+general to cope with an increase in regulation enforcement
+efforts of certain countries or state-driven protectionism
+-
+-
+Combined Management Report | Risk Management and Risks
+122
+We continuously monitor new and increased regulatory
+requirements, updated or new enforcement trends, and
+publicly available information on compliance issues in the
+computer software industry, in the emerging markets where
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent
+possible. For example:
+As we expand into new countries and markets or extend our
+business activities in these markets, including emerging
+markets, these risks could intensify. The application of the
+respective local laws and regulations to our business is
+sometimes unclear, subject to change over time, and often
+conflicting among jurisdictions. Additionally, these laws and
+government approaches to enforcement are continuing to
+change and evolve, just as our products and services continually
+evolve. Compliance with these varying laws and regulations
+could involve significant costs or require changes in products or
+business practices. Non-compliance could result in the
+imposition of penalties or cessation of orders due to alleged
+non-compliant activity. Governmental authorities could use
+considerable discretion in applying these statutes and any
+imposition of sanctions against us could be material. One or
+more of these factors could have an adverse effect on our
+operations globally or in one or more countries or regions, which
+could have an adverse effect on our business, financial position,
+profit, and cash flows.
+In 2017, an investigation was initiated and is ongoing with
+regards to potential sanction violations. For more information
+relating to the potential sanctions violations noted above, see
+the Notes to the Consolidated Financial Statements, Note (23).
+Expenses associated with the localization of our products and
+compliance with local regulatory requirements
+Difficulties enforcing intellectual property and contractual
+rights in certain jurisdictions
+Violations of country-specific sanctions (such as the UN
+sanction against North Korea or the United States' sanction
+requirements against Iran and certain other countries)
+Compliance with and stringent enforcement of laws and
+regulations (including interpretations), implications of
+government elections, lack of reforms, data protection and
+privacy rules, regulatory requirements and standards (such
+as the Payment Card Industry Data Security Standard (PCI
+DSS))
+Protectionist trade policies, import and export regulations,
+and trade sanctions (such as in Russia), and embargoes
+(such as in Iran) including, but not limited to, country-specific
+software certification requirements
+government elections), or through required works council
+involvements, labor union approvals, and immigration laws in
+different countries
+-
+Workforce restrictions resulting from changing laws and
+regulations, from political decisions (such as Brexit,
+Discriminatory, protective, or conflicting fiscal policies and
+tax laws, such as certain protectionist measures included in
+the U.S. Tax Reform which was enacted end of 2017 and
+involves uncertainties as to how the U.S. government will
+implement the new law
+Changes in accounting standards and tax laws including, but
+not limited to, conflict and overlap among tax regimes
+measures as well as the introduction of new tax concepts that
+harm digitized business models
+We believe that we will continuously be subject to claims and
+lawsuits, including intellectual property infringement claims, as
+our solution portfolio grows; as we acquire companies with
+increased use of third-party code including open source code; as
+we expand into new industries with our offerings, resulting in
+greater overlap in the functional scope of offerings; and as non-
+practicing entities that do not design, manufacture, or distribute
+products increasingly assert intellectual property infringement
+Possible tax constraints impeding business operations in
+certain countries
+claims. Moreover, protecting and defending our intellectual
+property is crucial to our success.
+-
+Non-compliance with applicable data protection and privacy
+laws, in particular the EU GDPR, by SAP and/or any of the
+subcontractors engaged by SAP for the processing of personal
+data could lead, for example, to risks in the following areas:
+As a global software and service provider, SAP is required to
+comply with local laws wherever SAP does business. With regard
+to data protection requirements, in May 2016, the EU enacted a
+"General Data Protection Regulation" (GDPR) with the aim of
+further harmonizing data protection laws across the EU. The
+GDPR will be directly applicable law in all EU and EEA member
+states as of May 25, 2018, after a two-year transition period.
+Within limits, member states can supplement the GDPR with
+additional national rules.
+Non-compliance with applicable data protection and privacy
+laws or failure to adequately meet the requirements of SAP's
+customers with respect to our products and services could
+lead to civil liabilities and fines, as well as loss of customers
+and damage to SAP's reputation.
+We are named as a defendant in various legal proceedings for
+alleged intellectual property infringements. For more
+information and a more detailed report relating to certain of
+these legal proceedings, see the Notes to the Consolidated
+Financial Statements, Note (23).
+We cannot exclude the possibility that if the risk were to occur, it
+could have a business-critical impact on our operations,
+financial position, profit, and cash flows. We estimate the
+probability of occurrence of this risk to be likely. We classify this
+risk as a high risk.
+We rely on a combination of the protections provided by
+applicable statutory and common law rights, including trade
+secret, copyright, patent, and trademark laws, license and
+non-disclosure agreements, and technical measures to
+establish and protect our proprietary rights in our products
+We are party to certain patent cross-license agreements with
+third parties, which removes the risk of litigation with respect
+to the involved patents
+We endeavor to protect ourselves in the respective third-
+party software agreements by obtaining certain rights in case
+such agreements are terminated
+We have established various internal programs, such as
+internal policies, processes, and monitoring, to assess and
+manage the risks associated with open source, and third-
+party intellectual property
+Our LCIO sets and manages internal policies related to our
+Code of Business Conduct, including the handling of third-
+party intellectual property. We monitor compliance with
+these policies. Our Global GRC organization works closely
+with the LCIO, the Global IP Office, and Corporate Audit, and
+is responsible for the management and reporting of potential
+risks associated with third-party intellectual property
+-
+-
+-
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent
+possible. For example:
+The outcome of litigation and other claims or lawsuits is
+intrinsically uncertain. Management's view of the litigation might
+also change in the future. Actual outcomes of litigation and other
+claims or lawsuits could differ from the assessments made by
+management in prior periods, which are the basis for our
+accounting for these litigations and claims under IFRS.
+customers' ability, to use that partner's or other third parties'
+products.
+123
+Combined Management Report | Risk Management and Risks
+Any legal action we bring to enforce our proprietary rights could
+also involve enforcement against a partner or other third party,
+which might have an adverse effect on our ability, and our
+Third parties might reverse-engineer or otherwise obtain and
+use technology and information that we regard as proprietary.
+Accordingly, we might not be able to protect our proprietary
+rights against unauthorized third-party copying or utilization.
+Adverse outcomes to some or all of the claims and lawsuits
+pending against us might result in the award of significant
+damages or injunctive relief against us or brought against us in
+the future that could hinder our ability to conduct our business
+and could have an adverse effect on our reputation, business,
+financial position, profit, and cash flows. Third parties could
+require us to enter into royalty and licensing arrangements on
+terms that are not favorable to us, cause product shipment
+delays, subject our products to injunctions, require a complete
+or partial redesign of products, result in delays to our
+customers' investment decisions, and damage our reputation.
+Third-party claims might require us to make freely accessible
+under open source terms one of our products or third-party
+(non-SAP) software upon which we depend.
+Despite our efforts, we might not be able to prevent third
+parties from obtaining, using, or selling without authorization
+what we regard as our proprietary technology and
+information. In addition, proprietary rights could be
+challenged, invalidated, held unenforceable, or otherwise
+affected. Moreover, the laws and courts of certain countries
+might not offer effective means to enforce our legal or
+intellectual property rights. Finally, SAP may not be able to
+collect all judgments awarded to it in legal proceedings
+Some intellectual property might be vulnerable to disclosure
+or misappropriation by employees, partners, or other third
+parties
+Claims and lawsuits being brought against us, including
+claims and lawsuits involving businesses we have acquired
+We might be dependent in the aggregate on third-party
+technology, including cloud and Web services, that we embed
+in our products or that we resell to our customers
+Third parties have claimed, and might claim in the future, that
+we infringe their intellectual property rights or that we are
+overusing or misusing licenses to these technologies
+We integrate certain open source software components from
+third parties into our software. Open source licenses might
+require that the software code in those components or the
+software into which they are integrated be freely accessible
+under open source terms
+-
+The outcome of litigation and other claims or lawsuits is
+intrinsically uncertain and could lead, for example, to the
+following risks:
+-
+-
+-
+decreased
+Icon:
+←
+medium
+business-critical
+remote
+low
+major
+remote
+→
+medium
+business-critical
+unlikely
+Innovation
+Mergers and Acquisitions
+Market Share and Profit
+Strategic Risks
+←
+business-critical medium
+unlikely
+Technology and Products
+→
+business-critical medium
+V
+unchanged
+increased
+1) Evolution: Risk level compared with previous year.
+All described risks are each applicable to a different extent to
+our reportable segments (Applications, Technology & Services,
+and SAP Business Network) unless otherwise noted.
+Our business in these countries is subject to numerous risks
+inherent to international business operations. Among others,
+these risks include:
+We are a global company and currently market our products and
+services in more than 180 countries and territories in the
+Americas (Latin America and North America); Asia Pacific Japan
+(APJ); China, Hong Kong, Macau, and Taiwan (Greater China);
+Europe, Middle East, and Africa (EMEA); and Middle and Eastern
+Europe (MEE) regions. As a European company domiciled in
+Germany with securities listed in Germany and the United
+States, we are subject to European, German, U.S., and other
+governance-related regulatory requirements.
+Laws, regulatory requirements and standards in Germany,
+the United States, and elsewhere continue to be very
+stringent. Our international business activities and processes
+expose us to numerous and often conflicting laws and
+regulations, policies, standards, or other requirements and
+sometimes even conflicting regulatory requirements, and to
+risks that could harm our business, financial position, profit,
+and cash flows.
+We cannot exclude the possibility that if the risk were to occur, it
+could have a business-critical impact on our operations,
+financial position, profit, and cash flows. We estimate the
+probability of occurrence of this risk to be likely. This could
+exacerbate the other risks we describe in this report or cause a
+negative deviation from our revenue and operating profit target.
+We classify this risk as a high risk.
+Internal cost discipline and a conservative financial planning
+Reshaping of our organizational structure and processes to
+increase efficiency
+Ongoing shift to a higher share of cloud subscriptions and
+software support revenue streams will lead to more
+predictable revenue streams over time, providing increased
+stability against financial volatility
+-
+-
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent
+possible such as:
+121
+Combined Management Report | Risk Management and Risks
+Mandatory disclosures of breaches to affected individuals,
+customers, and data protection supervisory authorities
+Investigations and administrative measures by data
+protection supervisory authorities, such as the instruction to
+alter or stop non-compliant data processing activities,
+including the instruction to stop using non-compliant
+subcontractors
+Any of these events could have an adverse effect on our
+business operations, financial position, profit, and cash flows.
+Increased number of bankruptcies among customers,
+business partners, and key suppliers
+Higher credit barriers for customers, reducing their ability to
+finance software purchases
+Financial market volatility episodes, global economic crises
+and chronic fiscal imbalances, slowing economic conditions,
+or disruptions in emerging markets
+Continued deterioration in global economic conditions
+(impact on accurate forecast) or budgetary constraints of
+national governments
+General economic, political, social, environmental, market
+conditions, and unrest (for example, Turkey, Venezuela, UK/
+Brexit)
+-
+These events could lead to risks in the following areas, among
+others:
+As a global company, we are influenced by multiple factors that
+are difficult to predict and beyond our influence and control. Any
+of these factors could have a significant adverse effect on the
+local economy and beyond.
+Uncertainty in the global economy, financial markets, social
+and political instability caused by state-based conflicts,
+terrorist attacks, civil unrest, war, or international hostilities
+could lead to disruptions of our business operations or have a
+negative impact on our business, financial position, profit,
+and cash flows.
+Economic, Political, Social, and
+Regulatory Risks
+SAP SE is the parent company of the SAP Group. Consequently,
+the risks described below also apply, directly or indirectly, to
+SAP SE.
+Terrorist attacks or other acts of violence, natural disasters,
+pandemic diseases impacting our business
+Selection of financially stable and reputable insurers
+→
+We cannot exclude the possibility that if the risk were to occur, it
+could have a business-critical impact on our operations,
+financial position, profit, and cash flows. However, we estimate
+the probability of occurrence of this risk to be remote. We
+classify this risk as a medium risk.
+Constant review of our insurance programs in relation to our
+risk profile and breadth of insurance coverage
+129
+Combined Management Report | Risk Management and Risks
+Challenges with effectively managing a large distribution
+network of third-party companies
+Mismatch of expenses and revenue due to changes in
+headcount and infrastructure needs, as well as local legal or
+tax regulations
+Lack of availability and scalability of business experts and
+consultants
+Failure to meet short-term and long-term workforce and skill
+requirements including achievements of internal gender
+diversity objectives
+Loss of key personnel of acquired business
+Poor succession management or failure to find adequate
+replacements
+Failure to successfully maintain, upskill, and expand our
+highly skilled and specialized workforce
+Failure to identify, attract, develop, motivate, adequately
+compensate, and retain well-qualified and engaged personnel
+to scale to targeted markets
+Failure to apply workforce planning processes, adequate
+resource allocation, and location strategy in alignment with
+our general strategy
+-
+-
+We could face risks in the following areas, among others:
+Lack of appropriate or inadequately executed benefit and
+compensation programs
+If we are unable to attract, develop, retain, and effectively
+manage our geographically dispersed workforce, we might
+not be able to run our business and operations efficiently and
+successfully, or develop successful new solutions and
+services.
+We could incur significant losses in connection with venture
+capital investments.
+Our success is dependent on appropriate alignment of our
+planning processes for our highly skilled and specialized
+workforce and leaders, both male and female, adequate
+resource allocation, and our location strategy with our general
+strategy. In certain regions and specific technology and solution
+areas, we continue to set very high growth targets, depending on
+short-term and long-term skill requirements, taking
+infrastructure needs as well as local legal or tax regulations in
+consideration. Successful maintenance and expansion of our
+highly skilled and specialized workforce in the area of cloud is a
+key success factor for our transition to be the leading cloud
+company. The availability of such personnel as well as business
+experts is limited and, as a result, competition in our industry is
+intense.
+Through Sapphire Ventures (formerly SAP Ventures), our
+consolidated venture investment funds, we plan to continue
+investing in new and promising technology businesses.
+This could lead to risks in the following areas, among others:
+-
+-
+Investments could generate net losses and require additional
+expenditures from their investors
+-
+Tax deductibility of capital losses and impairment in
+connection with equity securities are often restricted, and
+could therefore have an adverse effect on our effective tax
+rate
+Any one or more of these events could have an adverse effect on
+our business, financial position, profit, and cash flows.
+Sapphire Ventures has established measures to address and
+mitigate the described risks and adverse effects to the greatest
+extent possible, such as:
+Diversify the portfolio and actively manage our investments
+Balance the volume and scope of our venture capital
+activities
+We cannot exclude the possibility that if the risk were to occur, it
+could have a minor impact on our operations, financial position,
+profit, and cash flows. However, we estimate the probability of
+occurrence of this risk to be remote. We classify this risk as a
+low risk.
+Human Capital Risks
+Changes to planned business operations might affect the
+performance of companies in which Sapphire Ventures holds
+investments
+-
+Incorrect assumptions during the due diligence process for
+the acquisition (including assumptions related to business
+and license models)
+-
+-
+-
+-
+-
+Failure to successfully integrate acquired technologies or
+solutions into SAP's solution portfolio and strategy
+Failure to successfully integrate acquired operations,
+cultures, or languages, all within the constraints of applicable
+local laws
+Any one or more of these events could have an adverse effect on
+our business, financial position, profit, and cash flows.
+SAP has established measures to address and mitigate risks and
+adverse effects associated with acquisitions to the greatest
+extent possible, such as:
+Material unidentified liabilities of acquired companies (legal,
+tax, accounting, IP)
+Failure in implementing, restoring, or maintaining internal
+controls, procedures, and policies within acquired companies
+Incompatible practices or policies (compliance
+requirements)
+Insufficient integration of the acquired company's
+accounting, HR, and other administrative systems
+Failure to coordinate the acquired company's research and
+development (R&D), sales, and marketing activities
+Debt incurrence or significant unexpected cash expenditures
+Non-compliance with existing SAP standards
+Impairment of goodwill and other intangible assets acquired
+in business combinations
+-
+-
+-
+Unfulfilled needs of the acquired company's customers and
+partners
+-
+Strategic alliances among competitors and/or their growth-
+related efficiency gains in the cloud area could lead to
+the future. Over time, certain of these acquisitions have
+increased in size and in strategic importance for SAP.
+Management negotiation of potential acquisitions and alliances
+and integration of acquired businesses, products, or
+technologies demands time, focus, and resources of both
+management and workforce, and exposes us to unpredictable
+operational difficulties.
+increased complexity could lead to a loss of SAP's position as
+a leading cloud company and subsequently to reduced
+customer adoption
+Customers and partners might be reluctant or unwilling to
+migrate and adapt to the cloud or consider competitive cloud
+offerings or not extend renewals
+Existing customers might cancel or not renew their
+maintenance contracts, or decide not to buy additional
+products and services
+The market for cloud business might not develop further, or it
+might develop more slowly than anticipated
+Technical, operational, financial, and legal due diligence on
+the company or assets to be acquired
+significantly increased competition in the market with
+regards to pricing and ability to integrate solutions
+Price pressure, cost increases, and loss of market share
+through traditional, new, and especially cooperating
+competitors
+Any one or more of these events could have an adverse effect on
+our business, financial position, profit, and cash flows.
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent
+possible. For example, we:
+-
+-
+Share our overall long-term cloud strategy and our
+integration road map with our customers, and continuously
+implement improvements to enhance our cloud solutions
+Demonstrate the benefits of our solution and services
+portfolio through end-to-end integration scenarios,
+homogeneous and compelling user interfaces, customer
+references, and success stories
+Balance the distribution of our strategic investments by
+evolving and protecting our core businesses and
+simultaneously developing new solutions, technologies, and
+business models for markets, such as those in analytics,
+applications, and database and technology
+Place strong focus on providing our cloud services efficiently
+and to customer expectations, including service provisioning,
+quality, and security as well as data protection and privacy
+Drive the integration and convergence of our technology
+platform offerings, SAP S/4HANA, and acquired technologies
+Enable our current product portfolio for SAP HANA, develop
+new solutions based on SAP HANA, and offer comprehensive
+cloud-based services, extendable with SAP Cloud Platform
+Deliver standard software and product packages that are fast
+and easy to install, as well as financially attractive financing
+and subscription models
+Enable and encourage partners to leverage SAP technology,
+by providing guidance about business opportunities,
+architecture, and technology, as well as a comprehensive
+certification program designed to ensure that relevant third-
+party solutions are of consistently high quality
+We cannot exclude the possibility that if the risk were to occur, it
+could have a business-critical impact on our operations,
+financial position, profit, and cash flows. However, we estimate
+the probability of occurrence of this risk to be unlikely. We
+classify this risk as a medium risk.
+We might not acquire and integrate companies effectively or
+successfully.
+To expand our business, we acquire businesses, products, and
+technologies, and we expect to continue to make acquisitions in
+134
+Combined Management Report | Risk Management and Risks
+Acquiring businesses, products, and technologies may present
+risks to SAP, including risks related to the following areas,
+among others:
+A holistic evaluation of material transaction and integration
+risks
+-
+We cannot exclude the possibility that if the risk were to occur, it
+could have a major impact on our operations, financial position,
+profit, and cash flows. However, we estimate the probability of
+occurrence of this risk to be remote. We classify this decreased
+risk as a low risk.
+We cannot exclude the possibility that if the risk were to occur, it
+could have a business-critical impact on our operations,
+financial position, profit, and cash flows. However, we estimate
+the probability of occurrence of this risk to be remote. We
+classify this risk as a medium risk.
+Consolidated Risk Profile
+Following SAP's overall strategy towards the cloud powered by
+SAP HANA, we have revised the structure of our risk report to
+better reflect the risks of our adapted risk profile.
+We consolidate and aggregate relevant risks identified by the
+different business units and functions following our risk
+management policy, monitored by a Group-wide risk
+management governance function.
+Based on our aggregation approach, we recognized only minor
+changes in 2017 in the percentages of all reported risks
+categorized as "high" or "medium" in our risk level matrix. The
+number of risks categorized as "high" accounted for 17% (2016:
+11%) of all reported risks, while the risks categorized as
+"medium" accounted for 52% (2016: 67%) of all risks reported
+in the Risk Factors section.
+In our view, considering their impact level and likelihood of
+occurrence, the risks described in our aggregated risk report do
+not individually or cumulatively threaten our ability to continue
+as a going concern. Management remains confident that the
+Group's earnings strength forms a solid basis for our future
+business development and provides the necessary resource to
+pursue the opportunities available to the Group. Because of our
+strong position in the market, our technological leadership, our
+highly-motivated employees, and our structured processes for
+early risk identification, we are confident that we can continue to
+successfully counter the challenges arising from the risks in our
+risk profile in 2018.
+136
+Make strategic acquisitions with the potential to drive
+innovation and contribute to achieving our growth target
+Combined Management Report | Risk Management and Risks
+Future Trends in the Global
+Economy
+In 2018, economic activity will remain broadly stable at the
+global level, but developments across countries and regions
+could vary notably. That is what the European Central Bank
+(ECB) projects in its December 2017 Economic Bulletin.1 The
+ECB largely expects the growth potential to stabilize at below
+pre-crisis levels this year. Specifically, the outlook among
+advanced economies might entail robust expansion, which will
+most likely slow down gradually as the upturn matures. On the
+other side, the ECB awaits increased dynamism in emerging
+market economies, supported by strengthening activity in
+commodity exporters.
+Regarding the Europe, Middle East, and Africa (EMEA) region,
+the ECB concludes that the euro area economic expansion in
+2018 will continue to be solid and broad-based across countries
+and sectors. This will, on the one side, be due to private
+expenditure and consumption growth, supported by lower
+deleveraging needs and improved labor market conditions, says
+the ECB. On the other side, it attributes its projections to
+improvements in corporate profitability and the favorable
+financing conditions, while euro area exporters could benefit
+from the ongoing global economic expansion. In central and
+eastern European countries, the ECB expects economic activity
+to accelerate in the near term, driven by a rebound in investment
+and strong private consumption, on the back of improving labor
+markets and higher absorption of EU funds. Russia, according to
+the ECB, may lose some of its only recently recovered
+dynamism in the short term, but growth is expected to resume
+afterwards, supported by higher oil prices, a stronger ruble, and
+declining inflation.
+As to the North America and Latin America (Americas) region,
+the ECB anticipates a robust expansion in the United States,
+which will slow down over the next few years as the recovery
+matures and output gaps gradually close. U.S. activity will
+benefit primarily from solid domestic demand with growth in
+investment and consumption, as tight labor market conditions
+gradually feed into higher wage growth and favorable financial
+conditions boost wealth, says the ECB. Moreover, the
+strengthening of external demand and the recent depreciation
+of the U.S. dollar might support the U.S. outlook. As to Brazil,
+the ECB projects that although recurring political uncertainties
+will continuously weigh on business investment and consumer
+spending, loosening financial conditions alongside increasing
+monetary accommodation and improving terms of trade will
+support the Brazilian economy over the medium term.
+In the Asia Pacific Japan (APJ) region, the ECB expects
+economic activity in Japan in 2018 to be supported by firming
+foreign demand, private investment gains associated with high
+profits and increasing labor and capacity shortages, and
+favorable financing conditions. However, according to the ECB,
+Japan will face another slow down already after 2018. The ECB's
+near-term outlook for solid development in China is dominated
+by the authorities' focus on stable growth, given the ongoing
+political transition. However, the ECB's assumption over the
+medium term is that continued structural reforms in China will
+gradually be implemented, leading to an orderly slowdown of
+economic growth. Finally, as to the ECB, growth in India will also
+remain solid in 2018.
+Economic Trends -
+Year-Over-Year GDP Growth
+Expected Developments
+and Opportunities
+Conduct wide-ranging market and technology analyses and
+research projects, often in close cooperation with our
+customers and partners to remain competitive
+Explore future trends as well as the latest technologies, for
+example through our network of innovation centers under the
+leadership of our Chief Innovation Officer, and adapt these to
+the market if there is a clear business opportunity for SAP
+and if they provide value to our customers
+Develop new technology and new solutions such as the next-
+generation suite SAP S/4HANA or the next-generation
+business warehouse SAP BW/4HANA
+We might not be able to compete effectively if we strategize
+our solution portfolio ineffectively or if we are unable to keep
+up with rapid technological and product innovations,
+enhancements, new business models, and changing market
+expectations.
+Our future success depends upon our ability to keep pace with
+technological and process innovations and new business
+models, as well as on our ability to develop new products and
+services, enhance and expand our existing products and
+services portfolio, and integrate products and services we obtain
+through acquisitions. To be successful, we are required to adapt
+our products and our go-to-market approach to a cloud-based
+delivery and consumption model to satisfy changing customer
+demand and to ensure an appropriate level of adoption,
+customer satisfaction, and retention.
+Considering preceding dependencies, this could lead to risks in
+the following areas, among others:
+-
+-
+-
+Not being able to bring new business models, solutions,
+solution enhancements, integrations and interfaces, and/or
+services to market before our competitors or at equally
+favorable conditions
+Not being able to anticipate and develop technological
+improvements or succeed in adapting SAP products,
+services, processes, and business models to technological
+change, changing regulatory requirements, emerging
+industry standards, and changing requirements of our
+customers and partners (especially with innovations such as
+SAP S/4HANA and SAP Cloud Platform)
+Uncertainties regarding new SAP solutions, technologies, and
+business models as well as delivery and consumption models
+might lead customers to wait for proofs of concept or holistic
+integration scenarios through reference customers or more
+mature versions first
+Lower level of adoption of our new solutions, technologies,
+business models, and flexible consumption models, or no
+adoption at all
+New applications and services might not meet customer
+expectations
+Our product and technology strategy might not be
+successful, or our customers and partners might not adopt
+our technology platforms, applications, or cloud services
+quickly enough or they might consider other competitive
+solutions in the market, or our strategy might not match
+customers' expectations, specifically in the context of
+expanding the product portfolio into additional markets
+Delayed or unsuccessful market launches by us, new market
+entries, or introduction of new innovations by competitors.
+Increasing competition from open source software initiatives,
+or comparable models in which competitors might provide
+software and intellectual property free and/or at terms and
+conditions unfavorable for SAP
+Combined Management Report | Risk Management and Risks
+135
+Adverse revenue effects due to increasing cloud business and
+conversions from on-premise licenses to cloud subscriptions
+from existing SAP customers, which could have an adverse
+effect on related maintenance and services revenue
+Insufficient solution and service adoption together with
+Inability to drive growth of references through customer use
+cases and demo systems
+Any one or more of these events could have an adverse effect on
+our business, financial position, profit, and cash flows.
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent
+possible. For example, we:
+-
+-
+Align our organization, processes, products, delivery and
+consumption models, and services to changing markets and
+customer and partner demands
+A standardized methodology for detailed integration planning
+which is carried out by a dedicated integration team
+Potential loss of existing on-premise customers due to
+competing cloud market trends
+acquired technologies
+-
+continuity management processes
+Customer concerns with regards to security capabilities and
+reliability
+Failure to securely and successfully deliver cloud services by
+any cloud service provider could have a negative impact on
+customer trust in cloud solutions.
+Increased response time for identified security issues due to
+complexity and interdependencies could lead to security
+threats for SAP and customers.
+Customer systems or systems operated by SAP could
+potentially be compromised by vulnerabilities due to hacker
+exploitation.
+Recovery costs as well as significant contractual and legal
+claims by customers, partners, authorities, and third-party
+service providers for damages
+Any one or more of these events could have an adverse effect on
+our business, financial position, profit, and cash flows.
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent
+possible, such as:
+132
+Combined Management Report | Risk Management and Risks
+-
+-
+-
+-
+-
+-
+-
+Software security development lifecycle as a mandatory,
+integral part of our software development process
+For the Applications, Technology & Services segment, we
+systematically align our software security development
+lifecycle to the recommendations of ISO/IEC 27034, applying
+methods to develop secure software in all development
+phases starting early in the design phase
+Disruptions to back-up, disaster recovery, and business
+Customers are provided with security certifications (such as
+ISO/IEC 27001), security white papers, and reports from
+independent auditors and certification bodies
+- Exposure of our business operations and service delivery by
+virtual attack, disruption, damage, and/or unauthorized
+access, theft, destruction, industrial and/or economic
+espionage, serious and organized crime, and other illegal
+activities, as well as violent extremism and terrorism
+Abuse of data, social engineering, misuse, trespassers in our
+facilities, or systems could be rendered unusable
+State-driven economic espionage or competitor-driven
+industrial espionage, and criminal activities including, but not
+limited to, cyberattacks and “mega breaches" against cloud
+services and hosted on-premise software
+-
+as:
+-
+-
+-
+-
+Consolidation and harmonization of our data centers and our
+data protection measures, including implementation of
+security information and event management solutions as well
+as network access control enforcement
+Significant investment in infrastructure and processes in an
+effort to ensure secure operations of our cloud solutions
+Continuous enhancement of infrastructure landscape
+capabilities
+Increased transparency through our Cloud Trust Center,
+ensuring appropriate level of information, for example with
+regards to planned patching activities and associated
+downtimes
+We monitor and invest to continuously enhance our disaster
+recovery and business continuity capabilities
+We run a homogeneous landscape that supports the complex
+infrastructure, application and security requirements so that
+we can deliver the required service level for cloud services
+Physical access control systems at facilities, multilevel
+access controls, closed-circuit television surveillance,
+security personnel in all critical areas, and recurring social
+engineering tests for SAP premises and data centers
+Access to information and information systems is controlled
+using authorization concepts. Managers and employees are
+regularly sensitized to the issues and given mandatory
+security and compliance training
+Adaption of our cloud service delivery to local and/or specific
+market requirements (such as local or regional data centers)
+and compliance with all local legal regulations regarding data
+protection and privacy as well as data security
+Contracts that require third-party data centers are to have
+appropriate security and data protection and privacy terms in
+place. We establish contracts and service level agreements
+with our public cloud partners to ensure that data security
+and privacy measures meet local regulatory and compliance
+standards and SAP's own standards for data security and
+privacy
+Strict internal policies and controls concerning utilization of
+partner's cloud infrastructure, including people, process and
+technology standards required to ensure compliance
+Regular risks reviews, disclosure requests, and audits to
+ensure public cloud providers meet SAP's data privacy and
+security standards
+PCI validated compliance by successful PCI DSS audits
+We cannot exclude the possibility that if the risk were to occur, it
+could have a business-critical impact on our operations,
+financial position, profit, and cash flows. However, we estimate
+the probability of occurrence of this risk to be unlikely. We
+classify this risk as a medium risk.
+Undetected security vulnerabilities shipped and deployed
+within our products and infrastructure might cause damage
+to SAP and our customers and partners. Our cloud
+operations are dependent on a high-performance cyberspace.
+A cybersecurity breach or economic espionage could have an
+adverse effect on our customers, our reputation, and our
+business.
+Customer systems or systems operated by SAP to provide
+services could potentially be compromised by vulnerabilities or
+cybersecurity breaches.
+These kinds of occurrences could lead to risks in the following
+areas, among others:
+-
+Undetected security defects and vulnerabilities
+-
+Specific security training curriculums for our developers
+- Industry best practices such as security risk identification,
+threat modeling, a comprehensive security testing strategy,
+mandatory security training for all developers, and security
+validation of our products, patches, and services before
+shipment
+Continuous adaptation and modification of our security
+procedures
+Direct customer feedback is considered in the market release
+decision process
+Ensure high level of quality of our products, which is made
+transparent in the defined quality perception and support
+index and confirmed by our constantly high customer
+satisfaction ratings as measured by customer quality
+perception reporting
+Successfully drive the integration and convergence of our
+technology platform offerings, SAP S/4HANA, as well as
+%
+Combined Management Report | Risk Management and Risks
+133
+-
+-
+Enable our current product portfolio for SAP HANA, develop
+new solutions based on SAP HANA, and offer comprehensive
+cloud-based services, extendable with SAP Cloud Platform
+A comprehensive certification program designed to ensure
+that relevant third-party solutions are of consistently high
+quality
+We cannot exclude the possibility that if the risk were to occur, it
+could have a business-critical impact on our operations,
+financial position, profit, and cash flows. However, we estimate
+the probability of occurrence of this risk to be unlikely. We
+classify this risk as a medium risk.
+Strategic Risks
+Our market share and profit could decline due to increased
+competition, market consolidation, technological innovation,
+and new business models in the software industry.
+The market for cloud computing is increasing and shows strong
+growth relative to the market for on-premise solutions. To
+maintain or improve our operating results in the cloud business,
+it is important that our customers renew their agreements with
+us when the initial contract term expires and purchase
+additional modules or additional capacity. Additionally, we need
+to bring new solutions based on the SAP HANA platform as well
+as SAP Cloud Platform to the market in line with demands and
+ahead of our competitors, in particular, innovative applications
+such as SAP S/4HANA or new technologies such as Internet of
+Things, machine learning, or blockchain.
+Factoring in the aforementioned, this could lead to risks in the
+following areas, among others:
+-
+-
+A holistic testing strategy to validate the state of quality and
+security for every product before market introduction
+A software security response process is in place to rapidly
+react to detected vulnerabilities and provide fixes
+Improved roll-out procedures for security-relevant notes,
+patches, and service packs to ensure easy and fast
+consumption on the customer side
+Threat modelling at the beginning of every development
+project to identify potential risks including but not limited to
+using centrally provided tools
+-
+Measures such as technical IT security measures, identity
+and access management, and mandatory security and
+compliance training
+An internal security audit group within the Corporate Audit
+organization to appropriately address potential security
+threats
+Increase awareness through campaigns and security
+awareness training courses and projects
+Local and regional crisis management teams to respond and
+minimize possible losses in case of crisis situations
+Disaster recovery and business continuity plans to protect
+our key IT infrastructure (especially our data centers) include
+implementation of data redundancies and daily data backup
+strategies
+Certification of IT-related organizations to the internationally
+recognized Business Continuity Management standard with
+regards to the Applications, Technology & Services segment
+Corporate headquarters, which houses certain critical
+business functions, is located in the German state of Baden-
+Württemberg, an area that is historically free of natural
+disasters
+We cannot exclude the possibility that if the risk were to occur, it
+could have a business-critical impact on our operations,
+financial position, profit, and cash flows. However, we estimate
+the probability of occurrence of this risk to be unlikely. We
+classify this risk as a medium risk.
+Our technology and/or products may experience undetected
+defects, coding or configuration errors, may not integrate as
+expected, or may not meet customer expectations.
+Our product strategy and development investment, including
+new product launches and enhancements, are subject to risks in
+the following areas, among others:
+-
+Software products and services might not fully meet market
+needs or customer expectations
+We might not be as fast as expected in integrating our
+platforms and solutions, enabling the complete product and
+cloud service portfolio, harmonizing our user interface design
+and technology, integrating acquired technologies and
+products, or bringing packages, services or new solutions
+based on the SAP HANA platform as well as SAP Cloud
+Platform to the market
+New products, services and cloud offerings, including third-
+party technologies, might not comply with local standards
+and requirements or could contain undetected or detected
+defects or could not be mature enough from the customer's
+point of view for business-critical solutions after shipment
+despite all the due diligence SAP puts into quality
+Inability to define and provide adequate solution packages
+and scope for all customer segments
+Inability to fulfil expectations of customers regarding time
+and quality in the defect resolution process
+Lack of customer references for new products and solutions
+Any one or more of these events could have an adverse effect on
+our business, financial position, profit, and cash flows.
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent
+possible, such as:
+-
+A broad range of techniques, including project management,
+project monitoring, product standards and governance, and
+rigid and regular quality assurance measures certified to ISO
+9001:2008, applicable to the Applications, Technology &
+Services segment
+World
+Euro area
+2017p
+8.5
+8.2
+5.5
+5.2
+5.1
+Asia-Pacific-Japan (APJ)
+2.3
+4.5
+6.9
+4.7
+9.6
+9.8
+3.0
+3.7
+3.7
+Total IT
+Software
+Services
+e estimate, p = projection
+5.8
+2.9
+3.6
+2.0
+4.1
+4.3
+4.4
+Europe, the Middle East, and Africa (EMEA)
+Total IT
+1.7
+2.2
+2.1
+Software
+Services
+6.3
+8.1
+7.9
+2.8
+3.3
+3.7
+Americas
+Total IT
+Software
+Services
+52
+Table created by SAP based on: Gartner Market Databook, 4Q17 Update, December 28,
+2017, Table 2-1 "Regional End-User Spending on IT Products and Services in Constant
+U.S. Dollars, 2015-2021 (Millions of Dollars)".
+The Gartner Reports described herein, (the "Gartner Reports") represent research
+opinion or viewpoints published, as part of a syndicated subscription service, by Gartner,
+Inc. ("Gartner"), and are not representations of fact. Each Gartner Report speaks as of
+its original publication date (and not as of the date of this Annual Report) and the
+opinions expressed in the Gartner Reports are subject to change without notice.
+Impact on SAP
+Our 2017 results again showed that our strategy of innovation
+and growth is the right way forward. SAP once again showed
+impressive resilience and global breadth to successfully
+navigate the evolving economic and political environment. We
+will continue to invest in strategic growth areas such as the
+cloud, the lot, artificial intelligence, and blockchain, which are
+Actual
+Amounts
+for 2017
+Revenue adjustments
+<20
+3
+Share-based payment expenses
+Acquisition-related charges
+Restructuring
+800 to 1,100
+1,120
+500 to 540
+30 to 50
+587
+182
+The Company expects a full-year 2018 effective tax rate (IFRS
+and non-IFRS) of 27.0% to 28.0% (2017: 19.3% (IFRS) and
+22.6% (non-IFRS)).
+Impact of the New Accounting Standard
+IFRS 15 'Revenue from Contracts with
+Customers'
+As of January 1, 2018, SAP changed several of its accounting
+policies to adopt IFRS 15 'Revenue from Contracts with
+Customers'. Under the IFRS 15 adoption method chosen by
+SAP, prior years are not restated to conform to the new policies.
+Consequently, the year-over-year growth of revenue and profit
+in 2018 will be impacted by the new policies.
+The Company expects the impact of the policy change on
+revenue, operating expenses, and profit to be as follows:
+Revenues are expected to experience a benefit of
+substantially less than €0.1 billion, with most of the difference
+resulting from exercises of customer software purchase
+options granted in prior years that result in software revenue.
+Operating expenses are expected to benefit, in cost of sales
+and marketing, in the amount of approximately €0.2 billion
+from higher capitalization of sales commissions. Other policy
+changes will weigh on operating expenses with an additional
+cost of revenue of substantially less than €0.1 billion.
+The abovementioned effects will result in a net positive
+impact on operating profit of approximately €0.2 billion.
+For more information about the adoption of IFRS 15, see the
+Notes to the Consolidated Financial Statements, Note (3e).
+Combined Management Report | Expected Developments and Opportunities
+139
+Any one or more of these events could have an adverse effect on
+our business, financial position, profit, and cash flows.
+Estimated
+Amounts for
+2018
+Services
+€ millions
+The following table shows the estimates of the items that
+represent the differences between our non-IFRS financial
+measures and our IFRS financial measures.
+138
+Combined Management Report | Expected Developments and Opportunities
+expected to become significant investment priorities of our
+customers in the upcoming years.
+SAP is positioned at the business core processes of a large
+number of global corporations. The growing hyperconnectivity
+with the physical world, the capabilities of supercomputing
+architectures as well as the continuous adoption of cloud
+solutions makes us confident to significantly benefit from the
+mega trends predicted by industry analysts.
+Operational Targets for 2018
+(Non-IFRS)
+Revenue and Operating Profit
+Outlook
+The Company is providing the following 2018 outlook:
+-
+-
+-
+Based on the continued strong momentum in SAP's cloud
+business, the Company expects full-year 2018 non-IFRS
+cloud subscriptions and support revenue to be in a range of
+€4.8 billion to €5.0 billion at constant currencies (2017:
+€3.77 billion). This range represents a growth rate of 27% to
+33% at constant currencies.
+The Company expects full-year 2018 non-IFRS cloud and
+software revenue to be in a range of €20.7 billion to
+€21.1 billion (2017: €19.55 billion). This range represents a
+growth rate of 6% to 8% at constant currencies.
+The Company expects full-year 2018 non-IFRS total revenue
+to be in a range of €24.6 billion to €25.1 billion at constant
+currencies (2017: €23.46 billion). This range represents a
+growth rate of 5% to 7% at constant currencies.
+The Company expects full-year 2018 non-IFRS operating
+profit to be in a range of €7.3 billion to €7.5 billion at constant
+currencies (2017: €6.77 billion). This range represents a
+growth rate of 8% to 11% at constant currencies.
+We expect that non-IFRS total revenue will continue to depend
+largely on the revenue from both cloud and software. However,
+we expect cloud revenue to overtake software license revenue in
+2018 and beyond. As of Q2 2018, we expect an increase in
+operating margin again.
+In 2018, we expect our headcount to increase at a similar pace
+as in 2017.
+While the Company's full-year 2018 business outlook is at
+constant currencies, actual-currency reported figures are
+expected to be impacted by currency exchange rate fluctuations
+as we progress through the year. If exchange rates remain at the
+early January level for the rest of the year, we expect non-IFRS
+cloud and software revenue to experience a currency headwind
+in a range of -7pp to -9pp in Q1 2018 and -3pp to -5pp for the
+full year 2018, and non-IFRS operating profit to experience a
+currency headwind in a range of -6pp to -8pp in Q1 2018 and -
+4pp to -6pp for the full year 2018.
+We continuously strive for profit expansion in both of our
+reportable segments.
+Non-IFRS Measures
+2016
+8.3
+6.5
+3.5
+Middle East, North Africa, Afghanistan,
+and Pakistan
+5.0
+2.6
+3.5
+Sub-Saharan Africa
+1.4
+2.6
+4.5
+3.4
+United States
+Canada
+1.5
+2.2
+2.3
+1.5
+3.0
+2.1
+Latin America and the Caribbean
+Asia Pacific Japan (APJ)
+Americas
+3.1
+Emerging and Developing Europe
+1.8
+2018p
+3.2
+3.6
+3.7
+Advanced economies
+1.7
+2.2
+2.0
+Developing and emerging economies
+4.3
+4.6
+4.9
+Europe, Middle East, and Africa (EMEA)
+1.8
+2.1
+1.9
+Germany
+1.9
+2.0
+-0.9
+1.2
+1.9
+Japan
+Sources:
+¹ European Central Bank, Economic Bulletin, Issue 8/2017, Publication Date: December 28,
+2017 (http://www.ecb.europa.eu/pub/pdf/ecbu/eb201708.en.pdf)
+2 IDC FutureScape: Worldwide Digital Transformation 2018 Predictions, Doc #US43154617,
+October 2017
+3 IDC Market Forecast: Software License, Maintenance & Subscription Forecast, 2017-
+2021, Doc #US42825517, July 2017
+4 IDC Worldwide Whole Cloud Forecast, 2017-2021, Doc #US43215817, December 2017
+5 IDC FutureScape, Worldwide Cloud 2018 Predictions, Doc # US42014717, October 2017
+6 IDC FutureScape: Worldwide IT Industry 2018 Predictions, #US43171317, October 2017
+As to regional rates of growth, Gartner, another U.S.-based IT
+market research firm, projects the following accelerations in IT
+spending for the mid-term horizon until end of 2018:
+Trends in the IT Market -
+Accelerated IT Spending Year Over Year
+Growth in %
+at constant currencies
+World
+Total IT
+Software
+2016e
+2017p
+2018p
+2.0
+3.4
+3.2
+services by 2019 and 75% of commercial enterprise apps by
+2021.6 This means a compound annual growth rate of 54.4%
+through 2020 for cognitive and artificial intelligence solutions
+with a total revenue of more than $46 billion by then, 5 says IDC.
+8.6
+However, according to IDC, cognitive computing, artificial
+intelligence, and machine learning will soon become the fastest-
+growing segments of software development.6 40% of digital
+transformation initiatives could use artificial intelligence
+IDC expects the pace of IT innovation launches on public clouds
+to continue or even accelerate the migrations of applications
+and data from enterprise datacenters to shared/public cloud
+datacenters.4 This will be driven by new tooling and investments
+to manage and monitor public cloud-based resources and by the
+learning curve of getting familiar with new operational
+workflows, 5 says IDC. It will most likely in the long term have a
+positive overall impact on industry growth as more users adopt
+more advanced computing solutions at a faster rate.³
+1.0
+1.5
+0.7
+Emerging and Developing Asia
+China
+6.4
+6.5
+6.5
+6.7
+6.8
+6.5
+p = projection
+Source: International Monetary Fund (IMF), World Economic Outlook October 2017,
+Seeking Sustainable Growth, Short-Term Recovery, Long-Term Challenges
+(http://www.imf.org/~/media/Files/Publications/WEO/2017/October/pdf/main-
+chapter/text.ashx?la=en), p. 32.)
+Combined Management Report | Expected Developments and Opportunities
+137
+The IT Market:
+Outlook for 2018 and Beyond
+In 2018, digital transformation will still be the top driver of IT
+spending and will remain so for the coming years, 4 says IDC
+(International Data Corporation), a U.S.-based market research
+firm. IDC predicts worldwide spending on digital transformation
+technologies to expand at a compound annual growth rate of
+17.9% through 2021 to more than $2.1 trillion ($1.7 trillion in
+2019).6 According to IDC, virtually all digital transformation
+initiatives will be dependent on the cloud services delivery model
+for scale, access to key technologies, and access to digital
+supply networks and distribution networks.4
+Therefore, IDC expects still growing percentages of IT
+operations budgets to go to public cloud in the coming years, 5
+assuming that cloud services spending will continue to grow at
+double-digit rates for the next few years. 3 Most likely for IDC, the
+most notable growth area at a compound annual growth rate of
+27.3% through 2021 will be managed public cloud services
+offerings. But even the entire software and services markets
+will grow significantly, forecasts IDC, with $357.9 billion being
+invested in software in 2018 and $430.0 billion in 2019, while
+services will be at $601.7 billion in 2018 and $703.2 billion in
+2019.2
+By 2019, IDC expects that approximately $0.4 trillion will be
+invested in technologies like the cloud and Big Data while $1.3
+trillion could be invested in innovation accelerators like the
+Internet of Things (IoT), next-generation security, and machine
+learning.² They all, according to IDC, then combine to continually
+sense and collectively learn from the data environment of the
+enterprise.² Many future commerce business models even
+necessarily require technologies such as the loT, Big Data and
+analytics, security, enterprise mobility, cloud, and artificial
+intelligence, 2 says IDC, and predicts that, for example, by 2020,
+25% of global transaction banks, nearly 30% of manufacturers
+and retailers, and 20% of healthcare organizations will use
+blockchain networks in production, 6 calling this development the
+"blockchain-fueled rise of digital trust.6"
+Enable and support our customers in their transition path
+from on-premise to cloud, for example through the cloud
+extension policy
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the extent possible, such
+Increased Total Cost of Ownership (TCO)
+Partners might not meet quality requirements expected by
+our customers.
+Partners might not adhere to applicable legal and compliance
+regulations
+Partners might not embed our solutions sufficiently enough
+to profitably drive product adoption, especially with
+innovations such as SAP S/4HANA and SAP Cloud Platform
+(formerly called SAP HANA Cloud Platform)
+Failure to enable and train sufficient partner resources to
+promote, sell, and support to scale to targeted markets
+Partners might not develop a sufficient number of new
+solutions and content on our platforms or might not provide
+high-quality products and services to meet customer
+expectations
+Partners might not renew agreements with us, or not enter
+into new agreements on terms acceptable to us or at all, or
+start competing with SAP
+Products or services model being less strategic and/or
+attractive compared to our competition
+reduce speed and impact in market reach
+Failure to get the full commitment of our partners might
+Failure to establish and enable a network of qualified partners
+supporting our scalability needs
+-
+-
+-
+-
+-
+-
+-
+-
+-
+-
+These partnerships could lead to risks in the following areas,
+among others:
+market coverage, optimize cloud delivery, and provide high-
+quality services capacity in all market segments. Partners play a
+key role in driving market adoption of our entire solutions
+portfolio, by co-innovating on our platforms, embedding our
+technology, and reselling and/or implementing our software.
+Combined Management Report | Risk Management and Risks
+130
+If we are unable to scale, maintain, and enhance an effective
+partner ecosystem, revenue might not increase as expected.
+An open and vibrant partner ecosystem is a fundamental pillar
+of our success and growth strategy. We have entered into
+partnership agreements that drive co-innovation on our
+platforms, profitably expand all our routes to market to optimize
+We cannot exclude the possibility that if the risk were to occur, it
+could have a major impact on our operations, financial position,
+profit, and cash flows. However, we estimate the probability of
+occurrence of this risk to be unlikely. We classify this risk as a
+medium risk.
+Partners might not transform their business model in
+accordance with the transformation of SAP's business model
+in a timely manner
+Partners might not be able or might not have capacity to
+meet customer expectations in terms of service provisioning
+Partners might fail to abide to contract terms in embargoed
+or high-risk countries
+131
+Combined Management Report | Risk Management and Risks
+such as Payment Card Industry Data Security Standard (PCI-
+DSS)
+- Non-compliance with applicable certification requirements,
+Non-adherence to our quality standards in the context of
+partner co-location of data centers
+Scalability demands on infrastructure and operation could
+lead to cost increase and margin impacts
+Hardware failures or system errors resulting in data loss,
+corruption, or incompletion of the collected information
+Loss of the right to use hardware purchased or leased from
+third parties could result in delays in our ability to provide our
+cloud applications
+System outages or downtimes, failure of the SAP network
+due to human or other errors, security breaches, or variability
+in user traffic for cloud applications
+Interruptions in the availability of SAP's cloud applications
+portfolio
+Defects or disruption to data center operations or system
+stability and availability
+Customer concerns about the ability to scale operations for
+large enterprise customers
+Capacity shortage and SAP's inability to deliver and operate
+cloud services in a timely and efficient way as expected by or
+committed to our customers
+Continuous project monitoring and controlling activities
+Established escalation management process
+Ongoing development of new commercial models to
+address customer flexibility needs
+-
+This could lead to risks in the following areas, among others:
+SAP is highly dependent on the availability of our infrastructure,
+and the software used in our cloud portfolio is inherently
+complex.
+We may not be able to properly protect and safeguard our
+critical information and assets, business operations, cloud
+offerings, and related infrastructure against disruption or
+poor performance.
+We cannot exclude the possibility that if the risk were to occur, it
+could have a major impact on our operations, financial position,
+profit, and cash flows. However, we estimate the probability of
+occurrence of this risk to be unlikely. We classify this risk as a
+medium risk.
+Maintain certification process for third-party solutions to
+ensure consistent high-quality and seamless integration
+Offer training opportunities on a wide range of resources for
+our partners
+Enable and encourage partners to leverage SAP technology,
+by providing guidance about business opportunities,
+architecture, and technology for example, through demo
+solutions, to enable partners to lead business value
+discussions on cloud and on-premise solutions with
+customers
+Continue to develop and enhance a wide range of partner
+programs to retain existing and attract new partners of all
+types
+-
+Invest in long-term, mutually-beneficial relationships and
+agreements with partners
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent
+possible, such as:
+If one or more of these risks materialize, this might have an
+adverse effect on the demand for our products and services as
+well as the partner's loyalty and ability to deliver. As a result, we
+might not be able to scale our business to compete successfully
+with other software vendors, which could have an adverse effect
+on our reputation, business, financial position, profit, and cash
+flows.
+-
+Recommended project approaches for customers to
+optimize their IT solutions in a non-disruptive manner
+Adequate financial planning provisions for the remaining
+individual risks
+-
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent
+possible, such as:
+Projects include risk management processes as part of SAP's
+project management methods intended to safeguard
+implementations with coordinated risk and quality
+management programs
+Any one or more of these events could reduce our ability to
+attract, develop, retain, and effectively manage our
+geographically dispersed workforce, which in turn could have an
+adverse effect on our business, financial position, profit, and
+cash flows.
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent
+possible such as:
+-
+-
+Workforce planning (aiming to achieve diversity and the
+right mix of talent while considering demographic changes)
+and legally compliant mobility planning, utilizing the
+integration of our Concur travel solutions to support the
+challenges of a global workforce
+Career management (including, but not limited to,
+opportunity offerings for short-term assignments as well as
+skill, competencies, and qualification advancements)
+Building employee and leadership strengths through a range
+of targeted professional development, learning, mentoring,
+coaching, together with a gender diversity program to take
+the changes in a global workforce into consideration
+key positions to ensure sustainable leadership and
+safeguard the business from impacts through staff
+turnover
+1311
+Extended benefit and long-term incentive programs, which
+will enable us to hire and retain talents internationally
+Utilization of outsourcing or external short-term staffing
+We cannot exclude the possibility that if the risk were to occur, it
+could have a major impact on our operations, financial position,
+profit, and cash flows. However, we estimate the probability of
+occurrence of this risk to be unlikely. We classify this risk as a
+medium risk.
+Operational Business Risks
+Sales and implementation of SAP software and services,
+including cloud, is subject to a number of significant risks
+sometimes beyond our direct control.
+Strong focus on succession planning for leadership and
+However, we might encounter risks in the following areas,
+among others:
+Any one or more of these events could have an adverse effect on
+our business, financial position, profit, and cash flows.
+A core element of our business is the successful implementation
+of software and service solutions to enable our customers to
+master complexity and help our customers' businesses run at
+their best. The implementation of SAP software and cloud-
+based service deliveries is led by SAP, by partners, by
+customers, or by a combination thereof.
+Inadequate contracting and consumption models based on
+subscription models for services, support, and application
+management
+exceeding the fees agreed in fixed-price contracts
+Unrenderable services committed during the sales stage
+Delayed customer payments due to differing perception on
+project outcome/results
+Improper calculations or estimates leading to costs
+Lack of customer commitments and respective
+engagements, including lack of commitment of resources
+leading to delays or deviations from recommended best
+practices
+Challenges to effectively implement acquired technologies
+Protracted installation or significant third-party consulting
+costs
+integration and migration needs or functional requirement
+changes, or insufficient milestone management and tracking
+leading to delays in timeline
+-
+-
+Implementation risks, if, for example implementations take
+longer than planned or fail to generate the profit originally
+expected, scope deviations, solution complexity, individual
+Insufficient customer expectation management, including
+scope, integration capabilities and aspects as well as lack in
+purposeful selection, implementation, and utilization of SAP
+solutions
+(26)
+128
+-44
+-136
+Available-for-sale financial assets, before tax
+-18
+-26
+-250
+Reclassification adjustments on available-for-sale financial assets, before tax
+181
+114
+Income taxes relating to available-for-sale financial assets
+-53
+(10)
+Reclassification adjustments on cash flow hedges, before tax
+1
+Cash flow hedges, before tax
+74
+8
+-41
+Gains (losses) on remeasuring available-for-sale financial assets, before tax
+-59
+-24
+81
+Gains (losses) on cash flow hedges, before tax
+125
+-43
+-135
+(20)
+Available-for-sale financial assets, net of tax
+-2
+1
+1,861
+-8
+-2,732
+Reclassification adjustments on exchange differences on translation, before tax
+○
+-1
+0
+Exchange differences, before tax
+-2.730
+1,845
+864
+Income taxes relating to exchange differences on translation
+(10)
+-2
+-25
+16
+(25)
+1,845
+839
+865
+Gains (losses) on exchange differences on translation, before tax
+(20)
+29
+-10
+-19
+Exchange differences, net of tax
+(10)
+-2,730
+-7
+2
+22
+-17
+22
+-8
+-17
+2
+39
+5
+15
+Deferred tax assets
+Tax assets
+Other non-financial assets
+Trade and other receivables
+Other financial assets
+Property, plant, and equipment
+Total non-current assets
+Intangible assets
+Total current assets
+Tax assets
+Other non-financial assets
+Trade and other receivables
+3,056
+Other financial assets
+Goodwill
+Cash and cash equivalents
+Total assets
+2017
+233
+306
+581
+725
+(14)
+5,924
+Notes
+5,899
+1,124
+990
+(12)
+3,702
+4,011
+2016
+(13)
+-15
+€ millions
+Consolidated Financial Statements IFRS and Notes | Consolidated Financial Statements IFRS
+1,997
+785
+-2,838
+Other comprehensive income for items that will be reclassified to profit or loss, net of tax
+11
+-11
+Other comprehensive income, net of tax
+29
+Cash flow hedges, net of tax
+-4
+4
+-10
+(10)
+Income taxes relating to cash flow hedges
+(20)
+Consolidated Statements of Financial Position of SAP Group as at December 31
+-2,816
+1,980
+146
+-8
+-13
+38
+5,044
+4,423
+777
+1,202
+Attributable to non-controlling interests
+Attributable to owners of parent
+5,036
+4,410
+1,240
+Total comprehensive income
+The accompanying Notes are an integral part of these Consolidated Financial Statements.
+3,634
+4,056
+2015
+Software licenses and support
+Software support
+Software licenses
+Cloud subscriptions and support
+€ millions, unless otherwise stated
+Consolidated Income Statements of SAP Group for the Years Ended December 31
+Consolidated Financial Statements IFRS
+Consolidated Financial Statements IFRS and Notes
+220
+Management's Annual Report on Internal Control over Financial Reporting in the
+Consolidated Financial Statements
+214
+Cloud and software
+(34) Subsidiaries and Other Equity Investments.
+(33) Events After the Reporting Period.
+.213
+(32) German Code of Corporate Governance.
+.212
+(31) Principal Accountant Fees and Services.
+211
+(30) Related Party Transactions.
+.208
+(29) Board of Directors.
+.203
+(28) Segment and Geographic Information.
+.213
+Services
+Total revenue
+Notes
+20,793
+22,062
+23,461
+(5)
+3,579
+3,638
+3,911
+17,214
+18,424
+19,549
+14,928
+15,431
+15,780
+10,093
+10,571
+10,908
+4,835
+4,860
+4,872
+2,286
+2,993
+3,769
+2015
+2016
+2017
+199
+Cost of cloud subscriptions and support
+(27) Share-Based Payments.
+(26) Fair Value Disclosures on Financial Instruments..
+(11) Earnings per Share.
+166
+(10) Income Taxes....
+166
+(9) Financial Income, Net...
+166
+(8) Other Non-Operating Income/Expense, Net
+164
+(7) Employee Benefits Expense and Number of Employees
+164
+(6) Restructuring.
+(12) Other Financial Assets.
+164
+150
+150
+150
+150
+145
+(5) Revenue.
+(4) Business Combinations
+(3) Summary of Significant Accounting Policies
+(2) Scope of Consolidation.
+(1) General Information About Consolidated Financial Statements
+Notes
+164
+(13) Trade and Other Receivables.
+169
+169
+189
+(25) Financial Risk Management...
+.187
+(24) Financial Risk Factors.
+185
+(23) Litigation, Claims, and Legal Contingencies
+184
+(22) Other Financial Commitments.
+182
+(21) Additional Capital Disclosures
+181
+(20) Total Equity.
+.181
+(19) Deferred Income.
+.178
+(18) Provisions.
+.175
+(17) Trade and Other Payables, Financial Liabilities, and Other Non-Financial Liabilities
+.175
+.172
+171
+(16) Property, Plant, and Equipment
+(15) Goodwill and Intangible Assets.
+(14) Other Non-Financial Assets
+170
+193
+Cost of software licenses and support
+Cost of cloud and software
+Cost of services
+4,018
+3,056
+3,634
+4,056
+-935
+-1,229
+-970
+(10)
+3,991
+4,863
+5,026
+3,646
+-5
+185
+-246
+-268
+-278
+241
+230
+463
+-256
+-234
+-36
+(8)
+-38
+3,064
+38
+-13
+2016
+2017
+Notes
+Other comprehensive income for items that will not be reclassified to profit or loss, net of tax
+Items that will be reclassified subsequently to profit or loss
+Remeasurements on defined benefit pension plans, net of tax
+Income taxes relating to remeasurements on defined benefit pension plans
+Remeasurements on defined benefit pension plans, before tax
+Items that will not be reclassified to profit or loss
+Profit after tax
+€ millions
+Consolidated Statements of Comprehensive Income of SAP Group for the Years Ended December 31
+145
+Consolidated Financial Statements IFRS and Notes | Consolidated Financial Statements IFRS
+The accompanying Notes are an integral part of these Consolidated Financial Statements.
+2.56
+3.04
+3.35
+(11)
+Earnings per share, diluted (in €)
+2.56
+3.04
+3.36
+(11)
+Earnings per share, basic (in €)
+-8
+Attributable to non-controlling interests
+Attributable to owners of parent
+Profit after tax
+Income tax expense
+Sales and marketing
+-2,845
+-3,044
+-3,352
+14,548
+15,479
+16,410
+-6,245
+-6,583
+-7,051
+-2,932
+-3,089
+-3,158
+-3,313
+-3,495
+-3,893
+-2,291
+-2,182
+-2,234
+-1,022
+-1,313
+-1,660
+Research and development
+Gross profit
+Total cost of revenue
+-6,924
+11,930
+-6,265
+General and administration
+Profit before tax
+Financial income, net
+Finance costs
+Finance income
+Other non-operating income/expense, net
+4,252
+5,135
+4,877
+Operating profit
+-16,541
+-16,928
+-18,584
+Total operating expenses
+1
+-3
+1
+Other operating income/expense, net
+-621
+-28
+-182
+(6)
+Restructuring
+-1,048
+-1,005
+-1,075
+-5,782
+11,564
+(15)
+21,274
+226
+Purchase of intangible assets and property, plant, and equipment
+-1.275
+-1,001
+-636
+Proceeds from sales of intangible assets or property, plant, and equipment
+97
+63
+68
+Purchase of equity or debt instruments of other entities
+-2,914
+-106
+-1,549
+Proceeds from sales of equity or debt instruments of other entities
+3,272
+793
+1,880
+Net cash flows from investing activities
+Dividends paid
+Dividends paid on non-controlling interests
+Purchase of treasury shares
+Proceeds from reissuance of treasury shares
+Proceeds from borrowings
+Cash receipts from swap contracts
+-1,871
+-291
+Total cash flows for business combinations, net of cash and cash equivalents acquired
+266
+368
+218
+Interest paid
+-200
+-190
+-172
+Interest received
+88
+79
+82
+Income taxes paid, net of refunds
+-1,332
+-1,477
+-1,420
+Net cash flows from operating activities
+5,045
+4,628
+3,638
+Business combinations, net of cash and cash equivalents acquired
+-291
+-106
+-39
+Cash receipts from derivative financial instruments related to business combinations
+0
+0
+Total cash flows from proceeds from borrowings
+718
+Repayments of borrowings
+-1,799
+Net cash flows from financing activities
+Effect of foreign currency rates on cash and cash equivalents
+Net decrease/increase in cash and cash equivalents
+Cash and cash equivalents at the beginning of the period
+-3,406
+-2,705
+-3,356
+-218
+167
+135
+309
+0
+291
+(21)
+3,702
+3,411
+3,328
+Cash and cash equivalents at the end of the period
+(21)
+4,011
+3,702
+3,411
+The accompanying Notes are an integral part of these Consolidated Financial Statements.
+Consolidated Financial Statements IFRS and Notes | Consolidated Financial Statements IFRS
+83
+3
+2
+Transactions with non-controlling interests
+-334
+(21)
+-1,499
+-1,378
+-1,316
+-45
+0
+(20)
+-500
+○
+0
+0
+27
+64
+27
+400
+1,748
+0
+43
+0
+27
+443
+-1,391
+-1,800
+1,748
+-3,852
+-1,112
+Decrease/increase in deferred income
+757
+513
+-1,565
+-500
+-500
+-500
+8
+22
+22
+January 1, 2017
+Profit after tax
+Other comprehensive income
+Comprehensive income
+-66
+Share-based payments
+Purchase of treasury shares
+Reissuance of treasury shares
+13
+under share-based payments
+Changes in non-controlling
+interests
+Other changes
+December 31, 2017
+1,229
+570
+-33
+-33
+Dividends
+-1,499
+-1,499
+-43
+-17
+-17
+1,229
+599
+22,285
+3,346
+-1,099
+26,359
+21
+26,380
+4,018
+4,018
+38
+4,056
+22
+-2,838
+-2,816
+-2,816
+4,040
+-2,838
+1,202
+38
+1,240
+-43
+-43
+35
+2
+2
+2
+1,229
+935
+Financial income, net
+(9)
+-185
+38
+21
+Decrease/increase in sales and bad debt allowances on trade receivables
+-32
+51
+45
+Other adjustments for non-cash items
+-34
+39
+-2
+Decrease/increase in trade and other receivables
+-309
+-675
+-844
+Decrease/increase in other assets
+-355
+-248
+-313
+Decrease/increase in trade payables, provisions, and other liabilities
+389
+970
+149
+(10)
+1,289
+2
+4
+24,794
+508
+-1,591
+25,509
+31
+25,540
+The accompanying Notes are an integral part of these Consolidated Financial Statements.
+148
+Consolidated Financial Statements IFRS and Notes | Consolidated Financial Statements IFRS
+Consolidated Statements of Cash Flows of SAP Group for the Years Ended December 31
+€ millions
+Profit after tax
+Notes
+2017
+4,056
+2016
+2015
+3,634
+3,056
+Adjustments to reconcile profit after tax to net cash flow from operating activities:
+Depreciation and amortization
+(15)
+1,272
+1,268
+Income tax expense
+Consolidated Financial Statements IFRS
+26,376
+3,346
+Other components of equity
+Retained earnings
+Share premium
+Issued capital
+Total liabilities
+Total non-current liabilities
+Deferred income
+411
+240
+(10)
+Deferred tax liabilities
+Treasury shares
+217
+(18)
+Provisions
+461
+503
+(17)
+Other non-financial liabilities
+6.481
+5,034
+(17)
+Financial liabilities
+365
+303
+Equity attributable to owners of parent
+(19)
+79
+26,397
+44,277
+42,497
+25,540
+(20)
+21
+31
+The accompanying Notes are an integral part of these Consolidated Financial Statements.
+Total equity and liabilities
+Non-controlling interests
+Total equity
+-1,099
+26,376
+25,509
+-1.591
+3,346
+508
+22,302
+24,794
+599
+1,229
+1.229
+570
+17,880
+16,958
+8,205
+6,747
+143
+470
+Consolidated Financial Statements IFRS and Notes | Consolidated Financial Statements IFRS
+Tax liabilities
+119
+42,497
+32,713
+30,567
+571
+1,022
+(10)
+450
+443
+532
+621
+(14)
+44,277
+126
+(13)
+1,358
+1,155
+(12)
+2,580
+2,967
+(16)
+3,786
+2,967
+(15)
+23,311
+118
+Trade and other payables
+(17)
+1.151
+(17)
+Trade and other payables
+9,674
+10.210
+Total current liabilities
+2,383
+2,771
+(19)
+Deferred income
+183
+184
+(18)
+Provisions
+3,699
+3,946
+(17)
+Other non-financial liabilities
+1,813
+1,561
+(17)
+Financial liabilities
+316
+597
+Tax liabilities
+1,281
+127
+147
+Consolidated Statements of Changes in Equity of SAP Group for the Years Ended December 31
+€ millions
+3,646
+3,646
+23,295
+28
+23,267
+-1,124
+2,561
+20,043
+558
+1,229
+-2
+-13
+2
+-4
+180
+180
+100
+80
+-1,316
+-1,316
+-1,316
+-136
+-136
+-136
+-4
+3,634
+-8
+785
+22,302
+599
+1,229
+4
+6
+-2
+-2
+50
+50
+25
+25
+25
+-1,378
+-1,378
+-1,378
+16
+16
+16
+4,410
+-13
+4,423
+785
+3,638
+777
+777
+5,036
+-8
+5,044
+1,997
+Retained
+Share
+Issued
+Capital
+Equity Attributable to Owners of Parent
+Hyperinflation
+December 31, 2016
+Other changes
+under share-based payments
+Reissuance of treasury shares
+Dividends
+Share-based payments
+Comprehensive income
+Other comprehensive income
+Profit after tax
+December 31, 2015
+Other changes
+under share-based payments
+Reissuance of treasury shares
+Dividends
+Share-based payments
+Comprehensive income
+Other comprehensive income
+Profit after tax
+January 1, 2015
+Notes
+Premium
+-1,099
+Earnings
+Treasury
+Shares
+3,047
+1,980
+1,980
+1,997
+-17
+3,056
+-8
+3,064
+3,064
+19,534
+34
+19,499
+-1,224
+564
+18,317
+614
+1,229
+(20)
+(20)
+(20)
+(20)
+Equity
+Total Equity
+Non-
+Controlling
+Interests
+Total
+Other
+Compo-
+nents of
+-17
+26,397
+Provided the SAP Group continues to hit its revenue and profit
+targets, we expect SAP SE to sustain revenue and operating
+income growth into the medium term.
+140
+Combined Management Report | Expected Developments and Opportunities
+We reiterate our 2020 ambition for cloud subscription and
+support revenue, total revenue, operating profit, and more
+predictable revenue share last provided at the beginning of
+2017. This ambition reflects SAP's consistent fast growth in the
+cloud, solid software momentum, and operating profit
+expansion. Despite the currency headwinds in 2017 SAP
+continues to strive to reach the following in 2020:
+-
+€8.0 billion to €8.5 billion in Non-IFRS cloud subscriptions
+and support revenue (2017: €3.77 billion)
+€28 billion to €29 billion in Non-IFRS total revenue (2017:
+€23.46 billion)
+€8.5 billion to €9.0 billion in Non-IFRS operating profit (2017:
+€6.77 billion)
+By 2020, we expect our public cloud offerings to contribute
+approximately half of Non-IFRS cloud subscription and support
+revenue, closely followed by our business network offerings.
+Both of these offerings are expected to each generate, in 2020,
+cloud subscriptions and support revenues that are significantly
+higher than the cloud subscriptions and support revenue
+generated from our private cloud offerings.
+We expect to grow our more predictable revenue while steadily
+increasing operating profit. Our strategic objectives are focused
+primarily on our main financial and non-financial objectives:
+growth, profitability, customer loyalty, and employee
+engagement.
+Our revenue growth trajectory through 2020 is expected to be
+driven by continued strong growth in the cloud and continued
+growth in our software support revenue. We continue to expect
+low to mid-single-digit declines in software revenue. This is all
+expected to result in high single-digit growth in cloud and
+software revenue through 2020.
+We expect that the individual gross margins of our different
+cloud operating models will increase at different rates over the
+next years to reach the following mid-term targets.
+Previously, we expected our business network gross margin to
+reach 80% by 2020 (2017: 77%). We now expect that, in 2020,
+this gross margin will be higher than 80%.
+We continue to expect the gross margin from our public cloud
+offerings to reach approximately 80% (2017: 57%), but this is
+now expected to take one to two years longer than 2020 as
+previously targeted.
+We continue to expect the gross margin for our private cloud
+offerings to reach about 40% by 2020 (2017: 6%).
+The changes in our gross margin ambitions for the individual
+cloud operating models also impact our ambition for the overall
+cloud gross margin. Previously, we expected the cloud gross
+margin to reach approximately 73% in 2020. The cloud gross
+margin is now expected to be approximately 71% by 2020. This
+change primarily results from our revised public cloud gross
+margin ambition as outlined above. However, this is expected to
+be partially outweighed by revenue mix-shift effects, as our
+private cloud offerings are now expected to have a lower share
+of our overall cloud subscriptions and support revenue.
+We also aim at further improving the profitability of our on-
+premise software business. The gross margin for our software
+licenses and support is expected to be at approximately 87.5%
+by 2020 (2017: 87.0%) in 2020.
+In addition, we expect our services gross margin to remain
+stable (2017: 23.5%) in 2020. The change in this target
+compared to our previously communicated target of 20% is
+driven by the continued efficiency gains from our SAP ONE
+Service initiative.
+As we look to increase our profitability through 2020, our cost
+ratios (cost as a % of total revenue) are expected to develop as
+follows through 2020: Research and development is expected to
+remain at the current level. Sales and marketing as well as
+General and administration are expected to decline slightly.
+We also strive to significantly improve, over the next few years,
+the profitability of our cloud business. Starting in 2018, we
+expect to see the benefits from previous efficiency-based
+investments, and thus an increasing cloud gross margin. We
+expect these profitability improvements to accelerate in the
+following years.
+measures.
+In this section, all numbers are based exclusively on non-IFRS
+Medium-Term Prospects
+Goals for Liquidity and Finance
+On December 31, 2017, we had a negative net liquidity. We
+believe that our liquid assets combined with our undrawn credit
+facilities are sufficient to meet our operating financing needs
+also in 2018 and, together with expected cash flows from
+operations, will support debt repayments and our currently
+planned capital expenditure requirements over the near and
+medium term.
+In 2018, we anticipate operating cash flow to reach around
+€5.0 billion.
+We intend to repay US$150 million in U.S. private placements in
+June 2018 as well as €400 million and €750 million in
+Eurobonds in August and November 2018, respectively.
+Investment Goals
+Our planned capital expenditures for 2018 and 2019, other than
+from business combinations, consist primarily of the
+construction activities described in the Assets (IFRS) section of
+this report. We expect investments from these activities of
+approximately €473 million in 2018 (an increase of
+approximately 45% compared to the previous year). The
+expansion of our data centers is an important aspect of our
+planned investments again for 2018. In addition, we aim to
+extend our office space to cover currently anticipated future
+growth. In 2019, we expect investments of approximately
+€400 million.
+On January 30, 2018, SAP announced that SAP America, Inc.
+has entered into an agreement to acquire Callidus Software Inc.
+SAP safeguards funding of the transaction with existing cash
+balances and an acquisition term loan and intends to refinance
+substantial portions of the purchase price with capital market
+transactions. The transaction is expected to close in the second
+quarter of 2018, subject to approval from Callidus Software Inc.
+stockholders, clearances by the relevant regulatory authorities,
+and other customary closing conditions. For more information
+about the acquisition of Callidus Software Inc., see the Notes to
+the Consolidated Financial Statements section, Note (33).
+Other than that we do not expect major acquisitions in 2018 and
+2019 but will rather focus on organic growth, complemented by
+minor tuck-in acquisitions.
+Proposed Dividend
+In 2018, we intend to pay a dividend totaling more than 40% of
+the prior year's profit after tax, subject to shareholder approval
+at the Annual General Shareholders meeting in May 2018. For
+further information, see the Financial Performance: Review and
+Analysis section of this report.
+Premises on Which Our Outlook Is
+Based
+In preparing our outlook, we have taken into account all events
+known to us at the time we prepared this report that could
+influence SAP's business going forward. However, our outlook
+as well as the estimates for our non-IFRS adjustments do not
+include any contributions from the acquisition of CallidusCloud.
+SAP will provide an update on its outlook subsequent to the
+closing of the contemplated acquisition.
+Outlook for SAP SE
+The primary source of revenue for SAP SE is the license fees it
+charges subsidiaries for the right to market and maintain SAP
+software solutions. Consequently, the performance of SAP SE in
+operating terms is closely tied to the cloud and software revenue
+of the SAP Group.
+We expect product revenue for SAP SE to increase at constant
+currencies generally in line with the 6% to 8% constant-
+currency rise in non-IFRS cloud and software revenue
+anticipated for the SAP Group in 2018.
+Assuming there are no special effects relating to acquisitions or
+internal corporate restructuring measures in 2018, we also
+expect the operating profit of SAP SE to increase slightly.
+We believe SAP SE, the parent company of the SAP Group, will
+receive investment income in the form of profit transfers and
+dividends again in the future. The growth we expect from the
+SAP Group should have a positive effect on SAP SE investment
+income.
+The outlook projections for the SAP Group in respect of liquidity,
+finance, investment, and dividend are equally applicable to SAP
+SE.
+Among the assumptions underlying this outlook are those
+presented above concerning the economy and our expectations
+for the performance of the SAP Group.
+Non-Financial Goals 2018 and
+Ambitions for 2020
+In addition to our financial goals, we also focus on two non-
+financial targets: customer loyalty and employee engagement.
+We continue to expect the share of more predictable revenue
+(defined as the total of Non-IFRS cloud subscriptions and
+support revenue and Non-IFRS software support revenue) to
+reach 70% to 75% in 2020 (2017: 63%).
+We measure customer loyalty using the Customer Net Promoter
+Score (NPS). In 2018, we foresee a combined Customer NPS of
+21% to 23%, with our medium-term goal of reaching a combined
+Customer NPS of 35% to 40% by 2020 (2017: 17.8%).
+Combined Management Report | Expected Developments and Opportunities
+For more information about future opportunities for SAP, see
+the Strategy and Business Mode/section as well as the Expected
+Developments and Opportunities section.
+Opportunities from Our Partner
+Ecosystem
+SAP continues to grow and develop a global partner ecosystem.
+To increase market coverage, we want to enhance our portfolio
+and spur innovation with the specified objective of increasing the
+partner revenue contribution to SAP's overall revenue target. In
+addition to strengthening our core, we leverage our entire
+ecosystem to drive adoption of SAP HANA, cloud solutions,
+SAP S/4HANA, and SAP Cloud Platform (formerly called SAP
+HANA Cloud Platform). This includes strategic partnerships
+across all areas: third-party software vendors, systems
+integrators, service providers, and infrastructure providers. As a
+result, we are creating an ever-stronger setup in which SAP,
+customers, and partners co-innovate and develop new
+innovative solutions on and with SAP HANA. In 2017, SAP
+announced new strategic partnerships to co-innovate, which
+open new opportunities (for more information, see the
+Customers section). Should the business of our partners
+develop better than currently expected, our indirect sales
+(partner revenue) could grow stronger than reflected in our
+outlook and medium-term prospects. This may positively impact
+our revenue, profit, and cash flows, and result in their exceeding
+our stated medium-term prospects.
+Opportunities from Our Employees
+Our employees drive our innovation, provide the value to our
+customers, and consistently promote our growth and
+profitability. In 2017, we continued to increase the number of
+full-time employees in key strategic areas to support our growth
+ambitions. We anticipate improvements in employee
+productivity as a result of our continued endeavors in design-
+thinking principles. As described in the Employees and Social
+Investments section, we continuously invest in our talents to
+sustain their high level of engagement, collaboration, social
+innovation, and health.
+Our outlook and medium-term prospects are based on certain
+assumptions regarding employee turnover and our Business
+Health Culture Index (as defined in the Employees and Social
+Investments section). Should these develop better than
+expected, there might be a gain in employee productivity and
+engagement. A stronger than expected increase in the employee
+engagement index can therefore be seen as an opportunity
+which could positively impact our revenue, profit, and cash
+flows, and result in their exceeding our stated medium-term
+prospects.
+For 2018 through to 2020, we aim to reach an Employee
+Engagement Index of between 84% and 86% (2017: 85%).
+Opportunities from Our Customer
+Engagement
+SAP goes to market by region, customer segments, line of
+business, and industry. We evolve and invest in our go-to-
+market coverage model to effectively sell industry-specific
+solutions while increasing our engagement with customers. We
+focus on the dynamic and fast-changing landscape each
+industry faces as technology evolves.
+We offer unique services that support a significant return on
+investment, and continue to actively look at new opportunities to
+increase the value we deliver to our customers.
+In general, our outlook and medium-term prospects are based
+on certain assumptions regarding the success of our go-to-
+market approaches. If the actual go-to-market success exceeds
+these assumptions, this could positively impact our revenue,
+profit, and cash flows, and result in their exceeding our stated
+medium-term prospects.
+Combined Management Report | Expected Developments and Opportunities
+143
+144
+Consolidated Financial
+Statements IFRS and Notes
+142
+Further upside potential is possible by higher-than-expected
+renewal rates of our cloud solutions.
+For more information about future opportunities from our
+employees, see the Employees and Social Investments section.
+We see opportunities in growing product and market areas, such
+as in-memory computing, cloud, mobile, business networks,
+social media, Big Data, the Internet of Things, machine learning,
+artificial intelligence, predictive analytics, and especially all
+business developments that are targeted at the digital business
+transformation, which is key to our strategy. In addition to
+organic developments and tuck-in acquisitions, large strategic
+acquisitions in particular may boost our revenue and profits
+significantly. Furthermore, SAP seeks to establish new business
+models and leverage its expanding ecosystem of partners to
+achieve scale and maximize opportunities.
+Our strong assets in applications and analytics, as well as
+database and technology, continue to offer solid multiyear
+growth opportunities as we bring innovative technologies with
+simplified consumption to our installed base and continue to
+add net-new customers. Unexpected portfolio growth may
+positively impact our revenue, profit, and cash flows, and result
+in their exceeding our stated outlook and medium-term
+prospects. Specifically, SAP HANA, cloud offerings, and
+SAP S/4HANA solutions could create even more demand than is
+reflected in our stated outlook and medium-term prospects.
+New opportunities are generated by SAP Leonardo, SAP's
+platform to drive digital innovation. It is a comprehensive
+offering driving innovation based on digital business services,
+technical services, and a broad portfolio of applications focused
+on the Internet of Things for the extended supply chain.
+Opportunities
+Our customers rely on SAP as the trusted partner in their digital
+business transformation, not only for providing in-memory
+technology, standardized on-premise and cloud solutions, and
+access to business networks, but also for helping them drive
+new business outcomes and enabling business model
+innovations. To meet these expectations, we must grow
+consistently and accelerate the pace of our own business
+transformation by exploiting new opportunities.
+We have established a framework for opportunity management
+by evaluating and analyzing four key areas: current markets,
+competitive landscapes, external scenarios, and technological
+Combined Management Report | Expected Developments and Opportunities
+141
+As far as opportunities are likely to occur, we have incorporated
+them into our business plans, our outlook for 2018, and our
+medium-term prospects outlined in this report. Therefore, the
+following section focuses on future trends or events that might
+result in an uplift of our outlook and medium-term prospects, if
+they develop better than we have anticipated in our forecasts.
+SAP SE is the parent company of the SAP Group and earns most
+of its revenue from software license fees, subscriptions fees,
+and dividends paid by affiliates. Consequently, the opportunities
+described below also apply - directly or indirectly - to SAP SE.
+Opportunities from Economic
+Conditions
+Economic conditions have a clear influence on our business,
+financial position, profit, and cash flows. Should the global
+economy experience a more sustained growth than is reflected
+in our plans today, our revenue and profit may exceed our
+current outlook and medium-term prospects.
+trends. Additionally, we have delved into customer and product
+segmentation, growth drivers, and industry-specific success
+factors. Based on these combined insights, our Executive Board
+defines our market strategies. Our shareholder value relies
+heavily upon a fine balance of risk mitigation and value-driven
+opportunities. Therefore, our strong governance model ensures
+that decisions are based on return, investment required, and
+risk mitigation. We rely on the talent and resources within SAP
+and our entire ecosystem.
+For more information about future trends in the global economy
+and the IT market outlook, as well as their potential influence on
+SAP, see the Expected Developments and Opportunities
+section.
+Opportunities from Research and
+Development Traction
+Our continued growth through innovation is based on our ability
+to leverage research and development (R&D) resources
+effectively. We continue to improve our development processes
+through design thinking and lean methodologies. We are
+accelerating innovation cycles, especially in the area of cloud
+solutions, and engaging more closely with our customers to
+ensure accuracy and success. In addition, we have generated a
+new structure that enables innovations in a startup-like
+environment and ecosystem.
+While speed is a key strength, we also focus on ease of adoption
+and providing compelling returns. This allows our customers to
+easily consume technologies and software applications with
+immediate benefits for their businesses. If we make innovations
+available faster than currently anticipated, or if customers adopt
+the innovations faster than currently expected, for example, by
+shifting faster to managed clouds for enterprise resource
+planning, or by shifting faster to our new SAP S/4HANA
+solutions, whether cloud or on premise, this could positively
+impact our revenue, profit, and cash flows, and result in their
+exceeding our stated outlook and medium-term prospects.
+For more information about future opportunities in research and
+development for SAP, see the Products, Research &
+Development, and Services section as well as the Expected
+Developments and Opportunities section.
+Opportunities from Our Strategy for
+Profitable Growth
+Our midterm planning is based on unchanged market conditions
+in emerging markets. Should their stability increase again, this
+would be an upside to our midterm planning.
+SAP strives to generate profitable growth across its portfolio of
+products, solutions, and services to keep or improve its market
+position. Our aim is to continue to expand our addressable
+market to €320 billion in 2020, based on new assets in our SAP
+Business Network Segment, our new technologies and
+innovations, and the extension of our cloud portfolio.
+Consolidated Financial Statements IFRS and Notes | Notes
+156
+A provision for restructuring is recognized when a detailed and
+formal restructuring plan has been approved and the
+restructuring has been announced or has commenced.
+The employee-related provisions include, amongst others, long-
+term employee benefits. They are secured by pledged
+reinsurance coverage and are offset against the settlement
+amount of the secured commitment.
+We regularly adjust provisions as further information becomes
+available or as circumstances change. Non-current provisions
+are reported at the present value of their expected settlement
+amounts as at the reporting date. Discount rates are regularly
+adjusted to current market interest rates.
+-
+It is probable that an outflow of resources embodying
+economic benefits will be required to settle the obligation;
+and
+We have a present obligation (legal or constructive) as a
+result of a past event;
+Provisions are recorded when:
+Post-Employment Benefits
+-
+A reliable estimate can be made of the amount of the
+obligation.
+The discount rates used in measuring our post-employment
+benefit assets and liabilities are derived from rates available on
+high-quality corporate bonds and government bonds for which
+the timing and amounts of payments match the timing and the
+amounts of our projected pension payments. The assumptions
+used to calculate pension liabilities and costs are disclosed in
+Note (18a). Net interest expense and other expenses related to
+defined benefit plans are recognized as employee benefits
+expenses and classified in our Consolidated Income Statements
+according to the activities that the employees owning the
+awards perform.
+Subsequent accounting for goodwill and intangible assets
+Accounting for legal contingencies
+Deferred Income
+Deferred income is recognized as cloud subscriptions and
+support revenue, software licenses revenue, software support
+revenue, or services revenue, depending on the reason for the
+deferral, once the basic applicable revenue recognition criteria
+have been met. These criteria are met, for example, when the
+services are performed or when the discounts that relate to a
+material right granted in a purchase option are applied.
+(3c) Management Judgments and
+Sources of Estimation Uncertainty
+The preparation of the Consolidated Financial Statements
+requires management to make judgments, estimates, and
+assumptions that affect the application of accounting policies
+and the reported amounts of assets, liabilities, revenues, and
+expenses, as well as disclosure of contingent assets and
+liabilities.
+We base our judgments, estimates, and assumptions on
+historical and forecast information, as well as on regional and
+industry economic conditions in which we or our customers
+operate, changes to which could adversely affect our estimates.
+Although we believe we have made reasonable estimates about
+the ultimate resolution of the underlying uncertainties, no
+assurance can be given that the final outcome of these matters
+will be consistent with what is reflected in our assets, liabilities,
+revenues, and expenses. Actual results could differ from original
+estimates.
+The accounting policies that most frequently require us to make
+judgments, estimates, and assumptions, and therefore are
+critical to understanding our results of operations, include the
+following:
+Valuation of trade receivables
+Accounting for share-based payments
+Accounting for income taxes
+· Accounting for business combinations
+Recognition of internally generated intangible assets from
+development
+Our management periodically discusses these critical
+accounting policies with the Audit Committee of the Supervisory
+Board.
+Provisions
+Revenue Recognition
+Since our domestic defined benefit pension plans primarily
+consist of an employee-financed post-retirement plan that is
+fully financed with qualifying insurance policies, current service
+cost may become a credit as a result of adjusting the defined
+benefit liability's carrying amount to the fair value of the
+qualifying plan assets. Such adjustments are recorded in service
+cost.
+Expenses and gains/losses on financial liabilities mainly consist
+of interest expense, which is recognized based on the effective
+interest method.
+goodwill and intangible assets as well as the amounts of
+impairment charges recognized in profit or loss.
+Financial Liabilities
+As described in the Revenue Recognition section of Note (3b).
+we do not recognize revenue before the amount of revenue can
+be measured reliably, collection of the related receivable is
+probable, and the delivery has occurred or the services have
+been rendered. The determination of whether the amount of
+revenue can be measured reliably or whether the fees are
+collectible is inherently judgmental, as it requires estimates as to
+whether and to what extent subsequent concessions may be
+granted to customers and whether the customer is expected to
+pay the contractual fees. The timing and amount of revenue
+recognition can vary depending on what assessments have been
+made.
+155
+customer cloud subscription contract. We amortize these
+assets on a straight-line basis over the period of providing the
+cloud subscriptions to which the assets relate.
+Goodwill and Intangible Assets
+We classify intangible assets according to their nature and use in
+our operations. Software and database licenses consist
+primarily of technology for internal use, whereas acquired
+technology consists primarily of purchased software to be
+incorporated into our product offerings and in-process research
+and development (IPRD). Customer relationship and other
+intangibles consist primarily of customer contracts and acquired
+trademark licenses.
+All our purchased intangible assets other than goodwill have
+finite useful lives. They are initially measured at acquisition cost
+and subsequently amortized either based on expected
+consumption of economic benefits or on a straight-line basis
+over their estimated useful lives ranging from two to 20 years.
+Amortization for acquired in-process research and development
+project assets starts when the projects are complete and the
+developed software is taken to the market. We typically
+amortize these intangibles over five to seven years.
+Amortization expenses of intangible assets are classified as cost
+of cloud and software, cost of services, research and
+development, sales and marketing, and general and
+administration, depending on the use of the respective
+intangible assets.
+The annual goodwill impairment test is performed at the level of
+our operating segments since there are no lower levels in SAP at
+which goodwill is monitored for internal management purposes.
+The test is performed at the same time for all operating
+segments.
+Property, Plant, and Equipment
+Property, plant, and equipment are carried at acquisition cost
+plus the fair value of related asset retirement costs if any and if
+reasonably estimable, less accumulated depreciation.
+Property, plant, and equipment are depreciated over their
+expected useful lives, generally using the straight-line method.
+Useful Lives of Property, Plant, and
+Equipment
+Buildings
+Leasehold improvements
+Information technology equipment
+Office furniture
+Automobiles
+Predominantly 25 to 50 years
+Based on the term of the lease
+contract
+2 to 6 years
+4 to 20 years
+4 to 5 years
+Impairment of Goodwill and Non-Current
+Assets
+Impairment losses, if any, are presented in other operating
+income/expense, net in profit or loss.
+Liabilities
+Financial liabilities include trade and other payables, bank loans,
+issued bonds, private placements, and other financial liabilities
+that comprise derivative and non-derivative financial liabilities.
+They are classified as financial liabilities at amortized cost and at
+fair value through profit or loss. The latter include only those
+financial liabilities that are held for trading, as we do not
+designate financial liabilities at fair value through profit or loss.
+Customer funding liabilities are funds we draw from and make
+payments on behalf of our customers for customers' employee
+expense reimbursements, related credit card payments, and
+vendor payments. We present these funds in cash and cash
+equivalents and record our obligation to make these expense
+reimbursements and payments on behalf of our customers as
+customer funding liabilities.
+The application of the percentage-of-completion method
+requires us to make estimates about total revenue, total cost to
+complete the project, and the stage of completion. The
+assumptions, estimates, and uncertainties inherent in
+determining the stage of completion affect the timing and
+amounts of revenue recognized.
+For more information about goodwill and intangible assets, see
+Note (15).
+Which contracts with the same customer are to be accounted
+for as one single arrangement
+Subsequent Accounting for Goodwill and
+Intangible Assets
+Judgment is required in determining the following:
+-
+The useful life of an intangible asset, as this is based on our
+estimates regarding the period over which the intangible
+asset is expected to produce economic benefits to us
+The amortization method, as IFRS requires the straight-line
+method to be used unless we can reliably determine the
+pattern in which the asset's future economic benefits are
+expected to be consumed by us
+Both the amortization period and the amortization method have
+an impact on the amortization expense that is recorded in each
+period.
+In making impairment assessments for our goodwill and
+intangible assets, the outcome of these tests is highly
+dependent on management's assumptions regarding future
+cash flow projections and economic risks, which require
+significant judgment and assumptions about future
+developments. They can be affected by a variety of factors,
+including:
+-
+Changes in business strategy
+Internal forecasts
+Estimation of weighted-average cost of capital
+Changes to the assumptions underlying our goodwill and
+intangible assets impairment assessments could require
+material adjustments to the carrying amount of our recognized
+The outcome of goodwill impairment tests may also depend on
+the allocation of goodwill to our operating segments. This
+allocation involves judgment as it is based on our estimates
+regarding which operating segments are expected to benefit
+from the synergies of business combinations.
+Subsequent changes in the estimated fair values of liabilities
+and provisions may result in additional expense (if increasing
+the estimated fair value) or additional income (if decreasing
+the estimated fair value).
+Consolidated Financial Statements IFRS and Notes | Notes
+As described in Note (23), we are currently involved in various
+claims and legal proceedings. We review the status of each
+significant matter at least quarterly and assess our potential
+financial and business exposures related to such matters.
+Significant judgment is required in the determination of whether
+a provision is to be recorded and what the appropriate amount
+for such provision should be. Notably, judgment is required in
+the following:
+-
+-
+Determining whether an obligation exists
+Determining the probability of outflow of economic benefits
+Determining whether the amount of an obligation is reliably
+estimable
+- Estimating the amount of the expenditure required to settle
+the present obligation
+Due to uncertainties relating to these matters, provisions are
+based on the best information available at the time.
+At the end of each reporting period, we reassess the potential
+obligations related to our pending claims and litigation and
+adjust our respective provisions to reflect the current best
+estimate. In addition, we monitor and evaluate new information
+that we receive after the end of the respective reporting period
+but before the Consolidated Financial Statements are
+authorized for issue to determine whether this provides
+additional information regarding conditions that existed at the
+end of the reporting period. Changes to the estimates and
+assumptions underlying our accounting for legal contingencies
+and outcomes that differ from these estimates and assumptions
+could require material adjustments to the carrying amounts of
+the respective provisions recorded as well as additional
+provisions. For more information about legal contingencies, see
+Notes (18b) and (23).
+Recognition of Internally Generated
+Intangible Assets from Development
+We believe that determining whether internally generated
+intangible assets from development are to be recognized as
+intangible assets requires significant judgment, particularly in
+the following areas:
+Determining whether activities should be considered
+research activities or development activities
+Consolidated Financial Statements IFRS and Notes | Notes
+159
+Accounting for Legal Contingencies
+In the accounting for our multiple-element arrangements, we
+have to determine the following:
+Subsequent negative changes in the estimated fair values of
+assets may result in additional expense from impairment
+charges.
+-
+Which deliverables under one contract are distinct and thus
+to be accounted for separately
+How to allocate the total arrangement fee to the distinct
+deliverables
+The determination of whether different contracts with the same
+customer are to be accounted for as one arrangement involves
+the use of judgment, as it requires us to evaluate whether the
+contracts are negotiated together or linked in any other way.
+The timing and amount of revenue recognition can vary
+depending on whether two contracts are accounted for
+separately or as one single arrangement.
+Under a multiple-element arrangement including a cloud
+subscription or on-premise software, and other deliverables, we
+do not account for the cloud subscription or on-premise
+Consolidated Financial Statements IFRS and Notes | Notes
+157
+software, and the other deliverables separately if one of the
+other deliverables (such as consulting services) is deemed to be
+essential to the functionality of the cloud subscription or on-
+premise software. The determination of whether an undelivered
+element is essential to the functionality of the delivered element
+requires the use of judgment. The timing and amount of revenue
+recognition can vary depending on how that judgment is
+exercised, because revenue may be recognized over a longer
+service term.
+In the area of allocating the transaction fee to the different
+deliverables under the respective customer contract, judgment
+is required in the determination of an appropriate fair value and
+estimated stand-alone selling prices (ESP) measurement, which
+may impact the timing and amount of revenue recognized
+depending on the following:
+-
+Whether an appropriate measurement of fair value or ESP
+can be demonstrated for undelivered elements
+The approaches used to establish fair value or ESP
+Additionally, our revenue for on-premise software contracts
+would be significantly different if we applied a revenue allocation
+policy other than the residual method.
+Fair values assigned to assets subject to depreciation and
+amortization affect the amounts of depreciation and
+amortization to be recorded in operating profit in the periods
+following the acquisition.
+Valuation of Trade Receivables
+Accounting for Share-Based Payments
+We use certain assumptions in estimating the fair values for our
+share-based payments, including expected share price volatility
+and expected option life (which represents our estimate of the
+average amount of time remaining until the options are
+exercised or expire unexercised). In addition, the final payout for
+plans also depends on the achievement of performance
+indicators and on our share price on the respective exercise
+dates. Changes to these assumptions and outcomes that differ
+from these assumptions could require material adjustments to
+the carrying amount of the liabilities we have recognized for
+these share-based payments. The fair value of the share units
+granted under the Long-Term Incentive 2016 Plan are
+dependent on our performance against a group of peer
+companies (Peer Group Index), the volatility, and the expected
+correlation between the price of the index and our share price.
+For the purpose of determining the estimated fair value of our
+share options, we believe expected volatility is the most
+sensitive assumption. Regarding future payout under our cash-
+settled plans, the SAP share price is the most relevant factor.
+With respect to our Long-Term Incentive 2016 Plan, we believe
+that future payout will be significantly impacted not only by our
+share price but also by the relative performance against the
+Peer Group Index. Changes in these factors could significantly
+affect the estimated fair values as calculated by the valuation
+model, and the future payout. For more information, see
+Note (27).
+Accounting for Income Taxes
+We are subject to changing tax laws in multiple jurisdictions
+within the countries in which we operate. Our ordinary business
+activities also include transactions where the ultimate tax
+outcome is uncertain due to different interpretation of tax laws,
+such as those involving revenue sharing and cost
+reimbursement arrangements between SAP Group entities. In
+addition, the amount of income taxes we pay is generally subject
+to ongoing audits by domestic and foreign tax authorities. As a
+result, judgment is necessary in determining our worldwide
+income tax provisions. We make our estimates about the
+ultimate resolution of our tax uncertainties based on current tax
+laws and our interpretation thereof. Changes to the assumptions
+underlying these estimates and outcomes that differ from these
+assumptions could require material adjustments to the carrying
+amount of our income tax provisions.
+The assessment whether a deferred tax asset is impaired
+requires management judgment, as we need to estimate future
+taxable profits to determine whether the utilization of the
+deferred tax asset is probable. In evaluating our ability to utilize
+our deferred tax assets, we consider all available positive and
+negative evidence, including the level of historical taxable
+income and projections for future taxable income over the
+periods in which the deferred tax assets are recoverable. Our
+judgment regarding future taxable income is based on
+assumptions about future market conditions and future profits
+of SAP. Changes to these assumptions and outcomes that differ
+from these assumptions could require material adjustments to
+the carrying amount of our deferred tax assets.
+For more information about income taxes, see Note (10).
+158
+Consolidated Financial Statements IFRS and Notes | Notes
+Accounting for Business Combinations
+In our accounting for business combinations, judgment is
+required in determining whether an intangible asset is
+identifiable, and should be recorded separately from goodwill.
+Additionally, estimating the acquisition date fair values of the
+identifiable assets acquired and liabilities assumed involves
+considerable management judgment. The necessary
+measurements are based on information available on the
+acquisition date and are based on expectations and
+assumptions that have been deemed reasonable by
+management. These judgments, estimates, and assumptions
+can materially affect our financial position and profit for several
+reasons, including the following:
+Detailed information related to the accounting of Trade and
+Other Receivables can be found in Note (3b). As described
+within this section, we account for impairments of trade
+receivables by recording sales allowances and allowances for
+doubtful accounts on an individual receivable basis and on a
+portfolio basis. The assessment of whether a receivable is
+collectible involves the use of judgment and requires the use of
+assumptions about customer defaults that could change
+significantly. Judgment is required when we evaluate available
+information about a particular customer's financial situation to
+determine whether it is probable that a credit loss will occur and
+the amount of such loss is reasonably estimable and thus an
+allowance for that specific account is necessary. Basing the
+general allowance for the remaining receivables on our historical
+loss experience likewise requires the use of judgment, as history
+may not be indicative of future development. Changes in our
+estimates about the allowance for doubtful accounts could
+materially impact reported assets and expenses, and our profit
+could be adversely affected if actual credit losses exceed our
+estimates.
+Other non-financial assets are recorded at amortized cost. The
+capitalized contract cost mainly results from the capitalization
+of direct and incremental cost incurred when obtaining a
+Revenue recognition
+Included in trade receivables are unbilled receivables related to
+fixed-fee and time-and-material consulting arrangements for
+contract work performed to date.
+1.0739
+1.1702
+CHF
+Swiss franc
+134.12
+119.77
+126.85
+123.40
+135.01
+JPY
+1.1159
+Japanese yen
+0.8206
+0.8770
+0.8562
+0.8872
+GBP
+Pound sterling
+1.1071
+1.1045
+1.1315
+Other Non-Financial Assets
+0.7255
+1.0886
+1.0688
+Canadian dollar
+software functionality in a cloud-based-infrastructure
+(hosting) provided by SAP, where the customer does not
+have the right to terminate the hosting contract and take
+possession of the software to run it on the customer's own
+IT infrastructure or by a third-party hosting provider, or
+Platform-as-a-Service (PaaS), that is, access to a cloud-
+based infrastructure to develop, run, and manage
+applications, or
+■
+■
+Revenue from cloud subscriptions and support represents
+fees earned from providing customers with the following:
+Software-as-a-Service (SaaS), that is, a right to use
+-
+Cloud and software revenue, as presented in our Consolidated
+Income Statements, is the sum of our cloud subscriptions and
+support revenue, our software licenses revenue, and our
+software support revenue.
+We derive our revenue from fees charged to our customers for
+(a) the use of our hosted cloud offerings, (b) licenses to our on-
+premise software products, and (c) standardized and premium
+support services, consulting, customer-specific on-premise
+software development agreements, training, and other services.
+Classes of Revenue
+Revenue Recognition
+With effect from January 1, 2017, we have applied
+hyperinflationary accounting in accordance with IAS 29 for our
+subsidiary in Venezuela, the impact of which has not been
+material to us.
+1.4753
+1.4850
+1.4794
+1.4596
+1.5346
+AUD
+Australian dollar
+1.4227
+1.4606
+1.4705
+1.4188
+1.5039
+CAD
+1.1993
+Infrastructure-as-a-Service (laaS), that is, hosting and
+related application management services for software
+hosted by SAP, where the customer has the right to take
+possession of the software, or
+USD
+2015
+-28
+10
+245
+-18
+8
+255
+Total
+December 31, 2017
+Disposals
+Additions
+227
+December 31, 2016
+Additions
+December 31, 2015
+Entities Consolidated in the Financial Statements
+(2) Scope of Consolidation
+All amounts included in the Consolidated Financial Statements
+are reported in millions of euros (€ millions) except where
+otherwise stated. As figures were rounded, numbers presented
+throughout this document may not add up precisely to the totals
+we provide and percentages may not precisely reflect the
+absolute figures.
+Our Executive Board approved the Consolidated Financial
+Statements on February 21, 2018, for submission to our
+Supervisory Board.
+We have applied all standards and interpretations that were
+effective on and endorsed by the European Union (EU) as at
+December 31, 2017. There were no standards or interpretations
+as at December 31, 2017, impacting our Consolidated Financial
+Statements for the years ended December 31, 2017, 2016, and
+2015, that were effective but not yet endorsed. Therefore, our
+Consolidated Financial Statements comply with both IFRS as
+issued by the International Accounting Standards Board (IASB)
+and with IFRS as endorsed by the EU.
+The registered seat of SAP SE is in Walldorf, Germany
+(Commercial Register of the Lower Court of Mannheim
+HRB 719915). The accompanying Consolidated Financial
+Statements for 2017 of SAP SE and its subsidiaries (collectively,
+"we," "us," "our," "SAP," "Group," and "Company") have been
+prepared in accordance with International Financial Reporting
+Standards (IFRS).
+(1) General Information About
+Consolidated Financial
+Statements
+Notes
+Disposals
+The additions relate to legal entities added in connection with
+acquisitions and foundations. The disposals are mainly due to
+mergers and liquidations of legal entities.
+(3) Summary of Significant
+Accounting Policies
+(3a) Bases of Measurement
+2016
+2017
+2016
+2017
+as at December 31
+Middle Rate
+Annual Average Exchange Rate
+The exchange rates of key currencies affecting the Company
+were as follows:
+are translated at average rates of foreign exchange (FX)
+computed on a monthly basis. Exchange differences resulting
+from foreign currency transactions are recognized in other non-
+operating income/expense, net.
+Equivalent to €1
+Exchange Rates
+Income and expenses and operating cash flows of our foreign
+subsidiaries that use a functional currency other than the euro
+Foreign Currencies
+received, with the expense being classified as general and
+administration expense.
+Consolidated Financial Statements IFRS and Notes | Notes
+150
+We decide on a transaction-by-transaction basis whether to
+measure the non-controlling interest in the acquiree at fair value
+or at the proportionate share of the acquiree's identifiable net
+assets. Acquisition-related costs are accounted as expense in
+the periods in which the costs are incurred and the services are
+(3b) Relevant Accounting Policies
+Business Combinations and Goodwill
+Where applicable, information about the methods and
+assumptions used in determining the respective measurement
+bases is disclosed in the Notes specific to that asset or liability.
+Post-employment benefits are measured at present value of
+the defined benefit obligations less fair value of plan assets.
+Monetary assets and liabilities denominated in foreign
+currencies are translated at period-end exchange rates.
+Derivative financial instruments, available-for-sale financial
+assets, and liabilities for cash-settled share-based payments
+are measured at fair value.
+-
+The Consolidated Financial Statements have been prepared on
+the historical cost basis except for the following:
+U.S. dollar
+-
+1.0541
+"
+Among the other impairment indicators in IAS 39 (Financial
+Instruments: Recognition and Measurement), for an investment
+in an equity security, objective evidence of impairment includes
+a significant (more than 20%) or prolonged (a period of more
+than nine months) decline in its fair value. Impairment losses on
+financial assets are recognized in financial income, net. For
+available-for-sale financial assets, which are non-derivative
+financial assets that are not assigned to loans and receivables or
+financial assets at fair value through profit or loss, impairment
+losses directly reduce an asset's carrying amount, while
+impairments on loans and receivables are recorded using
+allowance accounts. Such allowance accounts are always
+presented together with the accounts containing the asset's
+cost in other financial assets. Account balances are written off
+against the respective allowance after all collection efforts have
+been exhausted and the likelihood of recovery is considered
+remote.
+Regular-way purchases and sales of financial assets are
+recorded as at the trade date.
+Our financial assets comprise cash and cash equivalents (highly
+liquid investments with original maturities of three months or
+less), loans and receivables, acquired equity and debt
+investments, and derivative financial instruments (derivatives)
+with positive fair values. Financial assets are only classified as
+financial assets at fair value through profit or loss if they are held
+for trading, as we do not designate financial assets at fair value
+through profit or loss. All other financial assets are classified as
+loans and receivables if we do not designate them as available-
+for-sale financial assets.
+Financial Assets
+Where we economically hedge our exposure to cash-settled
+awards, changes in the fair value of the respective hedging
+instruments are also recognized as employee benefits expenses
+in profit or loss. The fair values of hedging instruments are
+based on market data reflecting current market expectations.
+For more information about our share-based payments, see
+Note (27).
+the discount is recognized as an expense when the discounts
+are granted.
+Under certain programs, we grant our employees discounts on
+purchases of SAP shares. Since those discounts are not
+dependent on future services to be provided by our employees,
+Share-based payments cover cash-settled and equity-settled
+awards issued to our employees. The respective expenses are
+recognized as employee benefits expenses and classified in our
+Consolidated Income Statements according to the activities that
+the employees owning the awards perform.
+Share-Based Payments
+We measure current and deferred tax liabilities and assets for
+uncertainties in income taxes based on our best estimate of the
+most likely amount payable to or recoverable from the tax
+authorities, assuming that the tax authorities will examine the
+amounts reported to them and have full knowledge of all
+relevant information.
+Derivatives
+Accounting for Uncertainties in Income
+Taxes
+General and Administration
+Sales and marketing includes costs incurred for the selling and
+marketing activities related to our software and cloud solutions
+as well as our service portfolio.
+Sales and Marketing
+Research and development costs are expensed as incurred as
+not all criteria stipulated by the IFRS have been cumulatively
+met to allow for capitalization of material development
+expenses.
+Research and development includes the costs incurred by
+activities related to the development of software solutions (new
+products, updates, and enhancements) including resource and
+hardware costs for the development systems.
+Research and Development
+Cost of services includes the costs incurred in providing the
+services that generate service revenue, such as consulting and
+training activities, messaging, as well as certain application
+management services for our customers and our partners.
+Cost of Services
+cloud and software revenue. Consequently, this line item
+primarily includes employee expenses relating to these services,
+amortization of acquired intangibles, fees for third-party
+licenses, shipping, ramp-up costs, and depreciation of our
+property, plant, and equipment (for example, of our data centers
+in which we host our cloud solutions).
+153
+General and administration includes costs related to finance and
+administrative functions, human resources, and general
+management as long as they are not directly attributable to one
+of the other operating expense line items.
+Consolidated Financial Statements IFRS and Notes | Notes
+Derivatives Not Designated as Hedging Instruments
+Many transactions constitute economic hedges, and therefore
+contribute effectively to the securing of financial risks but do not
+qualify for hedge accounting under IAS 39. To hedge currency
+risks inherent in foreign-currency denominated and recognized
+monetary assets and liabilities, we do not designate our held-for-
+trading derivative financial instruments as accounting hedges,
+because the profits and losses from the underlying transactions
+Consolidated Financial Statements IFRS and Notes | Notes
+Account balances are written off, that is, charged off against the
+allowance after all collection efforts have been exhausted and
+the likelihood of recovery is considered remote.
+First, we consider the financial solvency of specific customers
+and record an allowance for specific customer balances when
+we believe it is probable that we will not collect the amount
+due according to the contractual terms of the arrangement.
+Second, we evaluate homogenous portfolios of trade
+receivables according to their default risk, primarily based on
+the age of the receivable and historical loss experience, but
+also taking into consideration general market factors that
+might impact our trade receivable portfolio. We record a
+general bad debt allowance to record impairment losses for a
+portfolio of trade receivables when we believe that the age of
+the receivables indicates that it is probable that a loss has
+occurred and we will not collect some or all of the amounts
+due.
+Trade receivables are recorded at invoiced amounts less sales
+allowances and allowances for doubtful accounts. We record
+these allowances based on a specific review of all significant
+outstanding invoices. When analyzing the recoverability of our
+trade receivables, we consider the following factors:
+Trade and Other Receivables
+Retrospectively, effectiveness is tested using statistical
+methods in the form of a regression analysis, by which the
+validity and extent of the relationship between the change in
+value of the hedged items as the independent variable and the
+fair value change of the derivatives as the dependent variable is
+determined. The hedge is deemed highly effective if the
+determination coefficient between the hedged items and the
+hedging instruments exceeds 0.8 and the slope coefficient lies
+within a range of -0.8 to -1.25.
+Fair Value Hedge
+change in the fair value of the hedging instrument employing its
+relevant terms. The hedge is deemed highly effective if the
+results are within the range 80% to 125%.
+Retrospectively, effectiveness is tested on a cumulative basis
+applying the dollar offset method by using the hypothetical
+derivative method. Under this approach, the change in fair value
+of a constructed hypothetical derivative with terms reflecting
+the relevant terms of the hedged item is compared to the
+Cash Flow Hedge
+The method of testing effectiveness retrospectively depends on
+the type of the hedge as described further below:
+154
+The effectiveness of the hedging relationship is tested
+prospectively and retrospectively. Prospectively, we apply the
+critical terms match for our foreign currency hedges, as
+currencies, maturities, and the amounts are identical for the
+forecasted transactions and the spot element of the forward
+exchange rate contract or intrinsic value of the currency options,
+respectively. For interest rate swaps, we also apply the critical
+terms match, as the notional amounts, currencies, maturities,
+basis of the variable legs or fixed legs, respectively, reset dates,
+and the dates of the interest and principal payments are
+identical for the debt instrument and the corresponding interest
+rate swaps. Therefore, over the life of the hedging instrument,
+the changes in the designated components of the hedging
+instrument will offset the impact of fluctuations of the
+underlying hedged items.
+We apply fair value hedge accounting for certain of our fixed rate
+financial liabilities.
+Fair Value Hedge
+occur.
+With regard to foreign currency risk, hedge accounting relates to
+the spot price and the intrinsic values of the derivatives
+designated and qualifying as cash flow hedges, while gains and
+losses on the interest element and on those time values
+excluded from the hedging relationship as well as the ineffective
+portion of gains or losses are recognized in profit or loss as they
+In general, we apply cash flow hedge accounting to the foreign
+currency risk of highly probable forecasted transactions and
+interest rate risk on variable rate financial liabilities.
+Cash Flow Hedge
+We use derivatives to hedge foreign currency risk or interest
+rate risk and designate them as cash flow or fair value hedges if
+they qualify for hedge accounting under IAS 39. For more
+information about our hedges, see Note (25).
+Derivatives Designated as Hedging Instruments
+In addition, we occasionally have contracts that contain foreign
+currency embedded derivatives that are required to be
+accounted for separately.
+are recognized in profit or loss in the same periods as the profits
+or losses from the derivatives.
+Valuation and Testing of Effectiveness
+Cost of cloud and software includes the costs incurred in
+producing the goods and providing the services that generate
+In our Consolidated Income Statements, expenses from
+recording bad debt allowances for a portfolio of trade
+receivables as well as bad debt allowances for specific customer
+balances are classified as other operating income/expense, net.
+Sales allowances are recorded as an offset to the respective
+revenue item in our Consolidated Income Statements.
+Messaging services (primarily transmission of electronic text
+messages from one mobile phone provider to another)
+Payment services in connection with our travel and expense
+management offerings.
+We usually recognize revenue from on-premise software
+arrangements involving resellers on evidence of sell-through by
+the reseller to the end customer, because the inflow of the
+economic benefits associated with the arrangements to us is not
+probable before sell-through has occurred.
+In general, our on-premise software license agreements include
+neither acceptance-testing provisions nor rights to return the
+software. If an arrangement allows for customer acceptance-
+testing of the software, we defer revenue until the earlier of
+customer acceptance or when the acceptance right lapses. If an
+arrangement allows for returning the software, we defer
+recognition of software revenue until the right to return expires.
+Revenue from the sale of perpetual licenses of our standard on-
+premise software products is recognized upon delivery of the
+software, that is, when the customer has access to the software.
+Occasionally, we license on-premise software for a specified
+period of time, revenue from such time-based licenses is also
+recognized upon delivery of the software.
+Cloud subscriptions and support revenue is recognized as the
+services are performed. Where a periodic fixed fee is agreed for
+the right to continuously access and use a cloud offering for a
+certain term, the fee is recognized ratably over the term covered
+by the fixed fee. Fees that are based on actual transaction
+volumes are recognized as the transactions occur. In general,
+our cloud subscriptions and support contracts include certain
+set-up activities. If these set-up activities have stand-alone
+value, they are accounted for as distinct deliverables, with the
+respective revenue being classified as service revenue and
+In general, we invoice fees for standard software upon contract
+closure and delivery. Periodic fixed fees for cloud subscription
+services and software support services are mostly invoiced
+yearly or quarterly in advance. Fees based on actual transaction
+volumes for cloud subscriptions and fees charged for non-
+periodical services are invoiced as the services are delivered.
+We do not start recognizing revenue from customer
+arrangements before evidence of an arrangement exists, the
+amount of revenue and associated costs can be measured
+reliably, collection of the related receivable is probable, and the
+delivery has occurred or the services have been rendered. If, for
+any of our product or service offerings, we determine at the
+outset of an arrangement that the amount of revenue cannot be
+measured reliably, we conclude that the inflow of economic
+benefits associated with the transaction is not probable, and we
+defer revenue recognition until the arrangement fee becomes
+due and payable by the customer. If, at the outset of an
+arrangement, we determine that collectability is not probable,
+we conclude that the inflow of economic benefits associated
+with the transaction is not probable, and we defer revenue
+recognition until the earlier of when collectability becomes
+probable or payment is received. If a customer is specifically
+identified as a bad debtor at a later point in time, we stop
+recognizing revenue from the customer except to the extent of
+the fees that have already been collected.
+Timing of Revenue Recognition
+We account for out-of-pocket expenses invoiced by SAP and
+reimbursed by customers as cloud subscriptions and support,
+software support, or services revenue, depending on the nature
+of the service for which the out-of-pocket expenses were
+incurred.
+Cost of Cloud and Software
+Training services
+Software licenses revenue from customer-specific on-premise
+software development agreements that qualify for revenue
+recognition by reference to the stage of completion of the
+contract activity is recognized using the percentage-of-
+completion method based on contract costs incurred to date as
+a percentage of total estimated contract costs required to
+complete the development work.
+Professional services, that is, consulting services that
+primarily relate to the installation and configuration of our
+cloud subscriptions and on-premise software products
+Premium support services, that is, high-end support services
+tailored to customer requirements
+-
+-
+151
+Consolidated Financial Statements IFRS and Notes | Notes
+Services revenue as presented in our Consolidated Income
+Statements represents fees earned from providing customers
+with the following:
+Software support revenue represents fees earned from
+providing customers with standardized support services
+which comprise unspecified future software updates,
+upgrades, and enhancements as well as technical product
+support services for on-premise software products. We do
+not sell separately technical product support or unspecified
+software upgrades, updates, and enhancements.
+Additionally, control for these components transfers
+simultaneously over time. Accordingly, we do not distinguish
+within software support revenue or within cost of software
+support the amounts attributable to technical support
+services and unspecified software upgrades, updates, and
+enhancements.
+Business Network Services, that is, connecting companies
+in a cloud-based-environment to perform business
+processes between the connected companies.
+Software licenses revenue represents fees earned from the
+sale or license of software to customers for use on the
+customer's premises, in other words, where the customer
+has the right to take possession of the software for
+installation on the customer's premises (on-premise
+software). Software licenses revenue includes revenue from
+both the sale of our standard software products and
+customer-specific on-premise software development
+agreements.
+the regular support that is embedded in the basic cloud
+subscription fees, or
+Additional premium cloud subscription support beyond
+"
+-
+Under our standardized support services, our performance
+obligation is to stand ready to provide technical product support
+and unspecified updates, upgrades, and enhancements on a
+when-and-if-available basis. Consequently, we recognize
+support revenue ratably over the term of the support
+arrangement.
+recognized as the set-up activity is performed. If we conclude
+that such set-up activities are not distinct deliverables, we do
+not account for them separately.
+152
+We also consider FASB ASC 985-605 in our accounting for
+options that entitle the customer to purchase, in the future,
+additional on-premise software or services. We allocate revenue
+to future incremental discounts whenever customers are
+granted a material right, that is, the right to license additional
+on-premise software at a higher discount than the one given
+within the initial software license arrangement, or to purchase or
+renew services at rates below the fair values established for
+these services. We also consider whether future purchase
+options included in arrangements for cloud subscription
+deliverables constitute a material right.
+For our on-premise software offerings, company-specific
+objective evidence of fair value can generally not be
+established and representative stand-alone selling prices are
+not discernible from past transactions. We therefore apply
+the residual method to multiple-element arrangements that
+include on-premise software. Under this method, the
+transaction fee is allocated to all undelivered elements in the
+amount of their respective fair values and the remaining
+amount of the arrangement fee is allocated to the delivered
+element. With this policy, we have considered the guidance
+provided by Financial Accounting Standards Board (FASB)
+Accounting Standards Codification (ASC) Subtopic 985-605
+(Software Revenue Recognition), where applicable, as
+authorized by IAS 8 (Accounting Policies, Changes in
+Accounting Estimates and Errors).
+Gross margin expectations and expected internal costs of
+the respective cloud business model.
+Substantive renewal rates stipulated in the cloud
+arrangement; and
+"
+Company-specific objective evidence of fair value can
+generally not be established for our cloud subscriptions. ESP
+for these offerings is determined based on the rates agreed
+for the individual contract to apply if and when the
+subscription arrangement renews. We determine ESP by
+considering multiple factors which include, but are not limited
+to, the following:
+We recognize services revenue as the services are rendered.
+Usually, our professional services contracts and premium
+support services contracts do not involve significant production,
+modification, or customization of software, and the related
+revenue is recognized as the services are provided using the
+percentage-of-completion method of accounting. For
+messaging services, we measure the progress of service
+rendering based on the number of messages successfully
+processed and delivered except for fixed-price messaging
+arrangements, for which revenue is recognized ratably over the
+contractual term of the arrangement. Revenue from our training
+services is recognized when the customer consumes the
+respective classroom training. For on-demand training services,
+whereby our performance obligation is to stand ready and
+provide the customer with access to the training courses and
+estimated stand-alone selling prices (ESP) for our major
+products and services are determined as follows:
+We allocate the total transaction fee of a customer contract to
+the distinct deliverables under the contract based on their fair
+values. The allocation is done relative to the distinct
+deliverables' individual fair values unless the residual method is
+applied as outlined below. Fair value is determined by company-
+specific objective evidence of fair value, which is the price
+charged consistently when that element is sold separately or, for
+elements not yet sold separately, the price established by our
+management if it is probable that the price will not change
+before the element is sold separately. Where company-specific
+objective evidence of fair value and third-party evidence of
+selling price cannot be established due to lacking stand-alone
+sales or lacking pricing consistency, we determine the fair value
+of a distinct deliverable by estimating its stand-alone selling
+price. Company-specific objective evidence of fair value and
+The portion of the transaction fee allocated to one distinct
+deliverable is recognized in revenue separately under the
+policies applicable to the respective deliverable. For combined
+deliverables consisting of cloud offerings or on-premise
+software and other services, the allocated portion of the
+transaction fee is recognized using the percentage-of-
+completion method, as outlined above, or over the cloud
+subscription term, if applicable, depending on which service
+term is longer.
+Goods and services that do not qualify as distinct deliverables
+are combined into one unit of account (combined deliverables).
+We derive the company-specific objective evidence of fair
+value for our renewable support services from the rates
+charged to renew the support services annually after an initial
+period. Such renewal rates generally represent a fixed
+percentage of the discounted software license fee charged to
+the customer. The majority of our customers renew their
+annual support service contracts at these rates.
+Company-specific objective evidence of fair value for our
+service offerings is derived from our consistently priced
+historic sales.
+The contract involves significant production, modification, or
+customization of the cloud subscription or on-premise
+software; and
+The services are not available from third-party vendors and
+are therefore deemed essential to the cloud subscription or
+on-premise software.
+learning content services, revenue is recognized ratably over the
+contractual term of the arrangement.
+Measurement of Revenue
+Revenue is recognized net of returns and allowances, trade
+discounts, and volume rebates.
+Consolidated Financial Statements IFRS and Notes | Notes
+Multiple-Element Arrangements
+We combine two or more customer contracts with the same
+customer and account for the contracts as a single arrangement
+if the contracts are negotiated as a package or otherwise linked.
+We account for the different goods and services promised under
+our customer contracts as separate units of account (distinct
+deliverables) unless:
+-
+Our contributions to resellers that allow our resellers to execute
+qualified and approved marketing activities are recognized as an
+offset to revenue, unless we obtain a separate identifiable
+benefit for the contribution and the fair value of that benefit is
+reasonably estimable.
+1,281
+Gross amounts due to
+customers
+30
+78
+41
+Salaries
+8,693
+7,969
+7,483
+Social security expense
+1,135
+1
+Share-based payment expense
+1,120
+785
+724
+Recognized losses stated for 2017 and 2016 predominantly
+resulted from strategic customer co-innovation projects.
+(6) Restructuring
+Restructuring Expenses
+Pension expense
+312
+270
+1,067
+2015
+20
+2017
+258
+Restructuring expenses
+182
+28
+621
+€ millions
+2017
+2016
+2015
+Aggregate cost recognized
+435
+527
+294
+(multi-year)
+(7) Employee Benefits Expense
+and Number of Employees
+Employee Benefits Expense
+Recognized result
+-104
+-174
+20
+(+ profit/- loss;
+multi-year)
+€ millions
+2016
+Employee-related restructuring
+-5
+33
+28
+621
+164
+Pension expense includes the amounts recorded for our defined
+benefit and defined contribution plans as described in
+Note (18a). Expenses for local state pension plans are included
+in social security expense.
+Consolidated Financial Statements IFRS and Notes | Notes
+The number of employees in the following table is broken down
+by function and by the regions EMEA (Europe, Middle East, and
+Africa), Americas (North America and Latin America), and APJ
+(Asia Pacific Japan).
+Number of Employees
+Full-time equivalents
+December 31, 2017
+182
+December 31, 2016
+EMEA
+Ame-
+ricas
+APJ
+Total
+EMEA
+Ame-
+ricas
+APJ
+Total
+EMEA
+Ame-
+ricas
+December 31, 2015
+Restructuring expenses
+restructuring expenses
+11
+610
+expense
+Termination benefits outside of
+57
+37
+28
+28
+restructuring plans
+Employee benefits expense
+11,643
+10,229
+10,170
+€ millions
+2017
+2016
+2015
+Employee-related restructuring
+180
+33
+(8) Other Non-Operating
+Income/Expense, Net
+expenses
+Onerous contract-related
+2
+180
+-2
+Other Non-Operating Income/Expense, Net
+147
+Assets for Cost of Obtaining Customer Contracts
+The most noticeable expense impact relates to the accounting
+for cost of obtaining customer contracts. Under our previous
+accounting policies, we only recognized as an asset those costs
+of obtaining a customer contract that were both incremental
+and directly related to the individual contract (that is, paid to
+sales personnel directly involved in obtaining the customer
+contract). This resulted in capitalizing certain amounts of sales
+commissions paid to our sales staff for obtaining cloud
+subscription contracts, and not capitalizing sales commissions
+paid for obtaining on-premise software and support contracts,
+because the terms of our on-premise software sales
+commissions refer directly only to the software licenses sold
+and not to the support contracts sold therewith. In contrast,
+under our IFRS 15 policies, we capitalize all incremental costs of
+obtaining a customer contract that are expected to be
+recovered, regardless of whether they are direct or not. Due to
+this change in policy, we will capitalize, after adoption of IFRS 15,
+higher amounts of cost of obtaining cloud subscription and
+service contracts than we did under our previous policies. In
+addition, we will start capitalizing incremental costs of obtaining
+on-premise support contracts with the resulting assets to be
+amortized over the expected life (including anticipated
+renewals) of the support contract obtained.
+For the incremental sales commissions paid for obtaining
+customer contracts from years before 2018 that were not
+completed before January 1, 2018, we will recognize, in the
+opening statement of financial position for 2018, assets
+reflecting the amounts of sales commissions that qualify for
+capitalization under IFRS 15 but which did not qualify for
+capitalization under our previous policies as far as these
+amounts are to be amortized in periods starting on or after
+January 1, 2018. We expect these assets to amount to
+€0.1 billion. The amount of sales commission capitalized in the
+opening statement of financial position for 2018 will be impacted
+your use of the practical expedient outlined above, as we will
+only apply the new IFRS 15 capitalization policies assets to sales
+commissions paid for obtaining contracts that were not
+completed before January 1, 2018. The changes to our policies
+for capitalization of sales commissions will result, in 2018, in a
+reduction of our total cost of sales and marketing. We estimate
+this reduction to amount to €0.2 billion, which reflects the
+amounts capitalized in 2018, net of expenses from amortization
+of the amounts capitalized either in the opening statement of
+financial position for 2018 or during 2018. The actual cost
+reduction amount will depend on our 2018 on-premise order
+entry, our sales compensation plans and changes thereto, as
+well as our future business and go-to-market practices. It may
+thus differ significantly from our current estimate.
+Other IFRS 15-Based Policy Changes Impacting
+Profit or Loss
+Further differences between our new IFRS 15-based policies and
+our respective previous accounting policies include the
+following:
+-
+In contrast to our previous policies, we will no longer identify
+onerous contracts on the level of the individual performance
+obligation but rather, consider the economic benefits and
+respective cost of all performance obligations under the
+same contract and include, as economic benefits, anticipated
+highly probable renewals of renewable performance
+obligations. Consequently, we expect to recognize provisions
+for onerous contracts more rarely and at lower amounts than
+under our previous policies. In our opening statement of
+financial position for 2018, we will adjust the provisions for
+onerous contracts recognized on December 31, 2017, to the
+amounts appropriate under our new IFRS 15-based policies.
+For certain of our customer-specific on-premise software
+development agreements, we will recognize revenue and the
+related cost at the point in time when the software is
+ultimately delivered to the customer whereas, under our
+previous policies, we recognized the revenues and costs from
+such contracts over time as the software was developed. For
+those contracts from years before 2018 affected by this
+policy change that were not completed before January 1,
+2018, we will recognize, in the opening statement of financial
+position for 2018, contract liabilities reflecting the amount
+allocated, under our new IFRS 15 policies, to the obligation to
+deliver the software. We will also recognize, for these
+contracts, assets from the direct and recoverable costs
+incurred in satisfying the obligation to deliver the software.
+We expect these changes to have an immaterial impact on our
+opening statement of financial position for 2018 and estimate
+that these changes will lead, in total, to additional revenue and
+operating expenses in 2018, each by substantially less than
+€0.1 billion.
+All other differences between our new IFRS 15-based policies
+and our respective previous accounting policies are expected to
+be insignificant to our revenues and profits in 2018.
+Presentation
+Under our new IFRS 15-based policies, we no longer present, in
+our statements of financial position, items for deferred
+revenues. Instead, we present a customer contract as either a
+contract liability or a contract asset once either party to the
+contract has started to perform. Rights to consideration from
+customers are only presented as accounts receivable if the
+rights are unconditional.
+We do not expect to recognize, neither in the opening statement
+of financial position for 2018 nor in 2018, material contract
+assets.
+revenue and profit from future grants of Material Right
+Additional Copy Options.
+Consolidated Financial Statements IFRS and Notes | Notes
+Under our previous policies, we recognized claims for
+prepayments from customers as trade receivables once the
+amounts were invoiced and the respective service had started.
+Simultaneously, we recognized respective deferred revenue
+items to be reversed into revenue as the prepaid goods or
+services were delivered. Under our new IFRS 15-based policies,
+we recognize trade receivables only as far as goods or services
+are delivered or prepayments from customers are due.
+Consequently, compared to the recognition of trade receivables
+and deferred revenue under our previous policies, the following
+applies:
+-
+Trade receivables and contract liabilities are recognized later,
+and contract liability amounts recognized are initially smaller
+where claims for prepayments are due after the respective
+service has started,
+Trade receivables and contract liabilities are recognized
+earlier where claims for prepayments are due before the
+respective service has started.
+This change is of a presentation nature only and thus does not
+affect revenues and profits.
+We currently expect this change in policy to increase the 2018
+opening balance of both our trade receivables and our contract
+liabilities by approximately €0.6 billion to €0.7 billion as
+compared to our 2017 closing balances of trade receivables and
+deferred revenues.
+The other IFRS 15-induced policy changes will additionally
+impact contract positions as outlined above.
+Disclosures
+It is not practicable to estimate whether any of the additional
+disclosures we will provide under IFRS 15 could be material to
+readers of our financial statements.
+IFRS 9 (Financial Instruments)
+161
+Consolidated Financial Statements IFRS and Notes | Notes
+160
+We currently estimate that our business practices will change in
+the light of this new accounting policy in a way that Material
+Right Additional Copy Options are only provided rarely. Thus, we
+do not expect a material impact on our 2018 and future years'
+APJ
+-584
+-38
+-74
+assets/liabilities at fair value
+through profit or loss
+-
+Determining whether the conditions for recognizing an
+intangible asset are met requires assumptions about future
+market conditions, customer demand, and other develop-
+ments.
+The term "technical feasibility" is not defined in IFRS, and
+therefore determining whether the completion of an asset is
+technically feasible requires judgment and a company-
+specific approach.
+Determining the future ability to use or sell the intangible
+asset arising from the development and the determination of
+the probability of future benefits from sale or use
+Determining whether a cost is directly or indirectly
+attributable to an intangible asset and whether a cost is
+necessary for completing a development
+These judgments impact the total amount of intangible assets
+that we present in our balance sheet as well as the timing of
+recognizing development expenses in profit or loss.
+(3d) New Accounting Standards
+Adopted in the Current Period
+No new accounting standards adopted in 2017 had a material
+impact on our Consolidated Financial Statements.
+(3e) New Accounting Standards Not
+Yet Adopted
+The standards and interpretations (relevant to the Group) that
+are issued, but not yet effective, up to the date of issuance of the
+Group's financial statements are disclosed below. The Group
+intends to adopt these standards, if applicable, when they
+become effective:
+IFRS 15 (Revenue from Contracts with
+Customers)
+On May 28, 2014, the IASB issued IFRS 15. The new revenue
+recognition standard is effective for us starting January 1, 2018.
+In preparing for the adoption of IFRS 15, we produced, over the
+last years, new IFRS 15-based revenue recognition policies and
+adjusted relevant business processes to these new policies.
+These efforts were part of a project established across SAP's
+finance and business functions. This project also covered the
+implementation of a new SAP-based revenue accounting and
+reporting solution and a global roll-out and training approach for
+all of the relevant stakeholder groups in SAP. Additionally, we
+started to implement internal controls over the application of
+the new policies and processes.
+IFRS 15 permits two possible transition methods for the
+adoption of the new guidance: (1) retrospectively to each prior
+reporting period presented in accordance with IAS 8
+(Accounting Policies, Changes in Accounting Estimates and
+Errors), or (2) retrospectively with the cumulative effect of
+initially applying the standard recognized as an adjustment to
+the opening balance of retained earnings on the date of the
+initial application (cumulative catch-up approach). Additionally,
+IFRS 15 allows, for its initial application, the use of certain
+practical expedients. Effective January 1, 2018, we started to
+apply the new standard retrospectively, using the cumulative
+catch-up approach and the practical expedient to apply the new
+standard only to contracts that were not completed as of
+January 1, 2018. This practical expedient affects both the
+transition adjustment amount recognized in retained earnings
+and our future revenues and expenses as outlined further below.
+There are several differences between our new IFRS 15-based
+policies and our respective previous accounting policies as they
+are described in Note (3b). The most significant differences are
+as follows:
+Customer Options for Additional Software License
+Copies
+The most notable revenue impact relates to the accounting for
+options for the purchase of additional copies of already licensed
+on-premise software where those options provide a material
+right to the customer (Material Right Additional Copy Options).
+Under our previous policies, we adhered to the guidance under
+previous U.S. GAAP to not account for these options. In
+contrast, IFRS 15 provides that such options are accounted for
+as a separate performance obligation. The transaction price
+portion allocated to a Material Right Additional Copy Option is
+recognized in software revenue upon exercise or forfeiture of
+the option, which will usually be later than the timing under our
+previous policies.
+For those contracts from years before 2018 that include
+Material Right Additional Copy Options and that were not
+completed (as this term is defined in IFRS 15) before January 1,
+2018, we will recognize, in the opening statement of financial
+position for 2018, contract liabilities reflecting the amounts
+allocated, under our new IFRS 15 policies, to those Material Right
+Additional Copy Options that were not executed before January
+1, 2018. We expect these contract liabilities to approximately
+amount to €0.1 billion, of which substantially less than
+€0.1 billion are estimated to be recognized in revenue in 2018
+with such revenue being classified as software revenue.
+The amounts of contract liabilities recognized, in the opening
+statement of financial position for 2018, for Material Right
+Additional Copy Options will be impacted by our use of the
+practical expedient outlined above, as we will only recognize
+such contract liabilities for Material Right Additional Copy
+Options that were granted in contracts that were not completed
+before January 1, 2018.
+On July 24, 2014, the IASB issued the fourth and final version of
+IFRS 9. We will adopt IFRS 9 on January 1, 2018. We will use the
+exceptions from full retrospective application and thus
+recognize the effect of the initial application as an adjustment to
+the opening balance of retained earnings.
+General and administration
+We have reviewed our financial assets and liabilities and expect
+the following impacts:
+The majority of our debt investments, and all loans, trade and
+other financial receivables will satisfy the conditions for a
+classification at amortized cost. Thus, we will see a change in
+classification for those debt investments which we currently
+classify as available-for-sale financial assets. Under our new
+policies, investments in money market and similar funds will be
+classified as fair value through profit or loss (FVTPL). However,
+Construction Contracts in Progress
+The increase in restructuring expenses was mainly caused by a
+restructuring program executed in the Digital Business Services
+(DBS) board area in 2017 which went hand-in-hand with the DBS
+transformation. The transformation was prompted by changing
+service requirements, as an increasing amount of software
+deployments are moving to the cloud.
+Restructuring provisions primarily include employee benefits
+that result from severance payments for employee terminations
+and onerous contract costs. Prior-year restructuring provisions
+relate to restructuring activities incurred in connection with
+organizational changes and the integration of employees of our
+acquisitions in previous years.
+If not presented separately in our income statement,
+restructuring expenses would break down by functional area as
+follows:
+Restructuring Expenses by Functional Area
+€ millions
+2017
+2016
+2015
+Cost of cloud and software
+Cost of services
+Revenue from construction contracts (contract revenue) is
+mainly included in software revenue and services revenue
+depending on the type of contract. In 2017, revenue of
+€317 million was recognized for all our construction contracts
+(2016: €280 million, 2015: €292 million). The status of our
+construction contracts in progress at the end of the reporting
+period accounted for under IAS 11 (Construction Contracts) was
+as follows:
+55
+80
+118
+7
+218
+Research and development
+Sales and marketing
+9
+7
+156
+2
+10
+3
+For revenue information by geographic region, see Note (28).
+For detailed information about our revenue recognition policies,
+see Note (3).
+(5) Revenue
+we do not expect these changes to have a material impact on
+our Consolidated Financial Statements.
+Under our new policies, we classify the majority of our equity
+investments on January 1, 2018 as FVTPL. This change will most
+likely lead to an increase of volatility in profit and loss, as we
+have classified those investments as available-for-sale with
+unrealized gains and losses recorded in OCI in the past. Under
+our new policies, the equity investments not classified as FVTPL
+will be classified as fair value through other comprehensive
+income (FVOCI), so that gains or losses realized on the sale
+(which were not material in the past) will no longer be
+transferred to profit or loss. Amounts attributable to available-
+for-sale financial assets accumulated in OCI so far will be
+reclassified to 2018 opening retained earnings. From 2018
+onwards, the decision whether to classify new equity
+investments as FVTPL or FVOCI will be made on an investment-
+by-investment basis.
+Financial liabilities
+We have never designated any financial liabilities at FVTPL and
+have no current intention to do so. Also, none of our financial
+liabilities has been modified in the past. Thus, we do not expect a
+material impact on our financial liabilities, considering that the
+only significant changes that IFRS 9 will bring to the accounting
+for financial liabilities are that for liabilities designated as at
+FVTPL, changes in the fair value attributable to changes in the
+credit risk of the liability must be presented in other
+comprehensive income (OCI) and that modified financial
+liabilities are accounted for using the original effective interest
+rate instead with the one resulting from the modification.
+Impairment
+We will apply the simplified impairment approach of IFRS 9 and
+thus record lifetime expected credit losses on all trade
+receivables and contract assets. The default risk of our trade
+receivables is managed based on assessing the
+creditworthiness of customers through external ratings and our
+past experience with the customers concerned. Outstanding
+receivables are continuously monitored locally.
+For bank balances, debt investments, and loans and other
+financial receivables not classified as FVTPL, we will apply the
+general IFRS 9 impairment approach under our new policies.
+It is our policy to only invest in high-quality assets of issuers with
+a minimum rating of at least investment grade to minimize the
+risk of credit losses. As the premium for credit default swaps
+mainly depends on market participants' assessments of the
+creditworthiness of a debtor, we also closely observe the
+development of credit default swap spreads in the market to
+evaluate probable significant increases in credit risk to timely
+react to changes if these should manifest. Loans and other
+financial receivables are monitored based on borrower-specific
+information.
+162
+Consolidated Financial Statements IFRS and Notes | Notes
+Despite the change from an incurred loss to an expected credit
+loss model, we do not expect our impairment allowances for
+trade receivables and other financial assets to be materially
+different from what they would be if we continued our current
+accounting policies.
+Hedge accounting
+We will apply the new hedge accounting requirements
+prospectively. The types of hedge accounting relationships that
+we currently designate meet the requirements of IFRS 9 and are
+aligned with our risk management strategy. Thus, all existing
+hedge relationships that we have designated in effective hedging
+relationships in the past will still qualify for hedge accounting
+under our new policies. In contrast to our current policies where
+fair value changes related to the forward element and foreign
+currency basis spreads have been recognized in profit or loss
+immediately, the respective costs for forward contracts
+designated in an effective hedging relationship are recorded in
+other comprehensive income under our new policies. Thus, the
+forward element and foreign currency basis spreads are
+recorded as cost of hedging in other comprehensive income.
+However, this is not expected to have a material impact on our
+Consolidated Financial Statements.
+Disclosures
+IFRS 9 will require extensive new disclosures. Our assessment
+included an analysis to identify data gaps against current
+processes, and we are in the process of implementing the
+system and controls that we believe will be necessary to gather
+the necessary data to be able to provide the required
+disclosures where they are material.
+IFRS 16 (Leases)
+On January 13, 2016, the IASB issued IFRS 16. We will adopt
+IFRS 16 as per its effective date of January 1, 2019, using the
+modified retrospective approach. The new standard will
+significantly impact especially the lease accounting by lessees
+as, in general, all leases need to be recognized on a company's
+balance sheet (represented by right-of-use assets and lease
+liabilities). We plan to use practical expedients offered by the
+standard (such as short-term leases, low-value leases, and no
+separation of non-lease components of a contract). Due to the
+adoption of IFRS 16, we expect the total assets and total
+liabilities to increase, as right-of-use assets/lease liabilities will
+have to be recorded for those items that were previously "off
+balance sheet"; operating profit is also expected to increase, as
+costs that were treated as rental expenses in the past will have
+to be presented as interest expense going forward. As the
+effects of applying IFRS 16 will depend on the lease agreements
+in effect at the time of adoption, the IFRS 16 impact on our
+Consolidated Financial Statements cannot be estimated reliably.
+Consolidated Financial Statements IFRS and Notes | Notes
+163
+(4) Business Combinations
+On September 24, 2017, SAP announced that it had entered into
+an agreement to acquire U.S.-based Gigya, Inc., a market leader
+for customer identity and access management solutions. The
+transaction closed on November 1, 2017, following receipt of
+regulatory approvals.
+The majority of the purchase price for our acquisitions was
+allocated to goodwill and intangible assets. For more
+information, see Note (15).
+There were no significant acquisitions in 2016.
+Classification of financial assets
+Total
+610
+5,869
+1,284
+1,326
+Tax expense at applicable tax
+1,162
+617
+Intangible assets
+3,991
+4,863
+5,026
+Profit before tax
+Deferred tax liabilities
+2015
+165
+2017
+€ millions, unless otherwise
+stated
+1,055
+Property, plant, and equipment
+92
+66
+Changes in tax laws and tax
+9
+Pension provisions
+-126
+-105
+-402
+Foreign tax rates
+1,868
+125
+Trade and other receivables
+Tax effect of:
+158
+104
+Other financial assets
+2015: 26.4%)
+rate of 26.4% (2016: 26.4%;
+125
+1,831
+102
+75
+The following table reconciles the expected income tax expense,
+computed by applying our combined German tax rate of 26.4%
+(2016: 26.4%; 2015: 26.4%), to the actual income tax expense.
+Our 2017 combined German tax rate includes a corporate
+income tax rate of 15.0% (2016: 15.0%; 2015: 15.0%), plus a
+solidarity surcharge of 5.5% (2016: 5.5%; 2015: 5.5%) thereon,
+and trade taxes of 10.6% (2016: 10.6%; 2015: 10.6%).
+18
+12
+Other financial assets
+32
+10
+Property, plant, and equipment
+Relationship Between Tax Expense and Profit
+Before Tax
+3,991
+5,026
+81
+563
+Intangible assets
+830
+1,754
+2,241
+4,863
+-212
+Trade and other receivables
+Pension provisions
+Share-based payments
+57
+Total deferred tax assets
+Other
+235
+166
+378
+187
+Carryforwards of unused tax losses
+Research and development and foreign tax
+credits
+Other provisions and obligations
+Deferred income
+118
+517
+408
+207
+164
+108
+112
+72
+77
+3,161
+3
+Share-based payments
+19.3
+Effective tax rate (in %)
+-36
+935
+1,229
+970
+Total income tax expense
+-1
+Cloud and software
+Other
+foreign tax credits
+development tax credits, and
+assets, research and
+43
+43
+185
+25.3
+23.4
+The increase in deferred tax assets for intangible assets mainly
+results from an intra-group transfer of intellectual property
+rights to SAP SE.
+The decrease in deferred tax liabilities for intangible assets
+mainly results from the remeasurement due to the U.S. tax
+reform.
+1,229
+970
+Income taxes recorded in profit
+Unused tax losses
+2015
+2016
+2017
+Reassessment of deferred tax
+€ millions
+2016
+2017
+€ millions
+Total Income Taxes
+Items Not Resulting in a Deferred Tax Asset
+167
+Consolidated Financial Statements IFRS and Notes | Notes
+2015
+-55
+-43
+-39
+-106
+-95
+Tax exempt income
+39
+22
+Deferred income
+61
+-103
+78
+Non-deductible expenses
+122
+29
+Other provisions and obligations
+rates
+3
+1
+82
+12
+Other
+26
+Prior-year taxes
+160
+782
+Total deferred tax assets, net
+and foreign tax credits
+-31
+-36
+50
+-26
+1,708
+1,049
+Total deferred tax liabilities
+115
+112
+131
+Withholding taxes
+Research and development
+3,109
+2,785
+Deferred tax assets
+liabilities at amortized cost
+-2
+-174
+-317
+Thereof from financial
+935
+1,229
+970
+Total income tax expense
+receivables
+-332
+-161
+-668
+Total deferred tax income
+-213
+Miscellaneous income/expense,
+-24
+-23
+-26
+1,623
+Tax expense for current year
+Financial Income, Net
+(9) Financial Income, Net
+Current tax expense/income
+2015
+2016
+26
+2017
+income/expense, net
+-256
+-234
+-36
+Other non-operating
+Major Components of Tax Expense
+net
+€ millions
+96
+Thereof from loans and
+-258
+2017
+€ millions
+408
+537
+716
+Foreign
+859
+2016
+853
+Germany
+Current tax expense
+2015
+2016
+2017
+€ millions
+Tax Expense According to Region
+922
+1,412
+2015
+1,638
+-123
+-84
+Foreign
+Germany
+-12
+-38
+180
+Total current tax expense
+Thereof from financial
+gain/loss, net
+-230
+-210
+-12
+Foreign currency exchange
+1,267
+1,390
+Deferred tax income
+1,278
+Taxes for prior years
+15
+-38
+185
+Financial income, net
+-72
+-114
+-116
+Thereof interest expense from
+derivatives
+-5
+cost
+1,229
+970
+-332
+-161
+-668
+Total income tax expense
+financial liabilities at amortized
+935
+-135
+The increase in financial income in 2017 is mainly due to higher
+gains from the disposal of equity instruments by our Sapphire
+investment funds.
+On December 22, 2017, a comprehensive U.S. tax reform, the
+Tax Cuts and Jobs Act, was enacted. As a result, deferred tax
+assets and liabilities as at December 31, 2017, were remeasured
+using the reduced U.S. federal corporate income tax rate of 21%
+(previously 35%). Besides that, the one-time transition tax for
+the mandatory income inclusion on accumulated foreign
+earnings was taken into account.
+2015
+2016
+2017
+Foreign
+Total
+Germany
+€ millions
+2016
+(10) Income Taxes
+2017
+Recognized Deferred Tax Assets and Liabilities
+Profit Before Tax
+Consolidated Financial Statements IFRS and Notes | Notes
+166
+Total deferred tax income also includes an expense of
+€120 million (2016: benefit of €8 million; 2015: benefit of
+€11 million) related to the write-down of previously recognized
+deferred tax assets which are partly offset by the reversal of a
+previous write-down of deferred tax assets.
+Total deferred tax income includes a benefit of €227 million
+(2016: expense of €3 million; 2015: expense of €12 million)
+related to changes in tax laws and tax rates, mainly due to the
+U.S. tax reform.
+The increase in current tax expense and deferred tax income
+mainly results from an intra-group transfer of intellectual
+property rights to SAP SE.
+€ millions
+935
+-108
+Thereof interest expense from
+Finance income
+-428
+-403
+-891
+Origination and reversal of
+2015
+2016
+463
+2017
+Deferred tax expense/income
+1,267
+1,390
+1,638
+Total current tax expense
+-11
+-22
+€ millions
+-89
+230
+temporary differences
+Total deferred tax income
+-246
+-268
+-278
+Finance costs
+foreign tax credits
+development tax credits, and
+241
+assets (equity)
+242
+223
+Unused tax losses, research and
+176
+164
+382
+Thereof available-for-sale financial
+96
+Not expiring
+20
+338
+Cost of services
+158
+101
+113
+Research and development
+269
+190
+166
+Sales and marketing
+442
+292
+260
+General and administration
+135
+113
+74
+89
+115
+Cost of cloud and software
+0
+73
+37,512
+25,459 24,029 86,999
+34,932
+23,532 22,145 80,609 33,561 21,832 19,788
+75,180
+111
+Due to reorganizations within our Digital Business Services in
+2017, employees were partially reallocated from cloud and
+software to services. Information for the current year is
+therefore not fully comparable to prior years.
+The operating cost line items in our income statement include
+the following share-based payment expenses:
+Share-Based Payments
+share price and additional grants in 2017 under Move SAP. For
+more information about our share-based payments, see
+Note (27).
+€ millions
+2017
+2016
+2015
+Allocation of Share-Based Payment
+Expense
+Share-based payments
+1,120
+785
+As at December 31, 2017, there were no loans and other financial
+receivables past due but not impaired. We have no indications of
+impairments of loans and other financial receivables that are not
+past due and not impaired as at the reporting date. For general
+information about financial risk and the nature of risk, see
+Note (24).
+Loans and other financial receivables mainly consist of time
+deposits, investments in pension assets for which the
+corresponding liability is included in employee-related
+obligations (see Note (17c)), other receivables, and loans to
+employees and third parties. The major part of our loans and
+other financial receivables is concentrated in Germany.
+Loans and Other Financial
+Receivables
+2,482
+1,358
+1,124
+2,145
+Available-for-Sale Financial Assets
+1,155
+Total
+38
+38
+0
+32
+32
+Investments in associates
+990
+○
+Our available-for-sale financial assets consist of debt
+investments in bonds of mainly financial and non-financial
+corporations and municipalities, and equity investments in listed
+and unlisted securities, mainly held in the United States.
+Derivatives
+724
+Thereof cash-settled share-
+963
+678
+637
+based payments
+Thereof equity-settled share-
+For more information about fair value measurement with regard
+to our equity investments, see Note (26).
+375
+87
+based payments
+The increase in share-based payment expenses in 2017
+compared to the prior year is mainly due to an increase in SAP's
+Consolidated Financial Statements IFRS and Notes | Notes
+169
+Consolidated Financial Statements IFRS and Notes | Notes
+Detailed information about our derivative financial instruments
+is presented in Note (25).
+107
+73
+209
+0
+10,525
+4,860 7,977 23,363
+9,676
+4,233 7,029 20,938
+Sales and marketing
+9,196
+9,169
+24,872
+4,854
+8,542
+8,999
+4,435 21,977
+7,683
+7,766 3,974 19,422
+General and administration
+2,676
+23,219
+1,781 1,047
+5,250 8,273
+Research and development
+3,895 4,719 14,482
+6.406
+4,184 5,412 16,002
+6,095
+3,920 4,976
+14,991
+Services
+11,349
+7,536
+17,379
+6,535
+4,119
+3,967
+14,621
+6,482
+3,812 3,574 13,868
+4,878 4,965
+196
+5,504
+1,746
+38,357
+25,827 24,359
+88,543
+36,222
+24,696 23,265
+84,183 33,906
+22,166
+SAP Group (December 31)
+20,914
+Thereof acquisitions
+SAP Group (months' end
+average)
+149
+133
+7
+289
+37
+172
+76,986
+2,629
+2,743
+783
+1,018
+5,393
+2,434
+1,653
+937
+5,024
+Infrastructure
+425
+1,732
+501
+3,087
+1,584
+788
+454
+2,827
+1,535
+855
+102
+157
+194
+25
+2
+Exchange differences
+20
+30
+34
+Expiring after the following year
+4
+-4
+10
+Cash flow hedges
+94
+1
+2
+Expiring in the following year
+-16
+assets
+Total
+1,242
+2017
+€ millions, unless otherwise stated
+Earnings per Share
+(11) Earnings per Share
+Consolidated Financial Statements IFRS and Notes | Notes
+168
+We are subject to ongoing tax audits by domestic and foreign tax
+authorities. Currently, we are in dispute mainly with the German
+and only a few foreign tax authorities. The German dispute is in
+respect of intercompany financing matters and certain secured
+capital investments, while the few foreign disputes are in respect
+of intercompany financing matters and the deductibility of
+intercompany royalty payments and intercompany services. In
+all cases, we expect that a favorable outcome can only be
+achieved through litigation. For all of these matters, we have not
+recorded a provision as we believe that the tax authorities'
+claims have no merit and that no adjustment is warranted. If,
+contrary to our view, the tax authorities were to prevail in their
+arguments before the court, we would expect to have an
+additional tax expense (including related interest expenses and
+penalties) of approximately €1,884 million (2016:
+€1,749 million) in total.
+We have not recognized a deferred tax liability on approximately
+€13.21 billion (2016: €10.81 billion) for undistributed profits of
+our subsidiaries, because we are in a position to control the
+timing of the reversal of the temporary difference and it is
+probable that such differences will not reverse in the foreseeable
+future.
+In 2017, subsidiaries that suffered a tax loss in either the current
+or the preceding period recognized deferred tax assets in excess
+of deferred tax liabilities amounting to €79 million (2016:
+€189 million; 2015: €129 million), because it is probable that
+sufficient future taxable profit will be available to allow the
+benefit of the deferred tax assets to be utilized.
+€263 million (2016: €309 million; 2015: €429 million) of the
+unused tax losses relate to U.S. state tax loss carryforwards.
+54
+64
+74
+Total unused tax credits
+909
+984
+2016
+34
+38
+919
+Total unused tax losses
+704
+649
+535
+Expiring after the following year
+95
+32
+9
+Expiring in the following year
+-14
+-5
+-4
+Income taxes recorded in share
+premium
+279
+1,019
+33
+1,078
+Deductible temporary
+Not expiring
+2
+-1
+-1
+Income taxes recorded in other
+comprehensive income that will
+be reclassified to profit and loss
+Available-for-sale financial
+development and foreign tax
+credits
+Unused research and
+-2
+-2
+7
+Remeasurements on defined
+benefit pension plans
+differences
+122
+33
+524
+Income taxes recorded in other
+comprehensive income that will
+not be reclassified to profit and
+loss
+2015
+0
+4,018
+195
+39
+0
+39
+Debt investments
+1,100
+266
+834
+1,054
+260
+793
+Loans and other financial receivables
+Total
+Non-Current
+Current
+0
+Total
+195
+0
+36
+158
+Derivatives
+1,148
+952
+196
+865
+827
+39
+Profit attributable to equity holders of SAP SE
+953
+952
+1
+827
+827
+Equity investments
+Non-Current
+Available-for-sale financial assets
+2016
+Dilutive effect of share-based payments¹
+1,197
+1,198
+1,197
+Weighted average shares outstanding, basic¹)
+-32
+-30
+1
+-31
+1,229
+1,229
+1,229
+Issued ordinary shares¹)
+3,064
+3,646
+Current
+Effect of treasury shares¹)
+1
+2016
+Weighted average shares outstanding, diluted")
+2
+€ millions
+Other Financial Assets
+(12) Other Financial Assets
+1) Number of shares in millions
+2.56
+3.04
+Earnings per share, diluted, attributable to equity holders of SAP SE
+(in €)
+2.56
+3.04
+3.35
+1,199
+1,198
+3.36
+1,198
+Earnings per share, basic, attributable to equity holders of SAP SE
+(in €)
+2017
+For more information about financial risk and how we manage it,
+see Notes (24) and (25).
+5,810
+305
+Carrying amount of trade receivables, net
+90
+1,422
+1,515
+Total past due but not individually impaired
+Individually impaired, net of allowances
+84
+95
+Past due over 365 days
+The changes in the allowances for doubtful accounts charged to
+expense were immaterial in all periods presented.
+5,825
+110
+Carrying amount trade receivables, net
+Past due 121 to 365 days
+-200
+Allowance for doubtful accounts charged to
+expense
+-74
+-89
+Past due but not individually impaired
+Past due 1 to 30 days
+266
+695
+170
+5,810
+5,825
+Past due 31 to 120 days
+459
+493
+541
+Consolidated Financial Statements IFRS and Notes | Notes
+2017
+Other Non-Financial Assets
+563
+424
+139
+696
+497
+199
+123
+○
+123
+209
+○
+209
+364
+107
+(14) Other Non-Financial Assets
+257
+264
+Total
+Non-Current
+Current
+Total
+Non-Current
+Current
+2016
+Total
+Miscellaneous other assets
+Capitalized contract cost
+Other tax assets
+Prepaid expenses
+€ millions
+123
+387
+2017
+0
+0
+136
+136
+Pension plans and similar obligations (see Note (18a))
+Current
+Current
+Total
+Non-
+Current
+Total
+Non-
+Current
+2016
+-163
+€ millions
+Provisions
+(18) Provisions
+177
+Consolidated Financial Statements IFRS and Notes | Notes
+140
+140
+Other provisions (see Note (18b))
+184
+Domestic Plans
+€ millions
+Present Value of the Defined Benefit Obligations (DBO) and the Fair Value of the Plan Assets
+plans are December 31.
+The measurement dates for our domestic and foreign benefit
+Defined Benefit Plans
+Obligations
+(18a) Pension Plans and Similar
+400
+Other taxes mainly comprise payroll tax liabilities and value-
+added tax liabilities.
+217
+487
+303
+184
+Total
+260
+77
+183
+351
+167
+183
+Foreign Plans
+Other employee-related liabilities mainly relate to vacation
+obligations, bonus and sales commission obligations, as well as
+employee-related social security obligations.
+4,160
+340
+815
+Share-based payment liabilities
+Total
+Non-Current
+Current
+Total
+Non-Current
+Current
+2016
+2017
+€ millions
+Other Non-Financial Liabilities
+(17c) Other Non-Financial Liabilities
+The U.S. private placement notes were issued by one of our
+subsidiaries that has the U.S. dollar as its functional currency.
+Private placements
+1,717
+1,130
+107
+1,154
+602
+309
+911
+461
+3,699
+4,450
+503
+3,947
+Other non-financial liabilities
+552
+0
+552
+For more information about our share-based payments, see
+Note (27).
+568
+568
+Other taxes
+2,697
+152
+2,545
+2,728
+163
+2,565
+Other employee-related liabilities
+0
+Other Post-
+Employment Plans
+Total
+2017
+-63
+-79
+-64
+-11
+-9
+2
+0
+1
+0
+1
+0
+0
+Non-current provisions
+Non-current other financial assets
+of Financial Position:
+Amounts recognized in the Consolidated Statement
+140
+134
+50
+-50
+-136
+-140
+€794 million (2016: €789 million) of the present value of the
+DBO of our domestic plans relate to plans that provide for lump-
+sum payments not based on final salary, and €329 million
+(2016: €316 million) of the present value of the defined benefit
+obligations of our foreign plans relate to plans that provide for
+annuity payments not based on final salary.
+Private placement transactions
+125
+965
+125
+1,005
+1,130
+420
+1,240
+418
+62
+1,298
+Bank loans
+24
+0
+24
+0
+24
+16
+0
+16
+1,717
+79
+63
+11
+336
+854
+857
+Thereof fully or partially funded plans
+1,321
+1,357
+98
+118
+369
+324
+382
+857
+Present value of the DBO
+2016
+2017
+2016
+2017
+2016
+2017
+2016
+854
+93
+78
+1,271
+9
+Net defined benefit liability (asset)
+1,181
+1,223
+48
+56
+290
+319
+843
+74
+848
+69
+86
+24
+40
+45
+46
+0
+Thereof unfunded plans
+1,252
+Fair value of the plan assets
+US$100
+3.57%
+3.53% (fix)
+1.75% (fix)
+1.86%
+€1,000
+991
+990
+Eurobond 10 - 2015
+2017
+100.000%
+0.000% (var.)
+0.11%
+€500
+0
+500
+Eurobond 11 - 2015
+2020
+100.000%
+0.000% (var.)
+0.07%
+€650
+99.284%
+2027
+Eurobond 9-2014
+994
+2.125% (fix)
+2.29%
+€750
+768
+776
+Eurobond 7 - 2014
+2018
+100.000%
+0.000% (var.)
+649
+0.08%
+750
+749
+Eurobond 8-2014
+2023
+99.478%
+1.125% (fix)
+1.24%
+€1,000
+995
+€750
+648
+Eurobond 12 - 2015
+2025
+2017
+2016
+Carrying
+Amount
+Carrying Amount
+(in € millions)
+currency in
+(in € millions)
+millions)
+U.S. private placements
+(in respective
+Tranche 2-2010
+2.95% (fix)
+3.03%
+US$200
+0
+189
+Tranche 4-2011
+2018
+3.43% (fix)
+3.50%
+2017
+496
+Nominal Volume
+Coupon Rate
+Eurobond 13 - 2016
+2018
+99.264%
+100.000%
+1.00% (fix)
+0.000% (var.)
+1.13%
+€600
+594
+594
+0.03%
+Effective Interest
+Rate
+€400
+400
+Eurobonds
+5,147
+6,147
+All of our Eurobonds are listed for trading on the Luxembourg
+Stock Exchange.
+176
+Consolidated Financial Statements IFRS and Notes | Notes
+Private Placement Transactions
+Maturity
+400
+6,147
+0
+3.59%
+0
+US$242.5
+2.16%
+2.13% (fix)
+2017
+Tranche 5-2012
+141
+0
+16
+Financial debt
+1,299
+4,965
+1,298
+5,002
+6,301
+1,435
+6,390
+1,430
+6,450
+229
+Tranche 6-2012
+2020
+2.82% (fix)
+2027
+Tranche 9 2012
+334
+289
+US$323
+3.37%
+3.33% (fix)
+2024
+Tranche 8-2012
+7,880
+439
+US$444.5
+3.22%
+3.18% (fix)
+2022
+Tranche 7 2012
+278
+241
+US$290
+2.86%
+382
+Derivatives
+NA
+NA
+6,481
+8,294
+Financial liabilities are unsecured, except for the retention of
+title and similar rights customary in our industry. Effective
+interest rates on our financial debt (including the effects from
+interest rate swaps) were 1.29% in 2017, 1.25% in 2016, and
+1.30% in 2015.
+For an analysis of the contractual cash flows of our financial
+liabilities based on maturity, see Note (24). For information
+about the risk associated with our financial liabilities, see
+Note (25). For information about fair values, see Note (26).
+Bonds
+2017
+Maturity
+Issue Price
+Coupon Rate
+1,813
+Effective
+Interest Rate
+Carrying
+Amount
+(in € millions)
+2016
+Carrying
+Amount
+(in € millions)
+Eurobond 2-2010
+2017
+Eurobond 6-2012
+2019
+99.780%
+99.307%
+3.50% (fix)
+Nominal Volume
+(in respective
+currency in
+millions)
+€500
+6,595
+1,561
+57
+29
+86
+ΝΑ
+ΝΑ
+152
+43
+194
+Other financial liabilities
+5,034
+ΝΑ
+205
+2
+208
+ΝΑ
+ΝΑ
+231
+-12
+219
+Financial liabilities
+ΝΑ
+54
+5,151
+5.150
+589
+2,186
+2,256
+5,135
+Foreign currency exchange differences
+-4
+-16
+-208
+-219
+-447
+Additions amortization
+79
+254
+327
+660
+Retirements/disposals
+0
+-51
+-688
+104
+December 31, 2016
+-109
+-92
+526
+1,812
+1,938
+4,379
+Foreign currency exchange differences
+1
+5
+54
+59
+-58
+119
+○
+74
+321
+351
+746
+Retirements/disposals
+0
+-16
+-1
+Additions amortization
+103
+-797
+100
+Ariba Customer relationships
+hybris Customer relationships
+Concur Acquired technologies
+Concur Customer relationships
+Total significant intangible assets
+Goodwill Impairment Testing
+SAP had two operating segments at the end of 2017. For more
+information about our segments, see Note (28).
+The carrying amount of goodwill has been allocated for
+impairment testing purposes to those operating segments
+expected to benefit from goodwill.
+Goodwill by Operating Segment
+€ millions
+December 31, 2016
+December 31, 2017
+The key assumptions on which management based its cash flow
+projections for the period covered by the underlying business
+plans are as follows:
+Carrying Amount Remaining Useful
+2017
+2016
+SuccessFactors - Customer relationships
+Sybase Customer relationships
+€ millions, unless otherwise stated
+Significant Intangible Assets
+601
+1,544
+2,306
+4,551
+Carrying amount
+December 31, 2016
+December 31, 2017
+Other additions to software and database licenses in 2017 and
+2016 were individually acquired from third parties and include
+cross-license agreements and patents.
+172
+December 31, 2017
+23,311
+721
+2,863
+27,097
+21,274
+208
+448
+2,311
+24,241
+Consolidated Financial Statements IFRS and Notes | Notes
+202
+January 1, 2016
+Accumulated amortization
+28,792
+IPRD
+Relationship and
+Other Intangibles
+January 1, 2016
+22,792
+727
+2,796
+5,033
+31,348
+Foreign currency exchange differences
+566
+7
+71
+135
+779
+Additions from business combinations
+57
+0
+41
+22
+Technology
+Database
+Licenses
+Total
+Customer
+54
+62
+○
+62
+725
+621
+1,346
+581
+532
+120
+1,113
+Consolidated Financial Statements IFRS and Notes | Notes
+171
+(15) Goodwill and Intangible Assets
+Goodwill and Intangible Assets
+€ millions
+Historical cost
+Goodwill
+Software and
+Acquired
+Prepaid expenses primarily consist of prepayments for
+operating leases, support services, and software royalties.
+Other additions
+0
+74
+51
+73
+332
+Other additions
+0
+93
+0
+10
+103
+0
+Retirements/disposals
+-53
+-688
+-62
+-803
+December 31, 2017
+21,374
+809
+1,992
+4,617
+0
+Life
+(in years)
+208
+-3,072
+0
+21
+95
+Retirements/disposals
+0
+-17
+-1
+-92
+-110
+Additions from business combinations
+December 31, 2016
+791
+2,907
+5,119
+32,232
+Foreign currency exchange differences
+-2,249
+-22
+-278
+-523
+23,415
+226
+325
+4 to 6
+primarily to the replacement and purchase of IT infrastructure
+(data centers, and so on).
+(17) Trade and Other Payables, Financial Liabilities, and Other Non-
+Financial Liabilities
+(17a) Trade and Other Payables
+Trade and Other Payables
+€ millions
+Trade payables
+Advance payments received
+Miscellaneous other liabilities
+Trade and other payables
+2017
+2016
+Current
+Non-Current
+Total
+Current
+Non-Current
+Total
+952
+0
+2,967
+213
+1,592
+2,580
+4.4
+174
+Consolidated Financial Statements IFRS and Notes | Notes
+(16) Property, Plant, and Equipment
+Property, Plant, and Equipment
+€ millions
+Net Value
+December 31, 2016
+December 31, 2017
+952
+Total additions (other than from business combinations)
+amounted to €1,196 million (2016: €933 million) and relate
+Other Property,
+Plant, and
+Equipment
+Advance
+Payments and
+Construction in
+Progress
+Total
+1,137
+1,162
+1,297
+146
+Land and
+Buildings
+1,015
+0
+1,015
+2016
+Nominal Volume
+Carrying Amount
+Nominal Volume
+Carrying Amount
+Current
+Non- Current
+Current
+Non-
+Current
+Total Current
+2017
+Non-
+Current
+Non-
+Current
+Total
+Bonds
+1,150
+4,000
+1,149
+3,997
+5,147
+1,000
+Current
+5.6
+€ millions
+(17b) Financial Liabilities
+58
+58
+145
+○
+145
+141
+119
+260
+120
+Financial Liabilities
+127
+1,151
+119
+1,270
+1,280
+127
+1,407
+Miscellaneous other liabilities mainly include deferral amounts
+for free rent periods and liabilities related to government grants.
+Consolidated Financial Statements IFRS and Notes | Notes
+175
+247
+996
+-15
+Target operating margin at the end of the
+budgeted period (change in percentage
+points)
+34
+23,311
+14,657
+6,617
+0
+21,274
+Consolidated Financial Statements IFRS and Notes | Notes
+173
+Key Assumption
+Budgeted revenue growth
+Budgeted operating margin
+Pre-tax discount rates
+Terminal growth rate
+Basis for Determining Values Assigned to Key Assumption
+Revenue growth rate achieved in the current fiscal year, adjusted for an expected increase
+in SAP's addressable cloud and database markets; expected growth in the established
+software applications and analytics markets. Values assigned reflect our past experience
+and our expectations regarding an increase in the addressable markets.
+The following weighted average assumptions were used for the
+actuarial valuation of our domestic and foreign pension liabilities
+as well as other post-employment benefit obligations as at the
+respective measurement date:
+Our estimated cash flow projections are discounted to present value using pre-tax discount
+rates. Pre-tax discount rates are based on the weighted average cost of capital (WACC)
+approach.
+Our estimated cash flow projections for periods beyond the business plan were
+extrapolated using segment-specific terminal growth rates. These growth rates do not
+exceed the long-term average growth rates for the markets in which our segments operate.
+Key Assumptions and Detailed Planning Period
+7,439
+15,839
+Services
+Total
+261
+353
+8
+366
+483
+1 to 10
+83
+106
+10
+SAP Business
+Network
+261
+4
+1,073
+1,281
+13 to 17
+2,270
+2,844
+Applications,
+Technology &
+SAP Business
+Network
+Other
+296
+2016
+Percent, unless
+otherwise stated
+Applications, Technology
+9
+9
+(in years)
+Applications, Technology & Services
+The recoverable amount of the segment has been determined
+based on a value-in-use calculation. The calculation uses cash
+flow projections based on actual operating results and a group-
+wide business plan approved by management.
+We believe that no reasonably possible change in any of the
+above key assumptions would cause the carrying amount of our
+Applications, Technology & Services segment to exceed the
+recoverable amount.
+SAP Business Network
+The recoverable amount of the segment has been determined
+based on fair value less costs of disposal calculation. The fair
+value measurement was categorized as a level 3 fair value based
+on the inputs used in the valuation technique. The cash flow
+projections are based on actual operating results and specific
+estimates covering a detailed planning period and the terminal
+growth rate thereafter. The projected results were determined
+based on management's estimates and are consistent with the
+assumptions a market participant would make. The segment
+operates in a relatively immature area with significant growth
+rates projected for the near future. We therefore have a longer
+and more detailed planning period than one would apply in a
+more mature segment.
+4
+We are using a target operating margin of 33% (2016: 34%) for
+the segment at the end of the budgeted period as a key
+assumption, which is within the range of expectations of market
+participants (for example, industry analysts).
+The following table shows amounts by which the key
+assumptions would need to change individually for the
+recoverable amount to be equal to the carrying amount:
+Sensitivity to Change in Assumptions
+SAP Business Network
+2017
+2016
+Budgeted revenue growth (change in
+percentage points)
+-8.6
+-6.9
+Pre-tax discount rate (change in
+percentage points)
+The recoverable amount exceeds the carrying amount by
+€8,143 million (2016: €6,404 million).
+-17
+3
+3.0
+& Services
+2017
+2016
+2017
+Budgeted revenue
+4.8
+6.7
+14.9
+15.0
+Detailed planning period
+growth (average of the
+Pre-tax discount rate
+10.6
+10.4
+11.9
+11.7
+Terminal growth rate
+2.9
+2.0
+3.0
+budgeted period)
+Sales allowances charged to revenue
+Operating margin budgeted for a given budget period equals the operating margin achieved
+in the current fiscal year, increased by expected efficiency gains. Values assigned reflect
+past experience, except for efficiency gains.
+4,185
+344
+357
+678
+800
+806
+Discount rate was 50 basis
+Present value of all defined
+benefit obligations if:
+2015
+2016
+311
+2017
+2016
+2017
+2015
+2016
+2017
+2015
+2016
+2017
+Plans
+2015
+114
+93
+79
+Foreign Plans
+Domestic Plans
+€ millions
+Total Expense of Defined Benefit Pension Plans
+1,221
+1,412
+1,446
+87
+101
+123
+359
+398
+411
+775
+913
+912
+Discount rate was 50 basis
+points lower
+points higher
+1,068
+1,237
+1,277
+Total
+Other Post-Employment
+Foreign Plans
+Domestic Plans
+0.0
+0
+0
+0
+0.1
+2.0
+2.0
+2.0
+Future pension increases
+6.3
+6.0
+5.0
+1.7
+1.7
+1.7
+2.5
+2.5
+2.5
+Future salary increases
+4.0
+4.0
+0.0
+Other Post-Employment
+Employee turnover
+2.0
+€ millions
+Sensitivity Analysis
+in discount rate assumption, holding all other actuarial
+assumptions constant. A reasonably possible change in all other
+actuarial assumptions would not materially influence the
+present value of all defined benefit obligations.
+The sensitivity analysis table shows how the present value of all
+defined benefit obligations would have been influenced by
+reasonably possible changes to above actuarial assumptions.
+The sensitivity analysis table presented below considers change
+1.0
+1.1
+1.0
+1.4
+1.4
+1.4
+2.0
+2.0
+2.0
+Inflation
+8.7
+8.6
+8.2
+10.3
+10.3
+16.2
+2.0
+2.0
+Total
+Plans
+2017
+21
+22
+22
+10
+6
+11
+Total expense
+0
+○
+2
+0
+0
+2
+0
+0
+0
+0
+0
+0
+Past service cost
+-22
+19
+-23
+12
+52
+179
+Consolidated Financial Statements IFRS and Notes | Notes
+benefit plans. Although our policy is to invest in a risk-diversified
+portfolio consisting of a mix of assets, both the defined benefit
+obligation and plan assets can fluctuate over time, which
+exposes the Group to actuarial and market (investment) risks.
+Depending on the statutory requirements in each country, it
+might be necessary to reduce any underfunding by addition of
+liquid assets.
+Our investment strategies for foreign benefit plans vary
+according to the conditions in the country in which the
+respective benefit plans are situated. Generally, a long-term
+investment horizon has been adopted for all major foreign
+Our investment strategy on domestic benefit plans is to invest
+all contributions in stable insurance policies.
+-74
+100
+5
+2
+2
+3
+0
+1
+19
+-76
+40
+97
+-17
+Actual return on plan assets
+41
+40
+10
+3.9
+-22
+-1
+10
+15
+21
+21
+22
+10
+10
+7
+11
+Current service cost
+2015
+2016
+2017
+2015
+2016
+2017
+2015
+2016
+2017
+2015
+2016
+9
+-2
+48
+40
+-2
+-3
+-2
+-2
+-17
+-20
+-18
+Interest income
+23
+25
+24
+3
+3
+4
+3
+3
+2
+17
+19
+18
+Interest expense
+38
+4,313
+125
+2015
+Non-Current
+Total
+Current
+Non-Current
+Total
+5,809
+1
+5,810
+5,823
+2
+5,825
+90
+116
+Current
+207
+124
+225
+5,899
+6,017
+5,924
+126
+6,050
+Aging of Trade Receivables
+€ millions
+Gross carrying amount
+2017
+2016
+€ millions
+101
+2016
+2017
+Carrying Amounts of Trade Receivables
+US$150
+0.7
+0.6
+0.8
+2.7
+2.1
+2.3
+Discount rate
+2016
+2017
+2015
+2016
+2017
+2015
+2016
+2017
+Other Post-Employment Plans
+Foreign Plans
+Domestic Plans
+Percent
+Actuarial Assumptions
+Consolidated Financial Statements IFRS and Notes | Notes
+178
+(13) Trade and Other Receivables
+Trade and Other Receivables
+€ millions
+Trade receivables, net
+Other receivables
+Total
+2017
+2016
+118
+6,114
+6,047
+Not past due and not individually impaired
+351
+Employee-related provisions primarily comprise obligations for
+time credits, severance payments, jubilee expenses, and
+semiretirement. The increase in the employee-related
+provisions mainly results from restructuring-related termination
+benefits which were transformed into time credits. While most
+of these employee-related provisions could be claimed within
+the next 12 months, we do not expect the related cash outflows
+within this time period.
+Customer-related provisions mainly include expected contract
+losses. The associated cash outflows are substantially short-
+term in nature. Furthermore, obligations resulting from
+customer-related litigation and claims are included. The related
+cash outflows are uncertain.
+For more information about our restructuring plans, see
+Note (6). Restructuring provisions comprise contract
+180
+Consolidated Financial Statements IFRS and Notes | Notes
+termination costs, including those relating to the termination of
+lease contracts. The cash outflows associated with employee-
+related restructuring costs are substantially short-term in
+nature. Utilization of the portion of the facility-related
+restructuring provisions depends on the remaining term of the
+associated lease.
+Miscellaneous other provisions comprise intellectual property-
+related provisions which relate to litigation matters further
+described in Note (23), as well as facility-related onerous
+contract provisions and renovation and restoration obligations.
+The timing of the associated cash outflows is dependent on the
+remaining term of the underlying contract.
+Derivative financial liabilities
+-3,639
+Deferred income consists mainly of prepayments made by our
+customers for cloud subscriptions and support; software
+support and services; fees from multiple-element arrangements
+allocated to undelivered elements; and amounts recorded in
+purchase accounting at fair value for obligations to perform
+under acquired customer contracts in connection with
+acquisitions.
+(20) Total Equity
+Issued Capital
+SAP SE has issued no-par value bearer shares with a calculated
+nominal value of €1 per share. All of the shares issued are fully
+paid.
+Currency derivatives not designated as hedging instruments
+Derivative financial assets
+-43
+-168
+(19) Deferred Income
+Currency derivatives not designated as hedging instruments
+Thereafter
+Contractual Cash Flows
+Total of non-derivative financial liabilities
+-9,115
+-2,755
+-1,371
+-835
+-995
+-62
+-3,639
+188
+Consolidated Financial Statements IFRS and Notes | Notes
+Contractual Maturities of Derivative Financial Liabilities and Financial Assets
+€ millions
+Carrying
+Amount
+Contractual Cash Flows
+12/31/2017
+2018 Thereafter
+Carrying
+Amount
+12/31/2016
+-194
+2017
+-53
+-86
+millions
+Cash outflows
+-24
+-1
+Currency derivatives designated as hedging instruments
+0
+3,025
+292
+0
+-62
+Cash inflows
+-43
+-3,160
+-309
+-3,909
+Cash outflows
+-170
+-84
+3,857
+-18
+-475
+Cash inflows
+Total of derivative financial liabilities
+0
+0
+14
+8
+Cash inflows
+0
+0
+0
+-15
+Cash outflows
+0
+-1
+Interest rate derivatives designated as hedging instruments
+0
+442
+0
+74
+-8
+-995
+January 1, 2015
+-1,371
+5,567
+187
+Credit Risk
+To reduce the credit risk in investments, we arrange to receive
+rights to collateral for certain investing activities in the full
+amount of the investment volume, which we would be allowed to
+make use of only in the case of default of the counterparty to the
+investment. In the absence of other significant agreements to
+reduce our credit risk exposure, the total amounts recognized as
+cash and cash equivalents, current investments, loans and other
+financial receivables, trade receivables, and derivative financial
+assets represent our maximum exposure to credit risks, except
+for the agreements mentioned above.
+Liquidity Risk
+Number of Shares
+December 31, 2017. Financial liabilities for which repayment can
+be requested by the contract partner at any time are assigned to
+the earliest possible period. Variable interest payments were
+calculated using the latest relevant interest rate fixed as at
+December 31, 2017. As we generally settle our derivative
+contracts gross, we show the pay and receive legs separately for
+all our currency and interest rate derivatives, whether or not the
+fair value of the derivative is negative. The cash outflows for the
+currency derivatives are translated using the applicable spot
+rate.
+For more information about the cash flows for unrecognized but
+contractually agreed financial commitments, see Note (22).
+1,364
+Contractual Maturities of Non-Derivative Financial Liabilities
+Carrying
+Contractual Cash Flows
+Amount
+12/31/2017
+2018
+2019
+2020
+2021
+€ millions
+2022
+3,308
+2.313
+1,815
+In rare circumstances, transacting in a currency other than the
+functional currency also leads to embedded foreign currency
+derivatives being separated and measured at fair value through
+profit or loss.
+In addition, the intellectual property (IP) holders in the SAP
+Group are exposed to risks associated with forecasted
+intercompany cash flows in foreign currencies. These cash flows
+arise out of royalty payments from subsidiaries to the respective
+IP holder. The royalties are linked to the subsidiaries' external
+revenue. This arrangement leads to a concentration of the
+foreign currency exchange rate risk with the IP holders, as the
+royalties are mostly denominated in the subsidiaries' local
+currencies, while the functional currency of the IP holders with
+the highest royalty volume is the euro. The highest foreign
+currency exchange rate exposure of this kind relates to the
+currencies of subsidiaries with significant operations, for
+example the U.S. dollar, the pound sterling, the Japanese yen,
+the Swiss franc, and the Australian dollar.
+Generally, we are not exposed to any significant foreign
+currency exchange rate risk with regard to our investing and
+financing activities, as such activities are normally conducted in
+the functional currency of the investing or borrowing entity. For
+more information, see Note (25).
+b) Interest Rate Risk
+We are exposed to economic interest rate risk as a result of our
+investing and financing activities mainly in euros and U.S.
+dollars.
+€ millions
+Investing activities
+Financing activities
+4,486
+c) Equity Price Risk
+Consolidated Financial Statements IFRS and Notes | Notes
+2017
+2016
+Cash Flow Risk
+3,800
+Fair Value Risk
+985
+Cash Flow Risk
+Fair Value Risk
+We are exposed to equity price risk with regard to our
+investments in equity securities (2017: €827 million; 2016:
+€952 million) and our share-based payments (for the exposure
+from these plans, see Note (27)).
+-835
+Thereafter
+-952
+€ millions
+Carrying
+Amount
+Contractual Cash Flows
+12/31/2016
+2017
+2018
+2019
+2020
+-3,102
+-3,102
+2021
+Trade payables
+-1,016
+-1,016
+0
+0
+Financial liabilities
+-8,099
+-1,739
+Thereafter
+Trade payables
+-429
+-957
+-952
+0
+0
+○
+○
+0
+Financial liabilities
+-6,508
+-58
+-1,554
+-957
+-58
+-429
+Total of non-derivative financial liabilities
+-7,460
+-2,506
+-10
+-834
+-834
+-6
+74
+1
+Plan Asset Allocation
+41
+35
+Cash outflows
+-2,799
+0
+-1,902
+0
+Cash inflows
+2,831
+0
+1,938
+0
+Currency derivatives designated as hedging instruments
+29
+29
+12
+€ millions
+Asset category
+Equity investments
+Corporate bonds
+Government bonds
+90
+0
+122
+118
+0
+105
+Active Market
+Not Quoted in an
+Cash outflows
+2016
+Not Quoted in an
+Active Market
+2017
+Quoted in an
+Active Market
+Total
+Others
+Cash and cash equivalents
+Insurance policies
+Real estate
+Quoted in an
+Active Market
+-634
+0
+-241
+65
+13
+95
+71
+29
+8
+12
+-5
+93
+-99
+-14
+12
+(25) Financial Risk Management Foreign Currency Exchange Rate
+We manage market risks (that is, foreign currency exchange
+rate risk, interest rate risk, and equity price risk), credit risk, and
+liquidity risk on a Group-wide basis through our global treasury
+department. Our risk management and hedging strategy is set
+by our treasury guideline and other internal guidelines, and is
+subject to continuous internal risk analysis. Derivative financial
+instruments are only purchased to reduce risks and not for
+speculation, which is defined as entering into derivative
+instruments without a corresponding underlying transaction.
+Risk Management
+We continuously monitor our exposure to currency fluctuation
+risks based on monetary items and forecasted transactions and
+pursue a Group-wide strategy to manage foreign currency
+exchange rate risk, using derivative financial instruments,
+primarily foreign exchange forward contracts, as appropriate,
+with the primary aim of reducing profit or loss volatility. Most of
+the hedging instruments are not designated as being in a hedge
+accounting relationship. For more information, see Note (3a).
+Consolidated Financial Statements IFRS and Notes | Notes
+189
+-97
+0
+112
+56
+0
+Cash inflows
+654
+0
+252
+0
+Interest rate derivatives designated as hedging instruments
+24
+62
+Cash outflows
+Total of derivative financial assets
+Total of derivative financial liabilities and assets
+47
+-12
+-43
+-38
+-83
+25
+Cash inflows
+10
+0
+5
+0
+48
+96
+Customer-related provisions
+188
+-3
+-1
+-42
+-77
+0
+fluctuations from ongoing ordinary operations is not considered
+significant. However, we occasionally generate foreign currency-
+denominated receivables, payables, and other monetary items
+by transacting in a currency other than the functional currency.
+To mitigate the extent of the associated foreign currency
+exchange rate risk, the majority of these transactions are
+hedged as described in Note (25).
+Employee-related provisions
+12/31/
+2017
+Currency
+Impact
+2017
+Release
+Utilization
+Accretion
+160
+Addition
+-5
+57
+390
+260
+38
+-2
+0
+-2
+1
+0
+-5
+41
+68
+0
+0
+-163
+0
+182
+49
+Restructuring provisions
+Miscellaneous other provisions
+Total other provisions
+-284
+1/1/
+Other Provisions
+864
+317
+873
+350
+0
+44
+45
+0
+Our expected contribution in 2018 to our domestic and foreign
+defined benefit pension plans is immaterial. The weighted
+duration of our defined benefit plans amounted to 13 years as at
+December 31, 2017, and 14 years as at December 31, 2016.
+11
+9
+864
+0
+873
+5
+49
+54
+0
+0
+€ millions
+Total future benefit payments from our defined benefit plans as
+at December 31, 2017, are expected to be €1,670 million (2016:
+€1,583 million). Of this amount, 80% has maturities of over five
+years, and 68% relates to domestic plans.
+on a percentage of the employees' salaries or on the amount of
+contributions made by employees. Furthermore, in Germany
+and some other countries, we make contributions to public
+pension plans that are operated by national or local government
+or a similar institution.
+(18b) Other Provisions
+647
+718
+787
+Total expense
+429
+484
+527
+Defined Contribution Plans/State Plans
+We also maintain domestic and foreign defined contribution
+plans. Amounts contributed by us under such plans are based
+State plans
+234
+260
+Defined contribution plans
+2015
+2016
+2017
+€ millions
+Total Expense of Defined Contribution Plans and
+State Plans
+218
+a) Foreign Currency Exchange Rate Risk
+As we are active worldwide, our ordinary operations are subject
+to risks associated with fluctuations in foreign currencies. Since
+the Group's entities mainly conduct their operating business in
+their own functional currencies, our risk of exchange rate
+-75
+We are exposed to various financial risks, such as market risks
+(including foreign currency exchange rate risk, interest rate risk,
+and equity price risk), credit risk, and liquidity risk.
+€ millions
+12/31/2016
+Cash Flows
+Business
+Combinations
+Foreign
+Currency
+Fair Value
+Changes
+Other 12/31/2017
+Current financial debt
+-1,435
+1,372
+Reconciliation of Liabilities Arising from Financing Activities
+1
+0
+-1,290
+-1,299
+Non-current financial debt
+-6,390
+-8
+144
+0
+1,289
+-4,965
+54
+Financial debt (nominal volume)
+Total financial debt consists of current and non-current bank
+loans, bonds, and private placements. The changes in our
+financial debts are reconciled to the cash flows from liabilities
+arising from financing activities below. For more information
+about our financial debt, see Note (17).
+-4
+26,397
+60
+-3
+10,210
+24
+9,674
+22
+6
+6,747
+16
+In 2017, we repaid €1,000 million in Eurobonds and
+US$442.5 million in U.S. private placements at maturity. Thus,
+the ratio of total financial debt to total equity and liabilities
+decreased by three percentage points to 15% at the end of 2017
+(18% as at December 31, 2016).
+8,205
+-18
+16,958
+40
+17,880
+40
+-5
+42,497
+100
+44,277
+100
+19
+60
+-7,826
+1
+-45
+0
+2
+0
+9
+-34
+Assets held to hedge financial debt
+47
+0
+0
+Accrued interest
+1
+0
+24
+Total liabilities from financing activities
+-7,878
+1,364
+1
+194
+7
+2
+-6,311
+-24
+1,364
+-6,301
+31
+197
+0
+-1
+-6,264
+Basis adjustment
+-86
+0
+-7
+31
+0
+-7
+-62
+32
+0
+0
+-7
+26
+Financial debt (carrying amount)
+-7,880
+1,364
+1
+191
+Transaction costs
+25,540
+Total Equity and
+Liabilities
+€ millions
+The Articles of Incorporation authorize the Executive Board to
+increase the issued capital as follows:
+-
+- By up to a total amount of €250 million by issuing new no-par
+value bearer shares against contributions in cash until
+May 19, 2020 (Authorized Capital I). The issuance is subject
+to the statutory subscription rights of existing shareholders.
+By up to a total amount of €250 million by issuing new no-par
+value bearer shares against contributions in cash or in kind
+until May 19, 2020 (Authorized Capital II). Subject to the
+consent of the Supervisory Board, the Executive Board is
+authorized to exclude the shareholders' statutory
+subscription rights in certain cases.
+Contingent Shares
+SAP SE's share capital is subject to a contingent capital increase
+which may be effected only to the extent that the holders or
+creditors of convertible bonds or stock options issued or
+guaranteed by SAP SE or any of its directly or indirectly
+controlled subsidiaries under certain share-based payments
+exercise their conversion or subscription rights, and no other
+methods for servicing these rights are used. As at December 31,
+2017,
+€100 million, representing 100 million shares, was still
+available for issuance (2016: €100 million).
+Consolidated Financial Statements IFRS and Notes | Notes
+181
+Other Components of Equity
+€ millions
+Authorized Shares
+Exchange
+Differences
+Cash Flow
+Total
+Sale Financial
+Assets
+Hedges
+January 1, 2015
+362
+211
+-8
+564
+Other comprehensive income for items that will be reclassified to profit or loss, net
+of tax
+Available-for-
+1,861
+December 31, 2017
+1,229
+Issued
+Treasury
+Capital
+Shares
+1,229
+-33
+Reissuance of treasury shares under share-
+based payments
+0
+2
+December 31, 2015
+-35
+1,229
+Reissuance of treasury shares under share-
+based payments
+1
+December 31, 2016
+1,229
+-30
+Purchase of treasury shares
+0
+-5
+Reissuance of treasury shares under share-
+based payments
+0
+-31
+125
+11
+1,997
+Dividends
+The total dividend available for distribution to SAP SE
+shareholders is based on the profits of SAP SE as reported in its
+statutory financial statements prepared under the accounting
+rules in the German Commercial Code (Handelsgesetzbuch). For
+the year ended December 31, 2017, the Executive Board intends
+to propose that a dividend of €1.40 per share (that is, an
+estimated total dividend of €1,671 million), be paid from the
+profits of SAP SE.
+Dividends per share for 2016 and 2015 were €1.25 and €1.15
+respectively and were paid in the succeeding year.
+(21) Additional Capital
+Disclosures
+Capital Structure Management
+The primary objective of our capital structure management is to
+maintain a strong financial profile for investor, creditor, and
+customer confidence, and to support the growth of our
+business. We seek to maintain a capital structure that will allow
+us to cover our funding requirements through the capital
+markets at reasonable conditions, and in so doing, ensure a high
+level of independence, confidence, and financial flexibility.
+SAP SE's long-term credit rating is "A2" by Moody's with stable
+outlook, and "A" by Standard & Poor's with positive outlook.
+182
+Consolidated Financial Statements IFRS and Notes | Notes
+By resolution of SAP SE's General Meeting of Shareholders held
+on June 4, 2013, the authorization granted by the General
+Meeting of Shareholders on June 8, 2010, regarding the
+acquisition of treasury shares was revoked to the extent it had
+not been exercised at that time, and replaced by a new
+authorization of the Executive Board of SAP SE to acquire, on or
+before June 3, 2018, shares of SAP SE representing a pro rata
+amount of capital stock of up to €120 million in aggregate,
+provided that the shares purchased under the authorization,
+together with any other shares in the Company previously
+acquired and held by, or attributable to, SAP SE do not account
+for more than 10% of SAP SE's issued share capital. Based on
+this authorization, we bought back five million of our shares in
+the total amount of €500 million in 2017. Although treasury
+shares are legally considered outstanding, there are no dividend
+or voting rights associated with shares held in treasury. We may
+redeem or resell shares held in treasury, or we may use treasury
+shares for the purpose of servicing option or conversion rights
+under the Company's share-based payment plans. Also, we may
+use shares held in treasury as consideration in connection with
+mergers with, or acquisitions of, other companies.
+Capital Structure
+Current liabilities
+Non-current liabilities
+Liabilities
+Total equity and liabilities
+12/31/2017
+12/31/2016
+A in %
+% of
+€ millions
+% of
+Total Equity and
+Liabilities
+Equity
+Market Risk
+508
+21
+December 31, 2015
+2,222
+336
+3
+2,561
+Other comprehensive income for items that will be reclassified to profit or loss, net
+of tax
+839
+-43
+-11
+785
+December 31, 2016
+3,062
+292
+-8
+3,345
+Other comprehensive income for items that will be reclassified to profit or loss, net
+of tax
+-2,732
+-135
+29
+-2,838
+December 31, 2017
+330
+157
+Reconciliation of Liabilities Arising from Financing Activities
+€ millions
+Treasury Shares
+Business
+Combinations
+1,425
+Net liquidity 2
+-1,479
+-3,153
+1,673
+Total
+2,782
+2,623
+Distribution Policy
+Our general intention is to remain in a position to return liquidity
+to our shareholders by distributing annual dividends totaling
+more than 40% (2016: 35%) of our profit after tax and by
+potentially repurchasing treasury shares in future.
+167
+In 2017, we distributed €1,499 million (€1.25 per share) in
+dividends for 2016 compared to €1,378 million paid in 2016 for
+2015 and €1,316 million paid in 2015 for 2014. Aside from the
+distributed dividend, in 2017, we also returned €500 million to
+our shareholders by repurchasing treasury shares.
+Our operating leases relate primarily to the lease of office space,
+hardware, and vehicles, with remaining non-cancelable lease
+terms between less than one year and 31 years. On a limited
+scale, the operating lease contracts include escalation clauses
+(based, for example, on the consumer price index) and renewal
+options. The contractual obligations for acquisition of property,
+plant, and equipment and intangible assets relate primarily to
+the construction of new and existing facilities and to the
+purchase of hardware, software, patents, office equipment, and
+vehicles. The remaining obligations relate mainly to marketing,
+consulting, maintenance, license agreements, cloud services
+and other third-party agreements. Historically, the majority of
+such purchase obligations have been realized.
+SAP invests and holds interests in other entities that manage
+investments in venture capital funds. On December 31, 2017,
+total commitments to make such investments amounted to
+€342 million (2016: €308 million), of which €161 million had
+been drawn (2016: €141 million). By investing in such venture
+capital funds, we are exposed to the risks inherent in the
+business areas in which the entities operate. Our maximum
+exposure to loss is the amount invested plus unavoidable future
+capital contributions.
+12/31/2015 Cash Flows
+Maturities of Other Financial Commitments
+€ millions
+Due 2018
+Due 2019 to 2022
+Due thereafter
+Total
+184
+As a result of our equity-settled share-based payments
+transactions (as described in Note (27)), we have commitments
+to grant SAP shares to employees. We intend to meet these
+commitments by reissuing treasury shares or to fulfill these
+obligations through an agent who administers the equity-settled
+programs and therefor purchases shares on the open market.
+Operating Leases
+182
+-6,390
+property, plant, and equipment and intangible
+assets
+Group liquidity
+4,785
+4,673
+112
+Other purchase obligations
+934
+650
+Current financial debt
+Investments in venture capital funds
+-1,299
+136
+Purchase obligations
+1,141
+877
+Net liquidity 1
+3,486
+3,238
+248
+Non-current financial debt
+-4,965
+-1,435
+Purchase Obligations
+December 31, 2017
+Investments in Venture Capital
+Funds
+322
+Wellogix trade secrets. That court likewise ruled in SAP's favor
+and Wellogix has appealed that decision. The appeal is expected
+to conclude in 2018.
+Customer-Related Litigation and
+Claims
+Customer-related litigation and claims include cases in which we
+indemnify our customers against liabilities arising from a claim
+that our products infringe a third party's patent, copyright, trade
+secret, or other proprietary rights. Occasionally, consulting or
+software implementation projects result in disputes with
+customers. Where customers are dissatisfied with the products
+and services that we have delivered to them in routine
+consulting contracts or development arrangements, we may
+grant functions or performance guarantees.
+The carrying amount of the provisions recorded for customer-
+related litigation and claims and the development of the carrying
+amount in the reporting period are disclosed in Note (18b). The
+expected timing or amounts of any resulting outflows of
+economic benefits from these lawsuits and claims is uncertain
+and not estimable, as they generally depend on the duration of
+the legal proceedings and settlement negotiations required to
+resolve the litigation and claims and the unpredictability of the
+outcomes of legal disputes in several jurisdictions. For more
+information, see Note (3c).
+Contingent liabilities exist from customer-related litigation and
+claims for which no provision has been recognized. Generally, it
+is not practicable to estimate the financial impact of these
+contingent liabilities due to the uncertainties around these
+lawsuits and claims outlined above.
+Tax-Related Litigation and Claims
+We are subject to ongoing audits by domestic and foreign tax
+authorities. In respect of non-income taxes, we, like many other
+companies operating in Brazil, are involved in various
+proceedings with Brazilian tax authorities regarding
+assessments and litigation matters on intercompany royalty
+payments and intercompany services. The total potential
+amount in dispute related to these matters for all applicable
+years is approximately €102 million (2016: €106 million). We
+have not recorded a provision for these matters, as we believe
+that we will prevail.
+For information about income tax-related litigation, see
+Note (10).
+Legal Contingencies
+185
+SAP received communications alleging conduct that may violate
+anti-bribery laws (including the U.S. Foreign Corrupt Practices
+Act (FCPA)). The Legal Compliance and Integrity Office of SAP is
+conducting investigations with the assistance of an external law
+firm and voluntarily advised local authorities as well as the U.S.
+The alleged conduct may result in monetary penalties or other
+sanctions under the FCPA and/or other anti-bribery laws. In
+addition, SAP's ability to conduct business in certain
+jurisdictions could be negatively impacted. Given the early stage
+of the comprehensive and exhaustive investigations and the
+corresponding remediation activities, and considering the
+complexity of individual factors and the large number of open
+questions, it is impossible at this point in time to assess the
+risks.
+We are implementing enhancements to our anti-corruption
+compliance program, including guidance and policy changes as
+well as additional internal controls related to compliance with
+international anti-bribery laws, and additional compliance staff.
+We continue to be fully committed to FCPA and other anti-
+bribery law compliance.
+Furthermore, we are investigating allegations regarding conduct
+that certain independent SAP partners violated SAP contractual
+terms and sold SAP products and services in embargoed
+countries. These SAP partners presumably did not adhere to
+SAP's strict procedures for indirect business activities. To the
+extent any company independent from SAP chooses not to
+follow SAP's licensing procedures, SAP is ultimately limited in its
+ability to stop their activities. SAP devotes considerable
+resources to prevent and mitigate such activities should they
+occur. We are also investigating allegations regarding direct
+sales between SAP and certain customers, who may have
+engaged in unauthorized activities in embargoed countries. The
+investigations are being conducted by SAP's Legal Compliance
+and Integrity Office with the assistance of an external law firm.
+In this context, SAP voluntarily self-disclosed potential export
+controls and economic sanctions violations to the U.S.
+Department of Justice and the U.S. Department of Treasury's
+Office of Foreign Assets Control (OFAC) in September 2017. At
+the same time, SAP provided notification to the U.S. Securities
+and Exchange Commission (U.S. SEC) and responded to an SEC
+comment letter on export restriction matters in October 2017.
+SAP has also provided disclosure to the U.S. Department of
+Commerce's Bureau of Industry and Security (BIS) based on the
+same alleged facts. Finally, pursuant to Section 219 of the U.S.
+Iran Threat Reduction and Syria Human Rights Act of 2012 and
+Section 13(r) of the U.S. Securities Exchange Act of 1934, SAP
+has filed the required Iran Notice with the SEC.
+As a reaction to preliminary findings, SAP has taken remedial
+actions to terminate access to SAP products and services for
+certain end users and block additional business activities with
+these end users through SAP or SAP partners. We are
+186
+Consolidated Financial Statements IFRS and Notes | Notes
+implementing enhancements to our export control compliance
+program, including adding further capacity to the Export Control
+Compliance team with a particular focus on high-risk countries.
+Given the early stage of the comprehensive and exhaustive
+investigations and the corresponding remediation activities, and
+considering the complexity of individual factors and the large
+number of open questions, it is impossible at this point in time to
+assess the risks.
+For the reasons outlined above, it is impossible at this point in
+time to determine whether the potential anti-bribery law
+violations and the potential export restriction violations
+represent present obligations of SAP and, if so, to reliably
+estimate the amount of these obligations. As a consequence, no
+provisions have been recognized for these potential violations in
+our consolidated financial statements 2017. It is also not
+practicable to estimate the financial effect of any contingent
+liabilities that may result from these potential violations.
+(24) Financial Risk Factors
+Securities and Exchange Commission (U.S. SEC) and the U.S.
+Department of Justice (U.S. DOJ). The investigations and
+dialogue with the local authorities and the U.S. SEC and U.S.
+DOJ are ongoing. SAP is cooperating with both the external law
+firm engaged for the investigation and the authorities.
+Consolidated Financial Statements IFRS and Notes | Notes
+In 2008, Wellogix, Inc. asserted trade secret misappropriation
+claims against SAP in U.S. federal court. Those claims were
+dismissed based on improper venue. In April 2010, SAP
+instituted legal proceedings (a declaratory judgment action) in
+the United States against Wellogix, Inc. and Wellogix Technology
+Licensing, LLC. The lawsuit sought a declaratory judgment that
+six patents owned by Wellogix were invalid or not infringed by
+SAP. The legal proceedings were stayed pending the outcome of
+six reexaminations filed by SAP with the United States Patent
+and Trademark Office (USPTO). All six reexaminations were
+decided in SAP's favor, the decisions were upheld on appeal,
+and the case has been dismissed. Wellogix re-asserted trade
+secret misappropriation claims against SAP. The court granted
+SAP's motion to dismiss based on improper venue for litigating
+the trade secret claims in the U.S. and Wellogix appealed that
+decision. The appeal was decided in SAP's favor and the claim
+was dismissed. In February 2015, SAP filed a declaratory
+judgment action in Frankfurt/Main, Germany, asking the
+German court to rule that SAP did not misappropriate any
+In February 2010, United States-based TecSec, Inc. (TecSec)
+instituted legal proceedings in the United States against SAP
+(including its subsidiary Sybase) and many other defendants.
+TecSec alleged that SAP's and Sybase's products infringe one
+or more of the claims in five patents held by TecSec. In its
+complaint, TecSec seeks unspecified monetary damages and
+permanent injunctive relief. The lawsuit is proceeding but only
+with respect to one defendant. The trial for SAP (including its
+subsidiary Sybase) has not yet been scheduled - the lawsuit for
+SAP (including its subsidiary Sybase) remains stayed.
+662
+182
+778
+386
+0
+358
+93
+0
+1,459
+1,141
+182
+Consolidated Financial Statements IFRS and Notes | Notes
+Our rental and operating lease expenses were €532 million,
+€458 million, and €386 million for the years 2017, 2016, and
+2015, respectively.
+(23) Litigation, Claims, and
+Legal Contingencies
+We are subject to a variety of claims and lawsuits that arise from
+time to time in the ordinary course of our business, including
+proceedings and claims that relate to companies we have
+acquired, claims that relate to customers demanding
+indemnification for proceedings initiated against them based on
+their use of SAP software, and claims that relate to customers
+being dissatisfied with the products and services that we have
+delivered to them. We will continue to vigorously defend against
+all claims and lawsuits against us. We currently believe that
+resolving the claims and lawsuits pending as at December 31,
+2017, will neither individually nor in the aggregate have a
+material adverse effect on our business, financial position,
+profit, or cash flows. The provisions recorded for these claims
+and lawsuits as at December 31, 2017, are neither individually
+nor in the aggregate material to SAP.
+However, the outcome of litigation and claims is intrinsically
+subject to considerable uncertainty. Management's view of
+these matters may also change in the future. Actual outcomes
+of litigation and claims may differ from the assessments made
+by management in prior periods, which could result in a material
+impact on our business, financial position, profit, cash flows, or
+reputation. Most of the lawsuits and claims are of a very
+individual nature and claims are either not quantified by the
+claimants or the claim amounts quantified are, based on
+historical evidence, not expected to be a good proxy for the
+expenditure that would be required to settle the case concerned.
+The specifics of the jurisdictions where most of the claims are
+located further impair the predictability of the outcome of the
+cases. Therefore, it is not practicable to reliably estimate the
+financial effect that these lawsuits and claims would have if SAP
+were to incur expenditure for these cases.
+Among the claims and lawsuits are the following classes:
+Intellectual Property-Related
+Litigation and Claims
+Intellectual property-related litigation and claims are cases in
+which third parties have threatened or initiated litigation
+claiming that SAP violates one or more intellectual property
+rights that they possess. Such intellectual property rights may
+include patents, copyrights, and other similar rights.
+The carrying amount of the provisions recognized for intellectual
+property-related litigation and claims and the change in the
+carrying amount in the reporting period are disclosed in
+Note (18b). The expected timing of any resulting outflows of
+economic benefits from these lawsuits and claims is uncertain
+and not estimable, as it depends generally on the duration of the
+legal proceedings and settlement negotiations required to
+resolve them. Uncertainties about the amounts result primarily
+from the unpredictability of the outcomes of legal disputes in
+several jurisdictions. For more information, see Note (3c).
+Contingent liabilities exist from intellectual property-related
+litigation and claims for which no provision has been recognized.
+Generally, it is not practicable to estimate the financial impact of
+these contingent liabilities due to the uncertainties around the
+litigation and claims, as outlined above. The total amounts
+claimed by plaintiffs in those intellectual property-related
+lawsuits or claims in which a claim has been quantified were not
+material to us as at December 31, 2017 and 2016. Based on our
+past experience, most of the intellectual property-related
+litigation and claims tend to be either dismissed in court or
+settled out of court for amounts significantly below the originally
+claimed amounts and not material to our consolidated financial
+statements.
+Individual cases of intellectual property-related litigation and
+claims include the following:
+-196
+971
+The table below is an analysis of the remaining contractual
+maturities of all our financial liabilities held as at
+Current investments
+0
+-27
+5
+0
+0
+-64
+Basis adjustment
+-7,826
+0
+0
+-86
+-42
+1,400
+-9,175
+Financial debt (nominal volume)
+-6,390
+1,413
+0
+-46
+-2
+852
+-8,607
+-8
+Non-current financial debt
+Transaction costs
+0
+774
+Assets held to hedge financial debt
+-1
+○
+1
+0
+0
+-45
+Accrued interest
+-7,880
+44
+-11
+-37
+-8
+1,400
+-9,195
+Financial debt (carrying amount)
+32
+-11
+0
+0
+0
+-27
+-1,435
+-45
+0
+the capital structure table above, we actively manage our
+liquidity and structure of our financial indebtedness based on
+the ratios group liquidity and net liquidity.
+Group Liquidity
+Commitments
+Other Financial Commitments
+€ millions
+2017
+-1,413
+€ millions
+2017
+While we continuously monitor the ratios presented in and below (22) Other Financial
+2016
+Operating leases
+1,459
+1,578
+Cash and cash equivalents
+4,011
+3,702
+309
+Contractual obligations for acquisition of
+227
+207
+Δ
+183
+2016
+-7,878
+-6
+4
+Consolidated Financial Statements IFRS and Notes | Notes
+547
+-567
+Current financial debt
+12/31/2016
+Other
+Foreign
+Currency
+100
+-43
+Fair Value
+Changes
+-3
+-12
+-33
+0
+-8
+1,357
+-40
+Total liabilities from financing activities
+47
+0
+-6
+-9,141
+13,000
+12/31/2007
+10 years
+22,010
+8.2
+12/31/2012
+5 years
+13,979
+12/31/2016
+1 year
+6.9
+16
+6.2
+6.5
+1.8
+Dividend Policy Increased to
+40%
+With strong growth and positive cash flow in 2017, we had a very
+successful year as customers continue to trust SAP to support
+their digital transformations. We want our shareholders to share
+greatly in this success, therefore we are increasing our dividend
+policy to pay a dividend totaling 40% or more of profit after tax
+in the future.
+At the Annual General Meeting of Shareholders, the Executive
+Board and the Supervisory Board will recommend increasing the
+total dividend for fiscal year 2017 by 12% to €1.40 per share
+(2016: €1.25)
+Capital stock unchanged
+SAP's capital stock as of December 31, 2017, was
+€1,228,504,232 (2016: €1,228,504,232). It is issued as
+1,228,504,232 no-par shares, each with an attribute value of €1
+in relation to capital stock.
+Shareholder structure
+Applying the definition accepted on the Frankfurt Stock
+Exchange, which excludes treasury stock from the free float, as
+of December 31, 2017, the free float stood at 85.2% (December
+31, 2016: 78.8%).
+30.0
+1.8
+S&P 500 Composite - total return index
+13.2
+To Our Stakeholders | Investor Relations
+Assuming all dividends were reinvested
+Source: Datastream
+12/31/2007
+10 years
+26,302
+10.2
+12/31/2012
+5 years
+15,398
+9.0
+12/31/2016
+10.6
+1 year
+12.8
+4.8
+5.4
+1.2
+2.0
+0.4
+-0.1
+8.3
+7.5
+0.5
+11,285
+Shareholder Structure
+Executive Board
+North America; 16%
+To Our Stakeholders | Corporate Governance Report
+reserved categories of transactions. The Executive Board
+regularly provides the Supervisory Board with full and timely
+reports on all material matters of strategy, business planning,
+and performance, including any deviations of actual business
+performance from plan, risks, risk management, and corporate
+compliance. We provide our shareholders with in-depth
+information about how the Executive Board and the Supervisory
+Board work, how the committees are composed, and how these
+committees work, in our corporate governance statement. For
+more information about the joint work of the Executive Board
+and the Supervisory Board and about the work of the
+Supervisory Board and its committees in 2017, see the Report
+by the Supervisory Board.
+Composition of the Supervisory
+Board
+The Supervisory Board members as a group possess the
+knowledge, ability, and expert experience required to properly
+perform its duties in our global IT company. At least one
+independent member has financial reporting and auditing
+expertise. The Supervisory Board has defined the following
+objectives for its own composition:
+-
+There should never be fewer than three persons of non-
+German origin on the shareholder representatives' side of the
+Supervisory Board.
+No employee, consultant, or director of a significant SAP
+competitor should be a Supervisory Board member.
+At least five shareholder representatives on the Supervisory
+Board, and at least ten members of the entire Supervisory
+Board, should be independent members in the meaning of
+Section 5.4.2 of the Code; the Supervisory Board considers
+these numbers as appropriate.
+No member of the Supervisory Board should be older than 75
+years.
+The duration of membership in the Supervisory Board is
+generally limited to a maximum of three terms of office of at
+least four full years each.
+In addition to these objectives, the Supervisory Board adopted a
+Profile of Skills and Expertise for the Supervisory Board which
+comprises general personal requirements applicable to each
+Supervisory Board member, as well as company-specific and
+professional requirements which must be fulfilled by the
+Supervisory Board as a whole. This means that the company-
+specific and professional requirements stated in the Profile of
+Skills and Expertise do not have to be met by each member of
+the Supervisory Board individually, but that it is sufficient if the
+knowledge, skills, and professional experience contributed by
+each of the Supervisory Board members combine to cover the
+totality of the company-specific and professional requirements
+stated in the Profile of Skills and Expertise. Proposals by the
+Supervisory Board to the General Meeting of Shareholders for
+the election of shareholders' representatives to the Supervisory
+Board shall aim at fulfilling the Profile of Skills and Expertise. The
+Profile of Skills and Expertise for the Supervisory Board is
+available on the SAP Web site.
+The Supervisory Board believes that the current composition of
+the Supervisory Board fulfills all of these objectives and the
+requirements contained in the Profile of Skills and Expertise.
+There is information about each member, the committees, and
+who serves on which committee, on the SAP Web site.
+Independence of the
+Supervisory Board
+SAP believes that a sufficient degree of independence of its
+Supervisory Board members is essential for effective and
+responsible corporate management and control. The
+Supervisory Board has a defined objective for its composition
+regarding the minimum number of independent members on the
+shareholder representative side, as recommended in the Code,
+Section 5.4.1, paragraph 2. The objective is five such members.
+At its meeting on October 12, 2017, the Supervisory Board
+determined that all of its shareholder representative members
+(that is, Hasso Plattner, Pekka Ala-Pietilä, Aicha Evans, Anja
+Feldmann, Wilhelm Haarmann, Gesche Joost, Bernard Liautaud,
+Erhard Schipporeit and Klaus Wucherer) are independent in the
+meaning of the Code, Section 5.4.2, based on the assumption
+that the duration of membership in the Supervisory Board does
+not per se exclude the relevant member from being considered
+as independent.
+Furthermore, the Supervisory Board determined that, including
+the employee representatives and taking into account the
+shareholder structure of SAP SE, it has an appropriate number
+of independent members in the meaning of the Code, Section
+5.4.2. This was based on the assumption that the employee
+representatives' capacity as employees does not per se raise
+any concerns as to their independence in the meaning of the
+Code, Section 5.4.2.
+The Audit Committee is chaired by Erhard Schipporeit, who for
+many years was the chief financial officer of a DAX company
+that is also listed on a U.S. stock exchange and therefore
+qualifies as an independent financial expert in the meaning of
+the Code, Section 5.3.2, and the German Stock Corporation Act,
+Section 100 (5).
+Diversity in the Company
+The Supervisory Board of SAP SE, which currently includes five
+women, meets the mandatory gender quota of 30%. The
+Supervisory Board also aims for diversity with regard to the
+composition of the Executive Board, which currently has two
+female members.
+To Our Stakeholders | Corporate Governance Report
+19
+Performance comparators
+18
+The Supervisory Board has 18 members who, in equal numbers,
+represent the shareholders and the employees. It appoints,
+monitors, and advises the Executive Board. The Executive Board
+involves the Supervisory Board in decisions on matters of
+fundamental importance for the Company. The Supervisory
+Board has reserved to itself the approval of certain transactions
+of fundamental importance, as set out in the Articles of
+Incorporation and detailed in the Supervisory Board's list of
+The size and composition of the Supervisory Board are
+governed not by the German Codetermination Act (which does
+not apply, because we are a European company) but by the
+Articles of Incorporation and the SAP SE Employee Involvement
+Agreement. Both documents are available on the SAP Web site.
+Supervisory Board
+Founders; 12%
+Private Investors /
+Unidentified; 29%
+Rest of World; 2%
+1,229 Million
+Outstanding Shares
+Germany; 8%
+Freefloat 85%
+UK/Ireland; 17%
+Europe (without
+Germany); 14%
+*11% of institutional investors (marked yellow) are classified as socially
+responsible investors (SRIs)
+To Our Stakeholders | Investor Relations
+Treasury Shares; 2%
+17
+We are a global company with an international shareholder base, Corporate Governance
+so we need sound governance. Good corporate governance
+means managing the Company accountably and transparently
+to secure long-term value. We believe our shareholders,
+business partners, employees, and the financial markets reward
+good corporate governance with the increased trust they place
+in our Company.
+Corporate Governance
+Principles at SAP
+SAP is an international firm with European roots, having the legal
+form of a European company (Societas Europaea, or SE). Being
+an SE headquartered in Germany, we are now subject to
+European and German law for SEs while remaining subject to
+German stock corporation law. Major characteristics of our
+governance structure remain in place since the conversion,
+notably our two-tier board comprising a Supervisory Board and
+an Executive Board, and parity for workforce representatives on
+the Supervisory Board. Because SAP SE is listed on a German
+stock exchange, our corporate governance is still based on the
+German Corporate Governance Code (the "Code" in this report).
+Since SAP is also listed in the United States, we comply with the
+rules that apply to non-U.S. companies listed on the New York
+Stock Exchange (NYSE). These include the requirements, as
+they apply to foreign private issuers, of the NYSE Corporate
+Governance Standards, the U.S. Sarbanes-Oxley Act of 2002,
+and the U.S. Securities and Exchange Commission (SEC).
+Section 161 Declaration
+Every year, as required by the German Stock Corporation Act,
+Section 161, the Executive Board and Supervisory Board issue a
+Section 161 Declaration stating whether SAP has implemented
+and is following the Code's recommendations, and identifying
+any recommendations that the Company has not followed - with
+a full explanation of why it has not done so. Our latest Section
+161 Declaration, published on October 27, 2017, is on the SAP
+Web site along with our declarations from previous years and
+links to the current and previous editions of the Code. As our
+2017 declaration shows, we currently follow all but two (previous
+year: five) of the 115 recommendations and all of the
+suggestions in the current Code.
+Statement
+On February 20, 2018, the Executive Board published a
+Corporate Governance Statement for 2017 pursuant to Sections
+315d and 289f of the German Commercial Code. The statement
+is on the SAP Web site. It comprises the current declaration
+pursuant to the German Stock Corporation Act, Section 161,
+certain details of our corporate governance practices, and an
+account of how the Executive Board and the Supervisory Board
+work, who serves on which Supervisory Board committees, and
+how those committees work. It also sets out the targets for the
+percentage of women on the Executive Board and the two
+management levels below Executive Board level, as well as
+information on the implementation of the minimum quota of
+men and women on the Supervisory Board, and details about
+the Diversity Policy of SAP SE.
+The Executive Board currently has nine members. It is solely
+responsible for managing the Company. It has a duty to exercise
+its management powers in the interest of the Company and in
+pursuit of the sustained growth of corporate value. It discusses
+and agrees its strategy for the Company with the Supervisory
+Board, ensures compliance with the requirements of the law
+throughout the Group, and maintains effective risk management
+structures and internal risk controls. The members of the
+Executive Board are appointed by the Supervisory Board which
+set a regular age limit of 65 years for the Executive Board.
+Information about each Executive Board member's portfolio of
+responsibilities is available on the SAP Web site.
+Corporate Governance Report
+Average annual return
+Date of investment
+Period of investment
+€1.40
+Increase in SAP stock
+in 2017
+12.8%
+Investor Relations
+Global Business Operations
+Chief Human Resources Officer
+Christian Klein
+Recommended dividend
+per share
+Stefan Ries
+Digital Business Services
+Robert Enslin
+Michael Kleinemeier
+Global Customer Operations Americas & APJ
+Jennifer Morgan
+Global Customer Operations EMEA & Greater China
+Adaire Fox-Martin
+President, Cloud Business Group
+Products & Innovation
+€114.8 bn
+at end of 2017
+■SAP-Share (Xetra) DAX 30 Performance Index (Xetra) S&P North American Technology Software Index Dow Jones EURO STOXX 50
+150
+Percent
+SAP Stock in Comparison to DAX 30, Dow Jones EURO STOXX 50, and S&P North American Technology Software Index
+December 30, 2016 (=100%) to December 29, 2017
+To Our Stakeholders | Investor Relations
+14
+Share priceses given are closing price on XETRA exchagne, unless otherwise stated.
+Market capitalization
+SAP's third-quarter figures, presented on October 20, were
+nevertheless met with initial caution from the market, and SAP
+stock hit a daily low of €92.27. SAP stock nevertheless rallied
+back to finish the day up 0.6%, closing at €95.60. The positive
+development spurred SAP stock all the way up to €100.35, its
+plateau for the year, on November 1. A combination of profit-
+taking, fears of the market overheating, and shifts away from
+technology stocks, which had increased sharply in value, to
+other securities caused prices to fall from the second week of
+November. Even the agreement on a tax reform in the USA
+shortly before Christmas could only trigger small quantitative
+effects on the markets. SAP stock nonetheless finished 2017
+with a strong year-on-year gain of 12.8%, closing on December
+29 at €93.45.
+€90.65 on March 16. Following the release of our favorable first-
+quarter 2017 results on April 25, SAP stock hit a new high,
+closing that day at €93.13. By May 10, the day of the Annual
+General Meeting of Shareholders, it stood at a record €95.04.
+This positive trend continued until June 2, reaching a high of
+€96.01 on June 22.
+share price a further boost, pushing SAP stock past the €90
+mark for the first time to close at
+On February 23, we announced an 9% increase in the dividend
+to €1.25 per share. Though this announcement did not initially
+impact the share price, the increase subsequently gave the
+After recording a new all-time high of €82.81 at the end of 2016,
+the SAP shares moved sideways at the beginning of 2017, more
+or less mirroring the movement of the DAX, and on January 4
+touched its lowest point of the year at €82.43¹. Publication of
+our strong final-quarter and full-year 2016 numbers on January
+24 initially had little effect on the share price. Buoyed by friendly
+market sentiment in early February, however, the share price
+then rallied through June, gaining a clear lead over the DAX.
+SAP Share Surpasses €100
+Mark for First Time
+The world's stock markets on the whole performed positively in
+2017, at times reaching new record levels. Despite short-term
+setbacks caused by the civil war in Syria, the conflict between
+the USA and North Korea, and key elections in Europe (Austria,
+France, Germany, and the Netherlands), the stock market's
+fundamentally positive trend held its ground. SAP stock was
+able to grow significantly in this climate, once again
+outperforming the benchmark indices: SAP shares increased
+12.8%, whereas the DAX 30 rose 12.5% and the EURO STOXX
+50 gained 6.7%. In terms of market capitalization, SAP
+remained the most valuable DAX company and currently ranks
+60th worldwide.
+Stock Markets Bullish in
+Difficult Environment - SAP
+Most Valuable Company in DAX
+Index
+On June 27, signals pointing to a turnaround in the European
+Central Bank's monetary policy sent the German stock market
+on a prolonged downward trajectory, and the SAP share was not
+immune to this trend. Market uncertainty reached its peak at the
+end of August with the threat of escalation in the USA/North
+Korea conflict. Against this backdrop, not even the publication of
+our strong second-quarter 2017 results could spark an upswing
+in the share price, which ultimately fell to €87.14 on August 29.
+Investor confidence, however, slowly returned at the beginning
+of September as global political tensions eased, giving way to an
+upturn in the markets.
+145
+Bernd Leukert
+Luka Mucic
+-
+As a market leader, SAP considers defeating bias in the
+workplace to be a moral imperative. We will only accelerate our
+work in this area until people of all backgrounds can avail
+themselves equally of professional advancement.
+We also continue to build a diverse and inclusive culture at SAP,
+exceeding our goal of 25% women in leadership positions. It is
+important to recognize that SAP is focused on developing the
+best leaders. When we focus on the best, we see everyone rise
+on their merits. There are no finer examples of this than Jennifer
+Morgan and Adaire Fox-Martin, both appointed to the Executive
+Board in 2017.
+We are proud to power our global data centers with 100%
+renewable energy. SAP was ranked #1 in the Dow Jones
+Sustainability Index for the 11th year in a row.
+As part of our company's strong commitment to service,
+more SAP colleagues are making time to serve their
+communities - both locally and globally - through our Month
+of Service and SAP Social Sabbatical programs.
+Our industry-leading Autism at Work program has now
+expanded to 110 SAP teams, harnessing the talents of
+differently-abled colleagues around the world.
+Our people are healthier than ever, based on our Business
+Health Culture Index.
+a record percentage of employees who are also shareholders
+of the company.
+Because we stand on the shoulders of giants - none larger than
+our founder and chairman Hasso Plattner we do not rest on
+our success. Our stakeholders deserve a company free from
+complacency, untarnished by low expectations. In this regard,
+we are never done.
+SAP employee engagement has never been higher, leading to
+-
+-
+With our business thriving, our employees are enthusiastic. As a
+truly integrated report, we showcase non-financial indicators
+and their financial impact.
+Our 2017 results were the latest in our record run. New cloud
+bookings surged 30%. Cloud subscriptions and support backlog
+soared 38%, hitting €7.5 billion. We have a nearly four billion
+euro cloud business, growing faster than most standalone cloud
+companies. New cloud and software license order entry is up
+17%. In short: our customers continue to invest their trust in
+SAP.
+With cloud established as the pervasive computing theme of
+this generation, we acquired the best assets to help customers
+innovate at scale. Today, we lead the industry by measure of
+cloud users with the most complete modular suite of
+solutions - ERP, line of business, business networks.
+We presided over a full-scale business model transformation
+of SAP, delivering a consistent trifecta of fast cloud growth,
+software license growth, and operating income growth.
+-
+-
+-
+Chief Financial Officer
+A Word About Our Challenges and Opportunities
+To satisfy our ambitions for SAP, we remain keenly focused on
+addressing the most significant challenges because they are our
+biggest opportunities.
+Another challenge involves maturing technologies like
+artificial intelligence (AI). As many businesses accept the
+premise of technology-driven change, public anxiety
+surrounding this disruption has only increased. This creates
+an obvious burden that stretches across the public, private,
+and not-for-profit sectors. While we do not take an alarmist
+view, we do believe the world has not yet adequately focused
+on all the impending economic implications. With careful
+foresight, automation represents a once-in-a-generation
+opportunity to address societal challenges. Gartner predicts
+Al-enabled tools will generate greater than €3B in business
+value in 2021 and become a positive net job motivator,
+creating 2.3M jobs while eliminating 1.8M, a gain of 500,000
+jobs. In cases where machine efficiency outweighs human
+discretion, we will engineer applications to absorb these
+processes. The correlating productivity gains will only be
+achieved when human workforces then rise into meaningful
+work which had been historically hampered by administrative
+complexity. This is why SAP's global strategy, fueled by SAP
+Leonardo technologies and services, is to make every
+business an intelligent enterprise. We are focused on
+business "next practices," the intersection of machine
+learning and augmented humanity. Success in the era of Al
+will only fully be recognized when we take the steps to initiate
+all people. We must not allow this period of uncertainty to
+deepen economic divides, especially as its real impact will be
+to surface transformational solutions for a better world.
+The challenges facing our customers during this period of
+unprecedented technological change cannot be stressed
+enough. There are certain aspects of this new economy that
+go beyond SAP's (or any vendor's) control. Other elements
+must be addressed by SAP in comprehensive fashion,
+including the modernization of our pricing, contracts and
+commercial practices. This is why customer loyalty is one of
+our four corporate objectives, along with growth, profitability,
+and employee engagement. SAP has never been more open
+than we are today. In addition to direct customer
+engagement, we aggressively pursue all constructive inputs,
+Chief Executive Officer
+Bill McDermott
+Board
+SAP Executive
+To Our Stakeholders | Letter from the CEO
+Bill McDermott
+CEO
+SAP SE
+Very truly yours,
+When we ask chief executive officers to identify their biggest
+challenge, most answer "complexity." CEOs know that the
+simplest global brands outperform the major indexes by
+330%. Also, that 64% of consumers are willing to pay more
+for simpler experiences. This only proves that we were
+correct to make "Run Simple" the organizing principle of
+SAP. In 2017, we welcomed Christian Klein to the Executive
+Board as our chief operating officer. His mandate is to drive
+the Run Simple operating model throughout SAP, to
+significantly streamline our operations and to create the best
+possible end-to-end customer experience.
+As we close out another successful year only to embark on
+another, we offer our enduring gratitude for your confidence,
+trust, and support.
+While we continue to deliver financial success, we measure
+ourselves on our ability to address the world's greatest
+challenges. We invite you to hold us accountable on all fronts:
+economic, societal, environmental.
+To the stakeholders of SAP, we believe we have delivered results
+worthy of our founders' legacy. Profitable growth, year after
+year. A transformation to the fastest-growing enterprise cloud
+company at scale. Promises made, promises kept. A strong
+foundation to achieve our bold ambitions for 2020 and beyond.
+First, to our customers around the world, we pledge our ongoing
+commitment to your success. We know that earning your trust
+requires empathy, intellectual curiosity, and above all, humility.
+This is a fractured world. Trust remains the ultimate human
+currency. We will fight like underdogs to be worthy of it. Of SAP,
+you have every right to expect a global market leader that
+understands your unique business challenges, regardless of
+size, industry, or geography. We recommit ourselves to be your
+trusted innovator, to look around corners for the next big ideas,
+to accept no measure of our success that does not tie directly to
+your own. Our customers must always win.
+A Few Messages in Closing
+including from our online SAP community, user groups and
+industry analysts. We will never tire of fighting for complete
+customer satisfaction.
+To Our Stakeholders | Letter from the CEO
+10
+The essence of a purpose-driven company is not what we
+achieve. It is to whom we dedicate ourselves. We dedicate SAP
+to improving people's lives, to lifting up new generations of
+innovators, to bypassing the limits of polarization in favor of a
+shared future.
+Value at 12/31/2017¹) (in US$)
+140
+130
+Return on SAP Common Stock
+15
+To Our Stakeholders | Investor Relations
+3.72
+Dow Jones EURO STOXX 50
+2.42
+Dow Jones STOXX 50
+Percent, unless otherwise stated
+6.94
+6.74
+CDAX
+6.47
+8.93
+SAPG.F or .DE
+SAP GR
+716460/DE0007164600
+803054204 (CUSIP)
+Berlin, Frankfurt, Stuttgart
+New York Stock Exchange
+HDAX
+Prime All Share
+Initial investment €10,000
+Value at 12/31/2017¹) (in €)
+Date of investment
+Initial investment US$10,000
+Percent, unless otherwise stated
+-
+Return on SAP ADRs 803054204 (CUSIP)
+Source: Datastream
+"Assuming all dividends were reinvested
+Period of investment
+S&P North American Technology Software Index
+-
+- total return index
+S&P 500 Composite
+REX General Bond - total return index
+DAX 30 Performance - total return index
+Performance comparators
+Average annual return
+- WKN 716460/ISIN DE007164600
+135
+Weight (%) in indexes at 12/31/2017
+DAX 30
+NYSE (ADRS)
+Reuters
+03
+02
+01
+12/29/2017
+€93,45
+Year high €100,35
+11/01/2017
+95
+04
+100
+110
+82,81€
+12/30/2016
+120
+125
+Year low € 82,43
+01/04/2017
+105
+Bloomberg
+05
+07
+WKN/ISIN
+United States (ADRs)
+IDs and symbols
+Germany
+Listings
+Key Facts About SAP Stock/SAP ADRS
+We webcast all key investor events at which members of our
+Executive Board speak, and we post all relevant presentations
+on the Investor Relations Web site.
+Twitter feed @sapinvestor, the quarterly SAP INVESTOR
+magazine, and a text message service. Shareholders can reach
+the IR team directly through a telephone hotline and through an
+e-mail at investor@sap.com. We also publish an overview of the
+latest analyst assessments in collaboration with Vara Research.
+06
+Investors can access a wide range of information about SAP and
+its shares online. Our channels of communication include our
+We are continuously engaged with the investment community
+through a number of channels. Over the course of the year,
+senior management at SAP and the Investor Relations (IR) team
+discussed our strategy and business development with
+institutional investors and analysts worldwide.
+Providing transparency to
+investors
+12
+11
+10
+09
+08
+A particular highlight of our global IR program in 2017 was the
+Capital Markets Day held in New York City. At this exciting event,
+attended by more than 50 financial analysts and investors, the
+SAP Executive Board discussed the details of the strong
+strategic position of SAP in the market and how SAP innovations
+support customers' digitization. The Executive Board also
+discussed the future outlook of the company. Four SAP
+customers, Maui Jim, Microsoft, HSBC Bank, and the Birchman
+Group also presented how SAP innovations help them realize
+their digital transformation. In addition, we hosted events for
+buy-side analysts in Walldorf. We also held events for investors
+and financial analysts at the CeBIT fair in Hanover, Germany and
+at the SAPPHIRE NOW conference in Orlando, Florida.
+Furthermore, we maintained regular dialog with socially
+responsible investors (SRI), providing them with insights into
+our environmental, social, and corporate governance policies.
+SAP representatives spoke at various retail shareholder events.
+The Investor Relations team and the Treasury teams also
+maintained regular communication with the debt investor
+community.
+115
+11
+Effects on Financial Income, Net
+2016
+HFT
+FX forward contracts
+Not designated as hedging instrument
+Interest rate swaps
+47
+47
+47
+47
+17
+12
+12
+12
+12
+Amortized
+Cost
+Total
+Level 3
+Level 2
+194
+Consolidated Financial Statements IFRS and Notes | Notes
+Fair Values of Financial Instruments and Classification Within the Fair Value Hierarchy
+€ millions
+Derivative assets
+Designated as hedging instrument
+35
+FX forward contracts
+December 31, 2016
+Carrying
+Amount
+Measurement Categories
+Fair Value
+At At Fair Value
+Level 1
+Category
+35
+35
+Call options for share-based payments
+-1,408
+AC
+-1,016
+-1,016
+-392
+-8,294
+Financial liabilities
+Non-derivative financial liabilities
+AC
+-16
+-16
+-16
+-16
+Bonds
+Loans
+956
+Other payables²)
+Trade and other payables
+HFT
+84
+84
+84
+=4
+35
+Trade payables¹)
+84
+HFT
+17
+17
+17
+17
+Liabilities
+Call option on equity shares
+AC
+956
+956
+Amortized
+Cost
+Total
+Level 3
+Level 2
+Level 1
+At At Fair Value
+Fair Value
+December 31, 2016
+Amount
+Carrying Measurement Categories
+Category
+Assets
+€ millions
+Fair Values of Financial Instruments and Classification Within the Fair Value Hierarchy
+-4,830
+742
+-364
+-1
+-1
+Not designated as hedging instrument
+FX forward contracts
+Total financial instruments, net
+HFT
+Cash and cash equivalents¹)
+-84
+-84
+-84
+4,308
+3,259
+974
+-5,209
+-84
+L&R
+3,702
+3,702
+AFS
+953
+953
+153
+94
+706
+Equity investments
+953
+38
+Loans and other financial receivables
+Financial instruments related to employee
+benefit plans²)
+144
+Other loans and other financial receivables
+L&R
+Investments in associates²)
+956
+195
+195
+Trade and other receivables
+6,050
+Trade receivables¹)
+L&R
+5,825
+5,825
+195
+Other receivables²)
+Other financial assets
+2,482
+Available-for-sale financial assets
+Debt investments
+AFS
+195
+225
+-1
+-6,147
+-6,374
+196
+It is our policy that transfers between the different levels of the
+fair value hierarchy are deemed to have occurred at the
+beginning of the period of the event or change in circumstances
+that caused the transfer. A description of the valuation
+techniques and the inputs used in the fair value measurement is
+given below:
+Determination of Fair Values
+-9.115
+-9,115
+AC
+At amortized cost
+-170
+-170
+HFT
+At fair value through profit or loss
+Financial liabilities
+10,484
+10,484
+L&R
+Loans and receivables
+1,148
+€ millions
+Category
+December 31, 2016
+Carrying Amount
+At Amortized Cost
+At Fair Value
+Consolidated Financial Statements IFRS and Notes | Notes
+Financial assets
+HFT
+136
+136
+Available-for-sale
+AFS
+1,148
+At fair value through profit or loss
+Financial Instruments Measured at Fair Value on a Recurring Basis
+Туре
+Fair Value
+Hierarchy
+ΝΑ
+ΝΑ
+Peer companies used
+(revenue multiples
+range from 3.4 to 7.8)
+Revenues of investees
+Discounts for lack of
+marketability (10% to
+20%)
+ΝΑ
+The estimated fair value
+would increase (decrease) if:
+The revenue multiples were
+higher (lower)
+The investees' revenues
+were higher (lower)
+ΝΑ
+The liquidity discounts were
+lower (higher).
+Market approach. Venture capital
+method evaluating a variety of
+quantitative and qualitative factors
+such as actual and forecasted
+results, cash position, recent or
+planned transactions, and market
+comparable companies.
+Last financing round valuations
+ΝΑ
+NA
+Liquidation preferences
+NA
+ΝΑ
+-7,460
+ΝΑ
+ΝΑ
+Determination of Fair
+Value/Valuation Technique
+Significant
+Unobservable Inputs
+Interrelationship Between
+Significant Unobservable
+Inputs and Fair Value
+Measurement
+Other financial assets
+Debt investments
+NA
+Listed equity
+Level 1
+Level 1
+Level 2
+Unlisted equity
+investments
+Level 3
+Quoted prices in an active market
+Quoted prices in an active market
+Quoted prices in an active market
+deducting a discount for the disposal
+restriction derived from the
+premium for a respective put option.
+Market approach. Comparable
+company valuation using revenue
+multiples derived from companies
+comparable to the investee.
+investments
+-6,147
+-7,460
+At amortized cost
+-170
+1,369
+-170
+2,533
+HFT
+Total financial instruments, net
+FX forward contracts
+Not designated as hedging instrument
+0
+0
+0
+0
+-24
+-24
+-24
+-24
+Interest rate swaps
+FX forward contracts
+-6,374
+Private placements
+AC
+-1,717
+-1,717
+-1,744
+1,149
+-1,744
+AC
+-219
+-219
+-219
+Derivatives
+Designated as hedging instrument
+Other non-derivative financial liabilities
+-6,026
+-170
+-944
+141
+Available-for-sale
+AFS
+865
+865
+Loans and receivables
+141
+L&R
+10,719
+Financial liabilities
+At fair value through profit or loss
+HFT
+-84
+-84
+10,719
+AC
+HFT
+Financial assets
+723
+-170
+-6,248
+1) We do not separately disclose the fair value for cash and cash equivalents, trade receivables, and accounts payable as their carrying amounts are a reasonable
+approximation of their fair values.
+2) Since the line items trade receivables, trade payables, and other financial assets contain both financial and non-financial assets or liabilities (such as other taxes
+or advance payments), the carrying amounts of non-financial assets or liabilities are shown to allow a reconciliation to the corresponding line items in the
+Consolidated Statements of Financial Position.
+Consolidated Financial Statements IFRS and Notes | Notes
+At fair value through profit or loss
+195
+€ millions
+Category
+Carrying Amount
+At Amortized Cost
+December 31, 2017
+At Fair Value
+Fair Values of Financial Instruments Classified According to IAS 39
+-1
+-1
+-1
+2.31
+1.80
+2.31
+1.94
+1.81
+From financing
+3.03
+4.38
+3.59
+3.31
+3.52
+4.10
+3.78
+3.80
+From investments (including cash)
+Cash flow interest rate risk
+0.03
+Low
+Year-End
+Average
+High
+Low
+Fair value interest rate risk
+2.94
+From investments
+0.12
+0.31
+0.03
+0.20
+0.08
+0.20
+0.04
+3.31
+2.31
+From interest rate swaps
+Liquidity Risk Management
+Our liquidity is managed by our global treasury department with
+the primary aim of maintaining liquidity at a level that is
+adequate to meet our financial obligations.
+Generally, our primary source of liquidity is funds generated
+from our business operations. Our global treasury department
+manages liquidity centrally for all subsidiaries. Where possible,
+we pool their cash surplus so that we can use liquidity centrally
+for our business operation, for subsidiaries' funding
+requirements, or to invest any net surplus in the market. With
+this strategy, we seek to optimize yields, while ensuring liquidity,
+by investing only with counterparties and issuers of high credit
+quality, as explained before. Hence, high levels of liquid assets
+and marketable securities provide a strategic reserve, helping
+keep SAP flexible, sound, and independent.
+Apart from effective working capital and cash management, we
+have reduced the liquidity risk inherent in managing our day-to-
+day operations and meeting our financing responsibilities by
+arranging an adequate volume of available credit facilities with
+various financial institutions on which we can draw if necessary.
+192
+Consolidated Financial Statements IFRS and Notes | Notes
+The default risk of our trade receivables is managed separately,
+mainly based on assessing the creditworthiness of customers
+through external ratings and our past experience with the
+customers concerned. Outstanding receivables are continuously
+monitored locally. For more information, see Note (3). The
+impact of default on our trade receivables from individual
+customers is mitigated by our large customer base and its
+distribution across many different industries, company sizes,
+and countries worldwide. For more information about our trade
+receivables, see Note (13). For information about the maximum
+exposure to credit risk, see Note (24).
+In order to retain high financial flexibility, on November 20, 2017, (26) Fair Value Disclosures on
+agreement with an initial term of five years plus two one-year
+extension options replacing its previous credit facility of
+€2.0 billion from 2013. The use of the facility is not restricted by
+any financial covenants. Borrowings under the facility bear
+interest of EURIBOR or LIBOR for the respective currency plus a
+margin of 17.0 basis points. We are also required to pay a
+commitment fee of 5.95 basis points per annum on the unused
+available credit. We have not drawn on the facility.
+Additionally, as at December 31, 2017, and 2016, we had
+available lines of credit totaling €510 million and €499 million,
+respectively. There were immaterial borrowings outstanding
+under these lines of credit in all years presented.
+Financial Instruments
+Fair Value of Financial Instruments
+We use various types of financial instruments in the ordinary
+course of business, which are classified as either: loans and
+receivables (L&R), available-for-sale (AFS), held-for-trading
+(HFT), or amortized cost (AC). For those financial instruments
+measured at fair value or for which fair value must be disclosed,
+we have categorized the financial instruments into a three-level
+fair value hierarchy depending on the inputs used to determine
+fair value and their significance for the valuation techniques.
+SAP SE entered into a €2.5 billion syndicated credit facility
+High
+In addition, the concentration of credit risk that exists when
+counterparties are involved in similar activities by instrument,
+sector, or geographic area is further mitigated by diversification
+of counterparties throughout the world and adherence to an
+internal limit system for each counterparty. This internal limit
+system stipulates that the business volume with individual
+counterparties is restricted to a defined limit, which depends on
+the lowest official long-term credit rating available by at least
+one of the major rating agencies, the Tier 1 capital of the
+respective financial institution, or participation in the German
+Depositors' Guarantee Fund or similar protection schemes. We
+continuously monitor strict compliance with these counterparty
+limits. As the premium for credit default swaps mainly depends
+on market participants' assessments of the creditworthiness of
+a debtor, we also closely observe the development of credit
+default swap spreads in the market to evaluate probable risk
+developments to timely react to changes if these should
+manifest.
+To mitigate the credit risk from our investing activities and
+derivative financial assets, we conduct all our activities only with
+approved major financial institutions and issuers that carry high
+external ratings, as required by our internal treasury guideline.
+Among its stipulations, the guideline requires that we invest only
+in assets from issuers with a minimum rating of at least "BBB
+flat". We only make investments in issuers with a lower rating in
+exceptional cases. Such investments were not material in 2017
+and 2016. The weighted average rating of our financial assets is
+in the range A- to BBB+. We pursue a policy of cautious
+investments characterized by predominantly current
+investments, standard investment instruments, as well as a wide
+portfolio diversification by doing business with a variety of
+counterparties.
+1.35
+1.75
+2.22
+1.35
+2.22
+2.59
+To further reduce our credit risk, we require collateral for certain
+investments in the full amount of the investment volume which
+we would be allowed to make use of in the case of default of the
+counterparty to the investment. As such collateral, we only
+accept bonds with at least investment grade rating level.
+2.69
+Consolidated Financial Statements IFRS and Notes | Notes
+191
+Equity Price Risk Management
+Our listed equity investments are monitored based on the
+current market value that is affected by the fluctuations in the
+volatile stock markets worldwide. Unlisted equity investments
+are monitored based on detailed financial information provided
+by the investees. The fair value of our listed equity investments
+depends on the equity prices, while the fair value of the unlisted
+equity investments is influenced by various unobservable input
+factors. An assumed 10% increase (decrease) in equity prices
+and respective unobservable inputs as at December 31, 2017,
+would have increased (decreased) the value of our marketable
+equity investments and other comprehensive income by
+€56 million (€56 million) (2016: increased by €84 million
+(decreased by €81 million)).
+We are exposed to equity price risk with regard to our share-
+based payments. In order to reduce resulting profit or loss
+volatility, we hedge certain cash flow exposures associated with
+these plans through the purchase of derivative instruments, but
+do not establish a designated hedge relationship. In our
+sensitivity analysis, we include the underlying share-based
+payments and the hedging instruments. Thus, we base the
+calculation on our net exposure to equity prices, as we believe
+that taking only the derivative instrument into account would not
+properly reflect our equity price risk exposure. An assumed 20%
+increase (decrease) in equity prices as at December 31, 2017,
+would have increased (decreased) our share-based payment
+expenses by €306 million (€291 million) (2016: increased by
+€281 million (decreased by €252 million); 2015: increased by
+€200 million (decreased by €198 million)).
+Credit Risk Management
+2.22
+Fair Values of Financial Instruments and Classification Within the Fair Value Hierarchy
+Average
+2016
+The aim of our interest rate risk management is to reduce profit
+or loss volatility and optimize our interest result by creating a
+balanced structure of fixed and variable cash flows. We
+therefore manage interest rate risks by adding interest rate-
+related derivative instruments to a given portfolio of
+investments and debt financing.
+Interest Rate Risk Management
+0.8
+0.9
+1.0
+1.0
+0.9
+0.9
+Lowest exposure
+Highest exposure
+Average exposure
+0.9
+0.9
+Year-end exposure toward all our major
+currencies
+2016
+2017
+€ billions
+Currency Hedges Designated as Hedging
+Instruments (Cash Flow Hedges)
+We enter into derivative financial instruments, primarily foreign
+exchange forward contracts, to hedge significant forecasted
+cash flows (royalties) from foreign subsidiaries denominated in
+foreign currencies with a defined set of hedge ratios and a hedge
+horizon of up to 12 months, which is also the maximum maturity
+of the foreign exchange derivatives we use.
+For all years presented, no previously highly-probable
+transaction designated as a hedged item in a foreign currency
+cash flow hedge relationship ceased to be probable. Therefore,
+we did not discontinue any of our cash flow hedge relationships.
+Also, we identified no ineffectiveness in all years reported.
+Generally, the cash flows of the hedged forecasted transactions
+are expected to occur and to be recognized in profit or loss
+monthly within a time frame of 12 months from the date of the
+statement of financial position.
+Foreign Currency Exchange Rate Exposure
+Our risk exposure is based on a sensitivity analysis considering
+the following:
+-
+The SAP Group's entities generally operate in their functional
+currencies. In exceptional cases and limited economic
+environments, operating transactions are denominated in
+currencies other than the functional currency, leading to a
+foreign currency exchange rate risk for the related monetary
+instruments. Where material, this foreign currency exchange
+rate risk is hedged. Therefore, fluctuations in foreign
+currency exchange rates neither have a significant impact on
+profit nor on other comprehensive income with regard to our
+non-derivative monetary financial instruments and related
+income or expenses.
+Derivatives Designated as Hedging
+Instruments (Fair Value Hedges)
+Our free-standing derivatives designed for hedging foreign
+currency exchange rate risks almost completely balance the
+changes in the fair values of the hedged item attributable to
+exchange rate movements in the Consolidated Income
+Statements in the same period. As a consequence, the
+hedged items and the hedging instruments are not exposed
+to foreign currency exchange rate risks, and thereby have no
+effect on profit.
+-
+Foreign currency embedded derivatives affecting other non-
+operating expense, net.
+We calculate our sensitivity on an upward/downward shift of
++/-10% of the foreign currency exchange rate between euro
+and all major currencies (2016 and 2015: upward/downward
+shift of +/-25% of the foreign currency exchange rate between
+euro and Brazilian real; +/-10% of the foreign currency
+exchange rate between euro and all other major currencies). If
+on December 31, 2017, 2016, and 2015, the foreign currency
+exchange rates had been higher/lower as described above, this
+would not have had a material effect on other non-operating
+expense, net and other comprehensive income.
+Our foreign currency exposure (and our average/high/low
+exposure) as at December 31 was as follows:
+Foreign Currency Exposure
+Consequently, we are only exposed to significant foreign
+currency exchange rate fluctuations with regard to the following:
+Derivatives held within a designated cash flow hedge
+relationship (excluding the interest element, which is not part
+of the assigned cash flow hedge relationships) affecting other
+comprehensive income
+The majority of our investments are based on variable rates
+and/or short maturities (2017: 79%; 2016: 71%) while most of
+our financing transactions are based on fixed rates and long
+maturities (2017: 71%; 2016: 71%). To match the interest rate
+risk from our financing transactions to our investments, we use
+receiver interest rate swaps to convert certain fixed-rate
+financial liabilities to floating, and by this means secure the fair
+value of the swapped financing transactions. The desired fixed-
+floating mix of our net debt is set by the Treasury Committee.
+Including interest rate swaps, 49% (2016: 42%) of our total
+interest-bearing financial liabilities outstanding as at December
+31, 2017, had a fixed interest rate.
+None of the fair value adjustment from the receiver swaps, the
+basis adjustment on the underlying hedged items held in fair
+value hedge relationships, and the difference between the two
+recognized in financial income, net is material in any of the years
+presented.
+190
+9
+29
+62
+Variable-rate financing
+Interest rates +25 bps in euro area (2016 and 2015: +50 bps in euro area)
+Interest rates -25 bps in euro area (2016 and 2015: -50 bps in euro area)
+Our interest rate exposure (and our average/high/low
+Interest rates -25 bps in U.S. dollar/euro area (2016 and 2015: -50 bps for U.S. dollar/euro
+area)
+exposure) as at December 31 was as follows:
+-5
+-21
+-39
+19
+€ billions
+2017
+Interest Rate Risk Exposure
+Year-End
+-105
+-26
+Consolidated Financial Statements IFRS and Notes | Notes
+Interest Rate Exposure
+A sensitivity analysis is provided to show the impact of our
+interest rate risk exposure on profit or loss and equity in
+accordance with IFRS 7, considering the following:
+-
+Changes in interest rates only affect the accounting for non-
+derivative fixed-rate financial instruments if they are
+recognized at fair value. Therefore, such interest rate
+changes do not change the carrying amounts of our non-
+derivative fixed-rate financial liabilities as we account for
+them at amortized cost. Investments in fixed-rate financial
+assets classified as available-for-sale were not material at
+each year end reported. Thus, we do not consider any fixed-
+rate instruments in the equity-related sensitivity calculation.
+Income or expenses recorded in connection with non-
+derivative financial instruments with variable interest rates
+are subject to interest rate risk if they are not hedged items in
+an effective hedge relationship. Thus, we take into
+consideration interest rate changes relating to our variable-
+rate financing and our investments in money market
+instruments in the profit-related sensitivity calculation.
+The designation of interest rate receiver swaps in a fair value
+hedge relationship leads to interest rate changes affecting
+Interest Rate Sensitivity
+-46
+financial income, net. The fair value movements related to the
+interest rate swaps are not reflected in the sensitivity
+calculation, as they offset the fixed interest rate payments for
+the bonds and private placements as hedged items. However,
+changes in market interest rates affect the amount of interest
+payments from the interest rate swap. As a consequence,
+those effects of market interest rates on interest payments
+are included in the profit-related sensitivity calculation.
+If, on December 31, 2017, 2016, and 2015, interest rates had
+been higher/lower as described above, this would not have had
+a material effect on financial income, net for our variable interest
+rate investments and would have had the following effects on
+financial income, net.
+€ millions
+2017
+2015
+Derivatives held within a designated fair value hedge relationship
+Interest rates +100 bps in U.S. dollar area/+25 bps in euro area (2016 and 2015: +100/+50 bps
+for U.S. dollar/euro area)
+Due to the different interest rate expectations for the U.S. dollar
+and the euro area, we base our sensitivity analyses on a yield
+curve upward shift of +100/+25 basis points (bps) for the U.S.
+dollar/euro area (2016 and 2015: +100/+50 bps for the U.S.
+dollar/euro area) and a yield curve downward shift of -25 bps
+for both the U.S. dollar/euro area (2016: -50 bps; 2015: -50
+bps).
+€ millions
+Assets
+Category
+-1,270
+Financial liabilities
+Other payables²)
+Trade payables¹)
+Trade and other payables
+Liabilities
+Amortized
+Cost
+Total
+Level 3
+Level 2
+Level 1
+At At Fair Value
+Fair Value
+December 31, 2017
+Measurement Categories
+Carrying
+Amount
+Category
+90
+90
+90
+90
+Call option on equity shares
+HFT
+AC
+11
+11
+11
+Consolidated Financial Statements IFRS and Notes | Notes
+193
+Fair Values of Financial Instruments and Classification Within the Fair Value Hierarchy
+€ millions
+11
+-952
+-952
+-318
+-1,136
+-1,136
+Other non-derivative financial liabilities
+AC
+-208
+-208
+-1,130
+-208
+Derivatives
+Designated as hedging instrument
+FX forward contracts
+Interest rate swaps
+-1
+-1
+-208
+HFT
+-1,130
+Private placements
+-6,595
+Non-derivative financial liabilities
+Loans
+AC
+-24
+-24
+AC
+-24
+Bonds
+AC
+-5,147
+-5,147
+-5,335
+-5,335
+-24
+Call options for share-based payments
+41
+41
+5,810
+5.810
+Other receivables²)
+207
+Other financial assets
+2,145
+L&R
+Available-for-sale financial assets
+AFS
+39
+39
+39
+39
+Equity investments
+Debt investments
+AFS
+Trade receivables¹)
+Trade and other receivables
+Carrying
+Amount
+Measurement Categories
+December 31, 2017
+Fair Value
+At At Fair Value
+Level 1
+6,017
+Level 2
+Total
+Amortized
+Cost
+Cash and cash equivalents¹)
+L&R
+4,011
+4,011
+Level 3
+ΝΑ
+827
+87
+Interest rate swaps
+29
+29
+29
+29
+24
+FX forward contracts
+24
+24
+Not designated as hedging instrument
+FX forward contracts
+HFT
+41
+41
+24
+827
+Designated as hedging instrument
+899
+8
+732
+827
+Investments in associates²)
+32
+32
+Derivative assets
+Loans and other financial receivables
+155
+Other loans and other financial receivables
+L&R
+899
+899
+899
+Financial instruments related to employee
+benefit plans²)
+Net asset value/Fair market value as NA
+reported by the respective funds
+-219
+Call options for
+Included in exchange differences in other comprehensive income
+December 31
+48
+28
+Included in available-for-sale financial assets in other comprehensive
+income
+96
+26
+Included in financial income, net in profit and loss
+-168
+-102
+156
+257
+-89
+-18
+18
+0
+568
+722
+Unlisted Equity Investments and Call
+Options on Equity Shares
+Options on Equity Shares
+Unlisted Equity Investments and Call
+2016
+2017
+Gains/losses
+Sales
+-100
+Purchases
+742
+0
+ΝΑ
+199
+Consolidated Financial Statements IFRS and Notes | Notes
+The options granted under the SOP 2010 give the employees the
+right to receive a certain amount of cash by exercising the
+options. After a three-year vesting period (four years for
+members of the Executive Board), the plan provides for 11
+predetermined exercise dates every calendar year (one date per
+month except for April) until the rights lapse six years after the
+grant date (seven years for members of the Executive Board).
+Employees can exercise their options only if they are employed
+by SAP; if they leave the Company, the options forfeit. Executive
+The grant base value was based on the average closing price of
+the SAP share over the five trading days prior to the Executive
+Board resolution date.
+SAP Stock Option Plan 2010 (SOP 2010)
+Under the SOP 2010, we granted members of the Senior
+Leadership Team, Global Executives, and employees with an
+exceptional rating as well as high potentials between 2010 and
+2015, and only in 2010 and 2011 members of the Executive
+Board, virtual stock options.
+At the end of the year in which the share units are granted, the
+share units vest. The share units are subject to a three-year
+holding period before payout. The payout depends on the
+number of vested share units and the SAP share price, which is
+set directly after the publication of SAP's fourth-quarter results
+for the last financial year of the respective three-year holding
+period.
+Under the LTI 2015 Plan, we granted to members of our former
+Global Managing Board virtual shares, referred to as share units,
+between 2012 and 2015 (2012-2015 tranches).
+Long-Term Incentive 2015 Plan (LTI 2015
+Plan)
+If an Executive Board member's service contract is terminated
+before the end of the third year following the year in which the
+share units were granted, both the RSUs and PSUs are forfeited
+in whole or in part, depending on the circumstances of the
+relevant resignation from office or termination of the service
+contract.
+share price performance equals the Peer Group Index
+performance over the same period, the performance factor is
+set at 100%. If the SAP share price performs better than the
+Peer Group Index (measured as difference between SAP share
+price performance and Peer Group Index performance), the
+performance factor is increased by the percentage point of the
+outperformance of the SAP share price. The percentage point is
+doubled if, additionally, the payout price is higher than the grant
+price. The performance factor is capped at 150%. If the Peer
+Group Index performs better than the SAP share price, the
+performance factor is decreased by the percentage point of the
+outperformance of the Peer Group Index. All PSUs lapse if the
+performance factor is below 50%.
+Change in unrealized gains/losses in profit and loss for equity investments
+held at the end of the reporting period
+All share units granted in this way, comprising 60%
+Performance Share Units (PSUs) and 40% Retention Share
+Units (RSUs), have a vesting period of approximately four years.
+At the end of the vesting period, the corresponding share units
+are non-forfeitable. The payout price used for the settlement is
+the arithmetic mean of the XETRA closing prices of the SAP
+share on the 20 trading days following the publication of SAP's
+fourth-quarter results subsequent to the end of the vesting
+period. The payout price is capped at 300% of the grant price.
+The LTI tranche is cash-settled and paid in euros after the
+Annual General Shareholders' Meeting of the corresponding
+year.
+The purpose of the LTI 2016 Plan is to reward the annual
+achievement of the operating profit (non-IFRS, at constant
+currency), to ensure long-term retention of our Executive Board
+members, and to reward them for a long-term SAP share price
+performance as compared to its main peer group (Peer Group).
+Long-Term Incentive 2016 Plan (LTI 2016
+Plan)
+a) Cash-Settled Share-Based
+Payments
+SAP has granted awards under various cash-settled and equity-
+settled share-based payment plans to employees and
+executives. Most of these plans are described in detail below.
+SAP has other share-based payment plans not described below,
+which are individually and in aggregate, immaterial to our
+Consolidated Financial Statements.
+(27) Share-Based Payments
+Consolidated Financial Statements IFRS and Notes | Notes
+198
+Transfers out of Level 3 are due to initial public offerings of the
+respective investee. Changing the unobservable inputs to reflect
+reasonably possible alternative assumptions would not have a
+material impact on the fair values of our unlisted equity
+investments held as available-for-sale as of the reporting date.
+0
+722
+22
+The virtual share program came into effect on January 1, 2016. A
+LTI tranche is granted annually and has a term of four years
+(2016-2017 tranches). Each grant starts with determining a
+grant amount in euros. The grant amount is based on the
+Executive Board members' contractual target amount and the
+operating profit target achievement for the previous year. The
+Supervisory Board sets the grant amount at a level between
+80% and 120% of the contractual target amount, taking into
+account the operating profit target achievement. This grant
+amount is converted into virtual shares, referred to as share
+units, by dividing the grant amount by the grant price. The grant
+price is the arithmetic mean of the XETRA closing prices of the
+SAP share on the 20 trading days following the publication of
+SAP's fourth-quarter results.
+Out of Level 3
+The number of PSUs ultimately paid out changes depending on
+the performance of the SAP share - absolute and relative to the
+Peer Group Index. In contrast, the final number of RSUs is fixed.
+SAP's absolute share price performance is measured by
+comparing the grant price against the payout price. If the SAP
+Transfers
+Level 2
+Interest rate swaps
+rates and spot rates.
+using the respective deposit interest
+remaining term of the contracts
+discounted over the respective
+forward exchange rates are
+Expected future cash flows based on
+NA
+NA
+Discounted cash flow using par-
+method.
+Discounted cash flow.
+FX forward contracts Level 2
+The investees' EBITDA were
+higher (lower)
+The estimated fair value
+would increase (decrease) if:
+The EBITDA multiples were
+higher (lower)
+EBITDA multiples used
+EBITDA of the investee
+Market approach. Company
+valuation using EBITDA multiples
+based on actual results derived from
+the investee.
+Call option on equity Level 3
+shares
+share-based
+payment plans
+ΝΑ
+ΝΑ
+Monte Carlo model.
+Into Level 3
+Level 2
+Other financial assets/ Financial liabilities
+NA
+Calculated considering risk-free
+interest rates, the remaining term of
+the derivatives, the dividend yields,
+the share price, and the volatility of
+our share.
+Expected future cash flows are
+€ millions
+NA
+January 1
+Reconciliation of Level 3 Fair Values
+The following table shows the reconciliation of fair values from
+the opening to the closing balances for our unlisted equity
+investments and call options on equity shares classified as Level
+3 fair values:
+Transfers of available-for-sale equity investments from Level 2
+to Level 1 which occurred because disposal restrictions lapsed
+and deducting a discount for such restriction was no longer
+necessary were €360 million in 2017 (2016: €17 million), while
+transfers from Level 1 to Level 2 did not occur at all.
+Transfers Between Levels 1 and 2
+For other non-derivative financial assets/liabilities and variable
+rate financial debt, it is assumed that their carrying value
+reasonably approximates their fair values.
+Future cash outflows for fixed interest and principal are discounted
+over the term of the respective contracts using the market interest
+rates as of the reporting date.
+Discounted cash flows.
+Quoted prices in an active market
+Level 2
+Level 3 Disclosures
+Consolidated Financial Statements IFRS and Notes | Notes
+Fixed-rate private placements/
+loans (financial liabilities)
+197
+Fair Value Hierarchy
+Determination of Fair Value/Valuation Technique
+Financial Instruments Not Measured at Fair Value
+Type
+Financial liabilities
+Fixed-rate bonds (financial
+liabilities)
+Level 1
+estimated based on forward interest
+rates from observable yield curves
+and contract interest rates,
+discounted at a rate that reflects the
+credit risk of the counterparty.
+Profit before tax
+The amounts for revenue by region in the following tables are
+based on the location of customers. The regions in the following
+table are broken down into the regions EMEA (Europe, Middle
+5,026
+5,026
+4,863
+4,863
+3,991
+Geographic Information
+SAP Group
+206
+Consolidated Financial Statements IFRS and Notes | Notes
+Revenue by Region
+€ millions
+EMEA
+Americas
+-5
+APJ
+East, and Africa), Americas (North America and Latin America),
+and APJ (Asia Pacific Japan).
+-38
+4,252
+-38
+-182
+Total Revenue by Region
+-28
+-28
+-621
+Operating profit
+4,877
+4,877
+5,135
+5,135
+Other non-operating income/expense, net
+-36
+-36
+-234
+-234
+-256
+Financial income, net
+185
+185
+3,851
+€ millions
+413
+2016
+303
+404
+3,321
+3,472
+3,447
+Services
+18,431
+19,818
+19,551
+1,622
+1,887
+1,857
+16,809
+17,931
+17,694
+Cloud and software
+support
+15,436
+-182
+9,347
+2017
+Americas
+1,763
+2015
+Germany
+3,352
+3,034
+2,771
+Rest of EMEA
+7,063
+6,721
+6,409
+EMEA
+10,415
+9,755
+9,181
+United States
+7,436
+7,167
+6,750
+Rest of Americas
+1,911
+1,678
+Restructuring
+subscriptions and
+-785
+-312
+-309
+0
+0
+0
+-221
+-312
+-309
+-221
+Cost of cloud
+support -
+15,987
+-840
+-1,128
+-1,112
+-384
+-435
+-428
+SaaS/PaaS¹)
+subscriptions and
+support laaS²)
+Cost of cloud
+-2,012
+-1
+-5
+-5
+-1,964
+-2,018
+-2,007
+Cost of software
+support
+subscriptions and
+-1,062
+-1,440
+-1,421
+-384
+-435
+-428
+-678
+-1,006
+-993
+-457
+-724
+-694
+Cost of cloud
+0
+Adjustment for
+Revenue under fair value accounting
+-3
+-3
+-5
+-5
+-11
+28
+Acquisition-related charges
+-587
+-680
+-680
+-738
+Share-based payment expenses
+-1,120
+-1,120
+-785
+-587
+0
+-151
+0
+22,055
+23,703
+23,402
+1,925
+2,300
+2,261
+20,130
+21,403
+21,141
+Total segment revenue
+3,624
+3,885
+12
+55
+-1,780
+-1,777
+-1,771
+-1.781
+-1,766
+-684
+15,780
+3,443
+18
+Thousands
+Equity-Settled Plans
+Changes in Numbers of Outstanding Awards for
+"For these awards, the fair value is calculated by subtracting the net present value of expected future dividend payments, if any, until maturity of the respective award from the prevailing
+share price as of the valuation date.
+1,492
+1.5
+1.67
+-0.08
+12/31/2015
+66.31
+Number of investment shares purchased (in thousands)
+Weighted average remaining life of awards outstanding at year end (in years)
+Expected dividend yield (in %)
+Risk-free interest rate (in %)
+Share price
+Option pricing model used
+62.98
+6/5/2015
+Other¹)
+Exercised
+Forfeited
+12/31/2016
+77
+140
+2015
+2016
+2017
+512
+-19
+-520
+1,051
+-105
+-444
+1,600
+SMP
+Own
+SMP
+€ millions
+Recognized Expense for Equity-Settled Plans
+12/31/2017
+Forfeited
+Exercised
+2015
+0
+Information how fair value was measured at grant date
+Grant date
+187
+28
+0
+2017
+2016
+2015
+Total expense (in € millions) recognized in
+90.91
+193
+91.13
+NA
+2017
+74.74
+78.74
+72.55
+ΝΑ
+Weighted average share price (in €) for share options exercised in
+2016
+0
+84.94
+7
+7
+183
+€, unless otherwise stated
+Fair Value and Parameters at Grant Date for SMP
+Consolidated Financial Statements IFRS and Notes | Notes
+202
+The weighted average remaining life of free matching shares
+outstanding is 0.4 years as at December 31, 2017. The following
+table shows the parameters and assumptions used at grant date
+to determine the fair value of free matching shares, as well as
+the quantity of shares purchased and free matching shares:
+The terms for members of the Senior Leadership Team and
+Global Executives were different than those for other
+employees. Both groups did not receive a discount when
+purchasing the shares. However, after a three-year holding
+period, they receive two free matching shares for every three
+SAP shares acquired. This plan was not open to members of the
+Executive Board.
+2015. The number of SAP shares an eligible employee could
+purchase through the SMP was limited to a percentage of the
+employee's annual base salary. After a three-year holding
+period, the plan participants receive, from SAP, one free
+matching share for every three SAP shares acquired.
+Under the SMP, SAP offered its employees the opportunity to
+purchase SAP shares at a discount of 40% between 2010 and
+Share Matching Plan (SMP)
+The number of shares purchased under this plan was 5.0 million
+in 2017 (2016: 1.4 million).
+Under the Own SAP Plan (Own) implemented in 2016, SAP
+offers its employees the opportunity to purchase, monthly, SAP
+shares without any holding period. Each eligible employee's
+investment is limited to a percentage of the employee's monthly
+base salary. SAP matches the employee investment by 40% and
+adds a subsidy of €20 per month for non-executives. For the
+participation in 2016, employees received a double matching
+contribution as well as a double subsidy. This plan is not open to
+members of the Executive Board.
+Own SAP Plan (Own)
+Payments
+b) Equity-Settled Share-Based
+712
+221
+9
+14
+458
+Fair value of granted awards
+15
+24
+80
+4,872
+Software licenses
+support
+2,995
+3,831
+3,772
+1,595
+1,870
+4,983
+1,840
+1,961
+1,932
+Cloud subscriptions and
+and support - laas²)
+209
+334
+328
+0
+1,400
+4,864
+-1
+-1
+17
+15,409
+15,970
+15,762
+Software licenses and
+10,572
+11,005
+10,908
+28
+18
+18
+10,545
+10,987
+10,890
+Software support
+4,864
+4,982
+4,871
+0
+0
+0
+209
+334
+2017
+2016
+2017
+Total Reportable Segments
+SAP Business Network
+Applications, Technology & Services
+€ millions
+Revenue and Results of Segments
+comprising SAP's healthcare strategy as well as the non-
+reportable segment combining our SAP Anywhere, SAP
+Business One, and SAP Business ByDesign solutions are no
+longer operating segments, and their activities were included in
+the Applications, Technology & Services segment. We have
+retrospectively restated the revenue and results for the
+Applications, Technology & Services segment to reflect this
+change.
+On May 1, 2017, we changed the responsibilities within our
+Executive Board which also resulted in minor changes in our
+segment structure. In particular, the non-reportable segment
+collaborative business networks and from services relating to
+the SAP Business Network (including cloud applications,
+professional services, and education services). Within the SAP
+Business Network segment, we mainly market and sell the cloud
+offerings developed by SAP Ariba, SAP Fieldglass, and Concur.
+203
+Consolidated Financial Statements IFRS and Notes | Notes
+The SAP Business Network segment derives its revenues mainly
+from transaction fees charged for the use of SAP's cloud-based
+The Applications, Technology & Services segment derives its
+revenues primarily from the sale of software licenses,
+subscriptions to our cloud applications, and related services
+(mainly support services and various professional services and
+premium support services, as well as implementation services
+for our software products and education services on the use of
+our products).
+The segments are largely organized and managed separately
+according to their product and service offerings.
+SAP has two operating segments that are regularly reviewed by
+the Executive Board, which is responsible for assessing the
+performance of the Company and for making resource
+allocation decisions as the Chief Operating Decision Maker
+(CODM). One is the Applications, Technology & Services
+segment and the other is the SAP Business Network segment.
+General Information
+(28) Segment and Geographic
+Information
+Actual
+Currency
+27
+Constant
+Currency
+Actual
+Currency
+328
+Cloud subscriptions
+SaaS/PaaS¹)
+and support -
+Actual
+Currency
+2,786
+3,497
+-2,022
+Constant
+Currency
+Actual
+Currency
+2016
+2017
+2016
+Actual
+Currency
+1,595
+1,870
+1,840
+1,191
+1,627
+1,604
+Cloud subscriptions
+Constant
+Currency
+Actual
+Currency
+-1,965
+intangibles acquired in business combinations and certain
+stand-alone acquisitions of intellectual property (including
+purchased in-process research and development)
+Settlements of pre-existing relationships in connection
+with a business combination
+62
+1,589
+1,337
+2,995
+3,007
+2,299
+support
+Software licenses
+4,864
+1,595
+4,895
+0
+0
+-1
+4,864
+4,894
+4,836
+Software support
+10,545
+4,837
+963
+1,417
+1,400
+1,337
+2,786
+Constant
+Currency
+2,794
+Actual
+Currency
+2,208
+and support -
+SaaS/PaaS¹)
+Cloud subscriptions
+209
+213
+91
+○
+○
+0
+209
+213
+91
+and support - laas²)
+Cloud subscriptions and
+10,627
+1,589
+10,062
+28
+18,555
+17,229
+Services
+3,321
+3,360
+3,272
+303
+304
+18.431
+249
+3,663
+3,521
+Total segment revenue
+20,130
+20,298
+19,134
+1,925
+1,920
+3,624
+1,367
+1,617
+1,622
+31
+10,572
+10,654
+10,093
+Software licenses and
+15,409
+15.521
+14,899
+27
+27
+30
+15,436
+15,549
+14,930
+support
+Cloud and software
+16,809
+16,939
+15,862
+28
+1,616
+1,595
+1,204
+-5,703
+-5,745
+-5,311
+-725
+-737
+-631
+-6,429
+-6,481
+Total cost of revenue
+-5,942
+15,438
+15,659
+14,819
+1,536
+1,563
+1,295
+16.974
+17,222
+Segment gross profit
+172
+-2,915
+-3,019
+licenses and support
+Cost of cloud and software
+-3,000
+-3,023
+-2,642
+-433
+-439
+-385
+-3,433
+-3.463
+-3.026
+Cost of services
+-2,703
+-2,722
+-2,669
+-293
+-297
+-246
+-2,996
+16,114
+872
+Other segment expenses
+-7,418
+Applications, Technology & Services
+SAP Business Network
+Total Reportable Segments
+2016
+2015
+2016
+2015
+2016
+€ millions
+2015
+Constant
+Currency
+Actual
+Currency
+Actual
+Currency
+Constant
+Currency
+Actual
+Currency
+Actual
+Currency
+Cloud subscriptions
+1,191
+Actual
+Currency
+Revenue and Results of Segments
+Consolidated Financial Statements IFRS and Notes | Notes
+204
+-6,768
+-1,151
+-1,169
+-954
+-8,486
+-8,586
+-7,722
+Segment profit
+8,102
+8,241
+8,051
+385
+394
+341
+8,488
+8,636
+8,392
+1) Software as a Service/Platform as a Service
+2) Infrastructure as a Service
+-7,336
+22,055
+22,219
+20,750
+Our management reporting system produces a variety of
+reports that differ by the currency exchange rates used in the
+accounting for foreign-currency transactions and operations.
+Reports based on actual currencies use the same currency rates
+as are used in our financial statements. Reports based on
+Consolidated Financial Statements IFRS and Notes | Notes
+205
+constant currencies report revenues and expenses using the
+average exchange rates from the previous year's corresponding
+period.
+We use an operating profit indicator to measure the
+performance of our operating segments. However, the
+accounting policies applied in the measurement of operating
+segment revenue and profit differ as follows from the IFRS
+accounting principles used to determine the operating profit
+measure in our income statement:
+The measurements of segment revenue and results include the
+recurring revenues that would have been recorded by acquired
+entities had they remained stand-alone entities but which are
+not recorded as revenue under IFRS due to fair value accounting
+for customer contracts in effect at the time of an acquisition.
+The expenses measures exclude:
+Reconciliation of Revenue and Segment Results
+Most of our depreciation and amortization expense affecting
+segment profits is allocated to the segments as part of broader
+infrastructure allocations and is thus not tracked separately on
+the operating segment level. Depreciation and amortization
+expense that is directly allocated to the operating segments is
+immaterial in all segments presented.
+Acquisition-related charges
+Amortization expense and impairment charges for
+■ Acquisition-related third-party expenses
+Share-based payment expenses
+- Restructuring expenses
+Certain activities are exclusively managed on corporate level,
+including finance, accounting, legal, human resources, and
+marketing. They are disclosed in the reconciliation under other
+revenue and other expenses, respectively.
+€ millions
+2017
+2016
+2015
+■
+Our management reporting system reports our intersegment
+services as cost reductions and does not track them as internal
+revenue. Intersegment services mainly represent utilization of
+human resources of one segment by another segment on a
+project basis. Intersegment services are charged based on
+internal cost rates including certain indirect overhead costs,
+excluding a profit margin.
+Measurement and Presentation
+Information about assets and liabilities and additions to non-
+current assets by segment are not regularly provided to our
+Executive Board. Goodwill by segment is disclosed in Note (15).
+-6,407
+-954
+-964
+-779
+-7,722
+-7,833
+-7,185
+Segment profit
+8,051
+8,054
+7,742
+341
+321
+317
+8,392
+8,374
+8,059
+1) Software as a Service/Platform as a Service
+2) Infrastructure as a Service
+Actual
+Currency
+-6,868
+Constant
+Currency
+Constant
+Currency
+-5
+-11
+Total revenue
+23,461
+23,461
+22,062
+22,062
+20,793
+-5
+Total segment profit for reportable segments
+Other expenses
+Adjustment for currency impact
+8,488
+8,636
+8,392
+8,374
+8,059
+62
+Other revenue
+-3
+-3
+Adjustment of revenue under fair value accounting
+Actual
+Currency
+Total segment revenue for reportable segments
+23,402
+23,703
+22,055
+22,219
+20,750
+Other revenue
+62
+62
+12
+12
+55
+Adjustment for currency impact
+○
+-301
+0
+-164
+0
+Actual
+Currency
+-6,768
+Other segment expenses
+15.244
+subscriptions and
+support laaS²)
+Cost of cloud
+-678
+-680
+-452
+-384
+-385
+-189
+-336
+-1,065
+-788
+subscriptions and
+support
+Cost of software
+-1,964
+-1,978
+-1,992
+-1,062
+-222
+-221
+0
+Cost of cloud
+-457
+-458
+-263
+-384
+-385
+-336
+-840
+-843
+-599
+subscriptions and
+support -
+SaaS/PaaS¹)
+Cost of cloud
+-221
+-222
+-189
+0
+0
+-1
+-1
+-1
+-1,965
+Total cost of revenue
+-5,311
+-5,376
+-4,985
+-631
+-635
+-520
+-5,942
+-6,012
+-5,506
+Segment gross profit
+14,819
+14,922
+14,148
+1,295
+1,285
+1,095
+16,114
+16,207
+-2,725
+12
+-2,967
+-183
+-1,979
+-1,993
+licenses and support
+Cost of cloud and software
+-2,642
+-2,658
+-2,444
+-385
+-386
+-337
+-3,026
+-3,044
+-2,781
+Cost of services
+-2,669
+-2,718
+-2,542
+-246
+-249
+-2,915
+49
+3,699
+154
+1,029
+2015
+2016
+2017
+2015
+2016
+2017
+Cloud and Software Revenue
+Cloud Subscriptions
+and Support Revenue
+Consolidated Financial Statements IFRS and Notes | Notes
+For information about the breakdown of our number of
+employees by region, see Note (7).
+The table above shows non-current assets excluding financial
+instruments, deferred tax assets, post-employment benefit
+assets, and rights arising under insurance contracts.
+30,695
+28,304
+SAP Group
+685
+723
+APJ
+22,075
+703
+507
+8,759
+8,193
+17,214
+18,424
+19,549
+2,286
+2,993
+3,769
+2,663
+2,865
+3,124
+19,504
+200
+419
+0
+6,929
+7,366
+7,666
+1,579
+2,000
+2,321
+7,622
+290
+Americas
+165
+201
+2,517
+2,552
+2,814
+Rest of APJ
+667
+825
+885
+Japan
+8,428
+Board of Directors, Qubit Digital Ltd., London, United Kingdom
+Board of Directors, Stanford University, Stanford,
+8,931
+Board members' options are non-forfeitable once granted - if
+the service agreement ends in the grant year, the number of
+options is reduced pro rata temporis. Any options not exercised
+up to the end of their term expire.
+The exercise price is 110% of the grant base value (115% for
+members of the Executive Board), which is €39.03 (€40.80) for
+the 2010 tranche, €46.23 (€48.33) for the 2011 tranche, €49.28
+for the 2012 tranche, €59.85 for the 2013 tranche, €60.96 for
+the 2014 tranche, and €72.18 for the 2015 tranche.
+Monetary benefits will be capped at 100% of the exercise price
+(150% for members of the SAP Executive Board).
+Restricted Stock Unit Plan Including Move
+SAP Plan (RSU Plan)
+To retain and motivate executives and certain employees, we
+granted virtual shares representing a contingent right to receive
+a cash payment determined by the SAP share price (or SAP SE
+American Depositary Receipts on the New York Stock
+Exchange) and the number of share units that ultimately vest.
+Granted share units will vest in different tranches, either:
+Over a one-to-three-year service period only, or
+Over a one-to-three-year service period and upon achieving
+certain key performance indicators (KPIs).
+The number of performance-based share units (PSUs) that will
+vest under the 2017 tranche was contingent upon achievement
+of the operating profit (non-IFRS, at constant currency) KPI
+target in 2017. Depending on performance, the number of PSUs
+vesting ranges between 0% and 200% of the number initially
+granted. Performance against the KPI target was 78.2% (2016:
+85.1%) in 2017. All share units are paid out in cash upon vesting.
+The valuation of our outstanding cash-settled plans was based
+on the following parameters and assumptions:
+APJ
+207
+3,377
+SAP Group
+Rest of Americas
+21,910
+19,303
+United States
+7,936
+8,077
+EMEA
+5,281
+4,338
+3,185
+Rest of EMEA
+3,739
+Germany
+2016
+2017
+€ millions
+Non-Current Assets by Region
+20,793
+22,062
+23,461
+2,655
+(29) Board of Directors
+Executive Board
+Memberships on supervisory boards and other comparable
+governing bodies of enterprises, other than subsidiaries of SAP
+on December 31, 2017
+Senior Vice President and Chief Strategy Officer, Intel
+Corporation, Santa Clara, CA, United States
+2), 4)
+Aicha Evans (from July 1, 2017)
+Product Manager
+Martin Duffek ¹), 3), 4), 8)
+Member of Works Council SAP SE
+Support Expert
+Panagiotis Bissiritsas ¹), 3), 4), 5)
+Chairman of the Board of Directors, Netcompany A/S,
+Copenhagen, Denmark (from October 31, 2017)
+Prof. Anja Feldmann 4), 8)
+Chairman of the Board of Directors, BMA Platform International
+Ltd., London, United Kingdom (until April 18, 2017)
+Chairman of the Board of Directors, Sanoma Corporation,
+Helsinki, Finland
+Chairman of the Board of Directors, CVON Innovation Services
+Oy, Turku, Finland (until December 19, 2017)
+Board of Directors, CVON Limited, London, United Kingdom
+(until December 19, 2017)
+Chairman of the Board of Directors, CVON Group Limited,
+London, United Kingdom (until December 19, 2017)
+Board of Directors, Pöyry Plc, Vantaa, Finland (until March 9,
+2017)
+Chairman of the Board of Directors, Huhtamäki Oyj,
+Espoo, Finland
+Pekka Ala-Pietilä 4), 5), 6), 7)
+Product Expert, IoT Standards,
+Member of Works Council SAP SE
+Andreas Hahn ¹), 2), 4)
+Linklaters LLP, Rechtsanwälte, Notare, Steuerberater, Frankfurt
+am Main, Germany
+Board of Directors, CVON Future Limited, London, United
+Kingdom (until December 19, 2017)
+Chairperson of the Spokespersons' Committee of Senior
+Managers of SAP SE
+Professor at the Electrical Engineering and Computer Science
+Faculty at the Technische Universität Berlin (until December 31,
+2017)
+Prof. Dr. Wilhelm Haarmann 2), 5), 7), 8)
+CA, United States
+Board of Directors, Opbeat Inc., San Francisco,
+CA, United States (until May 22, 2017)
+Board of Directors, Aircall.io, New York City, NY, United States
+Board of Directors, Virtuo Technologies, Paris, France (from July
+26, 2017)
+Consolidated Financial Statements IFRS and Notes | Notes
+209
+Board of Directors, Dashlane, Inc., New York, NY, United States
+Board of Directors, Recorded Future, Inc., Cambridge, MA,
+United States
+Board of Directors, Vestiaire Collective SA, Levallois-Perret,
+France
+Board of Directors, Wonga Group Ltd., London, United Kingdom
+Board of Directors, SCYTL Secure Electronic Voting SA,
+Barcelona, Spain
+Director of Max-Planck-Institut für Informatik, Saarbrücken,
+Germany (from January 1, 2018)
+Board of Directors, nlyte Software Ltd., London, United Kingdom
+Board of Directors, Talend SA, Suresnes, France
+Bernard Liautaud 2), 4), 6)
+Supervisory Board, Rhein-Neckar Loewen GmbH, Kronau,
+Germany
+Head of Sponsorships Europe and Asia
+Lars Lamadé ¹), 2), 7), 8)
+Supervisory Board, Ottobock SE & Co. KG (in course of
+incorporation), Duderstadt, Germany (from October 24, 2017)
+Supervisory Board, ING-DiBa AG, Frankfurt, Germany (from
+December 1, 2017)
+Supervisory Board, ClearVAT Aktiengesellschaft, Berlin,
+Germany (until December 1, 2017)
+Professor for Design Research and Head of the Design Research
+Lab, University of Arts Berlin
+Prof. Dr. Gesche Joost 4), 8)
+Attorney-at-Law, Certified Public Auditor, Certified Tax Advisor
+Managing Partner Balderton Capital, London, United Kingdom
+Fair Value and Parameters Used at Year End 2017 for Cash-Settled Plans
+Vice President, Head of SAP Alumni Relations
+Margret Klein-Magar ¹), 2), 4),
+Adaire Fox-Martin (from May 1, 2017)
+Board of Directors, Docker, Inc., San Francisco, CA, United
+States (from July 17, 2017)
+Board of Directors, Discovery Limited, Johannesburg, South
+Africa (from May 1, 2017)
+Concur, Ariba, Fieldglass (Sales, Development, Delivery),
+Customer Engagement and Commerce (CEC) and
+SuccessFactors (Development and Delivery),
+Industry Go-to-Market
+Cloud Business Group
+Robert Enslin
+Board of Directors, Bank of New York Mellon, New York, NY,
+United States
+Global Sales, Regional Field Organizations, Line of Business
+Solutions Sales
+Global Customer Operations (Americas and APJ)
+Global Customer Operations (EMEA, MEE, and Greater China)
+Global Sales, Regional Field Organizations, Line of Business
+Solutions Sales
+Jennifer Morgan (from May 1, 2017)
+Supervisory Board, DFKI (Deutsches Forschungszentrum für
+Künstliche Intelligenz GmbH), Kaiserslautern, Germany
+Supervisory Board, Bertelsmann SE & Co. KGaA, Guetersloh,
+Germany (from January 27, 2017)
+Global Development and Delivery of SAP Technology and
+Products, Strategic Innovation Initiatives, Design and User
+Experience
+Products & Innovation
+Bernd Leukert
+Board of Directors, Dell Secure Works, Atlanta, GA, United
+States
+Board of Directors, ANSYS, Inc., Canonsburg, PA, United States
+Board of Directors, Under Armour, Inc., Baltimore, MD, United
+States
+Strategy, Governance, Digital Government, Business
+Development, Corporate Development, Global Corporate
+Affairs, Corporate Audit and Global Marketing
+Chief Executive Officer
+Bill McDermott
+Supervisory Board TomTom N.V., Amsterdam, the Netherlands
+(from September 1, 2017)
+Deputy Chairperson
+Luka Mucic
+Global Finance and Administration including Investor Relations
+and Data Protection & Privacy
+Consolidated Financial Statements IFRS and Notes | Notes
+208
+Prof. Dr. h.c. mult. Hasso Plattner 2), 4), 6), 7), 8)
+Chairman
+Memberships on supervisory boards and other comparable
+governing bodies of enterprises, other than subsidiaries of SAP
+on December 31, 2017
+Supervisory Board
+Steve Singh (until April 30, 2017)
+Executive Board Members Who Left During
+2017
+Supervisory Board, innogy SE, Essen, Germany
+Global Consulting Delivery, Global and Regional Support and
+Premium Engagement, Maintenance Go-to-Market, Global User
+Groups, Mobile Services
+Chief Financial Officer
+Digital Business Services
+IT Services, Portfolio & Pricing
+Digital Transformation, Business Process Simplification,
+Global Business Operations
+Chief Operating Officer
+Christian Klein (from January 1, 2018)
+Supervisory Board, Rhein-Neckar Loewen GmbH, Kronau,
+Germany
+HR Strategy, Business Transformation, Leadership
+Development, Talent Development
+Chief Human Resources Officer, Labor Relations Director
+Stefan Ries
+Michael Kleinemeier
+€, unless otherwise stated
+Board of Directors, eWise Group, Inc., Redwood City,
+CA, United States
+Information how fair value was measured at measurement date
+"For these awards, the fair value is calculated by subtracting the net present value of expected future dividend payments, if any, until maturity of the respective award from the prevailing
+share price as of the valuation date.
+1.2
+2.4
+1.4
+3.0
+1.45
+1.46
+1.45
+1.45
+For SOP 2010, expected volatility of the SAP share price is
+based on a blend of implied volatility from traded options with
+corresponding lifetimes and exercise prices as well as historical
+volatility with the same expected life as the options granted.
+NA
+ΝΑ
+21.2
+-0.84
+-0.83
+-0.84
+-0.36 to
+-0.51 to
+-0.80 to
+-0.76
+22.3 to 51.0
+82.77
+For LTI 2016 Plan valuation, the Peer Group Index price on
+December 31, 2017, was US$247.24 (2016: US$179.57); the
+expected dividend yield of the index of 1.16% (2016: 1.24%), the
+expected volatility of the index of 16% to 17% (2016: 18%), and
+Expected remaining life of the options reflects both the
+contractual term and the expected, or historical, exercise
+behavior. The risk-free interest rate is derived from German
+government bonds with a similar duration. The SAP dividend
+yield is based on expected future dividends.
+0
+NA
+Adjustment based upon KPI target achievement
+9,104
+0
+0
+389
+Granted
+5,577
+the expected correlation of the SAP share price and the index
+price of 41% to 48% (2016: 39%) are based on historical data
+for the SAP share price and index price.
+29,127
+0
+12/31/2015
+RSU Plan
+(2013-2017
+Tranches)
+Tranches)
+SOP 2010
+(2010-2015
+LTI 2015 Plan
+(2012-2015
+Tranches)
+LTI 2016 Plan
+(2016-2017
+Tranches)
+Thousands, unless otherwise stated
+Changes in Numbers of Outstanding Awards Under Our Cash-Settled Plans
+977
+-66
+82.81
+82.81
+1) For these awards, the fair value is calculated by subtracting the net present value of expected future dividend payments, if any, until maturity of the respective award from the prevailing
+share price as of the valuation date.
+1.1
+1.6
+0.8
+2.9
+1.38
+1.38
+1.38
+1.38
+200
+NA
+NA
+17.5 to 19.6
+-0.70 to -0.32
+Weighted average fair value as at 12/31/2017
+-0.62 to -0.41
+-0.81
+-0.63 to -0.48
+93.45
+93.45
+21.1 to 34.5
+82.81
+Consolidated Financial Statements IFRS and Notes | Notes
+€, unless otherwise stated
+Other¹)
+Monte Carlo
+Other¹)
+Binomial
+81.34
+RSU Plan
+(2013-2016
+Tranches)
+20.94
+81.10
+74.54
+Fair Value and Parameters Used at Year End 2016 for Cash-Settled Plans
+SOP 2010
+(2010-2015
+Tranches)
+LTI 2016 Plan.
+(2016 Tranche)
+Weighted average remaining life of options outstanding as at 12/31/2016 (in
+years)
+Expected dividend yield (in %)
+Expected volatility (in %)
+Risk-free interest rate, depending on maturity (in %)
+Share price
+Option pricing model used
+Information how fair value was measured at measurement date
+Weighted average fair value as at 12/31/2016
+LTI 2015 Plan
+(2012-2015
+Tranches)
+Exercised
+NA
+-294
+LTI 2016 Plan
+(2016-2017
+Tranches)
+12/31/2017
+12/31/2016
+Total intrinsic value of vested awards (in € millions) as at
+12/31/2017
+12/31/2016
+Total carrying amount (in € millions) of liabilities as at
+Thousands, unless otherwise stated
+Changes in Numbers of Outstanding Awards Under Our Cash-Settled Plans
+LTI 2015 Plan
+(2012-2015
+Tranches)
+201
+4,948
+о
+0
+5,472
+0
+0
+Consolidated Financial Statements IFRS and Notes | Notes
+12/31/2017
+12/31/2016
+0
+0
+SOP 2010
+(2010-2015
+Tranches)
+7
+Option pricing model used
+Share price
+Risk-free interest rate, depending on maturity (in %)
+Expected volatility (in %)
+Expected dividend yield (in %)
+Weighted average remaining life of awards outstanding as at 12/31/2017 (in
+years)
+LTI 2016 Plan
+(2016-2017
+LTI 2015 Plan
+(2013-2015
+Tranches)
+RSU Plan
+(2013-2017
+Tranches)
+84.16
+58
+25
+708
+354
+51
+22
+436
+385
+58
+Tranches)
+13,520
+Outstanding awards exercisable as at
+531
+14,472
+Adjustment based upon KPI target achievement
+7,835
+0
+0
+93.45
+295
+Granted
+10,901
+0
+23,375
+377
+12/31/2016
+-1,055
+-1,059
+-12
+93.45
+Forfeited
+-2,659
+-4,693
+684
+ΝΑ
+ΝΑ
+Monte Carlo
+631
+12/31/2017
+-704
+-1,134
+0
+-41
+Forfeited
+Other¹)
+-7,769
+-152
+-4,388
+Exercised
+-124
+SOP 2010
+(2011-2015
+Tranches)
+92.40
+26.45
+RSU Plan
+(2014-2017
+Tranches)
+92.08
+Monte Carlo
+Other¹)
+0
+Merlin Systems Oy, Espoo, Finland
+100.0
+LLC "SAP Ukraine", Kiev, Ukraine
+100.0
+Garza Garcia, Mexico
+100.0
+100.0
+100.0
+100.0
+SAP Business Compliance Services GmbH, Siegen,
+Germany
+100.0
+SAP Malaysia Sdn. Bhd., Kuala Lumpur, Malaysia
+100.0
+SAP Malta Investments Ltd., Valletta, Malta
+100.0
+SAP Business Services Center Nederland B.V., 's-
+Hertogenbosch, the Netherlands
+SAP Chile Limitada, Santiago, Chile
+SAP China Holding Co., Ltd., Beijing, China
+SAP Colombia S.A.S., Bogotá, Colombia
+SAP Commercial Services Ltd., Valletta, Malta
+SAP Costa Rica, S.A., San José, Costa Rica
+SAP ČR, spol. s r.o., Prague, Czech Republic
+100.0 11)
+100.0 12)
+SAP MENA FZ L.L.C., Dubai, United Arab Emirates
+SAP Middle East and North Africa L.L.C., Dubai, United
+Arab Emirates
+100.0
+49.0
+5), 12)
+SAP Latvia SIA, Riga, Latvia
+100.0
+SAP Bulgaria EOOD, Sofia, Bulgaria
+100.0
+SAP Korea Ltd., Seoul, South Korea
+100.0
+SAP Labs Bulgaria EOOD, Sofia, Bulgaria
+100.0
+SAP Asia (Vietnam) Co., Ltd., Ho Chi Minh City, Vietnam
+100.0
+SAP Labs Finland Oy, Espoo, Finland
+100.0
+100.0
+SAP AZ LLC, Baku, Azerbaijan
+SAP Labs France SAS, Mougins, France
+100.0
+SAP Belgium NV/SA, Brussels, Belgium
+100.0
+SAP Labs Israel Ltd., Ra'anana, Israel
+100.0
+100.0
+SAP Labs Korea, Inc., Seoul, South Korea
+100.0
+100.0 12)
+SAP National Security Services, Inc., Newtown Square,
+PA, United States
+100.0
+SAP Dritte Beteiligungs- und Vermögensverwaltungs
+100.0
+GmbH, Walldorf, Germany
+SAP Philippines, Inc., Makati City, Philippines
+100.0
+SAP East Africa Limited, Nairobi, Kenya
+100.0 12)
+SAP Polska Sp. z o.o., Warsaw, Poland
+12)
+100.0
+100.0
+SAP Portals Europe GmbH, Walldorf, Germany
+100.0
+SAP EMEA Inside Sales S.L., Barcelona, Spain
+100.0
+SAP Portals Holding Beteiligungs GmbH, Walldorf,
+Germany
+100.0
+SAP Erste Beteiligungs- und Vermögensverwaltungs
+GmbH, Walldorf, Germany
+SAP Egypt LLC, Cairo, Egypt
+12)
+100.0
+100.0
+100.0
+SAP Nederland Holding B.V., 's-Hertogenbosch, the
+Netherlands
+100.0
+11)
+100.0 12)
+100.0
+SAP New Zealand Limited, Auckland, New Zealand
+SAP Norge AS, Lysaker, Norway
+100.0
+SAP Perú S.A.C., Lima, Peru
+100.0
+100.0
+SAP North West Africa Ltd, Casablanca, Morocco
+100.0
+SAP d.o.o., Zagreb, Croatia
+100.0
+SAP Österreich GmbH, Vienna, Austria
+100.0
+SAP Danmark A/S, Copenhagen, Denmark
+SAP Cyprus Limited, Nicosia, Cyprus
+Concur (Austria) GmbH, Vienna, Austria
+100.0
+100.0 12)
+SAP Andina y del Caribe, C.A., Caracas, Venezuela
+100.0
+Concur (Switzerland) GmbH, Zurich, Switzerland
+100.0
+PT SAP Indonesia, Jakarta, Indonesia
+99.0
+Concur Czech (s.r.o.), Prague, Czech Republic
+100.0
+PT Sybase 365 Indonesia, Jakarta, Indonesia
+100.0
+Concur Holdings (France) SAS, Paris, France
+100.0
+Quadrem Africa Pty. Ltd., Johannesburg, South Africa
+100.0
+Concur Holdings (Netherlands) B.V., Amsterdam, the
+Netherlands
+100.0 11)
+Quadrem Brazil Ltda., Rio de Janeiro, Brazil
+100.0
+Plateau Systems LLC, South San Francisco, CA, United
+States
+100.0
+Concur (Philippines) Inc., Makati City, Philippines
+100.0
+Multiposting Sp.z o.o., Warsaw, Poland
+100.0
+Concur (Canada), Inc., Toronto, Canada
+100.0
+Nihon Ariba K.K., Tokyo, Japan
+100.0
+Concur (France) SAS, Paris, France
+100.0
+Quadrem Chile Ltda., Santiago de Chile, Chile
+OutlookSoft Deutschland GmbH, Walldorf, Germany
+100.0 8).9)
+Plat.One Inc., Palo Alto, CA, United States
+100.0
+Concur (Japan) Ltd., Bunkyo-ku, Japan
+74.4
+Plat.One Lab Srl, Bogliasco, Italy
+100.0
+Concur (New Zealand) Limited, Wellington, New Zealand
+Concur (Germany) GmbH, Frankfurt am Main, Germany
+100.0
+Consolidated Financial Statements IFRS and Notes | Notes
+215
+SAP International, Inc., Miami, FL, United States
+100.0
+Quadrem Overseas Cooperatief U.A., Amsterdam, the
+Netherlands
+100.0
+SAP Investments, Inc., Wilmington, DE, United States
+SAP Ireland Limited, Dublin, Ireland
+100.0
+100.0
+Quadrem Peru S.A.C., Lima, Peru
+11)
+100.0
+100.0
+SAP Ireland US - Financial Services Designated Activity
+Company, Dublin, Ireland
+100.0
+SAP (Beijing) Software System Co., Ltd., Beijing, China
+100.0
+SAP Israel Ltd., Ra'anana, Israel
+100.0
+12)
+Ruan Lian Technologies (Beijing) Co., Ltd., Beijing, China
+SAP Argentina S.A., Buenos Aires, Argentina
+100.0
+100.0
+Name and Location of Company
+Owner-
+Foot-
+Name and Location of Company
+Owner-
+Foot-
+ship
+note
+Quadrem Netherlands B.V., Amsterdam, the Netherlands
+ship
+%
+%
+Quadrem Colombia SAS, Bogotá, Colombia
+100.0
+Quadrem International Ltd., Hamilton, Bermuda
+100.0
+SAP India (Holding) Pte Ltd, Singapore, Singapore
+SAP International Panama, S.A., Panama City, Panama
+100.0
+note
+SAP Beteiligungs GmbH, Walldorf, Germany
+67.311
+Total
+Name and Location of Company
+Foot-
+Owner-
+Name and Location of Company
+Consolidated Financial Statements IFRS and Notes | Notes
+214
+1,017
+3,247,742
+269,541
+958,049
+100.0
+SuccessFactors, Inc., South San Francisco, CA, United States
+1,460
+49,312
+10,766
+152,885
+100.0
+ship
+%
+SAP Service and Support Centre (Ireland) Limited, Dublin, Ireland
+note
+Foot-
+Ambin Properties Proprietary Limited, Johannesburg,
+South Africa
+4)
+100.0
+Abakus Ukraine Limited Liability Company, Kiev, Ukraine
+100.0
+Concur Technologies (India) Private Limited, Bangalore,
+India
+100.0
+100.0
+Concur Technologies (Hong Kong) Limited, Hong Kong,
+China
+100.0
+100.0
+"SAP Kazakhstan" LLP, Almaty, Kazakhstan
+110405, Inc., Newtown Square, PA, United States
+Abakus Europe Limited, London, United Kingdom
+100.0
+Concur Technologies (Australia) Pty. Limited, Sydney,
+Australia
+Other Subsidiaries 3)
+%
+ship note
+Owner-
+11)
+594
+92,475
+SAP Labs India Private Limited, Bangalore, India
+1,182
+99,896
+74,045
+900,807
+100.0
+SAP Japan Co., Ltd., Tokyo, Japan
+672
+387,063
+27,499
+547,575
+100.0
+SAP Italia Sistemi Applicazioni Prodotti in Data Processing S.p.A.,
+Vimercate, Italy
+328
+542,364
+39,032
+633,506
+100.0
+432,654
+46,791
+99,112
+39,684
+573,162
+100.0
+SAP Nederland B.V., 's-Hertogenbosch, the Netherlands
+12)
+777
+6,627
+17,577
+100.0
+382,974
+SAP México S.A. de C.V., Mexico City, Mexico
+2,108
+344,895
+44,162
+673,690
+100.0
+SAP Labs, LLC, Palo Alto, CA, United States
+7,451
+100.0
+100.0
+Concur Technologies (Singapore) Pte Ltd, Singapore,
+Singapore
+Ariba Czech s.r.o., Prague, Czech Republic
+100.0 4),10)
+Gigya UK Ltd, London, United Kingdom
+Gigya, Inc., Mountain View, CA, United States
+GlobalExpense Limited, London, United Kingdom
+Hipmunk, Inc., San Francisco, CA, United States
+hybris (US) Corp., Wilmington, DE, United States
+100.0
+Christie Partners Holding C.V., 's-Hertogenbosch, the
+Netherlands
+100.0
+Business Objects Software Limited, Dublin, Ireland
+100.0
+Business Objects Option LLC, Wilmington, DE, United
+States
+100.0 4)
+Gigya Ltd., Tel Aviv, Israel
+100.0 11)
+Business Objects Holding B.V., 's-Hertogenbosch, the
+Netherlands
+100.0 4)
+Gigya Australia Pty Ltd, Syndey, Australia
+100.0
+b-process, Paris, France
+100.0
+100.0 4)
+FreeMarkets Ltda., São Paulo, Brazil
+100.0
+100.0
+CNQR Operations Mexico S. de. R.L. de. C.V., San Pedro
+100.0
+LLC "SAP Labs", Moscow, Russia
+57.9
+ClearTrip Private Limited, Mumbai, India
+100.0
+Inxight Federal Systems Group, Inc., Wilmington, DE,
+United States
+57.9
+Cleartrip MEA FZ LLC, Dubai, United Arab Emirates
+57.9
+Clear Trip Inc., George Town, Cayman Islands
+8).9)
+100.0
+hybris GmbH, Munich, Germany
+57.9
+ClearTrip Inc. (Mauritius), Ebene, Mauritius
+100.0
+10)
+100.0
+Financial Fusion, Inc., San Ramon, CA, United States
+0
+100.0
+Crystal Decisions (Ireland) Limited, Dublin, Ireland
+100.0
+Ariba International Singapore Pte Ltd, Singapore,
+Singapore
+100.0
+ConTgo Pty. Ltd., Sydney, Australia
+100.0 10)
+100.0 10)
+ConTgo Consulting Limited, London, United Kingdom
+ConTgo Limited, London, United Kingdom
+100.0
+Ariba International Holdings, Inc., Wilmington, DE, United
+States
+100.0
+Ariba India Private Limited, Gurgaon, India
+10)
+100.0
+Concur Technologies (UK) Limited, London, United
+Kingdom
+100.0
+Ariba International, Inc., Wilmington, DE, United States
+100.0
+Crystal Decisions Holdings Limited, Dublin, Ireland
+100.0
+Beijing Zhang Zhong Hu Dong Information Technology
+Co., Ltd., Beijing, China
+10)
+100.0
+Fieldglass Europe Limited, London, United Kingdom
+11)
+100.0
+Ariba Technologies Netherlands B.V., 's-Hertogenbosch,
+the Netherlands
+100.0
+100.0 12)
+100.0
+100.0
+EssCubed Procurement Pty. Ltd., Johannesburg, South
+Africa
+100.0
+Ariba Software Technology Services (Shanghai) Co., Ltd.,
+Shanghai, China
+100.0
+Crystal Decisions UK Limited, London, United Kingdom
+100.0
+Ariba Slovak Republic s.r.o., Košice, Slovakia
+Ariba Technologies India Private Limited, Bangalore,
+India
+SAP Industries, Inc., Newtown Square, PA, United States
+1,876
+279,095
+(33) Events After the Reporting
+Period
+In 2017 and 2016, our Executive Board and Supervisory Board
+issued the required declarations of implementation. The
+declaration for 2017 was issued on October 27, 2017. These
+statements are available on our Web site:
+http://www.sap.com/corporate-en/investors/governance.
+The German federal government published the German Code of
+Corporate Governance in February 2002 and introduced a
+commission that amends the Code from time to time. The Code
+contains statutory requirements and a number of
+recommendations and suggestions. Only the legal requirements
+are binding for German companies. With regard to the
+recommendations, the German Stock Corporation Act, section
+161, requires that every year, listed companies publicly state the
+extent to which they have implemented them. Companies can
+deviate from the suggestions without having to make any public
+statements.
+(32) German Code of Corporate
+Governance
+Audit fees are the aggregate fees charged by KPMG for auditing
+our consolidated financial statements and the statutory financial
+statements of SAP SE and its subsidiaries. Audit-related fees are
+fees charged by KPMG for assurance and related services that
+are reasonably related to the performance of the audit or review
+of our financial statements and are not reported under audit
+fees.
+Consolidated Financial Statements IFRS and Notes | Notes
+212
+9
+6
+3
+10
+7
+3
+10
+7
+3
+Total
+On January 30, 2018, SAP announced that SAP America, Inc.
+has entered into an agreement to acquire Callidus Software Inc.
+The per share purchase price of $36.00 represents a 21%
+premium over the 30-day volume weighted average price per
+share and a 28% premium over Callidus Software Inc.'s 90-day
+volume weighted average price per share. The per share price
+represents an enterprise value of approximately $2.4 billion.
+SAP safeguards funding of the transaction with existing cash
+balances and an acquisition term loan and intends to refinance
+substantial portions of the purchase price with capital market
+transactions. The transaction is expected to close in the second
+quarter of 2018, subject to approval from Callidus Software Inc.
+stockholders, clearances by the relevant regulatory authorities,
+and other customary closing conditions.
+0
+Callidus Software Inc. is a leader in cloud-based sales,
+marketing, learning, and customer experience solutions.
+Callidus Software Inc. offers a complete suite of solutions that
+identify the right leads, ensure proper territory and quota
+distribution, enable sales forces, automate configure price
+quote, and streamline sales compensation. Callidus Software
+Inc. is a synergistic addition to SAP's portfolio and significantly
+strengthens SAP's position in the customer relationship
+management (CRM) space.
+Consolidated Financial Statements IFRS and Notes | Notes
+100.0
+Ariba, Inc., Palo Alto, CA, United States
+€ thousands
+€ thousands
+€ thousands
+%
+12/31/2017²)
+Number of Foot-
+Employees note
+as at
+Total Equity
+as at
+12/31/2017¹
+Major Subsidiaries
+(-) After Tax
+for 2017¹)
+Profit/Loss
+Ownership Total Revenue
+in 2017¹)
+Name and Location of Company
+Subsidiaries
+(34) Subsidiaries and Other
+Equity Investments
+213
+Other than that, no events have occurred since December 31,
+2017, that have a material impact on the Company's
+Consolidated Financial Statements.
+0
+0
+0
+0
+0
+Audit-related fees
+9
+6
+3
+9
+6
+3
+10
+7
+3
+Audit fees
+Firms
+Total
+Foreign
+KPMG
+KPMG AG
+(Germany)
+0
+0
+1
+1
+0
+0
+0
+All other fees
+0
+0
+0
+0
+1,128,586
+0
+0
+0
+0
+0
+Tax fees
+0
+○
+0
+100.0 8).9)
+Concur Technologies, Inc., Bellevue, WA, United States
+100.0
+1,455,188
+SAP Deutschland SE & Co. KG, Walldorf, Germany
+5,185
+-117,810
+-83,320
+892,266
+100.0
+SAP China Co., Ltd., Shanghai, China
+2,884
+467,224
+44,223
+808,782
+100.0
+1,762
+-62,107
+-66,298
+572,099
+100.0
+100.0
+3,950,051
+621,834
+1,442,856
+61.846
+577,685
+100.0
+SAP India Private Limited, Bangalore, India
+Adatfeldolgozásban Informatikai Kft., Budapest, Hungary
+845
+17,104
+1,748
+SAP Canada, Inc., Toronto, Canada
+89,454
+SAP Hungary Rendszerek, Alkalmazások és Termékek az
+1,531
+1,579,837
+170,321
+1,120,814
+100.0
+SAP France, Levallois-Perret, France
+4,513 7).9)
+100.0
+Foreign
+KPMG
+Firms
+SAP Brasil Ltda, São Paulo, Brazil
+68,050
+SAP (UK) Limited, Feltham, United Kingdom
+721
+-338,934
+818,999
+100.0
+SAP (Schweiz) AG, Biel, Switzerland
+826
+51,613
+8,711
+468,361
+100.0
+LLC SAP CIS, Moscow, Russia
+3,339
+7,069,785
+1,763
+3,580,181
+163,516
+130,063
+100.0
+1,068,795
+7,523
+-65,176
+-82,950
+707,027
+100.0
+SAP Australia Pty Ltd, Sydney, Australia
+1,151
+-26,721
+-28,550
+441,506
+1,257
+100.0
+7,801
+13,008,339
+-344,644
+5,248,201
+100.0
+SAP America, Inc., Newtown Square, PA, United States
+10)
+1,678
+SAP Asia Pte Ltd, Singapore, Singapore
+SAP Portals Israel Ltd., Ra'anana, Israel
+In total, we sold products and services to companies controlled
+by members of the Supervisory Board in the amount of
+€2 million (2016: €1 million), we bought products and services
+from such companies in the amount of €5 million (2016:
+€3 million), and we provided sponsoring and other financial
+SAP España - Sistemas, Aplicaciones y Productos en la
+3,663
+3,652
+Thereof fixed compensation
+3,135
+3,135
+Thereof committee
+528
+517
+3,728
+3,250
+479
+remuneration
+The Supervisory Board members do not receive any share-
+based payment for their services. As far as members who are
+employee representatives on the Supervisory Board receive
+(30) Related Party Transactions
+Certain Supervisory Board members of SAP SE currently hold,
+or held within the last year, positions of significant responsibility
+with other entities. We have relationships with certain of these
+entities in the ordinary course of business, whereby we buy and
+sell products, assets, and services at prices believed to be
+consistent with those negotiated at arm's length between
+unrelated parties.
+Companies controlled by Hasso Plattner, chairman of our
+Supervisory Board and Chief Software Advisor of SAP, engaged
+in the following transactions with SAP: providing consulting
+services to SAP, receiving sport sponsoring from SAP, making
+purchases of SAP products and services.
+Wilhelm Haarmann practices as a partner in the law firm
+Linklaters LLP in Frankfurt am Main, Germany. SAP occasionally
+purchased and purchases legal and similar services from
+Linklaters.
+Occasionally, members of the Executive Board of SAP SE obtain
+services from SAP for which they pay a consideration consistent
+with those negotiated at arm's length between unrelated parties.
+All amounts related to the abovementioned transactions were
+immaterial to SAP in all periods presented in these consolidated
+financial statements.
+Extended Systems, Inc., San Ramon, CA, United States
+Fedem Technology AS, Trondheim, Norway
+Consolidated Financial Statements IFRS and Notes | Notes
+211
+support to such companies in the amount of €4 million (2016:
+€4 million). Outstanding balances at year end from transactions
+with such companies were €0 million (2016: €0 million) for
+amounts owed to such companies and €0 million (2016:
+Total compensation
+2015
+2016
+2017
+33.935
+32,758
+SAP did not grant any compensation advance or credit to, or
+enter into any commitment for the benefit of, any member of the
+Executive Board or Supervisory Board in 2017, 2016, or 2015.
+Detailed information about the different elements of the
+compensation are disclosed in the Compensation Report, which
+is part of our Management Report and of our Annual Report on
+Form 20-F, both of which are available on SAP's Web site.
+In the table above, the share-based payment expense is the
+amount recorded in profit or loss under IFRS 2 (Share Based
+Payments) in the respective period.
+The defined benefit obligation (DBO) for pensions to Executive
+Board members and the annual pension entitlement of the
+members of the Executive Board on reaching age 60 based on
+entitlements from performance-based and salary-linked plans
+were as follows:
+Retirement Pension Plan for Executive Board
+Members
+€ thousands
+2017
+2016
+€0 million) for amounts owed by such companies. All of these
+balances are unsecured and interest-free and settlement is
+expected to occur in cash. Commitments (the longest of which
+is for six years) made by us to purchase further goods or
+services from these companies and to provide further
+sponsoring and other financial support amount to €21 million as
+at December 31, 2017 (2016: €28 million).
+2015
+3,191
+10,739
+8,948
+Annual pension entitlement
+148
+470
+427
+The total annual compensation of the Supervisory Board
+members is as follows:
+Supervisory Board Compensation
+€ thousands
+DBO December 31
+39,993
+In total, we sold services to members of the Executive Board and
+the Supervisory Board in the amount of €0 million (2016: €0
+million), and we received services from members of the
+Supervisory Board (including services from employee
+representatives on the Supervisory Board in their capacity as
+employees of SAP) in the amount of €1 million (2016:
+(2016: €0 million). All of these balances are unsecured and
+interest-free and settlement is expected to occur in cash.
+SAP SE
+Walldorf, February 21, 2018
+Consolidated Financial Statements IFRS and Notes | Notes
+218
+The SAVO Group Ltd., Chicago, IL, United States
+TidalScale, Inc., Campbell, CA, United States
+Upfront V, L.P., Santa Monica, CA, United States
+Wandera, Inc., San Francisco, CA, United States
+The SaaStr Fund I, L.P., Palo Alto, CA, United States
+The Currency Cloud Group Limited, London, United Kingdom
+T3C Inc., Mountain View, CA, United States
+SV Angel IV, L.P., San Francisco, CA, United States
+Sports Tech Fund, L.P., Palo Alto, CA, United States
+Sports Tech Parallel Fund, L.P., Palo Alto, CA, United States
+Spring Mobile Solutions, Inc., Salt Lake City, UT, United States
+Storm Ventures V, L.P., Menlo Park, CA, United States
+SumoLogic, Inc., Redwood City, CA, United States
+Ridge Ventures IV, L.P., San Francisco, CA, United States
+Rome2rio Pty. Ltd., Richmond, Australia
+Smart City Planning, Inc., Tokyo, Japan
+Socrata, Inc., Seattle, WA, United States
+Reltio, Inc., Redwood Shores, CA, United States
+Realize Corporation, Tokyo, Japan
+PubNub, Inc., San Francisco, CA, United States
+Post for Systems, Cairo, Egypt
+Point Nine Capital Fund II GmbH & Co. KG, Berlin, Germany
+Point Nine Capital Fund III GmbH & Co. KG, Berlin, Germany
+Point Nine Capital Fund IV GmbH & Co. KG, Berlin, Germany
+Portworx Inc., Los Altos, CA, United States
+Notation Capital, L.P., Brooklyn, NY, United States
+On Deck Capital, Inc., New York, NY, United States
+OpenX Software Limited, Pasadena, CA, United States
+OpsRamp, Inc., San Jose, CA, United States
+Pheonix Labs Canada, ULC, Burnaby, BC, Canada
+Point Nine Annex GmbH & Co. KG, Berlin, Germany
+Nor1, Inc., Santa Clara, CA, United States
+Notation Capital II, L.P., Brooklyn, NY, United States
+IEX Group, Inc., New York, NY, United States
+Inkling Systems, Inc., San Francisco, CA, United States
+Greater Pacific Capital (Cayman) L.P., Grand Cayman, Cayman Islands
+IDG Ventures USA III, L.P., San Francisco, CA, United States
+GK Software AG, Schöneck, Germany
+Walldorf, Baden
+The Executive Board
+Bill McDermott
+Robert Enslin
+For information about the compensation of our Executive Board
+and Supervisory Board members, see Note (29).
+(31) Principal Accountant Fees
+and Services
+At the Annual General Meeting of Shareholders held on May 10,
+2017, our shareholders elected KPMG AG Wirtschafts-
+prüfungsgesellschaft as SAP's independent auditor for 2017.
+KPMG AG Wirtschaftsprüfungsgesellschaft has been the
+company's principal auditor since the fiscal year 2002. Dr.
+Böttcher has signed as auditor responsible for the audit since
+the fiscal year 2013, and Ms. Herold has signed as auditor since
+the fiscal year 2016. KPMG AG Wirtschaftsprüfungsgesellschaft
+and other firms in the global KPMG network charged the
+following fees to SAP for audit and other professional services
+related to 2017 and the previous years:
+Fees for Audit and Other Professional Services
+2017
+2016
+2015
+€ millions
+KPMG AG
+(Germany)
+Foreign
+KPMG
+€1 million). Amounts owed to Supervisory Board members from
+these transactions were €0 million as at December 31, 2017
+Total
+Firms
+219
+Consolidated Financial Statements IFRS and Notes | Notes
+Stefan Ries
+Luka Mucic
+Jennifer Morgan
+Bernd Leukert
+Michael Kleinemeier
+Christian Klein
+Adaire Fox-Martin
+KPMG AG
+(Germany)
+Follow Analytics, Inc., San Francisco, CA, United States
+1,580
+1,997
+Supervisory Board, Georgsmarienhütte GmbH,
+Georgsmarienhütte, Germany (until June 13, 2017)
+Pierre Thiollet ¹), 4)
+Webmaster (P&I)
+Member of the SAP France Works Council
+Secretary of CHSCT (Hygiene, Security and Work Conditions
+Committee)
+Prof. Dr.-Ing. Dr.-Ing. E. h. Klaus Wucherer ³)
+Managing Director of Dr. Klaus Wucherer Innovations- und
+Technologieberatung GmbH, Erlangen, Germany
+Deputy Chairman of the Supervisory Board, HEITEC AG,
+Erlangen, Germany
+Deputy Chairman of the Supervisory Board, LEONI AG,
+Nuremberg, Germany (until May 11, 2017)
+Chairman of the Supervisory Board, Festo AG & Co. KG,
+Esslingen, Germany
+€ thousands
+2017
+2016
+2015
+Short-term employee benefits
+16,634
+19,206
+15,137
+Share-based payment¹)
+Subtotal¹)
+25,723
+23,942
+10,365
+Head of Company Law Unit, Hans Böckler Foundation
+Dr. Sebastian Sick ¹), 2), 5), 7)
+Executive Board Compensation
+Allocating the fair value of the share-based payments to the
+respective years they are economically linked to, the total
+compensation of the Executive Board members for the years
+2017, 2016, and 2015 was as follows:
+Christine Regitz ¹), 4), 8)
+Vice President User Experience
+Chief Product Expert
+Dr. Erhard Schipporeit ³), 5), 7)
+Supervisory Board Members Who Left
+During 2017
+Jim Hagemann Snabe (until June 30, 2017)
+Independent Management Consultant
+Supervisory Board, Talanx AG, Hanover, Germany
+Supervisory Board, Deutsche Börse AG, Frankfurt am Main,
+Germany
+Supervisory Board, HDI V.a.G., Hanover, Germany
+42,357
+Supervisory Board, Hannover Rückversicherung SE, Hanover,
+Germany
+Chairman of the Supervisory Board, innogy SE, Essen, Germany
+(from January 1, 2018)
+Robert Schuschnig-Fowler 1), 5), 8)
+Account Manager, Senior Support Consultant
+Deputy Chairman of SAP SE Works Council Europe
+Member of Works Council SAP SE
+Information as at December 31, 2017
+"Elected by the employees
+2) Member of the Company's General and Compensation Committee
+3) Member of the Company's Audit Committee
+4) Member of the Company's Technology and Strategy Committee
+5) Member of the Company's Finance and Investment Committee
+6) Member of the Company's Nomination Committee
+7) Member of the Company's Special Committee
+8) Member of the Company's People and Organization Committee
+Supervisory Board, Fuchs Petrolub SE, Mannheim, Germany
+Supervisory Board, BDO AG, Hamburg, Germany
+Supervisory Board, RWE AG, Essen, Germany
+1,667
+43,148
+Post-employment benefits
+2015
+Number of RSUs granted
+117,929
+147,041
+192,345
+Number of PSUs granted
+176,886
+220,561
+NA
+Total expense in € thousands
+19,068
+14,233
+22,310
+share-based payment, such compensation is for their services
+as employees only and is unrelated to their status as members
+of the Supervisory Board.
+Payments to/DBO for Former Executive Board
+Members
+€ thousands
+Payments
+DBO December 31
+2017
+2016
+2015
+2016
+2017
+Share-Based Payment for Executive Board
+Members
+Considering the grant date fair value of the RSUs allocated in
+2015 instead of the economically allocated amount of share-
+based payments in the table above, the sum of short-term
+employee benefits and share-based payment amounts to
+€15,400,400 and the total Executive Board compensation
+amounts to €16,678,400.
+1,312
+2,398
+1,278
+Thereof defined-benefit
+100.0
+1,792
+288
+Thereof defined-contribution
+889
+606
+25,502
+990
+43,669
+45,546
+26,780
+1)
+› Portion of total executive compensation allocated to the respective year
+The share-based payment amounts disclosed above for 2017
+and 2016 are based on the grant date fair value of the restricted
+share units (RSUs) and performance share units (PSUs),
+respectively, issued to Executive Board members during the
+year under the LTI 2016 Plan, effective January 1, 2016.
+The Executive Board members already received, in 2012, the LTI
+grants for the years 2012 to 2015 subject to continuous service
+as member of the Executive Board in the respective years.
+Although these grants are compensation for the Executive
+Board members in the respective years, section 314 of the
+German Commercial Code (HGB) required them to be included
+in the total compensation number for the year of grant. Upon his
+appointment to the Executive Board in 2015, Michael
+Kleinemeier received a grant related to 2015. Vesting of the LTI
+grants is dependent on the respective Executive Board
+member's continuous service for the Company.
+210
+Consolidated Financial Statements IFRS and Notes | Notes
+The share-based payment for 2015 as defined in section 314 of
+the German Commercial Code (HGB) amounts to €263,200 and
+4,622 RSUs, respectively, based on the allocation for 2015 for
+Michael Kleinemeier, which was granted in 2015 in line with his
+appointment to the Executive Board.
+Total¹)
+Felix Ventures II, L.P., London, United Kingdom
+423
+AP Opportunity Fund, LLC, Menlo Park, CA, United States
+Blue Yard Capital | GmbH & Co. KG, Berlin, Germany
+Catchpoint Systems, Inc., New York, NY, United States
+Char Software, Inc., Boston, MA, United States
+Cloudhealth Technologies, Inc., Boston, MA, United States
+Costanoa Venture Capital II L.P., Palo Alto, CA, United States
+Costanoa Venture Capital III L.P., Palo Alto, CA, United States
+Costanoa Venture Capital QZ, LLC, Palo Alto, CA, United States
+Culture Amp, Inc., San Francisco, CA, United States
+100.0
+SAP Slovensko s.r.o., Bratislava, Slovakia
+12)
+70.0
+Systems Applications Products (South Africa)
+Proprietary Limited, Johannesburg, South Africa
+100.0
+SAP sistemi, aplikacije in produkti za obdelavo podatkov
+d.o.o., Ljubljana, Slovenia
+GmbH, Walldorf, Germany
+100.0
+Systems Applications Products (Africa) Proprietary
+Limited, Johannesburg, South Africa
+100.0 8).9)
+SAP Siebte Beteiligungs- und Vermögensverwaltungs
+100.0
+SAP Services s.r.o., Prague, Czech Republic
+100.0
+Systems Applications Products (Africa Region)
+Proprietary Limited, Johannesburg, South Africa
+100.0 8).9)
+SAP Sechste Beteiligungs- und Vermögensverwaltungs
+GmbH, Walldorf, Germany
+100.0
+100.0
+Sybase Software (India) Private Ltd., Mumbai, India
+Sybase, Inc., San Ramon, CA, United States
+Systems Applications Products Nigeria Limited, Victoria
+Island, Nigeria
+100.0 12)
+SAP Software and Services LLC, Doha, Qatar
+49.0 5)
+100.0
+Volume Integration, Inc., VA, United States
+100.0
+SAP Technologies Inc., Palo Alto, CA, United States
+TRX, Inc., Bellevue, WA, United States
+100.0
+SAP Taiwan Co., Ltd., Taipei, Taiwan
+TRX UK Limited, London, United Kingdom
+100.0
+100.0
+75.0
+TRX Luxembourg, S.a.r.l., Luxembourg City, Luxembourg
+TRX Technologies India Private Limited, Raman Nagar,
+India
+SAP Systems, Applications and Products in Data
+Processing (Thailand) Ltd., Bangkok, Thailand
+100.0 4)
+SAP System Application and Products Myanmar Ltd.,
+Yangon, Myanmar
+10)
+100.0
+TRX Europe Limited, London, United Kingdom
+100.0 12)
+SAP Svenska Aktiebolag, Stockholm, Sweden
+100.0
+TomorrowNow, Inc., Bryan, TX, United States
+100.0
+SAP Saudi Arabia Software Trading Ltd, Riyadh,
+Kingdom of Saudi Arabia
+%
+%
+100.0
+SAP Public Services, Inc., Washington, DC, United States
+SAP Puerto Rico GmbH, Walldorf, Germany
+100.0
+SAP France Holding, Levallois-Perret, France
+100.0
+SAP Foreign Holdings GmbH, Walldorf, Germany
+100.0
+SAP Public Services Hungary Kft., Budapest, Hungary
+100.0
+SAP Finland Oy, Espoo, Finland
+100.0 8). 9): 12)
+100.0
+100.0
+SAP Financial, Inc., Toronto, Canada
+100.0
+SAP Estonia OÜ, Tallinn, Estonia
+Portugal
+100.0
+SAP Portugal - Sistemas, Aplicações e Produtos
+Informáticos, Sociedade Unipessoal, Lda., Porto Salvo,
+Informática, S.A., Madrid, Spain
+100.0
+Data Collective II L.P., San Francisco, CA, United States
+Data Collective III L.P., San Francisco, CA, United States
+Data Collective IV, L.P., San Francisco, CA, United States
+Dharma Platform, Inc., Washington, DC, United States
+EIT ICT Labs Germany GmbH, Berlin, Germany
+FeedZai S.A., Lisbon, Portugal
+SAP Projektverwaltungs- und Beteiligungs GmbH,
+Walldorf, Germany
+10)
+SAP Global Marketing, Inc., New York, NY, United States
+SAP Retail Solutions Beteiligungsgesellschaft GmbH,
+Walldorf, Germany
+ship note
+Foot-
+Owner-
+Name and Location of Company
+Foot-
+note
+ship
+Owner-
+Name and Location of Company
+Consolidated Financial Statements IFRS and Notes | Notes
+216
+100.0
+100.0 8).9)
+100.0
+SAP Saudi Arabia Software Services Ltd, Riyadh,
+Kingdom of Saudi Arabia
+100.0
+100.0 10)
+SAP Holdings (UK) Limited, Feltham, United Kingdom
+SAP Hong Kong Co., Ltd., Hong Kong, China
+100.0
+SAP Romania SRL, Bucharest, Romania
+100.0
+SAP Hellas S.A., Athens, Greece
+100.0
+SAP Hosting Beteiligungs GmbH, St. Leon-Rot, Germany
+100.0
+100.0
+SAP Training and Development Institute FZCO, Dubai,
+United Arab Emirates
+Jibe, Inc., New York, NY, United States
+JFrog, Ltd., Netanya, Israel
+Integral Ad Science, Inc., New York, NY, United States
+innoWerft Technologie- und Gründerzentrum Walldorf Stiftung GmbH,
+Walldorf, Germany
+Innovation Lab GmbH, Heidelberg, Germany
+Name and Location of Company
+Name and Location of Company
+Other Equity Investments
+12) Entity with support letter issued by SAP SE.
+requirement of independent audit, and the requirement of public disclosure,
+on the basis that SAP SE has provided a guarantee of the entity's liabilities in
+respect of its financial year ended December 31, 2017.
+217
+Consolidated Financial Statements IFRS and Notes | Notes
+11) Pursuant to article 2:403 of the Dutch Civil Code, the entity is exempt from
+applying certain legal requirements to their statutory stand-alone financial
+statements including the requirement to prepare the financial statements, the
+100.0
+Sybase Philippines, Inc., Makati City, Philippines
+10) Pursuant to sections 479A to 479C of the UK Companies Act 2006, the
+entity is exempt from having its financial statements audited on the basis that
+SAP SE has provided a guarantee of the entity's liabilities in respect of its
+financial year ended December 31, 2017.
+9) Pursuant to HGB, section 264 (3) or section 264b, the subsidiary is exempt
+from applying certain legal requirements to their statutory stand-alone
+financial statements including the requirement to prepare notes to the
+financial statements and a review of operations, the requirement of
+independent audit, and the requirement of public disclosure.
+"Entity whose personally liable partner is SAP SE.
+6) SAP SE does not hold any ownership interests in six structured entities,
+SAPV (Mauritius), Sapphire SAP HANA Fund of Funds, L.P., Sapphire
+Ventures Fund I, L.P., Sapphire Ventures Fund II, L.P., Sapphire Ventures Fund
+III, L.P., and SAP.io Fund, L.P. However, based on the terms of limited
+partnership agreements under which these entities were established, SAP SE
+is exposed to the majority of the returns related to their operations and has
+the current ability to direct these entities' activities that affect these returns, in
+accordance with IFRS 10 (Consolidated Financial Statements). Accordingly,
+the results of operations are included in SAP's consolidated financial
+statements.
+Agreements with the other shareholders provide that SAP SE fully controls
+the entity.
+6)
+Owner-
+ship
+Kaltura, Inc., New York, NY, United States
+%
+Landlog Limited, Tokyo, Japan
+100.0
+All Tax Platform - Solucoes Tributarias S.A., São Paulo, Brazil
+Amplify Partners II L.P., Menlo Park, CA, United States
+Amplify Partners L.P., Menlo Park, CA, United States
+Alchemist Accelerator Fund I LLC, San Francisco, CA, United States
+83North IV, L.P., Hertzalia, Israel
+Equity Investments with Ownership of at Least 5%
+Name and Location of Company
+47.01
+Yapta, Inc., Seattle, WA, United States
+MVP Strategic Partnership Fund GmbH & Co. KG, Munich, Germany
+Narrative Science, Inc., Chicago, IL, United States
+26.62
+6)
+Visage Mobile, Inc., Milwaukee, WI, United States
+Stay NTouch Inc., Bethesda, MD, United States
+Mosaic Ventures I, L.P., London, United Kingdom
+17.00
+Local Globe VII, L.P., St. Peter Port, Guernsey, Channel Islands
+Local Globe VIII, L.P., St. Peter Port, Guernsey, Channel Islands
+Looker Data Sciences, Inc., Santa Cruz, CA, United States
+40.93
+Convercent, Inc., Denver, CO, United States
+28.30
+China DataCom Corporation Limited, Guangzhou, China
+Joint Arrangements and Investments in Associates
+LeanData, Inc., Sunnyvale, CA, United States
+44.72
+0
+Procurement Negócios Eletrônicos S/A, Rio de Janeiro, Brazil
+6)
+100.0
+SuccessFactors (Philippines), Inc., Pasig City, Philippines
+6)
+SAPV (Mauritius), Ebene, Mauritius
+4):6)
+Sapphire Ventures Fund III, L.P., Palo Alto, CA, United
+States
+Sapphire Ventures Fund II, L.P., Palo Alto, CA, United
+States
+Sapphire Ventures Fund I, L.P., Palo Alto, CA, United
+States
+Sapphire SAP HANA Fund of Funds, L.P., Palo Alto, CA,
+United States
+SAP.io Fund, L.P., San Francisco, CA, United States
+SuccessFactors Asia Pacific Limited, Hong Kong, China
+GmbH, Walldorf, Germany
+SAP West Balkans d.o.o., Belgrade, Serbia
+100.0
+100.0 8).9)
+SAP Ventures Investment GmbH, Walldorf, Germany
+100.0
+SAP UAB, Vilnius, Lithuania
+100.0
+5)
+100.0
+SAP Türkiye Yazilim Üretim ve Ticaret A.Ş., Istanbul,
+Turkey
+SAP Zweite Beteiligungs- und Vermögensverwaltungs
+100.0
+SAP Vierte Beteiligungs- und Vermögensverwaltungs
+GmbH, Walldorf, Germany
+100.0
+3) Figures for profit/loss after tax and total equity pursuant to HGB, section
+285 and section 313 are not disclosed if they are of minor significance for a fair
+presentation of the profitability, liquidity, capital resources and financial
+position of SAP SE, pursuant to HGB, section 313 (2) sentence 3 no. 4 and
+section 286 (3) sentence 1 no. 1.
+4) Consolidated for the first time in 2017.
+0 4):6)
+SuccessFactors Cayman, Ltd., Grand Cayman, Cayman
+2) As at December 31, 2017, including managing directors, in FTE.
+1) These figures are based on our local IFRS financial statements prior to
+eliminations resulting from consolidation and therefore do not reflect the
+contribution of these companies included in the Consolidated Financial
+Statements. The translation of the equity into Group currency is based on
+period-end closing exchange rates, and on average exchange rates for
+revenue and net income/loss.
+100.0 8).9)
+100.0
+Sybase International Holdings Corporation, LLC, San
+Ramon, CA, United States
+100.0
+Sybase India Ltd., Mumbai, India
+100.0
+Sybase Iberia S.L., Madrid, Spain
+100.0
+Sybase Angola, LDA, Luanda, Angola
+8)
+100.0
+Sybase 365, LLC, San Ramon, CA, United States
+100.0
+Entity with (profit and) loss transfer agreement.
+100.0
+Islands
+Sybase 365 Ltd., Tortola, British Virgin Islands
+Employee Engagement > Growth
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of employee engagement. We
+have been able to prove a significant positive correlation
+between employee engagement and revenue.
+Growth > Employee Engagement
+We believe that higher revenue has a positive impact on a
+company's work environment, thereby increasing employee
+pride and loyalty. This is also stated in a study of Harter et al.
+(2010), which states that improving financial performance
+appears to increase general satisfaction and some specific work
+perceptions.6
+Women in Management > BHCI
+Our Business Health Culture Index assesses the health of both
+our organizational culture and our employees. In particular, the
+perception.
+We believe that a balance of men and women in management
+roles helps create a more balanced working environment, one in
+which diversity is valued and people feel free to express their
+individual styles. It is our expectation that such an environment
+will positively affect our BHCI.
+BHCI > Women in Management
+Employee Engagement > GHG Footprint
+We believe that engaged employees are more likely to want to
+help SAP achieve our own target in lowering GHG emissions. Yet
+another possible outcome is that a higher level of employee
+engagement may lead to more business activity requiring travel,
+and therefore could lead to an increase in GHG emissions.
+BHCI > Profitability
+McKinsey (2013) found that different elements of the BHCI,
+such as flexible working hours, the ability to work from home,
+and career flexibility, can make it easier for employees to
+balance work and family life. This leads us to conclude that the
+higher our BHCI, the more attractive SAP becomes to women
+who are also seeking management positions.
+Business Health Culture Index
+(BHCI)
+We believe that lowering SAP's GHG footprint can have a
+positive impact on employee engagement because loyalty
+should rise as employees see their company act responsibly
+towards the environment. However, because lowering emissions
+also brings certain restrictions, such as on business travel, it
+may also have a negative impact on employee engagement.
+In our view, a high operating profit, as great business news, can
+raise employee morale, encourage identification with our vision,
+and thus drive employee engagement. On the other hand, we
+believe that a high profit can also have a negative impact on
+employee engagement. For example, if cost savings and budget
+cuts are implemented to reach an ambitious profit target,
+employees might feel constrained and dissatisfied.
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of employee engagement. We
+have been able to prove a significant positive correlation
+between employee engagement and employee retention.
+Employee engagement is the level of employee commitment,
+pride, and loyalty, as well as the feeling of employees of being
+advocates for their company.
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of the BHCI. Now we can show
+what a change by 1pp of the BHCI would mean for SAP's
+operating profit, as detailed in the
+Documenting Financial Impact section.
+Capability Building > Employee
+Engagement
+Because it is closely linked to how much a company develops its
+employees and supports their careers, internal hiring to
+management and expert positions positively affects employees'
+commitment and loyalty. This hypothesis was confirmed by a
+study by Bedarkar & Pandita (2014), which identified "career
+opportunities" as the key driver of employee engagement.4
+Social Investment > Employee Engagement
+Mueller et al. (2012) have found that employees' perception of a
+company's commitment to corporate social responsibility is
+positively linked to their own commitment to the organization.5
+Employee Engagement > Profitability
+Since 2014, we have used real data from SAP to analyze and
+proof the financial impact of employee engagement. Now we
+can show what a change by 1pp of employee engagement would
+mean for SAP's operating profit, as detailed in the Documenting
+Financial Impact section.
+Profitability > Employee Engagement
+Business Health Culture Index (BHCI) >
+Employee Engagement
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of the BHCI. We have been able to
+prove a significant positive correlation between the BHCI and
+employee engagement. The BHCI positively influences the
+Leadership Trust Index, which positively influences the
+Employee Engagement Index; all correlations are significant.
+Bedarkar, M., Pandita, D. (2014): A Study on the drivers of employee engagement impacting employee
+performance. In: Procedia - Social and Behavioral Sciences, Vol. 133, pp. 106-115.
+Mueller, K., Hattrup, K., Spiess, S., Lin-Hi, N. (2012): The effects of corporate social responsibility on
+employees' affective commitment: A cross-cultural investigation. In: Journal of Applied Psychology, Vol.
+97(6), pp. 1186-1200.
+Further Information on Economic, Environmental, and Social Performance
+Connectivity of Financial and Non-Financial Indicators
+225
+Employee Engagement > Employee
+Retention
+Greenhouse Gas (GHG) Footprint >
+Employee Engagement
+Social Investment > BHCI
+Employee Retention > Customer Loyalty
+Koys (2001) has found evidence that employee turnover has a
+negative impact on customer satisfaction. 10 We believe this
+effect stems from the fact that experienced employees work
+more efficiently, have better product knowledge, and can build
+trusting relationships with colleagues and customers, so
+therefore have the ability to better serve customers' needs.
+BHCI > Employee Engagement
+Employee Retention > Growth
+Meifert (2005) stated a clear relationship between employee
+retention and a company's revenue and margin.⁹
+Employee Retention > Profitability
+We have been using real data from SAP to analyze and prove the
+financial impact of employee retention. Now we can show what a
+change by 1pp of employee retention would mean for SAP's
+operating profit, as detailed in the Documenting Financial
+Impact section.
+Women in Management
+"Women in Management" means the share of women in
+management positions (managing teams, managing managers,
+board members) as compared to the total number of managers.
+Capability Building > Women in
+Management
+Like many of our IT industry peers, SAP has less women than
+men in senior positions. Given our significant pool of talent, we
+assume that internal promotions will increase the percentage of
+women in management positions.
+Women in Management > BHCI
+We believe that a balance of men and women in management
+helps create a more balanced working environment, one in
+which diversity is valued and people feel free to express their
+individual styles. It is our expectation that such an environment
+will positively affect our BHCI.
+BHCI > Women in Management
+McKinsey (2013) found that different elements of the BHCI,
+such as flexible working hours, the ability to work from home,
+and career flexibility, can make it easier for employees to
+balance work and family life.11 This leads us to conclude that the
+higher our BHCI, the more attractive SAP becomes to women
+who are also seeking management positions.
+Women in Management > Growth
+Employee Engagement
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of employee engagement. We
+have been able to prove a significant positive correlation
+between employee engagement and employee retention.
+We believe that by supporting our employees in engaging in
+activities with a positive social impact, such as skills-based
+volunteering, we are enhancing the meaning they find in work.
+This sense of purpose can help create a richer and more
+rewarding work environment that reduces stress and promotes
+satisfaction and well-being.
+Employee Engagement > Employee
+Retention
+Employee retention is the ratio of the average headcount
+(expressed in full-time equivalents), minus employee-initiated
+terminations (turnover), divided by the average headcount,
+taking into account the past 12 months.
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of the BHCI. We have been able to
+prove a significant positive correlation between the BHCI and
+employee engagement. The BHCI positively influences the
+Leadership Trust Index, which positively influences the
+Employee Engagement Index; all correlations are significant.
+BHCI > Growth
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of the BHCI. We have been able to
+prove a significant positive correlation between the BHCI and
+revenue.
+GHG Footprint > BHCI
+Many of SAP's GHG emissions are caused by business travel
+and commuting, which we believe can have both negative and
+positive impacts on employee health. Some people may
+experience greater stress from more travel because they have
+less time to spend at home, suffer from jetlag, or lose valuable
+working time; others may enjoy travel because it enables them
+to experience other places and cultures as well as meet new
+people.
+⚫Harter, J., Schmidt, F., Asplund, J., Kilham, E., Agrawal, S. (2010): Causal Impact of Employee Work
+Perceptions on the Bottom Line of Organizations. In: Perspectives on Psychological Science, Vol. 5(4), pp.
+378-389.
+McKinsey & Company (2013): Women Matter. Gender diversity in top management: Moving corporate
+culture, moving boundaries. Available at:
+http://www.mckinsey.com/-/media/McKinsey/Global%20Themes/Women%20matter/WomenMatter%2
+02013%20Report%20(8).ashx [Accessed 16 Dec. 2016].
+226
+Further Information on Economic, Environmental, and Social Performance
+Connectivity of Financial and Non-Financial Indicators
+BHCI > Customer Loyalty
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of the BHCI. We have been able to
+prove a significant positive correlation between the BHCI and
+customer loyalty.
+Employee Retention
+Capability Building > Employee Retention
+According to the Global Workforce Study (2012), the "chances
+to advance the career" is the second-most important driver of
+employee retention.³ By promoting and thus growing from
+within, SAP creates career opportunities for our employees. In
+turn, it is our expectation that this opportunity leads to an
+increase in employee retention.
+Details: How Our Non-Financial
+and Financial Performance
+Indicators Are Interconnected
+These results reflect the quantification of a gross effect related to a change in a particular key performance
+indicator. They do not allow for any net impact measurement. The evaluation of required investment to
+Currently, our connectivity model focuses predominantly on
+internal issues within SAP. However, we are working to enhance
+our model to include the social, environmental, and economic
+impacts of SAP software and services when they are used by our
+customers. In 2017, we conducted a research project to
+exemplary identify and quantify relevant external (societal)
+impacts along SAP's value chain. Quantifications were
+performed separately for the three distinct areas of "upstream,"
+"operations," and "downstream", with an emphasis on the last
+aspect, when SAP software and services are used by our
+customers. First results (such as a "customer impact index")
+have been piloted in the core development processes of SAP,
+and major lessons learned (such as "external impact pathway
+methodology") have been transferred to the respective lines of
+businesses.
+Impact on Operating Profit
+(€ millions, non-IFRS)
+85 to 95 per pp
+50 to 60 per pp
+55 to 65 per pp
+5 per percent
+*The information in the section Connectivity of Financial and Non-Financial Indicators is not in the scope of
+the Independent Assurance Report from KPMG.
+Studies show that companies with a relatively high percentage
+of women in upper management or as board members achieve
+stronger financial performance compared to those with a
+relatively low percentage (Catalyst, 2013). 12 We believe that
+having a higher share of women in management positions will
+increase our revenue as it helps us better serve our diverse
+customer base.
+change the non-financial indicator is excluded from the scope of analysis. The economic gross impact of a
+single indicator includes interdependencies with other indicators, hence our results do not allow for a
+cumulative effect across all indicators included in this report. All calculations are based on the initial linear
+regression analysis results of 2014 and on non-IFRS figures (as shown in our Integrated Report 2017).
+Employee engagement
+Retention
+Carbon emissions
+Further Information on Economic, Environmental, and Social Performance
+Connectivity of Financial and Non-Financial Indicators
+Case Study: Documenting the
+Financial Impact of a Healthy
+Work Culture
+Our Business Health Culture Index assesses the health of both
+our organizational culture and our employees. Figure 2 shows
+how activities that support health at SAP strengthen our
+organizational culture and help our employees perform at their
+best. For example, we see that flexibility improves stress
+resilience and enhances the work-life balance. This leads to
+greater productivity, resulting in higher operating profit.
+Cause-and-Effect Chain for the Business Health Culture Index (BHCI)
+Non-Financial Performance
+Employees
+223
+Business Health Culture
+Index
+Non-Financial Indicator
+Since 2014, SAP has used techniques such as linear regression
+analysis to document the financial impact of four non-financial
+indicators. We assess each indicator to see what a change of 1pp
+(or 1% for carbon emissions) would mean for our operating
+profit. The results for 2017³ are below:
+Customer
+Loyalty
+Capability
+Building
+GHG Footprint
+Total Energy
+Consumed
+Figure 1: Connectivity Between Social, Environmental, and
+Economic Performance. SAP's main KPIs are marked in orange.
+Putting a Value on Non-Financial
+Performance Indicators
+At SAP, we put a monetary value on how our operating profit is
+affected by selected non-financial indicators that measure, for
+example, how well we engage with our employees and inspire
+them to commit to our vision and strategy, support a healthy
+business culture, and succeed in reducing our carbon emissions.
+To achieve this quantification, we created cause-and-effect
+chains that show how specific actions we take at SAP lead to
+shifts in behavior. This behavior impacts on our business and
+has a financial consequence.
+Such analysis establishes more than just a correlation between
+non-financial indicators and financial impact. It also reveals why
+and how something such as employee engagement ultimately
+leads to gains or losses in business performance. We believe
+that such insights are a prerequisite for fully modeling the
+financial impact of non-financial performance.
+Using Cause-and-Effect Analysis
+To create and validate these chains of cause and effect, we
+turned to both internal and external stakeholders. We started
+with those inside SAP, meeting in small groups that rigorously
+examined the impacts of activities related to each of our non-
+financial indicators.
+Next, we conferred with external stakeholders, including
+academics, financial investors, and industry peers, to vet our
+findings. Finally, we used real data from SAP to translate our
+cause-and-effect chains into a quantified impact on operating
+profit.
+Documenting Financial Impact
+Financial Impact
+Using the connectivity model, we have been able to embed non-
+financial key performance indicators into our solutions. We see
+this in our SAP Digital Boardroom offering, for example. By
+incorporating this connection into our software, the integrated
+approach to financial and non-financial performance not only
+helps SAP but also our customers. In this way, we can turn our
+vision into reality: enabling our customers to use our technology
+to make the world a better place.
+Activities that support
+health at SAP...
+have an impact on the
+company ...
+Figure 2: Impact Pathway of the Business Health Culture Index
+Case Study: Calculating ROI for
+Our “Join In - Stay Fit!" Health
+Initiative
+As part of the "Join In - Stay Fit!” program at SAP Germany, we
+implemented a number of measures to improve the work-life
+balance of our staff. These include workshops that raise health
+awareness and provide tips for employees on how to change
+unhealthy behavior.
+Before and after the launch of the program, we mapped direct
+and indirect costs related to this activity. We also measured the
+impact of the program on employees' work-life balance as well
+as its impact on the BHCI. In 2015, beside the multiple positive
+effects on individual health and engagement, the program
+resulted in an ROI of 3.9 for the year of the investment. This
+means that operating profit increased €3.90 for every €1
+invested in the program during that year.
+Promoting Sustainability
+Measures as a Way to Boost
+Financial Performance
+Documenting the financial impact of non-financial indicators
+helps us move closer to achieving our sustainability goals.
+Rather than simply stating the business case for social or
+environmental change, we now have the numbers to back it up.
+Our findings help us shift the conversation for business leaders,
+investors, employees, and other key stakeholders, and firmly
+establish non-financial indicators as playing a crucial role in our
+financial success. As a result, engaging employees or reducing
+our emissions is no longer seen as a nice-to-have, but rather as
+essential to carrying out a successful business strategy.
+Economic indicators
+Moving forward, we are promoting the use of sustainability
+measures as a way to improve financial performance, both
+Further Information on Economic, Environmental, and Social Performance
+Connectivity of Financial and Non-Financial Indicators
+inside and outside of SAP. By embedding this approach into our
+decision making and quarterly business reviews, our
+sustainability performance steers our business along with
+factors such as revenue and cost. Our goal is for all senior
+business leaders at SAP to recognize - and be held accountable
+for the fact that improving such measures as employee
+engagement also boosts financial performance.
+Embedding Non-Financial
+Performance Indicators into Our
+Solutions
+We continue to share our methodology with our customers to
+help them win in the marketplace. We believe that companies
+achieve higher operating profit - resulting from both greater
+cost efficiency as well as revenue growth - by addressing
+economic, social, and environmental considerations. More
+importantly, these companies are better equipped to lead in the
+future, as they navigate the world's most pressing challenges
+and help to bring about long-term sustainable change.
+224
+Productivity and innovation indicators
+Social indicators
+Increased customer loyalty
+... and influence the
+financial KPIs.
+Drive leadership
+Increased leadership skills
+Strengthened leadership and
+reward culture
+Increased productivity
+Profit
+Run health campaigns
+Improved individual health,
+stress resilience and
+Increased innovation
+Revenue
+KPIs of the Business Health Culture Index (BHCI):
+Foster work flexibility
+Customers
+Increased employee engagement
+Increased employee retention
+...change behavior and
+perception, ...
+Women in Management > Customer
+Loyalty
+» Catalyst Information Center (2013): Why Diversity Matters. Available at:
+http://www.catalyst.org/system/files/why_diversity_matters_catalyst_0.pdf [Accessed 16 Dec. 2016].
+Women in Management > Profitability
+Integrated reporting is based on the idea that social,
+environmental, and economic performance are interrelated,
+with each creating tangible impacts on the others. To achieve a
+truly integrated strategy, we must understand these
+connections and work to support them throughout SAP. Figure 1
+below shows how different elements connect, exemplified
+through profitability.
+Gaining a Holistic View of Our
+Performance
+Financial Indicators¹
+Connectivity of Financial and Non-
+Further Information on Economic, Environmental, and Social Performance
+The Further Information on Economic, Environmental, and
+Social Performance includes information that is required to
+comply with the GRI Standards. In addition, we present our
+Connectivity model that shows the interrelations between social,
+environmental and financial performance.
+Employee
+Engagement
+The social and environmental data and information included in
+the SAP Integrated Report has been prepared in accordance
+with the GRI Standards: Core option. This option indicates that a
+report contains the minimum information needed to understand
+the nature of the organization, its material topics and related
+impacts, and how these are managed.
+221
+Further Information on Economic, Environmental, and Social Performance
+.261
+260
+.254
+GRI Index and UN Global Compact Communication on Progress...
+Management's Acknowledgement of the SAP Integrated Report 2017
+Assurance Report of the Independent Auditor
+About This Further Information on
+Economic, Environmental, and Social
+Performance
+Growth
+BHCI
+€
+Profitability
+Profitability > Social Investment
+It is a common best practice for companies to invest a certain
+percentage of their annual profits in programs and activities that
+create a positive social impact. We believe that a higher profit is
+therefore likely to lead SAP to make greater social investments.
+Employee Retention > Profitability
+We have been using real data from SAP to analyze and prove the
+financial impact of employee retention. Now we can show what a
+change by 1pp of employee retention would mean for SAP's
+Meifert, M. (2005): Mitarbeiterbindung: eine empirische Analyse betrieblicher Weiterbildner in deutschen
+Großunternehmen. München and Mering: Hampp Verlag.
+PwC (2013): Busting the carbon budget - Low Carbon Economy Index 2013. Available at: https://www.pwc-
+wissen.de/pwc/de/shop/publikationen/Low+Carbon+Economy+Index+2013/?card=12994 [Accessed 16
+Dec. 2016].
+"Harter, J., Schmidt, F., Asplund, J., Kilham, E., Agrawal, S. (2010): Causal Impact of Employee Work
+Perceptions on the Bottom Line of Organizations. In: Perspectives on Psychological Science, Vol. 5(4), pp.
+378-389.
+54.
+**Reichheld, F. (2003): The One Number You Need to Grow. In: Harvard Business Review, Vol. 81(12), pp. 46-
+*McKinsey & Company (2007): Women Matter. Gender diversity, a corporate performance driver. Available
+at:
+http://www.mckinsey.com/-/media/McKinsey/Business%20Functions/Organization/Our%20Insights/Wo
+men%20matter/Women_matter_oct2007_english.ashx [Accessed 16 Dec. 2016].
+Further Information on Economic, Environmental, and Social Performance
+Connectivity of Financial and Non-Financial Indicators
+Employee
+Retention
+248
+Women in Management > Profitability
+Studies show that companies with a high level of gender
+diversity outperform companies with an average level in terms
+of return on equity (11.4% versus an average 10.3%); operating
+results (EBIT 11.1% versus 5.8%); and stock price increases
+(64% versus 47% over the period 2005-2007) (McKinsey,
+2007). 25 It is therefore likely that having a higher share of women
+in management positions will result in higher profit for SAP.
+Non-Financial Notes: Environmental Performance.
+246
+Economic, Environmental, and
+Social Performance
+Further Information on
+Management's Annual Report on Internal Control over Financial Reporting in the Consolidated Financial Statements
+Consolidated Financial Statements IFRS and Notes
+220
+KPMG AG Wirtschaftsprüfungsgesellschaft, our independent
+registered public accounting firm, has issued its attestation
+report on the effectiveness of SAP's internal control over
+financial reporting. It is included in the independent auditor's
+report on the Consolidated Financial Statements as at
+December 31, 2017.
+About This Further Information on Economic, Environmental, and Social Performance.
+Connectivity of Financial and Non-Financial Indicators¹.
+management has concluded that, as at December 31, 2017, the
+Company's internal control over financial reporting was
+effective.
+SAP's management assessed the effectiveness of the
+Company's internal control over financial reporting as at
+December 31, 2017. In making this assessment, it used the
+criteria set forth by the Committee of Sponsoring Organizations
+of the Treadway Commission (COSO) in Internal Control -
+Integrated Framework (2013).
+The management of SAP is responsible for establishing and
+maintaining adequate internal control over financial reporting as
+such term is defined in Rules 13a-15(f) and 15d-15(f) under the
+U.S. Securities Exchange Act of 1934. SAP's internal control
+over financial reporting is a process designed under the
+supervision of SAP's CEO and CFO to provide reasonable
+assurance regarding the reliability of financial reporting and the
+preparation of financial statements for external reporting
+purposes in accordance with International Financial Reporting
+Standards (IFRS) as issued by the International Accounting
+Standards Board (IASB).
+U.S. law requires that management submit a report on the
+effectiveness of internal control over financial reporting in the
+consolidated financial statements. For 2017, that report is as
+follows:
+in the Consolidated Financial Statements
+Management's Annual Report on
+Internal Control over Financial Reporting
+229
+Based on the assessment under these criteria, SAP
+Materiality
+Stakeholder Engagement.
+Sustainability Management and Policies.
+Non-Financial Notes: Social Performance.
+Memberships.
+.245
+.243
+241
+239
+.237
+.235
+.232
+.223
+.222
+Public Policy.
+Waste and Water .......
+Sustainable Procurement.
+Human Rights and Labor Standards...
+.247
+Diversity programs - including those focused on the promotion
+of women to management positions - have a direct and positive
+impact on customer satisfaction (Catalyst, 2013). 13
+In our view, high profits, as great business news, can raise
+employee morale, encourage identification with our vision, and
+help increase employee engagement. On the other hand, we
+believe that a high profit expectation can also have a negative
+impact on employee engagement. If cost savings and budget
+cuts are implemented to reach an ambitious profit target,
+employees might feel constrained and dissatisfied.
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of employee engagement. Now
+we can show what a change by 1pp of employee engagement
+would mean for SAP's operating profit, as detailed in the
+Documenting Financial Impact section.
+Profitability > Social Investment
+It is a common best practice for companies to invest a certain
+percentage of their annual profits in programs and activities that
+create a positive social impact. We believe that higher profit is
+therefore likely to lead SAP to make greater social investments.
+Capability Building
+Capability building is the internal hiring rate (promotions only)
+into management or expert positions as compared to the
+external hiring rate into such positions.
+Capability Building > Employee Retention
+According to the Global Workforce Study (2012), the "chances
+to advance the career" is the second-most important driver of
+employee retention. 17 By promoting and thus growing from
+within, SAP creates career opportunities for our employees. In
+A study by Muritala (2013) suggests that corporate social
+responsibility (or what we characterize as social investment) is
+likely to have a positive impact on an organization's financial
+performance. 16 In our experience, social investments do, in fact,
+have a positive impact on our ability to acquire new customers,
+especially in emerging markets.
+turn, it is our expectation that this opportunity leads to an
+increase in employee retention.
+Because it is closely linked to how much a company develops its
+employees and supports their careers, internal hiring to
+management and expert positions positively affects employees'
+commitment and loyalty. This hypothesis was confirmed by a
+study by Bedarkar & Pandita (2014), which identified "career
+opportunities" as the key driver of employee engagement.18
+Capability Building > Women in
+Management
+Like many of our IT industry peers, SAP has less women than
+men in senior positions. Given our significant pool of talent, we
+assume that internal promotions will increase the percentage of
+women in management positions.
+Growth
+Growth is one of our strategic objectives. We measure it through
+several KPIs, for example total revenue that SAP receives from
+the sale of our products and services.
+Social Investment > Growth
+Capability Building > Employee
+Engagement
+Social Investment > Growth
+Social Investment > Employee Engagement
+Mueller et al. (2012) have found that employees' perception of a
+company's commitment to corporate social responsibility is
+positively linked to their own commitment to the organization.15
+We believe that by supporting our employees in engaging in
+activities with a positive social impact, such as skills-based
+volunteering, we are enhancing the meaning they find in work.
+This sense of purpose helps create a richer and more rewarding
+work environment that reduces stress and promotes
+satisfaction and well-being.
+Studies show that companies with a high level of gender
+diversity outperform companies with an average level in terms
+of return on equity (11.4% versus an average 10.3%); operating
+results (EBIT 11.1% versus 5.8%); and stock price increases
+⚫Towers Watson (2012): Global Workforce Study. Geld, Karriere, Sicherheit? Was Mitarbeiter motiviert und in
+ihrem Unternehmen hält. Available at: https://www.towerswatson.com/de-AT/Insights/IC-Types/Survey-
+Research-Results/2012/07/Towers-Watson-Global-Workforce-Study-2012-Deutschlandergebnisse
+[Accessed 16 Dec. 2016].
+• Meifert, M. (2005): Mitarbeiterbindung: eine empirische Analyse betrieblicher Weiterbildner in deutschen
+Großunternehmen. München and Mering: Hampp Verlag.
+Koys, D. (2001): The effects of employee satisfaction, organizational citizenship behavior, and turnover on
+organizational effectiveness: A unit-level, longitudinal study. In: Personnel Psychology, Vol. 54(1), pp. 101-114.
+"McKinsey & Company (2013): Women Matter. Gender diversity in top management: Moving corporate
+culture, moving boundaries. Available at:
+http://www.mckinsey.com/-/media/McKinsey/Global%20Themes/Women%20matter/WomenMatter%2
+02013%20Report%20(8).ashx [Accessed 16 Dec. 2016].
+Catalyst Information Center (2013): Why Diversity Matters. Available at:
+http://www.catalyst.org/system/files/why_diversity_matters_catalyst_0.pdf [Accessed 16 Dec. 2016].
+"Catalyst Information Center (2013): Why Diversity Matters. Available at:
+http://www.catalyst.org/system/files/why_diversity_matters_catalyst_0.pdf [Accessed 16 Dec. 2016].
+Further Information on Economic, Environmental, and Social Performance
+Connectivity of Financial and Non-Financial Indicators
+227
+(64% versus 47% over the period 2005-2007) (McKinsey,
+2007).14 It is therefore likely that having a higher share of women
+in management positions will result in higher profit for SAP.
+Social Investment
+Social investment reflects SAP's activities in volunteering and
+technology as well as cash donations.
+Social Investment > BHCI
+A study by Muritala (2013) suggests that corporate social
+responsibility (or what we characterize as social investment) is
+likely to have a positive impact on an organization's financial
+performance. 19 In our experience, social investments do, in fact,
+have a positive impact on our ability to acquire new customers,
+especially in emerging markets.
+Profitability > Employee Engagement
+Women in Management > Growth
+Studies show that companies with a relatively high percentage
+of women in upper management ranks or as board members
+achieve stronger financial performance compared to those with
+a relatively low percentage (Catalyst, 2013). 20 We believe that
+having a higher share of women in management positions will
+increase our revenue as it helps us to better serve our diverse
+customer base.
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of the BHCI. We have been able to
+Lowering SAP's GHG footprint could have a positive impact on
+SAP's revenue because customers increasingly ask their
+suppliers to act sustainably. This reasoning is supported by a
+study by PwC (2013) confirming the existence of a positive
+correlation between a company's environmental performance
+and financial performance. 22 On the other hand, where
+additional travel is conducted to generate additional business,
+the resulting increase in SAP's GHG footprint could have
+positive impact on growth.
+Employee Engagement > Growth
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of employee engagement. We
+have been able to prove a significant positive correlation
+between employee engagement and revenue.
+Growth > Employee Engagement
+We believe that a higher revenue will have a positive impact on a
+company's work environment, thereby increasing employee
+pride and loyalty. This is also stated in a study of Harter et al.
+(2010), stating that improving financial performance appears to
+increase general satisfaction and some specific work
+perceptions.23
+Customer Loyalty > Growth
+GHG Footprint > Growth
+Reichheld (2003) found a strong correlation between
+companies' Customer NPS results and their revenue growth
+rates. 24 We support this view, as we believe that loyal SAP
+customers are likely to recommend SAP products to other
+companies, which is likely to result in increased sales and
+stronger revenue.
+Profit (or loss) is the total of income less expenses; if revenue as
+the main part of total income grows at a higher rate than costs, it
+will lead to greater profit.
+Profitability
+Profitability is one of our strategic objectives. We measure it
+through operating profit. Profit (or loss) is the total of income
+less expenses.
+BHCI > Profitability
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of the BHCI. Now we can show
+what a change by 1pp of the BHCI would mean for SAP's
+operating profit, as detailed in the Documenting Financial
+Impact section.
+Employee Engagement > Profitability
+Growth > Profitability
+Meifert (2005) stated a clear relationship between employee
+retention and the company's revenue and margin.21
+Employee Retention > Growth
+revenue.
+* McKinsey & Company (2007): Women Matter. Gender diversity, a corporate performance driver. Available
+at:
+http://www.mckinsey.com/-/media/McKinsey/Business%20Functions/Organization/Our%20Insights/Wo
+men%20matter/Women_matter_oct2007_english.ashx [Accessed 16 Dec. 2016].
+* Mueller, K., Hattrup, K., Spiess, S., Lin-Hi, N. (2012): The effects of corporate social responsibility on
+employees' affective commitment: A cross-cultural investigation. In: Journal of Applied Psychology, Vol.
+97(6), pp. 1186-1200.
+*Muritala, T. (2013): Does CSR Improve Organization Financial Performance? Evidence from Nigeria Using
+Triangulation Analysis. In: Economics and Applied Informatics, Issue 3, pp. 41-46.
+Towers Watson (2012): Global Workforce Study. Geld, Karriere, Sicherheit? Was Mitarbeiter motiviert und in
+ihrem Unternehmen hält. Available at: https://www.towerswatson.com/de-AT/Insights/IC-Types/Survey-
+Research-Results/2012/07/Towers-Watson-Global-Workforce-Study-2012-Deutschlandergebnisse
+[Accessed 16 Dec. 2016].
+"Bedarkar, M., Pandita, D. (2014): A Study on the drivers of employee engagement impacting employee
+performance. In: Procedia - Social and Behavioral Sciences, Vol. 133, pp. 106-115.
+"Muritala, T. (2013): Does CSR Improve Organization Financial Performance? Evidence from Nigeria Using
+Triangulation Analysis. In: Economics and Applied Informatics, Issue 3, pp. 41-46.
+228
+Further Information on Economic, Environmental, and Social Performance
+Connectivity of Financial and Non-Financial Indicators
+prove a significant positive correlation between the BHCI and
+BHCI > Growth
+222
+Women in
+Management
+Social
+Investment
+Our key policies include a global health and safety management
+policy and a diversity and inclusion policy. The global health and
+safety management policy supports business processes,
+leadership behavior, and culture by addressing, integrating, and
+leveraging health, occupational safety, well-being, and stress
+management topics. We aim to nurture our employees' long-
+term employability, engagement, and creativity in developing
+sustainable value for our organization, for our customers, and
+for themselves.
+In addition, the Executive Board answers employees' questions
+in quarterly all-hands meetings. In regular coffee corner
+sessions, senior executives explain our strategy to employees
+and answer their questions directly. Through topic-related
+discussion blogs, executives engage regularly with employees,
+foster open discussion, and receive focused feedback globally.
+Financial Analysts and Investors
+For more information about our dialog with investors, see the
+Investor Relations section.
+Governments
+For more information about our dialog with governments, see
+the Public Policy section.
+Industry Analysts
+Our Analyst Relations team, the Executive Board, and executives
+have strong relations and work strategically with IT analysts on a
+frequent basis. We engage with these analysts on key SAP
+topics including SAP HANA, SAP Cloud Platform, SAP Leonardo,
+ERP Portfolio, industry solutions, cloud solutions, ecosystem,
+and services. The latest industry positioning material integrates
+economic, social, and environmental impact creation.
+Non-Governmental
+Organizations (NGOs) and
+Academia
+Our dialog with NGOs, not-for-profit organizations, and
+academic institutions helps us understand how we can address
+today's most pressing issues with our solutions and what is
+expected from us as a corporation. For example, in 2017 SAP
+Ariba entered into a partnership with the UN Global Compact
+supporting the Decent Work in Global Supply Chains action
+platform. This partnership will bring the procurement
+community together to think about how we can all be more
+Further Information on Economic, Environmental, and Social Performance
+Stakeholder Engagement
+235
+purpose-driven and share ideas about how we can drive
+transparency in the supply chain.
+Partners
+Our partners are also key to our growth, as they co-innovate
+solutions with us, and sell and implement solutions at customer
+sites. The spirit of cooperation and engagement is exemplified
+by the online SAP Community. As with customers, we also
+gather partner feedback regularly through our "SAP Listens"
+program.
+Sustainability Advisory Panel
+Our sustainability advisory panel consists of expert
+representatives from our customers, investors, partners, NGOs,
+and academia. In 2017, the panel met with our chief financial
+officer (CFO), who is also the board sponsor for sustainability,
+and with SAP representatives from the areas of strategy,
+solutions, finance and administration, and marketing. The group
+discussed the further integration of sustainability into SAP's
+innovation culture, our impact valuation approach, and the
+question of whether we need a new approach to corporate
+responsibility in a digital economy.
+236
+Further Information on Economic, Environmental, and Social Performance
+Stakeholder Engagement
+Sustainability Management and Policies
+Putting Sustainability at the
+Heart of Our Strategy
+At SAP, we believe that it is not enough to simply have a
+sustainability strategy but that, instead, our overall corporate
+strategy must itself be sustainable. Only by achieving this can
+we fulfill our vision to help the world run better and improve
+people's lives. We therefore strive to promote sustainability
+across our entire business.
+Led by our chief sustainability officer, a dedicated team works to
+embed sustainability into our corporate strategy and promotes
+new sustainability initiatives across the organization. Our chief
+financial officer (CFO) is the sponsor for sustainability on the
+Executive Board, and we also have a dedicated person in charge
+of sustainability in each area of the business. These individuals
+are responsible for embedding sustainability in their business
+practices, for example, by setting relevant targets and
+implementing related programs. They are held accountable for
+their achievements in review meetings with the CFO and the
+chief sustainability officer that take place twice a year.
+Managing Our Response to Our
+Material and Other Reported
+Aspects
+SAP has dedicated personnel addressing the material aspects
+identified in our materiality analysis. For each topic, we look at
+ways that we can manage our response, and how we can
+evaluate whether our approach is effective.
+SAP management on topics that define the work environment
+and work processes. These topics include HR initiatives, talent
+development, payment and benefits, equal opportunities,
+changes in work or IT processes, privacy, and health and safety
+protection.
+These employee representation bodies consist of both elected
+union members and non-union members, and are consulted by
+Our Supervisory Board comprises 50% employee
+representation, and we strive for constructive labor relations
+across the world, working within each country's requirements.
+We currently have works councils in place in Belgium, France,
+Germany, the Netherlands, Slovenia, and Spain. In Italy, there is
+a union representative in place. In the United Kingdom and
+Ireland, employee consultation forums represent the
+employees' interests. In Romania and Sweden, union stewards
+are established. The majority of the SAP employees in Canada is
+represented by a Joint Health & Safety Committee.
+Furthermore, employee representatives are in place at SAP
+Japan Co. Limited. Employees of SAP Austria decided to be
+represented by an ombudsteam. In addition, we have a
+European works council that represents SAP employees in the
+28 countries of the European Economic Area.
+We survey employees annually. For the results of our latest
+employee survey and action items resulting from it, see the
+Listening to Our People section.
+For more information, see the Energy and Emissions section.
+Financial Performance
+Not only do we create financial value for SAP and our
+shareholders, we also create wealth for a broad range of
+stakeholders. We do this through employee wages and benefits,
+payments to our value chain and ecosystem, and tax payments
+to local governments and economies, for example.
+Human and Digital Rights
+For more information, see the Security, Privacy, and Data
+Protection section and the Human Rights and Labor Standards
+section.
+Human Capital
+Nothing has a greater impact on our long-term success than the
+creativity, talent, and commitment of our people. Their ability to
+innovate and understand the needs of our customers delivers
+sustainable value to our company and our society. For more
+information, see the Employees and Social Investments section.
+Impact on Society
+We believe that digital technologies will help companies and
+organizations contribute to the United Nations' 17 SDGs.
+Through our solutions, we provide customers, partners, and
+consumers with the tools that help them make a difference. This
+may be through empowering those disadvantaged in society
+through financial services, providing personalized medicine,
+building infrastructure, or combating climate change.
+As well as creating positive impacts through our solutions, we
+are equipping young people all over the world with the skills they
+need to tackle society's problems and thrive in the digital
+economy. For more information, see the Employees and Social
+Investments section.
+Innovation and Customer Loyalty
+At SAP, we are committed to our vision of helping the world run
+better and improving people's lives. To help achieve this vision,
+we lead with purpose to create innovations that help accelerate
+economic prosperity, drive positive social impact, and safeguard
+the planet. Our customers inspire everything we do, from the
+first spark of innovation to the design and completion of new
+products, not to mention the way in which we serve their needs
+over time.
+Business Conduct
+Our future business success, specifically in the cloud business,
+depends on customer loyalty. We view customer loyalty as being
+233
+so critical to our own success that we have made it one of our
+four company-wide strategic objectives, in addition to employee
+engagement, growth, and profitability.
+Further Information on Economic, Environmental, and Social Performance
+234
+Materiality
+Stakeholder Engagement
+For SAP, stakeholder engagement and collaboration are deeply
+embedded into our process of innovation and the development
+of our products and services. Before we can design a new
+solution, we must first understand the issue we are addressing.
+For this reason, design thinking and co-innovation are essential.
+To be able to innovate, we regularly engage with the stakeholder
+groups described below, including our sustainability advisory
+panel. We selected these groups as they are critical to our value
+creation.
+Customers
+Our customer-facing organizations, such as sales, consulting,
+education, and support, have multiple touch points with
+customers on a daily basis. In addition to the sales engagement
+cycle, we engage customers through industry value networks,
+co-innovation projects, customer councils, and customer-
+organized user groups throughout the world. Our Customer
+Engagement Initiative provides early insight into SAP product
+planning, allowing our customers to influence and collaborate
+around our product development cycle. We also gather
+customer feedback regularly through our "SAP Listens"
+program. For more information about our customer surveys, see
+the Customers section.
+Employees
+Further Information on Economic, Environmental, and Social Performance
+Materiality
+For information about our management approach, see the
+Business Conduct section.
+Climate and Energy
+For more information about our climate and energy
+management approach, see the Energy and Emissions section.
+Financial Performance
+238
+Further Information on Economic, Environmental, and Social Performance
+Sustainability Management and Policies
+Human Rights and Labor Standards
+Upholding High Standards
+Whether within SAP companies, across our extended supply
+chain, or through the impact of our solutions, we are committed
+to respecting human rights. We maintain high ethical standards
+and establish fairness, diversity, and inclusion across our
+business operations. In this way, we believe we can better
+attract and keep top talent, increase innovation and
+productivity, and enhance our reputation.
+SAP is a signatory of the United Nations Global Compact. This is
+a voluntary undertaking to align our strategy and operations
+with universal principles on human rights, labor, the
+environment, and anticorruption.
+By integrating human rights considerations into our standard
+business practices, we also support the values of the Universal
+Declaration of Human Rights, the OECD Guidelines for
+Multinational Enterprises, and the International Labor
+Organization Declaration on Fundamental Principles and Rights
+at Work. To ensure that our commitment to human rights
+translates into practice, we take guidance from the United
+Nations "Protect, Respect and Remedy" framework.
+Making a Commitment
+The SAP Global Human Rights Commitment Statement details
+our response to the international standards mentioned above.
+Based on the SAP Code of Business Conduct and approved by
+our Executive Board, the statement focuses on three main
+areas: our employees, our ecosystem of partners and suppliers,
+and our solutions.
+Our commitment statement applies to all our operations and
+subsidiaries globally and is reviewed on a regular basis. It also
+contains references to our other guidelines such as health and
+safety management, and data protection and privacy.
+To communicate and enforce this commitment statement, SAP
+has established a new governance structure for human rights.
+This includes a steering committee and allocates responsibility
+for maintaining human rights standards across board areas.
+Understanding Our Strengths
+and Weaknesses
+In 2017, we assessed our human rights processes and ongoing
+due diligence activity. With help from an external consulting
+company, we reviewed and mapped SAP documents against
+best-practice human rights initiatives and frameworks.
+Following this, we consulted with representatives across 19
+different business functions at SAP. Finally, we conducted
+interviews with a number of external stakeholders, including
+human rights organizations, asking for their views on key areas
+that SAP should focus on.
+Key strengths identified through the assessment include our
+approach to diversity and inclusion, health, accessibility,
+products enabling human rights and enhancing sustainability,
+and social investment. Meanwhile, we identified opportunities to
+improve our approach to global workforce standards for
+employees and contractors and due diligence for human rights
+for customers and partners. We also identified areas for
+improvement associated with SAP products. For example, we
+aim to adapt our processes to minimize human rights risks
+associated with our products being used by military
+organizations. In addition, we would like to increase
+transparency within our outsourced operations to reduce
+slavery risks.
+Enforcing Our Standards
+To assess our human rights measures, we consider external
+benchmarks, performance ratings, audit results, and
+stakeholder feedback. In addition, since 2012, we have
+conducted regular internal audits to verify that our subsidiaries
+adhere to our human rights standards and to check internal
+compliance with our policies.
+In 2017, we conducted a labor audit at our Philippines locations
+in Manila. Through the audit, we identified potential legal risks
+concerning local labor laws for external workers. We took steps
+to enhance training for line-of-business managers and to
+improve processes relevant for external workers. Other areas
+for improvement identified through the audit include HR
+management processes for vacations, wages, and benefits, as
+well as health and safety policies for night-shift workers.
+Respecting the Rights of Our
+Employees
+We have a long-standing policy of nondiscrimination in our
+dealings with employees and provide training on human rights
+issues that are most relevant to our business. These include
+security, privacy, and antidiscrimination.
+We encourage any employees who feel they are subjected to
+conduct that violates our antidiscrimination policies to report it.
+They can reach out confidentially to their managers, HR officers,
+Further Information on Economic, Environmental, and Social Performance
+Human Rights and Labor Standards
+239
+To help drive progress in our sustainability initiatives, we need
+the support of employees in every part of SAP. We have a global
+internal network of about 150 sustainability champions who
+represent different regions and LoBs at SAP. Not only do they
+act as role models, but they also tailor sustainability to local and
+LoB needs and interests as well as share best practices.
+Nurturing a Network of Sustainability
+Champions
+We measure the success of our initiatives through our annual
+People Survey. In 2017, 93% of our employees agreed with the
+statement "It is important for SAP to pursue sustainability"
+compared to 92% in 2016 and 77% in 2009. Furthermore, 84%
+of our employees stated, "I actively contribute to sustainability
+goals at SAP." This is up from 82% in 2016 and 46% in 2009.
+In addition, employees can access a dashboard detailing the
+environmental and social performance and its impact on the
+financial performance for our company as a whole, single sites,
+or departments. For example, data on employee retention and
+women in management helps create transparency on the social
+performance of our company. A personalized app also provides
+employees with statistics about their personal impact through
+activities such as driving a company car or using electronic
+equipment.
+The Executive Board retains ultimate responsibility for revenue
+growth, profitability, and the financial stability of SAP. For more
+information, see the Corporate Governance Report and the
+Report by the Supervisory Board.
+Human and Digital Rights
+For information about our management approach on human and
+digital rights, see the Security, Privacy, and Data Protection
+section and the Human Rights section.
+Human Capital
+Overall responsibility for our human resources strategy lies with
+the Executive Board, led by the Executive Board member
+responsible for Human Resources.
+The diversity and inclusion policy provides a framework for
+diversity and inclusion at SAP. As such, it supports our business
+goals and our "how we run" philosophy by helping employees
+flourish in an inclusive working environment.
+For more information about our human capital management
+approach, see the Employees and Social Investments section.
+Impact on Society
+When assessing our impact on society, we consider two key
+areas: firstly, the contribution we make towards the fulfilment of
+the United Nations Sustainable Development Goals (SDGs, also
+called UN Global Goals) through our software solutions; and
+secondly, our efforts to make the world a better place through
+our corporate social responsibility (CSR) programs.
+Our contribution to the SDGs is a cross-company effort driven
+by our sustainability contacts for each area of the business. We
+have mapped our existing engagement with customers to the
+SDGs in the How Our Vision Comes to Life brochure and
+illustrate further examples in our Web book SAP and the UN
+Global Goals.
+Our global CSR policy offers all SAP employees the opportunity
+to volunteer for up to eight working hours each year at a CSR
+event. For more information about our CSR events and
+activities, see the Employees and Social Investments section.
+Further Information on Economic, Environmental, and Social Performance
+Sustainability Management and Policies
+Climate and Energy
+237
+On a group level, we ensure that donations are made in an
+appropriate manner through financial and compliance control
+processes described in our global CSR policy, and we monitor all
+major CSR programs for social impact. For example, in our SAP
+Social Sabbatical portfolio, we survey both the participants and
+the non-profit organization or social business involved to
+determine whether our team has met the agreed deliverables.
+To capture long-term impact, the evaluation is repeated six
+months after our team's departure.
+Innovation and Customer Loyalty
+Every Executive Board member is responsible for innovation in
+their area. For more information about our software and
+services innovation efforts, see the Products, Research &
+Development, and Services section.
+Our Customer Experience Council regularly looks at how we are
+driving improvements in customer experience. For more
+information about customer loyalty, see the Customers section.
+Changing Our Behavior and
+Culture
+In our efforts to become a more sustainable organization, SAP is
+focusing on two key areas: our processes and our people. To
+achieve our goals, we need to challenge behaviors and find new
+ways of thinking.
+Employee engagement is essential, as the ideas and
+commitment of our staff help drive change throughout SAP. We
+run a number of programs to help employees understand how
+sustainability is connected to our vision to help the world run
+better and improve people's lives, and how they can contribute.
+In 2017, we encouraged open dialog through coffee corner
+sessions, virtual all-hands meetings, and social media. In
+addition, SAP includes sustainability in its onboarding training
+for new hires as well as management or line of business (LoB)
+specific training.
+Employees can explore how SAP contributes to the SDGS
+through our customers and our own operations through the
+interactive Web book SAP and the UN Global Goals. In addition,
+they can take the openSAP online course "Sustainability
+Through Digital Transformation," which is also available to the
+general public.
+Focusing on Transparency and
+Building Awareness
+Change starts with transparency and awareness. To gain a
+holistic overview of our performance, our Executive and
+Supervisory Boards have access to our own SAP Digital
+Boardroom solution that includes key financial and non-financial
+data such as human capital indicators.
+Our Global CSR Governance Committee, consisting of executive
+level representatives of different board areas at SAP, advises
+and approves the strategic direction of our overall CSR mission.
+In addition, regional CSR governance committees advise and
+approve all major CSR partnerships and efforts. Led by our head
+of global CSR, our global CSR team is part of the Office of the
+CEO and Corporate Affairs organization. There is also a regional
+CSR lead for each of our six major SAP regions.
+For more information, see the Business Conduct section.
+Collective bargaining agreements with unions are only made in
+countries where legally required. Overall, about 50% of our
+employees are represented by works councils, an independent
+trade union, or are covered by collective bargaining agreements.
+Each of our material aspects has significant impact on the
+business success of SAP as described below.
+230
+Further Information on Economic, Environmental, and Social Performance
+Connectivity of Financial and Non-Financial Indicators
+Employee Engagement > GHG Footprint
+We believe that engaged employees are likely to want to help
+SAP achieve our target in lowering GHG emissions. Yet another
+possible outcome is that a higher level of employee engagement
+may lead to more business activity requiring travel, and
+therefore could lead to an increase in GHG emissions.
+GHG Footprint > Growth
+Lowering SAP's GHG footprint could have a positive impact on
+SAP's revenue because customers increasingly ask their
+suppliers to act sustainably. This reasoning is supported by a
+study by PwC (2013) confirming the existence of a positive
+correlation between a company's environmental performance
+and financial performance. 29 On the other hand, where
+additional travel is conducted to generate additional business,
+the resulting increase in SAP's GHG footprint could have
+positive impact on growth.
+GHG Footprint > Customer Loyalty
+We believe that lowering SAP's carbon emissions has a positive
+effect on our reputation, thereby enhancing SAP's standing with
+our customers.
+Total Energy Consumed > GHG Footprint
+The emissions caused by SAP's energy consumption add
+directly to the corporate carbon footprint if they are not reduced
+through offsets or - for electricity consumption - renewable
+energy certificates (RECs).
+GHG Footprint > Profitability
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of the GHG footprint. Now we can
+show what a reduction of SAP's carbon emissions by one
+percentage would mean for SAP's operating profit, as detailed in
+the Documenting Financial Impact section.
+54.
+Total Energy Consumed
+sources.
+through offsets or - for electricity consumption - renewable
+energy certificates (RECs).
+Total Energy Consumed > Profitability
+We have found that reduced energy consumption is strongly
+correlated with a reduction in costs. The cost avoidance thus
+achieved has a positive impact on our profit.
+Total Energy Consumed > GHG Footprint
+The emissions caused by SAP's energy consumption add
+directly to the corporate carbon footprint if they are not reduced
+PwC (2013): Busting the carbon budget - Low Carbon Economy Index 2013. Available at: https://www.pwc-
+wissen.de/pwc/de/shop/publikationen/Low+Carbon+Economy+Index+2013/?card=12994 [Accessed 16
+Dec. 2016].
+Further Information on Economic, Environmental, and Social Performance
+Connectivity of Financial and Non-Financial Indicators
+231
+Materiality
+Defining Key Priorities for Our
+Reporting
+By understanding which environmental, social, and governance
+issues are key priorities for our stakeholders, we are better able
+to allocate time, budget, and resources accordingly within our
+integrated reporting. Based on our existing material aspects, in
+2016, we completed a materiality assessment to help identify
+and validate those topics which are the most relevant to our
+stakeholders such as employees, investors, and customers. The
+assessment also highlights those topics which contribute most
+to value creation both in our own operations and in those of our
+customers.
+Total energy consumed is the sum of all energy consumed
+through SAP's own operations, including energy from renewable
+Our materiality assessment process combined the GRI G4
+guidelines for sustainability reporting and the International
+Integrated Reporting Framework. Key stages of the process are
+detailed below.
+Reichheld, F. (2003): The One Number You Need to Grow. In: Harvard Business Review, Vol. 81(12), pp. 46-
+Business Conduct
+operating profit, as detailed in the Documenting Financial
+Impact section.
+Total Energy Consumed > Profitability
+We have found that reduced energy consumption is strongly
+correlated with a reduction in costs. Therefore, any cost
+avoidance achieved has a positive impact on our profit.
+Growth > Profitability
+Profit (or loss) is the total of income less expenses; if revenue as
+the main part of total income grows at a higher rate than costs, it
+will lead to greater profit.
+Customer Loyalty > Profitability
+We believe that positive experiences among our customers can
+significantly increase business with existing customers, as well
+as help attract new customers. Both results can lower the cost
+of sales, thereby increasing our profit.
+GHG Footprint > Profitability
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of our GHG footprint. Now we can
+show what a reduction of SAP's carbon emissions by 1pp would
+mean for SAP's operating profit, as detailed in the Documenting
+Financial Impact section.
+Customer Loyalty
+Customer loyalty is measured with the Net Promoter Score:
+Percentage of customers that are likely to recommend SAP to
+friends or colleagues minus the percentage of customers that
+are unlikely to do so.
+Women in Management > Customer
+Loyalty
+* Catalyst Information Center (2013): Why Diversity Matters. Available at:
+http://www.catalyst.org/system/files/why_diversity_matters_catalyst_0.pdf [Accessed 16 Dec. 2016].
+Koys, D. (2001): The effects of employee satisfaction, organizational citizenship behavior, and turnover on
+organizational effectiveness: A unit-level, longitudinal study. In: Personnel Psychology, Vol. 54(1), pp. 101-114.
+Diversity programs - including those focused on the promotion
+of women to management positions - have a direct and positive
+impact on customer satisfaction (Catalyst, 2013).26
+GHG Footprint > Customer Loyalty
+We believe that lowering SAP's carbon emissions has a positive
+reputational effect, thereby enhancing SAP's standing with its
+customers.
+Customer Loyalty > Growth
+Reichheld (2003) found a strong correlation between
+companies' Customer NPS results and their revenue growth
+rates. 28 We support this view, as we believe that loyal SAP
+customers are likely to recommend SAP products to other
+companies, which is likely to result in increased sales and
+stronger revenue.
+Customer Loyalty > Profitability
+We believe that positive experiences among our customers can
+significantly increase business with existing customers, as well
+as help attract new customers. Both results can lower the cost
+of sales, thereby increasing our profit.
+BHCI > Customer Loyalty
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of the BHCI. We have been able to
+prove a significant positive correlation between the BHCI and
+customer loyalty.
+GHG Footprint
+Our GHG footprint is the sum of all greenhouse gas emissions
+measured and reported, including renewable energy and third-
+party reductions, for example, offsets.
+GHG Footprint > BHCI
+Many of SAP's GHG emissions are caused by business travel
+and commuting, which we believe can have both negative and
+positive impacts on employee health. Some people may
+experience greater stress from more travel because they have
+less time to spend at home, suffer from jetlag, or lose valuable
+working time; others may enjoy travel because it enables them
+to experience other places and cultures as well as meet new
+people.
+Employee Retention > Customer Loyalty
+Koys (2001) has found evidence that employee turnover has a
+negative impact on customer satisfaction. 27 We believe this
+effect stems from the fact that experienced employees work
+more efficiently, have better product knowledge, and can build
+trusting relationships with colleagues and customers, so
+therefore have the ability to better serve customers' needs.
+Identification
+GHG Footprint > Employee Engagement
+We believe that lowering SAP's GHG footprint can have a
+positive impact on employee engagement because loyalty
+should rise as employees see their company act responsibly
+towards the environment. However, because lowering emissions
+also brings certain restrictions, such as on business travel, it
+may also have a negative impact on employee engagement.
+When identifying our key topics and their boundaries, we looked
+first at areas related to our operations and supply chain. Second,
+we looked at topics related to how our software can help our
+customers contribute to the achievement of the SDGs.
+Human capital
+Very High
+Influence on SAP's ability to create value
+(as an organization or through SAP solutions)
+Materiality Matrix (All Items Other Than Financial Performance)
+Key points of our materiality assessment results include:
+-
+-
+-
+Financial performance was seen as a mandatory part of
+reporting. As a result, in several interviews, its materiality was
+not expressly discussed. However, this category received
+high individual scores.
+The innovation, business conduct, and human capital
+categories received the highest scores and response rates.
+The climate and energy category, which looks at the way that
+SAP reduces emissions and energy consumption in our own
+operations, had the lowest response rates and scores.
+In evaluating our impact on society through the SAP portfolio,
+our stakeholders identified seven SDGs as material:
+SDG 9 Industry, innovation, and infrastructure
+Innovation
+SDG 3 Good health and well-being
+SDG 8 Decent work and economic growth
+■
+SDG 13 Climate action
+■
+SDG 17 Global partnerships
+■ SDG 12 Responsible consumption and production
+"
+SDG 4 Quality education
+Understanding the Relevance of
+Our Material and Other
+Reported Aspects
+During this stage, we drew up a long list of potential topics based
+on guidance from GRI G4 and the Sustainability Accounting
+Standards Board (SASB), as well as our existing material
+aspects. We also considered a materiality assessment for the
+ICT industry by the Global E-Sustainability Initiative (GeSI) as
+well as the United Nations' Sustainable Development Goals
+(SDGs).
+"
+Business
+conduct
+■
+Human and
+digital rights
+Prioritization
+Impact on
+society
+During the prioritization stage, we looked at the extent to which
+each individual topic affects our ability to create value at SAP.
+We assessed whether this value was financial, operational,
+strategic, reputational, or regulatory. All topics that were
+identified as delivering value in three or more areas were then
+included on our short list of seven categories, as follows:
+Business conduct
+Climate and energy
+Financial performance
+Human and digital rights
+Human capital
+Innovation
+- Impact on society
+To what degree does this topic influence SAP's ability to
+create value?
+How important is that topic for you to engage in a business
+relationship with SAP?
+To assess the category "impact on society," we asked
+stakeholders the following questions:
+How high is the potential of SAP to enable our customers to
+achieve the SDGs?
+How important is our ability to do this for you to engage in a
+business relationship with SAP?
+Next, we conducted semi-structured interviews with selected
+stakeholders to validate the shortlisted topics. We asked
+stakeholders to rate topics on a scale from 0 to 5 (where 0 is not
+important at all and 5 is very important) based on the following
+questions for the first six categories:
+We have included in our materiality matrix all topics with
+stakeholder ratings in the upper 50% for both questions
+respectively.
+Validation
+The results of the materiality analysis were reviewed and
+confirmed by our steering committee for integrated reporting
+and our sustainability advisory panel. The results were also
+reviewed by our chief financial officer, who is the board sponsor
+for sustainability and integrated reporting.
+Review
+Feedback on and analysis of the SAP Integrated Report will
+serve as an input for future materiality assessments.
+232
+Further Information on Economic, Environmental, and Social Performance
+High
+Materiality
+Results
+Importance to the business relationship with SAP
+Very High
+Managers managing teams: Refers to managing teams of
+at least one employee or vacant positions
+-
+At SAP, we differentiate between the following categories of
+managers:
+Managers managing managers: Refers to managing
+managers that manage teams
+-
+We define "women in management" as the share of women in
+management positions as compared to the total number of
+managers.
+Data for our social indicators is collected and reported on a
+quarterly or annual basis and is subject to external assurance
+for annual reporting.
+We define employee retention as a ratio that puts emphasis
+on employee-initiated turnover - in other words, we seek to
+measure how many employees choose to stay with SAP. As
+opposed to keeping a low turnover rate – which companies
+generally seek to do - we aim to keep our retention rate high.
+A higher retention rate signifies that fewer employees are
+choosing to leave SAP.
+Boundaries
+Employee Retention
+Our boundaries take two different perspectives: SAP as a
+company, which includes all our legal entities and operations
+and supply chain, and SAP as a solution provider enabling our
+customers. These boundaries are listed in detail in the GRI
+Standard Content Index.
+Social Indicators
+Board members
+Women in Management
+Business Health Culture Index
+The Business Health Culture Index (BHCI) measures the
+general cultural conditions in an organization that enable
+employees to stay healthy and balanced. The index covers
+questions concerning how employees rate their personal
+well-being and the working conditions at SAP, including our
+leadership culture. The BHCI is an indicator of the extent to
+which SAP successfully offers employees a working
+environment that promotes health supporting their long-term
+employability and their active engagement in reaching our
+ambitious corporate goals.
+We understand environmental performance as the
+measurable outcome of SAP's ability to meet environmental
+objectives and targets set forth in our environmental policy.
+In this context, we determine SAP's greenhouse gas
+footprint, total energy consumed, and data center energy as
+the three key environmental performance indicators.
+Furthermore, we realize external reductions by purchasing
+offsets and renewable energy which is partly self-generated
+in SAP locations but primarily purchased in form of
+Renewable Energy Certificates (RECs). Plus, we identify
+SAP's waste and water consumption as additional
+environmental aspects.
+Employee Engagement
+We define employee engagement as a score for the level of
+employee commitment, pride, and loyalty, as well as our
+employees' feeling of advocacy for SAP.
+It is calculated based on the results of an employee survey
+that is conducted annually (see BHCI).
+In 2015, we simplified our Employee Engagement Index and
+recalculated our score for 2015 from 81% to 82%. This
+calculation method has been applied moving forward.
+Further Information on Economic, Environmental, and Social Performance
+Non-Financial Notes: Social Performance
+247
+Non-Financial Notes:
+Environmental Performance
+Environmental Performance
+By looking at the energy usage and emissions throughout our
+entire value chain, we gain insights to help us manage our
+environmental performance and, in turn, help our customers
+to do the same.
+Our net carbon footprint is calculated by reducing purchased
+renewable energy certificates and carbon offsets from our
+gross carbon footprint in the respective reporting period. Our
+gross carbon footprint for 2017 was 680 kilotons CO2e (2016:
+682 kilotons CO2e), including all GHG emission categories in
+Scope 1 and 2, as well as selected categories of Scope 3 as
+outlined in figure 1.
+General Information About
+Social Indicators
+The activities and trends behind our results for 2017 are
+detailed below. This includes information about the areas in
+which we consume the most purchased electricity, as well as
+the impact caused by the use of our products.
+The BHCI is calculated based on the results of an employee
+survey ("People Survey") conducted annually. All employees
+were invited to take part in the 2017 People Survey and
+approximately 70,500 employees participated (response
+rate: 77%). The BHCI score for 2014 was recalculated from
+70% to 72% based on two updated questions in the people
+survey concerning work-life balance. The changes were
+carried out to simplify the questionnaire and to better
+compare against external benchmarks.
+Non-Financial Notes:
+Social Performance
+-
+Further Information on Economic, Environmental, and Social Performance
+-
+General Information
+Industrial Internet Consortium
+-
+Information Technology Industry Council
+-
+-
+-
+International Integrated Reporting Council
+Mechanical Engineering Industry Association
+Organization for International Investment
+Plattform Industrie 4.0
+Russian-German Chamber of Commerce
+Schmalenbach-Gesellschaft für Betriebswirtschaft e. V.
+Memberships
+The Business Council
+-
+The Sustainability Consortium
+-
+-
+-
+The Wall Street Journal CEO Council
+Trans-Atlantic Business Council
+Transparency International Germany
+United Nations Global Compact (since 2000)
+-
+U.S. Chamber of Commerce
+-
+World Economic Forum
+246
+The Conference Board, Inc.
+Boundaries
+Organizational Boundaries
+Reporting Approach
+000
+Contractor-
+owned vehicles
+Outsourced
+activities
+Product
+use
+Production
+of purchased
+materials
+Waste
+disposal
+RECS
+Scope 3
+Emissions from direct
+on-site sources
+Emissions from purchased Indirect emissions from
+energy/utilities supply chain or services
+Offsets
+External
+reductions
+SAP uses a significance threshold of 5% for structural or
+organizational changes and 1% for methodology changes of
+total current year emissions. A structural or organizational
+change that increases or decreases the total inventory by 5%
+or more will trigger an adjustment of historic years. A
+structural or organizational change that increases or
+쇠해
+decreases the total inventory by less than 5% will be
+considered insignificant and thus no adjustment will be made.
+Error Correction
+If a significant error is found in the base year inventory, it will
+be corrected. If a significant error is found that does not
+affect the base year but has an impact on this year's or last
+year's emissions, it will be corrected. An error is significant if
+it affects SAP's gross carbon footprint by more than 1%. No
+restatement due to error correction of historical data was
+necessary in 2017.
+CO2 Emission Factors
+The calculation of the GHG emissions is based on factors for
+conversion and extrapolation provided, among others, by
+IAE, WRI, US EPA, UK DEFRA, DEHSt, Environment Canada,
+GHG Protocol, and SAP's own measurements.
+Where relevant, our CO2 emissions factors consider all CO2
+equivalents (CO2e) for all greenhouse gases. Global Warming
+Potential factors are based on the Fifth Assessment Report of
+the Intergovernmental Panel on Climate Change (IPCC).
+In 2016, we updated our emissions and extrapolation factors
+for the categories stationary combustion facilities, corporate
+cars, corporate jets, business flights, rental cars, train travel,
+business trips with private cars, employee commuting as well
+as paper consumption, leading to a 10% downward impact on
+SAP's 2016 gross CO2 emissions.
+Methodology & Further Details
+We are reporting all our GHG emissions in CO2 equivalents
+(CO2e) including the impact from CH4, N2O, and HFCs in our
+Scope 1 and 2 emissions. As SF6 and PFCs mainly occur in
+chemical processes, they are not relevant for us.
+Below you will find the different parameters contributing to
+our carbon footprint. The methodology explanation will be
+complemented by activities and trends.
+Scope 1
+Refers to direct greenhouse gas emissions and is defined as
+emissions from sources that are owned or controlled by the
+organization. At SAP, the following areas are covered by
+Scope 1:
+Further Information on Economic, Environmental, and Social Performance
+Non-Financial Notes: Environmental Performance
+249
+Impact Valuation Roundtable
+Additionally, we annually measure the cumulative cost
+avoidance of our carbon emissions, compared to a business-
+as-usual scenario. In 2015, we introduced a cumulative cost
+avoidance calculation based on a triennial rolling method.
+This leads to additional comparability and thus, we continued
+this approach in 2017.
+Employee
+business travel
+Scope 2
+Scope 1
+Data for our environmental indicators is collected and
+reported on a quarterly basis and is subject to external
+assurance for annual reporting.
+Reporting on total energy consumed and data center energy
+is based on the data collected for the calculation of our
+greenhouse gas (GHG) footprint. All numbers are based on
+the metric system. Whenever we state "tons", we mean
+metric tons.
+The indicators greenhouse gas emissions per employee and
+total energy consumed per employee are calculated on the
+basis of an average number of employees. This average is
+calculated by adding the FTEs at the end of each quarter and
+then dividing the result by four.
+Greenhouse Gas Footprint
+Definition
+We define the GHG footprint or carbon footprint as the sum
+of all greenhouse gas emissions measured and reported for
+SAP, including the compensation with renewable energy or
+offsets.
+Reporting Principles
+SAP's preparation of the GHG footprint is based on the
+Corporate Accounting and Reporting Standard (Scope 1 and
+2) and the Corporate Value Chain (Scope 3) Standard of the
+World Resources Institute/World Business Council for
+Sustainable Development. This approach conforms to the
+requirements of GRI Standard indicators 302-1, 302-2, 305-1,
+305-2, and 305-3.
+In more detail, SAP reports our net greenhouse gas
+emissions according to the GHG Protocol Scope 2. In this
+context, two different calculation approaches are offered: the
+originally used location-based method and the recently
+introduced market-based method which is an amendment to
+the GHG Protocol Scope 2.
+SAP defines our organizational boundaries by applying the
+operational control approach as set out in the GHG Protocol.
+248
+Further Information on Economic, Environmental, and Social Performance
+Non-Financial Notes: Environmental Performance
+Operational control is established when SAP has the full
+authority to introduce and implement its operating policies.
+The emissions of all operations over which the company has
+operational control and all owned, leased facilities, co-
+location data centers, and vehicles that the company
+occupies or operates are accounted for in the GHG footprint.
+They are based either on measurements or, where no
+measured data is available, on estimations and
+extrapolations.
+A portion of SAP's leased facilities operates under full-service
+or multitenant leases, where SAP does not have access to
+actual energy consumption information. SAP includes these
+facilities in our definition of operational control and accounts
+for them by estimating related energy consumption.
+To support the growing demand for SAP's cloud offerings, we
+subcontract computation power in local third-party data
+centers. Carbon emissions are approximated and included
+based on the consumed computation power.
+In most instances, however, SAP has 100% ownership of our
+subsidiaries. Accordingly, the difference between applying
+the control versus the equity approach is about 0.6% based
+on SAP revenue. If additional investments in associates were
+included, the difference would be even smaller, about 0.5%.
+Data Consistency
+Purchased electricity
+Fuel combustion
+for own use
+Company-owned
+vehicles
+direct
+Scope 1
+Our boundaries take two different perspectives: SAP as a
+company, which includes all our legal entities and operations
+and supply chain, and SAP as a solution provider enabling our
+customers. These boundaries are listed in detail in the
+Content Index of the Global Reporting Initiative (GRI).
+Scope 3
+lindirect
+Scope 2
+PFCs
+N₂O HFCs
+SF6 CH4
+CO₂
+Comparability
+indirect
+Financial Women's Association
+14%
+European Roundtable of Industrialists
+Promoting Supplier Diversity
+Including more diverse businesses - that is, minority enterprises
+defined by gender, ethnicity, disability, sexual orientation, and
+other characteristics - into our supplier base has become a key
+priority for SAP. We believe that our commitment to an
+inclusive, bias-free culture in our workplace must be mirrored in
+our approach to our supplier base. In addition, through their
+flexibility and a high innovation potential, we believe that diverse
+businesses bring significant added value to SAP.
+Driven by our Global Procurement Organization (GPO), our
+supplier diversity program is an integral part of our supplier
+management program. It strives to ensure that diverse
+businesses have a fair chance at competing for contracts and
+are treated equally with other SAP suppliers. Targeted to reach
+a 5% spend ratio for diversity suppliers in selected countries by
+2020, the GPO will proactively involve diversity suppliers in
+selected categories in defined countries into our sourcing
+process. In 2017, we started a pilot project in the two
+procurement categories 'Services and HR' and 'Marketing',
+aimed at identifying a potential diversity-certified supplier for
+every bidding process whenever applicable.
+SAP is currently a corporate member of the following minority
+supplier certification organizations:
+-
+National Minority Supplier Development Council (NMSDC)
+WEConnect International
+· Minority Supplier Development UK (MSDUK)
+US Business Leadership Network (USBLN)
+Furthermore, in 2017 we started to include diversity and
+inclusion related content into the Global Procurement Policy and
+Guidelines. We encourage SAP suppliers to deliver goods and
+services that are accessible to everyone, including people with
+disabilities.
+Upholding High Standards
+Across Our Supply Chain
+Our supplier code of conduct is included in our standard supplier
+contracts. This strengthens its enforceability and sends a clear
+signal about its importance for SAP.
+In 2017, a new version of the supplier code of conduct went live.
+Key additions to the code include provisions on the Modern
+Slavery Act, diversity and inclusion, and an extension of the
+labor rights chapter.
+Further Information on Economic, Environmental, and Social Performance
+Sustainable Procurement
+27%
+241
+In 2017, the SAP Ariba Supplier Risk solution went live. It enables
+the procurement departments of our customers as well as our
+GPO to identify, manage, and mitigate sustainability risks within
+our supply chain. These risks include, for example, unethical
+practice, workplace discrimination, workplace safety neglect,
+the use of child labor, human trafficking, and environmental
+disasters such as oil spills and radioactive contamination.
+In addition, this innovative solution helps SAP measure due
+diligence activity and report on information-sharing programs
+across the supply chain. By providing insights into supplier risk,
+the solution enables us to detect early warning signals, minimize
+costly disruptions, and proactively monitor risk factors for each
+supplier. In this way, SAP can prioritize its corporate
+responsibilities, quantify the impact it wants its business to
+have, and identify the critical issues affecting the supply chain.
+SAP also works closely with suppliers to find new ways to make
+our supply chain more sustainable. We have a number of
+ongoing projects that minimize our impact on the environment
+in areas such as enterprise mobility, catering, office supplies,
+and SAP events.
+Our chief procurement officer and chief sustainability officer
+meet each quarter to discuss progress and challenges related to
+embedding sustainability in our procurement practices.
+242
+Federation of German Industries
+Waste and Water
+133 t
+e-waste recycled
+33%
+1.2 M m³
+paper reduction since 2009
+in water consumption
+Taking a Global Approach
+Improving Sustainability
+Through Innovation
+Our waste and water strategy ensures that we minimize the
+impact SAP has on the environment. By promoting company-
+wide initiatives, we dispose of less waste and reduce the amount
+of water we use in locations worldwide. A global approach
+combined with local targets and initiatives ensures that we
+optimize our environmental performance.
+27%
+EMEA
+51%
+compliance officers, or colleagues who are trained to be part of
+our internal mediation pool.
+In addition, our global ombudsperson investigates employee
+complaints and mediates fair settlements. The ombudsperson
+also helps the Executive Board analyze HR-related complaints
+and consider ways to address potential issues before they
+occur.
+Maintaining High Standards
+Across Our Supply Chain
+We expect all our business partners to respect human rights and
+to avoid complicity in human rights abuses. Our codes of
+conduct for suppliers and partners require them to uphold labor
+rights and to provide a safe and healthy work environment for all
+employees. In addition, we may carry out on-site audits to
+assess performance.
+Respecting Human Rights
+Throughout Our Product
+Lifecycle
+As reflected in our human rights risk assessment, we are
+committed to respecting human rights throughout the lifecycle
+of our products - from design through development to use. We
+develop innovative solutions that help customers embed human
+rights standards into their business and supply chain strategies.
+For example, our customers can use the SAP Ariba Supplier Risk
+solution to gain the intelligence and transparency they need to
+understand human rights risks within their supply chains. They
+can then make informed procurement decisions that may
+improve lives.
+When designing any solution, our development teams ensure
+that the product complies with human rights standards. For
+example, accessibility is a key area of focus and we follow Web
+content accessibility guidelines such as the Section 508
+standards to ensure inclusive design in all our software.
+The protection of personal information is another key area of
+focus for our development teams. To help ensure that our
+products enable our customers to respect digital rights, we
+adhere to robust privacy and security standards. These are
+defined in our global product development, quality, product
+standards, and data protection and privacy policies.
+240
+Further Information on Economic, Environmental, and Social Performance
+Human Rights and Labor Standards
+Sustainable Procurement
+Making Our Supply Chain More
+Sustainable
+A significant part of our social and environmental impact is
+delivered through our supply chain. Globally, more than 120,000
+full time equivalents (FTEs) are linked to our supply network.
+Furthermore, total greenhouse gases emissions from our supply
+chain are linked to cumulated annual societal costs of
+approximately €160 million.
+36%
+At SAP, we work hard to minimize any negative impacts
+associated with our supply chain. We achieve this through
+ongoing innovation that helps us ensure that our procurement
+activities meet high sustainability standards.
+At SAP, we consider our suppliers to be key partners in our
+business success. In 2017, we spent more than €5 billion in
+transactions with nearly 16,000 suppliers worldwide.
+Suppliers by Category
+Percent of total spend
+Services and HR
+IT and Telecommunications
+17%
+Enterprise Mobility
+Marketing
+15%
+Facility and Office
+Supplier Locations
+Percent of total spend
+APJ
+13%
+Americas
+What We Buy and Where We Buy
+It From
+Taking steps to recycle our waste and save water also
+contributes to our business performance. Through ongoing
+initiatives at SAP sites, we reduce our operational costs while
+engaging our employees in our efforts.
+Further Information on Economic, Environmental, and Social Performance
+Sustainable Procurement
+Our e-waste comes from the data center servers, IT equipment
+including PCs, peripherals, and a range of mobile devices. Our
+servers and IT equipment are either resold or recycled in an
+environmentally friendly manner depending on their condition.
+In 2017, we continued our engagement with our international
+sustainable e-waste disposal partner. In addition, we work
+together with local e-waste disposal partners. In 2017, we also
+extended our e-waste recycling approach to the Americas.
+SAP has developed trusting relationships with governments
+worldwide by exploring the potential for information and
+communications technology (ICT) to spur economic growth,
+create jobs, and address societal challenges.
+SAP engages with governments around the globe on a number
+of public policy issues, including the creation of reasonable
+framework conditions for new technologies or business models
+such as cloud computing, the Internet of Things, and Big Data.
+SAP supports global best practices to ensure cybersecurity and
+the protection of personal data to build trust in digital
+technologies. SAP favors global policy frameworks and
+international standards that enable the free flow of data across
+borders and the free trade of digital products and services.
+SAP believes in transparency in the political process.
+Accordingly, we are registered in the European Transparency
+Register for interest representatives. In the United States, our
+company is registered and reports in compliance with the
+Lobbying Disclosure Act.
+Political Contributions
+SAP does not support any political parties. Under the laws of the
+United States, a number of SAP employees exercise their right
+to create a political action committee (PAC). The SAP America
+PAC is an independent, registered, and strictly regulated
+organization that allows eligible employees in the United States
+to support political candidates at the state and federal level.
+Consistent with U.S. law, SAP exercises no control over or
+influence on the SAP America PAC. SAP America PAC
+expenditures are transparent and available on the U.S. Federal
+Election Commission Web site.
+Managing Our E-Waste
+Public Policy
+245
+Memberships
+To better understand and enable sustainable performance on a
+global level, both for our company and customers, SAP
+subscribes to and routinely engages in a range of third-party
+organizations, including:
+-
+-
+Public Policy
+-
+-
+-
+-
+-
+Alliance for Integrity
+Association of Climate Change Officers
+Bitkom e. V.
+Business for Social Responsibility
+Cellular Telephone Industries Association
+Deutschland sicher im Netz e. V.
+DIGITALEUROPE
+Dublin Chamber of Commerce
+econsense
+European Centre for Women and Technology
+-
+Further Information on Economic, Environmental, and Social Performance
+Waste and Water
+Further Information on Economic, Environmental, and Social Performance
+A few of our offices are located in areas with significant water
+scarcity. In locations such as Bangalore, India, or Ra'anana,
+Israel, we have been addressing this issue with dedicated water
+management efforts. These range from the reuse of treated
+sewage water to employee awareness campaigns.
+In addition, we support the reuse of IT equipment internally
+through used-equipment shops in some country locations. A
+sustainable procurement program complements our waste
+reduction efforts by offering more sustainably produced IT
+equipment wherever possible.
+106
+2016*
+E-Waste (Recycled)
+tons
+133
+244
+* E-waste for 2016 was recalculated. The rise in e-waste stems
+largely from recycling more servers in EMEA.
+Cutting Down on Landfill Waste
+In 2017, we continued to roll out 'zero waste' diversion programs
+at offices across the globe as part of our ISO 14001 program
+with specific targets to achieve and maintain landfill diversion at
+or above 90%. This approach focuses on eliminating the need to
+send waste to landfill, by changing processes or promoting the
+reuse of materials.
+We reduced our paper usage by almost 33% since 2009 through
+our global printing optimization initiative. Among other
+improvements, this sets printers to produce double-sided,
+black-and-white printouts as a default. In 2017, we continued our
+approach of paperless contracting. By using the SAP Signature
+Management application from DocuSign to enable electronic
+signatures, we have been able to handle 60,702 pages of
+contract, cutting down on paper contracts significantly.
+We have also successfully changed working behavior to
+significantly reduce the amount of pages that our employees
+print. A secure pull-printing system requires that employees
+bring their ID badges to a printing device to activate a job. This
+ensures better document security, and makes people think
+Further Information on Economic, Environmental, and Social Performance
+Waste and Water
+243
+2017
+Using Water Efficiently
+about whether the printout is really needed. More than 83,000
+employees currently use this system. Through all of these
+initiatives, our printing volume has gone down by 18 million
+pages in total since 2014. SAP employees can access a printing
+dashboard that shows the company's progress in reducing
+paper consumption at global, regional, and country levels.
+2017
+2016
+2015
+2013
+970
+1,049
+2014
+1,185
+1,269
+Thousand cubic meters
+Global Water Usage
+While our operations are not water-intensive, we continue to use
+water as efficiently as possible. As part of our efficiency efforts,
+we use rain and run-off water for irrigation and toilets in
+Walldorf, Germany, and other office locations.
+1,060
+250
+Only selected upstream emissions are directly measured and
+hence included in our corporate target. The additional
+upstream emissions such as products and services or grey
+energy of our buildings are based on an estimate. Together,
+Electricity Office: Calculations of emissions is based on
+building electricity consumption. Emission factors are
+updated annually. Where no measured data is available,
+stable values (kWh/m²) based on SAP's 2016 carbon
+footprint data are used for extrapolation (63% data
+coverage).
+Refers to other indirect greenhouse gas emissions and is
+defined as emissions that are a consequence of operations of
+an organization, but are not directly owned or controlled by
+the organization. In more detail, Scope 3 emissions are
+divided into upstream and downstream emissions.
+Scope 3
+We continued a wide range of efficiency projects to reduce
+our electricity usage, including facility upgrades and new
+LEED certifications. We also expanded the management of
+our environmental performance through ISO 14001. In
+addition, we are one of the global corporations that have
+signed on to the RE100 initiative. Led by The Climate Group in
+partnership with CDP (formerly Carbon Disclosure Project),
+the goal of the RE100 campaign is to have 100 of the world's
+most influential businesses committed to 100% renewable
+electricity.
+Purchased Chilled and Hot Water, Steam: Calculations
+of emissions is based on consumption of district heating.
+Emission factors are updated annually. Where no
+measured data is available, stable values (kWh/m²) based
+on SAP's 2016 carbon footprint data are used for
+extrapolation (43% data coverage).
+SAP-owned and SAP-managed data centers coming from
+acquisitions. Calculations of emissions is based on data
+center electricity consumption. Emission factors are
+updated annually. Where no data is available, electricity
+consumption for internal data centers is extrapolated
+based on the number of server units (87% data coverage).
+The stable values are based on SAP's 2016 carbon
+footprint data.
+Electricity Data Centers:
+-
+Refrigerants Corporate Cars: Refrigerant emissions are
+based on a rough estimate of HFC emissions per car and
+are extrapolated based on the number of corporate cars
+reported (0% measured data).
+Refers to indirect greenhouse gas emissions and is defined as
+emissions from the consumption of purchased electricity,
+steam, or other sources of energy generated upstream from
+the organization. At SAP, the following areas are covered by
+Scope 2:
+Scope 2
+Germany is participation in a national reduced train fare
+program called "BahnCard 100".
+Consumption of fuel for our company cars remains the single
+greatest contributor to our Scope 1 emissions. In 2017, we
+continued to enhance our car policy by linking emissions
+caps to efficiency improvements of the automotive industry.
+In addition, we focused on greater shifts in commuting habits.
+We continued the global rollout of TwoGo by SAP, our car-
+sharing solution, which is now available in 110 SAP locations
+worldwide. To increase the scale and attractiveness of
+TwoGo, we make the solution available to the public free of
+charge. As part of our initiative to increase the proportion of
+electric vehicles in our car fleet to 20% by 2020, we continue
+to offer incentives to our employees to purchase electrical
+cars. As an example of additional transportation alternatives
+for our employees, we established a company bike program
+in Germany, where employees have the opportunity to select
+between using a bicycle or a company car to commute to
+work. A further commuting alternative to a company car in
+Mobile Combustion Corporate Jets: Emission calculation
+for SAP's own jets is based on actual fuel consumption
+(100% data coverage).
+Stationary Combustion Facilities: Emission calculation is
+based on building gas or oil consumption in kWh. Where
+no measured data is available, stable values (kWh/m²) are
+used for extrapolation of buildings (70% measured data).
+In cases where no specific information is available, natural
+gas reported by local sites is assumed to be reported in
+Lower Heating Value. Besides gas and oil we also started
+to use wood pellets to produce thermal heat for our
+buildings. The Scope 1 emissions of wood pellets can be
+set to net 'O' since the wood itself absorbs an equivalent
+amount of CO2 during the growth phase as the amount of
+CO2 released through combustion. Still, to ensure
+complete accounting for all emissions caused we
+document the direct carbon dioxide (CO2) impact of
+burning wood pellets as 'outside of scopes' CO2 emissions.
+In 2017 these emissions accounted for 206 tons of CO2.
+Refrigerants Facilities: Refrigerant data is reported for
+completeness of our carbon footprint, but HFC emissions
+are fully estimated (0% measured data) based on the
+number of server units and office space with an A/C
+system; all refrigerants are assumed to be HFC134a.
+Mobile Combustion Corporate Cars: Emission
+calculation is based on fuel consumption. In 2017, 28
+countries reported actual fuel data (93% data coverage);
+for other countries, stable values (liters/car) are used for
+extrapolation based on the number of corporate cars
+reported. The stable values for extrapolation are based on
+SAP's 2016 carbon footprint data.
+-
+Further Information on Economic, Environmental, and Social Performance
+Non-Financial Notes: Environmental Performance
+The following scope 3 GHG emissions are included in our
+corporate GHG target:
+-
+our upstream emissions including these estimates are
+responsible for about 13% of SAP's total carbon footprint.
+-
+Employees and Social
+SAP + external
+parties
+V
+8,16
+V
+SAP
+V
+258
+Sustainability Management
+and Policies
+DMA
+Material Aspect: Impact on Society
+We are not aware of any
+operations or suppliers as
+having significant risk for
+incidents of forced or
+compulsory labor.
+Human Rights and Labor
+Standards,
+operations or suppliers as
+having significant risk for
+incidents of child labor.
+409-1
+We are not aware of any
+Standards;
+Human Rights and Labor
+408-1
+freedom of association and
+collective bargaining may be
+at significant risk.
+Investments
+We are not aware of any
+operations or suppliers in
+which the right to exercise
+Standards;
+Human Rights and Labor
+407-1
+Security and Privacy
+418-1
+Standards
+16
+V
+SAP
+8
+259
+parties
+SAP + external
+V
+GRI Index and UN Global Compact Communication on Progress
+Further Information on Economic, Environmental, and Social Performance
+Employees and Social
+Investments
+Investments
+Social
+Goals
+Development
+1 to 17
+external parties
+Human Rights and Labor
+V
+UN Sustainable
+Further Information on Economic, Environmental, and Social Performance
+GRI Index and UN Global Compact Communication on Progress
+V
+4
+8
+SAP
+V
+5
+ст
+8,16
+SAP
+V
+3
+Strategy and Business Model
+403-2
+Security and Privacy:
+and Digital Rights
+8
+SAP
+V
+3,8
+3,8
+8
+SAP
+V
+SAP
+V
+GRI Index and UN Global Compact Communication on Progress
+Further Information on Economic, Environmental, and Social Performance
+category are not a
+material issue for SAP
+as we align our training
+activities according to
+the needs of each
+employee and do not
+tolerate discrimination.
+Training hours split by
+gender and employee
+Non-Financial Notes: Social
+Performance
+Employees and Social
+Investments
+Sustainability Management
+and Policies:
+404-1
+DMA
+Material Aspect: Innovation
+Report on Equal Pay which
+we published in the German
+Business Register.
+equal value. See also our
+3
+SAP
+V
+Injuries, diseases, lost
+days, or absenteeism
+are not a material issue
+for SAP as we track our
+Business Health
+Culture Index on a
+global basis.
+men and women for work of
+commitment to equal pay for
+V
+SAP
+5,8
+SAP
+Material Aspect: Security and Privacy / Human
+Customers
+Innovation
+R&D and Local
+proprietary information
+for SAP.
+5,8,10
+SAP
+V
+The split by gender is
+Employees and Social
+Investments
+404-3
+learn about best practices in
+this field.
+8
+DMA
+SAP
+networks on workforce
+demographics to share and
+research studies and
+participates in external
+retirement. SAP also
+For continued employability
+and managing career
+endings, SAP has dedicated
+staff to support generational
+intelligence. These experts
+work on continuously
+improving processes and
+designing programs for
+sustaining employability as
+long as possible; providing
+training for cross-generation
+collaboration; managing
+career endings in a flexible
+way (for example, part-time
+options); and keeping
+employees connected with
+the company after
+Employees and Social
+Investments
+404-2
+257
+6
+4,5,8,10
+SAP
+V
+5,8,10
+V
+403-1
+Leadership
+Employees and Social
+Investments
+SAP does not conduct
+community assessment
+programs.
+studies.
+document this in case
+customers' success, and
+solutions have on our
+understanding the impact our
+We are working on
+Board
+Report by the Supervisory
+Opportunities:
+Expected Developments and
+Sustainability Management
+and Policies:
+DMA
+Material Aspect: Financial Performance
+material to our
+emissions of nitrogen
+oxides (NOX), sulfur
+oxides (SOX), and
+other significant air
+emissions is not
+As a software
+company, the
+emissions of ozone-
+depleting substances
+(ODS) is not material to
+company, the
+As a software
+Energy and Emissions:
+Non-Financial Notes,
+Chart Generator:
+Non-Financial Notes,
+Chart Generator:
+305-7
+Energy and Emissions:
+305-6
+8,9
+13, 14, 15
+Growth and
+Profitability
+203-1
+V
+6
+SAP
+V
+Employees and Social
+Investments
+Employee
+Engagement
+Investments
+Employees and Social
+and Policies:
+1,2,6
+V
+Sustainability Management
+DMA
+9
+SAP + external
+parties
+1,3,8
+V
+3, 12, 14, 15
+3,12,13
+256
+Material Aspect: Human Capital Management
+Strategy and Business Model:
+www.sap.com/purpose
+203-2
+investments is not
+material for SAP.
+The amount of these
+SAP
+V
+Financial Performance:
+Review and Analysis
+V
+external parties
+V
+parties
+8
+8
+7,8,13
+SAP
+V
+Non-Financial Notes;
+302-5
+Energy and Emissions
+302-4
+Chart Generator:
+Non-Financial Notes
+8
+7, 8, 12, 13
+SAP
+V
+V
+302-3
+7,8
+7, 8, 12, 13
+SAP + external
+parties
+V
+Energy and Emissions
+302-2
+Chart Generator:
+Non-Financial Notes;
+7,8
+7, 8, 12, 13
+SAP
+V
+Energy and Emissions:
+this includes our
+SAP + external
+parties
+8
+13, 14, 15
+SAP + external
+V
+Non-Financial Notes:
+Chart Generator:
+Energy and Emissions;
+305-5
+Chart Generator:
+305-4
+7,8
+external parties 3, 12, 13, 14, 15
+V
+Energy and Emissions:
+Non-Financial Notes;
+Chart Generator:
+305-3
+7,8,13
+7,8
+SAP
+V
+7,8
+3, 12, 13, 14, 15
+SAP
+V
+Energy and Emissions;
+Non-Financial Notes;
+Chart Generator:
+Energy and Emissions:
+Non-Financial Notes;
+Chart Generator:
+305-2
+305-1
+255
+Further Information on Economic, Environmental, and Social Performance
+GRI Index and UN Global Compact Communication on Progress
+00
+3, 12, 13, 14, 15
+Further Information on Economic, Environmental, and Social Performance
+GRI Index and UN Global Compact Communication on Progress
+discrimination on any basis;
+405-2
+Chart Generator:
+102-8
+Financial Performance: Review and Analysis
+Consolidated Financial Statements IFRS:
+Subsidiaries and Other Equity Investments;
+V
+V
+V
+✓
+V
+V
+V
+Headcount and Personnel Expense:
+102-7
+Overview of the SAP Group:
+Customers
+102-6
+Overview of the SAP Group
+102-5
+Overview of the SAP Group
+102-4
+Overview of the SAP Group
+102-3
+GRI Content Index
+102-2
+Overview of the SAP Group
+102-1
+UN Global Compact
+Principles
+6
+Non-Financial Notes
+102-9
+Sustainable Procurement
+Human Rights and Labor Standards
+102-41
+Stakeholder Engagement
+102-40
+Stakeholder Engagement
+Sustainability Management and Policies
+Corporate Governance Report:
+102-18
+Business Conduct
+Governance
+102-16
+Ethics and Integrity
+Letter from the CEO
+External
+Assurance
+102-14
+Memberships
+Memberships
+We support a precautionary approach towards environmental
+management. While we see little apparent risk for our own operations,
+we do see an opportunity to help our customers anticipate and
+manage this risk in a more agile and responsive fashion through
+effective product lifecycle management and sustainable design.
+102-13
+102-12
+7
+V
+102-11
+V
+There were no changes with significant impacts regarding our own
+organization or our supply chain.
+102-10
+3
+V
+Strategy
+102-42
+Links and Content
+Disclosures
+All energy outside the aforementioned categories falls within
+conventional energy. We define conventional energy as
+electricity coming from the standard electricity grid. The
+electricity grid provides a country-specific energy mix
+including all available sources, either fossil, nuclear, or
+renewable. Energy from renewable sources as part of the
+local grid is calculated as conventional energy and not
+displayed as part of renewable energy.
+Vintage: The renewable electricity must be produced in
+the same year or the year preceding the reporting period
+to which it will be applied.
+Accounting: SAP uses the grid-specific emissions factor
+to calculate the carbon reduction achieved by the RECs.
+As RECs are considered independently to the electricity
+achieved through their procurement, they can be allocated
+to any location globally
+Type of renewable electricity: SAP considers solar, wind,
+biogas, geothermal, and hydro power as renewable
+electricity. In 2017, we sourced only wind energy.
+Installation: The power plant producing the renewable
+energy shall not be older than 10 years. In case of a
+renovation of an old power plant, the 10-year rule applies
+only to the additional electricity output due to efficiency
+increase. Furthermore, SAP does not consider RECs from
+government supported power plants.
+We define renewable energy as electricity coming from
+renewable energy sources such as wind, solar, hydro, and
+geothermal. The shares of renewable energy used by SAP are
+calculated by adding the amount of renewable energy
+specifically sourced, produced onsite by our own solar cells,
+and covered by Renewable Energy Certificates (RECs). We
+have developed a quality standard that defines key criteria for
+the procurement of RECs to drive change in the electricity
+market and to avoid the risk caused by low-quality products.
+The key characteristics of our renewable energy purchasing
+guidelines are as follows:
+Renewable Electricity
+SAP uses external reductions, such as purchases of
+renewable energy and certified voluntary "offsets," to achieve
+its GHG targets. Emission reductions are subtracted from
+gross Scope 1 to 3 GHG emissions to achieve a net GHG
+inventory.
+External Reduction
+OtherScope 3 Emissions Not Included: Upstream
+Transportation and Distribution (due to data complexity
+and de minimis); Upstream Leased Assets (not
+applicable); Processing of Sold Products (not applicable);
+End-of-Life Treatment of Sold Products (not applicable);
+Downstream Leased Assets (not applicable); Franchises
+(not applicable); and investments (not applicable).
+251
+Further Information on Economic, Environmental, and Social Performance
+Non-Financial Notes: Environmental Performance
+Use of Sold Products: The vast majority of our overall
+emissions stem from the use of our software. When SAP
+software runs on our customers' hardware and on their
+premises, the resulting carbon footprint is about 30 times
+the size of our own net carbon footprint (9.7 million tons in
+2017). SAP is eager to cooperate with customers to
+optimize their on-premise landscapes. However, given
+that we have no control over our customers' IT landscapes
+as they usually contain a lot of third-party products, we
+share this responsibility with others. Resource need per
+year is determined using a landscape simulation. It is
+extrapolated globally based on the number of productive
+installations and power usage effectiveness (PUE). We use
+a PUE factor of 1.6, which is the average PUE of our
+external data centers. Emissions are calculated using a
+global electricity emission factor. Due to the special
+characteristics of software products, we chose an
+assessment of resource need per year. This deviates from
+the minimum boundaries as defined by the GHG
+Protocol's Corporate Value Chain (Scope 3) Accounting
+and Reporting Standard, which requires assessment and
+disclosure of "direct use-phase emissions of sold products
+over their expected lifetime." The calculation covers all of
+our major solutions, including on-premise software. Cloud
+solutions are not included, as they are part of our Scope 2
+emissions. Mobile solutions (for example, SAP apps
+running on customer IT equipment) are also not included.
+Calculation parameters will be adapted when significant
+technology changes occur.
+Downstream
+Due to the link of our upstream emissions to operating
+expenses, for 2017, we extrapolated our upstream figures by
+multiplying our four key contributors to our upstream
+emissions from 2016 with the year-over-year increase of
+operating expenses between 2016 and 2017.
+Upstream
+Additionally, we annually measure and publish the following
+Scope 3 GHG emissions based on the GHG Protocol's
+Corporate Value Chain (Scope 3) Accounting and Reporting
+Standard. These GHG emissions are not included in our
+corporate target and are meant to be for indicative purposes
+only.
+Paper Consumption: Calculation of emissions caused by
+the consumption of printing paper is based on printer
+tracker data (100% data coverage).
+Data Download: Carbon calculation is based on the data
+volume downloaded by our customers globally (100%
+data coverage).
+parcels and mail sent from our logistics center in Germany
+and is extrapolated globally.
+Logistics: Calculation is based on the actual number of
+-
+-
+Electricity External Data Centers: An external data
+center (co-location) is a local computing center with
+server units running SAP software that is operated by an
+external partner. CO2 conversion factors are updated
+annually based on country specific grid factors and include
+CH4 and N2O factors. Electricity consumption for external
+data centers is extrapolated based on the data center
+capacity, a utilization factor, and a power usage
+effectiveness (PUE) factor. As the utilization and PUE
+factors are not available for all external data centers,
+average factors are determined as follows: Utilization
+factor for external data centers is calculated as the sum of
+all actual consumptions divided by the sum of contracted
+server power of these data centers. The average PUE is
+calculated as the sum of all provided PUES divided by the
+number of data centers that have provided this factor.
+(90% data coverage).
+car.
+Train Travel: Average emission factors from train travel
+are calculated based on actual distance traveled and
+actual costs spent (32% data coverage). These factors are
+used for extrapolation based on the controlling costs.
+Business Trips with Private Cars: Carbon calculation is
+based on distance traveled with a private car,
+extrapolation is based on FTE (32% data coverage).
+Company car trips are excluded from this activity type.
+Employee Commuting: A system-integrated commuting
+survey about the distance to work and the mode of
+transport is conducted annually for SAP globally. The
+survey responses are the basis for carbon calculation of
+employee commuting in the following year. Approximately
+30,000 employees responded to the survey in 2017.
+Commuting data for non-responding employees and
+quarterly updates are extrapolated based on the number
+of FTEs excluding those employees who own a company
+Rental Cars: Average emission factors from rental cars
+are calculated based on actual distance and actual costs
+spent (95% data coverage). These factors are used for
+extrapolation based on the controlling costs.
+Business Flights: Calculation of emissions is based on
+actual distance travelled and actual costs spent (60%
+data coverage). This data is used to determine average
+emission factors for short, medium, and long-haul flights.
+For CO2 calculation, these factors are applied to actual
+controlling costs for business flights. Emission factors for
+business flights do not consider the radiative forcing
+factors.
+-
+To calculate the carbon reductions of the RECs, the amount
+of purchased electricity is multiplied by the grid-specific
+carbon factor derived from the location where the renewable
+energy was produced. The sum over all certificates is the
+global renewable energy emissions value of SAP. However,
+data is only valid with an official certificate or written
+confirmation of the electricity supplier (100% data
+coverage).
+In the net carbon footprint, the purchased as well as the
+produced renewable electricity is already deducted from our
+Scope 2 emissions.
+Offsets
+We compensate our Scope 3 emissions by investing in the
+Livelihood Funds and their high-quality carbon credits, which
+are included in our overall net carbon footprint. By using this
+investment, the Fund aims to abate emissions or sequester
+carbon from the atmosphere.
+General Standard
+The social and environmental data and information included in the SAP Integrated Report 2017 has been prepared in accordance
+with the GRI Standards: Core option.
+GRI Index and UN Global Compact
+Communication on Progress
+253
+Non-Financial Notes: Environmental Performance
+Further Information on Economic, Environmental, and Social Performance
+By e-waste, we mean any discarded electric devices used in
+our offices and data centers. Data is based on the actual
+weight of the devices (data coverage around 94%);
+remaining data is extrapolated based on the electricity
+consumption of SAP's data centers.
+E-Waste
+By water, we mean the total amount of freshwater withdrawn
+for our facilities. Data is based on estimations from sites and
+is largely extrapolated. Data was provided (estimated) for
+50% of the total space; remaining data is extrapolated based
+on square meter footage.
+Water
+Aspects
+Additional Environmental
+As it is expected that the emissions from external data
+centers will continue to grow in the future, SAP committed to
+a green cloud strategy and to compensate the emissions with
+renewable electricity certificates. By referring to the green
+cloud, we mean that SAP's cloud is carbon neutral due to
+purchasing 100% renewable electricity certificates and
+compensation by offsets.
+Organizational Profile
+We will continuously improve the data quality of energy
+consumption of external data centers.
+We define data center electricity as the sum of electricity
+consumed to provide internal and external computation
+power in SAP data centers and contracted third party data
+centers. A data center is any global, regional, or local
+computing center (location with any number of server units)
+that is part of our global IT infrastructure strategy. In 2017,
+we continued analyzing and reporting internal and external
+data center energy consumption intensity against our non-
+IFRS revenue.
+Data Center Electricity
+consumption data obtained through our measurements for
+the GHG footprint and is the sum of energy consumption
+from stationary combustion facilities, mobile combustion
+corporate cars, mobile combustion corporate jets, electricity
+offices, electricity data centers, and purchased chilled water,
+purchased hot water, and purchased steam.
+Further Information on Economic, Environmental, and Social Performance
+Non-Financial Notes: Environmental Performance
+252
+We define total energy consumed as the sum of all energy
+consumed through SAP-own operations, including energy
+from renewable sources. It is calculated based on the
+Total Energy Consumed
+In the net carbon footprint, purchased offsets are already
+deducted from our gross emissions.
+Verifiable: The performance of the GHG reduction
+projects can be readily and accurately quantified,
+monitored, and verified.
+Real: The GHG reductions represent actual emission
+reductions that have already occurred.
+Additional: The GHG reductions are surplus to regulation
+and would not have happened without the offset.
+Permanent: The GHG reductions are permanent or have
+guarantees to ensure that any losses are replaced in the
+future.
+A requirement for offsets is that the minimum standard
+(Voluntary Carbon Standard, VCS) is applied. SAP ensures
+that the quantified GHG emission reductions from offsets are
+credible and that they meet four key accounting principles:
+The investments in sustainable projects are equivalent to a
+certain amount of carbon reductions.
+On top of this, SAP invests in carbon emission offsets for air
+travel by charging an internal carbon price which is later
+invested in sustainable projects worldwide. Furthermore,
+employees owning a so-called climate neutral fuel card for
+their company car pay a small additional fee per liter gas
+purchased, which is then invested in gold standard certified
+compensation projects.
+Data center energy consumption per euro is calculated by
+dividing the electricity consumption of all internal and
+external data centers measured for the calculation of our
+GHG footprint by our revenue.
+Stakeholder Engagement
+102-43
+Stakeholder Engagement:
+Customers
+16
+SAP
+V
+Business Conduct
+205-3
+10
+16
+SAP
+V
+Business Conduct
+205-2
+10
+16
+SAP
+Business Conduct
+205-1
+10
+V
+Business Conduct
+DMA
+UN Global
+Compact
+Principles
+Goal
+Sustainable
+Development
+External Boundaries
+Assurance
+Omissions
+V
+V
+10
+206-1
+Litigation and Claims
+V
+GRI Content Index
+405-1
+403-4
+Stakeholder Engagement
+within SAP.
+diseases due to their work
+high incidence or high risk of
+There are no workers with a
+403-3
+reportable accidents per one
+million working hours (2.3 in
+2016).
+slightly increased to 2.4
+per one million working
+hours. In 2017, this value
+In Germany, we measure the
+accident rate with a "1000-
+Mann-Quote" (TMQ). This is
+calculated as the number of
+reportable accidents × 1,000
+employees/number of full-
+time equivalents. Reportable
+accidents are work-related
+and include commuting
+accidents that result in more
+than three days of absence
+from work. In 2017, the TMQ
+was 3.6 (3.6 in 2016). We also
+measure the accident rate
+V
+Employees and Social
+Investments
+302-1
+V
+Energy and Emissions
+DMA
+Material Aspect: Climate and Energy
+Business Conduct
+10
+16
+V
+Public Policy:
+415-1
+16
+SAP
+Energy and Emissions:
+V
+V
+V
+102-52
+February 28, 2017
+102-51
+About This Report
+102-50
+Non-Financial Notes
+102-49
+Non-Financial Notes
+102-48
+Materiality
+102-47
+About This Report
+Materiality:
+Annual Reporting Cycle
+Subsidiaries and Other Equity Investments;
+All entities are covered by the report.
+102-46
+102-45
+Further Information on Economic, Environmental, and Social Performance
+GRI Index and UN Global Compact Communication on Progress
+10
+✓
+V
+V
+✓
+V
+V
+254
+Stakeholder Engagement:
+Customers
+102-44
+Reporting Principles
+SAP does not tolerate
+102-53
+102-54
+V
+V
+V
+V
+Material Aspect: Business Conduct
+and Indicators
+Approach (DMA)
+Management
+Links and Content
+Disclosures on
+Data Security and Privacy
+Sustainability Management and Policies:
+Business Conduct:
+Investor Services
+103-3
+Sustainability Management and Policies:
+Business Conduct:
+103-2
+Non-Financial Notes
+GRI Content Index:
+103-1
+Management Approach
+Management's Acknowledgement of the SAP Integrated Report 2017;
+About This Report
+Independent Assurance Report:
+102-56
+GRI Content Index
+102-55
+About This Report
+Data Security and Privacy
+Business Health
+Culture Index
+Practitioner's Responsibility
+8,205
+2,762
+3,001
+3.627
+-1,589
+4,298
+-3,356
+3,266
+-2,705
+-7,240
+-334
+-1,799
+-1,112
+-3,406
+3,770
+3,832
+3,499
+-1,781
+3,638
+266
+€ millions, unless otherwise stated
+127
+124
+19
+16
+14
+16
+Additional Information | Five-Year Summary
+16
+2014
+2015
+2016
+2017
+Cash conversion rate
+Free cash flow in % of total revenue
+2013
+119
+4,628
+Net cash flows from financing activities
+Free cash flow
+67
+68
+Gross margin (in % of corresponding revenue)
+647
+1,616
+1,925
+68
+2,261
+SAP Business Network Segment
+42
+40
+6,946
+75
+74
+7,742
+Segment revenue
+5,045
+67
+385
+Net cash flows from investing activities
+Net cash flows from operating activities
+Liquidity and cash flow
+ΝΑ
+NA
+3333 3333
+Segment profit
+16
+18
+17
+Segment margin (Segment profit in % of Segment revenue)
+105
+317
+341
+20
+107
+115
+(net cash flows from operating activities in % of profit after tax)
+21,274
+7,351
+8,999
+9,739
+11,564
+11.930
+23,311
+3,962
+5,362
+6,050
+6,017
+Goodwill
+Total current assets
+Trade and other receivables
+4,443
+Assets, equity and liabilities
+22,689
+13.690
+6,747
+Total non-current liabilities (including deferred income)
+6,347
+8,574
+7,867
+9.674
+21,000
+10,210
+19,739
+29,566
+31,651
+32,713
+30,567
+Total non-current assets
+Total current liabilities (including deferred income)
+62
+65
+71
+4,785
+Group liquidity
+93
+95
+148
+971
+4,673
+774
+2,748
+3.328
+3.411
+3,702
+4,011
+Cash and cash equivalents
+Short-term investments
+3,559
+2,841
+(cash and cash equivalents/short-term investments/restricted cash).
+74
+70
+Days' sales outstanding (DSO, in days)
+-1,467
+-7,670
+-5.615
+-3.153
+-1,479
+Net liquidity
+4,308
+11,093
+9,174
+7,826
+6,264
+Financial debts (due to banks, private placements, bonds)
+10,228
+3,423
+4.44
+4,695
+19.2
+15.9
+14.3
+Additional Information | Five-Year Summary
+267
+€ millions, unless otherwise stated
+Women managing teams 6). 7) (in %)
+Employee Engagement Index (in %)
+Business Health Culture Index¹0) (BHCI, in %)
+Leadership Trust Index (LTI, in %)
+Employee retention (in %)
+Total turnover rate (in %)
+Customer
+Customer Net Promoter Score⁹) (in %)
+11111
+8
+20.8
+8
+9
+8
+17.8
+19.2
+22.4
+19.1
+12.1
+Environment
+Net Greenhouse gas emissions (in kilotons)
+Greenhouse gas emissions per employee 5) (in tons)
+325
+380
+455
+500
+545
+11
+3.8
+21.7
+21.3
+7,489
+Personnel expenses – excluding share-based payments
+10,523
+9,444
+9,446
+7,587
+7,162
+Personnel expenses per employee - excluding share-based payments (in €
+thousands)
+121
+117
+126
+111
+109
+Operating profit per employee (in € thousands)
+21.2
+Women working at SAP (in %)
+Women managing managers 6). 7) (in %)
+56
+64
+57
+63
+68
+33
+32
+31
+31
+31
+25.4
+24.5
+23.6
+Women in management” (total, in % of total number of employees)
+4.7
+6.0
+7.3
+43
+1) SAP Group. Amounts for 2013 to 2017 according to IFRS, unless otherwise stated.
+2) As sum of current and non-current liability.
+3) Numbers are based on the proposed dividend and on level of treasury stock at year-end.
+4) Average Annual Return. Assuming all dividends are reinvested.
+5) Full-time equivalents.
+6) Relates to different levels of management position.
+7) Numbers based on at year-end.
+8) Data center energy consumption normalized against € revenue combines a relative measure of required energy to develop and operate solution in internal and
+external data center.
+9) Due to changes in sampling, the 2015 Customer NPS is not fully comparable to the prior year's score.
+10) The BHCI score for 2014 was recalculated from 70% to 72% based on two updated questions in the people survey concerning work-life balance.
+¹¹) Due to reorganizations numbers from 2014 are not fully comparable to other years.
+268
+Additional Information | Five-Year Summary
+Glossary
+100
+A
+analytics - Discovery and communication of meaningful
+patterns in data. It is applied to business data to describe,
+predict, and improve business performance; recommend action;
+and guide decision making across all organizations and
+functions in a company. Analytics helps companies gain new
+insight and understanding of their business performance based
+on data and statistical methods. See "SAP Analytics."
+analytics solutions from SAP - See "SAP Analytics."
+application - Software that enables organizations to address
+specific business needs and to perform certain business
+processes or activities. An application may comprise one
+software product or multiple software products, components, or
+instances.
+application lifecycle management - The processes, tools,
+services, and organizational model used to manage SAP and
+third-party software throughout the solution lifecycle, from
+concept to phase-out. This recommended approach to
+application lifecycle management enables companies to adopt
+innovations from SAP rapidly and gain optimal value from their
+business solutions.
+Ariba See "SAP Ariba."
+Ariba Network - Business commerce network where
+companies of all sizes can connect to their trading partners
+anywhere, at any time from any application or device to buy, sell,
+and manage their cash more efficiently and effectively than ever
+before. Companies around the world use Ariba Network to
+simplify interenterprise commerce and enhance the results they
+deliver. See "business network."
+artificial intelligence (AI) - A standard definition refers to the
+simulation of human intelligence processes by machines and
+computer systems. These processes include learning through
+the acquisition of information and rules for using information;
+reasoning through using the rules to reach approximate or
+definite conclusions; and by self-correction. Al capabilities are
+built into SAP Leonardo Machine Learning and several
+applications powered by SAP Leonardo.
+B
+benchmarking - Process of measuring products, services, and
+practices against those of leading companies, which can also be
+used as a reference point of measurement for evaluating best
+practices.
+best practice - A management concept that involves devising a
+method of process that most effectively produces a desired
+outcome. SAP applications use business best practices to help
+customers automate common business processes through
+software and technology.
+-
+Big Data - The large volume of data created by billions of
+connected devices and people generating a tremendous amount
+of information about their behavior, location, and activity. This
+availability of massive amounts of data requires companies to
+rethink technology architecture and database structures.
+blockchain - A reliable, difficult-to-hack record of transactions
+and of who owns what. Blockchain is based on distributed
+ledger technology, which securely records information across a
+peer-to-peer network. Although it was originally created for
+trading Bitcoin, blockchain's potential reaches far beyond
+cryptocurrency. Blockchain ledgers can include land titles,
+loans, identities, logistics manifests - almost anything of value.
+The technology is still new, but the potential impact it can have
+on business is exciting, and immense.
+Business Beyond Bias - Concept addressed by SAP
+SuccessFactors solutions that helps move business beyond bias
+in the hiring process. Solutions in SAP SuccessFactors HCM
+Suite cover the full range of talent decision-making processes,
+including decisions around whom to hire, how to manage, and
+whom to develop, reward, and promote. Organizations can make
+informed decisions, preventing, detecting, and eliminating bias
+right where it occurs.
+Business Health Culture Index (BHCI) - A score for the general
+cultural conditions in an organization that enable employees to
+Additional Information | Glossary
+269
+Abakus - Marketing attribution company acquired by SAP in
+2017 specializing in measuring a customer's journey across all
+channels. By combining rich marketing performance
+management capabilities from Abakus with real real-time
+software and SAP Hybris Marketing solution capabilities,
+marketers get unique insight into marketing performance to
+optimize campaigns and understand customer interaction.
+ABAP - Proprietary SAP software programming language.
+add-on – A software application that is technically dependent on
+- and can only be installed on top of - another application. See
+"application."
+100
+100
+100
+8.3
+Greenhouse gas emissions per € revenue (in grams)
+13.9
+17.3
+21.9
+28.4
+32.4
+Total energy consumption (in GWh)
+Energy consumed per employee 5) (in kWh)
+Data center energy consumed (in GWh)
+920
+950
+965
+920
+910
+10,600
+11,800
+12,500
+Renewable energy sourced (in %)
+NA
+10
+12
+11
+11
+7,877
+Data center energy per € revenue) (in Wh)
+179
+249
+243
+265
+13,900
+13,400
+173
+10,170
+10,229
+11,643
+1,229
+1,229
+Earnings per share, basic (in €)
+3.36
+3.04
+2.56
+2.75
+2.79
+Earnings per share, basic (non-IFRS, in €)
+74
+8,051
+40
+3.90
+3.77
+3.50
+3.35
+1,229
+Earnings per share, diluted (in €)
+3.04
+2.56
+2.74
+2.78
+Dividend per share³) (in €)
+1.40
+1.25
+1.15
+1.10
+1.00
+Total dividend distributed³)
+1,671
+1,498
+1.378
+3.35
+1,229
+1,229
+Issued shares (in millions)
+Total equity (including non-controlling interests)
+25,540
+26,397
+23,295
+19,534
+16.048
+Total assets
+42,497
+44,277
+41,390
+38,565
+27,091
+Equity ratio (total equity in % of total assets)
+60
+60
+56
+51
+Key SAP Stock Facts
+1,813
+8,636
+676
+1,145
+1,630
+1,315
+Investments in goodwill, intangible assets or property, plant, and equipment
+(including capitalizations due to acquisitions)
+49
+44
+40
+40
+Debt ratio (total liabilities²) in % of total assets)
+59
+41
+10,457
+1,194
+41
+9.00
+17.30
+13.99
+13.90
+21.80
+10.20
+9.20
+6.72
+7.40
+7.90
+Employees and personnel expenses
+Number of employees 5). 7)
+88,543
+84,183
+Return on SAP shares) 5-year investment period (in %)
+Return on SAP shares) 10-year investment period (in %)
+76,986
+66,572
+Number of employees, annual average 5)
+86,999
+80,609
+75,180
+68,343
+65,409
+Number of employees in research and development 5). 7)
+24,872
+23,363
+20,938
+18,908
+17,804
+Personnel expenses
+74,406
+4.20
+-4.80
+25.87
+41
+45
+40
+36
+SAP share price" (in €)
+93.45
+82.81
+73.38
+58.26
+62.31
+SAP share price - peak (in €)
+100.35
+82.81
+74.85
+62.55
+64.80
+SAP share price - low (in €)
+14.70
+12.80
+Return on SAP shares) 1-year investment period (in %)
+76.50
+71.60
+90.18
+Total dividend distributed in % of profit after tax³)
+101.73
+Market capitalization" (in € billions)
+52.20
+50.90
+54.53
+64.90
+82.43
+114.80
+38
+-6.462
+19.6
+NA
+69.9
+70.2
+70.0
+71.6
+70.1
+Total gross margin (in % of total revenue, non-IFRS)
+72.5
+72.9
+73.3
+74.3
+73.1
+Operating profit (IFRS)
+4,877
+5,135
+4,252
+4,331
+4,479
+Non-IFRS adjustments
+1,892
+1,498
+2,095
+1,307
+1.003
+Operating profit (non-IFRS)
+6,769
+6,633
+86.3
+86.6
+87.4
+87.0
+2014
+2013
+Cloud and software margin (in % of corresponding revenue, non-IFRS)
+82.2
+83.7
+83.8
+84.6
+85.2
+Services margin (in % of corresponding revenue, IFRS)
+19.3
+15.1
+18.1
+25.2
+6,348
+16,897
+23.5
+18.2
+22.7
+29.0
+23.5
+Software and support gross margin (IFRS, in %)
+Software and support gross margin (non-IFRS, in %)
+Total gross margin (in % of total revenue, IFRS)
+85.8
+85.9
+84.7
+84.3
+NA
+Services margin (in % of corresponding revenue, non-IFRS)
+5,638
+5.482
+Operating margin (in % of total revenue, IFRS)
+-935
+-1,075
+-1,071
+Profit after tax
+4.056
+3.634
+3,056
+3,280
+3,325
+Effective tax rate (IFRS, in %)
+19.3
+25.3
+23.4
+-1,229
+24.7
+Effective tax rate (non-IFRS, in %)
+22.6
+26.8
+26.1
+26.1
+25.9
+Return on equity (profit after tax in percentage of average equity)
+16
+15
+14
+18
+41
+Order Entry
+24.4
+2015
+-970
+26.1
+20.8
+23.3
+20.5
+24.7
+26.6
+Operating margin (in % of total revenue, non-IFRS)
+28.9
+30.1
+30.5
+32.1
+32.4
+Financial income, net
+185
+Income tax expense
+-38
+-25
+-66
+Profit before tax (PBT)
+5.026
+4,863
+3,991
+4.355
+4,396
+PBT margin (in % of revenues)
+21.4
+22.0
+19.2
+24.8
+-5
+2016
+2017
+€ millions, unless otherwise stated
+-2,291
+-2,182
+238
+-1,944
+-2,044
+Cost of software licenses and support (non-IFRS)
+190
+Non-IFRS adjustments
+-2,234
+Cost of software licenses and support (IFRS)
+-218
+-393
+-789
+97
+88
+-2,076
+232
+-1,427
+Cost of cloud subscriptions and support (non-IFRS)
+233
+-314
+-481
+-1,022
+-1,313
+-1,660
+Cost of cloud subscriptions and support (IFRS)
+Non-IFRS adjustments
+Operating expenses
+Share of predictable revenue (non-IFRS, in %)
+NA
+57
+247
+-1,066
+60
+-2,056
+-3,893
+-2,370
+166
+113
+-2,991
+-7,051
+589
+-2,976
+Total cost of revenue (non-IFRS)
+We are independent from the entity in accordance with the
+requirements of independence and quality assurance set out in
+legal provisions and professional pronouncements and have
+fulfilled our additional professional obligations in accordance
+with these requirements.
+-6,583
+598
+-5,985
+Research and development (IFRS)
+-3,352
+-3,044
+167
+-2.765
+-6,245
+683
+-5.562
+-2,845
+263
+Cost of cloud and software (IFRS)
+258
+-1,818
+-3,010
+-3,089
+-3,158
+Non-IFRS adjustments
+Total cost of revenue (IFRS)
+Cost of services (non-IFRS)
+Non-IFRS adjustments
+Cost of services (IFRS)
+-3,471
+Cost of cloud and software (non-IFRS)
+485
+423
+Non-IFRS adjustments
+-3,495
+283
+-2,008
+-3,313
+516
+-2,797
+-2,932
+New cloud bookings
+61
+NA
+-1,048
+-892
+-866
+Depreciation and amortization (IFRS)
+-1,272
+-1,268
+-1,289
+-1,010
+-951
+Profits and Margins
+Cloud subscriptions and support margin (in % of corresponding revenue, IFRS)
+Cloud subscriptions and support margin (in % of corresponding revenue, non-IFRS)
+Cloud and software margin (in % of corresponding revenue, IFRS)
+56.0
+56.1
+-1,005
+55.3
+54.8
+62.2
+64.4
+65.6
+64.3
+71.2
+80.1
+81.0
+80.8
+82.1
+82.4
+Additional Information | Five-Year Summary
+265
+55.8
+63
+-1,075
+-4,131
+56
+60
+61
+63
+Share of predictable revenue (IFRS, in %)
+346
+-2,211
+-2,426
+122
+-2,304
+-4,983
+467
+-4,515
+360
+-2,011
+-2,660
+128
+-2,533
+-5,031
+487
+-4.543
+-2,331
+-2,282
+Research and development (in % of total revenue, IFRS)
+14.3
+General and administration (IFRS)
+13.8
+13.3
+13.6
+Research and development (in % of total operating expenses, IFRS)
+18.0
+18.0
+17.2
+17.6
+18.5
+Sales and marketing (IFRS)
+-6.924
+-6,265
+-5.782
+-4,593
+13.7
+-2,557
+1,448
+874
+4,860
+4,872
+Software licenses (IFRS)
+757
+1,101
+2,296
+2,995
+3,771
+Cloud subscriptions and support (non-IFRS)
+61
+14
+10
+2
+2
+Non-IFRS adjustments
+696
+1,087
+2,286
+2,993
+3,769
+Cloud subscriptions and support (IFRS)
+2013
+2014
+2015
+2016
+2017
+Revenues
+4,835
+4,399
+NA
+Non-IFRS adjustments
+1
+NA
+8,829
+10.093
+10,571
+10,908
+Total revenue (non-IFRS)
+Non-IFRS adjustments
+Our audit firm applies the national statutory provisions and
+professional pronouncements for quality assurance, in
+particular the Professional Code for German Public Auditors and
+Chartered Accountants (in Germany) and the quality assurance
+standard of the German Institute of Public Auditors (Institut der
+Wirtschaftsprüfer, IDW) regarding quality assurance
+requirements in audit practice (IDW QS 1).
+Total revenue (IFRS)
+Services (IFRS = non-IFRS)
+Cloud and software (non-IFRS)
+Non-IFRS adjustments
+€ millions, unless otherwise stated
+Cloud and software (IFRS)
+Non-IFRS adjustments
+Software support (IFRS)
+NA
+4,399
+4,836
+4.862
+4,872
+Software licenses (non-IFRS)
+NA
+0
+1
+2
+0
+Software support (non-IFRS)
+Five-Year Summary¹)
+Additional Information
+264
+An evaluation of the design and implementation, and tests of
+the operating effectiveness of the systems and methods used
+to collect and process the data, including the aggregation of
+these data into the selected quantitative sustainability
+indicators as presented in the Report
+-
+In addition, we conducted the following procedures to obtain
+reasonable assurance:
+Evaluation of the overall presentation of the selected
+qualitative and quantitative sustainability disclosures in the
+Report.
+-
+Reviewing the consistency in accordance with GRI Standard's
+'Core Option' as declared by SAP with the qualitative and
+quantitative sustainability disclosures presented in the
+Report.
+Evaluation of selected internal and external documentation.
+Analytical evaluation of data and trends of quantitative
+sustainability disclosures, which are submitted by all sites for
+consolidation on group level.
+Inquiries of personnel on corporate level responsible for
+providing the data and information, carrying out internal
+control procedures and consolidating the data and
+information relating to the qualitative and quantitative
+sustainability disclosures.
+data.
+Evaluation of the design and implementation of the systems
+and processes for determining, processing and monitoring of
+disclosures relating to the qualitative and quantitative
+sustainability disclosures, including the consolidation of the
+Reviewing the suitability of the internally developed
+definitions.
+A risk analysis, including a media search, to identify relevant
+information on SAP's sustainability performance in the
+reporting period.
+Inquiries of personnel on corporate level, who are responsible
+for the materiality analysis, in order to gain an understanding
+of the processes for determining material sustainability
+topics and respective reporting boundaries of SAP.
+Auditing internal and external documentation in order to
+determine in detail whether the selected quantitative
+sustainability indicators for the business year 2017
+correspond with the underlying sources, and whether all the
+relevant information contained in such underlying sources
+has been included in the Report.
+-
+-
+-
+-
+-
+-
+assurance:
+Within the scope of our engagement, we performed amongst
+others the following procedures when conducting the limited
+International Auditing and Assurance Standards Board (IAASB).
+These standards require that we comply with our professional
+duties and plan and perform the assurance engagement to
+obtain a reasonable level of assurance to conclude that the
+above mentioned selected quantitative sustainability indicators
+are prepared, in all material respects, in accordance with the
+aforementioned Reporting Criteria; and respectively to obtain
+limited assurance whether any matters have come to our
+attention that cause us to believe that the selected qualitative
+and quantitative sustainability disclosures of the entity have not
+been prepared, in all material respects, in accordance with the
+Reporting Criteria. We do not, however, provide a separate
+conclusion for each disclosure. In a limited assurance
+engagement the evidence gathering procedures are more
+limited than in a reasonable assurance engagement and
+therefore less assurance is obtained than in a reasonable
+assurance engagement. The choice of audit procedures is
+subject to the auditor's own judgement.
+on Assurance Engagements (ISAE) 3410: “Assurance
+Engagements on Greenhouse Gas Statements" of the
+261
+Further Information on Economic, Environmental, and Social Performance
+Assurance Report of the Independent Auditor
+We conducted our work in accordance with the International
+Standard on Assurance Engagements (ISAE) 3000 (Revised):
+"Assurance Engagements other than Audits or Reviews of
+Historical Financial Information" and the International Standard
+Our responsibility is to express a conclusion based on our work
+performed and the evidence obtained on the qualitative and
+quantitative sustainability disclosures marked in the GRI Index
+with the following symbol: V
+-
+0
+Location visits to Walldorf and St. Leon Rot (both Germany)
+and a remote visit to Bangalore (India) to assess the quality
+of information management systems and the reliability of the
+data as reported to corporate level.
+Based on the procedures performed and evidence received to
+obtain reasonable assurance, the selected quantitative
+sustainability indicators Business Health Culture Index,
+Employee Engagement, Employee Retention, Women in
+Management, Customer Net Promoter Score, Greenhouse Gas
+Emissions (Scope 1 and 2 as well as selected Scope 3 emissions
+including business flights and employee commuting),
+Renewable Energy and Total Energy Consumed, published in the
+SAP Integrated Report 2017, including the explanatory notes
+thereto, are, in all material respects, presented in accordance
+with the Reporting Criteria.
+281
+.280
+279
+.269
+265
+Publication Details......
+Financial and Sustainability Publications.
+Financial Calendar and Addresses
+Glossary...
+Five-Year Summary¹).
+Additional Information
+263
+Assurance Report of the Independent Auditor
+Conclusions
+Further Information on Economic, Environmental, and Social Performance
+[German Public Auditor]
+Wirtschaftsprüfer
+Laue
+Wirtschaftsprüfungsgesellschaft
+KPMG AG
+Düsseldorf, February 21, 2018
+(https://www.kpmg.de/bescheinigungen/lib/aab_english.pdf).
+By reading and using the information contained in this report,
+each recipient confirms having taken note of provisions of the
+General Engagement Terms (including the limitation of our
+liability for negligence to EUR 4 million as stipulated in No. 9)
+and accepts the validity of the attached General Engagement
+Terms with respect to us.
+Our assignment for the Executive Board of SAP SE, Walldorf,
+and professional liability is governed by the General Engagement
+Terms for Wirtschaftsprüfer (German Public Auditors) and
+Wirtschaftsprüfungsgesellschaften (German Public Audit Firms)
+(Allgemeine Auftragsbedingungen für Wirtschaftsprüfer und
+Wirtschaftsprüfungsgesellschaften) in the version dated
+January 1, 2017
+This assurance report is issued for purposes of the Executive
+Board of SAP SE, Walldorf, only. We assume no responsibility
+with regard to any third parties.
+Restriction of use/AAB clause
+Further Information on Economic, Environmental, and Social Performance
+Assurance Report of the Independent Auditor
+262
+Based on the procedures performed and evidence received to
+obtain limited assurance, nothing has come to our attention that
+causes us to believe that the selected qualitative and
+quantitative sustainability disclosures on materiality and
+stakeholder engagement, the disclosures on Materiality, About
+This Report, Stakeholder Engagement, Sustainability
+Management and Policies for the material aspects Business
+Conduct, Sustainable Procurement, Public Policy, Human
+Rights, Employees and Social Investment, Energy and Emissions
+(including selected Greenhouse Gas Protocol Scope 3
+Emissions), Waste and Water, GRI Index and UN Global
+Compact Communication on Progress, as well as for the other
+qualitative and quantitative sustainability disclosures in relation
+to these material aspects, published in the SAP Integrated
+Report 2017, are, in all material respects, not prepared in
+accordance with the Reporting Criteria.
+ppa. Hell
+5
+NA
+10,908
+11
+19
+82
+587
+680
+738
+562
+555
+1,120
+785
+724
+290
+327
+5
+182
+621
+126
+70
+0
+0
+0
+309
+-31
+Applications, Technology & Services Segment¹¹)
+Segment revenue
+21,141
+20,130
+19,134
+28
+16,734
+3
+Adjustment for Tomorrow Now and Versata litigation
+436
+NA
+Deferred income - current (IFRS)")
+2,771
+2,383
+2,001
+1,680
+Orders - Number of on-premise software deals (in transactions)
+59,147
+57,291
+57,439
+54,120
+1,408
+55.909
+Segment results
+Share of software orders greater than € 5 million (in % of total software order entry)
+Share of software orders less than € 1 million (in % of total software order entry)
+29
+27
+22
+40
+38
+40
+44
+ས་ བུ་
+Non-IFRS Adjustments
+Revenue adjustments
+Adjustment for acquisition-related charges
+Adjustment for share-based payment expenses
+Adjustment for restructuring
+30
+1,147
+Gross margin (in % of corresponding revenue)
+Segment profit
+16,815
+17,560
+20,793
+22,062
+3,310
+3,245
+3,579
+3,638
+3,911
+23,461
+13,587
+14,334
+17.226
+18.428
+3
+19,552
+19
+11
+5
+3
+13,505
+14,315
+17,214
+18.424
+19,549
+NA
+8,834
+10,094
+10,572
+82
+73
+5
+19
+8,102
+Segment margin (Segment profit in % of Segment revenue)
+Independence and quality
+assurance on the part of the
+auditing firm
+This responsibility of the legal representatives includes the
+selection and application of appropriate methods to prepare the
+Report and the use of assumptions and estimates for individual
+qualitative and quantitative sustainability disclosures which are
+reasonable under the circumstances. Furthermore, this
+responsibility includes designing, implementing and maintaining
+systems and processes relevant for the preparation of the
+Report in a way that is free of - intended or unintended -
+material misstatements.
+and Reporting Standard (Scope 1 and 2) and the Corporate
+Value Chain (Scope 3) Standard of the World Resources
+Institute/World Business Council for Sustainable Development,
+as well as internally developed definitions, as described in the
+'Non-Financial Notes: Social Performance' and the 'Non-
+Financial Notes: Environmental Performance' as Reporting
+Criteria.
+The legal representatives of SAP are responsible for the
+preparation of the Report in accordance with the Reporting
+Criteria. SAP applies the principles and standard disclosures of
+the Sustainability Reporting Standards of the Global Reporting
+Initiative (GRI) in combination with the Corporate Accounting
+Management´s Responsibility
+for the Report
+It was not part of our engagement to review product or service
+related information, references to external information sources,
+expert opinions and future-related statements in the Report.
+The selected qualitative and quantitative sustainability
+disclosures included in the scope of our assurance engagement
+are marked in the GRI Index, published online under
+https://www.sap.com/investors/sap-2017-integrated-report
+with the following symbol: V
+For the selected qualitative and quantitative sustainability
+disclosures on Materiality, About This Report, Stakeholder
+Engagement, Sustainability Management and Policies for the
+material aspects Business Conduct, Sustainable Procurement,
+Public Policy, Human Rights, Employees and Social Investment,
+Energy and Emissions (including selected Greenhouse Gas
+Protocol Scope 3 Emissions), Waste and Water, GRI Index and
+UN Global Compact Communication on Progress, as well as for
+the other qualitative and quantitative sustainability disclosures
+in relation to these material aspects, a limited assurance
+engagement was performed.
+For the selected quantitative sustainability indicators Business
+Health Culture Index, Employee Engagement, Employee
+Retention, Women in Management, Customer Net Promoter
+Score, Greenhouse Gas Emissions (Scope 1 and 2 as well as
+selected Scope 3 emissions including business flights and
+employee commuting), Renewable Energy and Total Energy
+Consumed, including the explanatory notes thereto, a
+reasonable assurance engagement was performed.
+We have performed an independent assurance engagement on
+selected qualitative and quantitative sustainability disclosures
+included in the Integrated Report 2017 (further: the "Report") of
+SAP SE, Walldorf (further "SAP"), published under
+http://www.sapintegratedreport.com.
+To the Executive Board of SAP SE, Walldorf
+11
+Auditor
+Further Information on Economic, Environmental, and Social Performance
+Management's Acknowledgement of the SAP Integrated Report 2017
+260
+Our Executive Board believes that the integrated report is
+presented in accordance with the <IR> Framework as far as
+possible given the aforementioned restrictions. Should the
+aforementioned restrictions ever cease to apply, we will
+continue to strive for further alignment with the <IR>
+Framework in future reports.
+Our Executive Board has reviewed the SAP Integrated Report
+2017, including the consolidated financial statements, the
+combined management report, as well as the additional
+information on economic, environmental, and social
+performance.
+Similar to previous reports, we have applied the Guiding
+Principles of the <IR> Framework, but we also must ensure our
+compliance with legal requirements, such as the provisions
+regarding financial reporting in the German Commercial Code as
+set out in detail in the German Accounting Standard 20 Group
+Management Report, while balancing other reporting standards
+such as the GRI Standards of the Global Sustainability
+Standards Board, with the <IR> Framework.
+The Executive Board is aware of its responsibility to ensure the
+integrity of the SAP Integrated Report 2017. The members of the
+Executive Board have applied their collective mind to the
+preparation and presentation of our integrated report.
+The International Integrated Reporting (<IR>) Framework
+launched by the International Integrated Reporting Council in
+December 2013 has a provision that an integrated report should
+include a statement in which management acknowledges its
+responsibility for the report. Our respective statement for 2017
+is as follows:
+Management's Acknowledgement of the
+SAP Integrated Report 2017
+17.580
+20.805
+22.067
+23,464
+82
+Assurance Report of the Independent
+-1,793
+SAP S/4HANA - Launched in February 2015, SAP's next-
+generation business suite offered exclusively on the SAP HANA
+platform, with on-premise and cloud deployment editions,
+Additional Information | Financial Calendar and Addresses
+product - A high-level non-versioned software offering that
+contains functionality and business logic to address a business
+need. An individual software product comprises software
+product versions.
+product footprint - The environmental impact of products,
+processes, or services by production, usage, and disposal.
+public cloud - Provides consumers access to a provider's
+software applications running on a cloud infrastructure. The
+resources are located on the premises of the cloud provider, not
+of the customer, and are shared by multiple customers
+accessing them through the Internet.
+R
+release - SAP software product that has a version number, is
+shipped at a particular time, and has defined maintenance
+phases.
+renewable energy - The shares and types of electricity obtained
+from renewable sources such as hydro, wind, solar, geothermal,
+and biomass. It is calculated by adding the amount of renewable
+energy specifically sourced, produced on-site by our own solar
+cells and covered by Renewable Energy Certificates (RECs).
+responsible growth - Economic growth that integrates with
+environmental responsibility and social equity.
+road map - Product timeline that has a variety of objectives,
+including communication to customers, users, or other parties
+interested in the timing of future product releases; the features
+planned for those releases; general prioritization of features; and
+in some cases, the requirements of features in enough detail
+that current and prospective customers can give feedback on
+the feature itself and the product's direction. See "SAP road
+maps."
+S
+SAP ActiveEmbedded - Enhanced engagement services for
+optimizing solutions and accelerating adoption of technologies
+without disrupting customer businesses.
+SAP Analytics - Portfolio of solutions that help customers
+achieve the power of collective insight in Big Data by
+empowering them with the right information at the right time to
+make insightful business decisions, anticipate change, and
+uncover new opportunities. SAP Analytics solutions cover the
+areas of business intelligence, enterprise performance
+management, and governance, risk, and compliance. Formerly
+called analytics solutions from SAP.
+SAP Analytics Cloud - A single solution encompassing
+analytics capabilities offered by SAP in the cloud. These
+capabilities, together with additional planning and analysis
+capabilities, have been integrated into this offering. This
+software as a service (SaaS) built natively on SAP Cloud
+Platform that provides all analytics capabilities for all users in
+one product. Customers can subscribe to SAP Analytics Cloud
+as a single solution with specific capabilities that can be licensed
+separately or together. The SAP Digital Boardroom solution is
+based on SAP Analytics Cloud. Formerly called SAP Cloud for
+Analytics.
+Additional Information | Glossary
+273
+SAP Ariba - Unified brand and portfolio of offerings resulting
+from the acquisition of Ariba in October 2012. The SAP Ariba
+portfolio includes cloud solutions for procurement, financials,
+and sourcing and the signature Ariba Network.
+SAP Business All-in-One - Comprehensive and flexible
+business management solution targeted to midsize companies
+with up to 2,500 employees that are looking for a
+comprehensive, integrated industry-specific ERP solution with
+built-in best practices.
+SAP Business ByDesign - A complete, integrated business
+solution delivered in the cloud, ideally suited for growing small to
+midsize companies and subsidiaries. The affordable suite
+connects and runs all business processes, including financials,
+HR, sales, procurement, customer service, and supply chain. It is
+available through a monthly software-as-a-service (SaaS)
+model.
+SAP BusinessObjects Business Intelligence - A category of
+solutions including a platform designed to help optimize
+business performance and provide business insight by
+connecting people with information.
+SAP Business One - An ERP solution designed for small
+businesses with up to 100 employees, providing a single,
+integrated solution for managing the entire business across all
+functions. A cloud version is available as SAP Business One
+Cloud, part of the new Cloud ERP portfolio.
+SAP BW/4HANA - SAP's next-generation data warehouse
+solution built entirely on SAP HANA. It provides a simple set of
+objects that is well suited for modelling an agile and flexible
+layered architecture of a modern data warehouse. SAP
+BW/4HANA manages data from SAP applications or other
+systems, structured or unstructured, and allows accessing all
+models through an open SQL interface. SAP BW/4HANA comes
+with state-of-the-art user interfaces for administrators,
+developers, and end users as well as processes optimized for
+SAP HANA that users leverage huge amounts of data in real time
+for competitive advantage. It is not a legal successor of any SAP
+BW solution.
+SAP Cloud - See "cloud solutions from SAP."
+SAP Cloud Platform - An open platform as a service (PaaS) for
+enterprises, large and small. With unique in-memory data
+management, comprehensive technical platform services, and
+unique business services leveraging machine learning, Big Data
+and IoT, customers and partners can rapidly build new
+innovative solutions and extend existing ones.
+In 2018, SAP introduced a consumption-based commercial
+model (https://cloudplatform.sap.com) for SAP Cloud Platform
+to create one common digital customer experience for finding,
+trying, buying, and consuming cloud-based technical and
+private option - See "private cloud."
+private edition See "private cloud."
+private cloud - Deployment model that implies resources are
+dedicated to one customer and accessed through the Internet.
+The infrastructure is owned, managed and operated by the
+customer, a third-party, or both, and is on the premises of the
+customer, cloud provider, or a third party. SAP indicates private
+cloud deployments using the term “private option" or "private
+edition."
+powered by SAP Leonardo - Applications powered by SAP
+Leonardo have SAP Leonardo technology behind them and
+provide machine learning, loT, Big Data, predictive analytics, or
+blockchain technology capabilities. These may be existing SAP
+applications that now run as part of the digital innovation system
+or brand-new offerings such as SAP Brand Impact, SAP
+Connected Retail, or SAP Financial Assessment.
+Intelligent Enterprise - SAP's concept of an event-driven, real-
+time business powered by intelligent applications and platforms.
+Enterprise data is at the core of a cycle whereby proprietary
+data assets from internal systems of record are combined with
+real-time, external data feeds to train intelligent algorithms. By
+embedding intelligence in core processes, businesses of all sizes
+will benefit from the automation of routine tasks and improved
+decision-making driven by advanced analytics.
+K
+key performance indicator (KPI) - Performance figure for
+which threshold values are defined and against which validation
+is executed.
+L
+Leadership Trust Score - Based on the Net Promoter Score
+(NPS) methodology that results from a question in our annual
+global employee survey that gauges employees' trust in our
+leaders. It measures our collective effort to foster a work
+environment based on trust. We use this score to further
+enhance accountability for our leaders and executive
+management.
+lean
+-
+Set of manufacturing principles that first defines
+customer value, then reorganizes every step required to design,
+order, build, deliver, and maintain this value across all the
+organizations and units. As a result, firms can do more with less,
+respond more quickly to customer needs, create jobs that are
+more rewarding for employees, and reduce their impact on the
+environment.
+line of business (LoB) - Internal organizational area or business
+unit in a company (division) that combines all responsibilities for
+a particular product, group, or set of processes, such as sales,
+purchasing, human resources, finance, marketing, and so on.
+SAP organizes its functional areas currently into 12 LoBs: asset
+management, commerce, finance, human resources,
+manufacturing, marketing, R&D/engineering, sales, service,
+sourcing and procurement, supply chain management, and
+sustainability.
+M
+machine learning - Technology that teaches computers how to
+perform tasks by learning from data – instead of being explicitly
+programmed. It uses sophisticated algorithms to "learn" from
+massive volumes of Big Data.
+business services from SAP and partners. See "SAP Cloud
+Platform Enterprise Agreement" and "cloud credit(s)."
+maintenance - Software support comprising support for legal
+changes and corrections delivered through the SAP Notes tool,
+support packages, problem support, and access to information
+and online service channels - depending on the maintenance
+phase.
+-
+mobile apps Applications for mobile devices available for
+download, demo, and purchase on SAP Store, App Store, and
+other online stores. Mobile apps are categorized as either
+business/product or consumer in focus. At SAP, our mobile
+apps are task-oriented or allow access to existing on-premise
+software.
+on demand - Model of software deployment whereby providers
+license software for use as a service, usually in the cloud, so
+customers can use it when they need it, that is, "on demand." It
+eliminates the need for IT resources to manage infrastructure
+and thereby reduces operational expenses. See "cloud solutions
+from SAP."
+on premise - A deployment model where a software license is
+purchased and deployed on the servers at the premises of the
+customer. The customer manages and controls the software.
+272
+Additional Information | Glossary
+open source - Software based on the concept of software
+developers coming together to build a virtual community and
+solving a common problem by developing working software that
+everyone has a right to change. Successful development
+projects under the open source model include Linux, a free
+operating system supported by SAP.
+P
+People Survey - SAP's annual employee survey that allows
+employees to provide feedback about issues that impact them.
+platform as a service (PaaS) - Cloud infrastructure, operating
+system, programming languages, libraries, services, tools and
+typically a defined level of support for consumers to deploy
+consumer-created or acquired applications. PaaS consumers do
+not manage underlying cloud infrastructure but have control
+over deployed applications. SAP Cloud Platform is the PaaS
+offering from SAP. See "SAP Cloud Platform."
+powered by SAP HANA - An SAP offering powered by SAP
+HANA runs on the SAP HANA platform. More than 100 SAP
+applications are currently "powered by SAP HANA." Partner
+solutions or applications that are powered by SAP HANA are
+certified by SAP to run on the SAP HANA platform. These
+applications take advantage of distinctive capabilities of SAP
+HANA to deliver key benefits, such as simpler administration,
+reduced overhead, and better business intelligence over
+conventional traditional technology platforms.
+managed cloud - Deployment model that implies resources are
+dedicated to one customer and accessed through a VPN. The
+infrastructure is owned, managed, and operated by the cloud
+provider in the cloud provider's data center. SAP HANA
+Enterprise Cloud is SAP's managed cloud service. See "SAP
+HANA Enterprise Cloud."
+SAP Co-Innovation Lab - SAP location featuring a simulated,
+heterogeneous data center that incorporates hardware and
+infrastructure software from various vendors. The lab provides a
+hands-on environment for SAP, customers, and partners to
+innovate, accelerate, and showcase new business solutions and
+technologies collaboratively. Customers and partners can visit
+the lab to evaluate the latest SAP and partner solutions in a
+simulated, real-world infrastructure.
+SAP Concur - Unified brand and portfolio of offerings for travel
+and expense management resulting from the acquisition of
+Concur Technologies in 2014 that helps customers manage
+business resources, processes, and spend through the world's
+largest business network in the cloud for comprehensive travel
+and expense management. SAP Concur solutions provide an
+integrated system for expense, invoice, travel, and spend
+intelligence in the cloud.
+SAP CoPilot - A digital assistant that runs on top of other SAP
+applications to enable productivity tasks such as real-time
+information exchange with co-workers, note-taking, creation of
+reminders, and creation of draft objects that can be completed
+at a later time. SAP CoPilot contextualizes, analyzes, and uses
+informal and unstructured speech to execute actions and
+present users with business objects, options, and other relevant
+data in a simple and conversational way.
+SAP Leonardo microservices and APIs - Microservices and
+application programming interfaces (APIs) are available in the
+SAP Leonardo digital innovation system to help customers and
+partners integrate SAP Leonardo capabilities into their own
+applications. These microservices and APIs run on SAP Cloud
+Platform.
+SAP MaxAttention - SAP's premium support offering, designed
+specifically for customers whose operations demand mission-
+critical customized support. The support option includes a full
+range of services for individual customer needs and covers all
+stages of an SAP solution's lifecycle.
+SAP PartnerEdge - Global, partner-to-partner business
+collaboration network where SAP partners can share expertise,
+development capabilities, solutions, and knowledge to extend
+their market reach. Available at www.sappartneredge.com, the
+site gives partners access to information, product and business
+news, tools, training, and business resources to order products.
+Partners can also manage their relationship with SAP and
+collaborate with other SAP partners through SAP PartnerEdge.
+SAPPHIRE NOW - SAP's signature business technology event
+and the largest SAP customer-driven conference is held
+annually in several locations around the globe. The global event
+in the United States is co-located with the Americas' SAP Users'
+Group (ASUG) annual conference. Attendees discover new
+initiatives, solutions, products, and services, as well as unique
+access to the latest business strategies and industry best
+practices from SAP customers, partners, executives, and
+industry experts to help them drive business results across all
+levels.
+Sapphire Ventures - Name of independent venture firm spun
+off from SAP, providing the agility of a start-up while allowing
+companies to tap into SAP's global enterprise ecosystem of
+customers and partners. The firm partners with outstanding
+entrepreneurs and venture firms worldwide to build industry-
+leading businesses. Formerly called SAP Ventures.
+SAP Predictive Analytics - Software that provides an intuitive
+tool for predictive model design and visualization. It is powered
+by SAP Leonardo, and available standalone or as part of the SAP
+Leonardo Analytics and SAP Leonardo Machine Learning
+capabilities.
+Scope 1 (emissions) - Direct greenhouse gas emissions from
+sources that are owned or controlled by the reporting company,
+for example, fuel burned in corporate cars.
+- see "Sapphire Ventures.'
+SAP Ventures
+SAP Value Assurance - A program that encourages customer
+migration to SAP software by communicating an assurance that
+SAP is committed to the success of the customer's migration.
+Service packages offer dedicated planning, design support, and
+safeguarding services orchestrated by a technical quality
+manager. SAP Value Assurance does not provide any
+implementation or execution services. For SAP-led projects, also
+see "SAP Advanced Deployment."
+SAP University Alliances - Program that introduces students
+to the exciting technologies shaping business today, and
+designed to connect students around the world interested in
+SAP solutions, careers, and research opportunities. Students
+participate in classroom sessions, app development, networking
+opportunities, events, and more. The SAP University Alliances
+community provides connections between university leaders
+and students, SAP customers and partners, and SAP internal
+experts. Also see "SAP Next-Gen."
+create, consume, and maintain machine self-learning apps with
+ease by using algorithms that require no data-science skills.
+SAP Supply Chain Management (SAP SCM) - Application that
+helps companies adapt their supply chain processes to a rapidly
+changing competitive environment. SAP SCM helps transform
+traditional supply chains from linear, sequential processes into
+open, configurable, responsive supply networks in which
+customer-centric, demand-driven companies can monitor and
+respond more smartly and quickly to demand and supply
+dynamics across a globally distributed environment.
+SAP SuccessFactors HCM Suite - Suite of HR solutions for
+talent management, core HR, collaboration, and workforce
+analytics. The cloud-based suite provides solutions to bridge the
+gap between strategy and execution with tools to hire, reward,
+and develop the right people with the right skills to grow a
+business sustainably.
+SAP SuccessFactors Employee Central - This solution is the
+foundation of the SAP SuccessFactors HCM Suite, offering core
+HR software delivered securely as a service from the cloud. It
+offers one global system of record, complete workforce
+overview combining HR and talent data, powerful analytics, and
+social collaboration fine-tuned to meet local needs.
+SAP SuccessFactors - Unified brand and portfolio of offerings
+resulting from the acquisition of SuccessFactors in August 2013.
+All cloud HR assets of SAP and SuccessFactors are consolidated
+under the SAP SuccessFactors brand. SAP SuccessFactors
+solutions help businesses sell more goods, services, and digital
+content through every touch point, channel, and device.
+SAP Standard Support - Support option offering a reliable
+response to technical disruptions and for maintaining system
+health and integrity. This basic support offering features
+updates, problem resolution, knowledge transfer, quality
+management, and more to keep IT landscapes up-to-date and
+stable.
+SAP solutions for small businesses and midsize companies
+Category of solutions that combine business management and
+business intelligence software for small and midsize enterprises
+(SMEs). It currently includes SAP Anywhere, Cloud ERP
+solutions, Edge editions of SAP BusinessObjects BI solutions,
+and other SME services. As with large enterprises, SMEs seek to
+streamline business processes, cut costs, drive growth, and
+increase profitability by receiving the right information at the
+right time across all operations.
+SAP Service and Support - See "SAP Digital Business
+Services."
+SAP S/4HANA Finance - A global financial solution powered by
+SAP HANA offering a complete choice of deployment (cloud, on
+premise, hybrid). It is part of the modular SAP S/4HANA Line-
+of-Business (LoB) Solutions.
+SAP S/4HANA Cloud - SAP's flagship next-generation Cloud
+ERP suite for large enterprises and their subsidiaries. It provides
+functionality that allows companies to run integrated and
+intelligent digital businesses in real time.
+designed with the role-based user experience of SAP Fiori. Cloud
+editions are available for marketing, project services, and the
+enterprise. SAP S/4HANA is our enterprise resource planning
+(ERP) suite for the intelligent enterprise. It enables a business to
+access and analyze data in real time, giving them insights to act
+in the moment, providing predictive suggestions, and
+connecting business functions and the people within them. SAP
+S/4HANA software spans across all business functions
+including finance, human resources, sales, service,
+procurement, manufacturing, asset management, supply chain,
+and R&D.
+Additional Information | Glossary
+276
+SAP Supplier Relationship Management (SAP SRM)
+Procurement application that helps organizations in all
+industries improve their centralized sourcing and contract
+management and interact with suppliers through multiple
+channels. SAP SRM is designed to accelerate and optimize the
+entire end-to-end procure-to-pay process by supporting
+integrated processes and by enforcing contract compliance,
+which can result in realizable savings.
+“innovative cloud company powered by SAP HANA" - Goal of
+SAP strategy to be the most innovative cloud company to help
+customers innovate faster and drive successful business
+outcomes.
+SAP Leonardo Internet of Things - Capability in the SAP
+Leonardo digital innovation system to connect things with
+people and processes, including connected products, assets,
+and fleets to drive Industrial loT, and connected infrastructures,
+markets, and people to enable the "Internet of Everything."
+SAP Leonardo Machine Learning - Capability in the SAP
+innovation system to embed intelligence into enterprise
+applications to solve common business challenges and train and
+deploy deep learning models. Applications powered by SAP
+Leonardo include SAP Resume Matching, SAP Brand Impact,
+SAP Cash Application, and SAP Service Ticket Intelligence,
+among others. In addition, SAP Machine Learning Foundation
+connects developers, partners, and customers to machine
+learning technology through SAP Cloud Platform. You can
+SAP.IO - SAP's startup incubation engine and related program
+that helps innovators inside and outside of SAP build products,
+find customers, and ultimately change industries. The SAP.IO
+team works with the best entrepreneurs, developers, designers,
+and data scientists to upend how business works. (Note:
+extension changed from ".io" to ".iO" to reflect the logo spelling)
+SAP Customer Relationship Management (SAP CRM) -
+Application that provides comprehensive software support to
+help marketing, sales, and service professionals obtain complete
+customer intelligence that they can leverage to manage
+customer relationships and customer-related processes
+effectively. SAP offers a number of CRM applications in on-
+premise and cloud deployment models.
+SAP Data Hub - A cloud solution that automates and
+orchestrates data flows in a complex landscape to help integrate
+data into business processes and decision making and create
+faster insights. The solution enables businesses to manage data
+from numerous sources, SAP or third party, without having to
+centralize data into one location. SAP Data Hub allows data to be
+processed "in flow," for example, while data is being recorded to
+the data store, or preparing it to be used for machine learning. It
+also provides enterprise data governance to see who changed or
+accessed the data. The solution lets companies safely and
+effectively move and share their data to enable agile data
+operations across the enterprise.
+SAP Design Thinking - A methodology for routine innovation
+that brings together the right side of the brain (creative) with the
+left side of the brain (analytical). SAP Design Thinking
+workshops are a key differentiator for deployment of the SAP
+Leonardo digital innovation system.
+274
+Additional Information | Glossary
+SAP Digital Boardroom - A premier solution that
+contextualizes the boardroom, locations, and devices into a real-
+time enterprise experience. Powered by SAP HANA and
+experienced through the SAP S/4HANA suite and the SAP
+Analytics Cloud solution, the solution empowers leaders to
+monitor, simulate, and drive change in a digital economy. See
+"SAP Analytics Cloud."
+SAP Digital Business Services - New name of SAP's services
+and support organization that provides a new approach to
+helping customers accelerate their digital transformation and
+business innovation using SAP Value Assurance service
+packages for SAP S/4HANA. It is also the name of the services
+and support portfolio includes a variety of named services and
+support offerings including SAP MaxAttention, SAP Enterprise
+Support, and others. Formerly called SAP Service and Support.
+SAP Enterprise Support - Services that provide proactive
+support in addition to all features of SAP Standard Support
+services. These proactive support services encompass tools,
+processes, and services that enable continuous improvement,
+holistic application lifecycle management for continuous
+innovation, business and operational process improvements,
+and levers to address the total cost of operation (TCO).
+SAP ERP - Application designed to optimize business and IT
+processes by reducing IT complexity, increasing adaptability,
+and delivering more IT value at a lower cost than traditional ERP
+solutions. It can support mission-critical, end-to-end business
+processes for finance, human capital management, asset
+management, sales, procurement, and other essential corporate
+functions. SAP ERP can also support industry-specific
+processes by providing industry-specific business functions that
+can be activated selectively via the switch framework, keeping
+the application core stable and helping ensure maximum
+performance.
+SAP Executive Board - The official governing body of SAP,
+overseeing and deciding on the activities of the company.
+Subject to the requirements of stock corporation law, the SAP
+Executive Board is committed to the interests of SAP and bound
+by company policy. It provides the SAP Supervisory Board with
+regular, prompt, and comprehensive reports about all essential
+issues of business, corporate strategy, and potential risks.
+Membership in the SAP Executive Board is part of the official
+titles for these board members.
+SAP Fieldglass - Unified brand and portfolio of offerings for
+contingent workforce resulting from the acquisition of Fieldglass
+in May 2014 that help companies manage their entire workforce
+including contract workers and permanent staff. The signature
+SAP Fieldglass Vendor Management System includes SAP
+Fieldglass Contingent Workforce Management, SAP Fieldglass
+Services Procurement, and SAP Fieldglass Worker Profile
+SAP Leonardo - Launched in 2017, this digital innovation
+system includes the following innovative technologies and
+capabilities: analytics, blockchain, Big Data, data intelligence,
+loT, machine learning, as well as accelerator packages to ease
+implementation and deployment, software applications powered
+by SAP Leonardo, SAP Cloud Platform, and SAP Design Thinking
+workshops held in SAP Leonardo Center locations across the
+globe.
+Management solutions as well as the SAP Fieldglass Approvals
+mobile app.
+SAP Fiori user experience (UX) - The user experience for SAP
+software. Based on modern design principles, it represents a
+consumer-like, consistent experience across devices, including
+tablets and smartphones.
+SAP HANA - SAP's flagship in-memory database. It enables
+businesses to process and analyze live data and make business
+decisions based on the most up-to-date information, a
+requirement of today's digital economy. The innovative
+architecture in SAP HANA allows both transactional processing
+for data capture and retrieval, and analytical processing for
+business intelligence and reporting. It reduces time-consuming
+database and data management tasks and underpins intelligent
+applications that use advanced analytic processing. It includes
+features such as text analysis, multitenant database containers
+to support multiple isolated databases in a single SAP HANA
+system, as well as external machine learning libraries.
+SAP HANA Enterprise Cloud - This service enables customers
+to access solutions in the cloud. It contains managed cloud
+applications, in-memory infrastructure, managed services, and
+through an additional license, SAP Cloud Platform to build
+custom applications in the cloud. On-premise applications from
+SAP can be delivered to customers through SAP HANA
+Enterprise Cloud.
+SAP HANA One - Deployment of SAP HANA certified for
+productive use on the Amazon Web Services Cloud. SAP HANA
+One can be deployed for production use with small data sets, in
+minutes, opening a door to starter projects from customers,
+ISVs, and startups.
+SAP Hybris - Unified brand and portfolio of offerings resulting
+from the acquisition of hybris AG in August 2013 that combines
+all cloud commerce solutions. SAP Hybris solutions help
+businesses sell more goods, services, and digital content
+through every touch point, channel, and device.
+SAP Hybris Cloud for Customer - A cloud-based offering of
+CRM applications and tools developed for sales, service, and
+marketing teams that provides an overview of end-to-end
+business, as well as deep customer insight and personalized
+engagement, so that they can deliver a relevant experience at
+every step of the customer's journey. It also offers designed-in
+Additional Information | Glossary
+275
+social collaboration to help transform social media
+conversations into business insight. SAP Hybris Cloud for
+Customer refers to a grouping of related CRM solutions and
+tools, which currently includes SAP Hybris Cloud for Sales, SAP
+Hybris Cloud for Service, and SAP Hybris Cloud for Social
+Engagement. The individual solutions are priced separately. An
+Edge edition is available for small and midsize enterprises.
+SAP Hybris Cloud for Sales/SAP Hybris Cloud for Service -
+Cloud-based solutions targeted at sales and service
+organizations with designed-in social collaboration to help
+transform social media conversations into business insight.
+Formerly called SAP Cloud for Sales/SAP Cloud for Service.
+SAP Hybris Marketing Cloud - A cloud solution offering
+customers a cloud marketing platform to carry out all core
+marketing processes in the cloud. Customers can purchase the
+entire solution or individual options for specific marketing
+functionality. In December 2016, as of the 1702 release, the SAP
+S/4HANA Marketing Cloud offering was renamed as SAP Hybris
+Marketing Cloud. The solution is the public cloud deployment of
+SAP Hybris Marketing which covers on-premise and private
+cloud deployment options. Replaces SAP S/4HANA Marketing
+Cloud.
+SAP Fiori - First developed as a set of extensible HTML5 apps
+specific to key user roles, offering a seamless user experience
+across devices using responsive design principles. SAP Fiori
+apps target all employees of existing SAP customers,
+addressing the most common business functions, such as
+workflow approvals, information lookups, and self-service tasks.
+A free launchpad allows users to access their SAP Fiori apps
+from one single entry point.
+in-memory database - Database that keeps all active records in
+main memory rather than on disk. Accessing in-memory records
+is considerably faster than retrieving them from the disk,
+significantly increasing performance. SAP HANA is SAP's
+groundbreaking database that allows businesses to take
+advantage of in-memory computing. See "SAP HANA."
+in-memory computing - A major advance in information
+technology that creates a dramatic change in computing,
+analytics, and data storage. Combining advances in multicore
+processing with more affordable servers, in-memory computing
+allows information to be stored in the main memory rather than
+in relational databases to greatly accelerate processing times. It
+disrupts the traditional IT stack comprised of hardware,
+middleware, and software, where disk-based relational
+databases can become bottlenecks.
+network, other computing resources and typically a defined level
+of support for consumers to deploy software (such as operating
+systems and applications). IaaS consumers do not manage
+underlying cloud infrastructure but may control networking
+components (such as host firewalls).
+Financial Calendar
+Financial Calendar and Addresses
+Additional Information | Glossary
+278
+works council - As dictated by the German Works Council
+Constitution Act, a works council is a legal body for representing
+employees' interests to the employer and codetermining the
+works in private companies. On June 21, 2006, the SAP AG
+employees working in Germany elected its first works council. A
+European works council was created in the spring of 2012. The
+SAP AG works council evolved to become the SAP SE works
+council in 2014 to reflect the legal entity of SAP SE.
+women in management - Phrase used to refer to the
+percentage of women in management positions (managing
+teams, managing managers, executive boards) as compared to
+the total number of managers, expressed by the number of
+individuals and not full-time equivalents (FTES).
+W
+user experience (UX) - In general terms, UX represents the
+quality of a user's interaction with and perceptions of a system.
+UX at SAP is a characteristic of solutions or products that use
+SAP Fiori UX technology and follow SAP Fiori UX guidelines to
+offer a next-generation experience to our users. See "SAP Fiori
+user experience."
+and economically sustainable future by tackling adverse
+challenges to humanity like poverty, hunger, and inequality.
+Nations which are aimed to ensure an environmentally, socially,
+UN Sustainable Development Goals (SDGs or UN Global
+Goals) - A set of 17 global development goals by the United
+2018
+UN Protect, Respect and Remedy - A framework provided by
+the United Nations which offers states and companies guidance
+regarding the fulfillment of their duty to protect, respect and
+remedy human rights.
+U
+total energy consumed - The sum of all energy consumed
+through SAP's own operations, including energy from renewable
+sources and energy consumed by external data centers
+delivering our cloud offerings.
+technology platform - The technical foundation for a business-
+driven software architecture that increases the adaptability,
+flexibility, openness, and cost-efficiency of IT operations and
+enables organizations to become more agile in responding to
+change.
+T
+sustainability - A method to create social, environmental, and
+economic value for long-term business success and responsible
+global development.
+SuccessFactors - See "SAP SuccessFactors."
+standard-related custom development project (SCDP) -
+Customer-specific development with a contractually binding
+commitment for at least a partial retrofit.
+solution - Business software that enables a customer to meet a
+challenge or take advantage of an opportunity and are built or
+assembled by flexibly combining software products and
+technology. SAP solutions may include support for best
+business practices and be aided by consulting and ongoing
+support. They may also be enhanced or extended by
+applications and services from partners.
+software as a service (SaaS) - Software that is provided
+literally "as a service." Software applications are delivered and
+managed remotely over a secure Internet connection and a
+standard Web browser. Access is charged on a subscription
+basis usually on a dedicated time basis and with expandable
+feature access options. Typically a defined level of support is
+included. See "cloud computing."
+service - A service provided to a customer by SAP (or SAP
+partners). Examples include consulting or data management
+services.
+277
+United Nations Global Compact (UN Global Compact) - A
+policy initiative for businesses that are committed to aligning
+their operations and strategies with ten universally accepted
+principles in the areas of human rights, labor standards,
+environment, and anti-corruption.
+Additional Information | Glossary
+April 24
+Annual General Meeting of Shareholders,
+Web site www.sap.com/press
+E-mail press@sap.com
+Tel. +49 6227 74 63 15
+Press
+Web site www.sap.com/investor
+E-mail investor@sap.com
+Fax +49 6227 74 08 05
+Tel. +49 6227 76 73 36
+Investor Relations
+For more information about the matters discussed in the report,
+contact:
+The addresses of all our international subsidiaries and sales
+partners are available on our public Web site at
+https://www.sap.com/directory/main.html.
+Results for the first quarter of 2018
+May 17
+Web site www.sap.com
+Dietmar-Hopp-Allee 16
+69190 Walldorf
+Germany
+SAP SE
+Group Headquarters
+Addresses
+Results for the third quarter of 2018
+October 18
+Results for the second quarter of 2018
+July 19
+Dividend payment
+May 22
+Mannheim, Germany
+Tel. +49 6227 74 74 74
+Fax +49 6227 75 75 75
+E-mail info@sap.com
+279
+Scope 3 (emissions) - Indirect emissions that are a
+consequence of the activities of the reporting company, but
+occur from sources owned or controlled by another company,
+such as business flights.
+SAP road maps -
+Available for industries, lines of business, and
+technology, SAP road maps highlight the SAP solutions available
+today, planned innovation, and the SAP vision for the future. See
+"road map."
+270
+Additional Information | Glossary
+digital core - An integrated system that enables customers to
+predict, simulate, plan, and even anticipate future business
+outcomes in a digital economy. SAP offers the SAP S/4HANA
+suite as a digital core, providing the framework that allows
+customers to run an entire enterprise in the cloud - such as
+finance, procurement, sales, inventory management, project
+system, and product lifecycle management. In this way,
+companies can achieve the real-time visibility they need into all
+mission-critical business processes and processes around their
+customers, suppliers, workforce, Big Data, and the Internet of
+Things.
+digital transformation - Concept that refers to the changes
+associated with the application of digital technology in all
+aspects of society. Digital technologies empower customers and
+consumers in a way they never could before, transforming their
+relationship with brands and products. Businesses need to meet
+these new challenges or will miss the potential business success
+to be realized in the digital economy.
+E
+- Construct encompassing SAP and its customers
+ecosystem
+and partners that extends the value SAP provides to its
+customers. By bringing together community-based insight,
+innovative partner solutions, and industry-leading collaboration
+and co-innovation, it enables customers to extract the greatest
+possible value from their SAP investments.
+Employee Engagement Index - A score for the level of
+employee commitment, pride, and loyalty, as well as the feeling
+of employees of being advocates for their company. The index is
+calculated based on the results of regular employee surveys.
+employee retention - The ratio of the average headcount
+(expressed in full-time equivalents/FTEs) minus employee-
+initiated terminations (turnover) divided by the average
+headcount, taking into account the past 12 months.
+end-to-end process - Set of activities supporting defined
+management, core, or support processes. Customers can use
+these activities as a reference to map their own processes.
+end-to-end solution - Software solution that drives strategic
+business outcomes and directly contribute to a business priority
+in an industry, line of business, or technology area. These
+solutions are structured into solution capabilities that comprise
+a number of individual software products, instances, and/or
+license materials. End-to-end solutions provide a business scope
+with a comprehensive value proposition. See “business priority."
+enterprise resource planning - See "SAP ERP."
+e-waste (electronic waste) – Any discarded electric devices
+used in our offices and data centers, such as computers,
+computer monitors, or mobile devices.
+F
+design thinking - See "SAP Design Thinking."
+Fieldglass - See "SAP Fieldglass."
+Gigya Company acquired by SAP in 2017 that offers customer
+identity technology and access management solutions designed
+to meet privacy, compliance, and security best practices. Cloud
+solutions include SAP Hybris Identity, which enables businesses
+to securely identify, register, and engage customers across
+channels and devices and renames the acquired offering Gigya
+Customer Identity Management Platform; and SAP Hybris
+Consent, which provides customer consent management
+capabilities and is a rename of the acquired offering Gigya
+Enterprise Preference Manager.
+Global Goals 100 - This is the overarching program name for
+the SAP Next-Gen initiatives from SAP University Alliances to
+address the 17 goals of the Global Goals for Sustainable
+Development initiative. The SAP Next-Gen program fosters
+next-generation leaders to generate new SAP innovations that
+can help customers accelerate their digitization and own
+business innovations.
+greenhouse gas (GHG) footprint - The sum of all greenhouse
+gas emissions measured and reported, including renewable
+energy and third-party reductions, for example, offsets.
+H
+Hadoop - Part of the Apache project sponsored by the Apache
+Software Foundation, this open source, Java-based
+programming framework supports the processing of large data
+sets in a distributed computing environment. As open source
+technology, Hadoop is an efficient distributed file system that
+enables the analysis and processing of very large volumes of
+data from a great number of varied, structured, and
+unstructured sources. SAP Distribution for Hadoop software
+provides redistribution of Apache Hadoop developed by
+Hortonworks.
+Hasso Plattner Founders' Award - Introduced in 2014, an
+employee award that signifies the highest employee recognition
+at SAP, awarded annually by the CEO to an individual or a team.
+How We Run - SAP's set of corporate values that sets
+behaviors that describe what makes SAP unique.
+hybrid cloud - Deployment model that uses resources
+comprised of a mix of two or more distinct cloud deployment
+models that are integrated by standardized or proprietary
+technology enabling data and application portability. Also called
+"hybrid cloud deployment model."
+hybris/Hybris - See "SAP Hybris. "
+271
+I
+infrastructure as a service (IaaS) - Processing, storage,
+G
+Scope 2 (emissions) - Indirect greenhouse gas emissions from
+consumption of purchased electricity, heat, or steam.
+data warehouse - An electronic collection of information
+organized for easy access by computer programs. See "SAP
+Business Warehouse."
+data center - A physical facility used to house computer
+systems and associated components.
+stay healthy and balanced. The index is calculated based on the
+results of regular employee surveys.
+business intelligence (BI) - Software that enables users to
+analyze an organization's raw data and make fact-based
+decisions. Bl-related processes include data mining, analytical
+processing, querying, and reporting. Business intelligence
+offerings from SAP include SAP BusinessObjects BI solutions,
+SAP Crystal Reports, as well as the SAP BusinessObjects BI
+platform.
+business network - An online service that connects businesses
+and their systems to those of their trading partners and enables
+new processes and information and insight sharing only possible
+in a digital environment. See “Ariba Network."
+business priority - An important priority for a line of business,
+industry, or technology area for which SAP addresses with end-
+to-end solutions. See "end-to-end solution."
+business process - Set of logically related activities performed
+within an organization to complete a defined business task. SAP
+provides software and technology that enable and support
+business processes. Order processing and payroll are typical
+examples.
+business user - Employees who spend significant time finding
+and sharing information, collaborating with others, coordinating
+projects, devising strategy or operational tactics, and coming up
+with new ideas based on information gathered from multiple
+sources. Also called "knowledge or information workers" or
+"business consumers."
+C
+carbon credit - A tradable certificate that allows the holder to
+emit one ton of CO2 or the respective equivalent of any other
+greenhouse gas.
+carbon emission offset- A unit of carbon dioxide-equivalent
+(CO2 equivalent) that is reduced, avoided, or sequestered to
+compensate for emissions occurring elsewhere.
+carbon neutral - A goal or state of emitting net zero greenhouse
+gases for certain activities. This includes reducing emissions,
+but also using renewable electricity certificates or carbon
+credits.
+cloud computing - Generic term for flexible, IT-related services
+available through, or hosted on, the Internet for consumers and
+business, including storage, computing power, software
+development environments, and applications, combined with
+service delivery. Accessed as needed "in the cloud," these
+services eliminate the need for in-house IT resources. See
+"cloud service model."
+data center energy - The amount of energy consumed in SAP's
+own and external data centers. An external data center is a local
+computing center with server units running SAP software that is
+operated by an external partner.
+cloud deployment models – The different infrastructure,
+software lifecycle management, and licensing models used for
+Cloud ERP - A unified portfolio encompassing all of SAP's
+cloud-based ERP solutions including SAP S/4HANA Cloud as
+the flagship ERP solution for midsize companies and large
+enterprises; SAP Business By Design for growing small to
+midsize enterprises; and SAP Business One for small
+businesses.
+cloud service model - "As-a-service" offerings where cloud
+services are offered as infrastructure as a service (laaS),
+platform as a service (PaaS), or software as a service (SaaS).
+cloud solutions from SAP - Category used to communicate all
+of SAP offerings and efforts related to the cloud, including
+platform, managed services, solutions, technology, and
+infrastructure.
+-
+component – Modular piece of software offering functions
+accessible via interfaces.
+Concur Technologies - See “SAP Concur."
+connectivity - A framework which describes the
+interrelatedness of SAP's social, environmental, and economic
+performance. Based on statistical analysis, it allows us to
+quantify the impact of non-financial measures on the operating
+profit offering a holistic understanding of SAP's value creation.
+corporate social responsibility - SAP's corporate social
+responsibility (CSR) program is about how the company creates
+social impact for people, both inside and outside SAP, to help
+make society more sustainable and the world run better.
+Customer Net Promoter Score (NPS) - Describes the
+willingness of customers to recommend or promote an
+organization or company to others. It is defined as the
+percentage of customers that are likely to recommend an
+organization or company to friends or colleagues (promoters)
+minus the percentage of customers that are unlikely to do so.
+D
+deploying software, that is, where the software is running and
+how much control and flexibility a customer has.
+Additional Information | Glossary
+Financial and Sustainability Publications
+© 2018 SAP SE or an SAP affiliate company. All rights reserved.
+No part of this publication may be reproduced or transmitted in
+any form or for any purpose without the express permission of
+SAP SE or an SAP affiliate company.
+SAP Partner Code of Conduct
+280
+Additional Information | Financial and Sustainability Publications
+Publication Details
+Publisher
+SAP SE
+Investor Relations
+SAP Integrated Report project team with the support of
+SAP software
+Photography Executive Board
+Andreas Pohlmann, Munich, Germany
+Printing
+ABC Druck, Heidelberg, Germany
+Copyright
+SAP SE
+Dietmar-Hopp-Allee 16
+69190 Walldorf
+Germany
+SAP and other SAP products and services mentioned herein as
+well as their respective logos are trademarks or registered
+trademarks of SAP SE (or an SAP affiliate company) in Germany
+and other countries. All other product and service names
+mentioned are the trademarks of their respective companies.
+Please see www.sap.com/about/legal/copyright.html for
+additional trademark information and notices.
+Additional Information | Publication Details
+281
+Group Headquarters
+SAP SE
+Dietmar-Hopp-Allee 16
+69190 Walldorf
+Germany
+www.sap.com
+www.sap.com/investor
+SAP Supplier Code of Conduct
+SAP Environmental Policy
+Concept and Realization
+SAP Human Rights Commitment
+We present our financial, social, and environmental performance
+in the SAP Integrated Report 2017, which is available at
+http://www.sapintegratedreport.com. This Excerpt from the
+Integrated Report 2017 comprises all of the information required
+by accounting and disclosure standards applicable to us.
+The following publications are available in English at
+www.sap.com/investor, or in German at www.sap.de/investor.
+-
+-
+-
+Annual Report on Form 20-F (IFRS, in English)
+SAP Global Health and Safety Management Policy
+SAP SE Statutory Financial Statements and Review of
+Operations (HGB, in German)
+Interim Reports (in English and German)
+XBRL versions of the annual and interim reports
+SAP INVESTOR, SAP's quarterly shareholder magazine
+(www.sap-investor.com, in English and German)
+Complete information on the governance of SAP is available at
+www.sap.com/corpgovernance. Materials include:
+-
+Information about the management of the company,
+SAP Integrated Report in PDF format
+Details of the directors' dealings in SAP shares
+including the members of the Executive and Supervisory
+Board and their curriculum vitae
+-
+-
+www.sap.com/corporate-sustainability.
+Profile of Skills and Expertise for the Supervisory Board
+Rules of Procedure for the Supervisory Board
+Corporate Governance Report
+Additional SAP policies are made public at
+Code of Business Conduct for Employees
+Declaration of Implementation pursuant to the German Stock
+Corporation Act, Section 161
+· Agreement on the Involvement of Employees in SAP SE
+German Code of Corporate Governance
+Shareholder meeting documents and ballot results
+Articles of Incorporation
+· Corporate Governance Statement pursuant to the German
+Commercial Code, Section 289f
+We also discussed corporate governance matters when we met
+in October, adopting both a Profile of Skills and Expertise for the
+Supervisory Board and a Diversity Policy for the Executive
+Board and Supervisory Board. The Profile of Skills and Expertise
+for the Supervisory Board is published on SAP's Web site. The
+Code also recommends that the Supervisory Board assess the
+independence of its members at regular intervals. We did this at
+our October meeting, using benchmarks we had set at our own
+discretion. We ascertained that the Supervisory Board has a
+sufficient number of independent members, set targets for the
+minimum number of independent Supervisory Board members
+as a whole and for the minimum number of independent
+shareholder representatives. In accordance with the Code
+provisions, we also identified those shareholder representatives
+whom the Supervisory Board deems independent; these
+representatives are named in the Corporate Governance
+Report.
+Meeting in April
+To Our Stakeholders | Report by the Supervisory Board
+Other matters addressed at our meetings in 2017 included:
+Meeting in February (Meeting to
+Discuss the Financial Statements)
+At our ordinary meeting on February 22, 2017, we discussed
+with the Executive Board the aforementioned compensation
+topics as well as the results of the 2016 employee survey. In
+addition, the Supervisory Board turned its attention to the SAP
+SE financial statements and the consolidated financial
+statements for 2016, the audits conducted by KPMG AG
+Wirtschaftsprüfungsgesellschaft (KPMG), and the Executive
+Board's proposed resolution on the appropriation of retained
+earnings for 2016. The Audit Committee comprehensively
+prepared all topics in connection with the financial statements
+and the consolidated financial statements for 2016, and in
+particular reported on the form and scope of its examination of
+the documents relating to the financial statements, which it
+recommended we approve. The auditor attended the meeting
+and reported in detail on the audit and its findings for each of
+the focus areas that had been agreed between the auditor and
+the Audit Committee. The auditor also related the discussions
+on those matters at the preceding meetings of the Audit
+Committee. The auditor then discussed the results of the audit
+with the Supervisory Board and answered our questions. The
+Supervisory Board approved the audit. There were no findings
+from our own examination, so we gave our consent to the SAP
+SE and consolidated financial statements for 2016. We checked
+and endorsed the Executive Board's proposal to appropriate
+retained earnings in accordance with the Audit Committee's
+recommendation. We then discussed in detail the annual budget
+for 2017 as presented to us by the Executive Board, and
+approved same. In addition, we adopted the agenda for the May
+2017 Annual General Meeting of Shareholders as well as our
+recommendation to the Annual General Meeting of
+Shareholders concerning the auditor to elect for 2017, which
+followed the recommendation of the Audit Committee to us. We
+were also informed about SAP's donation activities. The
+Executive Board then gave us an overview of the business
+successes achieved in 2016 and presented information on
+SAP's revenue growth in the individual business areas, regions,
+and product fields as well as on SAP's competitive position.
+A Morgan Stanley analyst joined our plenary session on April 13,
+2017, to share an outside view of SAP from the investors' and
+analysts' standpoint. His presentation provided us with very
+interesting and valuable insight. We then adopted the
+resolutions to expand and restructure the Executive Board, as
+described earlier in this report. In addition, the Executive Board
+gave us an overview of how SAP's interests are represented
+politically in Germany and abroad, and of the products SAP
+offers for the public sector. It also explained how the Company
+aims to help governments and states worldwide in their digital
+transformation.
+acquisition, particularly the due diligence reports. The
+At our meeting on July 13, 2017, we discussed the directors' and
+officers' (D&O) group liability insurance policies that we take out
+from year to year. We regularly reviewed and updated the list of
+transactions for which the Executive Board must obtain the
+Supervisory Board's consent. The Executive Board then gave us
+an account of business and presented the preliminary second-
+quarter results, reporting at our request particularly on revenue
+development in the various regions, and on SAP's competitive
+position in its core business and in the cloud. The COO updated
+us on the successes of our Run Simple initiative and explained
+the next steps the Company had lined up to simplify SAP
+solutions and internal processes even further.
+Extraordinary Meeting in September
+At our September meeting, we focused on the acquisition of
+Gigya, Inc., a U.S.-based company that offers a leading solution
+for customer data identification and profiling in the customer
+identity and access management (CIAM) space. The Executive
+Board informed us in detail about the benefits of the proposed
+acquisition. The proposed acquisition is a strategically
+expedient addition to SAP's existing portfolio of customer
+relationship management (CRM) solutions. In addition, the
+Executive Board explained in detail its justification of the
+negotiated purchase price, and in this context also presented
+the fairness opinion (that is, an independent expert opinion)
+from Ernst & Young GmbH which confirmed the purchase price
+was appropriate. It also apprised us of the opportunities the
+acquisition brought and the risks it entailed according to due
+diligence checks. Next, the Finance and Investment Committee
+reported that it had met before our meeting to examine and
+discuss in depth the issues and documents relating to the
+To Our Stakeholders | Report by the Supervisory Board
+25
+Committee recommended that we consent to the acquisition of
+Gigya. After discussing the matter thoroughly, the Supervisory
+Board authorized the Executive Board to conclude the
+acquisition.
+24
+Meeting in October
+Meeting in July
+24
+Prof. Dr. Wilhelm Haarmann
+In addition, the correspondence vote in December 2017
+enabled us to take steps to cease our deviation from the
+Code regarding a severance payment cap in Executive Board
+appointment contracts, which steps we implemented
+accordingly at the beginning of 2018. We further decided to
+address in 2018 the prerequisites for an individual deductible
+for Supervisory Board members in their directors' and
+officers' (D&O) liability insurance, in order to settle the
+remaining deviation from the Code in our current declaration.
+At our meeting in October, the Executive Board reported on
+business performance and on developments in the cloud
+platform segment and in SAP S/4HANA software. It also
+informed us about its acquisitions strategy and improvements
+to its processes for integrating acquired companies. We
+extended the list of transactions requiring our consent and, in
+agreement with the Executive Board, adopted, for regular
+publication in October 2017, the annual declaration of
+implementation of the Code. Next, we turned our attention to
+two current compliance matters: members of SAP's compliance
+department updated us on the internal investigations regarding
+potential violations of the U.S. Foreign Corrupt Practices Act
+(FCPA) in South Africa, as well as on the ongoing internal
+investigation in the Gulf region regarding potential export law
+violations. They also reported on the measures SAP had
+launched in respect of these matters and its communications
+with the relevant authorities.
+5
+91%
+The Supervisory Board and its committees also convened
+wholly or partly without the Executive Board as necessary to
+deliberate on items that pertained to the Executive Board or
+required internal discussion among Supervisory Board
+members alone. On this basis, the Executive Board withdrew
+temporarily from three of the plenary sessions. In addition, the
+shareholder representatives and the employee representatives
+independently discussed individual agenda items as required
+prior to the adoption of resolutions in plenary sessions. The
+Supervisory Board addressed the following key topics during
+the year:
+Expansion of the Executive Board,
+Restructuring of Executive Board
+Responsibilities, and Compensation
+Topics
+The Supervisory Board dealt at several meetings with personnel
+changes on the Executive Board. In the spring of 2017, Steve
+Singh, the Executive Board member responsible for the SAP
+Business Networks & Applications portfolio, decided to leave
+SAP and become an independent entrepreneur again. We took
+his departure as an occasion to restructure the responsibilities
+To Our Stakeholders | Report by the Supervisory Board
+23
+complexity. We also extended the Executive Board appointment
+contract of Michael Kleinemeier, the Board member responsible
+for SAP Digital Business Services, SAP's global services and
+support organization, to December 31, 2019.
+At our ordinary Supervisory Board meeting on February 22,
+2017, we discussed Executive Board compensation. Exercising
+our discretionary powers under the terms of the short-term
+incentive (STI) 2016, we first determined performance against
+the defined target for the STI. We then decided on the total
+target achievement and the payouts for the individual Executive
+Board members under the STI 2016. When we met in February,
+we also deliberated on Executive Board compensation for 2017.
+The Supervisory Board identified the key performance
+indicators (KPIs), set the target numbers for each KPI in the STI
+2017 and their relative weightings, and defined the criteria for
+assessing the discretionary KPI. Finally, we resolved the
+individual allocation amounts for the 2017 tranche of the Long-
+Term Incentive (LTI) Plan 2016, and the basis of the allocation of
+the 2018 tranche. The Supervisory Board, as required,
+evaluated the appropriateness of the Executive Board
+member's compensation, and in each case found it to be
+appropriate in terms of amount, structure, objective criteria,
+and for each member's responsibilities and tasks. We had
+regard to an appropriateness certificate from Ernst & Young
+issued in December 2016. For more information about the LTI
+Plan 2016 and the other elements of the compensation package
+for Executive Board members, see the Compensation Report.
+The Supervisory Board further resolved to take more account of
+the Company's strategic cloud business when determining
+Executive Board compensation. In our July 13, 2017, meeting,
+we therefore added “sustainability of cloud revenues" as a
+discretionary KPI. Finally, we adopted by way of
+correspondence vote in December 2017 two changes to the
+Executive Board appointment contracts. In compliance with the
+recommendations in the German Corporate Governance Code
+(the "Code"), we incorporated into the contracts a Code-
+compliant severance cap limiting severance to two times annual
+compensation, as well as a clawback provision for payouts
+under the STI and LTI. Under such provision, SAP can claim
+restitution for payments made from STI or LTI if it subsequently
+emerges that the payment was not justified in whole or in part
+because targets were not achieved at all or not achieved in the
+scope assumed when calculating the payment amount. In such
+case, the Executive Board member is obliged to repay to SAP
+the amount by which the payment actually made exceeds the
+payment amount due on the basis of the targets actually
+achieved.
+HR and compensation topics were extensively prepared by the
+General and Compensation Committee and subsequently
+discussed and adopted by the full Supervisory Board.
+Transparency and Corporate
+Governance Strategy
+We analyzed in depth the reasons behind the slim shareholder
+approval rates for the Executive Board compensation system
+("Say on Pay") at the 2016 Annual General Meeting of
+Shareholders and for the acts of the Supervisory Board at the
+2017 Annual General Meeting of Shareholders. In addition, SAP
+had scored in our view poorly on a corporate governance
+ranking of DAX-listed companies that was published at the end
+of January 2017. The Supervisory Board took the criticism
+expressed in this manner very seriously and implemented a
+number of measures in response.
+-
+For example, we published on SAP's Web site an overview of
+the individual Supervisory Board members' attendance at
+meetings, in order to offer shareholders even more
+transparency in this regard. This overview is also available
+henceforth in our report.
+In addition, the appointment of Aicha Evans as a new
+Supervisory Board member increased the number of women
+on our Supervisory Board, thus fulfilling the statutory quota
+for women.
+At its July meeting, the Supervisory Board agreed with a
+proposal by the General and Compensation Committee that
+the Supervisory Board chairperson, in accordance with a new
+recommendation in the Code, meet with investors to discuss
+Supervisory Board-related matters. These meetings took
+place in Walldorf, New York, and by telephone conference in
+the run-up to our October meeting, and gave us valuable
+insight into our investors' views on the Company's corporate
+governance and Executive Board compensation.
+As such, we consequently reduced the number of deviations
+SAP had declared to the Code from five to two: At our
+ordinary meeting in October, we set a standard age limit for
+Executive Board members, limited tenure on the Supervisory
+Board, and resolved to follow, in future, the Code's
+recommendation to take the objectives we adopted for our
+own composition into account when proposing candidates
+for election to the Supervisory Board by the Annual General
+Meeting.
+In the interest of greater transparency, the Supervisory
+Board also took steps to make the compensation report
+easier to read and understand.
+The Work of the Supervisory
+Board Committees
+To Our Stakeholders | Report by the Supervisory Board
+General and Compensation Committee: Hasso Plattner
+(chairperson), Wilhelm Haarmann, Andreas Hahn, Margret
+Klein-Magar, Lars Lamade, Bernard Liautaud, Sebastian Sick,
+Jim Hagemann Snabe
+-
+The Audit Committee held six physical meetings - two of
+which were jointly held with the Finance and Investment
+Committee and four telephone conference meetings in
+2017. It also adopted one resolution by correspondence vote.
+The telephone conference meetings were all ahead of the
+publication of quarterly financial reports for each quarter. At
+these meetings, the Committee primarily deliberated on the
+course of business over the quarter concerned, the process
+by which the quarterly financial reports were prepared, the
+quarterly reports to be published, and insights gained from
+the auditor's quarterly review of selected revenue-generating
+software agreements. The physical meeting in February
+concentrated on the SAP SE and consolidated financial
+reports for 2016 and the reporting process, the internal
+control structure for financial reporting, the most important
+accounting methods, and the audit. At the February meeting,
+the Committee also discussed the German Financial
+Reporting Enforcement Panel's criteria for 2017, the internal
+audit service's report for the previous year, organization and
+processes, and audit plan for 2017. Also at this meeting, the
+Committee did preparatory work on the Supervisory Board's
+recommendations to the Annual General Meeting of
+Shareholders concerning the election of an auditor and the
+appropriation of retained earnings. The April meeting
+focused inter alia on SAP's compliance system and changes
+to the IFRS reporting standards relevant for fiscal years 2017
+and 2018, such as the new standard for revenue recognition
+(IFRS 15). When it met in July, the Committee discussed the
+audit focus with the auditor, dealt with the internal audit
+service's work in the first half of the year and audit planning
+for the second half-year, and reviewed the Company's risk
+management system and internal controls. In addition, it
+inquired about the auditor's fees as well as the new reporting
+requirements under the European directive on Corporate
+Social Responsibility (CSR) and the law implementing the
+-
+directive at national level, which obliges listed companies to
+focus more on significant non-financial aspects of their
+business activities in a non-financial declaration in the future.
+At its October meeting, the Committee discussed the report
+from the chief compliance officer and came to the conclusion
+that the compliance system was effective. In this connection,
+the Executive Board gave us a detailed update on the internal
+investigations regarding potential FCPA violations in South
+Africa and on the ongoing internal investigation regarding
+potential export law violations in the Gulf region. The Audit
+Committee also discussed the audit fees at this meeting. As
+reported in more detail below, the Committee also held two
+joint meetings with the Finance and Investment Committee in
+February and December. In addition to discussing the Group
+annual plan for 2018, the Committee received an update on
+the aforementioned compliance matters at the December
+meeting.
+The auditor attended all physical meetings and telephone
+conference meetings of the Audit Committee and reported in
+depth on its audit work and on its quarterly reviews of
+selected software agreements.
+The Finance and Investment Committee held eight physical
+meetings in 2017. Of these, one was a joint meeting with the
+Technology and Strategy Committee and two were joint
+meetings with the Audit Committee. It also adopted one
+resolution by correspondence vote. At the joint meeting with
+the Audit Committee in February, members discussed and
+approved the Group annual plan for 2017. In the Finance and
+Investment Committee meeting that followed,
+representatives from Sapphire Ventures presented detailed
+information about the European and U.S. market for venture
+capital in technology and a status report on the three active
+SAP venture capital funds. The Committee also discussed
+the annual report on SAP's acquisitions in the February
+meeting. In April, the Executive Board informed the
+Committee among other things about current acquisition
+plans, and reported on important aspects of SAP's corporate
+financial profile, such as the credit rating, credit profile, and
+liquidity development. Matters discussed at the joint meeting
+with the Technology and Strategy Committee in July included
+a multiyear overview of the development of SAP's mergers
+and acquisitions as well as SAP's strategic alignment and
+competitive environment. At its meeting the following day,
+the Executive Board reported to the Committee on SAP's
+planned share buyback. At the Committee's September
+meeting, it examined the planned acquisition of Gigya Inc. at
+length and resolved to recommend that the Supervisory
+Board approve the purchase. In addition, the Executive Board
+reported on a potential further acquisition. The Committee
+meeting in October centered on SAP's participation in a joint
+venture to develop software for the energy industry. The
+Committee also approved by circular correspondence vote
+the sale of SAP's minority interest in Mulesoft, Inc. The focus
+of the joint meeting with the Audit Committee in December
+6
+27
+in February, the Committee and the Executive Board
+analyzed the corporate governance ranking of DAX-listed
+companies that was published at the beginning of the year.
+At its meeting in April, the Committee prepared the
+Supervisory Board's resolution to set a new target for the
+percentage of women on the Executive Board, which had
+become necessary in the course of appointing the new
+Executive Board members. At its July meeting, the
+Committee prepared a Profile of Skills and Expertise for the
+Supervisory Board and a Diversity Policy for the Executive
+Board and Supervisory Board. The Supervisory Board's
+decisions with respect to the submission of the declaration of
+implementation of the Code and ascertaining the
+independence of Supervisory Board members were prepared
+in October. The Committee also discussed the succession
+planning concept for the Executive Board throughout the
+year. In addition, the Committee approved the acceptance of
+outside supervisory board seats by Executive Board
+members in three cases.
+27
+-
+was the presentation of and discussion on the preliminary
+Group annual plan for 2018, in preparation for the
+Supervisory Board meeting in February 2018, at which the
+full Supervisory Board resolved to approve the 2018 Group
+annual plan.
+The Technology and Strategy Committee held four
+meetings in 2017, one of which being the joint meeting with
+the Finance and Investment Committee in July, as previously
+reported. It discussed key technology trends in the software
+industry in the years to come and SAP's corporate and
+product strategies. At the February meeting, management
+informed the Committee about SAP's machine learning
+strategy and the associated handling of huge data volumes,
+focusing specifically on SAP's road map and the marketing
+activities being taken to launch the machine learning
+solutions. The SAP Cloud Platform strategy and details of the
+market launch were also explained. When the Committee
+met in April, it deliberated on the SAP S/4HANA Cloud
+strategy and was given an update on the SAP Data Network
+segment. In October, the Committee examined SAP's cloud
+infrastructure strategy and the latest innovations in SAP
+SuccessFactors cloud solutions for human capital
+management.
+The People and Organization Committee held two meetings
+in 2017. In April, the Committee members discussed SAP's
+workforce planning strategy, taking the services area as an
+example. Here, the current reorganization meant there was
+an increased need for additional technical expertise among
+employees. The Committee's meeting therefore focused on
+the training offerings and learning programs for employees.
+In addition, the Committee members discussed the functions
+of SAP Digital Boardroom and its analysis options for HR
+data. The second meeting was held in December at the SAP
+Innovation Center in Potsdam, SAP's development center for
+new software technologies that opened in 2014. At the
+Committee's request, management explained in detail how
+employees helped to shape and drive innovation processes.
+The parties discussed in-depth how employees can submit
+and implement their own innovative ideas through the
+specially-created SAP.IO program, and by what other means
+SAP fosters a culture of innovation within the Company. The
+Committee also reviewed the update it had requested on the
+career paths at SAP and the "Skills of the Future" learning
+program. The program focuses on certain predefined
+technical skills that employees need to have in order to
+create innovative digital solutions on an ongoing basis.
+The Nomination Committee is composed exclusively of
+shareholder representatives. It met once, in April 2017, to
+deliberate suitable successors for the departing shareholder
+representative Jim Hagemann Snabe. The Committee
+members agreed that Aicha Evans was the best candidate
+and so presented their decision to the remaining shareholder
+representatives on the Supervisory Board. In addition, the
+Committee members regularly discussed succession
+planning and the search for candidates.
+Regular reports from the committees ensured that we were kept
+fully informed of all matters covered by the committees and
+were able to discuss them thoroughly.
+-
+The committees made a key contribution to the work of the
+Supervisory Board and reported on their work to us, including
+their preparatory work for and decisions made on the relevant
+agenda items of the full Supervisory Board. The following
+committees were in place in 2017, initially composed as follows:
+-
+26
+Audit Committee: Erhard Schipporeit (chairperson),
+Panagiotis Bissiritsas, Martin Duffek, Klaus Wucherer
+Finance and Investment Committee: Wilhelm Haarmann
+(chairperson), Pekka Ala-Pietilä, Panagiotis Bissiritsas,
+Margret Klein-Magar, Sebastian Sick, Jim Hagemann Snabe
+Technology and Strategy Committee: Hasso Plattner
+(chairperson), Christine Regitz (deputy chairperson), Pekka
+Ala-Pietilä, Panagiotis Bissiritsas, Anja Feldmann, Andreas
+Hahn, Gesche Joost, Margret Klein-Magar, Bernard Liautaud,
+Pierre Thiollet
+People and Organization Committee: Hasso Plattner
+(chairperson), Martin Duffek, Anja Feldmann, Wilhelm
+Haarmann, Gesche Joost, Lars Lamade, Christine Regitz,
+Robert Schuschnig-Fowler
+Nomination Committee: Hasso Plattner (chairperson),
+Pekka Ala-Pietilä, Bernard Liautaud
+-
+Special Committee: Hasso Plattner (chairperson), Pekka
+Ala-Pietilä, Wilhelm Haarmann, Lars Lamade, Erhard
+Schipporeit, Sebastian Sick
+Following the resignation of Jim Hagemann Snabe from the
+Supervisory Board and the court appointment of Aicha Evans to
+the Supervisory Board, the composition of the committees
+changed effective July 1, 2017, as follows:
+-
+-
+To Our Stakeholders | Report by the Supervisory Board
+General and Compensation Committee: Hasso Plattner
+(chairperson), Aicha Evans, Wilhelm Haarmann, Andreas
+Hahn, Margret Klein-Magar, Lars Lamade, Bernard Liautaud,
+Sebastian Sick
+Technology and Strategy Committee: Hasso Plattner
+(chairperson), Christine Regitz (deputy chairperson), Pekka
+Ala-Pietilä, Panagiotis Bissiritsas, Martin Duffek, Aicha Evans,
+Anja Feldmann, Andreas Hahn, Gesche Joost, Margret Klein-
+Magar, Bernard Liautaud, Pierre Thiollet
+People and Organization Committee: Hasso Plattner
+(chairperson), Martin Duffek, Anja Feldmann, Wilhelm
+Haarmann, Gesche Joost, Lars Lamade, Christine Regitz,
+Robert Schuschnig-Fowler
+Nomination Committee: Hasso Plattner (chairperson),
+Pekka Ala-Pietilä, Bernard Liautaud
+Special Committee: Hasso Plattner (chairperson), Pekka
+Ala-Pietilä, Wilhelm Haarmann, Lars Lamade, Erhard
+Schipporeit, Sebastian Sick
+Each of the committees was active in 2017 except the Special
+Committee.
+For more information about the Supervisory Board committees
+and their duties, see SAP's corporate governance statement
+pursuant to the German Commercial Code, sections 315d and
+289f, published on the SAP public Web site at
+www.sap.de/investor.
+In 2017, the committees focused primarily on the following
+topics:
+The General and Compensation Committee held five
+meetings. During its meetings, it extensively discussed,
+prepared, and recommended the Supervisory Board's
+resolutions, notably those on Executive Board compensation
+and HR decisions described above. Besides this, it engaged in
+improving the selection of agenda topics and the efficacy of
+plenary sessions. It also focused on the following matters: At
+its first meeting in February, the Committee deliberated on
+the report compiled by the Company's corporate governance
+and insider trading compliance officer. At its second meeting
+Audit Committee: Erhard Schipporeit (chairperson),
+Panagiotis Bissiritsas, Martin Duffek, Klaus Wucherer
+Finance and Investment Committee: Wilhelm Haarmann
+(chairperson), Pekka Ala-Pietilä, Panagiotis Bissiritsas,
+Erhard Schipporeit, Robert Schuschnig-Fowler, Sebastian
+Sick
+5
+Robert Schuschnig-Fowler
+11
+5
+5
+14
+14
+100%
+Lars Lamadé
+12
+5
+19
+5
+7
+100%
+Bernard Liautaud
+15
+5
+4
+10
+10
+7
+93%
+Margret Klein-Magar
+6
+100%
+5
+5
+14
+14
+100%
+Andreas Hahn
+14
+100%
+5
+9
+9
+100%
+Prof. Dr. Gesche Joost
+11
+5
+5
+6
+5
+5
+Christine Regitz
+5
+13
+13
+100%
+Jim Hagemann Snabe
+8
+2
+2
+6
+5
+6
+Pierre Thiollet
+9
+5
+5
+4
+4
+100%
+Prof. Dr. Klaus Wucherer
+100%
+11
+5
+Dr. Sebastian Sick
+5
+6
+6
+100%
+Dr. Erhard Schipporeit
+14
+5
+5
+18
+9
+100%
+Corporate Governance
+10
+5
+5
+5
+5
+100%
+9
+SAP's corporate governance and insider trading compliance
+officer monitored our compliance with those recommendations
+in the Code with which we claim to comply in SAP SE'S
+declaration, and reported in full to the General and
+Compensation Committee. For more information about
+compliance with the Code, see the Corporate Governance
+Report from the Executive Board and Supervisory Board.
+Members of the Executive Board and of the Supervisory Board
+had no conflicts of interest that were required to be disclosed to
+the Supervisory Board pursuant to sections 4.3.3 and 5.5.2 of
+the Code. Some Supervisory Board members currently have
+business dealings with SAP or hold senior positions or material
+equity in companies that currently have business dealings with
+SAP, or had done so in the course of the year. SAP's business
+dealings with these persons or companies are or were at arm's
+length. In our view, especially given the limited scope and
+materiality of those dealings, they did not affect the
+independence of the Supervisory Board members concerned
+and do not give rise to any substantial and not merely
+temporary conflict of interest in the meaning of the Code. The
+Supervisory Board consented by correspondence vote to the
+instruction of a law firm, in which a Supervisory Board member
+is a partner, for legal and tax advice in connection with the
+planned transfer of intellectual property rights of a Swiss
+subsidiary of the Company to SAP SE. The member concerned
+did not take part in the deliberations or voting on the matter.
+There were a number of transactions involving members of the
+Executive Board in 2016 which were all consistent with industry
+standards and immaterial. These transactions were approved
+by the General and Compensation Committee during the year
+under review. The Company made no other contracts with
+members of the Executive Board or Supervisory Board that
+would have required a resolution of the Supervisory Board.
+The Supervisory Board closely examined the Executive Board's
+corporate governance statement. We approved the statement
+with the combined SAP Group and SAP SE management report.
+SAP SE and Consolidated
+Financial Reports for 2017
+of the Executive Board members jointly with the Executive
+Board, for implementation at our meeting on April 13, 2017. The
+new portfolio structure largely reflects an increased focus on
+the cloud business as well as the changing requirements of
+SAP's business processes. As part of this restructuring, the
+Executive Board member Robert Enslin took over the lead of the
+SAP Business Networks segment, and is now also responsible
+for the development and delivery of our customer engagement
+and commerce solutions as well as our human capital
+management solutions. Further, Adaire Fox-Martin and Jennifer
+Morgan were appointed to the Executive Board effective May 1,
+2017, assuming joint responsibility for Global Customer
+Operations, SAP's global sales organization. In the course of
+appointing the new members to the Executive Board, we
+increased the target for the number of Executive Board seats to
+be held by women to two. At our October meeting, we appointed
+Christian Klein to the Executive Board effective January 1, 2018,
+thus expanding the Executive Board to nine members. Mr.
+Klein's appointment as Chief Operating Officer (COO) means
+that SAP's global business processes and digital transformation
+will henceforth be managed at Executive Board level as part of
+the new "Global Business Operations" portfolio. This measure
+underlines the significance of the Run Simple initiative, our
+internal efforts for simplifying internal processes and reducing
+28
+In 2017, the Supervisory Board advised the Executive Board on
+an ongoing basis with regard to the management of the
+Company and kept the Executive Board's global management of
+the Company under observation and scrutiny for legal
+compliance, adherence to proper accounting principles,
+business focus, and efficiency. At meetings of the full
+Supervisory Board and of the Technology and Strategy
+Committee, we regularly discussed the Company's strategy
+with the Executive Board and the Company's progress toward
+executing it. We were always directly involved when the
+Executive Board made any decisions of fundamental
+importance to SAP.
+We regularly received full and timely reports from the Executive
+Board, both from members in person and in written documents.
+They always kept us up to date on the Company's strategy,
+planning, business performance, risks, risk management,
+compliance (in other words, adherence to laws, to the
+Company's Articles of Incorporation, and to internal policies),
+and on transactions of special significance for SAP. The
+Executive Board advised us when business deviated from plan
+or target, and why. In addition, the Supervisory Board members
+can use the SAP Digital Boardroom solution to stay abreast of
+Company's performance whenever they wish, not just in their
+meetings. This digital decision and analysis cockpit is an
+analytical software solution that allows us to call up
+comprehensive metrics for all business areas in real time and
+generate evaluations and analyses as required. This provides
+the Supervisory Board members with an up-to-date view of
+SAP's business processes, data, and key figures - and
+unprecedented transparency.
+The content and scope of the Executive Board's reports to us
+fully met our requirements for them, and the questions raised
+by the Supervisory Board before and during the meetings were
+answered in detail. In addition, the Executive Board came to
+Supervisory Board meetings for discussion of the agenda items.
+We questioned and probed the Executive Board to satisfy
+ourselves that the information it gave us was plausible. All
+transactions requiring approval by the Supervisory Board
+whether by law, the Articles of Incorporation, or the Supervisory
+Board's list of transactions requiring its consent were carefully
+examined and discussed with the Executive Board, focusing on
+the benefits, potential risks, and other effects of each
+transaction. The Supervisory Board agreed to all transactions
+for which its consent was sought by the Executive Board.
+The CEO informed the Supervisory Board chairperson without
+delay of all important events that were significant for assessing
+SAP's position and progress or for the management and
+governance of the Company. Moreover, the chairperson of the
+Supervisory Board met regularly with the CEO to discuss SAP's
+strategy, planning, business performance, risks, risk
+management, compliance, and other key topics and decisions.
+In this way, the chairperson of the Supervisory Board was also
+kept fully informed between meetings of the Supervisory Board
+and its committees.
+Supervisory Board Meetings and
+Resolutions
+In 2017, the Supervisory Board of SAP SE held four ordinary
+meetings and one extraordinary meeting at which we
+deliberated and resolved on all matters of relevance to the
+Company. We also adopted seven resolutions by
+correspondence vote. No Supervisory Board member attended
+only half or less of the meetings of the Supervisory Board and of
+the committees to which the member belonged in the fiscal
+year. The following table provides an overview of the individual
+members' attendance at the Supervisory Board's plenary
+sessions and committee meetings in 2017:
+222
+Supervisory Board and the Executive
+Board
+22
+Supervisory Board
+Meetings
+Members
+(incl. Committees)
+Meetings
+(Plenum)
+Participation
+(Plenunm)
+Meetings
+(Committees)
+Participation
+(Committees)
+To Our Stakeholders | Report by the Supervisory Board
+Participation in %
+Collaboration Between the
+Dear Shareholders,
+Code of Business Conduct
+SAP's corporate governance includes our Code of Business
+Conduct for employees and members of the Executive Board.
+The Code of Business Conduct expresses the high standards
+that we require from our employees and Executive Board
+members and sets out the main principles that guide our
+business conduct toward customers, business partners, and
+shareholders. We see our Code of Business Conduct as the
+standard for our dealings involving customers, business
+partners, vendors, shareholders, and competitors. By following
+our Code of Business Conduct, we demonstrate a commitment
+against all forms of unfair competitive practice, corruption, and
+misrepresentation. Our global compliance organization
+monitors worldwide compliance with the Code of Business
+Conduct and other policies applying within the Group. It
+regularly reviews these internal policies, revises them if
+necessary, and delivers related employee training.
+Applying International
+Corporate Governance
+Standards
+SAP is a NYSE-listed company and we are therefore subject to
+certain U.S. laws (including the Sarbanes-Oxley Act of 2002,
+among others) and to the applicable SEC and NYSE regulations.
+Besides implementing the requirements of the Sarbanes-Oxley
+Act, Section 404, and other Sarbanes-Oxley Act requirements,
+including conducting an annual audit of our internal control over
+financial reporting, we comply with the corporate governance
+standards of the NYSE Listed Company Manual, Section 303A,
+which bind foreign private issuers. The Section 303A standards
+that apply to SAP include the requirement to have an audit
+committee composed of members who are independent in the
+meaning of the Sarbanes-Oxley Act, and related reporting
+requirements. Erhard Schipporeit, the chairperson of the Audit
+Committee, is an audit committee financial expert in the
+meaning of the Sarbanes-Oxley Act.
+Annual General Meeting of
+Shareholders
+Our shareholders exercise their rights, such as the rights to put
+questions to the management and to vote, at the Annual General
+Meeting of Shareholders. Shareholders and the public are able
+to watch a live broadcast of the entire Annual General Meeting of
+Shareholders on the Internet. They can vote their shares at the
+Meeting or instruct a proxy of their choice or one of the proxies
+provided for that purpose by SAP. Alternatively, they can
+participate online or vote by mail. The invitation to the Annual
+General Meeting of Shareholders includes full details and
+instructions. Every shareholder can access all of the paperwork
+on the SAP Web site in good time for the meeting.
+Transparency, Communication,
+and Service for Shareholders
+Our shareholders can obtain full and timely information about
+SAP on our Web site and can access current and historical
+Company data. Among other information, we post all of our
+financial reports, all relevant news about the Company's
+governing bodies and their corporate governance docu-
+mentation, information requiring ad hoc (current) disclosure,
+press releases, and news of notifiable directors' dealings.
+In the following, I would like to inform you about the work of the
+Supervisory Board in the past fiscal year.
+Financial Accounting, Risk
+Management, and Internal
+Control
+20
+To Our Stakeholders | Corporate Governance Report
+financial statements, the consolidated financial statements, as
+well as the combined management report and the separate
+combined non-financial report. The SAP SE financial
+statements, the consolidated financial statements, and the
+combined management report are audited by KPMG AG
+Wirtschaftsprüfungsgesellschaft, the auditor elected for that
+purpose by the Annual General Meeting of Shareholders.
+In addition to our annual financial statements, we also prepare
+quarterly statements for all four quarters in accordance with the
+rules and regulations of the Frankfurt Stock Exchange, as well a
+half-year financial report on June 30 pursuant to the legal
+requirements of the German Securities Trading Act. Our
+quarterly statements and half-year financial report are
+submitted to the Audit Committee of the Supervisory Board
+before they are published.
+In German stock corporation and commercial law, there are
+special requirements for internal risk management that apply to
+SAP. To meet them, our global risk management system
+supports risk planning, identification, analysis, handling, and
+minimization. We maintain standard documentation of all our
+internal control structures, especially those that affect financial
+reporting, and continually evaluate their effectiveness. As a
+company listed on the NYSE, we instruct our auditor, KPMG, to
+conduct an annual audit of our internal control over financial
+reporting in accordance with the requirements of the U.S.
+Sarbanes-Oxley Act of 2002, Section 404. The audit as of
+December 31, 2017, confirmed that our internal control is
+effective. In compliance with the reporting requirements in the
+German Commercial Code, Sections 289 (4) and 315 (4), the
+combined SAP SE and SAP Group management report contains
+full information about the principal features of the internal
+controls and risk management structure applying to SAP's
+consolidated financial reporting.
+To Our Stakeholders | Corporate Governance Report
+21
+Report by the Supervisory Board
+We prepare the SAP SE financial statements in accordance with
+the German Commercial Code and our consolidated financial
+statements in accordance with International Financial Reporting
+Standards (IFRSs). We prepare a combined management report
+and a separate combined non-financial report for SAP SE and
+the SAP Group as required by the German Commercial Code,
+and the Form 20-F annual report in accordance with SEC
+requirements. The Executive Board is responsible for financial
+accounting. The Supervisory Board approves the SAP SE
+Generally, the Executive Board follows the recommendation in
+the Code that executive boards should have regard to diversity
+when appointing people to leadership positions, and in
+particular, aim to employ appropriate numbers of women in
+such positions. In support of this, the Executive Board maintains
+a policy to enhance diversity in company leadership
+appointments. This policy comprises a number of elements to
+increase the percentage of women in management and, in the
+long term, establish a diverse pool of female and male
+candidates for senior management positions. In addition, SAP
+had set itself a voluntary target of increasing the percentage of
+positions in leadership on a global level held by women to 25%
+by the end of 2017, which was successfully achieved. The
+percentage of women in management stood at 25.4% globally at
+the end of 2017. From 2018 onwards, SAP voluntarily seeks to
+further increase this percentage by one percentage point
+annually to reach 28% by the end of 2020. It goes without
+saying that ability is still the primary selection criterion for any
+position at SAP.
+(all Meetings)
+17
+5
+9
+9
+100%
+Aicha Evans
+5
+3
+3
+5
+2
+100%
+Anja Feldmann
+11
+5
+5
+6
+6
+KPMG audited the SAP SE and consolidated financial reports for
+2017. The Annual General Meeting of Shareholders elected
+KPMG as the SAP SE and SAP Group auditor on May 10, 2017.
+The Supervisory Board proposed the appointment of KPMG on
+the recommendation of the Audit Committee. Before proposing
+2
+Prof. Dr. h.c. Hasso Plattner
+14
+100%
+5
+5
+12
+10
+88%
+Pekka Ala-Pietilä
+18
+5
+Martin Duffek
+4
+9
+72%
+Panagiotis Bissiritsas
+23
+5
+5
+18
+18
+13
+In accordance with the requirements of Section 289f para. (2)
+no. 6 of the German Commercial Code, the Supervisory Board
+adopted a Diversity Policy for the Executive Board and the
+Supervisory Board. The Diversity Policy as well as information
+on the targets for the numbers of women on the Executive
+Board and the first two management levels below the Executive
+Board are described in the Corporate Governance Statement
+which is available on the SAP SE Web site.
+Meeting Participation of SAP Supervisory Board Members during Fiscal Year 2017
+The Audit Committee and the Supervisory Board satisfied
+themselves that KPMG had conducted the audit properly. In
+particular, they concluded that both the audit reports and the
+audit itself fulfilled the legal requirements. On the basis of the
+report and the Audit Committee's recommendation, the
+Supervisory Board approved the audit and, since there were no
+findings from our own examination, we gave our consent to the
+SAP SE financial statements, the consolidated financial
+statements, and the combined management report (including
+the Executive Board's corporate governance statement
+pursuant to the German Commercial Code, sections 315d and
+289f), as well as the combined non-financial report pursuant to
+the German Commercial Code, sections 315b and 289b. The
+financial statements and combined management report were
+thus formally adopted. The Supervisory Board's opinion of the
+Company and the Group coincided with that of the Executive
+Board as set out in the combined management report. The
+Supervisory Board considered the proposal presented by the
+Executive Board concerning the appropriation of retained
+earnings. We had regard to the requirements of dividends
+policy, the effects on the liquidity of the Group, and the interests
+of the shareholders. We also discussed these matters with the
+auditor. We then endorsed the Executive Board's proposal
+explained the Annual Report on Form 20-F.
+To Our Stakeholders | Report by the Supervisory Board
+29
+Supervisory Board. At the Audit Committee meeting, they also
+At the meeting of the Audit Committee on February 20, 2018,
+and at the meeting of the Supervisory Board on February 22,
+2018, the Executive Board explained the financial statements of
+SAP SE and the SAP Group and its proposal concerning the
+appropriation of retained earnings. Members of the Executive
+Board answered questions from the Audit Committee and the
+On February 21, 2018, the Executive Board prepared the
+financial accounts of SAP SE and the Group for 2017,
+comprising the SAP SE financial statements, the consolidated
+financial statements, and the combined management report, as
+well as the combined non-financial report and submitted them
+without delay to the Supervisory Board.
+KPMG to the Annual General Meeting of Shareholders as auditor
+for the year, the chairperson of the Supervisory Board and the
+Audit Committee obtained confirmation from KPMG that
+circumstances did not exist that might prejudice or raise any
+doubt concerning its independence as the Company's auditor.
+In that connection, KPMG informed us of the volume of the
+services that were not part of the audit which it had either
+provided to the Group in the past year or was engaged to
+provide in the year to come. The Supervisory Board has agreed
+with KPMG that the auditor should report to the Supervisory
+Board and record in the auditor's report any fact found during
+the audit that is inconsistent with the declaration given by the
+Executive Board and the Supervisory Board concerning
+implementation of the German Corporate Governance Code.
+KPMG examined the SAP SE financial statements prepared in
+accordance with the German Commercial Code, the
+consolidated financial statements prepared in accordance with
+International Financial Reporting Standards (IFRSS) as required
+by the German Commercial Code, section 315e, and the
+combined SAP Group and SAP SE management report, and
+certified them without qualification. The auditor thus confirmed
+that, in its opinion and based on its audit in accordance with the
+applicable accounting principles, the SAP SE and consolidated
+financial statements give a true and fair view of the net assets,
+financial position, and results of operations of SAP SE and the
+SAP Group. The auditor also confirmed that the combined SAP
+SE and SAP Group management report is consistent with the
+corresponding financial statements and as a whole gives a
+suitable view of the position of SAP SE and the SAP Group and
+of foreseeable opportunities and risks. KPMG had completed its
+audit of SAP's internal control over financial reporting and
+certified without qualification that it complies with the
+applicable U.S. standards. The auditor stated in its opinion that
+it considers SAP's internal controls over financial reporting to be
+effective in all material respects. All Audit Committee and
+Supervisory Board members received the documents
+concerning the financial statements mentioned above, the audit
+reports prepared by KPMG, and the Executive Board's proposal
+concerning the appropriation of retained earnings in good time.
+To Our Stakeholders | Report by the Supervisory Board
+The Committee also reported that KPMG had told it no
+circumstances had arisen that might give cause for concern
+about KPMG's impartiality, and informed us about the services
+KPMG had provided that were not part of the audit. The
+Committee reported that it had examined the auditor's
+independence, taking the non-audit services it had rendered
+into consideration, and stated that in the Committee's opinion
+the auditor possessed the required degree of independence.
+19
+After the Executive Board had explained them, the Audit
+Committee and the Supervisory Board reviewed the financial
+statement documents along with the combined non-financial
+report in the light of KPMG's audit reports. The representatives
+of the auditor who attended presented full reports on the audit
+and the results of the audit to the Audit Committee and
+Supervisory Board meetings and explained the audit report. The
+auditor also reported that it had not identified any material
+weaknesses in our internal control and risk-management
+systems for financial reporting. Both the Audit Committee and
+the Supervisory Board asked detailed questions about the form,
+scope, and results of the audit. The Audit Committee reported
+to the Supervisory Board on its own review of the financial
+statements of SAP SE and the SAP Group, its discussions with
+the Executive Board and with the auditor, and its supervision of
+the financial reporting process. It confirmed that as part of its
+supervisory work, it had addressed the effectiveness of the SAP
+Group internal control, risk management, and internal auditing
+systems and found the systems to be effective.
+The individual elements of SAP's Executive Board compensation
+are described in more detail below.
+STI total target achievement (%) x target amount (€)
+The short-term, one-year performance-based compensation
+(Short-Term Incentive (STI)) is determined based on a set of
+financial targets (KPIs) with a weighting of 75% and a
+discretionary element with a weighting of 25%. This 25% in
+relation to the Executive Board target compensation based on a
+100% target achievement corresponds with a proportion of 5%
+to 8% of the total compensation.
+For the payout of the STI 2017, the financial KPIs are: constant
+currency new cloud bookings, non-IFRS constant currency cloud
+and software revenue growth, and non-IFRS constant currency
+operating margin increase. The KPIs and their respective target
+values are derived from SAP's budget for that year. For more
+information about financial KPIs, see the Performance
+Management System section.
+Further, the discretionary element of the STI allows the
+Supervisory Board to address SAP's performance along the
+following factors: innovative performance, employee satisfaction
+(taking attractiveness as an employer, innovative HR strategy,
+HR excellence, leadership development, and social partnership
+into consideration), customer satisfaction, further development,
+expansion of application and marketing of our product SAP
+S/4HANA Cloud, and sustainability of cloud revenues. The last
+two factors are new for 2017, reflecting the increasing relevance
+of the cloud business.
+SAP determines this discretionary element mainly based on
+market data, the results of an annual employee survey, and
+customer satisfaction surveys, and compares it with the
+corresponding prior-year values.
+The Supervisory Board is also authorized to consider the
+individual performance of the Executive Board members when
+determining the target achievement of the discretionary
+element. In previous years, the Supervisory Board has
+consistently evaluated the Executive Board as a whole and has
+not applied individual adjustments.
+If the weighted target achievement for the financial KPIs is below
+75%, there is no STI payout for the financial KPIs. In this case,
+the target achievement for these KPIs is set to zero.
+On February 21, 2018, the Supervisory Board assessed SAP's
+performance against the agreed targets and determined the
+amount of STI for the entire Executive Board compensation:
+Financial targets (KPIs) 88.3% (cloud and software revenue
+growth 99.6%, operating margin increase 85.0%, and new
+cloud bookings 81.1%)
+Discretionary element 88.0%
+This resulted in a total target achievement of 88.2%. The STI
+compensation for 2017 will be paid out after the Annual General
+Meeting of Shareholders in May 2018. It is paid in the Executive
+Board member's home currency²). All Executive Board members
+are obliged to purchase SAP shares worth at least 5% of the
+actual payout amount according to appropriate trading period
+regulations. These shares are subject to a three-year holding
+period.
+Long-Term Incentive
+The purpose of the long-term, multiyear performance-based
+compensation (Long-Term Incentive, LTI) is to reward the
+annual achievement of the non-IFRS constant currency
+operating profit, to ensure long-term retention of our Executive
+Board members ("Retention"), and to reward them for a long-
+term SAP share price performance ("Performance") as
+compared to its main peer group (Peer Group).
+The LTI 2016 plan came into effect on January 1, 2016. It is a
+virtual share program with a term of four years per tranche.
+2) Home currency is the currency of the Executive Board member's home
+country or primary place of residence.
+32
+To Our Stakeholders | Compensation Report
+Compensation
+Non-performance-based compensation
+Fixed compensation
+Fringe benefits
+Performance-based compensation
+STI
+The amount of performance-based compensation depends
+primarily on SAP's performance against predefined financial
+target values (Key Performance Indicators, KPIs) and on the
+SAP share price, and is subject to hurdles and caps. These KPIs
+and their target values as well as their weighting are set by the
+Supervisory Board each plan year and are aligned to the SAP
+budget for that year.
+of the target amount
+80% to 120%
+Supervisory Board determines grant amount for current
+financial year, based on operating profit target achievement
+(non-IFRS, at constant currency) set for the previous year,
+LTI Grant Process
+All Share Units granted in this way, comprising 60%
+Performance Share Units (PSUs) and 40% Retention Share
+Units (RSUs), have a vesting period of approximately four years,
+during which the Executive Board member must actively
+contribute to the Company's operations. The value of the Share
+Units varies positively and negatively with the performance of
+SAP's share price. At the end of the vesting period, the
+corresponding Share Units are non-forfeitable.
+This grant amount is converted into virtual shares (Share Units),
+so that Executive Board members participate in further share
+price developments. The grant price is the arithmetic mean of
+the XETRA closing prices of SAP stock on the 20 trading days
+following publication of SAP's fourth-quarter results. The grant
+date of the 2017 tranche was February 22, 2017 (April 13, 2017,
+for Adaire Fox-Martin and Jennifer Morgan).
+Under the plan, a new LTI tranche is granted annually. Each
+grant starts with determining a grant amount in euros. This
+grant amount is based on the Executive Board members'
+contractual target amount and the operating profit target
+achievement (non-IFRS, at constant currency) for the previous
+year. Taking this target achievement into account, the grant
+amount can be adjusted upwards or downwards in the range of
+80% to 120% of the contractual target amount. The 2016
+operating profit target achievement was 97.3%. Considering
+this, the Supervisory Board set the grant amount of the 2017
+tranche at 100% of the contractual target amount.
+Short-term incentive
+STI compensation
+0% to 181.3% (max = 75% x 175% +25% x 200%)
+0% to 200%
+30% New cloud bookings
+Financial targets (KPIs)
+75%
+Short-Term Incentive
+Performance-Based Compensation
+The contractually guaranteed fringe benefits mainly comprise
+additional benefits such as insurance contributions, benefits in
+kind, expenses for maintenance of two households, use of
+aircraft, tax gross-ups according to local conditions, and
+discrete payments arising through application of the fixed
+exchange-rate clause due to payments in previous years.
+Fringe Benefits
+(at constant currency)
+31
+2) Home currency is the currency of the Executive Board member's home
+country or primary place of residence.
+1) This compensation report is part of the audited management report.
+Long-term incentive
+LTI
+The fixed compensation is paid monthly in twelve equal
+installments in the Executive Board member's home currency²).
+Non-Performance-Based Compensation
+Fixed Compensation
+To Our Stakeholders | Compensation Report
+In the case of any extraordinary, unforeseeable events, the
+Supervisory Board is entitled, at its reasonable discretion, to
+adjust the performance-based compensation before payout
+upwards or downwards in the interest of SAP. No corrections to
+the payout amounts paid in May 2017 were made.
+25% Cloud and software revenue
+growth (non-IFRS, at constant
+currency)
+Target achievement
+Target
+achievement
+revenues
+STI total target achievement
+Sustainability of cloud
+The Supervisory Board sets the individual total target
+compensation for each Executive Board member, comprised of
+the fixed compensation element and the two performance-
+based elements. The target compensation is benchmarked
+based on SAP's global strategy, market position, business
+performance and future prospects of economy, and the
+compensation paid at comparable national and international
+companies. The Supervisory Board also considers the
+compensation systems applicable for the rest of the Company,
+comparing Executive Board pay with the pay of executives and
+employees. The performance-based elements each correspond
+to a target achievement of 100% of all KPIs. The Supervisory
+Board reviews, assesses, and if appropriate, revises these
+compensation targets, in its first meeting of each fiscal year. The
+Supervisory Board is of the opinion that this approach ensures
+the compensation is appropriate.
+Employee satisfaction
+Customer satisfaction
+20% Operating margin increase
+(non-IFRS, at constant currency)
+Innovative performance
+The compensation system is designed to support the growth of
+value for the Company over the long term. The long-term
+incentive element therefore has significant weighting, making up
+more than two-thirds of the CEO's compensation target, and
+more than 50% of each Executive Board member's
+compensation target.
+Discretionary
+25%
+75% to 175%
+0%
+a 75% hurdle
+0% if weighted achievement is below
+Factors:
+SAP S/4HANA Cloud
+Grant amount is converted
+1%
+Payout after four years
+number of PSUs and RSUs x payout price (€)
+Cap of payout price = 300% of grant price
+0%
+50% to 150%
+max. 150%
+Final number of PSUs
+Originally granted number x performance
+factor (%)
+To Our Stakeholders | Compensation Report
+33
+SAP's share price performance is measured by comparing the
+grant price against the payout price. We calculate the difference
+between SAP's share price performance and the Peer Group
+Index performance. In case of an increased SAP share price and
+an outperformance against the Peer Group Index, the calculated
+difference is doubled to reward positive performance. The
+following examples of the PSU calculation illustrate possible
+outcomes assuming 1,000 PSUs granted:
+SAP share price performs better than Peer Group Index
+SAP share price performance
+The Peer Group Index currently includes the following major
+international competitors of SAP: Microsoft, Adobe, IBM,
+Salesforce, Oracle, VMWare, Workday, ServiceNow, Symantec,
+and Tableau. The Supervisory Board has defined this group
+based on internal and external recommendations and, if
+necessary, adjusts the group, for example, in case of a
+competitor's delisting. The Peer Group Index is calculated as a
+price index based on weighted market capitalization, which is
+capped at 15%. Consequently, the weight of smaller, more
+volatile competitors is increased, resulting in a highly ambitious
+index. The index is calculated daily by Deutsche Börse Group
+and can be tracked under ISIN DE000A2BLEB9.
++18%
+The Supervisory Board - supported by its General and
+Compensation Committee - determines the compensation for
+each Executive Board member based on their individual role and
+performance in its first regular meeting of each fiscal year. For
+further details about the work of the Supervisory Board and its
+committees, see the Report by the Supervisory Board. As
+pictured below, the compensation contains the following
+elements:
+PSU calculation
+Performance factor
+resulting in a
+Retention
+Share Units
+resulting in
+The payout price used for the settlement is the simple
+arithmetic mean of the XETRA closing prices of the SAP share
+on the 20 trading days following the publication of SAP's fourth-
+quarter results subsequent to the end of the vesting period. The
+payout price is capped at 300% of the grant price. The LTI
+tranche is paid in euros after the Annual General Shareholders'
+Meeting of the corresponding year. Any potential foreign
+currency exchange rate risk is borne by the Executive Board
+members themselves.
+The number of Share Units that will finally result in payments to
+the Executive Board members can and will likely differ from the
+number originally granted. The number of PSUs ultimately paid
+out changes depending on the performance of the SAP share
+relative to the Peer Group Index. This places more weight on
+SAP's performance within the industry. In contrast, the final
+number of RSUs is fixed. However, both types of Share Units
+may expire during the entire term of a tranche under certain
+conditions (see the "LTI Forfeiture Rules" graphic below).
+PSU Calculation
+60% PSUs
+Originally granted
+SAP share price performance relative to
+Peer Group Index performance
+100% = same performance of SAP share price and Peer
+Group Index
+Peer Group Index
+performs better
+than SAP share
+price
+Peer Group Index performance
+decreased by percentage
+points of outperformance of
+Peer Group Index
+increased by percentage
+points of outperformance.
+If payout price is more than
+grant price, percentage points
+are doubled
+hurdle at 50%
+60% PSUs
+40%
+cap at 50%
+Performance Share Units
+RSUs
+SAP share price
+performs better
+than Peer Group
+Index
+into PSUs and RSUs
++10%
+Performance factor with doubled
+difference
+Performance factor with doubled
+difference
+(+35% x 2)+100%
+170%
+Oracle
+VMWare
+Workday
+ServiceNow
+14%
+11%
+5%
+5%
+Final number of PSUs
+Capped at
+150% x 1000
+150%
+Symantec
+4%
+1,500
+Tableau
++30% - (-5%) +35%
+Difference
+-5%
+Peer Group Index performance
++18% - (+10%)
+(+8% x 2)+100% 116%
++8%
+Composition of Peer Group Index
+Final number of PSUs
+116% x 1000
+1,160
+Microsoft
+Difference
+15%
+Adobe
+IBM
+15%
+15%
+SAP share price performance
++30%
+Salesforce
+15%
+SAP share price performs much higher than Peer Group Index;
+cap is triggered
+The compensation for Executive Board members is intended to
+reflect the demanding role of Executive Board members leading
+a global company in a quickly evolving sector. The
+compensation level is aimed to be competitive to support SAP in
+the worldwide market for highly skilled executives, especially in
+the context of the software industry. It is our vision that our
+Executive Board compensation provides sustainable incentive
+for committed, successful work in a dynamic business
+environment.
+538.5
+Compensation for Executive
+Board Members
+297.9
+0 2,297.4
+1,267.2
+One-year variable
+297.9
+297.9
+Total
+646.1
+1,083.3
+6.1
+6.1
+2.5
+2.5
+2.5
+Fringe benefits²)
+6,203.3
+2.5
+297.9
+1,131.0
+646.1
+1,866.0
+8,069.3
+10,561.1
+RSU Milestone
+25,723.3 21,856.2
+1,939.7
+Peer Group Index performs better than SAP share price
+○ 9,874.8
+2,555.6
+LTI 2016 Plan
+compensation
+Multiyear variable
+................……………………
+compensation
+2,170.7
+5,522.0
+5,522.0
+2,170.7
+7,692.7 8,069.3 7,692.7
+9,130.5 9,532.1 8,002.5
+1,866.0
+6,203.3
+640.0
+295.4
+640.0
+Member of the Executive Board
+(until April 30, 2017)
+Steve Singh
+€ thousands
+538.5
+1,605.5
+2,916.5
+722.4 10,563.4
+2,372.6 3,866.9
+1,886.3
+711.0 12,011.7 4,314.5
+4,233.2
+Total according to
+GCGC
+Service cost
+538.5
+2,916.5 1,605.5
+Total Executive Board
+5,787.6 9,244.7
+Benefits Granted
+Benefits Granted
+295.4
+295.4
+295.4
+Fixed compensation
+(Max)
+(Min)
+Benefits Received
+2017
+2016
+2016
+2017
+2016¹)
+2017¹)
+2016¹)
+2017
+2017
+2017¹)
+Benefits Received
+Plan 2015
+SAP SOP 2010
+6,029.8
+525.0
+Fringe benefits²)
+11.0
+11.0
+11.0
+12.1
+11.0
+12.1
+22.4
+22.4
+22.4
+13.5
+22.4
+13.5
+Total
+700.0
+711.0
+525.0
+700.0
+This compensation report describes the compensation system,
+outlines the criteria that apply to the compensation for
+Executive Board and Supervisory Board members for the year
+2017, and discloses the amount of compensation.
+Compensation for Executive and
+Supervisory Board Members
+Compensation Report¹)
+To Our Stakeholders | Report by the Supervisory Board
+30
+(Chairperson)
+Professor Hasso Plattner
+The Supervisory Board also thanks the Executive Board, the
+managing directors of the Group companies, and all of our
+employees for their great commitment and dedication in 2017.
+For the Supervisory Board
+The Supervisory Board would like to sincerely thank Jim
+Hagemann Snabe and Steve Singh for their invaluable
+contribution to the success of the Company.
+Steve Singh resigned from the Executive Board with effect from
+April 30, 2017. Adaire Fox-Martin and Jennifer Morgan were
+appointed to the Executive Board effective May 1, 2017.
+Christian Klein was likewise appointed to the Executive Board,
+effective January 1, 2018.
+Jim Hagemann Snabe resigned from the Supervisory Board
+effective June 30, 2017. His successor Aicha Evans was
+appointed to the Supervisory Board by order of the court with
+effect from July 1, 2017.
+Changes on the Supervisory and
+Executive Boards
+accordance with the Audit Committee's recommendation.
+Finally, we approved this present Report.
+concerning the appropriation of retained earnings, in
+700.0
+700.0
+Compensation System for 2017
+711.0
+712.1
+2,396.4
+0 9,259.6 2,476.6
+2,018.7
+0 7,799.9
+1,532.1
+RSU Milestone
+Plan 2015
+SAP SOP 2010
+SAP SOP 2011
+Total
+4,233.2
+711.0 12,011.7 4,314.5 1,886.3
+2,372.6 3,866.9
+722.4 10,563.4
+SAP SOP 2011
+LTI 2016 Plan
+711.0
+compensation
+................
+711.0
+One-year variable
+1,125.8
+0 2,041.1 1,125.8
+1,175.3
+712.1
+1,660.5
+722.4
+1,125.8
+722.4
+722.4
+722.4
+538.5
+0 2,041.1
+845.9
+883.1
+compensation
+Multiyear variable
+SAP share price performance
+on a pro rata temporis
+basis plus 50% which
+otherwise would be
+forfeited
+Difference
+2,396.4
+○ 6,215.4
+1,680.0
+LTI 2016 Plan
+compensation
+Multiyear variable
+compensation
+277.5
+726.9
+729.0
+726.9
+1.125.8 1,175.3
+0 2,041.1
+0 9,259.6
+1,125.8
+755.6
+One-year variable
+729.0
+729.0
+729.0
+0
+549.1
+0
+549.1
+549.1
+549.1
+Total
+0 1,369.9
+2,476.6
+RSU Milestone
+Plan 2015
+(from May 1, 2017)
+Member of the Executive Board
+Jennifer Morgan
+Member of the Executive Board
+Bernd Leukert
+€ thousands
+4,329.3 1,904.3 1,004.4
+729.0 12,029.7
+4,251.2
+0
+549.1
+0
+8,134.4
+549.1
+2,984.7
+Total according to
+GCGC
+Service cost
+729.0 12,029.7 4,329.3 1,904.3 1,004.4
+4,251.2
+0
+549.1
+0
+549.1 8,134.4
+2,984.7
+Total
+SAP SOP 2011
+SAP SOP 2010
+26.9
+Benefits Granted
+29.0
+29.0
+2017
+2017
+2017
+Benefits Received
+Benefits Granted
+Benefits Received
+Benefits Granted
+(from May 1, 2017)
+Michael Kleinemeier
+Member of the Executive Board
+Member of the Executive Board
+Adaire Fox-Martin
+€ thousands
+2016
+German Corporate Governance Code
+31
+To Our Stakeholders | Compensation Report
+3,023.2
+2,903.9
+34.7
+194.1
+34.7
+5,445.8
+194.1 194.1
+1,398.7 13,570.9
+2,988.5
+2,709.8
+5,411.1
+1,204.6 13,376.8
+37
+2017
+2016
+2017
+29.0
+29.0
+82.4
+82.4
+82.4
+82.4
+Fringe benefits²)
+700.0
+700.0
+700.0
+700.0
+700.0
+700.0
+466.7
+466.7
+466.7
+466.7
+Fixed compensation
+(Max)
+(Min)
+(Max)
+(Min)
+2016
+2017
+2016
+2017
+2017
+26.9
+Benefits Received
+Benefits Granted
+Benefits Received
+To Our Stakeholders | Compensation Report
+38
+lo
+487.7
+0
+8.9
+8.9
+7,925.4
+8.9
+487.7
+8.9
+2,841.9
+730.3 13,201.1 4,627.8 1,905.6 2,372.9
+4,555.4
+Total according to
+GCGC
+German Corporate Governance Code
+Service cost
+478.8
+O
+478.8 7,916.5
+2,833.0
+730.3 13,201.1 4,627.8 1,905.6 2,372.9
+4,555.4
+Total
+SAP SOP 2011
+SAP SOP 2010
+Plan 2015
+RSU Milestone
+6.215.4
+0
+€ thousands
+Luka Mucic
+Member of the Executive Board
+700.0
+700.0
+700.0
+700.0
+Fixed compensation
+(Max)
+(Min)
+(Max)
+(Min)
+2016
+2017
+2016
+2017
+2017
+2017
+2016
+2017
+2016
+2017
+2017
+2017
+Benefits Received
+Benefits Granted
+Benefits Received
+Benefits Granted
+Member of the Executive Board
+Stefan Ries
+0
+1,680.0
+0 10,429.7 2,789.6
+2,699.3
+430.4
+430.4
+430.4
+430.4
+700.0
+700.0
+700.0
+700.0
+700.0
+700.0
+Fixed compensation
+(Max)
+(Min)
+(Max)
+(Min)
+2016
+2017¹)
+2016
+2017
+2017
+2017¹)
+2016
+2017
+2016
+2017
+2017
+2017
+Fringe benefits²)
+2,646.2 36,353.3 13,411.1 21,099.0 15.016.9 5,027.5
+686.2 686.2 686.2 571.3 686.2 571.3
+194.1
+13,167.3 3,332.4 37,039.5 13,982.4 21,785.2 15,588.2 5,221.6
+30.3
+30.3
+LTI 2016 Plan
+compensation
+Multiyear variable
+compensation
+478.8
+0
+478.8
+1,222.3
+0
+478.8
+478.8
+674.2
+712.4
+1,660.5
+730.3
+1,175.3
+0 2,041.1 1,125.8
+1,125.8
+One-year variable
+712.4
+730.3
+730.3
+730.3
+Total
+48.4
+48.4
+48.4
+48.4
+12.4
+30.3
+12.4
+30.3
+Total according to
+GCGC
+Service cost
+12,481.1
+■■equalization amount
+1,500
+earned grants
+In the event an Executive Board member leaves the company
+and PSUs would otherwise be forfeited on a pro rata basis, the
+Executive Board member is entitled to PSUs equal to the
+equalization amount. The following graphic gives an example of
+how the equalization amount was derived, assuming a grant of
+€1,000 for the RSU Milestone Plan, a grant of €1,500 for the LTI
+2016 Plan, and a forfeiture of the grants on a pro rata temporis
+basis on December 31, 2019:
+The equalization amount is subject to:
+The change from the previous RSU Milestone Plan to the new
+LTI 2016 Plan required a transition rule in order to avoid
+unjustified disadvantages for Executive Board members. The
+disadvantage arises from the difference in the one-year vesting
+period in the RSU Milestone Plan in comparison to the four-year
+vesting period in the LTI 2016 Plan. In order to compensate for
+this disadvantage related to the vesting periods, Executive
+Board members who have participated in the RSU Milestone
+Plan will receive an individual equalization amount.
+2) For the definition, see the Early End-of-Service Undertakings section
+1) Example calculation with four tranches (grant allocation of 100%, stable share price from grant to vest, and no consideration of performance condition); Executive Board member's
+contract terminates after year four (December 31, 2019)
+Total 4-year: 18.75% forfeiture
+2019
+2017 2018
+2016
+forfeited grants
+37.5%
+12.5%
+0.0%
+4,148.5
+forfeited grants
+plus 50%
+■earned grants
+PSUs and RSUs are paid
+out
+Total 4-year: 37.5% forfeiture
+2018 2019
+2017
+2016
+75%
+25.0%
+-
+A target achievement of at least 60% of the non-IFRS
+constant currency operating profit target, and
+-
+-
+The maximum possible payout amount of the LTI is reached if all
+of the following conditions are cumulatively met:
+The maximum possible payout amount for the LTI tranche is
+468% of the contractual target amount.
+The maximum possible payout amount of the STI is reached
+when the target achievement of all financial KPIs is 175% and
+the target achievement of the discretionary element is 200%.
+This would amount to a total STI payout of 181.3%.
+The maximum compensation amount is capped at 369% (CEO)
+and 335% (Executive Board other than CEO) of the total target
+compensation. This would be achieved in the event of the
+maximum possible payout amount of the STI and the LTI, as
+follows:
+The minimum compensation amount reflects the fixed
+compensation amount and an LTI and STI payout of zero.
+Minimum and Maximum Compensation
+According to an amendment of the standard service contract for
+all Executive Board members implemented at the end of 2017,
+SAP has the contractual right to request that the Executive
+Board member returns any payments made from STI or LTI if it
+subsequently emerges that the payment was not justified in
+whole or in part because targets were not achieved at all or not
+achieved in the scope assumed when calculating the payment
+amount due on account of false information having been
+provided. In such case, the Executive Board member is obliged
+to repay to SAP the amount by which the payment actually
+made exceeds the payment amount due on the basis of the
+targets actually achieved. Such contractually agreed claim to
+repayment supplements the claim for restitution of unjustified
+enrichment pursuant to section 812 of the German Civil Code
+(BGB).
+Clawback Provisions
+36
+36
+35
+LTI 2016 Plan
+RSU Milestone Plan
+2019
+2018
+2017
+2016
+2015
+375
+750
+625
+1,125
+250
+1,000
+To Our Stakeholders | Compensation Report
+An ongoing employment relationship in 2016, 2017, and, in
+one case, in 2018.
+50%
+25%
+0%
+forfeited grants
+as at December 31, 2017
+0
+0% x 1000
+0%
+Hurdle is 50%
+40%
+-60% +100%
+-10% - (+50%) -60%
+-10%
++50%
+34
+34
+Final number of PSUs.
+Performance factor
+Difference
+Peer Group Index performance
+SAP share price performance
+Peer Group Index performs better than SAP share price;
+low hurdle triggered
+950
+95% x 1000
+95%
+-5% + 100%
+-5%
++5% - (+10%)
++10%
++5%
+Final number of PSUs
+Performance factor
+To Our Stakeholders | Compensation Report
+The grant amount for the LTI tranche has been set at its
+capped maximum of 120% of the contractual target amount.
+SAP's share price outperforms the Peer Group Index by at
+least 25 percentage points (reaching the capped maximum
+150% of the initial PSU allocation for that year).
+If an Executive Board member's service contract is terminated
+before the end of the third year following the year in which the
+Share Units were granted, both the PSUs and RSUs are forfeited
+in whole or in part, depending on the circumstances of the
+relevant resignation from office or termination of the service
+LTI Forfeiture Rules
+■earned grants
+Total 4-year: 100% forfeiture
+2018 2019
+2017
+2016
+100%
+100%
+100%
+100%
+forfeited grants
+Example Calculation¹)
+on a pro rata temporis
+basis
+PSUs and RSUs forfeit
+PSUs and RSUs forfeit
+in their entirety
+Change of
+control²)
+Executive Board member's service contract expires due to
+mutual consent, resignation, retirement, or death
+Executive Board member
+does not start working for
+an SAP competitor before
+to the end of the vesting
+period
++
+without cause
+Member resigns
+from office
+Executive Board
+Supervisory Board terminates the Executive Board
+member's service contract for cause
+Executive Board member
+starts working for an SAP
+competitor before the
+end of the vesting period
+without cause
+from office
+Member resigns
+Executive Board
+contract. In case PSUs and RSUs are forfeited in part, the
+percentage of the forfeiture is proportional to the four-year
+vesting period of each grant. This means that 25% of the grant is
+earned each year of the vesting period. Unearned grants are
+forfeited.
+Peer Group Index performance
+The SAP share price has at least tripled (corresponding to an
+average annual increase of approximately 32%) compared to
+the grant price (cap on share price development).
+The following graphic illustrates the relation of the fixed and
+performance-based compensation elements in the Executive
+Board members' target compensation for 2017 based on
+€ amounts, as well as the minimum and maximum possible
+compensation. The height of the bars is not indicative of the
+absolute compensation amount.
+836.5
+854.0
+836.5
+836.5
+836.5
+1,374.3 1,403.0
+(Max)
+(Min)
+2016¹)
+2017¹)
+2016¹)
+2017
+854.0
+2017
+Benefits Received
+Benefits Granted
+Benefits Received
+2017¹) 2016¹)
+Benefits Granted
+2016¹)
+2017
+(Max)
+1,374.3 1,403.0
+1,374.3 1,374.3
+Fixed compensation
+2017
+(Min)
+2017¹)
+Member of the Executive Board
+Robert Enslin
+Bill McDermott
+CEO
+2017¹)
+Fringe benefits²)
+1,271.9 1,271.9 1,271.9 1,625.7 1,271.9
+1,625.7
+Total
+6,029.8
+4,148.5
+SAP SOP 2011
+SAP SOP 2010
+5,787.6 9,244.7
+RSU Milestone
+Plan 2015
+2,641.3
+0 9,874.8
+2,555.7
+0 29,911.2 8,000.3
+7,741.2
+LTI 2016 Plan
+Multiyear variable
+compensation
+.......................
+compensation
+1,441.8 1,505.2 1,660.5
+1,328.0 1,204.6 1,328.0
+1,204.6 1,204.6
+0 2,297.4
+2,646.2 2,646.2 2,646.2 3,028.7 2,646.2 3,028.7 1,204.6
+2,093.7
+0 3,795.9 2,382.1 2,486.9 2,743.5 1,267.2
+One-year variable
+Total
+474.0
+368.1
+474.0
+368.1
+368.1
+368.1
+€ thousands
+We present the Executive Board compensation disclosures in
+accordance with the recommendations of the German
+Corporate Governance Code ("GCGC"). Furthermore, the tables
+below provide a reconciliation statement following the
+requirements of sections 314 and 315 of the German
+Commercial Code (Handelsgesetzbuch, or "HGB") as specified
+in the German Accounting Standards ("GAS 17"). Pursuant to
+the recommendations of the GCGC, the value of benefits
+granted for the year under review as well as the benefits
+received, that is, the amounts disbursed for the year under
+review, are disclosed below based on the reference tables
+recommended in the GCGC. In contrast to the disclosure rules
+stipulated in the German HGB and GAS 17, the GCGC includes
+the pension expense, that is, the service cost according to IAS
+19, in the Executive Board compensation and requires the
+additional disclosure of the target value for the one-year variable
+compensation and the maximum and minimum compensation
+amounts achievable for the variable compensation elements.
+Amount of Compensation for 2017
+The maximum target achievement of the financial KPIs and
+therefore the STI total target achievement for 2018 is 140%.
+(2017: 175% maximum target achievement of the financial
+KPIs and 181.3% STI total target achievement). This also
+reduces the maximum total compensation amount for 2018.
+2013
+2014
+2015
+2016
+2017
+Percentage
+STI Total Target Achievement
+Overview of the Relations Between Target and
+Payout for Performance-Based Compensation
+The total target achievements of STI reflect the relation between
+the target amount and the payout amount. The STIs for the
+years 2013 to 2016 were already paid out.
+Executive Board
+(other than CEO)
+CEO
+Max
+Target
+Min
+Max
+Target
+Min
+12%
+335%
+100%
+15%
+100%
+compensation
+Fixed
+■STI (short-term
+incentive)
+■LTI (long-term
+incentive)
+369%
+Compensation Scheme 2017
+88.2
+In the event of the maximum LTI payout for the entire Executive
+Board of €120 million in 2021, the shareholders would also
+benefit through the strong increase in market capitalization,
+which would mean an increase of at least €200 billion from 2017
+to 2021.
+104.4
+109.5
+The weighting of the financial targets is as follows: 40% New
+Cloud Bookings (at constant currencies), 35% Growth in
+Cloud and Software Revenue (non-IFRS, at constant
+currencies) and 25% growth of Operating Margin (non-IFRS,
+at constant currencies).
+-
+-
+Executive Board Members' Compensation
+German Corporate Governance Code
+The STI no longer includes a discretionary element. It is
+calculated solely on the basis of the three financial targets
+that were also part of the STI for 2017.
+-
+Under consideration of the feedback from the dialog between
+the Supervisory Board Chairman and investors, the Supervisory
+Board resolved in its February 21, 2018 meeting to change the
+structure of the Executive Board compensation for 2018
+compared to the 2017 structure described above. Changes were
+only made to the short-term, one-year compensation (STI) and
+are as follows:
+Changes to the Compensation
+Structure for 2018
+2) Consideration of individual adjustment factor in addition to target achievement 2015
+ranging between 31.62% and 37.38%
+"Consideration of theoretical payout amounts based on SAP's share price on December
+31, 2017
+131.83
+2013
+Tranche
+2014
+Tranche
+119.61
+240.73
+126.97
+107.76
+2015
+Tranche¹) 2)
+Tranche¹) Tranche
+2016
+2017
+LTI 2016 Plan
+RSU Milestone Plan 2015
+Percentage
+Relation between Target Amount and Payout
+Amount of the LTI
+The relation between the LTI target amounts for the 2015 to
+2017 tranches and the theoretical payout amounts are based on
+SAP's share price on December 31, 2017. The 2013 tranche
+discloses the relation between the respective target amount and
+the actual payout amount in May 2017. The 2014 tranche
+discloses the relation between the respective target amount and
+the payout amount scheduled for May 2018.
+To Our Stakeholders | Compensation Report
+93.4
+147.5
+Total
+700.0
+297.9 12,470.1 3,669.1 1,428.9
+700.0
+4,120.7
+39
+To Our Stakeholders | Compensation Report
+2) Insurance contributions, the private use of company cars and aircraft, benefits in kind, expenses for maintenance of two households, payments and related supplements for relocation
+upon appointment to the Executive Board, reimbursement of fees for the preparation of tax returns, tax gross ups according to local conditions and discrete payments arising through
+application of the fixed exchange-rate clause for 2015. The fringe benefits of Bill McDermott mainly consist of tax gross ups according to local conditions, discrete payments arising
+through application of the fixed exchange-rate clause for 2015 and expenses for maintenance of two households.
+GCGC
+606.0
+25,545.9
+26,387.2
+39,285.4
+45,242.9
+¹) The value of the fixed and one-year variable compensation is granted in U.S. dollars. For conversion purposes from U.S. dollars into euro, for fixed compensation the average exchange
+rate and for the one-year variable compensation the year-end exchange rate of the respective period applies.
+1,428.9
+3,669.1
+297.9 12,470.1
+4,120.7
+Total according to
+889.2
+44,353.7 38,679.4 25,498.0 24,939.9
+889.2
+606.0
+646.1
+646.1
+Service cost
+Plan assets change in 2016
+I
+156.0
+149.5
+DBO December 31, 2016
+116.7
+564.0
+1,459.2
+154.9
+870.9
+141.8
+257.9
+1,382.5
+199.2
+125.2
+76.7
+DBO change in 2016
+1,425.9
+26.9
+12.2
+4.3
+451.6
+Accrued January 1, 2016
+471.4
+205.8
+240.2
+211.9
+444.6
+1,459.2
+2,768.2
+143.1
+151.2
+164.5
+100.7
+Plan assets change in 2017
+422.7
+86.7
+141.3
+132.9
+117.0
+93.5
+-148.7
+DBO change in 2017
+1,732.8
+141.2
+97.0
+61.9
+-26.5
+25.4
+Accrued December 31, 2016
+December 31, 2016
+1,035.4
+116.7
+347.6
+389.7
+181.4
+Less plan assets market value
+257.9
+Less plan assets market value
+January 1, 2016
+Luka Mucic¹)
+232.7
+End-of-Service Benefits
+23,942
+220,561
+147,041
+367,602
+Total
+1,940
+62.61
+65.77
+18,221
+12,147
+30,368
+Regular End-of-Service Undertakings
+Steve Singh (until April 30, 2017)
+62.61
+65.77
+14,392
+9,595
+23,987
+Stefan Ries
+2,086
+64.57
+66.52
+19,154
+12,770
+31,924
+1,532
+Retirement Pension Plan
+The following retirement pension agreements apply to the
+individual members of the Executive Board:
+Adaire Fox-Martin, Michael Kleinemeier, Bernd Leukert, Luka
+Mucic, and Stefan Ries are entitled to receive a retirement
+252.4
+29.7
+1,382.5
+DBO January 1, 2016
+May 1, 2017)
+(CEO)
+Total
+Stefan Ries¹)
+159.1
+Bernd
+Leukert¹)
+Kleinemeier¹)
+Michael
+Adaire Fox-
+Martin" (from
+McDermott
+Bill
+€ thousands
+Total Defined Benefit Obligations (DBO) and the Total Accruals for Pension Obligations to Executive
+Board Members
+SAP made contributions to a third-party pension plan for Bill
+McDermott (2017: €686,200; 2016: €571,300), Robert Enslin
+(2017: €194,100; 2016: €34,700), and Jennifer Morgan
+(2017: €8,900). SAP's matching contributions are based on
+payments by Bill McDermott, Robert Enslin, and Jennifer
+Morgan into this pension plan.
+Qualified Retirement Plan" according to the U.S. Employee
+Retirement Income Security Act (ERISA). This "Non-
+Qualified" pension plan is a cash balance plan that provides
+either monthly pension payments or a lump sum on
+retirement. The pension becomes available from the
+beneficiary's 65th birthday. Subject to certain conditions, the
+plan also provides earlier payment or invalidity benefits. The
+"Non-Qualified" pension plan closed with effect from
+January 1, 2009. Interest continues to be accrued on the
+earned rights to benefits within this plan.
+-
+Bill McDermott has rights to future benefits under the portion
+of the pension plan for SAP America classified as "Non-
+60% of the retirement pension or vested disability pension
+entitlement at death. Entitlements are enforceable against
+SAP SE. Current pension payments are reviewed annually for
+adjustments and, if applicable, increased according to the
+surplus in the pension liability insurance. If service is ended
+before the retirement age of 62, pension entitlement is
+reduced in proportion as the actual length of service stands in
+relation to the maximum possible length of service. The
+applied retirement pension plan is contributory. The
+contribution is 4% of applicable compensation up to the
+applicable income threshold plus 14% of applicable
+compensation above the applicable income threshold. For
+this purpose, applicable compensation is 180% of annual
+base salary. The applicable income threshold is the statutory
+annual income threshold for the state pension plan in
+Germany (West), as amended from time to time.
+42
+42
+41
+To Our Stakeholders | Compensation Report
+pension when they reach the retirement age of 62 and retire
+from their Executive Board seat; or a disability pension
+depending on health examination if, before reaching the
+regular retirement age, they become subject to occupational
+disability or permanent incapacity. A surviving dependent's
+pension is paid on the death of a former member of the
+Executive Board. The disability pension is 100% of the vested
+retirement pension entitlement and is payable until the
+beneficiary's 62nd birthday, after which it is replaced by a
+retirement pension. The surviving dependent's pension is
+1,897.3
+718.6
+345.9
+1,310.5
+Bernd Leukert
+19,504
+1,869
+3/31/2019
+2,040
+3/31/2021
+1,376
+4/30/2020
+Jennifer Morgan (from May 1, 2017)
+2,200
+3/31/2021
+2,060
+Luka Mucic
+12/31/2019
+1,448
+4/30/2020
+Adaire Fox-Martin (from May 1,
+2017)
+2,426
+3/31/2021
+Robert Enslin
+6,085
+3/31/2021
+Payment¹)
+Bill McDermott (CEO)
+Each Executive Board member's contract includes a 12-month
+postcontractual non-compete agreement. During this non-
+compete period, Executive Board members receive abstention
+payments corresponding to 50% of their average contractual
+compensation as members. This average is calculated on the
+basis of the preceding three years. Any other occupational
+income generated by the Executive Board member is deducted
+from their compensation.
+Postcontractual Non-Compete Provisions
+Michael Kleinemeier
+Stefan Ries
+Total
+"For the purpose of this calculation, the following discount rates have been applied: Bill
+McDermott 0.16% (2016: 0.22%); Robert Enslin 0.16% (2016: 0.22%); Adaire
+Fox.Martin 0.01%; Michael Kleinemeier -0.01% (2016: -0.026%); Bernd Leukert 0.16%
+(2016: 0.22%); Jennifer Morgan 0.01%; Luka Mucic 0.16% (2016: 0.22%); Stefan Ries -
+0.09% (2016: -0.01%).
+Quantity of Share Units
+LTI 2016 Plan
+The table below shows Executive Board members' holdings, on
+December 31, 2017, of Share Units issued to them under the
+LTI 2016 plan.
+LTI 2016 Plan
+Members of the Executive Board hold or held share-based
+payment rights throughout the year under the LTI 2016 Plan, the
+RSU Milestone Plan 2015, and the SAP SOP 2010 (the last two
+were granted in previous years). For information about the
+terms and details of these programs, see the Notes to the
+Consolidated Financial Statements, Note (27).
+Executive Board Members' Holdings
+of Long-Term Incentives
+To Our Stakeholders | Compensation Report
+44
+In 2017, we paid pension benefits of €1,997,000 to Executive
+Board members who had retired before January 1, 2017 (2016:
+€1,667,000). At the end of the year, the DBO for former
+Executive Board members was €39,993,100 (2016:
+€33,935,000). Plan assets of €31,944,100 are available to meet
+these obligations (2016: €26,053,000).
+Payments to Former Executive Board
+Members
+Steve Singh resigned from his position as Executive Board
+member on his own accord with effect from April 30, 2017,
+therefore no severance payment was made. The
+postcontractual non-compete provision was canceled without
+compensation.
+Payments to Executive Board Members
+Retiring in 2017
+In case of permanent disability, the contract will end at the end
+of the quarter in which the permanent inability to work was
+determined. The Executive Board member receives, in addition
+to a potential disability pension under the retirement plan
+described above, the monthly basic salary (fixed compensation)
+for a further 12 months starting from the date the permanent
+disability is determined.
+Permanent Disability
+Abstention compensation for the postcontractual non-compete
+period as described above is also payable on early contract
+termination.
+Postcontractual Non-Compete Provisions
+An Executive Board member's contract can also be terminated
+before full term if their appointment as an Executive Board
+member of SAP SE is revoked in connection with a change of
+control.
+A control or profit transfer agreement is concluded with SAP
+SE as the dependent company.
+SAP SE merges with another company and becomes the
+subsumed entity;
+A third party is required to make a mandatory takeover offer
+to the shareholders of SAP SE under the German Securities
+Acquisition and Takeover Act;
+-
+If an Executive Board member's appointment to the Executive
+Board expires or ceases to exist because of, or as a
+consequence of, change or restructuring, or due to a change of
+control, SAP SE and each Executive Board member has the right
+to terminate the employment contract within eight weeks of the
+occurrence by giving six months' notice. A change of control is
+deemed to occur when:
+The standard contract for all Executive Board members
+provides that on termination before full term (for example, by
+the Company without cause where the member's appointment
+is revoked, where the member becomes occupationally
+disabled, or in connection with a change of control), SAP SE will
+pay to the member the outstanding part of the compensation
+target for the entire remainder of the term, appropriately
+discounted for early payment. Starting 2018, in accordance with
+the German Corporate Governance Code (GCGC), section 4.2.3,
+payments made to an Executive Board member due to early
+termination must not exceed twice the annual total
+compensation, or 150% of the severance payment cap in case of
+change of control. A member has no claim to that severance
+payment if he or she has not served SAP as a member of the
+Executive Board for at least one year or if he or she leaves SAP
+SE for reasons for which he or she is responsible. Upon the
+appointment of Adaire Fox-Martin and Jennifer Morgan to the
+Executive Board, the Supervisory Board abstained from the
+waiting period of one year in consideration of their long-term
+successful tenure with SAP.
+Severance Payments
+Early End-of-Service Undertakings
+To Our Stakeholders | Compensation Report
+43
+These are vested entitlements. To the extent that members
+continue to serve on the Executive Board and that therefore
+more contributions are made for them in the future, pensions
+actually payable at the scheduled retirement age will be higher
+than the amounts shown in the table.
+DBO December 31, 2017
+Non-Compete
+Abstention
+Contract Term
+Expires
+Annual Pension Entitlement
+To Our Stakeholders | Compensation Report
+The table below shows the annual pension entitlement earned
+during the Executive Board membership of each member of the
+Executive Board on reaching the scheduled retirement age of
+62, based on entitlements from SAP under performance-based
+and salary-linked plans.
+1) The values shown here only reflect the pension entitlements that Adaire Fox-Martin, Michael Kleinemeier, Bernd Leukert, Luka Mucic, and Stefan Ries will
+receive from the retirement pension plan for Executive Board members.
+1,436.9
+68.8
+95.2
+43.6
+-74.0
+-7.2
+1,310.5
+Accrued December 31, 2017
+€ thousands
+December 31, 2017
+275.8
+490.7
+540.9
+Gerhard Oswald (until December 31, 2016)
+100.7
+Less plan assets market value
+3,190.9
+344.6
+585.9
+584.5
+271.9
+93.5
+1,754.0
+Vested on
+December 31,
+Vested on
+December 31,
+€ thousands
+Net Present Values of the Postcontractual Non-
+Compete Abstention Payments
+Actual postcontractual non-compete payments will likely differ
+from these amounts depending on the time of departure and the
+compensation levels and target achievements at the time of
+departure.
+Their final average contractual compensation prior to their
+departure equals their compensation in 2017.
+The Executive Board member leaves SAP at the end of their
+respective current contract term.
+-
+The following table presents the theoretical amounts for the net
+present values of the postcontractual non-compete abstention
+payments. The calculation assumes the following:
+1) The rights shown here for Bill McDermott refer solely to rights under the pension plan
+for SAP America.
+3.6
+8.5
+Stefan Ries
+12.9
+18.1
+Luka Mucic
+14.0
+19.4
+Bernd Leukert
+5.2
+9.8
+Michael Kleinemeier
+2.9
+Adaire Fox-Martin (from May 1, 2017)
+106.5
+89.5
+Bill McDermott (CEO)¹)
+2016
+2017
+Net Present Value
+of Postcontractual
+2,477
+17,075
+66.52
+4,100.3
+0
+2,753.4
+Total compensation
+-606.0
+-889.2
+-8.9
+Less service cost
+compensation
+annual variable
+9,532.1
+8,564.6
+4,364.0
+1,131.0
+883.1
+992.9
+1,175.3
+992.9
+594.6
+Plus allocated actual
+............
+compensation
+variable target
+45.242.9 39,285.4
+-10,561.1 -9,130.5
+3.669.1
+-1,083.3
+4,120.7
+-1,267.2
+367.5
+3,734.0
+2,953.7
+3,221.0
+Share Units
+(40%)
+Total Share Units (RSU) Retention
+Grants for 2017
+The share-based payment amounts result from the following
+RSUS and PSUs under the LTI 2016 Plan.
+Share-Based Payment Grants
+To Our Stakeholders | Compensation Report
+40
+40
+(in € thousands)
+Employees
+including
+Executives
+Executives
+39
+111
+101
+4
+12
+923
+3,880
+11,209
+Average Annual
+Compensation
+Executive Board
+(other than CEO)
+CEO
+Ratio
+The vertical pay ratio compares the total benefits granted to the
+CEO and the Executive Board members other than CEO with the
+total benefits granted to the Executives and all employees
+collectively who were employed on December 31, 2017. In order
+to ensure comparability for total benefits granted, only fixed
+compensation, one-year and multiyear variable compensation
+are considered. The Executives comprise the first and second
+management levels below the Executive Board, that is, the
+Global Executive Team (GET) and the Senior Executive Team
+(SET).
+Vertical Pay Ratio
+42,357.2 39,081.0
+3,716.8
+2,916.5
+-845.9
+(PSU)
+Performance
+Share Units
+3.866.9
+-1,125.8
+4,233.2
+-1,125.8
+-34.7
+-194.1
+-571.3
+-686.2
+Less service cost
+compensation
+annual variable
+1,175.3
+992.9
+1,175.3
+992.9
+666.5
+Total compensation
+1,505.2
+2,486.9
+1,846.7
+Plus allocated actual
+compensation
+variable target
+4,627.8
+-1,125.8
+4,555.4
+-1,125.8
+4,329.3
+-1,125.8
+4,251.2
+-1,125.8
+0
+2,984.7
+-755.6
+5,221.6 5,445.8
+-1,267.2 -1,441.8
+1,117.7
+12,234.1 13,515.9
+4,878.0
+5,474.5
+-674.2
+Less granted annual
+0
+2,841.9
+Total according to GCGC
+2016
+2017
+2016
+2017
+2016
+2017
+2016
+2017
+2016
+2017
+Total Executive Board
+Steve Singh
+Stefan Ries
+Luka Mucic
+Jennifer Morgan
+€ thousands
+4,677.3
+4,422.5
+4,378.8
+4,118.3
+0
+2,895.6
+4,314.5
+-1,125.8
+Grant Value per
+RSU at Time of
+Grant
+Grant Value per
+PSU at Time of
+Grant
+Bill McDermott (CEO)
+€ thousands
+€
+€
+(60%)
+Quantity
+Quantity
+Quantity
+Total Grant
+Value at Time of
+Grant
+Grant Value per
+PSU at Time of
+Grant
+Grant Value per
+RSU at Time of
+Grant
+(PSU)
+Performance
+Share Units
+(RSU) Retention
+Share Units
+(40%)
+Robert Enslin
+Total Share Units
+25,723
+176,886
+117,929
+294,815
+Total
+2,556
+88.88
+83.60
+17,672
+11,782
+29,454
+Steve Singh (until April 30, 2017)
+Grants for 2016
+Michael Kleinemeier
+122,423
+48.969
+22,739
+15,159
+37,898
+Luka Mucic
+2,790
+64.57
+66.52
+25,612
+Year Granted
+42,687
+Bernd Leukert
+2,477
+64.57
+66.52
+22,739
+15,159
+37,898
+2,641
+64.57
+66.52
+24,250
+16,167
+40,417
+8,000
+64.57
+66.52
+73,454
+2,019
+88.88
+83.60
+13,959
+1,680
+93.76
+85.91
+11,123
+7,416
+18,539
+Adaire Fox-Martin (from May 1, 2017)
+2,556
+88.88
+83.60
+17,672
+11,782
+29,454
+Robert Enslin
+7,741
+88.88
+83.60
+53,530
+35,687
+89,217
+Bill McDermott (CEO)
+€ thousands
+€
+(60%)
+Quantity
+Quantity
+Quantity
+Total Grant
+Value at Time of
+Grant
+Michael Kleinemeier
+64.57
+27,619
+16,571
+9,306
+23,265
+Stefan Ries
+2,396
+88.88
+83.60
+16,571
+11,048
+27,619
+Luka Mucic
+1,680
+93.76
+85.91
+11,123
+7,416
+18,539
+Jennifer Morgan (from May 1, 2017)
+2,699
+88.88
+83.60
+18,665
+12,444
+31,109
+Bernd Leukert
+2,396
+88.88
+83.60
+11,048
+Holding on
+89,217
+Forfeited¹)
+11.0
+82.5
+Aicha Evans (from July 1, 2017)
+192.5
+27.5
+165.0
+198.0
+33.0
+165.0
+Martin Duffek
+203.5
+38.5
+165.0
+203.5
+38.5
+165.0
+Panagiotis Bissiritsas
+198.0
+33.0
+165.0
+198.0
+33.0
+165.0
+Pekka Ala-Pietilä
+253.0
+93.5
+ΝΑ
+NA
+NA
+165.0
+187.0
+22.0
+165.0
+Prof. Dr. Gesche Joost
+187.0
+22.0
+165.0
+187.0
+22.0
+165.0
+Andreas Hahn
+33.0
+209.0
+165.0
+209.0
+44.0
+165.0
+Prof. Dr. Wilhelm Haarmann
+187.0
+22.0
+165.0
+187.0
+22.0
+165.0
+Prof. Anja Feldmann
+44.0
+22.0
+220.0
+27.5
+Board Members
+Compensation for Supervisory
+As far as the law permits, SAP SE and its affiliated companies in
+Germany and elsewhere indemnify and hold harmless their
+respective directors and officers against and from the claims of
+third parties. To this end, we maintain directors' and officers'
+(D&O) group liability insurance. The policy is annual and is
+renewed from year to year. The insurance covers the personal
+We did not grant any compensation advance or credit to, or
+enter into any commitment for the benefit of, any member of
+our Executive Board in 2017 or the previous year.
+Executive Board: Other Information
+The expense is recognized in accordance with IFRS 2 (Share-
+Based Payments) and consists exclusively of obligations arising
+from Executive Board activities.
+11,539.8
+19,067.7
+Total
+367.5
+465.3
+1,676.5
+Steve Singh (until April 30, 2017)
+1,049.3
+Stefan Ries
+1,123.5
+2,059.0
+Luka Mucic
+309.7
+Jennifer Morgan (from May 1, 2017)
+Granted
+2,287.4
+Bernd Leukert
+635.2
+1,509.8
+Michael Kleinemeier
+Compensation System
+Supervisory Board members' compensation is governed by our
+Articles of Incorporation, section 16.
+Each member of the Supervisory Board receives, in addition to
+the reimbursement of their expenses, an annual basic
+compensation of €165,000. The chairperson receives €275,000
+and the deputy chairperson €220,000 annually. In addition, we
+reimburse members of the Supervisory Board for the value-
+added tax payable on their compensation.
+For membership of the Audit Committee, Supervisory Board
+members receive an additional fixed annual compensation of
+€16,500, and for membership of any other Supervisory Board
+committee €11,000, provided that the committee concerned
+has met in the year. The chairperson of the Audit Committee
+receives €27,500, and the chairpersons of the other
+committees receive €22,000. The fixed remuneration is payable
+after the end of the year.
+220.0
+Margret Klein-Magar (deputy chairperson)
+363.0
+88.0
+275.0
+363.0
+88.0
+275.0
+Prof. Dr. h.c. mult. Hasso Plattner (chairperson)
+tee Work
+tee Work
+for Commit-
+247.5
+Total
+Fixed Compen-
+sation
+for Commit-
+sation
+Total
+Fixed Compen- Compen-sation
+2016
+2017
+€ thousands
+Supervisory Board Members' Compensation in 2017
+To Our Stakeholders | Compensation Report
+47
+Any members of the Supervisory Board having served for less
+than the entire year receive one-twelfth of the annual
+remuneration for each month of service commenced. This also
+applies to the increased compensation of the chairperson and
+the deputy chairperson(s) and to the remuneration for the
+chairperson and the members of a committee.
+Compen-sation
+187.0
+Lars Lamadé
+165.0
+528.0
+3,135.0
+Total
+181.5
+16.5
+165.0
+181.5
+16.5
+165.0
+Reconciliation Reporting of Total Compensation Pursuant to Section 314(1)(6a) HGB in Connection with
+GAS 17
+€ thousands
+Bill McDermott
+Robert Enslin
+Adaire Fox-Martin
+Michael Kleinemeier
+Bernd Leukert
+2017
+2016
+2017
+2016
+2017
+2016
+2017
+2016
+2017
+3,663.0
+3,135.0
+517.0
+3,652.0
+49
+49
+To Our Stakeholders | Responsibility Statement
+Stefan Ries
+Luka Mucic
+Jennifer Morgan
+Bernd Leukert
+Michael Kleinemeier
+Christian Klein
+Adaire Fox-Martin
+Robert Enslin
+Bill McDermott
+2016
+Executive Board of SAP SE
+SAP SE
+Walldorf, February 21, 2018
+To the best of our knowledge, and in accordance with the
+applicable reporting principles, the Consolidated Financial
+Statements give a true and fair view of the assets, finances, and
+operating results of the SAP Group, and the management report
+of the Group and SAP SE includes a fair review of the
+development and performance of the business and the position
+of the Group and SAP SE, together with a description of the
+principal opportunities and risks associated with the expected
+development of the Group and SAP SE.
+Responsibility Statement
+To Our Stakeholders | Compensation Report
+48
+As far as the law permits, we indemnify Supervisory Board
+members against, and hold them harmless from, claims brought
+by third parties. To this end, we maintain directors' and officers'
+(D&O) group liability insurance. The 2017 D&O policy did not
+include an individual deductible for Supervisory Board members
+as envisaged in the German Corporate Governance Code
+(GCGC). Starting 2018, in accordance with section 3.8 of the
+GCGC, each member of the Supervisory Board will bear a
+deductible of at least 10% of any loss. The deductible is capped
+at 1.5 times a member's fixed annual compensation.
+Hasso Plattner, the chairperson of the Supervisory Board,
+entered into a consulting contract with SAP after joining the
+Supervisory Board in May 2003. The contract does not provide
+for any compensation. The only cost we incurred under the
+contract was the reimbursement of expenses.
+We did not grant any compensation advance or credit to, or
+enter into any commitment for the benefit of, any member of
+our Supervisory Board in 2017 or the previous year.
+Supervisory Board: Other
+Information
+We do not offer members of the Supervisory Board share-based
+payment for their Supervisory Board work. Any share-based
+payment awards received by employee-elected members relate
+to their position as SAP employees and not to their work on the
+Supervisory Board.
+In 2017, we received services from members of the Supervisory
+Board (including services from employee representatives on the
+Supervisory Board in their capacity as employees of SAP) in the
+amount of €1,269,700 (2016: €1,040,400). This amount
+includes fees paid in 2017 to Linklaters LLP in Frankfurt am
+Main, Germany (of which Supervisory Board member Wilhelm
+Haarmann is a partner), of €106,900 (2016: €0).
+Walldorf, Germany
+Total according to GCGC
+Less granted annual
+13,167.3
+-2,093.7
+192.5
+27.5
+165.0
+198.0
+33.0
+165.0
+187.0
+22.0
+165.0
+187.0
+22.0
+165.0
+Robert Schuschnig-Fowler
+Dr. Erhard Schipporeit
+198.0
+33.0
+165.0
+198.0
+33.0
+165.0
+Bernard Liautaud
+187.0
+22.0
+165.0
+187.0
+22.0
+Christine Regitz
+309.7
+165.0
+181.5
+13,982.4
+-2,382.1
+Prof. Dr.-Ing. Dr.-Ing. E.h. Klaus Wucherer
+176.0
+11.0
+165.0
+176.0
+11.0
+165.0
+Pierre Thiollet
+187.0
+22.0
+165.0
+16.5
+93.5
+82.5
+Jim Hagemann Snabe (until June 30, 2017)
+187.0
+22.0
+165.0
+187.0
+22.0
+165.0
+Dr. Sebastian Sick
+176.0
+11.0
+165.0
+11.0
+Adaire Fox-Martin (from May 1, 2017)
+1,237.2
+2,181.9
+0
+0
+0
+37,898
+2016
+27,619
+0
+16,571
+11,048
+2017
+Luka Mucic
+(from May 1, 2017)
+18,539
+0
+0
+11,123
+7,416
+0
+2017
+Jennifer Morgan
+42,687
+0
+0
+0
+42,687
+0
+37,898
+Stefan Ries
+2017
+20,266
+0
+0
+30,368
+2016
+1,185.8
+12,050
+27,035
+17,672
+11,782
+0
+2017
+2016
+(until April 30, 2017)
+23,987
+0
+0
+0
+23,987
+2016
+23,265
+0
+0
+13,959
+9,306
+0
+Steve Singh
+31,109
+0
+○
+40,417
+2016
+29,454
+0
+0
+17,672
+11,782
+0
+2017
+Robert Enslin
+122,423
+0
+0
+0
+0
+122,423
+2016
+0
+35,687
+2017
+December 31,
+Holding on
+Balanced
+Performance
+Share Units²)
+January 1, 2017 Retention Share Performance Share
+Units (40%)
+Units (60%)
+53,530
+2017
+Bill McDermott (CEO)
+0
+0
+0
+0
+18,665
+12,444
+0
+2017
+Bernd Leukert
+37,898
+0
+0
+0
+0
+37,898
+2016
+0
+27,619
+16,571
+11,048
+0
+2017
+Michael Kleinemeier
+(from May 1, 2017)
+18,539
+11,123
+7,416
+2017
+Adaire Fox-Martin
+40,417
+0
+10,102
+14,469
+335,678
+2010
+Bill McDermott
+(CEO)
+Quantity
+Quantity
+€
+Remaining
+Term (in
+Years)
+Quantity
+Price on
+Exercise Date
+Exercised
+Strike Price
+per Option
+Holding on
+January 1, 2017
+Year Granted
+Years)
+Remaining
+Term (in
+Holding on
+December 31, 2017
+SAP SOP 2010 Virtual Share Options
+The table below shows the Executive Board members' holdings,
+on December 31, 2017, of virtual share options issued to them
+under the SAP SOP 2010 since its inception. The strike price for
+an option is 115% of the base price. The issued options have a
+term of seven years and can only be exercised on specified
+dates after the vesting period. The options issued in 2010 were
+exercisable beginning in September 2014, and the options
+issued in 2011 were exercisable beginning in June 2015.
+SAP SOP 2010
+340,122
+Total
+408,259
+Total
+10,757
+0
+10,757
+135,714
+0.7
+40.80
+2011
+Robert Enslin
+6,525.3
+7,684.4
+Bill McDermott (CEO)
+2016
+2017
+€ thousands
+liability of the insured group for financial loss caused by its
+managerial acts and omissions. The current D&O policy includes
+an individual deductible for Executive Board members of SAP SE
+as required by section 93 (2) of the German Stock Corporation
+Act.
+Total Expense for Share-Based Payment
+Total expense for the share-based payment plans of Executive
+Board members was recognized as follows.
+Total Expense for Share-Based Payment
+To Our Stakeholders | Compensation Report
+2014
+46
+0
+248,140
+248,140
+Total
+0
+85.23
+0
+85.23
+135,714
+112,426
+48.33
+1.4
+112,426
+46
+41,130
+68,137
+2015
+59,488
+2014
+113,667
+113,667
+2015
+41,130
+Holding on December 31,
+Exercised
+Holding on January 1, 2017
+Year Granted
+Bill McDermott (CEO)
+Quantity of RSUs
+0
+RSU Milestone Plan 2015
+The table below shows the Executive Board members' holdings,
+on December 31, 2017, of RSUs issued to them under the RSU
+Milestone Plan 2015. The plan is a cash-settled long-term
+incentive scheme with a payout subsequent to a performance
+period of one year (after which the RSUs become non-
+forfeitable) and an additional holding period of three years. The
+RSU Milestone Plan 2015 consists of four plan tranches to be
+issued with respect to the calendar years 2012 through 2015.
+The RSUs granted in 2014 have a remaining term of 0.08 years;
+and the RSUs granted in 2015 have a remaining term of
+RSU Milestone Plan 2015
+45
+To Our Stakeholders | Compensation Report
+45
+2) To balance disadvantages from leaver rules under the LTI 2016 Plan
+1) Forfeiture according to leaver rules
+595,242
+12,050
+47,301
+176,886
+117,929
+1.08 years.
+59,488
+2017
+68,137
+Luka Mucic
+14,148
+0
+14,148
+2014
+2013
+0
+41,578
+2015
+Bernd Leukert
+5,221
+0
+5,221
+41,578
+Michael Kleinemeier
+2015
+68,137
+0
+Robert Enslin
+2015
+39.985
+Long-Term Incentives for the
+Supervisory Board
+39,985
+2014
+14,148
+0
+14,148
+0
+We conducted our audit of the consolidated financial
+statements and of the Group Management Report in
+accordance with Section 317 HGB and the EU Audit Regulation
+No. 537/2014 (referred to subsequently as "EU Audit
+Regulation") and in compliance with German Generally
+Accepted Standards for Financial Statement Audits
+promulgated by the Institut der Wirtschaftsprüfer [Institute of
+Public Auditors in Germany] (IDW) as well as in supplementary
+compliance with the International Standards on Auditing (ISAs)
+and guidelines of the Public Company Accounting Oversight
+Board (United States).
+Basis for the Opinions
+Pursuant to Section 322 (3) sentence 1 HGB, we declare that
+our audit has not led to any reservations relating to the legal
+compliance of the consolidated financial statements and of the
+Group Management Report.
+German language.
+1) The following translated auditor's report has been issued in
+the accompanying Group Management Report as a whole
+provides an appropriate view of the Group's position. In all
+material respects, this Group Management Report is
+consistent with the consolidated financial statements,
+complies with German legal requirements and appropriately
+presents the opportunities and risks of future development.
+In our opinion, on the basis of the knowledge obtained in the
+audit,
+-
+In addition, we have audited the combined group management
+report by the SAP Group and the management report of SAP
+SE, Walldorf ("Group Management Report") for the financial
+year from January 1, 2017 to December 31, 2017.
+We have audited the consolidated financial statements of SAP
+SE, Walldorf, and its subsidiaries (the Group), which comprise
+the consolidated statements of financial position as at
+December 31, 2017, consolidated income statements,
+consolidated statements of comprehensive income,
+consolidated statements of changes in equity and consolidated
+statements of cash flows for the financial year from January 1,
+2017, to December 31, 2017, and notes to the consolidated
+financial statements, including a summary of significant
+accounting policies.
+Opinions
+TO SAP SE, Walldorf
+Independent Auditor's Report¹)
+the accompanying consolidated financial statements comply,
+in all material respects, with the IFRSS as adopted by the EU
+and the additional requirements of German commercial law
+pursuant to Section 315e (1) HGB [Handelsgesetzbuch:
+German Commercial Code], as well as the IFRSS as adopted
+by the International Accounting Standards Board and, in
+compliance with these requirements, give a true and fair view
+of the assets, liabilities and financial position of the Group as
+at December 31, 2017, and of its financial performance for
+the financial year from January 1, 2017 to December 31, 2017,
+and
+Report on the Audit of the
+Consolidated Financial
+Statements and of the Group
+Management Report
+The German Public Auditor responsible for the engagement is
+Dr. Bert Böttcher.
+To Our Stakeholders | Independent Auditor's Report
+50
+Mannheim, February 21, 2018
+KPMG AG
+Wirtschaftsprüfungsgesellschaft
+[Original German version signed by:]
+Dr. Böttcher
+Wirtschaftsprüfer
+[German Public Auditor]
+Herold
+Wirtschaftsprüferin
+[German Public Auditor]
+56
+To Our Stakeholders | Independent Auditor's Report
+Combined Management Report
+Combined Management Report
+General Information About This Management Report.
+Overview of the SAP Group
+Strategy and Business Model..
+German Public Auditor Responsible
+for the Engagement
+In addition to the consolidated financial statements, we audited
+the financial statements of SAP SE and performed various
+financial statement audits at subsidiaries. Furthermore, other
+assurance services required by law or on a contractual basis
+were performed, such as an assurance engagement on selected
+qualitative and quantitative sustainability disclosures of the
+Integrated Report 2017, an EMIR audit pursuant to section 20 of
+German Securities Trading Act [WpHG] and audits of software
+products.
+In addition to the financial statement audit, we have provided to
+group entities the following services that are not disclosed in the
+consolidated financial statements or in the Group Management
+Report:
+We declare that the opinions expressed in this auditor's report
+are consistent with the additional report to the audit committee
+pursuant to Article 11 of the EU Audit Regulation (long-form
+audit report).
+Other Legal and Regulatory
+Requirements
+Report on Internal Control over
+Financial Reporting in the
+Consolidated Financial Statements
+pursuant to PCAOB
+Opinion on Internal Control over Financial
+Reporting in the Consolidated Financial
+Statements
+We have audited the internal control over financial reporting in
+the consolidated financial statements of SAP SE, Walldorf, and
+its subsidiaries in place as at December 31, 2017. This control
+system is based on criteria set out in the Internal Control -
+Integrated Framework of the Committee of Sponsoring
+Organizations of the Treadway Commission (COSO) (version of
+2013).
+In our opinion, SAP maintained, in all material respects, effective
+internal control over financial reporting in the consolidated
+financial statements as at December 31, 2017 based on the
+criteria set out in the Internal Control - Integrated Framework
+issued by COSO (in the version of 2013).
+Executive Board's and Supervisory Board's
+Responsibility for the Internal Control over
+Financial Reporting in the Consolidated
+Financial Statements
+SAP SE's Executive Board is responsible for maintaining an
+effective internal control over financial reporting in the
+consolidated financial statements and assessing its
+effectiveness, which is included in the Executive Board's report
+on the internal control over consolidated financial reporting.
+A company's internal control over financial reporting in the
+consolidated financial statements is a process designed to
+provide reasonable assurance regarding the reliability of
+financial reporting in the consolidated financial statements and
+the preparation of financial statements for external purposes in
+accordance with generally accepted accounting principles. A
+Products, Research & Development, and Services.
+company's internal control over financial reporting in the
+consolidated financial statements includes policies and
+procedures to (1) ensure an accounting system that in
+reasonable detail accurately and fairly reflects the transactions
+and dispositions of the company's assets, (2) provide
+reasonable assurance that transactions are recorded as
+necessary to permit preparation of financial statements in
+accordance with generally accepted accounting principles, and
+(3) provide reasonable assurance regarding prevention or
+timely detection of unauthorized acquisition, use or disposition
+of the company's assets that could have a material effect on the
+financial statements.
+Auditor's Responsibility for the Internal
+Control over Financial Reporting in the
+Consolidated Financial Statements
+Our responsibility is to express an opinion on the internal
+control over financial reporting in the consolidated financial
+statements based on our audit. We conducted our audit in
+accordance with the standards of the Public Company
+Accounting Oversight Board (United States). Those standards
+require that we plan and perform the audits to obtain
+reasonable assurance about whether effective internal control
+over financial reporting in the consolidated financial statements
+was maintained in all material respects. Our audit of internal
+control over financial reporting in the consolidated financial
+statements included obtaining an understanding of internal
+control over financial reporting, assessing the risk of material
+deficiencies in internal control, testing and evaluating the design
+and operating effectiveness of internal control based on this
+assessment, and performing such other procedures as we
+considered necessary in the circumstances.
+We believe that the audit evidence we have obtained is sufficient
+and appropriate to provide a basis for our opinion.
+Further Information pursuant to
+Article 10 of the EU Audit Regulation
+We were elected as group auditor by the annual general meeting
+on May 10, 2017. We were engaged by the Chairman of the Audit
+Committee of the Supervisory Board of SAP SE on July 12, 2017.
+To Our Stakeholders | Independent Auditor's Report
+55
+We have been the group auditor of SAP SE without interruption
+since the financial year 2002.
+Because of its inherent limitations, internal control over financial
+reporting may not prevent or detect material misstatements.
+Also, projections of any evaluation of effectiveness to future
+periods are subject to the risk that controls may become
+inadequate because of changes in conditions, or that the degree
+of compliance with the policies or procedures may deteriorate.
+The Supervisory Board is responsible for overseeing the
+Group's internal control over financial reporting in the
+consolidated financial statements
+Security, Privacy, and Data Protection..
+Customers..
+Performance Management System..
+57
+General Information About This
+Management Report
+Basis of Presentation
+This combined group management report by the SAP Group
+(collectively, “we,” “us,” “our," "SAP," "Group," or "Company")
+and the management report of SAP SE have been prepared in
+accordance with sections 289, 289a, 289f, 315, 315a, and 315d
+of the German Commercial Code and German Accounting
+Standards (GAS) No. 17 and 20. The management report is also
+a management commentary complying with the International
+Financial Reporting Standards (IFRS) Practice Statement
+"Management Commentary".
+German Commercial Code, sections 289b and 315b, require us
+to prepare, for both SAP SE and SAP Group, a non-financial
+statement within the management report or a non-financial
+report outside of the management report in which we report on
+social, environmental, and other non-financial matters. The
+required disclosures can but do not need to be a separate
+section in our management report. Instead, the information
+required can also be provided, in an integrated manner, in the
+different sections of the management report. SAP released a
+non-financial report outside of the combined management
+report but within our online integrated report with references to
+the sections of our combined management report. This non-
+financial report is available at
+http://www.sap.com/investors/sap-2017-combined-non-
+financial-report. We believe that this approach is best aligned
+with SAP's integrated reporting strategy, also taking into
+account that all non-financial information stipulated in the
+German Commercial Code, sections 315c and 289c, that is
+relevant to understand SAP's development, performance of the
+business, and the position of the Group and SAP SE is included
+in our combined management report.
+All of the information in this report relates to the situation as at
+December 31, 2017, or the fiscal year ended on that date, unless
+otherwise stated.
+Forward-Looking Statements
+54
+This management report contains forward-looking statements
+and information based on the beliefs of, and assumptions made
+by, our management using information currently available to
+them. Any statements contained in this report that are not
+historical facts are forward-looking statements as defined in the
+U.S. Private Securities Litigation Reform Act of 1995. We have
+based these forward-looking statements on our current
+The words "aim," "anticipate," "assume," "believe," "continue,"
+"could," "counting on," "is confident," "development,"
+“estimate," "expect," "forecast," "future trends," "guidance,"
+"intend," "may," "might," "outlook,” “plan,” “project,” “predict,"
+"seek," "should," "strategy," "want," "will," "would," and similar
+expressions as they relate to us are intended to identify such
+forward-looking statements. Such statements include, for
+example, those made in the Operating Results section, our
+quantitative and qualitative disclosures about market risk
+pursuant to the International Financial Reporting Standards
+(IFRS), namely IFRS 7 and related statements in our Notes to
+the Consolidated Financial Statements; Expected Developments
+and Opportunities section; Risk Management and Risks section;
+and other forward-looking information appearing in other parts
+of this report. To fully consider the factors that could affect our
+future financial results, both this report and our Annual Report
+on Form 20-F should be considered, as well as all of our other
+filings with the U.S. Securities and Exchange Commission (SEC).
+Readers are cautioned not to place undue reliance on these
+forward-looking statements, which speak only as of the date
+specified or the date of this report. We undertake no obligation
+to publicly update or revise any forward-looking statements as a
+result of new information that we receive about conditions that
+existed upon issuance of this report, future events, or otherwise
+unless we are required to do so by law.
+This report includes statistical data about the IT industry and
+global economic trends that comes from information published
+by sources including International Data Corporation (IDC),
+Gartner, the European Central Bank (ECB), and the International
+Monetary Fund (IMF). This type of data represents only the
+estimates of IDC, Gartner, ECB, IMF, and other sources of
+industry data. SAP does not adopt or endorse any of the
+statistical information provided by sources such as IDC, Gartner,
+ECB, IMF, or other similar sources that is contained in this
+58
+Combined Management Report | General Information About This Management Report
+report. The data from these sources is subject to risks and
+uncertainties, and subject to change based on various factors,
+including those described above, in the Risk Management and
+Risks section, and elsewhere in this report. These and other
+factors could cause our results to differ materially from those
+expressed in the estimates made by third parties and SAP. We
+caution readers not to place undue reliance on this data.
+Combined Management Report | General Information About This Management Report
+59
+59
+expectations, assumptions, and projections about future
+conditions and events. As a result, our forward-looking
+statements and information are subject to uncertainties and
+risks, many of which are beyond our control. If one or more of
+these uncertainties or risks materializes, or if management's
+underlying assumptions prove incorrect, our actual results could
+differ materially from those described in or inferred from our
+forward-looking statements and information. We describe these
+risks and uncertainties in the Risk Management and Risks
+section.
+From the matters communicated with the Supervisory Board,
+we determine those matters that were of most significance in
+the audit of the consolidated financial statements of the current
+period and are therefore the key audit matters. We describe
+these matters in our auditor's report, unless law or regulation
+precludes public disclosure about the matter.
+.137
+114
+Employees and Social Investments
+Energy and Emissions.
+Financial Performance: Review and Analysis.
+Corporate Governance Fundamentals.
+Business Conduct...
+Risk Management and Risks.
+Expected Developments and Opportunities.
+58
+116
+.60
+.65
+72
+.74
+.77
+.84
+.90
+.93
+112
+.61
+Our responsibilities under those requirements, principles and
+standards are further described in the "Auditor's
+Responsibilities for the Audit of the Consolidated Financial
+Statements and of the Group Management Report" section of
+our auditor's report. We are independent of the group entities in
+accordance with the requirements of European law and German
+commercial and professional law, and we have fulfilled our other
+German professional responsibilities in accordance with these
+requirements. In addition, in accordance with Article 10 (2) point
+(f) of the EU Audit Regulation, we declare that we have not
+provided non-audit services prohibited under Article 5 (1) of the
+EU Audit Regulation. We believe that the evidence we have
+obtained is sufficient and appropriate to provide a basis for our
+opinions on the consolidated financial statements and on the
+Group Management Report.
+may reasonably be thought to bear on our independence, and
+where applicable the related safeguards.
+We also provide the Supervisory Board with a statement that we
+have complied with relevant independence requirements, and
+communicate with them all relationships and other matters that
+529
+calculations. We also assessed the appropriateness of the
+related disclosures in the consolidated financial statements.
+On the implementation of the new Revenue Accounting and
+Reporting software solution and the related process changes we
+tested the design and operating effectiveness of the manual
+controls that were implemented to agree revenues processed
+through the Revenue Accounting and Reporting software
+solution to underlying source documentation. In this regard, we
+also assessed whether the reports used by SAP to perform the
+controls were complete and accurate and evaluated the results
+of management's testing. For the majority of software support
+revenue, we compared the actual support revenue with the
+support revenue that is expected based on last year's support
+revenue, the loss rate of last year's support contracts and the
+current year software sales that trigger additional support
+revenue. For all other significant revenue streams we selected
+samples to determine the completeness, accuracy and
+existence of revenue.
+On the disclosures relating to the expected impact of applying
+the new standard on revenue recognition we assessed whether
+the newly developed revenue recognition policies are in
+accordance with IFRS 15. We tested the internal controls over
+the estimation of the impact of these new policies and
+processes and assessed the completeness and accuracy of the
+estimates on the material differences to the existing policies.
+Our Observations
+SAP has developed an adequate framework for determining the
+accounting treatment for its revenue. For the vast majority of
+the software arrangements entered into during 2017, it was
+clear which of SAP's revenue recognition policies should be
+applied. Where there was room for interpretation, SAP's
+judgment was balanced and appropriate. SAP established
+processes and manual controls to ensure the completeness,
+accuracy and existence of revenue in the consolidated financial
+statements. The assumptions used in the estimation of the
+impact of applying the new revenue standard are reasonable.
+Measurement of the provision for income tax
+exposures
+Refer to note (3b) - Relevant Accounting Policies, note (3c) -
+Management Judgments and Sources of Estimation
+Uncertainty, note (10) - Income Taxes and Group Management
+Report, section Risk Management and Risks.
+The Financial Statement Risk
+SAP operates in multiple tax jurisdictions with complexities of
+transfer pricing, changing tax laws, and intercompany financing
+transactions. The determination of provisions for tax
+contingencies requires SAP to make judgments on tax issues
+and develop estimates regarding SAP's exposure to tax risks.
+SAP regularly engages external experts to provide tax opinions
+to support their own risk assessment. The risk for the
+consolidated financial statements relates to the
+appropriateness of the measurement of the provision for
+income tax exposures.
+Our Response
+We involved our tax specialists to evaluate the tax opinions of
+the external experts SAP engaged. We assessed the
+competency, skill and objectivity of the external experts as well
+as the opinions they prepared. We evaluated correspondence
+with the responsible tax authorities as well as the assumptions
+used to determine tax provisions based on our knowledge and
+experiences of the current application of the relevant legislation
+by authorities and courts. Through our international network we
+involved tax specialists with the appropriate knowledge on the
+respective local tax rules and regulations who reported the
+results of their assessment to us.
+Our Observations
+SAP's judgments as to the amounts recognized as tax
+provisions for income tax exposures as at December 31, 2017
+are appropriate.
+Recoverability of the carrying amount of goodwill
+for SAP Business Network
+Refer to note (3c) - Management Judgments and Sources of
+Estimation Uncertainty, note (15) - Goodwill and Intangible
+Assets.
+11511
+To Our Stakeholders | Independent Auditor's Report
+testing selections to corroborate the data underlying SAP's
+We evaluated the fair value assumptions for each deliverable
+that typically qualifies as a separate unit of accounting in SAP's
+multiple-element arrangements by assessing the
+appropriateness of the methodology applied, testing
+mathematical accuracy of the underlying calculations and
+Key Audit Matters in the Audit of
+Consolidated Financial Statements
+Key audit matters are those matters that, in our professional
+judgment, were of most significance in our audit of the
+consolidated financial statements for the financial year from
+January 1, 2017 to December 31, 2017. These matters were
+addressed in the context of our audit of the consolidated
+financial statements as a whole, and in forming our opinion
+thereon, we do not provide a separate opinion on these matters.
+Revenue
+Refer to note (3b) - Relevant Accounting Policies, note (3c) –
+Management Judgments and Sources of Estimation
+Uncertainty, note (3e) - New Accounting Standards Not Yet
+Adopted, and note (5) - Revenue and Group Management
+Report, section Risk Management and Risks.
+The Financial Statement Risk
+In the financial year 2017 SAP generated revenue of EUR 23.5
+billion, of which EUR 15.8 billion relate to revenues from
+software licenses and support. For sales of software licenses
+and support services IFRS do not provide specific guidance on
+recognizing revenue. SAP defined detailed policies, procedures
+and processes to manage the accounting for its software
+arrangements, which are also described in the notes. SAP's
+revenue generating transactions and, consequently, SAP's
+revenue recognition policies are complex. Applying them often
+requires significant judgments, such as in the allocation of
+revenue from customer contracts to multiple deliverables and
+the application of the revenue recognition criteria under IAS 18,
+e.g., assessing whether the significant risks and rewards have
+been transferred to the buyer and whether the amount of
+revenue can be measured reliably. The risk for the consolidated
+financial statements relates to the existence and valuation of
+revenue.
+SAP derives its revenue from different revenue classes. In
+anticipation of the forthcoming adoption of IFRS 15, SAP made
+changes to its revenue accounting processes including the
+implementation of a new Revenue Accounting and Reporting
+software solution which aimed at increasing the level of
+automation in SAP's revenue accounting processes. The
+implementation of the software solution and the related process
+changes bears a significant risk of error. In response to this
+significant risk of error, SAP established processes and manual
+controls to ensure the completeness, accuracy and existence of
+revenue in the consolidated financial statements. An internal
+task force was established by SAP to prevent and remediate
+issues. The additional processes and controls focused on
+agreeing revenues processed through the Revenue Accounting
+and Reporting software solution to underlying source
+documentation such as sales orders or billing plans. Thresholds
+The Financial Statement Risk
+were determined to focus the control performance on
+significant deviations.
+Our Response
+On software revenue recognition, we evaluated the compliance
+of SAP's accounting policies with the IFRS Framework and the
+individual applicable IFRSS. We considered the design and
+tested the operating effectiveness of the key controls
+implemented by SAP on the identification of multiple-element
+arrangements, the identification of deliverables and separate
+units of accounting and the identification of fair value for all
+relevant deliverables other than on premise software (due to the
+residual method being applied). For all software arrangements
+that we considered to be individually significant and for a
+sample of the remaining software arrangements, we also:
+-
+-
+obtained an understanding of the transaction through
+inspection of the underlying contractual agreements and
+other related documents as well as discussions with SAP's
+accounting and/or sales representatives;
+obtained external confirmations of the key terms and
+conditions from the respective customers to corroborate the
+information relevant for the accounting that we received
+from SAP;
+assessed whether SAP appropriately identified all separate
+units of accounting and allocated the transaction price to
+such units based on either the relative fair value method or
+the residual method, as applicable, using the established fair
+values; and
+evaluated whether the revenue recognition policies
+applicable to each separate unit of accounting were applied
+appropriately to ensure that revenue is recognized in the
+correct period.
+The new revenue recognition standard (IFRS 15) is effective only
+beginning January 1, 2018. But IAS 8 stipulates for the
+consolidated financial statements preceding its effective date
+disclosures about the to-be adopted standard, including known
+or reasonably estimable information relevant to assessing the
+possible impact of applying the new standard in the year of
+initial application. SAP developed new revenue recognition
+policies reflecting the requirements of IFRS 15 and adjusted the
+relevant business processes to these new policies. The
+disclosures about the expected impact require estimates which
+are based on various assumptions. The financial statement risk
+for the consolidated financial statements relates to the
+reasonableness of the estimate of the expected impact.
+SAP performed the annual goodwill impairment test at the level
+of its operating segments as there are no lower levels within
+SAP at which goodwill is monitored for internal management
+purposes. SAP's acquisitions executed in prior periods led to a
+material goodwill in the SAP Business Network Segment in
+which SAP mainly develops, markets and sells its SAP Ariba,
+SAP Fieldglass and SAP Concur cloud offerings. Goodwill
+allocated to the SAP Business Network is material as of
+December 31, 2017 (15.6% of consolidated balance sheet total).
+The respective impairment test is complex and involves
+significant judgment. The key assumptions relate to the
+budgeted revenue growth, budgeted operating margins, pre-tax
+discount rates including the determination of the peer group
+and terminal growth rates.
+The risk for the consolidated financial statements relates to the
+appropriateness of the determination and recognition of
+impairments.
+Our Response
+54
+54
+Auditor's Responsibilities for the Audit of
+the Consolidated Financial Statements and
+of the Group Management Report
+Our objectives are to obtain reasonable assurance about
+whether the consolidated financial statements as a whole are
+free from material misstatement, whether due to fraud or error,
+and whether the Group Management Report as a whole provides
+an appropriate view of the Group's position and, in all material
+respects, is consistent with the consolidated financial
+statements and the knowledge obtained in the audit, complies
+with the German legal requirements and appropriately presents
+the opportunities and risks of future development, as well as to
+issue an auditor's report that includes our opinions on the
+consolidated financial statements and on the Group
+Management Report.
+Reasonable assurance is a high level of assurance, but is not a
+guarantee that an audit conducted in accordance with Section
+317 HGB and the EU Audit Regulation and in compliance with
+German Generally Accepted Standards for Financial Statement
+Audits promulgated by the Institut der Wirtschaftsprüfer (IDW)
+as well as in supplementary compliance with ISA and guidelines
+of the Public Company Accounting Oversight Board (United
+States) will always detect a material misstatement.
+Misstatements can arise from fraud or error and are considered
+material if, individually or in the aggregate, they could
+reasonably be expected to influence the economic decisions of
+users taken on the basis of these consolidated financial
+statements and this Group Management Report.
+We exercise professional judgment and maintain professional
+skepticism throughout the audit. We also:
+-
+Identify and assess the risks of material misstatement of the
+consolidated financial statements and of the Group
+Management Report, whether due to fraud or error, design
+and perform audit procedures responsive to those risks, and
+obtain audit evidence that is sufficient and appropriate to
+provide a basis for our opinions. The risk of not detecting a
+material misstatement resulting from fraud is higher than for
+one resulting from error, as fraud may involve collusion,
+forgery, intentional omissions, misrepresentations, or the
+override of internal control.
+53
+Obtain an understanding of internal control relevant to the
+audit of the consolidated financial statements and of
+arrangements and measures (systems) relevant to the audit
+of the Group Management Report in order to design audit
+procedures that are appropriate in the circumstances.
+Evaluate the appropriateness of accounting policies used by
+the Executive Board and the reasonableness of accounting
+estimates made by the Executive Board and related
+disclosures.
+-
+-
+the audit evidence obtained, whether a material uncertainty
+exists related to events or conditions that may cast
+significant doubt on the Group's ability to continue as a going
+concern. If we conclude that a material uncertainty exists, we
+are required to draw attention in the auditor's report to the
+related disclosures in the consolidated financial statements
+and in the Group Management Report or, if such disclosures
+are inadequate, to modify our respective opinions. Our
+conclusions are based on the audit evidence obtained up to
+the date of our auditor's report. However, future events or
+conditions may cause the Group to cease to be able to
+continue as a going concern.
+Evaluate the overall presentation, structure and content of
+the consolidated financial statements, including the
+disclosures, and whether the consolidated financial
+statements present the underlying transactions and events
+in a manner that the consolidated financial statements give a
+true and fair view of the assets, liabilities, financial position
+and financial performance of the Group in compliance with
+IFRSS as adopted by the EU as well as with IFRSS as adopted
+by the International Accounting Standards Board and the
+additional requirements of German commercial law pursuant
+to Section 315e(1) HGB.
+Obtain sufficient appropriate audit evidence regarding the
+financial information of the entities or business activities
+within the Group to express opinions on the consolidated
+financial statements and on the Group Management Report.
+We are responsible for the direction, supervision and
+performance of the group audit. We remain solely
+responsible for our opinions.
+Evaluate the consistency of the Group Management Report
+with the consolidated financial statements, its conformity
+with German law, and the view of the Group's position it
+provides.
+Perform audit procedures on the prospective information
+presented by the Executive Board in the Group Management
+Report. On the basis of sufficient appropriate audit evidence
+we evaluate, in particular, the significant assumptions used
+by Executive Board as a basis for the prospective
+information, and evaluate the proper derivation of the
+prospective information from these assumptions. We do not
+express a separate opinion on the prospective information
+and on the assumptions used as a basis. There is a
+substantial unavoidable risk that future events will differ
+materially from the prospective information.
+We communicate with the Supervisory Board regarding, among
+other matters, the planned scope and timing of the audit and
+significant audit findings, including any significant deficiencies in
+internal control that we identify during our audit.
+Conclude on the appropriateness of the Executive Board's
+use of the going concern basis of accounting and, based on
+To Our Stakeholders | Independent Auditor's Report
+To Our Stakeholders | Independent Auditor's Report
+Furthermore, the Executive Board is responsible for the
+preparation of the Group Management Report, that as a whole,
+provides an appropriate view of the Group's position and is, in all
+material respects, consistent with the consolidated financial
+statements, complies with the German legal requirements and
+appropriately presents the opportunities and risks of future
+development. In addition, the Executive Board is responsible for
+such arrangements and measures (systems) as the Executive
+Board has considered necessary to enable the preparation of
+the Group Management Report that is in accordance with the
+applicable German legal requirements, the German Accounting
+Standards number 17 and 20 (GAS 17, GAS 20) and the
+International Financial Reporting Standard (IFRS) Practice
+Statement Management Commentary and to be able to provide
+sufficient appropriate evidence for the assertions in the Group
+Management Report.
+SAP has implemented controls designed to ensure that the
+calculation of the recoverable amount for SAP Business
+Network is appropriate. We tested the design and operating
+To Our Stakeholders | Independent Auditor's Report
+effectiveness of these controls. We involved our valuation
+specialists to assess the valuation methodologies applied and
+key assumptions used in measuring the fair value less cost of
+disposal and to test the mathematical accuracy of the
+discounted cash flows and other valuation models. We
+evaluated SAP's assumptions by comparing the fair value
+estimates to our own expectations and performed independent
+sensitivity analysis for each key assumption.
+Our Observations
+The approaches underlying the impairment testing of the
+goodwill are appropriate and consistent with the applicable
+accounting and valuation principles. SAP applied a balanced set
+of assumptions in determining the recoverable amount.
+Other Information
+The Executive Board of SAP SE is responsible for the other
+information. The other information comprises the Integrated
+Report published on the website of SAP SE, including the Annual
+Report on Form 20-F, except for the audited consolidated
+financial statements and the Group Management Report and
+our auditor's report thereon.
+Our opinions on the consolidated financial statements and on
+the Group Management Report do not cover the other
+information, and consequently we do not express, an opinion or
+any other form of assurance conclusion thereon.
+The Supervisory Board is responsible for overseeing the
+Group's financial reporting process for the preparation of the
+consolidated financial statements and of the Group
+Management Report.
+In connection with our audit, our responsibility is to read the
+other information and, in so doing, to consider whether the
+other information
+is materially inconsistent with the consolidated financial
+statements, with the Group Management Report or our
+knowledge obtained in the audit, or
+otherwise appears to be materially misstated.
+In addition, we were engaged to perform an independent
+assurance engagement on selected qualitative and quantitative
+sustainability disclosures of the integrated report 2017. In
+regard to the nature, extent and conclusions if this independent
+assurance engagement we refer to our Independence
+Assurance Report dated on February 21, 2018.
+Responsibilities of the Executive Board and
+the Supervisory Board for the Consolidated
+Financial Statements and the Group
+Management Report
+The Executive Board of SAP SE is responsible for the
+preparation of the consolidated financial statements that
+comply, in all material respects, with IFRSS as adopted by the
+EU and the additional requirements of German commercial law
+pursuant to Section 315e (1) HGB as well as IFRS as adopted by
+the International Accounting Standards Board and that the
+consolidated financial statements, in compliance with these
+requirements, give a true and fair view of the assets, liabilities,
+financial position, and financial performance of the Group. In
+addition, the Executive Board is responsible for such internal
+control as the Executive Board has determined necessary to
+enable the preparation of consolidated financial statements that
+are free from material misstatement, whether due to fraud or
+error.
+In preparing the consolidated financial statements, the
+Executive Board is responsible for assessing the Group's ability
+to continue as a going concern. The Executive Board also has
+the responsibility for disclosing, as applicable, matters related
+to going concern. In addition, the Executive Board is responsible
+for financial reporting based on the going concern basis of
+accounting unless there is an intention to liquidate the Group or
+to cease operations, or there is no realistic alternative but to do
+SO.
+-
+50
+If, based on the work we have performed, we conclude that
+there is a material misstatement of this other information, we
+are required to report that fact. We have nothing to report in this
+regard.
+Manufacturing &
+Supply Chain
+Extend and customize cloud and on-premise
+In the digital economy, companies need both standard
+applications and a highly flexible platform that allows them to:
+SAP Cloud Platform
+In September 2017, SAP launched SAP Data Hub. The solution
+enables businesses to manage data from numerous sources,
+SAP or third-party, without having to centralize data into one
+location. SAP Data Hub allows users to process data "in flow,"
+for example, while the data is being recorded to the data store,
+or while they are preparing the data for use in machine learning.
+It also provides enterprise data governance to see who changed
+or accessed the data. The solution lets companies safely and
+effectively move and share their data to enable agile data
+operations across the enterprise. SAP Data Hub is also part of
+the SAP Leonardo Data Intelligence capability.
+SAP Data Hub
+for data capture and retrieval, and analytical processing for
+business intelligence and reporting. It reduces time-consuming
+database and data management tasks and underpins intelligent
+applications that use advanced analytic processing. It includes
+features such as text analysis, multitenant database containers
+to support multiple isolated databases in a single SAP HANA
+system, as well as external machine learning libraries.
+SAP applications
+R&D expense in 2017 (IFRS)
+SAP HANA is our flagship in-memory database. It enables
+businesses to process and analyze live data and make business
+decisions based on the most up-to-date information, a
+requirement of today's digital economy. The innovative
+architecture in SAP HANA allows both transactional processing
+SAP HANA
+Digital Platform
+Cloud
+Platform
+SAP Leonardo: Al/ML | IoT | Analytics
+Digital Platform
+Data
+Management
+€3,352 M
+Develop new applications for different processes
+Integrate cloud and on-premise applications
+SAP Cloud Platform is an enterprise platform as a service
+(PaaS), an environment where companies can build, test, run,
+manage, and expand software applications in the cloud. It offers
+comprehensive capabilities to help business users and
+developers create better, more agile applications in less time.
+Customers can apply, among other things, mobile services,
+advanced analytic tools, state-of-the-art authentication
+mechanisms, and social functionality. For maximum flexibility,
+portability, and agility, we use open source technologies. SAP
+Cloud Platform enables businesses to connect and integrate
+Machine learning allows companies to augment human
+capabilities and automate repetitive tasks. The technology is an
+essential part of the SAP Leonardo digital innovation system,
+empowering enterprises to improve processes. Currently,
+several SAP Leonardo Machine Learning solutions are in
+productive use. We have already embedded machine learning
+capabilities into a wide range of applications across the SAP
+portfolio. Customers can also build their own machine learning
+models using SAP Leonardo Machine Learning Foundation.
+SAP Leonardo Machine Learning
+The SAP Leonardo digital innovation system enables customers
+to make business sense and opportunity of disruptive
+technologies such as advanced analytics, Big Data, Internet of
+Things (IoT), and machine learning. It does so with a proven
+methodology that brings together the customer vision, SAP's
+process and industry knowledge, and our software capabilities.
+SAP Cloud Platform provides the environment for applications
+to consume these disruptive technologies.
+SAP Leonardo
+Intelligent Systems
+SAP BW/4HANA is a data warehouse solution built entirely on
+SAP HANA. It offers a unique real-time analytics layer, which can
+query the database directly instead of processing data at the
+application layer like traditional analytical engines do. It
+integrates data from across an organization to deliver key
+business intelligence. SAP BW/4HANA provides customers with
+enhanced data modelling and governance, so that they can
+manage the availability, integrity, and security of their data. The
+solution can be connected to various data sources, including
+SAP or unstructured third-party data, such as Hadoop.
+SAP BW/4HANA
+SAP Cloud Platform allows customers to choose from a
+selection of infrastructure-as-a-service (laaS) providers, and
+today many enterprise customers are choosing more than one
+provider. SAP has partnered with Amazon, Google, and
+Microsoft so that our customers have the choice of running their
+applications in an SAP or a third-party data center or in a
+combination thereof.
+Multi-Cloud Strategy
+best-of-breed applications to our digital core and to custom-
+built solutions.
+66
+99
+59
+65
+Combined Management Report | Products, Research & Development, and Services
+HIN
+SAP Leonardo Blockchain
+Network & Spend
+Management
+Intelligent
+Insights
+The Intelligent Enterprise
+Opportunity in a Time of Disruption
+We are living in a time of unprecedented digital disruption that is
+transforming societies globally and changing how we work and
+interact with each other. Innovations in technology, such as the
+Internet of Things (IoT), Big Data, blockchain, artificial
+intelligence, and machine learning are disrupting entire
+industries. In this era, the key question our customers are asking
+is how they can apply these technological innovations to not just
+survive but also to thrive.
+Technological innovation is necessary to tackle some of the
+world's most intractable problems, which are often driven by
+complexity. With innovative solutions from SAP, we can
+empower our customers to create a better economy, society,
+and environment for the world. Together with our vibrant
+ecosystem of partners, we have an opportunity to execute our
+vision to "help the world run better and improve people's lives."
+We continue to help our more than 378,000 customers run at
+their best. Our strategy to be the most innovative cloud
+company powered by SAP HANA, focuses on how we can help
+our customers innovate faster and drive successful business
+outcomes.
+Strategy and Business Model
+Our Vision for the Intelligent
+Enterprise
+As the world's largest enterprise software company, SAP offers
+perspective on the massive scale and power of data. Our
+customers have a vast amount of enterprise data assets flowing
+through our SAP ERP and cloud applications and business
+networks every day. Our enterprise resource planning
+applications touch 76% of global transaction revenue, we run
+the world's largest business network with over US$1 trillion in
+commerce annually, and we have over 150 million users of our
+cloud applications.
+SAP software and technologies can deliver deep value to our
+customers by providing the tools to harness the power of the
+data flowing through their systems. Our vision for the intelligent
+enterprise is an event-driven, real-time business powered by
+intelligent applications and platforms. In this vision, enterprise
+data sits at the core of a virtuous cycle whereby:
+-
+Enterprises will combine proprietary data assets from their
+internal systems of record with real-time, external data feeds
+to train intelligent algorithms.
+Intelligent algorithms will be embedded into core business
+processes to enable enterprises to increase their awareness
+of events and respond in real time.
+In the digital era, data is the "new currency" in an enterprise.
+Businesses that are able to harness their data faster and more
+effectively will be the ones that succeed through disruption.
+Combined Management Report | Overview of the SAP Group
+60
+60
+Business
+Transactions
+Intelligent Systems
+Digital
+Core
+Intelligent Cloud Suite
+Overview of the
+SAP Group
+>76%
+>378,000
+of worldwide transaction revenue touches SAP customers worldwide
+an SAP system
+>180
+countries where SAP customers are
+located
+Our vision is to help the world run better and improve people's
+lives. Together with our broad ecosystem of partners, this
+comes to life as we help our customers master complexity as
+well as innovate and transform to become sustainable intelligent
+businesses. SAP drives innovation in numerous fields of the
+digital economy by using technology such as Internet of Things,
+machine learning, and artificial intelligence. For more
+information about our vision and strategy, see the Strategy and
+Business Mode/section.
+Founded in 1972, SAP is a global company headquartered in
+Walldorf, Germany. Our legal corporate name is SAP SE. SAP is
+the market leader in enterprise application software² and also
+the leading analytics and business intelligence company.
+Globally, more than 76% of all transaction revenue touches an
+SAP system. In 2017, SAP was ranked as the most sustainable
+software company in the Dow Jones Sustainability Index for the
+eleventh consecutive year. With more than 378,000 customers
+in more than 180 countries, the SAP Group has a global
+presence and employs more than 88,000 people.
+Our ordinary shares are listed on the Frankfurt Stock Exchange.
+American Depositary Receipts (ADRs) representing SAP SE
+ordinary shares are listed on the New York Stock Exchange
+(NYSE). SAP is a member of Germany's DAX, the Dow Jones
+EURO STOXX 50 and the Dow Jones Sustainability Indexes. As
+at December 31, 2017, SAP was the most valuable company in
+the DAX based on market capitalization and the 60th most
+valuable company in the world.
+As at December 31, 2017, SAP SE directly or indirectly controlled
+a worldwide group of 227 subsidiaries that develop, distribute,
+and provide our products, solutions, and services. For a list of
+our subsidiaries, associates, and other equity investments, see
+the Notes to the Consolidated Financial Statements, Note (34).
+2 Enterprise application software is computer software specifically developed to support and automate
+business processes.
+People
+Engagement
+As the cycle repeats itself, enterprises will produce even
+richer datasets based on business outcomes that can be
+used to train the next generation of increasingly intelligent
+algorithms.
+Blockchain technology is a distributed digital ledger where
+transactions can be securely shared among independent
+parties. It is most familiar as the underlying technology for
+cryptocurrencies but it has the potential to be the foundation for
+a new type of collaborative business. We intend to use
+blockchain technology to build a new generation of transactional
+SAP Leonardo Internet of Things
+Combined Management Report | Products, Research & Development, and Services
+In 2017, the SAP Fieldglass solutions connected customers with
+4.3 million workers and more than 89,000 suppliers in more
+than 180 countries. Its open API framework makes it easy for
+organizations to connect to other systems and solutions to
+transform how work gets done. To further help our customers,
+we introduced the flex edition of SAP Fieldglass Vendor
+Management System designed for the midmarket. In addition,
+SAP Fieldglass Live Insights, a machine-learning-based industry
+benchmarking and simulation service, enables users to assess
+external talent scenarios using anonymized and aggregated
+data.
+SAP Fieldglass solutions are cloud-based applications enabling
+external workforce management and services procurement. The
+SAP Fieldglass Vendor Management System, an external talent
+management system, helps organizations find, engage, and
+manage all types of flexible resources - including contingent
+workers, statement of work-based consultants, freelancers, and
+more.
+SAP Fieldglass Solutions
+Our cloud applications help customers manage spend across
+their entire organization, from the sourcing of indirect goods to
+direct materials and services with SAP Ariba solutions and the
+online marketplace Ariba Network, as well as SAP Fieldglass
+solutions for services procurement, and SAP Concur solutions
+for travel and expense management. Built on open platforms, all
+of our cloud applications work together seamlessly, enabling
+customers to use our entire portfolio or choose the specific
+solutions that address their specific needs.
+Spend Management
+SAP Ariba Solutions
+SAP SuccessFactors solutions help manage the core employee
+workforce, but organizations also need to manage flexible
+external talent such as freelancers or consultants. With
+seamlessly integrated SAP Fieldglass solutions for external
+workforce management and services procurement, we deliver a
+total workforce management solution.
+and retain their best talent. SAP SuccessFactors solutions
+integrate with companies' internal and external databases and
+software, including SAP S/4 HANA.
+SAP SuccessFactors HCM cloud software is used by more than
+6,400 customers in over 200 countries and territories. The core
+HR and talent management solutions reach more than 93 million
+users. Our development approach ensures that our solutions are
+optimized for different devices to provide the best user
+experience. We deliver SAP SuccessFactors HCM solutions as a
+complete and innovative digital HR suite that addresses all
+aspects of HR, from administration, payroll, and benefits to
+talent management and collaboration across the employee
+journey. They are designed to help companies attract, develop,
+Our SAP SuccessFactors Human Capital Management (HCM)
+solutions help organizations increase the value of their
+workforce by developing, managing, engaging, and empowering
+their people.
+SAP SuccessFactors Solutions
+Workforce Engagement
+As a modular, integrated ERP system, SAP S/4HANA is the
+backbone of a company. Our LoB cloud applications are
+designed to tightly integrate with SAP S/4HANA software and
+the wider SAP portfolio. They are built on open platforms that
+enable customers to easily link them with third-party
+applications, delivering real-time insights to help businesses run
+effectively and innovate with speed and flexibility.
+In 2017, SAP SuccessFactors Employee Central, a core HCM
+solution, surpassed 2,300 customers, more than doubling our
+customer numbers from 1,000 just two years ago. We
+developed "Business Beyond Bias," a set of business processes
+and smart data analytics tools based on SAP Leonardo Machine
+Learning capabilities, that can help companies eliminate
+unconscious bias in the workplace. Additionally, in partnership
+with Apple, we created a new mobile experience for SAP
+SuccessFactors solutions that combines the award-winning SAP
+Fiori UX with a best-in-class Apple iOS experience.
+SAP Ariba solutions offer an online business-to-business
+marketplace connecting more than 3.1 million buyers in more
+than 180 countries with sellers realizing more than US$1 trillion
+in goods and services every year. SAP Ariba solutions help
+buyers build a sustainable supply chain by connecting them with
+sellers through Ariba Network and by providing a
+comprehensive set of cloud-based applications to collaborate
+across the entire procurement process, from sourcing and
+orders to invoice and payment.
+With SAP Ariba solutions, sellers can easily connect with buyers,
+and more effectively manage both their sales cycle and cash
+flow to grow their businesses. Innovations such as "guided
+buying," a set of capabilities embedded within the SAP Ariba
+Buying and Invoicing solution, automatically leads users to the
+goods and services they need to do their jobs. Guided buying
+also leads employees through the purchase process in
+compliance with company policies. More than 1 million users are
+using guided buying to make procurement more simple,
+efficient, and intelligent.
+The Ariba Network light account capability is a new, simple way
+for companies to bring all of their suppliers onto Ariba Network,
+where they can collaborate on purchase orders, invoices, and
+more, free of charge and without any limits on the number of
+documents exchanged. To date, more than 185,000 purchase
+orders and invoices worth over US$40 billion in spend are
+managed using the service.
+Combined Management Report | Products, Research & Development, and Services
+These services and support products are underpinned by our
+collaborative platform, advisory services that provide customers
+with intelligent guidance, and the SAP ecosystem.
+Continuous customer success
+Premium engagements
+Services
+-
+In 2017, SAP Digital Business Services embarked on a major
+portfolio simplification process. This work resulted in a portfolio
+framework that groups our SAP Digital Business Services
+products into three categories:
+SAP offers an entire portfolio of services and support designed
+to help our customers maximize the value of their SAP solutions
+and to realize the full potential of innovation. We empower
+customer success, built on SAP's 45 years of delivery
+experience across 25 industries. Our people, processes, and
+platform help our customers to achieve digital transformation,
+enabling them to differentiate through innovation and produce
+exceptional business outcomes.
+SAP Digital Business Services
+Our commerce function helps businesses deliver retail services
+across all channels, in-store or online, via mobile device or a
+desktop. The customer relationship management and marketing
+function monitors, manages, and optimizes how the business
+engages with customers, whatever device they use to shop.
+Ready-to-use artificial intelligence (AI) and machine learning
+scenarios are integrated into SAP Hybris standard software.
+Examples include the SAP Brand Impact application for the
+precise measurement of brand exposure and value in SAP
+Hybris Marketing Cloud, as well as functionality to help sales
+executives evaluate deal opportunities at a glance in the SAP
+Hybris Sales Cloud solution. The SAP Hybris Revenue Cloud
+solution is designed to help companies rapidly deploy highly
+innovative offers and effective sales processes in an agile,
+flexible, and scalable environment.
+SAP Hybris offers cloud-based products that run front-office
+functions across customer experience, commerce, marketing,
+sales, services, and billing. It can be used for business-to-
+business and business-to-consumer operations to deliver
+contextual, consistent, and relevant experiences throughout the
+customer journey.
+SAP Hybris Solutions
+Customer Experience
+With close to 50 million users worldwide, SAP Concur solutions
+are the world's leading travel and expense management
+software. They help companies of all sizes and stages go beyond
+automation to a completely connected spend management
+system that encompasses travel, expense, invoice, compliance,
+and risk. New solutions include Concur Locate, an integrated
+traveler risk management solution. During times of crisis and
+uncertainty, Concur Locate enables businesses to find vital
+information and communicate it with employees. Concur
+Hipmunk, an expense solution built on Hipmunk's technology,
+gives small businesses the basic tools, access, and visibility they
+need to manage their travel expenses.
+SAP Concur Solutions
+Additionally, the SAP Ariba Supplier Risk solution automatically
+provides companies with a complete view of their exposure to
+risk across their supply chain. Companies can then make more
+timely, contextual, and accurate business decisions and build
+global supply chains that are more responsible, sustainable, and
+inclusive.
+SAP delivers line-of-business (LoB) cloud applications that
+simplify and connect key business areas and address specific
+customer needs, from human resources to supply chain and
+customer engagement to spend management. Each of these
+cloud applications from SAP represent a new generation of
+business applications - cloud based and connected to the
+world's largest businesses networks to automate, transform,
+and support business in the digital economy.
+applications that retain their trustworthiness and transparency
+even when used by multiple parties and business networks. We
+also encourage customers to use our SAP Leonardo Blockchain
+technology to build blockchain solutions for their specific
+business needs.
+Service Solutions
+SAP continuously improves our user experience (UX) in
+accordance with how people work today - collaboratively,
+spontaneously, or socially. Our users demand solutions that not
+only understand the business content but also the context in
+which they operate. SAP Fiori is our signature user interface,
+and we have personalized the UX even more with new machine
+learning capabilities. SAP CoPilot, a digital assistant and bot
+integration framework, is integrated into SAP Fiori. Its
+conversational user interface allows users to chat, ask
+questions, and give commands. SAP CoPilot augments users'
+capabilities with context and business situation awareness, and
+provides recommended actions.
+Machine Learning
+SAP S/4HANA is built specifically to take advantage of in-
+memory computing with SAP HANA. SAP S/4HANA reduces
+both the complexity of the data model and the data footprint. It
+enables SAP S/4HANA solutions to process huge amounts of
+data in real time and end users can flexibly change their
+perspective of the data. This not only saves time and costs for
+our customers but also delivers a new interactive experience
+and new business insights. SAP S/4HANA empowers business
+users to act in the moment, as they have immediate access to
+information at the most granular level to help make better, more
+informed decisions.
+Real Time
+SAP S/4HANA is developed first for the cloud, and can be
+delivered as a software-as-a-service (SaaS) solution, on
+premise, in a private cloud, or as a hybrid deployment. All
+consumption options are compatible, so that organizations have
+the flexibility to implement SAP S/4HANA to meet their exact
+needs. SAP S/4HANA Cloud provides SaaS qualities such as
+scalability as well as quarterly innovation updates. On-premise
+customers receive the same updates but on an annual update
+cycle.
+Flexible Deployment
+SAP S/4HANA is our enterprise resource planning (ERP) suite
+for the intelligent enterprise. Three years after its introduction,
+over 7,900 customers have chosen the suite to support their
+digital transformation. It enables businesses to access and
+analyze data in real time, giving them insights to act in the
+moment, providing predictive suggestions, and connecting
+business functions and the people within them. SAP S/4HANA
+software spans across all business functions including finance,
+human resources, sales, service, procurement, manufacturing,
+asset management, supply chain, and R&D.
+In 2017, we delivered SAP S/4HANA with innovations that utilize
+SAP Leonardo machine learning services. Routine business
+processes can now be automated by eliminating inefficient
+manual process steps, such as matching payments to invoices.
+This increase in automation increases productivity by allowing
+users to focus on higher value tasks. Machine learning also helps
+users by providing information that is relevant to the current
+task, so they can quickly identify areas requiring attention and
+action.
+SAP S/4HANA
+Combined Management Report | Products, Research & Development, and Services
+SAP Analytics Cloud leverages the inherent intersection of
+business intelligence (BI), planning, and predictive analytics to
+deliver new capabilities such as simulation and automated
+discovery in BI, as well as storytelling and predicted forecasts in
+planning. The solution allows organizations to close the gap
+between transactions, data preparation, analysis, and action.
+SAP Analytics solutions allow customers to take advantage of
+high-speed innovation in the cloud, while using their existing on-
+premise investments. To enable a smooth transition to the
+cloud, the SAP Analytics Hub solution, built on SAP Cloud
+Platform, is designed to centralize access to all analytics from
+SAP and third-party applications and platforms.
+SAP Analytics Cloud
+SAP Leonardo Innovation Services provide a guided approach to
+digital transformation. They use design thinking methods to help
+identify and test new digital business models - and offer a fast,
+low-risk path to SAP Leonardo adoption. There are three service
+editions to choose from: The express edition provides fast
+implementation of predefined use cases. The open innovation
+edition helps users create a new solution for their specific
+business challenges. The enterprise edition extends the scope of
+the open innovation edition. It includes services and
+empowerment sessions to help create multiple business-
+specific solutions in parallel.
+SAP Leonardo Innovation Services
+The proliferation of intelligent devices with sensors and
+ubiquitous connectivity, aptly named the Internet of Things
+(IoT), has led to an upsurge of connected things, from washing
+machines to airplane engines and oil rigs. The data generated
+from these "things" is processed either near the point of origin
+or in the cloud, and can be the catalyst for digital transformation
+as companies use this data to improve their business processes.
+With SAP Leonardo IoT capabilities, we enable companies to
+optimize their business processes by connecting things to
+people and processes. We help companies to collaborate with
+business partners on digital twins - digital replicas of connected
+things that change and are updated when the physical
+counterpart changes. SAP Leonardo loT also enables
+organizations to design innovative business models, and create
+new work environments and connected user experiences.
+The Intelligent Cloud Suite
+Integrated and Extendable
+SAP S/4HANA is built with an open architecture and connects
+to the entire SAP portfolio and beyond. The new SAP S/4HANA
+Cloud software development kit (SDK) allows our cloud and on-
+premise customers, as well as partners, to innovate quickly and
+easily on SAP Cloud Platform while leveraging the capabilities of
+their digital core. As part of the open architecture, the SDK
+provides all the necessary APIs, libraries, and project templates
+needed to develop extension applications on SAP S/4HANA so
+customers can get going quickly.
+Personalization with Fiori UX
+SAP Fiori
+88
+68
+67
+Combined Management Report | Products, Research & Development, and Services
+SAP Business One is an on-premise and cloud business
+application for small businesses that is modular and flexible,
+with add-ons available that are tailored to industries and special
+functions. These are developed and sold by an established
+network of partners ready to help small businesses grow
+wherever they are in the world.
+SAP Business One
+SAP Business ByDesign is a cloud-based ERP solution for
+midsize companies that uses the power of SAP HANA. It gives
+fast-growing midmarket businesses the platform to scale up
+their operations and compete in their markets without
+complexity or high costs. The solution connects every function
+across a company to time-tested best practices and in-depth
+analytics. As an integrated suite across all key business
+functions, it also enables the growing ecosystem of SAP's third-
+party partners to develop additional content for customers
+using their domain-specific expertise.
+SAP Business ByDesign
+Small and Midsize Enterprises (SMEs)
+SAP also offers a portfolio of solutions that extends the power of
+SAP HANA to support SMEs with their digital transformation.
+The SAP Integrated Business Planning solution is powered by
+SAP HANA, and delivers real-time supply chain planning
+capabilities for sales and operations, demand and supply
+planning, and inventory optimization in the cloud. It provides the
+necessary information to make business decisions using
+embedded analytics, simulation, prediction, and decision
+support. Individual SAP Integrated Business Planning
+applications can be used with the established user interface
+from SAP Fiori or with a Microsoft Excel plug-in, allowing users
+to run optimization scenarios directly in their spreadsheets.
+Integrated Business Planning
+To meet the rising expectations of today's discerning, tech-
+savvy customer, companies need to respond quickly and
+accurately to their demands, which means creating responsive
+and distributed manufacturing and supply chain networks. SAP
+solutions enable customers to set up a real digital supply chain
+that provides real-time visibility into manufacturing, logistics,
+and how their assets are operating, enabling them to optimize
+maintenance and service schedules.
+Supply Chain Management
+Line-of-Business Software-as-a-
+69
+By embedding intelligence in core processes, businesses of all
+sizes will benefit from the automation of routine tasks and
+improved decision-making driven by advanced analytics.
+Framework for the Intelligent
+Enterprise
+21% to 23%
+Employee Engagement Employee Engagement Index
+84% to 86%
+17.8%
+85%
+* The outlook was communicated in January 2017 and raised in July and October 2017. The 2017 outlook numbers above reflect the raised outlook from October
+2017.
+Customer Net Promoter Score
+Outlook for 2018 and Ambitions for 2020
+ΚΡΙ
+2017
+Results
+(non-IFRS)
+2018 Outlook
+(non-IFRS, at
+constant currencies)
+€20.7 billion to
+€21.1 billion
+Strategic Objective
+Customer Loyalty
+€6.92 billion
+€6.85 billion to €7.0 billion
+2017
+Results
+(non-IFRS, at constant currencies)
+Cloud subscriptions and
+support revenue
+€3.8 billion to €4.0 billion
+Growth
+Cloud and software revenue
++7.0% to +8.5%
+Profitability
+Total revenue
+Operating profit
+€3.83 billion
++8%
+€23.4 billion to €23.8 billion
+€23.77 billion
+2020
+Outlook*
+(non-IFRS, at constant currencies)
+Ambition
+(non-IFRS)
+Cloud subscriptions and
+support revenue
+84% to 86%
+84% to 86%
+64
+Combined Management Report | Strategy and Business Model
+Products, Research & Development,
+and Services
+85%
+>7,900
+~50 M
+people using SAP Concur solutions
+Bringing Continuous Innovation
+to Our Customers
+SAP solutions touch millions of lives around the world every day.
+Some users skim the edges of our technology when they use our
+customers' services, while others are fully immersed, driving
+their business forward with integrated applications built on our
+most advanced SAP technology foundation. Each SAP solution
+is a powerful standalone application, built to enrich and improve
+businesses and lives through its specific purpose. But when
+working together, they are optimized to integrate, learn, and
+improve themselves in a way that goes beyond basic software
+and database solutions.
+By bringing continuous innovation to our customers, we not only
+help them, and ourselves, to be successful, but we also realize
+our vision and purpose of helping the world run better and
+improving people's lives.
+Intelligent Enterprise Framework
+SAP S/4HANA customers
+Employee Engagement Employee Engagement Index
+35% to 40%
+21% to 23%
+€3.77 billion
+€4.8 billion to
+€5.0 billion
+Growth
+Cloud and software revenue
+€19.55 billion
+Total revenue
+Profitability
+Operating profit
+Customer Loyalty
+Customer Net Promoter Score
+17.8%
+€23.46 billion
+€6.77 billion
+€24.6 billion to
+€25.1 billion
+€7.3 billion to
+€7.5 billion
+€28 billion to
+€29 billion
+€8.5 billion to
+€9.0 billion
+€8.0 billion to
+€8.5 billion
+Combining intelligent algorithms with empowered employees
+will allow companies to free up scarce resources to focus on
+what matters most - driving value for their customers. In this
+way, we can fulfill our promise of enabling our customers to Run
+Simple, while helping the world run better and improving
+people's lives.
+2017
+Strategic Objective
+In addition to our investments in organic growth, SAP also
+supports entrepreneurs that aspire to build industry-leading
+businesses, through venture capital funds managed by Sapphire
+Ventures. Sapphire Ventures currently has over US$2 billion
+under management and has invested in more than 130
+companies on five continents. This includes growth-stage
+technology companies and early-stage venture capital funds on
+five continents. Sapphire Ventures pursues opportunities in
+which it can help fuel enterprise growth by adding expertise,
+relationships, geographic reach, and capital. It places a
+particular focus on companies in Europe, Israel, and the United
+States.
+62
+62
+Combined Management Report | Strategy and Business Model
+Our Business Model
+We innovate software and technology solutions that empower
+our customers to become intelligent digital businesses and
+create a better and more sustainable economy, environment,
+and society. This way, we aim to fulfill our strategic purpose of
+helping the world run better and improving people's lives.
+Sapphire Ventures
+We create value by identifying the business needs of our
+customers and addressing these with innovative software,
+service, and support solutions. The collaboration with our
+Our value creation process does not happen in a vacuum. It is
+enabled by external inputs and value drivers and leads to
+significant impact at our customers and - through them - in the
+world.
+How SAP creates value
+Our vision is to help the world run better and improve people's lives.
+We innovate software and technology solutions that empower our customers to become
+intelligent enterprises and create a better and more sustainable economy, environment, and society.
+Inputs
+Customer insights
+and stakeholder
+customers and partners throughout this process helps us
+continuously improve our solutions and deliver enhanced value
+to our customers.
+Investing in Future Technology
+Abakus, a marketing attribution company that measures the
+customer's journey across all channels, helps enhance SAP's
+marketing offerings to ensure marketers are optimizing
+marketing spend. By combining rich marketing performance
+management capabilities from Abakus with the SAP Hybris
+Marketing Cloud solution capabilities, marketers get unique
+insight into marketing performance to optimize campaigns
+and understand customer interaction across channels.
+Gigya, a customer identity management company, helps us
+to strengthen our customer experience across all devices and
+channels. The consent-based identity data platform from
+Gigya helps companies build better relationships with their
+customers while remaining within legal privacy requirements.
+We intend to integrate Gigya into our SAP Hybris software to
+build better profiles of our customers, and to personalize
+sales, service, and marketing.
+technologies to add to our broad solution offerings and improve
+coverage in key strategic markets. In 2017, SAP made the
+following smaller acquisitions:
+SAP delivers software and technologies addressing the three
+core elements of the intelligent enterprise:
+An intelligent cloud suite of applications for every line of
+business. This includes our next-generation ERP in the cloud,
+as well as solutions for manufacturing, digital supply chain,
+customer experience, networks, spend management, and
+people management. The intelligent cloud suite will be
+integrated and differentiated by industry-specific business
+processes for integrated scenarios (for example, order to
+cash, procure to pay, and so on). It will be enhanced by
+machine learning algorithms that deliver intelligence in the
+workflow and drive better business outcomes including
+profitability and customer satisfaction. While integrated, the
+suite will also be modular to enable lean consumption. We will
+extend it with business networks that enable our customers
+to see events happening in real time and to further automate
+business processes by creating information transparency
+across the value chain.
+Combined Management Report | Strategy and Business Model
+19
+61
+-
+A digital platform to help customers manage data
+orchestration and system integration across their entire
+business:
+"
+Real-time visibility into distributed data silos using the
+next generation of data management solutions. Our
+customers can tap into the data sitting in their core
+business applications, combined with third-party data
+streams and data from connected devices to radically
+simplify data management. SAP applications will be data-
+driven and will embed intelligence across their core
+business processes.
+An open cloud platform for new application development,
+extensions, and integration across heterogeneous
+environments. Using the cloud platform, our customers
+can extend the business processes of our intelligent cloud
+suite and build innovations that go beyond standard
+business processes. SAP Cloud Platform will also be the
+foundation for a vibrant, open ecosystem that can extend
+the power of SAP applications to drive customer value.
+Intelligent systems, such as loT, artificial intelligence, and
+machine learning, as well as analytics, help customers to
+optimize their core business processes and reinvent their
+business models. This intelligence is integrated across
+applications and helps SAP to deliver individual outcomes to
+every customer. Combined with a design thinking approach
+and SAP's industry thought leadership, customers can now
+reimagine new business models and deliver radically new
+customer experiences leveraging the power of intelligent
+technologies.
+By embracing all the components of the intelligent enterprise,
+we firmly believe that we can create the future of enterprise
+software. The cornerstones are empathy for our customers,
+innovative solutions, and engagement from our employees. By
+harnessing the power of data and machine learning, we can
+enable our customers to transform their businesses into
+intelligent enterprises.
+Acquisitions
+We take a balanced approach on how we grow. We will continue
+to focus on organic investments in technology and innovations
+to drive our short-term and midterm growth ambitions. We will
+continue to look at unleashing the full potential of our
+employees' talent as well as strategic partnerships with our
+ecosystem to foster innovation.
+Additionally, we occasionally acquire targeted “tuck-in”
+dialog
+ΚΡΙ
+Financial capital
+and intellectual property
+security
+Health and education
+Smart cities and safe
+communities
+Clean planet and
+climate change
+Responsible growth
+63
+Measuring Our Success
+We believe the most important indicators for measuring our
+success comprise both financial and non-financial areas:
+Growth
+Profitability
+Customer loyalty
+- Employee engagement
+The table below provides an overview of the specific key
+performance indicators (KPIs) used to measure performance,
+this performance with our goals.
+and compares
+Outlook and Results for 2017
+Innovation and
+Employees' expertise
+Work and prosperity
+support
+Third-party products
+and services
+Energy consumption in offices
+and data centers
+Develop
+solutions
+Results
+Combined Management Report | Strategy and Business Model
+Growth
+Employee engagement
+Deliver
+software
+and
+Impact
+Profitability
+Customer loyalty
+services
+Deliver cloud and
+Identify
+business
+needs
+Customer
+Experience
+Continuous Customer Success
+We want to enable our customers to succeed, so we help drive
+adoption of our products and facilitate business continuity with
+services and support. We deliver success plans to accelerate
+Advisory Services
+76
+Combined Management Report | Customers
+Performance Management System
+We use various performance measures to manage our
+performance with regard to our primary financial objectives,
+which are growth and profitability, and our primary non-financial
+objectives, which are customer loyalty and employee
+engagement. We view growth and profitability as indicators of
+our current performance, while we see customer loyalty and
+employee engagement as indicators of our future performance.
+Measures We Use to Manage
+Our Financial Performance
+Measures We Use to Manage Our
+Operating Financial Performance
+In 2017, we used the following key measures to manage our
+operating financial performance:
+Cloud subscriptions and support revenue (non-IFRS): This
+revenue driver comprises the main revenues of our fast-growing
+cloud business. We generate cloud subscriptions and support
+revenue when we provide software functionality in a cloud-based
+infrastructure (software as a service, or SaaS) to our customers;
+when we provide our customers with access to a cloud-based
+infrastructure to develop, run, and manage applications
+(platform as a service, or PaaS); and also when we provide
+hosting services for software hosted by SAP (infrastructure as a
+service, or laaS). Cloud subscriptions and support revenue is
+also generated by providing additional premium cloud
+subscription support beyond the regular support that is
+embedded in basic cloud subscription fees as well as by
+providing business network services to our customers. We use
+the cloud subscriptions and support revenue (non-IFRS)
+measure at both actual currencies and constant currencies.
+Cloud and software revenue (non-IFRS): We use cloud and
+software revenue (non-IFRS) expressed in both actual
+currencies and constant currencies to measure our revenue
+growth. Our cloud and software revenue includes cloud
+subscriptions and support revenue plus software licenses and
+support revenue. Cloud subscriptions and support revenue and
+software revenue are our key revenue drivers because they tend
+to affect our other revenue streams. Generally, customers that
+buy software licenses also enter into related support contracts,
+and these generate recurring revenue in the form of support
+revenue after the software sale. Support contracts cover
+standardized support services that comprise unspecified future
+software updates and enhancements. Software licenses
+revenue as well as cloud subscriptions and support revenue also
+tend to stimulate services revenue, which is earned by providing
+customers with professional services, premium engagement
+services, training services, messaging services, and payment
+services.
+Total revenue (non-IFRS): We use nominal total revenue (non-
+IFRS) and total revenue at constant currencies (non-IFRS) to
+measure our growth. The total of cloud subscriptions and
+support revenue and software support revenue divided by total
+revenue is the share of more predictable revenue. This measure
+provides additional insight into our sustained business success.
+New cloud bookings: For our cloud activities, we also look at
+new cloud bookings (both in actual currencies and constant
+currencies). This measure reflects the committed order entry
+from new customers and from incremental purchases by
+existing customers for offerings that generate cloud
+subscriptions and support revenue. In this way, it is an indicator
+of cloud-related sales success in a given period and of secured
+future cloud subscriptions and support revenue. We focus
+primarily on the average contract value variant of the new cloud
+bookings measure that generally takes into account annualized
+amounts for contracts. There are no comparable IFRS measures
+for these bookings metrics.
+Cloud backlog: In addition to new cloud bookings, we use the
+measure "cloud backlog" to evaluate our sales success in the
+cloud business. We define cloud backlog as a measure that
+represents the volume of business that, as of period end, is
+contracted but not yet billed.
+Operating profit (non-IFRS): We use operating profit (non-
+IFRS) expressed in both actual currencies and constant
+currencies to measure our overall operational process efficiency
+and overall business performance.
+Cloud subscriptions and support gross margin (non-IFRS):
+We use our cloud subscriptions and support gross margin (non-
+IFRS) to measure our process efficiency in our cloud business.
+Cloud subscriptions and support gross margin (non-IFRS) is the
+ratio of our cloud subscriptions and support gross profit (non-
+IFRS) to cloud subscriptions and support revenue (non-IFRS),
+expressed as a percentage.
+Operating margin (non-IFRS): We use operating margin to
+measure our overall operational efficiency. Operating margin
+(non-IFRS) is the ratio of our operating profit (non-IFRS) to total
+revenue (non-IFRS), expressed as a percentage.
+Combined Management Report | Performance Management System
+77
+Measures We Use to Manage Our
+Non-Operating Financial
+Performance
+We use the following measures to manage our non-operating
+financial performance:
+Financial income, net: This measure provides insight into the
+return on liquid assets and capital investments and the cost of
+borrowed funds. To manage our financial income, net, we focus
+on cash flow, the composition of our liquid assets and capital
+investment portfolio, and the average rate of interest at which
+assets are invested. We also monitor average outstanding
+borrowings and associated finance costs.
+Mercadona, the market leader for grocery retail in Spain, has
+chosen SAP to help move their business into the cloud. They
+will adopt SAP offerings to enable their end-to-end digital
+transformation, implementing a broad set of SAP software
+(including SAP S/4HANA and SAP SuccessFactors solutions)
+on the SAP HANA Enterprise Cloud service. This
+transformation will simplify company processes and the IT
+landscape, and help the company meet agile business
+requirements faster than ever. Mercadona and SAP have
+established a long-term partnership based on trust, which will
+help build a fully integrated SAP platform.
+-
+75
+Combined Management Report | Customers
+-
+Aldo Group, a Canadian retailer, and SAP engaged in a
+workshop on the SAP Leonardo digital innovation system at
+the SAP Leonardo Center in New York, bringing together
+CxO-level leaders of the Aldo team, SAP experts, and leading
+academics. Using design thinking techniques, the team
+developed a long list of new and creative digital
+transformation strategies to address Aldo's business
+priorities. Aldo will take these ideas, test them through
+controlled execution in real-world conditions, and iterate
+innovations in collaboration with SAP to help them increase
+scale and business value.
+Citrosuco, a leading supplier in the global orange juice
+market based in Brazil, turned to SAP as a partner in its
+digital transformation journey. Citrosuco has an ambitious
+innovation plan that includes the latest technology from the
+SAP Leonardo loT for SAP Vehicle Insights system (SAP
+Vehicle Insights now available as SAP Moving Assets),
+together with SAP S/4HANA and the full range of the SAP
+Supply Chain Management application. The combination of
+SAP solutions will enable better planning based on demand,
+and the ability to connect farms to manufacturing sites for an
+orchestrated process that will also optimize transportation
+logistics worldwide. In addition, the company has acquired
+SAP Ariba, SAP SuccessFactors, SAP Hybris, and SAP
+Fieldglass solutions to manage its human resources,
+suppliers, e-commerce, vendors, and external workforce.
+Duke Energy, a U.S. energy company, chose SAP S/4HANA
+for energy utilities and SAP Hybris Cloud for Service solutions
+to help them transform how they serve their customers. By
+combining four legacy billing systems onto a single customer
+service-centric platform, Duke Energy can easily provide a
+high-touch, personalized experience while driving
+efficiencies, consistency, and visibility across the
+organization.
+Google and its parent company, Alphabet Inc., have chosen
+to work with SAP to drive operational excellence in treasury
+and IT asset management by implementing these functions
+on SAP S/4HANA software running on Google Cloud. Google
+expects improved efficiency in finance operations and
+greater transparency through real-time insights. At
+SAPPHIRE NOW in May, SAP announced the expansion of our
+co-innovation partnership with Google to deliver integrated
+cloud solutions for our customers on Google Cloud.
+74
+Combined Management Report | Customers
+-
+Sancor Cooperativa de Seguros Ltda, a leading insurance
+company in Argentina with operations in Brazil, Uruguay, and
+Paraguay, purchased SAP S/4HANA software and the SAP
+HANA Enterprise Cloud service to advance its digital
+transformation strategy and to support its domestic and
+international expansion. With the goal of drastically reducing
+its use of paper, and making data from its core system readily
+available for consulting, management, and decision-making,
+the SAP solutions will allow Sancor to track processes
+ranging from claims to policy renewals in real time, and to
+integrate transactions.
+Component and the SAP Transportation Management
+application as its main ERP system. The successful
+implementation of this project enabled the SEBANG Group to
+become a company that is well-integrated, united, and
+aligned internally, while staying competitive and presenting a
+united front to the customer. Using SAP Transportation
+Management as a process model will facilitate growth in
+overall performance through more customer management
+applications, improved customer service, and improved new
+product and service innovation processes and applications,
+allowing the company to achieve market efficiency.
+Days Sales Outstanding (DSO): We manage working capital by
+controlling the DSO of trade receivables. Days sales outstanding
+measures the average number of days from the raised invoice to
+cash receipt from the customer. We calculate DSO by dividing
+the average invoiced trade receivables balance of the last 12
+months by the average monthly cash receipt of the last 12
+months.
+Asia Pacific Japan (APJ) Region Europe, Middle East, and Africa
+-
+China International Marine Containers Co. Ltd. (CIMC) is a
+leading logistics, energy equipment, and service supplier.
+CIMC chose SAP S/4HANA software as a foundation for
+innovation in smart manufacturing and Industry 4.0. Through
+accelerated digital transformation, CIMC hopes to become
+the industry lighthouse in China that is aligned with the
+state's "Belt and Road" initiative as well as "Made in China
+2025."
+Hanon Systems is a full-line supplier of automotive thermal
+and energy management solutions. The design thinking
+engagement with SAP helped Hanon Systems rapidly
+prototype a solution for its people to more effectively manage
+reporting and data checks to enable more time for strategic
+decisions and faster responses. The South Korean company
+is launching its Digital Manufacturing Performance initiative
+utilizing machine learning in one of its European plants to
+streamline floor operations and gain insights into machine
+availability, performance, effectiveness and quality.
+Ningbo Economic & Technical Development Zone Holding
+Co. Ltd. (NETD) operates public utilities businesses in
+logistics, real estate, financial investment, and environmental
+protection in China. Through the implementation of SAP
+Leonardo, SAP S/4HANA, and SAP SuccessFactors
+solutions, it is building a Smart Manufacturing Innovation
+Center in Ningbo to speed up the development of intelligent
+manufacturing. This will support NETD's strategic plan - to
+help the local government provide better services in Zhejiang
+Province and to expand to the whole of China in the future.
+Pricerite Stores Ltd. is the leading home-furnishing retailer
+in Hong Kong, including brands such as TMF Company Ltd.,
+the largest chain store offering tailor-made furniture to local
+homes and families. They chose the SAP Hybris Cloud for
+Customer and SAP Hybris Marketing Cloud solutions to gain
+a 360-degree view of their customers. Both Pricerite and
+TMF will use these solutions to understand their customers'
+interests and motivations, so that they can identify real-time
+marketing opportunities and develop personalized marketing
+experiences.
+SEBANG Express, a South Korea-based company engaged in
+the logistics business, has been operating SAP ERP Central
+(EMEA) Region
+-
+Al-Futtaim, a large conglomerate comprised of automotive,
+retail and property development, and engineering and
+technology businesses in the United Arab Emirates, moves to
+the cloud by integrating SAP SuccessFactors Employee
+Central with SAP Concur solutions. It will also leverage the
+SAP Leonardo digital innovation system to transform
+facilities management into “energy as a service" and reduce
+energy costs at its properties over the next five years. Al
+Futtaim plans to implement an energy management solution
+with loT on SAP Cloud Platform, enabling scale to future
+properties.
+Centrica, a multinational energy and services company
+based in the United Kingdom, has confirmed its commitment
+to SAP by extending its solution footprint to include SAP
+Hybris, SAP Ariba, and SAP Digital Boardroom solutions. We
+have also joined forces to develop an energy loT solution,
+integrating sensors and machine learning algorithms running
+on SAP Leonardo loT technologies. SAP S/4HANA Cloud will
+also act as Centrica's digital core, connecting the enterprise
+with these loT initiatives.
+ifm electronic GmbH, a German vendor of automation
+technology, has chosen SAP Cloud Platform and the SAP lOT
+Application Enablement toolkit to get more real-time
+information from each piece of equipment on the shop floor.
+ifm is building its own sensor platform for real-time
+maintenance, energy data management, and Big Data
+analysis through ifm dashboards, as well as building
+innovative, data-driven applications (positioned as ifm
+Sensor Cloud).
+innogy SE is a leading German energy company with the
+three business segments of grid and infrastructure, retail,
+and renewables. To be prepared for the future, innogy has
+chosen the SAP S/4HANA Finance solution, SAP Predictive
+Analytics software, SAP BusinessObjects BI suite, and the
+SAP Business Planning and Consolidation application to set
+up a new ERP system. innogy will use the digital core as the
+new platform for its management support and operations
+and maintenance processes.
+-
+North America and Latin
+America (Americas) Region
+Measures We Use to Manage Overall
+Financial Performance
+Earnings per share (EPS) (IFRS and non-IFRS): EPS measures
+our overall performance because it captures all operating and
+non-operating elements of profit as well as income tax expense.
+It represents the portion of profit after tax allocable to each SAP
+share outstanding. EPS is influenced not only by our operating
+and non-operating business and income taxes but also by the
+number of shares outstanding.
+Under IFRS, we record at fair value the contracts in effect at the
+time entities were acquired. Consequently, our IFRS software
+support revenue, IFRS cloud subscriptions and support revenue,
+IFRS cloud and software revenue, and IFRS total revenue for
+periods subsequent to acquisitions do not reflect the full amount
+of revenue that would have been recorded by entities acquired
+by SAP had they remained stand-alone entities. Adjusting
+revenue numbers for this revenue impact provides additional
+insight into the comparability of our ongoing performance
+across periods.
+Operating Expense (Non-IFRS)
+Operating expense numbers that are identified as operating
+expenses (non-IFRS) have been adjusted by excluding the
+following expenses:
+Combined Management Report | Performance Management System
+79
+SAP Model Company, an accelerator service created from
+best practices gathered in our digital transformation projects.
+SAP Model Company provides a preconfigured, ready-to-run
+reference solution with business content, accelerators, and
+engineered services for multiple industries or LoBs. It
+provides the fundamental building blocks for an industry or
+LoB solution, helping customers accelerate deployment and
+digital transformation.
+The SAP Value Assurance program, our systematic
+approach to accelerating implementation while minimizing
+risk. Customers and partners have access to best practices,
+methodologies, and tools, as well as deep technology
+expertise to accelerate the implementation of SAP S/4HANA
+and SAP BW/4HANA. It is available in packages depending
+on the level of service required, simplifying each phase of the
+implementation to ensure solutions are resilient, sustainable,
+and flexible.
+-
+-
+areas:
+Implementation and migration services help companies realize
+the benefits of our products and solutions faster and safer when
+deploying SAP technology. In 2017, we innovated in the following
+Implementation Services
+Recent innovations in our advisory services include SAP
+Leonardo Innovation Services.
+Advisory services create and realize new opportunities. We
+guide customers throughout the innovation process, focusing
+on creating economic, social, and environmental impact.
+Depending on the needs of the customer, we may offer advisory
+and implementation services separately, or package them
+together to deliver defined business outcomes.
+Services
+The SAP Active Embedded service encompasses a similar level
+of premium engagement but is designed to support smaller
+businesses requiring less intensive interaction.
+SAP MaxAttention is the most exclusive and closest customer
+partnership with SAP. As the highest engagement level
+throughout the software lifecycle, this customized, on-site
+engagement orchestrates all SAP experts to work with our
+customers to innovate, develop ideas, and accelerate their
+digital transformation. It enables our customers to simplify their
+IT operations and optimize operations.
+Premium Engagements
+70
+70
+Non-IFRS revenue measures have been adjusted from the
+respective IFRS financial measures by including the full amount
+of software support revenue, cloud subscriptions and support
+revenue, and other similarly recurring revenue that we are not
+permitted to record as revenue under IFRS due to fair value
+accounting for the contracts in effect at the time of the
+respective acquisitions.
+Revenue (Non-IFRS)
+Our non-IFRS financial measures reflect adjustments based on
+the items below, as well as adjustments for the related income
+tax effects.
+The annual budgeting process for all management units is
+based on revenue (non-IFRS) and operating profit (non-IFRS)
+numbers rather than the respective IFRS financial measures.
+All forecast and performance reviews with all senior
+managers globally are based on these non-IFRS measures,
+rather than the respective IFRS financial measures.
+Both our internal performance targets and the guidance we
+provide to the capital markets are based on non-IFRS
+revenue and profit measures rather than the respective IFRS
+financial measures.
+Effective tax rate (IFRS and non-IFRS): We define our effective
+tax rate as the ratio of income tax expense to profit before tax,
+expressed as a percentage.
+Operating, investing, and financing cash flows and free cash
+flow: Our consolidated statement of cash flows provides insight
+into how we generate and use cash and cash equivalents. When
+applied in conjunction with the other primary financial
+statements, it provides information that helps us evaluate the
+changes in our net assets, our financial structure (including our
+liquidity and solvency), and our ability to affect the amounts and
+timing of cash flows to adapt to changing circumstances and
+opportunities. We use our free cash flow measure to determine
+the cash flow remaining after all expenditures required to
+maintain or expand our organic business have been paid off.
+This measure provides management with supplemental
+information to assess our liquidity needs. We calculate free cash
+flow as net cash from operating activities minus purchases
+(other than purchases made in connection with business
+combinations) of intangible assets and property, plant, and
+equipment.
+Measures We Use to Manage
+In 2017, we used the following key measures to manage our non-
+financial performance in the areas of customer loyalty,
+employee engagement, and leadership trust:
+Customer Net Promoter Score (Customer NPS): This score
+measures the willingness of our customers to recommend or
+promote SAP to others. It is derived from our annual customer
+survey that identifies, on a scale of 0-10, whether a customer is
+loyal and likely to recommend SAP to friends or colleagues, is
+neutral, or is unhappy. We introduced this measure in 2012, as
+we are convinced that we can achieve our financial goals only
+when our customers are loyal to, and satisfied with, SAP and our
+solutions. To derive the Customer NPS, we start with the
+percentage of "promoters" of SAP, that is, those giving us a
+score of 9 or 10 on a scale of 0-10. We then subtract the
+percentage of "detractors," that is, those giving us a score of O
+to 6. The method ignores "passives", that is, those giving us a
+score of 7 or 8. Consequently, the range of achievable scores is
+-100 to +100, with the latter being the best achievable score for
+customer loyalty as measured by the Customer NPS
+methodology.
+Employee Engagement Index: We use this index to measure the
+motivation and loyalty of our employees, how proud they are of
+our company, and how strongly they identify with SAP. The
+index is derived from an annual survey of our employees.
+Applying this measure is recognition that our growth strategy
+depends on engaged employees.
+Leadership Trust Score: We use this score to further enhance
+accountability and to measure our collective effort to foster a
+work environment based on trust. It is derived from a question in
+our annual global employee survey that gauges employees' trust
+in our leaders. We measure leadership trust by using the same
+methodology as we do to compute the Net Promoter Score
+(NPS).
+Value-Based Management
+Our holistic view of the performance measures described above,
+together with our associated analyses, comprises the
+information we use for value-based management. We use
+planning and control processes to manage the compilation of
+these key measures and their availability to our decision-makers
+across various management levels.
+We use the following measures to manage our overall financial
+performance:
+SAP's long-term strategic plans are the point of reference for
+our short-term and mid-term planning and controlling
+processes. We initially identify future growth and profitability
+Combined Management Report | Performance Management System
+drivers at a highly aggregated level. In a first step, the resulting
+financial plan is broken down into (i) our deployment models
+"On Premise," "Software as a Service/Platform as a Service,"
+"Infrastructure as a Service," and "Business Networks"; and (ii)
+functions such as development, sales, and administration. In a
+second step, the planned total revenues and total expenses are
+generally allocated to the areas of functional responsibility of the
+individual members of the Executive Board (the board areas). If
+a board area represents not only a functional department but
+also has a responsibility for operating segments within this
+board area (for example, SAP Business Network segment), the
+allocation is done at the lower segment level. Budget
+adjustments may be applied during the year to reflect changes
+in priorities, to achieve efficiency targets and to reflect
+endogenous and exogenous factors. Such budget adjustments,
+as well as the Executive Board's performance assessment, are
+handled at the board area level or at the lower level within a
+board area if representing an operating segment as outlined
+above. It is then the individual board member's responsibility to
+break down the allocated budget adjustments. Based on an
+integrated portfolio process running in parallel to the budgeting
+process, we ensure aligned investment behavior across board
+areas with regards to specific solutions or solution areas. In a
+final step, customer-facing revenue targets and cost of sales
+and marketing targets are broken down into sales regions.
+Based on our detailed annual plans, we determine the budget for
+the respective year. We also have processes in place to forecast
+revenue and profit on a quarterly basis, to quantify whether we
+expect to realize our financial goals, and to identify any
+deviations from plan. We continuously monitor the affected
+units in the Group to analyze these developments and define any
+appropriate actions. Our entire network of planning, control, and
+reporting processes is implemented in integrated planning and
+information systems, based on SAP software, across all
+organizational units so that we can conduct the evaluations and
+analyses needed to make informed decisions.
+Non-IFRS Financial Measures
+Cited in This Report
+Explanation of Non-IFRS Measures
+We disclose certain financial measures such as revenue (non-
+IFRS), expense (non-IFRS), and profit measures (non-IFRS) that
+are not prepared in accordance with IFRS and are therefore
+considered non-IFRS financial measures. Our non-IFRS financial
+measures may not correspond to non-IFRS financial measures
+that other companies report. The non-IFRS financial measures
+that we report should only be considered in addition to, and not
+as substitutes for, or superior to, our IFRS financial measures.
+We believe that the disclosed supplemental historical and
+prospective non-IFRS financial information provides useful
+information to investors because management uses this
+information, in addition to financial data prepared in accordance
+with IFRS, to attain a more transparent understanding of our
+past performance and our anticipated future results. We use
+non-IFRS revenue and profit measures consistently in our
+internal planning and forecasting, reporting, and compensation,
+as well as in our external communications, as follows:
+Our management primarily uses these non-IFRS measures
+rather than IFRS measures as the basis for making financial,
+strategic, and operating decisions.
+The variable components of our Executive Board members'
+and employees' remuneration are based on revenue (non-
+IFRS), operating profit (non-IFRS), as well as new cloud
+bookings measures rather than the respective IFRS
+measures.
+78
+Our examples by region include the following customers:
+Our Non-Financial Performance
+Continuing Strong Customer
+Demand
+3,352
+3,044
+2,845
+2,282
+2,331
+10%
+7%
+5%
+1%
+2%
+2013
+2014
+2015
+2016
+2017
+In 2017, our IFRS R&D expenses as a portion of total operating
+expenses remained stable at 18.0% compared to the prior year.
+Our non-IFRS R&D expense ratio remained stable at 18.4% year
+over year. At the end of 2017, our total full-time equivalent (FTE)
+headcount in development work was 24,872 (2016: 23,363).
+Measured in FTEs, our R&D headcount was 28% of total
+headcount (2016: 28%).
+Total R&D expense not only includes our own personnel costs
+but also the external cost of work and services from the
+providers and cooperation partners we work with to deliver and
+enhance our products. We also incur external costs for the
+following:
+- Translating, localizing, and testing products
+- Obtaining certification for products in different markets
+Patent attorney services and fees
+Consulting related to our product strategy
+Professional development of our R&D workforce
+Patents
+Research and Development (IFRS)
+€ millions | change since previous year
+SAP's strong commitment to R&D is reflected in our
+expenditures (see figure below).
+Investment in R&D
+Through the power of partnership and co-innovation, our
+partner ecosystem helps drive the bulk of SAP's presence
+among the small businesses and midsize companies that make
+up more than 80% percent of SAP customers. In addition,
+partners are responsible for the more than 55,000 customers
+using SAP Business One. Overall, having a robust and vibrant
+partner ecosystem is vital for SAP's growth and success;
+partners are key allies in bringing awareness of SAP solutions
+and technology to the marketplace. They also help SAP break
+into new markets, for instance, with SAP Leonardo and SAP
+Cloud Platform, as well as leverage new technologies such as
+artificial intelligence, blockchain, and 3D to deliver successful
+business outcomes for customers.
+time to value from SAP technology. Our support offerings are
+the foundation of customer success plans, and are embedded in
+all cloud solutions from SAP and for on-premise installations.
+SAP Enterprise Support
+Providing a seamless end-to-end customer support experience
+across all products and solutions, our flagship SAP Enterprise
+Support offering is embedded in all relevant cloud subscriptions
+from SAP and offered as an option for on-premise systems.
+SAP Preferred Success
+The SAP Preferred Success plan focuses on advanced support,
+learning, and empowerment for administrators and end users. It
+also includes resources to drive cloud adoption and
+consumption. It is currently available for SAP S/4HANA, public
+cloud edition; SAP SuccessFactors solutions; and the SAP
+Hybris Cloud for Customer solution.
+Our SAP ONE Support approach ensures our customers enjoy
+the same support experience across their entire portfolio of SAP
+products. In addition, the Next-Generation Support approach
+enables us to anticipate customer needs, accelerate their path
+to getting accurate answers when they need them, and offering
+expert help at their fingertips.
+Collaboration Platform and
+Intelligent Guidance
+Complementing the skills of our people, we use technology
+internally and externally to support customer success.
+SAP Solution Manager
+SAP actively seeks intellectual property protection for
+innovations and proprietary information. Our software
+innovations continue to strengthen our market position as a
+leader in business solutions and services. Our investment in
+R&D has resulted in numerous patents. As at December 31,
+2017, SAP held a total of more than 8,852 validated patents
+worldwide. Of these, 845 were granted and validated in 2017.
+SAP Solution Manager helps customers manage their SAP
+products throughout the entire solution lifecycle, providing
+support for all SAP solutions and integrated third-party
+software, for both on-premise and cloud implementations. It
+enables customers to collaborate with SAP and to monitor and
+manage their existing applications, as well as new innovation.
+projects that can be managed from conception to deployment. It
+builds a single source of the truth into one, user-friendly solution
+that helps customers jump-start SAP implementation projects
+with predefined content, thereby minimizing business risk.
+-
+SAP Innovation and Optimization Pathfinder, a service that
+recommends new SAP innovations, business process
+improvements, and IT optimizations tailor-made for each
+business, based on the way the core SAP ERP system is
+being used. Available for customers in maintenance, SAP
+Innovation and Optimization Pathfinder helps them
+strengthen the relationship with their internal business
+departments by prioritizing areas of innovation and
+optimization.
+Combined Management Report | Products, Research & Development, and Services
+Companies continue to turn to our software to help their digital
+transformation. In 2017, customers licensed or subscribed to
+the full range of SAP software, from comprehensive solutions for
+large enterprises to the latest mobile apps.
+SAP Transformation Navigator, a self-service tool that
+identifies the SAP products and services already being used
+by the customer, and recommends new products and
+services that would benefit the customers' business and IT
+strategies. It is designed to answer the key questions SAP
+customers have about which innovations they need to bring
+into their organization, in what order, during what
+timeframes, and the business value and outcomes they can
+expect. SAP Transformation Navigator also provides
+information about integration, transformation services, and
+licenses.
+SAP Readiness Check, our latest tool to help prepare
+businesses for an SAP S/4HANA deployment. The easy-to-
+use cloud-based tool provides answers to the questions of
+compatibility, relevance, system requirements, and business
+impacts that customers may have regarding implementation
+of SAP S/4HANA. The tool removes the complexity of
+planning and discovery tasks that are required to prepare
+businesses for their transformation to SAP S/4HANA.
+Ecosystem
+Extending Our Reach Through a
+Broad Ecosystem
+Our extensive ecosystem and partner network extends our
+reach in the marketplace. Our vibrant ecosystem is made up of
+more than 17,000 partners worldwide that build, sell, service,
+and run SAP solutions and technology to customers from
+businesses large and small. Our partner ecosystem is a vital
+driver for SAP, especially in the SME sector.
+SAP has developed tools and related services in response to our
+customers' requests for more targeted guidance. These include:
+While our intellectual property is important to our success, we
+believe our business as a whole is not dependent on any
+particular patent or a combination of patents.
+-
+71
+-
+-
+Secure environments: Comprehensive physical security
+measures are in place to ensure the security of our data
+centers and development sites so that we can protect
+buildings and facilities effectively.
+Business continuity: A corporate continuity framework
+aimed at having robust governance in place at all times is
+reviewed on an annual basis to adapt to new or changed
+business needs.
+Complying with Data Protection
+and Privacy Legislation
+When processing data about employees, applicants, customers,
+suppliers, and partners, SAP respects and protects their right to
+data protection and privacy while implementing appropriate
+security measures. We develop and support our data protection
+and privacy strategy in accordance with our business strategy.
+To comply with applicable data protection laws, SAP has
+adopted a global data protection and privacy policy. It outlines a
+Group-wide minimum standard for handling personal data in
+compliance with data protection and privacy laws. The policy
+defines requirements for all operational processes that affect
+the processing of or access to personal data, as well as
+providing clear responsibilities and organizational structures.
+We actively monitor changes to applicable laws and regulations
+so that we can update our standards on an ongoing basis.
+SAP is committed to ensuring compliance with the harmonized
+European data protection law, the General Data Protection
+Regulation (GDPR), which will be applicable as of May 25, 2018.
+We are also developing our products to support our customers
+in applying GDPR requirements.
+We have implemented a wide range of measures to protect data
+controlled by SAP and SAP customers from unauthorized
+access and processing, as well as from accidental loss or
+destruction. These include, among others, the implementation
+of our data protection management system (DPMS) in areas
+critical to data protection. This system is certified on a yearly
+basis by the British Standards Institute. Initially implemented at
+our global support organization, the DPMS has been
+successively rolled out and is now implemented in almost all
+areas and countries at SAP and will be introduced in all acquired
+companies.
+In 2017, SAP did not experience any significant incidents within
+the scope of processing personal data - for its own purposes or
+on behalf of its customers - that are subject to the provisions of
+the German Federal Data Protection Act or other applicable data
+protection laws.
+At SAP, we take a holistic approach to the security of our
+company, encompassing processes, technology, and
+employees. At the heart of our secure company strategy is an
+information security management system and a security
+governance model that brings together different aspects of
+security. These include the following three main areas:
+Combined Management Report | Security, Privacy, and Data Protection
+Customers
+>378,000
+17.8%
+customers around the world
+Customer Net Promoter Score 2017
+Continuing to Build Strong
+Customer Relationships
+Customer loyalty is one of our four corporate objectives, along
+with growth, profitability, and employee engagement. We
+measure customer loyalty based on a Net Promoter Score
+(NPS) approach which uses a range from -100% to +100%. In
+2017, our combined on-premise and cloud Customer Net
+Promoter Score (Customer NPS) was +17.8% (2016: +19.2%).
+We completed the elimination of differences in the survey
+approach that existed in one of our acquired entities (where a
+year-over-year NPS comparison is not possible because of the
+change in survey approach).
+While we continue to have a positive Customer NPS, we did not
+reach our target of 25% in 2017. Based on customer feedback,
+we continue to focus on helping customers choose the SAP
+products that best support their business needs, simplifying
+purchasing processes for customers, and making our products
+easy and pleasing to use. With a sustained emphasis on
+customer experience across the company, we are again
+targeting a combined Customer NPS of 21% to 23% in 2018,
+with our medium-term goal being 35% to 40% by 2020.
+For more information about the Customer NPS, see the
+Performance Management System section.
+Combined Management Report | Products, Research & Development, and Services
+73
+Secure Company Strategy: Taking a Holistic
+Approach to the Security of Our Business
+Security culture: Awareness and compliance with our
+security policy and standards are fostered through regular
+mandatory training, assessments, and reporting.
+Our secure operations strategy focuses on the security
+principles of "confidentiality, integrity, and availability" to
+support overall protection of our business, as well as our
+customers' businesses. Our mission is to provide a
+comprehensive end-to-end IT operations security framework -
+from system and data access, and system security
+configuration to security patch management, security
+monitoring, and end-to-end incident handling. This involves the
+implementation of key security measures across all layers,
+including physical access and process-integrated controls.
+Furthermore, our secure operations approach concentrates on
+the early identification of deviations from the standards defined
+in our security framework. Deviations are identified through a
+combination of automated and manual reviews which are
+performed by third parties as well as SAP employees.
+Industry best-practice certifications are key success factors for
+our secure operations strategy. Many of our cloud solutions
+undergo Service Organization Control (SOC) audits ISAE3402,
+SSAE16 SOCI Type II, and SSAE16 SOC II Type II. The SOC
+standards are harmonized with a number of ISO certifications
+including ISO 9001, 27001, and 22301.
+In 2017, we also launched our SAP Cloud Trust Center site. Here,
+customers can find information about how SAP provides
+security, privacy, and compliance in the cloud.
+Combined Management Report | Security, Privacy, and Data Protection
+12
+72
+Our secure software development lifecycle is at the heart of this
+strategy. It provides a comprehensive methodological approach
+for incorporating security features and capabilities into our
+applications. Before a release decision is made, our software is
+assessed and validated by internal IT security experts. The
+development team then addresses any recommendations made
+by these security experts before we release the application.
+This approach conforms to the ISO/IEC 27034 standard for
+application security and is closely embedded into our ISO 9001-
+certified process framework for developing standard software.
+Businesses use SAP applications to process mission-critical
+transactional data that can be highly attractive to cyber
+attackers. Our secure products strategy focuses on
+incorporating security features into our applications to minimize
+the risk of a security breach.
+Secure Products Strategy: Championing Product
+Security
+Several of our security measures extend across all sectors of
+our company and thus to all of our products and services. These
+measures include, among other things, the regular training of
+our employees on IT security, data protection, and privacy,
+including the handling of confidential information and ensuring
+controlled and restrictive access to customer information. In
+addition, we have developed a three-pronged strategy focusing
+on the security of our products, operations, and organization:
+Our comprehensive portfolio includes sophisticated
+authentication and authorization tools and solutions for
+governance, risk, and compliance. In addition, we offer
+integrated tools for efficiently scanning and testing source code
+written in ABAP and solutions that enable organizations to
+detect system anomalies and react before damage can be done.
+As well as offering solutions from our security portfolio to our
+customers, SAP also runs the software internally.
+proactive when securing business-critical data and core
+information assets. Up-to-date security mechanisms, such as
+authentication, authorization, and encryption, serve as a first
+line of defense. To secure the SAP software landscape, we offer
+a comprehensive portfolio of security products, services, and
+secure support as well as security consulting. These offerings
+help our customers build security, data protection, and privacy
+capabilities into their businesses.
+For SAP and for our customers, security means more than just
+addressing compliance demands. Companies need to be
+Establishing a Comprehensive
+Security Vision
+Safeguarding data is an increasingly challenging task today.
+Companies are collecting and storing more data than ever
+before from more varied sources. Data now proliferates outside
+the four walls of businesses with multiple endpoints exposed
+and vulnerable to attack. Moreover, the sheer number of and the
+sophistication of attacks facing businesses are at an all-time
+high. We are seeing the "commercialization of hacking", while
+new advanced persistent threats can bypass many traditional
+security protection techniques.
+Facing Increasing Risks in IT
+Security
+Furthermore, SAP has established a formal security governance
+model. Relevant security topics are discussed at Executive
+Board level at least six times each year, during steering
+meetings attended by single or multiple board members. To
+meet and ensure consistent data protection compliance, our
+CFO and our data protection officer meet at least on a monthly
+basis. Furthermore, our compliance status related to data
+protection has been an inherent part of many Supervisory Board
+meetings.
+For this reason, data protection and IT security are of
+paramount importance to us. We have implemented safeguards
+to help protect the fundamental rights of everyone whose data is
+processed by SAP, whether they are our customers, prospects,
+employees, or partners. In addition, we work towards
+compliance with all relevant legal requirements for data
+protection. Our global security officer and our data protection
+officer report to the SAP chief technology officer and the SAP
+chief financial officer (CFO) respectively and monitor the
+compliance of all activities in these areas.
+Every day, organizations around the world trust SAP with their
+data - either on their own premises, in the cloud, or using mobile
+devices while on the move. Our customers need to know that we
+will keep that data safe, process it in a manner that complies
+with local legislation, and protect it from malicious use.
+Protection Challenges
+Meeting Today's Data
+Security, Privacy, and Data Protection
+Secure Operations Strategy: Running Secure
+Operations
+5,318
+1,300
+4,018
+-268
+3,646
+25.3
+22.6
+19.3
+Effective tax rate (in %)
+30.1
+23.3
+29.1
+28.9
+20.8
+Attributable to owners of parent
+Operating margin (in %)
+-13
+0
+-13
+38
+0
+38
+Attributable to non-controlling interests
+4,671
+1,024
+Key ratios
+4,658
+4,056
+3,634
+Financial income, net
+185
+0
+185
+-38
+-38
+Profit before tax
+5,026
+1,892
+6,918
+4,863
+1,498
+1,024
+6,361
+-970
+-592
+-1,563
+-1,229
+-474
+-1,703
+Profit after tax
+26.8
+0
+-268
+1,300
+5,356
+Income tax expense
+Earnings per share, basic (in €)
+307
+4.44
+Cost of services
+-3,158
+8
+158
+0
+-2,991
+-3,089
+12
+101
+0
+-2,976
+Research and
+-3,352
+11
+269
+0
+-3,072
+-3,044
+10
+190
+0
+-2,843
+development
+Sales and marketing
+-278
+software
+-3,010
+0
+89
+3.04
+3.90
+82
+Combined Management Report | Performance Management System
+Non-IFRS Adjustments by Functional Areas
+€ millions
+2017
+2016
+IFRS
+Acqui-
+sition-
+SBP¹)
+Restruc- Non-IFRS
+turing
+3.36
+IFRS
+SBP¹)
+Restructuring Non-
+Related
+sition-
+Related
+IFRS
+Cost of cloud and
+-3,893
+115
+0
+-3,471
+-3,495
+395
+Acqui-
+0
+149
+Finance costs
+Gross profit
+-3,158
+166
+-2,991
+-3,089
+113
+-2,976
+-7,051
+4,976
+589
+-6,462
+-6,583
+598
+-5,985
+16,410
+592
+17,001
+15,479
+603
+16,081
+Research and development
+-3,352
+281
+-3,072
+-3,044
+Total cost of revenue
+133
+-3,010
+485
+301
+23,765
+22,062
+5
+22,067
+Operating expense measures
+Cost of cloud subscriptions and support
+-1,660
+233
+-1,427
+-1,313
+247
+201
+-1,066
+-2,234
+190
+-2,044
+-2,182
+238
+-1,944
+Cost of cloud and software
+-3,893
+423
+-6,924
+-3,471
+-3,495
+Cost of software licenses and support
+-2,843
+Sales and marketing
+-6,924
+-16.928
+1,494
+-15,434
+Profit numbers
+Operating profit
+4,877
+1,892
+6,769
+151
+6,920
+5,135
+1,498
+-16,845
+6,633
+-36
+0
+-36
+-234
+0
+-234
+Finance income
+463
+0
+463
+230
+230
+Other non-operating income/expense, net
+-278
+-151
+1,889
+700
+-6,225
+-6,265
+549
+-5,716
+General and administration
+-1,075
+138
+-936
+-1,005
+119
+-886
+-16,694
+Restructuring
+182
+0
+-28
+28
+0
+Other operating income/expense, net
+0
+1
+-3
+-3
+Total operating expenses
+-18,584
+-182
+258
+SAP works closely with over 3,300 universities on events,
+executive lectures, office visits, competitions, student club
+sponsorships, and Webinars to recruit top students and
+graduates and to integrate the latest SAP technologies into
+0
+Activities to build an inclusive environment at SAP include:
+-
+-
+Focus on Insight - Diversity and Inclusion training
+program: Our global learning curriculum contributes to a
+shared understanding of the importance and benefits of a
+diverse workplace.
+Business Beyond Bias: The initiative includes significant
+investment in programs and technology that support greater
+diversity. This helps eliminate bias not only at SAP but also in
+customer and partner organizations.
+Autism at Work program: 113 employees with autism
+currently work at SAP.
+Global Pride@SAP employee network: This network has
+grown to more than 8,000 members, sponsoring numerous
+activities and initiatives that support lesbian, gay, bisexual,
+and transgender people and their allies.
+Cross-generational mentoring: This program connects SAP
+employees from different generations to form networks,
+share knowledge, and learn from each other.
+Caring for the Health and Well-
+Being of Our Employees
+We believe that the way we care for our people is closely linked
+to our business success. When people are healthy, respected,
+and cared for, it results in higher productivity, engagement,
+innovation, and customer satisfaction. Consequently, we invest
+in extensive employee benefits and programs. These include:
+Run Your Way initiative on Fit@SAP: This program
+encourages employees of all generations and physical
+conditions to integrate physical activity into their daily life. In
+2017, approximately 8,700 people used subsidized activity
+trackers.
+Employee Assistance Program (EAP): This program
+provides employees with free, confidential, and impartial
+expert advice and support for life's challenges, 24 hours a
+day, seven days a week.
+Corporate Oncology Program for Employees (COPE):
+Available in Canada, Germany, United Kingdom, and the
+United States, the program provides SAP employees facing
+cancer with access to an individual molecular genetic tumor
+analysis and interpretation.
+Healthy Leadership: Various offerings to support SAP
+leaders in fostering a healthy mindset and culture, such as
+-
+-
+healthy leadership training, personalized executive health
+and well-being program, etc.
+Health Ambassador Network: This global network
+strengthens our focus on health and well-being in SAP office
+locations.
+Local health and well-being offerings: Services such as
+health check-ups, skin screening, on-site fitness centers and
+activity classes, mindfulness practice, eyesight testing, and
+health awareness sessions are available to employees in
+various office locations.
+Headcount and Personnel
+Expense
+As of December 31, 2017, we had 88,543 full-time equivalent
+(FTE) employees worldwide (December 31, 2016: 84,183). This
+represents an increase in headcount of rounded 4,361 FTEs in
+comparison to 2016. The average number of employees in 2017
+was 86,999 (2016: 80,609).
+We define headcount in FTE as the number of people on
+permanent employment contract considering their staffing
+percentage. Students, individuals employed by SAP who are
+currently not working for reasons such as maternity leave, and
+temporary employees with limited contracts of less than six
+months are excluded from our figures. The number of
+temporary employees is not material.
+Our personnel expense for each employee increased to
+approximately €134,000 in 2017 (2016: approximately
+€127,000). This increase is primarily attributable to an increase
+of share-based payment expenses and employee-related
+restructuring expenses in 2017 compared to the previous year.
+The personnel expense per employee is defined as the overall
+personnel expense divided by the average number of
+employees.
+For more information about employee compensation, see the
+Notes to the Consolidated Financial Statements section,
+Note (7).
+Combined Management Report | Employees and Social Investments
+Working closely with ethnicity-based employee network groups
+such as the Black Employee Network (BEN) and Latinos@SAP,
+SAP launched several important initiatives in 2017 in the United
+States. An example is Project Propel, an effort dedicated to
+enabling historically black colleges and universities and
+minority-serving institutions across the United States to build
+the next generation of technology talent.
+Creating an Inclusive Environment
+Combined Management Report | Employees and Social Investments
+In June 2017, six months ahead of schedule, SAP achieved its
+publicly stated goal of filling 25% of our management positions
+with women. On December 31, 2017, the ratio of women in
+management positions reached 25.4% (2016: 24.5%). The
+Executive Board has further extended its commitment to
+increase the percentage of women in management positions by
+1% each year with a target of 30% by year-end 2022.
+Throughout 2017, SAP sponsored and hosted events to attract,
+develop, and support women around the world. Additional
+ongoing initiatives include the Women's Professional Growth
+Webinar series, the grassroots Business Women's Network
+which celebrated its 10th anniversary in 2017, and the
+Women@SAP online community. In addition, SAP offers the
+Leadership Excellence Acceleration Program (LEAP), a highly
+respected and award-winning development program that helps
+prepare high-potential women for leadership roles at SAP.
+and Engagement
+The following benefits and activities are paramount in
+maintaining an attractive workplace:
+-
+-
+SAP share purchase program: Own SAP is a share purchase
+plan for SAP employees. In 2017, the program was awarded
+the prestigious Global Equity Organization Award for "Best
+Plan Effectiveness." For more information, see the Notes to
+the Consolidated Financial Statements section, Note (27).
+Hasso Plattner Founders' Award: In its fourth year, this
+prestigious award provides the highest internal employee
+recognition at SAP for delivering on our vision and strategy. In
+2017, the award went to the "SAP Transformation Navigator"
+initiative, which transformed customer criticism into a tool
+valued by SAP users and viewed by analysts as a competitive
+advantage for the company. For more information about the
+SAP Transformation Navigator, see section Products,
+Research & Development, and Services.
+Intrapreneurship program: The program identifies high-
+potential entrepreneurial employees at SAP and develops
+them into successful leaders through the SAP.IO Venture
+Studio program. In 2017, more than 1,000 employees
+jumpstarted their entrepreneurial journeys.
+SAP SuccessFactors solutions: Like other SAP support
+functions do for their respective solutions, approximately 220
+HR experts supported sales teams in deals related to SAP
+SuccessFactors solutions. Furthermore, we continued the
+Klaus Tschira Human Resources Innovation Award. The
+award honors SAP partners and customers that have
+contributed a unique and innovative solution in the field of
+human resources.
+SAP Alumni Network: This network and online community
+provides a platform to reconnect with former colleagues and
+to unleash the power of a trusted network built on long-term
+relationships. In 2017, community members included 3,800
+former and 3,400 current SAP employees.
+People Weeks: In 2017, SAP again sponsored an event
+designed for employees to exchange ideas and cultivate a
+greater connection across cultures. With the motto
+"Experience Your Future," People Weeks 2017 reached over
+35,000 employees worldwide through local activities in 67
+countries.
+"How We Run": Our "How We Run" behaviors continue to be
+the cornerstone of our value-driven culture.
+Our "How We Run" behaviors
+?
+87
+Tell it like it is
+Embrace
+differences
+0100
+Keep the
+promise
+וד
+o O o
+How We Run
+SAP
+Build bridges,
+not silos
+Promoting an Inclusive and Bias-
+Free Culture
+An inclusive, bias-free workplace motivates, attracts, and helps
+us retain employees and enables us to better serve our
+customers. It also leads to improved innovation and helps us
+think through challenges in new ways.
+Closing the Gender Gap
+SAP is the first multinational technology company to be
+awarded the Economic Dividends for Gender Equality (EDGE)
+certificate. EDGE recognizes our global commitment to gender
+diversity and equality in the workplace.
+Stay curious
+Creating a Workplace that
+Drives Innovation, Performance,
+88
+289
+Combined Management Report | Employees and Social Investments
+89
+3,920
+6.095
+5,412 16,002
+Total
+APJ
+EMEA Americas
+Total
+APJ
+EMEA Americas
+4,184
+6,406
+14,482
+4,719
+3,895
+5,869
+Cloud and software
+Total
+APJ
+EMEA Americas
+equivalents
+December 31, 2015
+December 31, 2016
+December 31, 2017
+Full-time
+An example is the work carried out by SAP employees in
+Christchurch, New Zealand. In 2017, our volunteers engaged
+with four organizations that were established following the
+catastrophic 2010 and 2011 earthquakes. Initiatives such as
+Cultivate Christchurch, Ethique, Kilmarnock, and Science Alive!
+are all playing a key role in the ongoing revitalization of the city,
+with regards to both business and the post-traumatic recovery
+of its citizens. Teams taking part in the SAP Social Sabbatical
+initiative were embedded within these organizations to build
+operational capacity, identify key strengths and weaknesses,
+and inform strategic growth decisions for the ultimate benefit of
+5,190 estimated beneficiaries. With our partner Ākina
+Foundation, SAP was integral in bringing over 1,600 social
+entrepreneurs, policy makers and corporates together in
+Christchurch at the Social Enterprise World Forum to help
+define the next steps in advancing the social enterprise sector.
+Non-governmental organizations and social enterprises are
+instrumental in addressing our world's most pressing societal
+challenges. Focusing on organizations that put young people on
+the path to success, SAP provided significant capacity building
+for such organizations across the globe. Next to financial
+investments SAP supports these organizations with our key pro
+bono volunteering initiative, the SAP Social Sabbatical. In 2017
+alone we saw 217 SAP employees making an in-kind contribution
+of €2.7 million (time frame Q1-Q3) through their expertise and
+know-how to advance the social impact of numerous
+organizations.
+Helping Non-Governmental
+Organizations Run Better
+Another important initiative co-created by SAP in collaboration
+with our customers is the Code Unnati project. By fostering
+digital literacy, Code Unnati is opening the door to meaningful
+employment opportunities for young people, and contributing to
+social and economic development in India.
+37
+172
+0
+209
+73
+0
+0
+73
+37,512 25,459
+24,029 86,999 34,932 23,532
+22,145 80,609
+33,561
+Number of Employees by Region and Function
+21,832 19,788
+Due to reorganizations within our SAP Digital Business Services in 2017 employees were partially reallocated from cloud and
+software to services. Information for current year are therefore not fully comparable to prior years.
+Engaging in Social Investments
+At SAP, we are committed to helping the world's youth gain the
+skills they need to thrive in the digital economy. To achieve this,
+we leverage our talents, technology and non-governmental
+partnerships. Our primary focus lies on building capacity for
+organizations putting young people on the path of meaningful
+employment, and on supporting digital literacy programs for
+youth to increase their employability in the digital economy.
+In 2017, our employee volunteers gave about 298,000 hours to
+our corporate social responsibility (CSR) projects impacting
+four million lives. SAP also donated a total of €24 million to
+workforce development and youth entrepreneurship projects
+around the globe.
+Advancing Corporate Volunteering
+In addition to ongoing development of numerous volunteering
+programs for our own employees, we are also involved in helping
+other organizations to create their own employee volunteering
+initiatives. This year, SAP collaborated with corporate
+volunteering experts from the Realized Worth Institute to offer
+an online course through our openSAP platform. Aimed at
+volunteer leaders, the course focused on empowering global
+workforces to tackle some of our biggest social and economic
+challenges. Participants learned how to mobilize volunteers'
+empathy and received practical guidance on setting up
+impactful programs and running volunteer events. In short, the
+course offered the skills needed to help companies advance
+volunteering in their organization.
+Another initiative that has seen SAP lead the way in corporate
+volunteering is the IMPACT 2030 initiative. Co-founded by SAP,
+this business-led effort is designed to unite companies in their
+corporate volunteering efforts to address the United Nations'
+Agenda 2030 for Sustainable Development. It encourages
+companies everywhere, regardless of size and location, to
+support the achievement of global sustainable development
+goals through their community service programs.
+Preparing Young People for the
+Future of Work
+With employers reporting a significant skills gap in the tech
+sector, SAP is partnering with non-governmental organizations,
+such as TechSoup, Galway Education Center, and the ASEAN
+Foundation, to prepare young people for the future of work.
+Focusing on workforce readiness we run numerous digital
+literacy programs across the globe aimed at 1.4 million teens,
+students, and young professionals to help them thrive in the
+digital economy.
+One such program is Latin Code Week, an initiative that aims to
+empower young people to become active participants in the
+economic growth of Latin America. This the
+year, 
+program has
+helped 1,500 18-24 year olds in nine countries to develop the
+skills they need to open up new employment opportunities in the
+tech industry. As well as technical training, participants gain
+valuable business skills in areas such as empathy, teamwork,
+leadership, and entrepreneurship.
+88
+Combined Management Report | Employees and Social Investments
+75,180
+442
+98
+85
+0
+0
+1
+-3
+0
+0
+-3
+income/expense, net
+Total operating
+-18,584
+587
+1,120
+182
+-16.694 -16,928
+680
+785
+28 -15,434
+expenses
+1) Share-based payments
+Combined Management Report | Performance Management System
+83
+Employees and Social Investments
+88,543
+Employees at SAP
+(in FTEs)
+79%
+0
+1
+Other operating
+0
+-6,225
+-6,265
+257
+292
+0
+-5,716
+General and
+-1,075
+3
+135
+0
+-936
+Business Health
+Culture Index
+-1,005
+113
+0
+-886
+administration
+Restructuring
+-182
+0
+182
+-28
+0
+0
+28
+6
+86
+85%
+Driving Customer Success with
+the Best Talent in the Market
+2014*
+2015
+2016
+2017
+*The BHCI score for 2014 was recalculated based on updated
+questions.
+Getting the Best Talent
+While staying focused on a diverse workforce spanning different
+generations, "early talent" hires (people with professional
+experience of up to two years) continued to be a key priority. In
+2017, approximately 25% of our external hires fell into this
+category. To help attract this talent, we successfully launched a
+new recruitment campaign involving SAP employees. Featuring
+the slogan, "Bring everything you are. Become everything you
+want.", the campaign explores what success means to our
+people.
+In 2017, SAP received 281 global and local awards for diversity,
+inclusion, employer attractiveness, and people satisfaction.
+Collaborating with Educational
+Institutions
+23,464
+offered in parallel to our manager development track. We also
+successfully piloted two flagship programs for experts.
+Based on a successful early-adopter initiative in 2016, we also
+rolled out the SAP Talk approach globally in 2017. This approach
+fosters a continuous dialog and on-going feedback on
+professional development between managers and employees.
+Results from a survey in August 2017 showed that our people
+are already embracing this new philosophy.
+By investing in professional development, we stay focused on
+staff retention. Our overall retention rate in 2017 was 94.6%
+compared to 94.3% in 2016 (recalculated as per new definition).
+We define retention as the ratio of the average number of
+employees minus the employees who voluntarily departed, to
+the average number of employees (all in full-time equivalents or
+FTES). In 2017, we modified our definition of "voluntarily
+departing employees" used in calculating the retention rate.
+Under our new definition, employees who depart under
+restructuring plans are not considered voluntary departures
+even if their departure is the result of the employee's decision to
+accept an offer of benefits in exchange for the termination of
+employment. Prior period numbers have been adjusted to
+reflect this change in definition.
+The average tenure with SAP remains at a high level (7.2 years in
+2017 and 6.9 years in 2016). The high loyalty of our people is a
+true testimony of SAP being an employer of choice.
+Engaging Our People Through
+Impactful Leadership
+Building trust in leaders is a key ingredient for continuously high
+employee engagement. By the end of 2017, 58.9% of leaders at
+SAP completed our flagship leadership development program.
+In 2017, leadership trust continued to improve, with a Net
+Promoter Score (NPS) of 61% (2016: 57%).
+Making Learning a Great
+teaching. In addition, we sponsor several technical competitions Experience for Everyone
+(for example, SAP InnoJam) and diversity conferences (for
+example, Grace Hopper Celebration) that enable us to meet
+outstanding candidates.
+In 2017, more than 1,000 students were enrolled in our global
+vocational training program. After completing their studies, 85%
+of these students stayed with SAP.
+Developing Careers
+At SAP, we continue to invest in the professional development of
+all our people. In 2017, we focused on our career path for
+experts, who offer specialized expertise, drive innovation, and
+support our strategy to run better. The expert career path is
+We make high-quality learning opportunities easily accessible to
+all employees through our cloud-based learning management
+system, based on SAP SuccessFactors solutions. In 2017, we
+provided 1,136,978 courses (without compliance trainings) to
+84.7% of our employees.
+Self-paced online programs that include language learning, as
+well as technical and soft-skills training courses are open to all
+employees. Our innovative peer-to-peer learning portfolio
+encompasses coaching, mentoring, job shadowing, and
+facilitation opportunities.
+Combined Management Report | Employees and Social Investments
+2013
+72
+75
+78
+Our people are key in helping our customers to successfully
+drive their digital transformation. We are fully committed to
+enabling our employees to grow their skills at every stage of
+their career at SAP.
+Our human resources (HR) strategy focuses on creating a
+workplace that can attract and retain the best talent in the
+market. Using our own cloud technology and following our core
+principle of Run Simple, we transform the way we hire, develop,
+and retain our people. At the same time, our HR strategy allows
+us to create a culture at SAP that can successfully deal with the
+agility and scope of a digital workplace driven by purpose. This
+culture inspires innovation, leads change, and ultimately creates
+employee satisfaction. Our HR team stays focused on delivering
+seamless employee experiences by following three guiding
+principles: simplification, standardization, and consumer
+satisfaction for applicants, employees, and managers.
+Listening to Our People
+The People Survey 2017 results are very positive. One of our
+most important survey dimensions, the Employee Engagement
+Index (EEI), remained very strong at 85%. For 2018 through to
+2020, we aim to keep our Employee Engagement Index between
+84% and 86%.
+Employee Engagement Index
+79
+77
+Percent
+82
+85
+85
+2013
+Employee Engagement
+Index
+2014
+2016
+2017
+*The EEI score for 2015 was recalculated from 81% to 82%
+based on updated questions.
+In 2018, we will continue with two focus topics: simplification
+and innovation. In both areas, we see great improvements based
+on numerous initiatives that have been kicked off (e.g. Run
+Simple at SAP, The Innovation Roundtable). The overall
+Simplification score, which is based on various questions
+speaking to internal and external processes, improved by 3
+percentage points to 57%, continuing the positive trend since
+2015. The overall Innovation score improved by a strong 5
+percentage points to 80%.
+Additionally, also our Business Health Culture Index (BHCI)
+increased, which shows that we are sustainably developing our
+organization. The BHCI assesses the degree to which our
+workplace culture supports people's well-being, work-life
+balance, and organizational health. The positive trend of the
+BHCI continued with a score of 79% (2016: 78%).
+84
+Combined Management Report | Employees and Social Investments
+20
+67
+Business Health Culture Index
+Percent
+79
+2015*
+3
+Cost of services
+Total revenue
+7,536
+4,878
+4,965
+17,379
+6,535
+4,119
+3,967
+14,621
+6,482
+3,812
+Services
+3,574
+Research and
+11,349
+5,250
+8,273
+24,872
+10,525
+4,860
+7,977
+23,363
+9,676
+13,868
+14,991
+23,461
+Acquisition-related charges
+5,045
+A in %
+2016
+2017
+€ millions
+Free Cash Flow
+Among other measures, we use free cash flow to manage our
+overall financial performance.
+Free Cash Flow
+7
+components relating to operating profit that are adjusted for
+foreign currency effects.
+We believe it is important for investors to have information that
+provides insight into our sales. Revenue measures determined
+under IFRS provide information that is useful in this regard.
+However, both sales volume and currency effects impact period-
+over-period changes in sales revenue. We do not sell
+standardized units of products and services, so we cannot
+provide relevant information on sales volume by providing data
+on the changes in product and service units sold. To provide
+additional information that may be useful to investors in
+breaking down and evaluating changes in sales volume, we
+present information about our revenue and various values and
+Constant Currencies Information
+Operating profit, operating margin, effective tax rate, and
+earnings per share identified as operating profit (non-IFRS),
+operating margin (non-IFRS), effective tax rate (non-IFRS), and
+earnings per share (non-IFRS) have been adjusted from the
+respective IFRS measures by adjusting for the aforementioned
+revenue (non-IFRS) and operating expenses (non-IFRS) and the
+income tax effects thereon.
+Operating Profit (Non-IFRS), Operating
+Margin (Non-IFRS), Effective Tax Rate
+(Non-IFRS), and Earnings per Share (Non-
+IFRS)
+We exclude certain acquisition-related expenses for the purpose
+of calculating operating profit (non-IFRS), operating margin
+(non-IFRS), and earnings per share (non-IFRS) when evaluating
+SAP's continuing operational performance because these
+expenses generally cannot be changed or influenced by
+management after the relevant acquisition other than by
+disposing of the acquired assets. Since management at levels
+below the Executive Board does not influence these expenses,
+we generally do not consider these expenses for the purpose of
+evaluating the performance of management units. For similar
+reasons, we eliminate share-based payment expenses as these
+costs are impacted by share price developments and other
+factors outside our control. We also eliminate restructuring
+expenses because they are volatile and mostly cannot be
+influenced by management at levels below the Executive Board.
+Restructuring expenses, that is, expenses resulting from
+measures which comply with the definition of restructuring
+according to IFRS.
+Share-based payment expenses
+Acquisition-related third-party expenses
+purchased in-process research and development)
+Settlements of preexisting business relationships in
+connection with a business combination
+Amortization expense/impairment charges of intangibles
+acquired in business combinations and certain stand-
+alone acquisitions of intellectual property (including
+•
+■
+"
+4,233
+7.029
+20,938
+development
+administration
+Infrastructure
+1,732
+855
+501
+SAP Group
+38,357 25,827
+3,087
+24,359 88,543
+1,584
+36,222 24,696
+788
+454
+23,265
+2,827
+84,183
+1,535
+783
+425
+2,743
+33,906
+22,166 20,914
+76,986
+(December 31)
+Thereof
+acquisitions
+SAP Group
+(months' end
+average)
+5,024
+4,628
+937
+2,434
+Sales and
+9,196
+9,169
+4,854
+23,219
+8,542
+8,999
+4,435
+21,977
+7,683
+7,766
+3.974
+19,422
+marketing
+General and
+2,676
+1,781
+1,047
+5,504
+2,629
+1,746
+1,018
+5,393
+1,653
+9
+We calculate constant currencies measures by translating
+foreign currencies using the average exchange rates from the
+comparative period instead of the current period.
+Purchase of intangible assets and
+property, plant, and equipment
+2
+3,771
+59
+3,831
+2,993
+2
+2,995
+Software licenses
+4,872
+0
+4,872
+111
+4,983
+4,860
+2
+4,862
+Software support
+10,908
+0
+10,908
+97
+11,005
+10,571
+Cloud subscriptions and support
+1
+Revenue measures
+Adj.
+The remaining acquisition-related charges that we
+eliminate in deriving our profit (non-IFRS) numbers are
+likely to recur should SAP enter into material business
+combinations in the future. Similarly, the restructuring
+expenses that we eliminate in deriving our profit (non-
+IFRS) numbers are likely to recur should SAP perform
+restructurings in the future.
+Net cash flows from operating
+activities
+The revenue adjustment for the fair value accounting of
+the acquired entities' contracts and the expense
+adjustment for acquisition-related charges do not arise
+from a common conceptual basis. This is because the
+revenue adjustment aims to improve the comparability of
+the initial post-acquisition period with future post-
+acquisition periods, while the expense adjustment aims to
+improve the comparability between post-acquisition
+periods and pre-acquisition periods. This should
+particularly be considered when evaluating our operating
+profit (non-IFRS) and operating margin (non-IFRS)
+numbers as these combine our revenue (non-IFRS) and
+expenses (non-IFRS) despite the absence of a common
+conceptual basis.
+Our restructuring charges resulted in significant cash
+outflows in the past and could do so in the future. The
+same applies to our share-based payment expense
+because most of our share-based payments are settled in
+cash rather than shares.
+The valuation of our cash-settled share-based payments
+could vary significantly from period to period due to the
+fluctuation of our share price and other parameters used
+in the valuation of these plans.
+In the past, we have issued share-based payment awards
+to our employees every year and we intend to continue
+doing so in the future. Thus, our share-based payment
+expenses are recurring although the amounts usually
+change from period to period.
+We believe that constant currencies measures have limitations,
+particularly as the currency effects that are eliminated
+constitute a significant element of our revenue and expenses
+and could materially impact our performance. Therefore, we
+limit our use of constant currencies measures to the analysis of
+changes in volume as one element of the full change in a
+financial measure. We do not evaluate our results and
+performance without considering both constant currencies and
+nominal measures of revenue (non-IFRS) and operating profit
+(non-IFRS) measures on the one hand, and changes in revenue,
+operating expenses, operating profit, or other measures of
+financial performance prepared in accordance with IFRS on the
+other. We caution the readers of our financial reports to follow a
+similar approach by considering nominal and constant
+currencies non-IFRS measures only in addition to, and not as a
+substitute for or superior to, changes in revenue, operating
+expenses, operating profit, or other measures of financial
+performance prepared in accordance with IFRS.
+Despite these limitations, we believe that the presentation of our
+non-IFRS measures and the corresponding IFRS measures,
+together with the relevant reconciliations, provide useful
+information to management and investors regarding present
+and future business trends relating to our financial condition and
+results of operations.
+Combined Management Report | Performance Management System
+81
+Reconciliations of IFRS to Non-IFRS Financial Measures for the Years Ended
+December 31
+Due to rounding, the sum of the numbers presented in the following table might not precisely equal the totals we provide.
+€ millions, unless otherwise stated
+2017
+2016
+IFRS
+Adj.
+Non-IFRS
+Currency
+Impact
+Non-IFRS
+Constant
+Currency
+IFRS
+Non-IFRS
+10,572
+3,769
+15,780
+While our profit (non-IFRS) numbers reflect the
+elimination of certain acquisition-related expenses, no
+eliminations are made for the additional revenue or other
+income that results from the acquisitions.
+"
+not indicative of our present and future performance,
+foremost for the following reasons:
+Combined Management Report | Performance Management System
+80
+Without being analyzed in conjunction with the
+corresponding IFRS measures, the non-IFRS measures are
+We believe that our non-IFRS financial measures described
+above have limitations including but not limited to the following:
+Limitations of Non-IFRS Measures
+restructuring plans.
+The non-IFRS measures provide investors with additional
+information that enables a comparison of year-over-year
+operating performance by eliminating certain direct effects of
+acquisitions, share-based compensation plans, and
+Our revenue (non-IFRS), expense (non-IFRS), and profit
+(non-IFRS) measures, along with the "new cloud bookings"
+and "cloud backlog" measures (see above) provide investors
+with insight into management's decision making because
+management uses these measures to run our business and
+make financial, strategic, and operating decisions. We include
+the revenue adjustments outlined above and exclude the
+expense adjustments outlined above when making decisions
+to allocate resources. In addition, we use these non-IFRS
+measures to facilitate comparisons of SAP's operating
+performance from period to period.
+-
+We believe that our non-IFRS measures are useful to investors
+for the following reasons:
+Usefulness of Non-IFRS Measures
+4
+3,627
+3,770
+Free cash flow
+(without acquisitions)
+27
+Software licenses and support
+-1,275
+-1,001
+While we adjust for the fair value accounting of the
+acquired entities' recurring revenue contracts, we do not
+adjust for the fair value accounting of deferred
+compensation items that result from commissions paid to
+the acquired company's sales force and third parties for
+closing the respective customer contracts.
+The acquisition-related amortization expense that we
+eliminate in deriving our profit (non-IFRS) numbers is a
+recurring expense that will impact our financial
+performance in future years.
+Non-IFRS and non-GAAP measures are widely used in the
+software industry. In many cases, inclusion of our non-IFRS
+measures may facilitate comparison with our competitors'
+corresponding non-IFRS and non-GAAP measures.
+0
+0
+15,781
+3,638
+15,988
+15,431
+3
+15,434
+Cloud and software
+19,549
+3
+19,552
+267
+207
+18,424
+19,819
+3,946
+34
+3,911
+0
+3,638
+Services
+18,428
+5
+3,911
+.2
+Compensation Report.
+Report by the Supervisory Board.
+Corporate Governance Report..
+Investor Relations
+SAP Executive Board.
+Letter from the CEO.
+What we accomplished in 2018 is the latest in our track record
+of innovation and growth. This does not happen by accident. On the
+contrary, it reflects the talent, dedication, and professional
+excellence of our customers, partners, and employees around the
+world.
+As CEO, I can tell you that I am proud of SAP, honored by the
+opportunity to represent this company, and highly optimistic about
+our ability to help the world run better and improve people's lives
+far into the foreseeable future.
+Earning Your Trust
+Trust is the ultimate human currency.
+We have a loyal, committed, and engaged workforce. Ninety-
+three percent of our employees told us they are proud to work for
+SAP, which is eight percentage points higher than the industry
+average. Through our corporate social responsibility initiatives, our
+colleagues volunteered a quarter of a million hours and reached
+four million people in 2018 alone. While growing the entire size of
+the company by 10%, we beat our ambition to shrink our carbon
+footprint by nearly 5%.
+Even as we feel the momentum behind the company, we face
+the same turmoil in the macro environment that impacts all
+companies. Our stock reached a record high in September but also
+came under pressure as world markets experienced a very
+turbulent final quarter. While we ended 2018 down 7%, the stock
+still outperformed the DAX index by 11 percentage points. And we
+are already seeing a return to positive momentum in the early
+weeks of 2019.
+8
+Letter from the CEO
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+3
+Additional
+Infomation
+This is one reason our strong performance in 2018 means so
+much to us. We made promises and we kept them. Our cloud
+revenue is now larger than our software revenue and it became a
+main growth driver in our business, growing at 38% (non-IFRS at
+constant currencies). We delivered over €24.7 billion in total
+revenue (non-IFRS) and €7.2 billion in operating profit (non-IFRS) -
+the most ever. We met or exceeded every aspect of our financial
+guidance to the capital markets, guidance we increased three times
+during the year to account for strong momentum.
+5
+72
+8
+One of the hallmarks of any strong company is the distribution
+of success to its stakeholders. In this spirit, I am pleased to
+announce that, pending approval at the Annual General Meeting,
+SAP will return a dividend of €1.50 per share to shareholders, a 7%
+increase over last year's dividend.
+Notes.....
+.70
+Customers...
+Security, Privacy, and Data Protection
+64
+.57
+52
+.51
+50
+44
+7
+Products, Research & Development, and Services.
+Strategy and Business Model ....
+General Information About This Management Report...
+Combined Management Report
+Independent Auditor's Report
+43
+Responsibility Statement.
+26
+18
+15
+.12
+.10
+Performance Management System
+Securing Our Future
+0
+We did this with SAP HANA, a business data platform that
+shattered the status quo database market. We did this with a new
+era of applications built on SAP HANA. Now we move to a new and
+defining chapter in our SAP HANA journey.
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Bill McDermott
+Chief Executive Officer
+Robert Enslin
+President, Cloud Business Group
+Adaire Fox-Martin
+Global Customer Operations EMEA, MEE and Greater China
+Christian Klein
+Chief Operating Officer, Intelligent Enterprise Group
+10
+10
+SAP Executive Board
+To Our Stakeholders
+Contents
+About This Report..
+Key Facts.
+Contents
+Key Facts
+20
+265
+318
+Employees and Social Investments.
+920
+919
+SAP Executive Board
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+This is now, beyond any doubt, an experience economy. Each of
+us are shaped by our experiences. We have real power not only to
+express our sentiment but also to actively shape the relationships
+we have with the institutions around us - public, private, and non-
+profit.
+For SAP, this is the burning question we must help our
+customers to address.
+Throughout our 47-year history, SAP has helped companies
+operate in a constantly changing economy. Our solutions are
+industrial-grade, capable of powering the most sophisticated
+businesses as they help deliver highly complex business models in
+nearly every country on Earth.
+"Experience Management" is a paradigm-shifting category in
+the business software industry. No longer can enterprises operate
+without constantly asking "why?" We acquired Qualtrics to help us
+provide this operational capacity to the individuals our customers
+are serving.
+Why are people frustrated? Why are they loyal? Why are they
+looking elsewhere?
+The answers to these questions will not only pave the road to
+sustainable business success but they will also help intelligent
+enterprises recapture the US$1.6 trillion that is currently lost due to
+customer attrition.
+Our stakeholders should expect SAP will reach new heights
+when experience data ("X") from the Qualtrics platform joins the
+operational data ("O") from 77% of transactions on the SAP
+platform.
+X+O is the essential equation for winning in this experience
+economy. We expect this highly differentiated offering to drive SAP
+to grow our cloud revenue more than three times, reaching more
+than €35 in billion total revenue by 2023, and powering strong
+operating profit growth.
+Confronting Our Challenges
+Rather than leave you with the many unique attributes that
+make us strong, I will close with the candor to tell you where we
+must be stronger.
+SAP is the only truly global business software company. We
+serve 425,000 customers and counting, worldwide. There is no
+finish line when it comes to meeting the needs of our growing
+customer base.
+Looking back, we have always based SAP's strategy on where
+the world is going, not where it has already been.
+Customers expect SAP to lead more aggressively in the
+responsible use of artificial intelligence. Even as we embed these
+algorithms into our applications, we must answer the question of
+how these use cases will impact the human workforce. We must
+help leaders in all sectors find the proper balance between human
+judgement and machine speed, including a comprehensive strategy
+for worker retraining to address a growing digital skills gap.
+Finally, customers expect SAP to do more than celebrate a
+purposeful vision for our company. They want our solutions to help
+them be responsible, sustainable best-run businesses. They want
+our solutions to help them remove bias from the workplace,
+eliminate unfair labor practices, reduce carbon emissions, and
+educate a new generation of inspired workers. Underpinning what
+we do is our support of the UN Sustainable Development Goals,
+which will help us achieve our purpose and have a positive impact
+on the world.
+You should always expect that SAP's pride in engineering will
+continue to propel our products to improve. In all areas where we
+compete, we will not rest until SAP is #1 or fastest growing.
+But beyond our ambitions for profitable growth, you should
+always expect us to be a humble and hungry company - ever proud
+about what makes us strong and ever vigilant to confront our
+challenges.
+With your continued trust, not only will we seize the
+opportunities of the experience economy but we will also do so in a
+manner befitting the class and character of those who came before
+us.
+I thank you, especially, for standing behind us on this journey.
+Very truly yours,
+Bill McDermott
+Chief Executive Officer
+SAP SE
+Letter from the CEO
+9
+To Our
+Stakeholders
+Customers expect SAP to be a role model when it comes to
+compliant business practices and integrity. We on the Executive
+Board share this belief. Unfortunately, we, like many other
+companies, have experienced the challenges of non-compliance.
+Moving forward, even as SAP expands our own internal focus, we
+strive to help others understand the risks and warning signs. When
+businesses do not act in accordance with the highest ethical
+standards, the resulting decline in public trust is harmful for all
+sides. Therefore, we call for other interested groups to come
+together to support these values.
+Energy and Emissions
+5
+Corporate Governance Fundamentals...
+268
+Publication Details
+267
+Financial and Sustainability Publications.
+.266
+Financial Calendar and Addresses
+254
+Glossary......
+250
+Five-Year Summary.
+249
+60
+Additional Information
+Assurance Report of the Independent Auditor on selected qualitative and quantitative sustainability disclosures
+246
+Management's Acknowledgement of the SAP Integrated Report 2018.
+245
+Task Force on Climate-Related Financial Disclosure (TCFD)...
+240
+GRI Index and UN Global Compact Communication on Progress
+235
+Non-Financial Notes: Environmental Performance.
+.234
+233
+247
+232
+To Our Stakeholders
+SAP Executive Board.
+Thank you for investing your time in the SAP Integrated Report
+2018. In this experience, you will find a comprehensive assessment
+of a strong growth company. For seven years now, we have
+measured ourselves in a holistic fashion. This report is to empower
+you, our stakeholders, to make an informed judgement about the
+quality and sustainability of SAP.
+Dear Stakeholders,
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Letter from the CEO
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+7
+44
+Letter from the CEO.
+.43
+.15
+12
+10
+80258 0 2 =
+26
+Independent Auditor's Report.
+Responsibility Statement.
+Compensation Report.
+Report by the Supervisory Board
+Corporate Governance Report..
+Investor Relations.
+.18
+Financial Performance: Review and Analysis
+.231
+Memberships
+Section D Invested Capital.
+.153
+.145
+.139
+.136
+131
+130
+.123
+103
+.101
+.99
+161
+.81
+73
+Section C - Financial Results.
+-
+Section B Employees..
+Customers..
+Section A
+Consolidated Financial Statements IFRS.
+Consolidated Financial Statements IFRS
+Expected Developments and Opportunities.
+Risk Management and Risks..
+Business Conduct....
+78
+Non-Financial Notes: Social Performance.
+Section E Capital Structure, Financing, and Liquidity.
+Section F - Management of Financial Risk Factors
+Public Policy
+Waste and Water
+-5
+229
+227
+225
+223
+222
+.220
+Sustainable Procurement
+Human Rights and Labor Standards
+.169
+Our Contribution to the UN Sustainable Development Goals
+Stakeholder Engagement..
+Materiality..
+.212
+211
+About This Further Information on Economic, Environmental, and Social Performance
+Connectivity of Financial and Non-Financial Indicators..
+210
+Further Information on Economic, Environmental, and Social Performance
+Management's Annual Report on Internal Control over Financial Reporting in the Consolidated Financial Statements 209
+.193
+Section GOther Disclosures.
+175
+Sustainability Management and Policies
+325
+Customer Net Promoter Score) (in %)
+-128
+25
+Cost of cloud subscriptions and support (non-IFRS)
+-1,855
+-1,427
+30
+Cost of software licenses and support (IFRS)
+-1,660
+-2,092
+-6
+Cost of software licenses and support (non-IFRS)
+-1,962
+-2,044
+-4
+Cost of cloud and software (IFRS)
+-2,234
+-2,068
+Cost of cloud subscriptions and support (IFRS)
+Operating expenses
+2,629
+2,261
+16
+Customer Experience Segment revenue
+951
+643
+48
+Share of predictable revenue (IFRS, in %)
+65
+63
+3
+Share of predictable revenue (non-IFRS, in %)
+65
+63
+3
+Cost of cloud and software (non-IFRS)
+Total cost of revenue (IFRS)
+-4,160
+-3,893
+5
+63.1
+62.2
+1
+86.6
+85.8
+1
+Software and support gross margin (non-IFRS, in %)
+87.4
+87.0
+0
+Cloud and software margin (in % of corresponding revenue, IFRS)
+79.8
+80.1
+0
+56.0
+SAP Business Network Segment revenue
+58.6
+Profits and Margins
+7
+-3,817
+-3,471
+10
+-7,462
+-7,051
+6
+-6,969
+-6,462
+8
+-3,624
+-3,352
+8
+Total cost of revenue (non-IFRS)
+Research and development (IFRS)
+Cloud subscriptions and support margin (in % of corresponding revenue, IFRS)
+Cloud subscriptions and support margin (in % of corresponding revenue, non-IFRS)
+Software and support gross margin (IFRS, in %)
+Cloud and software margin (in % of corresponding revenue, non-IFRS)
+3
+20,806
+All financial and non-financial data and information for the
+reporting period is reported utilizing SAP software solutions and
+sourced from the responsible business units.
+The reporting period is fiscal year 2018. The report
+encompasses SAP SE and all subsidiaries of the SAP Group. To
+make this report as current as possible, we have included relevant
+information available up to the auditor's opinion and the
+responsibility statement dated February 20, 2019. The report is
+available in English and German.
+Independent Audit and Assurance
+KPMG AG Wirtschaftsprüfungsgesellschaft has audited our
+Consolidated Financial Statements and our Combined
+Management Report (including the information to which our Non-
+Financial Report makes references). Additionally, KPMG has
+provided assurance on selected non-financial data and information
+in accordance with the International Standard on Assurance
+Engagements (ISAE) 3000 and 3410 ("Assurance Engagements on
+Greenhouse Gas Statements"), two pertinent standards for the
+assurance of sustainability reporting. Where our SAP Integrated
+Report makes reference to SAP's public Web site, that Web site
+information is unaudited. Both the Independent Auditor's Report
+and the Independent Assurance Report for non-financial
+information are available in the Independent Auditor's Report
+section and the Independent Assurance Report section.
+Concept and Realization
+This report was designed by SAP and created with SAP
+S/4HANA software and the SAP Disclosure Management
+application.
+Data
+2
+Key Facts
+€ millions, unless otherwise stated
+2018
+2017
+A in %
+Revenues
+About This Report
+Protocol.
+Greenhouse gas data is prepared based on the Greenhouse Gas
+The social and environmental data and information included in
+the SAP Integrated Report is prepared in accordance with the GRI
+Standards: Core option. This GRI option indicates that a report
+contains the minimum information needed to understand the
+nature of the organization, its material topics and related impacts,
+and how these are managed. We apply the GRI principles
+(sustainability context, stakeholder inclusiveness, materiality, and
+completeness) for defining report content. We also report on SDGs
+identified as material.
+2018
+SAP
+Integrated
+Report
+Excerpt
+THE BEST RUN
+SAP
+Ⓡ
+About This Report
+Content
+The SAP Integrated Report 2018 presents our full-year financial,
+social, and environmental performance in one integrated report
+("SAP Integrated Report") available at
+www.sapintegratedreport.com. Since 2012, we have taken into
+consideration the recommendations of the International Integrated
+Reporting Framework.
+The Integrated Report also serves as our United Nations (UN)
+Global Compact progress report. In 2018, for the first time, we also
+report on our contribution to the UN Sustainable Development
+Goals (SDGs).
+Basis of Presentation
+Our Combined Management Report is prepared in accordance
+with sections 289, 289a, 289f, 315, 315a, and 315d of the German
+Commercial Code and German Accounting Standards No. 17 and
+20. The Combined Management Report is also a management
+commentary complying with the International Financial Reporting
+Standards (IFRS) Practice Statement Management Commentary.
+Our Consolidated Financial Statements are prepared in
+accordance with IFRS. Our executive management has confirmed
+the effectiveness of our internal controls over financial reporting.
+Our Non-Financial Report is prepared in accordance with
+sections 289b and 315b of the German Commercial Code, which
+require us to report, for both, SAP SE and SAP Group, on social,
+environmental, and other non-financial matters. All non-financial
+information stipulated in the German Commercial Code, sections
+315c and 289c that is relevant to understand SAP's development,
+performance of the business, and the position of the Group and
+SAP SE is included in our Combined Management Report. Rather
+than repeating this information, our Non-Financial Report (which is
+part of this integrated report at
+http://www.sap.com/investors/sap-2018-combined-non-
+financial-report) provides references to the sections of our
+Combined Management Report in which the required disclosures
+are made.
+Cloud subscriptions and support (IFRS)
+4,993
+3,769
+32
+1
+Cloud and software (IFRS)
+20,622
+19,549
+Cloud and software (non-IFRS)
+20,655
+19.552
+Total revenue (IFRS)
+24,708
+23,461
+Total revenue (non-IFRS)
+24,741
+23,464
+5655
+Applications, Technology & Services Segment revenue
+10,908
+20,218
+10,982
+1
+Cloud subscriptions and support (non-IFRS)
+5,027
+3,771
+33
+Software licenses (IFRS)
+4,647
+4,872
+-5
+Software licenses (non-IFRS)
+4,647
+4,872
+-5
+Software support (IFRS)
+10,981
+10,908
+Software support (non-IFRS)
+310
+81.5
+-1
+4.43
+-2
+1.50
+1.40
+7
+106.80
+4.35
+114.80
+Employees and personnel expenses
+Number of employees¹). 3)
+96,498
+88,543
+9
+Personnel expenses per employee - excluding share-based payments (in € thousands)
+-7
+2
+3.35
+3.42
+58,530
+59,147
+-1
+Share of software orders greater than € 5 million (in % of total software order entry)
+29
+30
+-3
+39
+40
+-3
+Key SAP Stock Facts
+Earnings per share, basic (in €)
+Earnings per share, basic (non-IFRS, in €)
+Dividend per share²)(in €)
+Market capitalization1) (in € billions)
+115
+121
+-5
+Women working at SAP (in %)
+93.9
+94.6
+-1
+Customer
+Environment
+Net Greenhouse gas emissions (in kilotons)
+Total energy consumption (in GWh)
+Total data center electricity (in GWh)
+1) Numbers based on at year-end.
+2) Numbers are based on the proposed dividend and on level of treasury stock at year-end.
+3) Full-time equivalents.
+4) Due to changes in sampling, Customer NPS is not fully comparable to the prior year's score.
+4
+-5.0
+17.8
+-2
+Orders - Number of on-premise software deals (in transactions)
+61
+-1
+33.0
+32.8
+0
+Women in management¹) (total, in % of total number of employees)
+25.7
+25.4
+1
+Employee Engagement Index (in %)
+84
+85
+Business Health Culture Index (in %)
+Leadership Trust Index (LTI, in %)
+Employee retention (in %)
+78
+79
+60
+82.2
+10
+3,047
+-2
+Operating profit (IFRS)
+5,703
+4,877
+17
+Operating profit (non-IFRS)
+80
+Operating margin (in % of total revenue, IFRS)
+7,163
+6,769
+6
+23.1
+20.8
+11
+Operating margin (in % of total revenue, non-IFRS)
+Free cash flow
+79
+Customer Experience Segment gross margin (in % of corresponding revenue)
+2
+Total gross margin (in % of total revenue, IFRS)
+69.8
+69.9
+0
+Total gross margin (in % of total revenue, non-IFRS)
+71.8
+72.5
+-1
+Applications, Technology & Services Segment gross margin (in % of corresponding revenue)
+73
+74
+-1
+SAP Business Network Segment gross margin (in % of corresponding revenue)
+69
+68
+29.0
+28.9
+0
+2,843
+0
+56
+60
+-7
+27.0
+19.5
+38
+26.3
+22.8
+16
+New cloud bookings
+1,814
+1,448
+25
+Deferred cloud subscriptions and support revenue (IFRS)")
+70
+2,771
+70
+-1,479
+3,770
+-25
+Key Facts
+3
+€ millions, unless otherwise stated
+Net liquidity
+Days' sales outstanding (DSO, in days)
+Equity ratio (total equity in % of total assets)
+Effective tax rate (IFRS, in %)
+Effective tax rate (non-IFRS, in %)
+Order Entry
+2018
+2017
+A in %
+-2,493
+69
+Share of software orders less than € 1 million (in % of total software order entry)
+Profit after tax increased to €4,088 million in 2018 (2017:
+€4,046 million).
+Combined
+-3,066
+-1,112
+>100
+Net cash flows from financing
+activities
+3,283
+-3,406
+<-100
+32
+28
+Total current assets increased by 39% in 2018 from
+€11,930 million to €16,620 million. This was mainly due to an
+increase in cash and cash equivalents based on cash inflows from
+the issuance of Eurobonds.
+Investment in Goodwill, Intangible Assets, and
+Property, Plant, and Equipment
+€ millions | change since previous year
+Net cash flows from investing
+activities
+In 2018, cash inflows from operating activities decreased by
+€743 million to €4,303 million (2017: €5,045 million). This is
+particularly due to an increase in income tax payments, higher
+insurance payments related to employees' time credits compared
+to the prior year, and higher share-based payments (€1.0 billion in
+2018 and €0.8 billion in 2017). Our days sales outstanding (DSO)
+for receivables, defined as the average number of days from the
+raised invoice to cash receipt from the customer, remained stable
+in 2018 at 70 days (2017: 70 days).
+Net cash inflows from financing activities were €3,283 million in
+2018, compared to cash outflows of €3,406 million in 2017. In
+2018, we issued €6,000 million in Eurobonds financing the
+8,636
+377%
+128%
+69%
+42%
+-92%
+3,715
+1,630
+1,145
+676
+2014
+Cash outflows from investing activities were €3,066 million in
+2018 (2017: €1,112 million). We paid a total of €2,140 million for
+acquisitions, mainly Callidus, in 2018, compared to €291 million in
+2017. Capital expenditures on purchases of intangible assets and
+property, plant, and equipment increased by €183 million to
+€1,458 million in 2018. For more information about current and
+planned capital expenditures, see the Assets section and the
+Investment Goals section.
+2015
+-15
+4,303
+Other
+Group Liquidity 12/31/2018
+4,303
+6,368
+59
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+acquisition of Callidus and Qualtrics, and a US$300 million USD
+bond. The cash outflows resulted from repayments of
+€1,150 million in Eurobonds and US$150 million in U.S. private
+placements when they matured. Cash outflows in 2017 resulted
+from repayments of €1,000 million in Eurobonds and
+US$442.5 million in U.S. private placements when they matured.
+The dividend payment of €1,671 million made in 2018 exceeded
+the amount of €1,499 million from the prior year, as a result of the
+increased dividend paid per share from €1.25 to €1.40. In 2017, we
+repurchased shares in the amount of €500 million (2018: €0).
+Assets (IFRS)
+Analysis of Consolidated Statements of
+Financial Position
+Total assets increased by 21% year over year to €51,491 million.
+Assets
+5,045
+Percent
+Current
+2018
+68
+8,838
+2017
+72
+Analysis of Consolidated Statements of Cash
+Flow
+€ millions
+2018
+2017
+A in %
+Net cash flows from operating
+activities
+■Non-current
+Proceeds from Borrowings
+2016
+2018
+Opp
+-4pp
+2017
+60
+16
+24
+-8pp
+Current liabilities increased slightly by 3% to €10,481 million in
+2018 (2017: €10,210 million).
+Total non-current liabilities increased by 80% to €12,133 million
+in 2018 compared to the previous year's figure of €6,759 million.
+This was due to the issuance of Eurobonds to finance the
+acquisition of Callidus and Qualtrics. For more information about
+our financing activities in 2018, see the Finances (IFRS) section.
+The equity ratio (that is, the ratio of shareholders' equity to total
+assets) decreased to 56% (prior year: 60%).
+2014
+2015
+2016
+4pp
+2017
+Principal Investments and Divestitures
+Currently in Progress
+In 2018, we continued various construction projects and started
+new construction activities in several locations. Except for one new
+office building in Walldorf, which is partially financed by a
+promotional loan, we plan to finance all of these projects from
+operating cash flow. Our most important projects are listed below.
+Construction Projects
+€ millions
+Country
+Location of Facility
+Short Description
+Estimated Total Costs Incurred as
+Cost
+at 12/31/2018
+Estimated
+Completion Date
+Germany
+2018
+2017
+5pp
+60
+Total non-current assets increased by 14% in 2018 to
+€34,871 million compared to the previous year's figure of
+€30,554 million. This change was mainly due to foreign-exchange-
+related revaluations as well as additions to goodwill from the
+acquisition of Callidus.
+Financial Performance: Review and Analysis
+95
+To Our
+Combined
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Liabilities
+Percent
+2018
+Percent
+56
+Non-current
+Shareholder's equity
+56
+24
+20
+Further Information on Economic,
+Environmental, and Social Performance
+Equity Ratio
+Additional
+Infomation
+Percent change since previous year
+56
+51
+60
+60
+Current
+Walldorf
+Repayments of Borrowings 1,407
+Dividends Paid
+1,000
+1.087
+1,000
+759
+500
+500
+500
+262
+194
+87
+2019
+2020
+600
+2021
+2023
+2024
+2025
+2026
+2027
+2028
+2030
+2031
+Nominal volume of financial debt on December 31, 2018,
+included amounts in euros (€10,050 million) and U.S. dollars
+(€1,273 million). Approximately 30% of the financial debt was held
+at variable interest rates, partially swapped from fixed into variable
+using interest rate swaps.
+We intend to repay €750 million in Eurobonds in November
+2019. In addition, we might repay portions of the Qualtrics related
+€2.5 billion acquisition term loan, and plan to repay the first
+tranches of a €50 million promotional loan with KfW.
+Financial Debt
+Bonds
+2022
+€ millions
+1,250
+500
+To Our
+Combined
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Financial Debts
+Financial debt is defined as the nominal volume of bank loans, private placements, and bonds.
+Maturity Profile of Financial Debts
+796
+1.415
+12
+1,288
+500
+€ millions
+■Fixed
+1,132
+1,000
+862
+1,250
+1,087
+1,000
+38
+1,094
+1,403
+500
+1,045
+■Variable
+1,671
+Private Placement
+Bank Loan
+4,594
+Non-current financial debt
+Net liquidity 2
+-10,572
+-4,965
+-5,607
+-2,493
+-1,479
+-1,013
+Group liquidity consists of cash and cash equivalents (for
+example, cash at banks, money market funds, and time deposits
+with original maturity of three months or less) and current
+investments (for example, time deposits and debt securities with
+original maturities of greater than three months and remaining
+maturities of less than one year included in other financial assets)
+as reported in our Consolidated Financial Statements. Group
+liquidity on December 31, 2018, primarily comprised amounts in
+euros and U.S. dollars. For more information about our liquidity,
+see the Notes to the Consolidated Financial Statements,
+Note (E.3).
+The increase in Group liquidity compared to 2017 was mainly
+due to proceeds from borrowings for the Qualtrics acquisition and
+cash inflows from our operations. They were offset by cash
+outflows for acquisitions, dividend payments, capital expenditures,
+and repayments of borrowings.
+For information about the impact of cash, cash equivalents,
+current investments, and our financial liabilities on our income
+Financial Performance: Review and Analysis
+3,486
+To Our
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+statements, see the analysis of our financial income, net, in the
+Operating Results (IFRS) section.
+Development of Group Liquidity
+€ millions
+Group Liquidity 12/31/2017
+Operating Cash Flow
+Capital Expenditure
+4,785
+1,458
+Acquisitions
+2,140
+Combined
+1,011
+8,080
+540
+58
+10,262
+For more information about our financial debt, see the Notes to
+the Consolidated Financial Statements, Note (E.3).
+94
+==
+Cash Flows and Liquidity
+Group Liquidity
+€ millions
+2018
+2017
+Δ
+Cash and cash equivalents
+Net liquidity 1
+8,627
+4,617
+Current investments
+211
+774
+-563
+Group liquidity
+8,838
+4,785
+4,053
+Current financial debt
+-759
+-1,299
+4,011
+New office building for approx.
+450 employees
+38
+27
+Marketable securities and liquid
+4,909
+731
+assets
+Short-term assets
+9,926
+4,947
+Prepaid expenses and deferred charges
+273
+226
+Deferred taxes
+266
+4,215
+227
+2
+3
+Total assets
+41,324
+34,770
+The increases in property, plant, and equipment of €213 million to
+€1,495 million (2017: €1,282 million) relate primarily to the
+replacement and purchase of IT infrastructure and the construction
+of new buildings. Financial assets increased €1,424 million year
+over year to €27,363 million (2017: €25,939 million), mainly due to
+€1,692 million in capital contributions to subsidiaries, thereof
+€1,137 million to SAP America Inc. for the Callidus acquisition. The
+increase was partly offset by €245 million in write-downs on
+investments in affiliated companies.
+The increase of €801 million in accounts receivable and other
+assets was primarily the result of €734 million higher receivables
+from affiliated companies.
+Marketable securities and liquid assets increased by €4,178 million
+to €4,909 million (2017: €731 million). The increase was mainly due
+to proceeds from borrowings for the Qualtrics acquisition.
+SAP SE shareholders' equity rose 2% to €16,452 million
+(2017: €16,171 million). Against outflows of €1,671 million
+associated with the payment of the 2017 dividend, there was a
+€1,929 million increase due to net income for 2018 and an inflow of
+€22 million from the issuance of shares to service the share-based
+payments of employees. The equity ratio (that is, the ratio of
+shareholders' equity to total assets) is 40% (2017: 47%).
+Provisions increased €40 million to €1,711 million
+(2017: €1,671 million).
+Other provisions increased €78 million to €1,128 million (2017:
+€1,050 million), primarily as a result of higher provisions for
+outstanding invoices on goods and services.
+In contrast, provisions for tax decreased €40 million to
+€575 million (2017: €615 million).
+Liabilities increased €6,233 million to €23,150 million
+(2017: €16,917 million). This increase mainly resulted from a
+€1,266 million increase in liabilities to affiliated companies,
+primarily due to higher cash contributions by subsidiaries through
+SAP SE's centralized management of finance and liquidity, and the
+issuance of Eurobonds for a total of €6,000 million to finance the
+acquisition of Callidus and Qualtrics. The increase in liabilities was
+partly offset by repayments of bonds in the total amount of
+€1,150 million.
+Surplus arising from offsetting
+Opportunities and Risks
+5,016
+1
+Additional
+Infomation
+amortization to €603 million (2017: €295 million) was mainly due
+to depreciation of intangible assets acquired at the end of 2017 in
+the course of the hybris business transfer. Other operating
+expenses increased by €193 million to €2,246 million (2017:
+€2,053 million). This increase is mainly attributable to a €66 million
+increase in write-downs on receivables and a €67 million increase
+in rental costs.
+Finance income was €745 million (2017: €1,745 million), a year-
+over-year decrease of €1,000 million. This decrease is primarily
+due to a €736 million lower income from investments in associates,
+€245 million higher write-downs on financial assets, a decrease of
+€79 million in net interest income, and a decrease of €9 million in
+income from other securities and from loans held as financial
+assets. The decrease in finance income was partly offset by a
+€69 million increase in results from profit and loss transfer
+agreements.
+SAP SE income before taxes decreased €1,259 million to
+€2,732 million (2017: €3,991 million). Income taxes decreased by
+€336 million to €788 million (2017: €1,124 million). After deducting
+taxes, the resulting net income was €1,929 million
+(2017: €2,856 million), a decrease of €927 million year over year.
+Assets and Financial Position
+In 2018, SAP SE total assets closed at €41,324 million
+(2017: €34,770 million).
+SAP SE Balance Sheet as at December 31-
+German Commercial Code (Short Version)
+2018
+2017
+1
+€ millions
+Accounts receivable and other assets
+Assets
+1,999
+2,146
+Property, plant, and equipment
+1,495
+1,282
+Financial assets
+27,363
+25,939
+Fixed assets
+30,857
+29,367
+Inventories
+Intangible assets
+Further Information on Economic,
+Environmental, and Social Performance
+SAP SE is subject to essentially the same opportunities and risks as
+the SAP Group. For more information, see the Risk Management
+and Risks section as well as the Expected Developments and
+Opportunities section.
+Shareholders' equity
+Information required under the German Commercial Code,
+sections 289a (1) and 315a (1), with an explanatory report:
+Composition of share capital: For information about the
+composition of SAP SE share capital as at December 31, 2018, see
+the Notes to the Consolidated Financial Statements, Note (E.2).
+Each share entitles the bearer to one vote. American depositary
+receipts (ADRs) representing our shares are listed on the New York
+Stock Exchange (NYSE) in the United States. ADRs are certificates
+representing non-U.S. shares and are traded on U.S. stock
+exchanges instead of the underlying shares. One SAP ADR
+corresponds to one SAP share.
+Restrictions applying to share voting rights or transfers: SAP
+shares are not subject to transfer restrictions. SAP held
+34,854,354 treasury shares as at December 31, 2018, see the
+Notes to the Consolidated Financial Statements, Note (E.2).
+Treasury shares do not carry voting rights or dividend rights or
+other rights. We are not aware of any other restrictions applying to
+share voting rights or to share transfers.
+Shareholdings that exceed 10% of the voting rights: We are
+not aware of any direct or indirect SAP SE shareholdings that
+exceed 10% of the voting rights.
+Shares with special rights conferring powers of control: No
+SAP shareholder has special rights conferring powers of control.
+Type of control over voting rights applying to employee
+shareholders who do not directly exercise their control rights: As
+with other shareholders, employee holders of SAP shares exercise
+their control rights in accordance with the law and the Articles of
+Incorporation. In votes on the formal approval of their acts at the
+Annual General Meeting of Shareholders, employee
+representatives on the Supervisory Board, as all other members of
+the Supervisory Board, are prohibited from exercising the voting
+rights associated with their shares.
+Requirements concerning appointments and dismissals of
+members of the Executive Board and amendments to the
+Articles of Incorporation: Conditions for the appointment and
+dismissal of members of the Executive Board and amendment to
+the Articles of Incorporation reflect the relevant provisions of
+applicable European and German law, including Council Regulation
+(EC) No. 2157/2001 on the Statute for a European Company ("SE
+Regulation") and the German Stock Corporation Act. Under the
+Articles of Incorporation, the Executive Board consists of at least
+two members, who are appointed for a period of not more than five
+years by the Supervisory Board in accordance with the SE
+Regulation, articles 39 and 46. The number of members of the
+Executive Board is decided by the Supervisory Board. Executive
+Board members may be reappointed for, or their term of office
+extended by, a maximum of five years. A simple majority of the
+Supervisory Board membership is required for Executive Board
+appointments. In the event of a tie, the chairperson of the
+Supervisory Board has the deciding vote. The Supervisory Board
+can appoint a chairperson of the Executive Board and one or more
+deputy chairpersons from among the members of the Executive
+Board. The Supervisory Board can revoke appointments to the
+Executive Board in accordance with the SE Regulation, article 9,
+and the German Stock Corporation Act, section 84, if compelling
+reasons exist, such as gross negligence on the part of the Executive
+Board member. If the Executive Board is short of a required
+member, one may be appointed in urgent cases by a court in
+accordance with the SE Regulation, article 9, and the German Stock
+Corporation Act, section 85. In accordance with the SE Regulation,
+article 59, and the German Stock Corporation Act, section 179, an
+amendment of the Articles of Incorporation requires a resolution of
+the General Meeting of Shareholders with a majority of at least
+three-quarters of the valid votes cast. For any amendments of the
+Articles of Incorporation that require a simple majority for stock
+corporations established under German law, however, the simple
+majority of the valid votes cast is sufficient if at least half of the
+subscribed capital is represented or, in the absence of such
+quorum, the majority prescribed by law (that is, two-thirds of the
+votes cast, pursuant to article 59 of the SE Regulation) is sufficient.
+Section 11 (2) of the Articles of Incorporation authorizes the
+Supervisory Board to amend the Articles of Incorporation where
+such amendments only concern the wording.
+Power to issue and repurchase shares: The Annual General
+Meeting of Shareholders on May 12, 2016, granted powers to the
+Executive Board, subject to the consent of the Supervisory Board,
+to issue convertible and/or warrant-linked bonds, profit-sharing
+rights and/or income bonds (or combinations of these
+Corporate Governance Fundamentals
+99
+To Our
+Stakeholders
+Combined
+Information Concerning Takeovers
+Management Report
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+instruments), and to grant conversion or option rights in respect of
+SAP SE shares representing a total attributable portion of the share
+capital of not more than €100 million secured by a corresponding
+amount of contingent capital. These powers will expire on
+May 11, 2021. The Executive Board is also authorized until
+May 19, 2020, to increase the share capital by not more than
+€250 million by issuing new shares against contributions in cash
+and to increase the share capital by not more than €250 million by
+issuing new shares against contributions in cash or in kind. For
+more information about the different tranches of authorized capital
+and the aforementioned contingent capital, see the Articles of
+Incorporation, section 4.
+The Annual General Meeting of Shareholders on May 17, 2018,
+granted a power to the Executive Board in accordance with the
+German Stock Corporation Act, section 71 (1)(8), to buy back for
+treasury on or before May 16, 2023, SAP SE shares attributable in
+total to not more than €120 million of the share capital. The power
+is subject to the proviso that the shares repurchased, together with
+any shares that were previously acquired and are still held by SAP
+in treasury and any other shares controlled by SAP, must not in
+total exceed 10% of SAP's share capital. Executive Board powers,
+such as those described to issue and repurchase stock and to grant
+rights of conversion and subscription to shares of SAP, are widely-
+followed common practice among German companies such as
+SAP. These powers give the Executive Board the flexibility it needs,
+in particular, the option to use SAP shares as consideration in
+equity investments, raise funds on the financial markets at short
+notice on favorable terms, or return value to shareholders during
+the course of the year.
+Material agreements with change of control provisions:
+SAP SE has concluded the following material agreements with
+provisions that take effect in the event of a change of control,
+whether following a takeover bid or otherwise:
+The terms of SAP's syndicated €2.5 billion revolving credit
+facility include a change-of-control clause. For more information
+about this syndicated credit facility, see the Notes to the
+Consolidated Financial Statements, Note (F.1). This clause obliges
+SAP SE to notify the banks in case of a change of control. If, on
+receiving the notification, banks that represent at least two-thirds
+of the credit volume so require, the banks have the right to cancel
+the credit facility and demand complete repayment of the
+outstanding debt. If no continuation agreement is reached, the
+credit facility would end and the obligation to repay would become
+effective at an ascertainable time.
+To finance the acquisition of Qualtrics International Inc., SAP
+concluded a credit agreement under which it can, as of
+December 31, 2018, take out a loan of up to €2.5 billion at the
+closing of the acquisition (see the Notes to the Consolidated
+Financial Statements, Note (G.9)). The agreement contains a
+change-of-control clause which obliges SAP SE to notify the banks
+in case of a change of control. If, on receiving the notification, banks
+that represent at least two-thirds of the credit volume so require,
+the banks have the right to terminate the loan and demand
+complete repayment of the outstanding debt. If no continuation
+agreement is reached, the termination of the loan and the
+obligation to repay would become effective at an ascertainable
+time.
+SAP had bonds totaling €10 billion and US$0.3 billion
+outstanding as at December 31, 2018. For more information about
+SAP's bonds, see the Notes to the Consolidated Financial
+Statements, Note (E.3). Under the terms agreed with the buyers,
+we are required to notify the buyers, without delay, of any change
+of control. If there is a change of control and SAP is consequently
+assigned a lower credit rating within a defined period, buyers are
+entitled to demand repayment.
+Under the terms of our U.S. private placements totaling
+approximately US$1.16 billion as at December 31, 2018, we are
+required to offer lenders repayment of outstanding debt if there is a
+change of control and SAP is consequently assigned a lower credit
+rating within a defined period. For more information about these
+private placements, see the Notes to the Consolidated Financial
+Statements, Note (E.3). Lenders would have at least 30 days to
+accept the offer.
+We have entered into relationships with other companies to
+jointly develop and market new software products. These
+relationships are governed by development and marketing
+agreements with the respective companies. Some of the
+agreements include provisions that, in the event of a change of
+control over one of the parties, give the other party a right to
+consent to the assignment of the agreement or to terminate it.
+Change of control provisions in Executive Board
+compensation agreements: Agreements have been concluded
+with the members of the Executive Board concerning
+compensation in the event of a change of control. These
+agreements, which are customary in Germany and elsewhere, are
+described in the compensation report, which is an integral part of
+this management report. We have no analogous compensation
+agreements with our other employees.
+100
+Corporate Governance Fundamentals
+Consolidated Financial
+Statements IFRS
+Equity and liabilities
+In October 2018, Jürgen Müller was appointed to the Executive
+Board effective January 1, 2019. He leads the board area
+Technology & Innovation. Further, it was decided to expand
+Christian Klein's previous board area Global Business Operations to
+include additional areas of responsibility, and to rename it as
+Intelligent Enterprise Group. Michael Kleinemeier and Bernd
+Leukert jointly lead the board area SAP Digital Business Services
+and will continue to do so until Michael Kleinemeier's Executive
+Board contract expires on December 31, 2019. All the
+aforementioned changes were effective January 1, 2019.
+Changes in Management
+16,452
+16,171
+Provisions
+1,711
+1,671
+Liabilities
+23,150
+16,917
+Deferred income
+11
+12
+Total shareholders' equity and liabilities
+In April 2018, the Supervisory Board extended the Executive
+Board contract of Stefan Ries, Chief Human Resources Officer and
+Labor Relations Director, until March 31, 2024.
+41,324
+98
+Financial Performance: Review and Analysis
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Corporate Governance Fundamentals
+Corporate Governance Statement
+The German Commercial Code, section 315d in connection with
+section 289f, requires that, as a listed company, SAP SE publishes
+a corporate governance statement either as part of our
+management report or on our Web site. The Executive Board of
+SAP SE filed the corporate governance statement on
+February 19, 2019, and published it on our public Web site at
+www.sap.com/corporate-en/investors/governance.
+For more information about the corporate governance of SAP,
+see the Corporate Governance Report section.
+34,770
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+New office building for approx.
+1.200 employees
+46
+0
+September 2021
+Germany
+Munich
+New office building for approx.
+850 employees
+100
+0
+December 2021
+India
+Bangalore
+Sofia
+New office building for approx.
+4,000 employees
+13
+December 2022
+For more information about planned investment expenditures, see the Investment Goals section. There were no material divestitures
+within the reporting period.
+96
+Financial Performance: Review and Analysis
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+97
+Competitive Intangibles
+Bulgaria
+December 2020
+January 2019
+Germany
+St. Leon-Rot
+New office building for approx.
+38
+24
+April 2019
+450 employees
+Germany
+Walldorf
+New office building for approx.
+74
+700 employees
+66
+700 employees
+Germany
+Walldorf
+New data center phase 2
+52
+34
+July 2019
+Brazil
+Sao Leopoldo
+New office building for approx.
+33
+2
+February 2019
+The resources that are the basis for our current as well as future
+success do not appear in the Consolidated Financial Statements.
+This is apparent from a comparison of the market capitalization of
+SAP SE (based on all issued shares), which was €106.8 billion at
+the end of 2018 (2017: €114.8 billion), with the book value of our
+equity in the Consolidated Financial Statements, which was
+€28.9 billion (2017: €25.5 billion). This means that the market
+capitalization of our equity is nearly four times higher than the book
+value. The difference is mainly due to certain internally generated
+intangible resources that the applicable accounting standards do
+not allow to be recorded (at all or at fair value) in the Consolidated
+Financial Statements. They include customer capital (our customer
+base and customer relations); employees and their knowledge and
+skills; our ecosystem of partners; internally developed software;
+our ability to innovate; the brands we have built up, in particular,
+the SAP brand itself; and our organization.
+As at December 31, 2018, SAP was the most valuable company
+in Germany in terms of market capitalization based on all issued
+shares.
+In 2018, SAP's brand value remained on a high level. According
+to the Interbrand "Best Global Brands" annual survey, SAP ranked
+as the 21st most valued brand in the world (2017: 21st). Against
+other German brands, the SAP brand ranks third behind Mercedes-
+Benz and BMW, and ninth globally against other brands in the
+technology sector. Interbrand determined our brand value to be
+US$22.9 billion, an increase of 1% compared to the previous year
+(2017: US$22.6 billion). BrandZ even recognized SAP as the
+world's 17th most valuable brand in the 2018 BrandZ Top 100 Most
+Valuable Global Brands ranking. The ranking estimates SAP's
+brand value at US$55 billion, an increase of 23% in brand value for
+SAP year over year.
+2,246
+745
+1,745
+2,732
+3,991
+-788
+-1,124
+1,943
+2,867
+-13
+-11
+1,929
+1,987
+2,856
+Finance income
+Income before taxes
+Income taxes
+Income after taxes
+Other taxes
+Net income
+The total revenue of SAP SE in 2018 was €14,244 million
+(2017: €13,634 million), an increase of 4%. Product revenue
+increased 8% to €11,768 million (2017: €10,928 million). As in
+previous years, product revenue was primarily generated from
+license fees paid by subsidiaries of SAP SE.
+Service revenue increased 1% to €534 million in 2018 (2017:
+€529 million), other revenue decreased by 11% to €1,941 million
+(2017: €2,176 million).
+SAP SE operating profit decreased 12% to €1,987 million
+(2017: €2,246 million). Other operating income decreased
+€1 million to €1,073 million (2017: €1,074 million).
+SAP SE cost of services and materials increased 4 % to
+€8,384 million (2017: €8,079 million). Services received increased
+€509 million to €6,427 million (2017: €5,918 million), mainly due to
+increased services received in the context of intra-group cost
+allocations. The main contributors to that increase were continued
+group-wide investments in research and development activities as
+well as greater revenue-related and investment-related cloud
+subscriptions and support costs. This was partly offset by a
+decrease in costs for licenses and provisions by 10% to
+€1,929 million (2017: €2,135 million).
+SAP SE personnel expenses, mainly the labor cost of software
+developers, service and support employees, and administration
+staff employed by SAP SE, increased 3% to €2,097 million (2017:
+€2,035 million). The 104% increase in depreciation and
+Financial Performance: Review and Analysis
+97
+97
+To Our
+Stakeholders
+Operating profit
+-2,053
+-2,246
+-295
+The results of our current and past investment in research and
+development are also a significant element in our competitive
+intangibles.
+Our customer capital continued to grow in 2018. At the end of
+2018, we had more than 413,000 customers (2017: 378,000) in
+various market segments. We serve customers in more than 180
+countries. For more information about our customers, see the
+Customers section.
+Employee-related activities increased the value of our employee
+base and our own software. For more information, see the
+Employees and Social Investment section and the Products,
+Research & Development, and Services section.
+Report on the Economic Position of
+SAP SE
+As the owner of the intellectual property in most SAP software,
+SAP SE derives its revenue mainly from software license fees and
+bears the group-wide research and development expenses for the
+most part.
+The SAP SE annual financial statements are prepared in
+accordance with the reporting standards in the German
+Commercial Code in the version of the Accounting Directive
+Implementation Act BilRUG and the German Stock Corporation
+Act. The full SAP SE annual financial report and unqualified audit
+report are submitted to the operator of the Elektronischer
+Bundesanzeiger (Online German Federal Gazette) for publication
+and inclusion in the Unternehmensregister (German Business
+Register). It is available from SAP SE on request.
+Income
+SAP SE's income statement is classified following the nature of
+expense method and presents amounts in millions of euros.
+SAP SE Income Statement - German Commercial
+Code (Short Version)
+€ millions
+Total revenue
+2018
+2017
+14,244
+13,634
+Other operating income
+1,073
+1,074
+Cost of services and materials
+-8,384
+-8,079
+Personnel expenses
+-2,097
+-2,035
+Depreciation and amortization
+Other operating expenses
+-603
+93
+To Our
+Stakeholders
+SAP SE is headquartered in Walldorf, Germany, and is the parent
+company of the SAP Group, which comprises 265 companies.
+SAP SE is the Group holding company and employs most of the
+Group's Germany-based development and service and support
+personnel.
+Our primary source of cash, cash equivalents, and current
+investments is funds generated from our business operations. Over
+the past several years, our principal use of cash has been to
+support operations and our capital expenditure requirements
+resulting from our growth, to quickly repay financial debt, to
+acquire businesses, to pay dividends on our shares, and to buy
+back SAP shares on the open market. On December 31, 2018, our
+cash, cash equivalents, and current investments were primarily
+held in euros and U.S. dollars. We generally invest only in the
+financial assets of issuers or funds with a minimum credit rating of
+BBB, and pursue a policy of cautious investment characterized by
+wide portfolio diversification with a variety of counterparties,
+predominantly short-term investments, and standard investment
+instruments. Investments in financial assets of issuers with a credit
+rating lower than BBB were not material in 2018.
+2.75
+2.56
+-2%
+-7%
+3.42
+3.35
+19%
+2%
+2014
+2015
+2016
+2017
+2018
+Dividend
+We believe our shareholders should benefit appropriately from
+the profit the Company made in 2018. Our dividend policy is to pay
+a dividend totaling 40% or more of profit after tax.
+The Executive Board and the Supervisory Board will recommend
+to the Annual General Meeting of Shareholders that the total
+dividend be increased by 7% to €1.50 per share (2017: €1.40).
+Based on this recommendation, the overall dividend payout ratio
+(which here means the total distributed dividend as a percentage of
+profit) would be 44% (2017: 41%).
+If the shareholders approve this recommendation and if
+treasury shares remain at the 2018 closing level, the total amount
+distributed in dividends would be €1,790 million. The actual amount
+distributed may be different from this total because the number of
+shares held in treasury may change before the Annual General
+Meeting of Shareholders. In 2018, we distributed €1,671 million in
+dividends from our 2017 profit after tax.
+Dividend per Share
+€ | change since previous year
+3.04
+€ | change since previous year
+€ | change since previous year
+Additional
+Infomation
+-1%
+-7%
+19%
+12%
+1%
+2014
+2015
+2016
+2017
+2018
+Basic earnings per share increased to €3.42 (2017: €3.35). The
+number of shares outstanding decreased to 1,194 million in 2018
+(2017: 1,197 million).
+Financial Performance: Review and Analysis
+91
+To Our
+Combined
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Earnings per Share
+3,056
+1.25
+1.10
+Combined
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+in the availability of funds, as well as the cost of such funding. In
+recent years, we were able to repay additional debt within a short
+period of time due to our persistently strong free cash flow. For
+more information about the financial debt, see the Cash Flows and
+Liquidity section.
+Capital Structure Management
+The primary objective of our capital structure management is to
+maintain a strong financial profile for investor, creditor, and
+customer confidence, and to support the growth of our business.
+We seek to maintain a capital structure that will allow us to cover
+our funding requirements through the capital markets at
+reasonable conditions, and in so doing, ensure a high level of
+independence, confidence, and financial flexibility.
+For more information about the capital structure and its
+analysis, see the Analysis of Consolidated Statement of Financial
+Position section and the Notes to the Consolidated Financial
+Statements, Note (E.1).
+The long-term credit rating for SAP SE is "A2" by Moody's and "A"
+by Standard & Poor's, both with a stable outlook.
+Aside from our dividend policy, we might return excess liquidity
+to our shareholders by potentially repurchasing treasury shares in
+future.
+Credit Facilities
+Other sources of capital are available to us through various
+credit facilities, if required.
+To retain high financial flexibility, on November 20, 2017,
+SAP SE entered into a €2.5 billion syndicated revolving credit
+facility agreement with an initial term of five years plus two one-
+year extension options, of which one was exercised in
+November 2018. It replaced the previous credit facility of
+€2.0 billion from 2013 and may be used for general corporate
+purposes. A possible future utilization is not subject to any financial
+covenants. Borrowings under the facility bear interest of EURIBOR
+or LIBOR for the respective currency plus a margin of 0.17%. We
+are also required to pay a commitment fee of 0.0595% per annum
+on the unused available credit. So far, we have not used, and do not
+currently foresee any need to use, this credit facility.
+As at December 31, 2018, SAP SE had additional available credit
+facilities totaling €424 million. Several of our subsidiaries have
+credit facilities available that allow them to borrow funds at
+prevailing interest rates. As at December 31, 2018, approximately
+€21 million was available through such arrangements. There were
+immaterial borrowings outstanding under these credit facilities
+from our foreign subsidiaries as at December 31, 2018.
+On November 12, 2018, SAP entered into a €7.0 billion credit
+facility agreement to finance the intended acquisition of Qualtrics.
+On December 10, 2018, we issued five tranches of Eurobonds with a
+total volume of €4.5 billion and maturities between two and 12.25
+years to refinance the intended acquisition early. The funds were
+used to cancel the credit facility accordingly, therefore resulting in
+€2.5 billion still available to SAP on December 31, 2018. The facility
+was fully drawn on January 23, 2019, and can be flexibly repaid
+within its lifetime of three years.
+Financial Performance: Review and Analysis
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+To Our
+1.15
+Financial Performance: Review and Analysis
+92
+1.50
+1.40
+12%
+10%
+9%
+5%
+7%
+.
+2014
+2015
+2016
+2017
+2018
+Finances (IFRS)
+Overview
+Global Financial Management
+We use global centralized financial management to control liquid
+assets and monitor exposure to interest rates and currencies. The
+primary aim of our financial management is to maintain liquidity in
+the Group at a level that is adequate to meet our financial
+obligations at all times. Most SAP companies have their liquidity
+managed centrally by the Group, so that liquid assets across the
+Group can be consolidated, monitored, and invested in accordance
+with Group policy. High levels of liquid assets help keep SAP
+flexible, sound, and independent. In addition, various credit
+facilities are currently available for additional liquidity, if required.
+For more information about these facilities, see the Credit Facilities
+section.
+We manage credit, liquidity, interest rate, equity price, and
+foreign exchange rate risks on a Group-wide basis. We use selected
+derivatives exclusively for this purpose and not for speculation,
+which is defined as entering into a derivative instrument for which
+we do not have corresponding underlying transactions. The rules
+for the use of derivatives and other rules and processes concerning
+the management of financial risks are documented in our treasury
+guideline, which applies globally to all companies in the Group. For
+more information about the management of each financial risk and
+about our risk exposure, see the Notes to the Consolidated
+Financial Statements, Notes (F.1) and (F.2).
+Liquidity Management
+We believe that our liquid assets combined with our undrawn
+credit facilities are sufficient to meet our operating financing needs
+in 2019 and, together with expected cash flows from operations,
+will support debt repayments and our currently planned capital
+expenditure requirements over the near term and medium term. It
+may also be necessary to enter into financing transactions when
+additional funds are required that cannot be wholly sourced from
+free cash flow (for example, to finance large acquisitions).
+To expand our business, we have made acquisitions of
+businesses, products, and technologies. Depending on our future
+cash position and future market conditions, we might issue
+additional debt instruments to fund acquisitions, maintain financial
+flexibility, and limit repayment risk. Therefore, we continuously
+monitor funding options available in the capital markets and trends
+42
+3,280
+10%
+4,088
+1,604
+47
+52
+Total
+4,539
+4,700
+3,443
+32
+36
+Cloud subscriptions and support revenue
+- laaS²)
+488
+506
+328
+49
+54
+Cloud subscriptions and support revenue
+5,027
+5,205
+3,771
+2,434
+2,361
+23
+18
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Reconciliation of Cloud Subscription Revenues and Margins
+€ millions, unless otherwise stated
+(Non-IFRS)
+2018
+Actual
+Currency
+Constant
+Currency
+33
+2017
+Actual
+Currency
+A in %
+Actual
+Currency
+3,634
+Currency
+Cloud subscriptions and support revenue
+- SaaS/PaaS¹)
+SAP Business Network segment
+Other³)
+2,178
+2,265
+1,840
+A in %
+38
+Constant
+SAP Business Network segment
+Other³)
+Cloud subscriptions and support gross
+margin (in %)
+63
+63
+63
+62
+1pp
+1pp
+1) Software as a service/platform as a service
+2) Infrastructure as a service
+7pp
+3) Other includes Applications, Technology & Services segment, Customer Experience segment, and miscellaneous. The individual revenue and margin numbers for the
+Applications, Technology & Services segment and the Customer Experience segment are disclosed on the previous pages.
+Financial income, net, changed to -€47 million (2017:
+€188 million). Our finance income was €371 million (2017:
+€476 million) and our finance costs were €418 million (2017:
+€288 million).
+Finance costs mainly consist of interest expense on financial
+liabilities amounting to €106 million (2017: €89 million), negative
+effects from derivatives amounting to €206 million (2017:
+€116 million), and losses from disposal or IFRS 9-related fair value
+adjustments of Sapphire Ventures investments totaling €44 million
+(2017: €27 thousands). For more information about financing
+instruments, see the Notes to the Consolidated Financial
+Statements, Note (E.3).
+Income Taxes
+The effective tax rate in 2018 was 27.0% (2017: 19.5%). The
+year-over-year increase in the effective tax rate mainly resulted
+from the absence of one-time tax benefits realized in 2017 relating
+to an intra-group transfer of intellectual property rights to SAP SE
+and the U.S. tax reform, and tax effects relating to intercompany
+financing, which were partly compensated by valuation allowances
+on deferred tax assets, and changes in the regional allocation of
+income. For more information about income taxes, see the Notes to
+the Consolidated Financial Statements, Note (C.5).
+Profit After Tax and Earnings per Share
+Profit After Tax
+€ millions | change since previous year
+4,046
+Cloud subscriptions and support gross margin
+- SaaS/PaaS) (in %)
+Financial Income, Net
+6pp
+Finance income mainly consists of gains from disposal of equity
+securities and IFRS 9-related fair value adjustments totaling
+€227 million (2017: €382 million), interest income from loans and
+receivables, and other financial assets (cash, cash equivalents, and
+current investments) totaling €62 million (2017: €49 million), and
+income from derivatives totaling €77 million (2017: €44 million).
+14
+78
+7
+78
+77
+1pp
+60
+59
+57
+3pp
+2pp
+1pp
+68
+68
+67
+1pp
+1pp
+Cloud subscriptions and support gross margin
+- laas²) (in %)
+Total
+13
+Consolidated Financial
+Statements IFRS
+Risk Identification
+Further Information on Economic,
+Environmental, and Social Performance
+Risk Analysis
+Risk Assessment
+Risk Response
+Risk Validation and
+Monitoring
+103
+Risk Management and Risks
+To Our
+Stakeholders
+Combined
+Risk Planning
+Management Report
+Risk Reporting
+Risk Management Methodology and Reporting
+Additional
+Infomation
+Risk Management Policy and Framework
+well as a central software solution to store, maintain, and report all
+risk-relevant information.
+Our risk management system is based on the framework
+published by the Committee of Sponsoring Organizations of the
+Treadway Commission (COSO) entitled "Enterprise Risk
+Management - Integrating with Strategy and Performance."
+Updated in 2017, this framework is built on four pillars, which
+include a dedicated risk management policy, a standardized risk
+management methodology, a global risk management governance
+framework, and a global risk management organization. Our
+internal control system consists of the internal control and risk
+management system for financial reporting (ICRMSFR), which also
+covers the broader business environment. In 2018, we adjusted
+existing control designs to adequately address the evolving risk
+environment, and we continued to automate our internal control
+landscape, leveraging continuous control monitoring and
+continuous auditing activities in selected business areas. Using the
+current COSO Internal Control - Integrated Framework of 2013, we
+have defined and implemented internal controls along the value
+chain on a process and subprocess level to ensure that sound
+business objectives are set in line with the organization's strategic,
+operational, financial, and compliance goals. In addition, we have a
+governance model in place across risk management and the
+internal control system to ensure both systems are effective, as
+Due to our public listings in both Germany and the United
+States, we are subject to both German and U.S. regulatory
+requirements that relate to risk management and internal controls
+over financial reporting, such as provisions in the German Stock
+Corporation Act, section 91 (2), and the U.S. Sarbanes-Oxley Act
+(SOX) of 2002, specifically sections 302 and 404. Hence, our
+Executive Board has established an early warning system (risk
+management system) to ensure compliance with applicable
+regulations and an effective management of risks.
+This system comprises numerous control mechanisms and is an
+important element of our corporate decision-making process; it is
+therefore implemented as an integral part of SAP's business
+processes across the entire Group. We have adopted an integrated
+risk management and internal control approach to help maintain
+effective global risk management while also enabling us to
+aggregate risks and report on them transparently.
+Internal Control and Risk Management System
+As a global company, SAP is exposed to a broad range of risks
+across our business operations. Consequently, our Executive
+Board has established comprehensive internal control and risk
+management structures that enable us to identify and analyze risks
+early and take appropriate action. Our risk management and
+internal control system is designed to identify potential events that
+could negatively impact the Company and to provide reasonable
+assurance regarding the operating effectiveness of our internal
+controls over our financial reporting while ensuring the
+achievement of the Company objectives, specifically our ability to
+achieve our financial, operational, or strategic goals as planned.
+Our Risk Management
+Risk Management and Risks
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Additional
+Infomation
+To Our
+Stakeholders
+Combined
+The risk management policy issued by our Executive Board
+governs how we handle risk in line with the Company's risk appetite
+and defines a methodology that is applied uniformly across all parts
+of the Group. The policy, updated and communicated in 2018,
+stipulates who is responsible for conducting risk management
+activities and defines reporting and monitoring structures. Along
+with the policy, we maintain a system-based Risk Management
+Policy Cockpit that describes all business process specifics
+associated with the risk management lifecycle. Our global
+corporate audit function conducts periodical audits to assess the
+effectiveness of our risk management system. Every year, SAP's
+external auditor assesses whether the SAP SE early risk
+identification system is adequate to identify risks that might
+endanger our ability to continue as a going concern. SAP's
+enterprise risk management covers risks in the areas of strategy,
+operations, finance, and compliance. Currently, the risk
+management system analyzes risks and only assesses or analyzes
+opportunities where it is deemed appropriate.
+The graphic above describes the key elements of the risk
+management process under SAP's risk management policy. Risk
+planning and risk identification for both internal and external risks
+are conducted jointly by risk managers and the business units or
+subsidiaries across the Group. We use various techniques to
+identify risks. For example, we have identified risk indicators and
+developed a comprehensive risk catalog that includes risk
+mitigation strategies. Risk identification takes place at various
+levels of our organization to ensure that common risk trends are
+identified and end-to-end risk management across organizational
+borders is enabled. We apply both qualitative and quantitative risk
+analysis and other risk analysis methods such as sensitivity
+analyses and simulation techniques.
+99%
+Probability/Likelihood of
+Business Conduct
+59%
+H
+M
+M
+L
+L
+to
+40%
+79%
+to
+60%
+H
+H
+H
+M
+L
+Description
+The combination of the likelihood that a risk will occur and its
+impact on SAP's reputation, business, financial position, profit, and
+cash flow leads to a subsequent classification of the risk as either
+"high," "medium," or "low."
+Probability
+M
+M
+H
+To determine which risks pose the greatest threat to the viability
+of the SAP Group, we classify them as "high," "medium," or "low"
+based on the likelihood that a risk will occur within the assessment
+horizon and the impact the risk would have on SAP's business
+objectives if it were to occur. The scales for measuring these two
+indicators are given in the following tables.
+H
+Minor
+Moderate
+Major
+Business-
+Critical
+80%
+to
+Insig-
+nificant
+102
+Operational Business Risks
+Investigating Misconduct
+Accounting and financial reporting
+Intellectual property
+Regulation of the appointment and remuneration of sales agents
+Charitable and political donations
+-
+-
+SAP has also established policies to maintain high standards
+within the following areas:
+-
+Full, fair, and accurate accounting
+-
+Gifts and business entertainment limits
+-
+Prohibition of bribery and corruption in all its forms, including
+facilitation or "grease payments"
+Our Code of Business Conduct (COBC) is communicated to
+employees globally and contains a fundamental set of rules that
+define how we conduct our business and require high levels of
+integrity and ethics. While we acknowledge that it is not possible to
+eliminate the potential for non-compliant behavior entirely, the
+CoBC remains one of our most important compliance documents
+and sets the standard for our dealings with customers, partners,
+competitors, and vendors, and each of our employees is bound by
+it. The CoBC is adapted locally and translated into local languages.
+The key areas covered by the CoBC include:
+Our internal compliance management system, for example, is
+part of the internal audit plan of Corporate Audit and encompasses
+all aspects of compliance management - from the analysis of
+compliance risks and the definition of objectives to the running of
+compliance programs as well as ongoing monitoring of business
+activities and adherence to policies.
+Export control and sanctions laws
+SAP expects compliance to permeate the entire company.
+Compliant behavior is expected to be an intrinsic part of our culture
+and an instinctive part of our daily decision-making at every level of
+the business. To help nurture this environment in which integrity
+and ethics dominate, we continually address compliance issues and
+strive to improve policies, guidelines, instruments, and measures
+related to their implementation.
+That is why, in 2018, our efforts to raise the awareness of
+compliance and to ensure the practice of compliant and ethical
+behavior throughout the organization were greater than ever and
+accompanied by an increase in our Legal Compliance and Integrity
+Office (LCIO) staff from 30 to 80 employees. Further significant
+investments are also planned for 2019.
+SAP's reputation for doing business the right way is one of our
+most important assets. It is synonymous with quality, innovation,
+and excellence.
+At SAP, we understand that our customers expect our business
+practices to not only meet international rules and legal
+requirements, but also to adhere to high standards of compliance
+and integrity.
+In an increasingly complex business environment, making the
+right decisions and abiding by ethical choices has never been more
+challenging.
+Championing Excellence in Business
+Conduct
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Business Conduct
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined
+To Our
+20%
+Nurturing an Environment in Which
+Integrity and Ethics Dominate
+Data protection and privacy
+Sustainability
+We also expect our partners and suppliers to commit to meeting
+our high standards of integrity and sustainability. For this reason,
+we have the SAP Partner Code of Conduct and the SAP Supplier
+Code of Conduct in place so that partners and suppliers
+understand what is expected of them.
+Providing Comprehensive Training
+Contact local compliance officers by e-mail or telephone
+Use the anonymous online Whistleblower reporting tool
+Reporting channels are published in SAP Corporate Portal, on
+SAP.com, and in our Codes of Conduct for Partners and Suppliers.
+-
+SAP employees have different options if they become aware of
+potential misconduct within the company. For example, they can:
+Call our governance helpline at +49 6227 7-40022
+E-mail the legal compliance and integrity office at
+global-compliance-office@sap.com
+If employees are concerned that our CoBC has been breached,
+or if they need advice on a compliance issue, they can access
+support in several ways. It sometimes takes courage to speak up
+when something is not right, and employees may feel
+uncomfortable or concerned when they do so. However, we
+guarantee a non-retaliation policy if employees reach out and raise
+their concerns.
+Employees at all levels of the organization must disclose
+conflicts of interest. Disclosures are followed up with guidance or
+mitigation if necessary.
+Facilitating Reporting and Remediation
+Without Retaliation
+In addition to making regular reports to the CFO, the Group
+Chief Compliance Officer reports to the Audit Committee of the
+Supervisory Board each quarter and to the Executive Board
+annually. Matters of significance are brought to the attention of the
+Executive Board and the Audit Committee of the Supervisory Board
+immediately.
+The LCIO oversees the development and implementation of our
+COBC, as well as other related policies and our anti-corruption
+compliance program. Our compliance officers are based not only at
+SAP Headquarters but also around the world, in high and low risk
+jurisdictions, and especially in markets where there are local
+language needs.
+SAP is committed to ensuring that compliance policies are
+strictly enforced, and that any infringements are quickly flagged
+and put right. To achieve this, we have a wide global network of
+compliance officers who act as business conduct stewards.
+Enforcing Policies
+Based on this information and local management input, we
+determine a risk ranking for each country and a general risk profile
+for subsidiary locations. For more information, see the Risk Report
+section.
+At SAP, we have mechanisms in place designed to prevent
+issues as well as a means to address issues, should they arise. We
+review SAP business units for potential bribery or corruption risks
+on an ongoing basis. For example, in 2018, we analyzed quantitative
+data regarding SAP business activities. The data we analyze
+includes revenue information, number of employees, percentage of
+public sector business, number of fraud allegations or incidents,
+changes or updates to relevant laws, and other quantitative
+information.
+Analyzing Compliance Risk
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+We endeavor to provide our employees with training to ensure
+they are able to meet the standards we expect. Our training
+programs cover, for example, guidelines on anti-corruption,
+competition law, and governance for customer commitments,
+intellectual property, and information security.
+Mandatory online certification on the Code of Business Conduct
+for employees worldwide continued in 2018. We recorded that
+more than 69,000 employees received this certification during the
+certification cycle. This number includes 26,264 employees in the
+Americas, 23,992 employees in Asia Pacific Japan (APJ) and
+19,070 employees in Europe, the Middle East and Africa (EMEA).
+LCIO holds classroom training sessions for employees across
+the organization - from customer-facing staff to individuals in
+supporting roles, such as corporate affairs and marketing.
+Furthermore, information about our compliance policies is included
+in onboarding sessions.
+Communicating Our Standards
+Quarterly newsletters provide employees with information on a
+range of compliance-related topics. We include a business ethics
+and compliance-related question in our annual People Survey and
+in company-wide polls throughout the year. Employees can use our
+corporate portal at any time for quick and easy access to all global
+policies, guidelines, and additional information. Our Executive
+Compliance Ambassador Program includes over 80 executives,
+from all board areas, who have taken on the role of championing
+compliance messaging and raising awareness of compliance
+throughout the company and the business. Members of the
+Executive Ambassador Program can access a specific intranet site
+set up specifically for the program and tailored to the Executive
+Compliance Ambassador role. In addition, a compliance-specific
+intranet site encourages the exchange of information and
+networking and keeps the compliance community alive.
+Conflicts of interest
+SAP received communications alleging conduct that may violate
+anti-bribery laws. Furthermore, we are investigating allegations
+regarding conduct that certain independent SAP partners violated
+SAP contractual terms and sold SAP products and services in
+embargoed countries. We are also investigating allegations
+regarding direct sales between SAP and certain customers who
+may have engaged in unauthorized activities in embargoed
+countries. For more information about the allegations and our
+reaction to them, see Note (G.4).
+Confidentiality
+Data protection and privacy rights
+Business Conduct
+101
+To Our
+Combined
+Stakeholders
+Anti-competitive practices
+to
+39%
+1% to
+-
+We continuously monitor new and increased regulatory
+requirements, updated or new enforcement trends, and publicly
+available information on compliance issues in the computer
+software industry, in the emerging markets where we invest our
+resources, and in the business environment in general to cope
+with an increase in regulation enforcement efforts of certain
+countries or state-driven protectionism.
+We have taken actions to terminate access to SAP products and
+services for certain users and to block additional business
+activities with these users through SAP or SAP partners to
+address export restriction requirements.
+We receive guidance from external economics consultants, law
+firms, tax advisors, and authorities in the concerned countries,
+and take legal actions when necessary.
+We engage with authorities in public policy issues, including the
+creation of reasonable framework conditions for new
+technologies such as cloud computing, Big Data, IoT, or
+international trade.
+We have a strong legal and compliance office presence in
+various countries, with compliance safeguards supported and
+monitored by SAP legal teams and Legal Compliance & Integrity
+Office (LCIO), maintaining an effective data protection and
+privacy office and associated policy.
+We initiated efforts to strengthen the Export Control team and
+have started a cross-board project to overhaul SAP's export
+control and trade sanctions policies, operations, and controls, to
+safeguard compliance with applicable European Union (EU) and
+-
+-
+We continuously update and refresh our compliance programs
+to improve our effectiveness and to ensure that our employees
+understand and comply with the SAP Code of Business
+Conduct. This process is coordinated by our LCIO, a team of
+dedicated resources who are tasked with managing our policy-
+related compliance measures.
+Our LCIO team coordinates and provides guidance on policy
+implementation, training, and enforcement efforts throughout
+SAP, including but not limited to a new Third Party Sales
+Commission Policy and accompanying training. These efforts
+are monitored and tracked to allow trending and risk analysis
+and to ensure consistent policy application throughout the SAP
+Group.
+We cannot exclude the possibility that if the risk were to occur, it
+could have a business-critical impact on our operations, financial
+position, profit, and cash flows. We estimate the probability of
+occurrence of this risk to be likely. We classify this risk as a high
+risk.
+Legal and IP: Claims and lawsuits against us, such as for IP
+infringements, or our inability to obtain or maintain adequate
+licenses for third-party technology, could have an adverse effect
+on our business, financial position, profit, cash flows, and
+reputation. Moreover, similar adverse effects could result if we
+are unable to adequately protect or enforce our own intellectual
+property.
+We believe that we will continuously be subject to claims and
+lawsuits, including intellectual property infringement claims, as our
+solution portfolio grows; as we acquire companies with increased
+use of third-party code including open source code; as we expand
+into new industries with our offerings, resulting in greater overlap in
+the functional scope of offerings; and as non-practicing entities that
+do not design, manufacture, or distribute products assert
+intellectual property infringement claims. Moreover, protecting and
+defending our intellectual property is crucial to our success.
+The outcome of litigation and other claims or lawsuits is
+intrinsically uncertain and could lead, for example, to the following
+risks:
+-
+-
+U.S. laws in all delivery channels both on premise and in the
+cloud.
+-
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent possible.
+For example:
+In 2017, an investigation was initiated and is ongoing with
+regards to potential sanctions violations. For more information
+relating to the potential sanctions violations noted above, see the
+Notes to the Consolidated Financial Statements, Note (G.4).
+Changes in accounting standards and tax laws including, but not
+limited to, conflict and overlap among tax regimes measures as
+well as the introduction of new tax concepts that harm digitized
+business models
+Discriminatory, protectionist, or conflicting fiscal policies and
+tax laws, such as certain protectionist measures included in the
+U.S. Tax Reform which was enacted at the end of 2017, and the
+lack of regulations at the time of the report to provide guidance
+on the interpretations thereon by the U.S. tax authorities, the
+Internal Revenue Services (IRS)
+Workforce restrictions resulting from changing laws and
+regulations, from political decisions (such as Brexit, government
+elections), or through required works council involvements,
+labor union approvals, and immigration laws in different
+countries
+Protectionist trade policies, import and export regulations, and
+trade sanctions (such as in Russia), counter or even conflicting
+sanctions (such as in the United States and Russia), and
+embargoes (such as in Iran) including, but not limited to,
+country-specific software certification requirements
+Violations of country-specific sanctions (such as the UN
+sanction against North Korea or the United States' sanction
+requirements against Iran and certain other countries)
+Compliance with and stringent enforcement of laws, as for
+example the EU General Data Protection Regulation (GDPR) or
+China's Cyber Security Law, and regulations (including
+interpretations), implications of government elections, lack of
+reforms, data protection and privacy rules, regulatory
+108
+Risk Management and Risks
+As we expand into new countries and markets and/or extend
+our business activities in these markets, including emerging and
+high-risk markets, these risks could intensify. The application of the
+respective local laws and regulations to our business is sometimes
+unclear, subject to change over time, and often conflicting among
+jurisdictions. Additionally, these laws and government approaches
+to enforcement are continuing to change and evolve, just as our
+products and services continually evolve. Compliance with these
+varying laws and regulations could involve significant costs or
+require changes in products or business practices. Non-compliance
+could result in the imposition of penalties or cessation of orders
+due to alleged non-compliant activity. Governmental authorities
+could use considerable discretion in applying these statutes and
+any imposition of sanctions against us could be material. One or
+more of these factors could have an adverse effect on our
+operations globally or in one or more countries or regions, which
+could have an adverse effect on our business, financial position,
+profit, and cash flows.
+To Our
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+requirements and standards (such as the Payment Card
+Industry Data Security Standard (PCI DSS))
+Expenses associated with the localization of our products and
+compliance with local regulatory requirements
+Difficulties enforcing intellectual property and contractual rights
+in certain jurisdictions
+Combined
+Possible tax constraints impeding business operations in certain
+countries
+-
+We might be dependent in the aggregate on third-party
+technology, including cloud and Web services, that we embed in
+our products or that we resell to our customers.
+We are party to certain patent cross-license agreements with
+third parties, which removes the risk of litigation with respect to
+the involved patents.
+We rely on a combination of the protections provided by
+applicable statutory and common law rights, including trade
+secret, copyright, patent, and trademark laws, license and non-
+disclosure agreements, and technical measures to establish and
+protect our proprietary rights in our products.
+We cannot exclude the possibility that if the risk were to occur, it
+could have a business-critical impact on our operations, financial
+position, profit, and cash flows. We estimate the probability of
+occurrence of this risk to be likely. We classify this risk as a high
+risk.
+We are named as a defendant in various legal proceedings for
+alleged intellectual property infringements. For more information
+and a more detailed report relating to certain of these legal
+proceedings, see the Notes to the Consolidated Financial
+Statements, Notes (A.4), (C.5), and (G.4).
+Data Protection and Privacy: Non-compliance with increasingly
+complex and stringent, sometimes even conflicting, applicable
+data protection and privacy laws or failure to adequately meet
+the contractual requirements of SAP's customers with respect
+to our products and services could lead to civil liabilities and
+fines, as well as loss of customers and damage to SAP's
+reputation.
+As a global software and service provider, SAP is required to
+comply with local laws wherever SAP does business. With regard to
+data protection requirements, in May 2016, the EU enacted a
+"General Data Protection Regulation" (GDPR) with the aim of
+further harmonizing data protection laws across the EU. Since May
+25, 2018, GDPR is applicable law in all EU and EEA member states.
+Within limits, member states can supplement the GDPR with
+additional national rules. Some member states have already
+enacted such laws.
+Furthermore, evolving regulations and new laws (such as the
+EU's proposed e-Privacy Regulation) globally regarding data
+protection and privacy or other standards increasingly aimed at the
+use of personal information, such as for marketing purposes and
+the tracking of individuals' online activities, may impose additional
+burdens for SAP due to increasing compliance standards that could
+restrict the use and adoption of SAP's products and services (in
+particular cloud services) and make it more challenging and
+complex to meet customer expectations.
+Our LCIO sets and manages internal policies related to our Code
+of Business Conduct. Our Global GRC organization works
+closely with the LCIO, Global Legal, and Corporate Audit, and is
+jointly responsible for the management and reporting of
+potential risks associated with third-party intellectual property.
+We have established various internal programs, such as internal
+policies, processes, and monitoring, to assess and manage the
+risks associated with open source, and third-party intellectual
+property.
+We endeavor to protect ourselves in the respective third-party
+software agreements by obtaining certain rights in case such
+agreements are terminated.
+This could lead to increased risks for SAP, which could harm
+SAP's business and limit SAP's growth.
+-
+-
+Mandatory disclosures of breaches to affected individuals,
+customers, and data protection supervisory authorities
+Investigations and administrative measures by data protection
+supervisory authorities, such as the instruction to alter or stop
+non-compliant data processing activities, including the
+instruction to stop using non-compliant subcontractors
+Fines of up to 4% of SAP's annual Group turnover
+Damage claims by customers
+Harm to SAP's reputation
+Increased complexity in times of digitalization with regards to
+legal requirements in the context of cross-border data transfer
+Non-compliance with applicable data protection and privacy
+laws, in particular the EU GDPR, by SAP and/or any of the
+subcontractors engaged by SAP within processing of personal data
+could lead, for example, to risks in the following areas:
+Claims and lawsuits might be brought against us, including
+claims and lawsuits involving businesses we have acquired.
+-
+-
+Third parties have claimed, and might claim in the future, that
+we infringe their intellectual property rights or that we are
+overusing or misusing licenses to these technologies.
+We integrate certain open source software components from
+third parties into our software. Open source licenses might
+require that the software code in those components or the
+software into which they are integrated be freely accessible
+under open source terms.
+Despite our efforts, we might not be able to prevent third parties
+from obtaining, using, or selling without authorization what we
+regard as our proprietary technology and information. In
+addition, proprietary rights could be challenged, invalidated,
+held unenforceable, or otherwise affected. Moreover, the laws
+Risk Management and Risks
+109
+To Our
+Stakeholders
+Combined
+-
+Management Report
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+and courts of certain countries might not offer effective means
+to enforce our legal or intellectual property rights. Finally, SAP
+may not be able to collect all judgments awarded to it in legal
+proceedings.
+Some intellectual property might be vulnerable to disclosure or
+misappropriation by employees, partners, or other third parties.
+Third parties might reverse-engineer or otherwise obtain and
+use technology and information that we regard as proprietary.
+Accordingly, we might not be able to protect our proprietary rights
+against unauthorized third-party copying or utilization. Adverse
+outcomes to some or all of the claims and lawsuits pending against
+us might result in the award of significant damages or injunctive
+relief against us or brought against us in the future that could
+hinder our ability to conduct our business and could have an
+adverse effect on our reputation, business, financial position, profit,
+and cash flows. Third parties could require us to enter into royalty
+and licensing arrangements on terms that are not favorable to us,
+cause product shipment delays, subject our products to
+injunctions, require a complete or partial redesign of products,
+result in delays to our customers' investment decisions, and
+damage our reputation. Third-party claims might require us to
+make freely accessible under open source terms one of our
+products or third-party (non-SAP) software upon which we depend.
+Any legal action we bring to enforce our proprietary rights could
+also involve enforcement against a partner or other third party,
+which might have an adverse effect on our ability, and our
+customers' ability, to use that partner's or other third parties'
+products.
+The outcome of litigation and other claims or lawsuits is
+intrinsically uncertain. Management's view of the litigation might
+also change in the future. Actual outcomes of litigation and other
+claims or lawsuits could differ from the assessments made by
+management in prior periods, which are the basis for our
+accounting for these litigations and claims under IFRS.
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent possible.
+For example:
+Consolidated Financial
+Statements IFRS
+In addition, the German Federal Office for the Protection of the
+Constitution and security industry experts have warned of risks
+related to a globally growing number of cybersecurity attacks
+aimed at obtaining or violating company data including personal
+medium
+-
+→
+Strategic Risks
+Market Share and Profit
+unlikely
+business-critical medium
+→
+Mergers and Acquisitions
+business-critical medium
+unlikely
+medium
+7
+Innovation
+remote
+business-critical medium
+→
+Icon:
+major
+decreased
+unlikely
+7
+Sales and Services
+unlikely
+major
+medium
+←
+Partner Ecosystem
+unlikely
+Technology and Products
+major
+→
+Cloud Operations
+unlikely
+Cybersecurity and Security
+likely
+business-critical medium
+business-critical high
+→
+medium
+-
+unchanged
+Risk Management and Risks
+Tariff conflicts, as for example between the United States and
+China
+Financial market volatility episodes, global economic crises and
+chronic fiscal imbalances, slowing economic conditions, or
+disruptions in emerging markets
+Higher credit barriers for customers, reducing their ability to
+finance software purchases
+Increased number of bankruptcies among customers, business
+partners, and key suppliers
+Terrorist attacks or other acts of violence, civil unrest, natural
+disasters, or pandemic diseases impacting our business
+Any of these events could limit our ability to reach our targets as
+they have a negative effect on our business operations, financial
+position, profit, and cash flows.
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent possible
+such as:
+Continued deterioration in global economic conditions (impact
+on accurate forecast) or budgetary constraints of national
+governments
+Further efforts to achieve our vison of a purpose-lead company
+by transforming our and our customers' business processes
+with intelligent technologies (SAP Leonardo) for the intelligent
+enterprise
+Internal cost discipline and a conservative financial planning
+Reshaping of our organizational structure and processes to
+increase efficiency
+We cannot exclude the possibility that if the risk were to occur, it
+could have a business-critical impact on our operations, financial
+position, profit, and cash flows. We estimate the probability of
+occurrence of this risk to be likely. This could exacerbate the other
+risks we describe in this report or cause a negative deviation from
+our revenue and operating profit target. We classify this risk as a
+high risk.
+International Laws and Regulations: Laws, regulatory
+requirements and standards in Germany, the United States, and
+elsewhere continue to be very stringent. Our international
+business activities and processes expose us to numerous and
+often conflicting laws and regulations, policies, standards, or
+other requirements and sometimes even conflicting regulatory
+requirements, and to risks that could harm our business,
+financial position, profit, and cash flows.
+We are a global company and currently market our products and
+services in more than 180 countries and territories in the Americas
+(Latin America and North America); Asia Pacific Japan (APJ);
+China, Hong Kong, Macau, and Taiwan (Greater China); Europe,
+Middle East, and Africa (EMEA); and Middle and Eastern Europe
+(MEE) regions. As a European company domiciled in Germany with
+securities listed in Germany and the United States, we are subject
+to European, German, U.S., and other governance-related
+regulatory requirements.
+Our business in these countries is subject to numerous risks
+inherent to international business operations. Among others, these
+risks include:
+-
+-
+Ongoing shift to a higher share of cloud subscriptions and
+software support revenue streams, which will lead to more
+predictable revenue streams over time, providing increased
+stability against financial volatility
+1) Trend: Risk level compared with previous year.
+General economic, political, social, environmental, market
+conditions, and unrest (for example, Turkey, Venezuela, UK/
+Brexit)
+-
+increased
+107
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+-
+Additional
+Infomation
+SAP SE is the parent company of the SAP Group. Consequently,
+the risks described below also apply, directly or indirectly, to SAP
+SE.
+Economic, Political, Social, and Regulatory
+Risks
+Global Economic and Political Environment: Uncertainty in the
+global economy, financial markets, social and political instability
+caused by state-based conflicts, terrorist attacks, civil unrest,
+war, or international hostilities could lead to disruptions of our
+business operations or have a negative impact on our business,
+financial position, profit, and cash flows.
+As a global company, we are influenced by multiple external
+factors that are difficult to predict and beyond our influence and
+control. Any of these factors could have a significant adverse effect
+on the overall economy as well as on our business.
+The following potential events, among others, could bring risks to
+SAP's business:
+-
+-
+All described risks are each applicable to a different extent to
+our reportable segments (Applications, Technology & Services,
+SAP Business Network, and Customer Experience) unless
+otherwise noted.
+110
+Risk Management and Risks
+major
+Internal Control and Risk Management System
+for Financial Reporting
+The head of Global GRC, who reports to the Group Chief
+Financial Officer (CFO), is responsible for SAP's internal control
+and risk management program and provides regular updates to the
+Audit Committee of the Supervisory Board. The overall risk profile
+of the Group is consolidated by the head of Global GRC.
+Risk managers are responsible for supporting and monitoring
+the implementation of risk management across the Group that is
+both effective and compliant with regulatory requirements and
+SAP's global risk management policy. In accordance with our risk
+management policy, all relevant risks and risk-related matters must
+be reported to the Global GRC organization.
+During the merger and acquisition and post-merger integration
+phase, newly acquired companies are subject to risk management
+performed by our Corporate Development M&A function.
+Furthermore, for as long as the newly acquired companies are not
+integrated, existing risk management structures are maintained or
+enhanced within the acquired companies for the purposes of
+compliance with legal requirements.
+Our global risk management organization (Global GRC)
+oversees the Group-wide systematic identification, assessment,
+management, and monitoring of operational, financial, compliance,
+and strategic risks as well as opportunities where it is deemed
+appropriate. In addition, the Global GRC function is responsible for
+standardized internal risk reporting to risk committees at different
+levels within the Company in line with the internal GRC Risk
+Reporting Standard, including the Executive Board, the chairperson
+of the Supervisory Board, and the Audit Committee of the
+Supervisory Board, as well as for the external risk reporting.
+Furthermore, Global GRC is responsible for the regular
+maintenance and implementation of our risk management policy.
+Operational, financial, and strategic risk management is
+uniformly implemented at SAP. Independent GRC risk managers,
+reporting to Global GRC, are assigned to each of SAP's key
+business units and business activities and to selected strategic
+initiatives. All GRC risk managers, working with assigned risk
+contacts in the business units, continuously identify and assess
+risks associated with material business operations using a uniform
+approach, and monitor the implementation and effectiveness of the
+measures chosen to mitigate risks. Further financial risk
+management activities are performed by our Global Treasury and
+our Global Taxdepartments. Security risk management is jointly
+conducted by the Global Security department and Global GRC. Risk
+management of compliance risks such as corruption, conflict of
+interest, and fraud is performed jointly by our Legal Compliance &
+Integrity Office (LCIO) and Global GRC, and general legal risks by
+Global Legal. Sanction and embargo-related risks are managed by
+the Export Control team, harassment and other HR-related issues
+by our Global Labor & Employee Relations Office, and IP risks by
+our Global IP Office.
+Risk Management Organization
+Board on a quarterly basis. This includes risks along our strategic
+portfolio for services and solutions as well as any risks to our ability
+to continue as a going concern, the latter supported by a process
+that analyzes those risks with respect to potential effects on
+liquidity, excessive indebtedness, and insolvency.
+The purpose of our system of internal control over financial
+reporting is to provide reasonable assurance that our financial
+reporting is reliable and compliant with generally accepted
+accounting principles. Because of the inherent limitations of
+internal control over financial reporting, it might not prevent or
+bring to light all potential misstatements in our financial
+statements.
+Supervisory Board and to the Audit Committee of the Supervisory
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+Risk Management and Risks
+104
+Additional
+Infomation
+All identified and relevant risks are reported at the local,
+regional, and global levels in accordance with our risk management
+policy. At local, regional, and global levels, we have established
+executive risk councils that regularly discuss risks and
+countermeasures and that monitor the success of risk mitigation.
+In addition, the Executive Board is informed regularly and quarterly
+about individual risks based on clearly defined qualitative reporting
+criteria. Newly identified or existing significant risks that are above
+a defined threshold, meet a qualitative criterion, or have a potential
+significant impact are also reported to the chairperson of the
+SAP's internal control and risk management system for financial
+reporting (ICRMSFR) is based on our Group-wide risk management
+methodology. The ICRMSFR includes organizational, control, and
+monitoring structures designed to ensure that data and
+information concerning our business is collected, compiled, and
+analyzed in accordance with applicable laws and properly reflected
+in the IFRS Consolidated Financial Statements.
+Our Corporate Financial Reporting (CFR) department codifies all
+accounting policies in our group accounting and global revenue
+recognition guidelines. These policies and the corporate closing
+schedule, together with our process handbooks, define the closing
+process. Under this closing process, we prepare, predominately
+through centralized or external services, the financial statements of
+all SAP legal entities for consolidation by CFR. CFR and other
+corporate departments are responsible for ensuring compliance
+with Group accounting policies and monitor the accounting work.
+CFR also conducts reviews of our accounting processes and books.
+The employees who work on SAP's financial reporting receive
+training in the respective policies and processes.
+Risk managers record and address identified risks using our risk
+management software online and in real time to help create
+transparency across all known risks that exist in the Group, as well
+as to facilitate risk management and the associated risk reporting.
+The GRC solution also supports the risk-based approach of the
+ICRMSFR. Our continuous controls monitoring activities are
+performed utilizing our GRC software as well. This information is
+available to managers through direct access to our SAP Fiori
+application for enterprise risk reporting, and in regularly issued
+reports, and is consolidated and aggregated for the quarterly risk
+report and to the Executive Board. We also utilize the SAP Digital
+Boardroom to share relevant risk information with the Executive
+Board and the Audit Committee of the Supervisory Board.
+We use our own risk management software, SAP solutions for
+GRC powered by SAP HANA, to support the governance process.
+Software Solution Deployed
+Our Executive Board is responsible for ensuring the
+effectiveness of the risk management and internal control system.
+The effectiveness of both systems and their implementation in the
+different Executive Board areas is monitored by each board
+member. We regularly provide a status update on the risk
+management and the internal control system to the Audit
+Committee of the Supervisory Board. Key risks are reported
+quarterly to the chairperson of the Supervisory Board and to the
+Audit Committee of the Supervisory Board. The Audit Committee
+of the Supervisory Board regularly monitors the effectiveness of
+SAP's risk management and internal control system. At the
+direction of our Audit Committee, the Corporate Audit department
+periodically audits various aspects of the risk management system
+and its effectiveness. Additional reassurance is obtained through
+the external audit of the effectiveness of our internal control
+system over financial reporting and the early warning system.
+Additionally, and in compliance with German commercial law
+requirements, SAP maintains an internal control system beyond
+financial reporting. This is supported through automated controls
+(continuous control monitoring) as part of our business processes.
+Risk Management and Internal Control
+Governance
+The assessment of the effectiveness of the ICRMSFR related to
+our IFRS consolidated financial statements concludes that, on
+December 31, 2018, the Group had an effective internal control
+system over financial reporting in place.
+Additional
+Infomation
+Our ICRMSFR also includes policies, procedures, and measures
+designed to ensure compliance of SAP's financial reports with
+applicable laws and standards. We analyze new statutes,
+standards, and other pronouncements concerning IFRS accounting
+and its impact on our financial statements and ICRMSFR. Failure to
+adhere to these new statutes, standards, and other
+pronouncements would present a substantial risk to the
+compliance of our financial reporting. Finally, the ICRMSFR has
+both preventive and detective controls, including, for example,
+automated and non-automated reconciliations, segregated duties
+with two-person responsibility, authorization concepts in our
+software systems, and corresponding monitoring measures.
+Further Information on Economic,
+Environmental, and Social Performance
+Management Report
+Combined
+To Our
+Stakeholders
+105
+Risk Management and Risks
+Based on an analysis of the design and operating effectiveness
+of our respective internal controls over financial reporting, a
+committee presents the results of the assessment on the ICRMSFR
+effectiveness with respect to our IFRS consolidated financial
+statements as at December 31 each year to the Group CFO. The
+committee meets regularly to set the annual scope for the test of
+effectiveness, to assess and evaluate any possible weaknesses in
+the controls, and to determine measures to address them
+adequately. During its own meetings, the Audit Committee of the
+Supervisory Board regularly scrutinizes the resulting assessments
+of the effectiveness of the internal controls over financial reporting
+with respect to the IFRS consolidated financial statements.
+We have outsourced some work, such as valuing projected
+benefit obligations and share-based payouts, quarterly tax
+calculations for most entities, and purchase price allocations in the
+context of asset acquisitions and business combinations. We have
+also outsourced the preparation of the local statutory financial
+statements for a number of our subsidiaries.
+Consolidated Financial
+Statements IFRS
+Risk Factors
+Risk analysis is followed by risk response and risk monitoring.
+The risk exposure and the risk description, as well as the
+appropriateness of agreed responses, are validated by the
+accountable management. Our risk managers work in close
+cooperation with the business owners, ensuring that effective
+strategies are implemented to address risks. Business owners are
+responsible for continuously monitoring the risks and the
+effectiveness of mitigation strategies, with support from the
+respective risk managers. Risks might be reduced by taking active
+steps based on risk approval. To provide greater risk transparency
+and enable appropriate decision-making for business owners, we
+have established a risk delegation of authority (RDOA) for relevant
+parts of the organization as deemed appropriate. RDOA is a risk
+management decision-making hierarchy that helps business
+owners gain timely insight into business transactions that have the
+greatest risk, so that they are better able to review the relevant
+information, understand the risk profile and associated mitigation
+strategies, and determine whether their approval is warranted.
+Depending on the exposure, approval is required at different levels
+of the Company, up to and including the Executive Board.
+H=
+Remote
+80% to 99%
+60% to 79%
+40% to 59%
+20% to 39%
+1% to 19%
+Occurrence
+Unlikely
+M
+L
+L
+19%
+M
+L
+L
+L
+M
+High Risk
+Likely
+Near Certainty
+M =
+Medium
+Risk
+Low Risk
+L =
+Impact
+Detrimental negative impact on
+business, financial position, profit,
+and cash flows
+Considerable negative impact on
+business, financial position, profit,
+and cash flows
+Some potential negative impact
+on business, financial position,
+profit, and cash flows
+Highly Likely
+Limited negative impact on
+business, financial position, profit,
+and cash flows
+Impact Definition
+Business-Critical
+Major
+Moderate
+Minor
+Impact Level
+Insignificant
+In this framework, we define a remote risk as one that will occur
+only under exceptional circumstances, and a near certain risk as
+one that can be expected to occur within the specified time horizon.
+The period for analyzing our risks correlates with the respective
+associated business activities, considering a relevant forecast
+horizon of up to one year, and up to 2023 where applicable. The
+period for analyzing the risks that could be possible threats to the
+Group's ability to continue as a going concern is eight rolling
+quarters.
+Negligible negative impact on
+business, financial position, profit,
+and cash flows
+The following sections outline our risk categories and risk
+factors that we have identified and continuously track. In 2018, we
+have combined the two risk factors Accounting Pronouncement
+and Management Use of Estimates into one risk factor named Use
+of Accounting Policies and Judgment, reflecting the pertinent
+interdependencies to further streamline our risk reporting.
+Compared to our internal risk reporting, we externally present our
+risk factors on an aggregated level.
+An overview of the risk categories and the corresponding risk
+factors is outlined in the table below, where the risk factors are
+categorized according to our framework detailed in the Risk
+Management Methodology and Reporting section.
+106
+moderate
+unlikely
+Use of Accounting Policies and Judgment
+→
+low
+major
+remote
+low
+Liquidity
+low
+moderate
+unlikely
+Sales and Revenue Conditions
+Financial Risks
+→
+low
+→
+moderate
+→
+remote
+unlikely
+Human Workforce
+Human Capital Risks
+→
+low
+minor
+remote
+Currency, Interest Rate, and Share Price Fluctuations
+Venture Capital
+medium
+business-critical
+remote
+Insurance
+→
+low
+major
+→
+unlikely
+→
+business-critical high
+business-critical high
+likely
+Global Economic and Political Environment
+Economic, Political, Social, and Regulatory Risks
+Trend¹)
+Risk Level
+Impact
+>>
+Probability
+Further Information on Economic,
+Environmental, and Social Performance
+Overview of Risk Factors (Aggregated Statement for 2018)
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+Risk Management and Risks
+Additional
+Infomation
+International Laws and Regulations
+likely
+business-critical high
+likely
+→>
+business-critical medium
+remote
+Environment and Sustainability
+Ethical Behavior
+Unauthorized Disclosure of Information
+Corporate Governance and Compliance Risks
+71
+business-critical high
+likely
+Data Protection and Privacy
+←
+business-critical high
+likely
+Legal and IP
+→
+→
+-
+Mismatch of expenses and revenue due to changes in
+Local and regional crisis management teams to respond and
+minimize possible losses in case of crisis situations
+Engagement of experts to advise on appropriate cybersecurity
+protocols and to further increase attention and awareness to
+cybersecurity protocols and protections
+Share price fluctuation impacting cash outflows for share-based
+compensation payments
+Any one or more of these events could have an adverse effect on
+our business, financial position, profit, and cash flows.
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent possible,
+such as:
+-
+Continuous monitoring of our exposure to all these financial
+risks
+Group-wide foreign exchange risk management strategy to
+hedge balance sheet items and expected cash flows in foreign
+currencies by using derivative financial instruments as
+appropriate
+-
+Balanced maturity profile and mixture of fixed and floating
+interest rate arrangements to hedge against interest rate risk
+Use of derivative instruments to reduce some of the impact of
+our share-based compensation plans on our income statement
+and cash flow
+We cannot exclude the possibility that if the risk were to occur, it
+could have a major impact on our operations, financial position,
+profit, and cash flows. However, we estimate the probability of
+occurrence of this risk to be remote. We classify this risk as a low
+risk.
+For more information about risks arising from financial
+instruments, including our currency and interest rate risks and our
+related hedging activity, see the Notes to the Consolidated
+Financial Statements section, Notes (A.2), (E.3), and (F.1).
+Insurance: Our insurance coverage might not be sufficient and
+uninsured losses may occur.
+We maintain insurance coverage to protect us against a broad
+range of risks, at levels we believe are appropriate and consistent
+with current industry practice. Our objective is to exclude or
+minimize risk of financial loss at reasonable cost.
+Nevertheless, we could still be subject to risks in the following
+areas, among others:
+-
+-
+-
+Losses that might be beyond the limits, or outside the scope,
+of coverage of our insurance and that may limit or prevent
+indemnification under our insurance policies
+Inability to maintain adequate insurance coverage on
+commercially reasonable terms in the future
+Certain categories of risks are currently not insurable at
+reasonable cost
+No assurance of the financial ability of the insurance
+companies to meet their claim payment obligations
+Any one or more of these events could have an adverse effect on
+our business, financial position, profit, and cash flows.
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent possible,
+such as:
+-
+Maintaining a scope of insurance coverage that is as broad as
+possible
+-
+Selection of financially stable and reputable insurers
+-
+Constant review of our insurance programs in relation to our risk
+profile and breadth of insurance coverage
+Interest rate fluctuation
+Exchange rate risks with currency appreciation or depreciation,
+or risks related to currency devaluation (legal and/or
+administrative changes to currency regimes)
+This could lead to the following risks, among others:
+Period-over-period fluctuations
+-
+Increased default risk of financial investments, which might lead
+to significant impairment charges in the future
+Limitation of operating and/or strategic financial flexibility
+Any one or more of these events could have an impact on the
+value of our financial assets, which could have an adverse effect on
+our business, financial position, profit, and cash flows.
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent possible,
+such as:
+-
+-
+We have policies and measures in place to support strong
+operating cash flow.
+SAP's investment policy with regards to total Group liquidity is
+described in our internal treasury guideline, which is a collection
+of uniform rules that apply globally to all companies in the SAP
+Group. Among other things, it requires that investments, with
+limited exceptions, are only executed in assets and funds rated
+BBB flat or better.
+The weighted average rating of the investments of our total
+Group liquidity is in the range of A-.
+We pursue a policy of cautious investment characterized by
+wide portfolio diversification with a variety of counterparties,
+predominantly short-term investments, and standard
+investment instruments.
+We cannot exclude the possibility that if the risk were to occur, it
+could have a major impact on our operations, financial position,
+profit, and cash flows. However, we estimate the probability of
+occurrence of this risk to be remote. We classify this risk as a low
+risk.
+Use of Accounting Policies and Judgment: In our accounting,
+management uses policies and applies estimates. This could
+negatively affect our business, financial position, profit, and
+cash flows.
+To comply with IFRS, management is required to establish and
+apply accounting policies as well as to apply judgment, including
+but not limited to making and using estimates and assumptions.
+The policies and judgment affect our reported financial figures.
+This use of policies and judgment could lead to risks in the
+following areas, among others:
+We cannot exclude the possibility that if the risk were to occur, it
+could have a business-critical impact on our operations, financial
+position, profit, and cash flows. However, we estimate the
+probability of occurrence of this risk to be remote. We classify this
+risk as a medium risk.
+Risk Management and Risks
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+New pronouncements by standard setters and regulators as
+well as changes in common practice or common interpretations
+of existing standards might force us to change existing policies.
+Where such changes trigger significant changes to our
+processes, we might struggle to implement the changes in a
+timely manner.
+The facts and circumstances, as well as the assumptions on
+which our management bases its judgment might change over
+time, requiring us to change the judgment previously applied.
+Both of the above risks could result in significant changes to our
+reported financials, and could have an adverse effect on our
+business, financial position, profit, and cash flows.
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent possible,
+such as:
+Regular monitoring of possible future changes to financial
+reporting standards or interpretations thereof in order to
+identify or anticipate changes at an early stage
+Control procedures to make sure that our estimates and
+judgments are adequate, such as two-person verification to
+significant estimating
+We cannot exclude the possibility that if the risk were to occur, it
+could have a moderate impact on our operations, financial position,
+profit, and cash flows. However, we estimate the probability of
+occurrence of this risk to be unlikely. We classify this risk as a low
+risk.
+Currency, Interest Rate, and Share Price Fluctuation: As a
+globally operating company, SAP is subject to various financial
+risks related to currencies, interest rates, and share price
+fluctuations, which could negatively impact our business,
+financial position, profit, and cash flows.
+Because we operate throughout the world, a significant portion
+of our business is conducted in foreign currencies. In 2018,
+approximately 72.1% of our revenue was attributable to operations
+in foreign currencies. This foreign currency business therefore gets
+translated into our reporting currency, the euro.
+113
+Venture Capital: We could incur significant losses in connection
+with venture capital investments.
+Through Sapphire Ventures, our consolidated venture
+investment funds, we plan to continue investing in new and
+promising technology businesses.
+This could lead to risks in the following areas, among others:
+Investments could generate net losses and/or require additional
+expenditures from their investors.
+Risk Management and Risks
+120
+Impairment of goodwill and other intangible assets acquired in
+business combinations
+Debt incurrence or significant unexpected cash expenditures
+Non-compliance with existing SAP standards including
+applicable product standards such as our open source product
+standards
+Failure to coordinate or successfully integrate the acquired
+company's research and development (R&D), sales, marketing
+activities, and security and cybersecurity protocols
+Incompatible practices or policies (compliance requirements)
+Insufficient integration of the acquired company's accounting,
+HR, and other administrative systems
+Failure in implementing, restoring, or maintaining internal
+controls, disclosure controls and procedures, and policies within
+acquired companies
+IP)
+Material unidentified liabilities of acquired companies (legal, tax,
+Unfulfilled needs of the acquired company's customers or
+partners
+Failure to successfully integrate acquired entities, operations,
+cultures, or languages, all within the constraints of applicable
+local laws
+Failure to integrate acquired technologies or solutions
+successfully and profitably into SAP's solution portfolio and
+strategy
+Incorrect information or assumptions during the due diligence
+process for the acquisition (including information or
+assumptions related to the business environment and/or
+business and licensing models)
+-
+Lack of availability and scalability of business experts and
+consultants
+-
+-
+-
+-
+-
+-
+Acquiring businesses, products, and technologies may present
+risks to SAP, including risks related to the following areas, among
+others:
+To expand our business, we acquire businesses, products, and
+technologies, and we expect to continue to make acquisitions in the
+future. Over time, certain of these acquisitions have increased in
+size and in strategic importance for SAP. Management negotiation
+of potential acquisitions and the integration of acquired businesses,
+products, or technologies demands time, focus, and resources of
+both management and workforce, and exposes us to unpredictable
+operational difficulties.
+Mergers and Acquisitions: We might not acquire and integrate
+companies effectively or successfully.
+We cannot exclude the possibility that if the risk were to occur, it
+could have a business-critical impact on our operations, financial
+position, profit, and cash flows. However, we estimate the
+probability of occurrence of this risk to be unlikely. We classify this
+risk as a medium risk.
+Enable and encourage partners to leverage SAP technology, by
+providing guidance about business opportunities, architecture,
+and technology, as well as a comprehensive certification
+program designed to ensure that relevant third-party solutions
+are of consistently high quality
+Deliver standard software and product packages that are fast
+and easy to install, as well as financially attractive financing and
+subscription models
+cloud-based services, extendable with SAP Cloud Platform and
+intelligent technologies
+-
+Enable our current product portfolio for SAP HANA, develop
+new solutions based on SAP HANA, and offer comprehensive
+-
+Inability to repay financial debt
+Lack of appropriate or inadequately executed benefit and
+compensation programs
+Loss of key personnel of acquired business
+114
+Risk Management and Risks
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Changes to planned business operations might affect the
+performance of companies in which Sapphire Ventures holds
+investments.
+Tax deductibility of capital losses and impairment in connection
+with equity securities are often restricted, and could therefore
+have an adverse effect on our effective tax rate.
+Any one or more of these events could have an adverse effect on
+our business, financial position, profit, and cash flows.
+Sapphire Ventures has established measures to address and
+mitigate the described risks and adverse effects, such as:
+-
+Diversify the portfolio and actively manage our investments
+Failure to meet short-term and long-term workforce and skill
+requirements including achievements of internal gender
+diversity objectives
+Balance the volume and scope of our venture capital activities
+Human Capital Risks
+Human Workforce: If we are unable to attract, develop, retain,
+and effectively manage our geographically dispersed workforce,
+we might not be able to run our business and operations
+efficiently and successfully, or develop successful new solutions
+and services.
+Our success is dependent on appropriate alignment of our
+planning processes for our highly skilled and specialized workforce
+and leaders, both male and female, adequate resource allocation,
+and our location strategy with our general strategy. In certain
+regions and specific technology and solution areas, we continue to
+set very high growth targets, depending on short-term and long-
+term skill requirements, taking infrastructure needs as well as local
+legal or tax regulations in consideration. Successful maintenance
+and expansion of our highly skilled and specialized workforce in the
+area of cloud is a key success factor for our transition to be the
+leading cloud company. The availability of such personnel as well as
+business experts is limited and, as a result, competition in our
+industry is intense.
+-
+-
+-
+-
+-
+-
+We could face risks in the following areas, among others:
+Failure to apply workforce planning processes, adequate
+resource allocation, and location strategy in alignment with our
+general strategy
+Failure to identify, attract, develop, motivate, adequately
+compensate, and retain well-qualified and engaged personnel to
+scale to targeted markets
+Failure to successfully maintain, upskill, and expand our highly
+skilled and specialized workforce
+Poor succession management or failure to find adequate
+replacements
+We cannot exclude the possibility that if the risk were to occur, it
+could have a minor impact on our operations, financial position,
+profit, and cash flows. However, we estimate the probability of
+occurrence of this risk to be remote. We classify this risk as a low
+risk.
+Drive the integration and convergence of our technology
+platform offerings SAP S/4HANA and SAP C/4HANA, and
+acquired technologies
+-
+However, adverse macroeconomic factors could increase the
+default risk associated with the investment of our total Group
+liquidity, and could lead to the following risks, among others:
+Group liquidity shortages
+Ongoing efforts and activities to maintain our listing in the most
+prominent and recognized sustainability indexes, such as the
+expansion of ISO 14001 audits, strengthening our human rights
+commitment, and increasing transparency regarding SAP's
+governance
+Recognition for our sustainability efforts is shared with the
+market
+Proactive identification and addressing of social and
+environmental issues
+-
+-
+-
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent possible,
+such as:
+If we do not meet stakeholder expectations in the areas
+identified, our rating in sustainable investment indexes might
+decrease, which could have an adverse effect on our reputation,
+profit, and share price.
+Failure to maintain our rating in sustainable investment indexes
+Failure to meet customer, partner, or other stakeholder
+expectations or generally accepted standards on climate
+change, energy constraints, and our social investment strategy
+Failure to achieve communicated targets for greenhouse gas
+emissions
+-
+-
+We have identified risks in this context, including, but not limited
+to, the following:
+Energy and emissions management are an integral component
+of our holistic management of social, environmental, and economic
+risks and opportunities.
+Environment and Sustainability: Failure to meet customer,
+partner, or other stakeholder expectations or generally
+accepted standards on climate change, energy constraints, and
+our social investment strategy could negatively impact SAP's
+business, results of operations, and reputation.
+We cannot exclude the possibility that if the risk were to occur, it
+could have a business-critical impact on our operations, financial
+position, profit, and cash flows. We estimate the probability of
+occurrence of this risk to be likely. We classify this risk as a high
+risk.
+collusion between multiple involved parties, cannot always be
+prevented.
+Despite our comprehensive compliance programs and
+established internal controls, intentional efforts of individuals to
+circumvent controls or engage in fraud, especially by way of
+In response to preliminary findings in the alleged anti-bribery
+law violations, we have implemented enhancements to our anti-
+corruption compliance program, including guidance and policy
+changes as well as additional internal controls, and intend to
+continue these enhancements further.
+compliance audit process
+Termination of partners who do not pass our partner
+Compliance policies and processes aimed at managing third
+parties and preventing misuse of third-party payments for illegal
+purposes, including the performance of compliance due
+diligence activities before engaging with third parties
+Guidance in our travel, entertainment, gift, and expense policies
+Promoting a commitment to business with integrity through our
+partner and vendor ecosystems
+Mandatory SAP Code of Business Conduct training applicable to
+every SAP employee, providing legal compliance guidance on
+how to avoid unethical behavior and solve dilemma situations
+Annual reconfirmation of SAP Code of Business Conduct by
+SAP's workforce (except where disallowed by local legal
+regulations)
+Several educational, counseling, control, and investigative
+instruments
+Internal monitoring as well as regular external auditing of our
+CMS approach
+payment of sales commissions on public sector deals in high-
+risk countries
+Discontinued engagement of sales agents as well as the
+Root cause analysis of all deviations related to unethical or
+fraudulent behavior to improve associated business processes
+and prevent further violations
+Comprehensive compliance management system (CMS) based
+on the three pillars of prevention, detection, and reaction
+Expansion of our Legal Compliance and Integrity Office's
+bandwidth through additional staffing
+Thus, we continue to receive excellent scores and rankings such
+as the Dow Jones Sustainability Indices, ISS-oekom Corporate
+Sustainability Review, and the CDP Climate Performance and
+Disclosure Leadership Indices
+We surpassed our greenhouse gas emissions target of
+333 kilotons by 23 kilotons
+We cannot exclude the possibility that if the risk were to occur, it
+could have a moderate impact on our operations, financial position,
+profit, and cash flows. However, we estimate the probability of
+occurrence of this risk to be unlikely. We classify this risk as a low
+risk.
+112
+-
+-
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent possible,
+such as:
+In recent years, the trend has been towards an increased
+number of sales transactions, with the average deal size remaining
+more or less constant. However, the loss or delay of one or a few
+large opportunities could have an adverse effect on our business,
+financial position, profit, and cash flows.
+High operating expenses or insufficient revenue generation to
+offset the significant research and development costs
+Inability of acquired companies to accurately predict their sales
+pipelines
+Shortfall in anticipated revenue or delay in revenue recognition
+or deployment models that require revenue to be recognized
+over an extended period of time
+Decreased software sales that could have an adverse effect on
+related maintenance and services revenue growth
+Changes in customer budgets or seasonality of technology
+purchases by customers
+Adoption of, and conversion to, new business models, leading
+from upfront payment models to an increase in pay-per-use or
+subscription-based payment models, thus the respective
+service period typically ranges from one to three years, and
+goes up to five years
+Introduction/adaptation of licensing and deployment models
+such as cloud subscription models
+Large size, complexity, and extended settlement of individual
+customer transactions
+Timing issues with respect to the introduction of new products
+and services or product and service enhancements by SAP or
+our competitors
+Long sales cycles for many of our products
+-
+Challenges in pipeline development and realization
+-
+-
+-
+Our revenue and operating results can vary and have varied in
+the past, sometimes substantially, from quarter to quarter. Our
+revenue in general, and our software revenue in particular, is
+difficult to forecast for a number of reasons, and could lead to risks
+related to the following, among others:
+Sales and Revenue Conditions: Our sales and revenue
+conditions are subject to market fluctuations and our forecasts
+might not be accurate.
+Financial Risks
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined
+To Our
+Risk Management and Risks
+-
+-
+-
+-
+-
+Such disclosure could lead to risks in the following areas, among
+others:
+Confidential information and internal information related to
+topics such as our strategy, new technologies, mergers and
+acquisitions, unpublished financial results, customer data, or
+personal data, could be disclosed prematurely or inadvertently and
+subsequently lead to market misperception and volatility.
+Unauthorized Disclosure of Information: Our controls and
+efforts to prevent the unauthorized disclosure of confidential
+information might not be effective.
+Corporate Governance and Compliance Risks
+We cannot exclude the possibility that if the risk were to occur, it
+could have a business-critical impact on our operations, financial
+position, profit, and cash flows. We estimate the probability of
+occurrence of this risk to be likely. We classify this increased risk as
+a high risk.
+We actively monitor legal developments and engage with
+political stakeholders and government authorities, directly or
+through industry associations, to clarify questions relevant to
+SAP and SAP's business.
+We have a data protection management system in place in the
+following areas, where data protection is critical: Product and
+Cloud Support, Enterprise Support and Premium Engagements,
+Global Consulting Delivery, and CoE, Cloud Operations,
+Maintenance Support and Software Development, Marketing,
+HR, and Global Customer Operations (MEE and EMEA regions).
+Furthermore, this data protection management system will be
+continuously enhanced and extended to apply to newly acquired
+companies within the SAP Group.
+We continuously enhance our data center operations worldwide,
+also taking into account local and sector-specific market and
+legal requirements. For this purpose, we are in the process of
+establishing a network of local and regional Data Protection and
+Privacy Coordinators.
+Data protection and privacy is reflected in the mandatory
+product standards of SAP's product development lifecycle.
+We continuously review SAP's existing standards and policies to
+include changes to applicable laws and regulations.
+We have implemented internal processes and measures to
+ensure that SAP is enabled to successfully and sufficiently
+comply with the new GDPR requirements.
+-
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent possible.
+For example:
+Any one or more of these events could have an adverse effect on
+our business, financial position, profit, and cash flows.
+-
+A globally increasing number of hacker attacks aimed at
+obtaining or violating company data including personal data as
+observed in recent prominent cases of cyberattacks where the
+use of ransomware was the preferred method of hackers
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+Ongoing analysis and monitoring of demand, supply, and our
+competitive environment
+Constant monitoring of our revenues, costs, and operational
+KPIs utilizing system-based, real-time reporting to continuously
+improve our business performance
+Increased predictability of revenue due to ongoing
+transformation to the cloud
+We cannot exclude the possibility that if the risk were to occur, it
+could have a moderate impact on our operations, financial position,
+profit, and cash flows. However, we estimate the probability of
+occurrence of this risk to be unlikely. We classify this risk as a low
+risk.
+Liquidity: External factors could impact our liquidity and
+increase the default risk associated with, and the valuation of,
+our financial assets.
+Macroeconomic factors such as an economic downturn could
+have an adverse effect on our future liquidity. We use a globally
+centralized financial management approach to control financial
+risk, such as liquidity, exchange rate, interest rate, counterparty,
+and equity price risks. The primary aim is to maintain liquidity in the
+SAP Group at a level that is adequate to meet our obligations at any
+time.
+data. We anticipate cyberattack techniques to continue to evolve
+and increase in sophistication, which could make it difficult to
+anticipate and prevent attacks and intrusions, thus leading, for
+example, to risks in the following areas, among others:
+-
+Disclosure of confidential information and intellectual property,
+defective products, production downtimes, supply shortages,
+and compromised data (including personal data) through, for
+example, inappropriate usage of social media by employees
+Requirement to notify multiple regulatory agencies and comply
+with applicable regulatory requirements and, where appropriate,
+the data owner
+SAP has established measures to address and mitigate the
+described risks and adverse effects to a great extent, such as:
+Mandatory compliance baseline training for all employees
+(security awareness, data privacy and data protection,
+compliance, and communication)
+-
+-
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent possible,
+such as:
+In 2017 and 2018, SAP encountered situations that required
+clear messaging and strong action on non-compliance in the
+context of ethical behavior that has the potential to harm our
+business. In South Africa, SAP is continuing to investigate its
+dealings with the public sector. For more information relating to the
+alleged anti-bribery law violations noted above, see the Notes to the
+Consolidated Financial Statements, Note (G.4).
+Any one or more of these events could have an adverse effect on
+our business, reputation, financial position, share price, profit, and
+cash flows.
+Impact on business activities in highly regulated industries such
+as public sector, healthcare, banking, or insurance
+Increased scrutiny of public sector transactions in high-risk
+territories
+Fraud and corruption together with operational difficulties,
+especially in countries with a high Corruption Perceptions Index
+and particularly in emerging markets
+-
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+Any one or more of these events could have an adverse effect on
+our market position and lead to fines and penalties. In addition, this
+could have an adverse effect on our business, reputation, financial
+position, profit, and cash flows.
+To Our
+Stakeholders
+Risk Management and Risks
+Collusion with external third parties, for example providing
+assistance in securing contracts
+Non-compliance with our integrity standards and violation of
+compliance related rules, regulations, and legal requirements
+including, but not limited to, anticorruption and bribery
+legislation in Germany, the U.S. Foreign Corrupt Practices Act,
+the UK Bribery Act, and other local laws prohibiting corrupt
+payments by employees, vendors, distributors, or agents
+Unethical and fraudulent behavior of individual employees or
+partners leading to criminal charges, fines, and claims by injured
+parties
+-
+However, we might for instance encounter the following risks
+associated with:
+SAP's leadership position in the global market is founded on the
+long-term and sustainable trust of our stakeholders worldwide. Our
+overarching approach is one of corporate transparency, open
+communication with financial markets, and adherence to
+recognized standards of business integrity. The SAP Code of
+Business Conduct, adopted by the Executive Board on
+January 29, 2003, and updated as necessary since then, codified
+and supplemented the already existing guidelines and expectations
+for the business behavior practiced at SAP.
+Ethical Behavior: Unethical behavior and non-compliance with
+our integrity standards due to intentional and fraudulent
+employee behavior could seriously harm our business, financial
+position, profit, and reputation.
+We cannot exclude the possibility that if the risk were to occur, it
+could have a business-critical impact on our operations, financial
+position, profit, and cash flows. However, we estimate the
+probability of occurrence of this risk to be remote. We classify this
+risk as a medium risk.
+All security groups have been combined organizationally into
+one global security unit to strengthen the security capabilities
+Continuous adoption of internal security measures
+Standards for safe internal and external communication
+Technical security features in our IT hardware and
+communication channels, such as mandatory encryption of
+sensitive data
+Social engineering tests
+-
+-
+-
+111
+quality, security, and data protection and privacy
+Place strong focus on providing our cloud services efficiently
+and to customer expectations, including service provisioning,
+We are engaging with our customers and offer a broader range
+of services to support and drive the digital transformation for
+our customers, for example with our premium service offering
+SAP MaxAttention.
+We cannot exclude the possibility that if the risk were to occur, it
+could have a major impact on our operations, financial position,
+profit, and cash flows. However, we estimate the probability of
+occurrence of this risk to be unlikely. We classify this risk as a
+medium risk.
+Provide customer guidance and support as required during
+partner dissolutions
+Maintain certification process for third-party solutions to ensure
+consistent high-quality and seamless integration
+Offer training opportunities on a wide range of resources for our
+partners
+and technology for example, through demo solutions, to enable
+partners to lead business value discussions on cloud and on-
+premise solutions with customers
+-
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+Risk Management and Risks
+116
+Continue to develop and enhance a wide range of partner
+programs to retain existing and attract new partners of all types
+Enable and encourage partners to leverage SAP technology, by
+providing guidance about business opportunities, architecture,
+Invest in long-term, mutually-beneficial relationships and
+agreements with partners
+-
+-
+-
+If one or more of these risks materialize, this might have an
+adverse effect on the demand for our products and services as well
+as the partner's loyalty and ability to deliver. As a result, we might
+not be able to scale our business to compete successfully with
+other vendors, which could have an adverse effect on our
+reputation, business, financial position, profit, and cash flows.
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent possible,
+such as:
+Partners might not be able or might not have capacity to meet
+customer expectations in terms of service provisioning.
+Partners might fail to abide to contract terms in embargoed or
+high-risk countries.
+accordance with the transformation of SAP's business model in
+a timely manner.
+Partners might not transform their business model in
+requirements expected by our customers or SAP.
+Partners and their products might not meet quality
+Partners might not adhere to applicable legal and compliance
+regulations.
+Failure to enable and train sufficient partner resources to
+promote, sell, and support to scale to targeted markets
+Partners might not develop a sufficient number of new solutions
+and content on our platforms or might not provide high-quality
+products and services to meet customer expectations.
+Partners might not embed our solutions sufficiently enough to
+profitably drive product adoption, especially with innovations
+such as SAP S/4HANA, SAP C/4HANA, and SAP Cloud
+Platform.
+Partners might not renew agreements with us, or not enter into
+new agreements on terms acceptable to us or at all, or start
+competing with SAP.
+Products or services model being less strategic and/or
+attractive compared to our competition
+Cloud Operations: We may not be able to properly protect and
+safeguard our critical information and assets, business
+operations, cloud offerings, and related infrastructure against
+disruption or poor performance.
+SAP is highly dependent on the availability of our infrastructure,
+and the software used in our cloud portfolio is inherently complex.
+This could lead to risks in the following areas, among others:
+Capacity shortage and SAP's inability to deliver and operate
+-
+-
+-
+-
+-
+-
+-
+-
+-
+-
+-
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the extent possible, such as:
+Any one or more of these events could have an adverse effect on
+our business, financial position, profit, and cash flows.
+Non-compliance with applicable certification requirements,
+such as Payment Card Industry Data Security Standard (PCI
+DSS)
+Customers' cloud service demands might not match our data
+center capacity investments
+Increased Total Cost of Ownership (TCO) for SAP
+Failure to get the full commitment of our partners, which might
+reduce speed and impact in market reach
+partner co-location of data centers
+Scalability demands on infrastructure and operation could lead
+to cost increase and margin impacts
+Loss of the right to use hardware purchased or leased from third
+parties could result in delays in our ability to provide our cloud
+applications
+Hardware failures or system errors resulting in data loss,
+corruption, or incompletion of the collected information
+Incomplete cloud portfolio or certification representation could
+lead to customer misperception
+System outages or downtimes, failure of the SAP network due
+to human or other errors, security breaches, or variability in user
+traffic for cloud applications
+Interruptions in the availability of SAP's cloud applications
+portfolio could potentially impact customer service level
+agreements
+Defects or disruption to data center operations or system
+stability and availability
+Customer concerns about the ability to scale operations for
+large enterprise customers
+cloud services in a timely and efficient manner as expected by or
+committed to our customers
+-
+-
+-
+-
+-
+-
+Non-adherence to our quality standards in the context of
+Failure to establish and enable a network of qualified partners
+supporting our scalability needs
+-
+-
+-
+-
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+115
+Risk Management and Risks
+Implementation risks, if, for example, implementations take
+longer than planned, or fail to generate the profit originally
+expected, scope deviations, solution complexity, individual
+However, we might encounter risks in the following areas,
+among others:
+A core element of our business is the successful implementation
+of software and service solutions to enable our customers to
+master complexity and help our customers' businesses run at their
+best. The implementation of SAP software and cloud-based service
+deliveries is led by SAP, by partners, by customers, or by a
+combination thereof.
+Sales and Services: Sales and implementation of SAP software
+and services, including cloud, is subject to a number of
+significant risks sometimes beyond our direct control.
+-
+Operational Business Risks
+Utilization of outsourcing or external short-term staffing
+Extended benefit and long-term incentive programs, which will
+enable us to hire and retain talents internationally
+Strong focus on succession planning for leadership and key
+positions to ensure sustainable leadership and safeguard the
+business from impacts through staff turnover
+Strong focus on expanding our talent landscape and reach
+through our diversity and inclusion efforts, including but not
+limited to neuro-diverse talent which provides a vibrant
+channel of talent with relevant skill sets required to compete
+successfully
+Building employee and leadership strengths through a range of
+targeted professional development, learning, mentoring,
+coaching, together with a gender diversity program to take the
+changes in a global workforce into consideration
+Career management (including, but not limited to, opportunity
+offerings for short-term assignments as well as skill,
+competencies, and qualification advancements)
+Workforce planning (aiming to achieve diversity and the right
+mix of talent while considering demographic changes) and
+legally compliant mobility planning, utilizing the integration of
+our Concur travel solutions to support the challenges of a
+global workforce
+-
+-
+-
+-
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent possible,
+such as:
+Any one or more of these events could reduce our ability to
+attract, develop, retain, and effectively manage our geographically
+dispersed workforce, which in turn could have an adverse effect on
+our business, financial position, profit, and cash flows.
+Challenges with effectively managing a large distribution
+network of third-party companies
+headcount and infrastructure needs, as well as local legal or tax
+regulations
+We cannot exclude the possibility that if the risk were to occur, it
+could have a major impact on our operations, financial position,
+profit, and cash flows. However, we estimate the probability of
+occurrence of this risk to be unlikely. We classify this risk as a
+medium risk.
+-
+-
+Insufficient customer expectation management, including
+scope, integration capabilities and aspects as well as lack in
+purposeful selection, implementation, and utilization of SAP
+solutions
+-
+-
+-
+-
+-
+-
+-
+These partnerships could lead to risks in the following areas,
+among others:
+An open and vibrant partner ecosystem is a fundamental pillar
+of our success and growth strategy. We have entered into
+partnership agreements that drive co-innovation on our platforms,
+profitably expand all our routes to market to optimize market
+coverage, optimize cloud delivery, and provide high-quality services
+capacity in all market segments. Partners play a key role in driving
+market adoption of our entire solutions portfolio, by co-innovating
+on our platforms, embedding our technology, and reselling and/or
+implementing our software.
+Partner Ecosystem: If we are unable to scale, maintain, and
+enhance an effective partner ecosystem, revenue might not
+increase as expected.
+We cannot exclude the possibility that if the risk were to occur, it
+could have a major impact on our operations, financial position,
+profit, and cash flows. However, we estimate the probability of
+occurrence of this risk to be unlikely. We classify this risk as a
+medium risk.
+A policy that clearly outlines communication rules on future
+functionalities as well as legal requirements for commitments
+to customers
+General simplification, alignment, and enforcement of
+contractual standard terms and conditions while conducting
+legal and operational assessments in case deviations are
+required
+Ongoing development of new commercial models to address
+customer flexibility needs
+integration and migration needs or functional requirement
+changes, or insufficient milestone management and tracking
+leading to delays in timeline, maybe even exceeding
+maintenance cycles of solutions in scope
+Continuous project monitoring and controlling activities
+Established escalation management process
+Recommended project approaches for customers to optimize
+their IT solutions in a non-disruptive manner
+implementations with coordinated risk and quality management
+programs
+Projects include risk management processes as part of SAP's
+project management methods intended to safeguard
+-
+-
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent possible,
+such as:
+Any one or more of these events could have an adverse effect on
+our business, financial position, profit, and cash flows.
+Statements on solution developments might be misperceived by
+customers as commitments on future software functionalities
+Deviations from standard terms and conditions, which may lead
+to an increased risk exposure
+Inadequate contracting and consumption models based on
+subscription models for services, support, and application
+management
+Delayed customer payments due to differing perception on
+project outcome/results
+Unrenderable services committed during the sales stage
+Challenges to effectively implement acquired technologies
+Protracted installation or significant third-party consulting costs
+Improper calculations or estimates leading to costs exceeding
+the fees agreed in fixed-price contracts
+Lack of customer commitments and respective engagements,
+including lack of commitment of resources leading to delays or
+deviations from recommended best practices
+Adequate financial planning provisions for the remaining
+individual risks
+-
+-
+Consolidation and harmonization of our data centers and our
+data protection measures, including implementation of security
+information and event management solutions as well as network
+access control enforcement
+Market Share and Profit: Our market share and profit could
+decline due to increased competition, market consolidation,
+technological innovation, and new business models in the
+software industry.
+Strategic Risks
+Enable our current product portfolio for SAP HANA, develop
+new solutions based on SAP HANA, and offer comprehensive
+cloud-based services, extendable with SAP Cloud Platform
+A comprehensive certification program designed to ensure that
+relevant third-party solutions are of consistently high quality
+We cannot exclude the possibility that if the risk were to occur, it
+could have a business-critical impact on our operations, financial
+position, profit, and cash flows. However, we estimate the
+probability of occurrence of this risk to be unlikely. We classify this
+risk as a medium risk.
+Enable the high level of quality of our products, which is made
+transparent in the defined quality perception and support index
+and confirmed by our constantly high customer satisfaction
+ratings as measured by customer quality perception reporting
+Continue to drive the integration and convergence of our
+technology platform offerings SAP S/4HANA and SAP
+C/4HANA, as well as acquired technologies
+Regular direct customer feedback is considered in the market
+release decision process
+A holistic end-to-end testing strategy to validate the state of
+quality and security for every product before market
+introduction
+Threat modelling at the beginning of every development project
+to identify potential risks including but not limited to using
+centrally provided tools
+A broad range of techniques, including project management,
+project monitoring, product standards and governance, and
+rigid and regular quality assurance measures certified to ISO
+9001:2008, applicable to the Applications, Technology &
+Services segment
+-
+-
+-
+-
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent possible,
+such as:
+Any one or more of these events could have an adverse effect on
+our business, financial position, profit, and cash flows.
+The market for cloud computing is increasing and shows strong
+growth relative to the market for on-premise solutions. To maintain
+or improve our operating results in the cloud business, it is
+important that our customers renew their agreements with us
+when the initial contract term expires and purchase additional
+modules or additional capacity, as well as for us to attract new
+customers. Additionally, we need to bring new solutions based on
+the SAP HANA business data platform, new technologies, as well as
+SAP Cloud Platform to the market in line with demands and ahead
+of our competitors. In particular, innovative applications supporting
+the Intelligent Enterprise such as SAP S/4HANA, SAP C/4HANA,
+or newer technologies such as Internet of Things, machine learning,
+robotic process automation (RPA), which automates rule-based,
+repetitive tasks, digital assistants (including voice recognition and
+interaction), and blockchain.
+Lack of customer references for new products and solutions
+Inability to define and provide adequate solution packages and
+scope for all customer segments
+New products, services, and cloud offerings, including third-
+party technologies, might not comply with local standards and
+requirements or could contain undetected or detected defects
+or could not be mature enough from the customer's point of
+view for business-critical solutions after shipment despite all the
+due diligence SAP puts into quality.
+We might not be as fast as expected in integrating our platforms
+and solutions, enabling the complete product and cloud service
+portfolio, harmonizing our user interface design and technology,
+integrating acquired technologies and products, or bringing
+packages, services, or new solutions based on the SAP HANA
+platform as well as SAP Cloud Platform to the market.
+Software products and services might not fully meet market
+needs or customer expectations
+-
+-
+-
+-
+Our product strategy and development investment, including
+new product launches and enhancements, are subject to risks in
+the following areas, among others:
+We cannot exclude the possibility that if the risk were to occur, it
+could have a business-critical impact on our customers, our
+partners, our operations, financial position, our reputation, and our
+business in general. We estimate the probability of occurrence of
+this risk to be likely. We classify this increased risk as a high risk.
+Technology and Products: Our technology and/or products may
+experience undetected defects, coding or configuration errors,
+may not integrate as expected, or may not meet customer
+expectations.
+-
+An internal security audit group within our Corporate Audit
+organization to appropriately address potential security threats
+Increased employee, contractor, third-party, and partner
+awareness through campaigns and security awareness training
+courses and projects
+Physical security measures such as access control systems and
+employee identification
+Continuous adaptation and modification of our security
+procedures, such as security risk identification, threat modeling,
+a comprehensive security testing strategy, mandatory security
+training for all developers, and security validation of our
+products, patches, and services before shipment
+Measures such as technical IT security measures, identity and
+access management, and mandatory security and compliance
+training
+Inability to fulfil expectations of customers regarding time and
+quality in the defect resolution process
+-
+Factoring in the aforementioned, this could lead to risks in the
+following areas, among others:
+Potential loss of existing on-premise customers due to
+competing cloud market trends
+Balance the distribution of our strategic investments by evolving
+and protecting our core businesses and simultaneously
+developing new solutions, technologies, and business models
+for markets, such as those in analytics, applications, and
+database and technology
+Enable and support our customers in their transition path from
+on-premise to cloud, for example through the cloud extension
+policy and our SAP S/4HANA Movement program, a cross-
+departmental initiative to promote the migration of our existing
+ERP customers to the intelligent enterprise
+Demonstrate the benefits of our solution and services portfolio
+through end-to-end integration scenarios, homogeneous and
+compelling user interfaces, intelligent technologies, customer
+references, and success stories
+Share our overall long-term cloud strategy and our integration
+road map with our customers, and continuously implement
+improvements to enhance our cloud solutions through our
+intelligent enterprise strategy, also covering the integration of
+experiential and operational data
+-
+-
+-
+-
+-
+Any one or more of these events could have an adverse effect
+on our business, financial position, profit, and cash flows.
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent possible.
+For example, we:
+Price pressure, cost increases, and loss of market share through
+traditional, new, and especially cooperating competitors
+Strategic alliances among competitors and/or their growth-
+related efficiency gains in the cloud area could lead to
+significantly increased competition in the market with regards to
+pricing and ability to integrate solutions.
+The market for cloud business might not develop further, or it
+might develop more slowly than anticipated.
+Existing customers might cancel or not renew their contracts
+(such as maintenance or cloud subscriptions), or decide not to
+buy additional products and services.
+-
+Customers and partners might be reluctant or unwilling to
+migrate and adapt to the cloud or consider competitive cloud
+offerings.
+from existing SAP customers, which could have an adverse
+effect on related maintenance and services revenue
+Insufficient solution and service adoption together with
+increased complexity, as well as failures during the execution of
+our intelligent enterprise strategy in the context of our portfolio
+for solution and services could lead to a loss of SAP's position as
+a leading cloud company and subsequently to reduced
+-
+-
+-
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined
+To Our
+119
+Risk Management and Risks
+Adverse revenue effects due to increasing cloud business and
+conversions from on-premise licenses to cloud subscriptions
+customer adoption.
+Implementation of methodologies and metrics for continuous
+forecasting and trend analysis in our business
+-
+Additional
+Infomation
+continuity management processes
+Disruptions to back-up, disaster recovery, and business
+industrial espionage, and criminal activities including, but not
+limited to, cyberattacks and breaches against cloud services
+and hosted on-premise software
+Abuse of data, social engineering, misuse or trespassers in our
+facilities, or systems could be rendered unusable
+State-driven economic espionage or competitor-driven
+serious and organized crime, and other illegal activities, as well
+as violent extremism and terrorism
+Exposure of our business operations and service delivery due to
+virtual attack, disruption, damage, and/or unauthorized access,
+theft, destruction, industrial and/or economic espionage,
+-
+-
+-
+As we continue to grow organically and through acquisitions,
+deliver a full portfolio of solutions via the cloud, host or manage
+elements of our customers' businesses in the cloud, process large
+amounts of data and offer more mobile solutions to users, we face
+a progressively more complex security environment. The
+complexity of this security environment is amplified due to the
+increasingly malicious global cybersecurity threat landscape in
+which we operate, including third-party data, products, and
+services that we incorporate into SAP products, and the continually
+evolving and increasingly advanced techniques employed by threat
+actors targeting IT products and businesses. Such threat actors
+include, but are not limited to, highly sophisticated parties such as
+nation-states and organized criminal syndicates. As a leading cloud
+company and service provider to some of the largest and best-
+known customers in the world, we are naturally a prominent target
+and experience cybersecurity attacks of varying types and degrees
+on a regular basis. As a result, we are subject to risks and
+associated consequences in the following areas, among others:
+Undetected security defects and vulnerabilities
+infrastructure, or services, or economic espionage could result
+in significant legal and financial exposure and have a material
+adverse effect on our customers, our partners, our financial
+position, our operations, our reputation, and our business in
+general.
+Cybersecurity and Security: A cybersecurity attack or breach, or
+undetected security vulnerabilities in our products,
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Failure to securely and successfully deliver cloud services by
+any cloud service provider could have a negative impact on
+customer trust in cloud solutions
+Consolidated Financial
+Statements IFRS
+Combined
+To Our
+Stakeholders
+117
+Risk Management and Risks
+We cannot exclude the possibility that if the risk were to occur, it
+could have a business-critical impact on our operations, financial
+position, profit, and cash flows. However, we estimate the
+probability of occurrence of this risk to be unlikely. We classify this
+risk as a medium risk.
+PCI validated compliance by successful PCI DSS audits
+Regular risks reviews, disclosure requests, and audits to ensure
+public cloud providers meet SAP's data privacy and security
+standards
+Strict internal policies and controls concerning utilization of
+partner's cloud infrastructure, including people, process and
+technology standards required to ensure compliance
+Close monitoring of data center utilization, capacity, and
+pipeline for subsequent investment planning
+Contracts that require third-party data centers to have
+appropriate security and data protection and privacy terms in
+place. We establish contracts and service level agreements with
+our public cloud partners to ensure that data security and
+privacy measures meet local regulatory and compliance
+standards and SAP's own standards for data security and
+privacy
+Adaption of our cloud service delivery to local and/or specific
+market requirements (such as local or regional data centers)
+and compliance with all local legal regulations regarding data
+protection and privacy as well as data security
+Access to information and information systems is controlled
+using authorization concepts. Managers and employees are
+regularly sensitized to the issues and given mandatory security
+and compliance training
+Monitoring and investment to continuously enhance our
+disaster recovery and business continuity capabilities
+Continuous aim for a homogeneous landscape that supports the
+complex infrastructure application and security requirements so
+that we can deliver the required service level for cloud services
+Physical access control systems at facilities, multilevel access
+controls, closed-circuit television surveillance, security
+personnel in all critical areas, and recurring social engineering
+tests for SAP premises and data centers
+Increased transparency through our continuously enhanced and
+expanded Cloud Trust Center, ensuring appropriate level of
+information, for example with regards to planned patching
+activities and associated downtimes
+Significant investment in infrastructure and processes in an
+effort to ensure secure operations of our cloud solutions
+Continuous enhancement of infrastructure landscape
+capabilities
+Management Report
+-
+Increased response time for identified security issues due to
+complexity and interdependencies could lead to security threats
+for SAP and customers
+Recovery costs as well as significant contractual and legal
+claims by customers, partners, authorities (including state,
+federal, and non-U.S.), and third-party service providers which
+could expose us to significant expense and liability or result in
+the issuance of orders or consent decrees that could require us
+to modify our business practices
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+Risk Management and Risks
+118
+patches, and service packs to ensure easy and fast
+consumption on the customer side
+Improved roll-out procedures for security-relevant notes,
+Certification of IT-related organizations to the internationally
+recognized Business Continuity Management standard with
+regards to the Applications, Technology & Services segment
+We have a responsible disclosure process in place to detect
+vulnerabilities and have implemented security patch days to
+rapidly respond to customer security needs and provide fixes
+Corporate headquarters, which houses certain critical business
+functions, is located in the German state of Baden-
+Württemberg, an area that is historically free of natural
+disasters.
+Specific security training curriculums for our developers
+Disaster recovery and business continuity plans to protect our
+key IT infrastructure (especially our data centers) include
+implementation of data redundancies and daily data backup
+strategies.
+Customers are provided with security certifications (such as
+ISO/IEC 27001), security white papers, and reports from
+independent auditors and certification bodies.
+to align our software security development lifecycle to the
+recommendations of ISO/IEC 27034, applying methods to
+develop secure software.
+Customer systems or systems operated by SAP could be
+compromised by vulnerabilities due to hacker exploitation
+Breach of security measures due to, for example but not limited
+to, employee error or wrongdoing, system vulnerabilities,
+malfunctions, or attempts of third parties to fraudulently induce
+employees, users, partners, or customers to gain access to our
+systems, data, or customers' data
+For the Applications, Technology & Services segment, we strive
+-
+-
+-
+-
+-
+-
+In response to the globally increasing number of cybersecurity
+attacks and because we anticipate hacker techniques to continue
+to evolve in our complex and threatening cybersecurity landscape,
+SAP has expended significant resources to analyze, modify and
+enhance its cybersecurity protective measures, has increased the
+Board's governance of and involvement in cybersecurity matters,
+and continues to investigate and remediate vulnerabilities. In
+particular, SAP has established measures designed to address the
+described risks and adverse effects, such as:
+Any one or more of these events could have a material adverse
+effect on our business, financial position, profit, and cash flows.
+Significant damage to the SAP brand, our reputation, our
+competitive position, our stock price, and our long-term
+shareholder value
+Increasing sophistication and frequency of cybersecurity
+attacks could mean that we might not discover a security
+breach or a loss of information for a significant amount of time
+after the breach, or at all, and might not be able to anticipate
+attacks or implement sufficient mitigating measures
+Our cybersecurity and security protocols might not be able to
+keep pace with the ever-evolving and emerging threats
+Customer concerns and loss of confidence in the current or
+future security and reliability of our products and services,
+including cloud solutions
+Significant costs to attempt to detect, prevent, and mitigate any
+successful attacks, including but not limited to the costs of
+third-party legal and security experts and consultants,
+insurance costs, additional personnel and technologies,
+organizational changes, and incentives to customers and
+partners to retain their business
+-
+-
+-
+Software security development lifecycle as a mandatory,
+integral part of our software development process
+Pipeline analyses based on our business planning, budgeting,
+and forecasting
+To Our
+Stakeholders
+Management's Annual Report on Internal Control over Financial Reporting in the Consolidated Financial Statements 209
+6.5
+6.3
+China
+6.9
+6.6
+6.2
+p = projection
+Source: International Monetary Fund (IMF), World Economic Outlook October 2018,
+Challenges to Steady Growth
+(https://www.imf.org/-/media/Files/Publications/WEO/2018/October/English/main
+-report/Text.ashx?la=en), p. 14
+The IT Market:
+Outlook for 2019 and Beyond
+The pace and volume of digital innovation will radically
+accelerate in the next three to five years, embracing all
+technologies as well as enterprises of all sizes. That is what the
+U.S.-based market research firm International Data Corporation
+(IDC) reports in its most recent publications. 2) According to IDC, by
+2022 more than 60% of global GDP could be digitized, and IT-
+related spending from 2019-2022 might amount to as much as
+US$7 trillion. Organizations will no longer digitize single aspects of
+their business, but create “digital native" IT environments.
+IDC predicts that one of the major markets will be the worldwide
+Internet of Things (IoT) market, growing at an average of 13.6% per
+year and reaching US$1.19 trillion in 2022, 48.2% of which in the
+APJ region 5). At the same time, the proportion spent on devices will
+shrink and give way to spending on the loT platform, analytics and
+Expected Developments and Opportunities
+123
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+6.5
+Emerging and developing Asia
+0.9
+1.1
+2.4
+2.7
+and Pakistan
+Sub-Saharan Africa
+2.7
+3.1
+3.8
+Americas
+United States
+2.2
+Additional
+Infomation
+2.9
+Canada
+3.0
+2.1
+2.0
+Latin America and the Caribbean
+Asia-Pacific Japan (APJ)
+1.3
+1.2
+2.2
+Japan
+1.7
+2.5
+application software, and ongoing services. By 2022, software will
+represent the largest proportion of spend at 25.1%, projects IDC.
+Furthermore, blockchain will be another growing technology
+over the next years, says IDC.³) It estimates that by 2021, nearly a
+third of all manufacturers and retailers globally will be using
+blockchain technology to build digital trust and establish prominent
+in-industry value chains, thus reducing transaction costs by 35%.
+However, one of the most important growth markets over the
+coming years will be artificial intelligence (AI) technologies and
+solutions. According to IDC, corporate investment in Al solutions
+might grow at an average of 46.2% per year and reach more than
+US$52 billion by 2021. By 2020, 80% of enterprises could already
+be making their data accessible to Al solutions from everywhere in
+the business ecosystem.
+Extending Al solutions further to the "edge" will strengthen
+enterprises' competitiveness and create new sources of revenue,
+says IDC. By 2022, over 40% of organizations' cloud infrastructure
+could include edge locations centered on an "intelligent core." Al
+could then reach 25% of endpoint devices and systems, such as
+handheld terminals, mobile phones, wearables, switches, drones,
+TVs, planes, surveillance cameras, self-driving vehicles, and smart
+buildings.2)
+As to regional rates of growth, Gartner, another U.S.-based IT
+market research firm, projects the following accelerations in IT
+spending for the mid-term horizon until the end of 2019:
+9.0
+7.9
+7.8
+3.7
+4.2
+4.5
+Americas
+Total IT
+Sources:
+1) European Central Bank, Economic Bulletin, Issue 8/2018, Publication Date:
+December 27, 2018
+Software
+Services
+(https://www.ecb.europa.eu/pub/pdf/ecbu/eb201808.en.pdf)
+3) IDC FutureScape: Worldwide Digital Transformation 2019 Predictions, Doc
+#US43647118, October 2018
+4) IDC FutureScape: Worldwide Intelligent ERP 2019 Predictions, Doc
+#US43262918, October 2018
+5) IDC Market Forecast: Worldwide Internet of Things Forecast, 2018-2022,
+September 2018
+3.0
+2.9
+3.4
+Software
+10.1
+8.4
+8.4
+2) IDC FutureScape: Worldwide IT Industry 2019 Predictions, Doc #US44403818,
+October 2018
+2.2
+2.0
+2.9
+Trends in the IT Market
+Accelerated IT Spending Year Over Year
+Growth in %
+at constant currencies
+World
+Total IT
+2017e
+2018p
+2019p
+3.7
+2.2
+3.1
+Software
+9.7
+8.5
+8.5
+Services
+4.1
+4.5
+4.7
+Europe, Middle East, and Africa (EMEA)
+Total IT
+3.2
+Middle East, North Africa, Afghanistan,
+2.0
+3.8
+Lower level of adoption of our new solutions, technologies,
+business models, and flexible consumption models, or no
+adoption at all
+Our product and technology strategy might not be successful,
+or our customers and partners might not adopt our technology
+platforms, applications, or cloud services quickly enough or they
+might consider other competitive solutions in the market, or our
+strategy might not match customers' expectations, specifically
+in the context of expanding the product portfolio into additional
+markets.
+Increasing competition from open source software initiatives, or
+comparable models in which competitors might provide
+software and intellectual property free and/or at terms and
+conditions unfavorable for SAP.
+Inability to drive growth of references through customer use
+cases and demo systems
+Any one or more of these events could have an adverse effect on
+our business, financial position, profit, and cash flows.
+SAP has established measures to address and mitigate the
+described risks and adverse effects to the greatest extent possible.
+For example, we:
+-
+-
+-
+might lead customers to wait for proofs of concept or holistic
+integration scenarios through reference customers or more
+mature versions first.
+Align our organization, processes, products, delivery and
+consumption models, and services to changing markets and
+customer and partner demands
+Explore future trends as well as the latest technologies, for
+example through our network of innovation centers as part of
+the Technology and Innovation board area, and adapt these to
+the market if there is a clear business opportunity for SAP and if
+they provide value to our customers
+Conduct wide-ranging market and technology analyses and
+research projects, often in close cooperation with our
+customers and partners to remain competitive
+Make strategic acquisitions with the potential to drive innovation
+and contribute to achieving our growth target
+We cannot exclude the possibility that if the risk were to occur, it
+could have a business-critical impact on our operations, financial
+position, profit, and cash flows. However, we estimate the
+probability of occurrence of this risk to be remote. We classify this
+risk as a medium risk.
+Consolidated Risk Profile
+We consolidate and aggregate relevant risks identified by the
+different business units and functions following our risk
+management policy, monitored by a Group-wide risk management
+governance function.
+Based on our aggregation approach, we recognized only minor
+changes in 2018 in the percentages of all reported risks categorized
+as "high" or "medium" in our risk level matrix. The number of risks
+categorized as "high" accounted for 27% (2017: 17%) of all
+reported risks, while the risks categorized as “medium” accounted
+Risk Management and Risks
+121
+Develop new technology and new solutions such as the next-
+generation suite SAP S/4HANA, SAP C/4HANA, or the next-
+generation SAP Analytics Cloud
+To Our
+-
+-
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Non-compliance of the acquired company with regulatory
+requirements, for example accounting standards, export control
+laws, and trade sanctions, for which SAP with and by the
+acquisition assumes responsibility and liability, including
+potential fines and the obligation to remedy the non-compliance
+Any one or more of these events could have an adverse effect on
+our business, financial position, profit, and cash flows.
+SAP has established measures to address and mitigate risks
+and adverse effects associated with acquisitions to the greatest
+extent possible, such as:
+-
+-
+-
+-
+A holistic evaluation of material transaction and integration risks
+Identification, implementation, and tracking of risk mitigation
+measures for material transactions or integration risks
+A standardized methodology for detailed integration planning
+which is carried out by a dedicated integration team
+Process, risk, and control analyses accompanied by subsequent
+integration into SAP's control framework and supported by
+mitigations as required by any specific circumstances
+We cannot exclude the possibility that if the risk were to occur, it
+could have a major impact on our operations, financial position,
+profit, and cash flows. We estimate the probability of occurrence of
+this risk to be unlikely. We classify this increased risk as a medium
+risk.
+Innovation: We might not be able to compete effectively if we
+strategize our solution portfolio ineffectively or if we are unable
+to keep up with rapid technological and product innovations,
+enhancements, new business models, and changing market
+expectations.
+Our future success depends upon our ability to keep pace with
+technological and process innovations and new business models,
+as well as on our ability to develop new products and services,
+enhance and expand our existing products and services portfolio,
+and integrate products and services we obtain through
+acquisitions. To be successful, we are required to adapt our
+products and our go-to-market approach to a cloud-based delivery
+and consumption model to satisfy changing customer demand and
+to ensure an appropriate level of adoption, customer satisfaction,
+and retention.
+Considering preceding dependencies, this could lead to risks in
+the following areas, among others:
+-
+Not being able to bring new business models, solutions, solution
+enhancements, intelligent technologies, integrations and
+interfaces, and/or services to market before our competitors or
+at equally favorable conditions
+Not being able to anticipate and develop technological
+improvements or succeed in adapting SAP products, services,
+processes, and business models to technological change,
+changing regulatory requirements, emerging industry
+standards, and changing requirements of our customers and
+partners (especially with innovations such as SAP S/4HANA,
+SAP C/4HANA, and SAP Cloud Platform) supporting the
+intelligent enterprise strategy
+Uncertainties regarding new SAP solutions, technologies, and
+business models as well as delivery and consumption models
+Technical, operational, financial, and legal due diligence on the
+company or assets to be acquired
+Services
+Combined
+Management Report
+3.7
+3.7
+3.7
+Advanced economies
+2.3
+2.4
+2.1
+Developing and emerging economies
+4.7
+4.7
+World
+4.7
+Euro area
+2.4
+2.0
+1.9
+Germany
+2.5
+1.9
+1.9
+Emerging and developing Europe
+6.0
+Europe, Middle East, and Africa (EMEA)
+Stakeholders
+2019p
+2017
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+for 45% (2017: 52%) of all risks reported in the Risk Factors
+section.
+In our view, considering their impact level and likelihood of
+occurrence, the risks described in our aggregated risk report do not
+individually or cumulatively threaten our ability to continue as a
+going concern. Management remains confident that the Group's
+earnings strength forms a solid basis for our future business
+development and provides the necessary resource to pursue the
+opportunities available to the Group. Because of our strong
+position in the market, our technological leadership, our highly-
+motivated employees, and our structured processes for early risk
+identification, we are confident that we can continue to successfully
+counter the challenges arising from the risks in our risk profile in
+2019.
+122
+Risk Management and Risks
+To Our
+Stakeholders
+Combined
+2018p
+Management Report
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Expected Developments and
+Opportunities
+Future Trends in the Global Economy
+The European Central Bank (ECB) expects global economic
+activity to decelerate in 2019 but remain steady through 2021,
+growing at rates below those before the 2007-2008 financial
+crisis. That is the essence of the ECB's December 2018 Economic
+Bulletin.¹) Advanced economies could continue to benefit from
+accommodative monetary policies and supportive financial
+conditions, though waning, for several more years. Tightening
+financial conditions in emerging markets, however, might more
+negatively affect global activity than thus far. Nevertheless, the
+ECB expects those emerging economies affected by the 2018
+financial market turbulences to recover in 2019.
+Regarding the Europe, Middle East, and Africa (EMEA) region,
+the ECB has revised its previous outlooks for GDP growth in the
+euro area slightly downwards. Geopolitical factors, the threat of
+protectionism, and financial market volatility might weigh on
+economic activity there. However, the near-term outlook for the
+euro area will depend largely on the eventual modus operandi of
+Great Britain's withdrawal from the European Union. In central and
+eastern European countries, the ECB projects a robust GDP growth
+in the near term, supported by strong investment, solid consumer
+spending and improvements in the labor market, but decelerating
+activity over the medium term. In Russia, economic recovery might
+continue in 2019, supported by improving domestic demand but
+will strongly depend on how the oil price develops.
+As for the Americas region, the ECB expects the United States
+to provide a sizeable fiscal stimulus in 2019, including lower taxes
+and increased expenditure, leading to a resilient economic activity
+that year, but slackening thereafter. In addition, intensifying trade
+tensions between the United States and China are likely to affect
+confidence and investment negatively. According to the ECB,
+economic activity in Brazil might accelerate in 2019 due to labor
+market improvements and continuing monetary accommodation.
+In the Asia Pacific Japan (APJ) region, the ECB projects
+Japanese economic activity to rebound in the near term,
+benefitting from an accommodative monetary policy. However, the
+pace of economic expansion in Japan is likely to decelerate again
+thereafter, due to increasing capacity constraints. Regarding China,
+the ECB emphasizes the strong impact from trade tensions
+between China and the United States. Furthermore, the Chinese
+housing market might slow, so that over the medium term, the ECB
+expects the pace of expansion in China to moderate gradually,
+resulting in an orderly slowdown and rebalancing of the Chinese
+economy.
+As for rates of growth, the International Monetary Fund (IMF)
+projects the following economic trends for the mid-term horizon
+until the end of 2019:
+GDP Growth Year Over Year
+%
+Consolidated Financial
+Statements IFRS
+4.1
+Economic Trends
+4.7
+Economic conditions have a clear influence on our business,
+financial position, profit, and cash flows. Should the global
+economy experience a more sustained growth than is reflected in
+our plans today, our revenue and profit may exceed our current
+outlook and medium-term prospects.
+Our medium-term planning is based on unchanged market
+conditions in emerging markets. Should their stability increase
+again, this would be an upside to our medium-term planning.
+For more information about future trends in the global economy
+and the IT market outlook, as well as their potential influence on
+SAP, see the Expected Developments and Opportunities section.
+Opportunities from Research and Development
+Traction
+Our continued growth through innovation is based on our ability
+to leverage research and development (R&D) resources effectively.
+We continue to improve our development processes through
+design thinking and lean methodologies. We are accelerating
+innovation cycles, especially in the area of cloud solutions, and
+engaging more closely with our customers to ensure accuracy and
+Expected Developments and Opportunities
+127
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+SAP SE is the parent company of the SAP Group and earns most
+of its revenue from subscription fees, software license fees, and
+dividends paid by affiliates. Consequently, the opportunities
+described below also apply - directly or indirectly - to SAP SE.
+Opportunities from Economic Conditions
+Further Information on Economic,
+Environmental, and Social Performance
+success. In addition, we have created a new structure that enables
+innovations in a startup-like environment and ecosystem.
+While speed is a key strength, we also focus on ease of adoption
+and providing compelling returns. This allows our customers to
+easily consume technologies and software applications with
+immediate benefits for their businesses. If we make innovations
+available faster than currently anticipated, or if customers adopt
+the innovations faster than currently expected, for example, by
+shifting faster to managed clouds for enterprise resource planning,
+or by shifting faster to our SAP S/4HANA suite, whether cloud or
+on premise, this could positively impact our revenue, profit, and
+cash flows, and result in their exceeding our stated outlook and
+medium-term prospects.
+For more information about future opportunities in research and
+development for SAP, see the Products, Research & Development,
+and Services section as well as the Expected Developments and
+Opportunities section.
+Opportunities from Our Strategy for Profitable
+Growth
+SAP strives to generate profitable growth across our portfolio of
+products, solutions, and services to keep or improve our market
+position. Our aim is to continue to expand our addressable market
+through the extension of our portfolio and our new technologies
+and innovations. Higher efficiency in our cloud delivery may
+moreover positively affect the profitability of our cloud business.
+With the acquisition of Qualtrics, we see growth opportunities
+from creating a highly differentiated offering for businesses to
+deliver superior customer, employee, product, and brand
+experiences. With Qualtrics, SAP will accelerate the new experience
+management category by combining experience data and
+operational data to power the experience economy. For more
+information about the acquisition of Qualtrics, see the Strategy and
+Business Mode/section. Furthermore, we see opportunities in
+growing product and market areas, such as in-memory computing,
+cloud, mobile, business networks, social media, Big Data, the
+Internet of Things, machine learning, artificial intelligence,
+predictive analytics, and all business developments that are
+targeted at digital business transformation, which is key to our
+strategy.
+Additional opportunities arise through new collaborations, such
+as the Open Data Initiative. SAP is joining forces with partnering
+companies to tackle one of the key challenges all enterprises face:
+siloed data. The Open Data Initiative allows data to be exchanged
+and enriched across systems, making data a renewable resource
+that flows into intelligent applications, enabling a single view of the
+customer, and delivering true end-to-end customer journeys.
+Furthermore, SAP seeks to establish new business models and
+leverage our expanding ecosystem of partners to achieve scale and
+maximize opportunities.
+Our strong assets in applications and analytics, as well as
+database and technology, continue to offer solid multiyear growth
+opportunities as we bring innovative technologies with simplified
+consumption to our installed base and continue to add net-new
+customers. Unexpected portfolio growth may positively impact our
+revenue, profit, and cash flows, and result in their exceeding our
+stated outlook and medium-term prospects. Specifically,
+SAP C/4HANA, the SAP HANA business data platform, cloud
+offerings, and SAP S/4HANA could create even more demand than
+is reflected in our stated outlook and medium-term prospects. New
+opportunities are generated by SAP Leonardo in combination with
+our Intelligent Enterprise strategy.
+Further upside potential is possible from higher-than-expected
+renewal rates of our cloud solutions.
+Additional
+Infomation
+For more information about future opportunities for SAP, see the
+Strategy and Business Model section as well as the Expected
+Developments and Opportunities section.
+As far as opportunities are likely to occur, we have incorporated
+them into our business plans, our outlook for 2019, and our
+medium-term prospects outlined in this report. Therefore, the
+following section focuses on future trends or events that might
+result in an uplift of our outlook and medium-term prospects, if
+they develop better than we have anticipated in our forecasts.
+Our customers rely on SAP as the trusted partner in their digital
+business transformation, not only for providing in-memory
+technology, standardized on-premise and cloud solutions, and
+access to business networks, but also for helping them drive new
+business outcomes and enabling business model innovations. To
+meet these expectations, we must grow consistently and
+accelerate the pace of our own business transformation by
+exploiting new opportunities.
+Expected Developments and Opportunities
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+million), share based payments (approximately additional €300
+million mainly due to Qualtrics), and tax-related cash outflows
+(approximately additional €300 million). In contrast, we expect
+operating cash flow to benefit from the cash flow reclassification
+due to IFRS 16 by an amount of €300 million to €400 million.
+Considering all these effects, we expect operating cash flow in 2019
+to be broadly in line with 2018. Free cash flow (as redefined in
+response to IFRS 16) is expected to decrease moderately despite
+an unchanged level of capital expenditure. For 2020, we expect a
+significant year-over-year increase in both, operating cash flow and
+free cash flow, mainly due to decreased cash outflows for
+restructuring and a profitable growth of our operating business.
+We intend to repay €750 million in Eurobonds in
+November 2019. In addition, we might repay portions of the
+Qualtrics related €2.5 billion acquisition term loan, and plan to
+repay the first tranches of a €50 million promotional loan with KfW.
+Non-Financial Goals 2019 and Ambitions
+for 2020
+In addition to our financial goals, we also focus on two non-
+financial targets: customer loyalty and employee engagement.
+For 2019 to 2020, we aim to reach an Employee Engagement
+Index of between 84% and 86% (2018: 84%).
+We have established a framework for opportunity management
+by evaluating and analyzing four key areas: current markets,
+competitive landscapes, external scenarios, and technological
+trends. Additionally, we have delved into customer and product
+segmentation, growth drivers, and industry-specific success
+factors. Based on these combined insights, our Executive Board
+defines our market strategies. Our shareholder value relies heavily
+upon a fine balance of risk mitigation and value-driven
+opportunities. Therefore, our strong governance model ensures
+that decisions are based on return, investment required, and risk
+mitigation. We rely on the talent and resources within SAP and our
+entire ecosystem.
+We measure customer loyalty using the Customer Net Promoter
+Score (NPS). In 2019, we aim for a Customer NPS of +1.0 (2018:
+-5) and expect a steady increase in 2020 and beyond.
+In preparing our outlook and prospects, we have taken into
+account all events known to us at the time we prepared this report
+that could influence SAP's business going forward. The Qualtrics
+acquisition is reflected in our outlook and prospects.
+Outlook for SAP SE
+The primary source of revenue for SAP SE is the license fees it
+charges subsidiaries for the right to market and maintain SAP
+software solutions. Consequently, the performance of SAP SE in
+operating terms is closely tied to the cloud and the software
+revenue of the SAP Group.
+Due to the rise at constant-currency in non-IFRS cloud and
+software revenue anticipated for the SAP Group in 2019, we expect
+product revenue for SAP SE to increase at constant currencies in a
+range of 6.5% to 8.0%.
+Against the background of the announced company-wide
+restructuring program and projected restructuring expenses at
+SAP SE level, we expect SAP SE operating profit to decrease
+slightly, assuming that there are no special effects relating to
+acquisitions or other extraordinary occurences.
+The financial ambitions of the SAP Group for the years 2020 to
+2023 provide for further growth of revenue and profit. We expect
+that such growth will also result in further revenue and profit
+growth for SAP SE to the same degree.
+We expect that SAP SE will continue to receive investment
+income in the form of profit transfers and dividends from its
+subsidiaries. The growth we expect for the SAP Group should have
+a positive effect on this investment income.
+The outlook for the SAP Group in respect to liquidity, finance,
+investment, and dividend are equally applicable to SAP SE.
+Among the assumptions underlying this outlook are those
+presented above concerning the economy and our expectations for
+the performance of the SAP Group.
+Opportunities
+Premises on Which Our Outlook and
+Prospects Are Based
+126
+Opportunities from Our Partner Ecosystem
+SAP S/4HANA Cloud and SAP Cloud Platform on the Alibaba Cloud
+infrastructure as a service (laaS) in China to help customers
+transition to the cloud and build intelligent enterprises.
+Consolidated Financial
+Statements IFRS
+Consolidated Financial Statements IFRS.
+Notes.
+Section A
+Customers.
+Section B Employees.
+-
+Section C - Financial Results.
+131
+.136
+Additional
+Infomation
+.139
+.153
+Section D Invested Capital.
+161
+Section E Capital Structure, Financing, and Liquidity...
+.169
+Section F - Management of Financial Risk Factors
+.175
+Section GOther Disclosures...
+4.5
+.193
+.145
+SAP continues to grow and develop a global partner ecosystem.
+To increase market coverage, we want to enhance our portfolio and
+spur innovation with the specified objective of increasing the
+partner revenue contribution to SAP's overall revenue target. In
+addition to strengthening our core, we leverage our entire
+ecosystem to drive adoption of SAP HANA, cloud solutions,
+SAP S/4HANA, and SAP Cloud Platform. This includes strategic
+partnerships across all areas: third-party software vendors,
+systems integrators, service providers, and infrastructure
+providers. In 2018, SAP announced plans to offer
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+As a result of our ecosystem engagement, we are creating an
+ever-stronger setup in which SAP, customers, and partners co-
+innovate and develop new innovative solutions on and with
+SAP HANA. Should the business of our partners develop better
+than currently expected, our indirect sales (partner revenue) could
+grow stronger than reflected in our outlook and medium-term
+prospects. This may positively impact our revenue, profit, and cash
+flows, and result in their exceeding our stated medium-term
+prospects.
+Opportunities from Our Employees
+Our employees drive our innovation, provide the value to our
+customers, and consistently promote our growth and profitability.
+In 2018, we continued to increase the number of employees
+(converted in full-time equivalents) in key strategic areas to
+support our growth ambitions. We anticipate improvements in
+employee productivity as a result of our continued endeavors in
+design-thinking principles. As described in the Employees and
+Social Investments section, we continuously invest in our talents to
+sustain their high level of engagement, collaboration, social
+innovation, and health.
+Our outlook and medium-term prospects are based on certain
+assumptions regarding employee turnover and our Business Health
+Culture Index (as defined in the Employees and Social Investments
+section). Should these develop better than expected, there might
+be a gain in employee productivity and engagement. A stronger-
+than-expected increase in the employee engagement index can
+therefore be seen as an opportunity which could positively impact
+our revenue, profit, and cash flows, and result in their exceeding
+our stated medium-term prospects.
+For more information about future opportunities from our
+employees, see the Employees and Social Investments section.
+Opportunities from Our Customer Engagement
+SAP goes to market by region, customer segments, line of
+business, and industry. We evolve and invest in our go-to-market
+128
+Expected Developments and Opportunities
+To Our
+Stakeholders
+Combined
+130
+Management Report
+Additional
+Infomation
+coverage model to effectively sell industry-specific solutions while
+increasing our engagement with customers. We focus on the
+dynamic and fast-changing landscape each industry faces as
+technology evolves.
+We offer unique services that support a significant return on
+investment, and continue to actively look at new opportunities to
+increase the value we deliver to our customers.
+In general, our outlook and medium-term prospects are based
+on certain assumptions regarding the success of our go-to-market
+approaches. If the actual go-to-market success exceeds these
+assumptions, this could positively impact our revenue, profit, and
+cash flows, and result in their exceeding our stated medium-term
+prospects.
+Expected Developments and Opportunities
+129
+To Our
+Stakeholders
+Combined
+Management Report
+Further Information on Economic,
+Environmental, and Social Performance
+On December 31, 2018, we had a negative net liquidity. We
+believe that our liquid assets, combined with our undrawn credit
+facilities, are sufficient to meet our operating financing needs in
+2019 as well, and, together with expected cash flows from
+operations, will support debt repayments and our currently planned
+capital expenditure requirements over the near and medium term.
+In 2019, compared to 2018 we expect higher cash outflows for
+restructuring (approximately additional €550 million to €750
+Consolidated Financial
+Statements IFRS
+Other than that, we do not expect major acquisitions in 2019 and
+2020. Our priority is to pay down debts resulting from the Qualtrics
+acquisition first. Therefore, we will rather focus on organic growth,
+complemented by minor tuck-in acquisitions.
+Financial Targets and Prospects
+Revenue and Operating Profit Targets and
+Prospects (Non-IFRS)
+Outlook 2019
+-
+The Company is providing the following 2019 outlook:
+Non-IFRS cloud subscriptions and support revenue is expected
+to be in a range of €6.7 billion to €7.0 billion at constant
+currencies (2018: €5.03 billion), up 33% to 39% at constant
+currencies.
+Non-IFRS cloud and software revenue is expected to be in a
+range of €22.4 billion to €22.7 billion at constant currencies
+(2018: €20.66 billion), up 8.5% to 10% at constant currencies.
+Non-IFRS operating profit is expected to be in a range of
+€7.7 billion to €8.0 billion at constant currencies (2018:
+€7.16 billion), up 7.5% to 11.5% at constant currencies.
+In addition, SAP expects total revenues to increase strongly, at a
+rate slightly lower than operating profit. The cloud and software
+revenue guidance above assumes a mid-single-digit decline in
+software license revenue.
+While SAP's full-year 2019 business outlook is at constant
+currencies, actual currency reported figures are expected to be
+impacted by currency exchange rate fluctuations as the Company
+progresses through the year. See the table below for the full-year
+2019 expected currency impacts.
+In percentage points
+2019
+Additional
+Infomation
+Cloud subscriptions and support
+Cloud and software
+Operating profit
+Opp to +3pp
++1pp to +3pp
+We continuously strive for profit expansion in our reportable
+segments. We expect the segment profit to increase in all our
+reportable segments.
+The following table shows the estimates of the items that
+represent the differences between our non-IFRS financial measures
+and our IFRS financial measures.
+Non-IFRS Measures
+€ millions
+Revenue adjustments
+Share-based payment expenses
+Acquisition-related charges
+Restructuring
+Estimated
+Amounts for
+2019
++1pp to +3pp
+Actual
+Amounts
+for 2018
+Further Information on Economic,
+Environmental, and Social Performance
+Management Report
+Asia-Pacific Japan (APJ)
+Total IT
+Goals for Liquidity and Finance
+5.6
+4.5
+4.1
+10.0
+10.2
+10.1
+4.8
+Consolidated Financial
+Statements IFRS
+5.0
+Software
+Services
+e estimate, p = projection
+Table created by SAP based on: Gartner Market Databook, 4Q18 Update,
+#376398, Table 2-1 "Regional End-User Spending on IT Products and Services in
+Constant U.S. Dollars, 2016-2022 (Millions of Dollars)".
+The Gartner Reports described herein, (the "Gartner Reports") represent
+research opinion or viewpoints published, as part of a syndicated subscription
+service, by Gartner, Inc. ("Gartner"), and are not representations of fact. Each
+Gartner Report speaks as of its original publication date (and not as of the date of
+this annual report) and the opinions expressed in the Gartner Reports are subject
+to change without notice.
+124
+Impact on SAP
+The 2018 results again showed SAP's impressive resilience and
+the business momentum driven by our strategy of innovation and
+growth. Even with evolving economic and political uncertainties, the
+SAP business model will ensure sustained cash flows via our high
+share of more predictable revenue. Our growth ambition remains
+strong and we will further continue to invest in strategic growth
+areas like the cloud, IoT, AI, machine learning, and blockchain.
+Those are expected to become significant investment priorities of
+our customers in the upcoming years. In addition, our focus on
+combining "Experience Management" from Qualtrics with SAP's
+"Operational Data Management" will significantly increase our total
+addressable market.
+Expected Developments and Opportunities
+Combined
+Stakeholders
+5.2
+100-150
+To Our
+1,200-1,500
+€8.6 billion to €9.1 billion in non-IFRS cloud subscriptions and
+support revenue (previously: €8.2 billion to €8.7 billion; 2018:
+€5.03 billion)
+€28.6 billion to €29.2 billion in non-IFRS total revenue
+(previously: €28.0 billion to €29.0 billion; 2018: €24.74 billion)
+€8.5 billion to €9.0 billion in non-IFRS operating profit
+(unchanged; 2018: €7.16 billion)
+The midpoints of the 2020 total revenue and operating profit
+ranges now imply an operating margin of 30.3%. Beyond 2020,
+SAP currently expects further increases of our operating margin.
+We expect the share of more predictable revenue (defined as
+the total of cloud subscriptions and support revenue and software
+support revenue) to reach 70% to 75% in 2020 (2018: 65%).
+We expect that, by 2020, our public cloud offerings will
+contribute slightly more than half of cloud subscription and support
+revenue, followed by our business network offerings at slightly less
+than 40%. Both offerings are expected to each generate, in 2020,
+cloud subscriptions and support revenues that are significantly
+higher than the cloud subscriptions and support revenue generated
+from our private cloud offerings.
+We expect our revenue growth trajectory through 2020 to be
+driven by continued strong growth in the cloud and continued
+growth in our software support revenue. We expect mid-single-digit
+declines in software revenue. This is all expected to result in high
+single-digit growth in cloud and software revenue through 2020.
+We also strive to significantly improve, over the next few years,
+the profitability of our cloud business. In 2019, we expect to see the
+benefits from previous efficiency-based investments, and thus an
+increasing cloud gross margin. We expect these profitability
+improvements to accelerate in the following years.
+We expect that the individual gross margins of our different
+cloud operating models will increase at different rates over the next
+years to reach the following mid-term targets.
+We expect that, in 2020, the gross margin from our business
+network offerings will be higher than 80% (2018: 78%).
+We expect that, in 2020, the gross margin from our public cloud
+offerings will reach approximately 70% (2018: 60%), and to expand
+to about 80% over the course of the two years thereafter.
+In 2020, SAP now expects:
+We continue to expect the cloud gross margin to be
+approximately 71% by 2020.
+In addition, we expect our 2020 services gross margin to be
+slightly higher than in 2018 (2018: 23%).
+As we look to increase our profitability through 2020, our cost
+ratios (cost as a percentage of total revenue) are expected to
+develop as follows through 2020: Research and development is
+expected to remain at the current level. Sales and marketing as well
+as general and administration are expected to decline slightly.
+We also introduced a 2023 ambition. Over the next five years,
+we expect to:
+-
+More than triple our non-IFRS cloud subscription and support
+revenue (2018: €5.03 billion)
+Grow our non-IFRS total revenue to more than €35 billion
+(2018: €24.74 billion)
+Grow our non-IFRS operating profit at a compound annual
+growth rate (CAGR) of 7.5% to 10% (2018: €7.16 billion)
+Approach a share of more predictable revenue of 80%.
+Investment Goals
+-
+33
+Our planned investment expenditures for 2019 and 2020, other
+than from business combinations, consist primarily of the
+construction activities described in the Assets (IFRS) section of this
+report. We expect investments from construction activities of
+approximately €359 million in 2019. The expansion of our data
+centers is an important aspect of our planned investments again
+for 2019. In addition, we aim to extend our office space to cover
+currently anticipated future growth. In 2020, we expect
+investments from construction activities of approximately
+€400 million. In 2019, we expect total capital expenditures of
+approximately €1.5 billion. In 2020, capital expenditures are
+expected to stay at a similar level as in 2019.
+Qualtrics will be reflected in our Customer Experience segment,
+which we are renaming upon the Qualtrics acquisition to Customer
+and Experience Management.
+We expect the 2020 gross margin for our software licenses and
+support to remain at a similar level to 2018 (2018:87%).
+Looking beyond 2019, SAP updated its 2020 ambition last
+provided in July 2018. This update reflects the Company's
+consistent fast growth in the cloud, strong cloud and software
+momentum, and operating profit expansion as well as the Qualtrics
+acquisition.
+Previously, we expected the gross margin from our private cloud
+offerings to reach about 40% by 2020 (2018: 13%). We now expect
+this gross margin to reach between 30% and 35%.
+In this section, all numbers are based exclusively on non-IFRS
+measures.
+830
+750-900
+577
+SAP expects to grow our more predictable revenue while
+steadily increasing operating profit. Our strategic objectives are
+focused primarily on our main financial and non-financial
+objectives: growth, profitability, customer loyalty, and employee
+engagement.
+800-950
+19
+In 2019, SAP will further increase focus on its key strategic
+growth areas. For the first time since 2015, SAP will execute a
+company-wide restructuring program to further simplify company
+structures and processes and to ensure that its organizational
+setup, skillsets, and resource allocation all continue to meet
+evolving customer demand. Restructuring expenses are projected
+to be €800 million to €950 million, the vast majority of which will
+be recognized in the first quarter of 2019. Due to the restructuring
+program we expect a cash outflow of about €550 million to
+€750 million in 2019. For 2020, we predict a lower cash flow impact
+from restructuring. Excluding restructuring expenses, the program
+is expected to provide a minor cost benefit in 2019 and
+€750 million to €850 million in annual cost savings as of 2020 that
+will fuel investments in strategic growth areas. Although we expect
+roughly 4,400 employees to leave SAP under the restructuring
+program, we continue to invest in key strategic growth areas. In
+2019, we expect our headcount to increase at a similar pace as in
+2018 to reach more than 100,000 by the end of 2019. The expected
+cost savings and reinvestment are fully reflected in SAP's financial
+outlook and ambitions.
+The Company expects a full-year 2019 effective tax rate (IFRS)
+of 26.5% to 27.5% (2018: 27.0%) and an effective tax rate (non-
+IFRS) of 26.0% to 27.0% (2018: 26.3%).
+Impact of the New Accounting Standard IFRS 16
+"Leases"
+As of January 1, 2019, SAP adopted the new IFRS standard on
+lease accounting (IFRS 16 "Leases"). SAP's profit, assets, and
+liabilities, and cash flows in 2019 will be impacted by the new
+policies. The actual impact of IFRS 16 on our profits depends not
+only on the lease agreements in effect at the time of adoption but
+also on new lease agreements entered into or terminated in 2019.
+For more information about the adoption of IFRS 16 and an
+estimation of the impact on SAP's income statement, statement of
+financial position, and cash flow statement, see the Notes to the
+Consolidated Financial Statements, Note (IN.1).
+Proposed Dividend
+In 2019, we intend to pay a dividend totaling 40% or more of the
+prior year's profit after tax. This results in a dividend of €1.50 per
+share (subject to shareholder approval at the Annual General
+Shareholders meeting in May 2019). For more information, see the
+Financial Performance: Review and Analysis section.
+Expected Developments and Opportunities
+On January 23, 2019, the acquisition of Qualtrics closed
+following satisfaction of applicable regulatory and other approvals.
+We acquired 100% of the Qualtrics shares for approx. US$35 per
+share, representing consideration transferred in cash of
+approximately US$7.1 billion. In addition to the cash payments,
+SAP will also incur liabilities and post-closing expenses relating to
+assumed share-based payment awards amounting to approx.
+US$0.9 billion. On January 23, 2019, we fully drew the Qualtrics-
+related €2.5 billion acquisition credit facility to partially finance the
+purchase price payment. The facility has a lifetime of three years
+and can be flexibly repaid with SAP's free cash flow or further
+refinancing transactions on the capital markets.
+Further Information on Economic,
+Environmental, and Social Performance
+125
+To Our
+Combined
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Additional
+Infomation
+Medium-Term Prospects
+-14
+Other adjustments for non-cash items
+51
+-32
+-67
+389
+29
+93
+-188
+47
+(C.4)
+Financial income, net
+Decrease/increase in sales and bad debt allowances on trade receivables
+-34
+-309
+Decrease/increase in trade and other receivables
+136
+1,242
+-675
+Decrease/increase in other assets
+-454
+-355
+-248
+Decrease/increase in trade payables, provisions, and other liabilities
+Interest paid
+Interest received
+Income taxes paid, net of refunds
+Net cash flows from operating activities
+39
+Decrease/increase in contract liabilities/deferred income
+Consolidated Financial
+Statements IFRS
+1,511
+28,832
+-1,580
+513
+45
+28,877
+The accompanying Notes are an integral part of these Consolidated Financial Statements.
+134
+Consolidated Financial Statements IFRS
+To Our
+Stakeholders
+Combined
+Management Report
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Consolidated Statements of Cash Flows of SAP Group for the Years Ended December 31
+€ millions
+Notes
+2018
+(C.5)
+Income tax expense
+1,268
+1,272
+1,362
+(D.2)-(D.4)
+983
+Depreciation and amortization
+3,629
+4,046
+4,088
+.Iil Profit after tax
+2016
+2017
+Adjustments to reconcile profit after tax to net cash flow from operating activities:
+-561
+-1,671
+368
+-1,549
+Proceeds from sales of equity or debt instruments of other entities
+1,488
+3,272
+793
+Net cash flows from investing activities
+Dividends paid
+Dividends paid on non-controlling interests
+-3,066
+-1,112
+-1,799
+(E.2)
+-1,499
+-1,378
+-2,914
+-7
+0
+Purchase of treasury shares
+Proceeds from reissuance of treasury shares
+(E.2)
+0
+-500
+0
+0
+0
+27
+Proceeds from borrowings
+Repayments of borrowings
+1,234
+(E.3)
+-45
+718
+-1,013
+63
+-251
+-200
+-190
+99
+88
+79
+-1,687
+-1,332
+-1,477
+4,303
+5,045
+4,628
+Business combinations, net of cash and cash equivalents acquired
+-2,036
+Purchase of equity or debt instruments of other entities
+-291
+Cash flows from derivative financial instruments related to business combinations
+Total cash flows for business combinations, net of cash and cash equivalents acquired
+Purchase of intangible assets and property, plant, and equipment
+-103
+0
+0
+(D.1)
+-2,140
+-291
+-106
+-1,458
+-1,275
+-1,001
+Proceeds from sales of intangible assets or property, plant, and equipment
+57
+97
+-106
+27,407
+-500
+3
+22
+22
+Share-based payments
+Dividends
+Purchase of treasury shares
+Reissuance of treasury shares
+13
+under share-based payments
+Hyperinflation
+Changes in non-controlling
+interests
+-17
+-33
+-17
+-17
+8
+-33
+2
+Other changes
+412/31/2017
+2
+2
+2
+4
+1,229
+570
+24,769
+508
+-1,591
+25,484
+31
+35
+25,515
+-500
+-1,565
+6,368
+-2
+6
+4
+1,229
+599
+22,287
+3,346
+-1,099
+26,361
+21
+26,383
+4,008
+22
+4,008
+-500
+38
+-2,838
+-2,816
+-2,816
+4,029
+-2,838
+1,191
+38
+1,229
+-43
+-43
+-43
+-1,499
+-1,499
+-66
+4,046
+1
+Adoption of IFRS 15
+83
+-40
+Dividends
+-1,671
+-1,671
+-13
+-1,684
+Reissuance of treasury shares
+13
+11
+24
+24
+under share-based payments
+Shares to be issued
+Hyperinflation
+-40
+7
+-8
+-8
+Changes in non-controlling
+0
+7
+-8
+19
+19
+interests
+Other changes
+12/31/2018
+1,229
+543
+-2
+-2
+7
+83
+-40
+4,986
+83
+Adoption of IFRS 9
+135
+-160
+-25
+-25
+1/1/2018
+1,229
+570
+24,987
+347
+-1,591
+25,542
+31
+Share-based payments
+25,573
+4,083
+4,083
+6
+4,088
+Other comprehensive income
+11
+887
+898
+898
+Comprehensive income
+4,093
+887
+4,980
+6
+Il Profit after tax
+27
+(D.3)
+(E.3)
+Sales and Marketing
+Sales and marketing includes costs incurred for the selling and
+marketing activities related to our software and cloud solutions and
+our service portfolio.
+General and Administration
+General and administration includes costs related to finance and
+administrative functions, human resources, and general
+management as long as they are not directly attributable to one of
+the other operating expense line items.
+Management Judgments and Sources of
+Estimation Uncertainty
+The preparation of the Consolidated Financial Statements requires
+our management to make judgments, estimates, and assumptions
+that affect the application of accounting policies and the reported
+amounts of assets, liabilities, revenues, and expenses, as well as
+disclosure of contingent liabilities.
+We base our judgments, estimates, and assumptions on historical
+and forecast information, and on regional and industry economic
+conditions in which we or our customers operate. Changes to these
+conditions could adversely affect our estimates. Although we
+believe we have made reasonable estimates about the ultimate
+resolution of the underlying uncertainties, no assurance can be
+given that the final outcome of these matters will be consistent with
+what is reflected in our recognized assets, liabilities, revenues, and
+expenses and disclosed contingent liabilities. Actual results could
+differ from original estimates.
+The accounting policies that most frequently or significantly require
+us to make judgments, estimates, and assumptions, and therefore
+Notes
+137
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Research and development includes the costs incurred by activities
+related to the development of software solutions (new products,
+updates, and enhancements) including resource and hardware
+costs for the development systems. For more information about the
+recognition of internally generated intangible assets from
+development, see Note (D.3).
+Further Information on Economic,
+Environmental, and Social Performance
+are critical to understanding our results of operations, include the
+following:
+Note
+→ Significant Accounting Policies
+(A.1)
+Revenue recognition
+(A.2)
+Valuation of trade receivables
+(B.3)
+Accounting for share-based payments
+(C.5)
+Accounting for income taxes
+(D.1)
+Accounting for business combinations
+Additional
+Infomation
+(D.2)
+Research and Development
+Cost of Services
+2016
+1.1045
+0.8206
+Japanese yen
+JPY
+125.85
+135.01
+130.41
+126.85
+119.77
+Swiss franc
+CHF
+1.1269
+1.1702
+1.1549
+1.1159
+Cost of services includes the costs incurred in providing the services
+that generate service revenue, such as consulting and training
+activities, messaging, as well as certain application management
+services for our customers and our partners.
+1.0886
+INR
+79.7298
+76.6055
+80.7277
+Australian dollar
+AUD
+1.6220
+1.5346
+1.5799
+73.9595
+1.4794
+73.9685
+1.4850
+Cost of Cloud and Software
+Cost of cloud and software includes the costs incurred in producing
+the goods and providing the services that generate cloud and
+software revenue. Consequently, this line item primarily includes
+employee expenses relating to these services, amortization of
+acquired intangibles, fees for third-party licenses, shipping, ramp-up
+costs, and depreciation of our property, plant, and equipment (for
+example, of our data centers in which we host our cloud solutions).
+Indian rupee
+0.8770
+Accounting for goodwill
+(G.4)
+Our customer contracts often include various products and
+services. Typically, the products and services outlined in the Classes
+of Revenue section qualify as separate performance obligations and
+the portion of the contractual fee allocated to them is recognized
+separately. Judgment is required, however, in determining whether
+a good or service is considered a separate performance obligation.
+In particular for our professional services and implementation
+activities, judgment is required to evaluate whether such services
+significantly integrate, customize, or modify the on-premise
+software or cloud service to which they relate. In this context, we
+consider the nature of the services and their volume relative to the
+volume of the on-premise software or cloud service to which they
+relate. In general, the implementation services for our cloud services
+go beyond pure setup activities and qualify as separate
+Section A Customers
+139
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+performance obligations. Similarly, our on-premise implementation
+services and our custom development services typically qualify as
+separate performance obligations. Non-distinct goods and services
+are combined into one distinct bundle of goods and services
+(combined performance obligation).
+When selling goods or services, we frequently grant customers
+options to acquire additional goods or services (for example,
+renewals of renewable offerings, or additional volumes of purchased
+software). We apply judgment in determining whether such options
+provide a material right to the customer that the customer would
+not receive without entering into that contract (material right
+options). In this judgment, we consider whether the options entitle
+the customer to a discount that exceeds the discount granted for
+the respective goods or services sold together with the option.
+Determination of Transaction Price
+We apply judgment in determining the amount to which we expect
+to be entitled in exchange for transferring promised goods or
+services to a customer. This includes estimates as to whether and to
+what extent subsequent concessions or payments may be granted
+to customers and whether the customer is expected to pay the
+contractual fees. In this judgment, we consider our history both with
+the respective customer and more broadly.
+Our typical cloud services do not provide the customer with a
+software license because the customer does not have the right to
+terminate the hosting contract and take possession of the software.
+Consequently, cloud fees that are based on transaction volumes are
+considered in the transaction price based on estimates rather than
+being accounted for as sales-based license royalties.
+Identification of Performance Obligations
+Only very rarely do our contracts include significant financing
+components. We do not account for financing components if the
+period between when SAP transfers the promised goods or services
+to the customer and when the customer pays for those goods or
+services is one year or less.
+We have established a hierarchy to identify the standalone selling
+prices (SSPs) that we use to allocate the transaction price of a
+customer contract to the performance obligations in the contract.
+Where standalone selling prices for an offering are observable
+and reasonably consistent across customers (that is, not highly
+variable), our SSP estimates are derived from our respective
+pricing history. Typically, our standardized support offerings and
+our professional service offerings follow this approach.
+Where sales prices for an offering are not directly observable or
+highly variable across customers, we use estimation techniques.
+For renewable offerings with highly variable pricing, these
+techniques consider the individual contract's expected renewal
+price as far as this price is substantive. Typically, our cloud
+subscription offerings follow this approach. For non-renewable
+offerings, these estimations follow a cost-plus-margin approach.
+For offerings that lack renewals, have highly variable pricing, and
+lack substantial direct costs to estimate based on a cost-plus-
+margin approach, we allocate the transaction price by applying a
+residual approach. We use this technique in particular for our
+standard on-premise software offerings.
+Judgment is required when estimating SSPs. To judge whether the
+historical pricing of our goods and services is highly variable, we
+have established thresholds of pricing variability. For judging
+whether contractual renewal prices are substantive, we have
+established floor prices that we use as SSPs whenever the
+contractual renewal prices are below these floor prices. In judging
+whether contracts are expected to renew at their contractual
+renewal prices, we rely on our respective renewal history. The SSPS
+of material right options depend on the probability of option
+exercise. In estimating these probabilities, we apply judgment
+considering historical exercise patterns.
+We review the stand-alone selling prices periodically or whenever
+facts and circumstances change to ensure the most objective input
+parameters available are used.
+Recognition of Revenue
+Cloud subscription and support revenue is recognized over time as
+the services are performed. Where our performance obligation is
+the grant of a right to continuously access and use a cloud offering
+for a certain term, revenue is recognized based on time elapsed and
+thus ratably over this term.
+Software revenue is recognized at a point in time or over time
+depending on whether we deliver standard software or customer-
+specific software:
+Licenses for our standard on-premise software products are
+typically delivered by providing the customer with access to
+download the software. The license period starts when such
+access is granted. We recognize revenue for these on-premise
+licenses at the point in time when the customer has access to
+and thus control over the software. In judging whether our on-
+premise software offerings grant customers a right to use, rather
+than a right to access, our intellectual property, we have
+considered the usefulness of our software without subsequent
+updates to it.
+Typically, our customer-specific on-premise-software
+development agreements:
+•
+Are for software developed for specific needs of individual
+customers and therefore it does not have any alternative use
+for us
+Provide us with an enforceable right to payment for
+performance completed to date
+For such development agreements, we recognize revenue over
+time as the software development progresses. Judgment is
+required in identifying an appropriate method to measure the
+progress toward complete satisfaction of such performance
+obligations. We typically measure progress of our development
+agreements based on the direct costs incurred to date in
+developing the software as a percentage of the total reasonably
+estimated direct costs to fully complete the development work
+(percentage-of-completion method). This method of measuring
+progress faithfully depicts the transfer of the development
+services to the customer, as substantially all of these costs are
+cost of the staff or third parties performing the development
+work. In estimating the total cost to fully complete the
+development work, we consider our history with similar projects.
+140
+Section A Customers
+Allocation of Transaction Price
+-2
+New arrangements with existing customers can be either a new
+contract or the modification of prior contracts with the customer.
+Our respective judgment in making this determination considers
+whether there is a connection between the new arrangement and
+the pre-existing contracts, whether the goods and services under
+the new arrangement are highly interrelated with the goods and
+services sold under prior contracts, and how the goods and services
+under the new arrangement are priced. In determining whether a
+change in transaction price represents a contract modification or a
+change in variable consideration, we examine whether the change in
+price results from changing the contract or from applying
+unchanged existing contract provisions.
+Accounting Policies, Judgments, and Estimates
+Identification of Contract
+Accounting for intangible assets (including recognition of
+internally generated intangible assets from development)
+Accounting for legal contingencies
+Our management periodically discusses these significant
+accounting policies with the Audit Committee of our Supervisory
+Board.
+New Accounting Standards Not Yet Adopted
+The standards and interpretations (relevant to the Group) that are
+issued, but not yet effective, up to the date of issuance of the
+Group's financial statements are discussed below. We intend to
+adopt these standards when they become effective:
+On January 13, 2016, the IASB issued IFRS 16 'Leases.' This new
+standard is effective for us starting January 1, 2019. We have
+decided to apply the modified retrospective approach, which
+requires that the cumulative effect of initially applying the standard
+be recognized as an adjustment to the opening balance of retained
+earnings on the date of initial application. The new standard
+significantly impacts the lease accounting by lessees as, in general,
+all leases need to be recognized on the lessee's balance sheet. A
+lessee recognizes a right-of-use asset representing its right to use
+the underlying asset and a lease liability representing its obligation
+to make lease payments. The nature of expenses related to those
+leases will now change because we will recognize a depreciation
+expense for right-of-use assets and interest expense on lease
+liabilities. These changes apply to leases that had previously been
+classified as operating leases under IAS 17. We have decided to use
+practical expedients offered by the standard (such as non-
+capitalization of short-term leases and low-value leases, and the use
+of hindsight when determining the lease term if the contract
+contains options to extend or terminate the lease). When measuring
+the right-of-use asset, there are two options in transition. We plan to
+apply the retrospective approach for our larger leases (primarily
+facility leases), while smaller leases will be measured at an amount
+equal to the lease liability and adjusted by the amount of any
+prepaid or accrued lease payments existing immediately prior to the
+date of initial application.
+Prior to the adoption of IFRS 16, we established a project across
+SAP's finance and business functions. This project included the
+implementation of a new SAP-based lease accounting and reporting
+solution, and the development of IFRS 16 lease accounting policies
+and business processes to support those policies. In addition to this,
+we have provided training for the relevant stakeholders within the
+organization.
+The vast majority of the impact comes from our leased facilities,
+data centers, and cars. These operating leases were previously off-
+balance-sheet items (lease payments were expensed directly to rent
+expense over the lease term) under IAS 17. We estimate the total
+assets and total liabilities will amount to approximately €1.9 billion
+and €2.0 billion, respectively, as at January 1, 2019 (the date of
+initially applying IFRS 16). The difference between these two
+amounts (less than €0.1 billion) is recorded as an adjustment to
+retained earnings as of the date of initial application. This difference
+is primarily due to interest accruing retrospectively at a higher rate
+in earlier years and decreasing over the lease term, while
+depreciation is recorded on a straight-line basis. The adoption of
+IFRS 16 is expected to have a favorable impact on operating profit in
+2019, since a portion of the costs that were previously classified as
+rental expenses are classified as interest expense and thus recorded
+outside operating profit. Based on the Group's leases as of
+January 1, 2019, operating profit is expected to increase by
+substantially less than €0.1 billion. The actual impact on our profits
+depends not only on the lease agreements in effect at the time of
+adoption but also on new lease agreements entered into or
+terminated in 2019. IFRS 16 has also an impact on how lease
+payments are presented in the cash flow statement. This will result
+in an increase in cash flows from operating activities and a decline in
+cash flows from financing activities. Cash flows from operating
+activities is expected to increase by approximately €0.3 billion to
+€0.4 billion.
+138
+Notes
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+We frequently enter into multiple contracts with the same customer
+that we treat, for accounting purposes, as one contract if the
+contracts are entered into at or near the same time and are
+economically interrelated. We do not combine contracts with
+closing days more than three months apart because we do not
+consider them being entered into near the same time. Judgment is
+required in evaluating whether various contracts are interrelated,
+which includes considerations as to whether they were negotiated
+as a package with a single commercial objective, whether the
+amount of consideration on one contract is dependent on the
+performance of the other contract, or if some or all goods in the
+contracts are a single performance obligation.
+Additional
+Infomation
+This section discusses disclosures related to contracts with our
+customers. These include but are not limited to explanations of how
+we recognize revenue, revenue breakdowns, and information about
+our trade receivables and customer-related obligations.
+Furthermore, in this section we disclose the most significant
+differences to prior-year figures resulting from the application of
+IFRS 15 'Revenue from Contracts with Customers' (see Note (A.5)).
+(A.1) Revenue
+Classes of Revenue
+We derive our revenue from fees charged to our customers for the
+use of our hosted cloud offerings, for licenses to our on-premise
+software products, and for standardized and premium support
+services, consulting, customer-specific software developments,
+training, and other services.
+Cloud and software revenue, as presented in our Consolidated
+Income Statements, is the sum of our cloud subscriptions and
+support revenue, our software license revenue, and our software
+support revenue.
+Revenue from cloud subscriptions and support represents fees
+earned from providing customers with any of the following:
+•
+"
+■
+Software as a Service (SaaS), that is, a right to use software
+functionality (including standard functionalities and custom
+cloud applications and extensions) in a cloud-based
+infrastructure hosted by SAP or third parties engaged by SAP,
+where the customer does not have the right to terminate the
+hosting contract and take possession of the software to either
+run it on its own IT infrastructure or to engage a third-party
+provider unrelated to SAP to host and manage the software;
+SaaS also includes transaction and agent fees for
+transactions that customers of our network business execute
+on our cloud-based transaction platforms.
+Platform as a Service (PaaS), that is, access to a cloud-based
+infrastructure to develop, run, and manage applications
+Infrastructure as a Service (IaaS), that is, hosting and related
+application management services for software hosted by SAP
+or third parties engaged by SAP, where the customer has the
+right to take possession of the software
+Premium cloud subscription support beyond the regular
+support that is embedded in the basic cloud subscription fees
+Software license revenue represents fees earned from the sale or
+license of software to customers for use on the customer's
+premises, in other words, where the customer has the right to
+take possession of the software for installation on the customer's
+premises or on hardware of third-party hosting providers
+unrelated to SAP (on-premise software). Software license
+revenue includes revenue from both the sale of our standard
+software products and customer-specific on-premise-software
+development agreements.
+Software support revenue represents fees earned from providing
+customers with standardized support services that comprise
+unspecified future software updates, upgrades, and
+enhancements as well as technical product support services for
+on-premise software products.
+Services revenue primarily represents fees earned from
+professional consulting services, premium support services, training
+services, and messaging services.
+Section A - Customers
+0.8847
+0.8872
+0.8945
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Notes
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+(IN.1) Basis for Preparation
+General Information
+The registered seat of SAP SE is in Walldorf, Germany
+(Commercial Register of the Lower Court of Mannheim
+Note
+(IN.1)
+The following table provides an overview of where our accounting
+policies, management judgments, and estimates are disclosed:
+Accounting Policies, Judgments, and Estimates
+Basis for Preparation
+HRB 719915). The Consolidated Financial Statements for 2018 of
+SAP SE and its subsidiaries (collectively, "we," "us," "our," "SAP,"
+"Group," and "Company") have been prepared in accordance with
+International Financial Reporting Standards (IFRS).
+Stakeholders
+(A.1)
+(A.2)
+(A.3)
+We have applied all IFRS standards and interpretations that were
+effective on and endorsed by the European Union (EU) as at
+December 31, 2018. There were no standards or interpretations as
+at December 31, 2018, impacting our Consolidated Financial
+Statements for the years ended December 31, 2018, 2017, and
+2016, that were effective but not yet endorsed. Therefore, our
+Consolidated Financial Statements comply with both, IFRS as
+issued by the International Accounting Standards Board (IASB) and
+IFRS as endorsed by the EU.
+Our Executive Board approved the Consolidated Financial
+Statements on February 20, 2019, for submission to our
+Supervisory Board.
+(A.4)
+Trade and Other Receivables
+Capitalized Cost from Contracts with Customers
+Customer-Related Provisions
+(B.3)
+Share-Based Payments
+(B.4)
+Pension Plans and Similar Obligations
+(B.5)
+Other Employee-Related Obligations
+Revenue
+(B.6)
+To Our
+Consolidated Financial Statements IFRS
+-1,407
+-1,391
+-1,800
+Transactions with non-controlling interests
+0
+2
+3
+Net cash flows from financing activities
+3,283
+-3,406
+-2,705
+Effect of foreign currency rates on cash and cash equivalents
+97
+-218
+135
+167
+4,617
+309
+291
+Cash and cash equivalents at the beginning of the period
+(E.3)
+4,011
+3,702
+3,411
+Cash and cash equivalents at the end of the period
+(E.3)
+8,627
+4,011
+3,702
+The accompanying Notes are an integral part of these Consolidated Financial Statements.
+Net decrease/increase in cash and cash equivalents
+Restructuring
+(C.1)
+Results of Segments
+Combined
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Foreign Currencies and Hyperinflation
+Income and expenses and operating cash flows of our foreign
+subsidiaries that use a functional currency other than the euro are
+translated at average rates of foreign exchange (FX) computed on a
+monthly basis. Exchange differences resulting from foreign
+currency transactions are recognized in other non-operating
+income/expense, net.
+We apply hyperinflation accounting for our subsidiaries in Argentina
+and Venezuela by restating the financial statements of these
+subsidiaries for the current period to account for changes in the
+general purchasing power of the local currency based on relevant
+price indexes at the reporting date. The restated financial
+statements of our subsidiaries in Venezuela and Argentina are
+translated at closing rates. Most significantly impacted by this
+accounting are the following:
+Total revenue (decrease of €19 million in 2018)
+Operating profit (decrease of €12 million in 2018)
+Other non-operating income/expense (gain of €25 million in
+2018)
+Equity (retained earnings and other comprehensive income)
+(decrease of €32 million as at December 31, 2018)
+Total liabilities (increase of €19 million as at December 31, 2018)
+The exchange rates of key currencies affecting the Company were
+as follows:
+To Our
+Exchange Rates
+Middle Rate
+as at 12/31
+Annual Average Exchange Rate
+2018
+2017
+2018
+2017
+U.S. dollar
+USD
+1.1450
+1.1993
+1.1815
+1.1315
+Pound sterling
+GBP
+Equivalent to €1
+Notes
+136
+Monetary assets and liabilities denominated in foreign currencies
+are translated at period-end exchange rates.
+(C.5)
+Income Taxes
+(D.1)
+Business Combinations
+All amounts included in the Consolidated Financial Statements
+are reported in millions of euros (€ millions) except where otherwise
+stated. As figures are rounded, numbers presented throughout this
+document may not add up precisely to the totals we provide and
+percentages may not precisely reflect the absolute figures.
+Amounts disclosed in the Notes that are taken directly from our
+Il Consolidated Income Statements or our 44 Consolidated
+Statements of Financial Position are marked by the symbols
+land, respectively.
+(D.2)
+Goodwill
+(D.3)
+Intangible Assets
+(D.4)
+Property, Plant, and Equipment
+(D.5)
+Equity Securities
+(E.3)
+Liquidity
+(F.1)
+Financial Risk Factors and Risk Management
+Derivative financial instruments and liabilities for cash-settled
+share-based payments are measured at fair value. In accordance
+with IFRS 9, financial assets with cash flows that are not solely
+payments of principal or interest are also measured at fair value.
+Post-employment benefits are measured at the present value of
+the defined benefit obligations less the fair value of the plan
+assets.
+The Consolidated Financial Statements have been prepared on the
+historical cost basis except for the following:
+Bases of Measurement
+General Accounting Policies
+For easier identification of our accounting policies, judgments,
+and estimates, disclosures are marked with the symbol and
+framed by a light gray box. They focus on the accounting choices
+made within the framework of the prevailing IFRS and refrain from
+repeating the underlying promulgated IFRS guidance, unless we
+consider it particularly important to the understanding of a Note's
+content.
+To ease the understanding of our financial statements, we
+present the accounting policies, management judgments, and
+sources of estimation uncertainty (hereafter: accounting policies,
+judgments, and estimates) on a given subject together with other
+disclosures related to the same subject in the Note that deals with
+this subject. Accounting policies, judgments, and estimates that do
+not relate to a specific subject are presented in the following
+section.
+443
+Other Litigation, Claims, and Legal Contingencies
+Executive and Supervisory Board Compensation
+(G.4)
+Accounting Policies, Management Judgments
+and Sources of Estimation Uncertainty
+How We Present Our Accounting Policies,
+Judgments, and Estimates
+Other Non-Financial Assets
+(G.1)
+Fair Value Disclosures on Financial Instruments
+(F.2)
+(G.6)
+50
+11,930
+25
+Additional
+Infomation
+Consolidated Statements of Comprehensive Income of SAP Group for the Years Ended December 31
+€ millions
+Notes
+2018
+2017
+2016
+lil Profit after tax
+4,088
+4,046
+3,629
+Items that will not be reclassified to profit or loss
+Further Information on Economic,
+Environmental, and Social Performance
+Remeasurements on defined benefit pension plans, before tax
+Other comprehensive income for items that will not be reclassified to profit or loss, net of tax
+Items that will be reclassified subsequently to profit or loss
+Gains (losses) on exchange differences on translation, before tax
+12
+29
+-10
+-1
+-7
+2
+==
+11
+22
+-8
+Income taxes relating to remeasurements on defined benefit pension plans
+Remeasurements on defined benefit pension plans, net of tax
+11
+Consolidated Financial
+Statements IFRS
+Combined
+-1,511
+-983
+-1,242
+4,088
+4,046
+3,629
+4,083
+4,008
+3,642
+6
+38
+-13
+Management Report
+Earnings per share, basic (in €)
+3.42
+3.35
+3.04
+Earnings per share, diluted (in €)
+(C.6)
+3.42
+3.35
+3.04
+The accompanying Notes are an integral part of these Consolidated Financial Statements.
+Consolidated Financial Statements IFRS
+131
+To Our
+Stakeholders
+(C.6)
+22
+-8
+910
+Income taxes relating to available-for-sale financial assets
+0
+1
+1
+Available-for-sale financial assets, net of tax
+(E.2)
+0
+-135
+-43
+Gains (losses) on cash flow hedges/cost of hedging, before tax
+-10
+81
+-44
+-24
+-22
+-41
+8
+Cash flow hedges/cost of hedging, before tax
+(F.1), (F.3)
+-32
+39
+-15
+Income taxes relating to cash flow hedges/cost of hedging
+9
+-10
+4
+Reclassification adjustments on cash flow hedges/cost of hedging, before tax
+-136
+0
+(F.2), (F.3)
+-2,730
+865
+Reclassification adjustments on exchange differences on translation, before tax
+0
+0
+-1
+Exchange differences, before tax
+910
+-2,730
+864
+Income taxes relating to exchange differences on translation
+○
+-2
+-25
+Exchange differences, net of tax
+(E.2)
+910
+-2,732
+839
+Gains (losses) on remeasuring available-for-sale financial assets, before tax
+○
+114
+-18
+Reclassification adjustments on available-for-sale financial assets, before tax
+Available-for-sale financial assets, before tax
+0
+-250
+-26
+(C.5)
+Attributable to non-controlling interests
+Attributable to owners of parent
+Profit after tax
+15,431
+20,622
+19,549
+18,424
+4,086
+3,912
+3,639
+(A.1), (C.2)
+24,708
+23,461
+22,062
+Cost of cloud subscriptions and support
+15,780
+Cost of software licenses and support
+Cost of services
+Total cost of revenue
+Gross profit
+-2,068
+-1,660
+-1,313
+-2,092
+-2.234
+-2,182
+-4,160
+-3,893
+-3.495
+Cost of cloud and software
+15,628
+10,571
+10,908
+50
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+lil Consolidated Income Statements of SAP Group for the Years Ended December 31
+€ millions, unless otherwise stated
+Cloud subscriptions and support
+Software licenses
+Software support
+Software licenses and support
+Cloud and software
+Services
+Total revenue
+Notes
+2018
+2017
+2016
+4,993
+3,769
+2,993
+4,647
+4,872
+4,859
+10,981
+-3,302
+Cash flow hedges/cost of hedging, net of tax
+-3,158
+-7,462
+4,877
+5,135
+Other non-operating income/expense, net
+(C.3)
+-56
+-36
+-234
+Finance income
+371
+476
+230
+Finance costs
+-16,928
+-418
+-259
+Financial income, net
+(C.4)
+-47
+188
+-29
+Profit before tax
+(C.2)
+5,600
+5,029
+4,872
+Income tax expense
+-288
+-18,584
+-19,005
+5,703
+Operating profit
+-7,051
+-6,583
+17,246
+16,410
+15,479
+Research and development
+-3,624
+-3,352
+-3,044
+Sales and marketing
+-6,781
+-6,924
+-6,265
+General and administration
+-1,098
+-1,075
+-1,005
+Restructuring
+(B.6)
+-19
+-182
+-28
+Other operating income/expense, net
+-20
+1
+-3
+Total operating expenses
+-3,089
+(E.2)
+Additional
+Infomation
+29
+88
+79
+12,133
+6,759
+22,614
+16,969
+1,229
+1,229
+543
+570
+27,407
+24,769
+(A.1)
+1,234
+-1,580
+28,832
+-1,591
+25,484
+45
+31
+(E.2)
+28,877
+51,491
+25,515
+42,484
+133
+To Our
+Stakeholders
+Combined
+Management Report
+508
+251
+97
+328
+611
+597
+(E.3)
+1,125
+1,561
+(B.5), (G.2)
+4,120
+3,982
+(A.4), (B.4), (B.5), (B.6)
+(A.1)
+110
+149
+3,028
+2,771
+10,481
+10,210
+129
+119
+495
+434
+(E.3)
+10,553
+5,034
+(B.5), (G.2)
+501
+514
+(A.4), (B.4), (B.5), (B.6)
+(C.5)
+270
+Consolidated Financial
+Statements IFRS
+1,151
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Statements of Changes in Equity of SAP Group for the Years Ended December 31
+20,033
+2,561
+-1,124
+23,257
+28
+23,285
+3,642
+3,642
+-13
+3,629
+-8
+785
+558
+777
+3,634
+785
+4,418
+-13
+4,406
+16
+16
+16
+-1,378
+-1,378
+25
+-23
+777
+1,229
+(E.2)
+(E.2)
+€ millions
+Equity Attributable to Owners of Parent
+Non- Total Equity
+Notes
+1/1/2016
+Profit after tax
+Other comprehensive income
+Comprehensive income
+Share-based payments
+Dividends
+Reissuance of treasury shares
+under share-based payments
+Other changes
+12/31/2016
+Il Profit after tax
+Other comprehensive income
+Comprehensive income
+Issued
+Capital
+Share
+Premium
+Retained
+Earnings
+Other
+Components
+of Equity
+Treasury
+Shares
+Total
+Controlling
+Interests
+(E.2)
+(E.2)
+Additional
+Infomation
+1,486
+-1,378
+The accompanying Notes are an integral part of these Consolidated Financial Statements.
+€ millions
+Notes
+2018
+2017
+Cash and cash equivalents
+(E.3)
+8,627
+4,011
+Other financial assets
+(D.5), (E.3)
+448
+990
+Consolidated Statements of Financial Position of SAP Group as at December 31
+Trade and other receivables
+Tax assets
+Total current assets
+Goodwill
+Intangible assets
+Property, plant, and equipment
+Other financial assets
+Trade and other receivables
+Other non-financial assets
+Tax assets
+Deferred tax assets
+Total non-current assets
+Total assets
+Other non-financial assets
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Consolidated Financial Statements IFRS
+Other comprehensive income for items that will be reclassified to profit or loss, net of tax
+887
+-11
+785
+Other comprehensive income, net of tax
+Total comprehensive income
+898
+-2,816
+777
+4,986
+1,229
+4,406
+Attributable to owners of parent
+Attributable to non-controlling interests
+The accompanying Notes are an integral part of these Consolidated Financial Statements.
+4,980
+1,191
+4,418
+6
+38
+-13
+132
+Consolidated Financial Statements IFRS
+To Our
+Stakeholders
+Combined
+Management Report
+(A.2)
+6,362
+-2,838
+(A.3), (G.1)
+51,491
+42,484
+Trade and other payables
+Tax liabilities
+Financial liabilities
+Other non-financial liabilities
+Provisions
+Contract liabilities/deferred income
+Total current liabilities
+Trade and other payables
+Tax liabilities
+Financial liabilities
+30,554
+Other non-financial liabilities
+Deferred tax liabilities
+Contract liabilities/deferred income
+Total non-current liabilities
+Total liabilities
+Issued capital
+Share premium
+Retained earnings
+Other components of equity
+Treasury shares
+Equity attributable to owners of parent
+Total equity
+5,899
+Provisions
+34,871
+Non-controlling interests
+1,015
+889
+1,037
+725
+293
+306
+16,620
+(D.2)
+23,725
+21,271
+(D.3)
+3,227
+2,967
+(D.4)
+Total equity and liabilities
+2,967
+3,553
+397
+687
+1,301
+(C.5)
+352
+(A.3), (G.1)
+118
+(A.2)
+1,155
+1,536
+(D.5), (E.3)
+118
+2,906
+1,970
+1.147
+1,047
+2,676
+1,781
+General and
+5,504
+2,629
+6,024
+marketing
+4,854
+4,435
+8,999
+8,542
+23,219
+9,169
+9,196
+24,213
+4,918
+9,452
+9,843
+Sales and
+development
+21,977
+1,746
+631
+5,393
+2,043
+434
+7,977 23,363
+952
+657
+Thereof
+acquisitions
+(12/31)
+2,827
+84,183
+23,265
+454
+788
+1,584
+36,222 24,696
+1,018
+3,087
+88,543
+25,827
+38,357
+41,848
+SAP Group
+501
+855
+1,732
+3,742
+951
+2,160
+Infrastructure
+administration
+24,359
+28,029 26,620 96,498
+5,869
+10,525
+Cloud and software
+Total
+APJ
+EMEA Americas
+Total
+APJ
+Americas
+EMEA
+Total
+APJ
+EMEA Americas
+equivalents
+6,341
+12/31/2016
+12/31/2018
+Full-time
+Employee Headcount by Region and Function
+The following table provides an overview of employee headcount,
+broken down by function and by the regions EMEA (Europe, Middle
+East, and Africa), Americas (North America and Latin America), and
+APJ (Asia Pacific Japan).
+(B.1) Employee Headcount
+This section provides financial insights into our employee benefit
+arrangements. It should be read in conjunction with the
+compensation disclosures for key management personnel in
+Note (G.6) as well as SAP's Compensation Report.
+Section B - Employees
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+12/31/2017
+4,860
+4,268
+15,983
+8,273
+5,250
+11,349
+27,060
+8,930
+5,651
+12,478
+Research and
+16,002
+14.621
+3.967
+4,119
+6,535
+5,374
+17,379
+4,878
+7,536
+19,476
+5,620
+5,736
+8,120
+Services
+5,412
+4,184
+6,406
+4,719 14,482
+3,895
+4,965
+149
+We use certain assumptions in estimating the fair values for our
+share-based payments, including expected share price volatility and
+expected award life (which represents our estimate of the average
+remaining life until the awards are exercised or expire unexercised).
+In addition, the final payout for plans also depends on the
+achievement of performance indicators and on our share price on
+the respective exercise dates. Changes to these assumptions and
+outcomes that differ from these assumptions could require material
+adjustments to the carrying amount of the liabilities we have
+recognized for these share-based payments. The fair value of the
+share units granted under the LTI 2016 Plan are dependent on our
+7
+Sales and marketing
+190
+269
+210
+Research and development
+101
+158
+142
+Cost of services
+89
+115
+78
+Cost of cloud and software
+2016
+2017
+2018
+€ millions
+The operating expense line items in our income statement
+include the following share-based payment expenses:
+Share-Based Payment Expenses by Function
+Under certain programs, we grant our employees discounts on
+purchases of SAP shares. Since those discounts are not dependent
+on future services to be provided by our employees, the discount is
+recognized as an expense when the discounts are granted.
+We believe that the expected volatility is the most sensitive
+assumption we use in estimating the fair values of our share
+options. Regarding future payout under our cash-settled plans, the
+SAP share price is the most relevant factor. With respect to our
+LTI 2016 Plan, we believe that future payout will be significantly
+impacted not only by our share price but also by the relative
+performance against the Peer Group Index. Changes in these
+factors could significantly affect the estimated fair values as
+calculated by the valuation model, and the future payout.
+performance against a group of peer companies (Peer Group
+Index), the volatility, and the expected correlation between the price
+of the index and our share price.
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+312
+442
+292
+General and administration
+Each share unit vested at the end of the year in which it was
+granted. The share units are subject to a three-year holding period
+before payout. The payout depends on the number of vested share
+units and the SAP share price, which is set directly after the
+publication of SAP's fourth-quarter results for the last financial year
+of the respective three-year holding period.
+Combined
+Under the LTI 2015 Plan, we granted members of our former
+Global Managing Board virtual shares, referred to as share units,
+between 2012 and 2015 (2012-2015 tranches).
+Long-Term Incentive 2015 Plan (LTI 2015 Plan)
+If an Executive Board member's service contract is terminated
+before the end of the third year following the year in which the share
+units were granted, both the RSUs and PSUs are forfeited in whole
+or in part, depending on the circumstances of the relevant
+resignation from office or termination of the service contract.
+The number of PSUs ultimately paid out depends on the
+performance of the SAP share - absolute and relative to the Peer
+Group Index. In contrast, the final number of RSUs is fixed. SAP's
+absolute share price performance is measured by comparing the
+grant price against the payout price. If the SAP share price
+performance equals the Peer Group Index performance over the
+same period, the performance factor is set at 100%. If the SAP
+share price performs better than the Peer Group Index (measured
+as difference between SAP share price performance and Peer Group
+Index performance), the performance factor is increased by the
+percentage point of the outperformance of the SAP share price. The
+percentage point is doubled if, additionally, the payout price is
+higher than the grant price. The performance factor is capped at
+150%. If the Peer Group Index performs better than the SAP share
+price, the performance factor is decreased by the percentage point
+of the outperformance of the Peer Group Index. All PSUs lapse if the
+performance factor is below 50%.
+All share units granted in this way, comprising 60% Performance
+Share Units (PSUs) and 40% Retention Share Units (RSUs), have a
+vesting period of approximately four years. At the end of the vesting
+period, the corresponding share units are non-forfeitable. The
+payout price used for the settlement is the arithmetic mean of the
+XETRA closing prices of the SAP share on the 20 trading days
+following the publication of SAP's fourth-quarter results subsequent
+to the end of the vesting period. The payout price is capped at
+300% of the grant price. The LTI tranche is cash-settled and paid in
+euros after the Annual General Shareholders' Meeting of the
+corresponding year.
+The virtual share program came into effect on January 1, 2016. A
+LTI tranche is granted annually and has a term of four years (2016-
+2018 tranches). Each grant starts with determining a grant amount
+in euros. The grant amount is based on the Executive Board
+members' contractual LTI target amount and the operating profit
+target achievement for the previous year. The Supervisory Board
+sets the grant amount at a level between 80% and 120% of the
+contractual LTI target amount, taking into account the operating
+profit target achievement. This grant amount is converted into
+virtual shares, referred to as share units, by dividing the grant
+amount by the grant price. The grant price is the arithmetic mean of
+the XETRA closing prices of the SAP share on the 20 trading days
+following the publication of SAP's fourth-quarter results.
+a) Cash-Settled Share-Based Payments
+Long-Term Incentive 2016 Plan (LTI 2016 Plan)
+The purpose of the LTI 2016 Plan is to reward our Executive
+Board Members for the annual achievement of SAP's operating
+profit (non-IFRS, at constant currency) targets, to ensure long-term
+retention of our Executive Board members, and to reward them for
+the long-term SAP share price performance as compared to its main
+peer group (Peer Group).
+based payments
+107
+157
+Combined
+156
+based payments
+678
+963
+674
+Thereof cash-settled share-
+785
+1,120
+830
+Share-based payments
+113
+135
+88
+Thereof equity-settled share-
+To Our
+Stakeholders
+145
+Section B Employees
+1,339
+Social security expense
+7,969
+8,693
+9,025
+Salaries
+2016
+2017
+2018
+€ millions
+Components of Employee Benefits Expenses
+(B.2) Employee Benefits Expenses
+1,281
+23,532 22,145 80,609
+86,999
+25,459 24,029
+37,512
+93,709
+27,454 25,759
+40,496
+SAP Group
+(months' end
+average)
+209
+0
+172
+37
+289
+34,932
+133
+1,135
+830
+Where we economically hedge our exposure to cash-settled awards,
+changes in the fair value of the respective hedging instruments are
+also recognized as employee benefits expenses in profit or loss. The
+fair values of hedging instruments are based on market data
+reflecting current market expectations.
+Most of these awards are described in detail below. SAP has other
+share-based payment plans not described below, which are,
+individually and in aggregate, immaterial to our Consolidated
+Financial Statements.
+recognized as employee benefits and classified in our Consolidated
+Income Statements according to the activities that the employees
+perform.
+Share-based payments cover cash-settled and equity-settled
+awards issued to our employees. The respective expenses are
+Accounting Policy, Management Judgment, and Sources of
+Estimation Uncertainty
+(B.3) Share-Based Payments
+10,229
+11,643
+11,595
+Employee benefits expense
+restructuring plans
+37
+Share-based payment expense
+57
+Termination benefits outside of
+expense
+33
+180
+19
+Employee-related restructuring
+270
+312
+330
+Pension expense
+785
+1,120
+52
+To Our
+Increases in contract liabilities mainly result from billing and
+invoices becoming due (€7.0 billion). Decreases in contract
+liabilities mainly result from satisfying performance obligations
+(€7.5 billion). The Callidus acquisition contributed to the increase in
+the contract liabilities balance (for more information, see
+Note (D.1)).
+144
+7,666
+7,973
+2,000
+2,321
+2.941
+8,192
+8,759
+9,339
+703
+1,029
+1,441
+2016
+2017
+2018
+2016
+2017
+2018
+Cloud and Software Revenue
+Cloud Subscriptions
+and Support Revenue
+.lil SAP Group
+APJ
+Americas
+EMEA
+€ millions
+Major Revenue Classes by Region
+7,366
+611
+419
+290
+Contract Balances
+Revenue recognized in the reporting period for performance
+obligations satisfied in earlier periods was €132 million, mainly
+resulting from changes in estimates related to percentage-of-
+completion-based contracts and changes in estimates of variable
+considerations.
+Performance Obligations Satisfied in Previous
+Years
+The contract period of our cloud and support contracts
+remaining at the balance sheet date and thus by the timing of
+contract renewals
+The majority of this amount is expected to be recognized as revenue
+over the next 12 months following the respective balance sheet date.
+This estimation is judgmental, as it needs to consider estimates of
+possible future contract modifications. The amount of transaction
+price allocated to the remaining performance obligations, and
+changes in this amount over time, are impacted by, among others:
+Currency fluctuations
+The transaction price allocated to performance obligations that
+are unsatisfied or partially unsatisfied as at December 31, 2018, is
+€31.3 billion. This amount mostly comprises obligations to provide
+software support or cloud subscriptions and support, as the
+respective contracts typically have durations of one or multiple
+years.
+Amounts of a customer contract's transaction price that are
+allocated to the remaining performance obligations represent
+contracted revenue that has not yet been recognized. They include
+amounts recognized as contract liabilities and amounts that are
+contracted but not yet due.
+Remaining Performance Obligations
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+22,062
+Combined
+141
+Section A Customers
+For information about the breakdown of revenue by segment and segment revenue by region, see Note (C.1).
+18,424
+19,549
+20,622
+2,993
+3,769
+4,993
+2,865
+3,124
+3,310
+To Our
+Stakeholders
+Contract liabilities as at December 31, 2018, were €3.1 billion
+(January 1, 2018: €3.5 billion).
+23,461
+.Iil SAP Group
+3,034
+3,352
+3,658
+2016
+2017
+2018
+Rest of EMEA
+EMEA
+€ millions
+Germany
+Total Revenue by Region
+The amounts for revenue by region in the following tables are
+based on the location of customers. The regions in the following
+table are EMEA (Europe, Middle East, and Africa), Americas (North
+America and Latin America), and APJ (Asia Pacific Japan).
+Geographic Information
+Typically, we invoice fees for on-premise standard software on
+contract closure and software delivery. Periodic fixed fees for cloud
+subscription services, software support services, and other multi-
+period agreements are typically invoiced yearly or quarterly in
+advance. Such fee prepayments account for the majority of our
+contract liability balance. Fees based on actual transaction volumes
+for cloud subscriptions and fees charged for non-periodical services
+are invoiced as the services are delivered. While payment terms and
+conditions vary by contract type and region, our terms typically
+require payment within 30 to 60 days.
+Contract liabilities primarily reflect invoices due or payments
+received in advance of revenue recognition.
+We recognize trade receivables for performance obligations
+satisfied over time gradually as the performance obligation is
+satisfied and in full once the invoice is due. Judgment is required in
+determining whether a right to consideration is unconditional and
+thus qualifies as a receivable.
+Contract Balances
+All of the judgments and estimates mentioned above can
+significantly impact the timing and amount of revenue to be
+recognized.
+Judgment is also required to determine whether revenue is to be
+recognized at a point in time or over time. For performance
+obligations satisfied over time, we need to measure progress using
+the method that best reflects SAP's performance. When using cost
+incurred as a measure of progress for recognizing revenue over
+time, we apply judgment in estimating the total cost to satisfy the
+performance obligation.
+Revenue for combined performance obligations is recognized over
+the longest period of all promises in the combined performance
+obligation.
+Service revenue is typically recognized over time. Where we stand
+ready to provide the service (such as access to learning content),
+we recognize revenue based on time elapsed and thus ratably over
+the service period. Consumption-based services (such as separately
+identifiable consulting services and premium support services,
+messaging services, and classroom training services) are
+recognized over time as the services are utilized, typically following
+the percentage-of-completion method or ratably. When using the
+percentage-of-completion method, we typically measure the
+progress toward complete satisfaction of the performance
+obligation in the same way and with the same reasoning and
+judgment as we do for customer-specific on-premise software
+development agreements. We apply judgment in determining
+whether a service qualifies as a stand-ready service or as a
+consumption-based service.
+Support revenue is typically recognized based on time elapsed and
+thus ratably over the term of the support arrangement. Under our
+standardized support services, our performance obligation is to
+stand ready to provide technical product support and unspecified
+updates, upgrades, and enhancements on a when-and-if-available
+basis. Our customers simultaneously receive and consume the
+benefits of these support services as we perform.
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+SAP Stock Option Plan 2010 (SOP 2010)
+7.446
+7,063
+6,721
+11,104
+3,377
+3,699
+3,891
+APJ
+2,552
+2,814
+2,928
+Rest of APJ
+825
+885
+963
+Japan
+24,708
+8,931
+9,713
+Americas
+1,763
+1.911
+1,832
+Rest of Americas
+7,167
+7,436
+7,880
+United States
+9,755
+10,415
+9,347
+The amount of revenue recognized in the reporting period that
+was included in the contract liability balance as at January 1, 2018,
+was €3.2 billion.
+(A.2) Trade and Other Receivables
+Accounting Policies, Management Judgments, and Sources of
+Estimation Uncertainty
+Accounting Policies, Judgments, and Estimates
+Customer-related provisions mainly include expected contract
+losses. We adjust these provisions as further information becomes
+available and as circumstances change. Non-current provisions are
+measured at the present value of their expected settlement
+amounts as at the reporting date.
+(A.4) Customer-Related Provisions
+Amortization expenses in 2018 for the costs of obtaining
+customer contracts and for the costs of fulfilling customer contracts
+were €231 million and €50 million respectively.
+As at December 31, 2017, before application of IFRS 15,
+capitalized contract costs were €696 million, of which €199 million
+were current and €497 million were non-current.
+65
+82
+41
+2,191
+1,301
+889
+1,433
+1,072
+361
+as % of other non-financial assets
+Capitalized contract cost
+Other non-financial assets
+Capitalized contract cost
+101
+66
+35
+Capitalized cost to fulfill customer
+contracts
+Capitalized cost of obtaining
+customer contracts
+1,332
+1,006
+326
+Furthermore, these provisions also include obligations resulting
+from customer-related litigation and claims. We are currently
+confronted with various claims and legal proceedings, including
+claims that relate to customers demanding indemnification for
+proceedings initiated against them based on their use of SAP
+software, and occasionally claims that relate to customers being
+dissatisfied with the products and services that we have delivered to
+them. The obligations arising from customer-related litigation and
+claims comprise cases in which we indemnify our customers against
+liabilities arising from a claim that our products infringe a third
+party's patent, copyright, trade secret, or other proprietary rights.
+Due to uncertainties relating to these matters, provisions are based
+on the best information available. Significant judgment is required in
+the determination of whether a provision is to be recorded and what
+the appropriate amount for such provision should be. Notably,
+judgment is required in the following:
+Determining whether an obligation exists
+Determining the probability of outflow of economic benefits
+Determining whether the amount of an obligation is reliably
+estimable
+Intangible assets were higher by €37 million (January 1, 2018:
+higher by €14 million), due to the capitalization of costs for
+certain custom on-premise software development
+arrangements.
+Provisions were lower by €4 million (January 1, 2018: lower by
+€25 million), reflecting lower provisions for onerous customer
+contracts.
+Trade and other receivables and contract liabilities were lower by
+€132 million and €188 million respectively (January 1, 2018:
+higher by €560 million and €650 million respectively), resulting
+from changes in the timing of and amounts recognized as
+contract balances.
+Non-current and current other non-financial assets were higher
+by €336 million and €64 million respectively (January 1, 2018:
+higher by €132 million and €26 million respectively) due to the
+higher capitalization of sales commissions.
+-
+As at December 31, 2018, balance sheet items are affected by the
+application of IFRS 15 as compared to our pre-IFRS 15 accounting
+policies as follows:
+Operating expenses benefitted, in cost of sales and marketing, in
+the amount of €239 million from higher capitalization of sales
+commissions net of higher amortization of amounts capitalized.
+The abovementioned revenue and expense effects, together with
+other insignificant effects, resulted in a net positive impact on
+operating profit of approximately €399 million.
+Revised recognition patterns for contracts that combine
+customer-specific on-premise software development
+agreements and the sale of standard on-premise software
+Together with other offsetting effects, this resulted in a benefit of
+€158 million on total revenue.
+prior years, which result in software revenue
+Revised recognition patterns for on-premise software
+subscription contracts, which combine the delivery of
+software and support service and the obligation to deliver, in
+the future, unspecified software products
+•
+■
+The impacts of the policy change in 2018 were as follows:
+Software license and support revenues experienced a benefit of
+€170 million, with most of the difference resulting from:
+Exercise of customer software purchase options granted in
+Total
+financial statements) are not restated to conform to the new
+policies.
+Effective January 1, 2018, we started to apply IFRS 15 'Revenue
+from Contracts with Customers' retrospectively, using the
+cumulative catch-up approach and the practical expedient to apply
+the new standard only to contracts that were not completed as of
+January 1, 2018. This practical expedient affected both the
+transition adjustment amount recognized in retained earnings and
+our revenues and expenses.
+(A.5) Adoption of IFRS 15
+At the end of each reporting period, we reassess the potential
+obligations related to our pending claims and litigation and adjust
+our respective provisions to reflect the current best estimate. In
+addition, we monitor and evaluate new information that we receive
+after the end of the respective reporting period but before the
+Consolidated Financial Statements are authorized for issue to
+determine whether this provides additional information regarding
+conditions that existed at the end of the reporting period. Changes
+to the estimates and assumptions underlying our accounting for
+legal contingencies, and outcomes that differ from these estimates
+and assumptions, could require material adjustments to the
+carrying amounts of the respective provisions recorded and
+additional provisions. The expected timing or amounts of any
+outflows of economic benefits resulting from these lawsuits and
+claims is uncertain and not estimable, as they generally depend on
+the duration of the legal proceedings and settlement negotiations
+required to resolve the litigation and claims and the unpredictability
+of the outcomes of legal disputes in several jurisdictions.
+Contingent liabilities exist in respect of customer-related litigation
+and claims for which no provision has been recognized. It is not
+practicable to estimate the financial impact of these contingent
+liabilities due to the uncertainties around these lawsuits and claims
+as outlined above.
+Estimating the amount of the expenditure required to settle the
+present obligation
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+143
+Section A Customers
+On adopting IFRS 15, SAP changed several of its accounting
+policies. Under the cumulative catch-up approach, prior years
+(including the prior-period numbers presented in the primary
+Non-
+Current
+Current
+2018
+180
+5,810
+1
+Total
+Non-Current
+Current
+5.809
+6.188
+6
+6,182
+Total
+Non-Current
+Current
+112
+2017
+142
+44 Total
+Other receivables
+Trade receivables, net
+In applying this judgment, we evaluate available information about a
+particular customer's financial situation to determine whether it is
+probable that a credit loss had occurred and, if so, whether the
+amount of the loss is reasonably estimable. If it is, an allowance for
+that specific account is then necessary. Basing the expected credit
+loss allowance for the remaining receivables primarily on our
+historical loss experience likewise requires judgment, as history may
+not be indicative of future development. Also, including reasonable
+and supportable forward-looking information in the loss rates of the
+expected credit loss allowance requires judgment, as they may not
+provide a reliable prognosis for future development. Changes in our
+estimates about the loss allowance could materially impact reported
+assets and expenses, and our profit could be adversely affected if
+actual credit losses exceed our estimates.
+Determining our expected credit loss allowance involves significant
+judgment. In this judgment, we primarily consider our historical
+experience with credit losses in the respective provision matrix risk
+class and current data on overdue receivables. We expect that our
+historical default rates represent a reasonable approximation for
+future expected customer defaults. Besides historical data, our
+judgment used in developing the provision matrix considers
+reasonable and supportable forward-looking information (for
+example, changes in country risk ratings, and fluctuations in credit
+default swaps of the countries in which our customers are located).
+The assessment of whether a receivable is collectible involves the
+use of judgment and requires us to make assumptions about
+customer defaults that could change significantly.
+For information about how the default risk for trade receivables is
+analyzed and managed, how the loss rates for the provision matrix
+are determined, how credit impairment is determined and what our
+criteria for write offs are, see the section on credit risk in Note (F.1).
+In our Consolidated Income Statements, net gains/losses include
+income/expenses from expected credit loss allowances from
+applying the provision matrix, from credit-impaired customer
+balances, and from write offs and related reversals which are
+included in other operating income/expense, net. Gains/losses
+from foreign currency exchange rate fluctuations are included in
+Other non-operating income/expense, net.
+Account balances are written off either partially or in full if we judge
+that the likelihood of recovery is remote.
+account for expected credit losses by recording an allowance on a
+portfolio basis. We apply the simplified impairment approach in that,
+on initial measurement of the receivables, we consider all credit
+losses that are expected to occur during the lifetime of the
+receivables. We use a provision matrix to estimate these losses.
+Additionally, we recognize allowances for individual receivables if
+there is objective evidence of credit impairment.
+€ millions
+Trade and Other Receivables
+We measure trade receivables and contract assets from contracts
+with customers at amortized cost less expected credit losses. We
+2018
+Section A Customers
+293
+116
+€ millions
+Capitalized Cost from Contracts with Customers
+Amortization of capitalized costs to fulfill contracts for custom
+cloud applications and extensions is included in the cost of cloud
+subscriptions and support.
+Capitalized costs incurred to fulfill customer contracts mainly
+consist of direct costs for custom cloud development contracts as
+far as these costs are not in scope of other standards than IFRS 15.
+These costs are amortized after completion of the development on a
+straight-line basis over the expected life of the cloud subscription
+contract and including expected renewals. Judgment is required in
+evaluating whether costs are direct or indirect and in estimating
+contract lives. Derived from our respective history, the amortization
+period is typically six years.
+Costs to Fulfill Customer Contracts
+We expense incremental costs of obtaining a customer contract as
+incurred if we expect an amortization period of one year or less.
+Typically, we either do not pay sales commissions for customer
+contract renewals or such commissions are not commensurate with
+the commissions paid for new contracts. Thus, the commissions
+paid for renewable new contracts also relate to expected renewals
+of these contracts. Consequently, we amortize sales commissions
+paid for new customer contracts on a straight-line basis over the
+expected contract life including probable contract renewals.
+Judgment is required in estimating these contract lives. In
+exercising this judgment, we consider our respective renewal
+history adjusted for indications that the renewal history is not fully
+indicative of future renewals. The amortization periods range from
+18 months to eight years depending on the type of offering.
+Amortization of the capitalized costs of obtaining customer
+contracts is classified as sales and marketing expense.
+The capitalized assets for the incremental costs of obtaining a
+customer contract primarily consist of sales commissions earned by
+our sales force. Judgment is required in determining the amounts to
+be capitalized, particularly where the commissions are based on
+cumulative targets and where commissions relate to multiple
+performance obligations in one customer contract. We capitalize
+such cumulative target commissions for all customer contracts that
+count towards the cumulative target but only if nothing other than
+obtaining customer contracts can contribute to achieving the
+cumulative target. Commissions for contracts with multiple
+performance obligations or probable renewals thereof are allocated
+to these performance obligations and probable renewals relative to
+the standalone selling price.
+Accounting Policies, Judgments, and Estimates
+Incremental Costs of Obtaining Customer Contracts
+Capitalized costs from customer contracts are classified as non-
+financial assets in our statement of financial position.
+(A.3) Capitalized Cost from Contracts
+with Customers
+For more information about financial risk, how we manage credit
+risk, and details of our trade receivables and contract assets
+allowances, see Note (F.1). For information about the transition to
+IFRS 9, see Note (F.3).
+Contract assets as at December 31, 2018, were €116 million
+(January 1, 2018: €14 million).
+90
+Additional
+Infomation
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+Section A Customers
+6,017
+118
+5,899
+6,480
+118
+6,362
+207
+Further Information on Economic,
+Environmental, and Social Performance
+Under the SOP 2010, we granted virtual stock options to
+members of the Senior Leadership Team, Global Executives,
+employees with an exceptional rating, and high potentials between
+2010 and 2015, and only in 2010 and 2011 to members of the
+Executive Board.
+Management Report
+The options granted under the SOP 2010 give the employees the
+right to receive a certain amount of cash by exercising the options.
+After a three-year vesting period (four years for members of the
+Executive Board), the plan provides for 11 predetermined exercise
+dates every calendar year (one date per month except for April)
+until the rights lapse six years after the grant date (seven years for
+2016
+2017
+2018
+Section B Employees
+Own
+€ millions
+Recognized Expense for Equity-Settled Plans
+Pension expense includes the amounts recorded for our defined
+benefit and defined contribution plans. Expenses for local state
+pension plans are included in social security expense. The discount
+rates used in measuring our post-employment benefit assets and
+liabilities are derived from rates available on high-quality corporate
+bonds and government bonds for which the timing and amounts of
+payments match the timing and the amounts of our projected
+pension payments. Net interest expense and other expenses related
+to defined benefit plans are recognized as employee benefits
+expenses and classified in our Consolidated Income Statements
+according to the activities that the employees owning the awards
+perform. Since our domestic defined benefit pension plans primarily
+consist of an employee-financed post-retirement plan that is fully
+financed with qualifying insurance policies, current service cost may
+become a credit as a result of adjusting the defined benefit liability's
+carrying amount to the fair value of the qualifying plan assets. Such
+adjustments are recorded in service cost. Total expenses on defined
+benefit pension plans comprise related current and past service
+costs as well as interest income and expense.
+Accounting Policy
+(B.4) Pension Plans and Similar
+Obligations
+As a result of our equity-settled share-based payments
+transactions, we have commitments to grant SAP shares to
+employees. We intend to meet these commitments by reissuing
+treasury shares or to fulfill these obligations through an agent who
+administers the equity-settled programs and therefor purchases
+shares on the open market. Since 2016, we have fulfilled the
+obligations of Own through an agent.
+1.4
+5.0
+5.3
+Own
+2016
+2017
+2018
+Millions
+Number of Shares Purchased
+Under Own implemented in 2016, employees have the
+opportunity to purchase SAP shares without any holding period on a
+monthly basis. The investment per each eligible employee is limited
+to a percentage of the respective employee's monthly base salary.
+SAP matches the employee investment by 40% and adds a subsidy
+of €20 per month for non-executives. This plan is not open to
+members of the Executive Board.
+Own SAP Plan (Own)
+b) Equity-Settled Share-Based Payments
+For more information about the derivatives, see Note (F.1).
+4
+149
+140
+77
+149
+857
+886
+2017
+2018
+2017
+2018
+2017
+2018
+2017
+2018
+Total
+Other Post-
+Employment Plans
+○
+Foreign Plans
+€ millions
+Present Value of the Defined Benefit Obligations (DBO) and the Fair Value of the Plan Assets
+Net defined benefit liability (asset)
+Fair value of the plan assets
+Present value of the DBO
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Defined Benefit Plans
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+Domestic Plans
+418
+9
+0
+1,154
+340
+815
+1,030
+316
+714
+Other non-financial liabilities
+Share-based payment liabilities
+Total
+Non-Current
+Current
+Total
+Non-Current
+Current
+2017
+2018
+€ millions
+Share-Based Payment Balances
+Infomation
+Additional
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Combined
+Stakeholders
+Combined
+4,120
+501
+4,621
+3,982
+15
+Derivatives Call options for share-based
+payments as % of 44 other financial
+assets
+2,145
+1,155
+990
+1,984
+1,536
+448
+Other financial assets
+based payments
+90
+0
+3
+90
+68
+Derivatives Call options for share-
+26
+66
+20
+20
+22
+63
+17
+Share-based payment liabilities as % of
+other non-financial liabilities
+4,496
+514
+68
+382
+132
+118
+806
+836
+Discount rate was 50 basis
+points higher
+benefit obligations if:
+Present value of defined
+2016
+2017
+2018
+2016
+2017
+2018
+2016
+2017
+2018
+2016
+2017
+2018
+Plans
+Total
+Other Post-Employment
+Foreign Plans
+Domestic Plans
+€ millions
+Sensitivity Analysis
+The sensitivity analysis considers change in discount rate
+assumptions, holding all other actuarial assumptions constant.
+800
+391
+357
+344
+-
+Section B Employees
+150
+horizon for all major foreign benefit plans. Although our policy is to
+invest in a risk-diversified portfolio consisting of a mix of assets,
+both the defined benefit obligation and plan assets can fluctuate
+over time, which exposes the Group to actuarial and market
+(investment) risks. Depending on the statutory requirements in
+each country, it might be necessary to reduce any underfunding by
+addition of liquid assets.
+Our investment strategies for foreign benefit plans vary
+according to the conditions in the country in which the respective
+benefit plans are situated. We have adopted a long-term investment
+Our investment strategy on domestic benefit plans is to invest all
+contributions in stable insurance policies.
+Investments in Plan Assets
+1,412
+1,446
+1,531
+101
+123
+The sensitivity analysis table below shows how the present value
+of all defined benefit obligations would have been influenced by
+reasonably possible changes to significant actuarial assumptions.
+141
+411
+450
+913
+912
+940
+Discount rate was 50 basis
+points lower
+1,237
+1,277
+1,353
+93
+114
+126
+398
+4.0
+3.9
+4.2
+0
+0
+0
+0
+0
+0
+Non-current other financial assets
+Non-current provisions
+Portion of net defined benefit liability (asset)
+recognized in the Consolidated Statement of
+Financial Position - % of:
+134
+144
+62
+73
+0
+63
+9
+8
+1,223
+1,292
+56
+59
+319
+355
+848
+878
+1,357
+1,436
+63
+To Our
+0
+3
+0.6
+0.8
+1.0
+2.1
+2.3
+2.3
+Other Post-Employment Plans
+2018
+2016
+2017
+Foreign Plans
+2016
+2017
+2018
+2016
+3
+2017
+Domestic Plans
+Discount rate
+Percent
+The following significant weighted average assumptions were
+used for the actuarial valuation of our domestic and foreign pension
+liabilities as well as other post-employment benefit obligations as at
+the respective measurement date:
+Significant Actuarial Assumptions
+€824 million (2017: €794 million) of the present value of the DBO
+of our domestic plans relate to plans that provide for lump-sum
+payments not based on final salary, and €356 million (2017:
+€329 million) of the present value of the defined benefit obligations
+of our foreign plans relate to plans that provide for annuity
+payments not based on final salary.
+41
+54
+19
+27
+20
+24
+2018
+-
+Section B Employees
+611
+93.45
+93.45
+93.45
+Share price
+Other¹)
+Monte Carlo
+Other¹)
+Monte Carlo
+Option pricing model used
+Information how fair value was measured at measurement date
+Weighted average fair value as at 12/31/2017
+92.08
+26.45
+92.40
+84.16
+RSU Plan
+(2014-2017
+Tranches)
+SOP 2010
+(2011-2015
+Tranches)
+LTI 2015 Plan
+(2013-2015
+Tranches)
+Tranches)
+LTI 2016 Plan
+(2016-2017
+€, unless otherwise stated
+Fair Value and Parameters Used at Year End 2017 for Cash-Settled Plans
+1) For these awards, the fair value is calculated by subtracting the net present value of expected future dividend payments, if any, until maturity of the respective award
+from the prevailing share price as of the valuation date.
+1.0
+1.2
+93.45
+Risk-free interest rate, depending on maturity (in %)
+-0.63 to -0.48
+-0.81
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+147
+Section B Employees
+1) For these awards, the fair value is calculated by subtracting the net present value of expected future dividend payments, if any, until maturity of the respective award
+from the prevailing share price as of the valuation date.
+1.1
+1.6
+0.8
+0.1
+2.9
+1.38
+1.38
+1.38
+1.38
+Expected dividend yield (in %)
+NA
+21.1 to 34.5
+NA
+17.5 to 19.6
+Expected volatility (in %)
+-0.70 to -0.32
+-0.62 to -0.41
+Weighted average remaining life of awards outstanding as at 12/31/2017
+(in years)
+2.4
+Weighted average remaining life of awards outstanding as at 12/31/2018
+(in years)
+1.63
+SOP 2010
+(2013-2015
+Tranches)
+Tranches)
+Tranches)
+LTI 2015 Plan
+(2014-2015
+LTI 2016 Plan
+(2016-2018
+Weighted average fair value as at 12/31/2018
+€, unless otherwise stated
+Fair Value and Parameters Used at Year End 2018 for Cash-Settled Plans
+The valuation of our outstanding cash-settled plans was based
+on the following parameters and assumptions:
+The number of performance-based share units (PSUs) that will
+vest under the different tranches were contingent upon
+achievement of the operating profit (non-IFRS, at constant
+currency) KPI target in the year of grant. Depending on
+performance, the number of PSUs vesting ranges between 0% and
+200% of the number initially granted. Performance against the KPI
+target was 106.7% (2017: 78.2%; 2016: 85.1%). All share units are
+paid out in cash upon vesting.
+Over a three-year service period and upon achieving certain key
+performance indicators (KPIs)
+Granted share units will vest in different tranches, either:
+Over a one-to-three-year service period only, or
+65.89
+receive a cash payment determined by the SAP share price and the
+number of share units that ultimately vest.
+Restricted Stock Unit Plan Including Move SAP
+Plan (RSU Plan)
+The exercise price is 110% of the grant base value, which is
+€59.85 for the 2013 tranche, €60.96 for the 2014 tranche, and
+€72.18 for the 2015 tranche. The weighted average exercise price of
+exercised options in 2018 was €67.59 (2017: €58.16) and of
+outstanding options at year end 2018 was €67.62 (2017: €67.55).
+Monetary benefits will be capped at 100% of the exercise.
+members of the Executive Board). Employees can exercise their
+options only if they are employed by SAP; if they leave the
+Company, the options forfeit. Executive Board members' options
+are non-forfeitable once granted - if the service agreement ends in
+the grant year, the number of options is reduced pro rata temporis.
+Any options not exercised up to the end of their term expire.
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+-
+Section B Employees
+146
+To retain and motivate executives and certain employees, we
+grant since 2014 virtual shares representing a contingent right to
+For the SOP 2010, expected volatility of the SAP share price is
+based on a blend of implied volatility from traded options with
+corresponding remaining lives and exercise prices as well as
+historical volatility with the same expected life as the options
+granted.
+86.93
+RSU Plan
+(2015-2018
+Tranches)
+1.63
+NA
+1.63
+Expected dividend yield (in %)
+ΝΑ
+22.8 to 38.5
+NA
+17.9 to 21.4
+Expected volatility (in %)
+-0.69 to -0.31
+-0.67 to -0.25
+NA
+20.67
+-0.70 to -0.55
+86.93
+86.93
+86.93
+86.93
+Share price
+Other¹)
+Monte Carlo
+Other¹)
+Monte Carlo
+Option pricing model used
+Information how fair value was measured at measurement date
+85.24
+Risk-free interest rate, depending on maturity (in %)
+The grant base value was based on the average closing price of
+the SAP share over the five trading days prior to the Executive
+Board resolution date.
+For the LTI 2016 Plan valuation, the Peer Group Index price on
+December 31, 2018, was US$277.92 (2017: US$247.24); the
+expected dividend yield of the index of 1.30% (2017: 1.16%), the
+expected volatility of the index of 19% to 24% (2017: 16% to 17%),
+The expected remaining life of the options reflects both the
+contractual term and the expected, or historical, exercise behavior.
+The risk-free interest rate is derived from German government
+bonds with a similar duration. The SAP dividend yield is based on
+expected future dividends.
+3
+12/31/2018
+172
+49
+49
+5
+12/31/2017
+Total intrinsic value of vested awards (in € millions) as at
+774
+146
+35
+30
+708
+354
+51
+22
+7,086
+4,948
+0
+0
+12/31/2018
+12/31/2017
+Total carrying amount (in € millions) of liabilities as at
+12/31/2018
+12/31/2017
+34
+137
+0
+Weighted average share price (in €) for awards exercised in
+43
+-3
+8
+712
+221
+9
+14
+458
+183
+7
+7
+148
+Outstanding awards exercisable as at
+2018
+2016
+Total expense (in € millions) recognized in
+88.67
+100.61
+88.27
+NA
+2018
+90.91
+91.13
+84.94
+NA
+2017
+2017
+15,264
+7,086
+385
+0
+-124
+NA
+0
+NA
+7,835
+0
+0
+295
+Forfeited
+Exercised
+Adjustment based upon KPI target achievement
+-152
+Granted
+23,375
+684
+377
+12/31/2016
+RSU Plan
+(2014-2018
+Tranches)
+SOP 2010
+(2011-2015
+Tranches)
+Tranches)
+Tranches)
+LTI 2015 Plan
+(2013-2015
+LTI 2016 Plan
+(2016-2018
+Thousands, unless otherwise stated
+Changes in Outstanding Awards Under Our Cash-Settled Plans
+10,901
+and the expected correlation of the SAP share price and the index
+price of 36% to 42% (2017: 41% to 48%) are based on historical
+data for the SAP share price and index price.
+-7,769
+-41
+926
+12/31/2018
+-977
+-473
+Forfeited
+-5,840
+-6,913
+-146
+0
+Exercised
+49
+ΝΑ
+-4,388
+0
+Adjustment based upon KPI target achievement
+8,512
+295
+Granted
+13,520
+14,472
+531
+631
+12/31/2017
+-704
+-1,134
+0
+NA
+To Our
+Stakeholders
+24,872
+44
+96
+148
+Thereof from financial assets at
+amortized cost (2017, 2016: loans
+and receivables)
+-15
+-25
+Total assets
+531
+26
+615
+Thereof from financial assets at
+fair value through profit or loss
+-15
+-25
+Total non-current assets
+gain/loss, net
+-210
+-12
+444
+Tax liabilities
+-36
+-32
+-317
+-202
+Thereof from financial liabilities at
+amortized cost
+0
+0
+Total liabilities
+fair value through profit or loss
+0
+0
+Total non-current liabilities
+-569
+-435
+-415
+Thereof from financial liabilities at
+32
+36
+Provisions
+-31
+Foreign currency exchange
+-80
+-91
+To Our
+157
+Section C Financial Results
+1) Constant currency numbers are calculated by translating numbers of the current period using the average exchange rates from the previous year's corresponding period
+instead of the current period. 2018 constant currency numbers are thus only comparable to 2017 actual currency numbers; 2017 constant currency numbers are only
+comparable to 2016 actual currency numbers.
+4,872
+5,029
+5,029
+5,600
+5,600
+-29
+188
+188
+-47
+-47
+-234
+-36
+-36
+Combined
+-174
+Stakeholders
+Consolidated Financial
+Statements IFRS
+Tax assets
+2016
+2017
+2018
+65
+66
+Other non-financial assets
+at 12/31/2016
+at 12/31/2017
+Adjustments as
+Adjustments as
+€ millions
+€ millions
+Income/Expense, Net
+(C.3) Other Non-Operating
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Management Report
+-56
+Retained earnings
+-15
+Accounting Policies, Judgments, and Estimates
+-29
+188
+-47
+(C.5) Income Taxes
+lil Financial income, net
+financial liabilities)
+In 2018, we adopted the IFRS Interpretations Committee's agenda
+decision on the accounting for interest and penalties related to
+income taxes. As a result, interest and penalties which are related to
+income taxes but do not, themselves, meet the definition of income
+taxes are now presented,
+through profit and loss (2017,
+2016: from available-for-sale
+-114
+-116
+-206
+Thereof interest expense from
+cost
+financial liabilities at amortized
+-108
+financial liabilities at fair value
+-
+in our statement of financial position, under other non-financial
+assets or other non-financial liabilities/provisions, and
+in our income statement, depending on the nature of the items
+either in financial income or other non-operating
+income/expense.
+2018
+€ millions
+Before Tax
+Relationship Between Tax Expense and Profit
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Tax Expense by Geographic Location
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined
+To Our
+Section C - Financial Results
+158
+The assessment whether a deferred tax asset is impaired requires
+judgment, as we need to estimate future taxable profits to
+determine whether the utilization of the deferred tax asset is
+probable. In evaluating our ability to utilize our deferred tax assets,
+we consider all available positive and negative evidence, including
+the level of historical taxable income and projections for future
+taxable income over the periods in which the deferred tax assets are
+recoverable. Our judgment regarding future taxable income is based
+on assumptions about future market conditions and future profits of
+SAP. Changes to these assumptions and outcomes that differ from
+these assumptions could require material adjustments to the
+carrying amount of our deferred tax assets.
+Judgment is required in evaluating whether interest or penalties
+related to income taxes meet the definition of income taxes, and, if
+not, whether it is of financial nature. In this judgment, we particularly
+consider applicable local tax laws and interpretations on IFRS by
+national standard setters in the area of group financial reporting.
+We are subject to changing tax laws in multiple jurisdictions within
+the countries in which we operate. Our ordinary business activities
+also include transactions where the ultimate tax outcome is
+uncertain due to different interpretations of tax laws, such as those
+involving revenue sharing and cost reimbursement arrangements
+between SAP Group entities. In addition, the amount of income
+taxes we pay is generally subject to ongoing audits by domestic and
+foreign tax authorities. As a result, judgment is necessary in
+determining our worldwide income tax provisions. We make our
+estimates about the ultimate resolution of our tax uncertainties
+based on current tax laws and our interpretation thereof. Changes
+to the assumptions underlying these estimates and outcomes that
+differ from these assumptions could require material adjustments
+to the carrying amount of our income tax provisions.
+Previously, these items were classified as income taxes. Prior-
+period numbers were adjusted to conform to the new classification.
+The following table summarizes the impact on our Consolidated
+Statements of Financial Position.
+-89
+-106
+Thereof interest expense from
+-259
+Total equity and liabilities
+-15
+-25
+Total equity
+income/expense, net
+parent
+-234
+-36
+-56
+.lil Other non-operating
+-15
+-25
+Equity attributable to owners of
+-23
+-24
+-25
+Miscellaneous income/expense, net
+-25
+-25
+-15
+€ millions
+-288
+-418
+Finance costs
+available-for-sale financial assets)
+and loss (2017, 2016: from
+assets at fair value through profit
+164
+382
+227
+Thereof gains from financial
+230
+476
+371
+Finance income
+2016
+2017
+2018
+(C.4) Financial Income, Net
+2017
+-56
+4,877
+637
+654
+643
+970
+Combined
+Stakeholders
+Management Report
+Total segment revenue for reportable segments
+Consolidated Financial
+Statements IFRS
+€ millions
+Total plan assets
+Thereof: Asset category
+Equity investments
+Corporate bonds
+Insurance policies
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Plan Asset Allocation
+24,386
+25,596
+23,122
+-33
+-33
+Adjustment of revenue under fair value accounting
+○
+-301
+0
+-1,219
+0
+Adjustment for currency impact
+294
+346
+341
+365
+356
+Other revenue
+21,773
+23,419
+2018
+2017
+Quoted in an
+Active Market
+Not Quoted in an
+Defined Contribution Plans/State Plans
+We also maintain domestic and foreign defined contribution
+plans. Amounts contributed by us under such plans are based on a
+percentage of the employees' salaries or on the amount of
+contributions made by employees. Furthermore, in Germany and
+some other countries, we make contributions to public pension
+plans that are operated by national or local government or similar
+institutions.
+Total Expense of Defined Contribution Plans and
+State Plans
+€ millions
+2018
+2017
+2016
+Defined contribution plans
+State plans
+280
+260
+234
+630
+603
+529
+910
+863
+763
+Total future benefit payments from our defined benefit plans as
+at December 31, 2018, are expected to be €1,783 million (2017:
+€1,670 million). Of this amount, 80% has maturities of over five
+years, and 66% relates to domestic plans.
+-3
+Our expected contribution in 2019 to our domestic and foreign
+defined benefit pension plans is immaterial. The weighted duration
+of our defined benefit plans amounted to 12 years as at
+December 31, 2018, and 13 years as at December 31, 2017.
+5
+Active Market
+Quoted in an
+Active Market
+Not Quoted in an
+Active Market
+387
+905
+350
+873
+116
+0
+105
+0
+142
+0
+122
+0
+5
+905
+873
+5,135
+-3
+lil Total revenue
+-33
+-33
+.lil Profit before tax
+Il Financial income, net
+Other non-operating income/expense, net
+lil Operating profit
+Restructuring
+-3
+Share-based payment expenses
+Revenue under fair value accounting
+Adjustment for
+0
+-151
+0
+-317
+0
+Acquisition-related charges
+-3
+-5
+-577
+4,877
+5,703
+5,703
+-28
+-182
+-182
+-19
+-19
+-785
+-1,120
+-1,120
+-830
+-830
+-680
+-587
+-587
+-577
+Adjustment for currency impact
+-2,501
+-2,529
+-2,523
+340
+397
+388
+545
+531
+SAP Business Network
+8,335
+8,616
+8,478
+9.183
+8,746
+Applications, Technology & Services
+22,062
+23,461
+23,461
+24,708
+24,708
+Customer Experience
+-5
+138
+85
+-2,751
+-2,608
+53
+294
+346
+341
+365
+356
+Other revenue
+8,840
+9,103
+8,951
+9,867
+9,415
+Total segment profit for reportable segments
+164
+90
+139
+2016
+Current tax expense
+€ millions, unless otherwise
+stated
+22
+23
+Contract liabilities/deferred income
+29
+18
+Other provisions and obligations
+1
+Other
+0
+9
+12
+Pension provisions
+125
+153
+Trade and other receivables
+115
+Share-based payments
+43
+50
+Total deferred tax liabilities
+Profit attributable to equity
+holders of SAP SE
+Items Not Resulting in a Deferred Tax Asset
+2016
+2017
+2018
+€ millions, unless otherwise
+stated
+786
+918
+Total deferred tax assets, net
+(C.6) Earnings per Share
+We are subject to ongoing tax audits by domestic and foreign tax
+authorities. Currently, we are in dispute mainly with the German and
+only a few foreign tax authorities. The German dispute is in respect
+of intercompany financing matters and certain secured capital
+investments, while the few foreign disputes are in respect of the
+deductibility of intercompany royalty payments and intercompany
+services. In all cases, we expect that a favorable outcome can only
+be achieved through litigation. For all of these matters, we have not
+recorded a provision as we believe that the tax authorities' claims
+have no merit and that no adjustment is warranted. If, contrary to
+our view, the tax authorities were to prevail in their arguments
+before the court, we would expect to have an additional expense of
+approximately €1,746 million (2017: €1,884 million) in total
+(including related interest expenses and penalties of €842 million
+(2017: €869 million)).
+Income Tax-Related Litigation
+We have not recognized a deferred tax liability on approximately
+€14.04 billion (2017: €13.21 billion) for undistributed profits of our
+subsidiaries, because we are in a position to control the timing of the
+reversal of the temporary difference and it is probable that such
+differences will not reverse in the foreseeable future.
+In 2018, subsidiaries that suffered a tax loss in either the current
+or the preceding period recognized deferred tax assets in excess of
+deferred tax liabilities amounting to €47 million (2017: €79 million;
+2016: €189 million), because it is probable that sufficient future
+taxable profit will be available to allow the benefit of the deferred tax
+assets to be utilized.
+Of the unused tax losses, €213 million (2017: €263 million; 2016:
+€309 million) relate to U.S. state tax loss carryforwards.
+1,060
+1,105
+133
+Other financial assets
+92
+95
+424
+Other provisions and obligations
+164
+140
+Share-based payments
+112
+116
+Pension provisions
+57
+55
+Trade and other receivables
+12
+11
+Other financial assets
+10
+28
+Property, plant, and equipment
+408
+4,083
+Contract liabilities/deferred income
+77
+Property, plant, and equipment
+617
+628
+Intangible assets
+Deferred tax liabilities
+75
+1,846
+2,023
+Total deferred tax assets
+181
+Other
+credits
+166
+21
+Research and development and foreign tax
+202
+150
+Carryforwards of unused tax losses
+229
+563
+4,008
+€ millions
+3.35
+3.42
+Earnings per share, diluted,
+attributable to equity holders of
+SAP SE (in €)
+development and foreign tax
+credits
+Unused research and
+3.04
+3.04
+3.35
+Earnings per share, basic,
+differences
+outstanding, diluted¹)
+33
+524
+509
+Deductible temporary
+3.42
+Not expiring
+54
+38
+Section C - Financial Results
+160
+64
+74
+72
+Total unused tax credits
+30
+34
+18
+Expiring after the following year
+1) Number of shares in millions
+1
+2
+0
+Expiring in the following year
+attributable to equity holders of
+SAP SE (in €)
+33
+1,199
+1,198
+1,194
+Weighted average shares
+Weighted average shares
+338
+375
+575
+Not expiring
+-30
+-31
+-35
+Effect of treasury shares¹)
+Unused tax losses
+1,229
+1,229
+1,229
+Issued ordinary shares")
+2016
+2017
+2018
+1,194
+3,642
+1,197
+Expiring in the following year
+1,019
+919
+1,058
+Total unused tax losses
+payments¹)
+649
+535
+476
+Expiring after the following year
+1
+1
+0
+Dilutive effect of share-based
+outstanding, basic¹)
+32
+9
+7
+1,198
+668
+Intangible assets
+Deferred tax assets
+-38
+Tax-exempt income
+78
+82
+106
+Non-deductible expenses
+1,242
+-95
+983
+lil Total income tax expense
+rates
+-161
+-668
+-241
+Total deferred tax income
+3
+1,511
+-106
+Major Components of Tax Expense
+Withholding taxes
+-30
+-26
+-17
+Prior-year taxes
+Current tax expense/income
+and foreign tax credits
+2016
+2017
+2018
+€ millions
+-36
+-26
+-33
+Research and development
+112
+131
+91
+-212
+0
+Changes in tax laws and tax
+-123
+1,478
+Tax expense at applicable tax
+537
+716
+1,019
+Foreign
+4,872
+5,029
+5,600
+.Iil Profit before tax
+866
+935
+733
+Germany
+2016
+2017
+2018
+1,327
+Tax expense for current year
+1,286
+Total current tax expense
+-84
+-298
+Foreign
+-107
+-403
+-147
+Foreign tax rates
+-38
+-584
+57
+Germany
+Tax effect of:
+Deferred tax expense/income
+(2017: 26.4%; 2016: 26.4%)
+1,403
+1,651
+1,752
+rate of 26.4%
+1,665
+1,623
+1,412
+Foreign
+3,118
+2,788
+3,106
+Germany
+2016
+2017
+2018
+€ millions
+Profit Before Tax by Geographic Location
+1,242
+983
+1,511
+lil Total income tax expense
+-161
+-668
+-241
+2,494
+Total deferred tax income
+2,241
+.lil Total
+2017
+2018
+€ millions
+and Liabilities
+Components of Recognized Deferred Tax Assets
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+159
+Section C Financial Results
+The following table reconciles the expected income tax expense,
+computed by applying our combined German tax rate of 26.4%
+(2017: 26.4%; 2016: 26.4%), to the actual income tax expense. Our
+2018 combined German tax rate includes a corporate income tax
+rate of 15.0% (2017: 15.0%; 2016: 15.0%), plus a solidarity
+surcharge of 5.5% (2017: 5.5%; 2016: 5.5%) thereon, and trade
+taxes of 10.6% (2017: 10.6%; 2016: 10.6%).
+4,872
+5,029
+5,600
+1,754
+Total expense
+foreign tax credits
+242
+Deferred tax expense/income
+foreign tax credits
+1,403
+1,651
+1,752
+Total current tax expense
+development tax credits, and
+assets, research and
+-9
+28
+87
+Taxes for prior years
+43
+33
+185
+58
+Reassessment of deferred tax
+Other
+development tax credits, and
+13
+-1
+223
+260
+Unused tax losses, research and
+25.5
+19.5
+27.0
+To Our
+Effective tax rate (in %)
+temporary differences
+1,242
+983
+1,511
+lil Total income tax expense
+-403
+-891
+-501
+Origination and reversal of
+20
+(B.5) Other Employee-Related
+Obligations
+Other expenses
+€ millions
+0
+0
+0
+0
+Cloud subscriptions and support
+528
+539
+200
+203
+119
+Software licenses
+413
+421
+438
+445
+0
+Cloud subscriptions and support - laas²)
+119
+203
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+€ millions
+2018
+2017
+2016
+Actual
+513
+Currency
+Actual
+Currency
+Constant
+Currency³)
+Actual
+Currency
+Cloud subscriptions and support - SaaS/PaaS)
+528
+539
+200
+Constant
+Currency³)
+Software support
+1
+1
+Services
+Total segment revenue
+951
+970
+643
+654
+637
+4
+Cost of cloud subscriptions and support - SaaS/PaaS¹)
+-178
+-81
+-82
+-30
+Cost of cloud subscriptions and support - laas²)
+○
+0
+-176
+Customer Experience
+6
+9
+0
+0
+0
+Software licenses and support
+414
+422
+437
+6
+445
+Cloud and software
+942
+961
+637
+648
+633
+9
+514
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+0
+0
+Cost of cloud subscriptions and support
+-483
+-503
+-428
+-435
+0
+-384
+Cost of cloud and software
+Cost of services
+Total cost of revenue
+Segment gross profit
+-6
+-7
+-5
+Cost of software licenses and support
+-5
+○
+-384
+436
+451
+404
+413
+303
+Total segment revenue
+2,629
+Cost of cloud subscriptions and support - laas²)
+2,733
+2,300
+1,925
+Cost of cloud subscriptions and support - SaaS/PaaS¹)
+-483
+-503
+-428
+-435
+2,261
+0
+-1
+-510
+2) Infrastructure as a service
+-1,285
+-1,341
+-1,148
+-1,166
+-953
+531
+1) Software as a service/platform as a service
+545
+397
+340
+3) Constant currency numbers are calculated by translating numbers of the current period using the average exchange rates from the previous year's corresponding period
+instead of the current period. 2018 constant currency numbers are thus only comparable to 2017 actual currency numbers; 2017 constant currency numbers are only
+comparable to 2016 actual currency numbers.
+Section C Financial Results
+155
+To Our
+Stakeholders
+388
+-489
+Segment profit
+1,293
+-433
+-440
+-385
+-324
+-337
+-292
+-297
+Other segment expenses
+-247
+-847
+-737
+-632
+1,816
+1,886
+1,536
+1,563
+-813
+Services
+0
+Cost of cloud subscriptions and support
+20,218
+20,465
+19,211
+SAP Business Network
+2,629
+2,733
+2,261
+2,300
+1,925
+Customer Experience
+951
+Addition
+141
+117
+24
+21,892
+20,806
+Applications, Technology & Services
+Actual
+Currency
+Section C - Financial Results
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Other employee-related provisions as
+at 1/1/2018
+(C.2) Reconciliation of Segment Measures to Income Statement
+2018
+2017
+2016
+Actual
+Currency
+Constant
+Currency¹)
+Actual
+Currency
+Constant
+Currency¹)
+€ millions
+Total
+Non-
+Current
+Current
+Current
+2,599
+3,051
+185
+Total
+Non-Current
+Current
+2,866
+4,120
+2017
+Non-Current
+2018
+Other employee-related liabilities
+Other non-financial liabilities
+Other employee-related liabilities
+€ millions
+Other Employee-Related Liabilities
+As far as the provision for long-term employee benefits is secured
+by pledged reinsurance coverage, it is offset with the relating plan
+asset.
+Accounting Policy
+as % of other non-financial liabilities
+156
+Total
+2,774
+2018
+€ millions
+Other Employee-Related Provisions
+Section B Employees
+Other employee-related liabilities mainly relate to bonus and
+sales commission obligations, vacation obligations, and employee-
+related social security obligations.
+62
+34
+175
+65
+37
+70
+4,496
+514
+3,982
+4,621
+501
+66
+For a breakdown of revenue by region for the SAP Group, see Note (A.1).
+24,386
+951
+-3
+-3
+-1
+-1
+-1
+-199
+-202
+-84
+-127
+-85
+751
+768
+516
+527
+552
+Other segment expenses
+-127
+Segment profit
+-127
+-198
+-176
+-178
+-81
+-82
+-30
+Cost of software licenses and support
+Cost of cloud and software
+-126
+Cost of services
+Segment gross profit
+-20
+-20
+-45
+-45
+-54
+-196
+Total cost of revenue
+0
+1) Software as a service/platform as a service
+-613
+Total Reportable Segments
+Services
+10,178
+443
+416
+11,037
+7,197
+Customer Experience
+1,915
+9,532
+3,431
+271
+114
+3,817
+20,806
+2,629
+421
+2) Infrastructure as a service
+SAP Business Network
+Actual Currency
+-630
+-431
+-437
+-388
+138
+139
+85
+Applications, Technology &
+90
+3) Constant currency numbers are calculated by translating numbers of the current period using the average exchange rates from the previous year's corresponding period
+instead of the current period. 2018 constant currency numbers are thus only comparable to 2017 actual currency numbers; 2017 constant currency numbers are only
+comparable to 2016 actual currency numbers.
+Segment Revenue by Region
+EMEA
+Americas
+APJ
+Total segment revenue
+2018
+164
+1,622
+-725
+1,857
+•
+"
+The measurements of segment revenue and results include the
+recurring revenues that would have been recorded by acquired
+entities had they remained stand-alone entities but which are not
+recorded as revenue under IFRS due to fair value accounting for
+customer contracts in effect at the time of an acquisition.
+The expense measures exclude:
+We use an operating profit indicator to measure the performance of
+our operating segments. However, the accounting policies applied in
+the measurement of operating segment revenue and profit differ as
+follows from the IFRS accounting principles used to determine the
+operating profit measure in our income statement:
+Our management reporting system produces a variety of reports
+that differ by the currency exchange rates used in the accounting
+for foreign-currency transactions and operations, where both actual
+and constant currency numbers are reported to and used by our
+CODM. Reports based on actual currencies use the same currency
+rates as are used in our financial statements. Reports based on
+constant currencies report revenues and expenses using the
+average exchange rates from the previous year's corresponding
+period.
+1,887
+Our management reporting system reports our intersegment
+services as cost reductions and does not track them as internal
+revenue. Intersegment services mainly represent utilization of
+human resources of one segment by another segment on a project
+basis. Intersegment services are charged based on internal cost
+rates including certain indirect overhead costs but excluding a profit
+margin.
+Acquisition-related charges such as amortization expense
+and impairment charges for intangibles acquired in business
+combinations and certain stand-alone acquisitions of
+intellectual property (including purchased in-process
+research and development), settlements of pre-existing
+business relationships in connection with a business
+combination, and acquisition-related third-party expenses
+Share-based payment expenses
+Accounting Policies, Judgments, and Sources for
+Management Reporting
+On April 5, 2018, we acquired Callidus Software Inc. and changed
+the structure of the Applications, Technology & Services segment.
+The Callidus business was combined with our existing customer
+experience activities to form a new end-to-end business unit. This
+new unit, which qualifies as an operating segment (called Customer
+Experience), comprises on-premise and cloud-based products that
+run front office functions across the customer experience. Support
+revenues related to our on-premise customer experience solutions
+continue to be reported in the Applications, Technology & Services
+segment, as we are unable to split the total software support
+revenues into support services provided for different solutions.
+Additionally, for one offering, revenues are currently included in the
+Customer Experience segment, whereas related development costs
+(2018: €16 million, 2017: €21 million, 2016: €19 million) are
+allocated to the Applications, Technology & Services segment.
+Further, the manner in which our messaging services are
+reported to our CODM has changed such that our business unit
+The SAP Business Network segment derives its revenues mainly
+from transaction fees charged for the use of SAP's cloud-based
+collaborative business networks and from services relating to the
+SAP Business Network (including cloud applications, professional
+services, and education services). Within the SAP Business Network
+segment, we mainly market and sell the cloud offerings developed
+by SAP Ariba, SAP Concur, and SAP Fieldglass.
+The Applications, Technology & Services segment derives its
+revenues primarily from the sale of software licenses and cloud
+subscriptions (as far as not included in one of the other segments),
+and from the sale of related services (mainly support services,
+various professional services, premium support services,
+implementation services for our software products, and education
+services on the use of our products). Service revenues also
+comprise almost all services related to our customer experience
+solutions (as far as not included in the Customer Experience
+segment).
+At year end 2018, SAP had four operating segments that are
+regularly reviewed by the Executive Board, which is responsible for
+assessing the performance of the Company and for making
+resource allocation decisions as the chief operating decision maker
+(CODM). The operating segments are largely organized and
+managed separately according to their product and service
+offerings, notably whether the products and services relate to our
+business network activities, customer experience solutions, or
+messaging services, or cover other areas of our business.
+General Information
+(C.1) Results of Segments
+This section provides insight into the financial results of SAP's
+reportable segments and of SAP overall as far as not already
+covered by previous sections. This includes but is not limited to
+segment results, income taxes, and earnings per share.
+Digital Interconnect now qualifies as an operating segment. Due to
+its size, however, Digital Interconnect is not a reportable segment.
+The segment information for prior periods has been restated to
+conform to the current year's presentation.
+Additional
+Infomation
+■ Restructuring expenses
+153
+Actual
+2016
+2017
+2018
+Information about assets and liabilities and additions to non-current
+assets by segment are not regularly provided to our Executive
+Board. Goodwill by segment is disclosed in Note (D.2).
+outlined above, are disclosed under the Other revenue and Other
+expenses items in the reconciliation in Note (C.2).
+€ millions
+Section C Financial Results
+Applications, Technology & Services
+Certain activities are exclusively managed on corporate level,
+including finance, accounting, legal, human resources, business
+operations, and marketing. They are not included in the results of
+our reportable segments.
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+Revenues and expenses of our operating but non-reportable
+segment, and the certain activities managed on corporate level, as
+Currency
+Section C - Financial Results
+Consolidated Financial
+Statements IFRS
+-3
+Research and development
+-7
+-118
+-3
+Cost of services
+-3
+-9
+-55
+Cost of cloud and software
+2016
+2017
+2018
+€ millions
+If not presented separately in our income statement,
+restructuring expenses would have been allocated to the different
+expense items in our income statement as follows:
+Restructuring Expenses by Functional Area
+Restructuring provisions primarily include employee benefits
+that result from severance payments for employee terminations and
+onerous contract costs. The cash outflows associated with
+employee-related restructuring costs are substantially short-term in
+nature. Utilization of the portion of the facility-related restructuring
+provisions depends on the remaining term of the associated lease.
+In 2018, no significant new restructuring activities occurred,
+except for follow-up costs resulting from restructuring programs of
+previous years and activities limited to individual business units to
+enhance our profitability and organizational efficiency. In 2017,
+restructuring provisions related primarily to a restructuring
+program executed in the Digital Business Services (DBS) board area
+which went hand-in-hand with the DBS transformation. The
+transformation was prompted by changing service requirements, as
+an increasing amount of software deployments are moving to the
+cloud.
+-3
+Further Information on Economic,
+Environmental, and Social Performance
+-7
+-11
+Management Report
+Combined
+To Our
+Stakeholders
+-
+Section B Employees
+152
+-28
+Sales and marketing
+-182
+.lil Restructuring expenses
+-1
+2
+0
+General and administration
+-10
+-2
+-19
+-28
+Constant
+Currency³)
+Constant
+Currency³)
+Cost of cloud subscriptions and support - SaaS/PaaS¹)
+19,211
+20,465
+20,218
+21,892
+20,806
+Total segment revenue
+-777
+3,037
+3,162
+3,559
+3,288
+Services
+16,174
+17,282
+17,056
+3,183
+18,333
+-818
+-581
+Cost of services
+Cost of cloud and software
+Cost of software licenses and support
+-630
+-888
+-877
+-1,254
+-572
+-1,201
+-225
+-307
+-305
+-436
+-424
+Cost of cloud subscriptions and support - laaS²)
+-404
+Cost of cloud subscriptions and support
+Actual
+Currency
+17,518
+14,894
+2,400
+2,317
+Cloud subscriptions and support
+206
+334
+328
+506
+1,732
+488
+1,423
+1,403
+1,894
+1,829
+Cloud subscriptions and support - laas²)
+Cloud subscriptions and support - SaaS/PaaS¹)
+Actual
+Currency
+1,074
+Cloud and software
+1,758
+Software licenses
+15,524
+15,325
+15,933
+15,201
+Software licenses and support
+10,544
+10,987
+1,280
+10,890
+10,968
+Software support
+4,350
+4,538
+4,434
+4,456
+4,233
+11,477
+-182
+Most of our depreciation and amortization expense affecting
+segment profits is allocated to the segments as part of broader
+infrastructure allocations and is thus not tracked separately on the
+operating segment level. Depreciation and amortization expense
+that is directly allocated to the operating segments is immaterial in
+all segments presented.
+5
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+SAP Business Network
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+€ millions
+2018
+2017
+2016
+Actual
+Currency
+Constant
+Currency³)
+Actual
+Currency
+Constant
+Currency³)
+Stakeholders
+To Our
+Section C - Financial Results
+154
+15,165
+14,284
+Other segment expenses
+Segment profit
+1) Software as a service/platform as a service
+2) Infrastructure as a service
+-6,435
+8,746
+Actual
+Currency
+-6,729
+-6,549
+-5,949
+9,183
+8,478
+8,616
+8,335
+3) Constant currency numbers are calculated by translating numbers of the current period using the average exchange rates from the previous year's corresponding period
+instead of the current period. 2018 constant currency numbers are thus only comparable to 2017 actual currency numbers; 2017 constant currency numbers are only
+comparable to 2016 actual currency numbers.
+-6,478
+Cloud subscriptions and support - SaaS/PaaS)
+2,178
+2,265
+0
+Software support
+16
+16
+18
+18
+28
+-1
+Software licenses and support
+17
+17
+18
+27
+Cloud and software
+2,193
+2,282
+16
+14,957
+-1
+0
+1,840
+1,870
+1,595
+Cloud subscriptions and support - laas²)
+0
+0
+0
+0
+0
+Cloud subscriptions and support
+-19
+2,265
+1,840
+1,870
+1,595
+Software licenses
+0
+15,912
+2,178
+-4,926
+Accounting Policy
+(B.6) Restructuring
+Employee-related provisions primarily comprise obligations for
+time credits, severance payments, and jubilee expenses. While most
+of these employee-related provisions could be claimed within the
+next 12 months, we do not expect the related cash outflows within
+this time period.
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+We only recognize provisions for restructuring if and when the
+following occurs:
+Combined
+151
+as % of provisions
+20
+19
+23
+Other employee-related provisions
+380
+To Our
+Stakeholders
+270
+SAP has designed a program that materially changes the scope
+of one our businesses or the manner in which the business is
+conducted, and
+The program established is planned to start shortly after the
+program plan is approved and is expected to be capable of being
+completed within 12 months, and
+15,181
+-2
+0
+lil Restructuring expenses
+Onerous contract-related
+restructuring expenses
+expenses
+-33
+A detailed and documented restructuring plan has been
+approved by our Executive Board, a member thereof, or a direct
+report of an Executive Board member, and
+-180
+Employee-related restructuring
+2016
+2017
+2018
+€ millions
+We consider whether a change in business is material based on the
+business affected rather than for SAP as a whole. In judging whether
+a unit qualifies for restructuring, we consider if the unit has its own
+management team, has access to all inputs and processes
+necessary to provide outputs, and generates or could generate
+revenues. Materiality in this context refers to the scope of business
+and the manner in which the business is conducted. Consequently,
+the term "materially" cannot necessarily be associated with a
+certain quantitative threshold. Either the size or the nature of the
+restructuring, or a combination of both, have to be the determining
+factor.
+The program has been announced to the parties affected or has
+commenced.
+-19
+110
+Restructuring Expenses
+77
+-1,958
+-1,896
+-3,101
+-3,285
+-2,825
+-2,846
+-2,525
+-1,948
+-2,695
+-2,453
+-2,401
+-5,625
+-5,980
+-5,262
+Provisions
+-5,300
+-2,437
+-2,031
+-2,524
+Segment gross profit
+25
+52
+-1,899
+Other employee-related provisions as
+at 12/31/2018
+0
+Currency impact
+-5
+-3
+Release
+-2
+-155
+-107
+Total cost of revenue
+-48
+Utilization
+97
+Further Information on Economic,
+Environmental, and Social Performance
+Other non-financial assets
+Additional
+Infomation
+Callidus Acquisition: Recognized Assets and
+Liabilities
+€ millions
+Trade and other receivables
+Other financial assets
+Consolidated Financial
+Statements IFRS
+Cash and cash equivalents
+Management Report
+Measurement period adjustments recorded in 2018 (which were
+not material) mostly relate to intangible assets (finalization of the
+fair value calculation) and tax-related assets and liabilities (deferred
+taxes from investments in subsidiaries and unused tax losses, and
+so on).
+Combined
+To Our
+161
+Section D Invested Capital
+The following table summarizes the preliminary values of
+identifiable assets acquired and liabilities assumed in connection
+with the acquisition of Callidus, as at the acquisition date:
+The initial accounting for the Callidus business combination is
+incomplete because we are still obtaining some information
+necessary to identify and measure tax-related assets and liabilities.
+Accordingly, the amounts recognized in our financial statements for
+these items are provisional as at December 31, 2018.
+The liabilities incurred relate to the earned portion of unvested
+share-based payment awards. These liabilities were incurred by
+replacing, upon acquisition, equity-settled share-based payment
+awards held by employees of Callidus with cash-settled share-based
+payment awards, which are subject to forfeiture. The respective
+liabilities represent the portion of the replacement awards that
+relates to pre-acquisition services provided by the acquiree's
+employees and were measured at the fair value determined under
+IFRS 2.
+Had Callidus been consolidated as at January 1, 2018, our
+estimated pro forma revenue for the reporting period would have
+been €24,766 million, and pro forma profit after tax would have
+been €4,071 million.
+1,957
+2,004
+47
+Stakeholders
+These amounts were calculated after applying SAP's accounting
+policies and after adjusting the results for Callidus to reflect
+significant effects from, for example:
+4
+64
+15
+Contract liabilities/deferred income
+Total consideration transferred
+Provisions and other non-financial liabilities
+65
+Current and deferred tax liabilities
+55
+-
+711
+Trade and other payables
+Total identifiable assets
+Thereof software and database licenses
+390
+Thereof customer relationship and other intangibles
+-
+121
+Thereof acquired technology
+515
+Intangible assets
+26
+Property, plant, and equipment
+11
+32
+63
+Liabilities incurred
+Our general intention is to remain in a position to return liquidity
+to our shareholders by distributing annual dividends totaling 40% or
+more of our profit after tax and by potentially repurchasing treasury
+shares in future.
+Callidus Acquisition: Consideration Transferred
+1,239
+0
+-5
+1,234
+Treasury Shares
+By resolution of SAP SE's General Meeting of Shareholders held
+on May 17, 2018, the authorization granted by the General Meeting
+of Shareholders on June 4, 2013, regarding the acquisition of
+treasury shares was revoked to the extent it had not been exercised
+at that time, and replaced by a new authorization of the Executive
+Board of SAP SE to acquire, on or before May 16, 2023, shares of
+SAP SE representing a pro rata amount of capital stock of up to
+€120 million in aggregate, provided that the shares purchased
+under the authorization, together with any other shares in the
+Company previously acquired and held by, or attributable to,
+SAP SE do not account for more than 10% of SAP SE's issued share
+capital. Although treasury shares are legally considered
+outstanding, there are no dividend or voting rights associated with
+them. We may redeem or resell shares held in treasury, or we may
+use treasury shares for the purpose of servicing option or
+conversion rights under the Company's share-based payment
+plans. Also, we may use shares held in treasury as consideration in
+connection with mergers with, or acquisitions of, other companies.
+Distribution Policy and Dividends
+In 2018, we distributed €1,671 million (€1.40 per share) in
+dividends for 2017 compared to €1,499 million (€1.25 per share)
+paid in 2017 for 2016 and €1,378 million (€1.15 per share) paid in
+2016 for 2015. Aside from the distributed dividend, in 2017, we also
+returned €500 million to our shareholders by repurchasing treasury
+shares.
+The total dividend available for distribution to SAP SE
+shareholders is based on the profits of SAP SE as reported in its
+statutory financial statements prepared under the accounting rules
+in the German Commercial Code (Handelsgesetzbuch). For the year
+ended December 31, 2018, the Executive Board intends to propose
+that a dividend of €1.50 per share (that is, an estimated total
+dividend of €1,790 million), be paid from the profits of SAP SE.
+(E.3) Liquidity
+Accounting Policies
+Non-Derivative Financial Debt Investments
+Our non-derivative financial debt investments comprise cash at
+banks and cash equivalents (highly liquid investments with original
+maturities of three months or less, such as time deposits and
+money-market funds), loans and other financial receivables, and
+acquired debt securities.
+As we do not designate financial assets as "at fair value through
+profit or loss," we generally classify financial assets as: at amortized
+cost (AC), at fair value through other comprehensive income
+(FVOCI), or at fair value through profit or loss (FVTPL), depending
+on the contractual cash flows of, and our business model for,
+holding the respective asset. Financial assets having cash flow
+characteristics other than solely principal and interest such as
+money market and similar funds are generally classified as FVTPL.
+Generally, all other financial assets with cash flows consisting solely
+of principal and interest are classified as AC because we follow a
+conservative investment approach, safeguarding our liquidity by
+ensuring the safety of principal investment amounts.
+Gains/losses on non-derivative financial debt investments at
+FVTPL are reported in Financial income, net and show interest
+income/expenses separately from other gains / losses which
+include gains/losses from fair value fluctuations and disposals.
+Gains/losses on non-derivative financial debt investments at AC
+are reported in Financial income, net and show interest income /
+expenses separately from other gains / losses which include gains/
+losses disposals and changes in expected and incurred credit
+losses. Gains/losses from foreign currency exchange rate
+fluctuations are included in Other non-operating income/expense,
+net. Regular way purchases and sales are recorded as at the trade
+date.
+For these financial assets, we apply considerable judgment by
+employing the general impairment approach as follows:
+-
+For cash at banks, time deposits, and debt securities such as
+acquired bonds and commercial paper, we apply the low credit
+170
+Section E- Capital Structure, Financing, and Liquidity
+55
+18
+12/31/2018
+887
+-23
+0
+representing consideration transferred in cash of approximately
+US$2.4 billion. The acquisition aims to accelerate and strengthen
+SAP's position and solution offerings in the Sales Performance
+Management (SPM) and configure-price-quote (CPQ) spaces.
+On April 5, 2018, following satisfaction of applicable regulatory
+and other approvals, we acquired 100% of the shares of Callidus
+(NDSQ: CALD), a leading provider of customer relationship
+management (CRM) solutions. SAP paid US$36 per share,
+Acquisition of Callidus
+Prior-year acquisitions are described in the Notes to the 2017
+Consolidated Financial Statements, Note (4).
+In 2018, we concluded several business combinations, with the
+Callidus Software Inc. ("Callidus") acquisition being the only
+material transaction.
+We acquire businesses in specific areas of strategic interest to us,
+particularly to broaden our product and service portfolio.
+Subsequent changes in the estimated fair values of liabilities and
+provisions may result in additional expense (if increasing the
+estimated fair value) or additional income (if decreasing the
+estimated fair value).
+Subsequent negative changes in the estimated fair values of
+assets may result in additional expense from impairment
+charges.
+Fair values assigned to assets subject to depreciation and
+amortization affect the amounts of depreciation and
+amortization to be recorded in operating profit in the periods
+following the acquisition.
+In our accounting for business combinations, judgment is required
+in determining whether an intangible asset is identifiable, and should
+be recorded separately from goodwill. Additionally, estimating the
+acquisition-date fair values of the identifiable assets acquired and
+liabilities assumed involves considerable judgment. The necessary
+measurements are based on information available on the
+acquisition date and are based on expectations and assumptions
+that have been deemed reasonable by management. These
+judgments, estimates, and assumptions can materially affect our
+financial position and profit for several reasons, including the
+following:
+We decide for each business combination whether to measure the
+non-controlling interest in the acquiree at fair value or at the
+proportionate share of the acquiree's identifiable net assets. We
+classify costs related to executing business combinations as general
+and administration expense.
+€ millions
+Cash paid
+Accounting Policies, Judgments, and Estimates
+This section highlights the non-current assets including
+investments that form the basis of our operating activities.
+Additions in invested capital include separate asset acquisitions or
+business combinations. Further, we disclose information about
+purchase obligations and capital contributions.
+Additional
+Infomation
+Section D - Invested Capital
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+347
+Other comprehensive income for items that will be reclassified to profit or loss, net
+of tax
+910
+(D.1) Business Combinations
+Total identifiable liabilities
+0
+Total identifiable net assets
+0
+26
+26
+32
+32
+0
+1,274
+1,274
+0
+859
+859
+448
+1,536
+1,984
+990
+1,155
+2,145
+0
+83
+827
+64
+827
+1,248
+As we do not designate financial assets as "at fair value through
+profit or loss," we generally classify financial assets into the
+following categories: at amortized cost (AC), at fair value through
+other comprehensive income (FVOCI), and at fair value through
+profit or loss (FVTPL), depending on the contractual cash flows of
+and our business model for holding the respective asset.
+For equity securities, as the cash flow characteristics are typically
+other than solely principal and interest, we take an investment-by-
+investment decision whether to classify as FVTPL or FVOCI.
+Judgment is required particularly in estimating the fair values of
+equity securities that are not listed publicly.
+Gains/losses on equity securities at FVTPL include gains/losses
+from fair value fluctuations, from disposals as well as dividends
+while gains/losses on equity securities at FVOCI only include
+dividends, all of which are shown in Financial Income, net. Regular
+way purchases and sales are recorded as at the trade date.
+Equity Investments
+€ millions
+Equity securities
+Investments in associates
+Total
+% of other financial assets
+2018
+2017
+Current
+Non-Current
+Total
+Current
+Non-Current
+Total
+0
+1,248
+Accounting Policies, Judgments, and Estimates
+74
+For a list of the names of other equity investments, see Note (G.10).
+in Venture
+Capital Funds
+Contractual obligations for acquisition of
+property, plant, and equipment and intangible
+assets
+Other purchase obligations
+Purchase obligations
+2018
+2017
+123
+207
+2,010
+934
+2,133
+1,141
+The contractual obligations for acquisition of property, plant, and
+equipment and intangible assets relate primarily to the construction
+of new and existing facilities and to the purchase of hardware,
+software, patents, office equipment, and vehicles. The remaining
+obligations relate mainly to marketing, consulting, maintenance,
+license agreements, cloud services, and other third-party
+agreements. The increase is mainly due to new purchase obligations
+related to cloud services. Historically, the majority of such purchase
+obligations have been realized.
+Maturities
+Due 2019
+Due 2020 to 2023
+Due thereafter
+Total
+187
+0
+Investments
+40
+12/31/2018
+Maturities
+Section D Invested Capital
+167
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Financial Commitments in Venture Capital Funds
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+(D.7) Purchase Obligations
+€ millions
+Investments in venture capital funds
+2018
+190
+2017
+€ millions
+187
+182
+SAP invests and holds interests in unrelated parties that manage
+investments in venture capital. On December 31, 2018, total
+commitments to make such investments amounted to €418 million
+(2017: €342 million), of which €232 million had been drawn (2017:
+€161 million). By investing in such venture capital funds, we are
+exposed to the risks inherent in the business areas in which the
+entities operate. Our maximum exposure to loss is the amount
+invested plus unavoidable future capital contributions.
+€ millions
+(D.5) Equity Investments
+The additions (other than from business combinations) relate
+primarily to the replacement and purchase of IT infrastructure (data
+centers, and so on) and the construction of new buildings. For more
+information about the expected effect of the initial application of
+IFRS 16, see Note (IN.1).
+1,302
+1,033
+1,073
+12 to 16
+Callidus - Acquired technologies
+103
+0
+4 to 6
+Callidus Customer relationships
+384
+0
+10 to 14
+Total significant intangible assets
+2,361
+2,106
+166
+Section D Invested Capital
+To Our
+Stakeholders
+Combined
+Management Report
+Concur Customer relationships
+Consolidated Financial
+Statements IFRS
+3
+114
+2,507
+3,227
+Carrying Amount Remaining Useful
+2018
+2017
+Life
+(in years)
+Sybase Customer relationships
+SuccessFactors - Customer relationships
+Ariba Customer relationships
+Concur Acquired technologies
+179
+226
+3 to 5
+225
+261
+7
+323
+366
+7 to 9
+180
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+(D.4) Property, Plant, and Equipment
+Payments and
+Equipment
+Construction in
+Progress
+1,162
+1,592
+213
+2,967
+1,344
+1,985
+224
+3,553
+96
+933
+167
+1,196
+199
+1,026
+77
+Plant, and
+Total
+Advance
+Other Property.
+Accounting Policies, Judgments, and Estimates
+Property, plant, and equipment are typically depreciated using the
+straight-line method. Judgment is required in estimating the useful
+life of the assets. In this assessment we consider, among others, our
+history with similar assets and current and future changes in
+technology.
+Useful Lives of Property, Plant, and Equipment
+Buildings
+Leasehold improvements
+Information technology
+equipment
+Office furniture
+Automobiles
+Predominantly
+25 to 50 years
+Based on the term of the lease contract
+€ millions
+2 to 6 years
+4 to 5 years
+Property, Plant, and Equipment
+€ millions
+12/31/2017
+12/31/2018
+Additions (other than those from business combinations)
+2017
+2018
+Land and
+Buildings
+4 to 20 years
+187
+Due 2019
+(D.6) Non-Current Assets by Region
+12/31/2016
+Purchase of treasury shares
+Reissuance of treasury shares under share-
+based payments
+12/31/2017
+1,228.5
+-35.1
+Reissuance of treasury shares under share-
+based payments
+12/31/2018
+1,228.5
+-34.9
+0.2
+Authorized Shares
+The Articles of Incorporation authorize the Executive Board to
+increase the issued capital as follows:
+By up to a total amount of €250 million by issuing new no-par
+value bearer shares against contributions in cash until
+May 19, 2020 (Authorized Capital I). The issuance is subject to
+the statutory subscription rights of existing shareholders.
+By up to a total amount of €250 million by issuing new no-par
+value bearer shares against contributions in cash or in kind until
+May 19, 2020 (Authorized Capital II). Subject to the consent of
+the Supervisory Board, the Executive Board is authorized to
+exclude the shareholders' statutory subscription rights in certain
+cases.
+Contingent Shares
+SAP SE's share capital is subject to a contingent capital increase,
+which may be effected only to the extent that the holders or
+creditors of convertible bonds or stock options issued or
+guaranteed by SAP SE or any of its directly or indirectly controlled
+subsidiaries under certain share-based payments exercise their
+conversion or subscription rights, and no other methods for
+servicing these rights are used. As at December 31, 2018,
+€100 million, representing 100 million shares, was still available for
+issuance (2017: €100 million).
+Section E Capital Structure, Financing, and Liquidity
+169
+0.7
+To Our
+0
+Treasury
+Shares
+-30.6
+100
+42,484
+100
+21
+In 2018, we repaid €1,150 million in Eurobonds and US$150 million in U.S. private placements at maturity. The repayment was partly
+refinanced through the issuance of a US$300 million USD bond. We took out a three-tranche Eurobond of €1,500 million in total and a five-
+tranche Eurobond of €4,500 million in total with maturities of two to 12 years to finance the acquisitions of Callidus and Qualtrics. Thus, the
+ratio of total nominal volume of financial debt to total equity and liabilities increased by 7pp
+(E.2) Total Equity
+Issued Capital
+SAP SE has issued no-par value bearer shares with a calculated
+nominal value of €1 per share. All of the shares issued are fully paid.
+Number of Shares
+millions
+1,228.5
+-29.9
+0
+-5.4
+0
+0.2
+Issued
+Capital
+1/1/2016
+1,228.5
+Reissuance of treasury shares under share-
+based payments
+Combined
+Stakeholders
+Management Report
+292
+-8
+3,345
+Other comprehensive income for items that will be reclassified to profit or loss, net
+of tax
+-2,732
+-135
+29
+-2,838
+12/31/2017
+330
+157
+21
+508
+Adoption of IFRS 9
+-158
+-3
+-160
+1/1/2018
+330
+3,062
+12/31/2016
+785
+-11
+Consolidated Financial
+Statements IFRS
+Other Components of Equity
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+€ millions
+Exchange
+Differences
+Available-for-
+Sale Financial
+Assets
+51,491
+Cash Flow
+Hedges/Cost of
+Hedging
+1/1/2016
+2,222
+336
+3
+2,561
+Other comprehensive income for items that will be reclassified to profit or loss, net
+of tax
+839
+-43
+Total
+403
+81
+6,264
+APJ
+922
+723
+SAP Group
+32,228
+28,276
+For a breakdown of our employee headcount by region, see
+Note (B.1), and for a breakdown of revenue by region, see
+Note (A.1).
+168
+Due 2020 to 2023
+Due thereafter
+Total
+12/31/2018
+Purchase Obligations
+827
+1,290
+17
+2,133
+Section D Invested Capital
+To Our
+Stakeholders
+19,500
+Combined
+22,380
+201
+The table below shows non-current assets excluding financial
+instruments, deferred tax assets, post-employment benefit assets,
+and rights arising under insurance contracts.
+Non-Current Assets by Region
+€ millions
+2018
+2017
+Germany
+4,184
+3,714
+Rest of EMEA
+4,742
+4,338
+EMEA
+8,926
+8,052
+United States
+22,123
+19,300
+Rest of Americas
+258
+Americas
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+60
+13
+10,481
+20
+10,210
+24
+3
+12,133
+24
+6,759
+16
+80
+22,614
+44
+16,969
+40
+33
+11,331
+22
+25,515
+56
+28,877
+% of
+Total Equity and
+Liabilities
+Section E - Capital Structure,
+Financing, and Liquidity
+Additional
+Infomation
+This section describes how SAP manages its capital structure.
+Our capital management is based on a high equity ratio, modest
+financial leverage, a well-balanced maturity profile, and deep debt
+capacity.
+(E.1) Capital Structure Management
+The primary objective of our capital structure management is to
+maintain a strong financial profile for investor, creditor, and
+customer confidence, and to support the growth of our business.
+We seek to maintain a capital structure that will allow us to cover
+our funding requirements through the capital markets on
+reasonable terms and, in so doing, ensure a high level of
+independence, confidence, and financial flexibility.
+SAP SE's long-term credit rating is "A2" by Moody's with stable
+outlook, and "A" by Standard & Poor's. Standard & Poor's revised
+the outlook from positive to stable in 2018.
+Equity
+Current liabilities
+15
+Non-current liabilities
+Thereof financial debt
+Total equity and liabilities
+12/31/2018
+12/31/2017
+A in %
+€ millions
+% of
+€ millions
+Total Equity and
+Liabilities
+Liabilities
+317
+Other financial assets
+2,311
+For more information about our segments and the changes in
+2018, see Note (C.1).
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+23,725
+21,271
+12/31/2018
+12/31/2017
+€ millions
+Goodwill by Operating Segment
+12/31/2018
+12/31/2017
+Carrying amount
+102
+12/31/2018
+2
+Foreign currency exchange differences
+100
+12/31/2017
+-4
+Foreign currency exchange differences
+104
+For impairment testing purposes, the carrying amount of
+goodwill has been allocated to the operating segments expected to
+benefit from goodwill as follows:
+Applications,
+Technology &
+Services
+SAP Business
+Network
+Customer
+Experience
+Revenue growth rate achieved in the current fiscal year, adjusted for an expected increase in SAP's
+addressable cloud and database markets; expected growth in the established software applications and
+analytics markets. Values assigned reflect our past experience and our expectations regarding an
+increase in the addressable markets.
+Basis for Determining Values Assigned to Key Assumption
+The key assumptions on which management based its cash flow
+projections for the period covered by the underlying business plans
+are as follows:
+Terminal growth rate
+Discount rates
+Budgeted operating margin
+Budgeted revenue growth
+Key Assumption
+At the end of 2018, the goodwill allocated to the Customer
+Experience segment includes goodwill of €1,656 million reallocated
+from the Applications, Technology & Services segment due to the
+changes in segment composition in 2018.
+23,725
+1/1/2017
+9
+6,925
+13,498
+21,271
+0
+0
+6,617
+2,967
+14,654
+Total
+Other
+3,293
+Accumulated amortization
+23,827
+12/31/2018
+Changes in business strategy
+In making impairment assessments for our goodwill and intangible
+assets, the outcome of these tests is highly dependent on
+management's assumptions regarding future cash flow projections
+and economic risks, which require significant judgment and
+assumptions about future developments. They can be affected by a
+variety of factors, including:
+The annual goodwill impairment test is performed at the level of our
+operating segments since there are no lower levels in SAP at which
+goodwill is monitored for internal management purposes. The test is
+performed at the same time (at the beginning of the fourth quarter)
+for all operating segments.
+Accounting Policies, Judgments, and Estimates
+(D.2) Goodwill
+These pro forma numbers have been prepared for comparative
+purposes only. The pro forma revenue and profit numbers are not
+necessarily indicative either of the results of operations that would
+have actually occurred had the acquisition been in effect at the
+beginning of the respective period, or of future results.
+Employee benefits, such as share-based compensation
+Transaction expenses incurred as part of the acquisition
+Related income taxes
+The borrowing costs on the funding levels and debt/equity
+position of SAP after the business combination
+The impact of fair value adjustments on contract
+liabilities/deferred income on a cumulative basis
+Additional depreciation and amortization that would have been
+charged assuming the fair value adjustment to property, plant,
+and equipment, and to intangible assets had been applied from
+January 1, 2018
+Internal forecasts
+-60
+180
+24,708
+2018
+as Reported
+Contribution
+of Callidus
+.Iil Profit after tax
+.Iil Revenue
+€ millions
+Callidus Acquisition: Impact on SAP's Financials
+Additional
+Infomation
+The amounts of revenue and profit or loss of the Callidus
+business acquired in 2018 since the acquisition date are included in
+the consolidated income statements for the reporting period as
+follows:
+4,088
+Operating margin budgeted for a given budget period equals the operating margin achieved in the current
+fiscal year, increased by expected efficiency gains. Values assigned reflect past experience, except for
+efficiency gains.
+Estimation of weighted-average cost of capital
+The outcome of goodwill impairment tests may also depend on the
+allocation of goodwill to our operating segments. This allocation
+involves judgment as it is based on our estimates regarding which
+operating segments are expected to benefit from the synergies of
+business combinations.
+1,609
+Additions from business combinations
+847
+Foreign currency exchange differences
+21,371
+12/31/2017
+205
+Additions from business combinations
+-2,249
+Foreign currency exchange differences
+Changes to the assumptions underlying our goodwill and intangible
+assets impairment assessments could require material adjustments
+to the carrying amount of our recognized goodwill and intangible
+assets as well as the amounts of impairment charges recognized in
+profit or loss.
+23,415
+Historical cost
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+€ millions
+Goodwill
+Stakeholders
+To Our
+Section D Invested Capital
+162
+1/1/2017
+Our estimated cash flow projections are discounted to present value using discount rates (after-tax rates
+for the SAP Business Network segment and pre-tax rates for all other segments). Pre-tax discount rates
+are based on the weighted average cost of capital (WACC) approach.
+Our estimated cash flow projections for periods beyond the business plan were extrapolated using
+segment-specific terminal growth rates. These growth rates do not exceed the long-term average growth
+rates for the markets in which our segments operate.
+Section D Invested Capital
+8.6
+8.2
+9.0
+9.3
+9.4
+NA
+Terminal growth rate
+3.0
+2.9
+3.0
+After-tax discount rate
+3.0
+NA
+Detailed planning period (in years)
+5
+3
+9
+9
+5
+NA
+Applications, Technology & Services
+The recoverable amount of the segment has been determined
+based on a value-in-use calculation. The calculation uses cash flow
+projections based on actual operating results and a group-wide
+business plan approved by management.
+3.0
+We believe that no reasonably possible change in any of the
+above key assumptions would cause the carrying amount of our
+Applications, Technology & Services segment to exceed the
+recoverable amount.
+NA
+11.9
+Additional
+Infomation
+Applications, Technology & Services
+SAP Business Network
+Customer Experience
+2018
+2017
+2018
+2017
+2018
+2017
+11.7
+4.8
+13.8
+14.9
+32.9
+ΝΑ
+Budgeted revenue growth (average of
+the budgeted period)
+Pre-tax discount rate
+11.0
+10.6
+11.5
+4.8
+Impact of the Business Combination on Our
+Financial Statements
+SAP Business Network
+We are using a target operating margin of 33% (2017: 33%) for
+the segment at the end of the budgeted period as a key assumption,
+which is within the range of expectations of market participants (for
+example, industry analysts).
+ΝΑ
+10.2
+NA
+-28
+ΝΑ
+> Accounting Policies, Judgments, and Estimates
+We classify intangible assets according to their nature and use in
+our operations. Software and database licenses consist primarily of
+technology for internal use, whereas acquired technology consists
+primarily of purchased software to be incorporated into our product
+offerings and in-process research and development (IPRD).
+Customer relationship and other intangibles consist primarily of
+customer relationships and acquired trademark licenses.
+All our purchased intangible assets other than goodwill have finite
+useful lives. They are initially measured at acquisition cost and
+subsequently amortized based on the expected consumption of
+economic benefits over their estimated useful lives ranging from
+two to 20 years.
+Acquired in-process research and development project assets are
+typically amortized over five to seven years (starting upon
+completion/marketing of the respective projects).
+Whereas in general, expenses for internally generated intangibles
+are expensed as incurred, development expenses incurred on
+standard-related customer development projects (for which the
+IAS 38 criteria are met cumulatively) are capitalized on a limited
+164
+Section D Invested Capital
+-8.3
+Key Assumptions and Detailed Planning Period
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined
+To Our
+163
+To Our
+Stakeholders
+The recoverable amount of the segment has been determined
+based on fair value less costs of disposal calculation. The fair value
+measurement was categorized as a level 3 fair value based on the
+inputs used in the valuation technique. The cash flow projections are
+based on actual operating results and specific estimates covering a
+detailed planning period and the terminal growth rate thereafter.
+The projected results were determined based on management's
+estimates and are consistent with the assumptions a market
+participant would make. The segment operates in a relatively
+immature area with significant growth rates projected for the near
+future. We therefore have a longer and more detailed planning
+period than one would apply in a more mature segment.
+2017
+Customer Experience
+The recoverable amount exceeds the carrying amount by
+€13,580 million (2017: €8,143 million).
+The following table shows the amounts by which the key
+assumptions would need to change individually for the recoverable
+amount to be equal to the carrying amount:
+Sensitivity to Change in Assumptions
+SAP Business Network
+2018
+2017
+Budgeted revenue growth (change in pp)
+-11.8
+-8.6
+After-tax discount rate (change in pp)
+2018
+6.6
+Target operating margin at the end of the
+-22
+-17
+budgeted period (change in pp)
+Customer Experience
+The recoverable amount of the segment has been determined
+based on a value-in-use calculation. The calculation uses cash flow
+projections based on actual operating results and a group-wide
+business plan approved by management. The recoverable amount
+exceeds the carrying amount by €8,476 million.
+The following table shows the amounts by which the key
+assumptions would need to change individually for the recoverable
+amount to be equal to the carrying amount:
+Sensitivity to Change in Assumptions
+Budgeted revenue growth (change in pp)
+Pre-tax discount rate (change in pp)
+Target operating margin at the end of the
+budgeted period (change in pp)
+(D.3) Intangible Assets
+4.3
+Further Information on Economic,
+Environmental, and Social Performance
+We have allocated the Callidus goodwill and intangibles to the
+newly established Customer Experience segment. For more
+information about our segments and about the changes in our
+segment structure, see Note (C.1).
+For the Callidus acquisition, we expect synergies particularly in
+the following areas:
+Other additions
+193
+0
+36
+229
+Retirements/disposals
+Transfers
+12/31/2018
+-43
+-62
+-41
+-146
+25
+0
+-28
+-3
+996
+2,178
+5,212
+8,386
+Accumulated amortization
+562
+410
+148
+4
+-803
+12/31/2017
+809
+1,992
+4,617
+7,418
+Adoption of IFRS 15
+0
+0
+14
+1/1/2017
+14
+809
+1,992
+4,631
+7,432
+Foreign currency exchange differences
+8
+100
+204
+312
+Additions from business combinations
+1/1/2018
+589
+2,186
+2,256
+Additions amortization
+95
+216
+337
+648
+Retirements/disposals
+-23
+-62
+-25
+-110
+170
+12/31/2018
+1,775
+2,705
+5,159
+Carrying amount
+12/31/2017
+12/31/2018
+Significant Intangible Assets
+€ millions, unless otherwise stated
+208
+448
+679
+-62
+87
+6
+5,031
+Foreign currency exchange differences
+-16
+-208
+-219
+-443
+Additions amortization
+79
+254
+327
+77
+660
+-51
+-688
+-58
+-797
+12/31/2017
+601
+1,544
+2,306
+4,451
+Foreign currency exchange differences
+Retirements/disposals
+-688
+-53
+Percent, unless otherwise stated
+Intangible Assets
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined
+To Our
+Section D Invested Capital
+These judgments impact the total amount of intangible assets that
+we present in our balance sheet as well as the timing of recognizing
+development expenses in profit or loss.
+Determining whether a cost is directly or indirectly attributable to
+an intangible asset and whether a cost is necessary for
+completing a development
+Determining the future ability to use or sell the intangible asset
+arising from the development and the determination of the
+probability of future benefits from sale or use
+Determining whether the conditions for recognizing an intangible
+asset are met requires assumptions about future market
+conditions, customer demand, and other developments.
+The term "technical feasibility" is not defined in IFRS, and
+therefore determining whether the completion of an asset is
+technically feasible requires judgment and a company-specific
+approach.
+Determining whether activities should be considered research
+activities or development activities
+€ millions
+The goodwill arising from our acquisitions consists largely of
+synergies and the know-how and technical skills of the acquired
+businesses' workforces.
+The amortization method, as IFRS requires the straight-line
+method to be used unless we can reliably determine the pattern
+in which the asset's future economic benefits are expected to be
+consumed by us
+The useful life of an intangible asset, as this is based on our
+estimates regarding the period over which the intangible asset is
+expected to produce economic benefits to us
+-
+Judgment is required in determining the following:
+Amortization expenses of intangible assets are classified as cost of
+cloud and software, cost of services, research and development,
+sales and marketing, and general and administration, depending on
+the use of the respective intangible assets.
+Cross-selling opportunities of Callidus products to existing SAP
+customers across all regions, using SAP's sales organization
+Integrating Callidus products into SAP C/4 HANA to strengthen
+SAP's customer experience suite of solutions
+Improved profitability in Callidus sales and operations
+Total consideration transferred
+Goodwill
+2,004
+scale with those amounts being amortized over the estimated useful
+life of eight years.
+1,483
+521
+Both the amortization period and the amortization method have an
+impact on the amortization expense that is recorded in each period.
+Determining whether internally generated intangible assets from
+development qualify for recognition requires significant judgment,
+particularly in the following areas:
+Further Information on Economic,
+Environmental, and Social Performance
+165
+Infomation
+103
+10
+0
+93
+Retirements/disposals
+Additional
+124
+73
+51
+0
+Additions from business combinations
+-823
+-523
+Other additions
+-22
+-278
+Software and
+Database Licenses
+Acquired
+Technology/IPRD
+Total
+Historical cost
+1/1/2017
+Customer
+Relationship and
+Other Intangibles
+791
+2,907
+5,119
+8,817
+Foreign currency exchange differences
+6,595
+68
+100
+97
+1,561
+83
+5.034
+Financial debt as
+99
+Section E- Capital Structure, Financing, and Liquidity
+% of financial
+liabilities
+Financial liabilities are unsecured, except for the retention of title
+and similar rights customary in our industry. Effective interest rates
+on our financial debt (including the effects from interest rate swaps)
+were 1.33% in 2018, 1.29% in 2017, and 1.25% in 2016.
+For information about the risk associated with our financial
+liabilities, see Note (F.1). For information about fair values, see
+Note (F.2).
+172
+To Our
+Stakeholders
+6,301
+96
+5,002
+125
+4,965
+1,005
+placement
+transactions
+Bank loans
+9
+49
+9
+49
+58
+24
+0
+24
+0
+24
+Financial debt
+759
+10,572
+768
+Financial liabilities
+1,125
+10,536
+10,553
+11,303
+11,678
+1,299
+1,298
+1,130
+759
+Bonds
+0
+Eurobond 18 - 2018
+2022
+99.654%
+0.250% (fix)
+0.36%
+€900
+500
+897
+Eurobond 19 - 2018
+2024
+99.227%
+0.750% (fix)
+0.89%
+€850
+843
+0
+€500
+-0.01%
+0.000% (var.)
+99.576%
+1.000% (fix)
+1.06%
+€500
+498
+0
+Eurobond 16 - 2018
+2030
+98.687%
+1.375% (fix)
+1.50%
+€500
+494
+0
+Eurobond 17 - 2018
+2020
+100.024%
+0
+2026
+Eurobond 20 - 2018
+98.871%
+US$300
+262
+0
+Bonds
+10,204
+5,147
+All of our Eurobonds are listed for trading on the Luxembourg Stock Exchange.
+3.35%
+Private Placements
+Coupon Rate
+Effective Interest
+Rate
+Nominal Volume
+(in respective
+2018
+2017
+965
+Maturity
+3.306% (var.)
+100.000%
+2025
+1.250% (fix)
+1.38%
+€1,000
+988
+0
+Eurobond 21 - 2018
+2031
+98.382%
+1.625% (fix)
+1.78%
+€1,250
+1,229
+0
+Eurobonds
+9.942
+5,147
+USD bond - 2018
+2028
+Eurobond 15 - 2018
+0
+502
+Eurobond 7 - 2014
+2018
+99.307%
+100.000%
+2.125% (fix)
+2.29%
+€750
+768
+2019
+0.000% (var.)
+€750
+0
+750
+Eurobond 8 - 2014
+2023
+99.478%
+1.125% (fix)
+0.00%
+Eurobond 6-2012
+(in € millions)
+(in € millions)
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Maturity
+Issue Price
+Coupon Rate
+Effective Nominal Volume
+Interest Rate
+(in respective
+2018
+Carrying
+Amount
+2017
+Carrying
+Amount
+currency in
+millions)
+1.24%
+€1,000
+996
+995
+€600
+595
+594
+Eurobond 13 - 2016
+2018
+100.000%
+0.000% (var.)
+0.00%
+€400
+0
+400
+Eurobond 14 - 2018
+2021
+100.519%
+0.000% (var.)
+-0.15%
+€500
+1.13%
+currency in
+millions)
+1.000% (fix)
+2025
+Eurobond 9 - 2014
+2027
+99.284%
+1.750% (fix)
+1.87%
+€1,000
+992
+991
+Eurobond 11 - 2015
+2020
+100.000%
+0.000% (var.)
+0.07%
+€650
+649
+649
+Eurobond 12 - 2015
+99.264%
+125
+2.918
+1,041
+1.139
+0
+1,139
+1,195
+0
+1,195
+Money market and other funds
+314
+0
+314
+Debt securities
+4,117
+4,117
+Time deposits
+2,558
+0
+2,558
+2.918
+0
+Cash at banks
+Total
+Non-Current
+0
+400
+○
+400
+Management Report
+Stakeholders
+Combined
+To Our
+171
+Section E- Capital Structure, Financing, and Liquidity
+4,011
+0
+4,011
+8,627
+0
+8,627
+Cash and cash equivalents
+0
+0
+0
+-3
+0
+-3
+Expected credit loss allowance
+0
+0
+0
+Current
+Consolidated Financial
+Statements IFRS
+Total
+Current
+774
+211
+4,617
+4,011
+8,627
+Cash and cash equivalents
+Current time deposits and debt
+securities
+Δ
+2017
+2018
+€ millions
+-563
+Group Liquidity
+As we do not designate financial liabilities as FVTPL, we generally
+classify non-derivative financial liabilities as AC.
+we draw from and make payments on behalf of our customers for
+customers' employee expense reimbursements, related credit card
+payments, and vendor payments. We present these funds in cash
+and cash equivalents and record our obligation to make these
+expense reimbursements and payments on behalf of our customers
+as customer funding liabilities.
+Non-derivative financial liabilities include bank loans, issued bonds,
+private placements, and other financial liabilities. Included in other
+financial liabilities are customer funding liabilities which are funds
+Non-Derivative Financial Liabilities
+risk exception, as it is our policy to invest only in high-quality
+assets of issuers with a minimum rating of at least investment
+grade to minimize the risk of credit losses. Thus, these assets are
+always allocated to stage 1 of the three-stage credit loss model,
+and we record a loss allowance at an amount equal to 12-month
+expected credit losses. This loss allowance is calculated based
+on our exposure at the respective reporting date, the loss given
+default for this exposure, and the credit default swap spread as a
+measure for the probability of default. Even though we invest
+only in assets of at least investment-grade, we also closely
+observe the development of credit default swap spreads as a
+measure of market participants' assessments of the
+creditworthiness of a debtor to evaluate probable significant
+increases in credit risk to timely react to changes should these
+manifest. Among others, we consider cash at banks, time
+deposits, and debt securities to be in default when the
+counterparty is unlikely to pay its obligations in full, when there is
+information about a counterparty's financial difficulties or if there
+is a drastic increase in a counterparty's credit default swap
+spread for a prolonged time period while the overall market
+environment remains generally stable. Such financial assets are
+written off either partially or in full if the likelihood of recovery is
+considered remote, which might be evidenced, for example, by
+the bankruptcy of a counterparty of such financial assets.
+Loans and other financial receivables are monitored based on
+borrower-specific internal and external information to determine
+whether there has been a significant increase in credit risk since
+initial recognition. We consider such assets to be in default if they
+are significantly beyond their due date or if the borrower is
+unlikely to pay its obligation. A write-off occurs when the
+likelihood of recovery is considered remote, for example when
+bankruptcy proceedings have been finalized or when all
+enforcement efforts have been exhausted.
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Carrying Carrying Amount
+Amount
+(in € millions)
+Expenses and gains or losses on financial liabilities at AC mainly
+consist of interest expense which is shown in Financial income, net.
+Gains/losses from foreign currency exchange rate fluctuations are
+included in Other non-operating income/expense, net.
+Group liquidity
+8,838
+4,785
+2017
+2018
+€ millions
+Cash and Cash Equivalents
+Group liquidity consists of cash at banks, money market and
+other funds, time deposits, and debt securities (both with remaining
+maturities of less than one year). Financial debt is defined as the
+nominal volume of bank loans, private placements, and bonds. Net
+liquidity is group liquidity less financial debt.
+While we continuously monitor the ratios presented in the capital
+structure table, we actively manage our liquidity and structure of
+our financial indebtedness based on the ratios group liquidity and
+net liquidity.
+-1,013
+-1,479
+-2,493
+Net liquidity
+-5,067
+-6,264
+-11,331
+Financial debt
+-5,607
+-4,965
+-10,572
+Non-current financial debt
+540
+-1,299
+-759
+Current financial debt
+4,053
+Non-Current
+Further Information on Economic,
+Environmental, and Social Performance
+Non-Derivative Financial Debt Investments
+Nominal Volume
+2017
+2018
+€ millions
+Financial Debt
+For more information about financial risk and the nature of risk,
+see Note (F.1).
+acquired bonds of mainly financial and non-financial corporations
+and municipalities.
+Time deposits and debt securities with original maturity of three
+months or less are presented as cash and cash equivalents, and
+those with original maturities of greater than three months
+(investments considered in group liquidity) are presented as other
+financial assets. Debt securities consist of commercial papers and
+as % of other financial assets
+51
+Current
+23
+26
+17
+60
+Non-derivative financial debt investments
+2,145
+1,155
+990
+1,984
+1,536
+448
+84
+Non-
+Current
+Current
+Non-
+Current
+○
+1,011
+0
+Private
+5,147
+3,997
+1,149
+4,000
+1,150
+10,204
+9,445
+759
+9,512
+750
+Bonds
+Total
+Non-
+Current
+Current
+Non-
+Current
+Current
+Carrying Amount
+Nominal Volume
+Carrying Amount
+Total
+44 Other financial assets
+1,092
+260
+832
+39
+77
+0
+77
+Debt securities
+736
+0
+736
+137
+0
+137
+Time deposits
+Total
+Non-Current
+Current
+Total
+Non-Current
+Current
+2017
+2018
+€ millions
+Infomation
+Additional
+0
+1,041
+39
+0
+524
+256
+268
+Non-derivative financial debt investments
+0
+0
+0
+-3
+0
+-3
+Expected credit loss allowance
+163
+105
+58
+147
+91
+57
+Loans and other financial receivables
+155
+155
+0
+165
+165
+Financial instruments related to employee benefit plans
+(in € millions)
+To further reduce our credit risk, we require collateral for certain
+investments in the full amount of the investment volume, which we
+would be allowed to make use of in the case of default of the
+counterparty to the investment. As such collateral, we only accept
+bonds with at least investment-grade rating level.
+Tranche 4 - 2011
+0.613%
+USD interest rate swaps
+2018
+Nominal amounts
+253
+194
+88
+€ millions
+Fixed-Rate
+Borrowing in EUR
+Fixed-Rate
+Borrowing in USD
+Average variable
+interest rate
+3.366%
+3.341%
+3.220%
+Notional amount
+Average variable
+interest rate
+750
+Nominal amounts
+EUR interest rate swaps
+10
+1
+Other financial liabilities
+0
+-3
+10
+Change in fair value used for
+measuring ineffectiveness
+750
+As at December 31, 2018, we held the following instruments to
+hedge exposures to changes in interest rates:
+€ millions
+2018
+Maturity
+2019
+2020
+2022
+2024
+Details on Hedging Instruments in Interest Rate
+Hedges
+535
+Carrying amount
+749
+Section F - Management of Financial Risk Factors
+To Our
+Combined
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Interest Rate Risk Exposure
+178
+€ billions
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+2018
+2017
+Year-End
+Average
+High
+Fair value interest rate risk
+Other financial assets
+The amounts as at December 31, 2018, designated as hedging
+instruments were as follows:
+Our interest rate exposure (and our average/high/low exposure)
+as at December 31 was as follows:
+534
+Accumulated fair value
+10
+-32
+adjustments in Other financial
+liabilities
+Change in fair value used for
+hedging gains/losses
+10
+measuring ineffectiveness
+Accumulated amount of fair value
+0
+-33
+hedge adjustments for hedged
+items ceased to be adjusted for
+None of the fair value adjustment from the receiver swaps, the
+basis adjustment on the underlying hedged items held in fair value
+hedge relationships, and the difference between the two recognized
+in financial income, net, is material in any of the years presented.
+Interest Rate Exposure
+1
+535
+750
+Interest Rate
+Swaps for USD
+Borrowing
+2018
+2017
+2018
+2017
+2016
+Derivatives held within a designated cash flow hedge relationship
+All major currencies -10% (2017: all major currencies -10%; 2016:
+Brazil real: -25%; all other major currencies -10%)
+Effects on Other Non-Operating Effects on Other Comprehensive Income
+Expense, Net
+2016
+All major currencies +10% (2017: all major currencies +10%; 2016:
+Brazil real: +25%; all other major currencies +10%)
+All currencies -10%
+11
+15
+23
+All currencies +10%
+-11
+-15
+Embedded derivatives
+-23
+We calculate our sensitivity on an upward/downward shift of
++/- 10% of the foreign currency exchange rate between the euro
+and all major currencies (2017: +/- 10% of the foreign currency
+exchange rate between the euro and all other major currencies;
+2016: upward/downward shift of +/- 25% of the foreign currency
+exchange rate between the euro and Brazilian real; +/- 10% of the
+foreign currency exchange rate between the euro and all other
+major currencies). If, on December 31, 2018, 2017, and 2016, the
+foreign currency exchange rates had been higher/lower as
+described above, this would have the following effects on other non-
+operating expense, net and other comprehensive income:
+0.7
+2018
+2017
+6.3
+0.9
+Foreign Currency Exchange Rate Exposure
+Our risk exposure is based on the following assumptions:
+The SAP Group's entities generally operate in their functional
+currencies. In exceptional cases and limited economic
+environments, operating transactions are denominated in
+currencies other than the functional currency, leading to a
+foreign currency exchange rate risk for the related monetary
+instruments. Where material, this foreign currency exchange rate
+risk is hedged. Therefore, fluctuations in foreign currency
+exchange rates have a significant impact neither on profit nor on
+other comprehensive income with regard to our non-derivative
+monetary financial instruments and related income or expenses.
+Our free-standing derivatives designed for hedging foreign
+currency exchange rate risks almost completely balance the
+changes in the fair values of the hedged item attributable to
+exchange rate movements in the Consolidated Income
+Statements in the same period. As a consequence, the hedged
+items and the hedging instruments are not exposed to foreign
+currency exchange rate risks, and thereby have no effect on
+profit.
+Foreign Currency Sensitivity
+0.9
+€ millions
+Highest exposure
+Lowest exposure
+Foreign Currency Exchange Rate Sensitivity
+2.1
+0.9
+6.3
+1.0
+Average exposure
+Low
+FX option held in connection with the acquisition of Qualtrics
+-29
+Additional
+Infomation
+Interest Rate Risk
+Interest Rate Risk Factors
+We are exposed to interest rate risk as a result of our investing
+and financing activities mainly in euros and U.S. dollars, since a
+large part of our investments are based on variable rates and/or
+short maturities (2018: 48%; 2017: 79%) and most of our financing
+transactions are based on fixed rates and long maturities (2018:
+83%; 2017: 71%).
+Interest Rate Risk Management
+The aim of our interest rate risk management is to reduce profit
+or loss volatility and optimize our interest result by creating a
+balanced structure of fixed and variable cash flows. We therefore
+manage interest rate risks by adding interest-rate-related derivative
+instruments to a given portfolio of investments and debt financing.
+The desired fixed-floating mix of our net debt is set by the Treasury
+Committee.
+Derivatives Designated as Hedging Instruments (Fair Value
+Hedges)
+Further Information on Economic,
+Environmental, and Social Performance
+To match the interest rate risk from our financing transactions to
+our investments, we use receiver interest rate swaps to convert
+certain fixed-rate financial liabilities to floating, and by this means
+secure the fair value of the swapped financing transactions in a 1:1
+ratio. Including interest rate swaps, 71% (2017: 49%) of our total
+interest-bearing financial liabilities outstanding as at
+December 31, 2018, had a fixed interest rate.
+Designated Hedged Items in Interest Rate Hedges
+Designated Hedging Instruments in Interest Rate
+Hedges
+€ millions
+Notional amount
+Carrying amount
+2018
+Interest Rate
+Swaps for EUR
+Borrowing
+The amounts as at December 31, 2018, relating to items
+designated as hedged items were as follows:
+USD -10%
+Consolidated Financial
+Statements IFRS
+Stakeholders
+0
+0
+USD +10%
+559
+0
+0
+Section F - Management of Financial Risk Factors
+Management Report
+62
+79
+-62
+-71
+-79
+177
+To Our
+Combined
+71
+Year-End
+Average
+High
+Increase in equity prices
+65
+56
+84
+and respective
+unobservable inputs of 10%
+- increase of Financial
+securities
+income, net by
+-65
+-56
+and respective
+unobservable inputs of 10%
+- decrease of Financial
+income, net by
+Share-based payments
+Decrease in equity prices
+-81
+Investments in equity
+2017
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+investees. The fair value of our listed equity investments depends on
+the equity prices, while the fair value of the unlisted equity
+investments is influenced by various unobservable input factors.
+We also monitor the exposure with regard to our share-based
+payment plans. To reduce resulting profit or loss volatility, we hedge
+certain cash flow exposures associated with these plans by
+purchasing derivative instruments, but we do not establish a
+designated hedge relationship.
+2016
+Equity Price Exposure
+For information about the exposure from our share-based
+payments plans, see Note (B.3).
+Equity Price Sensitivity
+In our sensitivity analysis for our share-based payments plans,
+we include the hedging instruments and the underlying share-based
+payments even though the latter are scoped out of IFRS 7, as we
+believe that taking only the derivative instrument into account would
+not properly reflect our equity price risk exposure.
+Our sensitivity towards a fluctuation in equity prices is as follows:
+Equity Price Sensitivity
+€ millions
+2018
+Our exposure from our investments in equity securities was
+€1,248 million (2017: €827 million; 2016: €952 million).
+To Our
+Stakeholders
+Increase in equity prices of
+-Increase of share-
+-46
+-44
+gains from hedging
+instruments by
+Credit Risk
+Credit Risk Factors
+To reduce the credit risk in investments, we arrange to receive
+rights to collateral for certain investing activities in the full amount
+of the investment volume, which we would be allowed to make use
+of only in the case of default of the counterparty to the investment.
+In the absence of other significant agreements to reduce our credit
+-44
+risk exposure, the total amounts recognized as cash and cash
+equivalents, current investments, loans, and other financial
+receivables, trade receivables, and derivative financial assets
+represent our maximum exposure to credit risks, except for the
+agreements mentioned above.
+Cash at Banks, Time Deposits, and Debt Securities
+To mitigate the credit risk from our investing activities and
+derivative financial assets, we conduct all our activities only with
+approved major financial institutions and issuers that carry high
+external ratings, as required by our internal treasury guideline.
+Among its stipulations, the guideline requires that we invest only in
+assets from issuers with a minimum rating of at least “BBB flat." We
+only invest in issuers with a lower rating in exceptional cases. Such
+investments were not material in 2018 and 2017. The weighted
+average rating of our financial assets is in the range A to A-. We
+pursue a policy of cautious investments characterized by
+predominantly current investments, standard investment
+instruments, as well as a wide portfolio diversification by doing
+business with a variety of counterparties.
+In addition, the concentration of credit risk that exists when
+counterparties are involved in similar activities by instrument,
+sector, or geographic area is further mitigated by diversification of
+counterparties throughout the world and adherence to an internal
+limit system for each counterparty. This internal limit system
+stipulates that the business volume with individual counterparties is
+restricted to a defined limit that depends on the lowest official long-
+term credit rating available by at least one of the major rating
+agencies, the Tier 1 capital of the respective financial institution, or
+participation in the German Depositors' Guarantee Fund or similar
+protection schemes. We continuously monitor strict compliance
+with these counterparty limits. As the premium for credit default
+swaps mainly depends on market participants' assessments of the
+creditworthiness of a debtor, we also closely observe the
+development of credit default swap spreads in the market to
+evaluate probable risk developments and react in a timely manner
+to changes should these manifest.
+For cash at banks, time deposits, and debt securities such as
+acquired bonds or commercial paper, we apply the general
+impairment approach. As it is our policy to only invest in high-quality
+assets of issuers with a minimum rating of at least investment grade
+so as to minimize the risk of credit losses, we use the low credit risk
+exception. Thus, these assets are always allocated to stage 1 of the
+three-stage credit loss model and we record a loss allowance for an
+amount equal to 12-month expected credit losses. This loss
+allowance is calculated based on our exposure as at the respective
+reporting date, the loss given default for this exposure, and the
+credit default swap spread as a measure for the probability of
+default. To ensure that during their lifetime our investments always
+fulfill the requirement of being investment-grade, we monitor
+changes in credit risk by tracking published external credit ratings.
+Among other things, we consider cash at banks, time deposits, and
+180
+Section F - Management of Financial Risk Factors
+Combined
+Credit Risk Management
+20%
+Decrease of offsetting
+296
+-279
+-371
+-333
+based payment
+expenses by
+- Increase of offsetting
+57
+payment expenses by
+65
+gains from hedging
+instruments by
+Decrease in equity prices of
+20%
+Decrease of share-based
+262
+337
+52
+Year-end exposure toward all our major
+currencies
+179
+Our listed equity investments are monitored based on the
+current market value that is affected by the fluctuations in the
+volatile stock markets worldwide. Unlisted equity investments are
+monitored based on detailed financial information provided by the
+From financing
+1.96
+2.08
+2.32
+1.45
+1.81
+1.94
+3.52
+2.31
+From interest rate swaps
+1.28
+1.31
+1.36
+1.27
+1.35
+1.75
+1.80
+2.22
+4.10
+3.80
+Low
+From investments
+0.08
+0.09
+0.10
+0.08
+0.04
+3.78
+0.12
+0.03
+Cash flow interest rate risk
+From investments (including cash)
+4.24
+4.16
+5.65
+3.50
+0.31
+Section F - Management of Financial Risk Factors
+1.35
+A sensitivity analysis is provided to show the impact of our
+interest rate risk exposure on profit or loss and equity in accordance
+with IFRS 7, considering the following:
+9
+29
+29
+Variable-rate financing
+Interest rates +100 bps for U.S. dollar area/+25 bps for euro area (2017: +25 bps for euro area;
+2016: +50 bps for euro area)
+-24
+-5
+5
+-21
+4
+0
+0
+Equity Price Risk
+Equity Price Risk Factors
+We are exposed to equity price risk with regard to our
+investments in equity securities and our share-based payments
+plans.
+Equity Price Risk Management
+Interest rates-25 bps for U.S. dollar/-10 bps for for euro area (2017: -25 bps for euro area;
+2016: -50 bps for euro area)
+Interest Rate Sensitivity
+Interest rates -25 bps for U.S. dollar/-10 bps for euro area (2017: -25 bps for U.S. dollar/euro
+area; 2016: -50 bps for U.S. dollar/euro area)
+-26
+-
+Changes in interest rates only affect the accounting for non-
+derivative fixed-rate financial instruments if they are recognized
+at fair value. Therefore, such interest rate changes do not change
+the carrying amounts of our non-derivative fixed-rate financial
+liabilities, as we account for them at amortized cost. Investments
+in fixed-rate financial assets classified as available-for-sale were
+not material at each year end reported. Thus, we do not consider
+any fixed-rate instruments in the equity-related sensitivity
+calculation.
+Income or expenses recorded in connection with non-derivative
+financial instruments with variable interest rates are subject to
+interest rate risk if they are not hedged items in an effective
+hedge relationship. Thus, we take into consideration interest rate
+changes relating to our variable-rate financing and our
+investments in money market instruments in the profit-related
+sensitivity calculation.
+The designation of interest rate receiver swaps in a fair value
+hedge relationship leads to interest rate changes affecting
+financial income, net. The fair value movements related to the
+interest rate swaps are not reflected in the sensitivity calculation,
+as they offset the fixed interest rate payments for the bonds and
+private placements as hedged items. However, changes in
+market interest rates affect the amount of interest payments
+from the interest rate swap. As a consequence, we include those
+effects of market interest rates on interest payments in the
+profit-related sensitivity calculation.
+Due to the different interest rate expectations for the U.S. dollar
+and the euro area, we base our sensitivity analyses on a yield curve
+upward shift of +100/+30 basis points (bps) for the U.S. dollar/euro
+area (2017: +100/+25bps for the U.S. dollar/euro area; 2016:
++100/+50bps for the U.S. dollar/euro area), and a yield curve
+downward shift of -25/-10bps for the U.S. dollar/euro area (2017:
+-25bps; 2016: -50bps).
+If, on December 31, 2018, 2017, and 2016, interest rates had
+been higher/lower as described above, this would not have had a
+material effect on financial income, net, for our variable interest rate
+investments and would have had the following effects on financial
+income, net.
+-46
+Interest Rate Sensitivity
+Effects on Financial Income, Net
+2018
+2017
+2016
+Derivatives held within a designated fair value hedge relationship
+Interest rates +100 bps for U.S. dollar area/+30 bps for euro area (2017: +100/+25 bps for U.S.
+dollar/euro area; 2016: +100/+50 bps for U.S. dollar/euro area)
+-20
+€ millions
+€ billions
+1.62
+1.61
+-19
+3
+11,303
+Accrued interest
+34
+0
+0
+50
+-1
+14
+47
+Interest rate swaps
+-24
+0
+-1
+17
+0
+-7
+7
+6,301
+62
+0
+0
+-1
+-19
+о
+42
+4,961
+Transaction costs
+-48
+0
+0
+0
+3
+-70
+Financial debt (carrying amount)
+-26
+62
+Total liabilities from financing activities
+4,961
+-54
+1,290
+1,299
+Non-current financial debt
+6,390
+8
+0
+-1
+-144
+-1,289
+4,965
+Financial debt (nominal volume)
+7,826
+-1,364
+-1
+-197
+0
+6,311
+-1,372
+Current financial debt
+7
+48
+-1
+18
+11,343
+€ millions
+12/31/2016
+1,435
+Cash Flows
+Foreign
+Fair Value
+Other
+12/31/2017
+Combinations
+Currency
+Changes
+Business
+0
+Basis adjustment
+0
+Tranche 8-2012
+2024
+3.33% (fix)
+Tranche 9-2012
+2027
+3.53% (fix)
+3.37%
+3.57%
+382
+US$323
+289
+US$100
+96
+93
+Private placements
+1,041
+1,130
+299
+The U.S. private placement notes were issued by one of our subsidiaries that has the U.S. dollar as its functional currency.
+395
+3.22%
+2018
+3.43% (fix)
+3.50%
+US$150
+0
+125
+Tranche 6-2012
+US$444.5
+2020
+2.86%
+US$290
+251
+241
+Tranche 7 2012
+2022
+3.18% (fix)
+2.82% (fix)
+11,331
+Section E Capital Structure, Financing, and Liquidity
+To Our
+Stakeholders
+3
+750
+759
+Non-current financial debt
+4,965
+6,308
+0
+7
+49
+-750
+10,572
+Financial debt (nominal volume)
+6,264
+5,008
+7
+51
+0
+173
+-1,300
+Current financial debt
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Reconciliation of Liabilities Arising from Financing Activities
+The changes in our financial debts are reconciled to the cash flows from borrowings included in the cash flow from financing activities.
+1,299
+€ millions
+Cash Flows
+Business
+Combinations
+Foreign
+Currency
+Fair Value
+Changes
+Other
+12/31/2018
+12/31/2017
+U.S. private placements
+1
+Basis adjustment
+Balances remaining in cash flow hedge
+reserve for which hedge accounting is no
+longer applied
+Forecasted License Payments
+2018
+The amounts as at December 31, 2018, designated as hedging
+instruments were as follows:
+Designated Hedging Instruments in Foreign
+Currency Exchange Rate Hedges
+€ millions
+Nominal amount
+Carrying amount
+Cost of hedging
+Other financial assets
+Change in value recognized in OCI
+Hedge ineffectiveness recognized in
+Finance income, net
+Cost of hedging recognized in OCI
+Amount reclassified from cash flow
+hedge in OCI to Other non-operating
+income, net
+Amount reclassified from cost of
+hedging in OCI to Finance income, net
+-4
+-2
+Other financial liabilities
+Forecasted License Payments
+Cash flow hedge
+Change in value used for calculating
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Foreign Currency Exchange Rate Risk
+Foreign Currency Exchange Rate Risk Factors
+As we are active worldwide, our ordinary operations are subject
+to risks associated with fluctuations in foreign currencies. Since the
+Group's entities mainly conduct their operating business in their
+own functional currencies, our risk of exchange rate fluctuations
+from ongoing ordinary operations is not considered significant.
+However, we occasionally generate foreign-currency-denominated
+receivables, payables, and other monetary items by transacting in a
+currency other than the functional currency. To mitigate the extent
+of the associated foreign currency exchange rate risk, the majority
+of these transactions are hedged as described below.
+In rare circumstances, transacting in a currency other than the
+functional currency also leads to embedded foreign currency
+derivatives being separated and measured at fair value through
+profit or loss.
+In addition, the intellectual property (IP) holders in the SAP
+Group are exposed to risks associated with forecasted
+intercompany cash flows in foreign currencies. These cash flows
+arise out of royalty payments from subsidiaries to the respective IP
+holder. The royalties are linked to the subsidiaries' external revenue.
+This arrangement leads to a concentration of the foreign currency
+exchange rate risk with the IP holders, as the royalties are mostly
+denominated in the subsidiaries' local currencies, while the
+functional currency of the IP holders with the highest royalty volume
+is the euro. The highest foreign currency exchange rate exposure of
+this kind relates to the currencies of subsidiaries with significant
+operations, for example the U.S. dollar, the pound sterling, the
+Japanese yen, the Swiss franc, and the Australian dollar.
+hedge ineffectiveness
+Generally, we are not exposed to any significant foreign currency
+exchange rate risk with regard to our investing and financing
+activities, as such activities are normally conducted in the functional
+currency of the investing or borrowing entity.
+We continuously monitor our exposure to currency fluctuation
+risks based on monetary items and forecasted transactions and
+pursue a Group-wide strategy to manage foreign currency exchange
+rate risk, using derivative financial instruments, primarily foreign
+exchange forward contracts, as appropriate, with the primary aim of
+reducing profit or loss volatility. Most of the hedging instruments are
+not designated as being in a hedge accounting relationship.
+Currency Hedges Designated as Hedging Instruments (Cash Flow
+Hedges)
+We enter into derivative financial instruments, primarily foreign
+exchange forward contracts, to hedge significant forecasted cash
+flows (royalties) from foreign subsidiaries denominated in foreign
+currencies with a hedge ratio of 1:1 and a hedge horizon of up to 12
+months, which is also the maximum maturity of the foreign
+exchange derivatives we use.
+For all years presented, no previously highly-probable
+transaction designated as a hedged item in a foreign currency cash
+flow hedge relationship ceased to be probable. Therefore, we did not
+discontinue any of our cash flow hedge relationships. Also,
+ineffectiveness was either not material or non-existent in all years
+reported. Generally, the cash flows of the hedged forecasted
+transactions are expected to occur and to be recognized in profit or
+loss monthly within a time frame of 12 months from the date of the
+statement of financial position.
+The amounts as at December 31, 2018, relating to items
+designated as hedged items were as follows:
+Designated Hedged Items in Foreign Currency
+Exchange Rate Hedges
+€ millions
+Foreign Currency Exchange Rate Risk
+Management
+Management Report
+2018
+On December 31, 2018, we held the following instruments to
+hedge exposures to changes in foreign currency:
+337
+195
+89.42
+90.21
+130.91
+130.06
+Maturity
+2018
+Forward exchange contracts
+Net exposure in € millions
+Average EUR:GBP forward rate
+Average EUR:JPY forward rate
+Consequently, we are only exposed to significant foreign
+currency exchange rate fluctuations with regard to the following:
+The spot component of derivatives held within a designated cash
+flow hedge relationship affecting other comprehensive income
+Foreign currency embedded derivatives affecting other non-
+operating expense, net
+net
+Thus, our foreign currency exposure (and our average/high/low
+exposure) as at December 31 was as follows:
+Average EUR:CHF forward rate
+1.15
+1.14
+Foreign Currency Exposure
+Average EUR:AUD forward rate
+The foreign currency option held in connection with the planned
+acquisition of Qualtrics affecting other non-operating expense,
+533
+6 to 12 months
+Details on Hedging Instruments in Foreign
+Currency Exchange Rate Hedges
+2
+-9
+4
+0
+2
+22
+-5
+1 to 6 months
+176
+To Our
+Combined
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Section F - Management of Financial Risk Factors
+6.264
+Combined
+175
+7
+6.301
+Accrued interest
+45
+0
+0
+-2
+-31
+0
+34
+Interest rate swaps
+-47
+0
+0
+-1
+24
+-9
+0
+-191
+-1,364
+86
+0
+0
+7
+-31
+0
+62
+-1
+Transaction costs
+0
+0
+0
+7
+-26
+Financial debt (carrying amount)
+7,880
+-32
+To Our
+Stakeholders
+-24
+7,878
+Many transactions constitute economic hedges, and therefore
+contribute effectively to the securing of financial risks but do not
+qualify for hedge accounting under IFRS 9. To hedge currency risks
+inherent in foreign-currency denominated and recognized monetary
+assets and liabilities, we do not designate our held-for-trading
+derivative financial instruments as accounting hedges, because the
+profits and losses from the underlying transactions are recognized
+in profit or loss in the same periods as the profits or losses from the
+derivatives.
+In addition, we occasionally have contracts that contain foreign
+currency embedded derivatives that are required to be accounted
+for separately.
+Fair value fluctuations in the spot component of such derivatives at
+FVTPL are included in Other non-operating income/expense, net
+while the forward element is shown in Financial income, net.
+Derivatives Designated as Hedging Instruments
+a) Cash Flow Hedge
+In general, we apply cash flow hedge accounting to the foreign
+currency risk of highly probable forecasted transactions. With
+regard to foreign currency risk, hedge accounting relates to the spot
+price and the intrinsic values of the derivatives designated and
+qualifying as cash flow hedges. Accordingly, the effective portion of
+these components determined on a present value basis is recorded
+in other comprehensive income. The forward element and time
+element as well as foreign currency basis spreads excluded from the
+hedging relationship are recorded as cost of hedging in a separate
+position in other comprehensive income. As the amounts are not
+material, they are presented together with the effective portion of
+the cash flow hedges in our consolidated statements of
+comprehensive income and consolidated statements of changes in
+equity. All other components including counterparty credit risk
+adjustments of the derivative and the ineffective portion are
+immediately recognized in Financial Income, net in profit and loss.
+Amounts accumulated in other comprehensive income are
+reclassified to profit and loss to Other non-operating
+income/expense, net and Financial income, net in the same period
+when the hedged item affects profit and loss.
+b) Fair Value Hedge
+We use derivatives to hedge foreign currency risk or interest rate
+risk and designate them as cash flow or fair value hedges if they
+qualify for hedge accounting under IFRS 9, which involves judgment.
+Derivatives Not Designated as Hedging
+Instruments
+We apply fair value hedge accounting for certain of our fixed-rate
+financial liabilities and show the fair value fluctuations in Financial
+income, net.
+At inception of a designated hedging relationship, we document our
+risk management strategy and the economic relationship between
+hedged item and hedging instrument. The existence of an economic
+relationship is demonstrated as well as the effectiveness of the
+hedging relationship tested prospectively by applying the critical
+terms match for our foreign currency hedges, since currencies,
+maturities, and the amounts are closely aligned for the forecasted
+transactions and for the spot element of the forward exchange rate
+contract or intrinsic value of the currency options, respectively. For
+interest rate swaps, effectiveness is tested prospectively using
+statistical methods in the form of a regression analysis, by which the
+validity and extent of the relationship between the change in value of
+the hedged items as the independent variable and the fair value
+change of the derivatives as the dependent variable is determined.
+The main sources of ineffectiveness are:
+The effect of the counterparty and our own credit risk on the fair
+value of the forward exchange contracts and interest rate swaps,
+which is not reflected in the respective hedged item, and
+Differences in the timing of hedged item and hedged transaction
+in our cash flow hedges.
+We are exposed to various financial risks, such as market risks
+(that is, foreign currency exchange rate risk, interest rate risk, and
+equity price risk), credit risk, and liquidity risk.
+We manage market risks, credit risk, and liquidity risk on a
+Group-wide basis through our global treasury department, global
+risk management, and global credit management. Risk
+management policies are established to identify risks, to set
+appropriate risk limits, and to monitor risks. Risk management
+policies and hedging strategies are laid out in our internal guidelines
+(for example, treasury guideline and other internal guidelines), and
+are subject to continuous internal review and analysis to reflect
+changes in market conditions and our business.
+We only purchase derivative financial instruments to reduce risks
+and not for speculation, which is defined as entering into derivative
+instruments without a corresponding underlying transaction.
+Section F - Management of Financial Risk Factors
+c) Valuation and Testing of Effectiveness
+Total liabilities from financing activities
+Accounting policies
+management regarding foreign currency exchange rate risk, interest
+rate risk, equity price risk, credit risk, and liquidity risk. Further, it
+contains information about financial instruments, including the
+adoption of IFRS 9 'Financial Instruments.'
+-1,364
+−1
+-194
+-7
+-2
+6,311
+174
+(F.1) Financial Risk Factors and Risk
+Management
+Section E- Capital Structure, Financing, and Liquidity
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Section F - Management of Financial
+Risk Factors
+This section discusses financial risk factors and risk
+To Our
+Stakeholders
+To Our
+Stakeholders
+-298
+Balance as at 01/01 under
+IAS 39
+Available-for-sale
+Category
+Carrying Amount At Amortized Cost
+12/31/2017
+At Fair Value
+HFT
+141
+141
+AFS
+865
+865
+L&R
+10,719
+10,719
+At amortized cost
+Financial liabilities
+At fair value through profit or loss
+HFT
+At fair value through profit or loss
+-84
+Financial assets
+Fair Values of Financial Instruments by Instrument Classification
+Category
+Additional
+Infomation
+12/31/2018
+Carrying Amount At Amortized Cost
+At Fair Value
+FVTPL
+2,617
+2,617
+AC
+13,978
+13,978
+FVTPL
+-65
+-65
+AC
+-12,866
+-12,866
+€ millions
+-84
+At amortized cost
+AC
+Level 1
+Quoted prices in an active market
+NA
+Debt securities
+Level 1
+Quoted prices in an active market
+Listed equity
+Level 1
+Quoted prices in an active market
+securities
+Level 2
+NA
+ΝΑ
+ΝΑ
+Unlisted equity
+securities
+Level 3
+Call options for
+Money-market and
+similar funds
+Other financial assets
+Significant Unobservable
+Inputs and Fair Value
+Measurement
+Significant Unobservable Interrelationship Between
+Inputs
+-7,460
+-7,460
+Section F - Management of Financial Risk Factors
+187
+188
+To Our
+Combined
+Stakeholders
+At amortized cost
+Management Report
+Further Information on Economic,
+Environmental, and Social Performance
+Determination of Fair Values
+A description of the valuation techniques and the inputs used in the fair value measurement is given below:
+Financial Instruments Measured at Fair Value on a Recurring Basis
+Type
+Fair Value
+Hierarchy
+Determination of Fair Value/Valuation Technique
+Additional
+Infomation
+Consolidated Financial
+Statements IFRS
+At fair value through profit or loss
+Financial liabilities
+At amortized cost
+-24
+-24
+-24
+Bonds
+AC -5,147
+-5,147
+-5,335
+-5,335
+Private placements
+AC
+-1,130
+-1,130
+-1,136
+-1,136
+Other non-derivative financial liabilities
+AC
+-208
+-24
+AC
+Loans
+Non-derivative financial liabilities
+90
+90
+Call option on equity shares
+HFT
+11
+11
+11
+11
+-208
+Liabilities
+Trade payables¹)
+Other payables²)
+Financial liabilities
+-1,270
+AC
+-952
+-952
+-318
+-6,595
+Trade and other payables
+Level 2
+-208
+Derivatives
+-84
+-364
+742
+-4,830
+1) We do not separately disclose the fair value for cash and cash equivalents, trade receivables, and accounts payable as their carrying amounts are a reasonable
+approximation of their fair values.
+2) Since the line items trade receivables, trade payables, and other financial assets contain both financial and non-financial assets or liabilities (such as other taxes or
+advance payments), the carrying amounts of non-financial assets or liabilities are shown to allow a reconciliation to the corresponding line items in the Consolidated
+Statements of Financial Position.
+186
+Section F - Management of Financial Risk Factors
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Fair Values of Financial Instruments by Instrument Classification
+€ millions
+Financial assets
+At fair value through profit or loss
+-84
+-5,209
+974
+-84
+Designated as hedging instrument
+FX forward contracts
+Interest rate swaps
+-1
+-1
+-1
+-1
+-1
+-208
+-1
+-1
+Not designated as hedging instrument
+FX forward contracts.
+HFT
+-84
+Total financial instruments, net
+4,308
+3,259
+-1
+share-based
+payment plans
+Call option on
+equity shares
+Level 3
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+time deposits and debt investment, leading to a decrease of
+opening retained earnings by €31 million
+Reclassification of amounts attributable to available-for-sale
+financial assets accumulated in other comprehensive income
+to opening retained earnings, leading to an increase of
+opening retained earnings by €157 million
+The adoption of IFRS 9 resulted in a decrease of opening other
+comprehensive income of €160 million (net of tax) as of
+January 1, 2018, which is mainly due to the following:
+Reclassification of amounts attributable to available-for-sale
+financial assets accumulated in other comprehensive income
+to opening retained earnings, leading to a decrease of opening
+other comprehensive income by €157 million
+The following table reconciles the carrying amounts and
+measurement categories of financial assets and liabilities under
+IAS 39 to the carrying amounts and measurement categories
+under IFRS 9 for each class of our financial assets and liabilities
+upon transition to IFRS 9 on January 1, 2018:
+190
+Section F - Management of Financial Risk Factors
+-9
+Currency derivatives designated as hedging instruments
+292
+3,857
+189
+Section F - Management of Financial Risk Factors
+The adoption of IFRS 9 resulted in an increase of opening
+retained earnings of €135 million (net of tax) as of
+January 1, 2018, which is mainly due to the following:
+Implementation of the expected credit loss model for trade
+receivables and contract assets as well as investments into
+Our new accounting policies are described in the specific
+notes covering financial instruments, see Notes (A.2), (D.4),
+(E.3), and (F.1).
+Included in available-for-sale financial assets in other comprehensive income
+Included in exchange differences in other comprehensive income
+12/31
+Change in unrealized gains/losses in profit and loss for equity investments held at the
+end of the reporting period
+Transfers out of Level 3 are due to initial public offerings of
+the respective investee. Changing the unobservable inputs to
+reflect reasonably possible alternative assumptions would not
+have a material impact on the fair values of our unlisted equity
+securities held as FVTPL (2017: available-for-sale) as of the
+reporting date.
+(F.3) Adoption of IFRS 9
+Effective January 1, 2018, we started to apply IFRS 9 'Financial
+Instruments' using the exception from full retrospective
+application. IFRS 9 replaces the provisions of IAS 39 relating to
+the classification and measurement of financial instruments, the
+impairment of financial assets, and hedge accounting. The
+168
+0
+26
+28
+38
+-89
+1,202
+742
+0
+0
+impact from a different classification of financial assets, the new
+impairment rules, and the different treatment of cost of hedging
+are recognized in retained earnings of the opening balance sheet
+on January 1, 2018. Comparative figures have not been restated
+but reflect the requirements of IAS 39.
+0
+-102
+2,062
+-309
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+183
+Section F - Management of Financial Risk Factors
+-3,102
+-429
+-58
+-957
+-834
+-2,506
+-7,460
+Total of non-derivative financial liabilities
+-3,102
+-429
+-58
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Contractual Maturities of Derivative Financial Liabilities and Financial Assets
+€ millions
+-3,909
+-11
+-2,111
+Cash outflows
+-84
+-64
+Currency derivatives not designated as hedging instruments
+Thereafter
+Cash inflows
+2018
+Thereafter
+2019
+12/31/2018
+Contractual Cash Flows
+Carrying
+Amount
+Carrying Contractual Cash Flows
+Amount
+Derivative financial liabilities
+Derivative financial liabilities and assets
+12/31/2017
+90
+-143
+409
+NA
+Revenue multiples (2017: The estimated fair value
+EBITDA multiples) used would increase (decrease)
+Revenue (2017: EBITDA)
+of the investee
+if:
+- The revenue multiples
+(2017: EBITDA multiples)
+were higher (lower)
+- The investees' revenue
+(2017: EBITDA) were
+higher (lower)
+FX forward
+contracts
+Level 2
+Discounted cash flow using par-method. Expected
+future cash flows based on forward exchange rates are
+discounted over the respective remaining term of the
+contracts using the respective deposit interest rates
+and spot rates.
+NA
+ΝΑ
+Interest rate swaps
+Level 2
+Discounted cash flow. Expected future cash flows are
+estimated based on forward interest rates from
+observable yield curves and contract interest rates,
+discounted at a rate that reflects the credit risk of the
+counterparty.
+NA
+ΝΑ
+Market approach. Company valuation using revenue
+multiples (2017: EBITDA multiples) based on actual
+results derived from the investee.
+Monte Carlo model. Calculated considering risk-free
+interest rates, the remaining term of the derivatives, the
+dividend yields, the share price, and the volatility of our
+share.
+ΝΑ
+3 3 3 3
+Other financial assets/ Financial liabilities
+333 3
+NA
+Quoted prices in an active market deducting a discount
+for the disposal restriction derived from the premium
+for a respective put option.
+Market approach. Comparable company valuation
+using revenue multiples derived from companies
+comparable to the investee.
+Peer companies used
+(revenue multiples range
+from 8.6 to 9.0)
+Revenues of investees
+Discounts for lack of
+marketability (10% to
+20%)
+The estimated fair value
+would increase (decrease)
+if:
+- The revenue multiples
+were higher (lower)
+-The investees' revenues
+were higher (lower)
+Section F - Management of Financial Risk Factors
+- The liquidity discounts
+were lower (higher).
+Market approach. Venture capital method evaluating a
+variety of quantitative and qualitative factors such as
+actual and forecasted results, cash position, recent or
+planned transactions, and market comparable
+companies.
+Last financing round valuations
+NA
+NA
+Liquidation preferences
+ΝΑ
+Net asset value/fair market value as reported by the
+respective funds
+NA
+NA
+257
+To Our
+Stakeholders
+Management Report
+Into Level 3
+Out of Level 3
+Purchases
+Sales
+Gains/losses
+Included in financial income, net in profit and loss
+€46 million in 2018 (2017: €360 million), while transfers from Level 1
+to Level 2 did not occur at all.
+Level 3 Fair Value Disclosures
+The following table shows the reconciliation of fair values from
+the opening to the closing balances for our unlisted equity securities
+and call options on equity shares classified as Level 3 fair values:
+2018
+2017
+742
+722
+0
+0
+-12
+-100
+Transfers
+01/01
+€ millions
+Reconciliation of Level 3 Fair Values
+Consolidated Financial
+Statements IFRS
+Financial Instruments Not Measured at Fair Value
+Type
+Fair Value
+Hierarchy
+Financial liabilities
+Further Information on Economic,
+Environmental, and Social Performance
+Determination of Fair Value/Valuation Technique
+Additional
+Infomation
+Combined
+Fixed-rate bonds (financial liabilities)
+Quoted prices in an active market
+Fixed-rate private placements/loans (financial
+liabilities)
+Level 2
+Discounted cash flows.
+Future cash outflows for fixed interest and principal are discounted over the term of
+the respective contracts using the market interest rates as of the reporting date.
+For other non-derivative financial assets/liabilities and variable
+rate financial debt, it is assumed that their carrying value reasonably
+approximates their fair values.
+Transfers Between Levels 1 and 2
+Transfers of equity securities from Level 2 to Level 1, which
+occurred because disposal restrictions lapsed and deducting a
+discount for such restriction was no longer necessary, were
+Level 1
+90
+HFT
+Call options for share-based payments
+Level 1
+Level 2
+Level 3
+Fair Value
+Total
+Cash and cash equivalents
+8,627
+Cash at banks¹)
+AC
+2,918
+2,918
+Time deposits¹
+AC
+4,514
+4,514
+Money market and similar funds
+FVTPL
+1,195
+At Fair Value
+At Amortized Cost
+Measurement Categories
+Carrying
+Amount
+(F.2) Fair Value Disclosures on Financial
+Instruments
+Accounting Policies
+It is our policy that transfers between the different levels of the fair
+value hierarchy are deemed to have occurred at the beginning of the
+period of the event or change in circumstances that caused the
+transfer.
+Fair Value of Financial Instruments
+We use various types of financial instruments in the ordinary
+course of business, which are classified as either amortized cost
+(AC) or fair value through profit or loss (FVTPL) (2017: loans and
+receivables (L&R), available-for-sale (AFS), held-for-trading (HFT),
+or amortized cost (AC)). For those financial instruments measured
+at fair value or for which fair value must be disclosed, we have
+categorized the financial instruments into a three-level fair value
+hierarchy depending on the inputs used to determine fair value and
+their significance for the valuation techniques.
+184
+Section F - Management of Financial Risk Factors
+To Our
+Stakeholders
+1,195
+Combined
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Fair Values of Financial Instruments and Classification Within the Fair Value Hierarchy
+€ millions
+Assets
+Category
+12/31/2018
+Management Report
+-5
+1,195
+6,480
+Investments in associates²)
+26
+Time deposits
+AC
+134
+134
+134
+Financial instruments related to employee
+165
+benefit plans²)
+Loans and other financial receivables
+AC
+147
+147
+147
+147
+Derivative assets
+1,248
+1,196
+0
+52
+Trade receivables¹)
+AC
+6,188
+6,188
+Other receivables²)
+Other financial assets
+Debt securities
+293
+Trade and other receivables
+1,984
+77
+77
+77
+77
+Equity securities
+FVTPL
+1,248
+1,248
+AC
+Designated as hedging instrument
+12
+-11
+13
+26
+8
+14
+Total of derivative financial liabilities
+-76
+-61
+-12
+-86
+-53
+-18
+Derivative financial assets
+Currency derivatives not designated as hedging instruments
+100
+41
+Cash outflows
+-4,025
+Cash inflows
+-15
+-8
+-27
+0
+-75
+0
+Cash inflows
+330
+0
+74
+0
+0
+Interest rate derivatives without designated hedge relationship
+0
+Cash outflows
+Cash inflows
+Interest rate derivatives designated as hedging instruments
+-3
+-1
+Cash outflows
+-15
+0
+8
+-2,799
+Cash inflows
+-14
+-12
+-43
+Cash inflows
+19
+15
+25
+56
+Total of derivative financial assets
+113
+61
+1
+93
+65
+13
+Total of derivative financial liabilities and assets
+37
+-8
+Cash outflows
+24
+11
+4,076
+0
+2.831
+0
+Currency derivatives designated as hedging instruments
+2
+29
+Cash outflows
+0
+-203
+-634
+0
+Cash inflows
+202
+о
+654
+○
+Interest rate derivatives designated as hedging instruments
+0
+-957
+FX forward contracts
+11
+Assets
+Cash and cash equivalents¹)
+L&R
+4,011
+4,011
+Trade and other receivables
+6,017
+Trade receivables¹)
+L&R
+5,810
+5,810
+Other receivables²)
+207
+Other financial assets
+2,145
+Available-for-sale financial assets
+Debt investments
+Fair Value
+Total
+Level 3
+Level 2
+Level 1
+-9,041 -1,006
+1,201 -10,175
+Section F - Management of Financial Risk Factors
+185
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+AFS
+Further Information on Economic,
+Environmental, and Social Performance
+Fair Values of Financial Instruments and Classification Within the Fair Value Hierarchy
+€ millions
+Category
+12/31/2017
+Carrying
+Amount
+Measurement Categories
+At Amortized Cost
+At Fair Value
+Additional
+Infomation
+2,553
+39
+AFS
+39
+827
+899
+899
+29
+29
+29
+24
+24
+24
+Interest rate swaps
+Not designated as hedging instrument
+FX forward contracts
+HFT
+41
+41
+41
+41
+732
+8
+00
+87
+827
+Investments in associates²)
+32
+Loans and other financial receivables
+Financial instruments related to employee
+benefit plans²)
+155
+Loans and other financial receivables
+L&R
+Equity investments
+899
+Derivative assets
+Designated as hedging instrument
+FX forward contracts
+29
+24
+39
+39
+827
+899
+2
+1,112
+-65
+5
+5
+5
+5
+Liabilities
+Trade and other payables
+Trade payables¹)
+Other payables²)
+Financial liabilities
+-1,614
+AC
+-1,265
+-1,265
+-350
+-11,678
+Non-derivative financial liabilities
+Loans
+FVTPL
+Call option on equity shares
+68
+68
+2
+2
+2
+11
+11
+11
+Interest rate swaps
+Not designated as hedging instrument
+Bonds
+FX forward contracts
+100
+100
+100
+100
+Call options for share-based payments
+FVTPL
+68
+68
+FVTPL
+3,798
+ㅎㅎ
+-58
+FX forward contracts
+-9
+-3
+-9
+-9
+-9
+-3
+-3
+-3
+Interest rate swaps
+Not designated as hedging instrument
+FX forward contracts
+Total financial instruments, net
+FVTPL
+-65
+-65
+-65
+Designated as hedging instrument
+Derivatives
+-1
+-298
+-58
+-58
+-58
+AC
+-10,204
+-10,204
+-10,365
+-10,365
+AC
+Private placements
+-1,041
+-1,041
+-1,035
+-1,035
+Other non-derivative financial liabilities
+AC
+-298
+-298
+AC
+-340
+-834
+-6,508
+8
+551
+-0.5%
+AR overdue 30 to 90 days
+-2
+15
+749
+-0.3%
+AR overdue 1 to 30 days
+-13
+-3
+0
+-0.3%
+AR not due and due
+ECL Allowance
+Gross Carrying Amount
+Credit-Impaired
+Gross Carrying Amount Not
+Credit-Impaired
+Weighted Average Loss
+Rate
+Credit Risk Exposure from Trade Receivables and Contract Assets
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+4,288
+AR overdue more than 90 days
+-13.0%
+558
+Net credit losses recognized
+IFRS 9
+-89
+-99
+Balance as at 01/01 under
+-25
+Adoption of IFRS 9
+-74
+Bad Debt Allowance
+ECL Allowance
+2018
+0
+-89
+2017
+Movement in ECL Allowance for Trade Receivables
+and Contract Assets
+For 2018, the movement in the ECL allowance (2017: movement
+in bad debt allowance according IAS 39) for trade receivables and
+contract assets is as follows:
+-107
+148
+6,146
+-1.7%
+Total
+-89
+125
+Management Report
+-18
+Combined
+181
+Gross Carrying Amount
+Not Credit-Impaired
+Rate
+Weighted Average Loss
+Risk class 1 - low risk AAA to BBB-
+Equivalent to
+External Rating
+Credit Risk Exposure from Cash, Time Deposits, and Debt Securities
+As at December 31, 2018, our exposure to credit risk from cash,
+time deposits and debt securities was as follows:
+Cash, Time Deposits, and Debt Securities
+Credit Risk Exposure
+The impact of default on our trade receivables from individual
+customers is mitigated by our large customer base and its
+distribution across many different industries, company sizes, and
+countries worldwide. For more information about our trade
+receivables, see Note (A.2.).
+Gross Carrying Amount
+Credit-Impaired
+the expected changes in the economic conditions over the expected
+life of the receivables. Forward-looking information is based on
+changes in country risk ratings, or fluctuations in credit default
+swaps of countries of the customers we do business with. We
+continuously monitor outstanding receivables locally to assess
+whether there is objective evidence that our trade receivables and
+contract assets are credit-impaired. Evidence that trade receivables
+and contract assets are credit-impaired include, among the trade
+receivables being past due, information about significant financial
+difficulty of the customer or non-adherence to a payment plan. We
+consider receivables to be in default when the counterparty is
+unlikely to pay its obligations in full, However, a delay of payments
+(for example, more than 90 days past due) in the normal course of
+business alone does not necessarily indicate a customer default. We
+write off account balances either partially or in full if we judge that
+the likelihood of recovery is remote, which might be evidenced, for
+example, when bankruptcy proceedings for a customer are finalized
+or when all enforcement efforts have been exhausted.
+The default risk of our trade receivables is managed separately,
+mainly based on assessing the creditworthiness of customers
+through external ratings and on our past experience with the
+customers concerned. Based on this assessment, individual credit
+limits are established for each customer and deviations from such
+credit limits need to be approved by management.
+Trade Receivables
+debt securities to be in default when the counterparty is unlikely to
+pay its obligations in full, when there is information about a
+counterparty's financial difficulties, or in case of a drastic increase in
+the credit default swap spread of a counterparty for a prolonged
+time period while the overall market environment remains rather
+stable. Such financial assets are written off either partially or in full if
+the likelihood of recovery is considered remote, which might be
+evidenced, for example, by the bankruptcy of a counterparty of such
+financial assets.
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+-1,554
+To Our
+Stakeholders
+We apply the simplified impairment approach using a provision
+matrix for all trade receivables and contract assets to take into
+account any lifetime expected credit losses already at initial
+recognition. For the purpose of the provision matrix, customers are
+clustered into different risk classes, mainly based on market
+information such as the country risk assessment of their country of
+origin. Loss rates used to reflect lifetime expected credit losses are
+determined using a roll-rate method based on the probability of a
+receivable progressing through different stages of being overdue
+and on our actual credit loss experience over the past years. These
+loss rates are enhanced by forward-looking information to reflect
+differences between economic conditions during the period over
+which the historical data has been collected, current conditions, and
+-0.1%
+7,406
+0
+Section F - Management of Financial Risk Factors
+As at December 31, 2018, our exposure to credit risk from trade
+receivables was as follows:
+Trade Receivables and Contract Assets
+As at December 31, 2017, the major part of our time deposits,
+other loans, and other financial receivables was concentrated in
+Germany. There were no time deposits, loans, or other financial
+receivables past due but not impaired and we had no indications of
+impairments of such assets that were not past due and not impaired
+as at that date.
+-6
+0
+7,470
+-0.1%
+-1
+0
+30
+-3.3%
+0
+-5
+ECL Allowance
+Total
+NA
+Risk class 3-
+unrated
+BB to D
+Risk class 2 high
+risk
+0
+34
+0.0%
+To Our
+Stakeholders
+4
+Cash outflows
+10
+Total of non-derivative financial liabilities
+-6,689
+-1,097
+-1.410
+-622
+-1,585
+-1,149
+-11,602
+Financial liabilities
+0
+-12,866
+0
+0
+-1,265
+-1,265
+Trade payables
+Non-derivative financial liabilities
+Thereafter
+2023
+2022
+2021
+2020
+0
+-2,414
+-1,585
+-1,410
+Amounts written off
+0
+0
+0
+0
+0
+-952
+-952
+Trade payables
+Non-derivative financial liabilities
+Thereafter
+2022
+2021
+2020
+2019
+2018
+12/31/2017
+Amount
+Contractual Cash Flows
+Carrying
+€ millions
+-6,689
+-1,097
+2019
+12/31/2018
+-622
+Carrying
+Amount
+1,515
+Total past due but not individually impaired
+95
+Past due over 365 days
+266
+Past due 121 to 365 days
+459
+695
+4,185
+Past due 31 to 120 days
+Individually impaired, net of allowances
+Carrying amount of trade receivables, net
+Past due 1 to 30 days
+Financial liabilities
+Not past due and not individually impaired
+€ millions
+Aging of Trade Receivables
+An analysis of trade receivables that were neither past due nor
+impaired and their aging as at December 31, 2017, was as follows:
+-74
+-107
+Contractual Cash Flows
+11
+Balance as at 12/31
+Past due but not individually impaired
+110
+2017
+Management Report
+Contractual Maturities of Non-Derivative Financial Liabilities
+whether or not the fair value of the derivative is negative. The cash
+outflows for the currency derivatives are translated using the
+applicable spot rate.
+5,810
+period. Variable interest payments were calculated using the latest
+relevant interest rate fixed as at December 31, 2018. As we generally
+settle our derivative contracts gross, we show the pay and receive
+legs separately for all our currency and interest rate derivatives,
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Combined
+To Our
+Stakeholders
+Section F - Management of Financial Risk Factors
+182
+The table below is an analysis of the remaining contractual
+maturities of all our financial liabilities held as at December 31, 2018.
+Financial liabilities for which repayment can be requested by the
+contract partner at any time are assigned to the earliest possible
+€ millions
+Liquidity Risk Exposure
+Liquidity Risk
+Liquidity Risk Factors
+Liquidity Risk Management
+Our liquidity is managed by our global treasury department with
+the primary aim of maintaining liquidity at a level that is adequate to
+meet our financial obligations.
+Generally, our primary source of liquidity is funds generated from
+our business operations. Our global treasury department manages
+liquidity centrally for all subsidiaries. Where possible, we pool their
+cash surplus so that we can use liquidity centrally for our business
+operations, for subsidiaries' funding requirements, or to invest any
+net surplus in the market. With this strategy, we seek to optimize
+yields, while ensuring liquidity, by investing only with counterparties
+and issuers of high credit quality, as explained before. Hence, high
+levels of liquid assets and marketable securities provide a strategic
+reserve, helping keep SAP flexible, sound, and independent.
+We are exposed to liquidity risk from our obligations towards
+suppliers, employees, and financial institutions.
+In order to retain high financial flexibility, on November 20, 2017,
+SAP SE entered into a €2.5 billion syndicated credit facility
+agreement with an initial term of five years plus two one-year
+extension options. In 2018, the initial term of this facility was
+extended for an additional period of one year until November 2023.
+The use of the facility is not restricted by any financial covenants.
+Borrowings under the facility bear interest of EURIBOR or LIBOR for
+the respective currency plus a margin of 17bps. We are also required
+to pay a commitment fee of 5.95bps per annum on the unused
+available credit. We have not drawn on the facility.
+In financing the planned acquisition of Qualtrics, we arranged for
+a €2.5 billion acquisition facility to partially finance the purchase
+price payment. The facility has a lifetime of three years and can be
+flexibly repaid with SAP's free cash flow or further refinancing
+transactions on the capital markets. For more information about
+drawings under the facility, see Note (G.9.).
+Additionally, as at December 31, 2018, and 2017, we had available
+lines of credit totaling €445 million and €510 million, respectively.
+There were immaterial borrowings outstanding under these lines of
+credit in all years presented.
+Apart from effective working capital and cash management, we
+have reduced the liquidity risk inherent in managing our day-to-day
+operations and meeting our financing responsibilities by arranging
+an adequate volume of available credit facilities with various
+financial institutions on which we can draw if necessary.
+20
+6
+8
+11
+19
+Aicha Evans
+100%
+12
+12
+8
+8
+8
+14
+96%
+17
+18
+8
+8
+26
+Panagiotis Bissiritsas
+83%
+16
+6
+8
+Martin Duffek
+74%
+To Our
+Diane Greene
+24
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined
+Report by the Supervisory Board
+100%
+7
+7
+3
+3
+10
+Anja Feldmann
+67%
+1
+3
+5
+16
+92%
+4
+4
+7
+8
+12
+Wilhelm Haarmann
+(Member until May 2018)
+(Member as of May 2018)
+1
+Pekka Ala-Pietilä
+Further Information on Economic,
+Environmental, and Social Performance
+11
+Management Report
+Combined
+To Our
+Stakeholders
+17
+Corporate Governance Report
+In German stock corporation and commercial law, there are
+special requirements for internal risk management that apply to
+SAP. To meet them, our global risk management system supports
+risk planning, identification, analysis, handling, and minimization.
+We maintain standard documentation of all our internal control
+structures, especially those that affect financial reporting, and
+continually evaluate their effectiveness. As a company listed on the
+NYSE, we instruct our auditor, KPMG, to conduct an annual audit of
+our internal control over financial reporting in accordance with the
+requirements of the U.S. Sarbanes-Oxley Act of 2002, Section 404.
+The audit as of December 31, 2018, confirmed that our internal
+control is effective. In compliance with the reporting requirements
+in the German Commercial Code, Sections 289 (4) and 315 (4), the
+combined SAP SE and SAP Group management report contains full
+information about the principal features of the internal controls and
+risk management structure applying to SAP's consolidated
+financial reporting.
+In addition to our annual financial statements, we also prepare
+quarterly statements for all four quarters in accordance with the
+rules and regulations of the Frankfurt Stock Exchange, as well a
+half-year financial report on June 30 pursuant to the legal
+requirements of the German Securities Trading Act. Our quarterly
+statements and half-year financial report are submitted to the
+Audit Committee of the Supervisory Board before they are
+published.
+SAP Group as required by the German Commercial Code, and the
+Form 20-F annual report in accordance with SEC requirements.
+The Executive Board is responsible for financial accounting. The
+Supervisory Board approves the SAP SE financial statements, the
+consolidated financial statements, as well as the combined
+management report and the separate combined non-financial
+report. The SAP SE financial statements, the consolidated financial
+statements, and the combined management report are audited by
+KPMG AG Wirtschaftsprüfungsgesellschaft, the auditor elected for
+that purpose by the Annual General Meeting of Shareholders.
+We prepare the SAP SE financial statements in accordance with
+the German Commercial Code and our consolidated financial
+statements in accordance with International Financial Reporting
+Standards (IFRSs). We prepare a combined management report
+and a separate combined non-financial report for SAP SE and the
+Financial Accounting, Risk Management,
+and Internal Control
+Our shareholders can obtain full and timely information about
+SAP on our Web site and can access current and historical
+Company data. Among other information, we post all of our
+financial reports, all relevant news about the Company's governing
+bodies and their corporate governance documentation, information
+requiring ad hoc (current) disclosure, press releases, and news of
+notifiable directors' dealings.
+Transparency, Communication, and
+Service for Shareholders
+Consolidated Financial
+Statements IFRS
+Our shareholders exercise their rights, such as the rights to put
+questions to the management and to vote, at the Annual General
+Meeting of Shareholders. Shareholders and the public are able to
+watch a live broadcast of the entire Annual General Meeting of
+Shareholders on the Internet. They can vote their shares at the
+Meeting or instruct a proxy of their choice or one of the proxies
+provided for that purpose by SAP. Alternatively, they can
+participate online or vote by mail. The invitation to the Annual
+General Meeting of Shareholders includes full details and
+instructions. Every shareholder can access all of the paperwork on
+the SAP Web site in good time for the meeting.
+SAP is a NYSE-listed company and we are therefore subject to
+certain U.S. laws (including the Sarbanes-Oxley Act of 2002,
+among others) and to the applicable SEC and NYSE regulations.
+Besides implementing the requirements of the Sarbanes-Oxley Act,
+Section 404, and other Sarbanes-Oxley Act requirements,
+including conducting an annual audit of our internal control over
+financial reporting, we comply with the corporate governance
+standards of the NYSE Listed Company Manual, Section 303A,
+which bind foreign private issuers. The Section 303A standards
+that apply to SAP include the requirement to have an audit
+committee composed of members who are independent in the
+meaning of the Sarbanes-Oxley Act, and related reporting
+requirements. Erhard Schipporeit, the chairperson of the Audit
+Committee, is an audit committee financial expert in the meaning
+of the Sarbanes-Oxley Act.
+Applying International Corporate
+Governance Standards
+involving customers, business partners, vendors, shareholders, and
+competitors. By following our Code of Business Conduct, we
+demonstrate a commitment against all forms of unfair competitive
+practice, corruption, and misrepresentation. Our global compliance
+organization monitors worldwide compliance with the Code of
+Business Conduct and other policies applying within the Group. It
+regularly reviews these internal policies, revises them if necessary,
+and delivers related employee training.
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+Corporate Governance Report
+16
+16
+Annual General Meeting of Shareholders
+86%
+Further Information on Economic,
+Environmental, and Social Performance
+Report by the Supervisory Board
+13
+7
+8
+21
+Hasso Plattner
+Participation in %
+(all Meetings)
+Participation
+(Committees)
+Meetings
+(Committees)
+Participation
+(Plenum)
+(Plenum)
+Members
+Meetings
+Additional
+Infomation
+Supervisory Board
+Meetings
+(incl.
+Committees)
+Meeting Participation of SAP Supervisory Board Members During Fiscal Year 2018
+In 2018, the Supervisory Board of SAP SE held four ordinary
+meetings and four extraordinary meetings at which we deliberated
+and resolved on all matters of relevance to the Company. We also
+adopted six resolutions by correspondence vote. In the fiscal year,
+no Supervisory Board member attended only half or less of the
+meetings of the Supervisory Board and of the committees to which
+the member belonged. The following table provides an overview of
+the individual members' attendance at the Supervisory Board's
+plenary sessions and committee meetings in 2018:
+Supervisory Board Meetings and Resolutions
+The Supervisory Board chairperson and the CEO were in
+continuous contact, which meant the Supervisory Board
+chairperson was always informed without delay of all important
+events that were significant for assessing SAP's situation and
+progress or for the management and governance of the Company.
+Moreover, the chairperson of the Supervisory Board met regularly
+with the CEO to discuss SAP's strategy, planning, business
+performance, risks, risk management, compliance, and other key
+topics and decisions. As such, the chairperson of the Supervisory
+Board was also kept fully informed between meetings of the
+Supervisory Board and its committees.
+the Supervisory Board were always answered in detail. The
+Executive Board came to Supervisory Board meetings for
+discussion of the agenda items. We questioned and probed the
+Executive Board to satisfy ourselves that the information it gave us
+was plausible. All transactions requiring approval by the
+Supervisory Board whether by law, the Articles of Incorporation, or
+the Supervisory Board's list of transactions requiring its consent
+were carefully examined and discussed with the Executive Board,
+focusing on the benefits, potential risks, and other effects of each
+transaction. The Supervisory Board agreed to all transactions for
+which its consent was sought by the Executive Board.
+The content and scope of the Executive Board's reports to us
+fully met our requirements for them, and the questions raised by
+We regularly received full and timely reports from the Executive
+Board, both from members in person and in written documents.
+This ensured that we were always kept up to date on the
+Company's strategy, planning, business performance, risks, risk
+management, compliance (in other words, adherence to laws, to
+the Company's Articles of Incorporation, and to internal policies),
+and on transactions of special significance for SAP. In its reports,
+the Executive Board also advised us in particular when business
+deviated from plan or target, and why. In addition, the Supervisory
+Board members can use the SAP Digital Boardroom solution to
+stay abreast of the Company's performance whenever they wish,
+not just in their meetings. This digital decision and analysis cockpit
+is an analytical software solution that allows us to call up
+comprehensive metrics for all business areas in real time and
+generate evaluations and analyses as required. As such, SAP Digital
+Boardroom affords the Supervisory Board members an up-to-date
+view of SAP's business processes, data, and key figures - and
+maximum transparency.
+In 2018, the Supervisory Board advised the Executive Board on
+an ongoing basis with regard to the management of the Company
+and kept the Executive Board's global management of the
+Company under observation and scrutiny for legal compliance,
+adherence to proper accounting principles, business focus, and
+efficiency. The Supervisory Board was always directly involved
+when the Executive Board made any decisions of fundamental
+importance to SAP.
+Collaboration Between the Supervisory Board
+and the Executive Board
+In the following, we would like to inform you about the work of
+the Supervisory Board in the past fiscal year.
+Dear Shareholders,
+18
+Additional
+100%
+Supervisory Board
+Members
+Klaus Wucherer
+Pierre Thiollet
+100%
+4
+4
+8
+8
+12
+100%
+13
+13
+8
+6
+8
+Sebastian Sick
+100%
+8
+8
+8
+8
+16
+Robert Schuschnig-Fowler
+95%
+14
+14
+7
+21
+8
+3
+3
+Report by the Supervisory Board
+20
+20
+In the plenary session on April 12, 2018, an analyst from Citibank
+gave a presentation on how analysts viewed SAP and the software
+market. Attendees discussed, among other things, SAP's current
+valuation compared to its peers and SAP's transformation to the
+cloud. We also resolved to adjust Executive Board compensation
+for acquisition effects from the Callidus acquisition, which had
+closed sooner than expected. In addition, the Executive Board gave
+Meeting in April
+May 17, 2018, for approval. In addition, we resolved the individual
+allocation amounts for the 2018 tranche of the Long-Term
+Incentive (LTI) Plan 2016, and the basis of the allocation of the
+2019 tranche. For more information about the LTI Plan 2016 and
+the other elements of the compensation package for Executive
+Board members, see the Compensation Report. The Supervisory
+Board, as required, evaluated the appropriateness of the Executive
+Board members' compensation, and in each case found it to be
+appropriate in terms of amount, structure, objective criteria, and
+for each member's responsibilities and tasks. We referred in this
+regard to an appropriateness certificate obtained from Ernst &
+Young GmbH. We then discussed the results of the 2017 employee
+survey and the Company's 2017 financial results with the Executive
+Board. In addition, the Supervisory Board turned its attention to the
+SAP SE financial statements and the consolidated financial
+statements for 2017, the audits conducted by KPMG AG
+Wirtschaftsprüfungsgesellschaft (KPMG), and the Executive
+Board's proposed resolution on the appropriation of retained
+earnings for 2017. The auditor attended the meeting and reported
+in detail on the audit and its findings for each of the focus areas that
+had been agreed between the auditor and the Audit Committee.
+The auditor also related the discussions on those matters at the
+preceding meetings of the Audit Committee. The auditor then
+discussed the results of the audit with the Supervisory Board and
+answered our questions. The Audit Committee comprehensively
+prepared all topics in connection with the financial statements and
+the consolidated financial statements for 2017, and in particular
+reported on the form and scope of its examination of the
+documents relating to the financial statements, which it
+recommended we approve. The Supervisory Board approved the
+audit. There were no findings from our own examination, so we
+gave our consent to the SAP SE and consolidated financial
+statements for 2017. We checked and endorsed the Executive
+Board's proposal to appropriate retained earnings in accordance
+with the Audit Committee's recommendation. We then discussed in
+detail the annual budget for 2018 as presented to us by the
+Executive Board, and approved same. In addition, we decided on
+the (further) resolutions we would propose for the agenda of the
+May 2018 Annual General Meeting of Shareholders, particularly our
+recommendation to the Annual General Meeting of Shareholders
+concerning the auditor to elect for 2018, which followed the
+recommendation of the Audit Committee to us. We were also
+informed about SAP's donation activities. Thereafter, we discussed
+corporate governance matters and the update to SAP's annual
+declaration of implementation. This update was necessary because
+SAP's last two deviations from the German Corporate Governance
+Code (the "Code") were settled at the start of the fiscal year,
+meaning SAP complied with all recommendations in the Code since
+February 2018.
+At our ordinary Supervisory Board meeting on
+February 21, 2018, we discussed Executive Board compensation for
+2017. Exercising our discretionary powers under the terms of the
+short-term incentive (STI) 2017, we first determined performance
+against the defined target for the STI. We then decided on the total
+target achievement and the payouts for the individual Executive
+Board members under the STI 2017. We also deliberated on
+Executive Board compensation for 2018 at the February meeting.
+We defined the key performance indicators (KPIs) for the STI 2018
+and set the target numbers for each KPI and their relative
+weightings. Prior to this, the Supervisory Board had, on
+recommendation of the General and Compensation Committee,
+resolved to remove the discretionary element from the STI 2018,
+which had long been a sore point among investors. In return, we
+resolved to increase the weighting of the individual KPIs to varying
+extents. This move served to further enhance the transparency of
+the Executive Board compensation system, which was again
+presented to the Annual General Meeting of Shareholders on
+Meeting in February (Meeting to Discuss the
+Financial Statements)
+Other key topics addressed at our meetings in 2018 notably
+included the following:
+One of our goals in 2018 was to make the Executive Board more
+effective for the tasks ahead and to clarify Executive Board
+succession planning at an early stage. We therefore introduced
+further changes to the Executive Board in our meeting on
+October 25, 2018: we appointed SAP's Chief Innovation Officer
+Jürgen Müller to the Executive Board effective January 1, 2019.
+Since his appointment, Jürgen Müller has been responsible for the
+Technology & Innovation Board area, pursuant to the Executive
+Board's revised portfolio concept. Simultaneously, Bernd Leukert
+took over the SAP Digital Business Services division effective
+January 1, 2019, in a co-lead capacity together with Michael
+Kleinemeier. We also discussed with the Executive Board a further
+change in portfolio assignments: Christian Klein, who had been
+responsible for global business processes since January 2018,
+would additionally be in charge of SAP S/4HANA as well as the
+global development and delivery of SAP's core applications as of
+January 2019. The General and Compensation Committee and the
+Supervisory Board discussed the preparation of the Executive
+Board appointment contract for Jürgen Müller and the required
+changes to the Executive Board appointment contract of Christian
+Klein in the respective October meetings and subsequently
+approved both measures by circular correspondence vote in
+November 2018. We resolved each of the above resolutions on the
+recommendation of the General and Compensation Committee,
+which had extensively prepared these topics for us. We believe that
+by adopting these changes, the Executive Board is well positioned
+for the challenges ahead.
+In our April meeting, we resolved to extend Stefan Ries'
+appointment to the Executive Board to the end of March 2024.
+review of all aspects, the Supervisory Board voted in favor of the
+acquisition of Qualtrics and the associated financing measures.
+Expansion of the Executive Board and
+Reassignment of Portfolios
+3
+Additional
+Infomation
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+19
+Report by the Supervisory Board
+Executive Board agreed to present all planned strategy measures
+for realizing the integrated suite to us in detail in our February
+meeting. Then, on February 21, 2018, the Executive Board
+presented its planned concept for a new organizational structure.
+This structure is aimed at standardizing and simplify the
+organization, thus forming the operational basis for the intelligent
+suite, which runs on a joint platform comprising SAP Cloud
+Platform and SAP HANA Data Management. On April 12, 2018, we
+examined, as a next step, the Executive Board's detailed plan for
+the product strategy and its technological implementation. We
+discussed with the Executive Board its road map for the further
+development of SAP solutions for the Intelligent Enterprise,
+particularly the intelligent suite and technologies in the areas of
+machine learning, artificial intelligence, and the Internet of Things.
+Experts from across SAP gave us detailed presentations in this
+regard. In the July 26, 2018, meeting, the Executive Board reported
+on the strategy's progress. The CEO informed us that the Executive
+Board's focus in the second half of the year was mainly on the
+continued development and marketing of the intelligent suite. We
+reviewed the individual priorities in this regard and asked the
+Executive Board to keep us up to date at all times. In our plenary
+session on October 25, 2018, the Executive Board announced its
+plans for a further key step in its strategy: the acquisition of
+Qualtrics International Inc., a U.S.-based market leader in
+Experience Management. The Supervisory Board was subsequently
+asked to examine and vote on the planned acquisition in an
+extraordinary meeting on November 11, 2018. In that meeting, the
+Finance and Investment Committee reported on the meeting it had
+held immediately beforehand to examine and discuss the
+acquisition. We then looked in depth at the different aspects of the
+acquisition, the associated opportunities and risks, and the
+valuation of Qualtrics. We also examined the fairness opinions of a
+U.S. bank and an international accounting firm on the
+appropriateness of the purchase price. Following consideration and
+Intelligent Enterprise Strategy and Acquisitions
+In the Technology and Strategy Committee meetings and in six
+meetings of the full Supervisory Board, the Supervisory Board
+continually discussed with the Executive Board the latter's product
+strategy aimed at helping SAP customers evolve into "intelligent
+enterprises” (Intelligent Enterprise strategy). This strategy is based
+on the conviction that an integrated suite will enable companies
+and their customers to successfully seize the opportunities of the
+digital era by means of intelligent applications and platforms. One
+of the first milestones of the Intelligent Enterprise strategy in 2018
+was the acquisition of Callidus Software Inc., a market leader in
+customer relationship management (CRM) applications. We
+discussed this acquisition particularly in our extraordinary
+Supervisory Board meeting on January 29, 2018. We examined all
+aspects of the acquisition, including the related opportunities and
+risks, in detail with the Executive Board. We firmly believe the
+acquisition of Callidus will represent an important addition to SAP's
+new CRM offering (SAP C/4HANA), and therefore, on the
+recommendation of the Finance and Investment Committee,
+approved the acquisition and the financing thereof. In this
+extraordinary January meeting, we also discussed a number of
+critical measures to be taken in product development, as well as
+platform strategy, in connection with this acquisition. The
+The Supervisory Board and its committees also convene wholly
+or partly without the Executive Board as necessary to deliberate on
+items that pertain to the Executive Board or require internal
+discussion among Supervisory Board members alone. In 2018, the
+Executive Board withdrew temporarily from six of the eight plenary
+sessions and from three of the five meetings of the General and
+Compensation Committee. In addition, the shareholder
+representatives and the employee representatives independently
+discussed individual agenda items as required prior to the adoption
+of resolutions in plenary sessions. The Supervisory Board
+addressed the following key topics during the year:
+(Member until May 2018)
+83%
+2
+Further Information on Economic,
+Environmental, and Social Performance
+Infomation
+22
+(Member as of May 2018)
+10
+8
+8
+18
+Margret Klein-Magar
+100%
+5
+5
+8
+8
+13
+Gesche Joost
+10
+100%
+10
+8
+8
+18
+Andreas Hahn
+Participation in %
+(all Meetings)
+Participation
+(Committees)
+Meetings
+(Committees)
+Participation
+(Plenum)
+Meetings
+(Plenum)
+(incl.
+Committees)
+Meetings
+10
+Erhard Schipporeit
+100%
+15
+100%
+7
+7
+5
+5
+12
+Friederike Rotsch
+SAP's corporate governance includes our Code of Business
+Conduct for employees and members of the Executive Board. The
+Code of Business Conduct expresses the high standards that we
+require from our employees and Executive Board members and
+sets out the main principles that guide our business conduct
+toward customers, business partners, and shareholders. We see
+our Code of Business Conduct as the standard for our dealings
+5
+5
+8
+8
+Lars Lamade
+13
+85%
+11
+12
+6
+8
+20
+Bernard Liautaud
+100%
+7
+7
+8
+8
+Christine Regitz
+Code of Business Conduct
+14
+Generally, the Executive Board follows the recommendation in
+the Code that executive boards should have regard to diversity
+when appointing people to leadership positions, and in particular,
+aim to employ appropriate numbers of women in such positions. In
+support of this, the Executive Board maintains a policy to enhance
+diversity in company leadership appointments. This policy
+comprises a number of elements to increase the percentage of
+women in management and, in the long term, establish a diverse
+pool of female and male candidates for senior management
+positions.
+Return on SAP Common Stock
+WKN 716460/ISIN DE007164600
+-
+We webcast all key investor events at which members of our
+Executive Board speak, and we post all relevant presentations on
+the Investor Relations Web site.
+Investors can access a wide range of information about SAP and
+its shares online. Our channels of communication include our
+Twitter feed @sapinvestor and the quarterly SAP INVESTOR
+magazine. Shareholders can reach the IR team directly through a
+telephone hotline and through an e-mail at investor@sap.com. We
+also publish an overview of the latest analyst consensus in
+collaboration with Vara Research.
+Once again, a highlight of our global IR program in 2018 was the
+Capital Markets Day held at our Hudson Yards office in New York
+City. This engaging event was attended by more than 90 financial
+analysts and investors, the SAP Executive Board discussed the
+details of SAP's strong market position and how SAP innovations
+support customers' digitization. The Executive Board also
+discussed the business model and future outlook of the company.
+SAP customers Whirlpool, Pregis, and DoTerra presented their
+perspective on how SAP software supports their business. In
+addition, we hosted events for buy-side analysts in Walldorf, New
+York, and San Francisco. Further, we hosted events for investors
+and financial analysts at the CeBIT fair in Hanover, Germany and at
+the SAPPHIRE NOW conference in Orlando, Florida. Members of
+the Investor Relations team as well as senior management
+participated in more than 25 conferences worldwide. We continued
+our regular dialog with socially responsible investors (SRI),
+providing them with insights into our environmental, social, and
+corporate governance policies. SAP representatives engaged with
+retail shareholders at multiple events. The Investor Relations team
+and the Treasury teams also maintained regular communication
+with the debt investor community.
+We are continuously engaged with the investment community
+through a number of channels. Over the course of the year, senior
+management at SAP and the Investor Relations (IR) team
+discussed our strategy and business development with institutional
+investors and analysts worldwide.
+Continued Dialog with Investors
+Infomation
+Additional
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined
+To Our
+Investor Relations
+12
+12
+12
+11
+10
+09
+08
+07
+06
+Percent, unless otherwise stated
+Initial investment €10,000
+Date of investment
+Period of investment
+Value at 12/31/2018) (in €)
+Average annual return
+Performance comparators
+12/31/2008 12/31/2013
+10 years
+Value at 12/31/2018) (in US$)
+Average annual return
+Performance comparators
+Period of investment
+Date of investment
+Return on SAP ADRS
+Percent, unless otherwise stated
+Initial investment US$10,000
+1) Assuming all dividends were reinvested
+Source: Bloomberg / Deutsche Bank
+S&P North American
+Technology Software Index
+total return index
+-1.7
+10.3
+13.0
+S&P 500 Composite -
+total return index
+05
+REX General Bond
+2.0
+8.2
+DAX 30 Performance -
+total return index
+-7.0
+6.9
+13.2
+9,302
+13,951
+34,441
+1 year
+5 years
+12/31/2017
+-18.3
+04
+03
+01
+Further Information on Economic,
+Environmental, and Social Performance
+Investor Relations
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+11
+Chief Human Resources Officer
+Stefan Ries
+Chief Technology Officer / Technology & Innovation
+(as of January 2019)
+Jürgen Müller
+Additional
+Infomation
+Additional
+Infomation
+SAP Digital Business Services (until February 2019)
+Products & Innovation (until end of 2018)
+Further Information on Economic,
+Environmental, and Social Performance
+SAP Executive Board
+Global Customer Operations Americas and Asia Pacific Japan
+Jennifer Morgan
+Chief Financial Officer
+Luka Mucic
+SAP Digital Business Services
+Michael Kleinemeier
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+Bernd Leukert
+S&P 500 Composite -
+total return index
+SAP Is the Most Valuable DAX Company,
+Despite Declining Stock Markets
+SAP Stock Reaches New All-Time High
+12
+65%
+€86.93
+Dec 28, 2018
+Annual high €108.02
+Sept 27, 2018
+March 2, 2018
+Annual low €82.47
+75%
+85%
+95%
+105%
+115%
+Clouded competitive prospects and political uncertainties left
+their mark on global stock markets in 2018. This was driven, among
+other things, by the trade conflict between the United States and
+China, the U.S. Federal Reserve's monetary policy, the tug-of-war
+in the Brexit negotiations, and the budget dispute between Italy and
+the European Union (EU). Though unable to escape these
+developments, SAP stock finished the year significantly higher than
+the benchmark indices: it declined 7.0%, whereas the DAX 30 and
+EURO STOXX 50 indexes lost as much as 18.3% and 14.8%,
+respectively. In terms of market capitalization, SAP is the most
+valuable DAX company.
+€93.45
+125%
+135%
+S&P North American Technology Software Index
+Dow Jones Euro STOXX 50
+DAX 30 Performanceindex (Xetra)
+SAP Share (Xetra)
+SAP Stock in Comparison to Major Indicies December 29, 2017 to December 28, 2018
+In the wake of the many uncertainties mentioned above, coupled
+with the increasing number of profit warnings including from some
+large DAX enterprises, the stock markets experienced broad-scale
+losses in a continuous downward trend that lasted until the end of
+the year. Share prices were hit particularly hard in December
+following the arrest of Huawei's chief financial officer in Canada and
+the Federal Reserve's decision to raise interest rates again. SAP
+was not immune: despite our renewed forecast increases, the
+publication of SAP's third-quarter results on October 18 failed to
+impress the markets, and SAP stock declined 5.9% that same day.
+On November 11, SAP announced its acquisition of Qualtrics
+International Inc., yet investors initially felt the acquisition was too
+expensive, prompting a 5.6% drop in the SAP share price the
+following day. SAP stock closed the year on December 28 at
+€86.93, down 7.0% for 2018 overall.
+Not even the publication of our favorable second-quarter results
+on July 19 could stimulate SAP stock in this climate. Increasing
+demand for technology shares in August, however, ultimately
+pushed SAP stock to a new all-time high of €108.02 on September
+27, before presentation of the Italian government's debt budget
+ushered in the markets' transition to a bear market in the fourth
+quarter.
+a weakening euro, SAP stock rallied even higher, gaining a clear
+lead over the rising market as a whole. By May 17, the date of the
+Annual General Meeting of Shareholders, the SAP share price had
+risen to €96.95. Shareholders subsequently approved a 12% higher
+dividend of €1.40 per share at this Meeting, lifting SAP stock to an
+interim high of €104.30 on June 14. A renewed flare-up of the trade
+dispute, however, put an end to this rise in the short term, with the
+turbulent political and monetary policy environment causing
+increasing volatility on the stock markets.
+renewed pressure on the stock markets. On March 2, SAP stock
+touched its lowest point of the year at €82.47. The trade dispute
+repeatedly impacted the stock markets as the year progressed.
+The markets were initially able to free themselves from this
+negative influence in April, and remained buoyant through to mid-
+June. Boosted additionally by strong first-quarter 2018 results and
+Having started the year at €93.45, the Xetra closing price on
+December 31, 2017, SAP stock initially experienced a short pull-
+back but then proceeded to develop largely in line with market
+developments. Considerable turbulence caused by recurring
+interest rate fears and an ever-stronger euro, however, dominated
+the markets, and SAP's excellent financial results for fiscal year
+2017 were not able to stop this trend. SAP's announcement of a
+higher dividend at the end of February, at least, managed to spark a
+slight recovery before the United States' confrontation course with
+international trading partners at the beginning of March put
+Dec 29, 2017
+In addition, SAP set itself a voluntary target of increasing the
+percentage of positions in leadership on a global level held by
+women to 27% by the end of 2019 and to 28% by the end of 2020.
+That percentage stood at 25.7% globally at the end of 2018. It goes
+without saying that ability is still the primary selection criterion for
+any position at SAP.
+1.5
+0.9
+The size and composition of the Supervisory Board are
+governed not by the German Codetermination Act (which does not
+apply, because we are a European company) but by the Articles of
+Incorporation and the SAP SE Employee Involvement Agreement.
+Both documents are available on the SAP Web site.
+Supervisory Board
+The Executive Board currently has ten members. It is solely
+responsible for managing the Company. It has a duty to exercise its
+management powers in the interest of the Company and in pursuit
+of the sustained growth of corporate value. It discusses and agrees
+its strategy for the Company with the Supervisory Board, ensures
+compliance with the requirements of the law throughout the Group,
+and maintains effective risk management structures and internal
+risk controls. The members of the Executive Board are appointed
+by the Supervisory Board which set a regular age limit of 65 years
+for the Executive Board. Information about each Executive Board
+member's portfolio of responsibilities is available on the SAP Web
+site.
+Executive Board
+the Executive Board and the two management levels below
+Executive Board level, as well as information on the implementation
+of the minimum quota of men and women on the Supervisory
+Board, and details about the Diversity Policy of SAP SE.
+On February 19, 2019, the Executive Board published a
+Corporate Governance Statement for 2018 pursuant to Sections
+315d and 289f of the German Commercial Code. The statement is
+on the SAP Web site. It comprises the current declaration pursuant
+to the German Stock Corporation Act, Section 161, certain details of
+our corporate governance practices, and an account of how the
+Executive Board and the Supervisory Board work, who serves on
+which Supervisory Board committees, and how those committees
+work. It also sets out the targets for the percentage of women on
+Corporate Governance Statement
+Every year, as required by the German Stock Corporation Act,
+Section 161, the Executive Board and Supervisory Board issue a
+Section 161 Declaration stating whether SAP has implemented and
+is following the Code's recommendations, and identifying any
+recommendations that the Company has not followed - with a full
+explanation of why it has not done so. Our latest Section 161
+Declaration, published in October 2018, is on the SAP Web site
+along with our declarations from previous years and links to the
+current and previous editions of the Code. As our latest declaration
+shows, we have followed since February 21, 2018, all of the 115
+recommendations and all of the suggestions in the current Code
+(while we followed all but two of the recommendations of the Code
+from the issuance of our Section 161 Declaration on October 27,
+2017, through the update issued on February 21, 2018).
+Section 161 Declaration
+Since SAP is also listed in the United States, we comply with the
+rules that apply to non-U.S. companies listed on the New York
+Stock Exchange (NYSE). These include the requirements, as they
+apply to foreign private issuers, of the NYSE Corporate Governance
+Standards, the U.S. Sarbanes-Oxley Act of 2002, and the U.S.
+Securities and Exchange Commission (SEC).
+We are a global company with an international shareholder base,
+so we need sound governance. Good corporate governance means
+managing the Company accountably and transparently to secure
+long-term value. We believe our shareholders, business partners,
+employees, and the financial markets reward good corporate
+governance with the increased trust they place in our Company.
+Corporate Governance Principles at SAP
+SAP is an international firm with European roots, having the
+legal form of a European company (Societas Europaea, or SE).
+Being an SE headquartered in Germany, we are now subject to
+European and German law for SEs while remaining subject to
+German stock corporation law. Major characteristics of our
+governance structure remain in place since the conversion, notably
+our two-tier board comprising a Supervisory Board and an
+Executive Board, and parity for workforce representatives on the
+Supervisory Board. Because SAP SE is listed on a German stock
+exchange, our corporate governance is still based on the German
+Corporate Governance Code (the "Code" in this report).
+Corporate Governance Report
+The Supervisory Board has 18 members who, in equal numbers,
+represent the shareholders and the employees. It appoints,
+monitors, and advises the Executive Board. The Executive Board
+involves the Supervisory Board in decisions on matters of
+fundamental importance for the Company. The Supervisory Board
+has reserved to itself the approval of certain transactions of
+fundamental importance, as set out in the Articles of Incorporation
+and detailed in the Supervisory Board's list of reserved categories
+of transactions. The Executive Board regularly provides the
+Supervisory Board with full and timely reports on all material
+matters of strategy, business planning, and performance, including
+any deviations of actual business performance from plan, risks, risk
+management, and corporate compliance. We provide our
+shareholders with in-depth information about how the Executive
+Board and the Supervisory Board work, how the committees are
+composed, and how these committees work, in our corporate
+governance statement. For more information about the joint work
+of the Executive Board and the Supervisory Board and about the
+work of the Supervisory Board and its committees in 2018, see the
+Report by the Supervisory Board.
+Additional
+Infomation
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+Investor Relations
+*12% of institutional investors (marked yellow) are classified as socially
+responsible investors (SRIs)
+Europe (without
+Germany); 15%
+Rest of World; 4%
+UK/Ireland; 15%
+Germany; 8%
+1,229 Million
+Outstanding Shares
+Freefloat 85.5%
+Private Investors /
+Unidentified; 25%
+Further Information on Economic,
+Environmental, and Social Performance
+North America; 18%
+Composition of the Supervisory Board
+Corporate Governance Report
+The Supervisory Board adopted a Diversity Policy for the
+Executive Board and the Supervisory Board which meets the
+requirements of Section 289f para. (2) no. 6 of the German
+Commercial Code. The Diversity Policy as well as information on
+the targets for the numbers of women on the Executive Board and
+the first two management levels below the Executive Board are
+described in the Corporate Governance Statement which is
+available on the SAP SE Web site.
+The Supervisory Board of SAP SE, which currently includes six
+women, meets the mandatory gender quota of 30%. For
+information on fulfillment of the gender quota obligation in financial
+year 2018, please see the Corporate Governance Statement. The
+Supervisory Board also aims for diversity with regard to the
+composition of the Executive Board, which currently has two
+female members.
+Diversity in the Company
+The Audit Committee is chaired by Erhard Schipporeit, who for
+many years was the chief financial officer of a DAX company that is
+also listed on a U.S. stock exchange and therefore qualifies as an
+independent financial expert in the meaning of the Code, Section
+5.3.2, and the German Stock Corporation Act, Section 100 (5).
+Furthermore, the Supervisory Board determined that, including
+the employee representatives and taking into account the
+shareholder structure of SAP SE, it has an appropriate number of
+independent members in the meaning of the Code, Section 5.4.2.
+This was based on the assumption that the employee
+representatives' capacity as employees does not per se raise any
+concerns as to their independence in the meaning of the Code,
+Section 5.4.2.
+Schipporeit) are independent in the meaning of the Code, Section
+5.4.2, based on the assumption that the duration of membership in
+the Supervisory Board does not per se exclude the relevant
+member from being considered as independent.
+SAP believes that a sufficient degree of independence of its
+Supervisory Board members is essential for effective and
+responsible corporate management and control. The Supervisory
+Board has a defined objective for its composition regarding the
+minimum number of independent members on the shareholder
+representative side, as recommended in the Code, Section 5.4.1,
+paragraph 2. The objective is five such members. At its meeting on
+October 25, 2018, the Supervisory Board determined that all of its
+shareholder representative members (that is, Hasso Plattner,
+Pekka Ala-Pietilä, Aicha Evans, Anja Feldmann, Diane Greene,
+Gesche Joost, Bernard Liautaud, Friederike Rotsch and Erhard
+Independence of the Supervisory Board
+The Supervisory Board believes that the current composition of
+the Supervisory Board fulfills all of these objectives and the
+requirements contained in the Profile of Skills and Expertise. There
+is information about each member, the committees, and who
+serves on which committee, on the SAP Web site.
+In addition to these objectives, the Supervisory Board adopted a
+Profile of Skills and Expertise for the Supervisory Board which
+comprises general personal requirements applicable to each
+Supervisory Board member, as well as company-specific and
+professional requirements which must be fulfilled by the
+Supervisory Board as a whole. This means that the company-
+specific and professional requirements stated in the Profile of Skills
+and Expertise do not have to be met by each member of the
+Supervisory Board individually, but that it is sufficient if the
+knowledge, skills, and professional experience contributed by each
+of the Supervisory Board members combine to cover the totality of
+the company-specific and professional requirements stated in the
+Profile of Skills and Expertise. Proposals by the Supervisory Board
+to the General Meeting of Shareholders for the election of
+shareholders' representatives to the Supervisory Board shall aim at
+fulfilling the Profile of Skills and Expertise. The Profile of Skills and
+Expertise for the Supervisory Board is available on the SAP Web
+site.
+Length of service on the Supervisory Board generally shall not
+exceed a period of 12 years. For a transition period, the
+Supervisory Board may, notably to retain valuable experience of
+SAP Supervisory Board work, propose from the nine
+shareholder representatives up to three candidates who exceed
+this regular limit to the Supervisory Board members' term of
+office. After financial year 2023, the regular limit may only be
+exceeded in justified individual cases. The eligibility of employee
+representatives remains unaffected.
+No member of the Supervisory Board should be older than 75
+years.
+The Supervisory Board members as a group possess the
+knowledge, ability, and expert experience required to properly
+perform its duties in our global IT company. At least one
+independent member has financial reporting and auditing
+At least five shareholder representatives on the Supervisory
+Board, and at least ten members of the entire Supervisory
+Board, should be independent members in the meaning of
+Section 5.4.2 of the Code; the Supervisory Board considers
+these numbers as appropriate.
+There should never be fewer than three persons of non-German
+origin on the shareholder representatives' side of the
+Supervisory Board.
+-
+-
+expertise. The Supervisory Board has defined the following
+objectives for its own composition:
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined
+To Our
+15
+No employee, consultant, or director of a significant SAP
+competitor should be a Supervisory Board member.
+1.4
+Treasury Shares; 3%
+Founders; 12%
+2017: 85.2%).
+Prime All Share
+DAX 30
+Weight (%) in indexes at 12/31/2018
+Bloomberg
+Reuters
+NYSE (ADRs)
+WKN/ISIN
+IDs and symbols
+United States (ADRs)
+Germany
+Listings
+--6.2
+Berlin, Frankfurt, Stuttgart
+New York Stock Exchange
+6.3
+1) Assuming all dividends were reinvested
+Source: Datastream / Deutsche Bank
+-11.4
+2.7
+10.6
+8,860
+1 year
+12/31/2017
+12/31/2008 12/31/2013
+10 years
+5 years
+27,485
+11,424
+· 803054204 (CUSIP)
+6.8
+18.2
+20.2
+10.7
+Shareholder Structure
+716460/DE0007164600
+803054204 (CUSIP)
+Dividend Increased to €1.50
+Applying the definition accepted on the Frankfurt Stock
+Exchange, which excludes treasury stock from the free float, as of
+December 31, 2018, the free float stood at 85.5% (December 31,
+Shareholder Structure
+€1,228,504,232 (2017: €1,228,504,232). It is issued as
+1,228,504,232 no-par shares, each with an attribute value of €1 in
+relation to capital stock.
+SAP's capital stock as of December 31, 2018, was
+Capital Stock Unchanged
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+Stakeholders
+To Our
+SAPG.F or .DE
+SAP GR
+13
+4.36
+Dow Jones EURO STOXX 50
+2.83
+Dow Jones STOXX 50
+8.07
+HDAX
+8.52
+CDAX
+7.55
+10.13
+At the Annual General Meeting of Shareholders, the Executive
+Board and the Supervisory Board will recommend increasing the
+total dividend for fiscal year 2018 by more than 7% to €1.50 per
+share (2017: €1.40). This represents a payout ratio of 43.8% (2017:
+41.3%).
+We had a very successful year in 2018, as customers continue to
+turn to SAP to support them to become intelligent enterprises. We
+believe our shareholders should share greatly in this success,
+therefore it is our policy to pay a dividend totaling 40% or more of
+IFRS profit after tax.
+Investor Relations
+Key Facts About SAP Stock/SAP ADRs
+192
+Section F - Management of Financial Risk Factors
+To Our
+Stakeholders
+Board of Directors, Vestiaire Collective SA, Levallois-Perret, France
+Board of Directors, Dashlane, Inc., New York, NY, United States
+Board of Directors, Recorded Future, Inc., Cambridge, MA, United
+States
+Board of Directors, SCYTL Secure Electronic Voting SA, Barcelona,
+Spain (until November 7, 2018)
+Board of Directors, nlyte Software Ltd., London, United Kingdom
+Board of Directors, Wonga Group Ltd., London, United Kingdom
+(until September 6, 2018)
+Managing Partner Balderton Capital, London, United Kingdom
+Bernard Liautaud 2), 4), 6)
+Supervisory Board, Rhein-Neckar Loewen GmbH, Kronau, Germany
+Head of Sponsorships Europe and Asia
+Lars Lamadé ¹), 2), 7), 8)
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined
+To Our
+Section G Other Disclosures
+Supervisory Board, Ottobock SE & Co. KGaA, Duderstadt, Germany
+Supervisory Board, ING-DiBa AG, Frankfurt, Germany
+Professor for Design Research and Head of the Design Research
+Lab, University of Arts Berlin
+Prof. Dr. Gesche Joost 4), 8)
+Board of Directors, eWise Group, Inc., Redwood City,
+CA, United States
+196
+Board of Directors, Qubit Digital Ltd., London, United Kingdom
+Board of Directors, Stanford University, Stanford,
+Board of Directors, Aircall.io, New York City, NY, United States
+Board of Directors, Virtuo Technologies, Paris, France
+Chairman of the Supervisory Board, innogy SE, Essen, Germany
+Supervisory Board, RWE AG, Essen, Germany
+Supervisory Board, Fuchs Petrolub SE, Mannheim, Germany
+Supervisory Board, BDO AG, Hamburg, Germany
+Supervisory Board, HDI V.a.G., Hanover, Germany
+Supervisory Board, Hannover Rückversicherung SE, Hanover,
+Germany
+Supervisory Board, Deutsche Börse AG, Frankfurt am Main,
+Germany (until May 16, 2018)
+Supervisory Board, Talanx AG, Hanover, Germany
+Independent Management Consultant
+Dr. Erhard Schipporeit ³), 5), 7)
+Group General Counsel and Head of Group Legal & Compliance,
+Merck KGaA, Darmstadt, Germany
+Dr. Friederike Rotsch (from May 17, 2018) 3), 5), 7)
+Chief Product Expert
+Vice President User Experience
+Christine Regitz ¹), 4), 8)
+Advisory Board, TSG 1899 Hoffenheim Fußball-Spielbetriebs GmbH,
+Sinsheim, Germany
+Managing Director of Oswald Consulting GmbH, Walldorf, Germany
+Gerhard Oswald (from January 1, 2019),
+Board of Directors, Citymapper Ltd., London, United Kingdom
+Board of Directors, Tim Talent SAS, Paris, France (from
+February 6, 2018)
+Board of Directors, The Hut Group, Manchester, United Kingdom
+Board of Directors, Peakon Aps, Copenhagen, Denmark (from
+February 5, 2018)
+CA, United States (until March 31, 2018)
+Robert Schuschnig-Fowler 1), 5), 8)
+Member of Works Council SAP SE
+Andreas Hahn ¹), 2), 4)
+Chairman of the Board of Directors, Huhtamäki Oyj,
+Pekka Ala-Pietilä 2), 4), 5), 6), 7)
+Chairperson of the Spokespersons' Committee of Senior Managers
+of SAP SE
+Vice President, Head of SAP Alumni Relations
+Deputy Chairperson
+Margret Klein-Magar ¹), 2), 4),
+Prof. Dr. h.c. mult. Hasso Plattner 2), 4), 6), 7), 8)
+Chairman
+governing bodies of enterprises, other than subsidiaries of SAP on
+December 31, 2018
+Memberships on supervisory boards and other comparable
+Supervisory Board
+Board of Directors, Bank of New York Mellon, New York, NY, United
+States
+Global Sales, Regional Field Organizations, Line of Business
+Solutions Sales
+Global Customer Operations (Americas and APJ)
+Jennifer Morgan
+Supervisory Board TomTom N.V., Amsterdam, the Netherlands
+Supervisory Board, DFKI (Deutsches Forschungszentrum für
+Künstliche Intelligenz GmbH), Kaiserslautern, Germany
+Supervisory Board, Bertelsmann SE & Co. KGaA, Guetersloh,
+Germany
+SAP Digital Business Services (Co-Lead with Michael Kleinemeier)
+Global Support Delivery, Global Innovation Services, Global
+Customer Success Group, Global User Groups, Digital Interconnect,
+SAP HANA Enterprise Cloud, Application Innovation Services, SAP
+Innovative Business Solutions, SAP Secrecy
+Bernd Leukert
+Board of Partners, E. Merck KG, Darmstadt, Germany (from
+January 27, 2019)
+Espoo, Finland
+Product Expert, IoT Standards,
+Chairman of the Board of Directors, Sanoma Corporation, Helsinki,
+Finland
+Panagiotis Bissiritsas ¹), 3), 4), 5)
+Board of Directors, Alphabet, Inc., Mountain View, CA, United States
+Board of Directors, Stripe Inc., San Francisco, CA, United States
+(from January 31, 2019)
+Chief Executive Officer. Google Cloud, Google LLC, Mountain View,
+CA, United States (until January 28, 2019)
+Diane Greene (from May 17, 2018) 4)
+Senior Vice President and Chief Strategy Officer, Intel Corporation,
+Santa Clara, CA, United States
+Aicha Evans 2), 4), 8)
+Product Manager
+Martin Duffek 1), 3), 4), 8)
+Supervisory Board, Rhein-Neckar Loewen GmbH, Kronau, Germany
+Chief Human Resources Officer, Labor Relations Director
+HR Strategy, Business Transformation, Leadership Development,
+Talent Development
+Stefan Ries
+Technology and Innovation Strategy, SAP HANA, SAP Cloud
+Platform, SAP Leonardo, SAP Analytics
+Technology & Innovation
+Chief Innovation Officer
+Jürgen Müller (from January 1, 2019)
+Global Finance and Administration including Investor Relations and
+Data Protection & Privacy, Global Security
+Chief Financial Officer
+Luka Mucic
+Member of Works Council SAP SE
+Support Expert
+Chairman of the Board of Directors, Netcompany A/S, Copenhagen,
+Denmark
+Supervisory Board, innogy SE, Essen, Germany
+Account Manager, Senior Support Consultant
+Member of Works Council SAP SE
+Thereof defined-benefit
+2,398
+1,312
+1,106
+Post-employment benefits
+43,148
+42,357
+42,298
+Subtotal¹)
+23,942
+25,723
+23,646
+Share-based payment¹)
+19,206
+16,634
+18,652
+Short-term employee benefits
+33,935
+39,993
+250
+38,374
+423
+Thereof defined-contribution
+8,054
+Total expense in € thousands
+177,106
+Number of PSUs granted
+118,072
+Number of RSUs granted
+2016
+2017
+2018
+Share-Based Payment for Executive Board
+Members
+1) Portion of total executive compensation allocated to the respective year
+45,546
+43,669
+43,404
+Total¹)
+SAP did not grant any compensation advance or credit to, or
+enter into any commitment for the benefit of, any member of the
+Executive Board or Supervisory Board in 2018, 2017, or 2016.
+Detailed information about the different elements of the
+compensation are disclosed in the Compensation Report, which is
+part of our Management Report and of our Annual Report on
+Form 20-F, both of which are available on SAP's Web site.
+606
+889
+856
+1,792
+Deputy Chairman of SAP SE Works Council Europe (until
+November 19, 2018)
+1,667
+2,054
+(G.6) Executive and Supervisory Board
+Compensation
+8) Member of the Company's People and Organization Committee
+7) Member of the Company's Special Committee
+6) Member of the Company's Nomination Committee
+5) Member of the Company's Finance and Investment Committee
+4) Member of the Company's Technology and Strategy Committee
+3) Member of the Company's Audit Committee
+2) Member of the Company's General and Compensation Committee
+1) Elected by the employees
+Information as at December 31, 2018
+Prof. Dr. Wilhelm Haarmann (until May 17, 2018)
+Prof. Dr.-Ing. Dr.-Ing. E. h. Klaus Wucherer (until May 17, 2018)
+Prof. Anja Feldmann (until December 31, 2018)
+Supervisory Board Members Who Left During 2018
+Secretary of CHSCT (Hygiene, Security and Work Conditions
+Committee)
+Member of the SAP France Works Council
+Webmaster (P&I)
+Pierre Thiollet ¹). 4)
+Head of Company Law Unit, Hans Böckler Foundation, Duesseldorf,
+Germany
+Dr. Sebastian Sick 1), 2), 5), 7)
+Accounting Policy
+1,997
+The share-based payment amounts disclosed below in the table
+"Executive Board Compensation" are based on the grant date fair
+value of the restricted share units (RSUs) and performance share
+units (PSUs), respectively, issued to Executive Board members
+during the year under the LTI 2016 Plan, effective January 1, 2016.
+In the table "Share-Based Payment for Executive Board Members",
+the share-based payment expense is the amount recorded in profit
+or loss under IFRS 2 (Share-Based Payment) in the respective
+period.
+197
+2016
+2017
+2018
+DBO 12/31
+2016
+2017
+2018
+€ thousands
+Payments
+€ thousands
+Executive Board Compensation
+Payments to/DBO for Former Executive Board
+Members
+The total compensation of the Executive Board members for the
+years 2018, 2017, and 2016 was as follows:
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+Section G - Other Disclosures
+117,929
+176,886
+19,068
+SAP Digital Business Services (Co-Lead with Bernd Leukert)
+Global Services Delivery, Regional Field Services
+Additional
+Infomation
+Current
+Total
+Non-Current
+Current
+€ millions
+2017
+2018
+(G.2) Other Tax Liabilities
+Prepaid expenses primarily consist of prepayments for operating leases, support services, and software royalties. Other tax assets primarily
+consist of VAT.
+47
+28
+65
+32
+18
+53
+Prepaid expenses and other tax assets as % of
+other non-financial assets
+1,411
+687
+725
+Non-Current
+2,191
+Total
+540
+13
+0
+14
+12
+0
+13
+Other tax liabilities as % of
+4,496
+514
+3,982
+4,621
+501
+4,120
+Other non-financial liabilities
+568
+0
+568
+540
+0
+Other tax liabilities
+other non-financial liabilities
+1,301
+Other non-financial assets
+Current
+Total
+Non-Current
+Current
+2017
+2018
+€ millions
+Prepaid Expenses and Other Tax Assets
+Prepaid expenses are recorded at historical cost in the amount of
+unexpired or unconsumed costs. They are charged to expense over
+the applicable period.
+Accounting Policy
+(G.1) Other Non-Financial Assets
+This section provides additional disclosures on miscellaneous
+topics, including information pertaining to the Executive Board,
+Supervisory Board, related party transactions, and other corporate
+governance topics.
+Additional
+Infomation
+Section G - Other Disclosures
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+Non-Current
+889
+Total
+Other tax assets
+662
+189
+472
+704
+229
+475
+275
+66
+209
+268
+98
+170
+387
+123
+264
+436
+131
+305
+Total
+Prepaid expenses
+Michael Kleinemeier
+(G.3) Financial Commitments -
+Operating Leases
+Operating leases
+Bill McDermott
+Memberships on supervisory boards and other comparable
+governing bodies of enterprises, other than subsidiaries of SAP on
+December 31, 2018
+Executive Board
+(G.5) Board of Directors
+the complexity of individual factors and the large number of open
+questions, it is impossible at this point in time to assess the risks.
+For the reasons outlined above, it is impossible at this point in
+time to determine whether the potential anti-bribery law violations
+and the potential export restriction violations represent present
+obligations of SAP and, if so, to reliably estimate the amount of
+these obligations. As a consequence, no provisions have been
+recognized for these potential violations in our consolidated
+financial statements 2018. It is also not practicable to estimate the
+financial effect of any contingent liabilities that may result from
+these potential violations.
+The comprehensive and exhaustive investigations and the
+corresponding remediation activities are ongoing, and considering
+SAP has taken remedial actions to terminate access to SAP
+products and services for certain end users and block additional
+business activities with these end users through SAP or SAP
+partners. We have implemented further enhancements to our
+export control compliance program, including new internal controls,
+and have increased the capacity of the Export Control Compliance
+team with a particular focus on high-risk countries. SAP has also
+required additional due diligence, conducted by independent third-
+parties, for certain SAP partners based in high-risk regions. We are
+fully committed to compliance with all U.S., EU, and German laws
+regarding economic sanctions and export controls, including laws
+restricting the sale, export, and usage of SAP software and services
+in Iran and in other embargoed countries.
+In this context, SAP voluntarily self-disclosed potential export
+controls and economic sanctions violations to the U.S. DOJ and the
+U.S. Department of Treasury's Office of Foreign Assets Control
+(OFAC) in September 2017. At the same time, SAP provided
+notification to the U.S. SEC and responded to an SEC comment
+letter on export restriction matters in October 2017. SAP has also
+provided disclosure to the U.S. Department of Commerce's Bureau
+of Industry and Security (BIS) based on the same alleged facts.
+Finally, pursuant to Section 219 of the U.S. Iran Threat Reduction
+and Syria Human Rights Act of 2012 and Section 13(r) of the U.S.
+Securities Exchange Act of 1934, SAP has filed the required Iran
+Notice with the U.S. SEC. The alleged conduct may result in
+monetary penalties or other sanctions under U.S. sanctions and
+export control laws.
+Furthermore, we continue to investigate separate allegations
+regarding conduct that certain independent SAP partners violated
+SAP contractual terms and sold SAP products and services in
+embargoed countries. These SAP partners presumably did not
+adhere to SAP's strict procedures for indirect business activities. To
+the extent any company independent from SAP chooses not to
+follow SAP's licensing procedures, SAP is ultimately limited in its
+ability to stop their activities. SAP devotes considerable resources
+to prevent and mitigate such activities should they occur. We are
+also investigating allegations regarding direct sales from SAP to
+certain customers, who may have engaged in unauthorized
+activities in embargoed countries. The investigations are being
+conducted by SAP's Legal Compliance and Integrity Office and
+SAP's Export Controls Team, with the assistance of an external law
+firm and forensic advisors.
+SAP has implemented substantial enhancements to its anti-
+corruption compliance program, including additional policy changes
+and more robust internal controls. SAP has appointed new
+management in some business units and has increased its
+compliance staff. Moreover, SAP has banned the use of
+commissioned business development partners as well as certain
+sales commission agents in high-risk markets and has undertaken a
+systematic review of all relationships with state-owned entities and
+institutions in Africa. We remain fully committed to compliance with
+all U.S., German, EU, and South African laws, as well as the laws and
+regulations in every jurisdiction in which SAP operates.
+ongoing, and considering the complexity of individual factors and
+the large number of open questions, it is impossible at this point in
+time to assess the risks or financial impact.
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+Section G Other Disclosures
+194
+Chief Executive Officer
+The alleged conduct may result in monetary penalties or other
+sanctions under the FCPA and/or other anti-bribery laws. In
+addition, SAP's ability to conduct business in certain jurisdictions
+could be negatively impacted. The comprehensive and exhaustive
+investigations and the corresponding remediation activities are still
+Strategy, Governance, Digital Government, Business Development,
+Corporate Development, Global Corporate Affairs, Corporate Audit
+and Global Marketing
+Board of Directors, Dell Secure Works, Atlanta, GA, United States
+Environmental, and Social Performance
+Further Information on Economic,
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined
+To Our
+195
+Section G - Other Disclosures
+Global Development and Delivery of SAP's Core Applications, Global
+Business Operations, IT Services, Cloud Infrastructure
+Intelligent Enterprise Group
+Chief Operating Officer
+Christian Klein (from January 1, 2018)
+Global Customer Operations (EMEA, MEE, and Greater China)
+Global Sales, Regional Field Organizations, Line of Business
+Solutions Sales
+Adaire Fox-Martin
+Board of Directors, Discovery Limited, Johannesburg, South Africa
+Board of Directors, Docker, Inc., San Francisco, CA, United States
+SAP Business Network Segment (including SAP Concur, SAP Ariba,
+and SAP Fieldglass), Customer and Experience Management
+Segment (including Customer Experience and Qualtrics),
+Development and Delivery of SAP SuccessFactors (as part of the
+Applications, Technology & Services Segment)
+Cloud Business Group
+Robert Enslin
+Board of Directors, ANSYS, Inc., Canonsburg, PA, United States
+Board of Directors, Under Armour, Inc., Baltimore, MD, United
+States
+€ millions
+SAP has received communications and whistleblower
+information alleging conduct that may violate anti-bribery laws in
+South Africa, the United States (including the U.S. Foreign Corrupt
+Practices Act (FCPA)), and other countries. The Legal Compliance
+and Integrity Office of SAP is conducting investigations with the
+assistance of an external law firm and voluntarily advised local
+authorities in South Africa as well as the U.S. Securities and
+Exchange Commission (U.S. SEC) and the U.S. Department of
+Justice (U.S. DOJ). The investigations and dialogue with the local
+authorities and the U.S. SEC and U.S. DOJ are ongoing. SAP is
+cooperating with both the external law firm engaged for the
+investigations and the authorities.
+For information about income tax-related litigation, see
+Note (C.5).
+1,442
+336
+755
+351
+Operating Leases
+12/31/2018
+Total
+Section G - Other Disclosures
+Due thereafter
+Due 2020 to 2023
+Due 2019
+Our operating leases relate primarily to the lease of office space,
+hardware, and vehicles, with remaining non-cancelable lease terms
+between less than one year and 50 years. On a limited scale, the
+operating lease contracts include escalation clauses (based, for
+example, on the consumer price index) and renewal options.
+€ millions
+Maturities
+1,459
+1,442
+2017
+2018
+Our rental and operating lease expenses were €708 million,
+€532 million, and €458 million for the years 2018, 2017, and 2016,
+respectively.
+193
+Anti-Bribery and Export Control Matters
+To Our
+Stakeholders
+Management Report
+We are subject to ongoing audits by domestic and foreign tax
+authorities. In respect of non-income taxes, we, like many other
+companies operating in Brazil, are involved in various proceedings
+with Brazilian tax authorities regarding assessments and litigation
+matters on intercompany royalty payments and intercompany
+services. The total potential amount in dispute related to these
+matters for all applicable years is approximately €95 million (2017:
+€102 million). We have not recorded a provision for these matters,
+as we believe that we will prevail.
+Tax-Related Litigation
+In February 2010, United States-based TecSec, Inc. (TecSec)
+instituted legal proceedings in the United States against SAP
+(including its subsidiary Sybase) and many other defendants.
+TecSec alleged that SAP's and Sybase's products infringe one or
+more of the claims in five patents held by TecSec. In its complaint,
+TecSec seeks unspecified monetary damages and permanent
+injunctive relief. The lawsuit is proceeding but only with respect to
+one defendant. The trial for SAP (including its subsidiary Sybase)
+has not yet been scheduled - the lawsuit for SAP (including its
+subsidiary Sybase) remains stayed.
+In June 2018, Teradata Corporation, Teradata US, Inc. and
+Teradata Operations, Inc. (collectively "Teradata") filed a civil
+lawsuit against SAP SE, SAP America, Inc. and SAP Labs, LLC in
+U.S. federal court in California. Teradata alleges that SAP
+misappropriated trade secrets of Teradata, infringed Teradata's
+copyrights, and violated U.S. antitrust laws. Teradata seeks
+unspecified monetary damages and injunctive relief. Trial is not yet
+scheduled.
+Individual cases of intellectual property-related litigation and
+claims include the following:
+of the intellectual property-related litigation and claims tend to be
+either dismissed in court or settled out of court for amounts
+significantly below the originally claimed amounts. We currently
+believe that resolving the intellectual property-related claims and
+lawsuits pending as at December 31, 2018, will neither individually
+nor in the aggregate have a material adverse effect on our business,
+financial position, profit, or cash flows.
+Contingent liabilities exist from intellectual property-related
+litigation and claims for which no provision has been recognized.
+Generally, it is not practicable to estimate the financial impact of
+these contingent liabilities due to the uncertainties around the
+litigation and claims, as outlined above. The total amounts claimed
+by plaintiffs in those intellectual property-related lawsuits or claims
+in which a claim has been quantified were not material to us as at
+December 31, 2018 and 2017. Based on our past experience, most
+Intellectual property-related litigation and claims are cases in
+which third parties have threatened or initiated litigation claiming
+that SAP violates one or more intellectual property rights that they
+possess. Such intellectual property rights may include patents,
+copyrights, and other similar rights.
+Intellectual Property-Related Litigation and
+Claims
+We are subject to a variety of claims and lawsuits that arise from
+time to time in the ordinary course of our business, including
+proceedings and claims that relate to companies we have acquired.
+We will continue to vigorously defend against all claims and lawsuits
+against us. The provisions recorded for these claims and lawsuits as
+at December 31, 2018, are neither individually nor in the aggregate
+material to SAP.
+Further, the expected timing of any resulting outflows of economic
+benefits from these lawsuits and claims is uncertain and not
+estimable, as it depends generally on the duration of the legal
+proceedings and settlement negotiations required to resolve them.
+The outcome of litigation and claims is intrinsically subject to
+considerable uncertainty. Management's view of these matters may
+also change in the future. Actual outcomes of litigation and claims
+may differ from the assessments made by management in prior
+periods, which could result in a material impact on our business,
+financial position, profit, cash flows, or reputation. Most of the
+lawsuits and claims are of a very individual nature and claims are
+either not quantified by the claimants or the claim amounts
+quantified are, based on historical evidence, not expected to be a
+good proxy for the expenditure that would be required to resolve the
+case concerned. The specifics of the jurisdictions where most of the
+claims are located further impair the predictability of the outcome of
+the cases. Therefore, it is not practicable to reliably estimate the
+financial effect that these lawsuits and claims would have if SAP
+were to incur expenditure for these cases.
+The policies outlined in Note (A.4) for customer-related provisions,
+which include provisions for customer-related litigation cases and
+claims, equally apply to our other litigation, claims, and legal
+contingencies disclosed in this Note.
+Accounting Policies, Judgments, and Estimates
+This Note discloses information about intellectual property-
+related litigation and claims, tax-related litigation other than income
+tax-related litigation (see Note (C.5)), and anti-bribery and export
+control matters.
+(G.4) Other Litigation, Claims, and Legal
+Contingencies
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Combined
+147,041
+220,561
+14,233
+Among the claims and lawsuits disclosed in this Note are the
+following classes:
+Retirement Pension Plan for Executive Board
+Members
+41
+90
+90
+11
+-84
+20
+29
+24
+24
+-318
+-1
+-1
+191
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+-208
+The reclassification adjustments result from the following:
+Reclassification from available-for-sale to FVTPL
+-1,130
+-24
+Private placements
+-1,130
+Other non-derivative
+-208
+financial liabilities
+Derivatives
+Designated as
+hedging instrument
+FX forward
+contracts
+Interest rate
+swaps
+Not designated as
+hedging instrument
+FX forward
+contracts
+Section F - Management of Financial Risk Factors
+-84
+-1
+-1
+-5,147
+-5,147
+"
+"
+6
+99
+7
+Section G Other Disclosures
+200
+The additions relate to legal entities added in connection with
+acquisitions and foundations. The disposals are mainly due to
+mergers and liquidations of legal entities.
+265
+-21
+59
+227
+-28
+10
+245
+Total
+Disposals
+12/31/2018
+Additions
+12/31/2017
+Disposals
+Additions
+25
+Equity securities in listed and unlisted entities classified as
+available-for-sale financial assets were classified as FVTPL
+on January 1, 2018. There is no difference between their
+carrying amounts based on IAS 39 compared to IFRS 9.
+However, as a result of the change in classification, we
+have reclassified amounts accumulated in Other
+components of equity attributable to these equity
+securities to our opening retained earnings for 2018.
+Reclassification from available-for-sale to AC
+1
+Cash at banks, time deposits, debt securities
+and loans and other receivables
+•
+Debt securities consisting of bonds of mainly financial and
+non-financial corporations and municipalities were
+reclassified from available-for-sale financial assets to
+amortized cost on January 1, 2018, as the cash flows from
+these assets consist solely of payment of principal and
+interest and our business model is to hold to collect the
+contractual cash flows. As there was no material difference
+between the fair value and the amortized cost of these
+debt securities, there was no material impact on our
+opening retained earnings for 2018.
+There was no material difference between the fair value of
+the debt securities at December 31, 2018 and their
+amortized cost. Thus, the fair value loss we would have
+recognized in Other components of equity in 2018, had the
+debt securities not been reclassified to amortized cost,
+would not have been material.
+Reclassification from AC to FVTPL
+Investments in money-market and similar funds were
+reclassified from amortized cost to FVTPL, as their
+contractual cash flows do not solely represent payments of
+principal and interest. As such funds have a stable net
+asset value, there was no difference between amortized
+cost and fair value and accordingly, no impact on our
+opening retained earnings for 2018.
+The remeasurement adjustments result from the following:
+Implementation of the expected credit loss model for trade
+receivables and contact assets
+The application of the simplified approach recording
+lifetime expected credit losses on our trade receivables
+and contract assets led to an increase of the loss allowance
+by €25 million with a corresponding impact on our opening
+retained earnings for 2018.
+Implementation of the expected credit loss model for cash at
+banks, time deposits, and debt securities
+The application of the general impairment approach on
+cash at banks, time deposits, and debt securities led to an
+increase of our expected credit loss allowance by
+€6 million with a corresponding impact on our opening
+retained earnings for 2018.
+The following table reconciles the ending impairment
+allowance under IAS 39 to the opening expected credit loss
+allowance under IFRS 9:
+Reconciliation of the Impairment to the Expected Credit Loss Allowance Upon Transition to IFRS 9
+€ millions
+Loss Allowance as at 12/31/2017
+under IAS 39
+Remeasurement
+Loss Allowance as at 01/01/2018
+under IFRS 9
+Financial assets at amortized cost
+Trade receivables and contract assets
+74
+12/31/2016
+Bonds
+Loans
+5,810
+Other financial assets
+Debt securities
+Equity securities
+Time deposits
+Loans and other
+financial receivables
+Derivative assets
+Designated as
+hedging instrument
+FX forward
+contracts
+Interest rate
+swaps
+Not designated as
+hedging instrument
+FX forward
+contracts
+39
+827
+736
+Trade receivables
+163
+similar funds
+Money market and
+The defined benefit obligation (DBO) for pensions to Executive
+Board members and the annual pension entitlement of the
+members of the Executive Board on reaching age 62 based on
+entitlements from performance-based and salary-linked plans were
+as follows:
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Reconciliation of Carrying Amounts and Measurement Categories Upon Transition to IFRS 9
+€ millions
+Carrying Amount IAS 39
+12/31/2017
+Assets
+Cash and cash equivalents
+L&R
+AFS
+HFT
+Cash at banks
+2,558
+Time deposits
+314
+1,139
+-24
+41
+90
+311
+0
+1,139
+207
+-25
+5,785
+207
+29
+24
+0
+39
+0
+827
+-3
+733
+163
+-952
+-318
+-952
+-3
+Call options for
+2,558
+Category
+IAS 39
+share-based
+payments
+Call option on
+11
+equity shares
+Liabilities
+Trade payables
+Financial liabilities
+Non-derivative financial
+liabilities
+AC
+Transition to IFRS 9
+Carrying Amount IFRS 9
+01/01/2018
+No
+Measure-
+Reclassifi-
+Re-
+AC
+FVTPL
+cation measure-
+ment
+No
+Measure-
+ment
+Category
+IFRS 9
+Entities Consolidated in the Financial Statements
+ment
+As we intensify our focus on our key strategic growth areas, we
+will execute a company-wide restructuring program in 2019 to
+further simplify company structures and processes and to ensure
+that our organizational setup, skills set, and resource allocation
+continue to meet evolving customer demand. The main features of
+the restructuring plan were announced on January 29, 2019.
+Restructuring expenses are projected to be €800 million to
+€950 million.
+Firms
+Total
+Foreign
+KPMG
+KPMG AG
+(Germany)
+KPMG
+Total
+Foreign
+KPMG AG
+(Germany)
+Total
+Foreign
+KPMG
+KPMG AG
+(Germany)
+2016
+2017
+2018
+€ millions
+At the Annual General Meeting of Shareholders held on
+May 17, 2018, our shareholders elected KPMG AG
+Wirtschaftsprüfungsgesellschaft as SAP's independent auditor for
+2018. KPMG AG Wirtschaftsprüfungsgesellschaft has been the
+company's principal auditor since the fiscal year 2002. Mr. Rackwitz
+signs as auditor responsible for audit of the financial reporting and
+the group reporting of SAP SE since the fiscal year 2018. KPMG AG
+Wirtschaftsprüfungsgesellschaft and other firms in the global KPMG
+network charged the following fees to SAP for audit and other
+professional services related to 2018 and the previous years:
+(G.8) Principal Accountant Fees and
+Services
+For information about the compensation of our Executive Board
+and Supervisory Board members, see Note (G.6).
+employees of SAP) in the amount of €1 million (2017: €1 million).
+Amounts owed, but not yet paid, to Supervisory Board members
+from these transactions were €0 million as at December 31, 2018
+(2017: €0 million). All of these balances are unsecured and interest-
+free and settlement is expected to occur in cash.
+Firms
+Additional
+Infomation
+Firms
+3
+Tax fees
+1
+1
+0
+0
+0
+0
+0
+0
+0
+Audit-related fees
+9
+6
+3
+10
+7
+3
+9
+6
+Audit fees
+0
+Further Information on Economic,
+Environmental, and Social Performance
+Management Report
+2016
+2017
+2018
+€ thousands
+Supervisory Board Compensation
+The total annual compensation of the Supervisory Board
+members is as follows:
+470
+148
+192
+10,739
+3,191
+3,441
+2016
+2017
+2018
+Annual pension entitlement
+(G.10) Scope of Consolidation,
+Subsidiaries and Other Equity
+Investments
+DBO 12/31
+€ thousands
+Total compensation
+Consolidated Financial
+Statements IFRS
+3,702
+Thereof fixed compensation
+Combined
+To Our
+Stakeholders
+Section G Other Disclosures
+198
+In total, we sold services to members of the Executive Board and
+the Supervisory Board in the amount of €0 million (2017:
+€0 million), and we received services from members of the
+Supervisory Board (including services from employee
+representatives on the Supervisory Board in their capacity as
+In total, we sold products and services to companies controlled
+by members of the Supervisory Board in the amount of €37 million
+(2017: €2 million), we bought products and services from such
+companies in the amount of €3 million (2017: €5 million), and we
+provided sponsoring and other financial support to such companies
+in the amount of €4 million (2017: €4 million). Outstanding balances
+at year end from transactions with such companies were €3 million
+(2017: €0 million) for amounts owed to such companies and
+€28 million (2017: €0 million) for amounts owed by such
+companies. All of these balances are unsecured and interest-free
+and settlement is expected to occur in cash. Commitments (the
+longest of which is for five years) made by us to purchase further
+goods or services from these companies and to provide further
+sponsoring and other financial support amount to €191 million as at
+December 31, 2018 (2017: €21 million).
+Occasionally, members of the Executive Board of SAP SE obtain
+services from SAP for which they pay a consideration consistent
+with those negotiated at arm's length between unrelated parties.
+All amounts related to the abovementioned transactions were
+immaterial to SAP in all periods presented.
+Wilhelm Haarmann, member of the Supervisory Board until
+May 17, 2018, practices as a partner in the law firm Linklaters LLP in
+Frankfurt am Main, Germany. SAP occasionally purchased and
+purchases legal and similar services from Linklaters.
+Companies controlled by Hasso Plattner, chairman of our
+Supervisory Board and Chief Software Advisor of SAP, engaged in
+the following transactions with SAP: providing consulting services to
+SAP, receiving sport sponsoring from SAP, making purchases of
+SAP products and services, and selling a piece of land to SAP.
+(G.7) Related Party Transactions Other
+Than Board Compensation
+The Supervisory Board members do not receive any share-based
+payment for their services. As far as members who are employee
+representatives on the Supervisory Board receive share-based
+payment, such compensation is for their services as employees only
+and is unrelated to their status as members of the Supervisory
+Board.
+remuneration
+517
+528
+540
+Thereof committee
+3,652
+3,135
+3,135
+3,162
+3,663
+0
+Certain Supervisory Board members of SAP SE currently hold, or
+held within the last year, positions of significant responsibility with
+other entities. We have relationships with certain of these entities in
+the ordinary course of business, whereby we buy and sell products,
+assets, and services at prices believed to be consistent with those
+negotiated at arm's length between unrelated parties.
+0
+2.3
+Total identifiable assets
+intangibles
+1.5
+Thereof customer relationship and other
+0.5
+Thereof acquired technology
+2.0
+Intangible assets
+0.1
+Property, plant, and equipment
+0.1
+0.1
+Trade and other receivables
+Cash and cash equivalents
+€ billions
+Assets and Liabilities
+Qualtrics Acquisition: Provisional Amounts of
+Additional
+Infomation
+Trade and other payables
+Further Information on Economic,
+Environmental, and Social Performance
+0.1
+0.3
+Qualtrics goodwill is attributed to expected synergies from the
+acquisition, particularly in the following areas:
+0
+In general, the goodwill arising from the acquisitions consists
+largely of the synergies and the know-how and technical skills of the
+acquired businesses' workforces.
+We have not yet completed the accounting for the Qualtrics
+acquisition. In particular, the fair values of the intangible assets and
+contract liabilities disclosed above have only been determined
+provisionally (with the provisional values of the intangibles being
+based on benchmarks), as the valuations have only just started. The
+tax related assets and liabilities presented above might also vary
+significantly, as deferred taxes from investments in subsidiaries,
+unused tax losses, and so on, could not be finally determined. It is
+also not yet possible to provide detailed information about each
+class of acquired receivables or contingent liabilities.
+The allocation of the goodwill resulting from the Qualtrics
+acquisition to our operating segments depends on how our
+operating segments actually benefit from the synergies of the
+Qualtrics business combination. We have not yet completed the
+identification of those benefits.
+Improved profitability in Qualtrics sales and operations
+Combining Qualtrics products and SAP products to deliver an
+end-to-end experience and operational management system to
+the customers
+6.5
+Total consideration transferred
+4.8
+Goodwill
+1.7
+Total identifiable net assets
+0.6
+Total identifiable liabilities
+0.1
+Other liabilities
+Restructuring
+Contract liabilities/deferred income
+Current and deferred tax liabilities
+Consolidated Financial
+Statements IFRS
+0.1
+Combined
+10
+7
+3
+9
+6
+3
+0
+0
+0
+3
+0
+0
+0
+0
+All other fees
+Total
+0
+0
+Management Report
+0
+0
+0
+7
+Cross-selling opportunities to existing SAP customers across all
+regions, using SAP's sales organization
+Audit fees are the aggregate fees charged by KPMG for auditing
+our consolidated financial statements and the statutory financial
+statements of SAP SE and its subsidiaries. Audit-related fees are
+fees charged by KPMG for assurance and related services that are
+reasonably related to the performance of the audit or review of our
+financial statements and are not reported under audit fees.
+10
+199
+Section G - Other Disclosures
+The following table summarizes the provisional values of
+identifiable assets acquired and liabilities assumed in connection
+with the acquisition of Qualtrics, as at the acquisition date.
+The liabilities incurred (the amounts above are provisional as
+forfeiture rates and so on have not been finally determined) relate to
+the earned portion of unvested share-based payment awards. These
+liabilities were incurred by replacing, upon acquisition, equity-
+settled share-based payment awards held by employees of
+Qualtrics with cash-settled share-based payment awards, which are
+subject to forfeiture. The liabilities represent the portion of the
+replacement awards that relates to pre-acquisition services
+provided by the acquiree's employees, and were measured at the
+fair value determined under IFRS 2.
+6.5
+0.3
+6.2
+Total consideration transferred
+Liabilities incurred
+To Our
+Stakeholders
+Cash paid
+Acquisition of
+€ billions
+Qualtrics Acquisition: Consideration Transferred
+(Provisional Amounts)
+The financial effects of this transaction have not been recognized
+in the consolidated financial statements as at December 31, 2018.
+The operating results and assets and liabilities of Qualtrics will be
+reflected in our consolidated financial statements from
+January 23, 2019, onward.
+We acquired 100% of the Qualtrics shares for approx. US$35 per
+share, representing consideration transferred in cash of
+approximately US$7.1 billion. In addition to the cash payments, SAP
+will also incur liabilities and post-closing expenses relating to
+assumed share-based payment awards amounting to approximately
+US$0.9 billion.
+On January 23, 2019, we concluded the acquisition of Qualtrics,
+following satisfaction of applicable regulatory and other approvals.
+Qualtrics is a leading provider of customer relationship
+management (CRM) solutions. By combining Qualtrics products
+and SAP products, we aim to deliver an end-to-end experience and
+operational management system to our customers.
+(G.9) Events After the Reporting Period
+Business Combinations
+Qualtrics
+100.0
+SAP Vierte Beteiligungs- und Vermögensverwaltungs
+GmbH, Walldorf, Germany
+100.0
+100.0
+8). 9)
+SAP Norge AS, Lysaker, Norway
+SAP Ventures Investment GmbH, Walldorf, Germany
+100.0
+11)
+SAP New Zealand Limited, Auckland, New Zealand
+100.0
+SAP North West Africa Ltd, Casablanca, Morocco
+100.0
+8).9)
+100.0
+SAP West Balkans d.o.o., Belgrade, Serbia
+SAP.io Fund, L.P., San Francisco, CA, United States
+100.0
+SAP Österreich GmbH, Vienna, Austria
+SAP Nederland Holding B.V., 's-Hertogenbosch, the
+Netherlands
+SAP Perú S.A.C., Lima, Peru
+100.0
+17)
+SAP Zweite Beteiligungs- und Vermögensverwaltungs
+GmbH, Walldorf, Germany
+100.0
+SAP Vietnam Company Limited, Ho Chi Minh City,
+Vietnam
+100.0
+SAP Training and Development Institute FZCO, Dubai,
+United Arab Emirates
+SAP UAB, Vilnius, Lithuania
+SAP Labs France SAS, Mougins, France
+SAP System Application and Products Asia Myanmar
+Limited, Yangon, Myanmar
+100.0
+100.0
+SAP Labs Israel Ltd., Ra'anana, Israel
+100.0
+SAP Systems, Applications and Products in Data
+Processing (Thailand) Ltd., Bangkok, Thailand
+100.0
+SAP Labs Korea, Inc., Seoul, South Korea
+100.0
+100.0
+17)
+SAP Latvia SIA, Riga, Latvia
+100.0
+SAP Technologies Inc., Palo Alto, CA, United States
+100.0
+SAP Malaysia Sdn. Bhd., Kuala Lumpur, Malaysia
+100.0
+SAP Malta Investments Ltd., Valletta, Malta
+100.0 17)
+100.0
+SAP MENA FZ L.L.C., Dubai, United Arab Emirates
+100.0
+SAP Türkiye Yazilim Üretim ve Ticaret A.Ş., Istanbul,
+Turkey
+100.0
+SAP Middle East and North Africa L.L.C., Dubai, United
+Arab Emirates
+49.0 5).17)
+100.0
+SAP Taiwan Co., Ltd., Taipei, Taiwan
+5) Agreements with the other shareholders provide that SAP SE fully controls the
+entity.
+SAP Philippines, Inc., Makati, Philippines
+4). 6)
+100.0 16)
+70.0
+17)
+1) These figures are based on our local IFRS financial statements prior to eliminations
+resulting from consolidation and therefore do not reflect the contribution of these
+companies included in the Consolidated Financial Statements. The translation of the
+equity into Group currency is based on period-end closing exchange rates, and on
+average exchange rates for revenue and net income/loss.
+2) As at December 31, 2018, including managing directors, in FTE.
+3) Figures for profit/loss after tax and total equity pursuant to HGB, section 285 and
+section 313 are not disclosed if they are of minor significance for a fair presentation
+of the profitability, liquidity, capital resources and financial position of SAP SE,
+pursuant to HGB, section 313 (2) sentence 3 no. 4 and section 286 (3) sentence 1
+no. 1.
+4) Consolidated for the first time in 2018.
+6) SAP SE has the following structured entities: SAP.io Fund, L.P, Sapphire Fund
+Investments II, L.P., Sapphire Fund Investments III, L.P., Sapphire SAP HANA Fund of
+Funds, L.P., Sapphire Ventures Fund I, L.P., Sapphire Ventures Fund II, L.P., Sapphire
+Ventures Fund III, L.P, Sapphire Ventures Fund IV, L.P., SAPV (Mauritius), and SFI II
+Blocker, LLC. The results of operations of these entities are included in SAP's
+consolidated financial statements in accordance with IFRS 10 (Consolidated
+Financial Statements).
+7) Entity whose personally liable partner is SAP SE.
+8) Entity with (profit and) loss transfer agreement.
+9) Pursuant to HGB, section 264 (3) or section 264b, the subsidiary is exempt from
+applying certain legal requirements to their statutory stand-alone financial
+statements including the requirement to prepare notes to the financial statements
+and a review of operations, the requirement of independent audit, and the
+requirement of public disclosure.
+Owner- Foot-
+ship note
+10) Pursuant to sections 479A to 479C of the UK Companies Act 2006, the entity is
+exempt from having its financial statements audited on the basis that SAP SE has
+provided a guarantee of the entity's liabilities in respect of its financial year ended
+December 31, 2018, or in respect of its financial year ended September 30, 2018,
+respectively.
+12) Pursuant to Irish Companies Act 2014, chapter 16 of Part 6, section 365, the entity
+is exempt from having its financial statements audited on the grounds that the entity
+is entitled to the benefits from a dormant entity exemption in respect of its financial
+year ended December 31, 2018.
+13) Pursuant to article 727a, paragraph 2 of the Swiss Code of Obligations, the entity
+is exempt from having its financial statements audited in respect of its financial year
+ended December 31, 2018, or in respect of its financial year ended
+September 30, 2018, respectively.
+14) The entity is exempt of preparation and audit of its financial statements on the
+grounds of article L-123-12 of the French commercial code as the entity changed its
+financial year closing date to June 30, 2019 instead of December 31, 2018. The
+obligation to prepare and audit the financial statements is due only at the closing date
+of the financial year which is usually 12 months, but can be shorter or longer when the
+entity changes its closing date.
+15) Pursuant to section 211 (3) of the New Zealand Companies Act 1993 and section
+45 (2) of the Financial Reporting Act 2013, the entity had approved exclusions and is
+not required to lodge audited financial statements in respect of its financial year
+ended September 30, 2018.
+16) Pursuant to Angola Tax Law and Presidential Decree no. 147/13 of October 1, 2013,
+the entity does not qualified as being a Large Taxpayer and therefore is exempt from
+having its financial statements audited in respect of its financial year ended
+December 31, 2018.
+17) Entity with support letter issued by SAP SE.
+%
+Sapphire Ventures Fund II, L.P., Palo Alto, CA, United
+States
+0
+17)
+Sapphire Ventures Fund III, L.P., Palo Alto, CA, United
+States
+6)
+11) Pursuant to article 2:403 of the Dutch Civil Code, the entity is exempt from applying
+certain legal requirements to their statutory stand-alone financial statements
+including the requirement to prepare the financial statements, the requirement of
+independent audit, and the requirement of public disclosure, on the basis that SAP SE
+has provided a guarantee of the entity's liabilities in respect of its financial year ended
+December 31, 2018, or in respect of its financial year ended September 30, 2018,
+respectively.
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Name and Location of Company
+100.0
+SAP Polska Sp. z o.o., Warsaw, Poland
+100.0
+Sapphire Fund Investments II, L.P., Palo Alto, CA, United
+Stated
+4). 6)
+SAP Portals Europe GmbH, Walldorf, Germany
+100.0
+Sapphire Fund Investments III, L.P., Palo Alto, CA, United
+States
+0
+4). 6)
+SAP Portals Holding Beteiligungs GmbH, Walldorf,
+100.0
+Germany
+Sapphire SAP HANA Fund of Funds, L.P., Palo Alto, CA,
+United States
+6)
+SAP Portals Israel Ltd., Ra'anana, Israel
+100.0
+Sapphire Ventures Fund I, L.P., Palo Alto, CA, United
+States
+0
+6)
+204
+Section GOther Disclosures
+To Our
+Combined
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+0
+100.0
+100.0
+100.0
+Outlook Soft Deutschland GmbH, Walldorf, Germany
+SAP Estonia OÜ, Tallinn, Estonia
+100.0
+Section G - Other Disclosures
+203
+To Our
+Combined
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+100.0 8).9)
+Name and Location of Company
+Name and Location of Company
+%
+Owner- Foot-
+ship
+note
+%
+SAP Financial, Inc., Toronto, Canada
+SAP Finland Oy, Espoo, Finland
+SAP Foreign Holdings GmbH, Walldorf, Germany
+100.0
+100.0
+SAP Portugal - Sistemas, Aplicações e Produtos
+Informáticos, Sociedade Unipessoal, Lda., Porto Salvo,
+Portugal
+Owner- Foot-
+ship note
+100.0
+SAP Erste Beteiligungs- und Vermögensverwaltungs
+GmbH, Walldorf, Germany
+100.0
+SAP d.o.o., Zagreb, Croatia
+0
+100.0
+LLC "SAP Labs", Moscow, Russia
+100.0
+SAP Danmark A/S, Copenhagen, Denmark
+100.0
+LLC "SAP Ukraine", Kiev, Ukraine
+100.0
+17)
+SAP Dritte Beteiligungs- und Vermögensverwaltungs
+GmbH, Walldorf, Germany
+100.0
+4)
+Merlin Systems Oy, Espoo, Finland
+SAP East Africa Limited, Nairobi, Kenya
+100.0 17)
+Nihon Ariba K.K., Tokyo, Japan
+Noteshark, LLC, Chantilly, VA, United States
+100.0
+51.0
+4)
+SAP Egypt LLC, Cairo, Egypt
+100.0 17)
+OrientDB Limited, London, United Kingdom
+Outerjoin, Inc., Dublin, CA, United States
+100.0 4). 10)
+SAP EMEA Inside Sales S.L., Madrid, Spain
+100.0
+100.0
+100.0
+SAP Projektverwaltungs- und Beteiligungs GmbH,
+Walldorf, Germany
+SAP France Holding, Levallois Perret, France
+8).9)
+SAP Investments, Inc., Wilmington, DE, United States
+100.0
+SAP Services s.r.o., Prague, Czech Republic
+100.0
+SAP Ireland Limited, Dublin, Ireland
+100.0
+12)
+SAP Ireland US - Financial Services Designated Activity
+Company, Dublin, Ireland
+100.0
+SAP Siebte Beteiligungs- und Vermögensverwaltungs
+GmbH, Walldorf, Germany
+100.0
+100.0
+8).9)
+100.0 17)
+SAP sistemi, aplikacije in produkti za obdelavo podatkov
+d.o.o., Ljubljana, Slovenia
+100.0
+SAP Korea Ltd., Seoul, South Korea
+100.0
+SAP Slovensko s.r.o., Bratislava, Slovakia
+100.0
+SAP Labs Bulgaria EOOD, Sofia, Bulgaria
+100.0
+SAP Software and Services LLC, Doha, Qatar
+49.0 5).17)
+SAP Labs Finland Oy, Espoo, Finland
+SAP Israel Ltd., Ra'anana, Israel
+SAP Sechste Beteiligungs- und Vermögensverwaltungs
+GmbH, Walldorf, Germany
+100.0
+SAP International, Inc., Miami, FL, United States
+100.0
+SAP Global Marketing, Inc., New York, NY, United States
+100.0
+SAP Public Services, Inc., Washington, DC, United States
+SAP Puerto Rico GmbH, Walldorf, Germany
+100.0
+100.0 8), 9), 17)
+SAP Hellas S.A., Athens, Greece
+100.0
+SAP Retail Solutions Beteiligungsgesellschaft mbH,
+Walldorf, Germany
+100.0
+SAP Hong Kong Co., Ltd., Hong Kong, China
+100.0
+17)
+SAP Romania SRL, Bucharest, Romania
+100.0
+SAP Hosting Beteiligungs GmbH, St. Leon-Rot, Germany
+100.0
+8). 9)
+SAP India (Holding) Pte Ltd, Singapore, Singapore
+100.0
+SAP Saudi Arabia Software Services Ltd, Riyadh,
+Kingdom of Saudi Arabia
+100.0
+SAP International Panama, S.A., Panama City, Panama
+100.0
+SAP Saudi Arabia Software Trading Ltd, Riyadh, Kingdom
+of Saudi Arabia
+75.0
+17)
+SAP Svenska Aktiebolag, Stockholm, Sweden
+Sapphire Ventures Fund IV, L.P., Palo Alto, CA, United
+States
+Jürgen Müller
+0
+Upfront V, L.P., Santa Monica, CA, United States
+Wandera, Inc., San Francisco, CA, United States
+(G.11) German Code of Corporate
+Governance
+The German federal government published the German Code of
+Corporate Governance in February 2002 and introduced a
+commission that amends the Code from time to time. The Code
+contains statutory requirements and a number of recommendations
+and suggestions. Only the legal requirements are binding for
+German companies. With regard to the recommendations, the
+German Stock Corporation Act, section 161, requires that every
+year, listed companies publicly state the extent to which they have
+implemented them. Companies can deviate from the suggestions
+without having to make any public statements.
+In 2018 and 2017, our Executive Board and Supervisory Board
+issued the required declarations of implementation. The declaration
+for 2017 was amended in February 2018. The declaration for 2018
+was issued at the end of October 2018. These statements are
+available on our Web site:
+www.sap.com/corporate-en/investors/governance.
+Section G - Other Disclosures
+207
+To Our
+Combined
+Stakeholders
+Management Report
+The SaaStr Fund, L.P., Palo Alto, CA, United States
+Consolidated Financial
+Statements IFRS
+SAP SE
+Walldorf, Baden
+The Executive Board
+Bill McDermott
+Adaire Fox-Martin
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Robert Enslin
+Christian Klein
+Michael Kleinemeier
+Bernd Leukert
+Walldorf, February 20, 2019
+The Currency Cloud Group Limited, London, United Kingdom
+T3C Inc., Mountain View, CA, United States
+SV Angel IV, L.P., San Francisco, CA, United States
+Point Nine Capital Fund II GmbH & Co. KG, Berlin, Germany
+Point Nine Capital Fund III GmbH & Co. KG, Berlin, Germany
+Point Nine Capital Fund IV GmbH & Co. KG, Berlin, Germany
+Portworx Inc., Los Altos, CA, United States
+Post for Systems, Cairo, Egypt
+Project 44, Inc., Chicago, IL, United States
+PubNub, Inc., San Francisco, CA, United States
+206
+Section G Other Disclosures
+To Our
+Combined
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Name and Location of Company
+Punchh, Inc., San Mateo, CA, United States
+Realize Corporation, Tokyo, Japan
+Reltio, Inc., Redwood Shores, CA, United States
+Return Path, Inc., New York, NY, United States
+Ridge Ventures IV, L.P., San Francisco, CA, United States
+Rome2rio Pty. Ltd., Richmond, Australia
+Scryer, Inc., New York, NY, United States
+Scytl, S.A., Barcelona, Spain
+Smart City Planning, Inc., Tokyo, Japan
+SportsTech Fund, L.P., Palo Alto, CA, United States
+Sports Tech Parallel Fund, L.P., Palo Alto, CA, United States
+Spring Mobile Solutions, Inc., Salt Lake City, UT, United States
+Storm Ventures V, L.P., Menlo Park, CA, United States
+SumoLogic, Inc., Redwood City, CA, United States
+Jennifer Morgan
+Point Nine Annex GmbH & Co. KG, Berlin, Germany
+Luka Mucic
+Section G - Other Disclosures
+Sustainable Procurement
+Waste and Water.
+Public Policy
+Memberships
+Non-Financial Notes: Social Performance.
+211
+.212
+220
+222
+223
+225
+227
+Human Rights and Labor Standards
+229
+.232
+.233
+234
+Non-Financial Notes: Environmental Performance.
+235
+GRI Index and UN Global Compact Communication on Progress
+240
+Task Force on Climate-Related Financial Disclosure (TCFD)...
+245
+Management's Acknowledgement of the SAP Integrated Report 2018.
+246
+4)
+.231
+Our Contribution to the UN Sustainable Development Goals
+Sustainability Management and Policies.
+Stakeholder Engagement..
+208
+To Our
+Combined
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Management's Annual Report on
+Internal Control over
+Financial Reporting in the Consolidated
+Financial Statements
+U.S. law requires that management submit a report on the
+effectiveness of internal control over financial reporting in the
+consolidated financial statements. For 2018, that report is as
+follows:
+The management of SAP is responsible for establishing and
+maintaining adequate internal control over financial reporting as
+such term is defined in Rules 13a-15(f) and 15d-15(f) under the
+U.S. Securities Exchange Act of 1934. SAP's internal control over
+financial reporting is a process designed under the supervision of
+SAP's CEO and CFO to provide reasonable assurance regarding the
+reliability of financial reporting and the preparation of financial
+statements for external reporting purposes in accordance with
+International Financial Reporting Standards as issued by the
+International Accounting Standards Board.
+SAP's management assessed the effectiveness of the Company's
+internal control over financial reporting as at December 31, 2018. In
+making this assessment, it used the criteria set forth by the
+Committee of Sponsoring Organizations of the Treadway
+Commission in Internal Control - Integrated Framework (2013).
+Based on the assessment under these criteria, SAP
+management has concluded that, as at December 31, 2018, the
+Company's internal control over financial reporting was effective.
+KPMG AG Wirtschaftsprüfungsgesellschaft, our independent
+registered public accounting firm, has issued its attestation report
+on the effectiveness of SAP's internal control over financial
+reporting. It is included in the independent auditor's report on the
+Consolidated Financial Statements as at December 31, 2018.
+Management's Annual Report on Internal Control over Financial Reporting in the Consolidated Financial Statements
+209
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+210
+Further Information on Economic,
+Environmental, and Social
+Performance
+About This Further Information on Economic, Environmental, and Social Performance
+Connectivity of Financial and Non-Financial Indicators..
+Materiality..
+Stefan Ries
+SAPV (Mauritius), Ebene, Mauritius
+Pheonix Labs Canada, ULC, Burnaby, BC, Canada
+OpenX Software Limited, Pasadena, CA, United States
+OpsRamp, Inc., San Jose, CA, United States
+Systems Applications Products (Africa Region)
+Proprietary Limited, Johannesburg, South Africa
+100.0
+Systems Applications Products (Africa) Proprietary
+100.0
+Limited, Johannesburg, South Africa
+Systems Applications Products (South Africa)
+Proprietary Limited, Johannesburg, South Africa
+Systems Applications Products Nigeria Limited, Victoria
+Island, Nigeria
+100.0
+17)
+Technology Management Associates Inc., Herndon, VA,
+United States
+100.0 4)
+100.0
+TomorrowNow, Inc., Bryan, TX, United States
+TRX Europe Limited, London, United Kingdom
+100.0 10)
+TRX Luxembourg, S.a.r.l., Luxembourg City, Luxembourg
+100.0
+TRX Technologies India Private Limited, Raman Nagar,
+India
+100.0
+TRX UK Limited, London, United Kingdom
+100.0 10)
+TRX, Inc., Bellevue, WA, United States
+100.0
+Volume Integration, Inc., VA, United States
+100.0
+100.0
+Sybase, Inc., San Ramon, CA, United States
+100.0
+Sybase Software (India) Private Ltd., Mumbai, India
+Saudi Ebreez Company for Electronic Services LLC,
+Riyadh, Kingdom of Saudi Arabia
+57.0
+4)
+SFI II Blocker, LLC, Palo Alto, CA, United States
+0
+4). 6)
+SuccessFactors (Philippines), Inc., Pasig City, Philippines
+100.0
+SuccessFactors Asia Pacific Limited, Hong Kong, China
+100.0
+SuccessFactors Cayman, Ltd., Grand Cayman, Cayman
+100.0
+Islands
+Sybase 365 Ltd., Tortola, British Virgin Islands
+100.0
+Sybase 365, LLC, San Ramon, CA, United States
+100.0
+Sybase Angola, LDA, Luanda, Angola
+Sybase Iberia S.L., Madrid, Spain
+100.0
+Sybase India Ltd., Mumbai, India
+100.0
+Sybase International Holdings Corporation, LLC, San
+100.0
+Ramon, CA, United States
+Sybase Philippines, Inc., Makati City, Philippines
+100.0
+Webcom d.o.o., Belgrade, Serbia
+Pendo.io, Inc., Raleigh, NC, United States
+100.0
+Webcom, Inc., Dublin, CA, United States
+Name and Location of Company
+Equity Investments with Ownership of at Least 5%
+83North IV, L.P., Hertzalia, Israel
+Alation, Inc., Redwood City, CA, United States
+Alchemist Accelerator Fund I LLC, San Francisco, CA, United States
+All Tax Platform - Solucoes Tributarias S.A., São Paulo, Brazil
+Amplify Partners II L.P., Menlo Park, CA, United States
+Amplify Partners III, L.P., Menlo Park, CA, United States.
+Amplify Partners, L.P., Menlo Park, CA, United States
+AP Opportunity Fund, LLC, Menlo Park, CA, United States
+Auth0, Inc., Bellevue, WA, United States
+Blue Yard Capital | GmbH & Co. KG, Berlin, Germany
+Catchpoint Systems, Inc., New York, NY, United States
+Char Software, Inc., Boston, MA, United States
+Contentful GmbH, Berlin, Germany
+Costanoa Venture Capital II L.P., Palo Alto, CA, United States
+Costanoa Venture Capital III L.P., Palo Alto, CA, United States
+Costanoa Venture Capital QZ, LLC, Palo Alto, CA, United States
+Culture Amp, Inc., San Francisco, CA, United States
+Data Collective II L.P., San Francisco, CA, United States
+Data Collective III L.P., San Francisco, CA, United States
+Data Collective IV, L.P., San Francisco, CA, United States
+DataRobot, Inc., Boston, MA, United States
+Dharma Platform, Inc., Washington DC, United States
+Digital Hub Rhein-Neckar GmbH, Ludwigshafen, Germany
+EIT ICT Labs Germany GmbH, Berlin, Germany
+FeedZai S.A., Lisbon, Portugal
+Felix Ventures II, L.P., London, United Kingdom
+45.71
+Follow Analytics, Inc., San Francisco, CA, United States
+GK Software AG, Schöneck, Germany
+JFrog, Ltd., Netanya, Israel
+Jibe, Inc., New York, NY, United States
+Kaltura, Inc., New York, NY, United States
+Kavacha TopCo LLC, New York, NY, United States
+Landlog Limited, Tokyo, Japan
+LeanData, Inc., Sunnyvale, CA, United States
+Livongo Health, Inc., Mountain View, CA, United States
+Local Globe VII, L.P., St. Peter Port, Guernsey, Channel Islands
+Local Globe VIII, L.P., St. Peter Port, Guernsey, Channel Islands
+Looker Data Sciences, Inc., Santa Cruz, CA, United States
+Matillion Ltd., Altrincham, United Kingdom
+Mosaic Ventures I, L.P., London, United Kingdom
+MVP Strategic Partnership Fund GmbH & Co. KG, Munich, Germany
+Narrative Science, Inc., Chicago, IL, United States
+Nor1, Inc., Santa Clara, CA, United States
+Notation Capital II, L.P., Brooklyn, NY, United States
+Notation Capital, L.P., Brooklyn, NY, United States
+On Deck Capital, Inc., New York, NY, United States
+innoWerft Technologie- und Gründerzentrum Walldorf Stiftung GmbH,
+Walldorf, Germany
+Yapta, Inc., Seattle, WA, United States
+4.50
+Visage Mobile, Inc., Milwaukee, WI, United States
+100.0
+4)
+Section G - Other Disclosures
+205
+To Our
+Combined
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Other Equity Investments
+Name and Location of Company
+Owner-
+ship
+Name and Location of Company
+%
+Greater Pacific Capital (Cayman) L.P., Grand Cayman, Cayman Islands
+Joint Arrangements and Investments in Associates
+IDG Ventures USA III, L.P., San Francisco, CA, United States
+China DataCom Corporation Limited, Guangzhou, China
+Convercent, Inc., Denver, CO, United States
+28.30
+IEX Group, Inc., New York, NY, United States
+37.32
+InfluxData, Inc., San Francisco, CA, United States
+Procurement Negócios Eletrônicos S/A, Rio de Janeiro, Brazil
+17.00
+Innovation Lab GmbH, Heidelberg, Germany
+4)
+100.0
+SAP Hungary Rendszerek, Alkalmazások és Termékek az
+Adatfeldolgozásban Informatikai Kft., Budapest, Hungary
+100.0
+132,888
+8,282
+SAP Labs, LLC, Palo Alto, CA, United States
+100.0
+604,460
+124,246
+484,511
+2,189
+SAP México S.A. de C.V., Mexico City, Mexico
+100.0
+386,079
+10,984
+40,051
+20,172
+17)
+SAP National Security Services, Inc., Newtown Square, PA, United
+States
+100.0
+552,326
+130,945
+426,052
+448
+SAP Nederland B.V., 's-Hertogenbosch, the Netherlands
+100.0
+613,282
+52,886
+145,553
+869
+477,630
+100.0
+SAP Labs India Private Limited, Bangalore, India
+1,775
+21,073
+956
+SAP India Private Limited, Bangalore, India
+100.0
+621,942
+72,674
+344,218
+2,028
+SAP Industries, Inc., Newtown Square, PA, United States
+100.0
+638,394
+118,321
+691,709
+338
+SAP Italia Sistemi Applicazioni Prodotti in Data Processing S.p.A.,
+Vimercate, Italy
+100.0
+563,346
+39,332
+427,184
+710
+SAP Japan Co., Ltd., Tokyo, Japan
+100.0
+980,832
+82,902
+192,939
+1,210
+611
+112,448
+11)
+100.0
+CallidusCloud Holdings Pty. Ltd., Sydney, Australia
+100.0
+4)
+100.0
+CallidusCloud K.K., Tokyo, Japan
+100.0
+4)
+Abakus Europe Limited, London, United Kingdom
+100.0 10)
+CallidusCloud Mexico, S. de R.L. de C.V., Mexico City,
+Mexico
+100.0
+4)
+100.0
+Abakus Ukraine Limited Liability Company, Kiev, Ukraine
+CallidusCloud Netherlands B.V., Rotterdam, the
+Netherlands
+100.0 4). 11)
+Ambin Properties Proprietary Limited, Johannesburg,
+South Africa
+100.0
+CallidusCloud New Zealand Corp., Auckland, New
+Zealand
+100.0 4)
+Apex Expert Solutions LLC, Arlington, VA, United States
+100.0
+4)
+CallidusCloud Pty. Ltd., Sydney, Australia
+100.0 4)
+Ariba Czech s.r.o., Prague, Czech Republic
+100.0
+110405, Inc., Newtown Square, PA, United States
+"SAP Kazakhstan" LLP, Almaty, Kazakhstan
+%
+180,364
+100.0
+867,910
+15,930
+203,903
+65,128
+1,628
+3,609,046
+999
+Section G - Other Disclosures
+201
+To Our
+Combined
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Other Subsidiaries ³)
+Name and Location of Company
+Owner-
+ship
+Foot-
+Name and Location of Company
+note
+Owner-
+ship
+Foot-
+note
+%
+SAP Service and Support Centre (Ireland) Limited, Dublin, Ireland
+SuccessFactors, Inc., South San Francisco, CA, United States
+100.0
+100.0
+1,564
+3,972,022
+2,053,873
+1,872
+810
+4)
+Concur Technologies, Inc., Bellevue, WA, United States
+100.0
+1,545,720
+1,787
+7,340,513
+3,569
+LLC SAP CIS, Moscow, Russia
+100.0
+-52,016
+472,531
+62,725
+837
+SAP (Schweiz) AG, Biel, Switzerland
+100.0
+822,547
+68,029
+84,935
+767
+SAP (UK) Limited, Feltham, United Kingdom
+100.0
+1,227,572
+10,385
+23,133
+175,789
+100.0
+Callidus Software Inc., Dublin, CA, United States
+To Our
+Combined
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Subsidiaries
+Major Subsidiaries
+Name and Location of Company
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Ownership
+Total Revenue in
+2018¹)
+Profit/Loss
+(-) After Tax
+for 2018
+Total Equity
+as at
+12/31/2018¹)
+Number of
+Foot-
+Employees
+note
+as at
+12/31/2018²)
+%
+Ariba, Inc., Palo Alto, CA, United States
+100.0
+€ thousands
+1,168,287
+€ thousands
+€ thousands
+212,728
+-47,515
+Assurance Report of the Independent Auditor on selected qualitative and quantitative sustainability disclosures
+1,794
+SAP America, Inc., Newtown Square, PA, United States
+865,582
+53,734
+465,034
+2,999
+SAP China Co., Ltd., Shanghai, China
+100.0
+949,367
+-67,883
+SAP Deutschland SE & Co. KG, Walldorf, Germany
+100.0
+4,199,201
+754,022
+100.0
+-184,135
+1,567,774
+4,707 7),9)
+SAP España - Sistemas, Aplicaciones y Productos en la Informática,
+S.A., Madrid, Spain
+100.0
+491,270
+24,691
+336,419
+652
+SAP France, Levallois Perret, France
+100.0
+1,051,242
+156,005
+1,606,922
+5,272 17)
+1,913
+-26,346
+-33,903
+100.0
+5,363,074
+SAP Argentina S.A., Buenos Aires, Argentina
+100.0
+142,718
+-514,481
+-25,540
+14,320,071
+8,184
+-15,237
+825 17)
+SAP Asia Pte Ltd, Singapore, Singapore
+100.0
+458,919
+-28,224
+21,625
+1,262
+17)
+SAP Australia Pty Ltd, Sydney, Australia
+SAP Brasil Ltda, São Paulo, Brazil
+SAP Canada, Inc., Toronto, Canada
+100.0
+733,060
+-18,774
+42,366
+1,322
+100.0
+519,124
+10). 17)
+Learning Seat Pty. Ltd., Sydney, Australia
+Christie Partners Holding C.V., 's-Hertogenbosch, the
+Netherlands
+11)
+Extended Systems, Inc., San Ramon, CA, United States
+Fieldglass Europe Limited, London, United Kingdom
+Financial Fusion, Inc., San Ramon, CA, United States
+Flyin Holding Limited, Dubai, United Arab Emirates
+Flyin Travel and Tourism Private Limited, Hyderabad,
+India
+100.0
+Quadrem Overseas Cooperatief U.A., Amsterdam, the
+Netherlands
+100.0
+11)
+100.0 10)
+Quadrem Peru S.A.C., Lima, Peru
+100.0
+100.0
+RevSym Inc., Dublin, CA, United States
+100.0 4)
+11)
+57.0
+RevSym Software India Private Limited, Bangalore, India
+100.0
+4)
+57.0
+4)
+Flyin Travel Limited, Limassol, Cyprus
+57.0 4)
+Ruan Lian Technologies (Beijing) Co., Ltd., Beijing, China
+SAP (Beijing) Software System Co., Ltd., Beijing, China
+100.0
+100.0
+Flyin Travel S.A.E, Cairo, Egypt
+57.0 4)
+4)
+100.0
+Quadrem Netherlands B.V., Amsterdam, the Netherlands
+100.0
+Crystal Decisions (Ireland) Limited, Dublin, Ireland
+Crystal Decisions Holdings Limited, Dublin, Ireland
+Crystal Decisions UK Limited, London, United Kingdom
+Datahug Limited, Dublin, Ireland
+100.0
+10)
+Plat. One Inc., Palo Alto, CA, United States
+100.0
+100.0
+Plat. One Lab Srl, Bogliasco, Italy
+100.0
+100.0 12)
+Plateau Systems LLC, South San Francisco, CA, United
+States
+100.0
+100.0 12)
+PT SAP Indonesia, Jakarta, Indonesia
+99.0
+100.0 10)
+Quadrem Africa Pty. Ltd., Johannesburg, South Africa
+100.0
+100.0
+Quadrem Brazil Ltda., Rio de Janeiro, Brazil
+100.0
+Dorset Acquisition Corp., Dublin, CA, United States
+Ebreez Egypt LLC, Cairo, Egypt
+100.0 4)
+57.0 4)
+Quadrem Chile Ltda., Santiago de Chile, Chile
+Quadrem International Ltd., Hamilton, Bermuda
+100.0
+100.0
+EssCubed Procurement Pty. Ltd., Johannesburg, South
+Africa
+SAP Andina y de. Caribe VE, Caracas, Venezuela
+ConTgo Pty. Ltd., Sydney, Australia
+100.0
+FreeMarkets Ltda., São Paulo, Brazil
+100.0
+17)
+100.0
+SAP China Holding Co., Ltd., Beijing, China
+100.0
+LeadFormix, Inc., Dublin, CA, United States
+Learning Heroes Ltd., Cheshire, United Kingdom
+Learning Seat Borrowings Pty. Ltd., Sydney, Australia
+100.0
+100.0 4). 10)
+4)
+SAP Colombia S.A.S., Bogotá, Colombia
+100.0 17)
+100.0
+SAP Chile Limitada, Santiago, Chile
+4)
+100.0 17)
+100.0
+17)
+Learning Seat Group Pty. Ltd., Sydney, Australia
+100.0
+4)
+SAP ČR, spol. s r.o., Prague, Czech Republic
+100.0
+Learning Seat Holdings Pty. Ltd., Sydney, Australia
+100.0
+4)
+SAP Cyprus Limited, Nicosia, Cyprus
+SAP Commercial Services Ltd., Valletta, Malta
+SAP Costa Rica, S.A., San José, Costa Rica
+Inxight Federal Systems Group, Inc., Wilmington, DE,
+United States
+11)
+100.0
+100.0
+SAP AZ LLC, Baku, Azerbaijan
+100.0
+Gigya Australia Pty Ltd, Syndey, Australia
+100.0
+SAP Belgium NV/SA, Brussels, Belgium
+100.0
+Gigya UK Ltd, London, United Kingdom
+100.0
+10)
+SAP Beteiligungs GmbH, Walldorf, Germany
+100.0
+GlobalExpense Limited, London, United Kingdom
+100.0
+10)
+SAP Bulgaria EOOD, Sofia, Bulgaria
+100.0
+Hipmunk, Inc., San Francisco, CA, United States
+100.0
+SAP Business Compliance Services GmbH, Siegen,
+Germany
+100.0
+hybris (US) Corp., Wilmington, DE, United States
+100.0
+hybris GmbH, Munich, Germany
+100.0
+8). 9)
+SAP Business Services Center Nederland B.V., 's-
+Hertogenbosch, the Netherlands
+17)
+100.0
+ConTgo Limited, London, United Kingdom
+%
+Concur (Austria) GmbH, Vienna, Austria
+100.0
+Ariba Technologies Netherlands B.V., 's-Hertogenbosch,
+the Netherlands
+100.0
+11)
+Concur (Canada), Inc., Toronto, Canada
+100.0
+Concur (France) SAS, Paris, France
+100.0
+Beijing Zhang Zhong Hu Dong Information Technology
+Co., Ltd., Beijing, China
+0
+5)
+100.0
+b-process, Paris, France
+14)
+Concur (Germany) GmbH, Frankfurt am Main, Germany
+Concur (Japan) Ltd., Tokyo, Japan
+100.0 8).9)
+73.8
+Business Objects Holding B.V., 's-Hertogenbosch, the
+Netherlands
+100.0
+11)
+Business Objects Option LLC, Wilmington, DE, United
+States
+100.0
+Business Objects Software Limited, Dublin, Ireland
+100.0
+Concur (New Zealand) Limited, Wellington, New Zealand
+Concur (Philippines) Inc., Makati City, Philippines
+Concur (Switzerland) GmbH, Zurich, Switzerland
+Concur Czech (s.r.o.), Prague, Czech Republic
+Concur Holdings (France) SAS, Paris, France
+100.0
+100.0
+CNQR Operations Mexico S. de. R.L. de. C.V., San Pedro
+Garza Garcia, Mexico
+Ariba Technologies India Private Limited, Bangalore,
+India
+Ariba India Private Limited, Gurgaon, India
+100.0
+C-Learning Pty. Ltd., Sydney, Australia
+100.0
+4)
+Ariba International Holdings, Inc., Wilmington, DE, United
+States
+100.0
+Clear Trip Inc. (Mauritius), Ebene, Mauritius
+57.0
+Ariba International Singapore Pte Ltd, Singapore,
+Singapore
+Clear Trip Inc., George Town, Cayman Islands
+57.0
+100.0
+Ariba International, Inc., Wilmington, DE, United States
+100.0
+Cleartrip MEA FZ LLC, Dubai, United Arab Emirates
+Cleartrip Packages and Tours Private Limited, Mumbai,
+India
+57.0
+57.0 4)
+Ariba Slovak Republic, s.r.o., Košice, Slovakia
+100.0
+Clear Trip Private Limited, Mumbai, India
+57.0
+Ariba Software Technology Services (Shanghai) Co., Ltd.,
+100.0
+Clicktools Limited, Dorset, United Kingdom
+100.0 4). 10)
+Shanghai, China
+100.0 15)
+%
+100.0
+100.0
+100.0 10)
+Contextor SAS, Orsay, France
+100.0
+4)
+CallidusCloud (Malaysia) Sdn. Bhd., Kuala Lumpur,
+Malaysia
+100.0
+4)
+ConTgo Consulting Limited, London, United Kingdom
+100.0
+10)
+202
+Section GOther Disclosures
+Concur Technologies (UK) Limited, London, United
+Kingdom
+To Our
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Name and Location of Company
+Owner- Foot-
+ship note
+Name and Location of Company
+Owner-
+Foot-
+ship
+note
+Combined
+4)
+100.0
+CallidusCloud (India) Pvt. Ltd., Hyderabad, India
+100.0
+Callidus Software (Canada) Inc., Toronto, Canada
+100.0
+4)
+Concur Holdings (Netherlands) B.V., Amsterdam, the
+Netherlands
+100.0
+11)
+Callidus Software (Singapore) Pte. Ltd., Singapore,
+Singapore
+100.0
+4)
+Concur Technologies (Australia) Pty. Limited, Sydney,
+Australia
+100.0
+Callidus Software GmbH, Munich, Germany
+100.0 4). 8). 9)
+Concur Technologies (Hong Kong) Limited, Hong Kong,
+China
+100.0
+Callidus Software Hong Kong Ltd., Hong Kong, China
+Callidus Software Ltd., London, United Kingdom
+100.0
+4)
+Concur Technologies (India) Private Limited, Bangalore,
+India
+100.0
+100.0 4). 10)
+Concur Technologies (Singapore) Pte Ltd, Singapore,
+Singapore
+100.0
+17)
+Callidus Software Pty. Ltd., Sydney, Australia
+100.0 4)
+100.0 13)
+247
+100.0
+The social and environmental data and information included in
+the SAP Integrated Report has been prepared in accordance with
+the GRI Standards: Core option. This option indicates that a report
+contains the minimum information needed to understand the
+nature of the organization, its material topics and related impacts,
+and how these are managed.
+Employee Engagement > GHG Footprint
+We believe that engaged employees are more likely to want to
+help SAP achieve our own target in lowering GHG emissions. Yet
+another possible outcome is that a higher level of employee
+engagement may lead to more business activity requiring travel,
+and therefore could lead to an increase in GHG emissions.
+Employee Engagement > Growth
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of employee engagement. We have
+*Bedarkar, M., Pandita, D. (2014): A Study on the drivers of employee engagement impacting employee
+performance. In: Procedia - Social and Behavioral Sciences, Vol. 133, pp. 106-115.
+Mueller, K., Hattrup, K., Spiess, S., Lin-Hi, N. (2012): The effects of corporate social responsibility on
+employees' affective commitment: A cross-cultural investigation. In: Journal of Applied Psychology, Vol.
+97(6), pp. 1186-1200.
+⚫ Johnson, Sheena et al., 2018. WELL-BEING: Productivity and Happiness at Work 2. ed. 2018., Cham:
+Springer International Publishing Imprint: Palgrave Macmillan.
+214
+Connectivity of Financial and Non-Financial Indicators
+To Our
+Stakeholders
+Combined
+We believe that lowering SAP's GHG footprint can have a
+positive impact on employee engagement because loyalty should
+rise as employees see their company act responsibly towards the
+environment. However, because lowering emissions also brings
+certain restrictions, such as on business travel, it may also have a
+negative impact on employee engagement.
+Management Report
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+been able to prove a significant positive correlation between
+employee engagement and revenue.
+Growth > Employee Engagement
+We believe that higher revenue has a positive impact on a
+company's work environment, thereby increasing employee pride
+and loyalty. This is also stated in a study of Harter et al. (2010),
+which states that improving financial performance appears to
+increase general satisfaction and some specific work perceptions.⁹
+Business Health Culture Index (BHCI)
+Our Business Health Culture Index assesses the health of both
+our organizational culture and our employees
+Women in Management > BHCI
+We believe that a balance of men and women in management
+roles helps create a more balanced working environment, one in
+which diversity is valued and people feel free to express their
+individual styles. It is our expectation that such an environment will
+positively affect our BHCI.
+BHCI > Women in Management
+McKinsey (2013) found that different elements of the BHCI,
+such as flexible working hours, the ability to work from home, and
+career flexibility, can make it easier for employees to balance work
+and family life. 10 This leads us to conclude that the higher our BHCI,
+the more attractive SAP becomes to women who are also seeking
+management positions.
+Consolidated Financial
+Statements IFRS
+BHCI > Profitability
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of employee engagement. We have
+been able to prove a significant positive correlation between
+employee engagement and employee retention.
+Greenhouse Gas (GHG) Footprint > Employee
+Engagement
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of the BHCI. We have been able to
+prove a significant positive correlation between the BHCI and
+employee engagement. The BHCI positively influences the
+Leadership Trust Index, which positively influences the Employee
+Engagement Index; all correlations are significant. This hypothesis
+was also confirmed by several studies, for example by Johnson,
+Sheena et al. (2018)8.
+-
+Connectivity of Financial and Non-Financial Indicators
+213
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+We continue to share our methodology with our customers to
+help them win in the marketplace. We believe that companies
+achieve higher operating profit - resulting from both greater cost
+efficiency as well as revenue growth - by addressing economic,
+social, and environmental considerations. More importantly, these
+companies are better equipped to lead in the future, as they
+navigate the world's most pressing challenges and help to bring
+about long-term sustainable change.
+Employee Engagement > Employee Retention
+Currently, our connectivity model focuses predominantly on
+internal steering for SAP. However, we are working to enhance our
+model to include the social, environmental, and economic impacts
+of SAP software and services when they are used by our
+customers. In 2017, we conducted a research project to exemplary
+identify and quantify relevant external (societal) impacts along
+SAP's value chain. Quantifications were performed separately for
+the three distinct areas of "upstream," "operations," and
+"downstream," with an emphasis on the last aspect, when SAP
+software and services are used by our customers. Rather than a
+very detailed customer impact index, we will pilot to integrate the
+contribution of future investment cases to our external aspirations
+of zero waste and zero unemployment as additional decision
+support.
+Details: How Our Non-Financial and
+Financial Performance Indicators Are
+Interconnected
+Employee Engagement
+Employee engagement is the level of employee commitment,
+pride, and loyalty, as well as the feeling of employees of being
+advocates for their company.
+Capability Building > Employee Engagement
+Because it is closely linked to how much a company develops its
+employees and supports their careers, internal hiring to
+management and expert positions positively affects employees'
+commitment and loyalty. This hypothesis was confirmed by a study
+by Bedarkar & Pandita (2014), which identified "career
+opportunities" as the key driver of employee engagement.6
+Social Investment > Employee Engagement
+By engaging our employees in social sabbaticals, their creating
+of significant social impact led to increased employee engagement.
+Mueller et al. (2012) have found that employees' perception of a
+company's commitment to corporate social responsibility is
+positively linked to their own commitment to the organization.7
+Employee Engagement > Profitability
+Since 2014, we have used real data from SAP to analyze and
+proof the financial impact of employee engagement. We can show
+what a change by 1pp of employee engagement would mean for
+SAP's operating profit, as detailed in the Documenting Financial
+Impact section.
+Profitability > Employee Engagement
+In our view, a high operating profit, as great business news, can
+raise employee morale, encourage identification with our vision,
+and thus drive employee engagement. On the other hand, we
+believe that a high profit can also have a negative impact on
+employee engagement. For example, if cost savings and budget
+cuts are implemented to reach an ambitious profit target,
+employees might feel constrained and dissatisfied.
+Business Health Culture Index (BHCI) > Employee
+Engagement
+Using the connectivity model, we have been able to embed non-
+financial key performance indicators into our solutions. We see this
+in our SAP Digital Boardroom offering, for example. By
+incorporating this connection into our software, the integrated
+approach to financial and non-financial performance not only helps
+SAP but also our customers. In this way, we can turn our vision into
+reality: enabling our customers to use our technology to make the
+world a better place.
+Moving forward, we are promoting the use of sustainability
+measures as a way to improve financial performance, both inside
+and outside of SAP. By embedding this approach into our decision
+making and quarterly business reviews, our sustainability
+performance steers our business along with factors such as
+revenue and cost. Our goal is for all senior business leaders at SAP
+to recognize and be held accountable for the fact that
+improving such measures as employee engagement also boosts
+financial performance.
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of the BHCI. We can show what a
+change by 1pp of the BHCI would mean for SAP's operating profit,
+as detailed in the Documenting Financial Impact section.
+Social Investment > BHCI
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of the BHCI. We have been able to
+prove a significant positive correlation between the BHCI and
+employee engagement. The BHCI positively influences the
+Leadership Trust Index, which positively influences the Employee
+Engagement Index; all correlations are significant. This hypothesis
+was also confirmed by several studies, for example by Johnson,
+Sheena et al. (2018)12.
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Employee Retention > Customer Loyalty
+Koys (2001) has found evidence that employee turnover has a
+negative impact on customer satisfaction. 17 We believe this effect
+stems from the fact that experienced employees work more
+efficiently, have better product knowledge, and can build trusting
+relationships with colleagues and customers, so therefore have the
+ability to better serve customers' needs.
+Employee Retention > Profitability
+We have been using real data from SAP to analyze and prove the
+financial impact of employee retention. We can show what a change
+by 1pp of employee retention would mean for SAP's operating
+profit, as detailed in the Documenting Financial Impact section.
+Women in Management
+"Women in Management" means the share of women in
+management positions (managing teams, managing managers,
+board members) as compared to the total number of managers.
+Capability Building > Women in Management
+Combined
+Like many of our IT industry peers, SAP has less women than
+men in senior positions. Given our significant pool of talent, we
+assume that internal promotions will increase the percentage of
+women in management positions.
+We believe that a balance of men and women in management
+helps create a more balanced working environment, one in which
+diversity is valued and people feel free to express their individual
+styles. It is our expectation that such an environment will positively
+affect our BHCI.
+BHCI > Women in Management
+McKinsey (2013) found that different elements of the BHCI,
+such as flexible working hours, the ability to work from home, and
+career flexibility, can make it easier for employees to balance work
+and family life. 18 This leads us to conclude that the higher our BHCI,
+the more attractive SAP becomes to women who are also seeking
+management positions.
+Women in Management > Growth
+Studies show that companies with a relatively high percentage
+of women in upper management or as board members achieve
+stronger financial performance compared to those with a relatively
+low percentage (Catalyst, 2013). 19 We believe that having a higher
+share of women in management positions will increase our revenue
+as it helps us better serve our diverse customer base.
+Women in Management > Customer Loyalty
+Diversity programs - including those focused on the promotion
+of women to management positions - have a direct and positive
+impact on customer satisfaction (Catalyst, 2013).20
+Women in Management > Profitability
+Studies show that companies with a high level of gender
+diversity outperform companies with an average level in terms of
+return on equity (11.4% versus an average 10.3%); operating
+results (EBIT 11.1% versus 5.8%); and stock price increases (64%
+versus 47% over the period 2005-2007) (McKinsey, 2007). 21 It is
+therefore likely that having a higher share of women in
+management positions will result in higher profit for SAP.
+Social Investment
+Social investment reflects SAP's activities in volunteering and
+technology as well as cash donations.
+Social Investment > BHCI
+Women in Management > BHCI
+We believe that by supporting our employees in engaging in
+activities with a positive social impact, such as skills-based
+volunteering, we are enhancing the meaning they find in work. This
+sense of purpose can help create a richer and more rewarding work
+environment that reduces stress and promotes satisfaction and
+well-being. Additionally, volunteering can increase overall employee
+health, which is shown in a study by S. S. Johnson (2017)11.
+BHCI > Employee Engagement
+To Our
+Stakeholders
+Connectivity of Financial and Non-Financial Indicators
+BHCI > Growth
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of the BHCI. We have been able to
+prove a significant positive correlation between the BHCI and
+revenue.
+GHG Footprint > BHCI
+Many of SAP's GHG emissions are caused by business travel
+and commuting, which we believe can have both negative and
+positive impacts on employee health. Some people may experience
+greater stress from more travel because they have less time to
+spend at home, suffer from jetlag, or lose valuable working time;
+others may enjoy travel because it enables them to experience
+other places and cultures as well as meet new people. Studies show
+that business travel potentially increases stress and poses a threat
+to employees' mental and physical health: see, for example, the
+study by Rundle, Revenson & Friedman (2017)13.
+BHCI > Customer Loyalty
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of the BHCI. We have been able to
+prove a significant positive correlation between the BHCI and
+customer loyalty. Recent studies, for example by Reed, Goolsby &
+Johnston (2016) also suggest this correlation. 14
+Employee Retention
+Employee retention is the ratio of the average headcount
+(expressed in full-time equivalents), minus employee-initiated
+terminations (turnover), divided by the average headcount, taking
+into account the past 12 months.
+Capability Building > Employee Retention
+215
+According to the Global Workforce Study (2012), the "chances
+to advance the career" is the second-most important driver of
+employee retention.15 By promoting and thus growing from within,
+SAP creates career opportunities for our employees. In turn, it is
+our expectation that this opportunity leads to an increase in
+employee retention.
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of employee engagement. We have
+been able to prove a significant positive correlation between
+employee engagement and employee retention.
+Employee Retention > Growth
+Meifert (2005) stated a clear relationship between employee
+retention and a company's revenue and margin.16
+⚫Harter, J., Schmidt, F., Asplund, J., Kilham, E., Agrawal, S. (2010): Causal Impact of Employee Work
+Perceptions on the Bottom Line of Organizations. In: Perspectives on Psychological Science, Vol. 5(4), pp.
+378-389.
+McKinsey & Company (2013): Women Matter. Gender diversity in top management: Moving corporate
+culture, moving boundaries. Available at:
+http://www.mckinsey.com/-/media/McKinsey/Global%20Themes/Women%20matter/WomenMatter%
+202013%20Report%20(8).ashx [Accessed December 16, 2016].
+-Johnson, S.S., 2017. The Art of Health Promotion ideas for improving health outcomes. American Journal
+of Health Promotion, 31(2), pp.163-164.
+* Johnson, Sheena et al., 2018. WELL-BEING: Productivity and Happiness at Work 2. ed. 2018., Cham:
+Springer International Publishing Imprint: Palgrave Macmillan.
+Rundle, A. G., Revenson T. A. & Friedman, M. 2017. Business travel and behavioral and mental health.
+Journal of Occupational and Environmental Medicine, 1 DOI: 10.1097/JOM.0000000000001262.
+Reed, Goolsby & Johnston, 2016. Listening in and out: Listening to customers and employees to
+strengthen an integrated market-oriented system. Journal of Business Research, 69(9), pp.3591-3599.
+Towers Watson (2012): Global Workforce Study. Geld, Karriere, Sicherheit? Was Mitarbeiter motiviert und
+in ihrem Unternehmen hält. Available at: https://www.towerswatson.com/de-AT/Insights/IC-
+Types/Survey-Research-Results/2012/07/Towers-Watson-Global-Workforce-Study-2012-
+Deutschlandergebnisse [Accessed December 16, 2016].
+Meifert, M. (2005): Mitarbeiterbindung: eine empirische Analyse betrieblicher Weiterbildner in deutschen
+Großunternehmen. München and Mering: Hampp Verlag.
+Employee Engagement > Employee Retention
+Our findings help us shift the conversation for business leaders,
+investors, employees, and other key stakeholders, and firmly
+establish non-financial indicators as playing a crucial role in our
+financial success. As a result, engaging employees or reducing our
+emissions is no longer seen as a nice-to-have, but rather as
+essential to carrying out a successful business strategy.
+Documenting the financial impact of non-financial indicators
+helps us move closer to achieving our sustainability goals. Rather
+than simply stating the business case for social or environmental
+change, we now have the numbers to back it up.
+Promoting Sustainability Measures as a
+Way to Boost Financial Performance
+Women in
+Management
+Social
+Investment
+الله
+Customer
+Loyalty
+Capability
+Building
+GHG Footprint
+Total Energy
+Consumed
+Figure 1: Connectivity Between Social, Environmental, and Economic
+Performance. SAP's main KPIs are marked in orange.
+Putting a Value on Non-Financial
+Performance Indicators
+At SAP, we put a monetary value on how our operating profit is
+affected by selected non-financial indicators that measure, for
+example, how well we engage with our employees and inspire them
+to commit to our vision and strategy, support a healthy business
+culture, and succeed in reducing our carbon emissions.
+Profitability
+To achieve this quantification, we created cause-and-effect
+chains that show how specific actions we take at SAP lead to shifts
+in behavior. This behavior impacts on our business and has a
+financial consequence.
+Using Cause-and-Effect Analysis
+To create and validate these chains of cause and effect, we
+turned to both internal and external stakeholders. We started with
+those inside SAP, meeting in small groups that rigorously examined
+the impacts of activities related to each of our non-financial
+indicators.
+Next, we conferred with external stakeholders, including
+academics, financial investors, and industry peers, to vet our
+findings. Finally, we used real data from SAP to translate our cause-
+and-effect chains into a quantified impact on operating profit.
+Documenting Financial Impact
+Since 2014, SAP has used techniques such as linear regression
+analysis to document the financial impact of four non-financial
+indicators. We assess each indicator to see what a change of 1
+percentage point (pp) (or 1% for carbon emissions) would mean for
+our operating profit. The results for 20185 are below:
+Non-Financial Indicator
+Business Health Culture Index
+Employee engagement
+Retention
+Carbon emissions
+Such analysis establishes more than just a correlation between
+non-financial indicators and financial impact. It also reveals why
+and how something such as employee engagement ultimately leads
+to gains or losses in business performance. We believe that such
+insights are a prerequisite for fully modeling the financial impact of
+non-financial performance.
+Impact on Operating Profit
+(€ millions, non-IFRS)
+Growth
+Employee
+Engagement
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+About This Further Information on
+Economic, Environmental, and Social
+Performance
+The Further Information on Economic, Environmental, and
+Social Performance includes information that is required to comply
+with the GRI Standards. In addition, we present our Connectivity
+model that shows the interrelations between social, environmental,
+and financial performance. We also report on our contribution
+towards the United Nations Sustainable Development Goals.
+About This Further Information on Economic, Environmental, and Social Performance
+Employee
+Retention
+211
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Connectivity of Financial and Non-
+Financial Indicators¹
+Additional
+Infomation
+Gaining a Holistic View of Our
+Performance
+At SAP, we believe that companies with a strong purpose have a
+significant competitive advantage. Customers, investors, as well as
+future and current employees can decide from whom they buy, in
+whom they invest, and for whom they work. Numerous studies
+provide strong evidence for this: For example, 87% of consumers
+believe companies perform best over time if their purpose goes
+beyond profit2, 80% of executives say purpose helps increase
+customer loyalty³, and organizations driven by purpose and values
+outperformed the market by 15 to 14. Thus, SAP has been able for
+several years to connect non-financial data, such as employee
+engagement, with financial success, providing a more complete
+picture of the total value created.
+Integrated reporting is based on the idea that social,
+environmental, and economic performance are interrelated, with
+each creating tangible impacts on the others. To achieve a truly
+integrated strategy, we must understand these connections and
+work to support them throughout SAP. Figure 1 below shows how
+different elements connect, exemplified through profitability.
+BHCI
+To Our
+Stakeholders
+90 to 100 per pp
+50 to 60 per pp
+55 to 65 per pp
+Increased leadership skills
+Strengthened leadership and
+reward culture
+Improved individual health,
+stress resilience and
+Financial Impact
+... and influence the
+financial KPIs.
+Increased productivity
+Profit
+Increased innovation
+KPIs of the Business Health Culture Index (BHCI):
+Foster work flexibility
+Run health campaigns
+Customers
+Increased employee retention
+Increased customer loyalty
+Revenue
+Social indicators
+Productivity and innovation indicators
+Economic indicators
+Figure 2: Impact Pathway of the Business Health Culture Index
+Case Study: Calculating ROI for Our “Join
+In - Stay Fit!" Health Initiative
+As part of the "Join In - Stay Fit!" program at SAP Germany, we
+implemented a number of measures to improve the work-life
+balance of our staff. These include workshops that raise health
+awareness and provide tips for employees on how to change
+unhealthy behavior.
+Before and after the launch of the program, we mapped direct
+and indirect costs related to this activity. We also measured the
+impact of the program on employees' work-life balance as well as
+its impact on the BHCI. In 2015, beside the multiple positive effects
+on individual health and engagement, the program resulted in an
+ROI of 3.9 for the year of the investment. This means that operating
+profit increased €3.90 for every €1 invested in the program during
+that year. These financial effects stem to a large part from the
+increase in our BHCI, which we believe is now at a very high level
+and thus we do not expect it to rise this substantially in the future.
+Increased employee engagement
+Drive leadership
+I have an impact on the
+company ...
+... change behavior and
+perception, ...
+6 per percent
+EY (2016): Winning with Purpose. Available at: https://www.ey.com/Publication/vwLUAssets/EY-purpose-
+led-organizations/%24FILE/EY-purpose-led-organizations.pdf [Accessed November 7, 2018].
+> HBR and EY (2015): The Business Case for Purpose. Available at:
+https://www.ey.com/Publication/vwLUAssets/ey-the-business-case-for-purpose/%24FILE/ey-the-
+business-case-for-purpose.pdf [Accessed November 7, 2018].
+⚫ BizShifts Trends (2014): Power of Purpose-Driven... Business, Leadership, Management. Available at:
+http://bizshifts-trends.com/power-purpose-driven-business-leadership-management-focus-mission-
+vision-reason-exist-really-matters/ [Accessed November 7, 2018].
+The information in the section Connectivity of Financial and Non-Financial Indicators is not in the scope of
+the Independent Assurance Report from KPMG.
+These results reflect the quantification of a gross effect related to a change in a particular key performance
+indicator. They do not allow for any net impact measurement. The evaluation of required investment to
+change the non-financial indicator is excluded from the scope of analysis. The economic gross impact of a
+single indicator includes interdependencies with other indicators, hence our results do not allow for a
+cumulative effect across all indicators included in this report. All calculations are based on the initial linear
+regression analysis results of 2014 and on non-IFRS figures (as shown in our Integrated Report 2018).
+212
+Connectivity of Financial and Non-Financial Indicators
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Case Study: Documenting the Financial
+Impact of a Healthy Work Culture
+Our Business Health Culture Index assesses the health of both
+our organizational culture and our employees. Figure 2 shows how
+activities that support health at SAP strengthen our organizational
+culture and help our employees perform at their best. For example,
+we see that flexibility improves stress resilience and enhances the
+work-life balance. This leads to greater productivity, resulting in
+higher operating profit.
+Cause-and-Effect Chain for the Business Health Culture Index (BHCI)
+Non-Financial Performance
+Employees
+Activities that support
+health at SAP...
+We believe that by supporting our employees in engaging in
+activities with a positive social impact, such as skills-based
+volunteering, we are enhancing the meaning they find in work. This
+sense of purpose helps create a richer and more rewarding work
+environment that reduces stress and promotes satisfaction and
+well-being. Additionally, volunteering can increase overall employee
+health, which is shown in a study by S. S. Johnson (2017) 22.
+Social Investment > Employee Engagement
+By engaging our employees in social sabbaticals, their creating
+of significant social impact led to increased employee engagement.
+Mueller et al. (2012) have found that employees' perception of a
+company's commitment to corporate social responsibility is
+positively linked to their own commitment to the organization. 23
+Social Investment > Growth
+Embedding Non-Financial Performance
+Indicators into Our Solutions
+Profitability > Social Investment
+We believe that engaged employees are likely to want to help
+SAP achieve our target in lowering GHG emissions. Yet another
+possible outcome is that a higher level of employee engagement
+may lead to more business activity requiring travel, and therefore
+could lead to an increase in GHG emissions.
+GHG Footprint > Growth
+Lowering SAP's GHG footprint could have a positive impact on
+SAP's revenue because customers increasingly ask their suppliers
+to act sustainably. This reasoning is supported by a study by PwC
+(2013) confirming the existence of a positive correlation between a
+company's environmental performance and financial
+performance. 39 On the other hand, where additional travel is
+conducted to generate additional business, the resulting increase in
+SAP's GHG footprint could have positive impact on growth.
+GHG Footprint > Customer Loyalty
+We believe that lowering SAP's carbon emissions has a positive
+effect on our reputation, thereby enhancing SAP's standing with
+our customers.
+Total Energy Consumed > GHG Footprint
+The emissions caused by SAP's energy consumption add
+directly to the corporate carbon footprint if they are not reduced
+through offsets or - for electricity consumption - renewable
+energy certificates (RECs).
+GHG Footprint > Profitability
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of the GHG footprint. We can show
+what a reduction of SAP's carbon emissions by one percentage
+would mean for SAP's operating profit, as detailed in the
+Documenting Financial Impact section.
+Total Energy Consumed
+Employee Engagement > GHG Footprint
+Total energy consumed is the sum of all energy consumed
+through SAP's own operations, including energy from renewable
+Total Energy Consumed > Profitability
+We have found that reduced energy consumption is strongly
+correlated with a reduction in costs. The cost avoidance thus
+achieved has a positive impact on our profit.
+Total Energy Consumed > GHG Footprint
+The emissions caused by SAP's energy consumption add
+directly to the corporate carbon footprint if they are not reduced
+through offsets or - for electricity consumption - renewable
+energy certificates (RECs).
+Rundle, A. G., Revenson T. A. & Friedman, M. 2017. Business travel and behavioral and mental health.
+Journal of Occupational and Environmental Medicine, 1 DOI: 10.1097/JOM.0000000000001262.
+- PwC (2013): Busting the carbon budget - Low Carbon Economy Index 2013. Available at:
+https://www.pwc-
+wissen.de/pwc/de/shop/publikationen/Low+Carbon+Economy+Index+2013/?card=12994 [Accessed
+December 16, 2016].
+Connectivity of Financial and Non-Financial Indicators
+219
+To Our
+sources.
+Combined
+We believe that lowering SAP's GHG footprint can have a
+positive impact on employee engagement because loyalty should
+rise as employees see their company act responsibly towards the
+environment. However, because lowering emissions also brings
+certain restrictions, such as on business travel, it may also have a
+negative impact on employee engagement.
+Many of SAP's GHG emissions are caused by business travel
+and commuting, which we believe can have both negative and
+positive impacts on employee health. Some people may experience
+greater stress from more travel because they have less time to
+spend at home, suffer from jetlag, or lose valuable working time;
+others may enjoy travel because it enables them to experience
+other places and cultures as well as meet new people. Studies show
+that business travel potentially increases stress and poses a threat
+to employees' mental and physical health, see for example the
+study by Rundle, Revenson & Friedman (2017) 38
+Customer Loyalty > Growth
+Reichheld (2003) found a strong correlation between
+companies' Customer NPS results and their revenue growth
+rates. 36 We support this view, as we believe that loyal SAP
+customers are likely to recommend SAP products to other
+companies, which is likely to result in increased sales and stronger
+revenue.
+Customer Loyalty > Profitability
+We believe that positive experiences among our customers can
+significantly increase business with existing customers, as well as
+help attract new customers. Both results can lower the cost of
+sales, thereby increasing our profit.
+BHCI > Customer Loyalty
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of the BHCI. We have been able to
+prove a significant positive correlation between the BHCI and
+customer loyalty. Recent studies, for example by Reed, Goolsby &
+Johnston (2016) also suggest this correlation.37
+GHG Footprint
+Our GHG footprint is the sum of all greenhouse gas emissions
+measured and reported, including renewable energy and third-
+party reductions, for example, offsets.
+*Koys, D. (2001): The effects of employee satisfaction, organizational citizenship behavior, and turnover on
+organizational effectiveness: A unit-level, longitudinal study. In: Personnel Psychology, Vol. 54(1), pp. 101-
+GHG Footprint > Employee Engagement
+114.
+Reed, Goolsby & Johnston, 2016. Listening in and out: Listening to customers and employees to
+strengthen an integrated market-oriented system. Journal of Business Research, 69(9), pp.3591-3599.
+218
+Connectivity of Financial and Non-Financial Indicators
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+GHG Footprint > BHCI
+Reichheld, F. (2003): The One Number You Need to Grow. In: Harvard Business Review, Vol. 81(12), pp.
+46-54.
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+The results of the materiality analysis were reviewed and
+confirmed by our steering committee for integrated reporting and
+our sustainability advisory panel. The results were also reviewed by
+our chief financial officer, who is the board sponsor for
+sustainability and integrated reporting.
+Review
+Feedback on and analysis of the SAP Integrated Report will
+serve as an input for future materiality assessments.
+Results
+Importance to the business relationship with SAP
+Very High
+High
+Innovation and
+customer loyalty
+Impact on
+society
+Human and
+digital rights
+Validation
+Business
+conduct
+A study by Muritala (2013) suggests that corporate social
+responsibility (or what we characterize as social investment) is
+likely to have a positive impact on an organization's financial
+performance. 24 In our experience, social investments do, in fact,
+have a positive impact on our ability to acquire new customers,
+especially in emerging markets.
+Next, we conducted semi-structured interviews with selected
+stakeholders to validate the shortlisted topics. We asked
+stakeholders to rate topics on a scale from 0 to 5 (where O is not
+important at all and 5 is very important) based on the following
+questions for the first six categories:
+-
+To what degree does this topic influence SAP's ability to create
+value?
+How important is that topic for you to engage in a business
+relationship with SAP?
+Influence on SAP's ability to create value
+(as an organization or through SAP solutions)
+Materiality Matrix Non-Financial Topics (the chart only shows topics with high or
+very high scores)
+220
+Materiality
+Human capital
+We have included in our materiality matrix all topics with
+stakeholder ratings in the upper 50% for both questions
+respectively.
+How important is our ability to do this for you to engage in a
+business relationship with SAP?
+How high is the potential of SAP to enable our customers to
+achieve the SDGs?
+Materiality
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Defining Key Priorities for Our Non-
+Financial Reporting
+By understanding which environmental, social, and governance
+issues are key priorities for our stakeholders, we are better able to
+allocate time, budget, and resources accordingly within our
+integrated reporting. Based on our existing material topics, in 2016,
+we completed a materiality assessment to help identify and
+validate those topics which are the most relevant to our
+stakeholders such as employees, investors, and customers. The
+assessment also highlights those topics which contribute most to
+value creation both in our own operations and in those of our
+customers.
+Our materiality assessment process combined the GRI G4
+guidelines for sustainability reporting and the International
+Integrated Reporting Framework. Key stages of the process are
+detailed below.
+Identification
+During this stage, we drew up a long list of potential topics
+based on guidance from GRI G4 and the Sustainability Accounting
+Standards Board (SASB), as well as our existing material topics.
+We also considered a materiality assessment for the ICT industry
+by the Global E-Sustainability Initiative (GeSI) as well as the United
+Nations' Sustainable Development Goals (SDGs).
+When identifying our key topics and their boundaries, we looked
+first at areas related to our operations and supply chain. Second,
+we looked at topics related to how our software can help our
+customers contribute to the achievement of the SDGS.
+Prioritization
+During the prioritization stage, we looked at the extent to which
+each individual topic affects our ability to create value at SAP. We
+assessed whether this value was financial, operational, strategic,
+reputational, or regulatory. All topics that were identified as
+delivering value in three or more areas were then included on our
+short list of seven categories, as follows:
+Business conduct
+-
+Climate and energy
+-
+Financial performance
+-
+Human and digital rights
+-
+Human capital
+Innovation
+Impact on society
+To assess the category "impact on society," we asked
+stakeholders the following questions:
+We believe that lowering SAP's carbon emissions has a positive
+reputational effect, thereby enhancing SAP's standing with its
+customers.
+GHG Footprint > Customer Loyalty
+Very High
+Diversity programs - including those focused on the promotion
+of women to management positions - have a direct and positive
+impact on customer satisfaction (Catalyst, 2013).34
+Employee Retention > Customer Loyalty
+Capability Building
+Capability building is the internal hiring rate (promotions only)
+into management or expert positions as compared to the external
+hiring rate into such positions.
+Capability Building > Employee Retention
+According to the Global Workforce Study (2012), the "chances
+to advance the career" is the second-most important driver of
+employee retention.25 By promoting and thus growing from within,
+SAP creates career opportunities for our employees. In turn, it is
+our expectation that this opportunity leads to an increase in
+employee retention.
+Capability Building > Employee Engagement
+Because it is closely linked to how much a company develops its
+employees and supports their careers, internal hiring to
+management and expert positions positively affects employees'
+commitment and loyalty. This hypothesis was confirmed by a study
+by Bedarkar & Pandita (2014), which identified "career
+opportunities" as the key driver of employee engagement.26
+Capability Building > Women in Management
+Like many of our IT industry peers, SAP has less women than
+men in senior positions. Given our significant pool of talent, we
+assume that internal promotions will increase the percentage of
+women in management positions.
+Growth
+Growth is one of our strategic objectives. We measure it through
+several KPIs, for example total revenue that SAP receives from the
+sale of our products and services.
+Social Investment > Growth
+Additional
+Infomation
+A study by Muritala (2013) suggests that corporate social
+responsibility (or what we characterize as social investment) is
+likely to have a positive impact on an organization's financial
+performance. 27 In our experience, social investments do, in fact,
+have a positive impact on our ability to acquire new customers,
+especially in emerging markets.
+Studies show that companies with a relatively high percentage
+of women in upper management ranks or as board members
+achieve stronger financial performance compared to those with a
+relatively low percentage (Catalyst, 2013). 28 We believe that having
+a higher share of women in management positions will increase our
+revenue as it helps us to better serve our diverse customer base.
+BHCI > Growth
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of the BHCI. We have been able to
+prove a significant positive correlation between the BHCI and
+revenue.
+*Towers Watson (2012): Global Workforce Study. Geld, Karriere, Sicherheit? Was Mitarbeiter motiviert und
+in ihrem Unternehmen hält. Available at: https://www.towerswatson.com/de-AT/Insights/IC-
+Types/Survey-Research-Results/2012/07/Towers-Watson-Global-Workforce-Study-2012-
+Deutschlandergebnisse [Accessed December 16, 2016].
+Bedarkar, M., Pandita, D. (2014): A Study on the drivers of employee engagement impacting employee
+performance. In: Procedia - Social and Behavioral Sciences, Vol. 133, pp. 106-115.
+Muritala, T. (2013): Does CSR Improve Organization Financial Performance? Evidence from Nigeria Using
+Triangulation Analysis. In: Economics and Applied Informatics, Issue 3, pp. 41-46.
+» Catalyst Information Center (2013): Why Diversity Matters. Available at:
+http://www.catalyst.org/system/files/why_diversity_matters_catalyst_0.pdf [Accessed December 16,
+2016].
+Employee Retention > Growth
+Women in Management > Growth
+Meifert (2005) stated a clear relationship between employee
+retention and the company's revenue and margin.29
+Further Information on Economic,
+Environmental, and Social Performance
+Management Report
+Koys (2001) has found evidence that employee turnover has a
+negative impact on customer satisfaction. 35 We believe this effect
+stems from the fact that experienced employees work more
+efficiently, have better product knowledge, and can build trusting
+relationships with colleagues and customers, so therefore have the
+ability to better serve customers' needs.
+It is a common practice for companies to invest a certain
+percentage of their annual profits in programs and activities that
+create a positive social impact. We believe that higher profit is
+therefore likely to lead SAP to make greater social investments.
+Koys, D. (2001): The effects of employee satisfaction, organizational citizenship behavior, and turnover on
+organizational effectiveness: A unit-level, longitudinal study. In: Personnel Psychology, Vol. 54(1), pp. 101-
+114.
+- McKinsey & Company (2013): Women Matter. Gender diversity in top management: Moving corporate
+culture, moving boundaries. Available at:
+http://www.mckinsey.com/-/media/McKinsey/Global%20Themes/Women%20matter/WomenMatter%
+202013%20Report%20(8).ashx [Accessed December 16, 2016].
+http://www.catalyst.org/system/files/why_diversity_matters_catalyst_0.pdf [Accessed December 16,
+2016].
+*Catalyst Information Center (2013): Why Diversity Matters. Available at:
+http://www.catalyst.org/system/files/why_diversity_matters_catalyst_0.pdf [Accessed December 16,
+2016].
+Consolidated Financial
+Statements IFRS
+McKinsey & Company (2007): Women Matter. Gender diversity, a corporate performance driver. Available
+http://www.mckinsey.com/-/media/McKinsey/Business%20Functions/Organization/Our%20Insights/
+Women%20matter/Women_matter_oct2007_english.ashx [Accessed December 16, 2016].
+"Johnson, S.S., 2017. The Art of Health Promotion ideas for improving health outcomes. American Journal
+of Health Promotion, 31(2), pp. 163-164.
+Mueller, K., Hattrup, K., Spiess, S., Lin-Hi, N. (2012): The effects of corporate social responsibility on
+employees' affective commitment: A cross-cultural investigation. In: Journal of Applied Psychology, Vol.
+97(6), pp. 1186-1200.
+Muritala, T. (2013): Does CSR Improve Organization Financial Performance? Evidence from Nigeria Using
+Triangulation Analysis. In: Economics and Applied Informatics, Issue 3, pp. 41-46.
+216
+Connectivity of Financial and Non-Financial Indicators
+To Our
+Stakeholders
+Combined
+at:
+GHG Footprint > Growth
+→ Catalyst Information Center (2013): Why Diversity Matters. Available at:
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of employee engagement. We have
+been able to prove a significant positive correlation between
+employee engagement and revenue.
+Profitability > Employee Engagement
+In our view, high profits, as great business news, can raise
+employee morale, encourage identification with our vision, and help
+increase employee engagement. On the other hand, we believe that
+a high profit expectation can also have a negative impact on
+employee engagement. If cost savings and budget cuts are
+implemented to reach an ambitious profit target, employees might
+feel constrained and dissatisfied.
+Women in Management > Profitability
+Studies show that companies with a high level of gender
+diversity outperform companies with an average level in terms of
+return on equity (11.4% versus an average 10.3%); operating
+results (EBIT 11.1% versus 5.8%); and stock price increases (64%
+versus 47% over the period 2005-2007) (McKinsey, 2007). 33 It is
+therefore likely that having a higher share of women in
+management positions will result in higher profit for SAP.
+Profitability > Social Investment
+It is a common practice for companies to invest a certain
+percentage of their annual profits in programs and activities that
+create a positive social impact. We believe that a higher profit is
+therefore likely to lead SAP to make greater social investments.
+Employee Retention > Profitability
+We have been using real data from SAP to analyze and prove the
+financial impact of employee retention. We can show what a change
+by 1pp of employee retention would mean for SAP's operating
+profit, as detailed in the Documenting Financial Impact section.
+Total Energy Consumed > Profitability
+We have found that reduced energy consumption is strongly
+correlated with a reduction in costs. Therefore, any cost avoidance
+achieved has a positive impact on our profit.
+Growth > Profitability
+Profit (or loss) is the total of income less expenses; if revenue as
+the main part of total income grows at a higher rate than costs, it
+will lead to greater profit.
+Customer Loyalty > Profitability
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of employee engagement. We can
+show what a change by 1pp of employee engagement would mean
+for SAP's operating profit, as detailed in the Documenting Financial
+Impact section.
+We believe that positive experiences among our customers can
+significantly increase business with existing customers, as well as
+help attract new customers. Both results can lower the cost of
+sales, thereby increasing our profit.
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of our GHG footprint. We can show
+"McKinsey & Company (2007): Women Matter. Gender diversity, a corporate performance driver. Available
+at:
+http://www.mckinsey.com/-/media/McKinsey/Business%20Functions/Organization/Our%20Insights/
+Women%20matter/Women_matter_oct2007_english.ashx [Accessed December 16, 2016].
+Catalyst Information Center (2013): Why Diversity Matters. Available at:
+http://www.catalyst.org/system/files/why_diversity_matters_catalyst_0.pdf [Accessed December 16,
+Women in Management > Customer Loyalty
+what a reduction of SAP's carbon emissions by 1pp would mean for
+SAP's operating profit, as detailed in the Documenting Financial
+Impact section.
+Customer Loyalty
+Customer loyalty is measured with the Net Promoter Score:
+Percentage of customers that are likely to recommend SAP to
+friends or colleagues minus the percentage of customers that are
+unlikely to do so.
+Lowering SAP's GHG footprint could have a positive impact on
+SAP's revenue because customers increasingly ask their suppliers
+to act sustainably. This reasoning is supported by a study by PwC
+(2013) confirming the existence of a positive correlation between a
+company's environmental performance and financial
+performance.30 On the other hand, where additional travel is
+conducted to generate additional business, the resulting increase in
+SAP'S GHG footprint could have positive impact on growth.
+Employee Engagement > Growth
+GHG Footprint > Profitability
+Employee Engagement > Profitability
+2016].
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+We believe that a higher revenue will have a positive impact on a
+company's work environment, thereby increasing employee pride
+and loyalty. This is also stated in a study of Harter et al. (2010),
+stating that improving financial performance appears to increase
+general satisfaction and some specific work perceptions.31
+Customer Loyalty > Growth
+Reichheld (2003) found a strong correlation between
+companies' Customer NPS results and their revenue growth
+rates.32 We support this view, as we believe that loyal SAP
+customers are likely to recommend SAP products to other
+companies, which is likely to result in increased sales and stronger
+revenue.
+Profit (or loss) is the total of income less expenses; if revenue as
+the main part of total income grows at a higher rate than costs, it
+will lead to greater profit.
+Profitability
+Profitability is one of our strategic objectives. We measure it
+through operating profit. Profit (or loss) is the total of income less
+expenses.
+BHCI > Profitability
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of the BHCI. We can show what a
+change by 1pp of the BHCI would mean for SAP's operating profit,
+as detailed in the Documenting Financial Impact section.
+Meifert, M. (2005): Mitarbeiterbindung: eine empirische Analyse betrieblicher Weiterbildner in deutschen
+Großunternehmen. München and Mering: Hampp Verlag.
+*PwC (2013): Busting the carbon budget - Low Carbon Economy Index 2013. Available at:
+https://www.pwc-
+Growth > Profitability
+December 16, 2016].
+Consolidated Financial
+Statements IFRS
+wissen.de/pwc/de/shop/publikationen/Low+Carbon+Economy+Index+2013/?card=12994 [Accessed
+Management Report
+Stakeholders
+Combined
+To Our
+Growth > Employee Engagement
+217
+Connectivity of Financial and Non-Financial Indicators
+Reichheld, F. (2003): The One Number You Need to Grow. In: Harvard Business Review, Vol. 81(12), pp.
+46-54.
+Harter, J., Schmidt, F., Asplund, J., Kilham, E., Agrawal, S. (2010): Causal Impact of Employee Work
+Perceptions on the Bottom Line of Organizations. In: Perspectives on Psychological Science, Vol. 5(4), pp.
+378-389.
+Build capacity throughout our broader ecosystem
+ΝΑ
+Direct:
+neutral by 2025
+Direct:
+Become carbon
+SAP Ariba
+Where You Can Find More
+Information in the SAP
+Integrated Report and Other
+Sources
+SAP Rural Sourcing Management; SAP Ariba
+Supplier Risk in cooperation with Made In A Free
+World
+Our Policies and Selected Activities and
+Programs to Enhance Positive Impacts and
+Mitigate Negative Impacts
+Infomation
+Additional
+Further Information on Economic,
+Environmental, and Social Performance
+Increase customers' energy consumption through
+use of software
+climate change relevant parameter
+Enable holistic operational steering by integrating
+Emit greenhouse gases
+SDG 12 Responsible Consumption and Production
+Indirect:
+Contribute to climate change mitigation and
+strengthen resilience and adaptive capacity to
+climate-related hazards and natural disasters of our
+customers
+SDG 17 Partnerships for the Goals
+Train and educate SAP employees
+Drive sustainable business practices and integrated
+reporting
+SAP Ariba Partnering with UN Global
+Compact
+Employees and Social Investment
+SAP & SDG17
+Engage in Global Partnership for Development
+Data, IMPACT 2030, UN Global Compact, or Social
+World Enterprise Forum
+Climate Change: What SAP Is Doing
+Breakthrough Energy
+Energy and Emissions
+SAP & SDG13
+Green Cloud; Breakthrough Energy Coalition
+Indirect:
+Global Environmental Policy; Report and reduce
+CO2 emissions and energy consumption; Procure
+100% renewable electricity
+We aspire to a world
+with zero waste.
+Direct:
+customers
+Indirect:
+Direct:
+SDG 4 Quality Education
+automation may be counteracted (rebound effect)
+consumption because efficiency gains through
+Increase absolute resource and energy
++ Decouple economic prosperity from resource
+consumption by enabling transparency and
+optimizing resource productivity in linear or circular
+economies
+Indirect:
+Use energy, water, resources, production of waste
+Build capability in our ecosystem and among our
++ Assuming responsibility for products in use-related
+emissions by running customer applications in the
+SAP green Cloud
+Employees and Social Investments
+SAP & SDG3
+SDG 13 Climate Action
+SAP Connected Health, SAP Work-Life
+Indirect:
+Global Health and Safety Management Policy;
+Employee Assistance Program; Corporate
+Oncology Program for Employees
+Direct:
+One Billion Lives Initiative
+SAP.io
+SAP Partnering with Social
+Enterprise Forum
+SAP Innnovation
+Employees and Social Investments
+SAP & SDG9
+Products, Research & Development,
+and Services
+Direct:
+SAP support for startups through various programs
+SAP Labs Network; One Billion Lives initiative
+fostering purpose-driven innovation
+Direct:
+employees (overall
+and in developing
+markets)
+Number of
+Business Health
+Culture Index
+NA
+SAP Partnering with Social
+Enterprise Forum
++ Create three million jobs in our ecosystem
+Indirect:
+Indirect:
+Direct:
+SAP recruiting programs; Diversity & Inclusion
+policy and programs including EDGE certification
+Healthcare
+employment through an accelerated digital divide
+and lack of digital skills
+Decouple societal groups from entire areas of
+Fuel negative effects on employment through
+digitalization and automation; potentially increase
+precarious jobs
+Combat forced and child labor throughout supply
+chains
+Enable an inclusive economy
+-
+Our Key
+Performance
+Indicators and
+Targets
+Our Potential Direct and Indirect Impact
+Consolidated Financial
+Statements IFRS
+Indirect:
+Management Report
+To Our
+Stakeholders
+225
+Our Contribution to the UN Sustainable Development Goals
+SAP Rural Sourcing Management
+Powering Opportunity Through
+Digital Inclusion
+Diversity & Inclusion
+SAP & SDG8
+Employees and Social Investments
+Sustainable Procurement
+SAP Connected Worker Safety
+SAP Work-Life
+Combined
+Direct: Supplier Code of Conduct; Sustainable
+Procurement; e-waste recycling
+Additional
+Infomation
+Energy and Emissions
+Waste and Water
+Making Our Supply Chain More
+Sustainable
+Additional
+Infomation
+Sustainable Procurement
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+Human Rights and Labor Standards
+A significant part of our social and environmental impact is
+delivered through our supply chain. Based on their volume,
+structure, and geographic distribution, we estimate that our
+purchases generated employment for approximately 120,000 full-
+time equivalents (FTEs) in 2017 in the businesses that supply
+goods and services to us. Furthermore, total greenhouse gases
+emissions from our supply chain were linked to cumulated annual
+societal costs of approximately €160 million in 2017. At SAP, we
+work hard to minimize any negative impacts associated with our
+supply chain.
+228
+When designing any solution, our development teams ensure
+that the product complies with human rights standards. For
+example, accessibility is a key area of focus and we follow Web
+content accessibility guidelines such as the Section 508 standards
+to ensure inclusive design in all our software.
+As the largest German software company, SAP sees a
+responsibility to lead a broad social discourse on the handling of
+innovative digital technologies. Thus, SAP supports the efforts of
+the German Federal Ministry of Justice and Consumer Protection in
+developing guidelines and principles for corporate digital
+responsibility.
+their full intellectual potential. Hence, SAP has launched guiding
+principles on A/that are intended to steer the development and
+deployment of our Al software. These guidelines were formulated
+through the expertise of an internal group of SAP executives and
+will be updated in conjunction with an external advisory panel. Our
+guiding principles mark a starting point for a deep and continuous
+engagement with the wider challenges of Al and will be an evolving
+reflection on these discussions and the ever-changing
+technological landscape.
+SAP is also looking at the ethical and societal implications of the
+latest advances in technology, such as artificial intelligence (AI),
+and is contributing to the public debate about these subjects. Our
+objective is to continue creating software that allows users to reach
+As reflected in our human rights risk assessment, we are
+committed to respecting human rights throughout the lifecycle of
+our products from design through development to use. We
+develop innovative solutions that help customers embed human
+rights standards into their business and supply chain strategies.
+For example, our customers can use the SAP Ariba Supplier Risk
+solution to gain the intelligence and transparency they need to
+understand human rights risks within their supply chains. They can
+then make informed procurement decisions that may improve
+lives.
+-
+Respecting Human Rights Throughout
+Our Product Lifecycle
+We expect all our business partners to respect human rights and
+to avoid complicity in human rights abuses. Our codes of conduct
+for suppliers and partners require them to uphold labor rights and
+to provide a safe and healthy work environment for all employees.
+In addition, we carry out due diligence regularly to assess their
+human rights performance.
+Maintaining High Standards Across Our
+Supply Chain
+The protection of personal information is another key area of
+focus for our development teams. To help ensure that our products
+enable our customers to respect digital rights, we adhere to robust
+privacy and security standards. These are defined in our global
+product development, quality, product standards, and data
+protection and privacy policies.
+Further Information on Economic,
+Environmental, and Social Performance
+What We Buy and Where We Buy It From
+Suppliers by Category (Tier 1)
++ Create decent jobs at SAP through our growth
+plans, specifically in developing markets
+Driven by our Global Procurement Organization (GPO), our
+supplier diversity program is an integral part of our supplier
+management program. It strives to ensure that diverse businesses
+have a fair chance at competing for contracts and are treated
+equally with other SAP suppliers. Targeted to reach a 5% spend
+ratio for diversity suppliers in selected countries by 2020, the GPO
+proactively involves diversity suppliers in all categories into our
+sourcing process. While supplier diversity classification definitions
+vary from region to region, SAP aligns with Dunn & Bradstreet's
+supplier diversity classification definitions including, but not limited
+to, Women Business Enterprise (WBE), Disabled Veteran Business
+Enterprise, and Small Disadvantaged Business (SDB).
+In 2018, based on our previous pilot project, we implemented a
+supplier diversity task force that comprises dedicated buyers from
+all categories, aimed at identifying potential diversity-certified
+suppliers for all Requests for Proposals (RFP). Looking at the
+United States, SAP already exceeded its own goal in 2017, with
+5.3% spend coming from diverse businesses. We are currently
+developing an extension to also include tier-2 suppliers into our
+supplier diversity program and further enhance our fraction of
+diversity suppliers.
+Including more diverse businesses - that is, minority
+enterprises defined by gender, ethnicity, disability, sexual
+orientation, and other characteristics - into our supplier base has
+become a key priority for SAP. We believe that our commitment to
+an inclusive, bias-free culture in our workplace must be mirrored in
+our approach to our supplier base. In addition, we believe that
+diverse businesses bring significant added value to SAP through
+their flexibility and a high innovation potential.
+Promoting Supplier Diversity
+Percent of total spend
+Supplier Locations
+5%
+Car Fleet
+At SAP, we consider our suppliers to be key partners in our
+business success. In 2018, we spent approximately €5.9 billion for
+purchases from more than 16,000 suppliers worldwide. Within our
+six categories¹, we approach sustainability from different angles:
+Cloud Infrastructure (for example, sustainable cooling of data
+centers), 3rd Party Services (for example, CO2-reduced mobility
+concepts), Marketing & Travel (for example, sustainable
+merchandise and CO2 compensation), Consumer Goods (for
+example, reduced packaging), Facility (for example, green energy),
+and Car Fleet (for example, sustainable mobility concepts).
+7%
+13%
+Facility
+24%
+Marketing & Travel
+25%
+Cloud Infrastructure
+26%
+3rd Party Services
+Percent of total spend
+Consumer Goods
+Indirect: SAP Plastics Challenge
+Consolidated Financial
+Statements IFRS
+Combined
+Human Rights and Labor Standards
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+Our Contribution to the UN Sustainable Development Goals
+226
+Upholding High Standards
+Powering Opportunity Through
+Digital Inclusion
+SAP & SDG4
+Employees and Social Investments
+openSAP; CSR digital literacy programs
+Indirect:
+Cloud-based learning management system for
+employees
+Direct:
+Engaging four million
+children, youth, and
+young adults in
+digital skills and
+coding programs by
+2020.
+SAP Leonardo Plastics Challenge
+Sustainable Procurement
+SAP & SDG12
+SAP Learning for Life
+Management Report
+Whether within SAP, across our extended supply chain, or
+through the impact of our solutions, we are committed to respecting
+human rights. We maintain high ethical standards and establish
+fairness, diversity, and inclusion across our business operations. In
+this way, we believe we can better attract and keep top talent,
+increase innovation and productivity, and enhance our reputation.
+SAP is a signatory of the United Nations (UN) Global Compact
+initiative. This is a voluntary undertaking to align our strategy and
+operations with universal principles on human rights, labor, the
+environment, and anticorruption.
+Making a Commitment
+To Our
+Stakeholders
+227
+Human Rights and Labor Standards
+In addition, our global ombudsperson receives employee
+complaints and mediates fair settlements. The ombudsperson also
+helps the Executive Board analyze HR-related complaints and
+consider ways to address potential issues before they occur.
+We encourage any employees, including vulnerable groups such
+as temporary external staff, who feel they are subjected to conduct
+that violates our antidiscrimination policies to report it. They can
+reach out confidentially to their managers, HR officers, compliance
+officers, or colleagues who are trained to be part of our internal
+mediation pool.
+We have a long-standing policy of nondiscrimination in our
+dealings with all employees and provide training on human rights
+issues that are most relevant to our business. These include
+security, privacy, and antidiscrimination.
+Respecting the Rights of Our Employees
+To assess our human rights measures, we consider external
+benchmarks, performance ratings, audit results, and stakeholder
+feedback. In addition, since 2012, we have conducted regular
+internal audits to check internal compliance with our policies and
+verify that our subsidiaries adhere to our human rights standards.
+In 2018, we conducted a labor audit across nine countries in the
+Middle East and North Africa within the EMEA region. It reviewed
+labor conditions, wages and hours, health and safety, the
+environment, management system, and business practices. While
+we did not encounter any labor rights abuses, the audit revealed
+some issues related to global data security standards, the HR
+compliance monitoring system, and the HR workforce plan. We
+took steps to address these shortcomings by increasing physical
+security elements and reworking our internal processes.
+Enforcing Our Standards
+By integrating human rights considerations into our standard
+business practices, we also support the values of the Universal
+Declaration of Human Rights, the OECD Guidelines for Multinational
+Enterprises, and the International Labor Organization Declaration on
+Fundamental Principles and Rights at Work. To ensure that our
+commitment to human rights translates into practice, we take
+guidance from the UN "Protect, Respect and Remedy" framework.
+We also received external endorsement of our human rights
+efforts. SAP has again been recognized as a leader in sustainability
+practices in the software industry according to the 2018 Dow Jones
+Sustainability Indices and RobecoSAM Corporate Sustainability
+Assessment. Our score for the category human rights in particular
+increased by over 50 percentage points.
+Protecting Human Rights
+rights and our products in the area of artificial intelligence (AI) and
+responsible business principles, which means we encourage our
+customers to embrace jointly with us their ethical responsibilities
+and share our commitment to the UN Global Compact
+The key changes include information on our new governance
+model and a new subchapter on the grievance processes we offer.
+Other inclusions reflect the connection we see between human
+In 2018, we reworked our Global Human Rights Commitment
+Statement to incorporate these assessment results, and
+restructured the document slightly to improve readability and to
+more closely align to the UN framework.
+SAP undertook a human-rights risk and capacity assessment in
+2017 to analyze human rights processes and ongoing due diligence
+activity. With help from an external consulting company, we
+reviewed and mapped SAP documents against best-practice
+human rights initiatives and frameworks. We conducted internal
+consultations and external stakeholder interviews to identify key
+strengths and opportunities for improvement.
+Understanding Our Strengths and
+Weaknesses
+To communicate and enforce this commitment statement, SAP
+established a governance structure for human rights. This includes
+a steering committee and allocates responsibility for maintaining
+human rights standards across board areas.
+Our commitment statement applies to all our operations and
+subsidiaries globally and is reviewed on a regular basis. It also
+contains references to our other guidelines such as health and
+safety management, and data protection and privacy.
+The SAP Global Human Rights Commitment Statement details
+our response to the international standards mentioned above and
+is our public commitment to becoming a role model of
+sustainability. Based on the SAP Code of Business Conduct and
+approved by our Executive Board, the statement focuses on three
+main areas: our employees, our ecosystem of partners and
+suppliers, and our solutions.
+Launched within SAP in 2018, the SAP Ariba Supplier Risk
+solution will allow us to continuously monitor suppliers to protect
+our company from exposure to environmental, reputational,
+compliance, financial, and operational risks. We intend to add
+forced-labor data, from non-profit organizations such as Made In A
+Free World, to help us review conditions for external workers and
+assess modern slavery risks within our supply chain in selected
+regions.
+Direct:
+Not only do we create financial value for SAP and our
+shareholders, we also create wealth for a broad range of
+stakeholders. We do this through employee wages and benefits,
+payments to our value chain and ecosystem, and tax payments to
+local governments and economies, for example.
+Increase transparency of physical, medical, and
+health conditions of individuals, which might be
+abused
+For more information about customer loyalty, see the
+Customers section.
+At SAP, we are committed to our vision of helping the world run
+better and improving people's lives. To help achieve this vision, we
+create innovations that help accelerate economic prosperity, drive
+positive social impact, and safeguard the planet. Our customers
+inspire what we do, from the first spark of innovation to the design
+and completion of new products, not to mention the way in which
+we serve their needs over time.
+As well as creating positive impacts through our solutions, we
+focus on three strategic pillars that foster digital inclusion and
+create opportunity for all people by building digital skills,
+accelerating non-profit organizations and social enterprises to be
+best run, and connecting our employees with purpose. For more
+information, see the Employees and Social Investments section.
+Innovation and Customer Loyalty
+We believe that digital technologies will help companies and
+organizations contribute to the United Nations' 17 SDGs. We
+provide our customers and partners with the solutions that help
+them make a difference. This may be through empowering those
+disadvantaged in society through financial services, providing
+personalized medicine, building infrastructure, or combating
+climate change. For more information, see the Our Contribution to
+the UN Sustainable Development Goals section.
+Nothing has a greater impact on our long-term success than the
+creativity, talent, and commitment of our people. Their ability to
+innovate and understand the needs of our customers delivers
+sustainable value to our company and our society. For more
+information, see the Employees and Social Investments section.
+Impact on Society
+Human Capital
+For more information, see the Security, Privacy, and Data
+Protection section and the Human Rights and Labor Standards
+section.
+Human and Digital Rights
+For more information, see the Energy and Emissions section.
+Financial Performance
+Climate and Energy
+For more information, see the Business Conduct section.
+Business Conduct
+Each of our material topics has significant impact on the
+business success of SAP as described below.
+Understanding the Relevance of Our
+Material and Other Reported Topics
+SDG 12 Responsible consumption and production
+SDG 4 Quality education
+SDG 17 Global partnerships
+SDG 13 Climate action
+SDG 8 Decent work and economic growth
+'
+Materiality
+221
+To Our
+Stakeholders
+Combined
+Industry Analysts
+For more information about our dialog with governments, see
+the Public Policy section.
+Governments
+For more information about our dialog with investors, see the
+Investor Relations section.
+Financial Analysts and Investors
+In addition, the Executive Board answers employees' questions in
+quarterly all-hands meetings. In regular coffee corner sessions,
+senior executives explain our strategy to employees and answer
+their questions directly.
+Collective bargaining agreements with unions are only made in
+countries where legally required. Overall, about 50% of our
+employees are represented by works councils, an independent trade
+union, or are covered by collective bargaining agreements.
+These employee representation bodies consist of elected union
+members and non-union members, and are consulted by SAP
+management on topics that define the work environment and work
+processes. These topics include HR initiatives, talent development,
+payment and benefits, equal opportunities, changes in work or IT
+processes, privacy, and health and safety protection.
+Our Supervisory Board comprises 50% employee
+representation, and we strive for constructive labor relations across
+the world, working within each country's requirements. We currently
+have works councils in place in Belgium, France, Germany, Israel,
+the Netherlands, Slovenia, and Spain. In Italy, there is a union
+representative in place. In the United Kingdom and Ireland,
+employee consultation forums represent the employees' interests.
+In Romania and Sweden, union stewards serve this purpose. The
+majority of the SAP employees in Canada is represented by a Joint
+Health & Safety Committee. Furthermore, employee
+representatives are in place at SAP Japan Co. Limited. Employees of
+SAP Austria decided to be represented by an ombudsteam. In the
+Czech Republic, labor unions have been established in all SAP
+entities. In China, a trade union for employees employed under the
+SAP China Beijing branch has been formed. In addition, we have an
+SE Works Council Europe that represents SAP employees in the 28
+countries of the European Economic Area.
+.
+SDG 8 Decent Work and Economic Growth
+For more information about our customer engagement
+programs, see the Customers section.
+Customers
+To be able to innovate, we regularly engage with the stakeholder
+groups described below, including our sustainability advisory panel.
+We selected these groups as they are critical to our value creation.
+For SAP, stakeholder engagement and collaboration are deeply
+embedded into our process of innovation and the development of
+our products and services. Before we can design a new solution, we
+must first understand the issue we are addressing. For this reason,
+design thinking and co-innovation are essential.
+Stakeholder Engagement
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Employees
+•
+SDG 3 Good health and well-being
+•
+1 3rd Party Services includes professional services as well as HR-related
+procurement. Cloud Infrastructure procures products and services for SAP's cloud
+business. Marketing & Travel focuses on transactions regarding SAP's marketing
+and business travel. Facility includes procurement for our buildings across the
+globe (and does not include leases and construction). Consumer goods primarily
+covers procurement in the area of telecommunications and IT-related
+products/services other than cloud infrastructure. Car fleet includes procurement
+regarding the global company car fleet.
+229
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Upholding High Standards Across Our
+Supply Chain
+Sustainable Procurement
+Our supplier code of conduct is included in our standard
+supplier contracts and will become an essential part of our supplier
+registration. This supplier registration ensures that potential
+suppliers of SAP are aware of SAP's basic code of acceptable
+conduct. We review and update our supplier code of conduct
+regularly to maintain high standards within our supplier network.
+This strengthens its enforceability and sends a clear signal about its
+importance for SAP.
+Improving Sustainability Through
+Innovation
+In 2018, we further enhanced our SAP Ariba Supplier Risk
+solution. It enables the procurement departments of our customers
+as well as our GPO to identify, manage, and mitigate sustainability
+risks within our supply chain. These risks include, for example,
+unethical practice, workplace discrimination, workplace safety
+neglect, the use of child labor, human trafficking, and
+environmental disasters such as oil spills and radioactive
+contamination.
+In addition, this innovative solution helps SAP measure due
+diligence activity and report on information-sharing programs
+across the supply chain. By providing insights into supplier risk, the
+solution enables us to detect early warning signals, minimize costly
+disruptions, and proactively monitor risk factors for each supplier.
+In this way, SAP can prioritize its corporate responsibilities,
+quantify the impact it wants its business to have, and identify the
+critical issues affecting the supply chain.
+SAP has also set up a cross-category task force of GPO buyers
+that is dedicated to actively improving our sustainability and
+initiating close collaboration with suppliers to find new and
+innovative ways to make our supply chain more sustainable. We
+have a number of ongoing projects that minimize our impact on the
+environment in areas such as waste management, energy,
+enterprise mobility, catering, office supplies, and SAP events.
+Our chief procurement officer and chief sustainability officer
+meet each quarter to discuss progress and challenges related to
+embedding sustainability in our procurement practices.
+230
+Sustainable Procurement
+To Our
+Stakeholders
+The current version of the SAP Supplier Code of Conduct also
+contains provisions on the Modern Slavery Act, diversity and
+inclusion, and a labor standards chapter that explicitly refers to
+human rights.
+Our Analyst Relations team, the Executive Board, and
+executives have strong relations and work strategically with IT
+analysts on a frequent basis. We engage with these analysts on key
+SAP topics including Intelligent Enterprise, SAP HANA, ERP and
+SAP S/4HANA, CRM and SAP C/4HANA on SAP Cloud Platform,
+SAP Leonardo, industry solutions, cloud solutions, ecosystem, and
+services. The latest industry-positioning material integrates
+economic, social, and environmental impact creation.
+APJ
+13%
+Americas
+32%
+SDG 9 Industry, innovation, and infrastructure
+■
+our stakeholders identified seven SDGs as material:
+The climate and energy category, which looks at the way in
+which SAP reduces emissions and energy consumption in our
+own operations, had the lowest response rates and scores.
+In evaluating our impact on society through the SAP portfolio,
+The innovation and customer loyalty, business conduct, and
+human capital categories received the highest scores and
+response rates.
+Key points of our materiality assessment results include:
+Stakeholders saw financial performance as a mandatory part of
+reporting. As a result, in several interviews, its materiality was
+not expressly discussed. However, this category received high
+individual scores.
+-
+-
+Additional
+Infomation
+EMEA
+55%
+Further Information on Economic,
+Environmental, and Social Performance
+Management Report
+Combined
+As part of its supplier diversity program, SAP was a corporate
+member of the following minority supplier certification
+organizations in 2018:
+-
+-
+National Minority Supplier Development Council (NMSDC)
+WEConnect International
+Minority Supplier Development UK (MSDUK)
+US Business Leadership Network (USBLN)
+In the spring of 2018, SAP partnered with the Social Enterprise
+World Forum (SEWF) to further enhance our diverse supplier
+network. Furthermore, diversity and inclusion-related content is
+included in our Supplier Code of Conduct. We recommend SAP
+suppliers to deliver goods and services that are accessible to
+everyone, including people with disabilities.
+Consolidated Financial
+Statements IFRS
+Non-Governmental Organizations
+(NGOs), Not-For-Profit Organizations
+(NPOs), and Academia
+We survey employees annually. For the results of our latest
+employee survey and action items resulting from it, see the
+Employees and Social Investments section.
+Partners
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+Sustainability Management and Policies
+224
+To help drive progress in our sustainability initiatives, we need
+the support of employees in every part of SAP. We have a global
+internal network of about 150 sustainability champions who
+represent different regions and areas of the business at SAP. Not
+only do they act as role models, they also tailor sustainability
+engagement activities to local and lines-of-business needs and
+interests, and share best practices.
+Our Contribution to the UN Sustainable
+Development Goals
+Nurturing a Network of Sustainability
+Champions
+In addition, employees can access a dashboard detailing the
+environmental and social performance and its impact on the
+financial performance for our company as a whole, single sites, or
+departments. For example, data on employee retention and women
+in management helps create transparency with regard to the social
+performance of our company. A personalized app also provides
+employees with statistics about their personal impact through
+activities such as driving a company car or using electronic
+equipment.
+Change starts with transparency and awareness. To gain a
+holistic overview of our performance, our Executive Board and
+Supervisory Board have access to our SAP Digital Boardroom
+solution that includes key financial and non-financial data such as
+human capital indicators.
+Focusing on Transparency and Building
+Awareness
+about how they contribute to the SDGs. Furthermore, programs
+such as the "Bike to Work" and "Fit@SAP" schemes connect health
+and environmental goals by linking fitness activities with financial
+contributions to organizations such as Plant-for-the-Planet, which
+educates people about climate change.
+SAP continues to include sustainability in its onboarding training
+for new hires. Sustainability is integrated in our training courses on
+vision and strategy. Furthermore, employees can take openSAP
+online courses on sustainability through digital transformation, and
+on climate change, which are also available to the general public.
+Our new SAP Together program provides an easy-to-access
+online platform to help SAP employees engage in activities and
+volunteering opportunities. We have also encouraged employee
+engagement through initiatives such as an online SDG quiz or the
+"What's your goal?" challenge, with SAP staff submitting stories
+In addition, the SDG Network provides a platform that helps
+employees working on initiatives involving SDGs to align and
+consolidate efforts and create synergies.
+We kicked off 2018 with a purpose campaign linking purpose to
+the SDGs. It encompassed a dedicated virtual employee kick-off,
+interviews, and blogs with board members and senior executives
+on the company intranet that focus on selected SDGs, and a
+"Watch and Win" contest featuring 17 videos dedicated to each
+SDG. We also integrated content about our vision and purpose into
+global employee all-hands meetings and created videos that
+explore our sustainability goals and efforts.
+Employee engagement is essential, as the ideas and
+commitment of our staff help drive change throughout SAP. We run
+a number of programs to help employees understand how
+sustainability is engrained in our vision and purpose to help the
+world run better and improve people's lives, and how they can
+contribute.
+Changing Our Behavior and Culture
+Our dialog with NGOs, NPOs, and academic institutions helps us
+understand how we can address today's most pressing issues with
+our solutions and what is expected from us as a corporation. For
+example, in 2018 our SAP Next-Gen program accelerated the
+impact of its partnership with UN Women through #sheinnovates, a
+program launched in 2017 that supports the goals of the Global
+Innovation Coalition for Change to drive industry-wide action to
+make innovation and technology work better for young women and
+girls, and which builds up the community on behalf of the
+movement.
+In addition to the Executive Board, our Customer Experience
+Strategy Council looks at customer feedback and helps drive
+improvements in our customer experience. For more information
+about customer loyalty and our efforts to improve the customer
+experience, see the Customers section.
+The information in the section Our Contribution to the UN Sustainable
+The 17 United Nations Sustainable Development Goals (SDGs)
+provide a globally accepted framework for communicating our
+vision and purpose to "help the world run better and improve
+people's lives". We strive to execute on this vision by being a role
+model for sustainable, purpose-led operations and by enabling our
+customers to operate in a sustainable way.
+Enhance safe and healthy working conditions,
+healthcare, and personalized medicine on a global
+scale
+Indirect:
++ Provide access to a healthy lifestyle and a safe and
+healthy working environment for employees
+Direct:
+SDG 3 Good Health and Well-Being
+Integrate small and medium-sized enterprises into
+global value chains and markets
++ Providing "Best Practice" business processes
+through standard software solutions
++ Support providers of infrastructure, financial
+services and clean technologies
+Indirect:
+Development Goals is not in the scope of the Independent Assurance Report from
+KPMG.
++ Increase inclusive and sustainable industrialization
+through SAP's investments in research and
+development (including in developing countries)
+Where You Can Find More
+Information in the SAP
+Integrated Report and Other
+Sources
+Our Policies and Selected Activities and
+Programs to Enhance Positive Impacts and
+Mitigate Negative Impacts
+Our Key
+Performance
+Indicators and
+Targets
+SDG 9 Industry, Innovation, and Infrastructure
+Our Potential Direct and Indirect Impact
+The following table describes the potential positive and negative
+direct or indirect impacts of our company and of our products and
+services related to SDGs that have received a high ranking in our
+materiality analysis. We use "direct" when we refer to impacts
+through our own operations; "indirect" describes impacts through
+the use of our solutions and technology or in our ecosystem.
+To validate and refine the focus of our impact through our
+operations and solutions, we included the SDGs in our 2016
+materiality analysis and discussed them with our external
+sustainability advisory panel. This highlighted the importance of
+focusing on SDGs for which there is a tangible and material link
+between our own operational activities or the use of our software
+by customers. For more information, see the Materiality section.
+(www.sap.com/unglobalgoals) was published in early 2016 and has
+been updated regularly.
+Following the adoption of the SDGs by world leaders in
+September 2015, we identified and aligned existing initiatives with
+all 17 SDGs. For example, we looked at the environmental and social
+impacts of customers using SAP technology and applications,
+linking these impacts to the SDGs. The resulting Web book
+Direct:
+Every Executive Board member is responsible for innovation in
+their area. For more information about our software and services
+innovation efforts, see the Products, Research & Development, and
+Services section.
+We measure the success of our initiatives through our annual
+People Survey. In 2018, 93% of our employees agreed with the
+statement "It is important for SAP to pursue sustainability". This
+was unchanged from 2017 (2009: 77%). Furthermore, 83% of our
+employees stated “I actively contribute to sustainability goals at
+SAP." This is slightly down from 84% in 2017 but up from 47% in
+2009 when we introduced the question.
+long-term impact, the evaluation is repeated six to nine months
+after our team's departure.
+For information about our compliance management approach,
+see the Business Conduct section.
+Business Conduct
+SAP has dedicated personnel addressing the material aspects
+identified in our materiality analysis. For each topic, we look at ways
+in which we can manage our response, and how we can evaluate
+whether our approach is effective.
+Managing Our Response to Our Material
+and Other Reported Aspects
+Our chief financial officer (CFO) is the sponsor for sustainability
+on the Executive Board, and we also have a dedicated person in
+charge of sustainability in each board area. These individuals are
+responsible for embedding sustainability in their business
+practices, for example, by setting relevant targets and
+implementing related programs. They are held accountable for
+their achievements, in review meetings with the CFO and the chief
+sustainability officer that take place twice a year.
+Led by our chief sustainability officer, a dedicated team works to
+embed sustainability into our corporate strategy and promotes new
+sustainability initiatives across the organization. We also aim to
+integrate measures that promote positive economic, social, and
+environmental impacts within our existing solutions, processes,
+and operations.
+At SAP, we believe that it is not enough to simply have a
+sustainability strategy but that, instead, our overall corporate
+strategy must itself be sustainable. Only by achieving this can we
+fulfill our vision and purpose to help the world run better and
+improve people's lives. We therefore strive to promote
+sustainability across our entire business and beyond: for example,
+through our recent branding campaign, which has sustainability at
+its core.
+Putting Sustainability at the Heart of Our
+Strategy
+Sustainability Management and Policies
+Climate and Energy
+Innovation and Customer Loyalty
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+Stakeholder Engagement
+222
+Our sustainability advisory panel consists of expert
+representatives from our customers, investors, partners, NGOs,
+and academia. In 2018, the panel met with our chief financial officer
+(CFO) and a member of our Supervisory Board, as well as with SAP
+representatives from the areas of solutions, finance and
+administration, corporate affairs, and marketing. The group
+discussed how SAP can better embed sustainability into our core
+business and how our solution portfolio and technology will enable
+our customers to run sustainable businesses.
+Sustainability Advisory Panel
+With more than 18,000 partners around the world, the SAP
+ecosystem is vital to our success. We take a multifaceted approach
+to partner engagement that begins with the dedicated, interactive
+partner portal, SAPPartnerEdge.com. Partners receive a weekly,
+customized newsletter with the latest announcements, training
+offers, and thought leadership information relevant to their specific
+partnership type. Additionally, partner-dedicated focus groups and
+events such as the SAP Global Partner Summit are held throughout
+the year, around the globe, to educate partners and further gauge
+their feedback on how SAP can continuously improve. For more
+information about our ecosystem, see the section Products,
+Research & Development, and Services.
+Further Information on Economic,
+Environmental, and Social Performance
+For information about our climate and energy management
+approach, see the Energy and Emissions section.
+Additional
+Infomation
+The Executive Board retains ultimate responsibility for revenue
+growth, profitability, and the financial stability of SAP. For more
+information, see the Corporate Governance Report and the Report
+by the Supervisory Board.
+Financial Performance
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+To Our
+Stakeholders
+223
+Sustainability Management and Policies
+On a group level, we ensure that donations are made in an
+appropriate manner through financial and compliance control
+processes described in our global CSR policy, and we monitor all
+major CSR programs for social impact. For example, in our SAP
+Social Sabbatical program, we survey both the participants and the
+non-profit organization or social business involved to determine
+whether our team has met the agreed deliverables. To capture
+Our Global CSR Governance Committee, consisting of executive
+level representatives of different board areas at SAP, advises and
+approves the strategic direction of our overall CSR mission. In
+addition, regional CSR governance committees advise and approve
+all major CSR partnerships and efforts. Led by our head of global
+CSR, our global CSR team is part of the Office of the CEO and
+Corporate Affairs organization. There is also a regional CSR lead for
+each of our major SAP regions.
+Combined
+Our contribution to the SDGs is a cross-company effort driven
+by experts from almost every board area. We illustrate examples of
+our existing engagement with customers and other activities
+contributing to the SDGs in our continuously updated Web book
+SAP and the UN Global Goals. In addition, we pursue partnerships
+with the World Economic Forum (WEF), United Nations Industrial
+Development Organization (UNIDO), UN Women, and UN Global
+Compact, as well as other organizations and non-governmental
+organizations (NGOs). In this way, we drive ideas, innovation,
+execution, and adoption for solutions to achieve the UN's 2030
+Agenda for Sustainable Development.
+Our global CSR policy offers all SAP employees the opportunity
+to volunteer for up to eight working hours each year at a CSR event.
+For more information about our CSR events and activities, see the
+Employees and Social Investments section.
+For information about our management approach on human
+and digital rights, see the Security, Privacy, and Data Protection
+section and the Human Rights section.
+Human Capital
+Overall responsibility for our human resources strategy lies with
+the Executive Board, led by the Executive Board member
+responsible for Human Resources.
+Human and Digital Rights
+For more information about our human capital management
+approach, see the Employees and Social Investments section.
+Impact on Society
+When assessing our impact on society, we consider two key
+areas: Firstly, we look at the contribution we make towards the
+fulfilment of the United Nations Sustainable Development Goals
+(SDGS, also called UN Global Goals) through our software
+solutions; and secondly, we consider our efforts to make the world
+a better place through our corporate social responsibility (CSR)
+programs.
+Our key policies include a global health and safety management
+policy and a diversity and inclusion policy. The global health and
+safety management policy aims to nurture our employees' long-
+term employability, engagement, and creativity by integrating
+health, occupational safety, well-being, and stress management
+topics. The diversity and inclusion policy provides a framework for
+an inclusive working environment.
+Stakeholder Engagement;
+Customers
+Corporate Governance Report;
+Sustainability Management and Policies
+102-40
+Stakeholder Engagement
+102-41
+Stakeholder Engagement
+102-42
+Stakeholder Engagement
+102-43
+Stakeholder Engagement;
+GRI Index and UN Global Compact Communication on Progress
+Customers;
+102-45
+102-46
+240
+Employees and Social Investments
+Scope of Consolidation, Subsidiaries and Other Equity Investments;
+All entities are covered by the report.
+Materiality;
+Non-Financial Notes
+10
+Employees and Social Investments
+102-44
+Business Conduct;
+Further Information on Economic,
+Environmental, and Social Performance
+102-16
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+General Information About Social
+Indicators
+Boundaries
+Our boundaries take two different perspectives: SAP as a
+company, which includes all our legal entities and operations and
+supply chain, and SAP as a solution provider enabling our
+customers. These boundaries are listed in detail in the GRI
+Standard Content Index.
+Social Indicators
+Data for our social indicators is collected and reported on a
+quarterly or annual basis and is subject to external assurance for
+annual reporting.
+Employee Retention
+We define employee retention as a ratio that puts emphasis on
+employee-initiated turnover - in other words, we seek to measure
+how many employees choose to stay with SAP. As opposed to
+keeping a low turnover rate - which companies generally seek to do
+- we aim to keep our retention rate high. A higher retention rate
+signifies that fewer employees are choosing to leave SAP. The
+number of voluntarily departed employees now excludes the
+voluntary part of restructuring-related departures for more
+transparency and precise headcount management purposes.
+Women in Management
+We define "women in management" as the share of women in
+management positions as compared to the total number of
+managers.
+At SAP, we differentiate between the following categories of
+managers:
+Managers managing teams: Refers to managing teams of at
+least one employee or vacant positions
+-
+Managers managing managers: Refers to managing managers
+that manage teams
+Board members
+Business Health Culture Index
+Social Performance
+The Business Health Culture Index (BHCI) measures the general
+cultural conditions in an organization that enable employees to stay
+healthy and balanced. The index covers questions concerning how
+employees rate their personal well-being and the working
+conditions at SAP, including our leadership culture. The BHCI is an
+indicator of the extent to which SAP successfully offers employees
+a working environment that promotes health supporting their long-
+term employability and their active engagement in reaching our
+ambitious corporate goals.
+Non-Financial Notes:
+Management Report
+Organization for International Investment
+Russian-German Chamber of Commerce
+Schmalenbach-Gesellschaft für Betriebswirtschaft e. V.
+Society of Corporate Compliance & Ethics
+The Conference Board, Inc.
+The Sustainability Consortium
+The Wall Street Journal CEO Council
+TRACE International
+Transparency International Germany
+United Nations Global Compact (since 2000)
+U.S. Chamber of Commerce
+World Economic Forum
+Memberships
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+233
+To Our
+Stakeholders
+Combined
+Consolidated Financial
+Statements IFRS
+The BHCI is calculated based on the results of an employee
+survey ("People Survey") conducted annually. All employees were
+invited to take part in the 2018 People Survey and approximately
+72,000 employees participated (response rate: 73%). The BHCI
+score for 2014 was recalculated from 70% to 72% based on two
+updated questions in the people survey concerning work-life
+balance. The changes were carried out to simplify the questionnaire
+and to better compare against external benchmarks.
+Employee Engagement
+We define employee engagement as a score for the level of
+employee commitment, pride, and loyalty, as well as our
+employees' feeling of advocacy for SAP.
+The indicators greenhouse gas emissions per employee and
+total energy consumed per employee are calculated on the basis of
+an average number of employees. This average is calculated by
+adding the FTEs at the end of each quarter and then dividing the
+result by four.
+Greenhouse Gas Footprint
+Definition
+We define the GHG footprint or carbon footprint as the sum of
+all greenhouse gas emissions measured and reported for SAP,
+including the compensation with renewable energy or offsets.
+Reporting Principles
+SAP's preparation of the GHG footprint is based on the
+Corporate Accounting and Reporting Standard (Scope 1 and 2) and
+the Corporate Value Chain (Scope 3) Standard of the World
+Resources Institute/World Business Council for Sustainable
+Development. This approach conforms to the requirements of GRI
+Standard indicators 302-1, 302-2, 305-1, 305-2, and 305-3.
+In more detail, SAP reports our net greenhouse gas emissions
+according to the GHG Protocol Scope 2. In this context, two
+different calculation approaches are possible: the classic location-
+based method and the recently introduced market-based method,
+which is an amendment to the GHG Protocol Scope 2.
+Organizational Boundaries
+SAP defines our organizational boundaries by applying the
+operational control approach as set out in the GHG Protocol.
+Operational control is established when SAP has the full
+authority to introduce and implement its operating policies. The
+emissions of all operations over which the company has operational
+control and all owned, leased facilities, co-location data centers,
+and vehicles that the company occupies or operates are accounted
+for in the GHG footprint. They are based either on measurements
+or, where no measured data is available, on estimations and
+extrapolations.
+A portion of SAP's leased facilities operates under full-service or
+multitenant leases, where SAP does not have access to actual
+energy consumption information. SAP includes these facilities in
+our definition of operational control and accounts for them by
+estimating related energy consumption.
+Non-Financial Notes: Environmental Performance
+235
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Reporting on total energy consumed and data center energy is
+based on the data collected for the calculation of our greenhouse
+gas (GHG) footprint. All numbers are based on the metric system.
+Whenever we state "tons," we mean metric tons.
+Data for our environmental indicators is collected and reported
+on a quarterly basis and is subject to external assurance for annual
+reporting.
+Reporting Approach
+Our boundaries take two different perspectives: SAP as a
+company, which includes all our legal entities and operations and
+supply chain, and SAP as a solution provider enabling our
+customers. These boundaries are listed in detail in the Content
+Index of the Global Reporting Initiative (GRI).
+It is calculated based on the results of an employee survey that
+is conducted annually (see BHCI).
+In 2015, we simplified our Employee Engagement Index and
+recalculated our score for 2015 from 81% to 82%. This calculation
+method has been applied moving forward.
+234
+Non-Financial Notes: Social Performance
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Mechanical Engineering Industry Association
+Further Information on Economic,
+Environmental, and Social Performance
+Non-Financial Notes:
+Environmental Performance
+Environmental Performance
+We understand environmental performance as the measurable
+outcome of SAP's ability to meet environmental objectives and
+targets set forth in our environmental policy. In this context, we
+determine SAP's greenhouse gas footprint, total energy consumed,
+and data center energy as the three key environmental
+performance indicators. Furthermore, we realize external
+reductions by purchasing offsets and renewable energy which is
+partly self-generated in SAP locations but primarily purchased in
+the form of Renewable Energy Certificates (RECs). Plus, we identify
+SAP's waste and water consumption as additional environmental
+aspects.
+By looking at the energy usage and emissions throughout our
+entire value chain, we gain insights to help us manage our
+environmental performance and, in turn, help our customers to do
+the same.
+The activities and trends behind our results for 2018 are detailed
+below. This includes information about the areas in which we
+consume the most purchased electricity, as well as the impact
+caused by the use of our products.
+Our net carbon footprint is calculated by reducing purchased
+renewable energy certificates and carbon offsets from our gross
+carbon footprint in the respective reporting period. Our gross
+carbon footprint for 2018 was 734 kilotons CO2e (2017: 680
+kilotons CO2e), including all GHG emission categories in Scope 1
+and 2, as well as selected categories of Scope 3 as outlined in
+figure 1.
+General Information
+We consider the principle of sustainability context in a number
+of ways, such as by looking at global issues or trends including
+climate change and demographic shifts. For example, we assess
+our greenhouse gas emissions in the context of the emissions of
+the entire information and communications technology landscape,
+with particular focus on the abatement potential of the industry.
+When it comes to completeness, we recognize that while we
+comply with this principle in reporting on our own operations, we
+are still developing methodologies to reliably quantify our impact
+through our solutions.
+Boundaries
+Additional
+Infomation
+To support the growing demand for SAP's cloud offerings, we
+subcontract computation power in local third-party data centers.
+Carbon emissions are approximated and included based on the
+consumed computation power.
+International Integrated Reporting Council
+Industrial Internet Consortium
+In 2018, we continued to roll out 'zero waste' diversion
+programs at offices across the globe as part of our ISO 14001
+program, with specific targets to achieve and maintain landfill
+diversion at or above 90%. This approach focuses on eliminating
+the need to send waste to landfill, by changing processes or
+promoting the reuse of materials.
+We reduced our paper usage by almost 43% since 2009.
+Initiatives such as our global printing optimization support this
+decrease, despite a 102.8% increase in employee headcount over
+the same period. Among other improvements, this initiative sets
+printers to produce double-sided, black-and-white printouts by
+default. In 2018, we continued our approach of paperless
+contracting. By using the SAP Signature Management application
+by DocuSign to enable electronic signatures, we have been able to
+handle 97,035 pages of contract, cutting down on paper-based
+contracts significantly.
+We have also successfully changed working behavior to
+significantly reduce the number of pages that our employees print.
+A secure pull-printing system requires that employees bring their
+ID badges to a printing device to activate a job. This ensures better
+document security, and makes people think about whether the
+printout is really needed. More than 89,000 employees are
+currently using this system. Through all of these initiatives, our
+printing volume has gone down by 25.6 million pages in total since
+2014. SAP employees can access a printing dashboard that shows
+the company's progress in reducing paper consumption at global,
+regional, and country levels.
+Finding Alternatives to Plastic
+In a bid to reduce the amount of plastic in our everyday lives,
+and in support of the United Nations Sustainable Development
+Goals for a more sustainable future for all, we ran the plastic-free
+initiative throughout October. Employees worldwide were
+challenged to find alternatives for everyday products that are
+usually packaged in plastic, and to share their photographs and
+stories on the company's intranet and social media channels. The
+employee with the most suggestions then won the competition.
+Some of the ideas included switching to reusable materials such as
+stainless steel, as well as compostable materials. A further initiative
+at local was the implementation of reusable mugs in our office in
+Newtown Square, PA, United States.
+Using Water Efficiently
+While our operations are not water-intensive, we continue to use
+water as efficiently as possible. As part of our efficiency efforts, we
+use rain and run-off water for irrigation and toilets in our
+headquarters in Walldorf, Germany, and other office locations.
+A few of our offices are located in areas with significant water
+scarcity. In locations such as Bangalore, India, Johannesburg,
+South Africa, Sofia, Bulgaria, or Ra'anana, Israel, we have been
+addressing this issue with dedicated water management efforts.
+These range from the reuse of treated sewage water to harvesting
+systems, and boreholes to save clean, fresh water.
+Global Water Usage
+Thousand cubic meters
+1,376
+1,185
+1,060
+1,049
+970
+2014
+2015
+2016
+2017
+2018
+2018
+Cutting Down on Landfill Waste
+2016
+To Our
+Combined
+Stakeholders
+102-18
+Consolidated Financial
+Statements IFRS
+Waste and Water
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Taking a Global Approach
+Our waste and water strategy ensures that we minimize the
+impact SAP has on our environment. By promoting company-wide
+initiatives, we dispose less waste and reduce the amount of water
+we use in locations worldwide. A global approach combined with
+local targets and initiatives ensures that we optimize our
+environmental performance.
+Taking steps to recycle our waste and save water also
+contributes to our business performance. Through ongoing
+initiatives at SAP sites, we reduce our operational costs while
+engaging our employees in our efforts.
+Managing Our E-Waste
+Our e-waste comes from the data center servers and from IT
+equipment including PCs, peripherals, and mobile devices. Our
+servers and IT equipment are either resold or recycled in an
+environmentally friendly manner depending on their condition. In
+2018, we continued our engagement with our international
+sustainable e-waste disposal partner. We also work together with
+local e-waste disposal partners.
+In addition, we support the reuse of IT equipment internally
+through used-equipment shops in some country locations. A
+sustainable procurement program complements our waste
+reduction efforts by offering sustainably produced IT equipment.
+E-Waste (Recycled)
+tons
+145
+133
+106
+2017
+Waste and Water
+231
+To Our
+-
+-
+-
+-
+-
+-
+-
+-
+-
+-
+Advancing Women Executives
+Alliance for Integrity
+Bitkom e.V.
+Business for Social Responsibility
+Cellular Telephone Industries Association
+Deutschland sicher im Netz e. V.
+DIGITALEUROPE
+econsense
+Federation of German Industries
+To better understand and enable sustainable performance on a
+global level, both for our company and customers, SAP subscribes
+to and routinely engages in a range of third-party organizations,
+including:
+Memberships
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Public Policy
+SAP has developed trusting relationships with governments
+worldwide by exploring the potential for information and
+communications technology (ICT) to spur economic growth, create
+jobs, and address societal challenges. This includes governments in
+their role as our customers by supporting their digital
+transformation to become more efficient, effective, and citizen-
+oriented.
+SAP engages with governments around the globe on a number
+of public policy issues, including the creation of reasonable
+framework conditions for new technologies or business models
+such as cloud computing, the Internet of Things, and Big Data.
+Information Technology Industry Council
+SAP supports global best practices to ensure cybersecurity and
+the protection of personal data to build trust in digital technologies.
+SAP favors global policy frameworks and international standards
+that enable the free flow of data across borders and the free trade
+of digital products and services.
+Political Contributions
+SAP does not support any political parties. Under the laws of the
+United States, a number of SAP employees exercise their right to
+create a political action committee (PAC). The SAP America PAC is
+an independent, registered, and strictly regulated organization that
+allows eligible employees in the United States to support political
+candidates at the state and federal level. Consistent with U.S. law,
+SAP exercises no control over or influence on the SAP America
+PAC. SAP America PAC expenditures are transparent and available
+on the U.S. Federal Election Commission Web site.
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+232
+Public Policy
+To Our
+Stakeholders
+Combined
+SAP believes in transparency in the political process.
+Accordingly, we are registered in the European Transparency
+Register for interest representatives. In the United States, our
+company is registered and reports in compliance with the Lobbying
+Disclosure Act.
+In most instances, however, SAP has 100% ownership of our
+subsidiaries. Accordingly, the difference between applying the
+control versus the equity approach is about 0.6% based on SAP
+revenue. If additional investments in associates were included, the
+difference would be even smaller, about 0.5%.
+Management Report
+Comparability
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+A requirement for offsets is that the minimum standard
+(Voluntary Carbon Standard, VCS) is applied. SAP ensures that the
+quantified GHG emission reductions from offsets are credible and
+that they meet four key accounting principles:
+-
+Real: The GHG reductions represent actual emission reductions
+that have already occurred.
+Additional: The GHG reductions are surplus to regulation and
+would not have happened without the offset.
+Permanent: The GHG reductions are permanent or have
+guarantees to ensure that any losses are replaced in the future.
+Verifiable: The performance of the GHG reduction projects can
+be readily and accurately quantified, monitored, and verified.
+In the net carbon footprint, purchased offsets are already
+deducted from our gross emissions.
+Total Energy Consumed
+We define total energy consumed as the sum of all energy
+consumed through SAP-own operations, including energy from
+renewable sources. It is calculated based on the consumption data
+obtained through our measurements for the GHG footprint and is
+the sum of energy consumption from stationary combustion
+facilities, mobile combustion corporate cars, mobile combustion
+corporate jets, electricity offices, electricity data centers,
+purchased chilled water, purchased hot water, and purchased
+steam.
+Data Center Electricity
+We define data center electricity as the sum of electricity
+consumed to provide internal and external computation power in
+SAP data centers and contracted third-party data centers. A data
+center is any global, regional, or local computing center (location
+with any number of server units) that is part of our global IT
+infrastructure strategy. In 2018, we continued analyzing and
+reporting internal and external data center energy consumption
+intensity against our non-IFRS revenue.
+Data center energy consumption per euro is calculated by
+dividing the electricity consumption of all internal and external data
+centers measured for the calculation of our GHG footprint by our
+revenue.
+We will continuously improve the data quality of energy
+consumption of external data centers.
+As we expect that emissions from external data centers will
+continue to grow in the future, SAP committed to a green cloud
+strategy and to compensate the emissions with renewable
+electricity certificates. By referring to the green cloud, we mean
+that SAP's cloud is carbon neutral due to purchasing 100%
+renewable electricity certificates and compensation by offsets.
+Additional Environmental Aspects
+Water
+By water, we mean the total amount of freshwater withdrawn for
+our facilities. Data is based on estimations from sites and is largely
+extrapolated. Data was provided (estimated) for 61% of the total
+space; remaining data is extrapolated based on square meter
+footage.
+Management Report
+E-Waste
+Combined
+Non-Financial Notes: Environmental Performance
+Due to the link of our upstream emissions to operating
+expenses, for 2018, we extrapolated our upstream figures by
+multiplying our four key contributors to our upstream emissions
+from 2017 with the year-over-year increase of operating expenses
+between 2017 and 2018.
+Downstream
+Use of Sold Products: The vast majority of our overall
+emissions stem from the use of our software. When SAP
+software runs on our customers' hardware and on their
+premises, the resulting carbon footprint is about 38 times the
+size of our own net carbon footprint (11.7 million tons in 2018).
+SAP is eager to cooperate with customers to optimize their on-
+premise landscapes. However, given that we have no control
+over our customers' IT landscapes as they usually contain a lot
+of third-party products, we share this responsibility with others.
+Resource need per year is determined using a landscape
+simulation. It is extrapolated globally based on the number of
+productive installations and power usage effectiveness (PUE).
+We use a PUE factor of 1.61, which is the average PUE of our
+external data centers. Emissions are calculated using a global
+electricity emission factor. Due to the special characteristics of
+software products, we chose an assessment of resource need
+per year. This deviates from the minimum boundaries as defined
+by the GHG Protocol's Corporate Value Chain (Scope 3)
+Accounting and Reporting Standard, which requires assessment
+and disclosure of "direct use-phase emissions of sold products
+over their expected lifetime." The calculation covers all of our
+major solutions, including on-premise software. Cloud solutions
+are not included, as they are part of our Scope 2 emissions.
+Mobile solutions (for example, SAP apps running on customer IT
+equipment) are also not included. Calculation parameters will be
+adapted when significant technology changes occur.
+Other Scope 3 Emissions Not Included: Upstream
+Transportation and Distribution (due to data complexity and de
+minimis); Upstream Leased Assets (not applicable); Processing
+of Sold Products (not applicable); End-of-Life Treatment of Sold
+Products (not applicable); Downstream Leased Assets (not
+applicable); Franchises (not applicable); and investments (not
+applicable).
+External Reduction
+SAP uses external reductions, such as purchases of renewable
+energy and certified voluntary "offsets," to achieve its GHG targets.
+Emission reductions are subtracted from gross Scope 1 to 3 GHG
+emissions to achieve a net GHG inventory.
+Renewable Electricity
+We define renewable energy as electricity coming from
+renewable energy sources such as wind, solar, hydro, and
+geothermal. The shares of renewable energy used by SAP are
+calculated by adding the amount of renewable energy specifically
+sourced, produced onsite by our own solar cells, and covered by
+Renewable Energy Certificates (RECs). We have developed a
+quality standard that defines key criteria for the procurement of
+RECS to drive change in the electricity market and to avoid the risk
+caused by low-quality products. The key characteristics of our
+renewable energy purchasing guidelines are as follows:
+-
+-
+Type of Renewable Electricity: SAP considers solar, wind,
+biogas, geothermal, and hydro power as renewable electricity. In
+2018, we sourced only wind and solar energy.
+Installation: The power plant producing the renewable energy
+shall not be older than 10 years. In case of a renovation of an old
+power plant, the 10-year rule applies only to the additional
+electricity output due to efficiency increase. Furthermore, SAP
+does not consider RECs from government supported power
+plants.
+Vintage: The renewable electricity must be produced in the
+same year or the year preceding the reporting period to which it
+will be applied.
+Accounting: SAP uses the grid-specific emissions factor to
+calculate the carbon reduction achieved by the RECs. As RECS
+are considered independently to the electricity achieved
+through their procurement, they can be allocated to any location
+globally
+All energy outside the aforementioned categories falls within
+conventional energy. We define conventional energy as electricity
+coming from the standard electricity grid. The electricity grid
+provides a country-specific energy mix including all available
+sources, either fossil, nuclear, or renewable. Energy from
+renewable sources as part of the local grid is calculated as
+conventional energy and not displayed as part of renewable energy.
+To calculate the carbon reductions of the RECs, the amount of
+purchased electricity is multiplied by the grid-specific carbon factor
+derived from the location where the renewable energy was
+produced. The sum over all certificates is the global renewable
+energy emissions value of SAP. However, data is only valid with an
+official certificate or written confirmation of the electricity supplier
+(100% data coverage).
+In the net carbon footprint, the purchased as well as the
+produced renewable electricity is already deducted from our Scope
+2 emissions.
+Offsets
+We compensate our Scope 3 emissions by investing in the
+Livelihood Funds and their high-quality carbon credits, which are
+included in our overall net carbon footprint. By using this
+investment, the Fund aims to abate emissions or sequester carbon
+from the atmosphere, while at the same time ensuring additional
+social benefits for developing countries.
+On top of this, SAP invests in carbon emission offsets for air
+travel by charging an internal carbon price which is later invested in
+sustainable projects worldwide. Furthermore, for employees who
+own a so-called climate neutral fuel card for their company car,
+SAP pays a small additional fee per liter gas purchased, which is
+then invested in gold standard certified compensation projects.
+The investments in sustainable projects are equivalent to a
+certain amount of carbon reductions.
+238
+To Our
+Stakeholders
+By e-waste, we mean any discarded electric devices used in our
+offices and data centers. Data is based on the actual weight of the
+devices (data coverage 100%).
+Non-Financial Notes: Environmental Performance
+239
+Chart Generator;
+102-8
+102-9
+102-10
+102-11
+Non-Financial Notes
+Sustainable Procurement
+UN Global Compact
+Principles
+16
+3
+There were no changes with significant impacts regarding our own organization or our supply chain.
+We support a precautionary approach towards environmental management. While we see little
+apparent risk for our own operations, we do see an opportunity to help our customers anticipate and
+manage this risk in a more agile and responsive fashion through effective product lifecycle
+management and sustainable design.
+Memberships
+7
+102-12
+102-13
+102-14
+Letter from the CEO
+Data Consistency
+Financial Performance: Review and Analysis
+Scope of Consolidation, Subsidiaries and Other Equity Investments;
+Consolidated Financial Statements IFRS;
+Headcount and Personnel Expense;
+https://www.sap.com/industries.html
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Additional
+Infomation
+GRI Index and UN Global Compact
+Communication on Progress
+The social and environmental data and information included in the SAP Integrated Report 2018 has been prepared in accordance with the
+GRI Standards: Core option.
+General Standard
+Disclosures
+102-1
+Upstream
+102-2
+102-4
+102-5
+102-6
+102-7
+Links and Content
+Strategy and Business Model
+Strategy and Business Model
+Strategy and Business Model
+Strategy and Business Model
+Strategy and Business Model
+Financial Performance - Review and Analysis;
+Strategy and Business Model;
+102-3
+Additionally, each year we measure and publish the following
+Scope 3 GHG emissions based on the GHG Protocol's Corporate
+Value Chain (Scope 3) Accounting and Reporting Standard. These
+GHG emissions are not included in our corporate target and are
+meant for indicative purposes only.
+Memberships
+Additional
+Infomation
+Production
+of purchased
+Paper Consumption: Calculation of emissions caused by the
+consumption of printing paper is based on printer tracker data
+(100% data coverage).
+Waste
+disposal
+RECS
+Offsets
+Scope 1
+Emissions from direct
+on-site sources
+Scope 2
+Emissions from purchased
+energy/utilities
+Scope 3
+Indirect emissions from
+supply chain or services
+External
+reductions
+Additionally, we annually measure the cumulative cost
+avoidance of our carbon emissions, compared to a business-as-
+usual scenario. In 2015, we introduced a cumulative cost avoidance
+calculation based on a triennial rolling method. This leads to
+additional comparability and thus, we continued this approach in
+2018.
+Error Correction
+If a significant error is found in the base year inventory, it will be
+corrected. If a significant error is found that does not affect the
+base year but has an impact on this year's or last year's emissions,
+it will be corrected. An error is significant if it affects SAP's gross
+carbon footprint by more than 1%. No restatement due to error
+correction of historical data was necessary in 2018.
+CO2 Emission Factors
+The calculation of the GHG emissions is based on factors for
+conversion and extrapolation provided, among others, by IEA, WRI,
+US EPA, UK DEFRA, DEHSt, Environment Canada, GHG Protocol,
+and SAP's own measurements.
+Where relevant, our CO2 emissions factors consider all CO2
+equivalents (CO2e) for all greenhouse gases. Global Warming
+Potential factors are based on the Fifth Assessment Report of the
+Intergovernmental Panel on Climate Change (IPCC).
+In 2016, we updated our emissions and extrapolation factors for
+the categories stationary combustion facilities, corporate cars,
+corporate jets, business flights, rental cars, train travel, business
+trips with private cars, employee commuting, and paper
+consumption, leading to a 10% downward impact on SAP's 2016
+gross CO2 emissions.
+Methodology & Further Details
+We are reporting all our GHG emissions in CO2 equivalents
+(CO2e) including the impact from CH4, N2O, and HFCs in our Scope
+1 and 2 emissions. As SF6 and PFCs mainly occur in chemical
+processes, they are not relevant for us.
+owned vehicles
+Below you will find the different parameters contributing to our
+carbon footprint. The methodology explanation will be
+complemented by activities and trends.
+Contractor-
+Product
+CO2
+SF6
+SAP uses a significance threshold of 5% for structural or
+organizational changes and 1% for methodology changes of total
+current-year emissions. A structural or organizational change that
+increases or decreases the total inventory by 5% or more will
+trigger an adjustment of past years. A structural or organizational
+change that increases or decreases the total inventory by less than
+5% will be considered insignificant and thus no adjustment will be
+made.
+CH4
+N₂O
+HFCs
+PFCs
+Scope 2
+indirect
+Scope 3
+lindirect
+Scope 1
+direct
+Company-owned
+vehicles
+Fuel combustion
+Purchased electricity
+for own use
+쇠해
+Outsourced
+activities
+Employee
+business travel
+use
+Scope 1
+materials
+-
+-
+-
+-
+-
+-
+Business Flights: Calculation of emissions is based on actual
+distance travelled and actual costs spent (61% data coverage).
+This data is used to determine average emission factors for
+short, medium, and long-haul flights. For CO2 calculation, these
+factors are applied to actual controlling costs for business
+flights. Emission factors for business flights do not consider the
+radiative forcing factors.
+Rental Cars: Average emission factors from rental cars are
+calculated based on actual distance and actual costs spent
+(86% data coverage). These factors are used for extrapolation
+based on the controlling costs.
+Train Travel: Average emission factors from train travel are
+calculated based on actual distance traveled and actual costs
+spent (35% data coverage). These factors are used for
+extrapolation based on the controlling costs.
+Business Trips with Private Cars: Carbon calculation is based
+on distance traveled with a private car; extrapolation is based on
+FTE (81% data coverage). Company car trips are excluded from
+this activity type.
+The following scope 3 GHG emissions are included in our
+corporate GHG target:
+Employee Commuting: A system-integrated commuting survey
+about the distance to work and the mode of transport was again
+conducted in 2018 for SAP globally. The survey responses are
+the basis for carbon calculation of employee commuting in the
+following year. Approximately 28,000 employees responded to
+the survey in 2018. Commuting data for non-responding
+employees and quarterly updates are extrapolated based on the
+number of FTEs excluding those employees who own a
+company car.
+Logistics: Calculation is based on the actual number of parcels
+and mail sent from our logistics center in Germany and is
+extrapolated globally.
+Data Download: Carbon calculation is based on the data volume
+downloaded by our customers globally (100% data coverage).
+Non-Financial Notes: Environmental Performance
+237
+To Our
+Stakeholders
+Combined
+Refers to direct greenhouse gas emissions and is defined as
+emissions from sources that are owned or controlled by the
+organization. At SAP, the following areas are covered by Scope 1:
+Stationary Combustion Facilities: Emission calculation is
+based on building gas or oil consumption in kWh. Where no
+measured data is available, stable values (kWh/m²) are used for
+extrapolation of buildings (58% measured data). In cases where
+no specific information is available, natural gas reported by local
+sites is assumed to be reported in Lower Heating Value. Besides
+gas and oil, we also began using wood pellets to produce
+thermal heat for our buildings. The Scope 1 emissions of wood
+pellets can be set to net 'O', since the wood itself absorbs an
+equivalent amount of CO2 during the growth phase as the
+amount of CO2 released through combustion. Still, to ensure
+complete accounting for all emissions caused, we document the
+direct carbon dioxide (CO2) impact of burning wood pellets as
+'outside of scopes' CO2 emissions. In 2018, these emissions
+accounted for 782 tons of CO2.
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Electricity External Data Centers: An external data center (co-
+location) is a local computing center with server units running
+SAP software that is operated by an external partner. CO2
+conversion factors are updated annually based on country
+specific grid factors and include CH4 and N2O factors. Electricity
+consumption for external data centers is extrapolated based on
+the data center capacity, a utilization factor, and a power usage
+effectiveness (PUE) factor. As the utilization and PUE factors
+are not available for all external data centers, average factors
+are determined as follows: The utilization factor for external
+data centers is calculated as the sum of all actual consumptions
+divided by the sum of contracted server power of these data
+centers. The average PUE is calculated as the sum of all
+provided PUES divided by the number of data centers that have
+provided this factor (81.5% data coverage).
+Only selected upstream emissions are measured directly and
+hence included in our corporate target. The additional upstream
+emissions such as products and services or grey energy of our
+buildings are based on an estimate. Together, our upstream
+emissions including these estimates are responsible for about 11%
+of SAP's total carbon footprint.
+Management Report
+Refers to other indirect greenhouse gas emissions and is
+defined as emissions that are a consequence of operations of an
+organization, but are not directly owned or controlled by the
+organization. Scope 3 emissions are divided into upstream and
+downstream emissions.
+-
+Mobile Combustion Corporate Cars: Emission calculation is
+based on fuel consumption. In 2018, 28 countries reported
+actual fuel data (93% data coverage); for other countries, stable
+values (liters/car) are used for extrapolation based on the
+number of corporate cars reported. The stable values for
+extrapolation are based on SAP's 2017 carbon footprint data.
+Refrigerants Corporate Cars: Refrigerant emissions are based
+on a rough estimate of HFC emissions per car and are
+236
+Non-Financial Notes: Environmental Performance
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Refrigerants Facilities: Refrigerant data is reported for
+completeness of our carbon footprint, but HFC emissions are
+fully estimated (0% measured data) based on the number of
+server units and office space with an A/C system; all
+refrigerants are assumed to be HFC134a.
+extrapolated based on the number of corporate cars reported
+(93% measured data).
+Mobile Combustion Corporate Jets: Emission calculation for
+SAP's own jets is based on actual fuel consumption (100% data
+coverage).
+Consumption of fuel for our company cars remains the single
+greatest contributor to our Scope 1 emissions. In 2018, we
+continued to enhance our car policy by linking emissions caps to
+efficiency improvements of the automotive industry. In addition, we
+focused on greater shifts in commuting habits. We continued the
+global rollout of TwoGo by SAP, our car-sharing solution, which is
+now available in 114 SAP locations worldwide. To increase the scale
+and attractiveness of TwoGo, we make the solution available to the
+public free of charge. As part of our initiative to increase the
+proportion of electric vehicles in our car fleet to 20% by 2020, we
+continue to offer incentives to our employees to purchase electrical
+cars. As an example of additional transportation alternatives for our
+employees, we offer a company bike program in Germany, where
+employees can now also use a bicycle in addition to their company
+car to commute to work. A further commuting alternative to a
+company car in Germany is participation in a national reduced train
+fare program called "BahnCard 100."
+Scope 2
+Additional
+Infomation
+Refers to indirect greenhouse gas emissions and is defined as
+emissions from the consumption of purchased electricity, steam,
+or other sources of energy generated upstream from the
+organization. At SAP, the following areas are covered by Scope 2:
+Electricity Office: Calculations of emissions is based on building
+electricity consumption. Emission factors are updated annually.
+Where no measured data is available, stable values (kWh/m²)
+based on SAP's 2017 carbon footprint data are used for
+extrapolation (75% data coverage).
+-
+Scope 3
+Electricity Data Centers: SAP-owned and SAP-managed data
+centers coming from acquisitions. Calculations of emissions is
+based on data center electricity consumption. Emission factors
+are updated annually. Where no data is available, electricity
+consumption for internal data centers is extrapolated based on
+the number of server units (94% data coverage). The stable
+values are based on SAP's 2017 carbon footprint data.
+Purchased Chilled and Hot Water, Steam: Calculations of
+emissions is based on consumption of district heating. Emission
+factors are updated annually. Where no measured data is
+available, stable values (kWh/m²) based on SAP's 2017 carbon
+footprint data are used for extrapolation (66% data coverage).
+We continued a wide range of efficiency projects to reduce our
+electricity usage, including facility upgrades and new LEED
+certifications. We also expanded the management of our
+environmental performance through ISO 14001. In addition, we are
+one of the global corporations that have signed on to the RE100
+initiative. Led by The Climate Group in partnership with CDP
+(formerly Carbon Disclosure Project), the goal of the RE100
+campaign is to have 100 of the world's most influential businesses
+committed to 100% renewable electricity.
+Additional Information
+Additional
+Infomation
+Management Report
+Consolidated Financial
+Statements IFRS
+Combined
+Stakeholders
+Further Information on Economic,
+Environmental, and Social Performance
+Five-Year Summary
+Publication Details
+Financial Calendar and Addresses
+Financial and Sustainability Publications.
+250
+.254
+266
+267
+To Our
+268
+249
+Glossary...
+Assurance Report of the Independent Auditor on Selected Qualitative and Quantitative Sustainability Disclosures
+This report is issued for purposes of the Executive Board of SAP
+SE, Walldorf, only. We assume no responsibility with regard to any
+third parties.
+ppa. Dollhofer
+In addition, we conducted the following procedures to obtain
+reasonable assurance:
+Reviewing the consistency of GRI Standard's in accordance with
+'Core Option' as declared by SAP with sustainability
+performance information presented in the online Integrated
+Report.
+An evaluation of the design, existence, and testing of the
+operation of the systems and methods used to collect and
+process data reported for Business Health Culture Index,
+Employee Engagement, Employee Retention, Women in
+Management, Customer Net Promoter Score, Greenhouse Gas
+Footprint (Scope 1 and 2 as well as selected Scope 3 emissions
+including business flights and employee commuting),
+Renewable Energy, Total Energy Consumed, including the
+aggregation of the data into the information as presented on the
+online Integrated Report.
+Auditing the 2018 data using internal and external
+documentation in order to determine in detail whether the data
+correspond to the information in the relevant underlying
+sources, and whether all the relevant information contained in
+such underlying sources has been included in SAP's online
+Integrated Report.
+Conducting site visits to Walldorf, St. Leon Rot (both Germany)
+and Shanghai (China) to assess the quality of information
+management systems and the reliability of the data as reported
+to corporate level.
+Conclusions
+Based on the procedures performed and evidence received to
+obtain reasonable assurance, the selected quantitative
+sustainability indicators Business Health Culture Index, Employee
+Engagement, Employee Retention, Women in Management,
+Greenhouse Gas Emissions (Scope 1 and 2 as well as selected
+Scope 3 emissions including business flights and employee
+commuting), Renewable Energy, Total Energy Consumed, and
+Customer Net Promoter Score, published in the SAP Integrated
+Report 2018, including the explanatory notes supplementing these
+indicators, are, in all material respects, presented in accordance
+with the Reporting Criteria.
+Based on the procedures performed and evidence received to
+obtain limited assurance, nothing has come to our attention that
+causes us to believe that the selected qualitative and quantitative
+sustainability disclosures on Sustainability Management and
+Policies, Sustainable Procurement, Public Policy, Human Rights,
+Employees and Social Investment, Energy and Emissions (including
+selected Greenhouse Gas Protocol Scope 3 Emissions), Waste and
+Water, GRI Index/UN Global Compact, About This Report,
+Materiality, and Stakeholder Engagement as well as for the other
+qualitative and quantitative sustainability disclosures in relation to
+these aspects, published in the SAP Integrated Report 2018, are, in
+all material respects, not prepared in accordance with the
+Reporting Criteria.
+Restriction of Use / Clause on General
+Engagement Terms
+Our assignment for the Executive Board of SAP SE, Walldorf,
+and professional liability is governed by the General Engagement
+Terms for Wirtschaftsprüfer and
+Wirtschaftsprüfungsgesellschaften (Allgemeine
+Auftragsbedingungen für Wirtschaftsprüfer und
+Wirtschaftsprüfungsgesellschaften) in the version dated January 1,
+2017
+(https://www.kpmg.de/bescheinigungen/lib/aab_english.pdf).
+By reading and using the information contained in this report,
+each recipient confirms notice of provisions of the General
+Engagement Terms (including the limitation of our liability for
+negligence to EUR 4 million as stipulated in No. 9) and accepts the
+validity of the General Engagement Terms with respect to us.
+Munich, February 20, 2019
+KPMG AG Wirtschaftsprüfungsgesellschaft
+Hell
+248
+To Our
+Stakeholders
+0
+Management Report
+Cloud subscriptions and support (non-IFRS)
+5,027
+3,771
+2,995
+2.296
+1,101
+Software licenses (IFRS)
+4,647
+4,872
+4,859
+4,835
+4,399
+Non-IFRS adjustments
+0
+0
+2
+1
+Software licenses (non-IFRS)
+4,647
+14
+Combined
+10
+2
+Consolidated Financial
+Statements IFRS
+Five-Year Summary¹)
+€ millions, unless otherwise stated
+Revenues
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+2018
+2017
+2016
+2015
+2014
+Cloud subscriptions and support (IFRS)
+4,993
+3,769
+2,993
+2,286
+1,087
+Non-IFRS adjustments
+33
+2
+Interviews with relevant staff at corporate level responsible for
+providing the data, carrying out internal control procedures and
+consolidating the data, including the 'Non-Financial Notes'.
+Evaluating internal and external documentation to determine
+whether selected qualitative claims and quantitative indicators
+on sustainability performance are supported by sufficient
+evidence.
+The International Integrated Reporting (<IR>) Framework
+launched by the International Integrated Reporting Council in
+December 2013 has a provision that an integrated report should
+include a statement in which management acknowledges its
+responsibility for the report. Our respective statement for 2018 is
+as follows:
+Evaluation of the design and implementation of the systems and
+processes for the collection, processing and control of the data
+on sustainability performance indicators, including the
+Governance
+Content
+SAP's governance of climate-related risks and opportunities.
+Chapter
+Energy & Emissions
+Strategy
+Actual and potential impacts of climate-related risks and opportunities on SAP's
+businesses, strategy, and financial planning where such information is material.
+Risk Management
+How does SAP identify, assess, and manage climate-related risks?
+Risk Management & Risks;
+Strategy & Business Model;
+Energy & Emissions
+Risk Management & Risks
+Metrics and Targets
+Metrics and targets that SAP uses to assess and manage relevant climate-related risks
+and opportunities where such information is material.
+Energy & Emissions;
+Risk Management & Risks;
+Chart Generator
+Task Force on Climate-Related Financial Disclosure (TCFD)
+245
+To Our
+Stakeholders
+Combined
+Management Report
+Area
+Consolidated Financial
+Statements IFRS
+The TCFD recommends companies to disclose their climate-related financial risks to investors, lenders, insurers, and other stakeholders. In
+2018, SAP started to report in alignment with the TCFD recommendations. For more information, see the table below.
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+4,872
+Omissions
+Boundaries
+Sustainable
+Development Goal
+UN Global Compact
+Principles
+External parties
+1 to 17
+SAP + external
+parties
+244
+GRI Index and UN Global Compact Communication on Progress
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Task Force on Climate-Related
+Financial Disclosure (TCFD)
+consolidation of the data.
+Further Information on Economic,
+Environmental, and Social Performance
+Management's Acknowledgement of
+the SAP Integrated Report 2018
+Our audit firm applies the national statutory provisions and
+professional pronouncements for quality assurance, in particular
+the Professional Code for German Public Auditors and Chartered
+Accountants (in Germany) and the quality assurance standard of
+the German Institute of Public Auditors (Institut der
+Wirtschaftsprüfer, IDW) regarding quality assurance requirements
+in audit practice (IDW QS 1).
+Practitioner's Responsibility
+Our responsibility is to express a conclusion based on our work
+performed and the evidence obtained on the qualitative and
+quantitative sustainability disclosures described above.
+We conducted our work in accordance with the International
+Standard on Assurance Engagements (ISAE) 3000 (Revised):
+"Assurance Engagements other than Audits or Reviews of
+Historical Financial Information" of the International Auditing and
+Assurance Standards Board (IAASB). This standards require that
+we comply with our professional duties and plan and perform the
+assurance engagement to obtain a reasonable level of assurance to
+conclude that the above mentioned selected quantitative
+sustainability indicators are prepared, in all material respects, in
+accordance with the aforementioned Reporting Criteria; and
+respectively to obtain limited assurance whether any matters have
+come to our attention that cause us to believe that the selected
+qualitative and quantitative sustainability disclosures of the entity
+have not been prepared, in all material respects, in accordance with
+the Reporting Criteria. We do not, however, provide a separate
+conclusion for each disclosure. In a limited assurance engagement
+the evidence gathering procedures are more limited than in a
+reasonable assurance engagement and therefore less assurance is
+obtained than in a reasonable assurance engagement. The choice
+of audit procedures is subject to the auditor's own judgement.
+Within the scope of our engagement, we performed amongst
+others the following procedures when conducting the limited
+assurance:
+-
+An evaluation of the process for determining material aspects
+and respective boundaries, including results of SAP's
+stakeholder engagement.
+A risk analysis, including a media search, to identify relevant
+sustainability aspects for SAP in the reporting period.
+Assurance Report of the Independent Auditor on Selected Qualitative and Quantitative Sustainability Disclosures
+247
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+-
+-
+Interviewing management at corporate level responsible for
+sustainability performance goal setting and monitoring process.
+Reviewing the suitability of the internally developed reporting
+criteria.
+We are independent from the entity in accordance with the
+requirements of independence and quality assurance set out in
+legal provisions and professional pronouncements and have
+fulfilled our additional professional obligations in accordance with
+these requirements.
+Additional
+Infomation
+Independence and Quality Assurance on
+the Part of the Auditing Firm
+The legal representatives of SAP are responsible for the
+preparation of the Report in accordance with the Reporting Criteria.
+SAP applies the principles and standard disclosures of the
+Sustainability Reporting Standards of the Global Reporting
+Initiative (GRI) in combination with the Corporate Accounting and
+Reporting Standard (Scope 1 and 2) and the Corporate Value Chain
+(Scope 3) Standard of the World Resources Institute / World
+Business Council for Sustainable Development, as well as internally
+developed definitions, as described in the 'Non-Financial Notes:
+Social Performance' and the 'Non-Financial Notes: Environmental
+Performance' as Reporting Criteria.
+The Executive Board is aware of its responsibility to ensure the
+integrity of the SAP Integrated Report 2018. The members of the
+Executive Board have applied their collective mind to the
+preparation and presentation of our integrated report.
+Similar to previous reports, we have applied the Guiding
+Principles of the <IR> Framework, but we also must ensure our
+compliance with legal requirements, such as the provisions
+regarding financial reporting in the German Commercial Code as
+set out in detail in the German Accounting Standard 20 Group
+Management Report, while balancing other reporting standards
+such as the GRI Standards of the Global Sustainability Standards
+Board, with the <IR> Framework.
+Our Executive Board has reviewed the SAP Integrated Report
+2018, including the consolidated financial statements, the
+combined management report, and the further information on
+economic, environmental, and social performance.
+Our Executive Board believes that the integrated report is
+presented in accordance with the <IR> Framework as far as
+possible given the aforementioned restrictions. Should the
+aforementioned restrictions ever cease to apply, we will continue to
+strive for further alignment with the <IR> Framework in future
+reports.
+246
+Management's Acknowledgement of the SAP Integrated Report 2018
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Assurance Report of the Independent
+Auditor on Selected Qualitative and
+Quantitative Sustainability Disclosures
+To the Executive Board of SAP SE, Walldorf
+We have performed an independent assurance engagement on
+selected qualitative and quantitative sustainability disclosures
+included in the Integrated Report 2018 (further: the "Report") of
+SAP SE, Walldorf (further "SAP"), published under
+https://www.sap.com/integrated-reports/2018/en.html.
+For the quantitative sustainability indicators Business Health
+Culture Index, Employee Engagement, Employee Retention,
+Women in Management, Greenhouse Gas Emissions (Scope 1 and 2
+as well as selected Scope 3 emissions including business flights
+and employee commuting), Renewable Energy, Total Energy
+Consumed, and Customer Net Promoter Score including the
+explanatory notes supplementing these indicators, a reasonable
+assurance engagement was performed.
+For the selected qualitative and quantitative sustainability
+disclosures on Sustainability Management and Policies,
+Sustainable Procurement, Public Policy, Human Rights, Employees
+and Social Investment, Energy and Emissions (including selected
+Greenhouse Gas Protocol Scope 3 Emissions), Waste and Water,
+GRI Index/UN Global Compact, About This Report, Materiality, and
+Stakeholder Engagement as well as for the other qualitative and
+quantitative sustainability disclosures in relation to these aspects, a
+limited assurance engagement was performed.
+Management's Responsibility
+This responsibility of the legal representatives includes the
+selection and application of appropriate methods to prepare the
+Report and the use of assumptions and estimates for individual
+qualitative and quantitative sustainability disclosures, which are
+reasonable under the circumstances. Furthermore, this
+responsibility includes designing, implementing and maintaining
+systems and processes relevant for the preparation of the Report
+in a way that is free of - intended or unintended - material
+misstatements.
+4,861
+Cost of software licenses and support (non-IFRS)
+4,399
+-7,462
+494
+-7,051
+589
+Total cost of revenue (non-IFRS)
+-6,969
+-6,462
+-2,976
+-6,583
+598
+-5,985
+-3,313
+516
+-2,797
+-2,932
+167
+-2,765
+-6,245
+683
+-5,562
+-2,557
+346
+-2,211
+-2,426
+122
+-2,304
+-4,983
+467
+-4,515
+Research and development (IFRS)
+-3,624
+-3,352
+-3,044
+113
+-2,845
+485
+-3,010
+-3,089
+151
+-3,151
+283
+-2,008
+258
+-1,818
+Cost of cloud and software (IFRS)
+-4,160
+-3,893
+-3,495
+Non-IFRS adjustments
+343
+423
+Cost of cloud and software (non-IFRS)
+-3,817
+-3,471
+Cost of services (IFRS)
+Non-IFRS adjustments
+Cost of services (non-IFRS)
+Total cost of revenue (IFRS)
+Non-IFRS adjustments
+-3,302
+-3,158
+166
+-2,991
+238
+-1,944
+-2,331
+14.7
+-1,272
+-1,268
+-1,289
+-1,010
+Profits and Margins
+Cloud subscriptions and support margin (in % of corresponding revenue, IFRS)
+Cloud subscriptions and support margin (in % of corresponding revenue, non-IFRS)
+58.6
+56.0
+56.1
+55.3
+55.8
+63.1
+62.2
+64.4
+65.6
+64.3
+Five-Year Summary
+250
+Employees and Social Investments
+-1,362
+Research and development (in % of total revenue, IFRS)
+Depreciation and amortization (IFRS)
+-1,048
+14.3
+13.8
+Research and development (in % of total operating expenses, IFRS)
+19.1
+18.0
+18.0
+13.7
+17.2
+13.3
+17.6
+Sales and marketing (IFRS)
+-6,781
+-6,924
+-6,265
+-5,782
+-4,593
+General and administration (IFRS)
+-1,098
+-1,075
+-1,005
+-892
+4,836
+190
+-2,044
+130
+19,549
+18,424
+17,214
+14,315
+33
+3
+3
+11
+19
+Total revenue (IFRS)
+20,655
+4,086
+24,708
+19,552
+18,427
+17,226
+14,334
+3,912
+3,639
+3,579
+23,461
+20,622
+22,062
+8,834
+10,572
+Software support (IFRS)
+Non-IFRS adjustments
+Software support (non-IFRS)
+Cloud and software (IFRS)
+Non-IFRS adjustments
+Cloud and software (non-IFRS)
+Services (IFRS = non-IFRS)
+10,981
+10,908
+10,571
+10,093
+8,829
+0
+0
+1
+0
+5
+10,982
+10,908
+10,094
+-1,962
+20,793
+Non-IFRS adjustments
+Operating expenses
+Cost of cloud subscriptions and support (IFRS)
+-2,068
+Non-IFRS adjustments
+213
+Cost of cloud subscriptions and support (non-IFRS)
+-1,855
+-1,660
+233
+-1,427
+Cost of software licenses and support (IFRS)
+-2.092
+-2,234
+-1,313
+247
+-1.066
+-2,182
+-1,022
+232
+-789
+-481
+88
+-393
+-2,291
+-2,076
+Non-IFRS adjustments
+Share of predictable revenue (non-IFRS, in %)
+3,245
+17,560
+Share of predictable revenue (IFRS, in %)
+60
+Total revenue (non-IFRS)
+33
+3
+5
+11
+19
+24,741
+23,464
+22,067
+20,805
+17,580
+65
+63
+61
+60
+56
+65
+63
+61
+57
+Strategy and Business Model;
+Our Contribution to the UN SDGS
+404-3
+Social Investments
+Non-Financial Notes
+305-1
+Energy and Emissions;
+SAP
+3, 12, 13, 14, 15
+7,8
+8
+Non-Financial Notes;
+305-2
+Energy and Emissions;
+SAP
+3, 12, 13, 14, 15
+7.8
+Non-Financial Notes;
+Chart Generator
+Chart Generator
+305-3
+7.8.13
+Energy and Emissions;
+7,8
+302-2
+302-3
+Non-Financial Notes;
+Chart Generator
+Energy and Emissions;
+Non-Financial Notes
+Energy and Emissions;
+Non-Financial Notes;
+Chart Generator;
+SAP
+The ratio uses only energy
+consumption within the
+7, 8, 12, 13
+7,8
+7, 8, 12, 13
+8
+organization.
+302-4
+SAP + external
+parties
+SAP
+7, 8, 12, 13
+Energy and Emissions;
+3, 12, 13, 14, 15
+Approach (DMA) and
+Indicators
+305-4
+Chart Generator;
+Non-Financial Notes
+305-5
+305-6
+UN Global Compact
+Principles
+Energy and Emissions;
+DMA
+Growth and
+Profitability
+Sustainability Management and
+Policies;
+Expected Developments and
+Opportunities;
+Report by the Supervisory Board
+Non-Financial Notes;
+Chart Generator
+External parties
+Sustainable
+Development Goal
+Boundaries
+7.8
+Non-Financial Notes;
+Chart Generator
+GRI Index and UN Global Compact Communication on Progress
+241
+To Our
+Combined
+Management
+Stakeholders
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Disclosures on
+Links and Content
+Omissions
+Management Report
+We are working on understanding
+the impact our solutions have on
+our customers' success, and we
+document this impact in case
+studies.
+SAP
+302-1
+102-52
+102-53
+Annual Reporting Cycle
+Investor Services
+102-54
+102-55
+February 28, 2018
+GRI Content Index
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Independent Assurance Report;
+Management's Acknowledgement of the SAP Integrated Report 2018;
+About This Report
+Materiality;
+102-56
+103-1
+102-51
+102-50
+Links and Content
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+About This Report
+102-48
+General Standard
+Disclosures
+102-47
+Links and Content
+Materiality
+Non-Financial Notes
+Non-Financial Notes
+102-49
+Energy and Emissions;
+GRI Content Index;
+103-3
+SAP
+16
+10
+Risk Management and Risks
+206-1
+Other Litigation, Claims, and Legal
+Contingencies
+205-1
+SAP
+415-1
+Public Policy
+16
+10
+DMA
+Energy and Emissions
+16
+103-2
+Business Conduct;
+Business Conduct
+Non-Financial Notes
+Sustainability Management and Policies
+Sustainability Management and Policies
+Disclosures on
+Links and Content
+Management
+10
+Approach (DMA) and
+Omissions
+Boundaries
+Sustainable
+Development Goal
+UN Global Compact
+Principles
+UN Global Compact
+Principles
+DMA
+Indicators
+SAP does not conduct community
+assessment programs.
+About This Report
+The emission of ozone-
+depleting substances
+(ODS) is not material to
+us as a software
+408-1
+Human Rights and Labor
+Standards
+407-1
+Security and Privacy
+418-1
+Security and Privacy;
+Human Rights and Labor
+Standards
+DMA
+Development, and Services
+Products, Research &
+R&D and Local
+Innovation
+for SAP.
+proprietary information
+5,8,10
+SAP
+Employees and Social Investments The split by gender is
+8
+SAP
+Employees and Social Investments Training hours split by
+Employees and Social Investments.
+For continued employability issues
+and managing career endings, SAP
+has dedicated staff to support
+generational intelligence. These
+experts work on continuously
+improving processes and designing
+programs for sustaining
+employability as long as possible;
+providing training for cross-
+generation collaboration; managing
+career endings in a flexible way (for
+example, part-time options); and
+keeping employees connected with
+the company after retirement. SAP
+also participates in external
+research studies and networks on
+workforce demographics to share
+and learn about best practices in
+this field.
+gender and employee
+category are not a
+409-1
+material issue for SAP
+as we align our training
+activities according to
+the needs of each
+employee and do not
+tolerate discrimination.
+Additional
+Infomation
+Boundaries
+Sustainable
+Development Goal
+UN Global Compact
+Principles
+SAP
+4, 5, 8, 10
+Further Information on Economic,
+Environmental, and Social Performance
+DMA
+We are not aware of any operations
+or suppliers in which the right to
+5
+8
+4
+243
+To Our
+Combined
+8, 16
+Stakeholders
+Consolidated Financial
+Statements IFRS
+Disclosures on
+Management
+Approach (DMA) and
+Indicators
+Financial Performance: Review and
+Analysis
+UN Sustainable
+Development Goals
+Management Report
+404-2
+SAP
+8
+exercise freedom of association
+and collective bargaining may be at
+significant risk.
+Human Rights and Labor
+Standards
+We are not aware of any operations
+or suppliers as having significant
+risk for incidents of child labor.
+Human Rights and Labor
+Standards
+We are not aware of any operations
+or suppliers as having significant
+risk for incidents of forced or
+compulsory labor.
+3
+Sustainability Management and
+Policies
+SAP
+8,16
+SAP + external
+16
+parties
+SAP
+00
+GRI Index and UN Global Compact Communication on Progress
+404-1
+SAP
+Omissions
+1,3,8
+9
+1,2,6
+SAP
+Business Health
+Employees and Social Investments Injuries, diseases, lost
+External parties
+SAP
+Culture Index
+days, or absenteeism
+are not a material issue
+for SAP as we track our
+Business Health Culture
+Index on a global basis.
+Leadership
+Employees and Social Investments
+SAP
+403-1
+3
+Workers representation
+3, 12, 13
+Employees and Social Investments
+13, 14, 15
+Indicators
+SAP + external
+parties
+8
+SAP + external
+parties
+13, 14, 15
+Employee Engagement Employees and Social Investments
+8,9
+203-1
+investments is not
+material for SAP.
+203-2
+Strategy and Business Model;
+http://www.sap.com/purpose
+DMA
+Sustainability Management and
+Policies;
+SAP
+SAP
+The amount of these
+in formal joint
+SAP
+5,8
+6
+6
+GRI Index and UN Global Compact Communication on Progress
+To Our
+3,8
+Combined
+Consolidated Financial
+Statements IFRS
+Disclosures on
+Approach (DMA) and
+8
+Links and Content
+Management
+Management Report
+to their work within SAP.
+Stakeholders
+committees are not a
+material topic to SAP, as
+there are no workers
+403-3
+with a high incidence or
+high risk of diseases due
+DMA
+There are no workers with a high
+incidence or high risk of diseases
+due to their work within SAP.
+Corporate Governance Statement;
+en/investors/governance/executiv
+e-board.html;
+https://www.sap.com/corporate/
+405-1
+health and safety
+242
+Sustainability Management and
+management-worker
+Chart Generator
+Policies
+25.7
+Women in management" (total, in % of total number of employees)
+31
+63
+33
+25.4
+33
+57
+Women working at SAP (in %)
+31
+32
+21.7
+23.6
+21.3
+Women managing managers6). 7) (in %)
+21.1
+20.8
+19.2
+15.9
+Women managing teams 6.7) (in %)
+64
+27.5
+26.8
+25.3
+25.9
+24.5
+56
+7,877
+Operating profit per employee (in € thousands)
+2015
+2014
+23.3
+2016
+Number of employees in research and development 5). 7)
+27,060
+24,872
+23,363
+20.938
+18,908
+Personnel expenses
+11,595
+11,643
+10,229
+10,170
+Personnel expenses - excluding share-based payments
+10.765
+10,523
+9,444
+9,446
+7.587
+Personnel expenses per employee - excluding share-based payments (in €
+thousands)
+115
+121
+117
+126
+111
+61
+Employee Engagement Index (in %)
+-5.0
+85
+19.2
+22.4
+19.1
+Net Greenhouse gas emissions (in kilotons)
+310
+325
+380
+455
+500
+Greenhouse gas emissions per employee 5) (in tons)
+3,3
+3.8
+17.8
+4.7
+7.3
+Greenhouse gas emissions per € revenue (in grams)
+12,6
+13.9
+17.3
+21.9
+28.4
+Total energy consumption (in GWh)
+919
+2017
+920
+950
+6.0
+Environment
+Customer Net Promoter Score⁹) (in %)
+Customer
+85
+82
+79
+Business Health Culture Index 10) (BHCI, in %)
+78
+79
+78
+75
+72
+Leadership Trust Index (LTI, in %)
+60
+61
+57
+52
+47
+Employee retention (in %)
+Total turnover rate (in %)
+93.9
+94.6
+93.7
+91.8
+93.5
+8
+8
+8
+11
+9
+84
+2018
+1,378
+Additional
+Infomation
+4.43
+3.77
+3.77
+3.50
+Earnings per share, diluted (in €)
+3.42
+3.35
+3.04
+2.56
+2.74
+Dividend per share³) (in €)
+1.50
+4.35
+1.40
+1.15
+1.10
+Total dividend distributed³)
+1,790
+1,671
+1,498
+1,315
+Total dividend distributed in % of profit after tax³)
+44
+41
+41
+45
+1.25
+Earnings per share, basic (non-IFRS, in €)
+2.75
+2.56
+60
+965
+56
+51
+Debt ratio (total liabilities²) in % of total assets)
+44
+40
+40
+44
+49
+Investments in goodwill, intangible assets or property, plant, and equipment
+(including capitalizations due to acquisitions)
+3,715
+1.630
+1,145
+676
+8,636
+Key SAP Stock Facts
+Issued shares" (in millions)
+1,229
+1,229
+1,229
+1,229
+1.229
+Earnings per share, basic (in €)
+3.42
+3.35
+3.04
+40
+€ millions, unless otherwise stated
+SAP share price) (in €)
+93.45
+14.0
+13.9
+Return on SAP shares) 10-year investment period (in %)
+13.2
+10.2
+9.2
+6.7
+7.4
+Employees and personnel expenses
+Number of employees 5). 7)
+Number of employees, annual average 5)
+96,498
+17.3
+93,709
+84,183
+80,609
+76,986
+75,180
+74,406
+68,343
+252
+Five-Year Summary
+To Our
+Combined
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+88,543
+86,999
+9.0
+6.9
+Return on SAP shares) 5-year investment period (in %)
+82.81
+73.38
+58.26
+SAP share price - peak (in €)
+108.02
+100.35
+82.81
+74.85
+62.55
+SAP share price - low (in €)
+82.47
+82.43
+64.90
+54.53
+50.90
+Market capitalization" (in € billions)
+106.80
+114.80
+101.73
+90.18
+71.60
+Return on SAP shares) 1-year investment period (in %)
+-7.0
+12.8
+14.7
+25.9
+-4.8
+86.93
+920
+Leadership Trust Score - Based on the Net Promoter Score
+(NPS) methodology that results from a question in our annual
+global employee survey that gauges employees' trust in our
+leaders. It measures our collective effort to foster a work
+environment based on trust. We use this score to further enhance
+accountability for our leaders and executive management.
+9,800
+private edition - See "single tenant edition."
+private option - See "single tenant edition."
+Processes Simplification Score - Measure from our yearly
+employee survey that focuses on how internal and external
+processes are perceived by our employees.
+product footprint - Environmental impact of products,
+processes, or services by production, usage, and disposal.
+project "Kyma" - Offering in prototype phase for the
+development and provisioning of microservices for the solutions
+within the SAP Customer Experience portfolio. See "SAP Customer
+Experience."
+public cloud - Cloud deployment that provides consumers
+access to a provider's software applications running in a cloud
+infrastructure. The resources are located on the premises of the
+cloud provider, not of the customer, and are shared by multiple
+customers accessing them through the Internet.
+Q
+Qualtrics International – In December 2018, SAP announced
+the intention to acquire Qualtrics, the global pioneer of experience
+management (XM) software. The company, with headquarters in
+Glossary
+Glossary
+60
+260
+SAP Digital Supply Chain - New portfolio offering enterprises
+an integrated suite of digital supply chain solutions to plan, design,
+manufacture, deliver, and operate their products. With these
+solutions, customers can blend the physical and the digital world
+throughout the complete supply chain - from design, planning, and
+manufacturing to logistics and ongoing maintenance - embedding
+intelligence and ensuring their customers are central to every
+phase of their business. Customers get total visibility as products
+are designed, delivered, and deployed by connecting their business
+processes with real-time data from assets, equipment, customers,
+and suppliers. This visibility is used to adequately anticipate and
+respond to real-world physical realities. Note that SAP Leonardo
+Internet of Things (IoT) and related IoT offerings are no longer part
+SAP Digital Business Services - Name of the service and
+support organization at SAP that provides a new approach to
+helping customers accelerate their digital transformation and
+business innovation. It is also the name of the service and support
+portfolio that helps customers maximize the value of their SAP
+implementations including the New SAP MaxAttention, SAP
+Enterprise Support, and other support offerings to enable an
+intelligent enterprise. The people, processes, and tools help
+customers of SAP Digital Business Services achieve digital
+transformation, enabling them to produce exceptional business
+outcomes. In 2018, SAP continued the process to simplify our
+services portfolio, creating three categories - continuous success,
+premium success, and project success - and expanded the range
+of intelligent tools designed to underpin service and support
+offerings.
+platform as a service (PaaS) - Cloud infrastructure, operating
+system, programming languages, libraries, services, tools and
+typically a defined level of support for consumers to deploy
+consumer-created or acquired applications. PaaS consumers do
+not manage underlying cloud infrastructure but have control over
+deployed applications. SAP Cloud Platform is the PaaS offering
+from SAP. See "SAP Cloud Platform."
+SAP Design Thinking - Methodology for routine innovation that
+brings together the right side of the brain (creative) with the left
+side of the brain (analytical). SAP Design Thinking workshops are a
+key differentiator for deployment of the SAP Leonardo digital
+innovation system.
+SAP Data Hub - Data operations management solution that
+enables data orchestration, pipelining, and governance as well as
+agile sharing of all data across a connected data landscape. This
+solution runs in the cloud. This solution enables businesses to
+manage data from numerous sources - SAP or third party -
+without having to centralize data into one location. SAP Data Hub
+allows data to be processed "in flow," for example, while data is
+being recorded to the data store, or being prepared for use in
+machine learning. It also provides enterprise data governance to
+see who changed or accessed the data. The solution lets
+companies safely and effectively move and share their data to
+enable agile data operations across the enterprise.
+modern engineering predicated on keeping customer data safe.
+SAP data centers are currently located in Australia, Brazil, China,
+Europe, and on the U.S. east coast.
+SAP data center - Physical facilities around the world used to
+house computer systems and associated components and meet
+the highest security standards. Comprised of various
+interconnected elements, the entire infrastructure is a feat of
+SAP Database and Data Management - See "SAP HANA Data
+Management Suite."
+SAP Customer Experience LIVE - Annual series of events that
+help SAP customers network, discover new solutions, and improve
+their overall customer experience. It is co-located with SAPPHIRE
+NOW in Orlando, Florida (USA), in 2019.
+SAP Customer Experience Labs - Physical locations that
+showcase futuristic prototypes and innovations that demonstrate
+the potential of SAP Customer Experience offerings.
+SAP Customer Experience - Extensible portfolio of customer
+experience solutions that speaks directly to the business benefits
+we seek to deliver to our C-suite audiences and shows category of
+solutions has evolved from traditional customer relationship
+management (CRM) to greater customer centricity. Launched at
+SAPPHIRE NOW in 2018, this portfolio brings together our SAP
+Hybris, CallidusCloud, Gigya, and Coresystems solutions under one
+umbrella, SAP C/4HANA is the name of the unified, front-office
+suite of customer experience solutions for LoBs that is the basis for
+this portfolio. See "SAP C/4HANA."
+SAP Customer Data Cloud - One of the five solution categories
+within the SAP Customer Experience portfolio and in the SAP
+C/4HANA suite. It encompasses all products across the customer
+experience that enable the collection, transparency, and
+harnessing of customer information. Individual offerings within this
+portfolio include solutions from acquired company Gigya, renamed
+SAP Customer Consent, SAP Customer Identity, and SAP
+Customer Profile. See "Gigya" and "SAP C/4HANA."
+SAP Custom Development - See "SAP Innovative Business
+Solutions."
+SAP CPQ Cloud solution that enables customers, channel
+partners, and sales teams to configure and price products
+accurately and efficiently. Rename of the CallidusCloud CPQ
+offering as a result of the acquisition of Callidus Software. See
+"Callidus Software."
+-
+SAP CoPilot - Digital assistant that runs on top of other SAP
+applications to enable productivity tasks such as real-time
+information exchange, note-taking, creation of reminders, and
+creation of draft objects that can be completed later. SAP CoPilot
+contextualizes, analyzes, and uses informal and unstructured
+speech to execute actions and present users with business objects,
+options, and other relevant data in a simple and conversational
+way.
+SAP Data Network - Cloud-based platform of networked
+business data that enables users to analyze and gain insight into
+their own business data, benchmark themselves against their
+industry competition, and enrich, distribute, and ultimately
+monetize their own data assets.
+SAP Conversational Al Foundation - Technical basis for
+building conversational applications using state-of-the-art natural
+language processing (NLP) and machine learning algorithms. You
+can use SAP CoPilot, a digital assistant for the enterprise, to
+expose the apps or use standard channels such as Slack, Microsoft
+Teams, or Facebook Messenger. See "SAP CoPilot."
+People Survey - SAP's annual employee survey that allows
+employees to provide feedback about issues that impact them.
+People Weeks - In 2018, SAP again sponsored a global event
+designed to expose employees to trending topics and cultivate
+greater connections across cultures. With the motto "Thrive in the
+Intelligent Enterprise," People Weeks 2018 reached 30,470
+participants worldwide through global sessions and local activities
+in 57 countries.
+Own SAP - Share purchase plan for SAP employees. In 2018,
+66% of our employees participated in Own SAP, purchasing a total
+of 5.2 million of shares.
+Innovation Score - Measure from our yearly employee survey
+that focuses on how the Innovation culture at SAP is perceived by
+our employees.
+Intelligent Enterprise - SAP's concept of an event-driven, real-
+time business powered by intelligent applications and platforms.
+Enterprise data is at the core of a cycle whereby proprietary data
+assets from internal systems of record are combined with real-
+time, external data feeds to train intelligent algorithms. By
+embedding intelligence in core processes, businesses of all sizes
+will benefit from the automation of routine tasks and improved
+decision-making driven by advanced analytics.
+intelligent suite - The intelligent suite is a fully unified, but still
+modular, sum of all SAP applications, enabling seamless cross-
+application business processes delivered through consistent and
+personalized user experiences. Built on a uniform data model and a
+central data storage, the intelligent suite allows you to leverage the
+possibilities of embedded artificial intelligence and machine
+learning. See "Intelligent Enterprise."
+intelligent technologies - Intelligent technologies that scale
+innovation in the intelligent suite. These technologies, including
+machine learning, IoT, and analytics capabilities from SAP
+Leonardo will be embedded in SAP applications. To let our
+customers and partners apply these technologies equally for
+innovation, they will be readily accessible through SAP Cloud
+Platform as managed and reusable services. See "Intelligent
+Enterprise" and "SAP Leonardo."
+256
+Glossary
+To Our
+Combined
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+P
+Additional
+Infomation
+key performance indicator (KPI) - Performance figure for
+which threshold values are defined and against which validation is
+executed.
+Klaus Tschira Innovation Award - Award that honors SAP
+partners and customers that have contributed a unique and
+innovative solution in the field of human resources, named in honor
+of one of the original founders of SAP.
+L
+Learning for Life - Program for all skill building initiatives from
+the Corporate Social Responsibility (CSR) team at SAP. This
+program helps support future workforce needs, reskilling efforts,
+and underserved people in the education/tech space including:
+women and those from culturally diverse backgrounds. Examples
+of existing initiatives are SAP Women Forward; Autism at Work;
+and SAP Skills for Africa.
+line of business (LoB) - Internal organizational area or
+business unit in a company (division) that combines all
+responsibilities for a product, group, or set of processes, such as
+sales, purchasing, human resources, finance, marketing, and so on.
+SAP organizes its functional areas currently into 12 LoBs: asset
+management, commerce, finance, human resources,
+manufacturing, marketing, R&D/engineering, sales, service,
+sourcing and procurement, supply chain management, and
+sustainability.
+M
+machine learning - Technology that teaches computers how to
+perform tasks by learning from data - instead of being explicitly
+programmed. It uses sophisticated algorithms to "learn" from
+massive volumes of Big Data. Machine learning describes
+algorithms that learn from data and support employees to focus on
+higher value work, thus empowering enterprises to scale innovative
+solutions and make their organization intelligent. See "SAP
+Leonardo Machine Learning."
+managed cloud - Deployment model that implies resources are
+dedicated to one customer and accessed through a VPN. The
+infrastructure is owned, managed, and operated by the cloud
+provider in the cloud provider's data center. SAP HANA Enterprise
+Cloud is SAP's managed cloud service. See "SAP HANA Enterprise
+Cloud."
+Open Data Initiative - Partnership initiative established in 2018
+(www.sap.com/about/announcement/open-data-initiative.html),
+between SAP, Microsoft, and Adobe. the goal of which is to meet a
+core need - to unlock a single view of our customers by bringing
+siloed data together. A shared vision for the secure exchange of
+data across systems is the basis for this initiative. Customers can
+then enable artificial intelligence-driven business processes to
+determine compelling insights and intelligence from their now-
+unified landscape, build trust by incorporating consumer consent,
+and preferences around data rights and usage.
+Open Industry 4.0 Alliance - Collaborative initiative between
+manufacturers and other asset providers as well as original
+equipment manufacturers (OEMs) to digitally transform industrial
+processes and interoperability. Manufacturers can assist operators
+in bringing intelligent Industry 4.0 products online quickly through a
+standard open platform and support ongoing operations.
+Operators can accelerate deployment and onboarding of new or
+replacement machines and equipment at lower costs.
+open source - Software based on the concept of software
+developers coming together to build a virtual community and
+solving a common problem by developing working software that
+everyone has a right to change. Successful development projects
+under the open source model include Linux, a free operating
+system supported by SAP.
+K
+answering, sentiment analysis, and other high-order capabilities.
+Ready-to-use chat bots are also included. SAP Conversational Al
+provides a way to build bots that automate conversational
+interactions through natural language processing within SAP
+offerings in the SAP C/4HANA suite, for example. SAP customers
+and partners are also able to create their own custom bots with this
+service.
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+SAP Asset Intelligence Network - Cloud subscription-based
+network hosted by SAP where manufacturers, asset owners,
+operators, regulators, and service providers can connect to each
+other. Content related to assets can be shared and stored on the
+network, and maintenance and service applications can be
+delivered through the network.
+SAP Ariba - Portfolio that includes cloud solutions for
+procurement, financials, and sourcing and the signature Ariba
+Network. SAP Ariba solutions offer an online business-to-business
+marketplace connecting more than 3.6 million sellers in more than
+190 countries, with sellers realizing more than US$2.2 trillion in
+goods and services every year.
+SAP App Content Center - Online marketplace where
+customers can subscribe to or buy third-party data content and
+services for their applications without requiring additional
+development. Customers buy applications from SAP App Center
+and then within the application itself, they can access the content
+center to purchase additional application-specific content to
+enhance the application. See "SAP App Center."
+SAP App Center - One-stop shop (www.sapappcenter.com)
+where customers, partners, and developers can find, buy, and sell
+solutions developed on SAP HANA. It provides links to SAP Store,
+where transactions take place. Content is available from SAP App
+Content Center. Formerly called SAP HANA App Center. See "SAP
+App Content Center."
+SAP Analytics Cloud - Software as a service (SaaS) built
+natively on SAP Cloud Platform that allows organizations to close
+the gap between transactions, data preparation, analysis and
+action providing all analytics capabilities in one offering. SAP
+Analytics Cloud combines business intelligence (BI), planning, and
+predictive analytics as well as new capabilities such as simulation
+and automated discovery in BI, as well as storytelling and predicted
+forecasts in planning. The solution allows customers to take
+advantage of high-speed innovation in the cloud, while using their
+existing on-premise investments. Customers can subscribe to SAP
+Analytics Cloud as a single solution with specific capabilities that
+can be licensed separately or together. The SAP Digital
+Boardroom solution is based on SAP Analytics Cloud.
+SAP Analytics - Portfolio of solutions that help customers
+achieve the power of collective insight in Big Data by empowering
+them with the right information at the right time to make insightful
+business decisions, anticipate change, and uncover new
+opportunities. SAP Analytics solutions cover the areas of business
+intelligence, enterprise performance management, and
+governance, risk, and compliance. Formerly called analytics
+solutions from SAP.
+our ecosystem. In 2018, community members included 3,472
+former and 2,160 current SAP employees.
+SAP Alumni Network - Network and online community that
+provides a platform to reconnect with former colleagues and to
+unleash the power of a trusted network for the benefit of SAP and
+SAP Advanced Deployment - Service that simplifies and
+accelerates the deployment of SAP S/4HANA for SAP-led project
+implementation for planning, design, and execution services. Based
+on proven SAP Activate methodology and tailored to enterprise's
+specific transition scenario, the service streamlines the
+implementation or migration to a high-performing, sustainable
+digital core. This end-to-end service offering also contains a
+complete implementation including execution services for SAP
+S/4HANA software. It is offered in parallel to SAP Value Assurance
+service packages, which address partner-led projects. See "SAP
+Value Assurance."
+SAP ActiveAttention - Enhanced engagement services for
+optimizing solutions and accelerating adoption of technologies
+without disrupting customer businesses. It is a premium-level
+engagement similar to the New MaxAttention but designed to
+support smaller businesses requiring a less intense engagement
+level. Formerly called SAP ActiveEmbedded.
+SAP Activate - Innovation adoption framework introduced for
+SAP S/4HANA that combines SAP Best Practices, methodology,
+and guided configuration delivered with a reference landscape. The
+SAP Activate methodology is the SAP guidance for implementation,
+enhancements, upgrades, or co-innovation of SAP solutions
+starting with SAP S/4HANA. It enables cost-effective, agile, and
+fast delivery of the SAP solution to the customer and supports
+deployments in the cloud, on premise, or in hybrid deployment.
+S
+SAP Beyond - Customer advocacy program designed for and
+tailored to customers that have purchased SAP S/4HANA as the
+foundation for their business future. The program takes a unique
+and positive approach as it offers these valued customers a range
+of tools and resources to support them at every stage of the
+journey, from helping to engage fully with the broader SAP
+community to providing a variety of opportunities to share ideas
+and experiences.
+Resume Matching - Machine-learning powered service that
+automatically reads and ranks candidates based on role
+requirements, identifying best-fit candidates while increasing
+efficiency and speed to hire. See "machine learning" and "SAP
+Leonardo Machine Learning."
+renewable energy - Shares and types of electricity obtained
+from renewable sources such as hydro, wind, solar, geothermal,
+and biomass. It is calculated by adding the amount of renewable
+energy specifically sourced, produced on-site by our own solar cells
+and covered by Renewable Energy Certificates (RECs).
+Relief.iO - Program, under the business unit of the same name,
+provides targeted support and services, engagement opportunities,
+and capital through seed funding of selected development and
+business from areas across SAP. To organically drive
+breakthrough innovation in new markets, the program is currently
+investing in strategic areas that include, but are not limited to,
+security, digital intelligence, healthcare, and cloud APIs.
+R
+organizations use to collect, manage, and act on experience data.
+The Qualtrics XM Platform is a "system of action," used by teams,
+departments, and entire organizations to manage the four core
+experiences of business - customer, product, employee and brand
+- on one platform.
+Provo, Utah, and Seattle, Washington, serves more than 9,000
+enterprises worldwide with a technology platform that
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+257
+responsible growth - Economic growth that integrates with
+environmental responsibility and social equity.
+SAP Business One - ERP solution designed for small
+businesses with up to 100 employees, providing a single, integrated
+solution for managing the entire business across all functions. A
+258
+Glossary
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+259
+Glossary
+SAP Concur - Unified brand and portfolio of offerings for travel
+and expense management resulting from the acquisition of Concur
+Technologies in 2014. SAP Concur solutions provide an integrated
+system for expense, invoice, travel, and spend intelligence in the
+cloud. With close to 56 million users worldwide, SAP Concur is the
+world's leading travel and expense management software. These
+solutions help companies of all sizes and stages go beyond
+automation to a connected spend management system that
+encompasses travel, expense, invoice, compliance, and risk.
+SAP Conversational Al - Collection of natural language
+processing and bot building services that developers and
+corporations can use to build conversational interfaces or "chat
+bots" through intent classification, entity detection, question
+SAP Commerce Cloud on Microsoft Azure - Partnership with
+Microsoft that combines SAP's market-leading solution for B2B
+and B2C scenarios with the Microsoft Azure public cloud
+infrastructure.
+SAP Commerce Cloud - One of the five solution categories
+within the SAP Customer Experience portfolio and in the SAP
+C/4HANA suite. This digital business solution helps integrate
+digital and physical customer touchpoints onto a single, robust
+platform, helping companies deliver a superior omnichannel
+commerce experience with state-of-the-art security and
+authentication technology. Individual offerings combine capabilities
+for product and Web content management, order management,
+personalization, bundling, and accelerators - all through a built-in
+omnichannel storefront. Formerly called SAP Hybris Commerce
+Cloud. See "SAP C/4HANA."
+SAP Commerce - Solution that offers customers a platform
+enabled for the cloud that supports product content management
+and unified commerce processes. It gives a business a single view
+of its customers, products, and orders, and its customers a single
+view of the business. It combines functionality. Formerly called SAP
+Hybris Commerce.
+SAP Co-Innovation Lab(s) - Physical location(s) featuring a
+simulated, heterogeneous data center that incorporates hardware
+and infrastructure software from various vendors. The lab provides
+a hands-on environment for SAP, customers, and partners to
+innovate, accelerate, and showcase new business solutions and
+technologies collaboratively. Customers and partners can visit the
+lab to evaluate the latest SAP and partner solutions in a simulated,
+real-world infrastructure.
+SAP Cloud Platform Integration Suite - Umbrella term for all
+SAP Cloud Platform Integration offerings. This suite integrates
+cloud applications, data, devices, and people with on-premise and
+cloud solutions from SAP and third-party vendors. Users with
+different skillsets can apply a variety of integration approaches,
+intuitive tools, and prepackaged content to achieve results faster
+and to gain business agility with this versatile, dynamic, and
+enterprise-grade cloud integration platform.
+SAP Cloud Platform Extension Factory - Enterprise-class
+extension framework that helps reduce the complexity of
+configuring and managing cloud solutions. Customers use one
+framework to connect systems and extend cloud applications from
+SAP using the capabilities of SAP Cloud Platform, allowing them to
+focus on business logic and user experience to build extensions
+without disruption to the business. Available Q2/2019.
+(https://cloudplatform.sap.com) is available by subscription or
+through consumption-based pricing. See "cloud credit(s)."
+SAP Cloud Platform - An open business platform designed to
+help companies innovate, integrate, and extend applications with
+agility, flexibility, and choice. With a multi-cloud foundation,
+customers can leverage the latest cloud-native technologies and
+benefit from major hyperscaler infrastructures. It is one platform
+for creating intelligent, mobile-ready, applications. As the
+foundation for an intelligent enterprise, SAP Cloud Platform
+enables companies to react, adapt, and grow quickly to match new
+market expectations. SAP Cloud Platform
+SAP Cloud ALM - New cloud-based tool for application lifecycle
+management (ALM) that covers all stages of the application
+lifecycle, from discovery of cloud solution capabilities to
+implementation, operations, and continuous innovation as well as
+business value realization and enhancement. It helps track and
+manage the needs of customers that use (only or predominantly)
+cloud solutions from SAP. Customers subscribing to a cloud
+solution from SAP automatically receive SAP Cloud ALM. It is
+complementary to SAP Solution Manager which provides
+comparable capabilities for on-premise landscapes. See
+"application lifecycle management" and "SAP Solution Manager."
+SAP Cloud for Customer – A cloud-based offering of CRM
+applications and tools developed for sales, service, and marketing
+teams that provides an overview of end-to-end business, as well as
+deep customer insight and personalized engagement, so that they
+can deliver a relevant experience at every step of the customer's
+journey. It also offers designed-in social collaboration to help
+transform social media conversations into business insight. An
+Edge edition is available for small and midsize enterprises.
+Formerly called SAP Hybris Cloud for Customer.
+SAP Cloud - See "cloud solutions from SAP."
+SAP City Connect - Solution that helps urban organizations
+and small business owners with tourism development, visitor and
+crowd management, business event subscriptions, and
+neighborhood development. Part of the SAP Future Cities initiative.
+See "SAP Future Cities."
+SAP C/4HANA - Launched at SAPPHIRE NOW in June 2018,
+this unified suite of cloud solutions represents the next generation
+of CRM and is the cornerstone of the SAP Customer Experience
+portfolio. It brings together customer data, machine learning
+technology, and microservices to power real-time customer
+engagements across sales, service, marketing, commerce,
+customer data, and beyond. SAP C/4HANA provides companies
+with a single, holistic view of each customer across all channels and
+connects demand to the fulfillment engine in one end-to-end value
+chain. Concretely, it comprises five cloud solution portfolios: SAP
+Sales Cloud; SAP Service Cloud; SAP Marketing Cloud; SAP
+Customer Data Cloud; and SAP Commerce Cloud. The suite
+includes individual offerings from acquired companies Callidus
+Software, Coresystems, and Gigya. See "SAP Customer
+Experience," "CallidusCloud," "Coresystems," and "Gigya."
+SAP BW/4HANA - Data warehouse solution built entirely on
+SAP HANA that provides customers with enhanced data modelling
+and governance, so they can manage the availability, integrity, and
+security of data. The solution can be connected to various data
+sources, including SAP or unstructured third-party data, such as
+Hadoop.
+cloud version is available as SAP Business One Cloud, which is part
+of the Cloud ERP portfolio. See "Cloud ERP."
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+industry portfolios - Software portfolios that address the
+business needs of 25 different industries.
+Industry 4.0 - refers to the current trend of automation and
+data exchange in manufacturing technologies. It includes cyber-
+physical systems, the Internet of Things, cloud computing, and
+cognitive computing. See "Open Industry 4.0 Alliance."
+"How We Run" - Core values that describe how we get things
+done at SAP and what makes our culture unique. These five
+behaviors are a cornerstone of our value-driven company: tell it like
+it is; stay curious; embrace differences; keep the promise; build
+bridges, not silos.
+Hasso Plattner Founders' Award - Introduced in 2014, this
+employee award is the highest employee recognition at SAP,
+presented annually by the CEO to an individual or a team. The
+award is named after one of the original founders of SAP and
+current chairman of the SAP Supervisory Board, Prof. Dr. Hasso
+Plattner.
+10) The BHCI score for 2014 was recalculated from 70% to 72% based on two updated questions in the people survey concerning work-life balance.
+¹¹) Due to reorganizations numbers from 2018, 2017, and 2016 are not fully comparable to other years.
+Five-Year Summary
+253
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Glossary
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+9) Due to changes in sampling, Customer NPS is not fully comparable to the prior years scores.
+A
+Americas' SAP Users' Group (ASUG) - Non-profit organization
+comprising customer companies dedicated to providing
+educational and networking opportunities in support of SAP
+software and implementation. User groups are established in
+regions around the world to share knowledge and influence SAP
+development efforts. ASUG is the largest user group with more
+than 100,000 members from thousands of companies across the
+SAP ecosystem.
+analytics - Discovery and communication of meaningful
+patterns in data. It is applied to business data to describe, predict,
+and improve business performance; recommend action; and guide
+decision making across all organizations and functions in a
+company. Analytics helps companies gain new insight and
+understanding of their business performance based on data and
+statistical methods. See "SAP Analytics."
+application lifecycle management - Processes, tools, services,
+and organizational model used to manage SAP and third-party
+software throughout the solution lifecycle, from concept to phase-
+out. This recommended approach to application lifecycle
+management enables companies to adopt innovations from SAP
+rapidly and gain optimal value from their business solutions. See
+"SAP Solution Manager" and "SAP Cloud ALM."
+Ariba Network - Business commerce network where
+companies of all sizes can connect to their trading partners
+anywhere, at any time from any application or device to buy, sell,
+and manage their cash more efficiently and effectively than ever
+before. Companies around the world use Ariba Network to simplify
+interenterprise commerce and enhance the results they deliver.
+See "business network."
+artificial intelligence (AI) - A standard definition of Al refers to
+the simulation of human intelligence processes by machines and
+computer systems. These processes include learning through the
+acquisition of information and rules for using information;
+reasoning through using the rules to reach approximate or definite
+conclusions; and by self-correction. Al capabilities are built into
+SAP Leonardo Machine Learning and several applications powered
+by SAP Leonardo. See "SAP Leonardo Machine Learning."
+Autism at Work - Outreach program connects people on the
+autism spectrum with SAP employment resources with an
+emphasis on careers in technology. In 2018, SAP onboarded people
+with autism in 23 different roles, in 13 countries, and 28 locations
+through this program.
+B
+Big Data - Large volume of data created by billions of
+connected devices and people generating a tremendous amount of
+information about their behavior, location, and activity. This
+availability of massive amounts of data requires companies to
+rethink technology architecture and database structures.
+blockchain - Based on distributed ledgers, blockchain
+technology securely records information across peer-to-peer
+networks. Although originally created for trading Bitcoin, the
+potential of blockchain reaches far beyond cryptocurrency.
+Blockchain ledgers can include land titles, loans, identities, logistics
+manifests - almost anything of value. The technology is still
+developing and areas for business application are growing. See
+"SAP Leonardo Blockchain."
+Build Customers for Life - Program that focuses on
+establishing unified post-sales process standards and supporting
+IT infrastructure across all cloud offerings. It enables one
+harmonized customer experience across both digital and direct
+interaction points to deliver one lifecycle experience across our
+portfolio,
+Business Beyond Bias - Concept addressed by SAP
+SuccessFactors solutions that helps move business beyond bias in
+the hiring process. Solutions in SAP SuccessFactors HCM Suite
+cover the full range of talent decision-making processes, including
+decisions around whom to hire, how to manage, and whom to
+develop, reward, and promote. Organizations can make informed
+decisions, preventing, detecting, and eliminating bias right where it
+occurs.
+business data platform - See "SAP HANA."
+Africa Code Week - Corporate social responsibility initiative led
+by SAP initiated in 2015 to help instill digital literacy and coding
+skills in the young generation across African countries. This
+program works closely with private, public, and non-profit partners
+to drive sustainable learning impact across Africa. 2008 results
+were phenomenal, with 2.3 million young Africans introduced to
+digital skills.
+8) Data center energy consumption normalized against € revenue combines a relative measure of required energy to develop and operate solution in internal and
+external data center.
+"Numbers based on at year-end.
+6) Relates to different levels of management position.
+10,600
+11,800
+12,500
+13,400
+Total data center electricity (in GWh)
+318
+265
+243
+249
+179
+Data center energy per € revenue³) (in Wh)
+13
+11
+11
+12
+10
+Renewable energy sourced (in %)
+100
+100
+100
+100
+100
+"SAP Group. Amounts according to IFRS, unless otherwise stated.
+2) As sum of current and non-current liability.
+3) Numbers are based on the proposed dividend and on level of treasury stock at year-end.
+4) Average Annual Return. Assuming all dividends are reinvested.
+5) Full-time equivalents.
+Business Health Culture Index (BHCI) - Score for the general
+cultural conditions in an organization that enable employees to stay
+healthy and balanced. The index is calculated based on the results
+of regular employee surveys.
+Energy consumed per employee 5) (in kWh)
+business network - An online service that connects businesses
+and their systems to those of their trading partners and enables
+new processes and information and insight sharing only possible in
+a digital environment. See "Ariba Network."
+CallidusCloud - See "Callidus Software."
+255
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+enterprise readiness guaranteed across the different infrastructure
+providers. See "Intelligent Enterprise."
+digital transformation - Concept that refers to the changes
+associated with the application of digital technology in all aspects
+of society. Digital technologies empower customers and
+consumers in a way they never could before, transforming their
+relationship with brands and products. Businesses need to meet
+these new challenges or will miss the potential business success to
+be realized in the digital economy.
+DSAG - Abbreviation for Deutschsprachige SAP-
+Anwendergruppe (German-Speaking SAP Users' Group), with more
+than 60,000 members in more than 3,500-member companies in
+German-speaking countries (Austria, Germany, and Switzerland).
+E
+Employee Engagement Index - Score for the level of employee
+commitment, pride, and loyalty, as well as the feeling of employees
+of being advocates for their company. The index is calculated
+based on the results of regular employee surveys.
+Glossary
+employee retention - Ratio of the average number of
+employees minus the employees who voluntarily departed, to the
+average number of employees, taking into account the past 12
+months (in full-time equivalents, FTES)
+e-waste (electronic waste) - Any discarded electric devices
+used in our offices and data centers, such as computers, computer
+monitors, or mobile devices.
+Expenselt - The mobile app was fully integrated with SAP
+Concur solutions this year, providing valuable functionality that
+uses receipt scanning technology powered by machine learning to
+turn receipts into expense report line items. See "SAP Concur."
+Expense Pay Global - Add-on to the Concur Expense solution,
+this Web service allows customers to gain greater visibility into all
+spend by standardizing the process on one end-to-end payment
+solution. This Web service improves communication, ensures
+timely payment, reduces or eliminates human intervention to
+speed up reimbursement time, and helps control cash flow. See
+"Concur Expense."
+F
+G
+Fieldglass - See "SAP Fieldglass."
+Gigya Company acquired by SAP in 2017 that offers customer
+identity technology and access management solutions designed to
+meet privacy, compliance, and security best practices. Gigya
+solutions are now included in the SAP Customer Data Cloud
+solution as part of the SAP C/4HANA suite. See "SAP Customer
+Data Cloud."
+Global Customer Reference Program - Program offering
+detailed information about reference customers from around the
+world using a database that channel partners can access to help
+close a deal with a new SAP customer. Reference customers have
+agreed to participate in one or more reference activities on behalf
+of SAP.
+Global Partner Operations (GPO) - Organization created in
+mid-2014 at SAP that is responsible for all SAP partner
+relationships.
+green cloud - Term to describe how SAP's environmental
+strategy to use 100% renewable electricity is tied to our business
+strategy. By using our green cloud services and cloud data centers,
+customers can significantly reduce their carbon footprint.
+greenhouse gas (GHG) footprint - Sum of all greenhouse gas
+emissions measured and reported, including renewable energy and
+third-party reductions, for example, offsets.
+H
+enterprise resource planning - See "SAP ERP."
+Digital Partner Network for SAP Fieldglass solutions -
+Network launched in 2018 as a new ecosystem network to help
+customers transform how they engage and manage an external
+workforce of freelancers, contingent workers, independent
+contractors, and other service providers. See "SAP Fieldglass."
+digital platform -Suite of tools, including SAP Cloud Platform
+and SAP HANA Data Management Suite, to manage and
+orchestrate distributed data from any source (from an SAP
+solution or a third-party application) and in any format (structured
+or unstructured). The digital platform offers out-of-the-box cloud
+digital core-Integrated system that enables customers to
+predict, simulate, plan, and even anticipate future business
+outcomes in a digital economy. SAP offers the SAP S/4HANA suite
+as a digital core, providing the framework that allows customers to
+run an entire enterprise in the cloud - such as finance,
+procurement, sales, inventory management, project system, and
+product lifecycle management. In this way, companies can achieve
+the real-time visibility they need into all mission-critical business
+processes and processes around their customers, suppliers,
+workforce, Big Data, and the Internet of Things. See "SAP
+S/4HANA."
+data center energy - Amount of energy consumed in SAP's
+own and external data centers. An external data center is a local
+computing center with server units running SAP software that is
+operated by an external partner.
+Callidus Software - Sales performance management company
+acquired by SAP in April 2018 known for its lead-to-cash and
+configure, price, quote (CPQ) solutions. Most of the offerings
+branded as CallidusCloud are part of the SAP Sales Cloud solution
+and the broader SAP C/4HANA suite. See "SAP C/4HANA," "SAP
+Sales Cloud," and "SAP CPQ."
+Call to Lead - SAP program that bring together thought leaders
+and executives from across industries to share personal
+experiences and best practices for creating and supporting diverse
+and inclusive communities. Call to Lead Unplugged is the related
+event series for executives to network and share their stories about
+thought leadership and customer experience
+254
+Glossary
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+carbon credit - A tradable certificate that allows the holder to
+emit one ton of CO2 or the respective equivalent of any other
+greenhouse gas.
+carbon emission offset - Unit of carbon dioxide-equivalent
+(CO2 equivalent) that is reduced, avoided, or sequestered to
+compensate for emissions occurring elsewhere.
+carbon neutral - Goal or state of emitting net zero greenhouse
+gases for certain activities. This includes reducing emissions, but
+also using renewable electricity certificates or carbon credits.
+cloud computing - Generic term for flexible, IT-related services
+available through, or hosted on, the Internet for consumers and
+business, including storage, computing power, software
+development environments, and applications, combined with
+service delivery. Accessed as needed “in the cloud," these services
+eliminate the need for in-house IT resources. See "cloud service
+model."
+cloud credit(s) - As part of the consumption-based commercial
+model for SAP Cloud Platform, cloud credits are the monetary
+value for prepaid service consumption. These credits are acquired
+through the SAP Cloud Platform Enterprise Agreement through a
+pre-investment. With cloud credits as a payment equivalent,
+customers can consume the cloud services they need. See "SAP
+Cloud Platform" and "SAP Cloud Platform Enterprise Agreement."
+Cloud ERP - Unified portfolio encompassing all our cloud-based
+ERP solutions including SAP S/4HANA Cloud as the flagship ERP
+solution for midsize companies and large enterprises; SAP
+Business ByDesign for growing small to midsize enterprises; and
+SAP Business One for small businesses.
+cloud service model - "As-a-service" offerings where cloud
+services are offered as infrastructure as a service (IaaS), platform
+as a service (PaaS), or software as a service (SaaS).
+cloud solutions from SAP - Category used to communicate all
+of SAP offerings and efforts related to the cloud, including platform,
+managed services, solutions, technology, and infrastructure.
+Code of Business Conduct - Global compliance document
+communicated to all SAP employees globally that contains a
+fundamental set of rules that define how we conduct our business
+and require the highest levels of integrity and ethics. The Code sets
+the standard for our dealings with customers, partners,
+competitors, and vendors, and each of our employees is bound by
+it. It is adapted locally and translated into local languages. We also
+expect our partners and suppliers to commit to meeting our high
+standards of integrity and sustainability through the SAP Partner
+Code of Conduct and the SAP Supplier Code of Conduct.
+Concur Drive - Add-on to the Concur Expense solution, this
+Web service allows businesses to automatically capture distance
+driven as an automated alternative to self-reported mileage,
+reducing overspending in organizations. See "Concur Expense."
+Concur Expense - Cloud solution that helps customers track,
+analyze, and report on spending. It does not include the travel
+management capabilities found in Concur Travel & Expense.
+Concur Technologies - see "SAP Concur."
+Concur Travel & Expense - Signature offering from acquired
+company Concur that helps businesses simplify the entire travel
+expense management process, from spend requests to
+reconciliation, with an integrated expense reporting solution. Easy-
+to-use tools help improve productivity, increase compliance, and
+gain control over spend. See "SAP Concur."
+connectivity - Framework that describes the interrelatedness
+of SAP's social, environmental, and economic performance. Based
+on statistical analysis, it allows us to quantify the impact of non-
+financial measures on the operating profit offering a holistic
+understanding of SAP's value creation.
+Coresystems - Crowd sourcing and field service management
+company based in Switzerland acquired by SAP in November 2018.
+With its artificial intelligence capabilities, Coresystems software
+provides advanced scheduling of field service activities in real time.
+Service organizations can use crowd sourcing to build and expand
+service networks beyond their own workforce. Coresystems
+offerings are now part of SAP Service Cloud and available in the
+SAP C/4HANA suite. See "SAP C/4HANA" and "SAP Service
+Cloud."
+corporate social responsibility - The Corporate Social
+Responsibility (CSR) organization at SAP fosters digital inclusion
+and creates opportunity for underserved people and communities
+through programming and partnerships that build digital skills,
+accelerate best-run NGOs and social enterprises, and connect SAP
+employees with purpose. See "SAP4Good."
+Customer First - Global internal initiative that focuses on
+efforts to improve the way everyone at SAP works and cares for our
+customers by ensuring we provide a consistent, positive, end-to-
+end experience that delivers successful outcomes.
+Customer Net Promoter Score (NPS) - Metric that describes
+the willingness of customers to recommend or promote an
+organization or company to others. It is defined as the percentage
+of customers that are likely to recommend an organization or
+company to friends or colleagues (promoters) minus the
+percentage of customers that are unlikely to do so.
+D
+C
+56
+SAP Digital Boardroom - Premier solution that contextualizes
+the boardroom, locations, and devices into a real-time enterprise
+experience. Powered by SAP HANA and experienced through the
+SAP S/4HANA suite and the SAP Analytics Cloud solution, the
+solution empowers leaders to monitor, simulate, and drive change
+in a digital economy. See "SAP Analytics Cloud."
+38,565
+26.3
+22.8
+26.9
+26.1
+26.1
+Return on equity (profit after tax in percentage of average equity)
+15
+16
+15
+14
+18
+Order Entry
+New cloud bookings
+1,814
+1,448
+1,147
+874
+436
+Contract liabilities / Deferred income - current (IFRS)")
+3,047
+2,771
+Effective tax rate (non-IFRS, in %)
+24.7
+23.4
+25.5
+4,355
+PBT margin (in % of revenues)
+22.7
+21.4
+22.1
+19.2
+24.8
+Income tax expense
+-1,511
+-983
+2,383
+-1,242
+-1,075
+Profit after tax
+4,088
+4,046
+3,629
+3,056
+3,280
+Effective tax rate (IFRS, in %)
+27.0
+19.5
+-935
+3,991
+2,001
+Orders - Number of on-premise software deals (in transactions)
+3
+5
+11
+19
+577
+587
+680
+738
+562
+830
+1,120
+785
+724
+290
+29
+182
+28
+621
+126
+0
+0
+33
+Segment revenue
+Applications, Technology & Services¹¹)
+Segment revenues and results
+58,530
+59,147
+57,291
+57,439
+54,120
+Share of software orders greater than € 5 million (in % of total software order entry)
+Share of software orders less than € 1 million (in % of total software order entry)
+29
+30
+29
+27
+1,680
+22
+40
+38
+40
+44
+Non-IFRS Adjustments
+Revenue adjustments
+Adjustment for acquisition-related charges
+Adjustment for share-based payment expenses
+Adjustment for restructuring
+Adjustment for Tomorrow Now and Versata litigation
+39
+0
+4,872
+5,600
+19.2
+19.3
+15.1
+18.1
+25.2
+Services margin (in % of corresponding revenue, non-IFRS)
+22.9
+23.5
+18.2
+22.7
+29.0
+Software and support gross margin (IFRS, in %)
+Software and support gross margin (non-IFRS, in %)
+Total gross margin (in % of total revenue, IFRS)
+Total gross margin (in % of total revenue, non-IFRS)
+Operating profit (IFRS)
+86.6
+85.8
+85.9
+84.7
+84.3
+84.6
+83.8
+83.7
+82.2
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+€ millions, unless otherwise stated
+2018
+87.4
+2017
+2015
+2014
+Cloud and software margin (in % of corresponding revenue, IFRS)
+79.8
+80.1
+81.0
+80.8
+82.1
+Cloud and software margin (in % of corresponding revenue, non-IFRS)
+Services margin (in % of corresponding revenue, IFRS)
+81.5
+2016
+5,029
+87.0
+86.6
+6,348
+5,638
+Operating margin (in % of total revenue, IFRS)
+23.1
+20.8
+23.3
+20.5
+24.7
+Operating margin (in % of total revenue, non-IFRS)
+29.0
+28.9
+30.1
+30.5
+32.1
+Financial income, net
+-47
+188
+-29
+-5
+-25
+Profit before tax (PBT)
+6,633
+Equity ratio (total equity in % of total assets)
+7,163
+Operating profit (non-IFRS)
+86.3
+69.8
+69.9
+70.2
+70.0
+71.6
+71.8
+72.5
+72.9
+73.3
+87.4
+74.3
+4,877
+5,135
+4,252
+4,331
+Non-IFRS adjustments
+1,459
+1,892
+1,498
+2,095
+1,307
+5,703
+0
+6,769
+20,806
+95
+Group liquidity (cash and cash equivalents/short-term investments/restricted cash)
+Financial debts (due to banks, private placements, bonds)
+8,838
+4,785
+4,673
+3,559
+3,423
+11,331
+6,264
+7,826
+9,174
+11,093
+Net liquidity
+-2,493
+-1,479
+-3,153
+-5,615
+-7,670
+Days' sales outstanding (DSO, in days)
+70
+70
+148
+971
+774
+211
+3,627
+3,001
+2,762
+Free cash flow in % of total revenue
+12
+16
+16
+14
+16
+Cash conversion rate (net cash flows from operating activities in % of profit after
+tax)
+74
+105
+128
+119
+107
+Cash and cash equivalents
+8,627
+4,011
+3,702
+3,411
+3,328
+Short-term investments
+125
+3,770
+71
+Assets, equity and liabilities
+10,481
+10,210
+9,674
+7,867
+8,574
+12,133
+6,759
+8,205
+10,228
+10,457
+28,877
+25,515
+26,397
+23,295
+19,534
+Total assets
+51.491
+42,484
+44,277
+41,390
+309
+29,566
+31,651
+32,713
+30,554
+Trade and other receivables
+Total current assets
+Goodwill
+Total non-current assets
+Total current liabilities
+Total non-current liabilities
+Total equity
+6,480
+6,017
+5,362
+65
+4,443
+11,930
+11,564
+9,739
+8,999
+23,725
+21,271
+23,311
+22,689
+21,000
+34,871
+16,620
+2,843
+6,050
+-3,356
+647
+68
+Segment profit
+531
+388
+340
+317
+105
+Segment margin (Segment profit in % of Segment revenue)
+20
+17
+18
+20
+Customer Experience
+Segment revenue
+Gross margin (in % of corresponding revenue)
+951
+643
+637
+79
+80
+1,616
+1,925
+67
+68
+69
+20,218
+4,298
+19.211
+19,134
+16,734
+Gross margin (in % of corresponding revenue)
+73
+74
+Segment profit
+8,746
+87
+Segment margin (Segment profit in % of Segment revenue)
+8,478
+42
+74
+8,335
+43
+74
+7,742
+75
+6,946
+40
+42
+SAP Business Network
+Segment revenue
+2,261
+Gross margin (in % of corresponding revenue)
+42
+ΝΑ
+2,629
+NA
+13
+26
+ΝΑ
+NA
+Liquidity and cash flow
+Net cash flows from operating activities
+Net cash flows from investing activities
+4,303
+5.045
+4,628
+14
+3,638
+-1,112
+-1,799
+-334
+-7,240
+Net cash flows from financing activities
+Free cash flow
+3,283
+3 3
+-3,406
+-2.705
+-3,066
+Segment margin (Segment profit in % of Segment revenue)
+3.499
+ΝΑ
+251
+NA
+To Our
+Combined
+Stakeholders
+Management Report
+Further Information on Economic,
+Environmental, and Social Performance
+33 5822
+Additional
+Infomation
+Consolidated Financial
+Statements IFRS
+2018
+164
+85
+€ millions, unless otherwise stated
+138
+Segment profit
+Five-Year Summary
+2015
+2016
+2017
+2014
+SAP Trust Center - External subsite of SAP.com that
+consolidates for prospective customers all trust-related content -
+for cloud and on-premise - such as details about SAP products,
+cybersecurity, data center security, data privacy, proof of
+compliance through international standards, and frequently asked
+questions. Formerly called SAP Cloud Trust Center.
+SAP Together - New cloud-based employee engagement
+platform, as well as funding of non-profit organizations. In this way,
+SAP works to foster employee engagement and societal impact. In
+2018, more than 20,000 SAP employees volunteered, dedicating
+more than 298,000 hours of service. See "SAP Month of Service."
+SAP Transformation Navigator - Marketing tool used to
+provide customers with clear guidance on their road map to an SAP
+S/4HANA centric application landscape and to support the design
+and implementation of new business models and business
+processes. It is available at no cost.
+SAP SuccessFactors Work-Life - Cloud solution for HR
+professionals to improve employee engagement and health at
+work. Real-time data and machine-learning algorithms help
+enterprises to attract and retain talents. Organizations access
+aggregated real-time data to better respond to the needs of their
+workforce. This solution is part of the Well-Being at Work program.
+Formerly called SAP Work-Life. See "Well-Being at Work."
+SAP SuccessFactors Visa and Permits Management - First
+SAP SuccessFactors solution built natively on SAP Cloud Platform.
+It offers a single place for HR to centrally manage, automate, and
+gain insight into complex employee work visa and permit processes
+for international hiring.
+SAP SuccessFactors Mobile for Android - Further improving
+usability across mobile devices, SAP partnered with Google to
+redesign the mobile app for Android users. Employees and
+managers can now more easily engage and complete critical
+people-related tasks.
+SAP Solution Manager - End-to-end application lifecycle
+management solution to help streamline business processes and
+proactively address improvement options, increasing efficiency
+and decreasing risk with the SAP maintenance agreement.
+Customers can centralize, enhance, automate, and improve the
+management of their entire system landscape (SAP and third
+party), thus reducing total cost of ownership. The solution includes
+features such as diagnostics, testing, root cause analysis, and
+solution monitoring. A category of focused solutions for SAP
+Solution Manager is available on SAP Store.
+SAP SuccessFactors HCM Suite - Suite of HR solutions for
+talent management, core HR, collaboration, and workforce
+analytics. The cloud-based suite provides solutions to bridge the
+gap between strategy and execution with tools to hire, reward, and
+develop the right people with the right skills to grow a business
+sustainably. Several key features were added to existing HCM
+solutions in 2018, including functionality for the General Data
+Protection Regulation (GDPR), a set of laws that came into force on
+May 25, 2018, which dramatically affects data privacy practices
+throughout the European Union (EU). This GDPR functionality is
+SAP SuccessFactors digital assistant - Digital tool developed
+to provide a business' entire workforce with a personalized,
+engaging experience by applying machine learning to guide and
+recommend actions based on verbal and written questions or
+commands.
+SAP SuccessFactors - Solutions that help organizations
+increase the value of their workforce by developing, managing,
+engaging, and empowering their people. Delivered as a complete
+digital suite, these solutions address all aspects of human
+resources (HR), from administration, payroll, and benefits to talent
+management and collaboration across the employee journey.
+These solutions integrate fully with the customer's other business
+software, including SAP S/4HANA. See "SAP SuccessFactors HCM
+Suite."
+SAP Standard Support - Support option offering a reliable
+response to technical disruptions and for maintaining system
+health and integrity. This basic support offering features updates,
+problem resolution, knowledge transfer, quality management, and
+more to keep IT landscapes up-to-date and stable. SAP Standard
+Support delivers support services to enable continuous and
+effective business operations.
+SAP S/4HANA Marketing Cloud - See "SAP Marketing Cloud."
+SAP S/4HANA Movement - SAP program and initiative to
+promote and accelerate adoption of SAP S/4HANA. This is an
+easy-to-use adoption starter engagement that helps customers
+structure and assess their transformation to SAP S/4HANA.
+now embedded across the entire HCM suite, making it easier for HR
+leaders to properly handle and protect sensitive employee and
+candidate data.
+SAP Store Public online store (www.sapstore.com) where you
+can discover, download, and buy SAP solutions, services, mobile
+apps, demos, and free trials from SAP and partners.
+Consolidated Financial
+Statements IFRS
+SAP Upscale Commerce - Next-generation cloud commerce
+solution to enable rapid deployment and consumption. It is
+targeted to midmarket consumer products and retail customers as
+well as direct-to-consumer companies looking to deploy a fast and
+highly engaging commerce experience. Built for a mobile-first
+consumer with rich Al-powered experiences, it can be deployed
+quickly. Launched in 2018, it is initially available only in North
+America but planned to expand globally in the future.
+SAP User Group Executive Network (SUGEN) - Umbrella
+network to promote the exchange of information, expertise, and
+experiences between user groups; identifies global priorities; and
+communicates consolidated customer feedback to SAP. Currently,
+21 SAP user groups exist across five continents with the shared aim
+of defining priorities and agreeing on plans of action to bring
+264
+Glossary
+To Our
+Stakeholders
+Combined
+Management Report
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+greater focus to the dialog between SAP and our user groups on
+the global scale. See "ASUG" and "DSAG."
+SAP Value Assurance - Program that encourages customer
+migration to SAP software by communicating an assurance that
+SAP is committed to the success of the customer's migration.
+Service packages offer dedicated planning, design support, and
+safeguarding services orchestrated by a technical quality manager.
+No implementation or execution services are provided in this
+program. SAP Value Assurance service packages safeguard
+implementations led by customers and partners by giving them
+access to best practices, methodologies, tools, and deep
+technology expertise, enabling them to accelerate the deployment
+of SAP S/4HANA and SAP BW/4HANA. For SAP-led projects, see
+"SAP Advanced Deployment."
+Scope 2 (emissions) - Indirect greenhouse gas emissions from
+consumption of purchased electricity, heat, or steam.
+SAP S/4HANA Finance - Global financial solution available in
+the SAP S/4HANA suite as one of the SAP S/4HANA Line-of-
+Business (LoB) Solutions.
+SAP Women Forward - Externally-facing women's initiative
+(https://discover.sap.com/women-forward/en-us/index.html)
+that includes an online community, newsletter, and annual events.
+Scope 1 (emissions) - Direct greenhouse gas emissions from
+sources that are owned or controlled by the reporting company, for
+example, fuel burned in corporate cars.
+SAP University Alliances - Program that introduces students
+to the exciting technologies shaping business today and designed
+to connect students around the world interested in SAP solutions,
+careers, and research opportunities. Students participate in
+classroom sessions, app development, networking opportunities,
+events, and more. The SAP University Alliances community
+provides connections between university leaders and students,
+SAP customers and partners, and SAP internal experts.
+SAP S/4HANA Cloud software development kit (SDK) allows
+customers and partners to innovate quickly and easily on SAP
+Cloud Platform while leveraging the capabilities of their digital core.
+SAP S/4HANA Enterprise Management - Core on-premise
+solution in the SAP S/4HANA suite covering all mission-critical
+processes of an enterprise. It is natively built on the SAP HANA
+platform, designed with SAP Fiori UX.
+SAP Model Company - Preconfigured ready-to-run reference
+solution with business content, accelerators, and engineered
+services for multiple industries or lines of business. This service
+provides the building blocks for a solution, helping customers
+accelerate deployment and digital transformation.
+Further Information on Economic,
+Environmental, and Social Performance
+To Our
+Stakeholders
+Scope 3 (emissions) - Indirect emissions that are a
+consequence of the activities of the reporting company but occur
+from sources owned or controlled by another company, such as
+business flights.
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+C/4HANA suite. It includes all marketing solutions to support
+developing a single view of the customer, gaining deeper customer
+insights, enabling consent-based marketing, delivering
+individualized marketing experiences, lead and account
+management, and optimizing marketing through closed loop
+planning, execution, and measurement. See "SAP C/4HANA."
+SAP MaxAttention - Our premium support offering, designed
+specifically for customers whose operations demand mission-
+critical customized support. The support option includes a full
+range of services for individual customer needs and covers all
+stages of an SAP solution's lifecycle. The program was completely
+redesigned in 2018, following close consultation with customers.
+New SAP MaxAttention helps customers turn ideas into value-
+based predictable outcomes with precise business and technical
+guidance from innovation to operation - and is composed one
+service portfolio for all deployment types, one team with clear
+accountabilities; and one commercial framework offers pay-as-
+you-use services with predictable outcomes. As the highest
+engagement level throughout the software lifecycle, this
+customized, on-site program orchestrates all SAP experts to work
+with our customers to innovate, develop ideas, and accelerate their
+digital transformation. It enables our customers to simplify and
+optimize their IT operations.
+-
+SAP Month of Service - Held annually in October, SAP's
+signature corporate volunteerism effort offers SAP employees
+around the world opportunities to come together to support social
+change in their communities. SAP Month of Service, an annual
+volunteering campaign, employees executed 800 projects globally.
+SAP Together will serve as a digital hub for employee volunteerism,
+continuing to build on the momentum from SAP Month of Service
+year-round. See "SAP Together."
+SAP One Billion Lives - Program that invites SAP colleagues to
+propose and gain support for projects that would benefit the public
+sector, specifically in the areas of education, health care, and
+disaster management and response. "SAP 1BLives" is used to refer
+to the program on social media.
+SAP ONE Support - Designed for flexibility and simplification of
+the customer experience, this program helps deliver a harmonized
+and integrated support experience to companies of all sizes and
+across all deployment scenarios - in the cloud, on-premise or in
+hybrid scenarios. The SAP ONE Support program is available
+through the SAP Enterprise Support and SAP Preferred Care
+offerings. See "SAP Enterprise Support."
+SAPPHIRE NOW - SAP's signature business technology event
+and the largest SAP customer-driven conference is held annually in
+several locations around the globe. The global event in the United
+States is co-located with the Americas' SAP Users' Group (ASUG)
+annual conference. Attendees discover new initiatives, solutions,
+products, and services, as well as unique access to the latest
+business strategies and industry best practices from SAP
+customers, partners, executives, and industry experts to help them
+drive business results across all levels.
+Additional
+Infomation
+Sapphire Ventures - Name of independent venture firm spun
+off from SAP, providing the agility of a start-up while allowing
+SAP Pinnacle Award - Annual partner recognition awarded to
+SAP partners excelling in various categories.
+SAP Predictive Analytics - Software that provides an intuitive
+tool for predictive model design and visualization. It is available as a
+stand-alone solution or as part of SAP Leonardo Analytics and SAP
+Leonardo Machine Learning technologies.
+SAP Preferred Success - Subscription-based customer
+success offering available on top of select cloud solution
+subscriptions. It offers a bundle of prescriptive customer success
+resources that accelerate cloud adoption and achieve quick
+business outcomes. This support engagement combines insight-
+driven recommendations to optimize cloud solution capabilities, a
+tailored learning strategy, and change management guidance. It
+also provides advanced support benefits to anticipate risks and
+address critical issues, such as enhanced customer response levels
+(target service-level agreements) and proactive health checks.
+SAP Readiness Check - Tool included in all customer
+maintenance contracts at no extra charge. It enables customers to
+understand the implications of a potential conversion project by
+analyzing software prerequisites, infrastructure requirements,
+functional implications, necessary custom code adaptations, and
+application data migration requirements that are required before
+they can convert their SAP ERP system to a newer SAP system.
+The first use case is for SAP S/4HANA.
+SAP Sales Cloud - One of the five solution categories within the
+SAP Customer Experience portfolio and in the SAP C/4HANA suite.
+Individual offerings help companies improve sales with better
+selling experiences, enhancing sales reps' daily work experience,
+while improving customer experiences and accelerating the buying
+process. It includes the former SAP Cloud for Sales solution. See
+"SAP C/4HANA."
+SAP Service Cloud - One of the five solution categories within
+the SAP Customer Experience portfolio and in the SAP C/4HANA
+suite. It encompasses all products across the customer experience
+that help secure customer satisfaction in support of ongoing
+loyalty. Individual offerings target sales and service organizations
+with designed-in social collaboration to help transform social media
+conversations into business insight. It includes the former SAP
+Hybris Cloud for Service solution. See "SAP C/4HANA."
+SAP S/4HANA - Launched in February 2015, SAP's next-
+generation business suite runs on the SAP HANA business data
+platform, is available in on-premise and cloud deployments, and is
+designed with role-based SAP Fiori UX. SAP S/4HANA is our
+enterprise resource planning (ERP) suite for the intelligent
+enterprise. More than 10,000 customers have chosen the suite to
+support their digital transformation. The SAP S/4HANA suite
+spans all business functions including finance, human resources,
+sales, service, procurement, manufacturing, asset management,
+supply chain, and R&D and acts as the digital core. See "digital
+core."
+SAP S/4HANA Cloud - SAP's flagship next-generation cloud
+ERP suite provides functionality that allows companies to run
+integrated and intelligent digital businesses in real time. SAP
+S/4HANA Cloud is built on SAP Cloud Platform with an open
+architecture that helps connect it to the wider SAP portfolio. The
+Glossary
+263
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+companies to tap into SAP's global enterprise ecosystem of
+customers and partners. The firm partners with outstanding
+entrepreneurs and venture firms worldwide to build industry-
+leading businesses. Formerly called SAP Ventures.
+single tenant edition - Deployment model that implies
+resources are dedicated to one customer and accessed through
+the Internet. The infrastructure is owned, managed and operated
+the customer, a third-party, or both, and is on the premises of
+the customer, cloud provider, or a third party. Formerly called
+private option or private edition.
+Web site www.sap.com
+spatial solutions from SAP - Category of solutions used to
+communicate all SAP offerings and efforts related to spatial
+intelligence, location intelligence, and geospatial analytics. It
+includes spatial capabilities in SAP HANA spatial services, SAP
+HANA geospatial content, SAP Geographical Enablement
+Framework, and SAP Geographical Enablement Framework for
+SAP S/4HANA.
+July 18
+Results for the second quarter and half-year 2019
+October 21
+Results for the third quarter of 2019
+2020
+January 28
+Results for the fourth quarter and full-year 2019
+Addresses
+Group Headquarters
+SAP SE
+Dietmar-Hopp-Allee 16
+69190 Walldorf
+Germany
+Tel. +49 6227 74 74 74
+Fax +49 6227 75 75 75
+Dividend payment
+E-mail info@sap.com
+www.sap.com/directory/main.html.
+For more information about the matters discussed in the report,
+contact:
+Investor Relations
+Tel. +49 6227 76 73 36
+Fax +49 6227 74 08 05
+E-mail investor@sap.com
+Web site www.sap.com/investor
+Press
+Tel. +49 6227 74 63 15
+E-mail press@sap.com
+Web site www.sap.com/press
+266
+Financial Calendar and Addresses
+To Our
+Stakeholders
+Combined
+Management Report
+Glossary
+The addresses of all our international subsidiaries and sales
+partners are available on our public Web site at
+SME Premier - A Web site and a program for small and midsize
+enterprises (SMEs) and members focused on a thought leadership
+community. The objective is to unite people with common interests
+to share engaging content on how to innovate and grow a small and
+midmarket business as well as to build awareness and engage with
+prospects, customers, influencers, analysts, partners, and SAP
+employees.
+May 20
+Annual General Meeting of Shareholders,
+SuccessFactors - See "SAP SuccessFactors."
+sustainability - Method to create social, environmental, and
+economic value for long-term business success and responsible
+global development.
+T
+total energy consumed - Sum of all energy consumed through
+SAP's own operations, including energy from renewable sources
+and energy consumed by external data centers delivering our cloud
+offerings.
+U
+UN Protect, Respect and Remedy - Framework provided by
+the United Nations which offers states and companies guidance
+regarding the fulfillment of their duty to protect, respect, and
+remedy human rights.
+UN Sustainable Development Goals (SDGs or UN Global
+Goals) - - Set of 17 global development goals by the United Nations
+which are aimed to ensure an environmentally, socially, and
+economically sustainable future by tackling adverse challenges to
+humanity like poverty, hunger, and inequality.
+user experience (UX) - In general terms, UX represents the
+quality of a user's interaction with and perceptions of a system. UX
+at SAP is a characteristic of solutions or products that use SAP
+Fiori UX technology and follow SAP Fiori UX guidelines to offer a
+next-generation experience to our users. See "SAP Fiori user
+experience."
+W
+Well-Being at Work - The SAP SuccessFactors organization
+joined forces with Thrive Global to introduce, a new initiative that
+puts employee well-being at the heart of organizations and
+positions technology as a catalyst for this cultural shift. SAP
+SuccessFactors Work-Life is the first solution to come from this
+partnership. It provides real-time insights into well-being needs and
+makes recommendations to improve employee satisfaction and
+engagement. See "SAP SuccessFactors Work-Life."
+women in management - Phrase used to refer to the
+percentage of women in management positions (managing teams,
+managing managers, executive boards) as compared to the total
+number of managers, expressed by the number of individuals and
+not full-time equivalents (FTEs). Throughout 2018, SAP sponsored
+and hosted events to attract, develop, and support women around
+the world. Ongoing initiatives include the Women's Professional
+Growth Webinar series, our grassroots Business Women's
+Network, and our Women@SAP online community. In addition, SAP
+offers the Leadership Excellence Acceleration Program (LEAP), a
+highly respected and award-winning development program that
+helps prepare high-potential women for leadership roles.
+works council - As dictated by the German Works Council
+Constitution Act, a works council is a legal body for representing
+employees' interests to the employer and codetermining the works
+in private companies. On June 21, 2006, the SAP AG employees
+working in Germany elected its first works council. A European
+works council was created in the spring of 2012. The SAP AG works
+council evolved to become the SAP SE works council in 2014 to
+reflect the legal entity of SAP SE.
+World Space Alliance - An initiative between SAP and the
+European Space Agency (ESA) to develop and promote digital
+technologies and Earth observation data for a range of space-
+related stakeholders including providers of satellite and drone data,
+spatial algorithms, and space software applications for start-ups,
+corporations, universities, and research institutes.
+Mannheim, Germany
+Glossary
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Financial Calendar and Addresses
+Additional
+Infomation
+Financial Calendar
+2019
+April 24
+Results for the first quarter of 2019
+Record date for dividend payment
+May 15
+265
+262
+Code of Business Conduct for Employees
+SAP Loyalty Management - A solution that helps marketing
+and commerce customers track customer behavior and create and
+manage loyalty programs. It is not a company loyalty program for
+SAP Hybris solutions. Formerly called SAP Hybris Loyalty.
+SAP Human Rights Commitment
+SAP Global Health and Safety Management Policy
+-
+SAP Environmental Policy
+-
+SAP Global Anti-Discrimination Policy
+SAP Global Diversity and Inclusion Commitment
+SAP's Guiding Principles for Artificial Intelligence
+SAP Supplier Code of Conduct
+SAP Partner Code of Conduct
+Financial and Sustainability Publications
+267
+To Our
+Additional SAP policies are made public at
+www.sap.com/corporate-sustainability:
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Publication Details
+Publisher
+SAP SE
+Investor Relations
+Concept and Realization
+SAP Integrated Report project team
+with the support of SAP software
+Printing
+ABC Druck, Heidelberg, Germany
+Copyright
+SAP SE
+Dietmar-Hopp-Allee 16
+Stakeholders
+69190 Walldorf
+Profile of Skills and Expertise for the Supervisory Board
+Corporate Governance Report
+Consolidated Financial
+Statements IFRS
+Financial and Sustainability
+Publications
+We present our financial, social, and environmental
+performance in the SAP Integrated Report 2018, which is available
+at www.sapintegratedreport.com. This excerpt from the SAP
+Integrated Report 2018 comprises all of the information required
+by accounting and disclosure standards applicable to us.
+The following publications are available in English at
+www.sap.com/investor, or in German at www.sap.de/investor:
+-
+Annual Report on Form 20-F (IFRS, in English)
+SAP Integrated Report (PDF)
+SAP SE Statutory Financial Statements and Review of
+Operations (HGB, in German)
+-
+Interim Reports (in English and German)
+-
+Rules of Procedure for the Supervisory Board
+SAP INVESTOR, SAP's quarterly shareholder magazine (in
+German)
+-
+-
+-
+| | |
+Information about the management of the company, including
+the members of the Executive Board and the Supervisory Board
+and their curriculum vitae
+Details of the managers' transactions in SAP shares
+Shareholder meeting documents and ballot results
+Articles of Incorporation
+Agreement on the Involvement of Employees in SAP SE
+German Code of Corporate Governance
+Declaration of Implementation pursuant to the German Stock
+Corporation Act, Section 161
+Corporate Governance Statement pursuant to the German
+Commercial Code, Section 289f
+Complete information on the governance of SAP is available at
+www.sap.com/corpgovernance. Materials include:
+SAP Marketing Cloud - One of the five solution categories
+within the SAP Customer Experience portfolio and in the SAP
+Germany
+SAP and other SAP products and services mentioned herein as well
+as their respective logos are trademarks or registered trademarks
+of SAP SE (or an SAP affiliate company) in Germany and other
+countries. All other product and service names mentioned are the
+trademarks of their respective companies. Please see
+www.sap.com/about/legal/copyright.html for additional
+trademark information and notices.
+SAP Global Partner Summit - Exclusive event held for all SAP
+partners on the day prior to SAPPHIRE NOW. A day full of
+practical business-building insights, strategies, innovations,
+enablement, business opportunities, and networking dedicated to
+all things partner, helping maximize the SAP partnership.
+SAP HANA - Business data platform that is SAP's flagship in-
+memory database, available both on premise and as a service in the
+cloud. It enables businesses to process and analyze live data and
+make business decisions based on the most up-to-date
+information, a requirement in today's digital economy. The
+innovative architecture in SAP HANA allows both transactional
+processing for data capture and retrieval, and analytical processing
+for business intelligence and reporting. It reduces time-consuming
+database and data management tasks and underpins intelligent
+applications that use advanced analytic processing. It includes
+features such as text analysis, multitenant database containers to
+support multiple isolated databases in a single SAP HANA instance,
+as well as external machine learning libraries.
+SAP HANA Data Management Suite -SAP's open, modular,
+hybrid, multi-cloud solution suite that integrates all data types into
+a trusted, unified landscape, while reducing the complexity and
+overhead of harnessing rapidly growing data resources. It is the
+umbrella term that represents SAP's entire data-oriented product
+portfolio to support the data foundation for the intelligent
+enterprise-enabling businesses to receive trusted, connected,
+and intelligent data much more simply, especially for data that is
+outside of their SAP environment. SAP HANA Data Management
+Suite currently comprises the following offerings: SAP HANA; SAP
+Data Hub; SAP Enterprise Architecture Designer; SAP Cloud
+Platform Big Data Services. Formerly called SAP Database and
+Data Management.
+SAP HANA Enterprise Cloud - This service enables customers
+to access solutions in the cloud. It contains managed cloud
+applications, in-memory infrastructure, managed services, and
+through an additional license, SAP Cloud Platform to build custom
+applications in the cloud. On-premise applications from SAP can be
+delivered to customers through SAP HANA Enterprise Cloud.
+SAP HANA One - A deployment of SAP HANA certified for
+productive use on the Amazon Web Services Cloud. SAP HANA
+One can be deployed for production use with small data sets, in
+Glossary
+261
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+SAP Future Cities - Umbrella term for an initiative that includes
+the strategy, solutions, and vision associated with smart urban
+management, targeting state and local governments worldwide. It
+represents a unified range of SAP offerings for government
+organizations that help them improve the lives of their citizens and
+make urban living sustainable. See "SAP City Connect."
+minutes, opening a door to starter projects from customers, ISVs,
+and startups.
+SAP Innovation Services - Portfolio of services that offers a
+flexible, open innovation approach to help businesses apply
+emerging technologies such as machine learning, Internet of
+Things, or blockchain to bring intelligence and commercial value to
+their organizations. It is also the name of the delivery unit in SAP
+Digital Business Services formerly called SAP Leonardo Services.
+Formerly called SAP Leonardo Innovation Services.
+SAP Innovative Business Solutions - SAP organization that
+specializes in building individual software solutions that address
+the unique needs of customers, and that fit seamlessly with existing
+SAP software. The organization draws on SAP innovations,
+especially SAP HANA, to deliver unmatched impact and value for
+specific customer use cases. Formerly called SAP Custom
+Development.
+SAP Integrated Business Planning - This solution is powered
+by SAP HANA and delivers real-time supply chain planning
+capabilities for sales and operations, demand and supply planning,
+and inventory optimization in the cloud. It provides the necessary
+information to make business decisions using embedded analytics,
+simulation, prediction, and decision support. Specific SAP
+Integrated Business Planning applications can be used with the
+established SAP Fiori user experience interface or with a Microsoft
+Excel plug-in, allowing users to run optimization scenarios directly
+in their spreadsheets.
+SAP Intelligent Asset Management - A group of five SAP
+offerings that enable an organization to use sensor technologies
+and predictive analytics to improve asset health. The five offerings
+are SAP Asset Intelligence Network; SAP Predictive Maintenance
+and Service; SAP Mobile Asset Management; SAP Asset Strategy
+and Performance Management; and SAP Predictive Engineering
+Insights.
+SAP.IO-SAP's startup incubation engine and related program
+that helps innovators inside and outside of SAP build products, find
+customers, and ultimately change industries. The SAP.iO team
+works with the best entrepreneurs, developers, designers, and data
+scientists to upend how business works.
+SAP Jam - Social software platform that enables sales teams
+and internal experts to socially connect and communicate with
+customers in the context of each opportunity. Customers can also
+easily provide feedback and share what is important to them to
+strengthen relationships. Available in two compatible elements,
+SAP Jam Collaboration and SAP Jam Communities.
+SAP Leonardo - Launched in 2017, SAP Leonardo provides the
+innovative technology and capabilities for analytics, blockchain, Big
+Data, data intelligence, IoT, and machine learning, as well as
+accelerator packages to ease implementation and deployment,
+industry innovative kits to address specific industry challenges,
+software applications powered by SAP Leonardo, SAP Cloud
+Platform, and SAP Design Thinking workshops held in SAP
+Leonardo Center locations across the globe.
+SAP Leonardo Blockchain - Innovative technology provided by
+SAP Leonardo to embed blockchain services into business
+applications to help ensure trust in peer-to-peer transactions,
+provide full visibility of goods provenance and history of ownership,
+and increase auditability and decreased fraud.
+SAP Leonardo Center(s) - Global network of connected,
+physical locations and go-to places for digital inspiration and co-
+innovation that also are home to SAP Innovation Services. These
+centers provide customers opportunities to collaborate with SAP
+development and consulting experts to start their innovation
+journeys based on the SAP Leonardo technologies. SAP Leonardo
+Centers currently exist in Palo Alto, California (USA); Paris;
+Shanghai; São Leopoldo (Brazil); SAP Leonardo Centers are
+planned to open around the world, including Berlin, China,
+Johannesburg, Moscow, Seoul, Singapore, Silicon Valley, and
+Tokyo.
+SAP Leonardo industry innovation kit(s) - Packages of
+software, services, and tools that address industry-specific
+challenges and combine deep industry expertise from SAP with
+pre-integrated capabilities to rapidly solve critical industry
+problems. With fixed pricing and a single contract, each innovative
+kit addresses specific business functions or processes in a
+particular industry.
+SAP Leonardo Internet of Things - Innovative technology
+provided by SAP Leonardo to connect things with people and
+processes, including connected products, assets, and fleets to
+drive Industrial loT, and connected infrastructures, markets, and
+people to enable the "Internet of Everything." Enterprise loT
+capabilities we provide are catalysts for digital transformation,
+delivering real-time and forward-looking predictive insights that our
+customers need for their intelligent enterprises.
+SAP Leonardo Machine Learning - Innovative technology in
+SAP Leonardo that embeds intelligence into enterprise applications
+to solve common business challenges and train and deploy deep
+learning models. These intelligent capabilities are orchestrated
+through SAP Leonardo Machine Learning Foundation, which runs
+on SAP Cloud Platform, and provides a variety of functional and
+business services. Individual applications include SAP Resume
+Matching, SAP Cash Application, and SAP Service Ticket
+Intelligence, among others.
+SAP Leonardo microservices and APIs - Microservices and
+application programming interfaces (APIs) are available in the SAP
+Leonardo digital innovation system to help customers and partners
+integrate SAP Leonardo capabilities into their own applications.
+These microservices and APIs run on SAP Cloud Platform.
+SAP Hybris - See "SAP Customer Experience."
+SAP Innovation Center - This organization manages co-
+innovation projects with industry, academic, and research partners.
+SAP Innovation Framework - A framework that helps
+customers organize their portfolio investment planning. This
+methodology helps explain the difference between embedded
+intelligence, SAP Leonardo industry innovation kits, and open
+innovation; categorize industry scenarios into different buckets so
+our customers can understand the scenarios more simply; and
+enable account executives on a guided selling approach. There are
+three categories of innovations within the SAP Innovation
+Framework: optimize existing processes for more efficiency or
+reliability; extend current business processes to capture new
+sources of value; and transform company's value chain or business
+mode.
+© 2019 SAP SE or an SAP affiliate company. All rights reserved. No
+part of this publication may be reproduced or transmitted in any
+form or for any purpose without the express permission of SAP SE
+or an SAP affiliate company.
+SAP4Good - Name used in social media channels to
+communicate the activities of the Corporate Social Responsibility
+(CSR) organization at SAP as well as the work SAP is doing in areas
+such as sustainability, diversity, and inclusion. See "corporate
+social responsibility."
+Fiori for Android was launched in 2018 and takes the strengths of
+the Fiori user interface and the Android operating system to deliver
+enterprise applications.
+268
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Publication Details
+Group Headquarters
+SAP SE
+Dietmar-Hopp-Allee 16
+69190 Walldorf
+Germany
+www.sap.com
+www.sap.com/investor
+Additional
+Infomation
+THE BEST RUN
+SAP
+SAP Fiori user experience (UX) - Umbrella term for the user
+experience for SAP software. Based on modern design principles, it
+represents a consumer-like, consistent experience across devices,
+including tablets and smartphones.
+Ⓡ
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+of this portfolio. SAP Digital Supply Chain is also the name of the
+organization responsible for this portfolio.
+SAP Enterprise Support - Services that provide proactive
+support in addition to all features of SAP Standard Support
+services. These proactive support services encompass tools,
+processes, and services that enable continuous improvement,
+holistic application lifecycle management for continuous
+innovation, business and operational process improvements, and
+levers to address the total cost of operation (TCO). SAP Enterprise
+Support, cloud editions offering is a foundational success plan
+included with any cloud subscription you have from SAP. It
+supports successful cloud adoption across your enterprise.
+SAP ERP - Application designed to optimize business and IT
+processes by reducing IT complexity, increasing adaptability, and
+delivering more IT value at a lower cost than traditional ERP
+solutions. It can support mission-critical, end-to-end business
+processes for finance, human capital management, asset
+management, sales, procurement, and other essential corporate
+functions. SAP ERP can also support industry-specific processes
+by providing industry-specific business functions that can be
+activated selectively via the switch framework, keeping the
+application core stable and helping ensure maximum performance.
+SAP Experience Center - Open space for Inspiration, Ideation,
+Innovation, and Illustration of digital opportunities today. A part of
+this is our maker space where organizations can test ideas and
+build digital and physical prototypes. Current centers exist in
+Copenhagen, Denmark, and Hudson Yards, in New York City.
+SAP Fieldglass - Unified brand and portfolio of offerings for
+contingent workforce resulting from the acquisition of Fieldglass in
+May 2014 that help companies manage their entire workforce
+including contract workers and permanent staff. The signature SAP
+Fieldglass Vendor Management System includes cloud-based
+applications for external workforce management and services
+procurement. In 2018, SAP Fieldglass solutions connected
+customers with 6.2 million active external workers and more than
+123,000 suppliers in over 220 countries and territories.
+SAP Fieldglass Live Insights - Machine learning data-as-a-
+service offering that enables organizations to plan, simulate,
+predict, and engage external talent in a seamless, intuitive
+workflow. The service provides real-time visibility, speed, and agility
+in activating new workforce strategies using a robust talent
+procurement data set supplemented with their data and trusted
+third-party data.
+SAP Fiori - First developed as a set of extensible HTML5 apps
+specific to key user roles, offering a seamless user experience
+across devices using responsive design principles. SAP Fiori apps
+target all employees of existing SAP customers, addressing the
+most common business functions, such as workflow approvals,
+information lookups, and self-service tasks. A free launchpad
+allows users to access their SAP Fiori apps from one single entry
+point. A cloud version is available as SAP Fiori Cloud.
+SAP Fiori for iOS - This design language combines SAP Fiori
+UX with a consumer-grade iOS experience to meet enterprise user
+needs. It is used to create native business apps for iPhone and iPad,
+built using Swift, Apple's modern, secure, and interactive
+programming language. Part of an Apple and SAP partnership,
+established in May 2016 to revolutionize the mobile work
+experience, combining powerful native apps for iPhone and iPad
+with the cutting-edge capabilities of the SAP HANA platform. SAP
+Further Information on Economic,
+Environmental, and Social Performance
+In 2018, the committees primarily focused on the following
+topics:
+Each of the committees was active in 2018 except the Special
+Committee. For more information about the Supervisory Board
+committees and their duties, see SAP's corporate governance
+statement pursuant to the German Commercial Code, sections
+315d and 289f, published on the SAP public Web site at
+www.sap.com/investor.
+on a pro rata temporis
+basis plus 50% which
+otherwise would be
+forfeited
+Performance factor
+0%
+50% to 150%
+max. 150%
+The payout price used for the settlement is the simple
+arithmetic mean of the XETRA closing prices of SAP stock on the
+20 trading days following the publication of SAP's fourth-quarter
+results subsequent to the end of the vesting period. The payout
+price is capped at 300% of the grant price. The LTI tranche is paid
+in euros after the Annual General Shareholders' Meeting of the
+corresponding year. Any potential foreign currency exchange rate
+risk is borne by the Executive Board members themselves.
+The number of Share Units that will finally result in payments to
+the Executive Board members can and will likely differ from the
+number originally granted. The number of PSUs ultimately paid out
+changes depending on the performance of the SAP share relative
+to the Peer Group Index at the end of the vesting period. This
+places more weight on SAP's performance within the industry. In
+contrast, the final number of RSUs is fixed. However, both types of
+Share Units may expire during the entire term of a tranche under
+certain conditions (see the "LTI Forfeiture Rules" graphic below).
+Final number of PSUs
+Originally granted number x performance factor (%)
+28
+Compensation Report
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+resulting in a
+Additional
+Infomation
+Final number of PSUs and RSUs x payout price (€)
+Cap of payout price = 300% of grant price
+cap at 50% increase
+100% = same performance of SAP share price and Peer Group
+Index
+Grant amount is converted
+into PSUs and RSUs
+resulting in
+60% PSUs
+Performance Share
+Units
+RSUS
+Retention
+Share Units
+40%
+Peer Group Index
+performs better
+than SAP share
+price
+decreased by percentage
+points of outperformance of
+Peer Group Index
+SAP share price
+performs better
+than Peer Group
+Index
+increased by percentage
+points of outperformance.
+If payout price is higher than
+grant price, percentage
+points are doubled
+PSU calculation
+hurdle at 50% decrease
+Payout after four years
+SAP share price performance relative
+to Peer Group Index performance
+SAP share price performs better than Peer Group Index
++18%
+15%
+SAP share price performance
++30%
+Salesforce
+15%
+Peer Group Index performance
+-5%
+Adobe
+14%
+Difference
++30%-(-5%)
++35%
+VMWare
+11%
+Performance factor with doubled difference (+35% x 2)+100%
+15%
+SAP share price performance
+IBM
+Oracle
+15%
+Peer Group Index performance
++10%
+Difference
++18% (+10%)
+SAP's share price performance is measured by comparing the
+grant price against the payout price. We calculate the difference
+between SAP's share price performance and the Peer Group Index
+performance. In case of an increased SAP share price and an
+outperformance against the Peer Group Index, the calculated
+difference is doubled to reward positive performance. The following
+examples of the PSU calculation illustrate possible outcomes
+assuming 1,000 PSUs granted:
+The Peer Group Index currently includes the following major
+international competitors of SAP: Microsoft, IBM, Oracle,
+Salesforce, Adobe, VMWare, Workday, Service Now, Symantec, and
+Tableau. The Supervisory Board has defined this group based on
+internal and external recommendations and, if necessary, adjusts
+the group, for example, in case of a competitor's delisting. The Peer
+Group Index is calculated as a price index based on weighted
+market capitalization. Each Peer Group competitor is applied at a
+maximum of 15%. Consequently, the weight of smaller, more
+volatile competitors is increased in relation to their size, resulting in
+a highly ambitious index. The index is calculated daily by Deutsche
+Börse Group and can be tracked under ISIN DE000A2BLEB9.
+Composition and Weighting of Peer Group Index
++8%
+Performance factor with doubled difference
+(+8% x 2) + 100%
+116%
+Final number of PSUs
+116% x 1,000
+1,160
+Microsoft
+SAP share price performs much higher than Peer Group Index;
+cap is triggered
+170%
+60% PSUs
+Originally granted
+80% to 120%
+26
+26
+Compensation Report
+To Our
+Combined
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Performance-Based Compensation
+Short-Term Incentive
+Financial targets (KPIs 2018)
+100%
+40%
+35%
+residence.
+25%
+¹) Home currency is the currency of the Executive Board member's primary place of
+Long-term incentive
+Fringe benefits
+Performance-based compensation
+STI
+Short-term incentive
+values (Key Performance Indicators, KPIs) and on the SAP share
+price, and is subject to hurdles and caps. These KPIs and their
+target values as well as their weighting are set by the Supervisory
+Board each plan year and are aligned to the SAP budget for that
+year.
+The Supervisory Board sets the individual total target
+compensation for each Executive Board member, comprised of the
+fixed compensation element and the two performance-based
+elements. This target compensation is benchmarked based on
+SAP's global strategy, market position, business performance and
+future prospects of economy, and the compensation paid at
+comparable national and international companies. The Supervisory
+Board also considers the compensation systems applicable for the
+rest of the Company, comparing Executive Board pay with the pay
+of SAP executives and non-executive SAP employees. The
+performance-based elements each correspond to a target
+achievement of 100% of all KPIs. The Supervisory Board reviews,
+assesses, and if appropriate, revises these compensation targets,
+in its first meeting of each fiscal year (February 21, 2018, for 2018).
+The Supervisory Board is of the opinion that this approach ensures
+that the compensation is appropriate.
+The compensation system is designed to support the growth in
+value for the Company over the long term. The long-term incentive
+element therefore has significant weighting, making up more than
+two-thirds of the CEO's compensation target, and more than 50%
+of each Executive Board member's compensation target.
+In the case of any extraordinary, unforeseeable events, the
+Supervisory Board is entitled, at its reasonable discretion, to adjust
+the performance-based compensation before payout upwards or
+downwards in the interest of SAP. No corrections to the payout
+amounts paid in May 2018 were made.
+The individual elements of SAP's Executive Board compensation
+are described in more detail below.
+Non-Performance-Based Compensation
+Fixed Compensation
+The fixed compensation is paid monthly in 12 equal installments
+in the Executive Board member's home currency¹).
+Fringe Benefits
+The contractually guaranteed fringe benefits mainly comprise
+additional benefits such as insurance contributions, benefits in
+kind, expenses for maintenance of two households, use of aircraft,
+and tax gross-ups according to local conditions.
+LTI
+The amount of performance-based compensation depends
+primarily on SAP's performance against predefined financial target
+of the target amount set in the Executive Board member's
+contract
+New cloud bookings
+Cloud and software revenue growth
+(non-IFRS, at constant currency)
+All Share Units granted in this way, comprising 60%
+Performance Share Units (PSUs) and 40% Retention Share Units
+(RSUS), have a vesting period of approximately four years, during
+which the Executive Board member must actively contribute to the
+Company's operations. The value of the Share Units varies
+positively and negatively with the performance of SAP's share
+price. At the end of the vesting period, the corresponding Share
+Units are non-forfeitable.
+¹) Home currency is the currency of the Executive Board member's primary place of
+residence.
+Compensation Report
+27
+27
+To Our
+Stakeholders
+LTI Grant Process
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+PSU Calculation
+Supervisory Board determines grant amount for current
+financial year, based on operating profit target achievement
+(non-IFRS, at constant currency) set for the previous year,
+This grant amount is converted into virtual shares (Share Units),
+so that Executive Board members participate in further share price
+developments. The grant price is the arithmetic mean of the XETRA
+closing prices of SAP stock on the 20 trading days following
+publication of SAP's fourth-quarter results. The grant date of the
+2018 tranche was February 21, 2018.
+(at constant currency)
+Under the plan, a new LTI tranche is granted annually. Each
+grant starts with determining a grant amount in euros. This grant
+amount is based on the Executive Board members' contractual LTI
+target amount and the operating profit target achievement (non-
+IFRS, at constant currency) for the previous year. Taking this target
+achievement into account, the grant amount can be adjusted
+upwards or downwards in the range of 80% to 120% of the
+contractual LTI target amount. The 2017 operating profit target
+achievement was 95.4%. Considering this, the Supervisory Board
+set the grant amount of the 2018 tranche at 95.4% of the
+contractual LTI target amount.
+("Retention"), and to reward them for a long-term SAP share price
+performance ("Performance") as compared to its main peer group
+(Peer Group).
+Operating margin increase
+(non-IFRS, at constant currency)
+Target achievement
+0% if weighted achievement is below a 75% hurdle
+0%
+75% to 140%
+STI compensation
+STI target achievement (%) x STI target amount (€)
+The short-term, one-year performance-based compensation
+(Short-Term Incentive (STI)) is determined based on a set of
+financial targets (KPIs).
+For the STI 2018, the financial KPIs are: Constant currency new
+cloud bookings in 2018, year-over-year growth in non-IFRS
+constant currency cloud and software revenue in 2018, and non-
+IFRS constant currency operating margin in 2018. The KPIs and
+their respective target values are derived from SAP's budget for
+that year. For more information about financial KPIs, see the
+Performance Management System section.
+If the weighted target achievement for the financial KPIs is
+below 75%, there is no STI payout for the financial KPIs. In this
+case, the target achievement for these KPIs is set to zero.
+On February 20, 2019, the Supervisory Board assessed SAP's
+performance against the agreed targets and determined the
+amount of the STI 2018 for the entire Executive Board. This
+resulted in a target achievement of 93.0% (cloud and software
+revenue growth of 125.8%, operating margin increase of 92.2%,
+and new cloud bookings of 64.9%).
+The STI compensation for 2018 will be paid out after the Annual
+General Meeting of Shareholders in May 2019. It is paid in the
+Executive Board member's home currency ¹). All Executive Board
+members are obliged to purchase SAP shares worth at least 5% of
+the actual payout amount according to appropriate trading period
+regulations. These shares are subject to a three-year holding
+period.
+Long-Term Incentive
+The purpose of the long-term, multi-year performance-based
+compensation (Long-Term Incentive, LTI) is to reward the annual
+achievement of the non-IFRS constant currency operating profit, to
+ensure long-term retention of our Executive Board members
+The LTI 2016 plan came into effect on January 1, 2016. It is a
+virtual share program with a term of four years per tranche.
+Fixed compensation
+Workday
+Capped at
+75%
+50%
+25%
+0%
+a pro rata temporis basis
+forfeited grants
+earned grants
+PSUs and RSUs forfeit on
+Total four-year: 100% forfeiture
+2019
+2018
+2017
+2016
+100%
+100%
+2016
+100%
+2017
+Total four-year: 37.5% forfeiture
+1) Example calculation with four tranches (grant allocation of 100%, stable share price from grant to vest, and no consideration of performance condition);
+Executive Board member's contract terminates after year four (December 31, 2019)
+Total four-year: 18.75% forfeiture
+2018 2019
+2017
+2016
+37.5%
+25.0%
+12.5%
+0.0%
+forfeited grants
+plus 50%
+■earned grants
++50%
+out immediately
+PSUs and RSUs are paid
+2018 2019
+2) For the definition, see the Early End-of-Service Undertakings section
+100%
+Example Calculation¹)
+Executive Board
+LTI Forfeiture Rules
+Stakeholders
+To Our
+29
+If an Executive Board member's service contract is terminated
+before the end of the third year following the year in which the
+Share Units were granted, both the PSUs and RSUs are forfeited in
+whole or in part, depending on the circumstances of the relevant
+resignation from office or termination of the service contract. In
+case PSUs and RSUs are forfeited in part, the percentage of the
+forfeiture is proportional to the four-year vesting period of each
+grant. This means that 25% of the grant is earned each year of the
+vesting period. Unearned grants are forfeited.
+as at December 31, 2018
+Compensation Report
+0% x 1,000
+Final number of PSUs
+0%
+Hurdle is 50%
+40%
+-60% +100%
+Performance factor
+Member resigns
+forfeited grants
+from office
+Combined
+Infomation
+Additional
+PSUs and RSUs forfeit in
+their entirety
+Further Information on Economic,
+Environmental, and Social Performance
+Change of
+control²)
+Executive Board member's service contract expires due to
+mutual consent, resignation, retirement, or death
+Executive Board member
+does not start working for
+an SAP competitor before
+the end of the vesting
+period
+from office
+without cause
+Member resigns
+Executive Board
+service contract for cause
+Supervisory Board terminates the Executive Board member's
+Executive Board member
+starts working for an SAP
+competitor before the end
+of the vesting period
+Consolidated Financial
+Statements IFRS
+Management Report
+without cause
+6%
+The change from the previous RSU Milestone Plan to the LTI
+2016 Plan required a transition rule in order to avoid unjustified
+disadvantages for Executive Board members. In the event an
+Executive Board member leaves the company, the disadvantage
+arises from the difference in the one-year vesting period in the RSU
+Milestone Plan in comparison to the four-year vesting period in the
+LTI 2016 Plan. In order to compensate for this disadvantage related
+to the vesting periods, an individual equalization amount was
+determined for Executive Board members who participated in the
+RSU Milestone Plan.
+-
++5% - (+10%)
+-5% + 100%
+95% x 1,000
+-5%
+95%
+950
+Peer Group Index performs better than SAP share price;
+low hurdle triggered
+SAP share price performance
+Peer Group Index performance
+-10%
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+us an overview of the first-quarter results for 2018 and SAP'S
+performance vis-à-vis its main competitors.
+Extraordinary Meeting in May
+Final number of PSUs
+The Supervisory Board held an extraordinary meeting
+immediately following the Annual General Meeting of Shareholders
+on May 17, 2018, to welcome the newly elected members and to
+decide membership on its committees.
+Performance factor
+LTI Forfeiture Rules
+150%
+ServiceNow
+5%
+Final number of PSUs
+150% x 1,000
+1,500
+Symantec
+2%
+Tableau
+2%
+Peer Group Index performs better than SAP share price
+SAP share price performance
++5%
+Peer Group Index performance
++10%
+Difference
+-
+Meeting in July
+At our meeting in October, the Executive Board reported on
+business performance in the third quarter. In addition, we
+discussed the appointment of new members to the committees as
+of January 2019, and, in agreement with the Executive Board,
+adopted for regular publication in October 2018 the annual
+declaration of implementation of the Code, which states that SAP
+has been following all Code recommendations since February 2018.
+The Supervisory Board also assessed the independence of its
+members at regular intervals pursuant to Code specifications,
+using benchmarks we had set at our own discretion. We
+ascertained that the Supervisory Board has a sufficient number of
+independent members and, in accordance with the Code
+provisions, identified those shareholder representatives whom the
+Supervisory Board deems independent; these representatives are
+named in the Corporate Governance Report. In 2018, we also
+reviewed the efficiency of the work of the full Supervisory Board
+and its committees, as is regularly required pursuant to the
+recommendations of the Code: In this regard, we first sent an
+electronic survey to all the Supervisory Board members ahead of
+the meeting with questions addressing all aspects of our work.
+After evaluating the questionnaire, we discussed the survey
+responses and comments in the plenum, taking some of these as
+an opportunity to talk about improvements to Supervisory Board
+processes and meeting topics. Ultimately, we came to the
+conclusion that, on the whole, our work was efficient. Also in the
+October meeting, the Executive Board explained its strategy for the
+Cloud ERP and SAP Digital Business Services areas, reported on
+progress on the process side including cloud infrastructure, and
+updated us on matters related to cybersecurity and the
+mechanisms established by SAP in this area.
+2015
+RSU Milestone
+Plan
+375
+750
+625
+1,125
+250
+forfeited grants
+■equalization amount
+1,500
+earned grants
+1,000
+In the event an Executive Board member leaves the company
+and PSUs would otherwise be forfeited on a pro rata basis, the
+Executive Board member is entitled to PSUs equal to the
+equalization amount. The following graphic gives an example of
+how the equalization amount was derived, assuming a grant of
+€1,000 for the RSU Milestone Plan, a grant of €1,500 for the LTI
+2016 Plan, and a forfeiture of the grants on a pro rata temporis
+basis on December 31, 2019:
+An ongoing employment relationship in 2016, 2017, and, in one
+case, in 2018.
+A target achievement of at least 60% of the non-IFRS constant
+currency operating profit target, and
+The equalization amount has been subject to:
+2016
+When the Supervisory Board met on July 26, 2018, we
+deliberated on the future terms and structure of Executive Board
+compensation. In addition, we looked at the investment activities of
+the SAP-financed venture capital funds, Sapphire Ventures. On
+recommendation from the Finance and Investment Committee, we
+approved the financing of two new Sapphire Ventures funds in the
+total amount of US$1.3 billion. Next, we discussed and approved
+the directors' and officers' (D&O) group liability insurance policies
+that we take out from year to year which, besides the statutory
+deductible, notably included an increase in the insurance coverage.
+We also reviewed and updated the list of transactions and business
+management measures for which the Executive Board must obtain
+the Supervisory Board's consent. The Executive Board then gave
+us an account of business in the second quarter of 2018 and
+performance in the first half-year. Referring to the Executive
+Board's reports, we discussed with the Executive Board our
+conclusions from the figures and the resulting measures.
+Meeting in October
+2017
+2019
+The Work of the Supervisory Board
+Committees
+The committees made a key contribution to the work of the
+Supervisory Board in 2018 and reported on their work to us,
+including their preparatory work for and decisions made on the
+relevant agenda items of the subsequent Supervisory Board
+meetings. In connection with the retirement of Wilhelm Haarmann
+and Klaus Wucherer from the Supervisory Board at the conclusion
+of the Annual General Meeting of Shareholders, and the election of
+Aicha Evans, Diane Greene, and Friederike Rotsch to the
+Supervisory Board by the Annual General Meeting of Shareholders
+on May 17, 2018, we resolved a number of changes to the
+composition of the committees that same day. The following
+committees were in place in 2018, composed as follows:
+-
+-
+-
+-
+General and Compensation Committee: Hasso Plattner
+(chairperson), Pekka Ala-Pietilä (from May 17, 2018), Aicha
+Evans, Wilhelm Haarmann (until May 17, 2018), Andreas Hahn,
+Margret Klein-Magar, Lars Lamade, Bernard Liautaud,
+Sebastian Sick
+Audit Committee: Erhard Schipporeit (chairperson), Panagiotis
+Bissiritsas, Martin Duffek, Friederike Rotsch (from
+May 17, 2018), Klaus Wucherer (until May 17, 2018)
+Finance and Investment Committee: Wilhelm Haarmann
+(chairperson) (until May 17, 2018), Pekka Ala-Pietilä, Panagiotis
+Bissiritsas, Friederike Rotsch (from May 17, 2018), Erhard
+Schipporeit (until May 17, 2018), Robert Schuschnig-Fowler,
+Sebastian Sick
+Technology and Strategy Committee: Hasso Plattner
+(chairperson), Christine Regitz (deputy chairperson), Pekka Ala-
+Pietilä, Panagiotis Bissiritsas, Martin Duffek, Aicha Evans, Anja
+Feldmann (until September 30, 2018), Diane Greene (from
+October 1, 2018), Andreas Hahn, Gesche Joost, Margret Klein-
+Magar, Bernard Liautaud, Pierre Thiollet
+People and Organization Committee: Hasso Plattner
+(chairperson), Martin Duffek, Aicha Evans (from May 17, 2018),
+Anja Feldmann, Wilhelm Haarmann (until May 17, 2018), Gesche
+Joost, Lars Lamade, Christine Regitz, Robert Schuschnig-Fowler
+Nomination Committee: Hasso Plattner (chairperson), Pekka
+Ala-Pietilä, Bernard Liautaud
+Special Committee: Hasso Plattner (chairperson), Pekka Ala-
+Pietilä, Wilhelm Haarmann (until May 17, 2018), Lars Lamade,
+Friederike Rotsch (from May 17, 2018), Erhard Schipporeit,
+Sebastian Sick
+Compensation Report
+30
+LTI 2016 Plan
+2018
+-10% - (+50%) -60%
+Non-performance-based compensation
+The Supervisory Board - supported by its General and
+Compensation Committee - determines the compensation for
+each Executive Board member based on their individual role and
+performance in its first regular meeting of each fiscal year. For
+more information about the work of the Supervisory Board and its
+committees, see the Report by the Supervisory Board. As pictured
+below, the compensation contains performance-based elements
+and non-performance-based elements:
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+-
+industry in the years to come and SAP's corporate and product
+strategies. In February, the Executive Board informed the
+Committee about SAP Data Hub, a cloud solution that
+automates and coordinates data flows in complex landscapes,
+and about the Company's CRM strategy. When it met in April,
+the Committee was updated by the Executive Board on the SAP
+Cloud Platform strategy as well as on SAP's strategy with
+respect to blockchain technology. In July, the Committee and
+the Executive Board discussed the intelligent suite and how this
+flexible, integrated solution with additional functions for
+machine learning capabilities can best support customers in
+their business processes. At the October meeting, the Executive
+Board apprised the Committee of current developments in
+SAP S/4HANA Cloud and SAP C/4HANA.
+Report by the Supervisory Board
+The People and Organization Committee held one meeting in
+2018. This meeting took place in December 2018, with key
+topics being China as a growth market, the current challenges
+there, the talent situation inside and outside SAP, and the
+various business areas in China. In addition, the Committee
+inquired about SAP's talent acquisition system, focusing
+particularly on SAP's data-driven recruiting processes.
+The Nomination Committee is composed exclusively of
+shareholder representatives. It met three times in 2018, but
+members discussed succession planning for the Executive
+Board outside of these meetings as well. Looking ahead to the
+2018 Annual General Meeting of Shareholders, the Committee
+met in January to deliberate on suitable successors for Wilhelm
+Haarmann, Klaus Wucherer, and Anja Feldmann, who had all
+announced their intention to retire from the Supervisory Board.
+Following personal interviews with potential candidates, the
+Committee members identified three suitable successors:
+Friederike Rotsch, Diane Greene, and Gerhard Oswald.
+Friederike Rotsch has a proven track record as a legal and
+corporate governance expert. Diane Greene is an outstanding IT
+expert from the United States whose many years of experience
+in the cloud domain will greatly benefit the Supervisory Board's
+deliberations in this key field for SAP. As a former member of
+the Executive Board, Gerhard Oswald knows SAP, its business,
+and its customers like no other, and as such can contribute
+significantly to the Supervisory Board's work going forward. The
+Committee held two further meetings in October and December
+to deliberate on the subject of succession planning for the
+Executive Board, and in particular, to find a candidate for the
+vital position of financial expert on the Supervisory Board, since
+Erhard Schipporeit would not be standing for reelection in the
+regular Supervisory Board elections in 2019. The Committee
+members are convinced that Gunnar Wiedenfels is a worthy and
+suitable candidate. As the former chief financial officer (CFO) of
+a then DAX-listed company, and as current CFO of a company
+that is listed on a U.S. stock exchange, he fulfills all of SAP's
+requirements for the position and thus for being proposed
+upon approval by the Supervisory Board - for election at the
+Annual General Meeting in 2019. In the Nomination Committee's
+opinion, all the selected candidates are perfect fits for
+augmenting expertise and diversity on the Supervisory Board.
+Corporate Governance
+SAP's corporate governance and insider trading compliance
+officer monitored our compliance with those recommendations in
+the Code with which we claim to comply in SAP SE's declaration,
+and reported in full to the General and Compensation Committee.
+For more information about compliance with the Code, see the
+Corporate Governance Report from the Executive Board and
+Supervisory Board. Members of the Executive Board and of the
+Supervisory Board had no conflicts of interest that were required to
+be disclosed to the Supervisory Board pursuant to sections 4.3.3
+and 5.5.2 of the Code. Some Supervisory Board members currently
+have business dealings with SAP or hold senior positions or
+material equity in companies that currently have business dealings
+with SAP, or had done so in the course of the year. SAP's business
+dealings with these persons or companies are at arm's length. In
+the Supervisory Board's view, especially given the limited scope
+and materiality of those dealings, they did not affect the
+independence of the Supervisory Board members concerned and
+do not give rise to any substantial and not merely temporary
+conflict of interest in the meaning of the Code. In its April meeting,
+the Supervisory Board confirmed the instruction of a law firm, in
+which a Supervisory Board member was a partner at the time, for
+legal and tax advice in connection with two court proceedings
+against the (German) tax authorities. Confirmation of the original
+engagement approved by the Supervisory Board in 2012 was
+necessary because the member had left the law firm to which it
+related to become partner in another firm, where the engagement
+was to continue. The member concerned did not take part in the
+deliberations or voting on the matter. There were a number of
+transactions involving members of the Executive Board in 2017 that
+were all consistent with industry standards and immaterial. These
+transactions were approved by the General and Compensation
+Committee during the year under review. The Company made no
+other contracts with members of the Executive Board or
+Supervisory Board that would have required a resolution of the
+Supervisory Board.
+The Supervisory Board closely examined the Executive Board's
+corporate governance statement. We approved the statement with
+the combined SAP SE and SAP Group management report.
+SAP SE and Consolidated Financial
+Reports for 2018
+KPMG audited the SAP SE and consolidated financial reports for
+2018. The Annual General Meeting of Shareholders elected KPMG
+as the SAP SE and SAP Group auditor on May 17, 2018. The
+Supervisory Board proposed the appointment of KPMG on the
+recommendation of the Audit Committee. Before proposing KPMG
+to the Annual General Meeting of Shareholders as auditor for the
+year, the chairperson of the Supervisory Board and the Audit
+Committee obtained confirmation from KPMG that circumstances
+did not exist that might prejudice or raise any doubt concerning its
+independence as the Company's auditor. In that connection, KPMG
+informed us of the volume of the services that were not part of the
+audit which it had either provided to the Group in the past year or
+was engaged to provide in the year to come. The Supervisory Board
+has agreed with KPMG that the auditor should report to the
+Supervisory Board and record in the auditor's report any fact found
+during the audit that is inconsistent with the declaration given by
+Report by the Supervisory Board
+23
+To Our
+Stakeholders
+Regular reports from the committees ensured that the
+Supervisory Board was kept fully informed of all matters covered
+by the committees and were able to discuss them thoroughly.
+Combined
+22
+The Technology and Strategy Committee met four times in
+2018. It discussed key technology trends in the software
+-
+Compensation
+The General and Compensation Committee held six regular
+meetings and one extraordinary meeting in 2018; outside these
+meetings it passed two resolutions by correspondence. In
+particular, the Committee extensively prepared and discussed
+Report by the Supervisory Board
+21
+To Our
+Stakeholders
+Combined
+Management Report
+22
+Consolidated Financial
+Statements IFRS
+Additional
+Infomation
+-
+in advance the deliberations of the Supervisory Board and its
+resolutions on Executive Board compensation and on the
+human resources (HR) decisions described above. The
+Committee members addressed compensation matters
+especially in the January and February meetings. The
+Committee also dealt with general questions concerning
+Executive Board compensation in its July meeting and, in its
+regular October meeting, discussed the expected changes to
+the recommendations on Executive Board compensation in
+connection with the forthcoming revision of the Code. In its
+meeting on April 11, 2018, the Committee prepared the
+Supervisory Board's resolution to extend Stefan Ries'
+appointment to the Executive Board to the end of March 2024.
+When it met in July, the Committee explored general questions
+regarding the term of Executive Board appointments and the
+succession planning concept for the Executive Board. The
+Supervisory Board's decisions with respect to the submission of
+the declaration of implementation of the Code and ascertaining
+the independence of Supervisory Board members were
+prepared in October. In addition, the Committee undertook to
+follow up on the suggestions for improvement derived from the
+efficiency review of the Supervisory Board's work. In the fiscal
+year ended, the Committee also approved the acceptance of
+two outside supervisory board seats by an Executive Board
+member.
+The Audit Committee held six physical meetings - two of which
+jointly with the Finance and Investment Committee - and five
+telephone conference meetings in 2018. At these meetings, the
+Committee deliberated on the course of business over the
+quarter concerned, the accounting processes, the preparation
+of quarterly financial reports, and the quarterly reports to be
+published. Other regular meeting topics included SAP's risk
+management system, internal control system, and compliance
+system. The Committee dealt with current compliance issues at
+numerous meetings in the reporting year. Together with
+members of SAP's compliance department, it discussed the
+existing compliance cases, the status of the respective internal
+SAP investigations, SAP's case-related collaboration with
+authorities, and measures to further strengthen SAP's
+compliance system. During its physical meeting in February, the
+Committee focused on the financial accounts of SAP SE and the
+Group for 2017, and prepared the Supervisory Board's
+recommendations to the Annual General Meeting of
+Shareholders concerning the election of an auditor and the
+appropriation of retained earnings. The decision on the
+recommendation regarding the election of the auditor was
+preceded by a review of the auditor's independence and
+qualifications. In addition, the internal audit department
+reported on the fiscal year 2017, the department's organization
+and processes, and its audit plan for 2018. At mid-year, the
+internal audit department informed the Committee about its
+audit findings to date as well as its plans for the second half of
+2018 and the first half of 2019. When the Committee met in
+April, it reviewed SAP's data protection measures and came to
+the conclusion that the global initiative for implementing the
+General Data Protection Regulation (GDPR), which came into
+force in May 2018, was making good progress. Increasing
+cybersecurity threats in our business environment worldwide
+have made the IT security environment much more complex.
+-
+-
+Therefore, the Committee turned its attention in the second half
+of the year to the resulting changes to its risk assessment for
+this area, and had SAP's IT security officer apprise it of
+additional security measures. In the second half of 2018, the
+Executive Board also informed the Committee about planned
+structural changes to the consolidated financial statements,
+about the pending audit of the consolidated financial statements
+and the combined management report by the German Financial
+Reporting Enforcement Panel (Deutsche Prüfstelle für
+Rechnungslegung), and about SAP's measures in response to
+the U.S. tax reform. The auditor attended all physical meetings
+and telephone conference meetings of the Audit Committee and
+reported in depth on its audit work and on its quarterly reviews
+of selected software agreements. The Committee discussed the
+audit focus with the auditor in July, and the audit fees with the
+auditor in October. As reported in more detail below, the
+Committee also held two joint meetings with the Finance and
+Investment Committee in February and December to discuss
+the Group annual plan for 2018 and the preliminary budget for
+2019.
+The Finance and Investment Committee held five ordinary
+meetings and two extraordinary physical meetings in 2018. Two
+of its ordinary meetings were joint meetings with the Audit
+Committee. The focus of the Committee's extraordinary
+meeting in January was the acquisition of Callidus Software Inc.,
+which, after extensively examining all acquisition-related
+aspects, it recommended the Supervisory Board approve. When
+the Committee met in February, it concerned itself with SAP's
+participation in a joint venture to develop software for the
+energy industry, received an overview of the Company's results
+and growth in 2018, and was updated on SAP's January 2018
+acquisition of Recast.Al, a French startup. This company
+developed a platform for text-based dialog systems that enables
+users to chat with technical systems ("chatbots"). In addition,
+representatives from Sapphire Ventures presented detailed
+information about the European and U.S. market for venture
+capital in technology and a status report on the four active SAP
+venture capital funds. In the joint meeting with the Audit
+Committee that followed, Committee members discussed the
+annual plan for 2018 and voted in favor of recommending its
+approval to the Supervisory Board. In April, the Executive Board
+gave the Committee an overview of various investor relations
+activities. In July, the Committee was informed about the
+Company's acquisition of Coresystems FSM AG, the developer
+of a leading platform for field service management. The
+Committee also recommended that the Supervisory Board
+approve the financing of two new Sapphire Ventures funds in the
+total amount of US$1.3 billion as had been presented
+beforehand. At its extraordinary meeting in November, held
+immediately prior to the Supervisory Board's plenary session,
+the Committee examined the planned acquisition of U.S.-based
+Qualtrics International Inc. The focus of the joint meeting with
+the Audit Committee in December was the presentation of, and
+discussion on, the preliminary Group annual plan for 2019. This
+meeting was held in preparation for the Supervisory Board
+meeting in February 2019, at which the full Supervisory Board
+resolved to approve the 2019 Group annual plan.
+Further Information on Economic,
+Environmental, and Social Performance
+Management Report
+Difference
+Further Information on Economic,
+Environmental, and Social Performance
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Report by the Supervisory Board
+25
+25
+To Our
+Stakeholders
+Combined
+Management Report
+(Chairperson)
+Consolidated Financial
+Statements IFRS
+Compensation Report
+Note: This compensation report is part of the audited management report.
+Compensation for Executive and
+Supervisory Board Members
+This compensation report describes the compensation system,
+outlines the criteria that apply to the compensation for Executive
+Board and Supervisory Board members for the year 2018, and
+discloses the amount of compensation.
+Compensation for Executive Board
+Members
+The compensation for Executive Board members is intended to
+reflect the demanding role of Executive Board members leading a
+global company in a quickly evolving sector. The compensation
+level is aimed to be competitive to support SAP in the worldwide
+market for highly skilled executives, especially in the context of the
+software industry. It is our goal that our Executive Board
+compensation provides sustainable incentive for committed,
+successful work in a dynamic business environment.
+Compensation System for 2018
+Consolidated Financial
+Statements IFRS
+Additional
+Infomation
+Professor Hasso Plattner
+Further Information on Economic,
+Environmental, and Social Performance
+The Supervisory Board would like to sincerely thank Bernd
+Leukert, Wilhelm Haarmann, Klaus Wucherer, and Anja Feldmann
+for their invaluable contribution to the success of the Company.
+The Supervisory Board also thanks the Executive Board, the
+managing directors of the Group companies, and all SAP
+employees for their great commitment and dedication in 2018.
+Additional
+Infomation
+For the Supervisory Board
+On February 20, 2019, the Executive Board prepared the
+financial accounts of SAP SE and the Group for 2018, comprising
+the SAP SE financial statements, the consolidated financial
+statements, and the combined management report, as well as the
+combined non-financial report and submitted them without delay
+to the Supervisory Board.
+The Executive Board explained the financial statements of SAP
+SE and the SAP Group and its proposal concerning the
+appropriation of retained earnings at the meeting of the Audit
+Committee on February 19, 2019 (based on the drafts identical to
+the final documents) and at the meeting of the Supervisory Board
+on February 20, 2019. Members of the Executive Board answered
+questions from the Audit Committee and the Supervisory Board. At
+the Audit Committee meeting, they also explained the Annual
+Report on Form 20-F prepared in accordance with the applicable
+U.S. standards.
+After the Executive Board had explained them, the Audit
+Committee and the Supervisory Board reviewed the financial
+statement documents along with the combined non-financial
+report, taking KPMG's audit reports (or the drafts identical to the
+final documents) into account. The representatives of the auditor
+who attended presented full reports on the audit and the results of
+the audit to the Audit Committee and Supervisory Board meetings
+and explained its audit reports (or final drafts thereof). The auditor
+also reported that it had not identified any material weaknesses in
+SAP's internal control and risk management systems for financial
+reporting. Both the Audit Committee and the Supervisory Board
+asked detailed questions about the form, scope, and results of the
+audit. The Audit Committee reported to the Supervisory Board on
+its own review of the financial statements of SAP SE and the SAP
+The Committee also reported that KPMG had told it that no
+circumstances had arisen that might give cause for concern about
+KPMG's impartiality, and informed us about the services KPMG had
+provided that were not part of the audit. The Committee reported
+that it had examined the auditor's independence, taking the non-
+audit services it had rendered into consideration, and stated that in
+the Committee's opinion the auditor possessed the required
+degree of independence and expertise.
+The Audit Committee and the Supervisory Board satisfied
+themselves that KPMG had conducted the audit properly. In
+particular, they concluded that both the audit reports and the audit
+itself fulfilled the legal requirements. On the basis of the report and
+the Audit Committee's recommendation, the Supervisory Board
+approved the audit and, since there were no findings from our own
+examination, we gave consent to the SAP SE financial statements,
+the consolidated financial statements, and the combined
+management report (including the Executive Board's corporate
+governance statement pursuant to the German Commercial Code,
+sections 315d and 289f), as well as the combined non-financial
+report pursuant to the German Commercial Code, sections 315b
+and 289b. The financial statements and combined management
+report were thus formally adopted upon approval by the
+Supervisory Board. The Supervisory Board's opinion of the
+Company and the Group coincided with that of the Executive Board
+as set out in the combined management report. The Supervisory
+Board considered the proposal presented by the Executive Board
+concerning the appropriation of retained earnings especially with
+regard to the requirements of dividends policy, the effects on the
+liquidity of SAP SE and the Group, and the interests of the
+shareholders. We also discussed these matters with the auditor.
+We then endorsed the Executive Board's proposal concerning the
+appropriation of retained earnings, in accordance with the Audit
+Committee's recommendation. Finally, we approved this present
+report.
+Changes on the Supervisory and
+Executive Boards
+Group, its discussions with the Executive Board and with the
+auditor, and its supervision of the financial reporting process. It
+confirmed that as part of its supervisory work, it had addressed the
+SAP Group's internal control, risk management, and internal
+auditing systems, and found the systems to be effective.
+the Executive Board and the Supervisory Board concerning
+implementation of the Code. KPMG examined the SAP SE financial
+statements prepared in accordance with the German Commercial
+Code, the consolidated financial statements prepared in
+accordance with International Financial Reporting Standards
+(IFRSS) as required by the German Commercial Code, section 315e,
+and the combined SAP Group and SAP SE management report
+prepared in accordance with the German Commercial Code, and
+certified them without qualification. The auditor thus confirmed
+that, in its opinion and based on its audit in accordance with the
+applicable accounting principles, the SAP SE and consolidated
+financial statements give a true and fair view of the net assets,
+financial position, and results of operations of SAP SE and the SAP
+Group. The auditor also confirmed that the combined SAP SE and
+SAP Group management report is consistent with the
+corresponding financial statements and as a whole gives a suitable
+view of the position of SAP SE and the SAP Group and of
+foreseeable opportunities and risks. KPMG had completed its audit
+of SAP's internal control over financial reporting and certified
+without qualification that it complies with the applicable U.S.
+standards. The auditor stated in its opinion that it considers SAP's
+internal controls with respect to the consolidated financial
+statements to be effective in all material respects. All Audit
+Committee and Supervisory Board members received - initially in
+the form of drafts that were identical to the final documents - the
+documents concerning the financial statements mentioned above,
+the audit reports prepared by KPMG, and the Executive Board's
+proposal concerning the appropriation of retained earnings in good
+time.
+24
+24
+Report by the Supervisory Board
+To Our
+Stakeholders
+Combined
+Management Report
+Wilhelm Haarmann and Klaus Wucherer resigned their seats on
+the Supervisory Board with effect from the conclusion of the
+Annual General Meeting of Shareholders on May 17, 2018. Anja
+Feldmann stepped down from the Supervisory Board effective
+December 31, 2018. To that end, the Annual General Meeting of
+Shareholders elected Diane Greene and Friederike Rotsch to the
+Supervisory Board with effect from the conclusion of the Annual
+General Meeting of Shareholders on May 17, 2018, and Gerhard
+Oswald to the Supervisory Board effective January 1, 2019. Aicha
+Evans was likewise elected to the Supervisory Board with effect
+from the conclusion of the Annual General Meeting of Shareholders
+on May 17, 2018. She had initially been appointed a Supervisory
+Board member by Mannheim municipal court on June 21, 2017, as a
+replacement for Jim Hagemann Snabe who had resigned, but only
+for a term ending at the conclusion of the Annual General Meeting
+of Shareholders in 2018.
+Consolidated Financial
+Statements IFRS
+Christian Klein was appointed to the Executive Board as of
+January 1, 2018, as Chief Operating Officer (COO). Jürgen Müller
+has been an Executive Board member since January 1, 2019, and is
+responsible for the Technology & Innovation Board area. Bernd
+Leukert left the Executive Board effective February 20, 2019.
+2017
+2018
+2017
+2017
+2018
+2018
+2018
+2018
+2018
+2017
+Bernd Leukert
+2018
+Benefits Received
+Benefits Granted
+Benefits Received
+Benefits Granted
+Member of the Executive Board
+Member of the Executive Board
+Michael Kleinemeier
+€ thousands
+GCGC
+(Min)
+2018
+(Max)
+29.1
+(Max)
+10.3
+10.3
+10.3
+29.0
+29.1
+29.0
+713.1
+29.1
+29.1
+Fringe benefits²)
+700.0
+700.0
+700.0
+700.0
+700.0
+700.0
+700.0
+700.0
+700.0
+700.0
+700.0
+700.0
+Fixed compensation
+(Min)
+0
+SAP SOP 2010
+713.1
+compensation
+1,576.1
+○
+1,125.8
+666.5
+755.6
+0 1,576.1
+1,125.8
+One-year variable
+713.1
+0
+Multi-year variable
+713.1
+713.1
+549.1
+754.6
+549.1
+754.6
+754.6
+754.6
+Total
+13.1
+13.1
+13.1
+713.1
+9,730.4
+compensation
+2,128.8
+549.1 3,632.1
+1,421.1
+11,164.4 2,984.7
+754.6
+4,009.2
+Total according to
+Service cost
+713.1
+0
+713.1 9,730.4
+549.1 3,632.1
+LTI 2016 Plan
+1.421.1
+754.6
+4,009.2
+Total
+and 2011
+30.3
+Plan 2015
+RSU Milestone
+7,441.2
+0
+1,793.2
+0 8,833.7 1,680.0
+11,164.4 2,984.7
+10.3
+992.9
+Total
+634.3
+634.3
+Fixed compensation
+(Max)
+(Min)
+(Max)
+(Min)
+2017
+2018
+2017
+2018
+2018
+2018
+2017¹)
+2018¹)
+2017¹)
+2018
+2018
+2018¹)
+Benefits Received
+Benefits Granted
+Benefits Received
+Benefits Granted
+634.3
+430.4
+634.3
+430.4
+478.8
+762.7
+762.7
+762.7
+Total
+11.0
+11.8
+11.0
+11.8
+11.8
+11.8
+Member of the Executive Board
+48.4
+48.4
+128.4
+128.4
+128.4
+Fringe benefits²)
+700.0
+700.0
+700.0
+700.0
+700.0
+700.0
+128.4
+30.3
+Member of the Executive Board
+Jennifer Morgan
+2,128.8
+LTI 2016 Plan
+compensation
+Multi-year variable
+compensation
+1,175.3
+○ 1,576.1 1,125.8
+730.3
+710.3
+730.3
+710.3
+710.3
+710.3
+729.0
+1,175.3 1,125.8
+992.9
+0 1,576.1 1,125.8
+1,125.8
+One-year variable
+729.1
+729.0
+729.1
+729.1
+729.1
+0 8,833.7 2,396.4
+RSU Milestone
+Plan 2015
+2,397.7
+0 9,949.7 2.699.3
+€ thousands
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+German Corporate Governance Code
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined
+To Our
+33
+Compensation Report
+Luka Mucic
+GCGC
+729.1 11,138.9 4,251.2 1,722.0 1,904.3 4,233.8
+3,983.7
+Total according to
+Service cost
+710.3 12,236.1 4,555.4 2,952.0 1,905.6
+4,233.8
+729.1 11,138.9 4,251.2 1,722.0 1,904.3
+3,983.7
+Total
+SAP SOP 2010
+and 2011
+1,248.8
+4,555.4 2,952.0 1,905.6
+710.3 12,236.1
+478.8
+762.7
+Share-Based Payment Information Relating to Long-Term Incentives
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+35
+Executives
+including
+Compensation Report
+including
+Executives
+Members of the Executive Board received, hold, or held share
+units issued to them under the LTI 2016 Plan and hold or held RSUs
+issued to them under the RSU Milestone Plan 2015. For more
+Employees
+Executives
+41
+119
+99
+Employees
+40
+105
+99
+5
+14
+823
+Executives
+Average Annual
+Compensation
+(in € thousands)
+4
+information about the terms and details of these programs, see the
+Notes to the Consolidated Financial Statements, Note (B.3).
+Year Granted
+35,687
+89,217
+2017
+6,876.6
+80.84
+79.01
+51,505
+34,336
+85,841
+2018
+Bill McDermott (CEO)
+€ thousands
+Grants Under the LTI 2016 Plan
+€
+Quantity
+Quantity
+Quantity
+Value at Time
+of Grant
+Total Grant
+Grant Value
+per PSU at
+Time of Grant
+per RSU at
+Time of Grant
+Grant Value
+(PSU)
+Performance
+Share Units
+(60%)
+(40%)
+(RSU)
+Retention
+Share Units
+Total
+Share Units
+€
+11
+906
+(in € thousands)
+42,298.4
+3,734.0
+3,562.0
+4,100.3
+3,887.5
+-855.5
+-8.9
+2,753.4
+-51.4
+3,869.9
+4,422.5
+4,154.9
+Total compensation
+Less service cost
+-889.2
+39,136.2
+compensation
+Plus allocated actual
+8,197.1
+10,534.0
+992.9
+1,046.9
+992.9
+1,046.9
+594.6
+978.4
+992.9
+1,046.9
+compensation
+annual variable
+Vertical Pay Ratio
+The vertical pay ratio compares the total benefits granted to the
+CEO and the Executive Board members other than CEO with the
+total benefits granted to the Executives and all employees
+collectively who were employed at year end. In order to ensure
+comparability for total benefits granted, only fixed compensation,
+one-year and multi-year variable compensation are considered.
+The Executives comprise the first and second management levels
+below the Executive Board, that is, the Global Executive Team
+(GET) and the Senior Executive Team (SET).
+Ratio
+4,090.8
+11,785.4
+Average Annual
+Compensation
+Executive Board
+(Other Than CEO)
+CEO
+2016
+3,942.3
+10,384.3
+Ratio
+Executive Board
+(Other Than CEO)
+CEO
+2018
+39
+111
+101
+4
+12
+923
+11,209.2
+Average Annual
+Compensation
+(in € thousands)
+3,880.0
+Executive Board
+(Other Than CEO)
+CEO
+2017
+Ratio
+Employees
+including
+Executives
+Executives
+53,530
+variable target
+83.60
+7,741.2
+10,630
+26,574
+2018
+Luka Mucic
+1,680.0
+93.76
+85.91
+11,123
+7,416
+18,539
+2017
+2,128.8
+15,944
+80.84
+15,944
+10,630
+26,574
+2018
+Jennifer Morgan
+2,699.3
+88.88
+83.60
+18,665
+12,444
+31,109
+2017
+79.01
+2,397.7
+79.01
+2,128.8
+118,072
+295,178
+2018
+Total
+2,018.7
+88.88
+83.60
+13,959
+9,306
+23,265
+2017
+1,793.2
+80.84
+80.84
+13,431
+8,954
+22,385
+2018
+Stefan Ries
+2,396.4
+88.88
+83.60
+16,571
+11,048
+27,619
+2017
+79.01
+80.84
+79.01
+17,959
+7,416
+18,539
+2017
+2,128.8
+80.84
+79.01
+15,944
+10,630
+26,574
+2018
+Adaire Fox-Martin
+2,555.7
+11,123
+88.88
+17,672
+11,782
+29,454
+2017
+2,270.3
+80.84
+79.01
+17,004
+11,336
+28,340
+2018
+Robert Enslin
+83.60
+85.91
+93.76
+1,680.0
+11,972
+29,931
+2018
+Bernd Leukert
+2,396.4
+88.88
+83.60
+16,571
+11,048
+27,619
+2017
+2,128.8
+80.84
+79.01
+15,944
+10,630
+26,574
+2018
+Michael Kleinemeier
+1,793.2
+80.84
+79.01
+13,431
+8,954
+22,385
+2018
+Christian Klein (from 1/1/2018)
+88.88
+13.1
+Less granted annual
+3,866.9
+-1,125.8
+5,907.9
+6,949.2
+5,907.9
+6,949.2
+700.0
+700.0
+700.0
+700.0
+700.0
+700.0
+Fixed compensation
+Fringe benefits²)
+2017
+21.9
+2018
+2018
+2017
+2018
+2017
+2018
+(Max)
+2018
+(Min)
+2018
+Benefits Received
+Benefits Granted
+Benefits Received
+Benefits Granted
+Member of the Executive Board
+2017
+Total Executive Board
+21.9
+22.4
+8,401.1
+8,197.1
+9,293.9
+11,327.1
+883.1
+992.9
+0 1,576.1 1,125.8
+1,125.8
+One-year variable
+7,771.4
+8,118.2
+7,771.4
+21.9
+8,118.2
+721.9
+722.4
+721.9
+721.9
+721.9
+Total
+1,863.5
+1,169.0
+1,863.5
+1,169.0
+22.4
+21.9
+722.4
+Stefan Ries
+€ thousands
+GCGC
+2,128.8
+RSU Milestone
+1,680.0
+0 8,833.7
+2,128.8
+LTI 2016 Plan
+compensation
+Multi-year variable
+compensation
+1,175.3
+992.9
+1,576.1 1,125.8
+0
+0
+594.6
+674.2
+0 1,472.8
+1,052.0
+One-year variable
+711.0
+711.8
+711.0
+711.8
+711.8
+711.8
+2017
+1,125.8
+8,833.7 2,396.4
+949.5
+Plan 2015
+2,654.2 1,886.3
+4,233.2
+711.8 11,121.6
+487.7 3,966.4
+1,408.7
+2,841.9
+11,120.6
+814.1
+3,994.9
+Total according to
+8.9
+51.4
+8.9
+51.4
+51.4
+51.4
+Service cost
+11,121.6 4,233.2 2,654.2 1,886.3
+711.8
+478.8 3,966.4
+1,357.3
+2,833.0
+762.7 11,069.2
+3,943.5
+Total
+and 2011
+SAP SOP 2010
+compensation
+43,947.0 41,122.2
+-11,327.1 -9,293.9
+Multi-year variable
+compensation
+1,793.2
+-686.2
+-568.3
+Less service cost
+compensation
+annual variable
+992.9
+1,046.9
+1,046.9
+666.5
+1,046.9
+1,117.7
+1,234.4
+Total compensation
+1,846.7
+Plus allocated actual
+compensation
+variable target
+3,983.7 4,251.2
+-1,125.8 -1,125.8
+0
+3,632.1
+-1,125.8
+2,984.7
+-755.6
+5,221.6 4,009.2
+-1,267.2 -1,125.8
+4,738.7
+-1,327.3
+13,167.3
+-2,093.7
+-2,193.0
+Less granted annual
+2,039.5
+11,747.3
+11,025.5 12,234.1
+-194.1
+4,878.0
+2017
+2018
+Total Executive Board
+Stefan Ries
+2017
+2018
+4,233.2 3.640.9
+-1,125.8 -1,125.8
+3,966.4
+-1,125.8
+2,841.9
+-674.2
+4,555.4 3,994.9
+-1,125.8 -1,052.0
+4,233.8
+-1,125.8
+Total according to GCGC
+2017
+2018
+-235.8
+4,410.0
+2017
+2017
+2018
+Luka Mucic
+Jennifer Morgan
+Bernd Leukert
+€ thousands
+4,118.3
+3,904.8
+0
+3,553.2
+2,895.6
+3,930.3
+2018
+Total according to GCGC
+2017
+2018
+889.2
+855.5
+889.2
+855.5
+32,138.4
+25,013.4
+40.233.0
+43,091.5
+721.9 9,739.2 3,866.9 1,714.8 1,605.5
+3,640.9
+1,714.8 1,605.5
+721.9 9,739.2 3,866.9
+43,947.0
+3,640.9
+Service cost
+Total
+and 2011
+10,178.3
+SAP SOP 2010
+Plan 2015
+5,787.6
+8,698.1
+23,167.7
+23,646.2
+RSU Milestone
+0 7,441.2 2,018.7
+Total according to
+41,122.2
+25,868.9
+33,027.6
+2017
+2018
+2017
+2018
+2017
+2018
+2017
+2018
+Michael Kleinemeier
+Christian Klein
+Adaire Fox-Martin
+Robert Enslin
+Bill McDermott
+€ thousands
+Reconciliation Reporting of Total Compensation Pursuant to Section 314(1)(6a) HGB in Connection with
+GAS 17
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+Compensation Report
+=
+34
+2) Insurance contributions, the private use of company cars and aircraft, benefits in kind, expenses for maintenance of two households, payments and related supplements
+for relocation upon appointment to the Executive Board, reimbursement of fees for the preparation of tax returns and tax gross ups according to local conditions. The
+fringe benefits of Bill McDermott mainly consist of tax gross ups according to local conditions and expenses for maintenance of two households.
+1) The value of the fixed and one-year variable compensation is granted in U.S. dollars. For conversion purposes from U.S. dollars into euro, for fixed compensation the
+average exchange rate and for the one-year variable compensation the year-end exchange rate of the respective period applies.
+GCGC
+LTI 2016 Plan
+82.4
+The maximum possible payout amount of the LTI is reached if all
+of the following conditions are cumulatively met:
+82.4
+Retirement Pension Plan
+The following retirement pension agreements apply to the
+individual members of the Executive Board:
+-
+Adaire Fox-Martin, Christian Klein, Michael Kleinemeier, Bernd
+Leukert, Luka Mucic, and Stefan Ries are entitled to receive a
+retirement pension when they reach the retirement age of 62
+and retire from their Executive Board seat; or a disability
+-
+pension depending on a health examination if, before reaching
+the regular retirement age, they become subject to occupational
+disability or permanent incapacity. A surviving dependent's
+pension is paid on the death of a former member of the
+Executive Board. The disability pension is 100% of the vested
+retirement pension entitlement and is payable until the
+beneficiary's 62nd birthday, after which it is replaced by a
+retirement pension. The surviving dependent's pension is 60%
+of the retirement pension or vested disability pension
+entitlement at death. Entitlements are enforceable against SAP
+SE. Current pension payments are reviewed annually for
+adjustments and, if applicable, increased according to the
+surplus in the pension liability insurance. If service is ended
+before the retirement age of 62, pension entitlement is reduced
+in proportion as the actual length of service stands in relation to
+the maximum possible length of service. The applied retirement
+pension plan is contributory. The contribution is 4% of
+applicable compensation up to the applicable income threshold
+plus 14% of applicable compensation above the applicable
+income threshold. For this purpose, applicable compensation is
+180% of annual base salary. The applicable income threshold is
+the statutory annual income threshold for the state pension plan
+in Germany (West), as amended from time to time.
+Bill McDermott has rights to future benefits under the portion of
+the pension plan for SAP America classified as "Non-Qualified
+Retirement Plan" according to the U.S. Employee Retirement
+Income Security Act (ERISA). This “Non-Qualified" pension plan
+is a cash balance plan that provides either monthly pension
+payments or a lump sum on retirement. The pension becomes
+available from the beneficiary's 65th birthday. Subject to certain
+conditions, the plan also provides earlier payment or invalidity
+benefits. The "Non-Qualified" pension plan closed with effect
+from January 1, 2009. Interest continues to be accrued on the
+earned rights to benefits within this plan. The rights were
+partially earned before Bill McDermott became a member of the
+SAP Executive Board.
+SAP made contributions to a third-party pension plan for Bill
+McDermott, Robert Enslin, and Jennifer Morgan, as disclosed in
+the tables 'German Corporate Governance Code'. SAP's
+matching contributions are based on payments by Bill
+McDermott, Robert Enslin, and Jennifer Morgan into this
+pension plan.
+38
+Compensation Report
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Total Defined Benefit Obligations (DBO) and Net Defined Benefit Liability (Asset) to
+Executive Board Members
+Additional
+Infomation
+€ thousands
+Regular End-of-Service Undertakings
+End-of-Service Benefits
+Total expense for the share-based payment plans of Executive
+Board members was recorded in accordance with IFRS 2 (Share-
+Based Payments) and consists exclusively of obligations arising
+from Executive Board activities.
+Total
+309.7
+Christian Klein (from 1/1/2018)
+442.2
+Michael Kleinemeier
+914.2
+1,509.8
+Bernd Leukert
+775.2
+McDermott
+796.1
+675.8
+2,059.0
+772.0
+1,049.3
+8,054.4
+17,391.2
+Jennifer Morgan
+Luka Mucic
+Stefan Ries
+2,287.4
+309.7
+Bill Adaire Fox-
+Martin¹)
+Christian
+Klein (from
+Michael
+Kleinemeier")
+Net Defined Benefit Liability
+1,459.2
+-26.5
+61.9
+97.0
+141.2
+1,732.8
+(Asset) 1/1/2017
+value 1/1/2017
+DBO change in 2017
+93.5
+117.0
+132.9
+141.3
+86.7
+422.7
+Plan assets change in 2017
+100.7
+-148.7
+796.1
+1,035.4
+347.6
+Bernd
+Leukert¹)
+Luka
+Mucic¹)
+Stefan
+Total
+Ries¹)
+(CEO)
+1/1/2018)
+1)
+116.7
+DBO 1/1/2017
+Less plan assets market
+154.9
+451.6
+444.6
+257.9
+2,768.2
+181.4
+389.7
+1,459.2
+Adaire Fox-Martin
+2,181.9
+727.0
+RSU Milestone Plan 2015
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Quantity of RSUs
+Bill McDermott (CEO)
+Year Granted
+Holding on
+1/1/2018
+Exercised
+Consolidated Financial
+Statements IFRS
+2015
+0
+Holding on
+12/31/2018
+113,667
+2014
+59,488
+59,488
+0
+Robert Enslin
+113,667
+2015
+Management Report
+Stakeholders
+22,385
+2017
+23,265
+0
+23,265
+2016
+23,987
+0
+Combined
+23,987
+570,671
+118,072
+177,106
+865,849
+The Share Units granted in 2018 have a remaining term of
+3.08 years, the share units granted in 2017 have a remaining
+term of 2.08 years, and the share units granted in 2016 have a
+remaining term of 1.08 years.
+Compensation Report
+37
+To Our
+Total
+164.5
+39,985
+39,985
+41,130
+2014
+10,757
+10,757
+0
+Total
+340,122
+98,541
+0
+241,581
+Total Expense for Share-Based Payment
+€ thousands
+2018
+2017
+Bill McDermott (CEO)
+2,155.8
+7,684.4
+Robert Enslin
+The table above shows the Executive Board members' holdings
+issued to them under the RSU Milestone Plan 2015. The plan is a
+cash-settled long-term incentive scheme with a payout subsequent
+to a performance period of one year (after which the RSUs become
+non-forfeitable) and an additional holding period of three years. The
+plan consists of four plan tranches to be issued with respect to the
+calendar years 2012 through 2015. The RSUs granted in 2015 have
+a remaining term of 0.08 years.
+0
+41,130
+Luka Mucic
+2014
+14,148
+14,148
+0
+Michael Kleinemeier
+2015
+5,221
+0
+2015
+5,221
+2015
+41,578
+○
+41,578
+2014
+14,148
+14,148
+0
+Bernd Leukert
+151.2
+143.1
+159.1
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Net Present Values of the Postcontractual Non-
+Compete Abstention Payments
+€ thousands
+Contract Term
+Expires
+Net Present Value
+of Postcontractual
+Non-Compete
+Abstention
+Payment¹
+Management Report
+Bill McDermott (CEO)
+5,493
+Robert Enslin
+3/31/2021
+2,197
+Adaire Fox-Martin
+4/30/2020
+1,964
+Christian Klein (from 1/1/2018)
+3/31/2021
+12/31/2020
+Combined
+39
+Bernd Leukert
+24.6
+19.4
+Luka Mucic
+23.2
+18.1
+Stefan Ries
+12.6
+To Our
+Stakeholders
+8.5
+Postcontractual Non-Compete Provisions
+Each Executive Board member's contract includes a 12-month
+postcontractual non-compete agreement. During this non-compete
+period, Executive Board members receive abstention payments
+corresponding to 50% of their average contractual compensation
+as members. This average is calculated on the basis of the
+preceding three years. Any other occupational income generated
+by the Executive Board member is deducted from their
+compensation.
+The following table presents the theoretical amounts for the net
+present values of the postcontractual non-compete abstention
+payments. The calculation assumes the following:
+The Executive Board member leaves SAP at the end of their
+respective current contract term.
+Their final average contractual compensation prior to their
+departure equals their compensation in 2018.
+Actual postcontractual non-compete payments will likely differ
+from these amounts depending on the time of departure and the
+compensation levels and target achievements at the time of
+departure.
+These are vested entitlements. To the extent that members
+continue to serve on the Executive Board and that therefore more
+contributions are made for them in the future, pensions actually
+payable at the scheduled retirement age will be higher than the
+amounts shown in the table.
+Compensation Report
+1)The rights shown here for Bill McDermott refer solely to rights under the
+pension plan for SAP America.
+9.8
+1,772
+12/31/2019
+A control or profit transfer agreement is concluded with SAP SE
+as the dependent company.
+An Executive Board member's contract can also be terminated
+before full term if their appointment as an Executive Board member
+of SAP SE is revoked in connection with a change of control.
+Postcontractual Non-Compete Provisions
+Abstention compensation for the postcontractual non-compete
+period as described above is also payable on early contract
+termination.
+Permanent Disability
+In case of permanent disability, the contract will end at the end
+of the quarter in which the permanent inability to work was
+determined. The Executive Board member receives, in addition to a
+potential disability pension under the retirement plan described
+above, the monthly basic salary (fixed compensation) for a further
+12 months starting from the date the permanent disability is
+determined.
+Payments to Former Executive Board Members
+In 2018, we paid pension benefits of €2,054,300 to Executive
+Board members who had retired before January 1, 2018 (2017:
+€1,997,000). At the end of the year, the DBO for former Executive
+Board members was €38,373,500 (2017: €39,993,100). Plan
+assets of €31,615,100 are available to meet these obligations
+(2017: €31,944,100).
+Executive Board: Other Information
+SAP SE merges with another company and becomes the
+subsumed entity;
+We did not grant any compensation advance or credit to, or
+enter into any commitment for the benefit of, any member of our
+Executive Board in 2018 or the previous year.
+Compensation for Supervisory Board
+Members
+Compensation System
+Supervisory Board members' compensation is governed by our
+Articles of Incorporation, section 16.
+Each member of the Supervisory Board receives, in addition to
+the reimbursement of their expenses, an annual basic
+compensation of €165,000. The chairperson receives €275,000
+and the deputy chairperson €220,000 annually. In addition, we
+reimburse members of the Supervisory Board for the value-added
+tax payable on their compensation.
+For membership of the Audit Committee, Supervisory Board
+members receive an additional fixed annual compensation of
+40
+40
+Compensation Report
+As far as the law permits, SAP SE and its affiliated companies in
+Germany and elsewhere indemnify and hold harmless their
+respective directors and officers against and from the claims of
+third parties. To this end, we maintain directors' and officers'
+(D&O) group liability insurance. The policy is annual and is renewed
+from year to year. The insurance covers the personal liability of the
+insured group for financial loss caused by its managerial acts and
+omissions. The current D&O policy includes an individual
+deductible for Executive Board members of SAP SE as required by
+section 93 (2) of the German Stock Corporation Act.
+Michael Kleinemeier
+A third party is required to make a mandatory takeover offer to
+the shareholders of SAP SE under the German Securities
+Acquisition and Takeover Act;
+If an Executive Board member's appointment to the Executive
+Board expires or ceases to exist because of, or as a consequence
+of, change or restructuring, or due to a change of control, SAP SE
+and each Executive Board member has the right to terminate the
+employment contract within eight weeks of the occurrence by
+giving six months' notice. A change of control is deemed to occur
+when:
+1,952
+Bernd Leukert
+3/31/2021
+2,070
+4/30/2020
+1,934
+3/31/2021
+1,937
+-
+3/31/2024
+21,035
+Jennifer Morgan
+Luka Mucic
+Stefan Ries
+Total
+1) For the purpose of this calculation, the following discount rates have been
+applied: Bill McDermott 0.16% (2017: 0.16%); Robert Enslin 0.16% (2017:
+0.16%); Adaire Fox.Martin 0.04% (2017: 0.01%); Christian Klein 0.13%; Michael
+Kleinemeier 0.03% (2017: -0.01%); Bernd Leukert 0.16% (2017: 0.16%);
+Jennifer Morgan 0.04% (2017: 0.01%); Luka Mucic 0.16% (2017: 0.16%); Stefan
+Ries 0.71% (2017: -0.09%).
+Early End-of-Service Undertakings
+Severance Payments
+The standard contract for all Executive Board members
+provides that on termination before full term (for example, by the
+Company without cause where the member's appointment is
+revoked, where the member becomes occupationally disabled, or in
+connection with a change of control), SAP SE will pay to the
+member the outstanding part of the compensation target for the
+entire remainder of the term, appropriately discounted for early
+payment. Starting 2018, in accordance with the German Corporate
+Governance Code (GCGC), section 4.2.3, payments made to an
+Executive Board member due to early termination must not exceed
+twice the annual total compensation, or 150% of the severance
+payment cap in case of change of control. Members are not entitled
+to that severance payment if they have not served SAP as a
+member of the Executive Board for at least one year or if they leave
+SAP SE for reasons for which they are responsible. Upon the
+appointment of Christian Klein to the Executive Board, the
+Supervisory Board abstained from the waiting period of one year in
+consideration of his long-term successful tenure with SAP.
+1,716
+13,431
+14.8
+4.1
+95.2
+68.8
+1,436.9
+(Asset) 12/31/2017
+DBO change in 2018
+106.2
+89.9
+112.8
+43.6
+66.7
+-42.1
+-67.2
+250.2
+Plan assets change in 2018
+156.3
+141.3
+161.7
+153.9
+-16.1
+145.0
+-74.0
+1,310.5
+718.6
+DBO 12/31/2017
+1,310.5
+93.5
+271.9
+584.5
+585.9
+344.6
+-7.2
+3,190.9
+100.7
+345.9
+540.9
+490.7
+275.8
+1,754.0
+value 12/31/2017
+Net Defined Benefit Liability
+Less plan assets market
+Michael Kleinemeier
+143.5
+DBO 12/31/2018
+-126.4
+-91.9
+-141.9
+785.4
+(Asset) 12/31/2018
+1) The values shown here only reflect the pension entitlements that Adaire Fox-Martin, Christian Klein, Michael Kleinemeier, Bernd Leukert, Luka Mucic, and Stefan Ries will
+receive from the retirement pension plan for Executive Board members.
+The table below shows the annual pension entitlement earned
+during the Executive Board membership of each member of the
+Executive Board on reaching the scheduled retirement age of 62,
+based on entitlements from SAP under performance-based and
+salary-linked plans.
+Annual Pension Entitlement
+-169.0
+€ thousands
+Vested on
+12/31/2017
+Bill McDermott (CEO) "
+105.1
+89.5
+Adaire Fox-Martin
+7.3
+2.9
+Christian Klein (from 1/1/2018)
+Vested on
+12/31/2018
+901.7
+-28.5
+1,416.7
+1,416.7
+183.4
+112.8
+338.6
+568.4
+543.8
+277.4
+3,441.1
+-73.6
+Less plan assets market
+141.3
+507.6
+694.8
+635.7
+419.3
+2,655.7
+value 12/31/2018
+Net Defined Benefit Liability
+257.0
+8,954
+0
+2018
+(Min)
+2018¹) 2017¹)
+2017¹)
+2018
+2018
+Benefits Received
+Benefits Granted
+Member of the Executive Board
+(Max)
+Robert Enslin
+Benefits Granted
+2017¹)
+2018
+(Max)
+2018
+(Min)
+1,314.7
+1,314.7
+Fixed compensation
+Fringe benefits²)
+2018¹)
+Bill McDermott
+CEO
+€ thousands
+Benefits Received
+2018¹) 2017¹) 2018¹)
+German Corporate Governance Code
+1,314.7 1,374.3
+800.2
+2,109.4 2,109.4 2,646.2
+2,109.4
+Total
+368.1
+105.1
+368.1
+105.1
+105.1
+1,314.7 1,374.3
+105.1
+794.7 1,271.9
+794.7
+794.7
+836.5
+800.2
+836.5
+800.2
+800.2
+794.7 1,271.9
+2,109.4 2,646.2
+Executive Board Members' Compensation
+Amount of Compensation for 2018
+The relation between the LTI target amounts for the 2016 to
+2018 tranches and the theoretical payout amounts are based on
+SAP's share price at year end. The 2014 tranche discloses the
+relation between the respective target amount and the actual
+payout amount in May 2018. The 2015 tranche discloses the
+relation between the respective target amount and the payout
+amount scheduled for May 2019.
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+32
+Relation Between Target Amount and Payout Amount of the LTI
+32
+Compensation Report
+109.5
+147.5
+104.4
+88.2
+93.0
+2014
+2015
+31
+We present the Executive Board compensation disclosures in
+accordance with the recommendations of the German Corporate
+Governance Code ("GCGC"). Furthermore, the tables below
+provide a reconciliation statement following the requirements of
+sections 314 and 315 of the German Commercial Code
+(Handelsgesetzbuch, or "HGB") as specified in the German
+Accounting Standards ("GAS 17"). Pursuant to the
+recommendations of the GCGC, the value of benefits granted for
+the year under review as well as the benefits received, that is, the
+amounts disbursed for the year under review, are disclosed below
+based on the reference tables recommended in the GCGC. In
+contrast to the disclosure rules stipulated in the German HGB and
+GAS 17, the GCGC includes the pension expense, that is, the service
+cost according to IAS 19, in the Executive Board compensation and
+requires the additional disclosure of the target value for the one-
+year variable compensation and the maximum and minimum
+compensation amounts achievable for the variable compensation
+elements.
+Percentage
+RSU Milestone Plan
+2015
+2) Consideration of individual adjustment factor in addition to target achievement
+2015 ranging between 31.62% and 37.38%
+1) Consideration of theoretical payout amounts based on SAP's share price at
+year end
+119.61
+240.73
+126.97
+107.76
+ΝΑ
+12/31/2017
+LTI 2016 Plan
+119.61
+55.50
+82.65
+90.87
+12/31/2018
+2014
+Tranche
+2016
+2015
+Tranche¹ Tranche²)
+2017
+Tranche¹)
+2018
+Tranche¹)
+233.77
+2016
+905.3
+905.3
+2018
+2018
+2018
+2017
+2018
+2017
+2018
+2018
+2017
+2018
+Benefits Granted
+Benefits Granted Benefits Received
+(from 1/1/2018)
+Member of the Executive Board
+Christian Klein
+Member of the Executive Board
+Adaire Fox-Martin
+€ thousands
+Benefits Received
+German Corporate Governance Code
+2018
+(Min)
+54.6
+54.6
+54.6
+Fringe benefits²)
+700.0
+700.0
+700.0
+700.0
+2017
+466.7
+466.7
+700.0
+700.0
+700.0
+Fixed compensation
+(Max)
+(Min)
+(Max)
+700.0
+905.3
+Additional
+Infomation
+Consolidated Financial
+Statements IFRS
+RSU Milestone
+2,555.7
+0 9,420.8
+2,270.3
+0 28,535.4 7,741.2
+6,876.6
+LTI 2016 Plan
+compensation
+5,251.0 5,787.6
+Multi-year variable
+1,505.2
+1,117.7
+0 1,858.2 1,267.2
+0 3,070.2 2,093.7 1,846.7 2,486.9 1,327.3
+2,193.0
+One-year variable
+905.3 1,204.6
+1,204.6
+compensation
+Further Information on Economic,
+Environmental, and Social Performance
+1,248.8
+SAP SOP 2010
+and 2011
+Management Report
+Stakeholders
+Combined
+To Our
+Compensation Report
+GCGC
+194.1
+235.8
+3,507.6 2,903.9
+Plan 2015
+194.1
+5,221.6
+5,027.5
+905.3 12,184.3
+235.8 235.8
+1,141.1 12,420.1
+9,207.1 21,099.0 4,502.9
+568.3 686.2
+235.8
+9,775.4 21,785.2 4,738.7
+11,179.0 2,109.4 33,715.0 12,481.1
+568.3 568.3 568.3 686.2
+11,747.3 2,677.7 34,283.3 13,167.3
+Total according to
+Service cost
+Total
+10,178.3
+3,271.8 2,709.8
+54.6
+2017
+Percentage
+8,954
+13,431
+22,385
+Michael Kleinemeier
+2018
+0
+10,630
+15,944
+0
+26,574
+27,619
+0
+0
+27,619
+2016
+37,898
+0
+37,898
+2017
+Bernd Leukert
+2018
+18,539
+0
+0
+29,454
+2016
+40,417
+0
+0
+40,417
+Christian Klein (from 1/1/2018)
+Adaire Fox-Martin
+0
+10,630
+15,944
+26,574
+2017
+18,539
+0
+0
+2018
+29,454
+2018
+11,972
+18,539
+Luka Mucic
+2018
+0
+10,630
+15,944
+26,574
+2017
+0
+27,619
+0
+27,619
+2016
+37,898
+0
+○
+37,898
+Stefan Ries
+0
+0
+0
+2017
+17.959
+29,931
+2017
+31,109
+0
+0
+31,109
+2016
+18,539
+42,687
+0
+42,687
+Jennifer Morgan
+2018
+0
+10,630
+15,944
+26,574
+0
+2018
+2017
+17,004
+362%
+100%
+compensation
+■STI (short-term
+incentive)
+■Fixed
+■LTI (long-term
+incentive)
+Compensation Scheme 2018
+The following graphic illustrates the relation of the fixed and
+performance-based compensation elements in the Executive Board
+members' target compensation for 2018 based on € amounts, as
+well as the minimum and maximum possible compensation. The
+height of the bars is not indicative of the absolute compensation
+amount.
+The maximum possible payout amount of the STI is reached
+when the target achievement of all financial KPIs is 140%.
+The maximum possible payout amount for the LTI tranche is
+468% of the contractual target amount.
+317%
+The maximum compensation amount is capped at 362% (CEO)
+and 317% (Executive Board member other than CEO) of the total
+target compensation. This would be achieved in the event of the
+maximum possible payout amount of the STI and the LTI, as
+follows:
+Minimum and Maximum Compensation
+SAP has the contractual right to request that the Executive
+Board member returns any payments made from STI or LTI if it
+subsequently emerges that the payment was not justified in whole
+or in part because targets were not achieved at all or not achieved
+in the scope assumed when calculating the payment amount due
+on account of false information having been provided. In such case,
+the Executive Board member is obliged to repay to SAP the amount
+by which the payment actually made exceeds the payment amount
+due on the basis of the targets actually achieved. Such
+contractually agreed claim to repayment supplements the claim for
+restitution of unjustified enrichment pursuant to section 812 of the
+German Civil Code (BGB).
+Clawback Provisions
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+The minimum compensation amount reflects the fixed
+compensation amount and an LTI and STI payout of zero.
+Stakeholders
+17%
+12%
+STI Total Target Achievement
+The total target achievements of STI reflect the relation between
+the target amount and the payout amount. The STIs for the years
+2014 to 2017 were already paid out.
+Overview of the Relations Between Target and Payout for
+Performance-Based Compensation
+In the event of the maximum LTI payout for the entire Executive
+Board of €123 million in 2022, the shareholders would also benefit
+through the strong increase in market capitalization, which would
+be at least €200 billion from 2018 to 2022.
+The SAP share price has at least tripled (corresponding to an
+average annual increase of approximately 32%) compared to
+the grant price (cap on share price development).
+SAP's share price outperforms the Peer Group Index by at least
+25 percentage points (reaching the capped maximum 150% of
+the initial PSU allocation for that year).
+-
+(other than CEO)
+100%
+CEO
+Executive Board
+Max
+Target
+Min
+Max
+Target
+Min
+177,106
+The grant amount for the LTI tranche has been set at its capped
+maximum of 120% of the contractual target amount.
+28,340
+To Our
+106,147
+2018
+0
+34,336
+51,505
+85,841
+2017
+89,217
+0
+Bill McDermott (CEO)
+0
+2016
+122,423
+0
+0
+122,423
+Robert Enslin
+2018
+11,336
+89,217
+265,361
+Performance Share
+Units (60%)
+Holding on
+12/31/2018
+159,214
+23,167.7
+36
+Compensation Report
+To Our
+Combined
+Stakeholders
+Management Report
+Retention Share
+Units (40%)
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+LTI 2016 Plan
+Quantity of Share Units
+Year Granted
+Holding on
+1/1/2018
+Granted
+Executive Board Members' Holdings
+23,646.2
+.123
+A company's internal control over financial reporting in the
+consolidated financial statements is a process designed to provide
+reasonable assurance regarding the reliability of financial reporting
+in the consolidated financial statements and the preparation of
+financial statements for external purposes in accordance with
+generally accepted accounting principles. A company's internal
+control over financial reporting in the consolidated financial
+statements includes policies and procedures to (1) ensure an
+accounting system that in reasonable detail accurately and fairly
+reflects the transactions and dispositions of the company's assets,
+(2) provide reasonable assurance that transactions are recorded as
+necessary to permit preparation of financial statements in
+accordance with generally accepted accounting principles, and (3)
+provide reasonable assurance regarding prevention or timely
+detection of unauthorized acquisition, use or disposition of the
+company's assets that could have a material effect on the financial
+statements.
+Independent Auditor's Report
+We involved our tax specialists to evaluate the tax opinions of
+the external experts SAP engaged. We assessed the competency,
+skill and objectivity of the external experts as well as the opinions
+they prepared. We evaluated correspondence with the responsible
+tax authorities as well as the assumptions used to determine tax
+provisions based on our knowledge and experiences of the current
+application of the relevant legislation by authorities and courts.
+Through our international network we involved tax specialists with
+SAP operates in multiple tax jurisdictions with complexities of
+transfer pricing, changing tax laws, and intercompany financing
+transactions. The determination of provisions for tax contingencies
+requires SAP to make judgments on tax issues and develop
+estimates regarding SAP's exposure to tax risks. SAP regularly
+engages external experts to provide tax opinions to support their
+own risk assessment. The risk for the consolidated financial
+statements relates to the completeness, measurement and
+disclosure of the provision for uncertain tax treatments.
+Our Audit Approach
+The Financial Statement Risk
+Refer to note (C.5) - Income Taxes, and Group Management
+Report section Risk Management and Risks.
+SAP has developed an adequate framework for determining the
+accounting treatment for its revenue. For the vast majority of the
+software arrangements entered into during 2018, it was clear which
+of SAP's revenue recognition policies should be applied. Where
+there was room for interpretation, SAP's judgment was balanced
+and appropriate. SAP established adequate processes and manual
+controls to ensure accurate revenue recognition in the
+consolidated financial statements. The disclosures on the impact of
+the newly adopted standard, including the description of the
+transition method used, the transition effect and the dual-GAAP
+reporting are appropriate and based on reasonable assumptions.
+Measurement of the provision for income tax exposures
+Our Observations
+On the disclosures relating the new applied revenue recognition
+standard we assessed whether the described policy changes,
+transition method and transition impact are accurate. We tested
+the internal controls and calculations related to SAP's dual-GAAP
+reporting and assessed the accuracy of the disclosures.
+On the Revenue Accounting and Reporting software solution
+and the related process we tested the design and operating
+effectiveness of the manual controls that were implemented to
+agree revenues processed through the Revenue Accounting and
+Reporting software solution to underlying source documentation.
+In this regard, we also assessed whether the reports used by SAP
+to perform the controls were complete and accurate and evaluated
+the results of management's testing. For the majority of software
+support revenue, we compared the actual support revenue with the
+support revenue that is expected based on last year's support
+revenue, the loss rate of last year's support contracts and the
+current year software sales that trigger additional support revenue.
+For all other significant revenue streams we selected samples to
+determine the accurate revenue recognition.
+selections to corroborate the data underlying SAP's calculations.
+We also assessed the accuracy of the related disclosures in the
+consolidated financial statements.
+We evaluated the stand-alone selling prices for each of the
+deliverables that typically qualify as separate performance
+obligations in SAP's multiple-element arrangements by assessing
+the appropriateness of the methodology applied, testing
+mathematical accuracy of the underlying calculations, and testing
+evaluated whether the revenue recognition policies applicable to
+each separate performance obligation were applied
+appropriately to ensure that revenue is recognized in the correct
+period.
+45
+obtained external confirmations of the key terms and conditions
+from the respective customers to corroborate the information
+relevant for the accounting that we received from SAP;
+assessed whether SAP appropriately identified all separate
+performance obligations and allocated the transaction price to
+such performance obligations on the basis of (relative) stand-
+alone selling prices, or the residual method for on premise
+software; and
+-
+-
+Our Audit Approach
+The financial statement risk for the consolidated financial
+statements relates to accuracy of the required disclosures under
+IFRS 15.
+The new revenue recognition standard (IFRS 15) has been
+effective beginning January 1, 2018. IFRS 15 stipulates for the
+consolidated financial statements to disclose the impact of the
+newly adopted standard, including a description of the transition
+method used and the transition effect including impact on future
+periods, as well as the amounts that would have been recorded for
+the current period using the accounting policies under the old
+revenue recognition standards (IAS 11 and 18) (dual-GAAP
+reporting).
+There is the financial statement risk that revenue recognition
+cut-off as at the balance sheet date is incorrect and that revenues
+are allocated incorrectly.
+bear a significant risk of error. In response to this significant risk of
+error, SAP established processes and manual controls to ensure
+the accurate revenue recognition in the consolidated financial
+statements. An internal task force was established by SAP to
+prevent and remediate issues. The additional processes and
+controls focused on agreeing revenues processed through the
+Revenue Accounting and Reporting software solution to underlying
+source documentation such as sales orders or billing plans.
+Thresholds were determined to focus the control performance on
+significant deviations.
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+obtained an understanding of the transaction through
+inspection of the underlying contractual agreements and other
+related documents as well as discussions with SAP's accounting
+and/or sales representatives;
+To Our
+Stakeholders
+45
+Combined
+We agreed the total purchase price with the underlying
+purchase agreement and evidence of payment.
+With the support of our valuation specialists we assessed,
+among other things, the appropriateness of the significant
+assumptions as well as the identification and valuation approaches.
+We initially obtained an understanding of the acquisition based on
+inquires of employees in the finance and M&A departments as well
+as by assessing the relevant contracts.
+We assessed the process of the identification of the assets
+acquired and liabilities assumed in terms of conformity with the
+requirements of IFRS 3 using our knowledge of SAP's business
+model. SAP has implemented controls designed to ensure that the
+assets acquired and the liabilities assumed are sufficiently
+identified and correctly measured and that the disclosures in the
+notes are accurate. We tested the design and operating
+effectiveness of these controls.
+Our Audit Approach
+The risk for the consolidated financial statements relates to
+insufficient identification or incorrect measurement of the assets
+acquired and the liabilities assumed. In addition, there is the risk
+that the disclosures in the notes to the consolidated financial
+statements are not accurate.
+The identification and measurement of the assets acquired and
+the liabilities assumed is complex and is based on the Executive
+Board's judgmental assumptions. Significant assumptions used in
+the measurement of intangible assets acquired and liabilities
+assumed comprise the projections of the acquired business's
+revenues and margins, asset-specific revenue and margin
+adjustments, estimated useful lives, royalty and attrition rates, as
+well as the cost of capital.
+external valuation expert to determine and measure the identifiable
+assets acquired and the liabilities assumed.
+On April 5, 2018 SAP acquired Callidus Inc., Dublin, USA
+("Callidus"). The purchase price amounted to USD 2,469 million. In
+allocating the purchase price to identifiable assets acquired and
+liabilities assumed, SAP recorded net assets in the amount of EUR
+648 million, and goodwill in the amount of EUR 1,483 million.
+Pursuant to IFRS 3, the identifiable assets acquired and the
+liabilities assumed are, unless specified otherwise in IFRS 3,
+recorded at their fair value on the acquisition date. SAP engaged an
+The Financial Statement Risk
+Accounting for the acquisition of Callidus Inc., Dublin/USA
+Refer to note (D.1) - Business Combinations.
+The approaches underlying the impairment testing of goodwill
+are appropriate and consistent with the applicable accounting and
+valuation principles. SAP applied a balanced set of assumptions in
+determining the recoverable amount.
+Our Observations
+To Our
+Stakeholders
+SAP has implemented controls designed to ensure that the
+calculation of the recoverable amount for SAP Business Network is
+appropriate. We tested the design and operating effectiveness of
+these controls. We involved our valuation specialists to assess the
+valuation methodologies applied and key assumptions used in
+measuring the fair value less cost of disposal and to test the
+mathematical accuracy of the discounted cash flows and other
+valuation models. We evaluated SAP's assumptions by comparing
+the fair value estimates to our own expectations and performed
+independent sensitivity analysis for each key assumption.
+The risk for the consolidated financial statements relates to the
+appropriateness of the determination and recognition of
+impairments.
+SAP performed the annual goodwill impairment test at the level
+of its operating segments as there are no lower levels within SAP at
+which goodwill is monitored for internal management purposes.
+SAP's acquisitions executed in prior periods led to a material
+goodwill in the SAP Business Network Segment in which SAP
+mainly develops, markets and sells its SAP Ariba, SAP Fieldglass
+and SAP Concur cloud offerings. Goodwill allocated to the SAP
+Business Network is material as of December 31, 2018 (13.4 % of
+consolidated balance sheet total). The respective impairment test
+is complex and involves significant judgment. The key assumptions
+relate to the budgeted revenue growth, budgeted operating
+margins, pre-tax discount rates including the determination of the
+peer group and terminal growth rates.
+The Financial Statement Risk
+Refer to note (D.2) - Goodwill.
+Recoverability of the carrying amount of goodwill for SAP
+Business Network
+SAP's judgments as to the amounts recognized as tax
+provisions for income tax exposures as at December 31, 2018 are
+appropriate.
+Our Observations
+the appropriate knowledge on the respective local tax rules and
+regulations who reported the results of their assessment to us.
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Our Audit Approach
+We assessed the competency, skills and objectivity of the
+external valuation expert engaged by SAP. Furthermore, we
+considered the consistency of the measurement methods used and
+the measurement principles applicable.
+Independent Auditor's Report
+In the financial year 2018 SAP generated revenue of
+EUR 24.7 billion, of which EUR 15.6 billion relate to revenues from
+sales of software licenses and support services. The accounting for
+revenue for software under IFRS 15 is complex and therefore bears
+the inherent risk that errors are made in the accounting for revenue
+arrangements. SAP defined detailed policies, procedures and
+processes to manage the accounting for its customer contracts,
+which are also described in the notes. Applying them often requires
+significant judgments, for example in the assessment of whether a
+multiple element arrangement exists, the identification of different
+performance obligations, the determination of the stand-alone
+selling price of a single performance obligation, and the allocation
+of the transaction price to the different performance obligations.
+SAP derives its revenue from different revenue classes. Since
+2017 SAP has been using a Revenue Accounting and Reporting
+software solution for all revenue streams which aimed at increasing
+the level of automation in SAP's revenue accounting processes.
+Primarily due to the high number and complexity of SAP's
+customer contracts, the new software solution as well as the
+application of the newly designed processes to these contracts
+Luka Mucic
+Jennifer Morgan
+Bernd Leukert
+Michael Kleinemeier
+Christian Klein
+Adaire Fox-Martin
+Robert Enslin
+Bill McDermott
+Executive Board of SAP SE
+Walldorf, Germany
+SAP SE
+Walldorf, February 20, 2019
+Jürgen Müller
+To the best of our knowledge, and in accordance with the
+applicable reporting principles, the Consolidated Financial
+Statements give a true and fair view of the assets, finances, and
+operating results of the SAP Group, and the management report of
+the Group and SAP SE includes a fair review of the development
+and performance of the business and the position of the Group and
+SAP SE, together with a description of the principal opportunities
+and risks associated with the expected development of the Group
+and SAP SE.
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+Compensation Report
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+42
+As far as the law permits, we indemnify Supervisory Board
+members against, and hold them harmless from, claims brought by
+third parties. To this end, we maintain directors' and officers'
+(D&O) group liability insurance. In accordance with section 3.8 of
+the GCGC, each member of the Supervisory Board will bear a
+deductible of at least 10% of any loss. The deductible is capped at
+1.5 times a member's fixed annual compensation.
+Consolidated Financial
+Statements IFRS
+Responsibility Statement
+44
+Stefan Ries
+43
+The Financial Statement Risk
+Refer to note (A.1) - Revenue, note (A.5) - Adoption of IFRS 15,
+and Group Management Report, section Risk Management and
+Risks.
+Revenue
+Key audit matters are those matters that, in our professional
+judgment, were of most significance in our audit of the
+consolidated financial statements for the financial year from
+January 1 to December 31, 2018. These matters were addressed in
+the context of our audit of the consolidated financial statements as
+a whole, and in forming our opinion thereon, we do not provide a
+separate opinion on these matters.
+Key Audit Matters in the Audit of Consolidated
+Financial Statements
+Our responsibilities under those requirements, principles and
+standards are further described in the "Auditor's Responsibilities
+for the Audit of the Consolidated Financial Statements and of the
+Group Management Report" section of our auditor's report. We are
+independent of the group entities in accordance with the
+requirements of European law and German commercial and
+professional law, and we have fulfilled our other German
+professional responsibilities in accordance with these
+requirements. In addition, in accordance with Article 10 (2) point (f)
+of the EU Audit Regulation, we declare that we have not provided
+non-audit services prohibited under Article 5 (1) of the EU Audit
+Regulation. We believe that the evidence we have obtained is
+sufficient and appropriate to provide a basis for our opinions on the
+consolidated financial statements and on the Group Management
+Report.
+Standards on Auditing (ISAs) and guidelines of the Public Company
+Accounting Oversight Board (United States).
+We conducted our audit of the consolidated financial
+statements and of the Group Management Report in accordance
+with Section 317 HGB and the EU Audit Regulation No. 537/2014
+(referred to subsequently as "EU Audit Regulation") and in
+compliance with German Generally Accepted Standards for
+Financial Statement Audits promulgated by the Institut der
+Wirtschaftsprüfer [Institute of Public Auditors in Germany] (IDW)
+as well as in supplementary compliance with the International
+Basis for the Opinions
+Pursuant to Section 322 (3) sentence 1 HGB, we declare that
+our audit has not led to any reservations relating to the legal
+compliance of the consolidated financial statements and of the
+Group Management Report.
+the accompanying Group Management Report as a whole
+provides an appropriate view of the Group's position. In all
+material respects, this Group Management Report is consistent
+with the consolidated financial statements, complies with
+German legal requirements and appropriately presents the
+opportunities and risks of future development.
+the accompanying consolidated financial statements comply, in
+all material respects, with the IFRSS as adopted by the EU and
+the additional requirements of German commercial law
+pursuant to Section 315e (1) HGB [Handelsgesetzbuch: German
+Commercial Code], as well as the IFRSS as adopted by the
+International Accounting Standards Board and, in compliance
+with these requirements, give a true and fair view of the assets,
+liabilities and financial position of the Group as at December 31,
+2018, and of its financial performance for the financial year from
+January 1 to December 31, 2018 and
+Responsibility Statement
+-
+In addition, we have audited the combined group management
+report by the SAP Group and the management report of SAP SE,
+Walldorf ("Group Management Report") for the financial year from
+January 1 to December 31, 2018.
+We have audited the consolidated financial statements of SAP
+SE, Walldorf, and its subsidiaries (the Group), which comprise the
+consolidated statements of financial position as at December 31,
+2018, consolidated income statements, consolidated statements of
+comprehensive income, consolidated statements of changes in
+equity and consolidated statements of cash flows for the financial
+year from January 1 to December 31, 2018 and notes to the
+consolidated financial statements, including a summary of
+significant accounting policies.
+Opinions
+Report on the Audit of the Consolidated
+Financial Statements and of the Group
+Management Report
+TO SAP SE, Walldorf
+Independent Auditor's Report
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+In our opinion, on the basis of the knowledge obtained in the
+audit,
+We discussed the expected development of revenues and
+margins used in the fair value measurements with those
+responsible for planning. Furthermore, we reconciled these with the
+budgets approved by the Executive Board and approved by the
+Supervisory Board and assessed the consistency of the
+assumptions with external market views of cloud companies. We
+assessed the appropriateness of significant assumptions by
+comparing them to our own expectations based on our knowledge
+of the acquired business, our experience in the software industry
+and taking into account recent comparable transactions. The
+assumptions and parameters underlying the cost of capital - in
+particular the risk-free interest rate, the market risk premium and
+the beta factor - were compared with own assumptions and
+publicly available data.
+To assess the mathematical accuracy we recalculated amounts
+selected using a risk-oriented approach. Finally, we assessed
+whether the disclosures in the notes to the consolidated financial
+statements with respect to the acquisition of Callidus are accurate.
+Our Observations
+The approaches underlying the identification and valuation of
+the assets acquired and the liabilities assumed are appropriate and
+consistent with the applicable accounting and valuation principles.
+To Our
+Stakeholders
+50
+50
+49
+49
+Independent Auditor's Report
+[German Public Auditor]
+Wirtschaftsprüferin
+Schneider
+Wirtschaftsprüfer
+[German Public Auditor]
+Rackwitz
+Wirtschaftsprüfungsgesellschaft
+[Original German version signed by:]
+Combined
+KPMG AG
+The German Public Auditor responsible for the engagement is Bodo
+Rackwitz.
+German Public Auditor Responsible for the
+Engagement
+We audited the financial statements of SAP SE and performed
+various financial statement audits at subsidiaries. Furthermore,
+other assurance services required by law or on a contractual basis
+were performed, including an assurance engagement on selected
+qualitative and quantitative sustainability disclosures of the
+Integrated Report 2018, an EMIR assurance service pursuant to
+section 20 of German Securities Trading Act [WpHG], assurance
+services related to software products, and the issuance of two
+comfort letters in connection with debt offerings of SAP SE.
+In addition to the financial statement audit, we have provided to
+group entities the following services that are not disclosed in the
+consolidated financial statements or in the Group Management
+Report:
+We declare that the opinions expressed in this auditor's report
+are consistent with the additional report to the audit committee
+pursuant to Article 11 of the EU Audit Regulation (long-form audit
+report).
+We were elected as group auditor at the annual general meeting
+on May 17, 2018. We were engaged by the Chairman of the Audit
+Committee of the Supervisory Board of SAP SE on May 29, 2018,
+and this engagement was confirmed on August 9, 2018. We have
+been the group auditor of SAP SE without interruption since the
+financial year 2002.
+Further Information pursuant to Article 10 of the
+EU Audit Regulation
+We believe that the audit evidence we have obtained is sufficient
+and appropriate to provide a basis for our opinion.
+Our responsibility is to express an opinion on the internal control
+over financial reporting in the consolidated financial statements
+based on our audit. We conducted our audit in accordance with the
+standards of the Public Company Accounting Oversight Board
+(United States). Those standards require that we plan and perform
+the audits to obtain reasonable assurance about whether effective
+internal control over financial reporting in the consolidated financial
+statements was maintained in all material respects. Our audit of
+internal control over financial reporting in the consolidated financial
+statements included obtaining an understanding of internal control
+over financial reporting, assessing the risk of material deficiencies
+in internal control, testing and evaluating the design and operating
+effectiveness of internal control based on this assessment, and
+performing such other procedures as we considered necessary in
+the circumstances.
+Auditor's Responsibility for the Internal Control
+over Financial Reporting in the Consolidated
+Financial Statements
+The Supervisory Board is responsible for overseeing the Group's
+internal control over financial reporting in the consolidated financial
+statements
+Additional
+Infomation
+Mannheim, February 20, 2019
+Further Information on Economic,
+Environmental, and Social Performance
+Management Report
+Further Information on Economic,
+Environmental, and Social Performance
+.101
+99
+.81
+78
+73
+72
+70
+64
+.57
+52
+51
+Expected Developments and Opportunities.
+Consolidated Financial
+Statements IFRS
+Risk Management and Risks
+Corporate Governance Fundamentals.
+Financial Performance: Review and Analysis
+Energy and Emissions
+Employees and Social Investments.
+Customers...
+Security, Privacy, and Data Protection
+Products, Research & Development, and Services.
+Performance Management System
+Strategy and Business Model
+General Information About This Management Report.
+Combined Management Report
+Additional
+Infomation
+Business Conduct......
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+Our objectives are to obtain reasonable assurance about
+whether the consolidated financial statements as a whole are free
+from material misstatement, whether due to fraud or error, and
+whether the Group Management Report as a whole provides an
+appropriate view of the Group's position and, in all material
+respects, is consistent with the consolidated financial statements
+and the knowledge obtained in the audit, complies with the German
+legal requirements and appropriately presents the opportunities
+and risks of future development, as well as to issue an auditor's
+report that includes our opinions on the consolidated financial
+statements and on the Group Management Report.
+Auditor's Responsibilities for the Audit of the
+Consolidated Financial Statements and of the
+Group Management Report
+The Supervisory Board is responsible for overseeing the Group's
+financial reporting process for the preparation of the consolidated
+financial statements and of the Group Management Report.
+material respects, consistent with the consolidated financial
+statements, complies with the German legal requirements and
+appropriately presents the opportunities and risks of future
+development. In addition, the Executive Board is responsible for
+such arrangements and measures (systems) as the Executive
+Board has considered necessary to enable the preparation of the
+Group Management Report that is in accordance with the
+applicable German legal requirements, the German Accounting
+Standards number 17 and 20 (GAS 17, GAS 20) and the IFRS
+Practice Statement Management Commentary and to be able to
+provide sufficient appropriate evidence for the assertions in the
+Group Management Report.
+Furthermore, the Executive Board is responsible for the
+preparation of the Group Management Report, that as a whole,
+provides an appropriate view of the Group's position and is, in all
+In preparing the consolidated financial statements, the
+Executive Board is responsible for assessing the Group's ability to
+continue as a going concern. The Executive Board also has the
+responsibility for disclosing, as applicable, matters related to going
+concern. In addition, the Executive Board is responsible for
+financial reporting based on the going concern basis of accounting
+unless there is an intention to liquidate the Group or to cease
+operations, or there is no realistic alternative but to do so.
+Responsibilities of the Executive Board and the
+Supervisory Board for the Consolidated Financial
+Statements and the Group Management Report
+The Executive Board of SAP SE is responsible for the
+preparation of the consolidated financial statements that comply,
+in all material respects, with IFRSS as adopted by the EU and the
+additional requirements of German commercial law pursuant to
+Section 315e (1) HGB as well as IFRS as adopted by the
+International Accounting Standards Board and that the
+consolidated financial statements, in compliance with these
+requirements, give a true and fair view of the assets, liabilities,
+financial position, and financial performance of the Group. In
+addition, the Executive Board is responsible for such internal
+control as the Executive Board has determined necessary to enable
+the preparation of consolidated financial statements that are free
+from material misstatement, whether due to fraud or error.
+In addition, we were engaged to perform an independent
+assurance engagement on selected qualitative and quantitative
+sustainability disclosures of the integrated report 2018. In regard to
+the nature, extent and conclusions of this independent assurance
+engagement we refer to our Independence Assurance Report dated
+on February 20, 2019.
+If, based on the work we have performed, we conclude that
+there is a material misstatement of this other information, we are
+required to report that fact. We have nothing to report in this
+regard.
+otherwise appears to be materially misstated.
+-
+- is materially inconsistent with the consolidated financial
+statements, with the Group Management Report or our
+knowledge obtained in the audit, or
+Reasonable assurance is a high level of assurance, but is not a
+guarantee that an audit conducted in accordance with Section 317
+HGB and the EU Audit Regulation and in compliance with German
+Generally Accepted Standards for Financial Statement Audits
+promulgated by the Institut der Wirtschaftsprüfer (IDW) as well as
+in supplementary compliance with ISAs and guidelines of the Public
+Company Accounting Oversight Board (United States) will always
+detect a material misstatement. Misstatements can arise from
+fraud or error and are considered material if, individually or in the
+aggregate, they could reasonably be expected to influence the
+economic decisions of users taken on the basis of these
+consolidated financial statements and this Group Management
+Report.
+In connection with our audit, our responsibility is to read the
+other information and, in so doing, to consider whether the other
+information
+The Executive Board of SAP SE is responsible for the other
+information. The other information comprises the Integrated
+Report published on the website of SAP SE and the Annual Report
+on Form 20-F, except for the audited consolidated financial
+statements and the Group Management Report and our auditor's
+report thereon.
+Other Information
+SAP applied a balanced set of key assumptions and parameters.
+The disclosures in the notes to the consolidated financial
+statements are appropriate.
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+Independent Auditor's Report
+46
+46
+Our opinions on the consolidated financial statements and on
+the Group Management Report do not cover the other information
+and consequently we do not express, an opinion or any other form
+of assurance conclusion thereon.
+We exercise professional judgment and maintain professional
+scepticism throughout the audit. We also:
+-
+Identify and assess the risks of material misstatement of the
+consolidated financial statements and of the Group
+Management Report, whether due to fraud or error, design and
+perform audit procedures responsive to those risks, and obtain
+audit evidence that is sufficient and appropriate to provide a
+basis for our opinions. The risk of not detecting a material
+misstatement resulting from fraud is higher than for one
+resulting from error, as fraud may involve collusion, forgery,
+intentional omissions, misrepresentations, or the override of
+internal control.
+To Our
+Stakeholders
+Independent Auditor's Report
+48
+48
+Because of its inherent limitations, internal control over financial
+reporting may not prevent or detect material misstatements. Also,
+projections of any evaluation of effectiveness to future periods are
+subject to the risk that controls may become inadequate because
+of changes in conditions, or that the degree of compliance with the
+policies or procedures may deteriorate.
+SAP SE's Executive Board is responsible for maintaining
+effective internal control over financial reporting in the
+consolidated financial statements and assessing its effectiveness,
+which is included in the Executive Board's report on the internal
+control over consolidated financial reporting.
+Executive Board's and Supervisory Board's
+Responsibility for the Internal Control over
+Financial Reporting in the Consolidated Financial
+Statements
+In our opinion, SAP maintained, in all material respects, effective
+internal control over financial reporting in the consolidated financial
+statements as at December 31, 2018 based on the criteria set out in
+the Internal Control - Integrated Framework (2013) issued by the
+COSO.
+We have audited the internal control over financial reporting in
+the consolidated financial statements of SAP SE, Walldorf, and its
+subsidiaries in place as at December 31, 2018. This control system
+is based on criteria set out in the Internal Control - Integrated
+Framework (2013) issued by the Committee of Sponsoring
+Organizations of the Treadway Commission (COSO).
+Opinion on Internal Control over Financial
+Reporting in the Consolidated Financial
+Statements
+Report on Internal Control over Financial
+Reporting in the Consolidated Financial
+Statements pursuant to PCAOB
+Other Legal and Regulatory
+Requirements
+and are therefore the key audit matters. We describe these matters
+in our auditor's report, unless law or regulation precludes public
+disclosure about the matter.
+From the matters communicated with the Supervisory Board,
+we determine those matters that were of most significance in the
+audit of the consolidated financial statements of the current period
+We also provide the Supervisory Board with a statement that we
+have complied with relevant independence requirements, and
+communicate with them all relationships and other matters that
+may reasonably be thought to bear on our independence, and
+where applicable the related safeguards.
+-
+Evaluate the appropriateness of accounting policies used by the
+Executive Board and the reasonableness of accounting
+estimates made by the Executive Board and related disclosures.
+Conclude on the appropriateness of the Executive Board's use
+of the going concern basis of accounting and, based on the audit
+evidence obtained, whether a material uncertainty exists related
+to events or conditions that may cast significant doubt on the
+Group's ability to continue as a going concern. If we conclude
+that a material uncertainty exists, we are required to draw
+attention in the auditor's report to the related disclosures in the
+consolidated financial statements and in the Group
+Management Report or, if such disclosures are inadequate, to
+modify our respective opinions. Our conclusions are based on
+the audit evidence obtained up to the date of our auditor's
+report. However, future events or conditions may cause the
+Group to cease to be able to continue as a going concern.
+Evaluate the overall presentation, structure and content of the
+consolidated financial statements, including the disclosures,
+and whether the consolidated financial statements present the
+underlying transactions and events in a manner that the
+consolidated financial statements give a true and fair view of the
+assets, liabilities, financial position and financial performance of
+the Group in compliance with IFRSS as adopted by the EU as
+well as with IFRSS as adopted by the International Accounting
+Standards Board and the additional requirements of German
+commercial law pursuant to Section 315e(1) HGB.
+Obtain sufficient appropriate audit evidence regarding the
+financial information of the entities or business activities within
+the Group to express opinions on the consolidated financial
+statements and on the Group Management Report. We are
+responsible for the direction, supervision and performance of
+the group audit. We remain solely responsible for our opinions.
+Evaluate the consistency of the Group Management Report with
+the consolidated financial statements, its conformity with
+German law, and the view of the Group's position it provides.
+Perform audit procedures on the prospective information
+presented by the Executive Board in the Group Management
+Report. On the basis of sufficient appropriate audit evidence we
+evaluate, in particular, the significant assumptions used by
+Executive Board as a basis for the prospective information, and
+evaluate the proper derivation of the prospective information
+from these assumptions. We do not express a separate opinion
+on the prospective information and on the assumptions used as
+a basis. There is a substantial unavoidable risk that future
+events will differ materially from the prospective information.
+We communicate with the Supervisory Board regarding, among
+other matters, the planned scope and timing of the audit and
+significant audit findings, including any significant deficiencies in
+internal control that we identify during our audit.
+Management Report in order to design audit procedures that
+are appropriate in the circumstances.
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+47
+Independent Auditor's Report
+Obtain an understanding of internal control relevant to the audit
+of the consolidated financial statements and of arrangements
+and measures (systems) relevant to the audit of the Group
+Management Report
+Combined
+On software revenue recognition, we evaluated the compliance
+of SAP's accounting policies with the IFRS Framework and IFRS 15.
+We considered the design and tested the operating effectiveness of
+the key controls implemented by SAP on the identification of
+multiple-element arrangements, the identification of separate
+performance obligations and the identification of the stand-alone
+selling price for all performance obligations other than on premise
+software (due to the residual method being applied). For all
+software arrangements that we considered to be individually
+significant and for a sample of the remaining software
+arrangements, we also:
+41
+165.0
+Prof. Anja Feldmann (until 12/31/2018)
+93.5
+11.0
+82.5
+194.3
+29.3
+165.0
+Aicha Evans (from 7/1/2017)
+198.0
+33.0
+165.0
+203.5
+38.5
+165.0
+203.5
+38.5
+165.0
+203.5
+19.3
+38.5
+184.3
+22.0
+187.0
+22.0
+165.0
+Andreas Hahn
+209.0
+44.0
+165.0
+82.3
+13.8
+68.5
+Prof. Dr. Wilhelm Haarmann (until 5/17/2018)
+ΝΑ
+NA
+NA
+112.8
+2.8
+110.0
+Diane Greene (from 5/17/2018)
+187.0
+165.0
+165.0
+198.0
+33.0
+Margret Klein-Magar (deputy chairperson)
+Prof. Dr. h.c. mult. Hasso Plattner (chairperson)
+Fixed
+Total
+Fixed Compensation
+2017
+2018
+€ thousands
+Supervisory Board Members' Compensation in 2018
+Any members of the Supervisory Board who have served for
+less than the entire year receive one-twelfth of the annual
+remuneration for each month of service commenced. This also
+applies to the increased compensation of the chairperson and the
+deputy chairperson(s) and to the remuneration for the chairperson
+and the members of a committee.
+€16,500, and for membership of any other Supervisory Board
+committee €11,000, provided that the committee concerned has
+met in the year. The chairperson of the Audit Committee receives
+€27,500, and the chairpersons of the other committees receive
+€22,000. The fixed remuneration is payable after the end of the
+year.
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+To Our
+Stakeholders
+103
+Pekka Ala-Pietilä
+Panagiotis Bissiritsas
+Martin Duffek
+Compensation for Committee
+205.3
+40,3
+165.0
+247.5
+27.5
+220.0
+242.0
+22.0
+220.0
+165.0
+363.0
+275.0
+363.0
+88.0
+275.0
+Work
+Work
+Total
+Compensation
+for Committee
+Compensation
+88.0
+22.0
+165.0
+Prof. Dr. Gesche Joost
+11.0
+165.0
+Pierre Thiollet
+93.5
+11.0
+82.5
+ΝΑ
+NA
+ΝΑ
+Jim Hagemann Snabe (until 6/30/2017)
+187.0
+22.0
+165.0
+187.0
+22.0
+165.0
+Dr. Sebastian Sick
+181.5
+16.5
+176.0
+11.0
+176.0
+Prof. Dr.-Ing. Dr.-Ing. E.h. Klaus Wucherer (until
+5/17/2018)
+Compensation Report
+Hasso Plattner, the chairperson of the Supervisory Board,
+entered into a consulting contract with SAP after joining the
+Supervisory Board in May 2003. The contract does not provide for
+any compensation. The only cost we incurred under the contract
+was the reimbursement of expenses.
+187.0
+We did not grant any compensation advance or credit to, or
+enter into any commitment for the benefit of, any member of our
+Supervisory Board in 2018 or the previous year.
+Supervisory Board: Other Information
+their position as SAP employees and not to their work on the
+Supervisory Board.
+In 2018, we received services from members of the Supervisory
+Board (including services from employee representatives on the
+Supervisory Board in their capacity as employees of SAP) in the
+amount of €1,206,500 (2017: €1,269,700). This amount includes
+fees paid in 2018 to Linklaters LLP in Frankfurt am Main, Germany
+(of which Wilhelm Haarmann, who was a Supervisory Board
+member until May 17, 2018, is a partner), of €0 (2017: €106,900).
+Long-Term Incentives for the Supervisory Board
+We do not offer members of the Supervisory Board share-based
+payment for their Supervisory Board work. Any share-based
+payment awards received by employee-elected members relate to
+3,663.0
+528.0
+165.0
+3,135.0
+540.4
+3,162.0
+Total
+181.5
+16.5
+165.0
+75.4
+6.9
+68.5
+3,702.4
+187.0
+165.0
+165.0
+198.0
+33.0
+165.0
+198.0
+33.0
+165.0
+187.0
+22.0
+165.0
+Christine Regitz
+187.0
+165.0
+Lars Lamadé
+187.0
+22.0
+165.0
+22.0
+187.0
+22.0
+165.0
+22.0
+165.0
+Bernard Liautaud
+22.0
+198.0
+33.0
+165.0
+211.8
+46.8
+165.0
+Dr. Erhard Schipporeit
+Robert Schuschnig-Fowler
+ΝΑ
+NA
+NA
+18.3
+110.0
+Dr. Friederike Rotsch (from 5/17/2018)
+187.0
+22.0
+165.0
+128.3
+187.0
+€6.7 billion to
+Ambitions for 2020 and 2023
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+(non-IFRS, at constant currencies)
+2019 Outlook
+€7.0 billion
+support revenue
+Infomation
+Note: A reconciliation of non-IFRS results to IFRS equivalent is available here.
+€24.74 billion
+Employee Engagement Index
+-5.0
+Customer Net Promoter Score
+€7.16 billion
+Operating profit
+Cloud and software revenue
+Total revenue
+€22.4 billion to
+€20.66 billion
+84%
+€22.7 billion
+Operating profit
+€7.7 billion to
+-5.0
+€5.03 billion
+Employee Engagement
+Index
+Customer Net Promoter
+Score
+€7.16 billion
+€24.74 billion
+Total revenue
+revenue
+Cloud and software
+€5.03 billion
+strong increase, slightly lower rate than
+operating profit
+Cloud subscriptions and
+support revenue
+ΚΡΙ
+€20.66 billion
+Employee Engagement
+Customer Loyalty
+Profitability
+Growth
+Strategic Objective
+84% to 86%
++1.0
+€8.0 billion
+2018 Results
+(non-IFRS)
+Cloud subscriptions and
+2018 Results
+ΚΡΙ
+Profitability
+€25.961 billion
+€25.200 billion to €25.500 billion
+Total revenue
+€21.577 billion
+€21.150 billion to €21.350 billion
+Cloud and software revenue
+Growth
+€5.205 billion
+€5.150 billion to €5.250 billion
+Cloud subscriptions and
+support revenue
+(non-IFRS, at constant currencies)
+(non-IFRS, at constant currencies)
+ΚΡΙ
+Strategic Objective
+2018 Outlook*
+Outlook and Results for 2018
+The table below provides an overview of the specific KPIs used to measure performance within these objectives, and compares this
+performance with our goals.
+- Employee engagement
+84%
+Customer loyalty
+Operating profit
+€7.425 billion to €7.525 billion
+€7.480 billion
+Customer Loyalty
+Employee Engagement
+Customer Loyalty
+Profitability
+Growth
+Strategic Objective
+Outlook for 2019
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined
+2018 Results
+(non-IFRS)
+To Our
+Strategy and Business Model
+Note: A reconciliation of non-IFRS results to IFRS equivalent is available here.
+* The outlook was communicated in January 2018 and financial targets were raised in April, July, and October 2018. The 2018 outlook numbers above reflect the raised
+outlook from October 2018.
+84%
+84% to 86%
+Employee Engagement Index
+-5.0
+21 to 23
+Customer Net Promoter Score
+Employee Engagement
+55
+Note: A reconciliation of non-IFRS results to IFRS equivalent is available here.
+Measures to Manage Overall Financial
+Performance
+€8.6 billion to
+€9.1 billion
+Management Report
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Non-IFRS Financial Measures Cited in
+This Report
+Explanation of Non-IFRS Measures
+We disclose certain financial measures such as revenue (non-
+IFRS), expense (non-IFRS), and profit measures (non-IFRS) that
+are not prepared in accordance with IFRS and are therefore
+considered non-IFRS financial measures. Our non-IFRS financial
+measures may not correspond to non-IFRS financial measures that
+other companies report. The non-IFRS financial measures that we
+report should only be considered in addition to, and not as
+substitutes for, or superior to, our IFRS financial measures.
+We believe that the disclosed supplemental historical and
+prospective non-IFRS financial information provides useful
+information to investors because management uses this
+information, in addition to financial data prepared in accordance
+with IFRS, to attain a more transparent understanding of our past
+performance and our anticipated future results. We use non-IFRS
+revenue and profit measures consistently in our internal planning
+and forecasting, reporting, and compensation, as well as in our
+external communications, as follows:
+-
+-
+Our management primarily uses these non-IFRS measures
+rather than IFRS measures as the basis for making financial,
+strategic, and operating decisions.
+The variable components of our Executive Board members' and
+employees' remuneration are based on revenue (non-IFRS),
+operating profit (non-IFRS), operating margin (non-IFRS), as
+well as new cloud bookings measures rather than the respective
+IFRS measures.
+The annual budgeting process for all management units is based
+on revenue (non-IFRS) and operating profit (non-IFRS) numbers
+rather than the respective IFRS financial measures.
+All forecast and performance reviews with all senior managers
+globally are based on these non-IFRS measures, rather than the
+respective IFRS financial measures.
+Both our internal performance targets and the guidance we
+provide to the capital markets are based on non-IFRS revenue
+and profit measures rather than the respective IFRS financial
+measures.
+Our non-IFRS financial measures reflect adjustments based on
+the items below, as well as adjustments for the related income tax
+effects.
+Revenue (Non-IFRS)
+Non-IFRS revenue measures have been adjusted from the
+respective IFRS financial measures by including the full amount of
+software support revenue, cloud subscriptions and support
+revenue, and other similarly recurring revenue that we are not
+permitted to record as revenue under IFRS due to fair value
+accounting for the contracts in effect at the time of the respective
+acquisitions.
+Under IFRS, we record at fair value the contracts in effect at the
+time entities were acquired. Consequently, our IFRS software
+support revenue, IFRS cloud subscriptions and support revenue,
+IFRS cloud and software revenue, and IFRS total revenue for
+periods subsequent to acquisitions do not reflect the full amount of
+revenue that would have been recorded by entities acquired by SAP
+had they remained stand-alone entities. Adjusting revenue
+numbers for this revenue impact provides additional insight into
+the comparability of our ongoing performance across periods.
+Operating Expense (Non-IFRS)
+Operating expense numbers that are identified as operating
+expenses (non-IFRS) have been adjusted by excluding the following
+expenses:
+Combined
+To Our
+Stakeholders
+Performance Management System
+Based on our detailed annual plans, we determine the budget for
+the respective year. We also have processes in place to forecast
+revenue and profit on a quarterly basis, to quantify whether we
+expect to realize our financial goals, and to identify any deviations
+from plan. We continuously monitor the affected units in the Group
+to analyze these developments and define any appropriate actions.
+Our entire network of planning, control, and reporting processes is
+implemented in integrated planning and information systems,
+based on SAP software, across all organizational units so that we
+can conduct the evaluations and analyses needed to make
+informed decisions.
+Profitability
+58
+5
+To Our
+Combined
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Acquisition-related charges
+We use the following measures to manage our overall financial
+performance:
+Effective tax rate (IFRS and non-IFRS): We define our effective
+tax rate as the ratio of income tax expense to profit before tax,
+expressed as a percentage.
+Operating, investing, and financing cash flows and free cash
+flow: Our consolidated statement of cash flows provides insight
+into how we generate and use cash and cash equivalents. When
+applied in conjunction with the other primary financial statements,
+it provides information that helps us evaluate the changes in our
+net assets, our financial structure (including our liquidity and
+solvency), and our ability to affect the amounts and timing of cash
+flows to adapt to changing circumstances and opportunities. We
+use our free cash flow measure to determine the cash flow
+remaining after all expenditures required to maintain or expand our
+organic business have been paid off. This measure provides
+management with supplemental information to assess our liquidity
+needs. We calculate free cash flow as net cash from operating
+activities minus purchases (other than purchases made in
+connection with business combinations) of intangible assets and
+property, plant, and equipment.
+Measures to Manage Our Non-Financial
+Performance
+In 2018, we used the following key measures to manage our
+non-financial performance in the areas of customer loyalty,
+employee engagement, and leadership trust:
+Customer Net Promoter Score (Customer NPS): This score
+measures the willingness of our customers to recommend or
+promote SAP to others. It is derived from ongoing customer
+surveys that identifies, on a scale of 0-10, whether a customer is
+likely to recommend SAP to friends or colleagues, is neutral, or is
+unwilling to recommend. We introduced this measure in 2012, as
+we are convinced that we can achieve our financial goals only when
+our customers are loyal to, and satisfied with, SAP and our
+solutions. To derive the Customer NPS, we start with the
+percentage of "promoters" of SAP, that is, those giving us a score
+of 9 or 10 on a scale of 0-10. We then subtract the percentage of
+"detractors," that is, those giving us a score of 0 to 6. The method
+ignores "passives," that is, those giving us a score of 7 or 8.
+Consequently, the range of achievable scores is -100 to +100, with
+the latter being the best achievable score for customer loyalty as
+measured by the Customer NPS methodology.
+Employee Engagement Index: We use this index to measure
+the motivation and loyalty of our employees, how proud they are of
+our company, and how strongly they identify with SAP. The index is
+derived from an annual survey of our employees. Applying this
+measure is recognition that our growth strategy depends on
+engaged employees.
+Leadership Trust Score: We use this score to further enhance
+accountability and to measure our collective effort to foster a work
+environment based on trust. It is derived from a question in our
+annual global employee survey that gauges employees' trust in our
+leaders. We measure leadership trust by using the same
+methodology as we do to compute the Net Promoter Score (NPS).
+Value-Based Management
+Our holistic view of the performance measures described above,
+together with our associated analyses, comprises the information
+we use for value-based management. We use planning and control
+processes to manage the compilation of these key measures and
+their availability to our decision-makers across various
+management levels.
+SAP's long-term strategic plans are the point of reference for
+our short-term and midterm planning and controlling processes.
+We initially identify future growth and profitability drivers at a highly
+aggregated level. In a first step, the resulting financial plan is
+broken down into (i) our deployment models “On Premise,"
+"Software as a Service/Platform as a Service," "Infrastructure as a
+Service," and "Business Networks"; and (ii) functions such as
+development, sales, and administration. In a second step, the
+planned total revenues and total expenses are generally allocated
+to the areas of functional responsibility of the individual members
+of the Executive Board (the board areas). If a board area represents
+not only a functional department but also has a responsibility for
+operating segments within this board area (for example, SAP
+Business Network segment and Customer Experience segment),
+the allocation is done at the lower segment level. Budget
+adjustments may be applied during the year to reflect changes in
+priorities, to achieve efficiency targets and to reflect endogenous
+and exogenous factors. Such budget adjustments, as well as the
+assessment of the Executive Board's performance, are handled at
+the board area level if the board area is part of a segment, or at the
+segment level if the board area comprises several segments. It is
+then the individual board member's responsibility to break down
+the allocated budget adjustments within the segment budget
+boundary. Based on an integrated portfolio process running in
+parallel to the budgeting process, we ensure aligned investment
+behavior across board areas with regards to specific solutions or
+solution areas. In a final step, customer-facing revenue targets and
+cost of sales and marketing targets are broken down into sales
+regions.
+Earnings per share (EPS) (IFRS and non-IFRS): EPS measures
+our overall performance because it captures all operating and non-
+operating elements of profit as well as income tax expense. It
+represents the portion of profit after tax allocable to each SAP
+share outstanding. EPS is influenced not only by our operating and
+non-operating business and income taxes but also by the number
+of shares outstanding.
+2020 Ambition
+(non-IFRS)
+"
+Settlements of pre-existing business relationships in
+connection with a business combination
+In 2018, we used the following key measures to manage our
+operating financial performance:
+Measures to Manage Our Operating Financial
+Performance
+Measures to Manage Our Financial
+Performance
+We use various performance measures to manage our
+performance with regard to our primary financial objectives, which
+are growth and profitability, and our primary non-financial
+objectives, which are customer loyalty and employee engagement.
+We view growth and profitability as indicators of our current
+performance, while we see customer loyalty and employee
+engagement as indicators of our future performance.
+Performance Management System
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+Strategy and Business Model
+56
+56
+7.5% to 10% CAGR
+More than €35 billion
+More than triple
+2023 Ambition
+(non-IFRS)
+84% to 86%
+steadily increase
+€28.6 billion to
+€29.2 billion
+€8.5 billion to
+€9.0 billion
+Cloud subscriptions and support revenue (non-IFRS): This
+revenue driver comprises the main revenues of our fast-growing
+cloud business. Revenue from cloud subscriptions and support
+represents fees earned from providing customers with any of the
+following:
+-
+-
+Software as a service (SaaS)
+Acquisition-related third-party expenses
+Share-based payment expenses
+Restructuring expenses, that is, expenses resulting from
+measures which comply with the definition of restructuring
+according to IFRS.
+We exclude certain acquisition-related expenses for the purpose
+of calculating operating profit (non-IFRS), operating margin (non-
+IFRS), and earnings per share (non-IFRS) when evaluating SAP's
+continuing operational performance because these expenses
+generally cannot be changed or influenced by management after
+the relevant acquisition other than by disposing of the acquired
+assets. Since management at levels below the Executive Board
+does not influence these expenses, we generally do not consider
+these expenses for the purpose of evaluating the performance of
+management units. For similar reasons, we eliminate share-based
+payment expenses as these costs are impacted by share price
+developments and other factors outside our control. We also
+eliminate restructuring expenses because they are volatile and
+mostly cannot be influenced by management at levels below the
+Executive Board.
+Operating Profit (Non-IFRS), Cloud Subscriptions
+and Support Gross Margin (Non-IFRS), Operating
+Margin (Non-IFRS), Effective Tax Rate (Non-
+IFRS), and Earnings per Share (Non-IFRS)
+40
+57
+Performance Management System
+Days Sales Outstanding (DSO): We manage working capital by
+controlling the DSO of trade receivables. DSO measures the
+average number of days from the raised invoice to cash receipt
+from the customer. We calculate DSO by dividing the average
+invoiced trade receivables balance of the last 12 months by the
+average monthly cash receipt of the last 12 months.
+Financial income, net: This measure provides insight into the
+return on liquid assets and capital investments and the cost of
+borrowed funds. To manage our financial income, net, we focus on
+cash flow, the composition of our liquid assets and capital
+investment portfolio, and the average rate of interest at which
+assets are invested. We also monitor average outstanding
+borrowings and associated finance costs.
+Amortization expense/impairment charges for intangibles
+acquired in business combinations and certain stand-alone
+acquisitions of intellectual property (including purchased in-
+process research and development)
+We use the following measures to manage our non-operating
+financial performance:
+Operating margin (non-IFRS): We use operating margin to
+measure our overall operational efficiency. Operating margin (non-
+IFRS) is the ratio of our operating profit (non-IFRS) to total revenue
+(non-IFRS), expressed as a percentage.
+Cloud subscriptions and support gross margin (non-IFRS):
+We use our cloud subscriptions and support gross margin (non-
+IFRS) to measure our process efficiency in our cloud business.
+Cloud subscriptions and support gross margin (non-IFRS) is the
+ratio of our cloud subscriptions and support gross profit (non-IFRS)
+to cloud subscriptions and support revenue (non-IFRS), expressed
+as a percentage.
+Operating profit (non-IFRS): We use operating profit (non-
+IFRS) expressed in both actual currencies and constant currencies
+to measure our overall operational process efficiency and overall
+business performance.
+Cloud backlog: In addition to new cloud bookings, we use the
+measure "cloud backlog" to evaluate our sales success in the cloud
+business. We define cloud backlog as a measure that represents
+expected future cloud subscriptions and support revenue that, as
+of period end, is contracted but not yet billed.
+New cloud bookings: For our cloud activities, we also look at
+new cloud bookings (both in actual currencies and constant
+currencies). This measure reflects the committed order entry from
+new customers and from incremental purchases by existing
+customers for offerings that generate cloud subscriptions and
+support revenue. For new cloud bookings we take into
+consideration committed deals only, meaning utilization-based
+payments are not included in this measure. In this way, it is an
+indicator of cloud-related sales success in a given period and of
+secured future cloud subscriptions and support revenue. We focus
+primarily on the average contract value variant of the new cloud
+bookings measure that generally takes into account annualized
+amounts for contracts. There are no comparable IFRS measures
+for these bookings metrics.
+Total revenue (non-IFRS): We use total revenue (non-IFRS) to
+measure our growth at both actual currencies and constant
+currencies. The total of cloud subscriptions and support revenue
+and software support revenue divided by total revenue is the share
+of more predictable revenue. This measure provides additional
+insight into our sustained business success.
+Cloud and software revenue (non-IFRS): We use cloud and
+software revenue (non-IFRS) expressed in both actual currencies
+and constant currencies to measure our revenue growth. Our cloud
+and software revenue includes cloud subscriptions and support
+revenue plus software licenses and support revenue. Cloud
+subscriptions and support revenue and software revenue are our
+key revenue drivers because they tend to affect our other revenue
+streams. Generally, customers that buy software licenses also
+enter into related support contracts, and these generate recurring
+revenue in the form of support revenue after the software sale.
+Support contracts cover standardized support services that
+comprise unspecified future software updates and enhancements.
+Software licenses revenue as well as cloud subscriptions and
+support revenue also tend to stimulate services revenue, which is
+earned by providing customers with professional services,
+premium engagement services, training services, messaging
+services, and payment services.
+We use the cloud subscriptions and support revenue (non-IFRS)
+measure at both actual currencies and constant currencies.
+Premium cloud subscription support beyond regular support
+For more information regarding cloud subscriptions and support
+revenue and a description of these services, see the Notes to the
+Consolidated Financial Statements, Note (A.1).
+Platform as a service (PaaS)
+Infrastructure as a service (laaS)
+Measures to Manage Our Non-Operating
+Financial Performance
+Growth
+59
+Furthermore, SAP knows there is power in collaboration and
+engages in a wide range of partnerships to address SDG 17.
+The words "aim," "anticipate," "assume," "believe," "continue,"
+"could," "counting on," "is confident," "development," "estimate,"
+"expect," "forecast," "future trends," "guidance," "intend," "may,"
+"might," "outlook," "plan," "predict," "project," "seek," "should,"
+"strategy," "want," "will," "would," and similar expressions as they
+relate to us are intended to identify such forward-looking
+statements. Such statements include, for example, those made in
+the Operating Results section, our quantitative and qualitative
+disclosures about market risk pursuant to the International
+Financial Reporting Standards (IFRS), namely IFRS 7 and related
+statements in our Notes to the Consolidated Financial Statements;
+Expected Developments and Opportunities section; Risk
+Management and Risks section; and other forward-looking
+information appearing in other parts of this report. To fully consider
+the factors that could affect our future financial results, both this
+report and our Annual Report on Form 20-F should be considered,
+as well as all of our other filings with the U.S. Securities and
+Exchange Commission (SEC). Readers are cautioned not to place
+undue reliance on these forward-looking statements, which speak
+only as of the date specified or the date of this report. We
+undertake no obligation to publicly update or revise any forward-
+looking statements as a result of new information that we receive
+about conditions that existed upon issuance of this report, future
+events, or otherwise unless we are required to do so by law.
+describe these risks and uncertainties in the Risk Management and
+Risks section.
+This management report contains forward-looking statements
+and information based on the beliefs of, and assumptions made by,
+our management using information currently available to them.
+Any statements contained in this report that are not historical facts
+are forward-looking statements as defined in the U.S. Private
+Securities Litigation Reform Act of 1995. We have based these
+forward-looking statements on our current expectations,
+assumptions, and projections about future conditions and events.
+As a result, our forward-looking statements and information are
+subject to uncertainties and risks, many of which are beyond our
+control. If one or more of these uncertainties or risks materializes,
+or if management's underlying assumptions prove incorrect, our
+actual results could differ materially from those described in or
+inferred from our forward-looking statements and information. We
+Forward-Looking Statements
+All of the information in this report relates to the situation as at
+December 31, 2018, or the fiscal year ended on that date, unless
+otherwise stated.
+German Commercial Code, sections 289b and 315b, requires us
+to prepare, for both SAP SE and SAP Group, a non-financial
+statement within the management report or a non-financial report
+outside of the management report in which we report on social,
+environmental, and other non-financial matters. The required
+disclosures can be, but do not need to be, a separate section in our
+management report. Instead, the information required can also be
+provided, in an integrated manner, in the different sections of the
+management report. SAP released a combined non-financial report
+outside of the combined management report but within our online
+integrated report with references to the sections of our combined
+management report. This combined non-financial report is
+available at http://www.sap.com/investors/sap-2018-combined-
+non-financial-report. We believe that this approach is best aligned
+with SAP's integrated reporting strategy, also taking into account
+that all non-financial information stipulated in the German
+Commercial Code, sections 289c and 315c, that is relevant to
+understand SAP's development, business performance, and the
+position of the Group and SAP SE is included in our combined
+management report.
+This combined group management report by the SAP Group
+(collectively, "we," "us," "our," "SAP," "Group," or "Company") and
+the management report of SAP SE have been prepared in
+accordance with sections 289, 289a, 289f, 315, 315a, and 315d of
+the German Commercial Code and German Accounting Standards
+(GAS) No. 17 and 20. The management report is also a
+management commentary complying with the International
+Financial Reporting Standards (IFRS) Practice Statement
+"Management Commentary."
+Basis of Presentation
+General Information About This
+Management Report
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+Operating profit, cloud subscriptions and support gross margin,
+operating margin, effective tax rate, and earnings per share
+identified as operating profit (non-IFRS), cloud subscriptions and
+support gross margin (non-IFRS), operating margin (non-IFRS),
+effective tax rate (non-IFRS), and earnings per share (non-IFRS)
+have been adjusted from the respective IFRS measures by
+adjusting for the aforementioned revenue (non-IFRS) and operating
+expenses (non-IFRS) and the income tax effects thereon.
+Performance Management System
+60
+60
+We believe that constant currencies measures have limitations,
+particularly as the currency effects that are eliminated constitute a
+significant element of our revenue and expenses and could
+materially impact our performance. Therefore, we limit our use of
+constant currencies measures to the analysis of changes in volume
+as one element of the full change in a financial measure. We do not
+evaluate our results and performance without considering both
+constant currencies and nominal measures of revenue (non-IFRS)
+and operating profit (non-IFRS) measures on the one hand, and
+changes in revenue, operating expenses, operating profit, or other
+In the past, we have issued share-based payment awards to
+our employees every year and we intend to continue doing so
+in the future. Thus, our share-based payment expenses are
+recurring although the amounts usually change from period
+to period.
+This report includes statistical data about the IT industry and
+global economic trends that comes from information published by
+sources including International Data Corporation (IDC), Gartner,
+the European Central Bank (ECB), and the International Monetary
+Fund (IMF). This type of data represents only the estimates of IDC,
+Gartner, ECB, IMF, and other sources of industry data. SAP does
+not adopt or endorse any of the statistical information provided by
+sources such as IDC, Gartner, ECB, IMF, or other similar sources
+that is contained in this report. The data from these sources is
+subject to risks and uncertainties, and subject to change based on
+various factors, including those described above, in the Risk
+Management and Risks section, and elsewhere in this report. These
+and other factors could cause our results to differ materially from
+those expressed in the estimates made by third parties and SAP.
+We caution readers not to place undue reliance on this data.
+General Information About This Management Report
+51
+To Our
+Stakeholders
+-
+SAP can deliver the intelligent enterprise by focusing on three
+key business outcomes:
+Enterprises are trying to leverage data-driven insights to solve
+these challenges. Winners in the digital economy are those that are
+able to extract intelligence and insights from their data and act
+faster relative to their competition. SAP can help our customers to
+win in the marketplace by reimagining entire business processes
+through injecting predictive insights leveraging technologies such
+as artificial intelligence (AI)/machine learning (ML), the Internet of
+Things (IoT), and analytics across an integrated value chain. With
+SAP innovations, our customers can engage in real time with their
+users to deliver and continuously improve their experiences.
+drive maximum cost synergies to fund innovation? How do they
+better engage their employees to attract and retain top talent?
+business processes.
+1) Enterprise application software is computer software specifically developed to support and automate
+Most enterprises today are struggling to address three key
+challenges: How do they deliver a next-generation customer
+experience to stay relevant in a world of disruption? How do they
+The Intelligent Enterprise
+We are committed to supporting the United Nations Sustainable
+Development Goals (UN SDGs). Technology-driven innovation
+underpins how SAP, together with our customers and our
+ecosystem, can execute initiatives across all 17 of the UN SDGS.
+At SAP, our purpose is to "help the world run better and improve
+people's lives" by empowering our customers to create a better
+economy, society, and environment for the world. With our
+innovations, we can help customers run at their best. Being the
+best means our customers can connect people and information to
+address the world's biggest challenges. That's why we focus on
+engineering solutions to fuel innovation, foster equality, and spread
+opportunity across borders and cultures. With our broad customer
+base and ecosystem of around 18,800 partners, we can amplify our
+collective economic, social, and environmental impact.
+The valuation of our cash-settled share-based payments
+could vary significantly from period to period due to the
+fluctuation of our share price and other parameters used in
+the valuation of these plans.
+We are living in a time of global uncertainty that is caused by
+massive social change and digital disruption. Some of the world's
+greatest challenges can only be addressed by combining
+technology-driven innovations and corporate leadership.
+As at December 31, 2018, SAP SE directly or indirectly
+controlled a worldwide group of 265 subsidiaries that develop,
+distribute, and provide our products, solutions, and services. For a
+list of our subsidiaries, associates, and other equity investments,
+see the Notes to the Consolidated Financial Statements, Note
+(G.10).
+Our ordinary shares are listed on the Frankfurt Stock Exchange.
+American Depositary Receipts (ADRs) representing SAP SE
+ordinary shares are listed on the New York Stock Exchange (NYSE).
+SAP is a member of Germany's DAX, TechDAX, the Dow Jones
+EURO STOXX 50, the Dow Jones Sustainability Index World, and
+the Dow Jones Sustainability Index Europe. As at December 31,
+2018, SAP was the most valuable company in the DAX based on
+market capitalization. SAP was ranked as the most sustainable
+software company in the Dow Jones Sustainability Indices for the
+twelfth consecutive year.
+Founded in 1972, SAP is a global company headquartered in
+Walldorf, Germany. Our legal corporate name is SAP SE. SAP is the
+market leader in enterprise application software¹) and also the
+leading analytics and business intelligence company. Globally,
+more than 77% of all transaction revenue touches an SAP system.
+With more than 425,000 customers in more than 180 countries,
+the SAP Group has a global presence and employs more than
+96,000 people.
+Overview of SAP
+Strategy and Business Model
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+Our Purpose
+-
+Our restructuring charges resulted in significant cash
+outflows in the past and could do so in the future. The same
+applies to our share-based payment expense because most
+of our share-based payments are settled in cash rather than
+shares.
+The acquisition-related amortization expense that we
+eliminate in deriving our profit (non-IFRS) numbers is a
+recurring expense that will impact our financial performance
+in future years.
+-1,458
+Purchase of intangible assets and
+activities
+Net cash flows from operating
+€ millions
+A in %
+-15
+5,045
+4,303
+2017
+2018
+Among other measures, we use free cash flow to manage our
+overall financial performance.
+Free Cash Flow
+We calculate constant currencies measures by translating
+foreign currencies using the average exchange rates from the
+comparative period instead of the current period.
+We believe it is important for investors to have information that
+provides insight into our sales. Revenue measures determined
+under IFRS provide information that is useful in this regard.
+However, both sales volume and currency effects impact period-
+over-period changes in sales revenue. We do not sell standardized
+units of products and services, so we cannot provide relevant
+information on sales volume by providing data on the changes in
+product and service units sold. To provide additional information
+that may be useful to investors in breaking down and evaluating
+changes in sales volume, we present information about our revenue
+and various values and components relating to operating profit that
+are adjusted for foreign currency effects.
+Constant Currencies Information
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+-1,275
+14
+property, plant, and equipment
+(without acquisitions)
+While we adjust for the fair value accounting of the acquired
+entities' recurring revenue contracts, we do not adjust for the
+fair value accounting of deferred compensation items that
+result from commissions paid to the acquired company's
+sales force and third parties for closing the respective
+customer contracts.
+While our profit (non-IFRS) numbers reflect the elimination
+of certain acquisition-related expenses, no eliminations are
+made for the additional revenue or other income that results
+from the acquisitions.
+"
+.
+"
+■
+•
+"
+present and future performance, foremost for the following
+reasons:
+We believe that our non-IFRS financial measures described
+above have limitations including but not limited to the following:
+Without being analyzed in conjunction with the corresponding
+IFRS measures, the non-IFRS measures are not indicative of our
+The remaining acquisition-related charges that we eliminate
+in deriving our profit (non-IFRS) numbers are likely to recur
+should SAP enter into material business combinations in the
+future. Similarly, the restructuring expenses that we
+eliminate in deriving our profit (non-IFRS) numbers are likely
+to recur should SAP perform restructurings in the future.
+The revenue adjustment for the fair value accounting of the
+acquired entities' contracts and the expense adjustment for
+acquisition-related charges do not arise from a common
+conceptual basis. This is because the revenue adjustment
+aims to improve the comparability of the initial post-
+acquisition period with future post-acquisition periods, while
+the expense adjustment aims to improve the comparability
+between post-acquisition periods and pre-acquisition
+periods. This should particularly be considered when
+evaluating our operating profit (non-IFRS) and operating
+margin (non-IFRS) numbers as these combine our revenue
+(non-IFRS) and expenses (non-IFRS) despite the absence of
+a common conceptual basis.
+Limitations of Non-IFRS Measures
+The non-IFRS measures provide investors with additional
+information that enables a comparison of year-over-year
+operating performance by eliminating certain direct effects of
+acquisitions, share-based compensation plans, and
+restructuring plans.
+Our revenue (non-IFRS), expense (non-IFRS), and profit (non-
+IFRS) measures, along with the "new cloud bookings" and
+"cloud backlog" measures (see above) provide investors with
+insight into management's decision making because
+management uses these measures to run our business and
+make financial, strategic, and operating decisions. We include
+the revenue adjustments outlined above and exclude the
+expense adjustments outlined above when making decisions to
+allocate resources. In addition, we use these non-IFRS measures
+to facilitate comparisons of SAP's operating performance from
+period to period.
+-
+-
+We believe that our non-IFRS measures are useful to investors
+for the following reasons:
+Usefulness of Non-IFRS Measures
+-25
+3,770
+2,844
+Free cash flow
+Non-IFRS and non-GAAP measures are widely used in the
+software industry. In many cases, inclusion of our non-IFRS
+measures may facilitate comparison with our competitors'
+corresponding non-IFRS and non-GAAP measures.
+Reimagining the end-to-end customer experience from
+predicting the demand to designing the product based on the
+unique need of the consumer, to procuring the best supplier for
+the product to manufacturing, and to delivering the product or
+service that maximizes customer satisfaction
+Delivering a step change in productivity through the next level
+of automation in business processes powered by AI/ML that will
+be embedded in every part of the business process (across
+financials, supply chain, manufacturing, procurement, travel,
+and human resources). The key to doing this is improving cycle
+time of business processes and injecting speed everywhere
+Transforming the way companies engage their workforce by
+delivering total workforce engagement across full-time and
+contingent labor and by improving the effectiveness of their
+workforce by driving touchless processes and voice/chat-
+enabled systems.
+At SAP, our commitment to our customers is to help them meet
+today's challenges and to prepare for anticipated challenges of the
+future. Our strategy is to deliver the intelligent enterprise for our
+customers. Our vision for the intelligent enterprise is an event-
+driven, real-time business. SAP can deliver on these objectives by
+leveraging the power of data in SAP software with technologies
+such as AI/ML to build powerful intelligent applications. With SAP
+HANA and SAP Cloud Platform, we can embed intelligence into
+every part of our portfolio. This enables enterprises to get step
+change in productivity and enables higher focus on innovation,
+customer experience, and new business models. The intelligent
+enterprise is how SAP sees the future of business for our
+customers, the future of work for our customers' employees, and
+the future of experience for our customers' customers.
+This value creation process does not happen in a vacuum. It is
+enabled by external inputs, most importantly customer insights
+and broader stakeholder dialog, financial capital, employees'
+expertise, and intellectual property, third party products and
+services, as well as the IT infrastructure we rely on.
+Inputs
+By developing software, providing our software and services to
+our customers, and engaging them in feedback, we immediately
+generate results for SAP such as growth, profitability, employee
+engagement, and customer loyalty. Value creation for the customer
+is realized when they implement the software and services to
+support their business and help achieve their own visions and
+purposes.
+Results
+We create value by identifying the business needs of our
+customers, then developing and delivering software, services, and
+support that address these business needs. The close collaboration
+with our customers and partners throughout the process helps us
+continuously improve our solutions, identify further business
+needs, and deliver enhanced value to our customers.
+Our Business Model
+For us, delivering the Intelligent Enterprise and helping our
+customers thrive in the experience economy are essential for a
+better, more productive world. By unlocking the full potential of
+innovation, we can transform how businesses and governments
+impact the economies, societies, and environments in which they
+exist. In this way, we aim to fulfill our purpose of helping the world
+run better and improving people's lives.
+Our purpose comes to life through our contribution to the UN
+Sustainable Development Goals (SDGs). We innovate software and
+technology solutions that help empower our customers to become
+intelligent enterprises. It means connecting people and information
+to address the world's biggest challenges.
+SAP's Impact
+Environment
+Deliver cloud and
+support
+Society
+Deliver
+software
+and
+services
+Profitability
+Growth
+Employee engagement
+Customer loyalty
+Identify
+business
+needs
+Results
+Economy
+Impact
+Develop
+solutions
+Impact
+Our solutions lead to significant impact at our customers and -
+through them - in the world. The following are some examples of
+our impact in various areas.
+54
+Strategy and Business Model
+With the world population growing steadily, humanity will need
+to provide water, food, and shelter to billions of people in the
+coming years. SAP solutions help our customers reduce water
+waste and support sustainable management of water and
+sanitation for all.
+We are all affected by climate change. SAP technology is helping
+our customers increase their overall resource productivity and
+transform their businesses to reduce carbon outputs.
+-
+SAP software supports the UN SDGs 6, 13, 14, and 15 and helps
+protect the environment by addressing the need for water, clean
+energy, and responsible development. For example:
+Environment:
+Cities are facing growing populations and aging infrastructures.
+SAP solutions for the Internet of Things can help manage and
+monitor resources so that cities can run more sustainably and
+help citizens enjoy more enjoyable, safer lives.
+Measuring Our Success
+SAP technology is at the epicenter of complex medical issues
+when it comes to prevention, treatments, and cures for cancer,
+diabetes and other diseases. We are also deeply committed to
+empowering the world's youth, working adults, differently-abled
+people, and the unemployed with the right skills to thrive in the
+digital economy.
+SAP software supports the UN SDGs 1, 2, 3, 4, 5, 7, 11, and 16 by
+helping create a peaceful and just society through better
+healthcare, education, and access to technology. For example:
+Society:
+Business Model
+As such, our software supports the responsible growth practices
+necessary to ensure the survival of future generations.
+Companies work better to bring economic prosperity and fairly-
+paid jobs to people around the world.
+SAP software supports the UN SDGs 8, 9, 10, and 12 by helping
+provide meaningful work and strengthening industries and
+infrastructure. For example, SAP software helps as follows:
+Economy:
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+Stakeholders
+To Our
+Organizations optimize resources utilization, aspiring for a world
+with zero waste
+IT infrastructure
+and services
+products
+We will continue to focus on investments in technology and
+innovations that ensure sustainable growth of our solution portfolio
+to drive our short-term, mid-term, and long-term ambitions. We will
+continue to unleash the full potential of our employees' talent as
+well as foster strategic partnerships with our ecosystem to
+cultivate innovation. Further, we may make targeted acquisitions to
+complement our solution offerings and improve coverage in key
+strategic markets.
+Acquisitions
+Most successful companies do not just react to problems as
+they occur, they try to predict and mitigate those problems before
+they ever happen. Experience management is the process of
+analyzing the interactions that people experience with a company
+in real time and identifying opportunities for improvement. By
+analyzing employee surveys and service center tickets and calls,
+and combining this information with organizational data, SAP can
+help support a higher level of employee engagement and retention
+for our customers. By capturing feedback on how consumers
+experience the physical or digital product in real time, SAP can help
+our customers design better. By understanding the sentiment of
+every customer interaction, and correlating this with operational
+data on price and service delivery, SAP can help our customers
+drive better topline performance and create better products and
+services.
+Every digital interaction is an opportunity to positively influence
+a customer. Each digital interaction is an opportunity to measure
+customer satisfaction, employee engagement, partner
+collaboration, and brand impact. It is also an opportunity to derive
+sentiment on how end users and customers perceive a company or
+a product. By combining experience data with operational data,
+SAP can expand from delivering the intelligent enterprise to
+delivering intelligent experiences to our customers.
+Expanding to Experience Management
+The innovative power of our people is key to delivering the
+intelligent enterprise, as our people are key in helping our
+customers transform. We strive to create a workplace that can
+attract and retain the best talent in the market. We are fully
+committed to enabling our employees to grow their skills at every
+stage of their career at SAP.
+For more information about the products and solutions offered
+as part of our Intelligent Enterprise Framework, see the Products,
+Research & Development, and Services section.
+Intelligent technologies, such as AI/ML, IoT, and advanced
+analytics, help customers optimize their core business
+processes, extract real-time insights, and reinvent their
+business models. This intelligence is integrated across
+applications and helps us deliver unique outcomes to every
+customer.
+A digital platform to help customers manage data
+orchestration across their entire application footprint. This
+includes real-time visibility into distributed data silos using next-
+generation data management solutions and an open cloud
+platform as a business platform for integration and business
+process innovation.
+An intelligent suite of LoB applications that includes next-
+generation enterprise resource planning (ERP) in the cloud, as
+well as solutions for customer experience, manufacturing and
+supply chain, network and spend management, and people
+engagement. The intelligent suite is integrated and
+differentiated by industry-specific business processes for end-
+to-end scenarios.
+In April 2018, we acquired Callidus Software Inc., a company
+offering a cloud-based customer relationship management (CRM)
+solution marketed under CallidusCloud, which provides SAP and
+our customers a differentiated, cloud-based CRM solution. This
+helps put SAP in a leading position to compete in the CRM market.
+SAP has consolidated the CallidusCloud offerings with SAP Hybris
+solutions into the SAP C/4HANA suite of customer experience
+solutions, and is reported as part of the Customer Experience
+segment. For more information about the acquisition of Callidus
+Software Inc., see the Notes to the Consolidated Financial
+Statements, Note (D.1).
+and rich portfolio of applications we deliver. Our software,
+technologies, and services address the three core elements of the
+intelligent enterprise for the 25 industries and 12 lines of business
+(LoBs) we serve:
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+Strategy and Business Model
+42
+52
+Our integrated end-to-end portfolio enables an intelligent
+enterprise by offering business value, data-driven innovation, rich
+customer experience insights, and embedded intelligence. We
+embed intelligent technologies throughout the extensive platform
+Delivering the Intelligent Enterprise
+Additional
+Infomation
+We use the following financial and non-financial objectives to steer our company:
+In November 2018, we announced our intent to acquire
+Qualtrics International, Inc., a global pioneer of the experience
+management software category that enables organizations to
+thrive in today's economy. The deal was closed on January 23,
+2019. Experience management focuses on obtaining and tapping
+the value of outside-in customer, employee, product, and brand
+feedback in real time. Together, SAP and Qualtrics aim to
+accelerate the new experience management category by
+combining experience data and operational data to power the
+experience economy. This creates a highly differentiated offering
+for businesses to engage with their customers to deliver and
+continuously improve customer, employee, product, and brand
+experiences. Qualtrics will be reflected in our Customer Experience
+segment which we renamed, upon the Qualtrics acquisition in 2019,
+to "Customer and Experience Management." For more information
+about the acquisition of Qualtrics International, Inc., see the Notes
+to the Consolidated Financial Statements, Note (G.9).
+In addition to our investments in organic growth and
+acquisitions, SAP also supports entrepreneurs that aspire to build
+industry-leading businesses, through venture capital funds
+managed by Sapphire Ventures. Sapphire Ventures currently has
+over US$3.5 billion under management and has invested in more
+than 160 companies on five continents. This includes growth-stage
+technology companies and early-stage venture capital funds.
+Sapphire Ventures pursues opportunities in which it can help fuel
+enterprise growth by adding expertise, relationships, geographic
+reach, and capital. It places a particular focus on companies in
+Europe, Israel, and the United States. In addition to our venture
+investments through Sapphire Ventures, SAP also has a dedicated
+SAP.iO fund, managed by Sapphire Ventures, that focuses on
+strategic early-stage investments in enterprise software startups.
+As a part of the SAP.IO Fund, SAP has also committed to invest up
+to 40% of the investable capital in under-represented groups in
+technology to foster diversity and inclusion. One of these
+investment examples is women in technology.
+Third-party
+Employees'
+expertise and
+intellectual
+property
+Financial capital
+dialog
+stakeholder
+insights and
+D.
+Customer
+Inputs
+We innovate software and technology solutions that empower our customers to become
+intelligent enterprises and create a better and more sustainable economy, environment, and society.
+Sapphire Ventures
+Our vision is to help the world run better and improve people's lives.
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined
+To Our
+33
+53
+Strategy and Business Model
+SAP's Impact
+Performance Management System
+Consolidated Financial
+Statements IFRS
+1,219
+188
+0
+188
+-47
+0
+-47
+Financial income, net
+-288
+0
+-288
+-418
+0
+Finance costs
+476
+0
+Profit before tax
+5,600
+1,459
+7,059
+1,300
+4,046
+5,199
+1,111
+4,088
+Profit after tax
+-1,575
+476
+-592
+-1,860
+-349
+-1,511
+Income tax expense
+6,921
+1,892
+5,029
+-983
+371
+0
+371
+-18,584
+-18,481
+-902
+-17,579
+1,426
+-19,005
+Total operating expenses
+1,889
+1
+1
+-20
+0
+-20
+Other operating income/expense, net
+0
+182
+0
+5,346
+-16,694
+Operating profit
+Finance income
+-36
+0
+-36
+-56
+0
+-56
+Profit numbers
+Other non-operating income/expense, net
+1,892
+4,877
+7,480
+317
+7,163
+1,459
+5,703
+6,769
+Attributable to owners of parent
+4,083
+1,111
+○
+78
+264
+-4,160
+Cost of cloud and software
+turing
+sition-
+Related
+-3,817
+Acqui- SBP¹) Restruc- Non-IFRS
+Restruc- Non-IFRS
+turing
+SBP¹)
+Acqui-
+sition-
+Related
+IFRS
+2017
+2018
+€ millions
+IFRS
+Additional
+Infomation
+-3,893
+115
+9
+-3,624
+Research and development
+-2,991
+0
+158
+8
+307
+-3,158
+○
+142
+9
+-3,302
+Cost of services
+-3.471
+0
+-3,151
+-182
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+23.1
+Earnings per share, basic (in €)
+Effective tax rate (in %)
+Operating margin (in %)
+Key ratios
+38
+0
+27.0
+38
+0
+6
+Attributable to non-controlling interests
+5,307
+1,300
+4,008
+5,193
+6
+Non-IFRS Adjustments by Functional Areas
+3.42
+26.3
+Management Report
+Stakeholders
+Combined
+To Our
+Performance Management System
+4.43
+3.35
+29.0
+22.8
+28.9
+20.8
+28.8
+62
+62
+Due to rounding, the sum of the numbers presented in the table above might not precisely equal the totals we provide.
+4.35
+19.5
+0
+19
+-19
+10,908
+0
+10,908
+11,494
+513
+10,982
+0
+Software licenses and support
+10,981
+4,872
+0
+4,872
+4,877
+231
+4,647
+0
+Software support
+4,647
+15,628
+15,629
+4,086
+Services
+19,552
+3
+19,549
+21,577
+922
+0
+20,655
+20,622
+Cloud and software
+15,780
+0
+15,780
+16,372
+743
+33
+0
+Software licenses
+2
+Reconciliations of IFRS to Non-IFRS Financial Measures for the Years 2018 and 2017
+€ millions, unless otherwise stated
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+61
+Additional
+Infomation
+Performance Management System
+Further Information on Economic,
+Environmental, and Social Performance
+Despite these limitations, we believe that the presentation of our
+non-IFRS measures and the corresponding IFRS measures,
+together with the relevant reconciliations, provide useful
+information to management and investors regarding present and
+future business trends relating to our financial condition and
+results of operations.
+measures of financial performance prepared in accordance with
+IFRS on the other. We caution the readers of our financial reports to
+follow a similar approach by considering nominal and constant
+currencies non-IFRS measures only in addition to, and not as a
+substitute for or superior to, changes in revenue, operating
+expenses, operating profit, or other measures of financial
+performance prepared in accordance with IFRS.
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+Additional
+Infomation
+3,771
+2018
+IFRS
+3,769
+5,205
+179
+5,027
+33
+4,993
+Cloud subscriptions and support
+2017
+Revenue measures
+Impact
+Non-IFRS
+Adj.
+IFRS
+Non-IFRS
+Currency
+Adj. Non-IFRS
+Constant
+Currency
+210
+4,086
+4,384
+-3,624
+Research and development
+17,001
+592
+16,410
+17,773
+527
+219
+17,246
+-6,462
+589
+-7,051
+-6,969
+494
+-7,462
+Total cost of revenue
+Gross profit
+-2,991
+-3,406
+281
+Restructuring
+-936
+138
+-1,075
+-992
+106
+-1,098
+-3,352
+General and administration
+700
+-6,924
+-6,192
+589
+-6,781
+Sales and marketing
+-3,072
+-6,225
+297
+166
+-3,151
+-1,855
+213
+-2,068
+Cost of cloud subscriptions and support
+Operating expense measures
+23,464
+3
+-1,660
+23,461
+24,741
+33
+24,708
+Total revenue
+3,912
+0
+3,912
+25,961
+-3,158
+233
+Cost of software licenses and support
+151
+-3,302
+Cost of services
+-3,471
+423
+-3,893
+-3,817
+-1,427
+343
+Cost of cloud and software
+-2,044
+190
+-2,234
+-1,962
+130
+-2,092
+-4,160
+0
+-418
+-3,352
+devices, aptly called the Internet of Things (IoT), has led to a surge
+of investment in opportunities to optimize and increase business
+outcomes by connecting things to people and processes.
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+The enterprise loT capabilities we provide are catalysts for
+digital transformation, delivering real-time and forward-looking
+predictive insights that our customers need for their intelligent
+enterprises.
+67
+Intelligent devices that generate contextual sensor data are
+becoming more commonplace in the enterprise, as older machines
+are retrofitted with sensors and processing capabilities, while
+newer machines are made intelligent by design. The data generated
+from these "things" can be processed with business logic, either at
+source, in the cloud, or in both; it allows the intelligent enterprise to
+expand into new business models. Connectivity between these
+SAP Leonardo Internet of Things
+SAP BW/4HANA is a data warehouse solution built entirely on
+SAP HANA. It offers a unique real-time analytics layer, which can
+directly query the database, instead of processing data at the
+application layer like traditional analytical engines do. It integrates
+data from across an organization to deliver key business
+intelligence. SAP BW/4HANA provides customers with enhanced
+data modelling and governance, so they can manage the
+availability, integrity, and security of data. The solution can be
+connected to various data sources, including SAP or unstructured
+third-party data, such as Hadoop.
+SAP BW/4HANA
+The SAP Analytics Cloud solution leverages the inherent
+intersection of business intelligence (BI), planning, and predictive
+analytics to deliver new capabilities such as simulation and
+automated discovery in BI, as well as storytelling and predicted
+forecasts in planning. The solution allows organizations to close the
+gap between transactions, data preparation, analysis, and action. In
+addition, the SAP Analytics Cloud solution allows customers to take
+advantage of high-speed innovation in the cloud, while using their
+existing on-premise investments. To further enable a smooth
+transition to the cloud, we offer the SAP Analytics Hub solution.
+SAP Analytics Hub makes it easier for our customers to find the
+analytics applications they need, as it delivers a single point of
+access to all analytics offerings, cloud and on premise, from SAP
+and our many ecosystem partners.
+Analytics
+SAP Leonardo is a methodology that combines design thinking
+services with intelligent technologies for every business process, to
+enable rapid innovation and create better outcomes for the
+customer. SAP Leonardo brings together the customer vision,
+SAP's processes and industry knowledge, and technologies such as
+analytics, Al/machine learning, and loT capabilities. SAP Cloud
+Platform provides the environment for applications to consume
+these technologies.
+Products, Research & Development, and Services
+SAP Leonardo
+SAP Leonardo Machine Learning
+SAP Digital Business Services
+-
+We standardized our services portfolio to help companies reap
+the benefits of SAP products and solutions faster. Depending on
+the needs of the customer, we offer the following services
+separately or packaged together:
+Project Success
+The SAP ActiveAttention program is a premium-level
+engagement similar to the New SAP MaxAttention, but designed to
+support smaller businesses requiring a less intense engagement
+level.
+As the highest engagement level throughout the software
+lifecycle, this customized, on-site program orchestrates all SAP
+experts to work with our customers to innovate, develop ideas, and
+accelerate their digital transformation. It enables our customers to
+simplify and optimize their IT operations.
+One commercial framework offers pay-as-you-use services
+with predictable outcomes.
+One team brings a holistic engagement model with clear
+accountabilities.
+Machine learning describes algorithms that learn from data and
+support employees to focus on higher value work, thus
+empowering enterprises to scale innovative solutions and make
+their organization intelligent. SAP Leonardo Machine Learning
+solutions are already integrated in our SAP portfolio, providing
+intelligent capabilities in SAP S/4HANA, SAP C/4HANA,
+SAP Concur, SAP Fieldglass, and SAP SuccessFactors solutions,
+among others. These intelligent capabilities are orchestrated
+through the SAP Leonardo Machine Learning Foundation, which
+runs on SAP Cloud Platform, and provides a variety of functional
+and business services. In addition to SAP's own software
+developers, our partners and customers can easily use
+"pretrained" or "retrainable" machine learning capabilities, train
+their own machine learning models, and build services on top of
+this foundation. Likewise, SAP Conversational Al provides a way to
+build bots that automate conversational interactions through
+natural language processing within SAP offerings in the SAP
+C/4HANA suite, for example. SAP customers and partners are also
+able to create their own custom bots with this service.
+One service portfolio ensures coverage for all SAP solutions
+and deployments - on premise, cloud, and hybrid.
+The SAP MaxAttention program represents the most exclusive
+and closest customer partnership with SAP. It was completely
+redesigned in 2018, following close consultation with customers.
+The New SAP MaxAttention helps customers turn ideas into value-
+based predictable outcomes with precise business and technical
+guidance - from innovation to operation - and is composed of the
+following:
+Premium Success
+SAP Preferred Success service offers a bundle of prescriptive
+customer success activities for accelerated cloud adoption. It
+focuses on effective change management, enablement,
+consumption techniques, and enhanced support. As an add-on
+to SAP Enterprise Support, cloud editions, SAP Preferred
+Success is available for SAP SuccessFactors solutions,
+SAP S/4HANA Cloud, SAP C/4HANA, and SAP Cloud Platform.
+SAP Enterprise Support services provide proactive, predictive,
+and preventive support for customers across hybrid landscapes
+to help them move to the cloud, make SAP S/4HANA their
+digital core, and embrace breakthrough innovations through
+SAP Leonardo.
+SAP helps accelerate the customer's time to value from our
+technology. As the foundation for customer success plans, the
+following support offerings are provided for our cloud solutions and
+on-premise software:
+Continuous Success
+In addition to our powerful software and technology, SAP
+provides an entire portfolio of service and support offerings to help
+customers maximize the value of their SAP implementations.
+These offerings enable the intelligent enterprise. Our people,
+processes, and tools help customers to achieve digital
+transformation, enabling them to produce exceptional business
+outcomes. In 2018, SAP continued a process that had begun the
+year before, to simplify its services portfolio, creating three
+categories continuous success, premium success, and project
+success and expanded the range of intelligent tools designed to
+underpin service and support offerings.
+-
+-
+Intelligent Technologies
+support multiple isolated databases in a single SAP HANA system,
+as well as external machine learning libraries.
+We also announced the Open Data Initiative, a partnership
+between SAP, Microsoft, and Adobe, the goal of which is to meet a
+core need for our customers - to unlock a single view of their
+customers by bringing siloed data together.
+SAP Commerce Cloud on Microsoft Azure is a partnership that
+combines SAP's market-leading solution for B2B and B2C
+scenarios with the Microsoft Azure public cloud infrastructure.
+SAP Upscale Commerce is a commerce solution designed for
+midmarket retailers, major brands, and direct-to-consumer
+companies looking to deploy a fast and highly engaging
+commerce experience. Built for today's mobile-first consumer,
+it can be deployed in a matter of days, bringing SAP customers
+speed to market with rich Al-powered experiences.
+New innovations in 2018 include the following:
+-
+-
+SAP C/4HANA is now a major growth driver for SAP, showing
+triple-digit growth in cloud subscription revenue during 2018.
+Winning in the CRM market hinges on our ability to deliver an
+integrated lead-to-cash process that connects the front office
+(SAP C/4HANA) with the digital core (SAP S/4HANA) while
+maintaining competitiveness in each area of the SAP Customer
+Experience portfolio.
+In June 2018, we launched SAP C/4HANA, a unified suite of
+cloud solutions designed as the next generation of customer
+relationship management. SAP C/4HANA software provides
+companies with a single, holistic view of each customer across all
+channels and connects demand to the fulfillment engine in one end-
+to-end value chain. To complete our portfolio of customer
+experience solutions, SAP acquired and integrated Gigya, Callidus
+Software, and Coresystems, and rebranded the SAP Hybris
+business area to SAP Customer Experience to reflect the depth and
+breadth of our offerings.
+Customer Experience
+SAP Intelligent Asset Management solutions support
+manufacturers and asset operators to define, plan, and monitor the
+optimal service and maintenance strategy for their physical
+products and assets. The solutions do this by providing the
+required level of collaboration, integration, and analytical insights,
+using an asset central foundation, our digital twin for physical
+assets, as the common data set.
+Asset Management
+inventory optimization in the cloud. It provides the necessary
+information to make business decisions using embedded analytics,
+simulation, prediction, and decision support. Specific SAP
+Integrated Business Planning applications can be used with the
+established SAP Fiori user experience interface or with a Microsoft
+Excel plug-in, allowing users to run optimization scenarios directly
+in their spreadsheets.
+The SAP Integrated Business Planning solution is powered by
+SAP HANA and delivers real-time supply chain planning capabilities
+for sales and operations, demand and supply planning, and
+Integrated Business Planning
+Our SAP Digital Supply Chain portfolio offers enterprises an
+integrated suite of digital supply chain solutions to plan, design,
+manufacture, deliver, and operate their products. With these
+solutions, customers can blend the physical and the digital world
+throughout the complete supply chain - from design, planning, and
+manufacturing to logistics and ongoing maintenance - embedding
+intelligence and ensuring their customers are central to every
+phase of their business. Customers get total visibility as products
+are designed, delivered, and deployed by connecting their business
+processes with real-time data from assets, equipment, customers,
+and suppliers. This visibility is used to adequately anticipate and
+respond to real-world physical realities.
+SAP C/4HANA
+The SAP Data Hub solution enables businesses to manage data
+from numerous sources - SAP or third party - without having to
+centralize data into one location. SAP Data Hub allows data to be
+processed "in flow," for example, while data is being recorded to
+the data store, or being prepared for use in machine learning. It also
+provides enterprise data governance to see who changed or
+accessed the data. The solution lets companies safely and
+effectively move and share their data to enable agile data
+operations across the enterprise.
+Digital Platform
+Products, Research & Development, and Services
+The SAP HANA business data platform is our flagship in-
+memory database, available both on premise and as a service in the
+cloud. It enables businesses to process and analyze live data and
+make business decisions based on the most up-to-date
+information, a requirement in today's digital economy. The
+innovative architecture in SAP HANA allows both transactional
+processing for data capture and retrieval, and analytical processing
+for business intelligence and reporting. It reduces time-consuming
+database and data management tasks and underpins intelligent
+applications that use advanced analytic processing. It includes
+features such as text analysis, multitenant database containers to
+Since 2010, SAP has helped customers realize the value in their
+data with SAP HANA. Today, customers have a new challenge with
+distributed data. Data is no longer just in transactional systems, but
+is distributed across products, machines, and people. This is why
+SAP has brought together the SAP HANA business data platform
+and SAP Data Hub as a complete commercial solution to address
+the emerging challenges enterprises face in managing a distributed
+data landscape.
+SAP HANA Data Management
+With SAP Cloud Platform, customers are free to choose from a
+range of infrastructure-as-a-service (laaS) providers, and today
+many enterprise customers are choosing more than one provider.
+SAP has partnered with Alibaba, Amazon, Google, and Microsoft,
+so our customers can run their applications in an SAP or a third-
+party data center, or in a combination thereof. We also offer SAP
+Cloud Platform as a private cloud deployment.
+Giving Customers Freedom of Choice
+SAP Cloud Platform offers an enterprise platform-as-a-service
+(PaaS) environment where companies can build, test, run, manage,
+and expand software applications in the cloud. It is the center of
+gravity for the intelligent enterprise, as applications can run on SAP
+Cloud Platform, or run with it, by using the platform's services while
+running on another stack. It offers comprehensive capabilities to
+help business users and developers create better, more agile
+applications in less time. Customers can apply, among other things,
+mobile services, advanced analytic tools, state-of-the-art
+authentication mechanisms, and social functionality. For maximum
+flexibility, portability, and agility, we use open source technologies.
+SAP Cloud Platform enables businesses to connect and integrate
+best-of-breed applications to our digital core and to custom-built
+solutions. The introduction of the SAP Cloud Platform Functions
+service and SAP Cloud Platform, ABAP environment, simplifies
+deployments and brings new choices for SAP customers in the
+cloud.
+Extend and customize cloud and on-premise SAP applications
+Develop new applications for different processes
+Integrate cloud and on-premise applications
+Helping customers manage data orchestration and system
+integration across their SAP installation, our digital platform
+consists of SAP Cloud Platform, the foundation on which the
+intelligent suite is built, and SAP HANA Data Management Suite,
+which manages distributed data from any source. The platform not
+only caters to the runtime and data storage needs of the end-to-
+In the digital economy, companies need both standard
+applications and a highly flexible platform that allows them to do
+the following:
+end applications in the intelligent suite, but it also enriches them
+with intelligent technologies, such as machine learning, Internet of
+Things (IoT), and analytics capabilities, all offered as cloud
+services, which are easily embedded in business applications.
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+SAP Cloud Platform
+Manufacturing and Supply Chain
+-
+-
+Security, Privacy, and Data Protection
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+Meeting Today's Data Protection
+69
+While our intellectual property is important to our success, we
+believe our business as a whole is not dependent on any particular
+patent or a combination of patents.
+SAP actively seeks intellectual property protection for
+innovations and proprietary information. Our software innovations
+continue to strengthen our market position as a leader in business
+solutions and services. Our investment in R&D has resulted in
+numerous patents. As at December 31, 2018, SAP held a total of
+more than 9,542 validated patents worldwide. Of these, 700 were
+granted and validated in 2018.
+Patents
+Professional development of our R&D workforce
+Consulting related to our product strategy
+Obtaining certification for products in different markets
+Patent attorney services and fees
+-
+Products, Research & Development, and Services
+-
+Challenges
+SAP has a formal security governance model in place. Relevant
+security topics are discussed at the Executive Board level
+numerous times each year, during steering committee meetings
+attended by individual or multiple board members. To meet and
+ensure consistent data protection compliance, our CFO and our
+data protection officer (DPO) meet at least monthly. Furthermore,
+our compliance status related to data protection has been an
+inherent part of Supervisory Board meetings.
+Security, Privacy, and Data Protection
+70
+At SAP, we take a holistic approach to the security of our
+company, encompassing processes, technology, and employees.
+At the heart of our secure company strategy are an information
+Secure Company Strategy: Taking a Holistic
+Approach to the Security of Our Business
+Industry certifications are key success factors our secure
+operations strategy. Many of our cloud solutions undergo Service
+Organization Control (SOC) audits, including ISAE3402, SSAE16
+SOC 1 Type II, and SSAE16 SOC 2 Type II. The SOC standards are
+harmonized with a number of certifications from the International
+Organization for Standardization (ISO), including ISO 9001, 27001,
+and 22301.
+Our secure operations strategy involves the implementation of
+key security measures across all layers, including physical access
+and process-integrated controls. Furthermore, our secure
+operations approach concentrates on the early identification of
+deviations from the standards defined in our security framework.
+Deviations are identified through a combination of automated and
+manual reviews that are performed by third parties as well as SAP
+employees.
+Our secure operations strategy focuses on the security
+principles of "confidentiality, integrity, and availability" to support
+the overall protection of our business and our customers'
+businesses. To help us achieve our mission to become an intelligent
+enterprise, we have established a comprehensive IT operations
+security framework. This includes system and data access, and
+system security configuration, through security patch
+management, proactive security event management, thread
+hunting, and robust incident handling.
+Every day, organizations around the world trust SAP with their
+data - either on their own premises, in the cloud, or when using
+mobile devices while on the move. Our customers need to know
+that we will keep that data safe, process it in a manner that
+complies with local legislation, and protect it from malicious use.
+For this reason, data protection and IT security are of
+paramount importance to us. We have implemented safeguards to
+help protect the fundamental rights of everyone whose data is
+processed by SAP, whether they are our customers, prospects,
+employees, or partners. In addition, we work towards compliance
+with all relevant legal requirements for data protection. Our chief
+security officer and our data protection officer report to the SAP
+chief financial officer (CFO) and monitor the compliance of all
+activities in these areas.
+Secure Operations Strategy: Running Secure
+Operations
+Our secure software development lifecycle is at the heart of this
+strategy. It provides a comprehensive methodological approach for
+incorporating security features and capabilities into our
+applications. Before a release decision is made, our software is
+assessed and validated by internal security experts. The
+development team then addresses any recommendations made by
+these security experts before we release the application.
+Businesses use SAP applications to process mission-critical
+transactional data, which can be highly attractive to
+cyberattackers. Our secure product strategy focuses on
+incorporating security features into our applications to minimize
+the risk of a security breach.
+Secure Product Strategy: Championing Product
+Security
+For SAP and for our customers, security means more than just
+addressing compliance demands. Companies need to be proactive
+when securing business-critical data and core information assets.
+Several of our security measures extend across all of our
+company and thus to all of our products and services. These
+measures include, among other things, the regular training of our
+employees on IT security, data protection, and privacy, including
+the handling of confidential information and ensuring controlled
+and restrictive access to customer information. In addition, we
+have developed a three-pronged strategy focusing on the security
+of our products, operations, and organization:
+Establishing a Comprehensive Security
+Vision
+Safeguarding data is an increasingly challenging task today.
+Companies are collecting and storing more data than ever before
+from more varied sources. Data now proliferates outside the four
+walls of businesses with multiple endpoints exposed and vulnerable
+to attack. Moreover, the sheer number of and the sophistication of
+attacks facing businesses are at an all-time high. We are seeing the
+"commercialization of hacking," while new advanced persistent
+threats can bypass many traditional security protection
+techniques.
+Facing Increasing Risks in IT Security
+We strive to align our secure software development lifecycle to
+the recommendations of the ISO/IEC 27034 standard for
+application security and our ISO 9001-certified process framework
+for developing standard software, as well as apply the methods for
+developing secure software.
+SAP Advisory Services help customers turn their digital
+business vision into executable strategies and exceptional
+business outcomes by offering support to reimagine business
+models, design enterprise architectures, and deliver business
+transformation to realize business value.
+Total R&D expense not only includes our own personnel costs
+but also the external cost of work and services from the providers
+and cooperation partners we work with to deliver and enhance our
+products. We also incur external costs for the following:
+Translating, localizing, and testing products
+2018
+The SAP Cloud ALM solution is a cloud-based application
+lifecycle management (ALM) tool that helps track and manage
+the needs of customers that use (only or predominantly) cloud
+solutions from SAP. SAP Cloud ALM starts with an
+implementation portal for SAP S/4HANA Cloud. Customers
+subscribing to a cloud solution from SAP automatically receive
+SAP Cloud ALM.
+SAP Cloud Platform Integration Advisor is a service that
+allows users to define, maintain, share, and deploy business-to-
+business (B2B) integration content and interfaces using
+machine-learning algorithms to significantly reduce build time
+and effort.
+-
+Complementing the skills of our people, we develop intelligent
+tools to help simplify and accelerate our customers'
+implementation of SAP solutions and ease the transition to an
+intelligent enterprise. In 2018, we expanded our range of intelligent
+tools. In addition to established tools such as SAP Transformation
+Navigator, SAP Readiness Check, SAP Solution Manager, and SAP
+Innovation and Optimization Pathfinder, we introduced two new
+offerings:
+Intelligent Tools
+SAP S/4HANA. This is an easy-to-use adoption starter
+engagement that helps customers structure and assess their
+transformation towards SAP S/4HANA.
+customers as they start to think about their transition to
+Ecosystem
+Additional
+Infomation
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+Products, Research & Development, and Services
+68
+SAP Innovation Services provide a flexible, open innovation
+approach that helps customers apply emerging technologies
+such as Al and machine learning to bring commercial value to
+their business, at scale. With expert guidance from SAP - from
+ideation to readiness for deployment – customers can bring
+their novel ideas to life as scaled implementations.
+SAP Model Company services provide a preconfigured, ready-
+to-run reference solution with business content, accelerators,
+and engineered services for multiple industries or lines of
+business. It provides the building blocks for a solution, helping
+customers accelerate deployment and digital transformation.
+SAP Value Assurance service packages safeguard
+implementations led by customers and partners by giving them
+access to best practices, methodologies, tools, and deep
+technology expertise, enabling them to accelerate the
+deployment of SAP S/4HANA and SAP BW/4HANA.
+The SAP Advanced Deployment service simplifies and
+accelerates the deployment of SAP S/4HANA for SAP-led
+implementations. Based on the proven SAP Activate
+methodology and tailored to the enterprise's specific transition
+scenario, the service streamlines the implementation or
+migration to a high-performing, sustainable digital core.
+In addition to our standardized service offerings, the new
+SAP S/4HANA Movement program guides SAP ERP
+Further Information on Economic,
+Environmental, and Social Performance
+In 2018, our IFRS R&D ratio, reflecting R&D expenses as a
+portion of total operating expenses, increased by 1.1 percentage
+points (pp) to 19.1% (2017: 18.0%). Our non-IFRS R&D ratio
+increased by 1.Opp to 19.4% year over year (2017: 18.4%). At the
+end of 2018, our total full-time equivalent (FTE) headcount in
+development work was 27,060 (2017: 24,872). Measured in FTEs,
+our R&D headcount was 28% of total headcount (2017: 28%).
+Extending Our Reach Through a Broad Ecosystem
+SAP's extensive ecosystem and partner network serves as a
+vital success driver, extending our reach in the marketplace. Our
+vibrant ecosystem is made up of more than 18,000 partners
+worldwide that build, sell, service, and run SAP solutions and
+technology.
+Investment in R&D
+2017
+2016
+2015
+5%
+-3,406
+8%
+10%
+Through the power of partnership and co-innovation, our
+partner ecosystem drives the bulk of SAP's presence among small
+and midsize companies, making up more than 80% of SAP
+customers. Partners are helping SAP break into new markets with
+SAP Leonardo and SAP Cloud Platform, and are also developing
+intellectual property by creating prepackaged solutions to simplify
+cloud implementations for customers. As Al/machine learning, IoT,
+and blockchain technologies become mainstream, SAP and our
+partners are enabling our customers to become intelligent
+enterprises. By taking advantage of these innovative technologies
+in end-to-end business processes, businesses can drive the next
+level of automation and drive a next-generation value economy.
+2014
+2,331
+2,845
+3,044
+3,352
+3,624
+€ millions | change since previous
+SAP's strong commitment to R&D is reflected in our
+expenditures (see figure below).
+2%
+SAP S/4HANA is built with an open architecture and connects
+to the entire SAP portfolio and beyond. The SAP S/4HANA Cloud
+software development kit (SDK) allows our customers and partners
+to innovate quickly and easily on SAP Cloud Platform while
+leveraging the capabilities of their digital core.
+7%
+Built specifically to take advantage of in-memory computing
+with SAP HANA, SAP S/4HANA reduces both the complexity of the
+data model and the data footprint. It enables SAP S/4HANA
+solutions to process huge amounts of data in real time and end
+users can flexibly change their perspective of the data. This not
+only saves time and costs for our customers but also delivers a new
+interactive experience and new business insights. SAP S/4HANA
+empowers business users to act in the moment, as they have
+immediate access to information at the most granular level to help
+make better, more informed decisions.
+587
+-18,584
+-17,579
+19
+830
+577
+-19,005
+1,120
+Total operating expenses
+1
+0
+0
+0
+1
+-20
+0
+income/expense, net
+0
+182 -16,694
+Performance Management System
+Digital
+Core
+Manufacturing
+To make good on our commitment to help customers transform
+themselves into full digital enterprises operating in real time, we
+have created a framework for the intelligent enterprise, as
+described in the Strategy and Business Model section and
+illustrated below. This framework is further strengthened with a
+portfolio of services and support offerings to help customers
+maximize the value of their SAP software and technology
+implementations.
+Intelligent Enterprise Vision
+SAP works to deliver an intelligent enterprise that brings
+together machine and human intelligence across all business
+functions to provide value to customers. As we make that happen,
+we aim to help customers make best use of their data assets to
+achieve their desired outcomes faster and with less risk.
+Bringing Together Machine and Human
+Intelligence
+and Services
+1) Share-based payments
+Products, Research & Development,
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+33
+63
+Additional
+Infomation
+& Supply Chain
+0
+Other operating
+General and administration
+-6,225
+0
+442
+258
+-6,924
+-6,192
+-1,098
+○
+277
+-6,781
+Sales and marketing
+-3,072
+0
+11 269
+Integrated and Extendable
+312
+-20
+18
+0
+0
+182
+0
+0
+-182
+0
+19
+88
+0
+-19
+Restructuring
+-936
+0
+3
+-1,075
+-992
+○
+People
+Engagement
+135
+Experience
+An SAP SuccessFactors digital assistant was developed to
+provide a business' entire workforce with a personalized,
+engaging experience by applying machine learning to guide and
+recommend actions based on verbal and written questions or
+commands.
+New innovations in 2018 include the following:
+-
+SAP SuccessFactors Human Capital Management (HCM)
+solutions help organizations increase the value of their workforce
+by developing, managing, engaging, and empowering their people.
+SAP SuccessFactors solutions are delivered as a complete digital
+suite that addresses all aspects of human resources (HR), from
+administration, payroll, and benefits to talent management and
+collaboration across the employee journey. These solutions
+integrate fully with the customer's other business software,
+including SAP S/4HANA. SAP SuccessFactors HCM solutions are
+used by more than 6,700 customers in over 200 countries and
+territories, and core HR and talent management solutions reach
+more than 125 million users.
+SAP SuccessFactors
+People Engagement
+The Concur Drive add-on is a Web service that allows
+businesses to automatically capture distance driven as an
+automated alternative to self-reported mileage, reducing
+overspending in organizations.
+SAP SuccessFactors Visa and Permits Management is the
+first SAP Success Factors solution built on SAP Cloud Platform.
+It offers a single place for HR to centrally manage, automate,
+and gain insight into complex employee work visa and permit
+processes for international hiring.
+The Budget add-on is a Web service that aggregates data in
+near real time from SAP Concur solutions including Concur
+Expense and Concur Invoice, as well as purchase and travel
+requests, for a comprehensive dashboard on spend - before
+and after the spend occurs.
+New innovations in 2018 include the following:
+-
+-
+With close to 58 million users worldwide, SAP Concur is the
+world's leading travel and expense management software. SAP
+Concur solutions help companies of all sizes and stages go beyond
+automation to a connected spend management system that
+encompasses travel, expense, invoice, compliance, and risk. These
+solutions help businesses gather instant, actionable insights that
+support the intelligent enterprise.
+SAP Concur
+We delivered a machine-learning powered Resume Matching
+service that automatically reads and ranks candidates based on
+role requirements, identifying best-fit candidates while
+increasing efficiency and speed to hire.
+The Digital Partner Network for SAP Fieldglass solutions was
+launched in 2018 as a new ecosystem network to help
+customers transform how they engage and manage an external
+workforce of freelancers, contingent workers, independent
+contractors, and other service providers.
+The Expenselt mobile app, an already established offering, was
+fully integrated with SAP Concur solutions in 2018, providing
+valuable functionality that uses receipt scanning technology
+powered by machine learning to turn receipts into expense
+report line items.
+New innovations in 2018 include the following:
+Several key features were also added to existing HCM solutions,
+including functionality for the General Data Protection
+Regulation (GDPR), a set of laws that came into force on
+May 25, 2018, which affects data privacy practices throughout
+the European Union (EU). This GDPR functionality is now
+embedded across the entire HCM suite, making it easier for HR
+leaders to properly handle and protect sensitive employee and
+candidate data. A candidate relationship management capability
+is now available as part of the SAP SuccessFactors Recruiting
+solution, helping recruiters to attract more relevant candidates,
+engage and nurture targeted talent pools, and manage the
+application and hiring process more efficiently.
+Products, Research & Development, and Services
+Real Time
+Customer
+Developed first for the cloud, SAP S/4HANA can be delivered as
+a software-as-a-service (SaaS) solution, on premise, in a private
+cloud, or as a hybrid deployment. All consumption options are
+compatible, so that organizations have the flexibility to implement
+SAP S/4HANA to meet their exact needs. SAP S/4HANA Cloud
+provides SaaS qualities such as scalability as well as quarterly
+innovation updates. On-premise customers receive the same
+updates but on an annual update cycle.
+Flexible Deployment Options
+SAP S/4HANA is our enterprise resource planning (ERP) suite
+for the intelligent enterprise. Approximately 10,500 customers
+have chosen it to support their digital transformation. It enables a
+business to access and analyze data in real time, giving them
+insights to act in the moment, providing predictive suggestions,
+and connecting business functions and the people within them.
+SAP S/4HANA software spans all business functions including
+finance, human resources, sales, service, procurement,
+manufacturing, asset management, supply chain, and R&D.
+SAP S/4HANA
+Digital Core
+Further improving usability across mobile devices, SAP and
+Google partnered in 2018 to redesign the SAP SuccessFactors
+Mobile app for Android. Employees and managers can now more
+easily engage and complete critical people-related tasks. We also
+joined forces with Thrive Global to introduce Well-Being at Work, a
+new initiative that puts employee well-being at the heart of
+organizations and positions technology as a catalyst for this
+cultural shift. SAP SuccessFactors Work-Life is the first solution to
+come from this partnership. It provides real-time insights into well-
+being needs and makes recommendations to improve employee
+satisfaction and engagement.
+Additional
+Infomation
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined
+99
+66
+65
+Further Information on Economic,
+Environmental, and Social Performance
+SAP Fieldglass solutions are cloud-based applications for
+external workforce management and services procurement. The
+SAP Fieldglass Vendor Management System helps organizations
+find, engage, and manage all types of flexible resources - including
+contingent workers, statement-of-work-based consultants,
+freelancers, and more. In 2018, SAP Fieldglass solutions connected
+customers with 5.7 million active external workers and more than
+131,000 suppliers in over 220 countries and territories.
+To Our
+The SAP Ariba Cloud Integration Gateway solution enabled by
+the SAP Cloud Platform Integration service provides with buyers
+a simple, reliable, and faster way to connect their SAP ERP and
+SAP S/4HANA systems with SAP Ariba solutions.
+Every business can benefit from better managing its spend. Our
+cloud solutions under the SAP Ariba, SAP Concur, and SAP
+Fieldglass brands give customers the essential visibility and
+capacity to control their spend. Together, the solutions comprise
+the largest commerce platform in the world, with approximately
+$2.9 trillion in global commerce transacted annually in more than
+230 countries and territories. These solutions enable insight and
+control across sourcing and supplier management, travel and
+expense, and external workforce. Our network and spend
+management solutions are built on an open platform of established
+business networks. They give customers greater understanding of
+all spend related to vendors and employees and the ability to share
+master data through SAP S/4HANA to maximize intelligence-
+based decisions. These solutions deliver best practices for our
+customers, no matter if they decide to use our entire portfolio or a
+specific solution to address their needs.
+Network and Spend Management
+With our acquisition of Qualtrics International Inc. on
+January 23, 2019, SAP adds experience management capabilities
+to further empower the intelligent enterprise, bringing a new
+dimension in which every digital interaction is an opportunity to
+influence a customer positively. A business can use each
+interaction to measure customer satisfaction, employee
+engagement, partner collaboration, brand impact, and user
+sentiment. By combining such experience data with the operational
+data already maintained in an SAP system, an intelligent enterprise
+can deliver intelligent experiences for customers.
+Integrated with SAP S/4HANA, our digital core, and built on an
+open cloud platform to enable integration across heterogeneous
+environments, these offerings can be linked easily with third-party
+applications and data, delivering the real-time and actionable
+insights that customers need.
+imperatives and identify opportunities for improvement. Together,
+these solutions support the customer's journey to becoming an
+intelligent enterprise.
+Whether a business needs to manage its total spend, gain a
+deeper understanding of its customers, engage its external
+workforce, or transform its workplace experience, our intelligent
+suite enables a global enterprise to thrive in the digital economy.
+Developed with new technologies such as artificial intelligence
+(AI)/machine learning, including chatbots and voice technology,
+SAP cloud applications provide businesses with insights and
+intelligence to anticipate and proactively respond to business
+Intelligent Suite
+SAP Ariba
+By bringing continuous innovation, we not only help our
+customers succeed as they adopt increasingly more sustainable
+business strategies, but we also realize our purpose of helping the
+world run better and improving people's lives.
+Data
+Management
+Digital
+Platform
+dol
+AI/ML | IoT | Analytics
+SAP Fieldglass
+Intelligent
+Suite
+Intelligent Technologies
+Cloud
+Platform
+SAP Ariba solutions offer an online business-to-business
+marketplace connecting more than 3.8 million sellers in more than
+190 countries, with sellers realizing more than US$2.6 trillion in
+goods and services every year.
+Network & Spend
+Management
+-
+SAP Ariba Strategic Sourcing Suite significantly expanded its
+industry capabilities with new retail industry capabilities for
+direct spend.
+-
+The SAP Ariba Supplier Risk solution provides additional
+insights to help customers track 175 risk incident types in
+partnership with Semantic Vision, Made In a Free World, World
+Economic Forum, and other public and private data
+aggregators. These risk incident types are used to calculate a
+company's supplier risk-exposure score. This score is then used
+to analyze exposure to high-risk suppliers. The solution also
+provides a comprehensive risk-due-diligence process, which
+helps companies meet third-party regulatory compliance
+requirements.
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Sourcing solution and Ariba Network, and enables
+manufacturers and service providers to connect and collaborate
+across the entire manufacturing process.
+Combined
+Management Report
+Products, Research & Development, and Services
+64
+The SAP Digital Manufacturing Cloud solution offers a
+manufacturing network that integrates with the SAP Ariba
+The SAP Ariba Snap program provides simple, affordable, and
+scalable options for fast-growing companies to implement
+sourcing solutions and reap the benefits they provide.
+New innovations in 2018 include the following:
+To Our
+Stakeholders
+The SAP Ariba Spend Analysis solution leverages Al and
+machine learning to reduce the time it takes to classify invoice
+data.
+Building Digital Skills
+In 2018, SAP donated €22.8 million to education and workforce
+development programs, as well as youth entrepreneurship
+projects. These programs, focused on digital skills, expanded
+operations into more than 93 countries, accelerating our ability to
+build an inclusive, skilled workforce to deliver an intelligent
+enterprise.
+CSR focuses on three strategic program pillars: building digital
+skills, accelerating best-run non-profits and social enterprises, and
+connecting employees with purpose. The programs within each
+pillar embrace the framework of the United Nations Sustainable
+Development Goals (SDGs), focusing primarily on three of the
+seventeen goals: quality education (SDG 4), decent work and
+economic growth (SDG 8), and strengthening partnerships for
+sustainable development (SDG 17).
+Stakeholders
+Powering Opportunity Through Digital
+Inclusion
+Additional
+Infomation
+Management Report
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+As technology and innovation rapidly change the competencies
+needed to succeed in today's digital world, SAP Corporate Social
+Responsibility (CSR) is tackling this skills gap head-on, putting
+SAP's purpose to help the world run better and improve people's
+lives into action through our mission -powering opportunity
+through digital inclusion. As such, our initiatives consider issues
+including access, adoption, and application of skills to ensure
+everyone can benefit from and participate in the digital economy.
+SAP recognizes the responsibility of meeting people where they
+are on their employment journey. As such, our educational
+initiatives aim to help people - regardless of age or background -
+attain the relevant 21st-century skills to thrive, innovate, and secure
+meaningful work (including entrepreneurial pursuits) in a digital
+world. In 2018, SAP digital skills and coding programs trained
+34,000 teachers, engaged 2.8 million young people, and spanned
+93 countries.
+Collaborating for Impact
+SAP social partners are selected because of their significant
+impact in areas of quality education and workforce preparedness.
+SAP provides unique skills, expertise, products, and financial
+support to partners that, in turn, accelerate their ability to drive
+sustainable social impact. In 2018, SAP built capacity for over 800
+innovative non-profit organizations and social enterprises, resulting
+in a social investment of €3.4 million and impacting one million
+lives.
+Social enterprises represent a powerful vehicle for a more
+caring, inclusive, and sustainable economy due to the nature of
+their socially-driven business models. In 2018, SAP extended
+investment in this area by formalizing two new long-term
+collaborations, entering a three-year partnership with the Social
+Enterprise World Forum (SEWF) as our first global commercial
+partner. SEWF is one of the world's leading and longest-established
+international movement-building organizations. Additionally, we
+formalized our partnership with the We Are Family Foundation's
+Three Dot Dash global teen leader initiative, supporting teen
+innovators who are addressing some of the world's most pressing
+issues. In 2018, the efforts of 32 teens representing five continents
+focused on improving healthcare, increasing food security, and
+promoting access to education, among other topics.
+Connecting Employees with Purpose
+SAP empowers our employees to take action around causes
+that matter to them personally through easy-to-digest resources
+including training, a new cloud-based employee engagement
+platform called SAP Together, as well as funding of non-profit
+organizations. In this way, SAP works to foster employee
+engagement and societal impact. In 2018, more than 20,000 SAP
+employees volunteered, dedicating more than 250,000 hours of
+service. During SAP Global Month of Service, an annual
+volunteering campaign, employees executed over 900 projects
+globally. SAP Together will serve as a digital hub for employee
+volunteerism and continue to build on the momentum from SAP
+Month of Service year-round.
+Increasingly, SAP CSR is collaborating with like-minded
+customers and partners to drive collective impact through
+exemplary initiatives such as Code Unnati. The program was co-
+founded in 2017 by SAP India and customer Larsen & Toubro Public
+Charitable Trust. Code Unnati is a first-of-its-kind multi-company
+initiative delivering positive social impact across 13 Indian states.
+Through digital skills access and education as well as ten new
+community service centers in rural areas, Code Unnati reached
+414,460 students and teachers in 2018.
+Employees and Social Investments
+77
+Management Report
+To Our
+Combined
+Combined
+Stakeholders
+One of our long-term CSR investments in building digital skills
+includes our Early College High School program in North America.
+Running in four cities and serving 1,016 students, this model blends
+high-school curriculum with college-level coursework and
+workplace experience to help students develop strong technical,
+design, and communication skills. The program connects students
+to career pathways in technology and improves the long-term
+pipeline of trained talent for the technology sector in North
+America. In 2018, SAP hosted 10 student interns in our offices in
+the United States. The founding school, New York City's Business
+Technology Early College High School (BTECH), graduated 89% of
+the legacy class, exceeding city graduation averages.
+Accelerating Best-Run Non-Profit Organizations
+and Social Enterprises
+To Our
+23,265
+76
+952
+434
+Consolidated Financial
+Statements IFRS
+657
+96,498
+2,043
+38,357
+25,827
+149
+133
+7
+24,359 88,543
+289
+36,222 24,696
+Employees and Social Investments
+84,183
+172
+0
+209
+acquisitions
+SAP Group
+40,496 27,454 25,759
+93,709
+37,512 25,459
+24,029 86,999 34,932 23,532
+22,145 80,609
+(months' end
+average)
+Due to reorganizations in our SAP Digital Business Services in 2017, some employees were reallocated from cloud and software to
+services. Numbers for 2017 are therefore not fully comparable to prior year.
+37
+Further Information on Economic,
+Environmental, and Social Performance
+At SAP, we have tied our business strategy to our environmental
+strategy by creating a "green cloud" powered by 100% renewable
+electricity. As more business moves to the cloud, data centers are a
+key part of how SAP provides solutions to our customers. By using
+our green cloud services, customers can significantly reduce their
+carbon footprint. Given the increasing data center capacity and an
+Energy and Emissions
+2015
+2016
+2017
+2018
+Strengthening Our “Green Cloud”
+78
+Energy and Emissions
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+increasing energy consumption, our data centers have become a
+primary focus of our carbon reduction efforts.
+We have introduced initiatives to drive efficiency and innovation
+with respect to our buildings, data center operations, and
+infrastructure. For example, in 2018, one of our main data centers
+in St. Leon-Rot, Germany, had a very efficient power usage
+effectiveness (PUE) of 1.36. The PUE is a ratio that describes the
+efficiency of a data center, with 1.0 being the ideal. In early 2019,
+SAP will open its new state-of-the-art data center in Walldorf,
+Germany.
+Committing to 100% Renewable
+Electricity
+Our commitment to 100% renewable electricity is crucial to
+making our operations more sustainable. While SAP produces a
+small amount of renewable electricity through solar panels in some
+locations, we rely primarily on the purchase of renewable energy
+certificates (RECs) to achieve our target of 100% renewable
+electricity. We only invest in Gold Standard RECs, which support
+renewable energy projects that meet robust criteria in terms of
+environmental integrity, stakeholder inclusivity, and reporting and
+verification. All of these RECs are 100% EKOenergy label certified,
+the highest quality energy ecolabel available.
+Total Data Center Electricity
+GWh
+■Internal
+External
+317
+Thereof
+249
+265
+2014
+Additional
+Infomation
+919
+920
+Being a Front-Runner for a Greener Way
+of Working
+SAP takes its environmental responsibilities seriously and strives
+to be a role model for sustainable business operations. We believe
+that by running cleaner, greener operations, we can make a
+difference to our planet. In addition, we aim to enable our customers
+to reduce their overall carbon footprint through our software.
+Our global environmental policy promotes a more productive use
+of resources by providing transparency in environmental issues,
+driving efficiency, and leveraging transformational strategies. It also
+outlines our environmental goals.
+The SAP Executive Board sponsor for sustainability, including
+climate change, is our chief financial officer (CFO). Our chief
+sustainability officer and our dedicated sustainability organization
+coordinate our response to climate change, which includes
+assessing and managing climate-related risks and opportunities.
+Facilities management staff design and operate our facilities based
+on robust environmental standards. In addition, our IT operations
+personnel is committed to optimizing energy consumption in our
+data centers. We assess our environmental performance and risks
+in quarterly management reviews.
+Designed to enable continous improvement and protect the
+environment, our environmental management system based on the
+ISO 14001 standard was rolled out to seven additional SAP sites in
+2018. The system now covers 55 SAP sites in 30 countries. In 2018,
+we successfully audited the Walldorf and St. Leon-Rot sites in
+Germany, thus fulfilling our target for the system to cover
+operations affecting about 70% of employees globally. Currently, we
+are also implementing the ISO 50001 energy management system
+for the Walldorf and St. Leon-Rot sites.
+Cutting Carbon Emissions
+In 2017, we announced a commitment to making our operations
+carbon neutral by 2025. This is the next logical step in our long-
+term greenhouse gas (GHG) avoidance strategy, which also
+includes an undertaking to reduce GHG emissions to levels of the
+year 2000 by 2020, which we achieved in 2017. The target includes
+all direct emissions from running our business as well as a selected
+subset of indirect emissions from supply chains and services.
+Furthermore, as a member of the Science-Based Targets initiative,
+we were the first German company to release a science-based
+climate target. This target reflects the level of decarbonization
+required to keep the global temperature increase below two
+degrees Celsius compared to pre-industrial temperatures. At SAP,
+this corresponds to an 85% reduction in our 2016 emissions level
+by 2050, including energy consumption of our products in use at
+our customers.
+A number of initiatives harness innovative technologies to help
+us run our operations in a way that minimizes our impact on the
+environment. In addition, our investment in renewable electricity
+certificates and carbon credits enables us to support sustainability
+projects across the globe.
+Total Net Emissions
+kilotons CO2
+500
+455
+380
+325
+310
+2014
+2015
+2016
+2017
+2018
+In addition to our long-term commitment for 2025, we have
+derived annual targets for our internal operational steering. In 2018,
+we overachieved our annual target to reduce our emissions to
+333 kilotons (kt) of CO2 by 23 kt. This result stems primarily from
+compensation with carbon emission offsets. Our focus on carbon
+emissions has contributed to a cumulative cost avoidance of
+€272.8 million in the past three years, compared to a business-as-
+usual scenario based on 2007. We achieved 39% of this cost
+avoidance in 2018.
+Total Energy Consumption
+GWh
+965
+950
+920
+28,029 26,620
+Total
+SAP Group (12/31)
+4,268
+5,374
+Total
+15,983
+EMEA Americas
+APJ
+Total
+EMEA Americas
+APJ
+5,869
+3,895
+4,719
+14,482
+6,406
+4,184
+5,412
+16,002
+Services
+8,120
+5,736
+5,620
+19,476
+7,536
+4,878
+4,965
+17,379
+6,341
+6,535
+Cloud and software
+Americas
+243
+In 2018, SAP did not experience any significant incidents in
+processing personal data - either on our own behalf or on behalf of
+our customers - that were subject to GDPR or other applicable
+data protection laws.
+We have implemented a wide range of measures to protect data
+controlled by SAP and SAP customers from unauthorized access
+and processing, as well as from accidental loss or destruction. Also,
+we are developing our products to support our customers in
+applying data protection requirements, including GDPR.
+BS 10012:2017. Initially implemented at our global support
+organization, the DPMS has been successively rolled out and is now
+in place in all areas critical to data protection. It covers almost all
+areas and countries in which SAP has operations and will be
+introduced in all acquired companies. It is audited and certified on a
+yearly basis by the British Standards Institute and this audit last
+took place in April 2018.
+Our DPMS conforms to the targets of the globally-recognized
+standard for data protection management systems,
+Our policy outlines a group-wide minimum standard for handling
+personal data in compliance with data protection and privacy laws.
+It defines requirements for all operational processes that affect the
+processing of, or access to, personal data. It also clearly allocates
+responsibilities and establishes organizational structures. We
+actively monitor changes to applicable laws and regulations so that
+we can update our standards on an ongoing basis.
+Our global data protection and privacy policy and global data
+protection management system (DPMS) are designed to ensure
+that we comply with applicable data protection laws. These include
+the harmonized European data protection law, the General Data
+Protection Regulation (GDPR).
+appropriate security measures, we develop and pursue our data
+protection and privacy strategy in accordance with our business
+strategy.
+SAP respects and protects the right to data protection and
+privacy when processing the personal data of employees,
+applicants, customers, suppliers, and partners. While implementing
+Complying with Data Protection and
+Privacy Legislation
+Furthermore, our SAP Cloud Trust Center site provides
+transparency for our customers with regard to how SAP helps to
+improve security, privacy, and compliance in cloud and on-premise
+landscapes.
+Our portfolio includes identity and access management tools
+and solutions for governance, risk, and compliance.
+In addition to these important measures, up-to-date security
+mechanisms, such as authentication, authorization, and
+encryption, serve as a first line of defense. To secure the SAP
+software landscape, we offer a portfolio of security products,
+services, and secure support as well as security consulting. These
+offerings help our customers build security, data protection, and
+privacy capabilities into their businesses.
+Business continuity: We maintain a corporate continuity
+framework aimed at having robust governance in place at all
+times, and review this framework on an annual basis to adapt to
+new or changed business needs.
+Secure environments: Industry-standard physical security
+measures are in place to ensure the security of our data centers
+and development sites so that we can protect buildings and
+facilities effectively.
+Security culture: Regular mandatory training, assessments, and
+reporting on these efforts foster awareness and compliance
+with our security policy and standards.
+security management system and a security governance model
+that bring together different aspects of security. These include the
+following three main areas:
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined
+To Our
+Stakeholders
+equivalents
+EMEA
+APJ
+41,848
+4,119
+14,621
+1,970
+1,147
+6,024
+2,676
+1,781
+1,047
+5,504
+2,629
+1,746
+1,018
+5,393
+administration
+Infrastructure
+2,160
+951
+631
+3,742
+1,732
+855
+501
+3,087
+1,584
+788
+454
+2,827
+2,906
+3,967
+General and
+21,977
+Research and
+12,478
+5.651
+8,930
+27,060
+11,349
+5,250
+8,273 24,872
+10,525
+4,860
+7,977
+23,363
+development
+Sales and
+9,843
+9,452
+4,918
+24,213
+9,196
+9,169
+4,854
+23,219
+8,542
+8,999
+4,435
+marketing
+137
+12/31/2016
+86
+-
+-
+Own SAP: Our share purchase plan for SAP employees. In 2018,
+66% of our employees participated in Own SAP, purchasing a
+total of 5.2 million shares. For more information, see the Notes
+to the Consolidated Financial Statements, Note (B.3).
+Hasso Plattner Founders' Award: In its fifth year, this
+prestigious award provides the highest internal employee
+recognition at SAP for delivering on our vision and strategy. For
+2018, the award went to the "Immersive experience", a 360-
+degree room revolutionizing customer engagement by putting
+its visitors in the middle of the intelligent enterprise journey with
+the help of 3D projections. The team of 15 people was chosen
+from 161 nominations and with a total of 1,752 employees from
+34 countries.
+SAP.IO Venture Studio: This initiative identifies high-potential
+entrepreneurial employees at SAP and helps develop them into
+successful leaders, with the objective of building new ventures
+that will have a massive impact on business and society. In 2018,
+the Venture Studio engaged more than 10,000 employees and
+jump-started close to 600 venture ideas.
+One Billion Lives: This initiative addresses the world's biggest
+social problems through our people, technology, and resources.
+The goal to improve one billion lives is realized by developing a
+portfolio of lean, sustainable, shared-value impact ventures,
+operating at startup speed, with the support of SAP.IO's Venture
+Studio. In 2018, more than 2,000 SAP employees participated in
+over 70 ideation events all around the world. Close to 400
+submissions were received spanning design challenges focused
+on the UN Development Goals.
+SAP SuccessFactors solutions: Approximately 250 HR experts
+supported sales teams in deals related to SAP SuccessFactors
+solutions, by sharing experiences with SAP's own HR
+transformation journey. We were the first large-scale enterprise
+to implement the SAP SuccessFactors Employee Central
+solution running on the SAP HANA business data platform
+globally. SAP SuccessFactors Employee Central simplifies
+manager and employee self-services, provides a better user
+experience, and represents a significant cornerstone of the
+intelligent enterprise.
+Klaus Tschira Award: We continued to run the Klaus Tschira
+Human Resources Innovation Award. This award honors SAP
+partners and customers that have contributed a unique and
+innovative solution in the field of HR.
+SAP Alumni Network: This network and online community
+provides a platform to reconnect with former colleagues and to
+unleash the power of a trusted network for the benefit of SAP
+and our ecosystem. In 2018, community members included
+3,472 former and 2,160 current SAP employees.
+74
+Employees and Social Investments
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+People Weeks: In 2018, SAP again sponsored a global event
+designed to expose employees to trending topics and cultivate
+greater connections across cultures. With the motto "Thrive in
+the Intelligent Enterprise," People Weeks 2018 reached over
+30,470 participants worldwide through global sessions and local
+activities in 56 countries.
+How We Run: Our corporate behaviors continue to be the
+cornerstone of our value-driven culture.
+Our "How We Run" Behaviors
+Tell it like it is
+Stay curious
+How We Run
+Keep the
+promise
+SAP
+Embrace
+differences
+-
+וד
+-
+The following benefits and activities are paramount in nurturing
+an attractive workplace:
+While remaining focused on a diverse workforce spanning five
+generations at work (Traditionalists, Baby Boomers, Generations X,
+Y, and Z), "early talent" hires (employees with up to two years of
+professional experience) continued to be a key priority. In 2018,
+approximately 22% of our external hires were early talents. To
+attract new employees, we expanded our recruiting campaign
+involving employees and featuring the slogan, "Bring everything
+you are. Become everything you want."
+Being an employer of choice is crucial in hiring and retaining the
+best talent in the market. In 2018, SAP received 175 global and local
+awards for diversity, inclusion, employer attractiveness, and people
+satisfaction. In addition, our initiatives in talent development were
+recognized externally with 12 Brandon Hall Group HCM Excellence
+Awards. SAP was also ranked as one of the best brands to work for
+with a Glassdoor rating of 4.5 out of 5. Furthermore, the Glassdoor
+rating for CEO Bill McDermott is at an exceptional 98%.
+Employees and Social Investments Employees and Social Investments
+73
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+We are passionate about developing deep and lasting
+relationships with our employees. Our overall retention rate in 2018
+was 93.9% compared to 94.6% in 2017. We define retention as the
+ratio of the average number of employees minus the employees
+who voluntarily departed, to the average number of employees (in
+full-time equivalents or FTEs).
+The average tenure with SAP remains at the same high level (7.2
+years in 2018 and 7.2 years in 2017). The loyalty of our people is an
+additional indication that SAP is regarded as an employer of choice.
+Collaborating with Educational Institutions
+SAP works closely with over 3,670 universities on events,
+executive lectures, office visits, competitions, student club
+sponsorships, and Webinars to recruit top students and graduates
+as well as to integrate the latest SAP technologies into the
+curriculum. In addition, we sponsor several technical competitions
+and diversity conferences that allow us to meet outstanding
+candidates.
+In 2018, more than 1,000 students were enrolled in SAP's
+vocational training program (in Brazil, China, Germany, Hungary,
+India, Ireland, Japan, Switzerland, and the United States). Overall,
+we measured a conversion rate (number of students who stayed
+with SAP after completing their dual studies) for vocational training
+students of 73% in 2018 (2017: 85%).
+Developing Careers
+We partner with our employees to develop their talents and
+passions into new opportunities that advance their careers. Our
+career framework and tools guide our people through their journey,
+helping them to discover who they are, identify in which areas they
+want to grow, and develop an action plan to get there.
+In 2018, we continued our strategic investment in developing
+our leaders and experts on different levels. We offer a career path
+for experts in parallel to our management development track. We
+successfully delivered two flagship programs, one for experts and
+one for chief experts, reaching over 2,700 participants.
+Our performance management approach, SAP Talk, involving
+continuous goal and development planning based on frequent
+dialogue and feedback between employee and manager, has been
+live globally for more than a year.
+Engaging Our People Through Passionate
+Leaders
+Building trust in leaders is a key ingredient for continuously high
+employee engagement. By the end of 2018, 54.7% of leaders at
+SAP completed our flagship leadership development program. In
+2018, leadership trust remained at a strong score of 60% (2017:
+61%). We measure leadership trust using the Net Promotor Score
+methodology. In April 2018, our Executive Board hosted a multiday
+corporate strategy workshop with the most senior leaders of the
+company. This workshop focused on enabling our leaders to deliver
+the Intelligent Enterprise for our customers.
+Making Learning Brilliant
+We make high-quality learning opportunities easily accessible to
+all employees through our cloud-based learning management
+system. In 2018, we provided more than 960,000 courses (not
+including compliance training) to 92% of our employees.
+Self-paced online programs that include language learning, as
+well as technical and soft-skills training courses, are open to all
+employees. Our innovative peer-to-peer learning portfolio
+encompasses coaching, mentoring, job shadowing, and facilitation
+opportunities.
+Creating a Workplace That Drives
+Innovation, Performance, and
+Engagement
+-
+Hiring and Retaining the Best People
+Build bridges,
+not silos
+An inclusive, bias-free workplace helps us attract, motivate, and
+retain employees and to better serve the needs of a diverse
+workforce. It also increases innovation, employee engagement, and
+group performance and helps us think through challenges in new
+ways to provide greater customer insights. At SAP, we are
+committed to reducing bias to make more objective decisions at all
+levels of our organization.
+employees receive medical and security assistance, 24x7.
+Corporate Oncology Program for Employees: Available in
+Australia, Canada, Germany, United Kingdom, and the United
+States, the program provides SAP employees facing cancer with
+Employees and Social Investments
+75
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+access to an individual molecular genetic tumor analysis and
+interpretation.
+Healthy leadership: Various offerings are available to support
+SAP leaders in fostering a healthy mindset and culture, such as
+healthy leadership training and a personalized executive health
+and well-being program.
+Local health and well-being offerings: Services, such as health
+check-ups, ergonomic consultation, cancer screenings, second
+medical opinions, financial wellness, enablement sessions, and
+on-site fitness centers and activity classes, are available to
+employees in various office locations.
+Headcount and Personnel Expense
+As at December 31, 2018, we had 96,498 full-time equivalent
+(FTE) employees worldwide (December 31, 2017: 88,543). This
+represents an increase in headcount of 7,955 FTEs in comparison
+to 2017. The average number of employees in 2018 was 93,709
+(2017: 86,999).
+12/31/2017
+Employee Headcount by Region and Function
+We define headcount in FTE as the number of people on
+permanent employment contracts considering their staffing
+percentage. Students, individuals employed by SAP who are
+currently not working for reasons such as maternity leave, and
+temporary employees on limited contracts of less than six months
+are excluded from our figures. The number of temporary
+employees is not material.
+Our personnel expense for each employee decreased to
+approximately €124,000 in 2018 (2017: approximately €134,000).
+This decrease is primarily attributable to a decline of share-based
+payment expenses as well as lowered average salary expenses in
+2018 compared to the previous year. The personnel expense for
+each employee is defined as the overall personnel expense divided
+by the average number of employees.
+For more information about the number of employees and
+employee compensation, see the Notes to the Consolidated
+Financial Statements, Note (B.2).
+Full-time
+12/31/2018
+Security, Privacy, and Data Protection
+Travel Emergency Assistance Program: During business trips,
+Creating an Inclusive and Bias-Free
+Culture
+management, and leadership skills.
+Mindfulness practice: Various offerings to support employees
+Increasing Gender Diversity
+In 2016, SAP was the first multinational technology company to
+be awarded the Economic Dividends for Gender Equality (EDGE)
+certificate. During the recertification with EDGE in 2018, the study
+showed that SAP had further improved in every category - across
+hiring, promotions, overall gender balance, career accelerators,
+and flexible work options.
+The ratio of women in management positions continued its
+upward trajectory and reached 25.7% on December 31, 2018. The
+Executive Board continues its commitment to increase the
+percentage of women in management positions by 1% each year
+with a target of 30% by year-end 2022.
+Throughout 2018, SAP sponsored and hosted events to attract,
+develop, and support women around the world. Ongoing initiatives
+include the Women's Professional Growth Webinar series, our
+grassroots Business Women's Network, and our Women@SAP
+online community. In addition, SAP offers the Leadership
+Excellence Acceleration Program, a highly respected and award-
+winning development program that helps prepare high-potential
+women for leadership roles.
+Fostering an Inclusive Environment
+More than 100 employee network groups at SAP support
+initiatives and programs to help attract, retain, train, and promote
+people of diverse backgrounds. In 2018, we also conducted training
+and leadership development programs to increase awareness
+about underrepresented minorities at SAP.
+SAP also has a lesbian, gay, bisexual, and transgender (LGBT)
+program that involves employee engagement actions, external
+visibility, strategic partnerships, and social engagement. SAP was
+among the first supporters of the United Nations Global LGBTI
+Standards of Conduct for Business and has been recognized by
+organizations including Human Rights Campaign, Stonewall, and
+Workplace Pride.
+-
+-
+-
+-
+Activities to build an inclusive environment at SAP include:
+Accessibility: These efforts ensure that communications are
+accessible for differently-abled people so they feel welcome and
+can be productive at SAP.
+Autism at Work: In 2018, SAP onboarded people with autism in
+23 different roles, in 13 countries, and 28 locations through this
+program.
+Cross-Generational Mentoring: A program connecting SAP
+employees from different generations to form networks, share
+knowledge, and learn from each other.
+Business Beyond Bias: A program that enables the use of
+technology to reduce bias within people processes.
+"Focus on Insight" Diversity and Inclusion: Award-winning
+training program that contributes to a shared understanding of
+the importance and benefits of a diverse workplace.
+Caring for the Health and Well-Being of
+Our People
+SAP fosters a culture that empowers people to run at their best
+by providing innovative health and well-being programs and
+solutions. When people are healthy, respected, and cared for, it
+results in higher productivity, engagement, innovation, and
+customer satisfaction. That is why we design health and well-being
+benefits and programs in an accessible and easy-to-consume way.
+We measure the progress of these activities through the Business
+Health Culture Index. For more information, see Improving Our
+Working Culture by Listening to Our People above.
+-
+-
+-
+Our programs include:
+Run Your Way initiative on Fit@SAP: This program encourages
+employees of all generations and physical conditions to
+integrate physical activity into their daily life through the aid of a
+Web application. In 2018, more than 10,000 of our people
+participated actively.
+Employee Assistance Program: This program provides
+employees with free, confidential, and impartial expert advice
+and support for life's challenges, 24x7.
+in bringing more mindfulness into their daily personal and
+professional life to increase well-being, productivity, self-
+In 2019, we will primarily focus on two topics: Innovation and
+process simplification. Our innovation capabilities are essential to
+drive the Intelligent Enterprise. The overall innovation score,
+*The EEI score for 2015 was recalculated from 81% to 82% based
+on updated questions.
+2018
+Energy and Emissions
+79
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+supports social causes as well as the sustainability of agricultural
+and rural communities worldwide. The returns from this unique
+investment in the Livelihoods Fund consist of high-quality carbon
+credits. Following the success of this scheme, we will invest in a
+second Livelihoods Fund in 2019, committing another €3 million
+over the next 30 years and thus increasing our commitment to
+sustainable initiatives. In 2018, the carbon credits we received from
+the first fund helped us to offset our carbon footprint by 35.7 kt.
+SAP has pledged to plant five million trees by 2025 in collaboration
+with various non-governmental organizations. In 2018, we started
+by investing in an additional 500,000 trees as part of our carbon
+offsetting initiatives.
+80
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Energy and Emissions
+To Our
+Combined
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Customers
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Approaching Our Customers with
+Empathy
+SAP's purpose is to help the world run better and improve
+people's lives. We achieve this by providing solutions that help our
+customers tackle the challenges of today's world to be successful.
+We can only do this with a sharp focus on our customers' needs. We
+want our customers to see a company that listens and responds to
+their needs. We want to design and develop with their needs in mind.
+We want them to experience a constantly improving SAP.
+To achieve this, SAP has implemented extensive programs to
+deepen our relationship with customers. Through these efforts, we
+reach out to our customers to ensure we understand what works
+well and not so well in their partnership with SAP.
+Measuring customer loyalty is a part of this program, and we
+use the Customer Net Promoter Score (Customer NPS) as one
+feedback mechanism to do so. This allows us to directly
+understand what our customers are thinking and identify key pain
+points for action. Our customers are of such importance to SAP, it
+is only logical that Customer NPS is one of our main KPIs.
+Specifically, Customer NPS measures the willingness of our
+customers to recommend or promote SAP to others. It is derived
+from ongoing customer surveys that identify, on a scale of 0-10,
+whether a customer is likely to recommend SAP to friends or
+colleagues, is neutral, or is unwilling to recommend. The responses
+are divided into three groups as follows:
+In 2018, we continued to realize the benefits of our investment in
+the Livelihoods Fund. Several years ago, we made a commitment to
+invest €3 million covering a 20-year participation in a fund that
+9 or 10: promoters
+Investment in Carbon Credits
+Internal Carbon Pricing for Business Flights
+179
+65
+18
+189
+178
+179
+180
+161
+2014
+2015
+2016
+2017
+2018
+Helping Our Customers Run Greener
+Operations
+The vast majority of our overall emissions result from the use of
+our software. When our customers run SAP software on their
+hardware and on their premises, the resulting carbon footprint is
+about 38 times the size of our own net carbon footprint. To address
+this, we have developed a downstream emissions strategy to help
+our customers, hardware providers, and others run greener
+operations. One of the most important ways we help our customers
+reduce their energy usage and emissions is by managing their SAP
+systems through cloud services provided by our carbon-neutral
+green cloud offerings. In addition, the solutions in our portfolio
+enable our customers to manage their resources, such as
+electricity, in an efficient manner.
+The SAP HANA platform also plays a vital role in helping our
+customers cut their carbon emissions. By combining the worlds of
+analytic and transactional data into one real-time, in-memory
+platform, it can help create much leaner operations, further
+simplifying the system landscape and reducing energy
+consumption. With the new SAP Profitability and Performance
+Management application powered by SAP HANA, we have
+integrated value chain sustainability management and carbon
+footprint management to support our customers on their path to
+increased transparency and combine non-financial and financial
+data into reporting and steering. For example, customers can
+improve their real-time energy demand response for power
+demand management.
+SAP also works with customers to optimize their on-premise
+landscapes so that they consume less energy. We achieve this by
+helping them decommission legacy systems, archive unused data,
+consolidate business applications, and virtualize their system
+landscape.
+Driving Environmental Initiatives
+Throughout SAP
+We continuously pursue strategies to help us achieve our goal of
+reducing emissions at a time of ongoing growth in our business.
+Key initiatives for 2018 included the following:
+EKOenergy Certification
+Most of our renewable electricity is purchased on the electricity
+market and is not produced by SAP. As recommended by the
+Greenhouse Gas Protocol and CDP, we actively look for the best
+available quality. Therefore, all of our purchased renewable
+electricity is EKOenergy certified. EKOenergy is the international
+not-for-profit ecolabel for energy. It certifies electricity from
+renewable energy installations that fulfil additional sustainability
+criteria. Through the purchase of EKOenergy certified electricity,
+we also contribute to EKOenergy's Climate Fund, used to finance
+solar projects tackling energy poverty.
+Electric Vehicles
+As a result of our business expansion, the number of SAP
+employees eligible for a company car has increased annually. We
+want to ensure that the resulting growth in our car fleet does not
+undo our successes in cutting emissions. To help address this, SAP
+aims to increase the number of electric vehicles (battery electric
+vehicles and plug-in hybrid electric vehicles) in our company car
+fleet from 7% at the end of 2018 to 20% by 2020.
+All electric company cars charged at SAP are powered with
+100% renewable electricity. In addition, in Germany, we provide
+employees with an incentive to switch to electric alternatives by
+offering a battery subsidy that partially offsets the higher costs of
+an electric vehicle.
+In addition to avoiding business flights by investing in virtual
+collaboration and communication technologies, we invest in carbon
+emission offsets for air travel in the majority of countries we travel
+from by charging an internal carbon price. This offset effort
+resulted in a compensation of 170 kt of CO2 in 2018.
+7 or 8: passives
+6 or below: detractors
+To derive the Customer NPS, we start with the percentage of
+promoters and subtract the percentage of detractors. Passives are
+ignored. Consequently, the range of achievable scores is -100 to
++100, with the latter being the best achievable score for customer
+loyalty as measured by the NPS methodology. In 2018, after
+critically reviewing the process of how we contact customers to
+participate in the survey, we made changes. We implemented a
+more standardized and more rigorous process to approach
+customer contacts in a more consistent manner across the
+company. We believe every customer, rather than only a sample,
+should have a voice.
+Employee Engagement Index
+Percent
+resulting from corresponding questions within our People Survey,
+is strong at 78% (score of previous year is not comparable due to
+adjusted question wording in 2018). The process simplification
+score was 55%, down 2pp from last year. Process simplification
+has an impact on innovation, so we want to further strengthen our
+already high innovation score by focusing on process simplification
+in 2019.
+Additionally, our Business Health Culture Index (BHCI)
+remained high, which shows that we are continuing to sustainably
+develop our organization. The BHCI assesses the degree to which
+our workplace culture supports people's well-being, work-life
+balance, and organizational health. The overall score for the BHCI
+was 78% (-1pp compared to 2017) and remained within our
+internal target corridor between 78% and 80%. For 2019 through
+to 2021, we aim to keep our BHCI within that corridor.
+Business Health Culture Index
+Percent
+72
+12
+75
+12
+79
+78
+78
+2014
+2015
+2016
+2017
+2018
+79
+2014
+82
+2015*
+85
+85
+84
+2016
+2017
+The People Survey results remained high in 2018. One of our
+most important survey dimensions, the Employee Engagement
+Index (EEI), remained very strong with a minor decrease of 1pp to
+84%. For 2019 through to 2021, we aim to keep our Employee
+Engagement Index between 84% and 86%.
+Improving Our Working Culture by
+Listening to Our People
+In 2018, we evolved our global HR business model to best serve
+our SAP workforce. In addition, we are leveraging our own cloud
+SAP SuccessFactors solutions to make HR services easy to use.
+To address these expectations and to provide intelligent,
+integrated, and meaningful experiences for our people, we
+continuously evolve our Human Resources (HR) strategy. Our HR
+strategy details out people implications, derived from the corporate
+strategy, into areas of strategic investment that span the entire
+employee lifecycle. At the same time, it allows us to create a culture
+that deals successfully with the agility and scope of a digital
+workplace built on our purpose to help the world run better and
+improve people's lives. This culture inspires innovation, leads
+change, and ultimately creates employee satisfaction.
+To adhere to this, we implemented measures to ultimately
+ensure all of our customers are invited to give feedback and a
+random selection of key contacts at each customer is selected to
+participate in the survey. This increases the quality and
+representation of the feedback we are receiving and helps us engage
+in an open dialogue with our customers. We have further reduced
+the set of criteria for which a customer can be excluded from the
+survey, designed our Customer NPS survey instrument to best
+practice standards and with a focus on probing for critical feedback.
+68% of customers gave us a score of 7 or higher. This means
+that a large majority of customers are satisfied or highly satisfied
+with SAP. Because the percentage of customers who rated us 9 or
+10 is slightly smaller than the percentage of customers who rated us
+6 or below our Customer NPS for 2018 is -5.0 (2017: +17.8). We did
+not reach our target of +21 to +23 in 2018. This was mainly due to
+the fact that we have a more rigorous process to ensure we receive
+open and direct feedback. Below you can find some of the programs
+we have implemented to address pain points customers share with
+us in their feedback.
+As we implement these customer engagement programs and
+with continued rigor in our processes, we are targeting a Customer
+NPS of +1.0 in 2019 and a steady increase in 2020 and beyond.
+For more information about the Customer NPS, see the
+Performance Management System section.
+Focusing on Customer Engagement
+In addition to quantitative customer feedback such as Customer
+NPS, we also utilize numerous executive, customer, and product
+advisory boards and councils. These committees allow SAP to listen
+to and engage customers for their feedback and guidance relative to
+our business and technology strategies, solutions, and services.
+Through these efforts, SAP gains a more detailed understanding of
+our strategies, road maps, and potential improvements. The long-
+term objective for each of these efforts is value generation for our
+customers and SAP alike.
+One of the programs we have introduced to support our
+customer engagement is Build Customers for Life. Customers
+expect us to deliver one lifecycle experience across our portfolio, all
+while delivering the promise of integration across our portfolio. To
+turn this objective into action, the program establishes unified post-
+sales process standards and supporting IT infrastructure across all
+cloud offerings. In this way, it enables one harmonized customer
+experience across both digital and direct interaction points with
+SAP.
+Another example is our global Customer First initiative, where
+efforts are underway to improve the way we work and care for our
+customers by ensuring we provide a consistent, positive, end-to-end
+experience that helps deliver successful outcomes for them.
+Some specific areas where we have received valuable feedback
+involve:
+-
+Harmonizing our interactions with customers
+Continuing to evolve our portfolio into a seamless Intelligent
+Enterprise offering
+60
+Further integrating customer experience for our cloud assets in
+particular
+Finally, we not only believe this customer focus is good for SAP,
+but also for our customers. Our commitment to our customer
+experience is clearly evidenced by our acquisition of Qualtrics. As we
+integrate Qualtrics into our portfolio, we will not only be embedding
+this technology into our software, but will also be offering experience
+management to our customers.
+72
+Customers
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+Employees and Social Investments
+Delivering the Intelligent Enterprise with
+the Best People
+Our people are key in enabling our customers to successfully
+become intelligent enterprises. For this reason, we strive to
+understand the needs of today's employee and how a 21st-century
+organization must evolve to keep attracting, retaining, and growing
+current and future talent.
+We engage in this process transparently, as we believe
+transparency leads to accountability. When feedback is honest,
+actionable, and transparent, we can address it head on and truly
+improve our customer experience. Further, the impact of measures
+and improvements is clearly visible. In this way, SAP continues to
+take measures to ensure customer feedback is incorporated in our
+business.
+71
+2,178
+7pp (8pp at constant currencies) favored by Callidus contributing
+positively with a cloud subscription and support gross margin of
+80%. However, changes in internal allocations of cloud delivery
+costs led to an increase in the cost of cloud subscription and
+support compared to 2017. Since its acquisition in the second
+quarter of 2018, Callidus contributed positively to the segment's
+cloud subscriptions and support revenue by €156 million and to the
+segment's operating profit by €53 million.
+Gross margin (in %)
+Segment profit
+Segment margin (in %)
+1) Software as a service/platform as a service
+The SAP Business Network segment increased its cloud
+subscriptions and support gross margin in 2018 by 1pp again, to
+78%. The segment's cost of revenue increased 12% in 2018 (17% at
+constant currencies) to €813 million (2017: €725 million).
+2018
+2017
+A in %
+A in %
+Actual
+Currency
+Constant
+Currency
+Actual
+Currency
+Actual
+Currency
+Constant
+Currency
+528
+2,265
+1,840
+18
+Segment revenue
+Cloud subscriptions and support gross margin (in %)
+Cloud subscriptions and support revenue
+Cloud subscriptions and support gross margin – SaaS/PaaS) (in %)
+2) Infrastructure as a service
+The Applications, Technology & Services segment recorded a
+strong increase in cloud subscriptions and support revenue in
+2018. As a consequence of strong demand in our digital core
+offering and database and data management solutions, and the
+growing success of our SAP Cloud Platform in the market,
+SaaS/PaaS revenue increased 30% (35% at constant currencies).
+We also saw SAP S/4HANA Cloud and SAP Leonardo, our strategic
+offerings for the future, develop very positively and achieve strong
+growth rates.
+Our software support revenue improved slightly in 2018. It rose
+1% (5% at constant currencies) to €10,968 million. Including
+software licenses revenue, which remained slightly below the prior-
+year level due to the shift toward cloud subscriptions and support
+revenue (0% at constant currencies), we achieved a total software
+licenses and support revenue of €15,201 million in 2018.
+Overall, the revenue share of more predictable revenue streams in
+this segment increased 1.4pp from 62.4% in 2017 to 63.9% in
+2018.
+The segment's cost of revenue during the same period
+increased 7% (14% at constant currencies) to €5,625 million
+(2017: €5,262 million). This increase in expenses was primarily the
+result of higher investment in expanding our cloud infrastructure
+and in providing and operating our cloud applications. This applied
+primarily to the SaaS/PaaS business, whose margin consequently
+declined 2pp (2pp at constant currencies) compared to the year
+before. These costs were partially offset by our laaS business,
+whose increasing level of maturity achieved significant increases in
+efficiency. It ended the fiscal year with a margin growth of 6pp (7pp
+at constant currencies).
+Financial Performance: Review and Analysis
+89
+0
+90
+23
+To Our
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+SAP Business Network Segment
+€ millions, unless otherwise stated
+(Non-IFRS)
+Cloud subscriptions and support revenue - SaaS/PaaS¹)
+Combined
+1) Software as a service/platform as a service
+78
+77
+388
+37
+40
+20
+20
+17
+3pp
+3pp
+The segment revenue increased by 16% (21% at constant
+currencies) to €2,629 million. As a result, the SAP Business
+Network segment achieved a segment gross margin of 69% in
+2018 (2017: 68%), an increase of 1pp (1pp at constant currencies).
+Customer Experience Segment
+€ millions, unless otherwise stated
+(Non-IFRS)
+2018
+Actual
+Currency
+Constant
+Currency
+Actual
+Currency
+A in %
+Actual
+Currency
+A in %
+545
+531
+1pp
+1pp
+1pp
+1pp
+2,178
+2,265
+1,840
+18
+23
+78
+78
+78
+77
+1pp
+2,629
+2,733
+2,261
+16
+21
+69
+69
+68
+1pp
+Financial Performance: Review and Analysis
+Segment margin (in %)
+Gross margin (in %)
+951
+Segment revenue
+8pp
+7pp
+59
+67
+67
+Cloud subscriptions and support gross margin (in %)
+>100
+>100
+200
+539
+528
+Cloud subscriptions and support revenue
+8pp
+7pp
+59
+67
+67
+970
+643
+48
+51
+The new Customer Experience segment established in 2018
+recorded strong growth in total revenue of 48% (51% at constant
+currencies). This positive development was mainly influenced by
+the strong growth in our cloud subscriptions and support revenue
+of 164% (170% at constant currencies). The acquisition of Callidus
+Software Inc. and SAP's cloud strategy resulted in an increasing
+cloud revenue share compared to software licenses and support
+revenue. Cloud subscription and support gross margin increased
+1) Software as a service/platform as a service
+Segment margin (in %)
+Segment profit
+1pp
+1pp
+13
+14
+14
+Cloud subscriptions and support gross margin - SaaS/PaaS) (in %)
+63
+85
+139
+138
+-1pp
+-1pp
+80
+79
+79
+Gross margin (in %)
+62
+Segment profit
+>100
+200
+73
+21,892
+73
+20,218
+3
+8
+74
+-1pp
+-1pp
+8,746
+42
+9,183
+42
+8,478
+3
+8
+42
+Opp
+Opp
+Cloud subscriptions and support gross margin (in %)
+Segment revenue
+20,806
+-2pp
+-1pp
+49
+539
+488
+506
+328
+49
+54
+Cloud subscriptions and support gross margin – laaS²) (in %)
+13
+14
+>100
+7
+7pp
+Cloud subscriptions and support revenue
+2,317
+2,400
+1,732
+34
+39
+48
+48
+6pp
+2017
+A solid market demand led to a 4% increase of €141 million in
+consulting revenue and premium support revenue from
+€3,215 million in 2017 to €3,356 million in 2018. In 2018, consulting
+and premium support revenue contributed 82% of the total service
+revenue (2017: 82%) and 14% of total revenue (2017: 14%).
+Revenue from other services increased €34 million, or 5%, to
+€731 million in 2018 (2017: €697 million).
+-2pp
+4%
+6%
+6%
+5%
+2014
+2015
+2016
+2017
+2018
+The growth in revenue resulted primarily from a €1,224 million
+increase in cloud subscriptions and support revenue to
+€4,993 million. Cloud and software revenue represented 83% of
+total revenue in 2018 (2017: 83%). Service revenue increased 4%
+from €3,912 million in 2017 to €4,086 million in 2018, which was
+17% of total revenue (2017: 17%).
+Revenue by Revenue Type
+€ millions
+4,993
+Cloud Subscriptions & Support
+Software Licenses
+4,647
+Software Support
+Services
+4,086
+10,981
+For more information about our regional performance, see the
+Revenue by Region section below.
+Cloud and Software Revenue
+Revenue from cloud subscriptions and support refers to the
+income earned from contracts that permit the customer to access
+specific software solutions hosted by SAP during the term of its
+contract with SAP. Software revenue results from the fees earned
+from selling or licensing software to customers. Support revenue
+represents fees earned from providing customers with technical
+support services and unspecified software upgrades, updates, and
+18%
+17,560
+20,793
+22,062
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+headcount by 7,955 full-time equivalents (thereof 5,912 organic),
+primarily in research and development, services, cloud, and sales.
+With these additional resources, we continued to make targeted
+investments in our innovation areas and growth markets. Thus,
+constant currency non-IFRS operating profit amounting to
+€7.48 billion was above the midpoint of our outlook range raised in
+October (€7.425 billion to €7.525 billion).
+We achieved an effective tax rate (IFRS) of 27.0% and an
+effective tax rate (non-IFRS) of 26.3%, which is at the lower end of
+the range of 27.0% to 28.0% (IFRS) and below the adjusted
+outlook of 26.5% to 27.5% (non-IFRS). This mainly resulted from
+taxes for prior years.
+Our constant currency non-IFRS revenues and non-IFRS results
+in 2018 were driven by our positive business development as well
+as the following factors:
+-
+-
+-
+The adoption of the new revenue recognition standard IFRS 15
+at the beginning of fiscal year 2018 took place without adjusting
+prior-year figures. Revenue was €0.16 billion higher (non-IFRS
+at constant currencies) than it would have been under the
+previous revenue recognition standard, while operating
+expenses (non-IFRS at constant currencies) were €0.25 billion
+lower after applying the new standard. For more information
+about the adoption of IFRS 15, see the Notes to the Consolidated
+Financial Statements, Note (A.5).
+84
+Revenue and earnings from our acquisitions are reflected in our
+results as of the respective acquisition date. Callidus Software
+Besides the financial recognition of hyperinflation in Argentina
+and Venezuela, our non-IFRS numbers at constant currencies
+are further impacted by the hyperinflation due to the mechanics
+of our constant currency adjustments: By applying prior-year
+currency exchange rates to our current-period numbers, these
+numbers are adjusted for currency exchange rate changes. In
+contrast, the 2018 constant currency numbers are not adjusted
+for the respective change in inflation. This benefitted the non-
+IFRS software revenue by €0.15 billion at constant currencies,
+the non-IFRS software support revenue by €0.15 billion at
+constant currencies, and our non-IFRS total revenue by
+€0.46 billion at constant currencies. In contrast, the operating
+expenses (non-IFRS at constant currencies) experienced a
+negative impact of €0.34 billion, resulting in an increase in our
+non-IFRS operating profit (non-IFRS) of €0.12 billion at constant
+currencies. For more information about currency conversion
+and hyperinflation, see the Notes to the Consolidated Financial
+Statements, Note (IN.1).
+Operating Results (IFRS)
+This section on operating results (IFRS) discusses results only in
+terms of IFRS measures, so the IFRS numbers are not expressly
+identified as such.
+We break our operations down into three regions: the Europe,
+Middle East, and Africa (EMEA) region, the Americas region, and
+the Asia Pacific Japan (APJ) region. We allocate revenue amounts
+to each region based on where the customer is located. For more
+information about revenue by geographic region, see the Notes to
+the Consolidated Financial Statements, Note (A.1).
+Revenue
+Total Revenue
+Total revenue increased from €23,461 million in 2017 to
+€24,708 million in 2018, representing an increase of €1,247 million,
+or 5%.
+€ millions | change since previous year
+24,708
+23,461
+Inc. (CallidusCloud), as our largest acquisition, had a positive
+impact of €0.16 billion in cloud subscriptions and support
+revenue (non-IFRS at constant currencies) and a positive
+impact of €0.05 billion on operating profit at constant
+currencies. For more information about our acquisitions in fiscal
+year 2018, see the Notes to the Consolidated Financial
+Statement, Note (D.1).
+Combined
+==
+To Our
+Stakeholders
+14,677
+13,564
+12,379
+4,993
+3,769
+2,993
+9,916
+1,087
+2,286
+10,093
+10,571
+10,908
+10.981
+8,829
+4,993
+2014
+2015
+2016
+2017
+2018
+1,087
+3,769
+2,993
+2,286
+15,975
+■Cloud
+■Software Support
+€ millions
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+enhancements. For further information about our revenue types,
+see the Notes to the Consolidated Financial Statements, Note (A.1).
+Cloud and software revenue grew from €19,549 million in 2017
+to €20,622 million in 2018, an increase of 5%.
+Cloud and Software
+€ millions
+19,549
+18,424
+17,214
+Financial Performance: Review and Analysis
+14,315
+contributor to our support revenue. The €73 million, or 1%, growth
+in support revenue is primarily attributable to our SAP Product
+Support for Large Enterprises services and our SAP Enterprise
+Support services. The acceptance rate for SAP Enterprise Support
+among new customers remained very high in 2018 at 98% (2017:
+99%).
+Software and support revenue decreased €152 million, or 1%,
+from €15,780 million in 2017 to €15,628 million in 2018
+We define more predictable revenue as the sum of our cloud
+subscriptions and support revenue and our software support
+revenue. Compared to the previous year, our more predictable
+revenue increased from €14,677 million in 2017 to €15,975 million
+in 2018. This reflects a rise of 9%. More predictable revenue
+accounted for 65% of our total revenue in 2018 (2017: 63%).
+More Predictable Revenue
+2014
+2015
+2016
+2017
+2018
+Cloud subscriptions and support revenue increased from
+€3,769 million in 2017 to €4,993 million in 2018.
+Cloud Subscriptions and Support
+€ millions
+20,622
+2014
+To Our
+Stakeholders
+Financial Performance: Review and Analysis
+In 2018, we met or exceeded all of our financial targets even
+though we had raised them multiple times throughout the year.
+Financial Performance: Review and Analysis
+81
+82
+88
+To Our
+Combined
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+SAP's rapidly expanding cloud business together with solid
+growth in support revenue led to robust topline growth and
+continued to drive the share of more predictable revenue. The
+combination of strong topline and strict operational discipline led to
+double-digit operating profit growth for the year.
+Earnings per share (EPS) (IFRS) increased whereas operating
+cash flow and EPS (non-IFRS) decreased in 2018. The decline in
+operating cash flow was mainly due to higher-than-expected share-
+based payments, tax, and insurance payments.
+To summarize, our consistent fast growth in the cloud, the
+quality and broadness of our portfolio, and our order entry set us
+up perfectly for continued, strong profitable growth in 2019.
+Therefore, we are confident that we will deliver on our operational
+outlook for 2019 and on our 2020 and 2023 mid-term ambitions.
+Performance Against Our Outlook for
+2018 (Non-IFRS)
+As in previous years, our 2018 operating profit-related goals and
+published outlook were based on our non-IFRS financial measures
+at constant currencies. For this reason, in the following section we
+discuss performance against our outlook only in terms of non-IFRS
+numbers derived from IFRS measures. The subsequent section
+about IFRS operating results discusses numbers only in terms of
+the International Financial Reporting Standards (IFRSS), so the
+numbers in that section are not expressly identified as IFRS
+numbers.
+Outlook for 2018 (Non-IFRS)
+At the beginning of 2018, we projected that our 2018 non-IFRS
+cloud subscriptions and support revenue would be between
+€4.8 billion and €5.0 billion at constant currencies (2017:
+€3.77 billion). This range represents a growth rate of 27% to 33%
+at constant currencies. The Company expected full-year 2018 non-
+IFRS cloud and software revenue to be in a range of €20.7 billion to
+€21.1 billion at constant currencies (2017: €19.55 billion). This
+range represents a growth rate of 6% to 8% at constant currencies.
+In addition, we aimed for non-IFRS total revenue in a range of
+€24.6 billion to €25.1 billion at constant currencies (2017:
+€23.46 billion). This range represents a growth rate of 5% to 7% at
+constant currencies. We also projected our full-year non-IFRS
+operating profit for 2018 would end between €7.3 billion and
+€7.5 billion (2017: €6.77 billion) at constant currencies. This range
+represents a growth rate of 8% to 11% at constant currencies. We
+expected a full-year 2018 effective tax rate (IFRS and non-IFRS) of
+27.0% to 28.0% (2017: 19.5% (IFRS) and 22.8% (non-IFRS)).
+On April 5, 2018, SAP completed the acquisition of Callidus
+Software Inc. (CallidusCloud). In light of this acquisition and our
+strong operating profit in the first quarter, we adjusted our outlook
+in April 2018 for all parameters. We then expected non-IFRS cloud
+subscriptions and support revenue to reach a range between
+€4.95 billion and €5.15 billion at constant currencies. We also
+raised our forecast for non-IFRS cloud and software revenue to a
+range of €20.85 billion to €21.25 billion at constant currencies. We
+expected our non-IFRS total revenue to end between €24.8 billion
+and €25.3 billion at constant currencies. We also adjusted our
+outlook for non-IFRS operating profit for 2018 upward to range
+between €7.35 billion and €7.5 billion at constant currencies.
+In July 2018, based on the strong momentum in our cloud
+business, we raised our forecast for 2018 non-IFRS cloud
+subscriptions and support revenue once more, to a range of
+€5.05 billion to €5.2 billion at constant currencies. We
+consequently also adjusted our outlook for the other parameters,
+as follows: The forecast for non-IFRS cloud and software revenue
+was increased to a range of €21.025 billion to €21.25 billion at
+constant currencies, the forecast for non-IFRS total revenue was
+increased to a range of €24.975 billion to €25.3 billion at constant
+currencies, and the forecast for non-IFRS operating profit was
+increased to a range of €7.4 billion to €7.5 billion at constant
+currencies. We continued to expect a full-year 2018 effective tax
+rate (IFRS and non-IFRS) of 27.0% to 28.0%, but now expected to
+reach the upper end of these ranges.
+In October 2018, based on the continued strong momentum in
+our cloud business, the Company raised its outlook a third time for
+non-IFRS cloud subscriptions and support revenue, to range
+between €5.15 billion and €5.25 billion at constant currencies. This
+range represents a growth rate of 36.5% to 39% at constant
+currencies. Consequently, we also raised the forecast for non-IFRS
+cloud and software revenue to a range of €21.15 billion to
+€21.35 billion at constant currencies. This range represents a
+growth rate of 8% to 9% at constant currencies. We expected our
+non-IFRS total revenue to end between €25.2 billion and
+€25.5 billion at constant currencies. This range represents a
+growth rate of 7.5% to 8.5% at constant currencies. We also
+adjusted our outlook for non-IFRS operating profit for 2018 upward
+to range between €7.425 billion and €7.525 billion at constant
+currencies. This range represents a growth rate of 9.5% to 11% at
+constant currencies. We continued to expect a full-year 2018
+effective tax rate (IFRS) at the upper end of the range of 27.0% to
+28.0%, but now expected an effective tax rate (non-IFRS) of 26.5%
+to 27.5%.
+Financial Performance: Review and Analysis
+Executive Board's Assessment
+Overall Financial Position
+The velocity of the global digital transformation increased
+further and SAP continued to significantly benefit from this mega
+trend. The strong momentum across our entire portfolio and in all
+regions was remarkable, and the share of our more predictable
+revenue reached a new high.
+Impact on SAP
+To Our
+Stakeholders
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Financial Performance:
+Review and Analysis
+Additional
+Infomation
+Economy and the Market
+Global Economic Trends
+In 2018, the global economy remained resilient and continued to
+expand at a steady pace, but at the same time, it showed signs of
+moderating momentum. That is what the European Central Bank
+(ECB) reported in its December 2018 Economic Bulletin¹). Overall,
+the services sector performed better in 2018 than manufacturing,
+and advanced economies better than emerging markets, due to
+more accommodative financial conditions. According to the ECB,
+economic activity weakened most substantially in those emerging
+markets that had been subject to financial turmoil in the summer,
+including Argentina and Turkey.
+In the Europe, Middle East, and Africa (EMEA) region, euro area
+real GDP increased on a broad basis and remained resilient overall,
+but on a lower level than the ECB had expected in the course of the
+year. This was mostly due to a diminishing demand for goods
+exports and temporary sector-specific developments (for example,
+car production in Germany). Meanwhile, services exports increased
+slightly, and the construction business showed robust growth. In
+addition, a strong labor market supported private consumption,
+while business investment benefitted from domestic demand,
+favourable financing conditions, and improving balance sheets.
+As for the Americas region, economic activity rebounded in the
+United States in 2018 and remained resilient. However, trade
+tensions with China escalated when both countries introduced
+tariffs on each other's exports in the second half of the year.
+To Our
+Stakeholders
+The Asia Pacific Japan (APJ) region in 2018 saw a rebound in
+economic activity but the end of fiscal stimulus in Japan. As a
+result, the Japanese economy even contracted during the third
+quarter, due also to temporary factors related to natural disasters.
+At the same time, economic activity in China remained strong,
+despite the trade tensions with the United States. According to the
+ECB, robust exports, solid consumption, easing financial
+conditions, and a supportive government policy strengthened the
+Chinese economy.
+Digital transformation was well on its way in 2018, elaborates
+the U.S.-based market research firm International Data
+Corporation (IDC) in its most recent publications³). This is what we
+described in our previous annual and half-year reports as well. IDC
+research shows that 46% of companies finished their
+"experimentation" stage in 2018 and opted for an integrated digital
+strategy and architecture, not just digitally-enabled products and
+services. Thus, in nearly every industry and in organizations of
+every size, digital transformation helped create new sources of
+revenue through higher competitiveness, with a huge impact on the
+global economy.
+According to IDC, the Internet of Things (IoT) was a major topic
+again in 2018, as it helped businesses run more efficiently, gain
+insight into business processes, and make real-time decisions.
+Worldwide spending on loT amounted to US$725.4 billion (+14.9%)
+in 2018, US$159.5 billion (+18.8%) of which in the EMEA region,
+US$212.9 billion (+15.0%) in the Americas region, and
+US$353.0 billion (+13.1%) in the APJ region. The largest portion of
+these spendings was in the device category, followed by application
+software, platform, and ongoing services5).
+In 2018, reports IDC, a further shift towards public cloud
+platforms took place and made these platforms primary sources
+for fundamental innovation in the application and service world,
+such as blockchain, data management, mobile, and security².
+However, it was mostly the need for machine learning and
+advanced analytics, whose workloads require the scalability and
+elasticity of cloud computing, that drove adoption of these systems
+into the cloud4).
+ERP rationalization and modernization were another focus in
+2018, with the aim to develop new sources of revenue through data
+management monetization³). Artificial intelligence (AI) became a
+part of numerous technologies and solutions and reached more
+devices, apps, and services than before. IDC calculates that
+enterprises using this technology made 21% of their revenue with it
+in 2018.
+Sources:
+¹) European Central Bank, Economic Bulletin, Issue 8/2018, Publication Date:
+December 27, 2018
+(https://www.ecb.europa.eu/pub/pdf/ecbu/eb201808.en.pdf)
+2) IDC FutureScape: Worldwide IT Industry 2019 Predictions, Doc #US44403818,
+October 2018
+3) IDC FutureScape: Worldwide Digital Transformation 2019 Predictions, Doc
+#US43647118, October 2018
+4) IDC FutureScape: Worldwide Intelligent ERP 2019 Predictions, Doc
+#US43262918, October 2018
+5) IDC Market Forecast: Worldwide Internet of Things Forecast, 2018–2022,
+September 2018
+The IT Market
+83
+Combined
+Consolidated Financial
+Statements IFRS
+€5.15 billion
+to €5.25 billion
+€21.15 billion
+to €21.35 billion
+€25.20 billion
+to €25.50 billion
+€7.425 billion
+to €7.525 billion
+26.5% to 27.5%
+Results
+for 2018
+€5.21 billion
+€21.58 billion
+€25.96 billion
+€7.48 billion
+27.0%
+26.3%
+Despite economic and diplomatic tensions, arising particularly
+from the trade conflict between China and the United States, and
+uncertainties regarding the possible outcome and effects of the
+Brexit negotiations, our new and existing customers in 2018
+continued to show a strong willingness to invest in our solutions
+and services.
+At constant currencies, non-IFRS cloud subscriptions and
+support revenue grew from €3.77 billion in 2017 to €5.21 billion in
+2018 and therefore ended in our guidance range of €5.15 billion to
+€5.25 billion. That represents an increase of 38% on a constant
+currency basis.
+Our new cloud bookings, which are one of our measures for
+cloud-related sales success and for future cloud subscriptions
+revenue, increased in 2018 to €1.81 billion (2017: €1.45 billion). This
+is an increase of 25% (28% on a constant currency basis). In
+addition to this strong growth, our cloud backlog (unbilled future
+revenue based on existing cloud contracts) reached €10.1 billion
+(2017: €7.5 billion). This is an increase of 35% (30% on a constant
+currency basis). We expect this committed business to contribute
+to our cloud subscriptions and support growth in 2019 and beyond.
+Besides the strong cloud business, our traditional on-premise
+business again achieved a solid result on a constant currency basis
+in 2018, at the same strong level as the year before. On a constant
+currency basis, non-IFRS cloud and software revenue grew from
+€19.55 billion in 2017 to €21.58 billion in 2018. That represents an
+increase of 10% on a constant currency basis. This revenue thus
+overachieved the forecast for 2018, which was raised in April, July,
+and October.
+Our total revenue (non-IFRS) on a constant currency basis rose
+11% in 2018 to €25.96 billion (2017: €23.46 billion) and therefore
+beat our repeatedly increased outlook.
+Operating expenses (non-IFRS) in 2018 on a constant currency
+basis were €18.48 billion (2017: €16.69 billion), an increase of 11%.
+Our expense base in 2018 continued to be impacted by our
+transformation to a fast-growing cloud business. In our initial
+outlook for 2018, we expected the cloud subscriptions and support
+gross margin to be at least stable or to increase slightly compared
+to 2017. The cloud subscriptions gross margin for 2018 was 63%,
+an increase of 0.7pp on a constant currency basis year over year.
+Despite continued investment in our business transformation, the
+margin improvement was primarily driven by increasing efficiency
+of our cloud offerings.
+All cloud subscriptions and support gross margins on our
+various cloud offerings developed positively in 2018:
+Our cloud subscriptions gross margin (non-IFRS) in our
+Business Network business increased further by 1.1pp (on a
+constant currency basis), resulting in 78% for 2018, already close
+to our long-term ambition of 80% for 2020. This excellent result is
+attributable to the continued positive gross margin development
+within the SAP Ariba and SAP Concur portfolio.
+The cloud subscriptions gross margin (non-IFRS) on our
+infrastructure as a service (laaS) cloud offering continued to
+develop well in 2018. Our cloud subscription gross margin (non-
+IFRS) was 13% in 2018, which reflects an improvement of 6.5pp on
+a constant currency basis.
+Profitability in our software as a service/platform as a service
+(SaaS/PaaS) cloud offering was 60% at constant currencies (non-
+IFRS) for 2018. Despite ongoing investments in the further
+development and harmonization of our various software as a
+service/platform as a service offerings on a single platform, we
+were able to increase the margin a further 2.4pp compared to our
+long-term ambition of 70%.
+We saw efficiency improvements in both our cloud and
+traditional on-premise business, which drove continued operating
+profit expansion. Non-IFRS operating profit in 2018 was
+€7.48 billion on a constant currency basis (2017: €6.77 billion),
+reflecting an increase of 10%. As a result, we were able to surpass
+our excellent results from 2017, despite our continued investment
+in our business transformation during the reporting year. The
+positive development of our operating profit was largely influenced
+by investment decisions focused on customers and products
+which, among other things, resulted in an increase in our overall
+Revised Outlook
+for 2018
+(Q3 Quarterly
+Statement)
+* In the 2018 Half-Year Report, we confirmed our previous outlook, but now expected to reach the upper end of these ranges.
+27.0% to 28.0%*
+Effective tax rate (non-IFRS)
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+2018 Actual Performance Compared to Outlook (Non-IFRS)
+We hit or exceeded the raised outlook for all our guidance parameters we published in April, July, and October.
+Comparison of Outlook and Results for 2018
+Cloud subscriptions and support
+revenue (non-IFRS, at constant
+currencies)
+Cloud and software revenue
+(non-IFRS, at constant currencies)
+Total revenue
+(non-IFRS, at constant currencies)
+Outlook for 2018
+(as reported in
+Integrated Report
+2017)
+€4.80 billion
+to €5.00 billion
+(non-IFRS, at constant currencies)
+Management Report
+€20.70 billion
+to €21.10 billion
+€24.60 billion
+to €25.10 billion
+€7.3 billion
+to €7.50 billion
+27.0% to 28.0%
+27.0% to 28.0%
+Revised Outlook
+for 2018
+(Q1 Quarterly
+Statement)
+€4.95 billion
+to €5.15 billion
+€20.85 billion
+to €21.25 billion
+€24.80 billion
+to €25.30 billion
+€7.35 billion
+to €7.50 billion
+Revised Outlook
+for 2018
+(Q2 Quarterly
+Statement)
+€5.05 billion
+to €5.20 billion
+€21.025 billion
+to €21.25 billion
+€24.975 billion
+to €25.30 billion
+€7.40 billion
+to €7.50 billion
+27.0% to 28.0%*
+Effective tax rate (IFRS)
+Operating profit
+Cloud subscriptions and support revenue - laaS²)
+2015
+2017
+2.8pp
+2.3pp
+-2.5pp
+-2.0pp
+-4.2pp
+2014
+2015
+2016
+2017
+2018
+As an overall result of these effects on operating profit, our
+operating margin widened 2.3pp to 23.1% in 2018 (2017: 20.8%).
+Our revenues and results in 2018 were influenced by positive
+business developments as well as the following special effects (for
+the impacts on our non-IFRS results at constant currencies, see the
+Performance Against Our Outlook for 2018 section):
+-
+-
+In 2018, the adoption of IFRS 15 had a positive effect on
+software license and support revenue of €170 million. Combined
+with other counter-effects, this resulted in a total effect on our
+revenues of €158 million. Our operating expenses benefited by
+€239 million and our operating profit was positively impacted by
+€399 million. For more information about the adoption of
+IFRS 15, see the Notes to the Consolidated Financial
+Statements, Note (A.5).
+The acquisition of Callidus Software Inc. (CallidusCloud) had a
+positive impact since the closing date of €126 million on our
+cloud subscriptions and support revenue, and a negative impact
+on our operating profit of €70 million. For more information
+about our acquisitions in 2018, see the Notes to the
+Consolidated Financial Statement, Note (D.1).
+The financial recognition of hyperinflation in Argentina and
+Venezuela resulted in a decrease in our total revenue of
+€19 million and in a decrease in our operating profit of
+€12 million. For more information about currency conversion
+and hyperinflation, see the Notes to the Consolidated Financial
+Statements, Note (IN.1).
+Changes to the individual elements in our cost of revenue were as
+follows:
+Cost of Cloud and Software
+Cost of cloud and software consists primarily of costs for
+deploying and operating cloud solutions, the cost of developing
+custom solutions that address customers' specific business
+requirements, customer support costs, amortization expenses
+relating to intangibles, and license fees and commissions paid to
+third parties for databases and the other complementary third-
+party products sublicensed by us to our customers.
+Financial Performance: Review and Analysis
+87
+89
+20.5
+20.8
+23.1
+23.3
+Cloud subscriptions revenue in the APJ region rose 46% to
+€611 million in 2018 (2017: €419 million). Software licenses and
+software support revenue slightly decreased from €2,705 million in
+2017 to €2,699 million in 2018, reflecting a year-over-year growth
+of 0%.
+Operating Profit and Operating Margin
+SAP posted record revenues in 2018, particularly in Cloud and
+Services. Total revenue grew 5% to €24,708 million (2017:
+€23,461 million), representing an increase of €1,247 million.
+On the other hand, our operating expenses increased
+€421 million or 2% to €19,005 million (2017: €18,584 million). The
+main contributors to that increase were our continued investment
+in research and development as well as our revenue-related cloud
+subscriptions and support activities. We also continued our
+investments in the Services area in line with the increased revenue.
+Concurrently, the decreased share price in 2018 lead to declining
+costs of share-based compensation of €830 million (2017:
+€1,120 million). Restructuring expenses decreased further to
+€19 million (2017: €182 million). Our employee headcount
+(measured in full-time equivalents, or FTEs) increased by 7,955
+FTES year over year to 96,498.
+Overall, our growth in revenue exceeded the increase in
+expenses, leading to a 17% increase in operating profit to
+€5,703 million (2017: €4,877 million).
+Operating Profit
+€ millions | change since previous year
+5,135
+4,877
+4,331
+4,252
+21%
+To Our
+Stakeholders
+-3%
+-5%
+5,703
+17%
+2014
+2015
+2016
+2017
+2018
+Operating Margin
+24.7
+Percent change since previous year
+-2%
+Additional
+Infomation
+Combined
+Consolidated Financial
+Statements IFRS
+€ millions, unless otherwise stated
+(Non-IFRS)
+2018
+2017
+A in %
+A in %
+Actual
+Currency
+Constant
+Currency
+Actual
+Currency
+Actual
+Currency
+Constant
+Currency
+Cloud subscriptions and support revenue - SaaS/PaaS¹)
+1,829
+1,894
+1,403
+30
+35
+Cloud subscriptions and support gross margin – SaaS/PaaS) (in %)
+58
+57
+59
+-2pp
+Applications, Technology & Services Segment
+Additional
+Infomation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+In 2018, the cost of cloud and software increased 7% to
+€4,160 million (2017: €3,893 million).
+The main impact on costs was an additional €408 million year
+over year for delivering and operating cloud applications in
+response to the strength of customer demand. These investments
+contributed to revenue growth. Our margin on cloud subscriptions
+and support widened by 2.6pp from 56.0% in 2017 to 58.6% in
+2018. This improvement in margin is attributable to strong growth
+in cloud subscriptions and support revenue of 32% to
+€4,993 million (2017: €3,769 million) with a lower increase in
+corresponding costs for cloud subscriptions and support of 25% to
+€2,068 million (2017: €1,660 million).
+A 1% decrease in software license and support revenue to
+€15,628 million (2017: €15,780 million) and a corresponding
+decrease of 6% in the software license and support costs to
+€2,092 million (2017: €2,234 million) enabled us to widen our
+software license and support margin by 0.8pp to 86.6% (2017:
+85.8%). The gross margin on cloud and software, defined as cloud
+and software profit as a percentage of cloud and software revenue,
+narrowed by 0.3pp in 2018 to 79.8% (2017: 80.1%). This decline
+was mainly driven by the change in the cloud and software revenue
+mix, which now has a higher proportion of cloud subscriptions and
+support revenues. Due to infrastructure costs, these revenues
+currently deliver a lower margin simultaneously with a declining
+proportion of higher-margin software and support revenues.
+Cost of Services
+Cost of services consists primarily of the cost of consulting,
+premium services and training courses and the cost of bought-in
+consulting and training resources.
+We were able to increase our service revenue by 4% year over
+year to €4,086 million in 2018 (2017: €3,912 million). As our
+service business trends away from traditional software licensing
+and consulting revenue toward more subscription revenue from
+cloud solutions, we continue to invest by expanding capacities to
+meet the increased demand. As a result, cost of services rose 5%
+to €3,302 million (2017: €3,158 million). Our gross margin on
+services, defined as services profit as a percentage of services
+revenue, remained for the most part stable at 19.2% (2017: 19.3%).
+Research and Development Expense
+Our research and development (R&D) expense consists
+primarily of the personnel cost of our R&D employees, costs
+incurred for independent contractors we retain to assist in our R&D
+activities, and amortization of the computer hardware and software
+we use for our R&D activities.
+Due to growing personnel costs driven by a 9% increase on
+average for the year in our R&D headcount, our R&D expense in-
+creased by 8% to €3,624 million in 2018 from €3,352 million in
+2017. R&D expense as a percentage of total revenue thus increased
+to 14.7% in 2018 (2017: 14.3%). For more information, see the
+Products, Research & Development, and Services section.
+Sales and Marketing Expense
+Management Report
+Sales and marketing expense consists mainly of personnel
+costs, direct sales costs, and the cost of marketing our products
+and services.
+Our general and administration expense consists mainly of
+personnel costs to support our finance and administration
+functions.
+General and administration expense increased 2% from
+€1,075 million in 2017 to €1,098 million in 2018. This increase is
+primarily the result of higher personnel costs related to job creation
+in administrative areas, based on the increased business volume
+related to our growth. Thanks to strong operating results, the ratio
+of general and administration expense to total revenue improved
+by 0.1pp year over year to 4.4% (2017: 4.6%).
+Segment Information
+At the end of 2018, SAP had three reportable segments: the
+Applications, Technology & Services segment, the SAP Business
+Network segment, and the Customer Experience segment.
+For more information about our segment reporting, see the
+Notes to the Consolidated Financial Statements, Notes (C.1) and
+(C.2), and the Performance Management System section.
+88
+Financial Performance: Review and Analysis
+To Our
+Combined
+Stakeholders
+Management Report
+Our sales and marketing expense decreased 2% from
+€6,924 million in 2017 to €6,781 million in 2018. This decrease is
+mainly attributable to the adoption of the new IFRS 15 accounting
+standard and the resulting capitalization of sales commissions. For
+more information, see the Notes to the Consolidated Financial
+Statements, Note (A.5). Accordingly, the ratio of sales and
+marketing expense to total revenue, expressed as a percentage, fell
+to 27.4% in 2018 (2017: 29.5%), a decrease of 2.1pp.
+General and Administration Expense
+2016
+Further Information on Economic,
+Environmental, and Social Performance
+Management Report
+7,973
+7,666
+7,366
+6,929
+5,275
+1,579
+2,000
+2,321
+2,941
+709
+EMEA Region
+In 2018, the EMEA region generated €11,104 million in revenue
+(2017: €10,415 million), which was 45% of total revenue (2017:
+44%). This represents a year-over-year increase of 7%. Revenue in
+Germany increased 9% to €3,658 million (2017: €3,352 million).
+Germany contributed 33% (2017: 32%) of all EMEA region revenue.
+The remaining revenue in the EMEA region was primarily generated
+in the United Kingdom, France, Switzerland, the Netherlands, and
+Italy. Cloud and software revenue generated in the EMEA region
+totaled €9,339 million (2017: €8,759 million). That was 84% of all
+revenue from the region (2017: 84%).
+EMEA: Cloud and Software Revenue
+€ millions
+On Premise
+■Cloud
+9,339
+8,759
+8,193
+7,622
+1,441
+1,029
+6,819
+277
+Cloud
+On Premise
+€ millions
+EMEA
+11,104
+2018
+Impacted by currency headwinds, our software revenue
+declined by €225 million from €4,872 million in 2017 to
+€4,647 million in 2018. Our customer base continued to expand in
+2018. Based on the number of contracts concluded, 15% of the
+orders we received for software in 2018 were from new customers
+(2017: 15%). The total value of software orders received decreased
+9% year over year. The total number of contracts signed for new
+software decreased 1% to 58,530 (2017: 59,147), with an average
+order value of €82 thousand in 2018 (2017: €89 thousand). Of all
+our software orders received in 2018, 29% were attributable to
+deals worth more than €5 million (2017: 30%), while 39% were
+attributable to deals worth less than €1 million (2017: 40%).
+Our stable customer base, the continued demand for our
+software throughout 2018 and the previous years, and the
+continued interest in our support offerings resulted in an increase
+in support revenue from €10,908 million in 2017 to €10,981 million
+in 2018. The SAP Enterprise Support offering was the largest
+Services Revenue
+Services revenue combines revenue from professional services,
+premium support services, and other services such as training
+services and messaging services. Professional services primarily
+relate to the implementation of our cloud subscriptions and on-
+premise software products. Our premium support offering consists
+of high-end support services tailored to customer requirements.
+Messaging services are primarily transmission of electronic text
+messages from one mobile phone provider to another.
+Services revenue increased €175 million, or 4%, from
+€3,912 million in 2017 to €4,086 million in 2018.
+Constant
+Currency
+Financial Performance: Review and Analysis
+85
+55
+To Our
+703
+Combined
+Management Report
+Consolidated Financial
+Statements IFRS
+Revenue by Region
+(based on customer location)
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Infomation
+€ millions
+APJ
+3,891
+Americas region. In the remaining countries of the Americas region,
+revenue decreased 4% to €1,832 million, induced by a challenging
+macroeconomic situation in Latin America. Revenue in the
+remaining countries of the Americas region was generated
+primarily in Canada, Brazil, and Mexico. Cloud and software
+revenue generated in the Americas region totaled €7,973 million
+(2017: €7,666 million). That was 82% of all revenue from the region
+(2017: 82%).
+Americas: Cloud and Software Revenue
+Americas
+9,713
+Stakeholders
+Consolidated Financial
+Statements IFRS
+507
+7,489
+■Cloud
+3,310
+3,124
+2,865
+2,221
+2,663
+200
+611
+419
+290
+101
+2,463
+2,575
+2,705
+2,699
+2,120
+2014
+2015
+2016
+2017
+2018
+Financial Performance: Review and Analysis
+To Our
+Stakeholders
+Combined
+On Premise
+€ millions
+86
+In 2018, 39% of our total revenue was generated in the
+Americas region (2017: 40%). Total revenue in the Americas region
+increased 4% to €9,713 million; revenue generated in the United
+States increased 6% to €7,880 million. The United States
+contributed 81% (2017: 80%) of all revenue generated in the
+7,730
+7,898
+6,542
+5,350
+5.366
+5,345
+5,032
+4,566
+2014
+2015
+2016
+7,115
+2017
+Cloud subscriptions revenue in the Americas region rose 27% to
+€2,941 million in 2018 (2017: €2,321 million). Software licenses and
+software support revenue decreased to €5,032 million in 2018
+(2017: €5,345 million).
+APJ Region
+In 2018, 16% (2017: 16%) of our total revenue was generated in
+the APJ region. Total revenue in the APJ region increased 5% to
+€3,891 million. In Japan, revenue increased 9% to €963 million.
+Revenue from Japan was 25% (2017: 24%) of all revenue
+generated in the APJ region. In the remaining countries of the APJ
+region, revenue increased 4%. Revenue in the remaining countries
+of the APJ region was generated primarily in Australia, India, and
+China. Cloud and software revenue in the APJ region totaled
+€3,310 million in 2018 (2017: €3,124 million). That was 85% of all
+revenue from the region (2017: 84%).
+APJ: Cloud and Software Revenue
+2014
+2015
+2016
+2017
+2018
+Cloud subscriptions revenue in the EMEA region rose 40% to
+€1,441 million in 2018 (2017: €1,029 million). Software licenses and
+software support revenue rose 2% to €7,898 million in 2018 (2017:
+€7,730 million).
+Americas Region
+2018
+Cloud subscriptions and support revenue - SaaS/PaaS¹)
+6,933
+2019
+10
+.8
+7
+-
+Section C Financial Results.
+Section B - · Employees.
+Customers
+Section A
+Notes
+Consolidated Financial Statements IFRS
+Expected Developments and Opportunities.
+Risk Management and Risks
+Business Conduct......
+12
+Corporate Governance Fundamentals.
+Energy and Emissions
+Employees and Social Investments...
+Customers..
+Security, Data Protection, and Privacy
+Products, Research & Development, and Services.
+Performance Management System
+Strategy and Business Model
+General Information About This Management Report..
+Combined Group Management Report
+Independent Auditor's Report
+Responsibility Statement.
+5
+23
+Financial Performance: Review and Analysis
+Compensation Report.
+.15
+44
+Section GOther Disclosures.
+.182
+Section F Management of Financial Risk Factors
+175
+Section E Capital Structure, Financing, and Liquidity.
+.164
+Section D Invested Capital.
+.156
+.147
+141
+.138
+131
+.126
+.23
+.105
+101
+83
+.80
+.75
+.74
+71
+.67
+60
+NO
+.54
+.52
+51
+.45
+.103
+.197
+Report by the Supervisory Board
+SAP Executive Board
+-2
+60
+59
+Employee retention (in %)
+Leadership Trust Index (LTI, as NPS)
+3
+78
+80
+Business Health Culture Index (in %)
+-1
+84
+83
+Employee Engagement Index (in %)
+93.3
+3
+26.4
+Women in management¹) (total, in % of total number of employees)
+0
+33.0
+33.5
+Women working at SAP (in %)
+14
+115
+131
+Personnel expenses per employee - excluding share-based payments (in € thousands)
+4
+96,498
+100,330
+25.7
+Investor Relations ....
+93.9
+Customer
+Letter from the Co-CEOS.
+To Our Stakeholders
+Contents
+About This Report.
+Key Facts....
+Contents
+Key Facts
+6
+318
+338
+4
+919
+955
+-3
+-1
+310
+20
+-5.0
+-6.0
+4
+4) Due to changes in sampling, Customer NPS is not fully comparable to the prior year's score.
+3) Full-time equivalents
+2) Numbers are based on the proposed dividend and on level of treasury stock at year-end.
+1) Numbers based on at year-end.
+Total data center electricity (in GWh)
+Total energy consumption (in GWh)
+Net greenhouse gas emissions (in kilotons)
+Environment
+Customer Net Promoter Score 4)
+300
+Management's Annual Report on Internal Control over Financial Reporting in the Consolidated Financial Statements
+.211
+Further Information on Economic, Environmental, and Social Performance
+Management Report
+Combined Group
+To Our
+Stakeholders
+Letter from the Co-CEOs
+8
+We are pleased that our shareholders continue to participate in
+our growth, with a proposed annual dividend of €1.58 per share for
+2019, representing an increase of 5.3%. Further, we intend to return
+an additional €1.5 billion to shareholders through a share buyback
+program. The share buyback program, in addition to the attractive
+regular dividend policy, is an important element in delivering value
+to our shareholders, and together they show our disciplined
+approach to capital allocation.
+Our stock posted an all-time high in December 2019, and again
+in early 2020. Our share price grew by 38.4% last year, out-
+performing the German DAX index, which increased by 25.5%.
+Our flagship suite, SAP S/4HANA, had a record year, growing to
+approximately 13,800 customers across 25 industries.
+With increased efficiency in cloud delivery, cloud gross margin
+increased 5pp in 2019.
+We increased our operating profit by 15% (non-IFRS), with
+margin improving by 0.8pp (non-IFRS).
+-
+-
+We delivered 12% growth in total revenue, our highest growth
+rate since 2015.
+Consolidated Financial
+Statements IFRS
+The year 2019 showed once again that SAP can deliver both
+reliable financial returns and strong underlying growth - and we
+take great pride in this continued growth story:
+Thank you for your commitment to and belief in SAP. As the
+company's new co-CEOs, we appreciate that SAP thrives when we
+put our customers, shareholders, and communities at the center of
+all that we do.
+Dear Fellow Shareholders,
+Information
+Additional
+Letter from the Co-CEOs
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+To Our Stakeholders
+7
+.45
+We are proud of all that SAP has accomplished in 2019 and are
+laser-focused on continued innovation at scale, integration across
+our portfolio, and strong customer success and adoption of our
+solutions. For nearly 50 years, SAP has grown because we have the
+market's best engineering talent, a global footprint across every
+industry in more than 180 countries, and a deep understanding of
+how businesses must operate in today's global landscape. Never
+has that heritage been more valuable.
+44
+Further Information on Economic,
+Environmental, and Social Performance
+We spent our first 100 days as co-CEOs listening to our
+stakeholders and understanding their perspectives, and we are now
+acting on what we have heard. Our first step was to align our
+customer-facing organization to simplify and improve the
+experience of our customers. We are also unifying our engineering
+teams across the entire portfolio into one team with one set of
+priorities. This will allow us to focus relentlessly on accelerating the
+integration of our Intelligent Enterprise and driving SAP's next wave
+of organic innovations. We will continue to be the partner that
+enables customers to rewrite their business models, redefine their
+industries, and leapfrog their competition.
+SAP Executive Board
+10
+Chief Financial Officer
+Luka Mucic
+Adaire Fox-Martin
+Global Customer Operations
+Jennifer Morgan
+Co-CEO
+Co-CEO and Chief Operating Officer
+Christian Klein
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+SAP Executive Board
+Consolidated Financial
+Statements IFRS
+Management Report
+Additional
+Information
+Combined Group
+9
+Letter from the Co-CEOS
+Jennifer Morgan and Christian Klein
+Co-CEOS, SAP SE
+Sincerely,
+In closing, we want to thank you for your trust and confidence.
+Between us, we have called SAP home for nearly four decades –
+and we ascended to the role of co-CEOS with deep humility, a
+profound reverence for our past, and an unbridled optimism for our
+future. It is an honor to write the next chapter of SAP alongside
+100,000 of the most talented colleagues in the technology industry.
+In 2020 and beyond, the best for SAP is yet to come.
+We will continue to support all aspects of diversity in our
+business. We are proud that SAP is at the top of the Forbes
+America's Best Employers for Diversity list, reflecting our
+industry-leading metrics, including roughly 34% women in our
+workforce today and nearly 27% women in leadership positions.
+We also strive to have a positive impact in the communities
+where we work and live: Our SAP One Billion Lives program
+inspires a closer collaboration between social enterprises,
+corporations, and consumers to accelerate wider social change.
+In 2019, SAP employees around the world dedicated more than
+270,000 hours of service to causes important to them.
+We are committed to becoming carbon neutral by 2025, and we
+have reduced our net carbon footprint for the past five years,
+despite strong growth.
+We are launching the Climate 21 program at SAP to build
+analytical and transactional capabilities into our core business
+applications, to help our customers both understand and
+minimize the carbon footprint of their products and operations.
+Our solutions help eradicate modern slavery from supply chains
+and help customers move away from single-use plastics to
+sustainable, alternative materials. Our software is used to predict
+and prevent disasters, eliminate gender inequality, and educate
+people who have never had the opportunity to enter a
+classroom.
+-
+-
+We also remain prouder than ever that our enduring vision is to
+help the world run better and improve people's lives. We lead our
+industry on issues ranging from sustainability to diversity and
+inclusion such as with our Autism at Work program. But that's just
+the start of how we serve our world:
+Leading in the experience economy also means putting an even
+greater focus on ensuring superior experiences for our own
+stakeholders, which is why we aim to increase our Customer Net
+Promoter Score by three to five points in 2020. We believe the
+changes we have already begun making will improve and harmonize
+how our customers experience SAP. The same holds true for our
+own workforce - we announced a new vision in 2019 that shifts HR
+from traditional, often transactional human capital management
+(HCM) to human experience management (HXM) - to go upstream
+in the employee lifecycle to transform the human experience at
+work. Our own Employee Engagement Index reflects our approach,
+remaining above industry benchmarks at 83%.
+Our acquisition of Qualtrics this past year makes SAP the leader
+in the Experience Management (XM) category. The Qualtrics XM
+Platform is enabling our customers to listen, understand, and act on
+the core experiences of business: customer, employee, brand, and
+product. Our vision for XM is resonating with our customers - as
+Qualtrics has expanded our customer base to over 11,450
+customers in 2019 and has only just begun to penetrate our
+installed base.
+To Our
+Stakeholders
+23
+.15
+.12
+Management's Acknowledgement of the SAP Integrated Report 2019.
+Task Force on Climate-Related Financial Disclosure (TCFD)
+GRI Index and UN Global Compact Communication on Progress
+Non-Financial Notes: Environmental Performance..
+Non-Financial Notes: Social Performance
+Memberships
+Public Policy
+5
+Contents
+232
+230
+228
+226
+Assurance Report of the Independent Auditor regarding Sustainability Information.
+224
+.221
+Waste and Water.
+Sustainable Procurement
+Human Rights and Labor Standards
+Our Contribution to the UN Sustainable Development Goals
+Sustainability Management and Policies
+Stakeholder Engagement..
+Materiality
+214
+Connectivity of Financial and Non-Financial Indicators..
+.213
+About This Further Information on Economic, Environmental, and Social Performance
+212
+223
+Additional Information
+Five-Year Summary.
+Glossary (Abridged).
+.10
+8
+Independent Auditor's Report
+Responsibility Statement.
+Compensation Report.
+Report by the Supervisory Board
+Investor Relations
+SAP Executive Board.
+Letter from the Co-CEOs...
+To Our Stakeholders
+Contents
+270
+.269
+268
+256
+252
+251
+249
+248
+247
+242
+.237
+.236
+235
+234
+6
+Publication Details
+Financial and Sustainability Publications.
+Financial Calendar and Addresses
+Number of employees¹). 3)
+Employees and Personnel Expenses
+Cloud revenue continued to be the major growth driver, growing
+40% (non-IFRS).
+106.80
+Cost of cloud (IFRS)
+Operating Expenses
+4
+65
+67
+Share of more predictable revenue (non-IFRS, in %)
+4
+65
+67
+Share of more predictable revenue (IFRS, in %)
+NA
+ΝΑ
+508
+-2,534
+Qualtrics Segment revenue
+2,629
+3,184
+Intelligent Spend Group Segment revenue
+8
+21,753
+23,544
+Applications, Technology & Services Segment revenue
+12
+24,741
+27,634
+Total revenue (non-IFRS)
+12
+24,708
+21
+27,553
+-2,068
+Cost of cloud (non-IFRS)
+10
+-6,969
+-7,655
+Research and development (IFRS)
+Total cost of revenue (non-IFRS)
+12
+-7.462
+-8,355
+Total cost of revenue (IFRS)
+11
+-3,817
+-4,247
+Cost of cloud and software (non-IFRS)
+22
+13
+-4,692
+Cost of cloud and software (IFRS)
+3
+-1,962
+-2,018
+Cost of software licenses and support (non-IFRS)
+3
+-2,092
+-2,159
+Cost of software licenses and support (IFRS)
+20
+-1,855
+-2,228
+-4,160
+-4,292
+Total revenue (IFRS)
+20.655
+Revenues
+€ millions, unless otherwise stated
+Key Facts
+About This Report
+2
+Concept and Realization
+KPMG AG Wirtschaftsprüfungsgesellschaft has audited our
+consolidated financial statements and our combined management
+report (including the information to which our non-financial report
+makes references). Additionally, KPMG has provided assurance on
+selected sustainability information in accordance with the
+International Standard on Assurance Engagements (ISAE) 3000, a
+pertinent standard for the assurance of sustainability reporting.
+Both the Independent Auditor's Report and the Assurance Report of
+the Independent Auditor for sustainability information are available
+in the Independent Auditor's Report section and the Independent
+Assurance Report section.
+Independent Audit and Assurance
+as current as possible, we have included relevant information
+available up to the auditor's opinion dated February 19, 2020. The
+report is available in English and German.
+The reporting period is fiscal year 2019. The report encompasses
+SAP SE and all subsidiaries of the SAP Group. To make this report
+All financial and non-financial data and information for the
+reporting period is reported utilizing SAP software solutions and
+sourced from the responsible business units.
+Data
+Protocol.
+Cloud (IFRS)
+Greenhouse gas data is prepared based on the Greenhouse Gas
+Our combined management report is prepared in accordance
+with sections 289, 289a, 289f, 315, 315a, and 315d of the German
+Commercial Code and German Accounting Standards No. 17 and
+20. The combined management report is also a management
+commentary complying with the International Financial Reporting
+Standards (IFRS) Practice Statement Management Commentary.
+Our consolidated financial statements are prepared in
+accordance with IFRS. Our executive management has confirmed
+the effectiveness of our internal controls over financial reporting.
+Our non-financial report is prepared in accordance with sections
+289b and 315b of the German Commercial Code, which require us
+to report, for both, SAP SE and SAP Group, on social,
+environmental, and other non-financial matters. All non-financial
+information stipulated in the German Commercial Code, sections
+315c and 289c that is relevant to understand SAP's development,
+performance of the business, and the position of the Group and
+SAP SE is included in our combined management report. Rather
+than repeating this information, our Non-Financial Report (which is
+part of this integrated report at http://www.sap.com/investors/sap-
+2019-combined-non-financial-report) provides references to the
+sections of our combined management report in which the required
+disclosures are made.
+Basis of Presentation
+The SAP Integrated Report also serves as our United Nations
+(UN) Global Compact progress report. Since 2018, we have also
+reported on our contribution to the UN Sustainable Development
+Goals (SDGs).
+www.sapintegratedreport.com. Since 2012, we have taken into
+consideration the recommendations of the International Integrated
+Reporting Framework.
+The SAP Integrated Report 2019 presents our full-year financial,
+social, and environmental performance in one integrated report
+("SAP Integrated Report") available at
+Content
+About This Report
+Ⓡ
+SAP
+THE BEST RUN
+Integrated
+Report
+SAP
+38
+The social and environmental data and information included in
+the SAP Integrated Report is prepared in accordance with the GRI
+Standards: Core option. This GRI option indicates that a report
+contains the minimum information needed to understand the
+nature of the organization, its material topics and related impacts,
+and how these are managed. We apply the GRI principles
+(sustainability context, stakeholder inclusiveness, materiality, and
+completeness) for defining report content. We also report on SDGs
+identified as material.
+12
+Cloud (non-IFRS)
+Software licenses (non-IFRS)
+23,093
+Cloud and software (non-IFRS)
+12
+20,622
+23,012
+Cloud and software (IFRS)
+5
+10,982
+11,548
+5
+10,981
+11,547
+-2
+Software licenses (IFRS)
+4,647
+-2
+4,647
+4,533
+40
+5,027
+7,013
+39
+4,993
+A in %
+2018
+2019
+Software support (non-IFRS)
+Software support (IFRS)
+4,533
+-3,624
+This report was designed by SAP and created with
+SAP S/4HANA software and the SAP Disclosure Management
+application.
+Profits and Margins
+1,814
+2,268
+New cloud bookings
+-1
+26.3
+26.2
+-1
+27.0
+26.7
+-9
+56
+51
+1
+25
+70
+232
+-2,493
+-8,286
+A in %
+2018
+2019
+Order Entry
+Effective tax rate (non-IFRS, in %)
+Effective tax rate (IFRS, in %)
+Equity ratio (total equity in % of total assets)
+Days sales outstanding (DSO, in days)
+Net liquidity (net debt)
+€ millions, unless otherwise stated
+71
+3
+Contract liabilities/Deferred income - current (IFRS)¹)
+3,028
+147.81
+18
+5
+1.50
+1.58
+17
+4.35
+5.11
+-19
+3.42
+2.78
+Market capitalization" (in € billions)
+Dividend per share²) (in €)
+4,266
+Earnings per share, basic (non-IFRS, in €)
+-10
+39
+35
+Share of software orders less than €1 million (in % of total software order entry)
+10
+29
+32
+Share of software orders greater than €5 million (in % of total software order entry)
+-10
+58,530
+52,584
+Orders - number of on-premise software deals (in transactions)
+41
+Key SAP Stock Facts
+Key Facts
+Earnings per share, basic (in €)
+2,844
+Gross margin (in % of total revenue, non-IFRS)
+0
+69.8
+69.7
+Gross margin (in % of total revenue, IFRS)
+0
+81.5
+81.6
+Cloud and software gross margin (in % of corresponding revenue, non-IFRS)
+0
+79.8
+79.6
+Cloud and software gross margin (in % of corresponding revenue, IFRS)
+0
+87.4
+87.4
+0
+86.6
+86.6
+63.1
+68.2
+8
+58.6
+63.5
+Software and support gross margin (non-IFRS, in %)
+Software and support gross margin (IFRS, in %)
+Cloud gross margin (in % of corresponding revenue, IFRS)
+-20
+Cloud gross margin (in % of corresponding revenue, non-IFRS)
+72.3
+71.8
+8
+Applications, Technology & Services Segment gross margin (in % of corresponding revenue)
+3
+29.0
+1
+2,276
+29.7
+-30
+23.1
+16.2
+7,163
+8,208
+Operating margin (in % of total revenue, non-IFRS)
+Free cash flow
+Operating margin (in % of total revenue, IFRS)
+Operating profit (non-IFRS)
+-22
+5,703
+15
+Operating profit (IFRS)
+4,473
+73
+Intelligent Spend Group Segment gross margin (in % of corresponding revenue)
+70
+69
+1
+1
+74
+78
+ΝΑ
+NA
+Qualtrics Segment gross margin (in % of corresponding revenue)
+The decrease in group liquidity compared to 2018 was mainly
+due to the cash outflows for the Qualtrics acquisition, while the cash
+inflow from borrowings for the Qualtrics acquisition already took
+place in 2018. They were partly offset by cash inflows from our
+operations.
+investments (for example, time deposits and debt securities with
+original maturities of greater than three months and remaining
+maturities of less than one year included in other financial assets)
+as reported in our Consolidated Financial Statements. Group
+liquidity on December 31, 2019, primarily comprised amounts in
+euros and U.S. dollars.
+-2,203
+ΝΑ
+-10,489
+Net debt including lease liability
+Net debt is financial debt less group liquidity. For more
+information about our liquidity, see the Notes to the Consolidated
+Financial Statements, Note (E.3).
+ΝΑ
+Group liquidity consists of cash and cash equivalents (for
+example, cash at banks, money market funds, and time deposits
+with original maturity of three months or less) and current
+Net debt (-)
+-5,793
+-2,493
+-8,286
+-2,337
+-11,331
+-13,668
+Non-current financial debt
+-11,139
+For information about the impact of cash, cash equivalents,
+current investments, and our financial liabilities on our income
+statements, see the analysis of our financial income, net, in the
+Operating Results (IFRS) section.
+Financial debt
+-10,572
+-567
+Lease liability
+Financial Performance: Review and Analysis
+-403
+To Our
+Flow
+Cash
+Expen-
+diture
+Capital
+-3,456
+-1,770
+Operating
+Net
+Debt
+12/31/2018
+PY: -1,479
+-8,286
+-64
+-1,790
+-6,215
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+€ millions
+Free Cash Flow +2,276
+-817
++3,496
+-2,493
+Development of Net Debt
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined Group
+95
+-759
+-0.9
+Current financial debt
+-0.6 to -0.8
+additional 0.55 to 0.75
+additional 0.6
+-1.3
+-1.4
+additional 0.4
+additional 0.3
+additional 0.55 to 0.75
+additional 0.3
+-1.7
+Income taxes payouts
+-0.1
+-1.0
+2.3
+decrease moderately
+-0.8
+-1.0
+-1.2
+3.5
+slightly lower
+broadly in line
+unchanged level
+decrease moderately
+2.8
+Lease
+Payments
+Restructuring payouts
+Share-based payment payouts
+Free cash flow
+-2.2 to -2.4
+-2,529
+-2.3
+-2.5
+8,838
+5,382
+Group liquidity
+debt securities
+-144
+211
+67
+Current time deposits and
+-3,313
+8,627
+5,314
+Cash and cash equivalents
+A
+2018
+2019
+€ millions
+Group Liquidity and Net Debt
+1.3
+>1.2
+0.4
+Ratio of net debt divided by operating profit
+plus depreciation and amortization
+-8.3
+-8
+Net debt (-)
+Business
+Combi-
+nations
+20
+Other
+1,145
+1,630
+-92%
+42%
+69%
+The equity ratio (that is, the ratio of shareholders' equity to total
+assets) decreased to 51% (prior year: 56%).
+Total non-current liabilities increased by 23% to €14,931 million
+in 2019 compared to the previous year's figure of €12,138 million.
+This was mainly due to additional bank loans to finance the
+acquisition of Qualtrics. For more information about our financing
+activities in 2019, see the Finances (IFRS) section.
+Current liabilities increased by 38% to €14,462 million in 2019
+(2018: €10,486 million). This was mainly due to additional
+provisions out of our share-based payments plans, lease liabilities
+following the initial application of IFRS 16, as well as changes to our
+contract liabilities: increases in contract liabilities mainly result from
+billing and invoices becoming due (€9.0 billion), while decreases in
+contract liabilities mainly result from satisfying performance
+obligations (€8.0 billion). Furthermore, we issued commercial
+papers. For more information about our financing activities in 2019,
+see the Finances (IFRS) section.
+€ millions | change since previous year
+Investment in Goodwill, Intangible Assets, and
+Property, Plant, and Equipment
+Total current assets decreased by 8% in 2019 from
+€16,620 million to €15,213 million. This was mainly due to a
+decrease in cash and cash equivalents based on cash outflows for
+the acquisition of Qualtrics, which were partly offset by cash inflows
+from our operations.
+25
+32
+68
+2018
+75
+2019
+24
+56
+2018
+24
+25
+51
+676
+Current
+128%
+Equity Ratio
+2016
+2015
+-1.5
+-5pp
+-4pp
+Opp
+4pp
+5pp
+51
+56
+60
+56
+60
+Percent change since previous year
+Financial Performance: Review and Analysis
+Total non-current assets increased by 29% in 2019 to
+€45,002 million compared to the previous year's figure of
+€34,881 million. This change was mainly due to additions to
+goodwill and intangible assets from the acquisition of Qualtrics,
+capitalizations following the initial application of IFRS 16, and
+foreign-exchange-related revaluations.
+2019
+2018
+2017
+2016
+2015
+8,090
+118%
+3,715
+Dividends
+Non-current
+Percent
+3,283
+102
+Net cash flows from financing
+activities
+>100
+-3,066
+-7,021
+Net cash flows from investing
+activities
+-19
+4,303
+3,496
+Net cash flows from operating
+activities
+A in %
+2018
+2019
+€ millions
+Analysis of Consolidated Statements of Cash
+Flow
+Net
+Debt
+12/31/2019
+-2,493
+-40
+-1,671
+-2,146
++0
+-1,458
++4,303
+-97
+Shareholder's equity
+In 2019, cash inflows from operating activities decreased by
+€807 million to €3,496 million (2018: €4,303 million). This is
+particularly due to an increase in income tax payments (€2.3 billion
+in 2019 and €1.7 billion in 2018), higher payments related to
+restructuring (€0.9 billion in 2019 and €0.1 billion in 2018), and
+higher share-based payments (€1.3 billion in 2019 and €1.0 billion
+in 2018). Our days sales outstanding (DSO) for receivables, defined
+as the average number of days from the raised invoice to cash
+receipt from the customer, remained flat in 2019 at 71 days (2018:
+70 days).
+Cash outflows from investing activities were €7,021 million in
+2019 (2018: €3,066 million). We paid, net of cash received, a total of
+€6.1 billion for the Qualtrics acquisition in 2019, compared to
+€2.1 billion in 2018, mainly for Callidus. Instead of investing in the
+expansion of our data centers, there was a strong focus on
+improving capacity utilization, resulting in a decrease in capital
+expenditures on purchases of intangible assets and property, plant,
+and equipment by €642 million to €817 million. For more
+information about current and planned capital expenditures, see
+the Assets section and the Investment Goals section.
+Additional
+Information
+2019
+Liabilities
+Further Information on Economic,
+Environmental, and Social Performance
+Current
+■Non-current
+Percent
+Assets
+Total assets increased by 17% year over year to €60,215 million.
+Financial Position
+Analysis of Consolidated Statements of
+Assets (IFRS)
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined Group
+To Our
+Financial Performance: Review and Analysis
+96
+96
+The dividend payment of €1,790 million made in 2019 exceeded
+the respective amount of €1,671 million paid in the prior year, the
+dividend paid per share increased from €1.40 to €1.50.
+SAP SE to issue short-term notes up to €2.5 billion. The cash
+outflows resulted from repayments of €0.75 billion in Eurobonds
+when they matured, whereof we refinanced €0.6 billion through
+Commercial Paper. In 2018, we issued €6.0 billion in Eurobonds
+financing the acquisition of Callidus and Qualtrics, and a
+US$0.3 billion USD bond. Cash outflows in 2018 resulted from
+repayments of €1.15 billion in Eurobonds and US$0.15 billion in U.S.
+private placements when they matured.
+Net cash inflows from financing activities were €102 million in
+2019, compared to €3,283 million in 2018. In 2019, we drew
+€2.5 billion of an acquisition term loan for Qualtrics. We refinanced
+€0.5 billion of the acquisition term loan through the issuance of the
+same amount under a commercial paper program (Commercial
+Paper) we launched in September 2019. This program enables
+Following the new lease accounting rules (IFRS 16), we had a
+positive impact on operating cash flow from the reclass of leasing
+payments into cash flows from financing of €0.4 billion.
+4.3
+Besides this, the Company intends to repurchase shares with a
+volume of €1.5 billion by December 31, 2020.
+Operating cash flows
+10%
+19%
+2.78
+3.42
+3.35
+-7%
+2.56
+3.04
+€ | change since previous year
+Earnings per Share
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+Stakeholders
+To Our
+===
+91
+Financial Performance: Review and Analysis
+Basic earnings per share decreased to €2.78 (2018: €3.42). The
+number of shares outstanding remainded constant at 1,194 million
+in 2019 (2018: 1,194 million).
+2019
+2018
+2%
+2017
+-19%
+2016
+2019
+2018
+2017
+2016
+2015
+5%
+5%
+7%
+9%
+12%
+1.50
+1.58
+1.15
+1.25
+1.40
+€ | change since previous year
+Dividend per Share
+The Executive Board and the Supervisory Board of SAP SE will
+recommend to the Annual General Meeting of Shareholders in
+May 2020 that the total dividend be increased by 5% to €1.58 per
+share (2018: €1.50). Based on this recommendation, the overall
+dividend payout ratio (which here means the total distributed
+dividend as a percentage of profit) would be 56% (2018: 44%).
+If the shareholders approve this recommendation and if treasury
+shares remain at the 2019 closing level, the total amount distributed
+in dividends would be €1,886 million. The actual amount distributed
+may be different from this total because the number of shares held
+in treasury may change before the Annual General Meeting of
+Shareholders. In 2019, we distributed €1,790 million in dividends
+from our 2018 profit after tax.
+We believe our shareholders should benefit appropriately from
+the profit the Company made in 2019. Our dividend policy is to pay
+a dividend totaling 40% or more of profit after tax.
+Dividend
+2019
+2018
+2017
+2015
+Finances (IFRS)
+2016
+-18%
+28.5
+29.1
+3.9pp
+4.Opp
+68.6
+72.5
+72.5
+Total
+8.5pp
+8.4pp
+60.0
+68.5
+68.4
+0.2pp
+0.2pp
+77.8
+78.0
+78.1
+Intelligent Spend Group segment
+Other³)
+35
+40
+5,027
+2017
+12.2
+2015
+16.9pp
+68.2
+1%
+12%
+19%
+3,370
+4,088
+-7%
+3,056
+3,634
+€ millions | change since previous year
+4,046
+Profit After Tax
+Profit after tax decreased to €3,370 million in 2019 (2018:
+€4,088 million).
+Profit After Tax and Earnings per Share
+The effective tax rate in 2019 was 26.7% (2018: 27.0%). For more
+information about income taxes, see the Notes to the Consolidated
+Financial Statements, Note (C.5).
+Income Taxes
+Finance costs mainly consist of interest expense on financial
+liabilities amounting to €207 million (2018: €106 million), negative
+effects from derivatives amounting to €155 million (2018:
+€206 million), and losses from disposal or IFRS 9-related fair value
+adjustments of Sapphire Ventures investments totaling €152 million
+(2018: €45 million). For more information about financing
+instruments, see the Notes to the Consolidated Financial
+Statements, Note (E.3).
+Finance income mainly consists of gains from disposal of equity
+securities and IFRS 9-related fair value adjustments, mainly of
+Sapphire Ventures investments, totaling €596 million (2018:
+€227 million), interest income from loans and receivables, and
+other financial assets (cash, cash equivalents, and current
+investments) totaling €75 million (2018: €62 million), and income
+from derivatives totaling €77 million (2018: €77 million).
+Financial income, net, changed to €198 million (2018:
+-€47 million). Our finance income was €787 million (2018:
+€371 million) and our finance costs were €589 million (2018:
+€418 million).
+Financial Income, Net
+3) Other includes Applications, Technology & Services segment, Qualtrics segment, and miscellaneous. The individual revenue and margin numbers for the Applications, Technology &
+Services segment and the Qualtrics segment are disclosed on the previous pages.
+5.Opp
+5.1pp
+63.1
+68.1
+16.4pp
+Capital expenditure
+Overview
+We use global centralized financial management to control liquid
+assets and monitor exposure to interest rates and currencies. The
+primary aim of our financial management is to maintain liquidity in
+the Group at a level that is adequate to meet our financial
+obligations at all times. Most SAP entities have their liquidity
+managed centrally by the Group, so that liquid assets across the
+Group can be consolidated, monitored, and invested in accordance
+with Group policy. High levels of liquid assets help keep SAP flexible,
+sound, and independent. In addition, various credit facilities are
+currently available for additional liquidity, if required. For more
+information about these facilities, see the Credit Facilities section.
+We manage credit, liquidity, interest rate, equity price, and
+foreign exchange rate risks on a Group-wide basis. We use selected
+derivatives exclusively for this purpose and not for speculation,
+which is defined as entering into a derivative instrument for which
+we do not have corresponding underlying transactions. The rules for
+the use of derivatives and other rules and processes concerning the
+management of financial risks are documented in our treasury
+guideline, which applies globally to all companies in the Group. For
+more information about the management of each financial risk and
+about our risk exposure, see the Notes to the Consolidated
+Financial Statements, Notes (F.1) and (F.2).
+Bonds
+€ millions
+Financial Debt by Instrument
+For information about the intended repayments, see the goals
+for liquidity and finance in the Financial Targets and Prospects
+section.
+Nominal volume of financial debt on December 31, 2019,
+included amounts in euros (€12,362 million) and U.S. dollars
+(€1,297 million). On December 31, 2019, approximately 54% of the
+financial debt was held at variable interest rates, partially swapped
+from fixed into variable using interest rate swaps.
+2031
+2030
+2028
+2027
+2026
+2025
+2024
+2023
+2022
+2021
+2020
+89
+267
+198
+500
+500
+500
+1,000
+Private Placement
+1,000
+1,030
+1,100
+2019
+Results
+Revised
+Outlook
+(November)
+Revised Outlook (Q2
+Quarterly Statement)
+Outlook (as reported in
+the Integrated Report)
+Results 2018
+€ billions
+We met or exceeded the revised outlook for capital expenditure, share-based payment payouts, and income tax payouts that we published
+in November 2019. Due to higher payouts, we did not meet our outlook for restructuring payouts, operating cash flow, and free cash flow.
+2019 Actual Cash Flow and Liquidity Performance Compared to Outlook
+Cash Flows and Liquidity
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+Financial Performance: Review and Analysis
+For more information about our financial debt, see the Notes to
+the Consolidated Financial Statements, Note (E.3).
+9,517
+==
+94
+2,021
+Bank Loan
+Commercial Paper
+Global Financial Management
+600
+1,250
+Resulting from the acquisition of Qualtrics, a term loan of
+€2.0 billion was still outstanding on December 31, 2019. The
+amount can be flexibly repaid until maturity of the loan on
+January 23, 2022.
+As at December 31, 2019, SAP SE had additional available credit
+facilities totaling €424 million. Several other SAP entities have
+credit facilities available that allow them to borrow funds at
+prevailing interest rates. As at December 31, 2019, approximately
+€7 million was available through such arrangements. There were
+immaterial borrowings outstanding under these credit facilities
+from our foreign subsidiaries as at December 31, 2019.
+To retain high financial flexibility, we have available a €2.5 billion
+syndicated revolving credit facility with an end date in
+November 2024. A possible future utilization is not subject to any
+financial covenants. Borrowings under the facility bear interest of
+EURIBOR or LIBOR for the respective currency plus a margin of
+0.17%. We are also required to pay a commitment fee of 0.0595%
+per annum on the unused available credit. So far, we have not used,
+and do not currently foresee any need to use, this credit facility.
+Other sources of capital are available to us through various
+credit facilities, if required.
+Credit Facilities
+The Company intends to repurchase shares with a volume of
+€1.5 billion by December 31, 2020. The timing and the instruments
+of capital returns will be determined by SAP based on its evaluation
+of market conditions, company performance, and other factors.
+The enhanced capital return will be in addition to SAP's regular
+dividend policy. Further capital returns in subsequent years will be
+decided on an annual basis in line with SAP's capital allocation
+priorities.
+The long-term credit rating for SAP SE is "A2" by Moody's and
+"A" by Standard & Poor's, both with a stable outlook.
+For more information about the capital structure and its analysis,
+see the Analysis of Consolidated Statement of Financial Position
+section and the Notes to the Consolidated Financial Statements,
+Note (E.1).
+The primary objective of our capital structure management is to
+maintain a strong financial profile for investor, creditor, and
+customer confidence, and to support the growth of our business.
+We seek to maintain a capital structure that will allow us to cover
+our funding requirements through the capital markets at
+reasonable conditions, and in so doing, ensure a high level of
+independence, confidence, and financial flexibility.
+Capital Structure Management
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+Financial Performance: Review and Analysis
+42
+92
+Therefore, we continuously monitor funding options available in
+the capital markets and trends in the availability of funds, as well as
+the cost of such funding. In recent years, we were able to repay
+additional debt within a short period of time due to our persistently
+strong free cash flow. For more information about the financial debt,
+see the Cash Flows and Liquidity section.
+We believe that our liquid assets combined with our undrawn
+credit facilities are sufficient to meet our operating financing needs
+in 2020 and, together with expected cash flows from operations,
+will support debt repayments, currently planned capital expenditure
+requirements, and capital returns to our shareholders over the near
+term and medium term. It may also be necessary to enter into
+financing transactions when additional funds are required that
+cannot be wholly sourced from free cash flow, to maintain flexibility,
+and/or limit repayment risk.
+Our primary source of cash, cash equivalents, and current
+investments is funds generated from our business operations. Over
+the past several years, our principal use of cash has been to support
+operations and our capital expenditure requirements resulting from
+our growth, to quickly repay financial debt, to acquire businesses, to
+pay dividends on our shares, and to buy back SAP shares on the
+open market. On December 31, 2019, our cash, cash equivalents,
+and current investments were primarily held in euros and U.S.
+dollars. We generally invest only in the financial assets of issuers or
+funds with a minimum credit rating of BBB, and pursue a policy of
+cautious investment characterized by wide portfolio diversification
+with a variety of counterparties, predominantly short-term
+investments, and standard investment instruments. Our
+investments in financial assets of issuers with a credit rating lower
+than BBB were not material in 2019.
+Liquidity Management
+Financial Performance: Review and Analysis
+1,000
+93
+Combined Group
+Management Report
+1,049
+500
+500
+500
+1,408
+1,000
+1,089
+89
+867
+1,000
+1,138
+1,250
+■Fixed
+■ Variable
+€ millions
+3,098
+3,296
+1,121
+2,529
+Financial debt is defined as the nominal volume of bank loans, commercial papers, private placements, and bonds.
+Maturity Profile of Financial Debts
+Financial Debts
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+To Our
+Stakeholders
+2018
+7,013
+97
+Provisions
+Liabilities
+Deferred income
+Total shareholders' equity and liabilities
+15,993 16,452
+1,968 1,711
+27,068 23,150
+14
+11
+45,043
+41,324
+Financial assets increased by €6,511 million year over year to
+€33,874 million (2018: €27,363 million), mainly due to
+€6,725 million in capital contributions to subsidiaries, thereof
+€5,715 million to SAP America Inc. for the Qualtrics acquisition. The
+increase was partly offset by €155 million in write-downs on
+investments in affiliated companies.
+Financial Performance: Review and Analysis
+99
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+The decrease of €103 million in accounts receivable and other
+assets was primarily the result of a €241 million decrease in
+receivables from affiliated companies and a €37 million decrease in
+options premiums. The decrease in accounts receivable and other
+assets was partly offset by an €184 million increase in tax assets.
+Marketable securities and liquid assets decreased by
+€4,444 million to €465 million (2018: €4,909 million). The decrease
+was mainly due the indirect financing of the Qualtrics acquisition.
+The increase in prepaid expenses is mainly due to prepayments
+of license fees of €1,805 million to subsidiaries for the years
+2020, 2021, and 2022.
+SAP SE shareholders' equity decreased 3% to €15,993 million
+(2018: €16,452 million). Against outflows of €1,790 million
+associated with the payment of the 2018 dividend, there was a
+€1,332 million increase due to net income for 2019.
+The equity ratio (that is, the ratio of shareholders' equity to total
+assets) is 36% (2018: 40%).
+Shareholders' equity
+Equity and liabilities
+Surplus arising from offsetting
+Total assets
+Short-term assets
+Fixed assets
+Inventories
+Assets
+Intangible assets
+1,751
+1,999
+Property, plant, and equipment
+1,512 1,495
+Financial assets
+33,874 27,363
+37,136 30,857
+1
+Provisions increased by €256 million to €1,968 million
+(2018: €1,711 million).
+1
+4,913
+5,016
+465 4,909
+5,379 9,926
+Prepaid expenses and deferred charges
+Deferred taxes
+2,157
+273
+369
+266
+2
+2
+45,043 41,324
+Accounts receivable and other assets
+Marketable securities and liquid assets
+€596 million increase in restructuring costs, a €114 million increase
+in other services, and a €49 million increase in maintenance and
+services expense. The increase in other operating expenses is partly
+offset by a €182 million decrease in write-downs on receivables and
+a €93 million decrease in exchange rate losses.
+Other provisions increased by €325 million to €1,453 million
+(2018: €1,128 million), primarily as a result of an increase in other
+obligations toward employees.
+Liabilities increased by €3,918 million to €27,068 million
+(2018: €23,150 million). This increase mainly resulted from a
+€3,062 million increase in liabilities to financial institutions and
+from a €1,519 million increase in liabilities to affiliated companies,
+primarily due to higher cash contributions by subsidiaries through
+SAP SE's centralized management of finance and liquidity. The
+increase in liabilities was partly offset by the scheduled repayment
+of a bond in the total amount of €750 million.
+Constant
+Currency
+Currency
+Actual
+A in %
+A in %
+2018
+2019
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+2) Infrastructure as a service
+1) Software as a service/platform as a service
+Cloud gross margin (in %)
+Cloud gross margin - laaS2) (in %)
+Cloud gross margin - SaaS/PaaS¹) (in %)
+Cloud revenue
+Cloud revenue - laas²)
+Cloud revenue - SaaS/PaaS¹)
+(Non-IFRS)
+€ millions, unless otherwise stated
+Reconciliation of Cloud Revenues and Margins
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+6,773
+Actual
+Currency
+Actual
+Currency
+Constant
+Currency
+Intelligent Spend Group segment
+Opportunities and Risks
+SAP SE is subject to essentially the same opportunities and risks
+as the SAP Group. For more information, see the Risk Management
+and Risks section and the Expected Developments and
+Opportunities section.
+100
+Financial Performance: Review and Analysis
+38
+43
+488
+673
+695
+34
+39
+4,539
+In contrast, provisions for tax decreased by €71 million to
+€504 million (2018: €575 million).
+6,100
+Total
+49
+54
+2,361
+3,515
+3,625
+Other³)
+19
+24
+2,178
+2,585
+2,693
+6,318
+SAP SE personnel expenses, mainly the labor cost of software
+developers, service and support employees, and administration
+staff employed by SAP SE, increased 17% to €2,463 million (2018:
+€2,097 million) primarily due to higher shared-based compensation
+expenses and headcount increase over the year. Other operating
+expenses increased by €509 million to €2,755 million (2018:
+€2,246 million). This increase is mainly attributable to a
+2019
+SAP SE operating profit decreased 44% to €1,107 million
+(2018: €1,987 million). Other operating income decreased
+€43 million to €1,028 million (2018: €1,073 million).
+Brazil
+São Leopoldo
+New office building for approx. 700
+employees
+33
+2
+March 2021
+Bulgaria
+Sofia
+New office building for approx. 1,200
+employees
+46
+446
+1
+October 2022
+India
+Bangalore
+New office building for approx.
+4,000 employees
+US
+Seattle
+New office building for approx. 1,850
+employees
+28
+84
+0
+December 2022
+July 2020
+For more information about planned investment expenditures, see the Investment Goals section. There were no material divestitures
+within the reporting period.
+March 2023
+0
+90
+New office building for approx. 600
+employees
+SAP SE cost of services and materials increased 11% to
+€9,328 million (2018: €8,384 million). Services received increased
+by €783 million to €7,210 million (2018: €6,427 million), mainly due
+to increased services received in the context of intra-Group cost
+allocations. The main contributors to that increase were continued
+Group-wide investments in research and development activities as
+well as greater revenue-related and investment-related cloud
+subscriptions and support costs. The costs for licenses and
+provisions increased by 8% to €2,090 million (2018:
+€1,929 million).
+57
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+Principal Investments and Divestitures Currently in Progress
+In 2019, we finalized various construction projects and continued and started new construction activities in several locations. We plan to
+finance all of these projects from operating cash flow. Our most important projects are listed below.
+€ millions
+Country
+Competitive Intangibles
+Location of Facility
+Estimated Total
+Cost
+Costs Incurred as at
+12/31/2019
+Estimated
+Completion Date
+Germany
+Berlin
+New office building for approx.
+1,000 employees
+40
+2
+October 2022
+Germany
+Munich
+Short Description
+The resources that are the basis for our current as well as future
+success do not appear in the Consolidated Financial Statements.
+This is apparent from a comparison of the market capitalization of
+SAP SE (based on all issued shares), which was €147.8 billion at the
+end of 2019 (2018: €106.8 billion), with the book value of our equity
+in the Consolidated Financial Statements, which was €30.8 billion
+(2018: €28.9 billion). This means that the market capitalization of
+our equity is nearly five times higher than the book value. The
+difference is mainly due to certain internally generated intangible
+resources that the applicable accounting standards do not allow to
+be recorded (at all or at fair value) in the Consolidated Financial
+Statements. They include customer capital (our customer base and
+customer relations); employees and their knowledge and skills; our
+ecosystem of partners; internally developed software; our ability to
+innovate; the brands we have built up, in particular, the SAP brand
+itself; and our organization.
+Construction Projects
+In 2019, SAP's brand value increased compared to 2018.
+According to the Interbrand “Best Global Brands" annual survey,
+SAP ranked as the 20th most valued brand in the world (2018:
+21st). Against other German brands, the SAP brand ranks third
+behind Mercedes-Benz and BMW, and fourth globally against other
+brands in the business services sector. Interbrand determined our
+brand value to be US$25.1 billion, an increase of 10% compared to
+the previous year (2018: US$22.9 billion). Brand Z even recognized
+SAP as the world's 16th most valuable brand in the 2019 BrandZ
+Top 100 Most Valuable Global Brands ranking. The ranking
+estimates SAP's brand value at US$58 billion, an increase of 4% in
+brand value for SAP year over year.
+15,220 14,244
+1,028 1,073
+-9,328 -8,384
+-2,463 -2,097
+-596 -603
+-2,755 -2,246
+1,107 1,987
+729
+745
+1,343
+1,836
+-492 -788
+1,943
+2,732
+-12
+-13
+1,332
+1,929
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+Finance income was €729 million (2018: €745 million),
+representing a year-over-year decrease of €16 million. This
+decrease is primarily due to a €117 million decrease in income from
+other securities and loans held as financial assets and a €24 million
+decrease in income from investments.
+The decrease in finance income was partly offset by a
+€86 million decrease in write-downs on financial assets, a
+€17 million increase in results from profit and loss transfer
+agreements, and a €23 million increase in net interest income.
+SAP SE income before taxes decreased €896 million to
+€1,836 million (2018: €2,732 million). Income taxes decreased by
+€296 million to €492 million (2018: €788 million). After deducting
+taxes, the resulting net income was €1,332 million
+(2018: €1,929 million), a decrease of €598 million year over year.
+Assets and Financial Position
+In 2019, SAP SE total assets closed at €45,043 million
+(2018: €41,324 million).
+-
+€ millions
+2019
+2018
+The total revenue of SAP SE in 2019 was €15,220 million
+(2018: €14,244 million), an increase of 7%. Product revenue
+increased 8% to €12,715 million (2018: €11,768 million). As in
+previous years, product revenue was primarily generated from
+license fees paid by subsidiaries of SAP SE.
+As at December 31, 2019, SAP was the most valuable company
+in Germany in terms of market capitalization based on all issued
+shares.
+The milder increase compared to the sales growth of the
+SAP Group is primarily due to a reduction in the license fees during
+the year to be paid by the subsidiaries to cloud subscriptions and
+support. Service revenue decreased 14% to €462 million in 2019
+(2018: €534 million), other revenue increased by 5% to
+€2,043 million (2018: €1,941 million).
+2018
+2019
+SAP SE Balance Sheet as at December 31 –
+German Commercial Code (Short Version)
+Other taxes
+SAP SE is headquartered in Walldorf, Germany, and is the parent
+company of the SAP Group, which comprises 264 companies.
+SAP SE is the Group holding company and employs most of the
+Group's Germany-based development and service and support
+personnel.
+Net income
+Report on the Economic Position of
+SAP SE
+As the owner of the intellectual property in most SAP software,
+SAP SE derives its revenue mainly from software license fees and
+bears the Group-wide research and development expenses for the
+most part.
+The SAP SE annual financial statements are prepared in
+accordance with the reporting standards in the German
+Commercial Code and the German Stock Corporation Act. The full
+SAP SE annual financial report and unqualified audit report are
+submitted to the operator of the Elektronischer Bundesanzeiger
+(Online German Federal Gazette) for publication and inclusion in the
+Unternehmensregister (German Business Register). It is available
+from SAP SE on request.
+SAP SE's income statement is classified following the nature of
+expense method and presents amounts in millions of euros.
+98
+86
+Financial Performance: Review and Analysis
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Income
+€ millions
+SAP SE Income Statement - German Commercial
+Code (Short Version)
+Income before taxes
+Finance income
+Other operating expenses
+Depreciation and amortization
+Operating profit
+Cost of services and materials
+Other operating income
+Income after taxes
+Total revenue
+Personnel expenses
+Income taxes
+For more information about the allegations, see Note (G.3).
+SAP has taken remedial actions to terminate access to SAP
+products and services for certain end users and block additional
+business activities with these end users through SAP or SAP
+partners. SAP is implementing further enhancements to its export
+control compliance program, including new internal controls, and
+has been increasing the capacity of SAP's Export Control team with
+a particular focus on high-risk countries. SAP has also required
+additional due diligence, conducted by independent third-parties,
+for certain SAP partners based in high-risk regions. We are fully
+committed to compliance with all U.S., EU, and German laws
+regarding economic sanctions and export controls, including laws
+restricting the sale, export, and usage of SAP software and services
+in Iran and in other embargoed countries.
+global-compliance-office@sap.com
+Furthermore, we are investigating allegations regarding conduct
+that certain independent SAP partners violated SAP contractual
+terms and sold SAP products and services in embargoed countries.
+We are also investigating allegations regarding direct transactions
+between SAP and certain customers that may have engaged in
+unauthorized activities in embargoed countries.
+Since 2018, SAP implemented substantial enhancements to its
+anti-corruption compliance program, including additional policy
+changes and more robust internal controls. SAP has appointed new
+management in some business units to address corruption
+concerns. SAP prohibits the use of commissioned business
+development partners as well as certain sales commission agents in
+public sector deals in high-risk markets and continues a systematic
+review of all relationships with state-owned entities and institutions
+in Africa.
+SAP has received communications and whistleblower
+information alleging conduct that may violate antibribery laws. The
+OEC is conducting investigations with the assistance of an external
+law firm and has voluntarily advised the U.S. Securities and
+Exchange Commission and the U.S. Department of Justice, as well
+as local authorities where potential violations are being
+investigated.
+Investigating Misconduct
+Use the anonymous online Whistleblower reporting tool
+Reporting channels are published in SAP Corporate Portal, on
+SAP.com, and in our codes of conduct for partners and suppliers.
+Contact local compliance officers by e-mail or telephone
+Employees at all levels of the organization must disclose
+conflicts of interest. Disclosures are followed up with guidance or
+mitigation if necessary.
+-
+SAP employees have different options if they become aware of
+potential misconduct within the company. For example, they can:
+Call our governance helpline at +49 6227 7-40022
+E-mail the Office of Ethics and Compliance at
+If employees are concerned that our CoBC has been breached,
+or if they need advice on a compliance issue, they can access
+support in several ways. It sometimes takes courage to speak up
+when something is not right, and employees may feel
+uncomfortable or concerned when they do so. However, we
+guarantee a non-retaliation policy if employees reach out and raise
+their concerns.
+Facilitating Reporting and Remediation
+Without Retaliation
+In addition to making regular reports to our CFO, the Group chief
+compliance officer reports to the Audit Committee of the
+Supervisory Board each quarter and to the Executive Board
+annually. Matters of significance are brought to the attention of the
+Executive Board and the Audit Committee of the Supervisory Board
+immediately. As of 2020, the Group chief compliance officer will
+report directly to our Co-CEO Jennifer Morgan.
+The OEC oversees the development and implementation of our
+COBC, as well as other related policies and our anticorruption
+compliance program. Our compliance officers are based not only at
+SAP headquarters but also around the world, in high-risk and low
+risk jurisdictions, and especially in markets where there are local
+language needs.
+SAP is committed to ensuring that compliance policies are
+strictly enforced, and that any infringements are quickly flagged
+and put right. To achieve this, we have a wide global network of
+compliance officers who act as business conduct stewards.
+QAudit Scope
+Enforcing Policies
+At SAP, we acknowledge that compliance risks exist in the
+business environments and countries in which we operate. We
+review the exposure of SAP business units to potential compliance
+risks on a regular basis. In 2019, we analyzed quantitative internal
+data such as number of employees, revenue information (including
+percentage of public sector business), number of compliance-
+related allegations and audits with compliance-relevant findings,
+and other quantitative information. In addition, we considered
+external information, such as the Transparency International
+Corruption Perceptions Index, in our wider compliance risk analysis.
+Based on this information, we performed a detailed assessment
+for all SAP relevant high-risk countries and derived local as well as
+global mitigations. For more information, see the Risk Management
+and Risks section.
+-
+The content of this section was not subject to the statutory audit of
+the combined group management report. However, our external
+auditor KPMG carried out an independent limited assurance
+engagement on the contents of this section.
+As a global company, SAP is exposed to a broad range of risks
+across our business operations. Consequently, our Executive Board
+has established comprehensive internal control and risk
+management structures that enable us to identify and analyze risks
+early and take appropriate action. Our risk management and
+internal control system is designed to identify potential events that
+could negatively impact the Company and to provide reasonable
+assurance regarding the operating effectiveness of our internal
+controls over our financial reporting.
+Business Conduct
+The risk management governance framework at SAP represents
+a comprehensive system of approaches and processes to ensure
+control through a clearly structured risk management system and a
+supporting risk culture. The risk culture is considered the basis of
+SAP's risk management system. Risk culture at SAP comprises a
+system of values, beliefs, knowledge, attitudes, and understanding
+concerning risks and risk management as part of our corporate
+culture. To support and continuously foster SAP's risk culture, our
+Global Governance, Risk and Compliance (GRC) organization
+conducts comprehensive risk awareness activities for the
+organization.
+Assessing Compliance Risk
+Our Global Risk Management Governance
+Framework
+dedicated risk management policy, a global risk management
+organization, and a standardized risk management methodology,
+In accordance with the COSO framework, SAP's enterprise risk
+management covers risks in the areas of strategy, operations,
+finance, and compliance.
+Our risk management system is based on the framework
+published by the Committee of Sponsoring Organizations of the
+Treadway Commission (COSO) entitled “Enterprise Risk
+Management - Integrating with Strategy and Performance."
+Updated in 2017, this framework is built on four pillars, which
+include a global risk management governance framework, a
+Risk Management Pillars
+The risk management policy issued by our Executive Board
+governs how we handle risk in line with the Company's risk appetite
+and defines a methodology that is applied uniformly across all parts
+of the Group. Our global corporate audit function conducts
+periodical audits to assess the effectiveness of our risk
+management system. Every year, SAP's external auditor assesses
+whether the SAP SE early risk identification system is adequate to
+identify risks that might endanger our ability to continue as a going
+concern.
+Risk Management Policy and Framework
+Due to our public listings in both Germany and the United States,
+we are subject to both German and U.S. regulatory requirements
+that relate to risk management and internal controls over financial
+reporting, such as provisions in the German Stock Corporation Act,
+section 91 (2), and the U.S. Sarbanes-Oxley Act (SOX) of 2002,
+specifically sections 302 and 404. Hence, our Executive Board has
+established an early warning system (risk management system) to
+enable compliance with applicable regulations.
+Legal and Regulatory Requirements
+In addition, we have a governance model in place across risk
+management and the internal control system to ensure both
+systems are effective, as well as a central software solution to store,
+maintain, and report all risk-relevant information.
+This system comprises numerous control mechanisms and is an
+important element of our corporate decision-making process; it is
+therefore implemented across the entire Group as an integral part
+of SAP's business processes. We have adopted an integrated risk
+management and internal control approach to help maintain
+effective global risk management while also enabling us to
+aggregate risks and report on them transparently.
+Internal Control and Risk Management System
+Our Risk Management
+Additional
+Information
+Risk Management and Risks
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+104
+We introduced a second cohort to our Executive Compliance
+Ambassador Program. We now have 119 executives, from all Board
+areas, who have taken on the role of championing compliance
+messaging and raising awareness of compliance throughout the
+company and the business. Program members can access a
+specific intranet site tailored to the ambassador role. This site
+encourages the exchange of information and networking and keeps
+the compliance community alive.
+Prohibition of bribery and corruption in all its forms, including
+facilitation or "grease payments"
+Additional
+Information
+-
+-
+Our Code of Business Conduct (COBC) is communicated to
+employees globally and contains a fundamental set of rules that
+define how we conduct our business and require high levels of
+integrity and ethics. While we acknowledge that it is not possible to
+eliminate the potential for non-compliant behavior entirely, the
+CoBC remains one of our most important compliance documents
+and sets the standard for our dealings with customers, partners,
+competitors, and vendors, and each of our employees is bound by it.
+The CoBC is adapted locally and translated into local languages
+where required.
+Our internal compliance management system, for example, is
+part of the internal audit plan of Corporate Audit and encompasses
+all aspects of compliance management - from the analysis of
+compliance risks and the definition of objectives to the running of
+compliance programs as well as ongoing monitoring of business
+activities and adherence to policies.
+SAP expects compliance to permeate the entire company.
+Compliant behavior is expected to be an intrinsic part of our culture
+and an instinctive part of our daily decision-making at every level of
+the business. To help nurture this environment in which integrity
+and ethics dominate, we continually address compliance issues and
+strive to improve policies, guidelines, instruments, and measures
+related to their implementation.
+Nurturing an Environment in which
+Integrity and Ethics Dominate
+In 2019, the Office of Ethics and Compliance (OEC), formerly the
+Legal Compliance and Integrity Office (LC&IO), grew from 80 to 113
+employees as it continued its efforts to raise the awareness of
+compliance and to ensure the practice of compliant and ethical
+behavior throughout SAP.
+SAP's reputation for doing business the right way is one of our
+most important assets. It is synonymous with quality, innovation,
+and excellence.
+At SAP, we understand that our customers expect our business
+practices to not only meet international rules and legal
+requirements, but also to adhere to high standards of compliance
+and integrity.
+The key areas covered by the CoBC include:
+In an increasingly complex business environment, making the
+right decisions and abiding by ethical choices has never been more
+challenging. As a company operating in numerous countries across
+the globe, SAP is required to adhere to strict international
+legislation that defines acceptable and ethical business conduct
+and practices.
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Business Conduct
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+Corporate Governance Fundamentals
+Our Executive Board is responsible for ensuring the
+effectiveness of the risk management system and the internal
+control system. The effectiveness of both systems and their
+implementation in the different Executive Board areas is monitored
+by each board member. Global GRC regularly provides a status
+update on the risk management and the internal control system to
+the Audit Committee of the Supervisory Board. The Audit
+Committee of the Supervisory Board regularly monitors the
+effectiveness of SAP's risk management and internal control
+systems. At the direction of this Committee, the Corporate Audit
+department periodically audits various aspects of our risk
+management system and its effectiveness. Additional reassurance
+is obtained through the external audit of the effectiveness of our
+system of internal controls over financial reporting and the early
+warning system.
+Championing Excellence in Business
+Conduct
+Gifts and business entertainment limits
+Full, fair, and accurate accounting
+Conflicts of interest
+Confidentiality
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+To Our
+Stakeholders
+103
+Business Conduct
+Quarterly newsletters provide employees with information on a
+range of compliance-related topics. We include a business ethics
+and compliance-related question in our annual engagement survey
+and in company-wide polls throughout the year. Employees can use
+the corporate portal at any time to access all global policies,
+guidelines, and additional information. In 2019, a compliance mobile
+app was also launched to provide mobile access to company
+Communicating Our Standards
+Field compliance officers at the OEC continued to hold
+classroom training sessions for employees across the organization
+- from customer-facing staff to individuals in supporting roles, such
+as corporate affairs and marketing. Furthermore, information about
+our compliance policies is included in onboarding sessions.
+Mandatory online certification on the CoBC for employees
+worldwide continued in 2019. We recorded that more than 72,000
+employees received this certification during the certification cycle.
+This number includes 26,475 employees in the Americas region,
+25,283 employees in the APJ region, and 20,295 employees in the
+EMEA region.
+In 2019, the OEC rolled out the "Five Pillars of Compliance"
+training to all employees. This online training was mandatory
+wherever legally permissible, and in those jurisdictions a completion
+rate of over 90% was achieved across all Executive Board areas.
+The training included modules on: bribery and corruption, conflict
+of interest, competition, channel and fair business conduct, partner
+engagement, and hospitality. A total of 54,857 employees had
+completed the training modules by November 2019.
+SAP provides its employees with training to ensure that they are
+aware of the standards SAP expects. Our training programs cover,
+for example, guidelines on anticorruption, competition law, and
+governance for customer commitments, intellectual property, and
+information security.
+Providing Comprehensive Training
+We also expect our partners and suppliers to commit to meeting
+our high standards of integrity and sustainability. For this reason, we
+have the SAP Partner Code of Conduct and the SAP Supplier Code
+of Conduct in place so that partners and suppliers understand what
+is expected of them.
+Accounting and financial reporting
+Export control and sanctions laws
+Data protection and privacy
+Sustainability
+Intellectual property
+Regulation of the appointment and remuneration of sales agents
+Charitable and political donations
+-
+SAP also has established policies to maintain high standards
+within the following areas:
+Data protection and privacy rights
+Anti-competitive practices
+policies, compliance messaging, and a directory of field compliance
+officers.
+Our Global Risk Management Policy
+To Our
+Stakeholders
+Our Global Risk Management Organization
+H
+H
+H
+M
+80% to 99%
+Business-Critical
+Major
+Moderate
+Minor
+Insignificant
+Probability
+The combination of the likelihood that a risk will occur and its impact on SAP's reputation, business, financial position, profit, and cash flow
+leads to a subsequent classification of the risk as either "high," "medium," or "low."
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+Risk Management and Risks
+106
+Detrimental negative impact on business,
+financial position, profit, and cash flows
+Considerable negative impact on business,
+financial position, profit, and cash flows
+Business-Critical
+60% to 79%
+Major
+L
+M
+L = Low Risk
+Impact
+M
+L
+L
+L
+L
+1% to 19%
+M
+M
+L
+L
+20% to 39%
+H
+M
+M
+L
+L
+40% to 59%
+H
+H
+102
+The risk management policy, updated in 2019, stipulates
+responsibilities for conducting risk management activities and
+defines reporting and monitoring structures. Our global SAP risk
+management policy clearly states that every employee is
+responsible for active engagement in the risk management process
+as well as for the continuous identification of risks, based upon
+clear rules of engagement in adherence to the policy. Along with the
+policy, we maintain a system-based Risk Management Policy
+Cockpit that describes all business process specifics associated
+with the risk management lifecycle. The risk management system
+primarily analyzes risks. Opportunities are only assessed or
+analyzed where it is deemed appropriate.
+Minor
+Moderate
+Risk Assessment
+Risk planning and risk identification for internal and external
+risks are conducted jointly by GRC risk managers and the relevant
+business units or SAP entities.
+Based on SAP's risk management policy and framework, the risk
+planning phase serves to align on the definition and assignment of
+roles and responsibilities, the definition of risk-relevant business
+activities (such as processes, projects or other aspects affecting
+Company assets), the determination of objectives and value drivers,
+the planning of risk assessments, and the determination of
+adequate information flow.
+The illustration on the right describes the key elements of the
+risk management process under SAP's risk management policy.
+Risk Planning
+Risk Management Methodology and Reporting
+The head of Global GRC, who reports to our Group CFO, is
+responsible for SAP's internal control and risk management
+program.
+Furthermore, for as long as the newly acquired companies are not
+integrated, existing risk management structures are maintained or
+enhanced within the acquired companies for the purposes of
+compliance with legal requirements.
+During the merger and acquisition and post-merger integration
+phase, newly acquired companies are subject to risk management
+performed by our Corporate Development M&A function.
+Further financial risk management activities are performed by
+our Global Treasury and our Global Tax departments. General legal
+risks are managed by Global Legal. Sanction and embargo-related
+risks are managed by the Export Control team, harassment and
+other HR-related issues by our Global Labor & Employee Relations
+Office, and IP risks by our Global IP Office.
+All GRC risk managers, working with assigned risk contacts in
+the relevant business units, identify and assess risks associated
+with material business operations using a uniform approach, and
+monitor the implementation and effectiveness of the measures
+chosen to mitigate risks.
+and implementation of our risk management policy as well as the
+standardized internal and external risk reporting.
+Information
+Additional
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+105
+Risk Management and Risks
+Our global risk management organization is responsible for the
+implementation of a group-wide effective risk management system.
+Furthermore, Global GRC is responsible for the regular maintenance
+A risk assessment covers the identification and analysis of a risk,
+as well as the determination of a response to that risk. We use
+various approaches to identify risks. For example, we have identified
+risk indicators and have developed a comprehensive risk catalog
+that includes risk mitigation strategies. Risk identification takes
+place at various levels of our organization to ensure that common
+risk trends are identified and end-to-end risk management across
+organizational borders is enabled. We apply both qualitative and
+quantitative risk analyses and other risk analysis methods such as
+sensitivity analyses and simulation techniques.
+Some potential negative impact on business,
+financial position, profit, and cash flows
+To determine which risks pose the greatest threat to the viability
+of the SAP Group, we classify them as "high," "medium," or "low"
+based on the likelihood that a risk will occur within the assessment
+horizon and the impact the risk would have on SAP's business
+objectives if it were to occur. The scales for measuring these two
+indicators are given in the following tables.
+Description
+Negligible negative impact on business,
+financial position, profit, and cash flows
+Limited negative impact on business, financial
+position, profit, and cash flows
+Insignificant
+Impact Definition
+Risk Reporting
+Risk Validation and
+Monitoring
+Risk Response
+Risk Assessment
+Risk Analysis
+Risk Identification
+Risk Planning
+Impact Level
+In this framework, we define a remote risk as one that will occur
+only under exceptional circumstances, and a near certain risk as
+one that can be expected to occur within the specified time horizon.
+The period for analyzing our risks correlates with that of the
+respective associated business activities, considering a relevant
+forecast horizon of up to one year, and up to 2023 where applicable.
+The period for analyzing risks that could be possible threats to the
+Group's ability to continue as a going concern is eight rolling
+quarters.
+Near Certainty
+Highly Likely
+Likely
+80% to 99%
+40% to 59%
+60% to 79%
+20% to 39%
+1% to 19%
+Unlikely
+Remote
+Probability/Likelihood of Occurrence
+M
+Market Share and Profit
+H = High Risk
+Icon:
+decreased
+unchanged
+increased
+←
+1) Trend: Risk level compared with previous year.
+Risk Management and Risks
+109
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+Economic, Political, Social, and Regulatory
+Risks
+Global Economic and Political Environment: Uncertainty in the
+global economy, financial markets, social and political instability
+caused by state-based conflicts, terrorist attacks, civil unrest,
+war, or international hostilities could lead to disruptions of our
+business operations or have a negative impact on our business,
+financial position, profit, and cash flows.
+As a global company, we are influenced by multiple external
+factors that are difficult to predict and beyond our influence and
+control. Any of these factors could have a significant adverse effect
+on the overall economy as well as on our business.
+The following potential events, among others, could bring risks to
+SAP's business:
+-
+-
+-
+-
+General economic, political, social, environmental, market
+conditions, and unrest (for example, United States-China supply
+chain restrictions, United States-North Korea conflicts, western
+pressure on Iran, UK/Brexit, unrest in Hong Kong, and so on)
+Continued deterioration in global economic conditions (impact
+on accurate forecast) or budgetary constraints of national
+governments
+Confrontations, frictions, trade or tariff conflicts such as that
+between the United States and China, with potential global
+implications as indicated by signs of a widespread economic
+slowdown, maybe even leading to a recession
+Financial market volatility episodes, global economic crises and
+chronic fiscal imbalances, slowing economic conditions, or
+disruptions in emerging markets
+Higher credit barriers for customers, reducing their ability to
+finance software purchases
+Increased number of bankruptcies among customers, business
+partners, and key suppliers
+Terrorist attacks or other acts of violence, civil unrest, natural
+disasters, or pandemic diseases impacting our business
+Regional conflicts, which may affect data centers as critical
+infrastructure assets
+medium
+Any of these events could limit our ability to reach our targets as
+they could have a negative effect on our business operations,
+financial position, profit, and cash flows.
+business-critical
+7
+medium
+Cloud Operations
+unlikely
+business-critical
+medium
+←
+←
+Cybersecurity and Security
+highly likely
+business-critical high
+7
+Technology and Products
+unlikely
+business-critical
+medium
+→
+Strategic Risks
+SAP had bonds totaling €9.25 billion and US$0.3 billion
+outstanding as at December 31, 2019. For more information about
+SAP's bonds, see the Notes to the Consolidated Financial
+Statements, Note (E.3). Under the terms agreed with the buyers,
+we are required to notify the buyers, without delay, of any change of
+control. If there is a change of control and SAP is consequently
+assigned a lower credit rating within a defined period, buyers are
+entitled to demand repayment.
+Mergers and Acquisitions
+Innovation
+unlikely
+business-critical
+medium
+→
+likely
+major
+medium
+remote
+major
+SAP has established measures to address and mitigate the
+described risks and adverse effects, such as:
+-
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+To Our
+Stakeholders
+101
+Corporate Governance Fundamentals
+Requirements concerning appointments and dismissals of
+members of the Executive Board and amendments to the
+Articles of Incorporation: Conditions for the appointment and
+dismissal of members of the Executive Board and amendment to
+the Articles of Incorporation reflect the relevant provisions of
+applicable European and German law, including Council Regulation
+(EC) No. 2157/2001 on the Statute for a European Company ("SE
+Regulation") and the German Stock Corporation Act. Under the
+Articles of Incorporation, the Executive Board consists of at least
+two members, who are appointed for a period of not more than five
+years by the Supervisory Board in accordance with the SE
+Regulation, articles 39 and 46. The number of members of the
+Executive Board is decided by the Supervisory Board. Executive
+Board members may be reappointed for, or their term of office
+extended by, a maximum of five years. A simple majority of the
+Supervisory Board membership is required for Executive Board
+appointments. In the event of a tie, the chairperson of the
+Supervisory Board has the deciding vote. The Supervisory Board
+can appoint a chairperson of the Executive Board and one or more
+deputy chairpersons from among the members of the Executive
+Board. The Supervisory Board can revoke appointments to the
+Executive Board in accordance with the SE Regulation, article 9, and
+the German Stock Corporation Act, section 84, if compelling
+reasons exist, such as gross negligence on the part of the Executive
+Board member. If the Executive Board is short of a required
+member, one may be appointed in urgent cases by a court in
+accordance with the SE Regulation, article 9, and the German Stock
+Corporation Act, section 85. In accordance with the SE Regulation,
+article 59, and the German Stock Corporation Act, section 179, an
+amendment of the Articles of Incorporation requires a resolution of
+the General Meeting of Shareholders with a majority of at least
+three-quarters of the valid votes cast. For any amendments of the
+Articles of Incorporation that require a simple majority for stock
+corporations established under German law, however, the simple
+majority of the valid votes cast is sufficient if at least half of the
+subscribed capital is represented or, in the absence of such
+quorum, the majority prescribed by law (that is, two-thirds of the
+votes cast, pursuant to article 59 of the SE Regulation) is sufficient.
+Section 11 (2) of the Articles of Incorporation authorizes the
+Supervisory Board to amend the Articles of Incorporation where
+such amendments only concern the wording.
+Shares with special rights conferring powers of control: No
+SAP shareholder has special rights conferring powers of control.
+Type of control over voting rights applying to employee
+shareholders who do not directly exercise their control rights: As
+with other shareholders, employee holders of SAP shares exercise
+their control rights in accordance with the law and the Articles of
+Incorporation. In votes on the formal approval of their acts at the
+Annual General Meeting of Shareholders, employee representatives
+on the Supervisory Board, as all other members of the Supervisory
+Board, are prohibited from exercising the voting rights associated
+with their shares.
+Shareholdings that exceed 10% of the voting rights: We are
+not aware of any direct or indirect SAP SE shareholdings that
+exceed 10% of the voting rights.
+Restrictions applying to share voting rights or transfers: SAP
+shares are not subject to transfer restrictions. SAP held 34,854,354
+treasury shares as at December 31, 2019 (see the Notes to the
+Consolidated Financial Statements, Note (E.2)). Treasury shares do
+not carry voting rights or dividend rights or other rights. We are not
+aware of any other restrictions applying to share voting rights or to
+share transfers.
+Composition of share capital: For information about the
+composition of SAP SE's share capital as at December 31, 2019, see
+the Notes to the Consolidated Financial Statements, Note (E.2).
+Each share entitles the bearer to one vote. American depositary
+receipts (ADRs) representing our shares are listed on the New York
+Stock Exchange (NYSE) in the United States. ADRs are certificates
+representing non-U.S. shares and are traded on U.S. stock
+exchanges instead of the underlying shares. One SAP ADR
+corresponds to one SAP share.
+Information required under the German Commercial Code,
+sections 289a (1) and 315a (1), with an explanatory report:
+Information Concerning Takeovers
+In October 2019, Thomas Saueressig was appointed to the
+Executive Board effective November 1, 2019. He leads the Board
+area SAP Product Engineering.
+On October 10, 2019, Bill McDermott stepped down as SAP's
+chief executive officer (CEO). Jennifer Morgan and Christian Klein
+succeeded as Co-CEOs. Bill McDermott served as Executive Board
+member until November 15, 2019.
+In April 2019, the Executive Board member Robert Enslin, who
+had served as president of the Cloud Business Group, left SAP.
+Executive Board member Jennifer Morgan succeeded Robert Enslin
+as president of the Cloud Business Group, and Executive Board
+member Adaire Fox-Martin took over sole responsibility as
+president of Global Customer Operations.
+SAP Executive Board member Bernd Leukert, who had co-led
+the SAP Digital Business Services organization together with
+Michael Kleinemeier, left SAP at the end of March 2019. The
+Supervisory Board extended the Executive Board contract of
+Michael Kleinemeier through 2020.
+Changes in Management
+The German Commercial Code, section 315d in connection with
+section 289f, requires that, as a listed company, SAP SE publishes a
+corporate governance statement either as part of our management
+report or on our Web site. The Executive Board and the Supervisory
+Board of SAP SE issued the Corporate Governance Statement,
+which also includes the Corporate Governance Report, on
+February 18, 2020, and published it on our public Web site at
+www.sap.com/corporate-en/investors/governance.
+Corporate Governance Statement,
+Including Corporate Governance Report
+Corporate Governance Fundamentals
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+To Our
+Stakeholders
+We have entered into relationships with other companies to
+jointly develop and market new software products. These
+relationships are governed by development and marketing
+agreements with the respective companies. Some of the
+agreements include provisions that, in the event of a change of
+control over one of the parties, give the other party a right to
+consent to the assignment of the agreement or to terminate it.
+Change-of-control provisions in Executive Board
+compensation agreements: Agreements have been concluded with
+the members of the Executive Board concerning compensation in
+the event of a change of control. These agreements, which are
+customary in Germany and elsewhere, are described in the
+compensation report, which is an integral part of this management
+report. We have no analogous compensation agreements with our
+other employees.
+Additional
+Information
+-
+Power to issue and repurchase shares: The Annual General
+Meeting of Shareholders on May 12, 2016, granted powers to the
+Executive Board, subject to the consent of the Supervisory Board,
+to issue convertible and/or warrant-linked bonds, profit-sharing
+rights and/or income bonds (or combinations of these
+instruments), and to grant conversion or option rights in respect of
+SAP SE shares representing a total attributable portion of the share
+capital of not more than €100 million secured by a corresponding
+amount of contingent capital. These powers will expire on
+May 11, 2021. The Executive Board is also authorized until
+May 19, 2020, to increase the share capital by not more than
+€250 million by issuing new shares against contributions in cash
+and to increase the share capital by not more than €250 million by
+issuing new shares against contributions in cash or in kind. For
+more information about the different tranches of authorized capital
+and the aforementioned contingent capital, see the Articles of
+Incorporation, section 4.
+Material agreements with change-of control-provisions:
+SAP SE has concluded the following material agreements with
+provisions that take effect in the event of a change of control,
+whether following a takeover bid or otherwise:
+-
+-
+Further efforts to achieve our vison of a purpose-led company by
+transforming our and our customers' business processes with
+intelligent technologies (SAP Leonardo) for the intelligent
+enterprise
+Ongoing shift to a higher share of cloud subscriptions and
+software support revenue streams, which will lead to more
+predictable revenue streams over time, providing increased
+stability against financial volatility
+Internal cost discipline and a conservative financial planning
+Reshaping of our organizational structure and processes to
+increase efficiency
+Monitoring and evaluation of global and political developments
+supported by our government relations unit to share insights
+and provide guidance to allow for proactive preparation
+We cannot exclude the possibility that if the risk were to occur, it
+could have a business-critical impact on our operations, financial
+position, profit, and cash flows. We estimate the probability of
+occurrence of this risk to be likely. This could exacerbate the other
+risks we describe in this report or cause a negative deviation from
+our revenue and operating profit target. We classify this risk as a
+high risk.
+International Laws and Regulations: Laws, regulatory
+requirements and standards in Germany, the United States, and
+elsewhere continue to be very stringent. Our international
+business activities and processes expose us to numerous and
+often conflicting laws and regulations, policies, standards, or
+other requirements and sometimes even conflicting regulatory
+requirements, and to risks that could harm our business,
+financial position, profit, and cash flows.
+We are a global company and currently market our products and
+services in more than 180 countries and territories. As a European
+company domiciled in Germany with securities listed in Germany
+and the United States, we are subject to European, German, U.S.,
+and other governance-related regulatory requirements.
+Our business in these more than 180 countries is subject to
+numerous risks inherent to international business operations.
+Among others, these risks include:
+-
+-
+-
+-
+-
+-
+Possible tax constraints impeding business operations in certain
+countries
+Changes in external reporting standards and tax laws including,
+but not limited to, conflict and overlap among tax regimes as well
+as the introduction of new tax concepts that harm digitized
+business models
+Discriminatory, protectionist, or conflicting fiscal policies and tax
+laws, such as certain protectionist measures included in the U.S.
+Tax Reform which was enacted at the end of 2017, with some
+provisions still awaiting final regulations to provide guidance on
+compliance
+Workforce restrictions resulting from changing laws and
+regulations, from political decisions (such as Brexit, government
+elections), or through required works council involvements, labor
+union approvals, and immigration laws in different countries
+Protectionist trade policies, import and export regulations, and
+trade sanctions (such as in Russia or China), counter or even
+conflicting sanctions (such as in the United States and Russia),
+and embargoes (such as in Iran) including, but not limited to,
+country-specific software certification requirements
+Violations of country-specific sanctions (such as the UN
+sanction against North Korea or the United States' sanction
+requirements against Iran and certain other countries)
+Compliance with and stringent enforcement of laws, as for
+example the EU General Data Protection Regulation (GDPR) or
+China's Cyber Security Law, and regulations (including
+interpretations), implications of government elections, lack of
+reforms, data protection and privacy rules, regulatory
+requirements and standards (such as the Payment Card
+Industry Data Security Standard (PCI DSS)) or other compliance
+requirements (such as Service Organization Controls (SOC))
+Expenses associated with the localization of our products and
+compliance with local regulatory requirements
+Difficulties enforcing intellectual property and contractual rights
+in certain jurisdictions
+110
+Risk Management and Risks
+To finance the acquisition of Qualtrics International Inc., SAP
+took out a loan of €2.5 billion. The loan agreement contains a
+change-of-control clause which obliges SAP SE to notify the banks
+in case of a change of control. If, on receiving the notification, banks
+that represent at least two-thirds of the credit volume so require,
+the banks have the right to terminate the loan and demand
+complete repayment of the outstanding debt. If no continuation
+agreement is reached, the termination of the loan and the obligation
+to repay would become effective at an ascertainable time.
+The terms of SAP's syndicated €2.5 billion revolving credit
+facility include a change-of-control clause. For more information
+about this syndicated credit facility, see the Notes to the
+Consolidated Financial Statements, Note (F.1). This clause obliges
+SAP SE to notify the banks in case of a change of control. If, on
+receiving the notification, banks that represent at least two-thirds of
+the credit volume so require, the banks have the right to cancel the
+credit facility and demand complete repayment of the outstanding
+debt. If no continuation agreement is reached, the credit facility
+would end and the obligation to repay would become effective at an
+ascertainable time.
+The Annual General Meeting of Shareholders on May 17, 2018,
+granted a power to the Executive Board in accordance with the
+German Stock Corporation Act, section 71 (1)(8), to buy back for
+treasury on or before May 16, 2023, SAP SE shares attributable in
+total to not more than €120 million of the share capital. This power
+is subject to the proviso that the shares repurchased, together with
+any shares that were previously acquired and are still held by SAP in
+treasury and any other shares controlled by SAP, must not in total
+exceed 10% of SAP's share capital. Executive Board powers, such as
+those described to issue and repurchase stock and to grant rights
+of conversion and subscription to shares of SAP, are widely-followed
+common practice among German companies such as SAP. These
+powers give the Executive Board the flexibility it needs, in particular,
+the option to use SAP shares as consideration in equity
+investments, raise funds on the financial markets at short notice on
+favorable terms, or return value to shareholders during the course
+of the year.
+M = Medium Risk
+unlikely
+→>
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+Overview of Risk Factors (Aggregated Statement for 2019)
+Probability
+Impact
+Risk Level
+Trend¹)
+Economic, Political, Social, and Regulatory Risks
+Global Economic and Political Environment
+likely
+business-critical
+high
+International Laws and Regulations
+likely
+business-critical
+high
+←
+←
+Legal and IP
+likely
+business-critical
+high
+→
+Risk Management and Risks
+Data Protection and Privacy
+108
+The following sections outline our risk categories and risk factors
+that we have identified and continuously track.
+In the final stage of the risk assessment, after identifying and
+analyzing the risk, we determine a response for each identified risk.
+We have different response categories such as mitigating, retaining
+for research, transferring, delegating, accepting, or avoiding, for
+example by deciding not to start or not to continue the activity that
+may lead to a risk.
+Risk Validation and Monitoring
+Risk assessment is followed by risk validation and risk
+monitoring. The risk exposure and the risk description, as well as
+the appropriateness of agreed responses, are validated by the
+accountable management. Our GRC risk managers work in close
+cooperation with the relevant business owners, ensuring that
+strategies are implemented to address risks. Business owners are
+responsible for continuously monitoring the risks and associated
+mitigation strategies, with support from the respective GRC risk
+managers. Risks might be reduced by taking active steps based on
+risk approval. To provide greater risk transparency and enable
+appropriate decision-making for business owners, we have
+established a risk delegation of authority (RDOA) for relevant parts
+of the organization as deemed appropriate. RDOA is a risk
+management decision-making hierarchy that helps business
+owners gain timely insight into business transactions that pose the
+greatest risk, so that they are better able to review the relevant
+information, understand the risk profile and associated mitigation
+strategies, and determine whether their approval is warranted.
+Depending on the exposure, approval is required at different levels
+of the Company, up to and including the Executive Board.
+Risk Reporting
+All identified and relevant risks are reported at the local, regional,
+and global levels in accordance with our risk management policy
+and the risk reporting standard. At these levels, we have established
+executive risk councils that regularly discuss risks and
+countermeasures and that monitor the success of risk mitigation. In
+addition, the Executive Board is informed regularly and quarterly
+about individual risks based on clearly defined qualitative reporting
+criteria. Newly identified or existing significant risks that are above a
+defined threshold, meet a qualitative criterion, or have a potential
+significant impact are also reported to the Audit Committee and the
+chairperson of the Supervisory Board on a quarterly basis. This
+includes risks along our strategic portfolio for services and
+solutions as well as any risks to our ability to continue as a going
+concern, the latter supported by a process that analyzes those risks
+with respect to potential effects on liquidity, excessive
+indebtedness, and insolvency.
+Internal Control and Risk Management System
+for Financial Reporting
+The purpose of our system of internal control over financial
+reporting is to provide reasonable assurance that our financial
+reporting is reliable and compliant with generally accepted
+accounting principles. Because of the inherent limitations of
+internal control over financial reporting, it might not prevent or
+bring to light all potential misstatements in our financial
+statements.
+Our internal control system consists of the internal control and
+risk management system for financial reporting (ICRMSFR), which
+also covers the broader business environment. In 2019, we adjusted
+existing control designs to adequately address the evolving risks
+and we continued to automate our internal control landscape. Using
+the current COSO Internal Control - Integrated Framework of 2013,
+we have defined and implemented internal controls along the value
+chain on a process and subprocess level to ensure that sound
+business objectives are set in line with the organization's strategic,
+operational, financial, and compliance goals.
+SAP's ICRMSFR is based on our Group-wide risk management
+methodology. It includes organizational, control, and monitoring
+structures designed to ensure that data and information concerning
+our business is collected, compiled, and analyzed in accordance
+with applicable laws and properly reflected in our IFRS Consolidated
+Financial Statements.
+Our ICRMSFR also includes policies, procedures, and measures
+designed to ensure compliance of SAP's financial reports with
+applicable laws and standards. We analyze new statutes, standards,
+and other pronouncements concerning IFRS accounting and its
+impact on our financial statements and the ICRMSFR. Failure to
+adhere to these would present a substantial risk to the compliance
+of our financial reporting. Finally, the ICRMSFR has both preventive
+and detective controls, including, for example, automated and non-
+automated reconciliations, segregated duties with two-person
+responsibility, authorization concepts in our software systems, and
+corresponding monitoring measures.
+Our Corporate Financial Reporting (CFR) department codifies all
+accounting policies in our Group accounting and global revenue
+recognition guidelines. These policies and the corporate closing
+schedule, together with our process descriptions, define the closing
+Risk Management and Risks
+107
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+process. Under this closing process, we prepare, predominately
+through centralized or external services, the financial statements of
+all SAP entities for consolidation by CFR. CFR and other corporate
+departments are responsible for ensuring compliance with Group
+accounting policies and monitor the accounting work. CFR also
+conducts reviews of our accounting processes and books. The
+employees who work on SAP's financial reporting receive training in
+the respective policies and processes.
+We have outsourced some tasks, such as valuing projected
+benefit obligations and share-based payouts, quarterly tax
+calculations for most entities, and purchase price allocations in the
+context of asset acquisitions and business combinations. We have
+also outsourced the preparation of the local statutory financial
+statements for a number of our subsidiaries.
+Based on an analysis of the design and operating effectiveness
+of our respective internal controls over financial reporting, a
+committee presents the results of the assessment on the ICRMSFR
+effectiveness with respect to our IFRS consolidated financial
+statements as at December 31 each year to our Group CFO. The
+committee meets regularly to set the annual scope for the test of
+effectiveness, to assess and evaluate any possible weaknesses in
+the controls, and to determine measures to address them timely
+and adequately. During its own meetings, the Audit Committee of
+the Supervisory Board regularly scrutinizes the resulting
+assessments of the effectiveness of the internal controls over
+financial reporting with respect to the IFRS consolidated financial
+statements.
+The assessment, conducted by SAP and external audit, of the
+effectiveness of the ICRMSFR related to our IFRS consolidated
+financial statements concludes that, on December 31, 2019, the
+Group had an effective internal control system over financial
+reporting in place.
+Additionally, and in compliance with German commercial law
+requirements, SAP maintains an internal control system beyond
+financial reporting. This is supported through automated controls
+(continuous control monitoring) as part of our business processes.
+Supporting Software Solution
+We use our own risk management software, SAP solutions for
+GRC powered by SAP HANA, to support the governance process.
+GRC risk managers record and track identified risks using our risk
+management software online and in real time to help create
+transparency across all known risks that exist in the Group, as well
+as to facilitate risk management and the associated risk reporting.
+This GRC solution also supports the risk-based approach of the
+ICRMSFR. Our continuous controls monitoring activities are
+performed utilizing our GRC software as well. This information is
+available to managers through direct access to our SAP Fiori
+application for enterprise risk reporting, and in regularly issued
+reports, and is consolidated and aggregated for the quarterly risk
+report to the Executive Board. We also utilize the SAP Digital
+Boardroom solution to share relevant risk information with the
+Executive Board and the Audit Committee of the Supervisory Board.
+Risk Factors
+An overview of the risk categories and the corresponding risk
+factors is outlined in the table below. Therein, risk factors are
+categorized according to our framework which is detailed in the
+Risk Management Methodology and Reporting section.
+Partner Ecosystem
+likely
+→>
+→
+Currency, Interest Rate, and Share Price Fluctuations
+remote
+major
+low
+←
+Insurance
+remote
+business-critical
+medium
+→>
+Venture Capital
+remote
+minor
+low
+→
+Human Capital Risks
+Human Workforce
+unlikely
+major
+medium
+→
+Operational Business Risks
+Sales and Services
+unlikely
+major
+medium
+low
+business-critical high
+moderate
+Use of Accounting Policies and Judgment
+Corporate Governance and Compliance Risks
+Unauthorized Disclosure of Information
+Ethical Behavior
+Environment and Sustainability
+remote
+business-critical
+medium
+→
+likely
+business-critical
+high
+←
+unlikely
+moderate
+low
+→
+Financial Risks
+Sales and Revenue Conditions
+unlikely
+moderate
+low
+→
+Liquidity
+remote
+major
+low
+→
+unlikely
+Under the terms of our U.S. private placements totaling
+approximately US$1.16 billion as at December 31, 2019, we are
+required to offer lenders repayment of outstanding debt if there is a
+change of control and SAP is consequently assigned a lower credit
+rating within a defined period. For more information about these
+private placements, see the Notes to the Consolidated Financial
+Statements, Note (E.3). Lenders would have at least 30 days to
+accept the offer.
+114
+To Our
+Stakeholders
+Risk Management and Risks
+A core element of our business is the successful implementation
+of software and service solutions. The implementation of SAP
+Sales and Services: Sales and implementation of SAP software
+and services, including cloud, are subject to a number of
+significant risks sometimes beyond our direct control.
+Operational Business Risks
+We cannot exclude the possibility that if the risk were to occur, it
+could have a major impact on our operations, financial position,
+profit, and cash flows. However, we estimate the probability of
+occurrence of this risk to be unlikely. We classify this risk as a
+medium risk. For more information, see the Employees and Social
+Investments section.
+Extended benefit and long-term incentive programs, which will
+enable us to hire and retain talents internationally
+Utilization of outsourcing or external short-term staffing
+channel of talent with relevant skill sets required to compete
+successfully
+Strong focus on expanding our talent landscape and reach
+through our diversity and inclusion efforts, including but not
+limited to neuro-diverse talent, which provides a vibrant
+Strong focus on succession planning for leadership and key
+positions to ensure sustainable leadership and safeguard the
+business from impacts through staff turnover
+Building employee and leadership strengths through a range of
+targeted professional development, learning, mentoring,
+coaching, together with a gender diversity program to take the
+changes in a global workforce into consideration
+competencies, and qualification advancements)
+Career management (including, but not limited to, opportunity
+offerings for short-term assignments as well as skill,
+Utilization of SAP solutions to support compliance and
+streamline processes
+Utilization of external advisory services to address complexity
+in legal requirements while ensuring adequate resource
+allocation
+Workforce planning (aiming to achieve diversity and the right
+mix of talent while considering demographic changes) and
+legally compliant mobility planning, utilizing the integration of
+our Concur travel solutions to support the challenges of a
+global workforce
+-
+-
+-
+-
+-
+-
+-
+SAP has established measures to address and mitigate the
+described risks and adverse effects, such as:
+Any one or more of these events could reduce our ability to
+attract, develop, retain, and effectively manage our geographically
+dispersed workforce, which in turn could have an adverse effect on
+our business, financial position, profit, and cash flows.
+Mismatch of expenses and revenue due to changes in headcount
+and infrastructure needs, as well as local legal or tax regulations
+Challenges with effectively managing a large distribution
+network of third-party companies
+Lack of availability and scalability of business experts and
+consultants
+Lack of appropriate or inadequately executed benefit and
+compensation programs
+-
+-
+117
+Failure to meet short-term and long-term workforce and skill
+requirements including achievement of internal gender diversity
+objectives
+To Our
+Stakeholders
+Further Information on Economic,
+Environmental, and Social Performance
+We cannot exclude the possibility that if the risk were to occur, it
+could have a major impact on our operations, financial position,
+profit, and cash flows. However, we estimate the probability of
+occurrence of this risk to be unlikely. We classify this risk as a
+medium risk.
+Simplification, alignment, and enforcement of contractual
+standard terms and conditions while conducting legal and
+operational assessments in case deviations are required
+A policy that clearly outlines communication rules on future
+functionalities as well as legal requirements for commitments
+to customers
+Ongoing development of new commercial models to address
+customer flexibility needs
+Adequate financial planning provisions for the remaining risks
+Continuous project monitoring and controlling activities
+Established escalation management process
+practices for customers to optimize their IT solutions in a non-
+disruptive manner
+Recommended project approaches, guidance, and best
+Scope reviews and monitoring are conducted with required
+adaptations through a clearly defined change request process to
+support successful implementations together with respective
+project governance and steering
+implementations with coordinated risk and quality management
+programs
+Projects include risk management processes as part of SAP's
+project management methods intended to safeguard
+-
+-
+-
+SAP has established measures to address and mitigate the
+described risks and adverse effects, such as:
+Any one or more of these events could have an adverse effect on
+our business, financial position, profit, and cash flows.
+Statements on solution developments might be misperceived by
+customers as commitments on future software functionalities
+Deviations from standard terms and conditions, which may lead
+to an increased risk exposure
+Unrenderable services committed during the sales stage
+Delayed customer payments due to differing perception on
+project outcome/results or customer solvency challenges
+Inadequate contracting and consumption models based on
+subscription models for services, support, and application
+management
+Protracted installation or significant third-party consulting costs
+Improper calculations or estimates leading to costs exceeding
+the fees agreed in fixed-price contracts
+Lack of customer commitments and respective engagements,
+including lack of commitment of resources, leading to delays or
+deviations from recommended best practices
+Challenges to effectively implement acquired technologies
+Challenges to achieve a seamlessly integrated and aligned
+service delivery in complex deliveries or implementations, for
+example due to lack of insights especially in the event of limited
+project involvement of SAP
+Insufficient or incorrect information provided by the customer,
+subsequently leading to requirement or technology mismatches
+Insufficient customer expectation management, including
+scope, integration capabilities and aspects, as well as lack in
+purposeful selection, implementation, and utilization of SAP
+solutions
+Implementation risks, if, for example, implementations take
+longer than planned, or fail to generate the profit originally
+expected, scope deviations, solution complexity, individual
+integration and migration needs or functional requirement
+changes, or insufficient milestone management and tracking
+leading to delays in timeline, maybe even exceeding
+maintenance cycles of solutions in scope
+-
+-
+-
+-
+others:
+However, we might encounter risks in the following areas, among
+software and cloud-based service deliveries is led by SAP, by
+partners, by customers, or by a combination thereof.
+Additional
+Information
+Combined Group
+Consolidated Financial
+Management Report Statements IFRS
+Partner Ecosystem: If we are unable to scale, maintain, and
+enhance an effective partner ecosystem, revenue might not
+increase as expected.
+Loss of key personnel of acquired business
+Failure to successfully maintain, upskill, and expand our highly
+skilled and specialized workforce
+our business, financial position, profit, and cash flows.
+Any one or more of these events could have an adverse effect on
+No assurance of the financial ability of the insurance
+companies to meet their claim payment obligations
+Certain categories of risks that are currently not insurable at
+reasonable cost
+Inability to maintain adequate insurance coverage on
+commercially reasonable terms in the future
+Losses that might be beyond the limits, or outside the scope
+of coverage of our insurance and that may limit or prevent
+indemnification under our insurance policies
+-
+-
+Nevertheless, we could still be subject to risks in the following
+areas, among others:
+We maintain insurance coverage to protect us against a broad
+range of risks, at levels we believe are appropriate and consistent
+with current industry practice. Our objective is to exclude or
+minimize risk of financial loss at reasonable cost.
+Insurance: Our insurance coverage might not be sufficient and
+uninsured losses may occur.
+For more information about risks arising from financial
+instruments, including our currency, interest rate, and equity price
+risks, and our related hedging activity, see the Notes to the
+Consolidated Financial Statements section, Notes (A.2, E.3, and
+F.1).
+We cannot exclude the possibility that if the risk were to occur, it
+could have a major impact on our operations, financial position,
+profit, and cash flows. However, we estimate the probability of
+occurrence of this risk to be remote. We classify this risk as a low
+risk.
+Use of derivative instruments to reduce some of the impact of
+our share-based compensation plans on our income statement
+and cash flow
+Balanced maturity profile and mixture of fixed and floating
+interest rate arrangements to hedge against interest rate risk
+currencies by using derivative financial instruments as
+appropriate
+-
+Group-wide foreign exchange risk management strategy to
+hedge balance sheet items and expected cash flows in foreign
+Continuous monitoring of our exposure to all these financial
+risks
+-
+-
+SAP has established measures to address and mitigate the
+described risks and adverse effects, such as:
+Any one or more of these events could have an adverse effect on
+our business, financial position, profit, and cash flows.
+Share price fluctuation impacting cash outflows for share-based
+compensation payments
+Interest rate fluctuation
+Exchange rate risks with currency appreciation or depreciation,
+or risks related to currency devaluation (legal and/or
+administrative changes to currency regimes)
+This could lead to the following risks, among others:
+Period-over-period fluctuations
+Because we operate throughout the world, a significant portion
+of our business is conducted in foreign currencies. In 2019,
+approximately 72.6% of our revenue was attributable to operations
+in foreign currencies. This foreign currency business therefore gets
+translated into our reporting currency, the euro.
+Currency, Interest Rate, and Share Price Fluctuation: As a
+globally operating company, SAP is subject to various financial
+risks related to currencies, interest rates, and share price
+fluctuations, which could negatively impact our business,
+financial position, profit, and cash flows.
+SAP has established measures to address and mitigate the
+described risks and adverse effects, such as:
+Poor succession management or failure to find adequate
+replacements
+-
+Selection of financially stable and reputable insurers
+Failure to identify, attract, develop, motivate, adequately
+compensate, and retain well-qualified and engaged personnel to
+scale to targeted markets
+We could face risks in the following areas, among others:
+Failure to apply workforce planning processes, adequate
+resource allocation, and location strategy in alignment with our
+general strategy
+-
+-
+Our success is dependent on appropriate alignment of our
+planning processes for our highly skilled and specialized workforce
+and leaders, both male and female, adequate resource allocation,
+and our location strategy with our general strategy. In certain
+regions and specific technology and solution areas, we continue to
+set very high growth targets, depending on short-term and long-
+term skill requirements, taking infrastructure needs as well as local
+legal or tax regulations in consideration. Successful retention and
+expansion of our highly skilled and specialized workforce in
+identified strategic areas, are key success factors for our transition
+to become the Experience Company powered by the Intelligent
+Enterprise. The availability of such personnel as well as business
+experts is limited and, as a result, competition in our industry is
+intense.
+Human Workforce: If we are unable to attract, develop, retain,
+and effectively manage our geographically dispersed workforce,
+we might not be able to run our business and operations
+efficiently and successfully, or develop successful new solutions
+and services.
+Human Capital Risks
+We cannot exclude the possibility that if the risk were to occur, it
+could have a minor impact on our operations, financial position,
+profit, and cash flows. However, we estimate the probability of
+occurrence of this risk to be remote. We classify this risk as a low
+risk.
+Balance the volume and scope of our venture capital activities
+Diversify the portfolio and actively manage our investments
+-
+Sapphire Ventures has established measures to address and
+mitigate the described risks and adverse effects, such as:
+Any one or more of these events could have an adverse effect on
+our business, financial position, profit, and cash flows.
+Tax deductibility of capital losses and impairment in connection
+with equity securities are often restricted and could therefore
+have an adverse effect on our effective tax rate.
+Changes to planned business operations might affect the
+performance of companies in which Sapphire Ventures holds
+investments.
+Investments could generate net losses and/or require additional
+expenditures from their investors.
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+Risk Management and Risks
+116
+This could lead to risks in the following areas, among others:
+Through Sapphire Ventures, our consolidated venture
+investment funds, we plan to continue investing in new and
+promising technology businesses.
+Venture Capital: We could incur significant losses in connection
+with venture capital investments.
+We cannot exclude the possibility that if the risk were to occur, it
+could have a business-critical impact on our operations, financial
+position, profit, and cash flows. However, we estimate the
+probability of occurrence of this risk to be remote. We classify this
+risk as a medium risk.
+Constant review of our insurance programs in relation to our risk
+profile and breadth of insurance coverage
+Maintaining a scope of insurance coverage that is as broad as
+possible
+We cannot exclude the possibility that if the risk were to occur, it
+could have a moderate impact on our operations, financial position,
+profit, and cash flows. However, we estimate the probability of
+occurrence of this risk to be unlikely. We classify this risk as a low
+risk.
+An open and vibrant partner ecosystem is a fundamental pillar of
+our success and growth strategy. We have entered into partnership
+agreements that drive co-innovation on our platforms, profitably
+expand all our routes to market to optimize market coverage,
+optimize cloud delivery, and provide high-quality services capacity
+in all market segments. Partners play a key role in driving market
+adoption of our entire solutions portfolio, by co-innovating on our
+platforms, embedding our technology, and reselling and/or
+implementing our software.
+-
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+To Our
+Stakeholders
+119
+Risk Management and Risks
+using authorization concepts. Managers and employees are
+regularly sensitized to the issues and given mandatory security
+and compliance training
+Access to information and information systems is controlled
+Physical access control systems at facilities, multilevel access
+controls, closed-circuit television surveillance, security
+personnel in all critical areas, and recurring social engineering
+tests for SAP premises and data centers
+so that we can deliver the required service level for cloud
+services
+complex infrastructure, application, and security requirements
+Continuous aim for a homogeneous landscape that supports the
+Monitoring and investment to continuously enhance our disaster
+recovery and business continuity capabilities
+activities and associated downtimes
+Increased transparency through our continuously enhanced and
+expanded SAP Trust Center, ensuring appropriate level of
+information, for example with regards to planned patching
+Adherence to stringent SLAs with hyperscalers to ensure a high-
+quality customer experience
+capabilities including harmonized, efficient, and highly repetitive
+migration services
+Significant investment in infrastructure and processes in an
+effort to ensure secure operations of our cloud solutions while
+continuously improving resistance, resilience, and scalability
+towards a standardized and harmonized portfolio
+Continuous enhancement of infrastructure landscape
+Consolidation and harmonization of our data centers and our
+data protection measures, including implementation of security
+information and event management solutions as well as network
+access control enforcement
+-
+-
+-
+-
+-
+-
+-
+Any one or more of these events could have a material adverse
+effect on our business, financial position, profit, and cash flows.
+SAP has established measures to address and mitigate the
+described risks and adverse effects, such as:
+Non-compliance with applicable certification requirements, such
+as Payment Card Industry Data Security Standard (PCI DSS)
+Customers' cloud service demands might not match our data
+center capacity investments
+Increased Total Cost of Ownership (TCO) for SAP
+Further Information on Economic,
+Environmental, and Social Performance
+Non-adherence to our quality standards in the context of partner
+co-location of data centers
+Additional
+Information
+-
+Risk Management and Risks
+120
+compromised by vulnerabilities due to threat actor exploitation
+Operational disruptions due to an increasing number of
+destructive malware, ransomware, or other cybersecurity
+attacks
+Customer systems or systems operated by SAP being
+Insufficient or ineffective asset management potentially
+endangering secure operations
+Cybersecurity threats for SAP and customers due to delayed or
+insufficient responses to identified cybersecurity issues
+attributable to complexity, interdependencies or other factors
+Challenges in effectively synchronizing cybersecurity processes
+across our various lines of business in a heterogeneous
+environment
+Failure to securely and successfully deliver cloud services by any
+cloud service provider could have a negative impact on customer
+trust in cloud solutions
+Disruptions due to exposure of our network systems to
+cybersecurity attacks via defects and vulnerabilities in the IT
+systems of our customers, or in the systems of third parties that
+facilitate our business activities such as cloud service providers,
+including those that are beyond SAP's cybersecurity
+infrastructure and protocols
+Disruptions to back-up, disaster recovery, or business continuity
+management processes
+Exposure of our business operations and service delivery due to
+a number of threats, including virtual attack, disruption, damage,
+and/or unauthorized access, theft, destruction, industrial and/or
+economic espionage, serious or organized crime, and other
+illegal activities, as well as violent extremism and terrorism
+Abuse of data, social engineering, misuse, or trespassers in our
+facilities, or systems being rendered unusable
+State-driven economic espionage or competitor-driven
+industrial espionage, and criminal activities including, but not
+limited to, cyberattacks and breaches against cloud services and
+hosted on-premise software, whether managed by us or our
+customers, partners, or other third parties
+Increased complexity and risk of exploitation due to utilization of
+open-source software components
+Identified or undetected cybersecurity defects and
+vulnerabilities
+-
+-
+-
+-
+-
+-
+-
+degrees on a regular basis. When we become aware of unauthorized
+access to our systems, we take steps intended to identify and
+remediate the source and impact of the incursions, and steps to
+comply with related necessary notification and disclosure
+obligations. To date, none of the incursions we have identified has
+had a material adverse effect on our business. However, we do not
+have visibility into all unauthorized incursions, and our systems may
+be experiencing ongoing incursions of which we are not aware. In
+addition, while we are continually taking steps to enhance our
+cybersecurity defenses, increased investments, coordination, and
+resources are required to achieve our objective of ensuring over
+time that our cybersecurity infrastructure meets or exceeds
+evolving industry standards. Achieving this objective will require
+continued effort and vigilance, including sustained investment of
+money and management resources in order to support the ongoing
+development and maintenance of systems that meet these
+standards. As a result, we are subject to risks and associated
+consequences in the following areas, among others:
+As we continue to grow organically and through acquisitions,
+deliver a full portfolio of solutions via the cloud, host or manage
+elements of our customers' businesses in the cloud, process large
+amounts of data and offer more mobile solutions to users, in each
+case either directly or through partners and other third parties, we
+face a progressively more complex and threatening cybersecurity
+environment. The severity of the challenges posed by this
+cybersecurity environment is amplified due to the increasingly
+sophisticated and malicious global cybersecurity threat landscape
+in which we operate, including third-party data, products, and
+services that we incorporate into SAP products and services, and
+the continually evolving and increasingly advanced techniques
+employed by threat actors targeting IT products and businesses in
+general. Such threat actors include, but are not limited to, highly
+sophisticated parties such as nation-states and organized criminal
+syndicates. As a leading cloud company and service provider to
+some of the largest and best-known customers in the world, we are
+naturally a prominent target for cybersecurity attacks. We have
+observed increased threat activity to our products and systems,
+and we experience cybersecurity attacks of varying types and
+Cybersecurity and Security: A cybersecurity attack or breach, or
+cybersecurity vulnerabilities in our products, infrastructure, or
+services, or economic espionage could result in significant legal
+and financial exposure and have a material adverse effect on our
+customers, partners, financial performance, profit, cash flows,
+operations, brand, reputation, competitive position, the
+perception of our products and services by current and
+prospective customers, and our business in general.
+We cannot exclude the possibility that if the risk were to occur, it
+could have a business-critical impact on our operations, financial
+position, profit, and cash flows. However, we estimate the
+probability of occurrence of this risk to be unlikely. We classify this
+risk as a medium risk.
+PCI validated compliance by successful PCI DSS audits
+Investment in training and certifications concerning
+hyperscalers and related next-generation technologies
+Implementation of best-of-breed tools for IT operations
+management and automation
+Regular risks reviews, disclosure requests, and audits to ensure
+public cloud providers meet SAP's data privacy and security
+standards
+Strict internal policies and controls concerning utilization of
+partner's cloud infrastructure, including people, process and
+technology standards required to ensure compliance
+Close monitoring of data center utilization, capacity, and
+pipeline for subsequent investment planning
+Adaptation of our cloud service delivery to local and/or specific
+market requirements (such as local or regional data centers)
+and compliance with all local legal regulations regarding data
+protection and privacy as well as data security
+Contracts that require third-party data centers to have
+appropriate security and data protection and privacy terms in
+place. We establish contracts and service level agreements with
+our public cloud partners to ensure that data security and
+privacy measures meet local regulatory and compliance
+standards and SAP's own standards for data security and
+privacy
+-
+-
+-
+These partnerships could lead to risks in the following areas,
+among others:
+Scalability demands on infrastructure and operation could lead
+to cost increase and margin impacts
+System outages or downtimes, failure of the SAP network due to
+human or other errors, security breaches, or variability in user
+traffic for cloud applications
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+Risk Management and Risks
+118
+If one or more of these risks materialize, this might have an
+adverse effect on the demand for our products and services as well
+as the partner's loyalty and ability to deliver. As a result, we might
+Partners might not be able or might not have capacity to meet
+customer expectations in terms of service provisioning.
+Partners might fail to comply with contract terms in embargoed
+or high-risk countries.
+-
+-
+accordance with the transformation of SAP's business model in
+a timely manner.
+Partners might not transform their business model in
+-
+requirements expected by our customers or SAP.
+-
+Partners and their products might not meet quality
+Partners might not develop a sufficient number of new solutions
+and content on our platforms or might not provide high-quality
+products or services to meet customer expectations.
+Partners might not embed our solutions sufficiently enough to
+profitably drive product adoption, especially with innovations
+such as SAP S/4HANA, SAP C/4HANA, and SAP Cloud Platform.
+Partners might not adhere to applicable legal and compliance
+regulations.
+Failure to enable or train sufficient partner resources to promote,
+sell, and support to scale to targeted markets
+new agreements on terms acceptable to us or at all or start
+competing with SAP
+-
+Partners might not renew agreements with us, or not enter into
+Products or services model being less strategic and/or attractive
+compared to our competition
+Failure to get the full commitment of our partners, which might
+reduce speed and impact in market reach
+Failure to establish and enable a network of qualified partners
+supporting our scalability needs
+-
+-
+-
+-
+-
+Further Information on Economic,
+Environmental, and Social Performance
+Hardware failures or system errors resulting in data loss,
+corruption, or incompletion of the collected information
+Loss of the right to use hardware purchased or leased from third
+parties could result in delays in our ability to provide our cloud
+applications
+Additional
+Information
+-
+Interruptions in the availability of SAP's cloud applications
+portfolio could potentially impact customer service level
+agreements
+The certification provisioning may not always be exhaustively
+published in the SAP Trust Center and subsequently lead to
+incorrect customer perceptions
+-
+-
+-
+-
+Defects or disruption to data center operations or system
+stability and availability
+lead to customers considering a reallocation of their primary or
+disaster recovery landscapes to a different data center
+Local legal requirements or changes to data sovereignty may
+Lack of tools to manage and optimize operations while providing
+a seamless end-to-end experience to customers
+Lack of sufficient 'future skills' for delivering and operating
+hybrid environments
+Incomplete cloud portfolio representation or strategic directions
+of cloud operations that may not fully meet customer demands
+and potentially lead to a disconnected customer orientation
+Lack of hyperscaler availability and/or infrastructure stability,
+which may lead to challenges in meeting Service Level
+Agreement (SLA) commitments
+Customer concerns about the ability to scale operations for
+large enterprise customers
+Capacity shortage and SAP's inability to deliver and operate
+cloud services in a timely and efficient manner as expected by or
+committed to our customers
+-
+-
+-
+SAP is highly dependent on the availability of our infrastructure,
+and the software used in our cloud portfolio is inherently complex.
+This could lead to risks impacting successful cloud operations,
+such as:
+Cloud Operations: We may not be able to properly protect and
+safeguard our critical information and assets, business
+operations, cloud offerings and portfolio presentation, and
+related infrastructure against disruption or poor performance.
+We cannot exclude the possibility that if the risk were to occur, it
+could have a major impact on our operations, financial position,
+profit, and cash flows. However, we estimate the probability of
+occurrence of this risk to be unlikely. We classify this risk as a
+medium risk.
+Provide customer guidance and support as required during
+partner dissolutions
+Maintain certification process for third-party solutions to ensure
+consistent high-quality and seamless integration
+Offer training opportunities on a wide range of resources for our
+partners, and provide safeguarding services to customers and
+partners
+Continue to develop and enhance a wide range of partner
+programs to retain existing and attract new partners of all types
+Enable and encourage partners to leverage SAP technology, by
+providing guidance about business opportunities, architecture,
+and technology for example, through demo solutions, to enable
+partners to lead business value discussions on cloud and on-
+premise solutions with customers
+Invest in long-term, mutually-beneficial relationships and
+agreements with partners
+-
+-
+-
+-
+not be able to scale our business to compete successfully with
+other vendors, which could have an adverse effect on our
+reputation, business, financial position, profit, and cash flows.
+SAP has established measures to address and mitigate the
+described risks and adverse effects, such as:
+Control procedures to make sure that our estimates and
+judgments are adequate, such as two-person verification to
+significant estimating
+Introduction of the Partner Delivery Quality Framework to
+monitor and safeguard the success of partner-led projects while
+ensuring that SAP quality criteria are met
+SAP has established measures to address and mitigate the
+described risks and adverse effects, such as:
+-
+-
+-
+Any one or more of these events could have a material adverse
+effect on our business, financial position, profit, and cash flows.
+SAP has established measures to address and mitigate the
+described risks and adverse effects. For example:
+A globally increasing number of threat actor attacks aimed at
+obtaining or violating Company data including personal data as
+observed in recent prominent cases of cyberattacks where the
+use of ransomware was the preferred method of threat actors
+prevent, detect, and mitigate attacks and intrusions, thus leading,
+for example, to risks described in the Cybersecurity and Security
+section, including risks in the following areas, among others:
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+Risk Management and Risks
+112
+Lack of digital frameworks such as in the context of machine
+learning or artificial intelligence could lead to distortion of
+individual data or information.
+Increased complexity in times of digitalization with regards to
+legal requirements in the context of cross-border data transfer
+Harm to SAP's reputation
+Damage claims by customers
+Mandatory disclosures of breaches to affected individuals,
+customers, and data protection supervisory authorities
+Investigations and administrative measures by data protection
+supervisory authorities, such as the instruction to alter or stop
+non-compliant data processing activities, including the
+instruction to stop using non-compliant subcontractors
+Fines of up to 4% of SAP's annual Group turnover, or unlimited
+fines
+-
+-
+-
+Non-compliance with applicable data protection and privacy
+laws by SAP and/or any of the sub-processors engaged by SAP
+within the processing of personal data could lead, for example, to
+risks in the following areas:
+This could lead to increased risks for SAP, which could harm
+SAP's business and limit SAP's growth.
+Furthermore, evolving regulations and new laws globally (such as
+the California Consumer Privacy Act and the EU's proposed e-
+Privacy Regulation) regarding data protection and privacy or other
+standards increasingly aimed at the use of personal information,
+such as for marketing purposes and the tracking of individuals'
+online activities, may impose additional burdens for SAP due to
+increasing compliance standards that could restrict the use and
+adoption of SAP's products and services (in particular cloud
+services) and make it more challenging and complex to meet
+customer expectations.
+We have implemented internal processes and measures in an
+effort to enable SAP to successfully and sufficiently comply with
+applicable data protection requirements.
+As a global software and service provider, SAP is required to
+comply with local laws wherever SAP does business. One of the
+latest major harmonizations of European data protection laws has
+been the General Data Protection Regulation (GDPR).
+Data protection and privacy is reflected in the mandatory
+product standards of SAP's product development lifecycle.
+We continuously enhance our data center operations worldwide,
+also taking into account local and sector-specific market and
+legal requirements. For compliance with local legal requirements,
+we have established a network of local and regional Data
+Protection and Privacy Coordinators.
+-
+SAP's leadership position in the global market is founded on the
+long-term and sustainable trust of our stakeholders worldwide. Our
+overarching approach is one of corporate transparency, open
+communication with financial markets, and adherence to
+recognized standards of business integrity. This commitment is
+formalized in SAP's CoBC and supporting guidelines.
+Ethical Behavior: Unethical behavior and non-compliance with
+our integrity standards by employees, other individuals,
+partners, or entities associated with SAP could seriously harm
+our business, financial position, profit, and reputation.
+We cannot exclude the possibility that if the risk were to occur, it
+could have a business-critical impact on our operations, financial
+position, profit, and cash flows. However, we estimate the
+probability of occurrence of this risk to be remote. We classify this
+risk as a medium risk.
+Organizational grouping of all security divisions into one global
+security unit to strengthen the security capabilities
+Continuous adoption of internal security measures
+Technical security features in our IT hardware and
+communication channels, such as mandatory encryption of
+sensitive data
+Standards, governance, and controls for safe internal and
+external communication to ensure consistency
+Social engineering tests to check employees' adherence to
+security policies
+Mandatory compliance baseline training for all employees
+(security awareness, data privacy and data protection,
+compliance, and communication)
+-
+-
+-
+-
+SAP has established measures to address and mitigate the
+described risks and adverse effects, such as:
+Any one or more of these events could have an adverse effect on
+our market position and lead to fines and penalties. In addition, this
+could have an adverse effect on our business, reputation, financial
+position, profit, and cash flows.
+Disclosure of confidential information and intellectual property,
+defective products, production downtimes, supply shortages,
+and compromised data (including personal data) through, for
+example, inappropriate usage of social media by employees
+Requirement to notify multiple regulatory agencies and comply
+with applicable regulatory requirements and, where appropriate,
+the data owner
+-
+Such disclosure could lead to risks in the following areas, among
+others:
+Confidential information and internal information related to
+topics such as our strategy, new technologies, mergers and
+acquisitions, unpublished financial results, customer data, or
+personal data, could be disclosed prematurely or inadvertently and
+subsequently lead to market misperception and volatility.
+Unauthorized Disclosure of Information: Our controls and
+efforts to prevent the unauthorized disclosure of confidential
+information might not be effective.
+Corporate Governance and Compliance Risks
+We cannot exclude the possibility that if the risk were to occur, it
+could have a business-critical impact on our operations, financial
+position, profit, and cash flows. We estimate the probability of
+occurrence of this risk to be likely. We classify this risk as a high risk.
+For more information, see the Cybersecurity and Security and
+Security, Data Protection, and Privacy sections.
+Clear governance and guidance on data handling and processing
+standards as part of our data management framework,
+specifically incorporating aspects of new technologies such as
+those represented in embedded intelligence
+We actively monitor legal developments and engage with
+political stakeholders and government authorities, directly or
+through industry associations, to clarify questions relevant to
+SAP and SAP's business.
+We have a data protection management system in place in all
+our Board areas: SAP Digital Business Services (DBS), Global
+Finance & Administration (GFA), Office of the Co-CEOS (OCEO),
+Cloud Business Group (CBG), Global Customer Operations
+(GCO), Human Resources (HR), Technology & Innovation (T&I),
+Intelligent Enterprise Group (IEG), and SAP Product Engineering
+(PE). Furthermore, this data protection management system will
+be continuously enhanced and extended to apply to newly
+acquired companies within the SAP Group. SAP has been
+awarded the British Standards Institution (BSI) certification for
+the implementation and operation of SAP's data protection
+management system, which underlines SAP's compliance with
+data protection laws, including GDPR.
+We continuously review SAP's existing standards and policies to
+address changes to applicable laws and regulations.
+However, we might for instance encounter the following risks:
+Non-compliance with our integrity standards and violation of
+compliance related rules, regulations, and legal requirements
+Data Protection and Privacy: Non-compliance with increasingly
+complex and stringent, sometimes even conflicting, applicable
+data protection and privacy laws or failure to adequately meet
+the contractual requirements of SAP's customers with respect
+to our products and services could lead to civil liabilities and
+fines, as well as loss of customers and damage to SAP's
+reputation, and could have a material adverse effect on our
+financial performance and our business in general.
+We cannot exclude the possibility that if the risk were to occur, it
+could have a business-critical impact on our operations, financial
+The outcome of litigation and other claims or lawsuits is
+intrinsically uncertain and could lead, for example, to the following
+risks:
+We believe that we will continuously be subject to claims and
+lawsuits, including intellectual property infringement claims, as our
+solution portfolio grows; as we acquire companies with increased
+use of third-party code including open source code; as we expand
+into new industries with our offerings, resulting in greater overlap in
+the functional scope of offerings; and as non-practicing entities that
+do not design, manufacture, or distribute products assert
+intellectual property infringement claims. Moreover, protecting and
+defending our intellectual property is crucial to our success.
+We cannot exclude the possibility that if the risk were to occur, it
+could have a business-critical impact on our operations, financial
+position, profit, and cash flows. We estimate the probability of
+occurrence of this risk to be likely. We classify this risk as a high risk.
+Legal and IP: Claims and lawsuits against us, such as for IP
+infringements, or our inability to obtain or maintain adequate
+licenses for third-party technology, could have an adverse effect
+on our business, financial position, profit, cash flows, and
+reputation. Moreover, similar adverse effects could result if we
+are unable to adequately protect or enforce our own intellectual
+property.
+Our OEC team coordinates and provides guidance on
+implementation, training, and enforcement efforts with respect
+to compliance-related policies throughout SAP, including but not
+limited to the Third Party Sales Commission Policy and
+accompanying training.
+We continuously update and enhance our compliance programs
+to improve our effectiveness and to ensure that our employees
+understand and comply with the SAP Code of Business Conduct
+(COBC). This process is coordinated by our OEC, a team of
+dedicated resources who are tasked with managing our policy-
+related compliance measures.
+safeguard compliance with applicable European Union (EU) and
+U.S. laws in all delivery channels both on premise and in the
+cloud.
+We continue efforts to strengthen the Export Control team and
+have started a cross-board project to overhaul SAP's export
+control and trade sanctions policies, operations, and controls, to
+We maintain a data protection and privacy office and associated
+policy.
+We have a legal and compliance office presence in various
+countries, with compliance safeguards supported and monitored
+by our Office of Ethics & Compliance (OEC), formerly the Legal
+Compliance & Integrity Office (LC&IO).
+We conduct audits based on various audit standards on a regular
+basis to identify and remediate issues early on.
+We engage with authorities in public policy issues, including the
+creation of reasonable framework conditions for new
+technologies such as cloud computing, Big Data, IoT, and for
+international trade.
+We receive guidance from external economic consultants, law
+firms, tax advisors, and authorities in the concerned countries,
+and take legal actions when necessary.
+We continuously strive to improve, harmonize, and standardize
+our global processes and solutions to increase our efficiency and
+effectivity in meeting the various legal requirements to ensure
+compliance, while also utilizing scenario impact analyses.
+We have taken actions to terminate access to SAP products and
+services for certain users and to block additional business
+activities with these users through SAP or SAP partners to
+address export restriction requirements.
+We continuously monitor new and increased regulatory
+requirements, updated or new enforcement trends, and publicly
+available information on compliance issues in the computer
+software industry, in the emerging markets where we invest our
+resources, and in the business environment in general to cope
+with an increase in regulation enforcement efforts of certain
+countries or state-driven protectionism.
+-
+-
+-
+SAP has established measures intended to address and mitigate
+the described risks and adverse effects. For example:
+As we expand into new countries and markets and/or extend our
+business activities in these markets, including emerging and high-
+risk markets, these risks could intensify. The application of the
+respective local laws and regulations to our business is sometimes
+unclear, subject to change over time, and often conflicting among
+jurisdictions. Additionally, these laws and government approaches
+to enforcement are continuing to change and evolve, just as our
+products and services continually evolve. Compliance with these
+varying laws and regulations could involve significant costs or
+require changes in products or business practices. Non-compliance
+could result in the imposition of penalties or cessation of orders due
+to alleged non-compliant activity. Governmental authorities could
+use considerable discretion in applying these statutes and any
+imposition of sanctions against us could be material. One or more
+of these factors could have an adverse effect on our operations
+globally or in one or more countries or regions, which could have an
+adverse effect on our business, financial position, profit, and cash
+flows.
+In 2017, an investigation was initiated and is ongoing with regards
+to potential sanctions violations. For more information relating to
+the potential sanctions' violations noted above, see the Business
+Conduct section and the Notes to the Consolidated Financial
+Statements, Note (G.3).
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+Regular monitoring of possible future changes to financial
+reporting standards or interpretations thereof in order to identify
+or anticipate changes at an early stage
+-
+position, profit, and cash flows. We estimate the probability of
+occurrence of this risk to be likely. We classify this risk as a high risk.
+We are named as a defendant in various legal proceedings for
+alleged intellectual property infringements. For more information
+and a more detailed report relating to certain of these legal
+proceedings, see the Notes to the Consolidated Financial
+Statements, Notes (A.4, C.5, and G.3).
+-
+Claims and lawsuits might be brought against us, including
+claims and lawsuits involving customers or businesses we have
+acquired.
+We rely on a combination of the protections provided by
+applicable statutory and common law rights, including trade
+secret, copyright, patent, and trademark laws, license and non-
+disclosure agreements, and technical measures to establish and
+protect our proprietary rights in our products.
+We are party to certain patent cross-license agreements with
+third parties, which removes the risk of litigation with respect to
+the involved patents.
+We endeavor to protect ourselves in the respective third-party
+software agreements by obtaining certain rights in case such
+agreements are terminated.
+We have established various internal programs, such as internal
+policies, processes, and monitoring, to assess and manage the
+risks associated with open source, and third-party intellectual
+property.
+Our OEC sets and manages internal policies related to our CoBC.
+Our Global GRC organization works closely with the OEC, Global
+Legal, and Corporate Audit, and is jointly responsible for the
+management and reporting of potential risks associated with
+third-party intellectual property.
+-
+-
+SAP has established measures to address and mitigate the
+described risks and adverse effects. For example:
+The outcome of litigation and other claims or lawsuits is
+intrinsically uncertain. Management's view of the litigation might
+also change in the future. Actual outcomes of litigation and other
+claims or lawsuits could differ from the assessments made by
+management in prior periods, which are the basis for our
+accounting for these litigations and claims under IFRS.
+Any legal action we bring to enforce our proprietary rights could
+also involve enforcement against a partner or other third party,
+which might have an adverse effect on our ability, and our
+customers' ability, to use that partner's or other third parties'
+products.
+Third parties might reverse-engineer or otherwise obtain and
+use technology and information that we regard as proprietary.
+Accordingly, we might not be able to protect our proprietary rights
+against unauthorized third-party copying or utilization. Adverse
+outcomes to some or all of the claims and lawsuits pending against
+us might result in the award of significant damages or injunctive
+relief against us or brought against us in the future that could hinder
+our ability to conduct our business and could have an adverse effect
+on our reputation, business, financial position, profit, and cash
+flows. Third parties could require us to enter into royalty and
+licensing arrangements on terms that are not favorable to us, cause
+product shipment delays, subject our products to injunctions,
+require a complete or partial redesign of products, result in delays
+to our customers' investment decisions, and damage our
+reputation. Third-party claims might require us to make freely
+accessible under open source terms one of our products or third-
+party (non-SAP) software upon which we depend.
+Some intellectual property might be vulnerable to disclosure or
+misappropriation by employees, partners, or other third parties.
+enforce our legal or intellectual property rights. Finally, SAP may
+not be able to collect all judgments awarded to it in legal
+proceedings.
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+111
+Risk Management and Risks
+Despite our efforts, we might not be able to prevent third parties
+from obtaining, using, or selling without authorization what we
+regard as our proprietary technology and information. In
+addition, proprietary rights could be challenged, invalidated, held
+unenforceable, or otherwise affected. Moreover, the laws and
+courts of certain countries might not offer effective means to
+We integrate certain open source software components from
+third parties into our software. Open source licenses might
+require that the software code in those components or the
+software into which they are integrated be freely accessible
+under open source terms.
+Third parties have claimed, and might claim in the future, that we
+infringe their intellectual property rights or that we are overusing
+or misusing licenses to these technologies.
+We might be dependent in the aggregate on third-party
+technology, including cloud and Web services, that we embed in
+our products or that we resell to our customers.
+-
+Risk Management and Risks
+In addition, the German Federal Office for the Protection of the
+Constitution and security industry experts have warned of risks
+related to a globally growing number of cybersecurity attacks aimed
+at obtaining or violating company data including personal data. We
+anticipate cyberattack techniques to continue to evolve and
+increase in sophistication, which could make it difficult to anticipate,
+To Our
+Stakeholders
+Continuous process standardization to increase transparency
+and reduce complexity
+113
+Both of the above risks could result in significant changes to our
+reported financials, and could have an adverse effect on our
+business, financial position, profit, and cash flows.
+Increased predictability of revenue due to ongoing
+transformation to the cloud
+Monitoring and payment planning measures for critical overdue
+accounts
+Constant monitoring of our revenues, costs, and operational
+KPIs utilizing system-based, real-time reporting to continuously
+improve our business performance
+Ongoing analysis and monitoring of demand, supply, and our
+competitive environment
+Implementation of methodologies and metrics for continuous
+forecasting and trend analysis in our business
+-
+-
+-
+-
+SAP has established measures to address and mitigate the
+described risks and adverse effects, such as:
+In recent years, the trend has been towards an increased
+number of sales transactions, with the average deal size remaining
+more or less constant. However, the loss or delay of one or a few
+large opportunities could have an adverse effect on our business,
+financial position, profit, and cash flows.
+Inability of acquired companies to accurately predict their sales
+pipelines
+Shortfall in anticipated revenue or delay in revenue recognition
+or deployment models that require revenue to be recognized
+over an extended period of time
+Decreased software sales that could have an adverse effect on
+related maintenance and services revenue growth
+Changes in customer budgets or seasonality of technology
+purchases by customers, or customer solvency challenges due
+for example to political instability
+Adoption of, and conversion to, new business models, leading
+from upfront payment models to an increase in pay-per-use or
+subscription-based payment models, thus the respective service
+period typically ranges from one to three years, and goes up to
+five years
+Introduction/adaptation of licensing and deployment models
+such as cloud subscription models
+Large size, complexity, and extended settlement of individual
+customer transactions
+Timing issues with respect to the introduction of new products
+and services or product and service enhancements by SAP or
+our competitors
+Long sales cycles for many of our products
+Challenges in pipeline development and realization
+-
+We cannot exclude the possibility that if the risk were to occur, it
+could have a moderate impact on our operations, financial position,
+profit, and cash flows. However, we estimate the probability of
+occurrence of this risk to be unlikely. We classify this risk as a low
+risk.
+Liquidity: External factors could impact our liquidity and
+increase the default risk associated with, and the valuation of,
+our financial assets.
+Macroeconomic factors such as an economic downturn could
+have an adverse effect on our future liquidity. We use a globally
+centralized financial management approach to control financial risk,
+such as liquidity, exchange rate, interest rate, counterparty, and
+equity price risks. The primary aim is to maintain liquidity in the
+SAP Group at a level that is adequate to meet our obligations at any
+time.
+However, adverse macroeconomic factors could increase the
+default risk associated with the investment of our total Group
+liquidity, and could lead to the following risks, among others:
+The facts and circumstances, as well as the assumptions on
+which our management bases its judgment might change over
+time, requiring us to change the judgment previously applied.
+New pronouncements by standard setters and regulators as well
+as changes in common practice or common interpretations of
+existing standards might force us to change existing policies.
+Where such changes trigger significant changes to our
+processes, we might struggle to implement the changes in a
+timely manner.
+but not limited to making and using estimates and assumptions.
+The policies and judgment affect our reported financial figures.
+This use of policies and judgment could lead to risks in the
+following areas, among others:
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+115
+Risk Management and Risks
+To comply with IFRS, management is required to establish and
+apply accounting policies as well as to apply judgment, including
+-
+Use of Accounting Policies and Judgment: In our accounting,
+management uses policies and applies estimates. This could
+negatively affect our business, financial position, profit, and
+cash flows.
+We pursue a policy of cautious investment characterized by wide
+portfolio diversification with a variety of counterparties,
+predominantly short-term investments, and standard
+investment instruments.
+The weighted average rating of the investments of our total
+Group liquidity is in the range of A.
+SAP's investment policy with regards to total Group liquidity is
+described in our internal treasury guideline, which is a collection
+of uniform rules that apply globally to all companies in the
+SAP Group. Among other things, it requires that investments,
+with limited exceptions, are only executed in assets and funds
+rated BBB flat or better.
+We have policies and measures in place to support strong
+operating cash flow.
+-
+SAP has established measures to address and mitigate the
+described risks and adverse effects, such as:
+Any one or more of these events could have an impact on the
+value of our financial assets, which could have an adverse effect on
+our business, financial position, profit, and cash flows.
+Limitation of operating and/or strategic financial flexibility
+Increased default risk of financial investments, which might lead
+to significant impairment charges in the future
+Inability to repay financial debt
+Group liquidity shortages
+-
+We cannot exclude the possibility that if the risk were to occur, it
+could have a major impact on our operations, financial position,
+profit, and cash flows. However, we estimate the probability of
+occurrence of this risk to be remote. We classify this risk as a low
+risk.
+-
+Pipeline analyses based on our business planning, budgeting,
+and forecasting
+Combined Group
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+Failure to meet customer, partner, or other stakeholder
+expectations or generally accepted standards on climate
+change, energy constraints, and our social investment strategy
+Failure to achieve communicated targets for greenhouse gas
+emissions
+-
+including, but not limited to, anticorruption and bribery
+legislation in Germany, the U.S. Foreign Corrupt Practices Act,
+the UK Bribery Act, and other local laws prohibiting corrupt
+conduct
+Unethical and fraudulent behavior by individual employees,
+other individuals, partners, or entities associated with SAP
+leading to criminal charges, fines, and claims by affected parties
+Collusion with external third parties, for example by aiding in
+securing business
+Fraud and corruption, especially in countries with a low
+Corruption Perceptions Index score and particularly in emerging
+markets
+Increased scrutiny of public sector transactions in territories
+exposed to a high risk of corruption
+-
+Increased exposure and impact on business activities in highly
+regulated industries such as public sector, healthcare, banking,
+or insurance
+Any one or more of these events could have an adverse effect on
+our business, reputation, financial position, share price, profit, and
+cash flows.
+SAP has encountered situations that required clear messaging
+and strong action on non-compliance in the context of corrupt
+behavior that has the potential to harm our business and
+reputation. In South Africa, SAP is continuing to investigate its
+dealings with the public sector. For more information relating to the
+alleged anti-bribery law violations noted above, see the Business
+Conduct section and the Notes to the Consolidated Financial
+Statements, Note (G.3).
+SAP has established measures to address and mitigate the
+described risks and adverse effects, such as:
+Management Report
+-
+-
+-
+-
+Continuous development of our comprehensive compliance
+management system (CMS) based on the three pillars of
+prevention, detection, and response
+Expansion of our OEC's bandwidth through additional staffing
+Root cause analysis of all observations related to corrupt or
+fraudulent behavior to improve associated business processes
+and prevent further and future violations
+Refraining from engaging sales agents and paying third-party
+sales commissions on public sector deals in high-risk countries
+Review of partner compensation models to mitigate risks of
+corruption while meeting agility requirements
+Internal audit of our CMS
+-
+We have identified risks in this context, including, but not limited
+to, the following:
+Energy and emissions management are an integral component
+of our holistic management of social, environmental, and economic
+risks and opportunities.
+We cannot exclude the possibility that if the risk were to occur, it
+could have a business-critical impact on our operations, financial
+position, profit, and cash flows. We estimate the probability of
+occurrence of this risk to be likely. We classify this risk as a high risk.
+Environment and Sustainability: Failure to meet customer,
+partner, or other stakeholder expectations or generally
+accepted standards on climate change, energy constraints, and
+our social investment strategy could negatively impact SAP's
+business, results of operations, and reputation.
+Despite our comprehensive and continuously evolving
+compliance management system and established internal controls,
+intentional efforts of individuals to circumvent controls or engage in
+corruption, especially by way of collusion with other involved
+parties, cannot always be prevented.
+In response to preliminary findings of alleged anti-corruption law
+violations, we have implemented enhancements to our anti-
+corruption compliance program, including guidance and policy
+changes as well as additional internal controls, and intend to
+continue these enhancements further.
+Termination of partners who do not pass our partner compliance
+audit process, or remediation of their deficiencies
+Guidance in our travel, entertainment, gift, and expense policies
+Promotion of a commitment for doing business with integrity
+through our partner and vendor ecosystems and internally
+within the Company
+Annual reconfirmation of commitment to the CoBC by SAP's
+workforce (except where disallowed by local legal regulations)
+Implementation of compliance policies and processes aimed at
+managing third parties and preventing misuse of third-party
+payments for illegal purposes, including the performance of
+compliance due diligence activities prior to the engagement of
+third parties
+-
+Requirement for mandatory CoBC training applicable to every
+SAP employee, providing practical guidance on how to avoid
+corrupt behavior and solve dilemma situations
+Several educational, counseling, control, and investigative
+instruments
+We reduced our carbon emissions further to 300 kilotons in
+2019 (2018: 310 kilotons)
+Combined Group
+We cannot exclude the possibility that if the risk were to occur, it
+could have a moderate impact on our operations, financial position,
+Management Report
+Ongoing efforts to continue receiving excellent scores and
+rankings such as the Dow Jones Sustainability Indices, ISS-
+oekom Corporate Sustainability Review, FTSE4GOOD, and the
+CDP Climate Change rating
+Ongoing efforts and activities to maintain our listing in the most
+prominent and recognized sustainability indexes, such as the
+expansion of ISO 14001 and ISO 50001 audits, strengthening our
+human rights commitment, and increasing transparency
+regarding SAP's governance
+Recognition for our sustainability efforts is shared with the
+market
+Proactive identification and addressing of social and
+environmental issues
+Consolidated Financial
+Statements IFRS
+To Our
+Stakeholders
+-
+If we do not meet stakeholder expectations in the areas
+identified, our rating in sustainable investment indexes might
+decrease, which could have an adverse effect on our reputation,
+profit, and share price.
+Failure to maintain our rating in sustainable investment indexes
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+profit, and cash flows. However, we estimate the probability of
+occurrence of this risk to be unlikely. We classify this risk as a low
+risk.
+Financial Risks
+Sales and Revenue Conditions: Our sales and revenue
+conditions are subject to market fluctuations and our forecasts
+might not be accurate.
+Our revenue and operating results can vary and have varied in
+the past, sometimes substantially, from quarter to quarter. Our
+revenue in general, and our software revenue in particular, is difficult
+to forecast for a number of reasons, and could lead to risks related
+to the following, among others:
+SAP has established measures to address and mitigate the
+described risks and adverse effects, such as:
+Risk Management and Risks
+Make strategic acquisitions with the potential to drive innovation
+and contribute to achieving our growth target
+125
+Conduct wide-ranging market and technology analyses and
+research projects, often in close cooperation with our customers
+and partners, to remain competitive
+Risk Management and Risks
+In our view, considering their impact level and likelihood of
+occurrence, the risks described in our aggregated risk report do not
+individually or cumulatively threaten our ability to continue as a
+going concern. Management remains confident that the Group's
+earnings strength forms a solid basis for our future business
+development and provides the necessary resource to pursue the
+opportunities available to the Group. Because of our structured
+processes for early risk identification, we are confident that we can
+continue to counter the challenges arising from the risks in our risk
+profile in 2020.
+Based on our aggregation approach, we recognized only minor
+changes in 2019 in the percentages of all reported risks categorized
+as "high" or "medium" in our risk level matrix. The number of risks
+categorized as "high" accounted for 27% (2018: 27%) of all
+reported risks, while the risks categorized as “medium” accounted
+for 45% (2018: 45%) of all risks reported in the Risk Factors
+section.
+We consolidate and aggregate relevant risks identified by the
+different business units and functions following our risk
+management policy, monitored by a Group-wide risk management
+governance function.
+Consolidated Risk Profile
+position, profit, and cash flows. However, we estimate the
+probability of occurrence of this risk to be remote. We classify this
+risk as a medium risk.
+We cannot exclude the possibility that if the risk were to occur, it
+could have a business-critical impact on our operations, financial
+To Our
+Stakeholders
+Our future success depends on our ability to keep pace with
+technological and process innovations and new business models, as
+well as on our ability to develop new products and services, enhance
+and expand our existing products and services portfolio, and
+integrate products and services we obtain through acquisitions. To
+be successful, we are required to adapt our products and our go-to-
+market approach to a cloud-based delivery and consumption model
+to satisfy increasing customer demand and to ensure an
+appropriate level of adoption, customer satisfaction, and retention.
+Considering preceding dependencies, this could lead to risks in
+the following areas, among others:
+SAP has established measures to address and mitigate the
+Develop new technology and new solutions such as the next-
+generation suite SAP S/4HANA, SAP C/4HANA, or the next-
+generation SAP Analytics Cloud solution
+Innovation: We might not be able to compete effectively if we
+strategize our solution portfolio ineffectively or if we are unable
+to keep up with rapid technological and product innovations,
+enhancements, new business models, and changing market
+expectations.
+As we continue to grow through our recent significant and
+innovative acquisitions, we concurrently observe a logically
+connected increase in the complexity of our associated integration
+activities. Consequently, we increase our estimate of the
+occurrence of this Mergers and Acquisitions risk to be likely and we
+cannot exclude the possibility that if the risk were to occur, it could
+have a major impact on our operations, financial position, profit, and
+cash flows. We classify this increased risk as a medium risk.
+Combined Group
+-
+-
+-
+-
+-
+Inability to bring new business models, solutions, solution
+enhancements, intelligent technologies, integrations and
+interfaces, and/or services to market before our competitors or
+at equally favorable terms
+Inability to develop and sell new cloud products spanning various
+organizations on time and in line with market demands due to
+complexity in heterogeneous technical environments
+Inability to anticipate and develop technological improvements
+or succeed in adapting SAP products, services, processes, and
+business models to technological change, changing regulatory
+requirements, emerging industry standards, and changing
+requirements of our customers and partners (especially with
+innovations such as SAP S/4HANA, SAP C/4HANA, and
+SAP Cloud Platform) to support the intelligent enterprise
+strategy
+Uncertainties regarding new SAP solutions, technologies, and
+business models as well as delivery and consumption models
+might lead customers to wait for proofs of concept or holistic
+integration scenarios through reference customers or more
+mature versions
+Lower level of adoption of our new solutions, technologies,
+business models, and flexible consumption models, or no
+adoption at all
+Our product and technology strategy might not be successful, or
+our customers and partners might not adopt our technology
+platforms, applications, or cloud services quickly enough or they
+might consider other competing solutions in the market, or our
+strategy might not match customers' expectations, specifically
+in the context of expanding the product portfolio into additional
+markets.
+Increasing competition from open source software initiatives, or
+comparable models in which competitors might provide
+software and intellectual property free and/or at terms and
+conditions unfavorable for SAP.
+124
+Risk Management and Risks
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+Inability to drive growth of references through customer use
+cases and demo systems
+Any one or more of these events could have an adverse effect on
+our business, financial position, profit, and cash flows.
+described risks and adverse effects. For example, we:
+-
+-
+Align our organization, processes, products, delivery and
+consumption models, and services to changing markets and
+customer and partner demands
+Explore future trends as well as the latest technologies, for
+example through our network of innovation centers as part of
+the Technology and Innovation board area, and adapt these to
+the market if there is a clear business opportunity for SAP and
+value to our customers
+Management Report
+4.4
+Further Information on Economic,
+Environmental, and Social Performance
+1.9
+1.2
+1.3
+Germany
+1.5
+0.5
+1.1
+Emerging and Developing Europe
+3.1
+Euro area
+1.8
+Middle East and Central Asia
+1.9
+0.8
+2.8
+Sub-Saharan Africa
+3.2
+3.3
+A standardized methodology for detailed integration planning,
+which is carried out by a dedicated integration team
+Process, risk, and control analyses accompanied by subsequent
+integration into SAP's processes and control framework, and
+supported by mitigations as required by any specific
+circumstances to subsequently increase adherence to SAP's
+standards and policies
+3.5
+2.6
+Regions (according to new IMF taxonomy)
+3.7
+4.5
+Additional
+Information
+Expected Developments and
+Opportunities
+Future Trends in the Global Economy
+The recovery in global economic activity is expected to be mild in
+2020, according to the European Central Bank (ECB) in its
+December 2019 Economic Bulletin.¹) The main influences will be a
+deceleration of growth in advanced economies and China, and a
+moderate recovery in some emerging economies (even if less
+dynamic than previously expected).
+In the Europe, Middle East, and Africa (EMEA) region, the ECB
+predicts that the ongoing weakness of international trade will weigh
+on the euro area economy in 2020 due to persistent global
+uncertainties. However, the ECB's economic data, while remaining
+weak overall, points to a stabilization in the slowdown of economic
+growth in the euro area. The ECB expects the euro area economy to
+grow by 1.1% in 2020 and by 1.4% in both 2021 and 2022. At the
+same time, economic growth is projected to remain buoyant in
+central and eastern European countries over the projection horizon.
+In Russia, the medium-term outlook will be shaped primarily by
+fiscal and structural policy implementation, global oil market
+developments, and the scope of the international sanctions regime.
+Looking at the Americas region, the ECB expects economic
+activity in the United States to remain resilient in the near term, but
+to decelerate in the medium term to growth rates of just below 2%.
+This will, however, depend on the outcome of continuing trade talks
+with China and many other countries. In Brazil, medium-to-long
+term growth will be significantly influenced by the degree to which
+necessary fiscal reforms are going to be implemented.
+For the Asia Pacific Japan (APJ) region, the ECB projects that
+economic activity in Japan will grow moderately over the medium
+term, but weaken temporarily following the value-added tax hike in
+October 2019. A recently announced fiscal stimulus package could
+provide some support to economic growth further ahead. The
+gradual transition of China to a lower growth path will weigh on the
+global economy as a whole in the coming years. However, the
+Chinese economy might pick up marginally in 2021 and 2022,
+supported by policy actions and the implementation of structural
+reforms.
+With regard to growth rates, the International Monetary Fund
+(IMF) projects the following economic trends for the mid-term
+horizon until the end of 2020:
+Economic Trends
+GDP Growth Year Over Year
+%
+2018
+2019e 2020p
+World
+3.6
+2.9
+3.3
+Advanced economies
+2.2
+1.7
+1.6
+Developing and emerging economies
+Consolidated Financial
+Statements IFRS
+A holistic evaluation of material transaction and integration risks
+Identification, implementation, and tracking of risk mitigation
+measures for material transactions or integration risks
+Consolidated Financial
+Statements IFRS
+-
+Inability to successfully engage with on-premise customers on
+their cloud transformation journey with fully suitable solutions
+and transformation services
+Inability to successfully execute our strategy for integrating
+hyperscalers
+Adverse revenue effects due to increasing cloud business and
+conversions from on-premise licenses to cloud subscriptions
+from existing SAP customers, which could have an adverse
+effect on related maintenance and services revenue
+Insufficient solution and service adoption together with
+increased complexity, as well as failures during the execution of
+our intelligent enterprise strategy in the context of our portfolio
+for solutions and services could lead to a loss of SAP's position
+as a leading cloud company and subsequently to reduced
+customer adoption.
+Customers and partners might be reluctant or unwilling to
+migrate and adapt to the cloud, or they might consider cloud
+offerings from our competitors.
+Existing customers might cancel or not renew their contracts
+(such as maintenance or cloud subscriptions) or decide not to
+buy additional products and services.
+The market for cloud business might not develop further, or it
+might develop more slowly than anticipated.
+Strategic alliances among competitors and/or their growth-
+related efficiency gains in the cloud area could lead to
+significantly increased competition in the market with regards to
+pricing and ability to integrate solutions.
+Price pressure, cost increases, and loss of market share through
+traditional, new, and especially cooperating competitors and
+hyperscalers
+Inability to achieve the planned margin increase in time as
+planned
+-
+Any one or more of these events could have an adverse effect
+on our business, financial position, profit, and cash flows.
+-
+-
+-
+-
+-
+-
+-
+Share our overall long-term cloud strategy and our integration
+road map with our customers, and continuously implement
+improvements to enhance our cloud solutions through our
+intelligent enterprise strategy, also covering the integration of
+experiential and operational data
+Demonstrate the benefits of our solution and services portfolio
+through end-to-end integration scenarios, homogeneous and
+compelling user interfaces, intelligent technologies, customer
+references, and success stories
+SAP has established measures to address and mitigate the
+described risks and adverse effects. For example, we:
+Enable and support our customers in their transition path from
+on-premise to cloud, for example through the cloud extension
+policy and our SAP S/4HANA Movement program, a cross-
+departmental initiative to promote the migration of our existing
+ERP customers to the intelligent enterprise
+-
+-
+Regular direct customer feedback is considered in the market
+release decision process
+Continue to maintain the high quality level of our products,
+(which is made transparent in the defined KPIs for quality
+transparency and confirmed by our constantly high customer
+satisfaction ratings as measured by our customer survey)
+Continue to drive the integration and convergence of our
+technology platform offerings SAP S/4HANA and
+SAP C/4HANA, as well as acquired technologies
+Enable our current product portfolio for SAP HANA, develop new
+solutions based on SAP HANA, and offer comprehensive cloud-
+based services, extendable with SAP Cloud Platform
+A comprehensive certification program designed to ensure that
+relevant third-party solutions are of consistently high quality
+We cannot exclude the possibility that if the risk were to occur, it
+could have a business-critical impact on our operations, financial
+position, profit, and cash flows. However, we estimate the
+probability of occurrence of this risk to be unlikely. We classify this
+risk as a medium risk.
+122
+Risk Management and Risks
+To Our
+-
+Stakeholders
+United States
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+Strategic Risks
+Market Share and Profit: Our market share and profit could
+decline due to increased competition, market consolidation,
+technological innovation, and new business models in the
+software industry.
+The market for cloud computing is increasing and shows strong
+growth relative to the market for on-premise solutions. To maintain
+or improve our operating results in the cloud business, it is
+important that our customers renew their agreements with us when
+the initial contract term expires and purchase additional modules or
+additional capacity, as well as for us to attract new customers.
+Additionally, we need to bring new solutions based on the
+SAP HANA business data platform, new technologies, as well as
+SAP Cloud Platform to the market in line with demands and ahead
+of our competitors. In particular, innovative applications supporting
+the Intelligent Enterprise such as SAP S/4HANA, SAP C/4HANA, or
+newer technologies such as Internet of Things, machine learning,
+robotic process automation (RPA), which automates rule-based,
+repetitive tasks, digital assistants (including voice recognition and
+interaction), and blockchain.
+Factoring in the aforementioned, this could lead to risks in the
+following areas, among others:
+Combined Group
+Management Report
+Technical, operational, financial, and legal due diligence on the
+company or assets to be acquired
+Balance the distribution of our strategic investments by evolving
+and protecting our core businesses and simultaneously
+developing new solutions, technologies, and business models for
+markets, such as those in analytics, applications, and database
+and technology
+Drive the integration and convergence of our technology
+platform offerings SAP S/4HANA and SAP C/4HANA, and
+-
+-
+Incorrect information or assumptions during the due diligence
+process for the acquisition (including information or
+assumptions related to the business environment and/or
+business and licensing models)
+Failure to integrate acquired technologies or solutions
+successfully and profitably into SAP's solution portfolio and
+strategy
+Failure to successfully integrate acquired entities, operations,
+cultures, or languages, all within the constraints of applicable
+local laws
+Unfulfilled needs of the acquired company's customers or
+partners
+Material unidentified liabilities of acquired companies (including
+legal, tax, IP)
+Failure in implementing, restoring, or maintaining internal
+controls, disclosure controls and procedures, and policies within
+acquired companies
+-
+Incompatible practices or policies (compliance requirements)
+Insufficient integration of the acquired company's accounting,
+HR, and other administrative systems
+Debt incurrence or significant unexpected cash expenditures
+Non-compliance with existing SAP standards including
+applicable product standards such as our open source product
+standards
+Impairment of goodwill and other intangible assets acquired in
+business combinations
+Non-compliance of the acquired company with regulatory
+requirements, for example accounting standards, export control
+laws, and trade sanctions, for which SAP with and by the
+acquisition assumes responsibility and liability, including
+potential fines and the obligation to remedy the non-compliance
+Any one or more of these events could have an adverse effect on
+our business, financial position, profit, and cash flows.
+SAP has established measures to address and mitigate risks and
+adverse effects associated with acquisitions, such as:
+-
+-
+-
+Failure to coordinate or successfully integrate the acquired
+company's research and development (R&D), sales, marketing
+activities, and security and cybersecurity protocols
+Engage with our customers and offer a broader range of services
+to support and drive the digital transformation for our
+customers, for example with our premium service offerings
+Place strong focus on providing our cloud services efficiently and
+to customer expectations, including service provisioning, quality,
+security, and data protection and privacy
+-
+-
+acquired technologies
+Enable our current product portfolio for SAP HANA, develop new
+solutions based on SAP HANA, and offer comprehensive cloud-
+based services, extendable with SAP Cloud Platform and
+intelligent technologies
+Enable our portfolio for hyperscalers in order to extend
+customer reach and further meet customer expectations
+Deliver standard software and product packages that are fast
+and easy to install, as well as financially attractive financing and
+subscription models
+Enable and encourage partners to leverage SAP technology, by
+providing guidance about business opportunities, architecture,
+and technology, as well as a comprehensive certification
+program designed to ensure that relevant third-party solutions
+are of consistently high quality
+Continue to move SAP HANA Enterprise Cloud towards full-
+stack offering, and increase the share of high-value cloud
+application services to further improve the margin
+We cannot exclude the possibility that if the risk were to occur, it
+could have a business-critical impact on our operations, financial
+position, profit, and cash flows. However, we estimate the
+probability of occurrence of this risk to be unlikely. We classify this
+risk as a medium risk.
+Mergers and Acquisitions: We might not acquire and integrate
+companies effectively or successfully.
+To expand our business, we acquire businesses, products, and
+technologies, and we expect to continue doing so in the future. Over
+time, certain of these acquisitions have increased in size and in
+-
+Risk Management and Risks
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+strategic importance for SAP. Management negotiation of potential
+acquisitions and the integration of acquired businesses, products,
+or technologies demands time, focus, and resources of both
+management and workforce, and exposes us to unpredictable
+operational difficulties.
+Acquiring businesses, products, and technologies may present
+risks to SAP, including risks related to the following areas, among
+others:
+-
+123
+2.9
+•
+2.0
+As at December 31, 2019, we had a net debt of €8,286 million.
+We believe that our liquid assets, combined with our undrawn credit
+facilities, are sufficient to meet our operating financing needs in
+2020 as well, and, together with expected cash flows from
+operations, will support debt repayments and our currently planned
+capital expenditure requirements over the near and medium term.
+In 2020, compared to 2019, we expect lower cash outflows for
+restructuring and extraordinary taxes. Together with a positive
+impact from our operating activity, we expect about €6 billion in
+operating cash flow for 2020. Free cash flow (as redefined in
+response to IFRS 16) is expected to increase to a level of
+€4.5 billion. For 2023, we expect around €8 billion in free cash flow.
+We intend to repay €1,150 million in Eurobonds and
+US$290 million in U.S. Private Placements in 2020. In addition, we
+might refinance the full or portions of the currently outstanding
+€2.0 billion Qualtrics acquisition term loan with additional capital
+market transactions. The ratio of net debt as at December 31, 2020,
+of around €7 billion divided by the total of operating profit (IFRS)
+plus depreciation and amortization should be below 0.9. From 2020
+to 2023, we expect to reduce net debt due to scheduled debt
+repayments of around €6.2 billion.
+Non-Financial Goals 2020 and Ambitions
+for 2023
+In addition to our financial goals, we also focus on three non-
+financial targets: customer loyalty, employee engagement, and
+carbon emissions.
+For 2020 throughout to 2023, we aim to lift employee
+engagement, as measured by the Employee Engagement Index, and
+keep it between 84% and 86%. (2019: 83%).
+We measure customer loyalty using the Customer Net Promoter
+Score (NPS). We are targeting to increase the Customer NPS by
+3 points to 5 points in 2020 and to steadily increase the Customer
+NPS in 2021 and beyond. (2019: -6).
+We aim to decrease carbon emissions to 238 kt in 2020 (2019:
+300 kt) with a steady decrease further on, reaching 95kt by 2023.
+Our overarching ambition is to achieve a net-zero carbon footprint
+of SAP's operations by 2025.
+Premises on Which Our Outlook and
+Prospects Are Based
+In preparing our outlook and prospects, we have taken into
+account all events known to us at the time we prepared this report
+that could influence SAP's business going forward.
+Goals for Liquidity and Finance
+Outlook for SAP SE
+128
+Expected Developments and Opportunities
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+Despite the increase in cloud and software revenue expected for
+the SAP Group in 2020, we expect product revenue for SAP SE in
+2020 to remain at the level of 2019. This is due to the reduction of
+the license fees on cloud solutions payable to SAP SE by its
+subsidiaries which was implemented per August 2019.
+The primary source of revenue for SAP SE is the license fees it
+charges subsidiaries for the right to market and maintain SAP
+software solutions. Consequently, the performance of SAP SE in
+operating terms is closely tied to the cloud and the software
+revenue of the SAP Group.
+Considering the € 603 million in restructuring costs in 2019 and
+that no major restructuring is planned for 2020, we expect SAP SE'S
+operating profit to increase strongly in 2020, assuming that there
+are no significant effects from acquisitions or other unforeseeable
+infrastructure of approximately €591 million and in construction
+activities of approximately €235 million in 2020. In 2020, we expect
+total capital expenditures of approximately €1.1 billion. In 2021,
+capital expenditures are expected to stay at a similar level as in
+2020.
+Investment Goals
+Proposed Dividend
+In line with our dividend policy of distributing at least a dividend
+totaling 40% or more of the prior year's profit after tax, we intend to
+pay a dividend of €1.58 per share (subject to shareholder approval
+at the Annual General Shareholders meeting in May 2020). Besides
+this, the Company intends to repurchase shares with a volume of
+€1.5 billion by December 31, 2020. For more information, see the
+Financial Performance: Review and Analysis section.
+Organizational Changes
+At the beginning of 2020, SAP modified its organizational
+structure to strengthen the focus on customer success and
+employee engagement while driving innovation and simplicity. The
+set-up moving forward aims at raising synergies, reducing
+complexity while initiating key steps towards further integration.
+The organizational changes will also affect SAP's segment
+reporting. SAP has already started the process of redefining its
+management reporting under the new organizational structure,
+which the segment reporting will follow.
+Medium-Term Prospects
+In this section, all numbers are based exclusively on non-IFRS
+measures.
+SAP expects to grow our more predictable revenue while steadily
+increasing operating profit. Our strategic objectives are focused
+primarily on our main financial and non-financial objectives: growth,
+profitability, customer loyalty, and employee engagement.
+At the beginning of 2019, we introduced a 2023 ambition. Over
+the period from 2018 through 2023, SAP continues to expect to:
+More than triple our non-IFRS cloud revenue (2018:
+€5.03 billion)
+Our planned investment expenditures for 2020 and 2021, other
+than for business combinations, consist primarily of the purchase of
+IT infrastructure and the construction activities described in the
+Assets (IFRS) section of this report. We expect investments in IT
+-
+Approach a share of more predictable revenue of 80%.
+-
+Reach a non-IFRS cloud gross margin of 75%
+-
+Increase the non-IFRS operating margin by one percentage point
+(pp) per year on average, representing a total expansion of
+approximately 500 basis points. We expect to achieve this result
+based on the following effects:
+An adverse revenue mix effect of approximately minus 4pp.
+Our cloud gross margin expansion will add approximately
+5pp.
+Our services margin expansion will add approximately 0.5pp.
+Reduction of our sales and marketing expense ratio will add
+between 2.5pp and 3pp (2018: 25%).
+Reduction of our general and administration expense ratio
+will add between 0.5pp and 1pp(2018: 4%).
+The gross margin for our software licenses and support (2018:
+87%) as well as our research and development cost ratio (2018:
+14%) is expected to remain at a similar level to 2018.
+Grow our non-IFRS total revenue to more than €35 billion (2018:
+€24.74 billion)
+The Company expects a full-year 2020 effective tax rate (IFRS)
+of 27.0% to 28.0% (2019: 26.7%) and an effective tax rate (non-
+IFRS) of 26.5% to 27.5% (2019: 26.2%).
+occurences.
+We expect that SAP SE will continue to receive investment
+income in the form of profit transfers and dividends from its
+subsidiaries. The growth we expect for the SAP Group should have a
+positive effect on this investment income.
+Furthermore, SAP seeks to establish new business models and
+leverage our expanding ecosystem of partners to achieve scale and
+maximize opportunities. As an example of this, SAP has entered an
+innovative partnership with business-to-business platform Alibaba
+to market SAP solutions in its cloud marketplace.
+We also see additional opportunities arising through new
+collaborations, such as the partnership with Microsoft Azure,
+Amazon Web Services (AWS), and Google Cloud, which were
+announced in May 2019 under the "Embrace" program. This
+collaboration is aimed at the transition of customers from on-
+premise editions of ERP to SAP S/4HANA Cloud solutions on a
+common reference architecture, which we believe will drive faster
+innovation as well as consumption of SAP cloud services by
+facilitating access to state-of-art technologies of leading cloud
+providers.
+computing, as well as blockchain, are also driving digital business
+transformation.
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+To Our
+Stakeholders
+129
+Our strong assets in applications and analytics, as well as
+database and technology, continue to offer solid multiyear growth
+opportunities as we bring innovative technologies with simplified
+consumption to our installed base and continue to acquire new
+customers. Specifically, SAP C/4HANA, SAP HANA, cloud offerings,
+and SAP S/4HANA could create more demand than is reflected in
+our stated outlook and medium-term prospects.
+Expected Developments and Opportunities
+With the acquisition of Qualtrics, we see growth opportunities
+from creating a highly differentiated offering for businesses to
+deliver superior customer, employee, product, and brand
+experiences. With Qualtrics software, SAP will accelerate the new
+XM category by combining experience data and operational data to
+power the experience economy. For more information about the
+acquisition of Qualtrics, see the Strategy and Business Model
+section.
+SAP strives to generate profitable growth across our portfolio of
+products, solutions, and services to keep or improve our market
+position. Our aim is to continue to expand our addressable market
+through the extension of our portfolio and our new technologies and
+innovations. Moreover, higher efficiency in our cloud delivery may
+positively affect the profitability of our cloud business.
+Opportunities from Our Strategy for Profitable
+Growth
+For more information about future opportunities in research and
+development for SAP, see the Products, Research & Development,
+and Services section.
+In addition to speed of innovation, we also focus on ease of
+adoption, so our customers can receive the benefits from our
+software applications and technologies at reduced time to value.
+Enabling our customers to adopt our innovations faster, for
+example, accelerated adoption of the SAP S/4HANA suite through
+our SAP S/4HANA Movement program, or enabling greater
+customer success through our Customer First program, may
+positively impact our revenue, profit, and cash flows, and result in
+their exceeding our stated medium-term prospects.
+Our continued growth through innovation is based on our ability
+to leverage research and development (R&D) resources effectively.
+We continue to improve our development processes through design
+thinking and lean methodologies. We are accelerating innovation
+cycles, especially in the area of cloud solutions, and engaging more
+closely with our customers to enable success. In addition, we
+continue to expand open innovation initiatives to support long-term
+innovation in strategic opportunity areas, supporting talented
+innovators both inside (employees, for example) and outside
+(startups, for example) of SAP.
+Opportunities Through Innovation
+ISO 9001:2015, applicable to the Applications, Technology &
+Services segment
+A holistic testing strategy to validate the state of quality and
+security for every product before market introduction
+We also see opportunities in growing product and market areas,
+such as in the enhancement of business processes with intelligent
+technologies, which are key to our Intelligent Enterprise strategy.
+Capabilities including machine learning and artificial intelligence,
+predictive analytics, the Internet of Things and distributed
+The financial ambitions of the SAP Group for the years 2021 to
+2023 provide for further growth of revenue and profit. We expect
+that such growth will also result in further revenue and profit growth
+for SAP SE to the same degree.
+Opportunities from Our Partner Ecosystem
+With the launch of the Next-Generation Partnering initiative in
+2019, we sharpened our focus on supporting growth and delivering
+quality across all our partner channels. Our partner program will
+reflect evolving partnering models and will introduce a new unified
+governance model to support the complete partner journey,
+including streamlined enablement, simplified certification, and new
+commercial models.
+The outlook for the SAP Group in respect to liquidity, finance,
+investment, and dividend are equally applicable to SAP SE.
+Among the assumptions underlying this outlook are those
+presented above concerning the economy and our expectations for
+the performance of the SAP Group.
+Opportunities
+Our customers rely on SAP as the trusted partner in their digital
+business transformations, not only for providing a Business
+Technology Platform for business process automation,
+standardized cloud and on-premise solutions, and access to
+business networks, but also for enabling business model
+innovations. SAP believes in continuous, agile innovation to exceed
+customer and market expectations, such as the embedding of
+intelligent technologies and Experience Management (XM) into our
+solution portfolio.
+We have established a framework for opportunity management
+by evaluating and analyzing four key areas: current markets,
+competitive landscapes, external scenarios, and technological
+trends. We have also delved into customer and product
+segmentation, growth drivers, and industry-specific success
+factors. Based on these combined insights, our Executive Board
+defines our market strategies. Our shareholder value relies heavily
+upon a fine balance of risk mitigation and value-driven
+opportunities. Therefore, our strong governance model ensures that
+decisions are based on return, investment required, and risk
+mitigation. We rely on the talent and resources within SAP and our
+entire ecosystem.
+As far as opportunities are likely to occur, we have incorporated
+them into our business plans, our outlook for 2020, and our
+medium-term prospects outlined in this report. Therefore, the
+following section focuses on future trends or events that might
+result in an uplift of our outlook and medium-term prospects, if they
+develop better than we have anticipated in our forecasts.
+SAP SE is the parent company of the SAP Group and earns most
+of its revenue from subscription fees, software license fees, and
+dividends paid by affiliates. Consequently, the opportunities
+described below also apply - directly or indirectly - to SAP SE.
+Opportunities from Economic Conditions
+Economic conditions have a clear influence on our business,
+financial position, profit, and cash flows. Should the global economy
+experience more sustained growth than is reflected in our plans
+today, our revenue and profit may exceed our current outlook and
+medium-term prospects.
+SAP's partner ecosystem is defined by the interdependent
+relationships of our customers, our employees, our suppliers, our
+partners, and our competition. Partners are adding value to key
+components of customer sales, implementation, and renewal cycles
+with SAP, and are primarily involved in new SAP customer
+acquisition through the entire range of customer segments.
+Our medium-term planning is based on unchanged market
+conditions in emerging markets. Should their stability increase
+again, this would be an upside to our medium-term planning.
+Expected Developments and Opportunities
+130
+For more information about future opportunities from our
+employees, see the Employees and Social Investments section.
+Our outlook and medium-term prospects are based on certain
+assumptions regarding employee turnover and our Business Health
+Culture Index (as defined in the Employees and Social Investments
+section). Should these develop better than expected, there might
+be a gain in employee productivity and engagement. A stronger-
+than-expected increase in the Employee Engagement Index can
+therefore be an opportunity which could positively impact our
+revenue, profit, and cash flows, and result in their exceeding our
+stated medium-term prospects.
+2019, we continued to support our growth ambitions by increasing
+the number of employees (in full-time equivalents), especially in key
+strategic areas. As described in the Employees and Social
+Investments section, we continuously invest in our talents to retain
+their high level of engagement, knowledge, collaboration, social
+involvement, and health. By doing so, we anticipate improvements
+in our employee productivity and innovation capabilities.
+Our employees drive our innovation, provide value to our
+customers, and consistently enable our growth and profitability. In
+Opportunities from Our Employees
+Partners continue to increase indirect revenue for SAP with new
+names, installed base conversion, and partner innovation
+capabilities for SAP customers. With Next-Generation Partnering,
+SAP will help partners run intelligent solutions and technologies.
+The interaction of all these measures may positively impact our
+revenue, profit, and cash flows, and result in their exceeding our
+stated medium-term prospects.
+SAP is also refreshing our independent software vendor (ISV)
+business models, offering more transparency around our portfolio
+road maps to enable an exponential ecosystem of innovation
+around our core technologies. With the launch of new commercial
+models such as the Build engagement model in the SAP
+PartnerEdge program and SAP Endorsed Apps, these programs are
+putting partner solutions at the heart of our go-to-market motions,
+enabling a greater fit of SAP solutions for customers and increasing
+share of SAP customers using partner innovation.
+For more information about future trends in the global economy
+and the IT market outlook, as well as their potential influence on
+SAP, see the beginning of Expected Developments and
+Opportunities section.
+2.3
+Additional
+Information
+Consolidated Financial
+Statements IFRS
+Outlook for 2020 and Beyond
+International Data Corporation (IDC), a U.S.-based market
+research firm, predicts that within the next four years, the global
+economy will reach "digital supremacy"2): More than half of all
+global GDP will then be driven by products and services from
+digitally transformed enterprises. Digital apps and services will be
+created and enhanced many times faster than today, in much
+greater numbers, and based on massively expanded digital supply
+chains. In addition, by 2024 more than 50% of all IT spending will be
+directed toward digital transformation and innovation, which means
+an annual growth rate of 17% compared to 2% for the rest of IT (for
+example, maintenance of existing systems). The largest growth,
+however, will be in data intelligence and analytics, 48% of this
+represented by the Internet of Things (IoT) alone.³)
+Along with this development, IDC expects a strong market
+concentration over the coming years: By 2023, the top five public
+cloud platforms will make up at least 75% of infrastructure- and
+126
+Expected Developments and Opportunities
+To Our
+Stakeholders
+Combined Group
+Consolidated Financial
+Management Report Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+The IT Market:
+platform-as-a-service (laaS/PaaS) market share (62% in 2018). At
+the same time, the top ten pure-play software-as-a-service (SaaS)
+vendors will generate an average of nearly 20% of revenue from
+expanding their PaaS solutions coming along with their apps (4% in
+2018).2)
+By 2025, at least 90% of new enterprise apps will embed Al, and
+over half of all user interface transactions will use technologies such
+as computer vision, natural language processing, and gesture
+control, says IDC. 2) Already by 2022, over 75% of enterprise
+application suppliers might have connected their business apps to
+create a digital core that enable them to analyze different types of
+data from numerous sources. 4) What's more, by 2025, 50% of
+business applications could have functionality that does not yet
+exist, making them far more efficient than today's offerings and
+requiring significantly less human intervention.4
+Sources:
+1) European Central Bank, Economic Bulletin, Issue 8/2019, Publication Date: December
+27, 2019 (https://www.ecb.europa.eu/pub/pdf/ecbu/eb201908.en.pdf)
+2) IDC FutureScape: Worldwide IT Industry 2020 Predictions, Doc #US45599219, October
+2019
+3) IDC FutureScape: Worldwide Digital Transformation 2020 Predictions, Doc
+#US45569118, October 2019
+4) IDC FutureScape: Worldwide Intelligent ERP 2020 Predictions, Doc US44646019,
+October 2019
+Impact on SAP
+The digital transformation of the global economy is in full swing,
+and SAP's broad solution portfolio and innovation strategy are
+playing a key role in this evolution. Though current macroeconomic
+uncertainties are holding back individual countries and sectors, the
+majority of enterprises is taking advantage of the latest
+technological developments to restructure their business models,
+win market share, and increase efficiency.
+SAP's innovative applications and our offerings for next-
+generation technologies such as machine learning, Al, blockchain,
+and the loT are convincing more customers of the power and
+efficiency of our portfolio and our technology platform. We also
+offer our customers unparalleled flexibility options for using our
+software on premise, in the cloud, or hybrid.
+In recent publications, IDC puts particular emphasis on the
+importance of artificial intelligence (AI), which it believes will
+become "inescapable" over the coming years. It expects
+investments in Big Data analytics and cognitive Al to reach over
+$265 billion in 2023 ($124 billion in 2019).³) Investments in Al
+solutions alone might grow by 38% annually until 2022, by which
+time revenue could reach $79.2 billion.4)
+We continue to expect solid growth going forward, particularly
+with respect to our cloud solutions, which remain in high demand.
+The IMF changed the taxonomy and grouping of countries and regions in October 2019.
+Source: International Monetary Fund (IMF), World Economic Outlook Update January
+2020, Tentative Stabilization, Sluggish Recovery?
+(https://www.imf.org/~/media/Files/Publications/WEO/2020/January/English/text.a
+Canada
+1.9
+1.5
+1.8
+Latin America and the Caribbean
+Japan
+1.1
+0.1
+1.6
+0.3
+shx?la-en), p. 9.
+1.0
+Emerging and Developing Asia
+6.4
+5.6
+5.8
+China
+6.6
+6.1
+6.0
+e estimate, p = projection
+0.7
+Further Information on Economic,
+Environmental, and Social Performance
+Financial Targets and Prospects
+Outlook 2020
+Actual
+Amounts
+Estimated
+Amounts for
+2020
+for 2019
+0-30
+81
+Share-based payment expenses
+1,200-1,600
+1,835
+Revenue adjustments
+Acquisition-related charges
+689
+Restructuring
+10-20
+1,130
+Expected Developments and Opportunities
+127
+To Our
+Stakeholders
+Combined Group
+Management Report
+580-690
+Revenue and Operating Profit Targets and
+Prospects (Non-IFRS)
+€ millions
+The following table shows the estimates of the items that
+represent the differences between our non-IFRS financial measures
+and our IFRS financial measures.
+The Company is providing the following 2020 outlook:
+Non-IFRS cloud revenue is expected to be in a range of
+€8.7 billion to €9.0 billion at constant currencies (2019:
+€7.01 billion), up 24% to 28% at constant currencies.
+-
+-
+Non-IFRS cloud and software revenue is expected to be in a
+range of €24.7 billion to €25.1 billion at constant currencies
+(2019: €23.09 billion), up 7% to 9% at constant currencies.
+Non-IFRS total revenue is expected to be in a range of
+€29.2 billion to €29.7 billion at constant currencies (2019:
+€27.63 billion), up 6% to 8% at constant currencies.
+Non-IFRS operating profit is expected to be in a range of
+€8.9 billion to €9.3 billion at constant currencies (2019:
+€8.21 billion), up 8% to13% at constant currencies.
+The share of more predictable revenue (defined as the total of
+cloud revenue and software support revenue) is expected to be
+approximately 70%.
+We expect that, in 2020, the gross margin from our Intelligent
+Spend Group segment will be higher than 80% (2019: 78%).
+We expect that, in 2020, the gross margin from our public cloud
+offerings will reach approximately 70% (2019: 68%), and expand to
+about 80% over the course of the two years thereafter.
+We expect the gross margin from our private cloud offerings to
+be in a range of approximately 30% to 35% by 2020 (2019: 29%).
+We continue to expect the cloud gross margin to be
+approximately 71% by 2020.
+We expect the 2020 gross margin for our software licenses and
+support to remain at a similar level to 2019 (2019: 87%).
+Non-IFRS Measures
+In addition, we expect our 2020 gross margin for services to
+remain at a similar level to 2019 (2019: 25%).
+While SAP's full-year 2020 business outlook is at constant
+currencies, actual currency reported figures are expected to be
+impacted by currency exchange rate fluctuations throughout the
+year. See the table below for the full-year 2020 expected currency
+impacts. These currency expectations for the full-year 2020 are
+based on the December 2019 level.
+In percentage points
+Cloud subscriptions and support
+Cloud and software
+Operating profit
+2020
+-1pp to +1pp
+-1pp to +1pp
+Opp to +2pp
+As we look to increase our profitability through 2020, our cost
+ratios (cost as a percentage of total revenue) are expected to
+develop as follows through 2020: Research and development is
+expected to remain at the current level; sales and marketing as well
+as general and administration are expected to decline slightly.
+Further, we expect the segment profit to increase in all our
+reportable segments.
+Threat modelling at the beginning of every development project
+to identify potential risks including but not limited to using
+centrally provided tools
+A broad range of techniques, including project management,
+project monitoring, product standards and governance, and rigid
+and regular quality assurance measures certified to
+-
+Focus on increased coordination across our various lines of
+business with respect to our ability to detect, identify, and
+respond in a timely manner to unauthorized incursions in our
+systems
+Physical security measures such as access control systems and
+employee identification
+Investment in data and asset governance of SAP's global asset
+repository
+Measures such as technical IT security measures, identity and
+access management, and mandatory security and compliance
+training
+Continuous enhancement of cloud-based central DNS (Domain
+Name System) filtering capabilities, managing endpoints,
+malware filtering, and data leakage prevention
+Continuous enhancement of holistic assessment methodologies
+and means in order to keep pace with technology
+Focus on development and implementation of heightened
+cybersecurity measures designed to further safeguard SAP's
+most strategic assets
+and security validation of our critical components, products,
+patches, and services before shipment
+-
+-
+-
+-
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+Focus on increased hiring, training, development, and retention
+of skilled personnel in SAP's cybersecurity and product security
+workforce
+Increased employee, contractor, third-party, and partner
+awareness through campaigns and cybersecurity awareness
+training courses and projects
+Local and regional crisis management teams to respond and
+minimize possible losses in case of crisis situations
+Engagement of experts to advise on appropriate cybersecurity
+protocols and to further increase attention and awareness to
+cybersecurity protocols and protections
+As we continuously observe and investigate an increase in
+malicious cyber-attacks, we subsequently increase the probability
+of occurrence of this risk to highly-likely while we cannot exclude
+the possibility that risks that have materialized, alone or in
+combination with other risks that may materialize, could have a
+business-critical impact on our customers, our partners, our
+operations, financial position, our reputation, and our business in
+general. We classify this increased risk as a high risk. For more
+information, see the Security, Data Protection, and Privacy section.
+Technology and Products: Our technology and/or products may
+experience undetected defects, coding or configuration errors,
+may not integrate as expected, or may not meet customer
+expectations.
+Increased focus on localization needs to further meet customer
+demands
+-
+-
+-
+-
+SAP has established measures to address and mitigate the
+described risks and adverse effects, such as:
+Any one or more of these events could have an adverse effect on
+our business, financial position, profit, and cash flows.
+Lack of customer references for new products and solutions
+To Our
+Stakeholders
+Inability of algorithms to correctly adapt to evolving
+circumstances may lead to adverse decision-making processes
+in the context of artificial intelligence related technologies
+Inability to fulfil expectations of customers regarding time and
+quality in the defect resolution process
+New products, services, and cloud offerings, including third-
+party technologies, might not comply with local standards and
+requirements or might contain defects or might not be mature
+enough from the customer's point of view for business-critical
+solutions after shipment despite all the due diligence SAP puts
+into quality.
+-
+-
+-
+We might not be as fast as expected in integrating our platforms
+and solutions, enabling the complete product and cloud service
+portfolio, harmonizing our user interface design and technology,
+integrating acquired technologies and products, or bringing
+packages, services, or new solutions based on the SAP HANA
+platform as well as SAP Cloud Platform to the market.
+Software products and services from acquired companies might
+not fully comply with SAP quality standards
+Software products and services might not fully meet market
+needs or customer expectations
+Our product strategy and development investment, including
+new product launches and enhancements, are subject to risks in the
+following areas, among others:
+Inability to define and provide adequate solution packages and
+scope for all customer segments
+121
+To Our
+Stakeholders
+Continuous vigilance, adaptation, standardization, and
+modification of our security procedures, such as security risk
+identification, threat modeling, advanced threat defense, a
+comprehensive security testing strategy, container security
+enhancements, mandatory security training for all developers,
+Insufficient investment, coordination, or resources to achieve
+our objective of ensuring over time that our cybersecurity
+infrastructure meets or exceeds evolving industry standards,
+and defending against the ever-evolving and emerging threat
+landscape
+measures
+Inability to anticipate attacks or implement sufficient mitigating
+Material recovery costs as well as significant contractual and
+legal claims by customers, partners, authorities (including state,
+federal, and non-U.S.), and third-party service providers which
+could expose us to significant expense and liability and/or result
+in the issuance of orders, judgments, or consent decrees that
+could require us to modify our business practices
+Material costs to attempt to detect, prevent, and mitigate any
+successful attacks, including but not limited to the costs of third-
+party legal and cybersecurity experts and consultants, insurance
+costs, additional personnel and technologies, organizational
+changes, and incentives to customers and partners to
+compensate for any losses and/or retain their business
+Increasing sophistication, proliferation, and escalation in
+frequency, severity, and impact of cybersecurity attacks
+Inability to discover a cybersecurity breach or a loss of
+information either fully, in a timely manner, for a significant
+amount of time after the breach, or at all
+Expansion of cybersecurity attack surface due to increased
+connectivity of operational data
+Increased challenges due to an expanding and morphing cyber-
+attack surface attributable to interconnected technologies such
+as Internet of Things (IoT) accompanied by an elevation of entry
+and endpoints
+Failure to maintain a sufficient complement of personnel with
+sufficient levels of knowledge, experience, and training in
+cybersecurity matters necessary to support SAP's evolving
+cybersecurity needs and commensurate with the increasingly
+complex and sophisticated threat landscape
+Breach of cybersecurity measures due to, for example but not
+limited to, employee error or wrongdoing, system vulnerabilities,
+malfunctions, or attempts of third parties to fraudulently induce
+employees, users, partners, or customers to gain access to our
+systems, data, or customers' data
+Material costs and time associated with enhancing our
+cybersecurity infrastructure, which may impact the ongoing
+pace of development and delivery of our products and services,
+and our financial performance
+-
+-
+-
+-
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+Risk Management and Risks
+-
+Failure to integrate SAP's cybersecurity infrastructure and
+protocols with other network systems obtained through
+acquisition, including addressing cybersecurity defects and
+vulnerabilities in acquired systems
+-
+Inaccurate or incomplete third-party or SAP audit results,
+certifications, or representations concerning the adequacy of
+our cybersecurity infrastructure and protocols
+Customer concerns and loss of confidence in the current or
+future security and reliability of our products and services,
+including cloud solutions, and the resulting termination of key
+contracts by customers and partners
+Failure to maintain SAP's cybersecurity infrastructure and
+protocols in connection with the divestiture of businesses and
+network systems from SAP
+Improved monitoring with respect to implementing
+enhancements to our cybersecurity infrastructure
+Certification of IT-related organizations to the internationally
+recognized Business Continuity Management standard with
+regards to the Applications, Technology & Services segment
+We have a responsible disclosure process in place to detect
+vulnerabilities and have implemented security patch days to
+rapidly respond to customer security needs and provide fixes.
+Increased investments, coordination, and resources, including
+various internal initiatives, to achieve SAP's objective of ensuring
+over time that our cybersecurity infrastructure meets or exceeds
+evolving industry standards
+Corporate headquarters, which house certain critical business
+functions, are located in the German state of Baden-
+Württemberg, an area that is historically free of natural
+disasters.
+key IT infrastructure (especially our data centers) include
+implementation of data redundancies and daily data backup
+strategies.
+Product standard requirements such as mandatory non-
+erroneous modeling taking into account software dependencies
+Disaster recovery and business continuity plans to protect our
+An SAP Global Security Policy that is mandatory for all
+employees and supported by documented security standards,
+procedures, and good practices including specific security
+training curricula for our developers
+Customers are provided with security certifications (such as
+ISO/IEC 27001), security white papers, and reports from
+independent auditors and certification bodies.
+Review/audit of our certifications and representations to
+customers concerning our cybersecurity infrastructure and
+protocols
+Software security development lifecycle as a mandatory, integral
+part of our software development process, including checks on
+open-source component coverage
+For the Applications, Technology & Services segment, we strive
+to align our software security development lifecycle to the
+recommendations of ISO/IEC 27034, applying methods to
+develop secure software.
+-
+-
+-
+-
+-
+-
+-
+Any one or more of these events could have a material adverse
+effect on our business, financial position, profit, and cash flows.
+In response to the increasing number of cybersecurity attacks
+and because we anticipate threat actor techniques to continue to
+evolve in our complex and threatening cybersecurity landscape,
+SAP has expended significant resources to enhance its
+cybersecurity program, has increased the Board's governance of
+and involvement in cybersecurity matters, and continues to
+investigate and remediate vulnerabilities. In particular, SAP has
+established measures intended to address the described risks and
+adverse effects, such as:
+Improved roll-out procedures for security-relevant notes,
+patches, and service packs to ensure easy and fast consumption
+on the customer side
+€ millions
+Consolidated Statements of Financial Position of SAP Group as at December 31
+Additional
+Information
+2018
+2019
+Further Information on Economic,
+Environmental, and Social Performance
+Cash and cash equivalents
+Notes
+Consolidated Financial
+Statements IFRS
+4,980
+Combined Group
+To Our
+Stakeholders
+Consolidated Financial Statements IFRS
+134
+38
+6
+50
+1,191
+3,804
+(E.3)
+Management Report
+5,314
+(D.2)
+Other financial assets
+Intangible assets
+23,736
+29,162
+Under the adoption methods we chose for IFRS 9, 15, and 16, prior-year numbers are not restated to conform to the new accounting policies. For more information, see Note (IN.1).
+16,620
+15,213
+293
+506
+889
+1,188
+8,627
+(A.3), (G.1)
+7,908
+(A.2)
+Goodwill
+Total current assets
+Tax assets
+Other non-financial assets
+Trade and other receivables
+448
+297
+(D.5), (E.3)
+6.362
+The accompanying Notes are an integral part of these Consolidated Financial Statements.
+9
+Attributable to owners of parent
+-22
+22
+Reclassification adjustments on cash flow hedges/cost of hedging, before tax
+81
+-10
+-24
+Gains (losses) on cash flow hedges/cost of hedging, before tax
+-135
+0
+0
+Available-for-sale financial assets, net of tax
+1
+0
+(D.3)
+Income taxes relating to available-for-sale financial assets
+-136
+0
+0
+-250
+0
+-57
+-41
+Cash flow hedges/cost of hedging, before tax
+(F.1)
+-2
+1,229
+4,986
+3,854
+Total comprehensive income
+-2,816
+898
+483
+Other comprehensive income, net of tax
+-2,838
+887
+Attributable to non-controlling interests
+536
+29
+-23
+-1
+(E.2)
+Cash flow hedges/cost of hedging, net of tax
+-10
+0
+Income taxes relating to cash flow hedges/cost of hedging
+39
+-32
+Other comprehensive income for items that will be reclassified to profit or loss, net of tax
+0
+4,491
+Property, plant, and equipment
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+Consolidated Statements of Changes in Equity of SAP Group for the Years Ended December 31
+€ millions
+Equity Attributable to Owners of Parent
+Issued
+Capital
+Share
+Premium
+Retained
+Earnings
+Other
+Components
+Treasury
+Shares
+Non- Total Equity
+Total
+Controlling
+Interests
+of Equity
+Notes
+1/1/2017
+To Our
+Stakeholders
+Profit after tax
+135
+The accompanying Notes are an integral part of these Consolidated Financial Statements.
+Under the adoption method we chose for IFRS 16, prior-year numbers are not restated to conform to the new accounting policies. For more information, see Note (IN.1).
+1,229
+1,229
+545
+543
+28,783
+27,407
+1,770
+1,234
+-1,580
+-1,580
+30,746
+28,832
+76
+45
+(E.2)
+30,822
+28,877
+60,215
+51,502
+Consolidated Financial Statements IFRS
+22,624
+Other comprehensive income
+Share-based payments
+-2,816
+-2,816
+4,029
+-2,838
+1,191
+38
+1,229
+-43
+-43
+-43
+-1,499
+-1,499
+-66
+-1,565
+-500
+-500
+-500
+8
+22
+-2,838
+Comprehensive income
+22
+38
+Dividends
+Purchase of treasury shares
+Reissuance of treasury shares
+13
+under share-based payments
+(E.2)
+(E.2)
+(E.2)
+(E.2)
+1,229
+599
+22,287
+3,346
+-1,099
+26,361
+21
+26,383
+4,008
+4,008
+4,046
+29,393
+12,138
+14,931
+1.014
+45,002
+34,881
+60,215
+51,502
+Trade and other payables
+Tax liabilities
+Financial liabilities
+Other non-financial liabilities
+Provisions
+Contract liabilities
+Total current liabilities
+Trade and other payables
+Tax liabilities
+Financial liabilities
+Other non-financial liabilities
+Provisions
+Deferred tax liabilities
+Contract liabilities
+1,251
+Total non-current liabilities
+(C.5)
+435
+(D.4), (D.8)
+5,496
+3,553
+Other financial assets
+(D.5), (E.3)
+2,336
+1,536
+Trade and other receivables
+(A.2)
+129
+118
+Other non-financial assets
+Tax assets
+Deferred tax assets
+Total non-current assets
+Total assets
+(A.3), (G.1)
+1,701
+1,301
+397
+Total liabilities
+Issued capital
+Share premium
+10,486
+8
+129
+538
+495
+(E.3), (D.8)
+12,923
+10,553
+(B.3), (B.5), (G.2)
+814
+501
+(A.4), (B.4), (B.5), (B.6)
+478
+270
+(C.5)
+(A.1)
+82
+102
+89
+88
+14,462
+3,028
+4,266
+(A.1)
+Retained earnings
+Other components of equity
+Treasury shares
+Equity attributable to owners of parent
+Non-controlling interests
+Total equity
+Total equity and liabilities
+1,581
+1,491
+3,227
+255
+(E.3), (D.8)
+3,273
+1,125
+(B.3), (B.5), (G.2)
+4,818
+4,120
+(A.4), (B.4), (B.5), (B.6)
+268
+110
+611
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+0
+0
+0
+Exchange differences, before tax
+537
+910
+-2,730
+Income taxes relating to exchange differences on translation
+0
+0
+-2
+Exchange differences, net of tax
+(E.2)
+537
+910
+-2,732
+Gains (losses) on remeasuring available-for-sale financial assets, before tax
+0
+0
+Reclassification adjustments on exchange differences on translation, before tax
+114
+-2,730
+537
+-7,693
+Sales and marketing
+-3,352
+-3,624
+-4,292
+29
+5
+-1
+-7
+Remeasurements on defined benefit pension plans, net of tax
+-52
+11
+22
+Other comprehensive income for items that will not be reclassified to profit or loss, net of tax
+-52
+11
+22
+Items that will be reclassified subsequently to profit or loss
+Gains (losses) on exchange differences on translation, before tax
+910
+-6,781
+Reclassification adjustments on available-for-sale financial assets, before tax
+Available-for-sale financial assets, before tax
+17,246
+23,461
+24,708
+27,553
+(A.1), (C.2)
+3,912
+4,086
+4,541
+19,549
+20,622
+23,012
+15,780
+15,628
+16,080
+10,908
+10,981
+11,547
+4,872
+4,647
+4,533
+Cost of cloud
+16,410
+-2,534
+-1,660
+19,199
+-7,051
+-7,462
+-8,355
+-3,158
+-3,302
+-3,662
+Research and development
+Gross profit
+Total cost of revenue
+Cost of services
+-3,893
+-4,160
+-4,692
+Cost of cloud and software
+-2,234
+-2,092
+-2,159
+Cost of software licenses and support
+-2,068
+-6,924
+General and administration
+-1,629
+2.78
+(C.6)
+3.35
+3.42
+2.78
+(C.6)
+38
+6
+50
+4,008
+4,083
+3,321
+4,046
+4,088
+3,370
+-983
+-1,511
+-1,226
+(C.5)
+3.42
+Earnings per share, diluted (in €)
+3.35
+Consolidated Financial Statements IFRS
+Income taxes relating to remeasurements on defined benefit pension plans
+Remeasurements on defined benefit pension plans, before tax
+Items that will not be reclassified to profit or loss
+4,046
+4,088
+3,370
+2017
+2018
+2019
+Notes
+lil Profit after tax
+€ millions
+Consolidated Statements of Comprehensive Income of SAP Group for the Years Ended December 31
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+To Our
+Stakeholders
+133
+The accompanying Notes are an integral part of these Consolidated Financial Statements.
+Under the adoption methods we chose for IFRS 9, 15, and 16, prior-year numbers are not restated to conform to the new accounting policies. For more information, see Note (IN.1).
+Earnings per share, basic (in €)
+Attributable to non-controlling interests
+Attributable to owners of parent
+Other non-operating income/expense, net
+4,877
+5,703
+-18.584
+-19,005
+-23,081
+4,473
+Operating profit
+Total operating expenses
+1
+-20
+18
+Other operating income/expense, net
+-182
+-19
+-1,130
+(B.6)
+Restructuring
+-1,075
+-1,098
+(C.3)
+-74
+-56
+-36
+Profit after tax
+Income tax expense
+5,029
+5,600
+4,596
+(C.2)
+Profit before tax
+188
+-47
+3,769
+198
+Financial income, net
+-288
+-418
+-589
+Finance costs
+476
+371
+787
+Finance income
+(C.4)
+4,993
+6,933
+2017
+(C.6)
+161
+Income Taxes..
+(C.5)
+161
+Financial Income, Net..
+(C.4)
+161
+Other Non-Operating Income/Expense, Net
+(C.3)
+.160
+Reconciliation of Segment Measures to the Consolidated Income Statements.
+(C.2)
+.156
+Results of Segments
+(C.1)
+156
+Financial Results
+-
+Earnings per Share.
+Section C
+.163
+-
+Non-Current Assets by Region.
+(D.6)
+0
+Equity Investments..
+(D.5)
+172
+Property, Plant, and Equipment
+(D.4)
+170
+Intangible Assets.
+(D.3)
+.167
+Goodwill.
+(D.2)
+.164
+Business Combinations
+(D.1)
+164
+Invested Capital
+Section D
+.154
+Restructuring.
+(B.6)
+(B.1)
+141
+.138
+(A.4)
+(A.3)
+(A.2)
+(A.1)
+Customers
+-
+Section A
+Basis for Preparation
+(IN.1)
+Notes
+133-137
+Consolidated Income Statements, Consolidated Statements of Comprehensive Income, Consolidated Statements of
+Financial Position, Consolidated Statements of Changes in Equity, Consolidated Statements of Cash Flows.
+Primary Financial Statements
+Consolidated Financial Statements IFRS
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Revenue...
+Trade and Other Receivables
+Capitalized Cost from Contracts with Customers
+Customer-Related Provisions
+.154
+Other Employee-Related Obligations
+(B.5)
+.152
+Pension Plans and Similar Obligations
+(B.4)
+.147
+Share-Based Payments
+(B.3)
+173
+.147
+(B.2)
+.147
+147
+.146
+.145
+.144
+141
+Employee Headcount....
+Section B - Employees
+Employee Benefits Expenses
+22
+(D.7)
+.173
+German Code of Corporate Governance.
+(G.10)
+202
+Scope of Consolidation, Subsidiaries and Other Equity Investments
+(G.9)
+202
+Events After the Reporting Period
+(G.8)
+202
+Principal Accountant Fees and Services
+(G.7)
+.201
+Related Party Transactions Other Than Board Compensation
+(G.6)
+.201
+Executive and Supervisory Board Compensation
+(G.5)
+.199
+Board of Directors
+209
+(G.4)
+Management's Annual Report on Internal Control over Financial Reporting in the Consolidated
+Financial Statements
+132
+2018
+2019
+Notes
+Additional
+Information
+Total revenue
+Services
+Cloud and software
+Software licenses and support
+Software support
+Software licenses
+Cloud
+€ millions, unless otherwise stated
+lil Consolidated Income Statements of SAP Group for the Years Ended December 31
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+Consolidated Financial Statements IFRS
+211
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+-
+Section F
+Liquidity...
+(F.2)
+(F.1)
+(E.3)
+175
+Total Equity
+(E.2)
+175
+175
+Capital Structure Management.
+Capital Structure, Financing, and Liquidity
+(E.1)
+-
+Section E
+.174
+Adoption of IFRS 16..
+(D.8)
+Management of Financial Risk Factors
+Financial Risk Factors and Risk Management.
+Fair Value Disclosures on Financial Instruments
+177
+182
+.182
+Management Report
+Stakeholders
+Combined Group
+To Our
+131
+Consolidated Financial Statements IFRS
+.197
+Other Litigation, Claims, and Legal Contingencies
+(G.3)
+Purchase Obligations
+.197
+(G.2)
+.197
+Prepaid Expenses and Other Tax Assets.
+(G.1)
+197
+Other Disclosures
+-
+Section G
+191
+Other Tax Liabilities....
+Hyperinflation
+172
+combinations
+0
+2
+102
+3,283
+-3,406
+Effect of foreign currency rates on cash and cash equivalents
+Net decrease/increase in cash and cash equivalents
+110
+97
+-218
+-3,313
+4,617
+309
+Cash and cash equivalents at the beginning of the period
+Cash and cash equivalents at the end of the period
+Net cash flows from financing activities
+Transactions with non-controlling interests
+0
+0
+(E.2)
+0
+0
+-500
+Proceeds from borrowings
+Repayments of borrowings
+(E.3)
+(E.3)
+(E.3)
+3,622
+27
+(E.3)
+-1,309
+-1,407
+-1,391
+Payments of lease liabilities.
+-403
+6,368
+8,627
+4,011
+3,702
+All amounts included in the Consolidated Financial Statements
+are reported in millions of euros (€ millions) except where otherwise
+stated. As figures are rounded, numbers presented throughout this
+document may not add up precisely to the totals we provide and
+percentages may not precisely reflect the absolute figures.
+Amounts disclosed in the Notes that are taken directly from our
+lil Consolidated Income Statements or our 44 Consolidated
+Statements of Financial Position are marked with the symbols
+land, respectively.
+Comparative Figures
+Effective January 1, 2018, we started to apply IFRS 15 'Revenue
+from Contracts with Customers' retrospectively, using the
+cumulative catch-up approach and the practical expedient to apply
+the new standard only to contracts that were not completed as at
+January 1, 2018. On adopting IFRS 15, SAP changed several of its
+accounting policies. Under the cumulative catch-up approach, the
+amounts for the financial year 2017 presented in the financial
+statements were not restated to conform to these policies.
+Also effective January 1, 2018, we started to apply IFRS 9
+*Financial Instruments' using the exception from full retrospective
+application. The impact from a different classification of financial
+assets, the new impairment rules, and the different treatment of cost
+of hedging were recognized in retained earnings of the opening
+balance sheet on January 1, 2018. Comparative figures for the
+financial year 2017 presented in the financial statements were not
+restated.
+Effective January 1, 2019 we apply IFRS 16 'Leases' using the
+modified retrospective transition approach. We recognized the
+cumulative effect of the initial application of the standard as an
+adjustment to the opening balance of retained earnings on the date
+of initial application while the prior-year figures for the financial
+years 2018 and 2017 were not adjusted. For more information about
+the application of IFRS 16, see Note (D.8).
+Our Executive Board approved the Consolidated Financial
+Statements on February 18, 2020, for submission to our Supervisory
+Board which approved the Consolidated Financial Statements on
+February 19, 2020.
+Accounting Policies, Management Judgments,
+and Sources of Estimation Uncertainty
+How We Present Our Accounting Policies,
+Judgments, and Estimates
+138
+Notes
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+To ease the understanding of our financial statements, we
+present the accounting policies, management judgments, and
+sources of estimation uncertainty (hereafter: accounting policies,
+judgments, and estimates) on a given subject together with other
+disclosures related to the same subject in the Note that deals with
+this subject. Accounting policies, judgments, and estimates that do
+not relate to a specific subject are presented in the following section.
+For easier identification of our accounting policies, judgments,
+and estimates, the respective disclosures are marked with the
+symbol and highlighted with a light gray box. They focus on the
+accounting choices made within the framework of the prevailing
+IFRS and refrain from repeating the underlying promulgated IFRS
+guidance, unless we consider it particularly important to the
+understanding of a Note's content.
+-45
+We have applied all IFRS standards and interpretations that were
+effective on and endorsed by the European Union (EU) as at
+December 31, 2019. There were no standards or interpretations as at
+December 31, 2019, impacting our Consolidated Financial
+Statements for the years ended December 31, 2019, 2018, and 2017,
+that were effective but not yet endorsed. Therefore, our
+Consolidated Financial Statements comply with both, IFRS as issued
+by the International Accounting Standards Board (IASB) and IFRS as
+endorsed by the EU.
+The registered seat of SAP SE is in Walldorf, Germany
+(Commercial Register of the Lower Court of Mannheim
+5,314
+8,627
+4,011
+The accompanying Notes are an integral part of these Consolidated Financial Statements.
+Under the adoption methods we chose for IFRS 9, 15, and 16, prior-year numbers are not restated to conform to the new accounting policies. For more information, see Note (IN.1).
+Consolidated Financial Statements IFRS
+137
+To Our
+HRB 719915). The Consolidated Financial Statements for 2019 of
+SAP SE and its subsidiaries (collectively, "we," "us," "our," "SAP,"
+"Group," and "Company") have been prepared in accordance with
+International Financial Reporting Standards (IFRS).
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+(IN.1) Basis for Preparation
+General Information
+Notes
+-7
+-17
+-1,499
+984
+-561
+718
+Share-based payments
+Interest paid
+Interest received
+-1,257
+Increase/decrease in contract liabilities
+-971
+-341
+-251
+-200
+97
+99
+88
+Income taxes paid, net of refunds
+-849
+-2,329
+63
+328
+14
+-67
+-32
+Other adjustments for non-cash items
+Decrease/increase in trade and other receivables
+-54
+3
+240
+-9
+136
+-309
+Decrease/increase in other assets
+Increase/decrease in trade payables, provisions, and other liabilities
+-583
+-477
+-325
+-1,469
+Additional
+Information
+-1,687
+Net cash flows from operating activities
+Purchase of equity or debt instruments of other entities
+-900
+-1,013
+-2,914
+Proceeds from sales of equity or debt instruments of other entities
+Net cash flows from investing activities
+Dividends paid
+97
+Dividends paid on non-controlling interests
+(E.2)
+778
+-7,021
+-1,790
+1,488
+3,272
+-3,066
+-1,112
+-1,671
+Purchase of treasury shares
+-1,332
+57
+Proceeds from sales of intangible assets or property, plant, and equipment
+3,496
+4,303
+5,045
+Cash flows for business combinations, net of cash and cash equivalents acquired
+(D.1)
+-6,215
+-2,140
+71
+-291
+61
+0
+0
+Purchase of intangible assets and property, plant, and equipment
+-817
+-1,458
+-1.275
+Proceeds from sale of subsidiaries or businesses
+Additions from business
+The following table provides an overview of where our accounting
+policies, management judgments, and estimates are disclosed:
+Capitalized Cost from Contracts with Customers
+Australian dollar
+AUD
+1.5995
+1.6220
+1.6106
+1.5799
+1.4794
+Cost Classification
+which we host our cloud solutions), and costs for third-party hosting
+services.
+Cost of Cloud and Software
+Cost of cloud and software includes the costs incurred in producing
+the goods and providing the services that generate cloud and
+software revenue. Consequently, this line item primarily includes
+employee expenses relating to these services, amortization of
+acquired intangibles, fees for third-party licenses, depreciation of our
+property, plant, and equipment (for example, of our data centers in
+Cost of Services
+Cost of services includes the costs incurred in providing the services
+that generate service revenue. Consequently, this line item primarily
+includes employee expenses and related training, system, and
+system administration costs, costs for third-party resources, and
+Notes
+139
+1.4644
+1.5302
+1.4857
+1.5605
+GBP
+0.8508
+0.8945
+0.8773
+0.8847
+0.8770
+Swiss franc
+To Our
+Stakeholders
+CHF
+1.1269
+1.1127
+1.1549
+1.1159
+Canadian dollar
+CAD
+1.4598
+1.0854
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+(C.5)
+Accounting for income taxes
+General and administration includes the costs related to finance and
+administrative functions, human resources, and general
+management as long as they are not directly attributable to one of
+the other operating expense line items.
+(D.1)
+Accounting for business combinations
+(D.2)
+Accounting for goodwill
+General and Administration
+(D.3)
+The preparation of the Consolidated Financial Statements requires
+our management to make judgments, estimates, and assumptions
+that affect the application of accounting policies and the reported
+amounts of assets, liabilities, revenues, and expenses, as well as
+disclosure of contingent liabilities.
+We base our judgments, estimates, and assumptions on historical
+and forecast information, and on regional and industry economic
+conditions in which we or our customers operate. Changes to these
+conditions could adversely affect our estimates. Although we believe
+Accounting for intangible assets (including recognition of
+internally generated intangible assets from development)
+Our management periodically discusses these significant
+accounting policies with the Audit Committee of our Supervisory
+Board.
+New Accounting Standards Not Yet Adopted
+The IASB has - on top of a new conceptual framework – issued
+various amendments to IFRS standards (such as IFRS 3 (definition
+of a business), and IFRS 9 (benchmark reform)) that are relevant for
+SAP but not yet effective. We are currently in the process of
+assessing the impact on SAP, but do not expect material effects on
+our financial position or results of operations.
+140
+Notes
+Management Judgments and Sources of
+Estimation Uncertainty
+Pound sterling
+Accounting for share-based payments
+Accounting for legal contingencies
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+costs for enabling mobile information and mobile commerce
+services.
+Research and Development
+Research and development includes the costs incurred by activities
+related to the development of software solutions (new products,
+updates, and enhancements) including resource and hardware costs
+for the development systems. For more information about the
+recognition of internally generated intangible assets from
+development, see Note (D.3).
+Sales and Marketing
+we have made reasonable estimates about the ultimate resolution of
+the underlying uncertainties, no assurance can be given that the
+final outcome of these matters will be consistent with what is
+reflected in our recognized assets, liabilities, revenues, and expenses
+and disclosed contingent liabilities. Actual results could differ from
+original estimates.
+(B.3)
+The accounting policies that most frequently or significantly require
+us to make judgments, estimates, and assumptions, and therefore
+are critical to understanding our results of operations, include the
+following:
+Revenue recognition
+Valuation of trade receivables
+Note
+Sales and marketing includes the costs incurred for the selling
+activities (such as sales commissions and amortization of
+capitalized sales commissions) and marketing activities related to
+our software and cloud solutions and our service portfolio.
+(A.1)
+(A.2)
+(A.4), (G.3)
+Significant Accounting Policies
+126.85
+130.41
+122.06
+(C.5)
+Income Taxes
+(D.1)
+Business Combinations
+(D.2)
+Goodwill
+(D.3)
+Results of Segments
+Intangible Assets
+Property, Plant, and Equipment
+(D.5)
+Equity Investments
+(D.8)
+Adoption of IFRS 16
+(E.3)
+Liquidity
+(D.4)
+(F.1)
+(C.1)
+(B.6)
+Customer-Related Provisions
+Note
+> Accounting Policies, Judgments, and Estimates
+(IN.1)
+Basis for Preparation
+(A.1)
+Revenue
+Restructuring
+(A.2)
+(A.4)
+(B.3)
+Share-Based Payments
+(B.4)
+Pension Plans and Similar Obligations
+(B.5)
+Other Employee-Related Obligations
+(A.3)
+Trade and Other Receivables
+(F.2)
+(G.3)
+2019
+2018
+2019
+2018
+2017
+U.S. dollar
+USD
+Annual Average Exchange Rate
+1.1234
+1.1196
+1.1815
+1.1315
+Japanese yen
+JPY
+121.94
+125.85
+1.1450
+(G.1)
+Middle Rate
+as at 12/31
+Exchange Rates
+(G.5)
+General Accounting Policies
+Bases of Measurement
+The Consolidated Financial Statements have been prepared on the
+historical cost basis except for the following:
+Derivative financial instruments, liabilities for cash-settled share-
+based payments, and financial assets with cash flows that are not
+solely payments of principal or interest are measured at fair
+value.
+Post-employment benefits are measured at the present value of
+the defined benefit obligations less the fair value of the plan
+assets.
+Monetary assets and liabilities denominated in foreign currencies
+are translated at period-end exchange rates.
+Equivalent to €1
+The financial statements of our subsidiaries to which
+hyperinflation accounting applies.
+Fair Value Disclosures on Financial Instruments
+Prepaid Expenses and Other Tax Assets
+Other Litigation, Claims, and Legal Contingencies
+Executive and Supervisory Board Compensation
+Foreign Currencies and Hyperinflation
+Income and expenses and operating cash flows of our foreign
+subsidiaries that use a functional currency other than the Euro are
+translated at average rates of foreign exchange (FX) computed on a
+monthly basis. Exchange differences resulting from foreign currency
+transactions are recognized in other non-operating income/expense,
+net.
+We apply hyperinflation accounting for our subsidiaries in
+Argentina and Venezuela by restating the financial statements of
+these subsidiaries for the current period to account for changes in
+the general purchasing power of the local currency based on
+relevant price indexes at the reporting date. The restated financial
+statements of our subsidiaries in Argentina and Venezuela are
+translated at closing rates.
+The exchange rates of key currencies affecting the Company
+were as follows:
+Financial Risk Factors and Risk Management
+Decrease/increase in allowances on trade receivables
+12
+4,088
+3,268
+536
+3,804
+50
+3,854
+Share-based payments
+2
+2
+Dividends
+Comprehensive income
+-1,790
+-19
+Hyperinflation
+Other changes
+-29
+-2
+-29
+-1,810
+-29
+-2
+0
+-2
+-1,790
+12/31/2019
+483
+536
+28,877
+Adoption of IFRS 16
+-71
+-71
+-71
+1/1/2019
+1,229
+543
+Profit after tax
+483
+27,336
+3,321
+-1,580
+28,761
+45
+28,807
+3,321
+50
+3,370
+Other comprehensive income
+-52
+1,234
+45
+1,229
+28,783
+Depreciation and amortization
+(D.2)-(D.4)
+1,872
+1,362
+1.272
+Share-based payment expense
+(B.3)
+1,835
+830
+Adjustments to reconcile profit after tax to net cash flow from operating activities:
+1,120
+(C.5)
+1,226
+1,511
+983
+Financial income, net
+(C.4)
+-198
+47
+-188
+Income tax expense
+545
+4,046
+.Iil Profit after tax
+1,770
+-1,580
+30,746
+76
+30,822
+The accompanying Notes are an integral part of these Consolidated Financial Statements. Under the adoption methods we chose for IFRS 9, 15, and 16, prior-year numbers are not
+restated to conform to the new accounting policies. For more information, see Note (IN.1).
+136
+Consolidated Financial Statements IFRS
+To Our
+Stakeholders
+3,370
+Combined Group
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+Consolidated Statements of Cash Flows of SAP Group for the Years Ended December 31
+€ millions
+Notes
+2019
+2018
+2017
+Management Report
+28,832
+2
+1,234
+-25
+-25
+-160
+135
+Adoption of IFRS 9
+83
+83
+83
+Adoption of IFRS 15
+1/1/2018
+25,515
+25,484
+-1,591
+508
+24,769
+570
+1,229
+12/31/2017
+4
+2
+31
+2
+1,229
+24,987
+4,980
+887
+4,093
+898
+898
+887
+11
+Comprehensive income
+Other comprehensive income
+570
+4,088
+4,083
+4,083
+Profit after tax
+25,573
+31
+-1,580
+25,542
+-1,591
+347
+6
+2
+2
+-33
+Hyperinflation
+7
+-8
+Changes in non-controlling
+7
+7
+-8
+-8
+0
+19
+19
+interests
+Other changes
+-2
+-2
+3
+1
+12/31/2018
+1,229
+543
+27,407
+Shares to be issued
+35
+under share-based payments
+24
+-17
+-17
+-33
+-17
+Other changes
+6
+4,986
+Share-based payments
+-40
+24
+-40
+Dividends
+-1,671
+-1,671
+-13
+-1,684
+Reissuance of treasury shares
+13
+11
+-40
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Combined Group
+Management Report
+143
+3,945
+For information about the breakdown of revenue by segment and segment revenue by region, see Note (C.1).
+Cloud Revenue
+.Iil SAP Group
+APJ
+Americas
+EMEA
+€ millions
+23,461
+24,708
+27,553
+.Iil SAP Group
+3,699
+3,891
+Cloud and Software Revenue
+4,254
+2,814
+2,928
+3,074
+Rest of APJ
+885
+963
+1,180
+Japan
+9,347
+9,713
+11,194
+Additional
+Information
+APJ
+Section A Customers
+2019
+2017
+19,549
+20,622
+23,012
+3,769
+4,993
+6,933
+3.124
+3,310
+3,629
+419
+611
+872
+2018
+7,666
+9,172
+2,321
+2,941
+8,759
+9,339
+10,211
+1,029
+1,441
+2,115
+2017
+2018
+2019
+7,973
+Remaining Performance Obligations
+7,582
+The transaction price allocated to performance obligations that
+are unsatisfied or partially unsatisfied as at December 31, 2019, is
+€35.5 billion (December 31, 2018: €31.3 billion). This amount mostly
+comprises obligations to provide software support or cloud
+subscriptions services, as the respective contracts typically have
+durations of one or multiple years.
+Current
+Non-Current
+Total
+7,561
+21
+Americas
+6,182
+6
+6,188
+346
+108
+454
+180
+112
+Total
+293
+129
+8,037
+6,362
+118
+6,480
+Contract assets as at December 31, 2019, were €234 million
+(December 31, 2018: €116 million).
+For more information about financial risk, how we manage credit
+risk, and details of our trade receivables and contract assets
+allowances, see Note (F.1).
+(A.3) Capitalized Cost from Contracts
+with Customers
+Costs of Obtaining Customer Contracts
+Capitalized costs from customer contracts are classified as Other
+non-financial assets in our statement of financial position.
+The capitalized assets for the incremental costs of obtaining a
+customer contract primarily consist of sales commissions earned by
+our sales force. Judgment is required in determining the amounts to
+be capitalized, particularly where the commissions are based on
+cumulative targets and where commissions relate to multiple
+performance obligations in one customer contract. We capitalize
+such cumulative target commissions for all customer contracts that
+count towards the cumulative target but only if nothing other than
+obtaining customer contracts can contribute to achieving the
+cumulative target. Commissions for contracts with multiple
+performance obligations or for probable renewals thereof are
+allocated to these performance obligations and probable renewals
+relative to the respective standalone selling price.
+Typically, we either do not pay sales commissions for customer
+contract renewals or such commissions are not commensurate with
+the commissions paid for new contracts. Thus, the commissions
+paid for renewable new contracts also relate to expected renewals of
+these contracts. Consequently, we amortize sales commissions paid
+for new customer contracts on a straight-line basis over the
+expected contract life including probable contract renewals.
+Judgment is required in estimating these contract lives. In exercising
+this judgment, we consider our respective renewal history adjusted
+for indications that the renewal history is not fully indicative of future
+renewals. The amortization periods range from 18 months to 12
+years depending on the type of offering. In 2019, the amortization
+period for commissions granted for on premise support contracts
+was adjusted from eight years to 12 years based on changes in our
+renewal history. Amortization of the capitalized costs of obtaining
+customer contracts is classified as sales and marketing expense.
+We expense incremental costs of obtaining a customer contract as
+incurred if we expect an amortization period of one year or less.
+Costs to Fulfill Customer Contracts
+Capitalized costs incurred to fulfill customer contracts mainly
+consist of direct costs for custom cloud development contracts as
+far as these costs are not in scope of other standards than IFRS 15.
+These costs are amortized after completion of the development on a
+straight-line basis over the expected life of the cloud subscription
+contract and including expected renewals. Judgment is required in
+evaluating whether costs are direct or indirect and in estimating
+contract lives. Derived from our respective history, the amortization
+period is typically six years.
+7,908
+Amounts of a customer contract's transaction price that are
+allocated to the remaining performance obligations represent
+contracted revenue that has not yet been recognized. They include
+amounts recognized as contract liabilities and amounts that are
+contracted but not yet due.
+Non-Current
+2018
+The majority of this amount is expected to be recognized as
+revenue over the next 12 months following the respective balance
+sheet date. This estimate is based on our best judgment, as it needs
+to consider estimates of possible future contract modifications. The
+amount of transaction price allocated to the remaining performance
+obligations, and changes in this amount over time, are impacted by,
+among others:
+Currency fluctuations
+The contract period of our cloud and software support contracts
+remaining at the balance sheet date and thus by the timing of
+contract renewals
+Performance Obligations Satisfied in Previous
+Years
+Revenue recognized in the reporting period for performance
+obligations satisfied in earlier periods was €77 million
+(December 31, 2018: €132 million), mainly resulting from changes in
+estimates related to percentage-of-completion-based contracts and
+changes in estimates of variable considerations.
+Contract Balances
+Contract liabilities as at December 31, 2019, were €4.4 billion
+(December 31, 2018: €3.1 billion).
+Increases in contract liabilities mainly result from billing and
+invoices becoming due (€9.0 billion). Decreases in contract liabilities
+mainly result from satisfying performance obligations (€8.0 billion).
+The Qualtrics acquisition contributed to the increase in the contract
+liabilities balance (for more information, see Note (D.1)).
+The amount of revenue recognized in the reporting period that
+was included in the contract liability balance at the beginning of the
+reporting period was €2.6 billion (December 31, 2018: €3.2 billion).
+(A.2) Trade and Other Receivables
+Accounting for Trade and Other Receivables
+We measure trade receivables and contract assets from contracts
+with customers at amortized cost less expected credit losses. We
+account for expected credit losses by recording an allowance on a
+portfolio basis. We apply the simplified impairment approach in that,
+on initial measurement of the receivables, we consider all credit
+losses that are expected to occur during the lifetime of the
+receivables. We use a provision matrix to estimate these losses.
+Additionally, we recognize allowances for individual receivables if
+there is objective evidence of credit impairment.
+Account balances are written off either partially or in full if we judge
+that the likelihood of recovery is remote.
+For information about how the default risk for trade receivables is
+analyzed and managed, how the loss rates for the provision matrix
+are determined, how credit impairment is determined and what our
+criteria for write-offs are, see the section on credit risk in Note (F.1).
+In our Consolidated Income Statements, net gains/losses include
+income/expenses from expected credit loss allowances from
+applying the provision matrix, from credit-impaired customer
+balances, and from write-offs and related reversals which are
+included in other operating income/expense, net. Gains/losses from
+foreign currency exchange rate fluctuations are included in Other
+non-operating income/expense, net.
+Current
+Determining our expected credit loss allowance involves significant
+judgment. In this judgment, we primarily consider our historical
+experience with credit losses in the respective provision matrix risk
+class and current data on overdue receivables. We expect that our
+historical default rates represent a reasonable approximation for
+future expected customer defaults. Besides historical data, our
+judgment used in developing the provision matrix considers
+reasonable and supportable forward-looking information (for
+example, changes in country risk ratings, and fluctuations in credit
+default swaps of the countries in which our customers are located).
+The assessment of whether a receivable is collectible involves the
+use of judgment and requires us to make assumptions about
+customer defaults that could change significantly.
+144
+Section A Customers
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Trade and Other Receivables
+€ millions
+Trade receivables, net
+Other receivables
+Total
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+2019
+In applying this judgment, we evaluate available information about a
+particular customer's financial situation to determine whether it is
+probable that a credit loss had occurred and, if so, whether the
+amount of the loss is reasonably estimable. If it is, an allowance for
+that specific account is then necessary. Basing the expected credit
+loss allowance for the remaining receivables primarily on our
+historical loss experience likewise requires judgment, as history may
+not be indicative of future development. Also, including reasonable
+and supportable forward-looking information in the loss rates of the
+expected credit loss allowance requires judgment, as they may not
+provide a reliable prognosis for future development.
+1,911
+To Our
+Stakeholders
+2,109
+Additional
+Information
+distinct bundle of goods and services (combined performance
+obligation).
+When selling goods or services, we frequently grant customers
+options to acquire additional goods or services (for example,
+renewals of renewable offerings, or additional volumes of purchased
+software). We apply judgment in determining whether such options
+provide a material right to the customer that the customer would not
+receive without entering into that contract (material right options).
+In this judgment, we consider, for example, whether the options
+entitle the customer to a discount that exceeds the discount granted
+for the respective goods or services sold together with the option.
+whether contractual renewal prices are substantive, we have
+established floor prices that we use as SSPs whenever the
+contractual renewal prices are below these floor prices. In judging
+whether contracts are expected to renew at their contractual
+renewal prices, we rely on our respective renewal history. The SSPs
+of material right options depend on the probability of option
+exercise. In estimating these probabilities, we apply judgment
+considering historical exercise patterns.
+We review the SSPs periodically or whenever facts and
+circumstances change to ensure the most objective input
+parameters available are used.
+Determination of Transaction Price
+We apply judgment in determining the amount to which we expect to
+be entitled in exchange for transferring promised goods or services
+to a customer. This includes estimates as to whether and to what
+extent subsequent concessions or payments may be granted to
+customers and whether the customer is expected to pay the
+contractual fees. In this judgment, we consider our history both with
+the respective customer and more broadly.
+Our typical cloud services do not provide the customer with a
+software license because the customer does not have the right to
+terminate the hosting contract and take possession of the software.
+Consequently, cloud fees that are based on transaction volumes are
+considered in the transaction price based on estimates rather than
+being accounted for as sales-based license royalties.
+Only very rarely do our contracts include significant financing
+components. We do not account for financing components if the
+period between when SAP transfers the promised goods or services
+to the customer and when the customer pays for those goods or
+services is one year or less.
+Allocation of Transaction Price
+We have established a hierarchy to identify the standalone selling
+prices (SSPs) that we use to allocate the transaction price of a
+customer contract to the performance obligations in the contract.
+Where standalone selling prices for an offering are observable
+and reasonably consistent across customers (that is, not highly
+variable), our SSP estimates are derived from our respective
+pricing history. Typically, our standardized support offerings and
+our professional service offerings follow this approach.
+Where sales prices for an offering are not directly observable or
+highly variable across customers, we use estimation techniques.
+For renewable offerings with highly variable pricing, these
+techniques consider the individual contract's expected renewal
+price as far as this price is substantive. Typically, our cloud
+offerings follow this approach. For non-renewable offerings, these
+estimations follow a cost-plus-margin approach.
+For offerings that lack renewals, have highly variable pricing, and
+lack substantial direct costs to estimate based on a cost-plus-
+margin approach, we allocate the transaction price by applying a
+residual approach. We use this technique in particular for our
+standard on-premise software offerings.
+Judgment is required when estimating SSPs. To judge whether the
+historical pricing of our goods and services is highly variable, we
+have established thresholds of pricing variability. For judging
+Further Information on Economic,
+Environmental, and Social Performance
+Recognition of Revenue
+Software revenue is recognized at a point in time or over time
+depending on whether we deliver standard software, customer-
+specific software, or software subscription contracts that combine
+the delivery of software and the obligation to deliver, in the future,
+unspecified software products:
+Licenses for our standard on-premise software products are
+typically delivered by providing the customer with access to
+download the software. The license period starts when such
+access is granted. We recognize revenue for these on-premise
+licenses at the point in time when the customer has access to
+and thus control over the software. In judging whether our on-
+premise software offerings grant customers a right to use, rather
+than a right to access, our intellectual property, we have
+considered the usefulness of our software without subsequent
+updates to it.
+Typically, our customer-specific on-premise software
+development agreements:
+"
+■
+Are for software developed for specific needs of individual
+customers and therefore it does not have any alternative use
+for us
+Provide us with an enforceable right to payment for
+performance completed to date
+For such development agreements, we recognize revenue over
+time as the software development progresses. Judgment is
+required in identifying an appropriate method to measure the
+progress toward complete satisfaction of such performance
+obligations. We typically measure progress of our development
+agreements based on the direct costs incurred to date in
+developing the software as a percentage of the total reasonably
+estimated direct costs to fully complete the development work
+(percentage-of-completion method). This method of measuring
+progress faithfully depicts the transfer of the development
+services to the customer, as substantially all of these costs are
+cost of the staff or third parties performing the development
+work. In estimating the total cost to fully complete the
+development work, we consider our history with similar projects.
+142
+Section A Customers
+To Our
+Stakeholders
+Amortization of capitalized costs to fulfill contracts for custom cloud
+applications and extensions is included in the cost of cloud.
+Other¹)
+Share price
+Cloud revenue is recognized over time as the services are performed.
+Where our performance obligation is the grant of a right to
+continuously access and use a cloud offering for a certain term,
+revenue is recognized based on time elapsed and thus ratably over
+this term.
+86.93
+Consolidated Financial
+Statements IFRS
+Combined Group
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Section A - Customers
+Additional
+Information
+This section discusses disclosures related to contracts with our
+customers. These include but are not limited to explanations of how
+we recognize revenue, revenue disaggregation, and information
+about our trade receivables and customer-related obligations.
+enhancements as well as technical product support services for
+on-premise software products.
+Services revenue primarily represents fees earned from professional
+consulting services, premium support services, training services,
+and messaging services.
+(A.1) Revenue
+> Accounting for Revenue from Contracts with Customers
+Classes of Revenue
+We derive our revenue from fees charged to our customers for the
+use of our hosted cloud offerings, for licenses to our on-premise
+software products, and for standardized and premium support
+services, consulting, customer-specific software developments,
+training, and other services.
+Cloud and software revenue, as presented in our Consolidated
+Income Statements, is the sum of our cloud revenue, our software
+license revenue, and our software support revenue.
+Management Report
+Cloud revenue represents fees earned from providing customers
+with any of the following:
+Software as a service (SaaS), that is, a right to use software
+functionality (including standard functionalities and custom
+cloud applications and extensions) in a cloud-based
+infrastructure hosted by SAP or third parties engaged by SAP,
+where the customer does not have the right to terminate the
+hosting contract and take possession of the software to either
+run it on its own IT infrastructure or to engage a third-party
+provider unrelated to SAP to host and manage the software;
+SaaS also includes transaction and agent fees for transactions
+that customers of our network business execute on our cloud-
+based transaction platforms.
+Platform as a service (PaaS), that is, access to a cloud-based
+infrastructure to develop, run, and manage applications
+Infrastructure as a service (laaS), that is, hosting and related
+application management services for software hosted by SAP
+or third parties engaged by SAP
+Premium cloud support beyond the regular support that is
+embedded in the basic cloud subscription fees
+Software license revenue represents fees earned from the sale or
+license of software to customers for use on the customer's
+premises, in other words, where the customer has the right to
+take possession of the software for installation on the customer's
+premises or on hardware of third-party hosting providers
+unrelated to SAP (on-premise software). Software license
+revenue includes revenue from both the sale of our standard
+software products and customer-specific on-premise-software
+development agreements.
+Software support revenue represents fees earned from providing
+customers with standardized support services that comprise
+unspecified future software updates, upgrades, and
+Identification of Contract
+We frequently enter into multiple contracts with the same customer.
+For accounting purposes, we treat these contracts as a single
+contract if they are entered into at or near the same time and are
+economically interrelated. We do not combine contracts with closing
+days more than three months apart because we do not consider
+them being entered into near the same time. Judgment is required in
+evaluating whether various contracts are interrelated, which
+includes considerations as to whether they were negotiated as a
+package with a single commercial objective, whether the amount of
+consideration on one contract is dependent on the performance of
+the other contract, or if some or all goods in the contracts are a
+single performance obligation.
+New arrangements with existing customers can be either a new
+contract or the modification of prior contracts with the customer.
+Our respective judgment in making this determination considers
+whether there is a connection between the new arrangement and
+the pre-existing contracts, whether the goods and services under
+the new arrangement are highly interrelated with the goods and
+services sold under prior contracts, and how the goods and services
+under the new arrangement are priced. In determining whether a
+change in transaction price represents a contract modification or a
+change in variable consideration, we examine whether the change in
+price results from changing the contract or from applying
+unchanged existing contract provisions.
+Identification of Performance Obligations
+Our customer contracts often include various products and services.
+Typically, the products and services outlined in the Classes of
+Revenue section qualify as separate performance obligations and
+the portion of the contractual fee allocated to them is recognized
+separately. Judgment is required, however, in determining whether a
+good or service is considered a separate performance obligation. In
+particular for our professional services and implementation
+activities, judgment is required to evaluate whether such services
+significantly integrate, customize, or modify the on-premise software
+or cloud service to which they relate. In this context, we consider the
+nature of the services and their volume relative to the volume of the
+on-premise software or cloud service to which they relate. In general,
+the implementation services for our cloud services go beyond pure
+setup activities and qualify as separate performance obligations.
+Similarly, our on-premise implementation services and our custom
+development services typically qualify as separate performance
+obligations. Non-distinct goods and services are combined into one
+Section A Customers
+141
+To Our
+Stakeholders
+■
+1,832
+Risk-free interest rate, depending on maturity (in %)
+86.93
+-0.67 to -0.25
+Revenue for combined performance obligations is recognized over
+the longest period of all promises in the combined performance
+obligation.
+Judgment is also required to determine whether revenue is to be
+recognized at a point in time or over time. For performance
+obligations satisfied over time, we need to measure progress using
+the method that best reflects SAP's performance. When using cost
+incurred as a measure of progress for recognizing revenue over time,
+we apply judgment in estimating the total cost to satisfy the
+performance obligation.
+Major Revenue Classes by Region
+All of the judgments and estimates mentioned above can
+significantly impact the timing and amount of revenue to be
+recognized.
+Contract Balances
+We recognize trade receivables for performance obligations satisfied
+over time gradually as the performance obligation is satisfied and in
+full once the invoice is due. Judgment is required in determining
+whether a right to consideration is unconditional and thus qualifies
+as a receivable.
+Contract liabilities primarily reflect invoices due or payments
+received in advance of revenue recognition.
+Typically, we invoice fees for on-premise standard software on
+contract closure and software delivery. Periodic fixed fees for cloud
+subscription services, software support services, and other multi-
+period agreements are typically invoiced yearly or quarterly in
+advance. Such fee prepayments account for the majority of our
+contract liability balance. Fees based on actual transaction volumes
+for cloud subscriptions and fees charged for non-periodical services
+are invoiced as the services are delivered. While payment terms and
+conditions vary by contract type and region, our terms typically
+require payment within 30 to 60 days.
+Geographic Information
+The amounts for revenue by region in the following tables are
+based on the location of customers. The regions in the following
+table are EMEA (Europe, Middle East, and Africa), Americas (North
+America and Latin America), and APJ (Asia Pacific Japan).
+Total Revenue by Region
+€ millions
+Germany
+Rest of EMEA
+2019
+2018
+Service revenue is typically recognized over time. Where we stand
+ready to provide the service (such as access to learning content), we
+recognize revenue based on time elapsed and thus ratably over the
+service period. Consumption-based services (such as separately
+identifiable consulting services and premium support services,
+messaging services, and classroom training services) are recognized
+over time as the services are utilized, typically following the
+percentage-of-completion method or ratably. When using the
+percentage-of-completion method, we typically measure the
+progress toward complete satisfaction of the performance obligation
+in the same way and with the same reasoning and judgment as we
+do for customer-specific on-premise software development
+agreements. We apply judgment in determining whether a service
+qualifies as a stand-ready service or as a consumption-based
+service.
+2017
+3,658
+3,352
+8,158
+7,446
+7,063
+EMEA
+12,105
+11,104
+10,415
+United States
+9,085
+7,880
+7,436
+Rest of Americas
+3,948
+-0.70 to -0.55
+Software support revenue is typically recognized based on time
+elapsed and thus ratably over the term of the support arrangement.
+Under our standardized support services, our performance
+obligation is to stand ready to provide technical product support and
+unspecified updates, upgrades, and enhancements on a when-and-
+if-available basis. Our customers simultaneously receive and
+consume the benefits of these support services as we perform.
+Additional
+Information
+86.93
+86.93
+-0.69 to -0.31
+NA
+Expected volatility (in %)
+17.9 to 21.4
+22.8 to 38.5
+NA
+NA
+Expected dividend yield (in %)
+1.63
+1.63
+1.63
+ΝΑ
+For agreements that combine the delivery of software and the
+obligation to deliver, in the future, unspecific software products,
+we recognize revenue at a point in time for licenses that are made
+immediately accessible to the customer. We recognize revenue
+ratably over the term of the software subscription contract for
+the unspecified software products, as our performance obligation
+is to stand ready to deliver such products on a when-and-if-
+available basis.
+Weighted average remaining life of awards outstanding as at 12/31/2018
+1.2
+1.0
+0.1
+(in years)
+1)
+For these awards, the fair value is calculated by subtracting the net present value of expected future dividend payments, if any, until maturity of the respective award
+from the prevailing share price as at the valuation date.
+For the SOP 2010, expected volatility of the SAP share price is
+based on a blend of implied volatility from traded options with
+corresponding remaining lives and exercise prices as well as
+historical volatility with the same expected life as the options
+granted.
+For the LTI 2016 Plan valuation, the Peer Group Index price on
+December 31, 2019, was US$363.63 (2018: US$277.92); the
+expected dividend yield of the index of 1.17% (2018: 1.30%), the
+expected volatility of the index of 18% to 22% (2018: 19% to 24%),
+and the expected correlation of the SAP share price and the index
+price of 38% to 40% (2018: 36% to 42%) are based on historical
+data for the SAP share price and index price.
+The expected remaining life of the options reflects both the
+contractual term and the expected, or historical, exercise behavior.
+The risk-free interest rate is derived from German government
+bonds with a similar duration. The SAP dividend yield is based on
+expected future dividends.
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+2.4
+€ millions
+Total
+2019
+Risk-free interest rate, depending on maturity (in %)
+Expected volatility (in %)
+-0.68 to -0.57
+20.4 to 24.8
+120.32
+-0.25 to -0.08
+120.32
+120.32
+-0.68 to -0.31
+-0.55 to -0.35
+27.4 to 35.8
+NA
+ΝΑ
+Expected dividend yield (in %)
+1.26
+1.26
+1.26
+1.26
+Weighted average remaining life of awards outstanding as at 12/31/2019
+(in years)
+1.9
+0.3
+1.0
+1.7
+120.32
+1) For these awards, the fair value is calculated by subtracting the net present value of expected future dividend payments, if any, until maturity of the respective award from
+the prevailing share price as at the valuation date.
+Share price
+Other¹)
+830
+330
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+The valuation of our outstanding cash-settled plans was based on the following parameters and assumptions:
+Fair Value and Parameters Used at Year End 2019 for Cash-Settled Plans
+€, unless otherwise stated
+LTI 2016 Plan
+(2016-2019
+SOP 2010
+(2014-2015
+Tranches)
+RSU Plan
+(2016-2019
+Tranches)
+Qualtrics
+Rights
+94.06
+49.51
+118.72
+37.55
+Tranches)
+Weighted average fair value as at 12/31/2019
+Information how fair value was measured at measurement date
+Option pricing model used
+Monte Carlo
+Monte Carlo
+Other¹)
+Fair Value and Parameters Used at Year End 2018 for Cash-Settled Plans
+€, unless otherwise stated
+LTI 2016 Plan
+(2016-2018
+Tranches)
+99,157 40,496
+29,368 27,092
+42,697
+SAP Group
+(months' end
+average)
+289
+7
+133
+149
+2,043
+434
+952
+657
+2,113
+137
+1,638
+338
+Thereof
+acquisitions
+(12/31)
+88,543
+24,359
+25,827
+27,454 25,759 93,709 37,512 25,459 24,029
+86,999
+(B.2) Employee Benefits Expenses
+Components of Employee Benefits Expenses
+SOP 2010
+(2013-2015
+Tranches)
+Capitalized Cost from Contracts with Customers
+RSU Plan
+(2015-2018
+Tranches)
+LTI 2015 Plan
+(2015
+Tranche)
+65.89
+20.67
+85.24
+86.93
+Weighted average fair value as at 12/31/2018
+312
+Information how fair value was measured at measurement date
+Monte Carlo
+Monte Carlo
+Other¹)
+369
+Pension expenses
+2019
+2018
+2017
+10,031
+9,025 8,693
+1,477 1,339 1,281
+1,835
+1,120
+Share-based payment expenses
+Social security expenses
+Salaries
+€ millions
+Option pricing model used
+Employee-related restructuring expenses
+1,111
+19
+To Our
+Stakeholders
+- Employees
+Section B -
+148
+If an Executive Board member's service contract is terminated
+before the end of the third year following the year in which the share
+units were granted, both the RSUs and PSUs are forfeited in whole or
+in part, depending on the circumstances of the relevant resignation
+from office or termination of the service contract.
+The number of PSUs ultimately paid out depends on the
+performance of the SAP share - absolute and relative to the Peer
+Group Index. In contrast, the final number of RSUs is fixed. SAP's
+absolute share price performance is measured by comparing the
+grant price against the payout price. If the SAP share price
+performance equals the Peer Group Index performance over the
+same period, the performance factor is set at 100%. If the SAP share
+price performs better than the Peer Group Index (measured as
+difference between SAP share price performance and Peer Group
+Index performance), the performance factor is increased by the
+percentage point of the outperformance of the SAP share price. The
+percentage point is doubled if, additionally, the payout price is higher
+than the grant price. The performance factor is capped at 150%. If
+the Peer Group Index performs better than the SAP share price, the
+performance factor is decreased by the percentage point of the
+outperformance of the Peer Group Index. All PSUs lapse if the
+performance factor is below 50%.
+All share units granted in this way, comprising 60% Performance
+Share Units (PSUs) and 40% Retention Share Units (RSUs), have a
+vesting period of approximately four years. At the end of the vesting
+period, the corresponding share units are non-forfeitable. The
+payout price used for the settlement is the arithmetic mean of the
+XETRA closing prices of the SAP share on the 20 trading days
+following the publication of SAP's fourth-quarter results subsequent
+to the end of the vesting period. The payout price is capped at 300%
+of the grant price. The LTI tranche is cash-settled and paid in euros
+after the Annual General Shareholders' Meeting of the
+corresponding year.
+The virtual share program came into effect on January 1, 2016. An
+LTI tranche is granted annually and has a term of four years (2016-
+2019 tranches). Each grant starts with determining a grant amount
+in euros. The grant amount is based on the Executive Board
+members' contractual LTI target amount and the operating profit
+target achievement for the previous year. The Supervisory Board
+sets the grant amount at a level between 80% and 120% of the
+contractual LTI target amount, taking into account the operating
+profit target achievement. This grant amount is converted into
+virtual shares, referred to as share units, by dividing the grant
+amount by the grant price. The grant price is the arithmetic mean of
+the XETRA closing prices of the SAP share on the 20 trading days
+following the publication of SAP's fourth-quarter results.
+The purpose of the LTI 2016 Plan is to reward our Executive
+Board members for the annual achievement of SAP's operating
+profit (non-IFRS, at constant currency) targets, to ensure long-term
+retention of our Executive Board members, and to reward them for
+the long-term SAP share price performance as compared to its main
+peer group (Peer Group).
+a) Cash-Settled Share-Based Payments
+Our major share-based payment plans are described below.
+Long-Term Incentive 2016 Plan (LTI 2016 Plan)
+In 2019, we paid €79 million in share-based payments that
+became fully vested because of terminations due to operational
+reasons in connection with our restructuring plan. These payments
+as well as the expense portion initially allocated to future services
+were classified as share-based payments and not as restructuring
+expenses.
+157
+156
+171
+Thereof equity-settled share-
+based payments
+963
+674
+1,664
+Thereof cash-settled share-
+based payments
+1,120
+830
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+149
+Section B - Employees
+From January 23, 2019, through December 31, 2019, 7.8 million
+Qualtrics Rights vested. The unrecognized expense related to
+Qualtrics Rights was €225 million as at December 31, 2019, and will
+be recognized over a remaining vesting period of up to four years.
+The unvested RSUs include grants as at the closing date of
+6.1 million replacement RSUs. These RSUs have a two-year service
+period.
+There were 24.7 million unvested RSAs, RSUs, PSUs, and options
+as at the closing date of the Qualtrics acquisition, representing a fair
+value of €793 million after considering expected forfeitures
+dependent on grant dates and remaining vesting periods. Of the
+total fair value, €237 million was allocated to consideration
+transferred, while €556 million was allocated to future services to be
+provided. Post-acquisition compensation expense will be recognized
+as the awards vest over the remainder of the original vesting terms.
+The remaining vesting periods for such Qualtrics Rights are in a
+range of up to five years from closing date.
+-RSUS, PSUs, and options granted in 2018 and thereafter and
+unvested as at the closing date of the Qualtrics acquisition were
+converted into awards that are indexed to SAP's share price as
+follows: SAP's consideration per share (US$35.00) was divided
+by the average closing price of the SAP share over the five trading
+days on the closing date (€91.28), translated into US$
+(US$103.75), and the result (Equity Award Exchange Ratio of
+0.3373) was multiplied by the average closing price of the SAP
+share over the five trading days prior to the exercise or vesting
+date.
+-RSAS, RSUs, PSUs, and options granted before 2018 and
+unvested as at the closing date of the Qualtrics acquisition were
+converted into the right to receive, at the originally agreed vesting
+dates, an amount in cash equal to the number of RSAs and RSUs
+held as at the vesting date multiplied by US$35.00 per share. The
+respective amount of options equals the number of options held
+as at the vesting date multiplied by US$35.00 per share less the
+originally-agreed exercise price.
+-The replaced awards were planned to be settled by issuing
+equity instruments, whereas the replacement awards are settled
+in cash.
+The replacement awards closely mirror the terms of the replaced
+awards except that:
+In conjunction with the acquisition of Qualtrics in 2019, under the
+terms of the acquisition agreement, SAP exchanged unvested
+Restricted Share Awards (RSAs), Restricted Share Units (RSUs), and
+Performance Share Units (PSUs), and options held by employees of
+Qualtrics into cash-settled share-based payment awards of SAP
+(Qualtrics Rights).
+1,835
+Qualtrics Cash-Settled Awards Replacing Pre-
+Acquisition Qualtrics Awards (Qualtrics Rights)
+Over a three-year service period and upon achieving certain key
+performance indicators (KPIs)
+Over a one-to-three-year service period only, or
+Granted share units will vest in different tranches, either:
+To retain and motivate executives and certain employees, we
+grant virtual shares representing a contingent right to receive a cash
+payment determined by the SAP share price and the number of
+share units that ultimately vest.
+The exercise price is 110% of the grant base value, which is
+€59.85 for the 2013 tranche, €60.96 for the 2014 tranche, and
+€72.18 for the 2015 tranche. The weighted average exercise price of
+exercised options in 2019 was €66.42 (2018: €67.59) and of
+outstanding options at year end 2019 was €69.15 (2018: €67.62).
+Monetary benefits will be capped at 100% of the exercise price.
+Restricted Stock Unit Plan Including Move SAP
+Plan (RSU Plan)
+The options granted under the SOP 2010 give the employees the
+right to receive a certain amount of cash by exercising the options.
+After a three-year vesting period (four years for members of the
+Executive Board), the plan provides for 11 predetermined exercise
+dates every calendar year (one date per month except for April) until
+the rights lapse six years after the grant date (seven years for
+members of the Executive Board). Employees can exercise their
+options only if they are employed by SAP; if they leave the Company,
+the options forfeit. Executive Board members' options are non-
+forfeitable once granted - if the service agreement ends in the grant
+year, the number of options is reduced pro rata temporis. Any
+options not exercised up to the end of their term expire.
+The grant base value was based on the average closing price of
+the SAP share over the five trading days prior to the Executive Board
+resolution date.
+Under the SOP 2010, we granted virtual stock options to
+members of the Senior Leadership Team, Global Executives,
+employees with an exceptional rating, and high potentials between
+2010 and 2015, and only in 2010 and 2011 to members of the
+Executive Board.
+SAP Stock Option Plan 2010 (SOP 2010)
+Additional
+Information
+The number of performance-based share units (PSUs) that will
+vest under the different tranches were contingent upon achievement
+of the operating profit (non-IFRS, at constant currency) KPI target in
+the year of grant. Depending on performance, the number of PSUs
+vesting ranges between 0% and 200% of the number initially
+granted. Performance against the KPI target was 118.7% in 2019
+(2018: 106.7%; 2017: 78.2%). All share units are paid out in cash
+upon vesting.
+To Our
+Stakeholders
+Share-based payment expenses
+88
+We believe that the expected volatility is the most sensitive
+assumption we use in estimating the fair values of our share options.
+Regarding future payout under our cash-settled plans, the SAP share
+price is the most relevant factor. With respect to our LTI 2016 Plan,
+we believe that future payout will be significantly impacted not only
+by our share price but also by the relative performance against the
+Peer Group Index. Changes in these factors could significantly affect
+the estimated fair values as calculated by the valuation model, and
+the future payout.
+the respective exercise dates. Changes to these assumptions and
+outcomes that differ from these assumptions could require material
+adjustments to the carrying amount of the liabilities we have
+recognized for these share-based payments. The fair value of the
+share units granted under the LTI 2016 Plan are dependent on our
+performance against a group of peer companies (Peer Group Index),
+the volatility, and the expected correlation between the price of the
+index and our share price.
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+147
+Share-based payments cover cash-settled and equity-settled
+awards issued to our employees. The respective expenses are
+recognized as employee benefits and classified in our Consolidated
+Income Statements according to the activities that the employees
+perform. Where we economically hedge our exposure to cash-settled
+awards, changes in the fair value of the respective hedging
+instruments are also recognized as employee benefits expenses in
+profit or loss. The fair values of hedging instruments are based on
+market data reflecting current market expectations. For more
+information about the equity price risk, see Note (F.1).
+Valuation, Judgment, and Sources of Estimation Uncertainty
+We use certain assumptions in estimating the fair values for our
+share-based payments, including expected share price volatility and
+expected award life (which represents our estimate of the average
+remaining life until the awards are exercised or expire unexercised).
+In addition, the final payout for plans also depends on the
+achievement of performance indicators and on our share price on
+Classification in the Income Statement
+Accounting for Share-Based Payments
+(B.3) Share-Based Payments
+Section B - Employees
+14,870 11,595 11,643
+Employee benefits expenses
+57
+52
+47
+Termination benefits outside of restructuring
+plans
+180
+Under certain programs, we grant our employees discounts on
+purchases of SAP shares. Since those discounts are not dependent
+on future services to be provided by our employees, the discount is
+recognized as an expense when the discounts are granted.
+Presentation in the Statements of Cash Flows
+Unlike in previous years, we present the payments of our share-
+based payment plans separately in our Statements of Cash Flows
+under cash flows from operating activities. As a result, the changes
+in other assets and in other liabilities presented in the reconciliation
+of operating cash flow no longer consider share-based payment-
+related assets or liabilities. Prior-period numbers were adjusted to
+conform to the new presentation.
+The operating expense line items in our income statement
+include the following share-based payment expenses:
+Share-Based Payment Expenses by Functional
+Area
+461
+General and administration
+442
+312
+562
+Sales and marketing
+269
+210
+429
+Research and development
+135
+158
+246
+Cost of services
+115
+78
+138
+Cost of cloud and software
+2017
+2018
+2019
+€ millions
+142
+Section B -
+- 
+Employees
+Combined Group
+27,060
+9,169
+9,196
+24.213
+4,918
+9,452
+9,843
+25,781
+5,209
+10,368
+10,205
+Sales and
+development
+24,872
+8,273
+5,250
+11,349
+12/31/2017
+4,854
+23,219
+marketing
+General and
+654
+29,712 27,571 100,330
+984
+2,220
+43,048
+SAP Group
+Infrastructure
+administration
+5,504
+1,047
+8,930
+1,781
+6,024
+1,147
+1,970
+2,906
+6,530
+1,246
+2,123
+3,161
+2,676
+5,651
+12,478
+27,634
+4,268
+6,341
+16.288
+5,361
+4,426
+6,501
+Cloud and software
+Total
+5,374 15,983
+APJ
+EMEA
+Total
+APJ
+Ame-
+ricas
+ricas
+EMEA
+150
+APJ
+Ame-
+ricas
+3,859
+5,869
+4,719
+9,131
+5,793
+12,710
+Research and
+17,379
+4,965
+4,878
+7,536
+3,895
+19,476
+5,736
+8,120
+20,239
+5,971
+6,018
+8,250
+Services
+14,482
+5,620
+2,160
+41,848
+12/31/2018
+12/31/2019
+2,889
+889 1,301
+2,191
+Other non-
+financial assets
+Capitalized
+contract cost
+as % of other
+non-financial
+assets
+40
+84
+66
+1,701
+41
+65
+Amortization Expense
+€ millions
+Capitalized cost of obtaining customer contracts
+Capitalized cost to fulfill customer contracts
+2019
+2018
+367
+231
+82
+81
+1,188
+1,435 1,915
+2018
+Current
+Non- Total Current Non-
+Current
+Current
+Total
+Capitalized cost
+of obtaining
+customer
+contracts
+414
+1,318 1,732
+326 1,006
+361 1,072 1,433
+1,332
+66
+117
+183
+35
+66
+101
+Capitalized
+contract cost
+480
+Capitalized cost
+to fulfill customer
+contracts
+Ame-
+50
+145
+At the end of each reporting period, we reassess the potential
+obligations related to our pending claims and litigation and adjust
+our respective provisions to reflect the current best estimate. In
+addition, we monitor and evaluate new information that we receive
+after the end of the respective reporting period, but before the
+Consolidated Financial Statements are authorized for issue, to
+determine whether this provides additional information regarding
+conditions that existed at the end of the reporting period. Changes
+to the estimates and assumptions underlying our accounting for
+legal contingencies, and outcomes that differ from these estimates
+and assumptions, could require material adjustments to the carrying
+amounts of the respective provisions recorded and additional
+provisions. The expected timing or amounts of any outflows of
+economic benefits resulting from these lawsuits and claims is
+uncertain and not estimable, as they generally depend on the
+duration of the legal proceedings and settlement negotiations
+required to resolve the litigation and claims and the unpredictability
+of the outcomes of legal disputes in several jurisdictions.
+Contingent liabilities exist in respect of customer-related
+litigation and claims for which no provision has been recognized. It is
+not practicable to estimate the financial impact of these contingent
+liabilities due to the uncertainties around these lawsuits and claims
+as outlined above.
+146
+Section A Customers
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+Section B - Employees
+This section provides financial insights into our employee benefit
+arrangements. It should be read in conjunction with the
+compensation disclosures for key management personnel in
+Note (G.5) as well as SAP's Compensation Report.
+Employee Headcount by Region and Function
+(B.1) Employee Headcount
+The following table provides an overview of employee headcount,
+broken down by function and by the regions EMEA (Europe, Middle
+East, and Africa), Americas (North America and Latin America), and
+APJ (Asia Pacific Japan).
+Full-time
+equivalents
+Estimating the amount of the expenditure required to settle the
+present obligation
+Section A Customers
+Determining whether the amount of an obligation is reliably
+estimable
+Determining whether an obligation exists
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+(A.4) Customer-Related Provisions
+3,087
+Determining the probability of outflow of economic benefits
+501
+1,732
+3,742
+28,029 26,620 96,498 38,357
+631
+951
+Expected Contract Losses
+Customer-related provisions mainly include expected contract
+losses. We adjust these provisions as further information becomes
+available and as circumstances change. Non-current provisions are
+measured at the present value of their expected settlement amounts
+as at the reporting date.
+Customer-Related Litigation and Claims
+Furthermore, these provisions also include obligations resulting from
+customer-related litigation and claims. We are currently confronted
+with various claims and legal proceedings, including claims that
+relate to customers demanding indemnification for proceedings
+initiated against them based on their use of SAP software, and
+occasionally claims that relate to customers being dissatisfied with
+the products and services that we have delivered to them. The
+obligations arising from customer-related litigation and claims
+comprise cases in which we indemnify our customers against
+liabilities arising from a claim that our products infringe a third
+party's patent, copyright, trade secret, or other proprietary rights.
+Due to uncertainties relating to these matters, provisions are based
+on the best information available. Significant judgment is required in
+the determination of whether a provision is to be recorded and what
+the appropriate amount for such provision should be. Notably,
+judgment is required in the following:
+855
+EMEA
+814
+0
+0
+Intelligent Spend Group
+696
+661
+531
+Adjustment for currency impact
+345
+368
+8,587
+359
+398
+Other revenue
+23,118
+25,593
+24,383
+26,520
+27,236
+385
+9,359
+8,922
+9,597
+-1,219
+0
+0
+Adjustment of revenue under fair value accounting
+-81
+-81
+-33
+-33
+-3
+lil Total revenue
+27,553
+27,553
+24,708
+24,708
+23,461
+Applications, Technology & Services
+9,868
+Total segment revenue for reportable segments
+728
+ΝΑ
+ΝΑ
+9,904
+8,975
+Other revenue
+398
+385
+359
+368
+9,453
+345
+-2,763
+-2,700
+-2,649
+-2,791
+-2,551
+0
+255
+Other expenses
+10,268
+10,573
+Total segment profit for reportable segments
+483
+508
+Qualtrics
+2,261
+2,733
+2,629
+3,057
+3,184
+Intelligent Spend Group
+20,857
+388
+Qualtrics
+8
+9
+ΝΑ
+NA
+NA
+ΝΑ
+545
+348
+& Services
+5,600
+4,596
+4,596
+lil Profit before tax
+188
+-47
+5,600
+-47
+198
+Financial income, net
+-36
+-56
+-56
+-74
+198
+5,029
+1) The 2019 constant currency amounts are only comparable to 2018 actual currency amounts; 2018 constant currency amounts are only comparable to 2017 actual currency amounts.
+160
+Additional
+Information
+(C.2) Reconciliation of Segment Measures to the Consolidated Income Statements
+€ millions
+2019
+2018
+2017
+Actual
+Currency
+Constant
+Currency¹)
+Actual
+Currency
+Constant
+Currency¹)
+Actual
+Currency
+Applications, Technology & Services
+23,544
+22,980
+Section C - Financial Results
+-74
+Further Information on Economic,
+Environmental, and Social Performance
+Other non-operating income/expense, net
+5,703
+-3
+-33
+-33
+-81
+-81
+Restructuring
+-689
+Share-based payment expenses
+Revenue under fair value accounting
+Adjustment for
+Adjustment for currency impact
+0
+-317
+21,753
+Acquisition-related charges
+-689
+-577
+-577
+5,703
+4,473
+4,473
+lil Operating profit
+-182
+-19
+-19
+-1,130
+-1,130
+-1,120
+-830
+-830
+-1,835
+-1,835
+-587
+4,877
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+To Our
+Stakeholders
+11,152
+10,610
+612
+594
+443
+68
+11,279
+65
+11,959
+11,811
+11,053
+Americas
+8,463
+8,158
+ΝΑ
+EMEA
+Actual
+Currency Currency
+Actual Constant
+Currency
+2019
+2018
+2019
+2018
+2019
+2018
+2019
+2018
+Actual Constant
+Currency
+Actual Actual
+Currency Currency Currency
+Constant
+Currency
+Actual
+Currency
+Actual
+Currency
+Constant
+Currency
+Actual
+Currency
+7,604
+2,216
+2.115
+1,915
+23,544 22,980
+21,753
+3,184
+3,057
+2,629
+508
+483
+ΝΑ
+27,236
+26,520 24,383
+segment
+revenue
+For a breakdown of revenue by region for the SAP Group, see Note (A.1).
+Section C - Financial Results
+159
+Total
+Total Reportable Segments
+3,810
+4,196
+403
+383
+NA
+11,081
+10,655
+9,519
+APJ
+3,802
+3,669
+3,539
+356
+271
+37
+36
+NA
+4,053
+22,859
+4,818
+2.3
+2018
+2019
+2017
+2018
+2019
+Total
+Other Foreign Post-
+Employment Plans
+Foreign Plans
+Domestic Plans
+Present value of all defined
+€ millions
+Sensitivity Analysis
+The sensitivity analysis table below shows how the present value of all defined benefit obligations would have been influenced by
+reasonably possible changes to significant actuarial assumptions. The sensitivity analysis considers change in discount rate assumptions,
+holding all other actuarial assumptions constant.
+3.9
+4.2
+3.7
+0.8
+1.0
+0.3
+2.3
+0.8
+2018
+Other Foreign Post-Employment Plans
+2019
+2017
+Foreign Plans
+2017
+2018
+2019
+2017
+2018
+2019
+2017
+Domestic Plans
+2019
+2017
+1,825
+123
+141
+159
+411
+450
+576
+912
+940
+1,090
+Discount rate was 50 basis
+points higher
+1,277
+1,353
+1,617
+114
+126
+154
+357
+391
+495
+806
+836
+968
+Discount rate was 50 basis
+benefit obligations if:
+2017
+2018
+2019
+2018
+1,531
+Discount rate
+The following significant weighted average assumptions were
+used for the actuarial valuation of our domestic and foreign pension
+liabilities as well as other post-employment benefit obligations as at
+the respective measurement date:
+65
+355
+411
+878
+1,009
+Fair value of the plan assets
+1,436
+1,715
+132
+156
+418
+533
+886
+1,026
+Present value of the DBO
+2018
+2019
+2018
+2019
+2018
+2019
+2018
+2019
+Total
+Other Foreign Post-
+Employment Plans
+Foreign Plans
+Domestic Plans
+€ millions
+Present Value of the Defined Benefit Obligations (DBO) and the Fair Value of the Plan Assets
+59
+Percent
+1,485
+Net defined benefit liability (asset)
+Significant Actuarial Assumptions
+Of the present value of the DBO of our domestic plans,
+€951 million (2018: €824 million) relate to plans that provide for
+lump-sum payments not based on final salary; of the present value
+of the DBO of our foreign plans, €459 million (2018: €356 million)
+relate to plans that provide for annuity payments not based on final
+salary.
+Non-current provisions
+54
+49
+27
+19
+24
+26
+3
+4
+0
+0
+0
+0
+0
+0
+0
+0
+Non-current other financial assets
+Net defined benefit liability (asset) as % of:
+144
+230
+73
+91
+63
+122
+8
+17
+1,292
+1,446
+points lower
+Investments in Plan Assets
+-95
+-43
+-52
+Utilization
+190
+137
+53
+Addition
+at 1/1/2019
+77
+52
+25
+Other employee-related provisions as
+Total
+Non-
+Current
+Current
+2019
+€ millions
+Other Employee-Related Provisions
+Other employee-related liabilities mainly relate to bonus and
+sales commission obligations, vacation obligations, and employee-
+related social security obligations.
+as % of other non-financial liabilities
+66
+37
+70
+58
+26
+63
+Other employee-related liabilities
+4,622
+Release
+501
+-5
+-8
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+- Employees
+Section B -
+154
+We consider whether a change in business is material based on the
+business affected rather than for SAP as a whole. In judging whether
+a unit qualifies as a business for restructuring purposes, we consider
+if the unit has its own management team, has access to all inputs
+and processes necessary to provide outputs, and generates or could
+generate revenues. The materiality of a change to a business is
+assessed based on both the size and the nature of the change and
+therefore does not necessarily involve a material quantitative impact
+on our financial statements.
+The program has been announced to the parties affected or has
+commenced.
+The program established is planned to start shortly after the
+program plan is approved and is expected to be capable of being
+completed within 12 months, and
+A detailed and documented restructuring plan has been
+approved by our Executive Board, a member thereof, or a direct
+report of an Executive Board member, and
+SAP has designed a program that materially changes the scope
+of one of our businesses or the manner in which the business is
+conducted, and
+We only recognize provisions for restructuring if and when the
+following occurs:
+Recognition of Restructuring Provisions
+(B.6) Restructuring
+Employee-related provisions primarily comprise obligations for
+time credits accumulated in the working time account, severance
+payments outside restructuring programs, and jubilee expenses.
+While most of these employee-related provisions could be claimed
+within the next 12 months, we do not expect the related cash
+outflows within this time period.
+22
+30
+8
+746
+478
+268
+Other employee-related provisions
+as % of provisions
+Provisions
+164
+143
+21
+Other employee-related provisions as
+at 12/31/2019
+-3
+4,120
+5,632
+814
+Insurance policies
+Corporate bonds
+Equity investments
+Thereof: Asset category
+Total plan assets
+905
+387
+1,040
+445
+Not Quoted in an
+Active Market
+Quoted in an
+Active Market
+Not Quoted in an
+Active Market
+Quoted in an
+Active Market
+2018
+2019
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+€ millions
+Plan Asset Allocation
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined Group
+To Our
+153
+Section B - Employees
+major foreign benefit plans. Although our policy is to invest in a risk-
+diversified portfolio consisting of a mix of assets, both the defined
+benefit obligation and plan assets can fluctuate over time, which
+exposes the Group to actuarial and market (investment) risks.
+Depending on the statutory requirements in each country, it might
+be necessary to reduce any underfunding by addition of liquid
+assets.
+Our investment strategies for foreign benefit plans vary according
+to the conditions in the country in which the respective benefit plans
+are situated. We have adopted a long-term investment horizon for all
+Our investment strategy on domestic benefit plans is to invest all
+contributions in stable insurance policies.
+Our expected contribution in 2020 to our domestic and foreign
+defined benefit pension plans is immaterial. The weighted duration
+of our defined benefit plans amounted to 13 years as at
+December 31, 2019, and 12 years as at December 31, 2018.
+Total future benefit payments from our defined benefit plans as at
+December 31, 2019, are expected to be €1,831 million (2018:
+€1,783 million). Of this amount, 77% (2018: 80%) has maturities of
+over five years, and 61% (2018: 66%) relates to domestic plans.
+Other Employee-Related Liabilities
+137
+4,818
+3,051
+185
+2,866
+3,247
+209
+3,038
+Other employee-related liabilities
+Other non-financial liabilities
+Total
+Non-Current
+Current
+Total
+Non-Current
+Current
+Defined Benefit Plans
+2018
+As far as the provision for long-term employee benefits is secured by
+pledged reinsurance coverage, it is offset with the relating plan asset.
+Accounting Policy
+(B.5) Other Employee-Related
+Obligations
+905
+5
+1,040
+6
+0
+142
+0
+156
+0
+116
+0
+€ millions
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+12/31/2018
+12/31/2019
+Total carrying amount (in € millions) of liabilities as at
+12/31/2018
+12/31/2019
+0
+0
+7,086
+0
+NA
+0
+3,039
+O
+0
+30
+35
+146
+774
+ΝΑ
+73
+0
+150
+1,100
+377
+Total intrinsic value of vested awards (in € millions) as at
+12/31/2018
+3
+34
+137
+Outstanding awards exercisable as at
+0
+1) Granted includes additions from business combinations
+16,128
+NA
+Granted¹)
+344
+0
+0
+9,339
+24,666
+Adjustment based upon KPI target achievement
+NA
+0
+ΝΑ
+122
+NA
+Exercised
+0
+-385
+-3,904
+-7,540
+-7,776
+Forfeited
+-160
+0
+-144
+-1,057
+-883
+12/31/2019
+1,110
+0
+3,039
+16,007
+NA
+12/31/2019
+51
+1,087
+461
+Section B - Employees
+151
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Share-Based Payment Balances
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+€ millions
+2019
+2018
+Current
+Non-Current
+Total
+Current
+Non-Current
+Total
+Share-based payment liabilities
+1,130
+605
+1,735
+714
+316
+1,030
+Other non-financial liabilities
+66
+-1
+44
+2019
+0
+155
+0
+0
+Weighted average share price (in €) for awards exercised in
+2018
+NA
+88.27
+100.61
+88.67
+NA
+2019
+NA
+90.75
+15,264
+111.58
+106.15
+Total expense (in € millions) recognized in
+2017
+14
+9
+221
+712
+NA
+2018
+8
+-3
+43
+611
+NA
+98.11
+In early 2019, we launched a Company-wide restructuring
+program to further increase our focus on our key strategic growth
+areas. The program is aimed at further simplifying Company
+structures and processes and to ensure that SAP's organizational
+setup, skillsets, and resource allocation continue to meet evolving
+customer demand. The main features of the restructuring plan were
+announced on January 29, 2019. Substantially all restructuring
+expenses recognized in 2019 result from this program. Cash
+outflows related to restructuring were €0.9 billion in 2019 (2018:
+€0.1 billion).
+7,086
+926
+Own
+€ millions
+Recognized Expense for Equity-Settled Plans
+As a result of our equity-settled share-based payments
+transactions, we have commitments to grant SAP shares to
+employees. We intend to meet these commitments by reissuing
+treasury shares or through an agent who administers the equity-
+settled programs and purchases shares on the open market. We
+have fulfilled the obligations of Own through an agent.
+5.0
+5.3
+5.2
+2017
+2018
+2019
+Own
+Millions
+Number of Shares Purchased
+Under Own, employees have the opportunity to purchase, on a
+monthly basis, SAP shares without any required holding period. The
+investment per each eligible employee is limited to a percentage of
+the respective employee's monthly base salary. SAP matches the
+employee investment by 40% and adds a subsidy of €20 per month
+for non-executives. This plan is not open to members of the
+Executive Board.
+b) Equity-Settled Share-Based Payments
+Own SAP Plan (Own)
+For more information about the derivatives, see Note (F.1).
+3
+0
+15
+4
+0
+32
+Derivatives Call options for share-
+other
+based payments as % of
+financial assets
+1,984
+1,536
+448
+2,633
+2,336
+2019
+297
+2018
+171
+Combined Group
+Management Report
+To Our
+Stakeholders
+- Employees
+Section B -
+312
+330
+369
+Pension expenses
+52
+50
+55
+Defined benefit pension plans
+260
+280
+314
+Defined contribution plans
+2017
+2018
+2019
+€ millions
+152
+Total Expense of Pension Plans
+The discount rates used in measuring our post-employment benefit
+assets and liabilities are derived from rates available on high-quality
+corporate bonds and government bonds for which the timing and
+amounts of payments match the timing and the amounts of our
+projected pension payments. Net interest expense and other
+expenses related to defined benefit plans are recognized as
+employee benefits expenses and classified in our Consolidated
+Income Statements according to the activities that the employees
+owning the awards perform. Since our domestic defined benefit
+pension plans primarily consist of an employee-financed post-
+retirement plan that is fully financed with qualifying insurance
+policies, current service cost may become a credit as a result of
+adjusting the defined benefit liability's carrying amount to the fair
+value of the qualifying plan assets. Such adjustments are recorded in
+service cost. Total expenses on defined benefit pension plans
+comprise related current and past service costs as well as interest
+income and expense.
+Defined Benefit Pension Plans
+Amounts for domestic and foreign defined contribution plans are
+based on a percentage of the employees' salaries or on the amount
+of contributions made by employees. In Germany and some other
+countries, we make contributions to public pension schemes that
+are operated by national or local government or similar institutions.
+Expenses for such local state pension plans are recognized as short-
+term employee benefits, that is, social security expenses.
+Defined Contribution Plans
+(B.4) Pension Plans and Similar
+Obligations
+140
+149
+2017
+Other financial assets
+based payments
+68
+531
+14,472
+13,520
+ΝΑ
+Granted
+295
+0
+0
+8,512
+ΝΑ
+Adjustment based upon KPI target achievement
+ΝΑ
+0
+NA
+49
+ΝΑ
+Exercised
+0
+-146
+-6,913
+-5,840
+ΝΑ
+Forfeited
+0
+0
+-473
+-977
+ΝΑ
+12/31/2018
+631
+12/31/2017
+Qualtrics
+Rights
+RSU Plan
+(2015-2019
+Tranches)
+0
+68
+95
+0
+95
+Derivatives - Call options for share-
+22
+63
+17
+31
+74
+23
+Share-based payment liabilities as % of
+other non-financial liabilities
+4,622
+385
+501
+5,632
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+Changes in Outstanding Awards Under Our Cash-Settled Plans
+Thousands, unless otherwise stated
+LTI 2016 Plan
+(2016-2019
+Tranches)
+LTI 2015 Plan
+(2014-2015
+SOP 2010
+(2012-2015
+Tranches)
+Tranches)
+4,120
+In total, approximately 4,000 employees will leave or have already
+left the Company under the plan. Restructuring expenses primarily
+include the following components:
+2019
+€ millions
+-338
+-324
+-340
+-352
+Cost of services
+-433
+-510
+-489
+-579
+-601
+Cost of cloud and software
+-5
+-7
+-6
+-10
+-11
+Cost of software licenses and support
+-428
+-503
+-483
+-569
+-591
+Cost of cloud
+-428
+-503
+-483
+-569
+-292
+-591
+Total cost of revenue
+-953
+Combined Group
+To Our
+Section C - Financial Results
+158
+2) The 2019 constant currency amounts are only comparable to 2018 actual currency amounts; 2018 constant currency amounts are only comparable to 2017 actual currency amounts.
+388
+545
+531
+661
+696
+-1,148
+-1,341
+-1,285
+-1,477
+-1,534
+1) Software as a service/platform as a service
+Segment profit
+Other segment expenses
+1,536
+Restructuring Expenses
+1,816
+2,138
+2,231
+-725
+-847
+-813
+-919
+Segment gross profit
+Stakeholders
+Cost of cloud - SaaS/PaaS¹)
+2,733
+0
+0
+Software licenses
+1,840
+2,265
+2,178
+2,585
+2,693
+Cloud
+1,840
+2,265
+2,178
+2,585
+2,693
+Cloud SaaS/PaaS¹)
+Actual
+Currency
+Constant
+Currency²)
+Currency
+Currency²)
+Actual
+Constant
+Actual
+Currency
+2017
+2018
+2019
+€ millions
+Intelligent Spend Group
+0
+2,261
+0
+Software support
+2,629
+3,057
+3,184
+Total segment revenue
+404
+451
+436
+458
+476
+Services
+1,857
+2,282
+2,193
+2,599
+2,708
+Cloud and software
+17
+17
+16
+14
+15
+Software licenses and support
+18
+16
+16
+14
+15
+-1
+Additional
+Information
+Management Report
+Further Information on Economic,
+Environmental, and Social Performance
+ΝΑ
+ΝΑ
+ΝΑ
+-74
+-78
+Cost of services
+NA
+NA
+NA
+-31
+-33
+Cost of cloud and software
+ΝΑ
+ΝΑ
+NA
+0
+0
+Cost of software licenses and support
+ΝΑ
+NA
+NA
+-31
+-33
+Cost of cloud
+ΝΑ
+NA
+ΝΑ
+Total cost of revenue
+-31
+Segment gross profit
+Segment profit
+Qualtrics
+Intelligent Spend Group
+Applications, Technology
+€ millions
+Segment Revenue by Region
+2) There are no prior-period numbers for the Qualtrics segment presented, since we acquired Qualtrics in 2019.
+1) Software as a service/platform as a service
+ΝΑ
+ΝΑ
+ΝΑ
+9
+8
+ΝΑ
+NA
+NA
+-368
+-389
+ΝΑ
+NA
+ΝΑ
+377
+398
+ΝΑ
+NA
+NA
+-106
+-110
+Other segment expenses
+Consolidated Financial
+Statements IFRS
+-33
+ΝΑ
+ΝΑ
+0
+0
+Software licenses
+ΝΑ
+NA
+NA
+353
+371
+ΝΑ
+NA
+NA
+353
+371
+Cloud
+Cloud SaaS/PaaS¹)
+Actual
+Currency
+Constant
+Currency
+Actual
+Currency
+Constant
+Currency
+Actual
+Currency
+2017²)
+20182)
+2019
+€ millions
+Qualtrics
+Additional
+Information
+NA
+Cost of cloud - SaaS/PaaS¹)
+ΝΑ
+0
+NA
+ΝΑ
+483
+508
+Total segment revenue
+ΝΑ
+ΝΑ
+ΝΑ
+130
+137
+Services
+NA
+NA
+NA
+353
+371
+Cloud and software
+NA
+ΝΑ
+NA
+0
+0
+Software licenses and support
+NA
+NA
+NA
+0
+Software support
+Environmental, and Social Performance
+1,886
+Consolidated Financial
+Statements IFRS
+Segment Reporting Policies
+The segment information for 2019 and the comparative prior
+periods were both restated to conform with the new segment
+composition of the Applications, Technology & Services segment,
+the Qualtrics segment, and the Digital Interconnect segment.
+Further, we changed the composition of our non-reportable
+Digital Interconnect segment through integration of telephony, video
+chat, and routing offerings, which formerly were included in the
+Applications, Technology & Services segment and former Customer
+Experience segment. Due to its size, however, Digital Interconnect
+continues to not qualify as a reportable segment.
+The Qualtrics segment derives its revenues mainly from the sale
+of experience management cloud solutions (offerings of Qualtrics)
+that run front-office functions across the experience data and from
+the sale of related services. Before we acquired Qualtrics on
+January 23, 2019, this segment was called Customer Experience and
+included our customer experience offerings. Following the Qualtrics
+acquisition, we combined our existing customer experience
+solutions with the Qualtrics business and renamed the Customer
+Experience segment to Customer and Experience Management. The
+customer experience offerings continued to belong to this segment
+until they became part of the Applications, Technology & Services
+segment in October 2019 through splitting and partial integration
+into other company functions. The segment was thereafter renamed
+to Qualtrics. The expenses reflected in the Qualtrics segment,
+however, do not comprise the full impact of the acquisition due to
+the fact that some functions of Qualtrics mostly affecting general
+and administration expense have already been integrated into SAP's
+corporate functions. There are no prior-period numbers for the
+Qualtrics segment presented, since we acquired Qualtrics on
+January 23, 2019.
+The former SAP Business Network segment was renamed during
+2019 without any changes in the composition of this segment. The
+new name is Intelligent Spend Group. The Intelligent Spend Group
+segment derives its revenues mainly from transaction fees charged
+for the use of SAP's cloud-based collaborative business networks
+and from the sale of subscriptions to the Intelligent Spend Group's
+cloud offerings (mainly SAP Ariba, SAP Concur, and SAP Fieldglass
+offerings) and of related professional and educational services.
+The Applications, Technology & Services segment derives its
+revenues primarily from the sale of software licenses and cloud
+subscriptions (as far as not included in one of the other segments),
+and from the sale of related services (mainly support services,
+various professional services, premium support services,
+implementation services for our software products, and education
+services on the use of our products).
+At year end 2019, SAP had four operating segments that are
+regularly reviewed by the Executive Board, which is responsible for
+assessing the performance of the Company and for making resource
+allocation decisions as our chief operating decision maker (CODM).
+The operating segments are largely organized and managed
+separately according to their product and service offerings, notably
+whether the products and services relate to our business network
+activities, experience management activities, or communication
+offerings, or cover other activities of our business.
+General Information
+(C.1) Results of Segments
+This section provides insight into the financial results of SAP's
+reportable segments and of SAP overall as far as not already covered
+by previous sections. This includes but is not limited to segment
+results, income taxes, and earnings per share.
+Additional
+Information
+Section C - Financial Results
+Our management reporting system, and hence our segment
+reporting system, reports our intersegment services as cost
+reductions and does not track them as internal revenue.
+Intersegment services mainly represent utilization of human
+resources of one segment by another segment on a project basis.
+Intersegment services are charged based on internal cost rates
+including certain indirect overhead costs but excluding a profit
+margin.
+Further Information on Economic,
+Environmental, and Social Performance
+Management Report
+Combined Group
+To Our
+Stakeholders
+155
+Section B - Employees
+-182
+-19
+-1,130
+lil Restructuring expenses
+2
+0
+-71
+Consolidated Financial
+Statements IFRS
+Most of our depreciation and amortization expense affecting
+segment profits is allocated to the segments as part of broader
+infrastructure allocations and is thus not tracked separately on the
+operating segment level. Depreciation and amortization expense
+that is directly allocated to the operating segments is immaterial in
+all segments presented.
+Our management reporting system produces a variety of reports
+that differ by the currency exchange rates used in the accounting for
+foreign-currency transactions and operations, where both actual and
+constant currency numbers are reported to and used by our CODM.
+Reports based on actual currencies use the same currency rates as
+are used in our financial statements. Reports based on constant
+currencies report revenues and expenses using the average
+exchange rates from the previous year's corresponding period.
+We use an operating profit indicator to measure the performance of
+our operating segments. However, the accounting policies applied in
+the measurement of operating segment revenue and profit differ as
+follows from the IFRS accounting principles used to determine the
+operating profit measure in our income statement:
+The measurements of segment revenue and results include the
+recurring revenues that would have been recorded by acquired
+entities had they remained stand-alone entities but which are not
+recorded as revenue under IFRS due to fair value accounting for
+customer contracts in effect at the time of an acquisition.
+Actual
+Currency
+Constant
+Currency³)
+Actual
+Currency
+Constant
+Currency³)
+Actual
+Currency
+2017
+2018
+2019
+Information about assets and liabilities and additions to non-current
+assets by segment are not regularly provided to our Executive Board.
+Goodwill by segment is disclosed in Note (D.2).
+Revenues and expenses of our operating but non-reportable
+segment, and the certain activities managed on corporate level, as
+outlined above, are presented under the Other revenue and Other
+expenses items in the reconciliation in Note (C.2).
+€ millions
+Applications, Technology & Services
+Certain activities are exclusively managed on corporate level,
+including finance, accounting, legal, human resources, global
+business operations, and global marketing. They are not included
+in the results of our reportable segments.
+■ Restructuring expenses
+Share-based payment expenses
+relationships in connection with a business combination, and
+acquisition-related third-party expenses
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+Section C - Financial Results
+156
+Acquisition-related charges such as amortization expense and
+impairment charges for intangibles acquired in business
+combinations and certain stand-alone acquisitions of
+intellectual property (including purchased in-process research
+and development), settlements of pre-existing business
+■
+The expense measures exclude:
+General and administration
+-2
+-11
+-299
+-180
+-19
+-1,111
+Employee-related restructuring
+expenses
+2017
+2018
+2019
+Further Information on Economic,
+746
+208
+1
+-4
+-938
+1,125
+24
+Restructuring Provisions
+Additional
+Information
+as % of total provisions
+Restructuring provisions
+Total provisions
+12/31/2019
+Currency impact
+Release
+Utilization
+Addition
+€ millions
+1/1/2019
+Restructuring Provisions
+If not presented separately in our income statement,
+restructuring expenses would have been classified in the different
+expense items in our income statement as follows:
+Cloud SaaS/PaaS¹)
+Onerous contract-related
+0
+Sales and marketing
+-9
+-3
+-467
+Research and development
+Restructuring provisions are predominantly short-term in nature.
+They primarily include employee termination benefits. For more
+information about the accounting treatment of share-based
+compensation in connection with the restructuring program, see
+Note (B.3).
+-118
+-3
+-154
+Cost of services
+-182
+-19
+-1,130
+lil Restructuring expenses
+-55
+-3
+-138
+Cost of cloud and software
+losses
+2017
+2018
+2019
+€ millions
+restructuring-related impairment
+Restructuring Expenses by Functional Area
+restructuring expenses and
+-2
+-19
+Cloud - laaS²)
+28
+3,243
+Segment gross profit
+Total cost of revenue
+-2,434
+-2,694
+-2,523
+-2,583
+-2,636
+Cost of services
+-2,978
+-3,489
+-3,300
+-3,505
+-3,592
+Cost of cloud and software
+-1,998
+-2,056
+-1,924
+-1,933
+-1,972
+Cost of software licenses and support
+-981
+-1,433
+-1,377
+-1,573
+-1,620
+Cost of cloud
+-305
+-6,228
+-441
+-6,089
+-6,183
+Cloud
+Management Report
+Stakeholders
+Combined Group
+To Our
+157
+Section C - Financial Results
+3) The 2019 constant currency amounts are only comparable to 2018 actual currency amounts; 2018 constant currency amounts are only comparable to 2017 actual currency amounts.
+8,587
+9,359
+8,922
+9,868
+-6,858
+-7,318
+-7,008
+-7,294
+-7,448
+2) Infrastructure as a service
+1) Software as a service/platform as a service
+Segment profit
+Other segment expenses
+15,445
+16,677
+15,931
+16,892
+17,316
+-5,412
+-5,823
+-428
+9,597
+-493
+Software licenses and support
+10,890
+11,478
+10,969
+11,269
+11,532
+Software support
+4,869
+4,875
+4,645
+4,422
+4,523
+Software licenses
+1,922
+2,929
+2,835
+3,825
+3,938
+328
+506
+673
+695
+1,593
+2,424
+2,347
+-481
+3,152
+16,054
+15,691
+488
+16,353
+15,614
+Cost of cloud - laas²)
+-992
+-948
+-676
+-1,126
+Cost of cloud - SaaS/PaaS¹)
+20,857
+22,859
+21,753
+22,980
+23,544
+Total segment revenue
+-1,092
+3,577
+3,176
+Cloud and software
+19,993
+18,449
+19,283
+17,681
+19,516
+Services
+3,551
+3,464
+3,305
+15,760
+€ millions
+The liabilities incurred related to the earned portion of unvested
+share-based payment awards. These liabilities were incurred by
+replacing, upon acquisition, equity-settled share-based payment
+awards held by employees of Callidus with cash-settled share-based
+payment awards, which are subject to forfeiture. The respective
+liabilities represented the portion of the replacement awards that
+relates to pre-acquisition services provided by the acquiree's
+employees and were measured at the fair value determined under
+IFRS 2.
+For more information about our segments and about the changes
+in our segment structure, see Note (C.1).
+Cash paid
+Liabilities incurred
+Total consideration transferred
+1,957
+47
+2,004
+On April 5, 2018, following satisfaction of applicable regulatory
+and other approvals, we acquired 100% of the shares of Callidus
+(NDSQ: CALD), a leading provider of customer relationship
+management (CRM) solutions. SAP paid US$36 per share,
+representing consideration transferred in cash of approximately
+US$2.4 billion. The acquisition aimed to accelerate and strengthen
+SAP's position and solution offerings in the sales performance
+management (SPM) and configure-price-quote (CPQ) spaces.
+Callidus Acquisition: Consideration Transferred
+Combined Group
+Measurement period adjustments recorded in both 2018 and
+2019 were not material.
+Section D Invested Capital
+165
+To Our
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+Callidus Acquisition: Recognized Assets and
+Liabilities
+The following table summarizes the values of identifiable assets
+acquired and liabilities assumed in connection with the acquisition of
+Callidus, as at the acquisition date:
+2
+The allocation of the goodwill resulting from the Qualtrics
+acquisition to our operating segments depends on how our
+operating segments actually benefit from the synergies of the
+Qualtrics business combination. For more information, see
+Note (D.2).
+Total identifiable net assets
+Creation of new offerings by combining Qualtrics products and
+SAP products to deliver an end-to-end experience and
+operational management system to the customers
+Financial liabilities
+53
+€ millions
+97
+2018 Acquisitions
+Current and deferred tax liabilities
+320
+Provisions and other non-financial liabilities
+41
+Contract liabilities
+129
+Total identifiable liabilities
+640
+1,434
+Goodwill
+5,015
+Total consideration transferred
+6,449
+In general, the goodwill arising from our acquisitions consists
+largely of the synergies and the know-how and technical skills of the
+acquired businesses' workforces.
+Qualtrics goodwill is attributed to expected synergies from the
+acquisition, particularly in the following areas:
+-
+-
+Cross-selling opportunities to existing SAP customers across all
+regions, using SAP's sales organization
+Improved profitability in Qualtrics sales and operations
+Cash and cash equivalents
+390
+The amounts of revenue and profit or loss of the Callidus
+business acquired in 2018 since the acquisition date are included in
+the consolidated income statements for the reporting period as
+follows:
+4
+Total identifiable assets
+711
+Trade and other payables
+59
+59
+-
+Current and deferred tax liabilities
+71
+Provisions and other non-financial liabilities
+Thereof software and database licenses
+15
+55
+Total identifiable liabilities
+200
+Total identifiable net assets
+511
+1,493
+Goodwill
+Trade and other payables
+The goodwill arising from our acquisitions consists largely of
+synergies and the know-how and technical skills of the acquired
+businesses' workforces.
+Total consideration transferred
+Contract liabilities/deferred income
+Impact of the Business Combination on Our
+Financial Statements
+Thereof customer relationship and other
+intangibles
+Thereof acquired technology
+180
+-60
+Had Callidus been consolidated as at January 1, 2018, our
+estimated pro forma revenue for the reporting period would have
+been €24,766 million, and pro forma profit after tax would have been
+€4,071 million.
+63
+Other financial assets
+64
+€ millions
+Trade and other receivables
+Other non-financial assets
+Property, plant, and equipment
+121
+32
+Jil Revenue
+26
+lil Profit after tax
+Callidus Acquisition: Impact on SAP's Financials
+2018
+as Reported
+24,708
+4,088
+Contribution
+of Callidus
+Intangible assets
+515
+11
+Had Qualtrics been consolidated as at January 1, 2019, our
+revenue and profit after tax for the reporting period would not have
+been materially different.
+Subsequent changes in the estimated fair values of liabilities and
+provisions may result in additional expense (if increasing the
+estimated fair value) or additional income (if decreasing the
+estimated fair value).
+2
+72
+45
+Total unused tax credits
+attributable to equity holders of
+3.35
+3.42
+2.78
+Earnings per share, basic,
+34
+18
+74
+17
+outstanding, diluted¹)
+We decide for each business combination whether to measure the
+non-controlling interest in the acquiree at fair value or at the
+proportionate share of the acquiree's identifiable net assets.
+We classify costs related to executing business combinations as
+general and administration expense.
+In our accounting for business combinations, judgment is required in
+determining whether an intangible asset is identifiable, and should
+be recorded separately from goodwill. Additionally, estimating the
+acquisition-date fair values of the identifiable assets acquired and
+liabilities assumed involves considerable judgment. The necessary
+measurements are based on information available on the acquisition
+date and are based on expectations and assumptions that have
+been deemed reasonable by management. These judgments,
+estimates, and assumptions can materially affect our financial
+position and profit for several reasons, including the following:
+Fair values assigned to assets subject to depreciation and
+amortization affect the amounts of depreciation and
+amortization to be recorded in operating profit in the periods
+following the acquisition.
+Subsequent negative changes in the estimated fair values of
+assets may result in additional expense from impairment
+charges.
+We acquire businesses in specific areas of strategic interest to us,
+particularly to broaden our product and service portfolio.
+2019 Acquisitions
+On January 23, 2019, we concluded the acquisition of Qualtrics,
+following satisfaction of applicable regulatory and other approvals
+(also see Note (G.9) of our 2018 Consolidated Financial
+Statements).
+Qualtrics is a leading provider of experience management
+solutions. By combining Qualtrics products and SAP products, we
+aim to deliver an end-to-end experience and operational
+management system to our customers.
+We acquired 100% of the Qualtrics shares for approx. US$35 per
+share, representing consideration transferred in cash of
+approximately US$7.1 billion. In addition to the cash payments, SAP
+also incurs liabilities and post-closing expenses relating to assumed
+share-based payment awards amounting to approximately
+US$0.9 billion.
+Expiring after the following year
+The operating results and assets and liabilities of Qualtrics are
+reflected in our consolidated financial statements from
+January 23, 2019, onward.
+SAP SE (in €)
+2.78
+2,004
+Measuring Non-Controlling Interests and Allocation of
+Consideration Transferred
+(D.1) Business Combinations
+For more information about the effects resulting from the
+application of IFRS 16 'Leases', see Note (D.8).
+This section highlights our non-current assets including
+investments that form the basis of our operating activities. Additions
+to invested capital include separate asset acquisitions or business
+combinations. Further, we disclose information about purchase
+obligations and capital contributions.
+Section D - Invested Capital
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Earnings per share, diluted,
+Combined Group
+163
+Section C - Financial Results
+We are subject to ongoing tax audits by domestic and foreign tax
+authorities. Currently, we are in dispute mainly with the German and
+only a few foreign tax authorities. The German dispute is in respect
+of intercompany financing matters and certain secured capital
+investments, while the few foreign disputes are in respect of the
+deductibility of intercompany royalty payments and intercompany
+services. In all cases, we expect that a favorable outcome can only be
+achieved through litigation. For all of these matters, we have not
+recorded a provision as we believe that the tax authorities' claims
+have no merit and that no adjustment is warranted. If, contrary to
+our view, the tax authorities were to prevail in their arguments before
+the court, we would expect to have an additional expense of
+approximately €2,013 million (2018: €1,746 million) in total
+(including related interest expenses and penalties of €982 million
+(2018: €842 million)).
+Income Tax-Related Litigation
+1) Number of shares in millions
+We have not recognized a deferred tax liability on approximately
+€17.41 billion (2018: €14.04 billion) for undistributed profits of our
+subsidiaries, because we are in a position to control the timing of the
+reversal of the temporary difference and it is probable that such
+differences will not reverse in the foreseeable future.
+Of the unused tax losses, €187 million (2018: €213 million; 2017:
+€263 million) relate to U.S. state tax loss carryforwards.
+attributable to equity holders of
+SAP SE (in €)
+3.35
+3.42
+To Our
+Stakeholders
+Qualtrics Acquisition: Consideration Transferred
+€ millions
+Cash paid
+Qualtrics Acquisition: Recognized Assets and
+Liabilities
+€ millions
+Cash and cash equivalents
+Other financial assets
+Trade and other receivables
+Other non-financial assets
+Impact of the Business Combination on Our
+Financial Statements
+The amounts of revenue and profit or loss of the Qualtrics
+business acquired in 2019 since the acquisition date are included in
+our consolidated income statements for the reporting period as
+follows:
+Qualtrics Acquisition: Impact on SAP's Financials
+€ millions
+20
+Property, plant, and equipment
+Thereof acquired technology
+75
+1,803
+lil Revenue
+575
+lil Profit after tax
+Thereof customer relationship and other intangibles
+1,226
+Thereof software and database licenses
+Total identifiable assets
+Intangible assets
+37
+1
+138
+Liabilities incurred
+Total consideration transferred
+6,212
+237
+6,449
+The liabilities incurred relate to the earned portion of unvested
+share-based payment awards. These liabilities were incurred by
+replacing, upon acquisition, equity-settled share-based payment
+awards held by employees of Qualtrics with cash-settled share-
+based payment awards, which are subject to forfeiture. The
+respective liabilities represent the portion of the replacement awards
+that relates to pre-acquisition services provided by the acquiree's
+employees and were measured at the fair value determined under
+IFRS 2 (also see Note (B.3)).
+Measurement period adjustments recorded in 2019 (which were
+not material) mostly relate to intangible assets (finalization of the
+fair value calculation) and tax-related assets and liabilities.
+The following table summarizes the values of identifiable assets
+acquired and liabilities assumed in connection with the acquisition of
+Qualtrics, as at the acquisition date.
+164
+=
+Section D Invested Capital
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+2019
+as Reported
+27,553
+Contribution
+of Qualtrics
+429
+3,370
+-526
+2,074
+For the Callidus acquisition, synergies particularly relate to the
+following areas:
+Consolidated Financial
+Statements IFRS
+Cross-selling opportunities of Callidus products to existing SAP
+customers across all regions, using SAP's sales organization
+Integrating Callidus products into SAP C/4HANA to strengthen
+SAP's customer experience suite of solutions
+ΝΑ
+NA
+9.1
+8.6
+10.4
+9.0
+11.1
+NA
+3.0
+3.0
+11.5
+3.0
+3.0
+NA
+5
+5
+9
+9
+13
+NA
+1) The Customer Experience segment existing at the end of 2018 was renamed to Customer and Experience Management following the addition of Qualtrics at the beginning
+of 2019.
+2) Testing date: October 1
+3.0
+3) Testing date: December 1
+NA
+NA
+Percent, unless otherwise stated
+Applications, Technology &
+Services²)
+Intelligent Spend Group²)
+(Formerly SAP Business Network)
+Qualtrics³)
+(Formerly Customer and
+Experience Management)")
+2019
+2018
+2019
+2018
+2019
+20184)
+11.0
+Budgeted revenue growth (average of
+4.8
+13.3
+13.8
+22.6
+ΝΑ
+the budgeted period)
+Pre-tax discount rate
+After-tax discount rate
+Terminal growth rate
+Detailed planning period (in years)
+3.0
+4) See below for information about the assumptions used for the former Customer Experience segment - given the segment changes, comparability to the previous year is
+limited.
+On October 1, 2019, we performed a goodwill impairment test for
+the Applications, Technology & Services and Intelligent Spend Group
+(formerly SAP Business Network) reportable segments as well as for
+the part of the Customer and Experience Management segment that
+was moved to the Applications, Technology & Services segment in
+October (given the proximity of the move to the testing date, the
+tests coincided). At the beginning of October, we had not yet
+completed the synergy identification/valuation and thus tested
+Qualtrics at the beginning of December (after completion of the
+synergy identification/valuation).
+Budgeted revenue growth (change in pp)
+After-tax discount rate (change in pp)
+20185)
+2019
+Qualtrics
+Sensitivity to Change in Assumptions
+The following table shows the amounts by which the key
+assumptions would need to change individually (that is, without
+changing the other key assumptions) for the recoverable amount to
+be equal to the carrying amount. For budgeted revenue growth
+sensitivity, the cost structure was not adjusted, hence leading to a
+modified terminal operating margin:
+Given the fact that the Qualtrics segment is expected to show
+disproportionate growth in the coming years and has not yet
+reached a steady state, we have used a longer and more detailed
+planning period than one would apply in a more mature segment.
+The recoverable amount exceeded the carrying amount by
+€4,071 million.
+The recoverable amount was determined based on fair value less
+costs of disposal calculation. The fair value measurement was
+categorized as a Level 3 fair value based on the inputs used in the
+valuation. The cash flow projections were based on actual operating
+results and specific estimates covering a detailed planning period
+and the terminal growth rate thereafter. The projected results were
+determined based on management's estimates and are consistent
+with the assumptions a market participant would make (a target
+operating margin of 21.5% was used in the valuation).
+The impairment test for the Qualtrics segment was performed on
+December 1 because at that time, we had finalized the initial
+allocation of the Qualtrics goodwill to our segments. The test already
+reflects the allocation of parts of the Qualtrics goodwill to the
+Applications, Technology & Services segment and Intelligent Spend
+Group segment.
+For more information about the Qualtrics segment, see
+Note (C.1).
+-1.6
+Qualtrics
+The following table shows the amounts by which the key
+assumptions could - at the time of the impairment test - have
+changed individually (that is, without changing the other key
+assumptions) for the recoverable amount to be at least equal to the
+carrying amount. For budgeted revenue growth sensitivity, the cost
+structure was not adjusted, hence leading to a modified terminal
+operating margin:
+Given the fact that the Customer Experience part of the former
+Customer and Experience Management segment has still not
+reached a steady state, we have used a longer and more detailed
+planning period than one would apply in a more mature segment.
+Based on these key assumptions, at the time of the transfer, the
+recoverable amount exceeded the carrying amount by
+€4,574 million (2018: €8,476 million).
+Detailed planning period in years: 9 (2018: 5)
+Terminal growth rate: 3.0 (2018: 3.0)
+Pre-tax discount rate: NA (2018: 11.7)
+After-tax discount rate: 9.0 (2018: 9.4)
+The following key assumptions were factored into the calculation
+of the recoverable amount (percent, unless otherwise stated):
+Budgeted revenue growth: 18.6 (2018: 32.9)
+When performing the impairment test, the recoverable amount
+was determined based on fair value less costs of disposal calculation
+(in 2018, a value-in-use calculation was performed). The fair value
+measurement was categorized as a Level 3 fair value based on the
+inputs used in the valuation. The cash flow projections were based
+on actual operating results and specific estimates covering a
+detailed planning period and the terminal growth rate thereafter. The
+projected results were determined based on management's
+estimates and are consistent with the assumptions a market
+participant would make (a target operating margin of 22.6% was
+used in the valuation).
+& Services segment in October 2019 through splitting and partial
+integration into other company functions (for more information, see
+Note (C.1)). The impairment test at the time of the transfer
+coincided with the impairment test on October 1.
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Sensitivity to Change in Assumptions
+NA
+6.3
+NA
+Goodwill Impairment Test Performed on October 1
+Applications, Technology & Services Segment and Intelligent Spend
+Group Segment
+The recoverable amount of these segments was determined
+based on fair value less costs of disposal calculation (in 2018, a
+value-in-use calculation was performed for the Applications,
+Technology & Services segment). The fair value measurement was
+categorized as a Level 3 fair value based on the inputs used in the
+valuation. The cash flow projections were based on actual operating
+results and specific estimates covering a detailed planning period
+and the terminal growth rate thereafter. The projected results were
+determined based on management's estimates and are consistent
+with the assumptions a market participant would make (target
+operating margins of 35.9% (Applications, Technology & Services)
+and 30.6% (Intelligent Spend Group) were used in the valuation).
+We believe that no reasonably possible change in any of the
+above key assumptions would cause the carrying amount of our
+Applications, Technology & Services segment and Intelligent Spend
+Group segment to exceed the recoverable amount.
+Customer and Experience Management Segment
+The Customer Experience offerings that continued to belong to
+the Customer and Experience Management segment during the first
+three quarters of 2019 became part of the Applications, Technology
+168
+=
+Section D Invested Capital
+To Our
+Stakeholders
+Combined Group
+Management Report
+0
+-8.3
+-1.9
+Budgeted revenue growth (change in pp)
+2018
+2019
+5) See above for more information about the sensitivity analysis performed for the
+former Customer Experience segment - given the segment changes,
+comparability to the previous year is limited.
+Customer Experience Part of
+the Customer and Experience
+Management Segment
+budgeted period (change in pp)
+ΝΑ
+-15
+Target operating margin at the end of the
+Key Assumptions and Detailed Planning Period
+-
+Our estimated cash flow projections for periods beyond the business plan were extrapolated using
+segment-specific terminal growth rates. These growth rates do not exceed the long-term average growth
+rates for the markets in which our segments operate.
+Operating margin budgeted for a given budget period equals the operating margin achieved in the current
+year, increased by expected efficiency gains. Values assigned reflect past experience, except for efficiency
+gains.
+Changes to the assumptions underlying our goodwill and intangible
+assets impairment assessments could require material adjustments
+to the carrying amount of our recognized goodwill and intangible
+assets as well as the amounts of impairment charges recognized in
+profit or loss.
+The outcome of goodwill impairment tests may also depend on the
+allocation of goodwill to our operating segments. This allocation
+involves judgment as it is based on our estimates regarding which
+operating segments are expected to benefit from the synergies of
+business combinations.
+Changes in our segment structure result in the reallocation of
+goodwill with the reallocated goodwill being calculated based on
+relative values (if a direct allocation is not possible).
+Goodwill
+€ millions
+Historical cost
+1/1/2018
+21,371
+Foreign currency exchange differences
+Additions from business combinations
+847
+Estimation of weighted-average cost of capital
+1,620
+417
+5,017
+12/31/2018
+Foreign currency exchange differences
+Additions from business combinations
+Retirements/disposals
+12/31/2019
+Accumulated amortization
+1/1/2018
+Foreign currency exchange differences
+12/31/2018
+23,838
+Foreign currency exchange differences
+Internal forecasts
+In making impairment assessments for our goodwill and intangible
+assets, the outcome of these tests is highly dependent on
+management's assumptions regarding future cash flow projections
+and economic risks, which require significant judgment and
+assumptions about future developments. They can be affected by a
+variety of factors, including:
+Improved profitability in Callidus sales and operations
+After the acquisition, we had allocated the Callidus goodwill and
+intangibles to the newly established Customer Experience segment.
+For more information about our segments and about the changes in
+our segment structure after the allocation, see Note (C.1).
+These amounts were calculated after applying SAP's accounting
+policies and after adjusting the results for Callidus to reflect
+significant effects from, for example:
+Additional depreciation and amortization that would have been
+charged assuming the fair value adjustment to property, plant,
+and equipment, and to intangible assets had been applied from
+January 1, 2018
+The impact of fair value adjustments on contract
+liabilities/deferred income on a cumulative basis
+The borrowing costs on the funding levels and debt/equity
+position of SAP after the business combination
+Employee benefits, such as share-based compensation
+Transaction expenses incurred as part of the acquisition
+Related income taxes
+These pro forma numbers have been prepared for comparative
+purposes only. The pro forma revenue and profit numbers are not
+necessarily indicative either of the results of operations that would
+have actually occurred had the acquisition been in effect at the
+beginning of the respective period, or of future results.
+166
+=
+Changes in business strategy
+Section D Invested Capital
+Combined Group
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+(D.2) Goodwill
+Goodwill and Intangible Asset Impairment Testing
+The annual goodwill impairment test is performed at the level of our
+operating segments, since there are no lower levels in SAP at which
+goodwill is monitored for internal management purposes.
+In general, the test is performed at the same time (at the beginning
+of the fourth quarter) for all operating segments.
+To Our
+12/31/2019
+Carrying amount
+12/31/2018
+12/31/2019
+29,263
+29,162
+1) The Customer Experience segment existing at the end of 2018 was renamed to Customer and Experience Management following the addition of Qualtrics at the beginning
+of 2019.
+Based on the expected synergies, the goodwill added through
+the Qualtrics acquisition (see Note (D.1) for more information)
+was partially allocated to the Applications, Technology & Services
+(€1,509 million) and the Intelligent Spend Group (€734 million)
+segments, with the residual amount being allocated to the
+Qualtrics segment.
+Due to the changes in our segments in 2019, the former
+Customer Experience segment goodwill of €3,438 million was
+moved to the Applications, Technology & Services segment.
+Section D Invested Capital
+167
+To Our
+Stakeholders
+Combined Group
+Management Report
+9
+Consolidated Financial
+Statements IFRS
+Additional
+Information
+Goodwill Impairment Test
+The key assumptions on which management based its cash flow projections for the period covered by the underlying business plans are as
+follows:
+Key Assumption
+Budgeted revenue growth
+Budgeted operating margin
+Discount rates
+Terminal growth rate
+Basis for Determining Values Assigned to Key Assumption
+Revenue growth rate achieved in the current year, adjusted for an expected increase in SAP's addressable
+cloud and database markets; expected growth in the established software applications and analytics
+markets. Values assigned reflect our past experience and our expectations regarding an increase in the
+addressable markets.
+Further Information on Economic,
+Environmental, and Social Performance
+2,882
+23,736
+9
+100
+2
+102
+-1
+101
+23,736
+29,162
+For more information about our segments and the changes in
+2019, see Note (C.1).
+For impairment testing purposes, the carrying amount of goodwill
+is allocated to the operating segments expected to benefit from
+goodwill as follows:
+Goodwill by Operating Segment
+€ millions
+Applications,
+Technology &
+Services
+12/31/2018
+13,498
+18,509
+Intelligent
+Spend Group
+(Formerly
+SAP Business
+Network)
+6,925
+7,762
+Qualtrics
+(Formerly
+Other
+Total
+Customer and
+Experience
+Management)¹)
+3,304
+Our estimated cash flow projections are discounted to present value using discount rates (after-tax rates).
+Discount rates are based on the weighted average cost of capital (WACC) approach.
+0
+Both the amortization period and the amortization method have an
+impact on the amortization expense that is recorded in each period.
+1,198
+625
+733
+935
+Foreign
+1,153 1,019
+716
+Total current tax expense
+1,778
+1,752 1,651
+Section C - Financial Results
+Germany
+Deferred tax expense/income
+Foreign
+Total deferred tax income
+lil Total income tax expense
+-3
+57
+-584
+-549 -298
+-84
+-552 -241 -668
+1,226 1,511
+983
+Germany
+161
+Current tax expense
+-47
+Thereof interest expense from financial
+-207
+-106
+-89
+liabilities at amortized cost
+Thereof interest expense from financial
+liabilities at fair value through profit or loss
+(2017: from available-for-sale financial
+liabilities)
+-155
+-206
+-116
+(C.5) Income Taxes
+188
+Judgments and Estimates
+The assessment whether a deferred tax asset is impaired requires
+judgment, as we need to estimate future taxable profits to determine
+whether the utilization of the deferred tax asset is probable. In
+evaluating our ability to utilize our deferred tax assets, we consider
+all available positive and negative evidence, including the level of
+historical taxable income and projections for future taxable income
+over the periods in which the deferred tax assets are recoverable.
+Our judgment regarding future taxable income is based on
+assumptions about future market conditions and future profits of
+SAP.
+Judgment is also required in evaluating whether interest or penalties
+related to income taxes meet the definition of income taxes, and, if
+not, whether it is of financial nature. In this judgment, we particularly
+consider applicable local tax laws and interpretations on IFRS by
+national standard setters in the area of group financial reporting.
+Tax Expense by Geographic Location
+€ millions
+2019
+2018
+2017
+lil Financial income, net
+198
+We are subject to changing tax laws in multiple jurisdictions within
+the countries in which we operate. Our ordinary business activities
+also include transactions where the ultimate tax outcome is
+uncertain due to different interpretations of tax laws, such as those
+involving revenue sharing and cost reimbursement arrangements
+between SAP Group entities. In addition, the amount of income taxes
+we pay is generally subject to ongoing audits by domestic and
+foreign tax authorities. In determining our worldwide income tax
+provisions, judgment is involved in assessing whether to consider
+each uncertain tax treatment separately or together with one or
+more other uncertain tax treatments and whether to reflect the
+respective effect of uncertainty based on the most likely amount or
+the expected value. In applying these judgments, we consider the
+nature and the individual facts and circumstances of each uncertain
+tax treatment as well as the specifics of the respective jurisdiction,
+including applicable tax laws and our interpretation thereof.
+To Our
+Stakeholders
+Combined Group
+Management Report
+1,778 1,752
+1,651
+Property, plant, and equipment
+19
+28
+Deferred tax expense/income
+Other financial assets
+11
+11
+Origination and reversal of temporary
+Total current tax expense
+-710 -501
+Trade and other receivables
+61
+55
+differences
+Pension provisions
+135
+116
+Unused tax losses, research and development
+158
+260
+-891
+668
+504
+Intangible assets
+Consolidated Financial
+Statements IFRS
+Major Components of Tax Expense
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+Components of Recognized Deferred Tax Assets
+and Liabilities
+€ millions
+2019
+2018
+2017
+€ millions
+2019
+2018
+Current tax expense/income
+Tax expense for current year
+1,818
+1,665
+1,623
+Deferred tax assets
+Taxes for prior years
+-40
+87
+28
+-288
+223
+-418
+Finance costs
+To Our
+Stakeholders
+169
+Section D Invested Capital
+The goodwill impairment test on October 1 resulted in a
+headroom that is significantly higher than the portion of the goodwill
+that - at the beginning of December - was allocated to the
+segments respectively. Thus, there is no impairment risk resulting
+from the partial allocation of the Qualtrics goodwill.
+Applications, Technology & Services Segment and Intelligent Spend
+Group Segment
+Goodwill Impairment Test Performed on December 1
+-28
+-13
+Target operating margin at the end of the
+budgeted period (change in pp)
+10.2
+Combined Group
+NA
+8.7
+To Our
+Combined Group
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+(C.3) Other Non-Operating
+Income/Expense, Net
+€ millions
+Pre-tax discount rate (change in pp)
+Foreign currency exchange
+gain/loss, net
+Management Report
+Further Information on Economic,
+Environmental, and Social Performance
+Section D Invested Capital
+=
+170
+We classify intangible assets according to their nature and use in our
+operations. Software and database licenses consist primarily of
+technology for internal use, whereas acquired technology consists
+primarily of purchased software to be incorporated into our product
+offerings and in-process research and development (IPRD).
+Customer relationship and other intangibles consist primarily of
+customer relationships and acquired trademark licenses.
+Amortization expenses of intangible assets are classified as cost of
+cloud, cost of services, research and development, sales and
+marketing, and general and administration, depending on the use of
+the respective intangible assets.
+Classification of Intangibles
+After-tax discount rate (change in pp)
+The amortization method, as IFRS requires the straight-line
+method to be used unless we can reliably determine the pattern
+in which the asset's future economic benefits are expected to be
+consumed by us
+The useful life of an intangible asset, as this is based on our
+estimates regarding the period over which the intangible asset is
+expected to produce economic benefits to us
+Judgment is required in determining the following:
+Acquired in-process research and development project assets are
+typically amortized over five to seven years (starting upon
+completion/marketing of the respective projects).
+Consolidated Financial
+Statements IFRS
+All our purchased intangible assets other than goodwill have finite
+useful lives. They are initially measured at acquisition cost and
+subsequently amortized based on the expected consumption of
+economic benefits over their estimated useful lives ranging from two
+to 20 years.
+These judgments impact the total amount of intangible assets that
+we present in our balance sheet as well as the timing of recognizing
+development expenses in profit or loss.
+Determining whether a cost is directly or indirectly attributable to
+an intangible asset and whether a cost is necessary for
+completing a development
+Determining the future ability to use or sell the intangible asset
+arising from the development and the determination of the
+probability of future benefits from sale or use
+Determining whether the conditions for recognizing an intangible
+asset are met requires assumptions about future market
+conditions, customer demand, and other developments.
+The term "technical feasibility" is not defined in IFRS, and
+therefore determining whether the completion of an asset is
+technically feasible requires judgment and a company-specific
+approach.
+Determining whether activities should be considered research
+activities or development activities
+Determining whether internally generated intangible assets from
+development qualify for recognition requires significant judgment,
+particularly in the following areas:
+Whereas in general, expenses for internally generated intangibles are
+expensed as incurred, development expenses incurred on standard-
+related customer development projects (for which the IAS 38
+criteria are met cumulatively) are capitalized on a limited scale with
+those amounts being amortized over the estimated useful life of up
+to 12 years.
+Recognition of Intangibles
+(D.3) Intangible Assets
+Additional
+Information
+Measurement of Intangibles
+2019
+2018
+2017
+-23
+-25
+-24
+net
+lil Other non-operating
+-74
+-56
+-36
+income/expense, net
+(C.4) Financial Income, Net
+Miscellaneous income/expense,
+€ millions
+2018
+2017
+Finance income
+787
+371
+476
+Thereof gains from financial assets at fair
+value through profit or loss (2017: from
+available-for-sale financial assets)
+596
+227
+382
+2019
+liabilities at amortized cost
+-317
+-202
+-51
+-31
+-12
+Thereof from financial assets
+358
+444
+615
+at fair value through profit or
+loss
+Thereof from financial assets
+194
+148
+96
+at amortized cost (2017: loans
+and receivables)
+Thereof from financial
+-396
+-415
+-435
+liabilities at fair value through
+profit or loss
+Thereof from financial
+-176
+-589
+Expiring in the following year
+tax credits, and foreign tax credits
+268
+983
+Effective tax rate (in %)
+26.7
+27.0
+19.5
+162
+Section C - Financial Results
+To Our
+Stakeholders
+Combined Group
+Management Report
+1,511
+Consolidated Financial
+Statements IFRS
+Additional
+Information
+Items Not Resulting in a Deferred Tax Asset
+(C.6) Earnings per Share
+€ millions
+2019
+2018
+2017
+€ millions, unless otherwise
+2019
+2018
+Further Information on Economic,
+Environmental, and Social Performance
+2017
+1,226
+20
+138
+91
+131
+Research and development
+-89
+-33
+-26
+and foreign tax credits
+Prior-year taxes
+80
+lil Total income tax expense
+-17
+Reassessment of deferred tax
+48
+58
+185
+assets, research and
+development tax credits, and
+foreign tax credits
+Other
+13
+13
+-26
+Unused tax losses
+stated
+Not expiring
+919
+Weighted average shares
+1,194
+1,194
+1,197
+Deductible temporary differences
+538
+509
+524
+outstanding, basic¹)
+1,058
+Unused research and development and
+foreign tax credits
+0
+1
+payments¹)
+Not expiring
+28
+54
+38
+Weighted average shares
+1,194
+1,194
+Dilutive effect of share-based
+1,124
+Total unused tax losses
+-31
+688
+575
+375
+Profit attributable to equity
+3,321
+4,083
+4,008
+holders of SAP SE
+Expiring in the following year
+63
+7
+9
+Issued ordinary shares¹)
+1,229
+1,229
+1,229
+Expiring after the following year
+373
+476
+535
+Effect of treasury shares¹)
+-35
+-35
+Withholding taxes
+Share-based payments
+The increase in deferred tax assets for other provisions and
+obligations mainly results from deferred intercompany income and
+the adoption of IFRS 16 'Leases, the latter leading also to a
+corresponding increase in deferred tax liabilities for property, plant,
+and equipment. Furthermore, the deferred tax assets for contract
+liabilities increased mainly because of deferred revenue, and the
+deferred tax liabilities for intangible assets increased mainly due to
+our business combination in 2019.
+-38
+2017
+Other
+152
+181
+Foreign
+.lil Total
+The following table reconciles the expected income tax expense,
+computed by applying our combined German tax rate of 26.4%
+(2018: 26.4%; 2017: 26.4%), to the actual income tax expense. Our
+2019 combined German tax rate includes a corporate income tax
+rate of 15.0% (2018: 15.0%; 2017: 15.0%), plus a solidarity surcharge
+of 5.5% (2018: 5.5%; 2017: 5.5%) thereon, and trade taxes of 10.6%
+(2018: 10.6%; 2017: 10.6%).
+Relationship Between Tax Expense and Profit
+Before Tax
+Trade and other receivables
+Pension provisions
+2,012 3,106 2,788
+2,584 2,494 2,241
+4,596 5,600 5,029
+2018
+Total deferred tax assets
+2,023
+Deferred tax liabilities
+Intangible assets
+1,006
+628
+Property, plant, and equipment
+544
+95
+Other financial assets
+224
+3,220
+139
+2019
+€ millions
+140
+Total deferred tax income
+-552
+-241
+-668
+Other provisions and obligations
+1,330
+424
+lil Total income tax expense
+1,226
+Germany
+1,511
+Contract liabilities
+553
+229
+Carryforwards of unused tax losses
+131
+150
+Profit Before Tax by Geographic Location
+Research and development and foreign tax credits
+56
+21
+983
+148
+153
+13
+1,212
+1,478
+1,327
+rate of 26.4%
+(2018: 26.4%; 2017: 26.4%)
+Tax effect of:
+Foreign tax rates
+-209
+Changes in tax laws and tax
+10
+Tax expense at applicable tax
+-147
+10
+0
+-212
+rates
+Non-deductible expenses
+116
+106
+82
+Tax-exempt income
+-93
+-403
+912
+1,169
+Total deferred tax assets, net
+12
+Share-based payments
+1
+0
+Other provisions and obligations
+Contract liabilities
+50
+18
+16
+23
+Other
+59
+43
+€ millions, unless otherwise
+stated
+2019
+2018
+2017
+Total deferred tax liabilities
+2,051
+1,111
+lil Profit before tax
+4,596
+5,600
+5,029
+-95
+4.9
+12/31/2019
+1,011
+=
+For more information about right-of-use asset additions, see
+Note (D.4), and for a maturity analysis of lease liabilities, see
+Note (F.1). For more information about the cash flow related to lease
+liabilities, see the "Reconciliation of Liabilities Arising from Financing
+Activities" table within Note (E.3).
+The net impact on retained earnings on January 1, 2019, was a
+decrease of €0.1 billion.
+The adjustments to the opening balances resulting from the initial
+application of IFRS 16 as at January 1, 2019, were as follows:
+Property, plant, and equipment - increased by €1.9 billion
+Trade and other payables - decreased by €0.1 billion
+Financial liabilities – increased by €2.1 billion
+IFRS 16 also affects SAP's cash flow statement for the year ended
+2019: operating cash flow increased by €319 million and cash flow
+from financing activities decreased by €319 million.
+55
+Lease expenses within finance income, net
+Interest expense on lease liabilities
+174
+2,140
+Lease liabilities recognized as at 1/1/2019
+borrowing rate
+(279)
+Section D Invested Capital
+Discounting using the Company's incremental
+953
+Add: adjustments as a result of different treatment of
+1,466
+Adjusted commitments
+108
+Add: data updates
+(238)
+(Less): non-lease components
+(51)
+(Less): commitments starting in 2019
+1,647
+Lease related commitments as at 12/31/2018
+extension and termination options
+To Our
+Stakeholders
+Combined Group
+Management Report
+28,877
+51
+30,822
+A in %
+% of
+Total Equity and
+Liabilities
+€ millions
+% of
+Total Equity and
+Liabilities
+€ millions
+12/31/2018
+12/31/2019
+Total equity and liabilities
+Thereof lease liabilities
+Thereof financial debt
+Liabilities
+Non-current liabilities
+Current liabilities
+Equity
+SAP SE's long-term credit rating is "A2" by Moody's and "A" by
+Standard & Poor's, both with stable outlook.
+customer confidence, and to support the growth of our business. We
+seek to maintain a capital structure that will allow us to cover our
+funding requirements through the capital markets on reasonable
+terms and, in so doing, ensure a high level of independence,
+confidence, and financial flexibility.
+The primary objective of our capital structure management is to
+maintain a strong financial profile for investor, creditor, and
+(E.1) Capital Structure Management
+This section describes how SAP manages its capital structure.
+Our capital management is based on a high equity ratio, modest
+financial leverage, a well-balanced maturity profile, and deep debt
+capacity.
+Additional
+Information
+Section E - Capital Structure,
+Financing, and Liquidity
+E-
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+1,442
+Financial commitments as at 12/31/2018
+205
+Purchase obligations relevant to IFRS 16 as at
+12/31/2018
+Leases in the Balance Sheet
+Leases are shown as follows in the balance sheet as at
+December 31, 2019, and in the income statement for the year:
+Upon IFRS 16 adoption, lease liabilities from pre-existing leases
+were discounted at the incremental borrowing rates as at
+January 1, 2019. The weighted average discount rate applied to the
+lease liabilities on January 1, 2019, was 2.5%. The following
+reconciliation to the opening balance for the lease liabilities as at
+January 1, 2019, is based upon the operating lease obligations
+disclosed as at December 31, 2018:
+On January 1, 2019, we adopted IFRS 16 'Leases' using the modified
+retrospective transition approach. This approach requires that the
+cumulative effect of initially applying the standard be recognized as
+an adjustment to the opening balance of retained earnings on the
+date of initial application while the prior-year figures are not
+adjusted. The new standard impacts our lease accounting as, in
+general, all leases need to be recognized on the lessee's balance
+sheet. A lessee recognizes a right-of-use asset representing its right
+to use the underlying asset and a lease liability representing its
+obligation to make lease payments. The nature of expenses related
+to those leases has now changed because we recognize depreciation
+expense for right-of-use assets and interest expense on lease
+liabilities. These changes apply to leases that had previously been
+classified as operating leases under IAS 17. We have used practical
+expedients offered by the standard (such as non-capitalization of
+short-term leases and low-value leases, and the use of hindsight
+when determining the lease term if the contract contains options to
+extend or terminate the lease). For measuring our right-of-use assets
+for pre-existing leases, we have applied the retrospective approach
+for our most significant leases (primarily facility and data center
+leases), while smaller leases were measured at an amount equal to
+the lease liability and adjusted by the amount of any prepaid or
+accrued lease payments existing immediately prior to the date of
+initial application.
+Accounting Policies, Judgments, and Estimates
+(D.8) Adoption of IFRS 16
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined Group
+To Our
+173
+Section D Invested Capital
+For a breakdown of our employee headcount by region, see
+Note (B.1), and for a breakdown of revenue by region, see Note (A.1).
+2,592
+43
+1,298
+1,251
+Purchase Obligations
+12/31/2019
+32,239
+41,302
+SAP Group
+922
+1,276
+€ millions
+56
+Right-of-use assets
+12/31/2019
+€ millions
+396
+Lease expenses within operating profit
+Depreciation of right-of-use assets
+2019
+€ millions
+Leases in the Income Statement
+14
+Non-current lease liabilities as % of non-current
+financial liabilities
+1,814
+12,923
+Non-current financial liabilities
+12
+3,273
+389
+Non-current lease liabilities
+Current lease liabilities as % of current financial
+liabilities
+Current financial liabilities
+Current lease liabilities
+Lease liabilities
+Right-of-use assets as % of non-current assets
+Non-current assets
+Total right-of-use assets
+4
+45,002
+1,967
+38
+Right-of-use assets - other property, plant, and
+equipment
+1,929
+Right-of-use assets - land and buildings
+APJ
+7
+24
+-2,732
+3,345
+-8
+292
+3,062
+of Hedging
+Available-for-Sale Cash Flow Hedges/Cost
+Financial Assets
+reclassified to profit or loss, net of tax
+Other comprehensive income for items that will be
+1/1/2017
+Total
+SAP SE's share capital is subject to a contingent capital increase,
+which may be effected only to the extent that the holders or
+creditors of convertible bonds or stock options issued or guaranteed
+by SAP SE or any of its directly or indirectly controlled subsidiaries
+under certain share-based payments exercise their conversion or
+subscription rights, and no other methods for servicing these rights
+are used. As at December 31, 2019, €100 million, representing
+100 million shares, was still available for issuance (2018:
+€100 million).
+-135
+Contingent Shares
+€ millions
+Other Components of Equity
+May 19, 2020 (Authorized Capital I). The issuance is subject to
+the statutory subscription rights of existing shareholders.
+By up to a total amount of €250 million by issuing new no-par
+value bearer shares against contributions in cash or in kind until
+May 19, 2020 (Authorized Capital II). Subject to the consent of
+the Supervisory Board, the Executive Board is authorized to
+exclude the shareholders' statutory subscription rights in certain
+cases.
+By up to a total amount of €250 million by issuing new no-par
+value bearer shares against contributions in cash until
+-
+The Articles of Incorporation authorize the Executive Board to
+increase the issued capital as follows:
+Authorized Shares
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Exchange Differences
+29
+-2,838
+12/31/2017
+0
+537
+Other comprehensive income for items that will be
+reclassified to profit or loss, net of tax
+1,234
+-5
+0
+1,239
+12/31/2018
+887
+-23
+0
+910
+Other comprehensive income for items that will be
+reclassified to profit or loss, net of tax
+347
+18
+0
+330
+1/1/2018
+-160
+-3
+-158
+0
+Adoption of IFRS 9
+508
+21
+157
+330
+Combined Group
+To Our
+175
+-34.9
+17
+100
+51,502
+100
+60,215
+0
+0
+4
+2,203
+21
+22
+11,331
+23
+13,668
+30
+44
+22,624
+49
+29,393
+23
+24
+12,138
+25
+14,931
+38
+20
+10,486
+Upon IFRS 16 adoption, liabilities and assets increased by
+€2,203 million, representing 4pp of the increase in total equity and
+liabilities.
+14,462
+In 2019, we drew €2,500 million of an acquisition term loan for
+Qualtrics, whereof we repaid €500 million. At maturity, we repaid
+€750 million in Eurobonds. We refinanced €1,100 million through the
+issuance of commercial papers. Thus, the ratio of total nominal
+volume of financial debt to total equity and liabilities increased
+by 1pp.
+SAP SE has issued no-par value bearer shares with a calculated
+nominal value of €1 per share. All of the shares issued are fully paid.
+1,228.5
+-34.9
+1,228.5
+12/31/2019
+12/31/2018
+0.2
+0
+Reissuance of treasury shares under share-
+based payments
+-35.1
+1,228.5
+12/31/2017
+0.2
+0
+-5.4
+-29.9
+1,228.5
+Shares
+Capital
+Treasury
+Issued
+Reissuance of treasury shares under share-
+based payments
+Purchase of treasury shares
+1/1/2017
+Section E Capital Structure, Financing, and Liquidity
+-
+Millions
+Number of Shares
+(E.2) Total Equity
+Issued Capital
+-1
+22,391
+Americas
+4 to 20 years
+2 to 6 years
+Based on the term of the
+lease contract
+Predominantly
+25 to 50 years
+Automobiles
+Office furniture
+Information technology equipment
+Leased assets and leasehold improvements
+Buildings
+Useful Lives of Property, Plant, and Equipment
+Property, Plant, and Equipment
+At the beginning of 2019, we changed our estimate of the expected
+useful lives of certain information technology equipment. This
+change from four to five years is still within the range of two to six
+years. This change reduces our depreciation expense by €93 million
+in the year 2019 (there of €65 million in cost of cloud).
+4 to 5 years
+Changed Estimates of Useful Lives
+(D.4) Property, Plant, and Equipment
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+171
+Section D Invested Capital
+2,144
+3.526
+Total significant intangible assets
+Depreciation of Property, Plant and Equipment
+Property, plant, and equipment are typically depreciated using the
+straight-line method. Judgment is required in estimating the useful
+life of the assets. In this assessment we consider, among others, our
+history with similar assets and current and future changes in
+technology.
+€ millions
+12/31/2018
+12/31/2019
+586
+360
+1,026
+85
+199
+5,496
+36
+38
+1,956
+1,929
+1,537
+3,553
+224
+1.985
+1,344
+and Construction in
+Progress
+Plant, and
+Equipment Leased
+Plant, and
+Equipment
+Leased
+Total
+Advance Payments
+Other Property,
+Other Property,
+Land and Buildings Land and Buildings
+2019
+2018
+Additions
+13 to 18
+0
+1,152
+Qualtrics - Customer relationships
+331
+3,227
+2,507
+403
+317
+€ millions, unless otherwise stated
+Significant Intangible Assets
+12/31/2019
+12/31/2018
+Carrying amount
+5,605
+2,976
+2,031
+598
+12/31/2019
+-391
+-163
+-48
+-180
+Retirements/disposals
+760
+395
+271
+94
+Additions amortization
+77
+39
+721
+19
+3,439
+Carrying Amount Remaining Useful
+6
+0
+495
+Qualtrics Acquired technologies
+9 to 13
+384
+336
+Callidus Customer relationships
+11 to 15
+1,033
+955
+Concur Customer relationships
+6 to 8
+323
+273
+6
+225
+184
+2 to 4
+179
+131
+Ariba Customer relationships
+SuccessFactors - Customer relationships
+Sybase Customer relationships
+Life
+(in years)
+2018
+2019
+4,491
+30,154
+77
+17
+Non-Current Assets by Region
+The table below shows non-current assets excluding financial
+instruments, deferred tax assets, post-employment benefit assets,
+and rights arising under insurance contracts.
+206
+206
+(D.6) Non-Current Assets by Region
+Investments
+in Venture
+Capital Funds
+12/31/2019
+Total
+Due 2020
+€ millions
+Maturities
+SAP invests and holds interests in unrelated parties that manage
+investments in venture capital. On December 31, 2019, total
+commitments to make such investments amounted to €517 million
+(2018: €418 million), of which €312 million had been drawn (2018:
+€232 million). By investing in such venture capital funds, we are
+exposed to the risks inherent in the business areas in which the
+entities operate. Our maximum exposure to loss is the amount
+invested plus contractually committed future capital contributions.
+Other purchase obligations
+Purchase obligations
+123
+Contractual obligations for acquisition of
+property, plant, and equipment and intangible
+assets
+187
+206
+2018
+2019
+€ millions
+2018
+2019
+Investments in venture capital funds
+€ millions
+(D.7) Purchase Obligations
+Additional
+Information
+342
+2,251
+2,010
+2,592
+258
+411
+Rest of Americas
+22,133
+29,744
+United States
+8,926
+9,872
+EMEA
+4,742
+5,386
+Rest of EMEA
+Total
+4,184
+4,486
+Germany
+Due thereafter
+2018
+2019
+€ millions
+Due 2021 to 2024
+Due 2020
+€ millions
+Maturities
+Of the other purchase obligations reported in 2018, €205 million
+contain lease components which are now in the scope of IFRS 16.
+Those purchase obligations can be seen in the reconciliation table in
+Note (D.8).
+The contractual obligations for acquisition of property, plant, and
+equipment and intangible assets relate primarily to the construction
+of new and existing facilities and to the purchase of hardware,
+software, patents, office equipment, and vehicles. The remaining
+obligations relate mainly to marketing, consulting, maintenance,
+license agreements, cloud services, and other third-party
+agreements. The increase is mainly due to new purchase obligations
+related to cloud services and obligations to purchase hardware.
+Historically, the majority of such purchase obligations have been
+realized.
+2,133
+Further Information on Economic,
+Environmental, and Social Performance
+Financial Commitments in Venture Capital Funds
+Consolidated Financial
+Statements IFRS
+Management Report
+0
+1,996
+1,996
+0
+Total
+Non-Current
+Current
+Total
+Non-Current
+Current
+2018
+2019
+Equity investments as % of 44 other financial assets
+Other financial assets
+Equity investments
+Investments in associates
+Equity securities
+Gains/losses on equity securities at FVTPL include gains/losses
+from fair value fluctuations, from disposals as well as dividends,
+while gains/losses on equity securities at FVOCI only include
+dividends, all of which are shown in Financial Income, net. Regular
+way purchases and sales are recorded as at the trade date.
+For equity securities, as the cash flow characteristics are typically
+other than solely principal and interest, we take an investment-by-
+investment decision whether to classify as FVTPL or FVOCI.
+Judgment is required particularly in estimating the fair values of
+equity securities that are not listed publicly.
+loss (FVTPL), depending on the contractual cash flows of and our
+business model for holding the respective asset.
+€ millions
+Equity Investments
+As we do not designate financial assets as "at fair value through
+profit or loss," we generally classify financial assets into the following
+categories: at amortized cost (AC), at fair value through other
+comprehensive income (FVOCI), and at fair value through profit or
+Accounting Policies, Judgments, and Estimates
+(D.5) Equity Investments
+The additions (other than from business combinations) relate
+primarily to the replacement and purchase of information
+technology equipment and the construction and leasing of buildings
+and data centers. For more information about the effect of the
+adoption of IFRS 16, see Note (D.8).
+1,067
+1,248
+1,302
+1,248
+16
+Combined Group
+To Our
+Stakeholders
+Section D Invested Capital
+=
+172
+For a list of the names of other equity investments, see Note (G.9).
+64
+83
+0
+76
+86
+0
+1,984
+1,536
+448
+2,633
+2,336
+297
+1,274
+1,274
+2,012
+2,012
+0
+26
+26
+0
+16
+0
+33
+536
+0
+1.87%
+1.750% (fix)
+99.284%
+2027
+Eurobond 9 - 2014
+996
+997
+€1,000
+1.24%
+1.125% (fix)
+99.478%
+2023
+€1,000
+Eurobond 8 - 2014
+0
+€750
+2.29%
+2.125% (fix)
+99.307%
+2019
+Eurobond 6 - 2012
+(in € millions)
+(in € millions)
+Carrying
+Amount
+2018
+Carrying
+Amount
+759
+985
+992
+Eurobond 11-2015
+1.000% (fix)
+99.576%
+2026
+Eurobond 15 - 2018
+502
+501
+€500
+-0.15%
+0.000% (var.)
+100.519%
+2021
+Eurobond 14 - 2018
+595
+596
+€600
+1.13%
+1.000% (fix)
+99.264%
+2025
+Eurobond 12 - 2015
+649
+650
+€650
+0.07%
+0.000% (var.)
+100.000%
+2020
+2019
+Nominal Volume
+(in respective
+currency in
+millions)
+Effective
+Interest Rate
+Coupon Rate
+Financial debt
+58
+49
+9
+49
+9
+2,017
+1,995
+22
+2,000
+21
+Bank loans
+Papers
+NA
+NA
+NA
+NA
+NA
+1,100
+0
+1,100
+0
+1,100
+Commercial
+transactions
+placement
+1,041
+2,529
+1.06%
+11,139
+11,086
+Issue Price
+Maturity
+Bonds
+For information about the risk associated with our financial
+liabilities, see Note (F.1). For information about fair values, see
+Note (F.2).
+Financial liabilities are unsecured, except for the retention of title
+and similar rights customary in our industry. Effective interest rates
+on our financial debt (including the effects from interest rate swaps)
+were 1.09% in 2019, 1.33% in 2018, and in 1.29% 2017.
+97
+100
+68
+84
+86
+77
+liabilities
+of financial
+Financial debt as %
+liabilities
+11,678
+10,553
+1,125
+11,303
+10,535
+768
+10,572
+759
+13,617
+16,196
+12,923
+3,273
+Financial
+2,531
+1,041
+€500
+498
+(in € millions)
+Carrying Amount
+Carrying
+Amount
+2018
+2019
+Additional
+Information
+currency in
+millions)
+Nominal Volume
+(in respective
+Effective
+Interest Rate
+Coupon Rate
+Maturity
+Further Information on Economic,
+Environmental, and Social Performance
+(in € millions)
+Private placements
+Tranche 8-2012
+Tranche 7-2012
+Tranche 6-2012
+U.S. private placements
+Private Placements
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+179
+Section E - Capital Structure, Financing, and Liquidity
+All of our Eurobonds are listed for trading on the Luxembourg Stock Exchange.
+Tranche 9 2012
+2020
+2.82% (fix)
+2.86%
+180
+The net proceeds from our commercial paper program
+("Commercial Paper") are being used for general corporate
+purposes, including dividends and share repurchases. As at
+December 31, 2019, we had €1,099.5 million of Commercial Paper
+outstanding with maturities generally less than six months and the
+carrying amount amounted to €1,100.5 million (December 31, 2018:
+NA). The weighted average interest rate of our Commercial Paper
+was -0.38% as at December 31, 2019 (December 31, 2018: NA).
+Commercial Paper
+The U.S. private placement notes were issued by one of our
+subsidiaries that has the U.S. dollar as its functional currency.
+1,041
+1,067
+96
+97
+US$100
+3.57%
+3.53% (fix)
+2027
+299
+305
+US$323
+3.37%
+3.33% (fix)
+2024
+395
+406
+US$444.5
+3.22%
+3.18% (fix)
+2022
+251
+259
+US$290
+10,204
+9,433
+Bonds
+262
+99.227%
+2024
+Eurobond 19 - 2018
+897
+898
+€900
+0.36%
+0.250% (fix)
+99.654%
+2022
+Eurobond 18 - 2018
+500
+500
+€500
+-0.01%
+0.000% (var.)
+100.024%
+2020
+Eurobond 17 2018
+494
+491
+€500
+1.50%
+1.375% (fix)
+98.687%
+2030
+Eurobond 16 - 2018
+0.750% (fix)
+498
+0.89%
+844
+267
+US$300
+2.46%
+2.607% (var.)
+100.000%
+2025
+USD bond - 2018
+9,942
+9,166
+Eurobonds
+1,229
+1,224
+€1,250
+1.78%
+1.625% (fix)
+98.382%
+2031
+Eurobond 21 - 2018
+988
+982
+€1,000
+1.38%
+1.250% (fix)
+98.871%
+2028
+Eurobond 20 - 2018
+843
+€850
+1,776
+0
+1,067
+Cash at banks
+Total
+Non-Current
+Current
+Total
+Non-Current
+Current
+2018
+2019
+€ millions
+While we continuously monitor the ratios presented in the capital
+structure table, we actively manage our liquidity and structure of our
+financial indebtedness based on the ratios group liquidity and net
+debt.
+Additional
+Information
+2,877
+Further Information on Economic,
+Environmental, and Social Performance
+-5,793
+-2,493
+-8,286
+Net debt (-)
+-2,337
+-11,331
+-13,668
+Financial debt
+-567
+-10,572
+-11,139
+Non-current financial debt
+Cash and Cash Equivalents
+0
+2,877
+2,918
+-3
+-3
+0
+-3
+Expected credit loss allowance
+400
+0
+400
+0
+0
+Debt securities
+1,195
+0
+1,195
+1,347
+0
+1,347
+Money market and other funds
+4,117
+0
+4,117
+1,093
+0
+1,093
+Time deposits
+2,918
+0
+-1,770
+-759
+-2,529
+Current financial debt
+Loans and other financial receivables are monitored based on
+borrower-specific internal and external information to determine
+whether there has been a significant increase in credit risk since
+initial recognition. We consider such assets to be in default if they
+are significantly beyond their due date or if the borrower is
+unlikely to pay its obligation. A write-off occurs when the
+likelihood of recovery is considered remote, for example when
+bankruptcy proceedings have been finalized or when all
+enforcement efforts have been exhausted.
+development of credit default swap spreads as a measure of
+market participants' assessments of the creditworthiness of a
+debtor to evaluate probable significant increases in credit risk to
+timely react to changes should these manifest. Among others, we
+consider cash at banks, time deposits, and debt securities to be
+in default when the counterparty is unlikely to pay its obligations
+in full, when there is information about a counterparty's financial
+difficulties or if there is a drastic increase in a counterparty's
+credit default swap spread for a prolonged time period while the
+overall market environment remains generally stable. Such
+financial assets are written off either partially or in full if the
+likelihood of recovery is considered remote, which might be
+evidenced, for example, by the bankruptcy of a counterparty of
+such financial assets.
+For cash at banks, time deposits, and debt securities such as
+acquired bonds and commercial paper, we apply the low credit
+risk exception, as it is our policy to invest only in high-quality
+assets of issuers with a minimum rating of at least investment
+grade to minimize the risk of credit losses. Thus, these assets are
+always allocated to stage 1 of the three-stage credit loss model,
+and we record a loss allowance at an amount equal to 12-month
+expected credit losses. This loss allowance is calculated based on
+our exposure at the respective reporting date, the loss given
+default for this exposure, and the credit default swap spread as a
+measure for the probability of default. Even though we invest only
+in assets of at least investment-grade, we also closely observe the
+Impairment of Non-Derivative Financial Debt Investments
+For these financial assets, we apply considerable judgment by
+employing the general impairment approach as follows:
+Gains/losses on non-derivative financial debt investments at FVTPL
+are reported in Financial income, net and show interest
+income/expenses separately from other gains/losses which include
+gains/losses from fair value fluctuations and disposals. Gains/losses
+on non-derivative financial debt investments at AC are reported in
+Financial income, net and show interest income/expenses
+separately from other gains/losses which include gains/losses
+disposals and changes in expected and incurred credit losses.
+Gains/losses from foreign currency exchange rate fluctuations are
+included in Other non-operating income/expense, net. Regular way
+purchases and sales are recorded as at the trade date.
+As we do not designate financial assets as "at fair value through
+profit or loss," we generally classify financial assets as: at amortized
+cost (AC), at fair value through other comprehensive income
+(FVOCI), or at fair value through profit or loss (FVTPL), depending on
+the contractual cash flows of, and our business model for, holding
+the respective asset. Financial assets having cash flow
+characteristics other than solely principal and interest such as
+money market and similar funds are generally classified as FVTPL.
+Generally, all other financial assets with cash flows consisting solely
+of principal and interest are classified as AC because we follow a
+conservative investment approach, safeguarding our liquidity by
+ensuring the safety of principal investment amounts.
+Our non-derivative financial debt investments comprise cash at
+banks and cash equivalents (highly liquid investments with original
+maturities of three months or less, such as time deposits and
+money-market funds), loans and other financial receivables, and
+acquired debt securities.
+> Accounting for Non-Derivative Financial Instruments
+Classification and Measurement of Non-Derivative Financial Debt
+Investments
+(E.3) Liquidity
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined Group
+To Our
+Section E Capital Structure, Financing, and Liquidity
+176
+The total dividend available for distribution to SAP SE
+shareholders is based on the profits of SAP SE as reported in its
+statutory financial statements prepared under the accounting rules
+in the German Commercial Code (Handelsgesetzbuch). For the year
+ended December 31, 2019, the Executive Board intends to propose
+that a dividend of €1.58 per share (that is, an estimated total
+dividend of €1,886 million), be paid from the profits of SAP SE.
+In 2019, we distributed €1,790 million (€1.50 per share) in
+dividends for 2018 compared to €1,671 million (€1.40 per share)
+paid in 2018 for 2017 and €1,499 million (€1.25 per share) paid in
+2017 for 2016. Aside from the distributed dividend, in 2017, we also
+returned €500 million to our shareholders by repurchasing treasury
+shares.
+Our general intention is to remain in a position to return liquidity
+to our shareholders by distributing annual dividends totaling 40% or
+more of our profit after tax and by potentially repurchasing treasury
+shares in future. We intend to repurchase shares with a volume of
+€1.5 billion in 2020.
+Distribution Policy and Dividends
+By resolution of SAP SE's General Meeting of Shareholders held
+on May 17, 2018, the authorization granted by the General Meeting of
+Shareholders on June 4, 2013, regarding the acquisition of treasury
+shares was revoked to the extent it had not been exercised at that
+time, and replaced by a new authorization of the Executive Board of
+SAP SE to acquire, on or before May 16, 2023, shares of SAP SE
+representing a pro rata amount of capital stock of up to €120 million
+in aggregate, provided that the shares purchased under the
+authorization, together with any other shares in the Company
+previously acquired and held by, or attributable to, SAP SE do not
+account for more than 10% of SAP SE's issued share capital.
+Although treasury shares are legally considered outstanding, there
+are no dividend or voting rights associated with them. We may
+redeem or resell shares held in treasury, or we may use treasury
+shares for the purpose of servicing option or conversion rights under
+the Company's share-based payment plans. Also, we may use shares
+held in treasury as consideration in connection with mergers with, or
+acquisitions of, other companies.
+Treasury Shares
+12/31/2019
+1,770
+-6
+Non-Derivative Financial Liabilities
+0
+Non-derivative financial liabilities include bank loans, issued bonds,
+private placements, and other financial liabilities. Included in other
+financial liabilities are customer funding liabilities which are funds
+we draw from and make payments on behalf of our customers for
+customers' employee expense reimbursements, related credit card
+payments, and vendor payments. We present these funds in cash
+and cash equivalents and record our obligation to make these
+expense reimbursements and payments on behalf of our customers
+as customer funding liabilities.
+Expenses and gains or losses on financial liabilities at AC mainly
+consist of interest expense which is shown in Financial income, net.
+Gains/losses from foreign currency exchange rate fluctuations are
+included in Other non-operating income/expense, net.
+-3,456
+8,838
+5,382
+Group liquidity
+securities
+-144
+211
+67
+Current time deposits and debt
+-3,313
+8,627
+5,314
+Cash and cash equivalents
+Δ
+2018
+2019
+€ millions
+Group Liquidity and Net Debt
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined Group
+To Our
+177
+Section E - Capital Structure, Financing, and Liquidity
+Group liquidity consists of cash at banks, money market and other
+funds, time deposits, and debt securities (both with remaining
+maturities of less than one year). Financial debt is defined as the
+nominal volume of bank loans, commercial papers, private
+placements, and bonds. Net debt is group liquidity less financial
+debt.
+Group Liquidity, Financial Debt, and Net Debt
+As we do not designate financial liabilities as FVTPL, we generally
+classify non-derivative financial liabilities as AC.
+0
+-3
+5,314
+2019
+€ millions
+Financial Debt
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+Stakeholders
+To Our
+Section E Capital Structure, Financing, and Liquidity
+178
+2018
+For more information about financial risk and the nature of risk,
+see Note (F.1).
+Time deposits and debt securities with original maturity of three
+months or less are presented as cash and cash equivalents, and
+those with original maturities of greater than three months
+(investments considered in group liquidity) are presented as other
+financial assets. Debt securities consist of commercial papers and
+26
+17
+60
+18
+13
+56
+56
+1,984
+1,536
+448
+2,633
+acquired bonds of mainly financial and non-financial corporations
+and municipalities.
+Nominal Volume
+Carrying Amount
+Nominal Volume
+808
+259
+772
+258
+Private
+10,204
+9,445
+759
+9,512
+750
+9,433
+8,283
+1,150
+8,367
+1,150
+Bonds
+Total
+Non-
+Current
+Current
+Non-
+Current
+Current
+Total
+Non-Current
+Current
+Non-
+Current
+Current
+Carrying Amount
+2,336
+297
+as % of other financial assets
+Non-derivative financial debt investments
+77
+27
+0
+27
+Debt securities
+137
+0
+137
+44
+0
+44
+Time deposits
+Total
+Non-Current
+Current
+Total
+Non-Current
+Current
+2018
+2019
+€ millions
+Non-Derivative Financial Debt Investments
+8,627
+0
+8,627
+5,314
+0
+0
+Cash and cash equivalents
+77
+0
+Other financial assets
+524
+256
+268
+467
+300
+167
+Non-derivative financial debt investments
+-3
+0
+-3
+-3
+0
+-3
+Expected credit loss allowance
+147
+91
+57
+217
+117
+100
+Loans and other financial receivables
+165
+165
+0
+183
+183
+Financial instruments related to employee benefit plans
+Section E Capital Structure, Financing, and Liquidity
+5
+5,159
+312
+4
+148
+410
+562
+193
+0
+36
+229
+-43
+204
+-62
+-146
+25
+0
+-28
+-3
+12/31/2018
+996
+2,178
+5,212
+8,386
+-41
+8
+Transfers
+Retirements/disposals
+Foreign currency exchange differences
+To Our
+Combined Group
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Intangible Assets
+€ millions
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+Software and
+Database Licenses
+Acquired
+Technology/IPRD
+Customer
+Relationship and
+Other Intangibles
+Total
+Historical cost
+1/1/2018
+809
+1,992
+4,631
+7,432
+Foreign currency exchange differences
+Additions from business combinations
+Other additions
+Foreign currency exchange differences
+4
+100
+100
+601
+1,544
+2,306
+4,451
+Foreign currency exchange differences
+6
+77
+87
+Additions amortization
+95
+216
+337
+648
+Retirements/disposals
+-23
+-62
+-25
+-110
+12/31/2018
+679
+1,775
+48
+2,705
+1/1/2018
+Accumulated amortization
+170
+Additions from business combinations
+152
+10,096
+2
+574
+1,226
+1,802
+Other additions
+84
+68
+152
+Retirements/disposals
+Transfers
+0
+-182
+6,415
+12/31/2019
+929
+0
+-25
+2,752
+-396
+-166
+-48
+25
+Increase of share-based payment
+expenses by
+56
+financial income, net by
+Decrease in equity prices and respective
+unobservable inputs of 10% - decrease of
+-156
+-65
+-56
+financial income, net by
+Share-based payments
+Increase in equity prices of 20%
+-298
+Decrease of offsetting gains from
+hedging instruments by
+-371
+Increase of offsetting gains from
+hedging instruments by
+48
+57
+Decrease in equity prices of 20%
+Decrease of share-based payment
+expenses by
+307
+262
+337
+65
+-279
+156
+To Our
+Investments in equity securities
+-46
+Combined Group
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+Equity Price Risk
+Equity Price Risk Factors
+We are exposed to equity price risk with regard to our
+investments in equity securities and our share-based payments
+plans.
+Equity Price Risk Management
+Increase in equity prices and respective
+unobservable inputs of 10% - increase of
+Our listed equity investments are monitored based on the current
+market value that is affected by the fluctuations in the volatile stock
+markets worldwide. Unlisted equity investments are monitored
+based on detailed financial information provided by the investees.
+The fair value of our listed equity investments depends on the equity
+prices, while the fair value of the unlisted equity investments is
+influenced by various unobservable input factors.
+Equity Price Exposure
+On December 31, 2019, our exposure from our investments in
+equity securities was €1,996 million (2018: €1,248 million; 2017:
+€827 million).
+For information about the exposure from our share-based
+payments plans, see Note (B.3).
+Equity Price Sensitivity
+In our sensitivity analysis for our share-based payments plans, we
+include the hedging instruments and the underlying share-based
+payments even though the latter are scoped out of IFRS 7, as we
+believe that taking only the derivative instrument into account would
+not properly reflect our equity price risk exposure.
+Our sensitivity towards a fluctuation in equity prices is as follows:
+2019
+2018
+2017
+Equity Price Sensitivity
+€ millions
+We also monitor the exposure with regard to our share-based
+payment plans. To reduce resulting profit or loss volatility, we hedge
+certain cash flow exposures associated with these plans by
+purchasing derivative instruments, but we do not establish a
+designated hedge relationship.
+-44
+0
+557
+2019
+Equivalent to External
+Rating
+Weighted Average Loss
+Rate
+Gross Carrying Amount
+Not Credit-Impaired
+Gross Carrying Amount
+Credit-Impaired
+ECL Allowance
+Risk class 1 - low risk
+AAA to BBB-
+-0.1%
+3,838
+0
+Risk class 2 - high risk BB to D
+Risk class 3 - unrated
+0.0%
+23
+0
+0
+ΝΑ
+-5.0%
+52
+Section F - Management of Financial Risk Factors
+-3
+€ millions, unless
+otherwise stated
+Credit Risk Exposure from Cash, Time Deposits, and Debt Securities
+As at December 31, 2019, our exposure to credit risk from cash,
+time deposits, and debt securities was as follows:
+Cash, Time Deposits, and Debt Securities
+65
+Credit Risk
+Credit Risk Factors
+To reduce the credit risk in investments, we arrange to receive
+rights to collateral for certain investing activities in the full amount of
+the investment volume, which we would be allowed to make use of
+only in the case of default of the counterparty to the investment. In
+the absence of other significant agreements to reduce our credit risk
+exposure, the total amounts recognized as cash and cash
+equivalents, current investments, loans, and other financial
+receivables, trade receivables, and derivative financial assets
+represent our maximum exposure to credit risks, except for the
+agreements mentioned above.
+Credit Risk Management
+Cash at Banks, Time Deposits, and Debt Securities
+To mitigate the credit risk from our investing activities and
+derivative financial assets, we conduct all our activities only with
+approved major financial institutions and issuers that carry high
+external ratings, as required by our internal treasury guideline.
+Among its stipulations, the guideline requires that we invest only in
+assets from issuers with a minimum rating of at least “BBB flat." We
+only invest in issuers with a lower rating in exceptional cases. Such
+investments were not material in 2019 and 2018. The weighted
+average rating of our financial assets is in the range A to A-. We
+pursue a policy of cautious investments characterized by
+predominantly current investments, standard investment
+instruments, as well as a wide portfolio diversification by doing
+business with a variety of counterparties.
+To further reduce our credit risk, we require collateral for certain
+investments in the full amount of the investment volume, which we
+would be allowed to make use of in the case of default of the
+counterparty to the investment. As such collateral, we only accept
+bonds with at least investment-grade rating level.
+In addition, the concentration of credit risk that exists when
+counterparties are involved in similar activities by instrument, sector,
+or geographic area is further mitigated by diversification of
+counterparties throughout the world and adherence to an internal
+limit system for each counterparty. This internal limit system
+stipulates that the business volume with individual counterparties is
+restricted to a defined limit that depends on the lowest official long-
+term credit rating available by at least one of the major rating
+agencies, the Tier 1 capital of the respective financial institution, or
+participation in the German Depositors' Guarantee Fund or similar
+protection schemes. We continuously monitor strict compliance with
+these counterparty limits. As the premium for credit default swaps
+mainly depends on market participants' assessments of the
+creditworthiness of a debtor, we also closely observe the
+development of credit default swap spreads in the market to
+evaluate probable risk developments and react in a timely manner to
+changes should these manifest.
+For cash at banks, time deposits, and debt securities such as
+acquired bonds or commercial paper, we apply the general
+impairment approach. As it is our policy to only invest in high-quality
+assets of issuers with a minimum rating of at least investment grade
+so as to minimize the risk of credit losses, we use the low credit risk
+exception. Thus, these assets are always allocated to stage 1 of the
+three-stage credit loss model and we record a loss allowance for an
+amount equal to 12-month expected credit losses. This loss
+Section F - Management of Financial Risk Factors
+-46
+187
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+allowance is calculated based on our exposure as at the respective
+reporting date, the loss given default for this exposure, and the credit
+default swap spread as a measure for the probability of default. To
+ensure that during their lifetime our investments always fulfill the
+requirement of being investment-grade, we monitor changes in
+credit risk by tracking published external credit ratings. Among other
+things, we consider cash at banks, time deposits, and debt securities
+to be in default when the counterparty is unlikely to pay its
+obligations in full, when there is information about a counterparty's
+financial difficulties, or in case of a drastic increase in the credit
+default swap spread of a counterparty for a prolonged time period
+while the overall market environment remains rather stable. Such
+financial assets are written off either partially or in full if the
+likelihood of recovery is considered remote, which might be
+evidenced, for example, by the bankruptcy of a counterparty of such
+financial assets.
+Trade Receivables
+The default risk of our trade receivables is managed separately,
+mainly based on assessing the creditworthiness of customers
+through external ratings and on our past experience with the
+customers concerned. Based on this assessment, individual credit
+limits are established for each customer and deviations from such
+credit limits need to be approved by management.
+We apply the simplified impairment approach using a provision
+matrix for all trade receivables and contract assets to take into
+account any lifetime expected credit losses already at initial
+recognition. For the purpose of the provision matrix, customers are
+clustered into different risk classes, mainly based on market
+information such as the country risk assessment of their country of
+origin. Loss rates used to reflect lifetime expected credit losses are
+determined using a roll-rate method based on the probability of a
+receivable progressing through different stages of being overdue and
+on our actual credit loss experience over the past years. These loss
+rates are enhanced by forward-looking information to reflect
+differences between economic conditions during the period over
+which the historical data has been collected, current conditions, and
+the expected changes in the economic conditions over the expected
+life of the receivables. Forward-looking information is based on
+changes in country risk ratings, or fluctuations in credit default
+swaps of countries of the customers we do business with. We
+continuously monitor outstanding receivables locally to assess
+whether there is objective evidence that our trade receivables and
+contract assets are credit-impaired. Evidence that trade receivables
+and contract assets are credit-impaired include, among the trade
+receivables being past due, information about significant financial
+difficulty of the customer or non-adherence to a payment plan. We
+consider receivables to be in default when the counterparty is
+unlikely to pay its obligations in full, However, a delay of payments
+(for example, more than 90 days past due) in the normal course of
+business alone does not necessarily indicate a customer default. We
+write off account balances either partially or in full if we judge that
+the likelihood of recovery is remote, which might be evidenced, for
+example, when bankruptcy proceedings for a customer are finalized
+or when all enforcement efforts have been exhausted.
+The impact of default on our trade receivables from individual
+customers is mitigated by our large customer base and its
+distribution across many different industries, company sizes, and
+countries worldwide. For more information about our trade
+receivables, see Note (A.2.).
+Credit Risk Exposure
+To Our
+Stakeholders
+186
+4.16
+4
+10,572
+Non-current financial debt
+2,529
+1,963
+0
+-6
+0
+-188
+759
+Current financial debt
+Changes
+12/31/2019
+Other
+Fair Value
+Foreign
+Currency
+Business
+Combinations
+Cash Flows
+1/1/2019
+€ millions
+The changes in our financial debts are reconciled to the cash flows from borrowings included in the cash flow from financing activities.
+Reconciliation of Liabilities Arising from Financing Activities
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+2,500
+0
+30
+0
+0
+0
+0
+0
+-70
+Transaction costs
+13
+0
+-30
+1
+0
+Consolidated Financial
+Statements IFRS
+0
+Basis adjustment
+13,668
+0
+0
+25
+0
+2,312
+11,331
+Financial debt (nominal volume)
+11,139
+-1,963
+42
+0
+Management Report
+To Our
+Stakeholders
+interest rate swaps are not reflected in the sensitivity calculation,
+as they offset the fixed interest rate payments for the bonds and
+private placements as hedged items. However, changes in market
+interest rates affect the amount of interest payments from the
+interest rate swap. As a consequence, we include those effects of
+market interest rates on interest payments in the profit-related
+sensitivity calculation.
+Due to the different interest rate expectations for the U.S. dollar
+and the euro area, we base our sensitivity analyses on a yield curve
+upward shift of +50/+10 basis points (bps) for the U.S. dollar/euro
+area (2018: +100/+30bps for the U.S. dollar/euro area; 2017:
++100/+25bps for the U.S. dollar/euro area), and a yield curve
+downward shift of -50/-20bps for the U.S. dollar/euro area (2018: -
+25/-10bps for the U.S. dollar/euro area; 2017: -25bps).
+If, on December 31, 2019, 2018, and 2017, interest rates had been
+higher/lower as described above, this would not have had a material
+effect on financial income, net, for our variable interest rate
+investments and would have had the following effects on financial
+income, net.
+Effects on Financial Income, Net
+2019
+2018
+2017
+Derivatives held within a designated fair value hedge relationship
+Interest rates +50bps for U.S. dollar area/+10bps for euro area (2018: +100/+30bps for U.S.
+dollar/euro area; 2017: +100/+25bps for U.S. dollar/euro area)
+-41
+-20
+-26
+Interest rates -50bps for U.S. dollar/-20bps for euro area (2018: -25 /-10bps for U.S.
+dollar/euro area; 2017: -25bps for U.S. dollar/euro area)
+76
+5
+9
+Variable-rate financing
+Interest rates +50bps for U.S. dollar area/+10bps for euro area (2018: +100/+30bps for U.S.
+dollar/euro area; 2017: +25bps for euro area)
+-8
+-24
+-5
+Interest rates -50bps for U.S. dollar/-20bps for for euro area (2018: -25/-10bps for U.S.
+dollar/euro area; 2017: -25bps for euro area)
+8
+€ millions
+Interest Rate Sensitivity
+The designation of interest rate receiver swaps in a fair value
+hedge relationship leads to interest rate changes affecting
+financial income, net. The fair value movements related to the
+Income or expenses recorded in connection with non-derivative
+financial instruments with variable interest rates are subject to
+interest rate risk if they are not hedged items in an effective
+hedge relationship. Thus, we take into consideration interest rate
+changes relating to our variable-rate financing and our
+investments in money market instruments in the profit-related
+sensitivity calculation.
+Total
+5.65
+3.50
+From financing
+3.92
+4.25
+4.43
+3.92
+1.96
+2.08
+2.32
+Combined Group
+1.45
+4.29
+3.05
+5.06
+1.28
+1.28
+1.31
+1.36
+1.27
+Interest Rate Sensitivity
+A sensitivity analysis is provided to show the impact of our
+interest rate risk exposure on profit or loss and equity in accordance
+with IFRS 7, considering the following:
+Changes in interest rates only affect the accounting for non-
+derivative fixed-rate financial instruments if they are recognized
+at fair value. Therefore, such interest rate changes do not change
+the carrying amounts of our non-derivative fixed-rate financial
+liabilities, as we account for them at amortized cost. Investments
+in fixed-rate financial assets classified as fair value through profit
+or loss were not material at each year end reported. Thus, we do
+not consider any fixed-rate instruments in the equity-related
+sensitivity calculation.
+From interest rate swaps
+-0.2%
+-0.2%
+-6
+until 2024. The use of the facility is not restricted by any financial
+covenants. Borrowings under the facility bear interest of EURIBOR or
+LIBOR for the respective currency plus a margin of 17bps. We are
+also required to pay a commitment fee of 5.95bps per annum on the
+unused available credit. We have not drawn on the facility.
+In September 2019, we initiated a commercial paper program
+("Commercial Paper"). As at December 31, 2019, we had
+€1,099.5 million of Commercial Paper outstanding with maturities
+generally less than six months.
+Additionally, as at December 31, 2019, and 2018, we had available
+lines of credit totaling € 430 million and €445 million, respectively.
+There were immaterial borrowings outstanding under these lines of
+credit in all years presented.
+Liquidity Risk Exposure
+The table below is an analysis of the remaining contractual
+maturities of all our financial liabilities held as at December 31, 2019.
+Financial liabilities for which repayment can be requested by the
+contract partner at any time are assigned to the earliest possible
+period. Variable interest payments were calculated using the latest
+relevant interest rate fixed as at December 31, 2019. As we generally
+settle our derivative contracts gross, we show the pay and receive
+legs separately for all our currency and interest rate derivatives,
+whether or not the fair value of the derivative is negative. The cash
+outflows for the currency derivatives are translated using the
+applicable spot rate.
+Contractual Maturities of Non-Derivative Financial Liabilities
+€ millions
+Carrying
+Amount
+Contractual Cash Flows
+12/31/2019
+2020
+2021
+2022
+2023
+2024
+Thereafter
+Non-derivative financial liabilities
+Trade payables
+-1,283
+-1,283
+0
+0
+0
+In order to retain high financial flexibility, in 2017, SAP SE entered
+into a €2.5 billion syndicated credit facility agreement with a term
+Apart from effective working capital and cash management, we
+have reduced the liquidity risk inherent in managing our day-to-day
+operations and meeting our financing responsibilities by arranging
+an adequate volume of available credit facilities with various
+financial institutions on which we can draw if necessary.
+Generally, our primary source of liquidity is funds generated from
+our business operations. Our global treasury department manages
+liquidity centrally for all subsidiaries. Where possible, we pool their
+cash surplus so that we can use liquidity centrally for our business
+operations, for subsidiaries' funding requirements, or to invest any
+net surplus in the market. With this strategy, we seek to optimize
+yields, while ensuring liquidity, by investing only with counterparties
+and issuers of high credit quality, as explained before. Hence, high
+levels of liquid assets and marketable securities provide a strategic
+reserve, helping keep SAP flexible, sound, and independent.
+Our liquidity is managed by our global treasury department with
+the primary aim of maintaining liquidity at a level that is adequate to
+meet our financial obligations.
+2018
+ECL Allowance
+ECL Allowance
+-107
+-99
+-38
+-18
+13
+-131
+10
+-107
+0
+Section F - Management of Financial Risk Factors
+To Our
+Combined Group
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+Liquidity Risk
+Liquidity Risk Factors
+We are exposed to liquidity risk from our obligations towards
+suppliers, employees, and financial institutions.
+Liquidity Risk Management
+189
+2019
+0
+-2,203
+2022
+2023
+Thereafter
+Non-derivative financial liabilities
+Trade payables
+-1,265
+-1,265
+0
+0
+0
+0
+Financial liabilities
+-11,602
+-1,149
+Total of non-derivative financial liabilities
+-12,866
+-2,414
+-1,585
+-1,585
+-622
+-622
+-1,410
+-1,410
+-1,097
+-1,097
+-6.689
+-6,689
+2021
+2020
+2019
+12/31/2018
+-431
+-363
+-284
+-224
+-190
+-1,019
+Other financial liabilities
+-13,912
+-2,888
+-630
+-3,414
+Lease liabilities
+Total of non-derivative financial liabilities
+-4,602
+-993
+-3,698
+-1,095
+-1,319
+-1,231
+-1,421
+-5,467
+-6,486
+€ millions
+Carrying
+Contractual Cash Flows
+Amount
+-17,398
+Balance as at 12/31
+Amounts written off
+Net credit losses recognized
+Risk class 3 - unrated
+Total
+188
+Section F - Management of Financial Risk Factors
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+As at December 31, 2019, the major part of our time deposits,
+other loans, and other financial receivables was concentrated in
+Germany. There were no time deposits, loans, or other financial
+receivables past due but not impaired and we had no indications of
+impairments of such assets that were not past due and not impaired
+as at that date.
+Trade Receivables and Contract Assets
+As at December 31, 2019, our exposure to credit risk from trade
+receivables was as follows:
+Credit Risk Exposure from Trade Receivables and Contract Assets
+€ millions, unless otherwise
+stated
+Weighted Average Loss Rate
+Gross Carrying Amount
+Not Credit-Impaired
+Gross Carrying Amount
+Credit-Impaired
+2019
+ECL Allowance
+AR not due and due
+AR overdue 1 to 30 days
+5
+5,226
+Risk class 2 - high risk BB to D
+Risk class 1 - low risk
+-6
+0
+€ millions, unless
+otherwise stated
+2018
+Equivalent to External
+Rating
+Weighted Average Loss
+Rate
+Gross Carrying Amount Gross Carrying Amount
+Not Credit-Impaired
+Credit-Impaired
+ECL Allowance
+AAA to BBB-
+-0.1%
+7,406
+0
+0
+0.0%
+34
+○
+0
+ΝΑ
+-3.3%
+30
+0
+-1
+-0.1%
+7,470
+-5
+-9
+-0.5%
+733
+-13
+-0.3%
+749
+15
+-2
+AR overdue 30 to 90 days
+AR overdue more than 90 days
+TOTAL
+-0.5%
+551
+8
+0
+-3
+558
+125
+-89
+-1.7%
+6,146
+148
+-107
+For 2019, the movement in the ECL allowance for trade
+receivables and contract assets is as follows:
+Movement in ECL Allowance for Trade Receivables
+and Contract Assets
+€ millions
+Balance as at 1/1 under IFRS 9
+-13.0%
+3,913
+4,288
+AR overdue 1 to 30 days
+36
+-4
+AR overdue 30 to 90 days
+-0.8%
+668
+23
+-5
+AR overdue more than 90 days
+-11.1%
+869
+158
+-0.3%
+-114
+-1.7%
+7,496
+217
+-131
+€ millions, unless otherwise
+stated
+2018
+Weighted Average Loss Rate
+Gross Carrying Amount
+Not Credit-Impaired
+Gross Carrying Amount
+Credit-Impaired
+ECL Allowance
+AR not due and due
+TOTAL
+-64
+1,299
+11,303
+71
+62
+53
+0
+559
+0
+0
+-29
+о
+-15
+-11
+-53
+15
+11
+53
+USD +10%
+184
+FX option held in connection with the acquisition of Qualtrics
+USD -10%
+All currencies +10%
+All currencies -10%
+Embedded derivatives
+All major currencies +10% (2018: all major currencies +10%;
+2017: all major currencies +10%)
+All major currencies -10% (2018: all major currencies -10%;
+2017: all major currencies -10%)
+-53
+-62
+-71
+Section F - Management of Financial Risk Factors
+3,750
+in USD
+in EUR
+2019
+Fixed-Rate Borrowing
+Fixed-Rate Borrowing
+Carrying amount
+Notional amount
+€ millions
+Designated Hedged Items in Interest Rate Hedges
+The amounts as at December 31, 2019, relating to items
+designated as hedged items were as follows:
+To match the interest rate risk from our financing transactions to
+our investments, we use receiver interest rate swaps to convert
+certain fixed-rate financial liabilities to floating, and by this means
+secure the fair value of the swapped financing transactions on a 1:1
+ratio. Including interest rate swaps, 35% (2018: 71%) of our total
+interest-bearing financial liabilities outstanding as at
+December 31, 2019, had a fixed interest rate.
+Derivatives held within a designated cash flow hedge relationship
+Derivatives Designated as Hedging Instruments (Fair Value
+Hedges)
+Interest Rate Risk Management
+We are exposed to interest rate risk as a result of our investing
+and financing activities mainly in euros and U.S. dollars, since a large
+part of our investments are based on variable rates and/or short
+maturities (2019: 80%; 2018: 48%) and most of our financing
+transactions are based on fixed rates and long maturities (2019:
+69%; 2018: 83%).
+Interest Rate Risk Factors
+Interest Rate Risk
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined Group
+To Our
+The aim of our interest rate risk management is to reduce profit
+or loss volatility and optimize our interest result by creating a
+balanced structure of fixed and variable cash flows. We therefore
+manage interest rate risks by adding interest-rate-related derivative
+instruments to a given portfolio of investments and debt financing.
+The desired fixed-floating mix of our net debt is set by the Treasury
+Committee.
+545
+2017
+2019
+1.0
+Year-end exposure toward all our major currencies
+forward rate
+2018
+2019
+€ billions
+1.09
+1.11
+Average EUR:CHF
+Foreign Currency Exposure
+forward rate
+119.32
+121.97
+Average EUR:JPY
+forward rate
+Thus, our foreign currency exposure (and our average/high/low
+exposure) as at December 31, 2019, was as follows:
+The spot component of derivatives held within a designated cash
+flow hedge relationship affecting other comprehensive income
+Foreign currency embedded derivatives affecting other non-
+operating expense, net
+-
+Consequently, we are only exposed to significant foreign currency
+exchange rate fluctuations with regard to the following:
+changes in the fair values of the hedged item attributable to
+exchange rate movements in the Consolidated Income
+Statements in the same period. As a consequence, the hedged
+items and the hedging instruments are not exposed to foreign
+currency exchange rate risks, and thereby have no effect on
+profit.
+89.84
+88.77
+193
+6.3
+Average EUR:AUD
+1.63
+1.65
+Net
+2017
+2018
+2019
+Effects on Other Comprehensive Income
+Effects on Other Non-Operating Expense,
+We calculate our sensitivity on an upward/downward shift of +/-
+10% of the foreign currency exchange rate between the euro and all
+major currencies (2018: +/-10% of the foreign currency exchange
+rate between the euro and all other major currencies; 2017: +/-10%
+of the foreign currency exchange rate between the euro and all other
+major currencies). If, on December 31, 2019, 2018, and 2017, the
+foreign currency exchange rates had been higher/lower as described
+above, this would have had the following effects on other non-
+operating expense, net and other comprehensive income:
+Foreign Currency Exchange Rate Sensitivity
+€ millions
+Foreign Currency Sensitivity
+The SAP Group's entities generally operate in their functional
+currencies. In exceptional cases and limited economic
+environments, operating transactions are denominated in
+currencies other than the functional currency, leading to a foreign
+currency exchange rate risk for the related monetary
+instruments. Where material, this foreign currency exchange rate
+risk is hedged. Therefore, fluctuations in foreign currency
+exchange rates do not have a significant impact on either profit or
+other comprehensive income with regard to our non-derivative
+monetary financial instruments and related income or expenses.
+Our free-standing derivatives designed for hedging foreign
+currency exchange rate risks almost completely balance the
+-
+2018
+-
+Foreign Currency Exchange Rate Exposure
+0.7
+0.6
+Lowest exposure
+6.3
+1.0
+Highest exposure
+forward rate
+2.1
+0.7
+Average exposure
+Our risk exposure is based on the following assumptions:
+324
+3,707
+25
+Further Information on Economic,
+Environmental, and Social Performance
+€ billions
+Interest Rate Risk Exposure
+as at December 31 was as follows:
+Our interest rate exposure (and our average/high/low exposure)
+Interest Rate Exposure
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined Group
+To Our
+185
+Section F - Management of Financial Risk Factors
+hedge relationships, and the difference between the two recognized
+in financial income, net, is material in any of the years presented.
+None of the fair value adjustment from the receiver swaps, the
+basis adjustment on the underlying hedged items held in fair value
+1,250
+1.090%
+0.927%
+500
+1,000
+0.952%
+1,000
+1.528%
+2.370%
+2.491%
+2.516%
+Additional
+Information
+2019
+2018
+Year-End
+4.24
+3.89
+5.04
+4.32
+4.32
+From investments (including cash)
+Cash flow interest rate risk
+0.08
+0.10
+0.09
+0.08
+89
+0.03
+0.05
+0.03
+From investments
+Fair value interest rate risk
+Low
+High
+Average
+Year-End
+Low
+High
+Average
+0.07
+545
+198
+2031
+Carrying amount
+545
+3,750
+Interest Rate Swaps for
+USD Borrowing
+Interest Rate Swaps for
+EUR Borrowing
+2019
+Notional amount
+€ millions
+Designated Hedging Instruments in Interest Rate
+Hedges
+The amounts as at December 31, 2019, designated as hedging
+instruments were as follows:
+adjustments for hedged
+items ceased to be
+adjusted for hedging
+gains/losses
+fair value hedge
+-28
+0
+Accumulated amount of
+ineffectiveness
+for measuring
+-11
+25
+Change in fair value used
+adjustments in Other
+financial liabilities
+Accumulated fair value
+-38
+Other financial
+assets
+Other financial
+liabilities
+2030
+2028
+2027
+2024
+2022
+2020
+Maturity
+2019
+9
+-16
+0
+258
+-16
+0
+Average variable interest rate
+Nominal amounts
+USD interest rate swaps
+Average variable interest rate
+Nominal amounts
+EUR interest rate swaps
+€ millions
+As at December 31, 2019, we held the following instruments to hedge exposures to changes in interest rates:
+Details on Hedging Instruments in Interest Rate Hedges
+used for measuring
+ineffectiveness
+Change in fair value
+9
+Financial debt (carrying amount)
+7 to 12 months
+2019
+0
+-19
+-1
+0
+0
+62
+Basis adjustment
+11,331
+0
+O
+51
+7
+5,008
+6,264
+Financial debt (nominal volume)
+10,572
+-750
+0
+49
+0
+6,308
+4,965
+Non-current financial debt
+42
+Transaction costs
+-26
+-48
+0
+-24
+Interest rate swaps
+47
+14
+0
+-1
+0
+0
+34
+Accrued interest
+759
+11,303
+-19
+50
+7
+4,961
+6,301
+Financial debt (carrying amount)
+-70
+3
+0
+0
+0
+3
+0
+750
+3
+Lease¹)
+7
+0
+14
+0
+0
+0
+-7
+Interest rate swaps
+67
+19
+0
+1
+0
+0
+47
+Accrued interest
+13,616
+5
+-30
+25
+0
+2,312
+2,168
+-403
+52
+38
+7
+-1,300
+Current financial debt
+12/31/2018
+Other
+Fair Value
+Changes
+Foreign
+Currency
+Combinations
+Business
+Cash Flows
+1/1/2018
+0
+€ millions
+15,895
+373
+-16
+64
+52
+1,910
+13,512
+Total liabilities from financing activities
+2,204
+348
+0
+1) Other includes new lease liabilities
+1 to 6 months
+-1
+0
+-7
+Amount reclassified from cost of
+hedging in OCI to finance income, net
+Amount reclassified from cash flow
+hedge in OCI to other non-operating
+income, net
+Cost of hedging recognized in OCI
+Hedge ineffectiveness recognized in
+finance income, net
+Change in value recognized in OCI
+Other financial liabilities
+Other financial assets
+Carrying amount
+Nominal amount
+€ millions
+Designated Hedging Instruments in Foreign
+Currency Exchange Rate Hedges
+The amounts as at December 31, 2019, designated as hedging
+instruments were as follows:
+-7
+2019
+Forecasted License Payments
+Balances remaining in cash flow hedge
+reserve for which hedge accounting is no
+longer applied
+Cost of hedging
+Cash flow hedge
+Change in value used for calculating hedge
+ineffectiveness
+€ millions
+Designated Hedged Items in Foreign Currency
+Exchange Rate Hedges
+The amounts as at December 31, 2019, relating to items
+designated as hedged items were as follows:
+-2
+0
+Forecasted License Payments
+2019
+Maturity
+Details on Hedging Instruments in Foreign
+Currency Exchange Rate Hedges
+On December 31, 2019, we held the following instruments to
+hedge exposures to changes in foreign currency:
+Average EUR:GBP
+millions
+Net exposure in €
+contracts
+Forward exchange
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+transactions are expected to occur and to be recognized in profit or
+loss monthly within a time frame of 12 months from the date of the
+statement of financial position.
+Management Report
+To Our
+Stakeholders
+183
+Section F - Management of Financial Risk Factors
+-6
+-22
+2
+о
+7
+-11
+3
+518
+Combined Group
+17
+For all years presented, no previously highly-probable transaction
+designated as a hedged item in a foreign currency cash flow hedge
+relationship ceased to be probable. Therefore, we did not
+discontinue any of our cash flow hedge relationships. Also,
+ineffectiveness was either not material or non-existent in all years
+reported. Generally, the cash flows of the hedged forecasted
+We continuously monitor our exposure to currency fluctuation
+risks based on monetary items and forecasted transactions and
+pursue a Group-wide strategy to manage foreign currency exchange
+rate risk, using derivative financial instruments, primarily foreign
+exchange forward contracts, as appropriate, with the primary aim of
+reducing profit or loss volatility. Most of the hedging instruments are
+not designated as being in a hedge accounting relationship.
+Currency Hedges Designated as Hedging Instruments (Cash Flow
+Hedges)
+Many transactions constitute economic hedges, and therefore
+contribute effectively to the securing of financial risks but do not
+qualify for hedge accounting under IFRS 9. To hedge currency risks
+inherent in foreign-currency denominated and recognized monetary
+assets and liabilities, we do not designate our held-for-trading
+derivative financial instruments as accounting hedges, because the
+profits and losses from the underlying transactions are recognized in
+profit or loss in the same periods as the profits or losses from the
+derivatives.
+Derivatives Not Designated as Hedging
+Instruments
+We use derivatives to hedge foreign currency risk or interest rate risk
+and designate them as cash flow or fair value hedges if they qualify
+for hedge accounting under IFRS 9, which involves judgment.
+Accounting for Derivative Financial Instruments
+(F.1) Financial Risk Factors and Risk
+Management
+This section discusses financial risk factors and risk management
+regarding foreign currency exchange rate risk, interest rate risk,
+equity price risk, credit risk, and liquidity risk. Further, it contains
+information about financial instruments.
+Section F - Management of Financial
+Risk Factors
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+To Our
+Stakeholders
+181
+Section E - Capital Structure, Financing, and Liquidity
+11,343
+18
+-1
+48
+7
+4,961
+6,311
+Total liabilities from financing activities
+-7
+In addition, we occasionally have contracts that contain foreign
+currency embedded derivatives that are required to be accounted
+for separately.
+Fair value fluctuations in the spot component of such derivatives at
+FVTPL are included in Other non-operating income/expense, net
+while the forward element is shown in Financial income, net.
+Derivatives Designated as Hedging Instruments
+a) Cash Flow Hedge
+In general, we apply cash flow hedge accounting to the foreign
+currency risk of highly probable forecasted transactions. With regard
+to foreign currency risk, hedge accounting relates to the spot price
+and the intrinsic values of the derivatives designated and qualifying
+as cash flow hedges. Accordingly, the effective portion of these
+components determined on a present value basis is recorded in
+other comprehensive income. The forward element and time
+element as well as foreign currency basis spreads excluded from the
+hedging relationship are recorded as cost of hedging in a separate
+position in other comprehensive income. As the amounts are not
+material, they are presented together with the effective portion of
+the cash flow hedges in our consolidated statements of
+comprehensive income and consolidated statements of changes in
+equity. All other components including counterparty credit risk
+Foreign Currency Exchange Rate Risk
+Management
+Generally, we are not exposed to any significant foreign currency
+exchange rate risk with regard to our investing and financing
+activities, as such activities are normally conducted in the functional
+currency of the investing or borrowing entity.
+In addition, the intellectual property (IP) holders in the
+SAP Group are exposed to risks associated with forecasted
+intercompany cash flows in foreign currencies. These cash flows
+arise out of royalty payments from subsidiaries to the respective IP
+holder. The royalties are linked to the subsidiaries' external revenue.
+This arrangement leads to a concentration of the foreign currency
+exchange rate risk with the IP holders, as the royalties are mostly
+denominated in the subsidiaries' local currencies, while the
+functional currency of the IP holders with the highest royalty volume
+is the euro. The highest foreign currency exchange rate exposure of
+this kind relates to the currencies of subsidiaries with significant
+operations, for example the U.S. dollar, the pound sterling, the
+Japanese yen, the Swiss franc, and the Australian dollar.
+In rare circumstances, transacting in a currency other than the
+functional currency also leads to embedded foreign currency
+derivatives being separated and measured at fair value through
+profit or loss.
+As we are active worldwide, our ordinary operations are subject
+to risks associated with fluctuations in foreign currencies. Since the
+Group's entities mainly conduct their operating business in their own
+functional currencies, our risk of exchange rate fluctuations from
+ongoing ordinary operations is not considered significant. However,
+SAP occasionally generates foreign-currency-denominated
+receivables, payables, and other monetary items by transacting in a
+currency other than the functional currency. To mitigate the extent
+of the associated foreign currency exchange rate risk, the majority of
+these transactions are hedged as described below.
+Foreign Currency Exchange Rate Risk
+Foreign Currency Exchange Rate Risk Factors
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+We enter into derivative financial instruments, primarily foreign
+exchange forward contracts, to hedge significant forecasted cash
+flows (royalties) from foreign subsidiaries denominated in foreign
+currencies with a hedge ratio of 1:1 and a hedge horizon of up to 12
+months, which is also the maximum maturity of the foreign
+exchange derivatives we use.
+To Our
+Stakeholders
+182
+We only purchase derivative financial instruments to reduce risks
+and not for speculation, which is defined as entering into derivative
+instruments without a corresponding underlying transaction.
+We manage market risks, credit risk, and liquidity risk on a Group-
+wide basis through our global treasury department, global risk
+management, and global credit management. Risk management
+policies are established to identify risks, to set appropriate risk
+limits, and to monitor risks. Risk management policies and hedging
+strategies are laid out in our internal guidelines (for example,
+treasury guideline and other internal guidelines), and are subject to
+continuous internal review and analysis to reflect changes in market
+conditions and our business.
+We are exposed to various financial risks, such as market risks
+(that is, foreign currency exchange rate risk, interest rate risk, and
+equity price risk), credit risk, and liquidity risk.
+Differences in the timing of hedged item and hedged transaction
+in our cash flow hedges.
+The effect of the counterparty and our own credit risk on the fair
+value of the forward exchange contracts and interest rate swaps,
+which is not reflected in the respective hedged item, and
+At inception of a designated hedging relationship, we document our
+risk management strategy and the economic relationship between
+hedged item and hedging instrument. The existence of an economic
+relationship is demonstrated as well as the effectiveness of the
+hedging relationship tested prospectively by applying the critical
+terms match for our foreign currency hedges, since currencies,
+maturities, and the amounts are closely aligned for the forecasted
+transactions and for the spot element of the forward exchange rate
+contract or intrinsic value of the currency options, respectively. For
+interest rate swaps, effectiveness is tested prospectively using
+statistical methods in the form of a regression analysis, by which the
+validity and extent of the relationship between the change in value of
+the hedged items as the independent variable and the fair value
+change of the derivatives as the dependent variable is determined.
+The main sources of ineffectiveness are:
+c) Valuation and Testing of Effectiveness
+We apply fair value hedge accounting for certain of our fixed-rate
+financial liabilities and show the fair value fluctuations in Financial
+income, net.
+b) Fair Value Hedge
+adjustments of the derivative and the ineffective portion are
+immediately recognized in Financial Income, net in profit or loss.
+Amounts accumulated in other comprehensive income are
+reclassified to profit or loss to Other non-operating income/expense,
+net and Financial income, net in the same period when the hedged
+item affects profit or loss.
+Section F - Management of Financial Risk Factors
+190
+Section F - Management of Financial Risk Factors
+Investor Relations
+100%
+31
+31
+22
+22
+9
+9
+Dr. Friederike Rotsch
+100%
+24
+24
+24
+15
+15
+9
+9
+Christine Regitz
+93%
+28
+30
+1199
+21
+9
+9
+Gerhard Oswald (since January 1, 2019)
+90%
+19
+Dr. Erhard Schipporeit (until May 15, 2019)
+21
+3
+7
+9
+10
+3
+4
+6
+6
+Heike Steck (since May 15, 2019)
+100%
+10
+10
+7
+7
+3
+3
+Dr. Sebastian Sick (until May 15, 2019)
+100%
+7
+7
+4
+4
+3
+3
+Robert Schuschnig-Fowler (until May 15, 2019)
+100%
+10
+10
+7
+3
+12
+12
+7
+100%
+9
+9
+6
+6
+3
+3
+Andreas Hahn (until May 15, 2019)
+100%
+13
+13
+4
+4
+9
+9
+Diane Greene
+96%
+23
+24
+14
+15
+9
+9
+Aicha Evans
+100%
+10
+10
+Prof. Dr. Gesche Joost
+9
+9
+7
+9
+Bernard Liautaud
+100%
+20
+20
+11
+11
+9
+Lars Lamadé
+100%
+10
+10
+4
+90%
+4
+6
+100%
+24
+24
+15
+15
+9
+9
+Margret Klein-Magar
+100%
+16
+16
+7
+6
+Pierre Thiollet (until May 15, 2019)
+3
+3
+The Work of the Supervisory Board
+Committees
+CEOs. We approved these changes. In addition to the above, the
+Supervisory Board assessed the independence of its members at
+regular intervals pursuant to the specifications of the German
+Corporate Governance Code ("Code"), using benchmarks we had
+set at our own discretion. We first ascertained that the Supervisory
+Board has a sufficient number of independent members, and
+confirmed that the targets set also provide for an appropriate
+number of independent shareholder representatives in our opinion.
+We then ascertained that, taking account of the shareholder
+structure, the Supervisory Board has a sufficient number of
+independent members. In accordance with the Code provisions, we
+also identified those shareholder representatives whom the
+Supervisory Board deems independent; these representatives are
+named in the Corporate Governance Statement, which also
+includes the Corporate Governance Report. In agreement with the
+Executive Board, we also adopted for regular publication in
+October 2019 the annual Declaration of Implementation of the
+Code.
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+To Our
+Stakeholders
+Report by the Supervisory Board
+18
+At our meeting on October 24, 2019, the Executive Board
+reported on business performance in the third quarter. On
+recommendation from the Finance and Investment Committee, we
+consented to the financing of a new Sapphire Ventures fund
+("SAPPHIRE Ventures Fund V") and approved the release of further
+capital for existing Sapphire Venture funds. The total volume
+committed for both investments was €1.55 billion. The Executive
+Board also explained the planned changes in Executive Board
+responsibilities resulting from the appointment of the new Co-
+Meeting in October
+On August 30, 2019, we consented by way of correspondence
+vote to a long-term R&D collaboration agreement between SAP SE,
+the Technical University of Munich, and the Free State of Bavaria.
+Resolutions Adopted by Correspondence in
+August
+Our ordinary meeting on July 25, 2019, was held in San Martin,
+California, USA, where the newly-comprised Supervisory Board
+spent several days together. It used this time intensively for
+discussions and networking, and also had the opportunity to meet
+with a number of strategic customers and partners locally. In the
+plenary session, we mainly discussed the directors' and officers'
+group liability insurance policies that we take out from year to year,
+and resolved adjustments to the rules of procedure for the
+Executive Board, the Supervisory Board, and several of the latter's
+Committees. In addition, we updated the list of transactions and
+business management measures for which the Executive Board
+must obtain the Supervisory Board's consent. The Executive Board
+then gave us an account of business in the second quarter of 2019
+and performance in the first half year. Referring to the Executive
+Board's reports, we discussed with the Executive Board the
+measures to be taken and their implementation. Thereafter, one of
+Qualtrics' founders gave us a deep dive into Qualtrics products and
+their application areas for SAP.
+Meeting in July
+By way of correspondence vote in July 2019, we consented, on
+recommendation from the Finance and Investment Committee, to
+the issuance of bonds up to a volume of €2.5 billion under the
+commercial paper program that had been created for this purpose.
+With this program, the Executive Board has extended SAP's options
+for addressing short-term funding needs.
+Resolution Adopted by Correspondence in July
+The Supervisory Board held an extraordinary meeting
+immediately following the Annual General Meeting of Shareholders
+on May 15, 2019, to welcome the newly-elected members, to elect
+the Supervisory Board chairperson and deputy chairperson, and to
+decide the membership of its committees.
+Extraordinary Meeting in May
+customers to become intelligent enterprises (Intelligent Enterprise
+strategy), with particular focus on the experience management
+products from Qualtrics and SAP's competitive position. In this
+context, the Executive Board explained its further plans for the
+abovementioned program to optimize SAP's business processes. In
+addition, the Executive Board reported on first-quarter results for
+2019, using the SAP Digital Boardroom solution.
+When we met on April 11, 2019, an analyst from Royal Bank of
+Canada presented his perspective of SAP. We also looked at the
+capital market's expectations of SAP, particularly with regards to
+SAP's business model and its financial reporting approach. We then
+discussed in-depth with the Executive Board its strategy to enable
+Meeting in April
+In the plenary session on February 20, 2019, we discussed with
+the Executive Board the results of the 2018 employee survey and
+the Company's 2018 financial results. The Supervisory Board also
+dealt in depth with the SAP SE financial statements and the
+consolidated financial statements for 2018, the audits conducted by
+KPMG AG Wirtschaftsprüfungsgesellschaft (KPMG), and the
+Executive Board's proposed resolution on the appropriation of
+retained earnings for 2018. The auditor attended the meeting and
+reported in detail on the audit and its findings for each of the focus
+areas that had been agreed between the auditor and the Audit
+Committee. The auditor also related the discussions on those
+matters at the preceding meetings of the Audit Committee. The
+auditor then discussed the results of the audit with the Supervisory
+Board and answered our questions. The Audit Committee had
+comprehensively prepared all topics in connection with the financial
+statements and the consolidated financial statements for 2018, and
+in particular reported on the form and scope of its examination of
+the documents relating to the financial statements, which it
+recommended we approve. The Supervisory Board approved the
+audit. There were no findings from our own examination, so we gave
+our consent to the SAP SE and consolidated financial statements
+for 2018. We checked and endorsed the Executive Board's proposal
+to appropriate retained earnings in accordance with the Audit
+Committee's recommendation. We then discussed in detail the
+annual budget for 2019 as presented to us by the Executive Board,
+and approved same. The Executive Board also reported on its
+priorities for 2019 and its strategy for Cloud ERP, SAP's cloud-based
+solution for enterprise resource planning. Following these reports,
+we decided on the (further) resolutions we would propose for the
+agenda of the Annual General Meeting of Shareholders in May 2019.
+This notably included our recommendation to the Annual General
+Meeting of Shareholders concerning the auditor to elect for 2019,
+which followed the recommendation of the Audit Committee to us.
+We were also informed about SAP's donation activities. Thereafter
+we discussed corporate governance matters and resolved to
+restrict the maximum amount of time a member can serve on the
+Supervisory Board in future to 12 years. It had not been our practice
+in the past to set a time limit in absolute figures.
+Meeting in February (Meeting to Discuss the
+Financial Statements)
+Other key topics addressed at our meetings in 2019 notably
+included the following:
+into potential export controls and economic sanctions violations.
+Currently ongoing, these investigations and likewise being pursued
+with the assistance the with external lawyers. Management has
+made substantial improvements to the Company's measures for
+complying with anti-corruption legislation and export control laws,
+and has expanded the compliance teams significantly. The
+Executive Board kept us up to speed on the details of these
+measures throughout the year.
+Additional
+Information
+The committees made a key contribution to the work of the
+Supervisory Board in 2019 and reported on their work to us,
+including their preparatory work for and decisions made on the
+relevant agenda items of the subsequent Supervisory Board
+meetings. In the course of the regular election of new shareholder
+and employee representatives on the Supervisory Board, we
+adopted a number of changes to the composition of the
+committees. The following committees were in place during the
+reporting year:
+General and Compensation Committee: Hasso Plattner
+(chairperson), Pekka Ala-Pietilä, Panagiotis Bissiritsas (from
+May 15, 2019), Aicha Evans, Andreas Hahn (until May 15, 2019),
+Margret Klein-Magar, Lars Lamade, Bernard Liautaud, Christine
+Regitz (from May 29, 2019), Friederike Rotsch (from
+May 29, 2019), Sebastian Sick (until May 15, 2019), Ralf Zeiger
+(from May 15, 2019)
+Audit Committee: Gunnar Wiedenfels (from May 15, 2019, as
+member and chairperson), Panagiotis Bissiritsas, Martin Duffek
+(until May 15, 2019), Margret Klein-Magar (from May 15, 2019),
+Gerhard Oswald (from May 15, 2019), Friederike Rotsch, Erhard
+Schipporeit (until May 5, 2019, as member and chairperson),
+James Wright (from May 15, 2019)
+Report by the Supervisory Board
+20
+20
+The People and Organization Committee held three meetings
+in 2019. At its meeting in February, the Committee discussed the
+SAP University Alliances program. Offered at universities
+worldwide, this initiative aims to familiarize and inspire students
+with the latest SAP innovations and provide next-generation
+talents with the skills and technologies they need for the 21st
+century, whether at SAP or elsewhere. When we met in July, the
+Executive Board explained its new, comprehensive program to
+accelerate operational excellence, the approach behind it, its
+implementation, and its impact on employees. We also met in
+September, with key topics being India as a growth market, the
+current challenges there, the talent situation inside and outside
+SAP in India, and the business areas and business potential for
+SAP in that country. We also discussed the SAP's measures to
+The Technology and Strategy Committee met four times in
+2019. It discussed the key technology trends in the software
+industry in the years to come and SAP's corporate and product
+strategies. At the February meeting, the Executive Board
+reported on the progress made in implementing the Company's
+Intelligent Enterprise strategy aimed at helping SAP customers
+evolve into "intelligent enterprises." The report focused primarily
+on SAP's partnerships with hyperscaler cloud providers as
+regards SAP Cloud Platform. In addition, the Executive Board
+updated the Committee on the SAP Customer Experience
+portfolio, especially the integration of Qualtrics solutions. When
+it met in April 2019, the Committee reviewed the integration
+status of various SAP solutions and discussed the latest
+innovations in SAP HANA Cloud. In July 2019, the Executive
+Board briefed the Committee members on security risks and
+protection measures, and updated them on the status of and
+further plans for the Cloud Business Group. At its meeting in
+October 2019, the Committee addressed the master agreements
+with Microsoft with respect to SAP Cloud Platform and
+discussed SAP's machine learning portfolio.
+we met by telephone conference to prepare a resolution on the
+use of a $2.5 billion commercial paper program to sell short-
+term bonds to investors. In October 2019, representatives from
+Sapphire Ventures, LLC. gave the Committee an overview of the
+European and U.S. market for venture capital in technology and a
+status report on the active SAP venture capital funds. In this
+context, the Committee resolved, as reported above, to
+recommend that the Supervisory Board approve further
+financing for the Sapphire Venture funds. In December 2019, the
+Committee held a second joint meeting with the Audit
+Committee, at which the Executive Board presented the
+preliminary 2020 Group annual plan. This meeting was held in
+preparation for the Supervisory Board's meeting in
+February 2020, at which the full Supervisory Board resolved the
+2020 Group annual plan. In the separate Finance and Investment
+Committee meeting that followed the joint meeting in
+December 2019, the members were given a status report on the
+success of the Company's acquisitions in 2018, the current
+climate for corporate takeovers, and ongoing divestment
+projects. Further, the Committee approved the sale of a building
+and the land on which it stands to a company whose shares are
+owned by the Supervisory Board chairperson. The sale was
+negotiated at arm's length; the Supervisory Board chairperson is
+not a member of the Committee and therefore did not vote on
+the resolution.
+-
+-
+The Finance and Investment Committee held six ordinary
+meetings and four extraordinary meetings in 2019. Two of the
+meetings held in February and December 2019 were held jointly
+with the Audit Committee. Outside these meetings it passed two
+resolutions by correspondence. At its February 2019 meeting,
+the Committee examined the transactions in 2018 involving
+equity interests, and took a critical look at the Company's
+current process of involving the Supervisory Board on major
+acquisitions. In the joint meeting with the Audit Committee that
+followed immediately thereafter, the members of both
+Committees discussed the annual plan for 2019 and voted in
+favor of recommending its approval to the Supervisory Board. In
+April, the Executive Board gave the Committee an overview of
+various investor relations activities. By circular correspondence
+vote in May 2019, the Committee approved the sale of assets
+from our healthcare business, which consists of SAP solutions
+for the data management in the healthcare sector. In July 2019,
+financial accounts of SAP SE and the Group for 2018, and
+prepared the Supervisory Board's recommendations to the
+Annual General Meeting of Shareholders concerning the election
+of an auditor and the appropriation of retained earnings. The
+decision on the recommendation regarding the election of the
+auditor was preceded by a review of the auditor's independence,
+qualifications, and quality of work. To this end, the Audit
+Committee obtained regular reports from the auditor on its
+internal quality assurance standards and on any material
+findings from internal quality audits, from external quality
+controls via peer review, and from any investigations conducted
+by the government or regulators into the auditor's audits. In
+addition, the internal audit department reported on the fiscal
+year 2018 for its area, and on its audit plan for 2019. At mid-year,
+the internal audit department informed the Committee about its
+audit findings to date as well as its plans for the second half of
+2019 and the first half of 2020. We were informed at several
+meetings about the course and result of the audit of the
+consolidated financial statements and the combined
+management report for 2017 by the German Financial Reporting
+Enforcement Panel (Deutsche Prüfstelle für Rechnungslegung).
+Throughout the year, we engaged in detailed discussions about
+corporate security, with particular focus on additional security
+measures in the IT environment. The Committee turned its
+attention in the second half of the year to the revised German
+auditing standard IDW PS 350 (new version) and the resulting
+changes to SAP's combined management report and non-
+financial report. We also discussed the regulatory requirements
+for mandatory rotation of external auditors, and their
+implications for SAP. Also, in the second half of the year, we
+updated the Committee's rules of procedure due to the changed
+composition and increased number of Committee members.
+The auditor attended all physical meetings and telephone
+conference meetings of the Audit Committee and reported in-
+depth on its audit work and on its quarterly reviews of selected
+software agreements. The Committee discussed the audit focus
+with the auditor in July, and the audit fees with the auditor in
+October 2019. As reported in more detail below, the Committee
+also held two joint meetings with the Finance and Investment
+Committee in February and December 2019 to discuss the
+Group annual plan for 2019 and the preliminary Group annual
+plan for 2020.
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Management Report
+To Our
+Stakeholders
+19
+Report by the Supervisory Board
+The Audit Committee held six physical meetings - two of which
+jointly with the Finance and Investment Committee - and four
+telephone conference meetings in 2019. At these meetings, the
+Committee deliberated on the course of business over the
+quarter concerned, the accounting processes, the preparation of
+quarterly financial reports, and the quarterly reports to be
+published. Recurring topics at our meetings included SAP's risk
+management system, internal control system, and compliance
+system (including the existing compliance cases, the status of
+the respective SAP-internal investigations, and SAP's case-
+related collaboration with authorities). During its physical
+meeting in February 2019, the Committee focused on the
+The General and Compensation Committee held five regular
+meetings and three extraordinary meeting in 2019, and outside
+these meetings it passed four resolutions by correspondence. In
+particular, the Committee extensively prepared and discussed in
+advance the deliberations of the Supervisory Board and its
+resolutions on Executive Board compensation within the scope
+of duties assigned to it, or resolved its own resolutions in this
+regard. This applies in particular for the meetings in January,
+February, April, July, and October 2019, for the correspondence
+vote in November 2019, and for a correspondence vote and two
+extraordinary meetings in December 2019. At its meeting in
+February 2019, the Committee also deliberated on the annual
+report compiled by SAP's corporate governance and insider
+trading compliance officer. The Supervisory Board's decisions
+with respect to the submission of the declaration of
+implementation of the Code and ascertaining the independence
+of Supervisory Board members were prepared in October 2019.
+In the fiscal year ended, the Committee also approved the
+acceptance of an outside supervisory board seat by an Executive
+Board member in two cases.
+-
+Besides the matters mentioned above, the committees focused
+primarily on the following topics in 2019:
+Each of the committees was active in 2019 except the
+Nomination Committee and the dissolved Special Committee. For
+more information about the Supervisory Board committees and
+their duties, see SAP's Corporate Governance Statement pursuant
+to the German Commercial Code, sections 315d and 289f,
+published on the SAP public Web site.
+People and Organization Committee: Gerhard Oswald (from
+May 15, 2019, as chairperson), Pekka Ala-Pietilä (from
+May 15, 2019), Martin Duffek (until May 15, 2019), Aicha Evans,
+Gesche Joost, Monika Kovachka-Dimitrova (from May 15, 2019),
+Lars Lamade (until May 15, 2019), Hasso Plattner (until
+May 15, 2019, as member and chairperson), Christine Regitz
+(until May 15, 2019), Robert Schuschnig-Fowler (until
+May 15, 2019), Heike Steck (from May 15, 2019), Christa Vergien-
+Knopf (from May 15, 2019), Ralf Zeiger (from May 15, 2019)
+Nomination Committee: Hasso Plattner (chairperson), Pekka
+Ala-Pietilä, Diane Green (from May 15, 2019), Bernard Liautaud
+Special Committee: This committee was dissolved effective
+May 15, 2019. Its members were Hasso Plattner (chairperson),
+Pekka Ala-Pietilä, Lars Lamade, Friederike Rotsch, Erhard
+Schipporeit, and Sebastian Sick.
+May 15, 2019), Christa Vergien-Knopf (from May 15, 2019),
+James Wright (from May 15, 2019)
+-
+Technology and Strategy Committee: Hasso Plattner
+(chairperson), Christine Regitz (deputy chairperson), Panagiotis
+Bissiritsas (until May 15, 2019), Martin Duffek (until
+May 15, 2019), Aicha Evans, Diane Greene, Andreas Hahn (until
+May 15, 2019), Gesche Joost, Margret Klein-Magar (until
+May 15, 2019), Monika Kovachka-Dimitrova (from May 15, 2019),
+Lars Lamade (from May 15, 2019), Bernard Liautaud, Gerhard
+Oswald, Heike Steck (from May 15, 2019), Pierre Thiollet (until
+Finance and Investment Committee: Friederike Rotsch (from
+May 15, 2019, as chairperson), Panagiotis Bissiritsas, Gerhard
+Oswald, Christine Regitz (from May 15, 2019), Erhard
+Schipporeit (until May 15, 2019, as member and chairperson),
+Robert Schuschnig-Fowler (until May 15, 2019), Sebastian Sick
+(until May 15, 2019), Gunnar Wiedenfels (from May 15, 2019),
+James Wright (from May 15, 2019)
+Combined Group
+7
+Consolidated Financial
+Statements IFRS
+To Our
+Stakeholders
+19
+13
+13
+6
+6
+James Wright (since May 15, 2019)
+100%
+17
+17
+11
+11
+6
+6
+Gunnar Wiedenfels (since May 15, 2019)
+100%
+10
+10
+4
+4
+6
+6
+Christa Vergien-Knopf (since May 15, 2019)
+100%
+5
+5
+2
+2
+19
+100%
+Ralf Zeiger (since May 15, 2019)
+6
+17
+Report by the Supervisory Board
+In 2019, SAP's compliance department (Ethics and Compliance
+Office) continued to investigate possible violations of anti-bribery
+laws (including the U.S. Foreign Corrupt Practices Act (FCPA)) with
+the assistance of an external law firm, and updated the Audit
+Committee and the full Supervisory Board on the status of those
+investigations frequently throughout the fiscal year, notably at the
+Audit Committee's meetings and at the plenary sessions in April,
+July, and October 2019. Among other things, it explained SAP's
+voluntary cooperation with local authorities, the U.S. Securities and
+Exchange Commission (U.S. SEC), and the U.S. Department of
+Justice (U.S. DOJ). To gain deeper insight into this matter, the Audit
+Committee had submitted a catalog of questions to the Executive
+Board regarding the facts under investigation and the measures
+taken. The Executive Board answered these questions in detail in
+the plenary session on October 24, 2019. At the April 11 session, the
+Executive Board also reported on the status of the investigations
+Compliance Matters
+In 2019, we consulted with the Executive Board on an ongoing
+basis with regard to the Company strategy and the Executive
+Board's proposals for the future allocation of capital. In three
+plenary meetings and four meetings of the Finance and Investment
+Committee, the Supervisory Board met with and in some cases
+without the Executive Board, as appropriate, to discuss the
+Company's capital allocation policy. We first discussed this topic in
+our April 11, 2019, meeting. On April 24, 2019, the Company
+announced an updated ambition for 2023 together with a new,
+comprehensive program to accelerate operational excellence, and
+scheduled a Special Capital Markets Day for November 12, 2019.
+The Executive Board also announced in this context that it would
+investigate the possibility of a share buyback program. On
+July 25, 2019, and October 24, 2019, the Supervisory Board
+discussed the Executive Board's proposed allocation of resources,
+taking into account the Company's strategy. In our extraordinary
+meeting on November 4, 2019, we subsequently approved, on
+recommendation of the Finance and Investment Committee, the
+Executive Board's plan for an enhanced capital return in 2020. Thus,
+the Company is authorized to share buybacks and/or the issue of a
+special dividend in an amount of up to €1.5 billion in the financial
+year 2020. Due to the complexity of the subject matter, the
+Supervisory Board solicited advice from a large management
+consultancy firm when assessing the Executive Board's proposed
+capital allocation plan. The consultant in question attended the
+preparatory meetings of the Finance and Investment Committee on
+September 11, October 18 and 24, and November 3, 2019.
+Capital Allocation Policy
+Supervisory Board sought the support of two external
+compensation experts, who provided the Supervisory Board with
+benchmarks for Executive Board compensation and advised on the
+Plan's design. The project group's proposed Plan details were
+discussed in the General and Compensation Committee's meetings
+on April 10, 2019, and July 24, 2019, together with the
+compensation experts, and adopted in several stages, most recently
+in the abovementioned circular resolution in November 2019.
+For more detailed information about the STI 2020, the LTI 2016
+Plan, the new LTI 2020 Plan, and the other elements of the
+compensation package for Executive Board members, see the
+Compensation Report.
+July 25, 2019, and October 24, 2019, we also dealt at length with the
+concept of the new LTI 2020 Plan, which we subsequently adopted
+at our extraordinary meeting on November 19, 2019, based on a
+recommendation that the General and Compensation Committee
+had adopted earlier by circular resolution. The preparatory work for
+this new LTI Plan had been executed by a project group that was set
+up in February 2019 following deliberations by the Committee and
+by the plenum. Comprised of members from the Executive Board
+and Supervisory Board, the group had been tasked to draw up a
+proposal for the new LTI plan for 2020. In this connection, the
+Besides this, we made several decisions in 2019 regarding
+Executive Board compensation - either in the course of our regular
+deliberations, as developments warranted, or in connection with the
+introduction of the new LTI 2020 Plan. At our ordinary Supervisory
+Board meeting on February 20, 2019, for example, we determined
+Executive Board compensation for 2018 by deciding on the total
+target achievement and the payouts for the individual Executive
+Board members under the Short-Term Incentive (STI) 2018 Plan.
+We also deliberated on Executive Board compensation for 2019 at
+the February meeting: We first defined the key performance
+indicators (KPIs) for the STI 2019 and set the target numbers for
+each KPI and their relative weightings. We then resolved the
+individual allocation amounts for the 2019 tranche of the LTI 2016.
+The Supervisory Board, as required, evaluated the appropriateness
+of the Executive Board members' compensation, and in each case
+found it to be appropriate in terms of amount, structure, objective
+criteria, and for each member's responsibilities and tasks. We
+referred in this regard to an appropriateness certificate obtained
+beforehand from Ernst & Young GmbH. In our meeting on
+October 24, 2019, we approved numerous changes to the STI with
+effect from fiscal year 2020. At our plenary meetings on
+employment contract. In accordance with our succession planning,
+we also approved the appointment of Jennifer Morgan and Christian
+Klein as Co-CEOs effective October 10, 2019, and in the process
+extended the duration of Christian Klein's appointment contract to
+match and keep it in sequence with Jennifer Morgan's. Bill
+McDermott served as a regular member of the Executive Board
+from this date onward until his departure on November 15, 2019. At
+its ordinary meeting on October 24, 2019, the Supervisory Board
+appointed Thomas Saueressig to the Executive Board effective
+November 1, 2019. He took on responsibility for the Product
+Engineering unit and the Company's global product development,
+particularly for SAP's core product SAP S/4HANA, its supply chain
+solutions, its software for small businesses and midsize companies,
+the SAP User Experience organization, the SAP Knowledge and
+Education organization, and SAP Labs Network, as well as the global
+cloud infrastructure and SAP HANA Enterprise Cloud. In an
+extraordinary meeting on November 19, 2019, the new Co-CEOS
+apprised us of their corporate strategy and the further changes
+they planned to make step-by-step to the Executive Board
+portfolios in order to improve SAP's organizational structure, for
+which we gave our approval. All resolutions of the full Supervisory
+Board regarding the personnel changes, the ensuing agreements in
+Executive Board appointment contracts, and the necessary
+adjustments to the individual Executive Board members'
+compensation resulting from the reassignment of portfolios were
+prepared by the General and Compensation Committee, whose
+proposed recommendations we discussed in-depth prior to
+approving.
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+Combined Group
+Management Report
+Report by the Supervisory Board
+16
+April 30, 2025. At the end of September 2019, SAP's CEO of nearly
+10 years, Bill McDermott, decided to leave SAP and thus the
+Executive Board before the regular end of his contract. The
+Supervisory Board therefore held an extraordinary meeting on
+October 10, 2019, to discuss the timing and modalities of Bill
+McDermott's departure from the Executive Board, and resolved on
+the contractual terms in relation to the early termination of his
+together with Bernd Leukert his early departure from the Executive
+Board effective March 31, 2019. At the same time, we extended
+Michael Kleinemeier's Executive Board appointment to
+December 31, 2020. In our extraordinary meeting on April 5, 2019,
+we dealt with Robert Enslin's resignation from the Executive Board.
+The Executive Board informed us of the resulting changes to the
+Executive Board portfolios, which included Jennifer Morgan and
+Adaire Fox-Martin assuming responsibility for the Cloud Business
+Group and SAP's global sales organization, respectively. When we
+met on July 25, 2019, we extended both Jennifer Morgan's and
+Adaire Fox-Martin's Executive Board appointments to
+The Supervisory Board's work and deliberations in 2019 were
+predominated by several personnel changes on the Executive
+Board. At our meeting on February 20, 2019, we mutually agreed
+Changes on the Executive Board, and
+Compensation Topics
+The Supervisory Board and its committees also convened wholly
+or partly without the Executive Board as necessary in 2019 to
+deliberate on items that pertained to the Executive Board or
+required internal discussion among Supervisory Board members
+alone. This was the case in five of the seven plenary sessions, in
+three of the eight General and Compensation Committee sessions,
+and in two of the 10 Finance and Investment Committee sessions. In
+addition, the shareholder representatives and the employee
+representatives independently discussed individual agenda items
+as required prior to the adoption of resolutions in plenary sessions.
+The Supervisory Board addressed the following key topics during
+the year:
+92%
+11
+12
+5
+6
+6
+To Our
+Stakeholders
+7
+Monika Kovachka-Dimitrova (since May 15, 2019)
+3
+Percent, unless otherwise stated
+Initial investment €10,000
+Date of investment
+Period of investment
+Value as at 12/31/2019) (in €)
+Average annual return
+Performance comparators
+DAX 30 Performance
+716460/DE0007164600
+803054204 (CUSIP)
+SAPG.F or .DE
+SAP GR
+10.00
+8.54
+3
+9.11
+3.22
+4.87
+12/31/2009
+10 years
+36,736
+12/31/2014 12/31/2018
+5 years
+1 year
+20,652
+13,841
+13.9
+15.6
+38.4
+1.5
+0.6
+1.3
+8.3
+Return on SAP Common Stock
+WKN 716460/ISIN DE007164600
+New York Stock Exchange
+Berlin, Frankfurt, Stuttgart
+-
+Dec.
+Investor Relations
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+Continued Dialog with Investors
+SAP is continuously engaged with the investment community
+through a number of channels. Over the course of the year,
+members of the Executive Board of SAP SE and the Investor
+Relations (IR) team discussed our strategy and business
+development with institutional investors, analysts, and private
+investors worldwide.
+Once again an essential part of our global IR program, we held a
+Capital Markets Day at the New York Stock Exchange in February
+2019. With more than 120 financial analysts and investors in
+attendance, the Executive Board discussed the details of SAP's
+strong position in the market and how SAP technologies help
+customers run at their best. The Executive Board also discussed the
+business model and charted the future course of the Company. SAP
+customers New Era Cap, Verizon Communications, and JetBlue
+presented their perspectives on how the intelligent enterprise
+supports their respective business. This year, we further enhanced
+our dialogue for the financial community with a Special Capital
+Markets Day held at our Hudson Yards offices in New York City in
+November, highlighting our strategic vision, details on operation
+excellence programs, and future capital allocation.
+In addition, we hosted events during the year for buy-side
+analysts in Walldorf (Germany), and New York City (USA). At the
+SAPPHIRE NOW conference in Orlando, Florida, we hosted events
+for investors and financial analysts. Members of the Executive
+Board together with the IR team participated in more than 25
+conferences worldwide. We continued our dialogue with socially
+responsible investors (SRI), providing them with insights into our
+environmental, social, and corporate governance policies. SAP
+representatives engaged with retail shareholders at multiple events.
+The IR team and the Treasury team also maintained regular
+communication with the debt investor community.
+We provide a wide range of information about SAP and its shares
+online. Our communications channels include our Twitter feed
+@sapinvestor and the quarterly SAP INVESTOR magazine.
+Shareholders can reach the IR team directly by telephone hotline
+and by e-mail at investor@sap.com. We also publish an overview of
+the latest analyst consensus in collaboration with Vara Research.
+We provide a Webcast for all key investor events at which
+members of our Executive Board speak, and we post all relevant
+presentations on the Investor Relations Web site.
+6.2
+Key Facts About SAP Stock/SAP ADRs
+Germany
+United States (ADRs)
+IDs and symbols
+WKN/ISIN
+NYSE (ADRs)
+Reuters
+Bloomberg
+Weight (%) in indexes as at 12/31/2019
+DAX 30
+Prime All Share
+CDAX
+HDAX
+Dow Jones STOXX 50
+Dow Jones EURO STOXX 50
+Listings
+Nov.
+25.5
+REX General Bond -
+13
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+Dividend Increased to €1.58
+We had a very successful year in 2019, as customers continue to
+turn to SAP to support them in their journey to become intelligent
+enterprises. We believe our shareholders should share greatly in this
+success, therefore it is our policy to pay a dividend totaling 40% or
+more of IFRS profit after tax.
+At the Annual General Meeting of Shareholders, the Executive
+Board and the Supervisory Board of SAP SE will recommend
+increasing the total dividend for fiscal year 2019 by more than 5%
+to €1.58 per share (2018: €1.50). This represents a payout ratio of
+56% (2018: 44%).
+Capital Stock Unchanged
+To Our
+Stakeholders
+SAP's capital stock as at December 31, 2019, was
+€1,228,504,232 (2018: €1,228,504,232). It is issued as
+1,228,504,232 no-par shares, each with an attribute value of €1 in
+relation to capital stock. According to the German Stock Exchange
+(Deutsche Börse), shares of SAP were among the most traded
+German stock in 2019.
+Shareholder Structure
+Applying the definition accepted on the Frankfurt Stock
+Exchange, which excludes treasury stock from the free float, as at
+December 31, 2019, the free float stood at 86%
+(December 31, 2018: 85.5%).
+Treasury Shares 3%
+Founders 11%
+North America 21%
+Private Investors /
+Unidentified 24%
+1,229 Million
+Outstanding Shares
+Germany 7%
+Free float 86%
+Rest of World 4%
+UK/Ireland 15%
+Europe (without Germany) 16%
+*15% of institutional investors (marked yellow) are classified as socially
+responsible investors (SRIs)
+Source: Bloomberg
+1) Assuming all dividends were reinvested
+total return index
+28.9
+total return index
+S&P 500 Composite -
+total return index
+14.0
+11.1
+31.8
+S&P North American
+Technology Software Index
+1) Assuming all dividends were reinvested
+Source: Bloomberg
+Return on SAP ADRs
+Percent, unless otherwise stated
+Initial investment US$10,000
+Date of investment
+Period of investment
+Value at 12/31/2019) (in US$)
+Average annual return
+19.1
+total return index
+20.8
+- 803054204 (CUSIP)
+10 years
+28,841
+12/31/2009 12/31/2014 12/31/2018
+5 years
+19,238
+1 year
+13,460
+11.2
+14.0
+34.6
+Investor Relations
+Performance comparators
+S&P 500 Composite -
+11.2
+9.4
+44.5
+Oct.
+9.84
+Aug.
+Meeting Participation of SAP Supervisory Board Members During Fiscal Year 2019
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+To Our
+Stakeholders
+15
+Report by the Supervisory Board
+In 2019, the full Supervisory Board of SAP SE held four ordinary
+meetings and five extraordinary meetings at which it deliberated
+and resolved on all matters of relevance to the Company. These
+meetings were regularly held in the form of physical meetings but in
+some cases in the form of telephone conference meetings. We also
+adopted five resolutions by correspondence vote. In the fiscal year,
+no Supervisory Board member attended only half or less of the
+meetings of the Supervisory Board and of the committees to which
+the member belonged. One shareholder representative on the
+Supervisory Board was only able to attend 13 of the 19 meetings of
+the Supervisory Board or its committees to which he belongs,
+particularly due to the fact that several of these meetings were
+called at very short notice. The Supervisory Board member in
+question nevertheless participated in the resolutions passed at
+these meetings by means of voting instructions submitted
+beforehand. The table included in this chapter provides an overview
+of all the members' attendance at the Supervisory Board's plenary
+sessions and committee meetings during fiscal year 2019.
+Supervisory Board Meetings and Resolutions
+The CEO, and subsequently the Co-CEOs, were in continuous
+contact with the Supervisory Board chairperson, which meant that
+the chairperson was always informed without delay of all important
+events that were significant for assessing SAP's situation and
+progress or for the management and governance of the Company.
+Moreover, the chairperson of the Supervisory Board met regularly
+with the CEO, and subsequently the Co-CEOs, to discuss SAP's
+strategy, planning, business performance, risks, risk management,
+compliance, and other key topics and decisions. The chairperson of
+the Supervisory Board was thus in a position to inform the
+members of the Supervisory Board between meetings.
+Articles of Incorporation, or the Supervisory Board's list of
+transactions requiring its consent were carefully examined and
+discussed with the Executive Board.
+The content and scope of the Executive Board's reports to us
+fully met our requirements for them. The Executive Board came to
+Supervisory Board meetings for discussion of the agenda items. We
+questioned and probed the Executive Board to satisfy ourselves
+that the information it gave us was plausible. All transactions
+requiring approval by the Supervisory Board whether by law, the
+We regularly received full and timely reports from the Executive
+Board, both from members in person and in written documents.
+This ensured that we were always up-to-date, even between
+meetings, on the Company's strategy, planning, business
+performance, risks, risk management, compliance (in other words,
+adherence to laws, to the Company's Articles of Incorporation, and
+to internal policies), and on transactions of special significance for
+SAP. In its reports, the Executive Board also informed us in
+particular where business deviated from plan or target, and why. In
+addition, the Supervisory Board members can use the SAP Digital
+Boardroom solution to check on business performance at any time.
+Offering maximum transparency, the digital decision and analysis
+cockpit allows us to call up comprehensive metrics in real time and
+generate analyses as and when required.
+In the past fiscal year, the Supervisory Board advised the
+Executive Board on an ongoing basis with regard to the
+management of the Company and kept the Executive Board's global
+management of the Company under observation and scrutiny for
+legal compliance, adherence to proper accounting principles,
+business focus, and expediency. We were directly involved when the
+Executive Board made any decision of fundamental importance to
+SAP.
+Collaboration Between the Supervisory Board
+and the Executive Board
+In the following, we would like to inform you about the work of
+the Supervisory Board in the fiscal year 2019.
+Dear Shareholders,
+Additional
+Information
+Report by the Supervisory Board
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+Jürgen Müller
+Combined Group
+Management Report
+Plenum
+Committees
+All Meetings
+Supervisory Board Members
+Martin Duffek (until May 15, 2019)
+100%
+33
+33
+24
+24
+9
+9
+Panagiotis Bissiritsas
+68%
+13
+19
+7
+Consolidated Financial
+Statements IFRS
+10
+9
+Sept.
+100%
+21
+21
+12
+12
+9
+9
+Prof. Dr. h.c. Hasso Plattner
+Participa-
+tion in %
+Participation
+Meetings Participation Meetings Participation Meetings
+6
+Further Information on Economic,
+Environmental, and Social Performance
+Pekka Ala-Pietilä
+Michael Kleinemeier
+ex dividend
+€ 1.50 per share
+Oct. 11, 2019
+Preliminary results Q3
+Change of CEO
+130
+Jan. 29, 2019
+Financial results
+125
+Q4/full year
+120
+Dec. 30, 2019
+Dec. 28, 2018
+115
+Closing price € 120.32
+May 16, 2019
+Closing price
+110
+Jul. 18, 2019
+Financial results Q2
+105
+100
+95
+Jan.
+Feb.
+March
+April
+May
+June
+July
+Additional
+Information
+€ 86.93
+Apr. 24, 2019
+Financial results Q1
+14
+140
+Chief Technology Officer
+135
+SAP Digital Business Services
+Stefan Ries
+Thomas Saueressig
+Chief Human Resources Officer
+SAP Executive Board
+11
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Investor Relations
+Further Information on Economic,
+Environmental, and Social Performance
+SAP Product Engineering
+July then brought a turn in direction fueled by fears of recession
+and continuing escalations in the trade dispute between the United
+States and China, which also impacted SAP's business in Asia. In
+addition, presentation of our second-quarter results on July 18
+failed to fully meet market expectations, particularly with respect to
+margin development, causing SAP stock to close the day down
+5.6% at €113.32. The share price continued to drop throughout the
+month, reaching a low of €104.00 at the beginning of August.
+Industry sentiment remained generally negative in September, such
+that SAP stock was unable to benefit from speculation about
+interest rate cuts or the market upswing that month.
+Additional
+Information
+145
+SAP Stock in Comparison to Major Indicies December 28, 2018 to December 30, 2019
+SAP Share (Xetra) DAX 30 Performance Index (Xetra) NASDAQ-100 (NDX-NAS)
+The fourth quarter moved primarily on expectations of a
+conciliation in the pervasive trade dispute between the United
+States and China, which were partially fulfilled when the two
+countries signed a Phase 1 trade agreement on December 15.
+Global stock markets reacted favorably to the news. In addition,
+SAP surprised the markets on October 11 with changes in the
+Company's leadership and strong preliminary results for the third
+quarter. SAP stock advanced 10.2% in response, closing the day at
+€ 115.68. SAP's new cloud partnership with Microsoft announced
+on October 21 provided further momentum: SAP stock continued
+to grow in line with the market trend, reaching a new all-time high of
+€124.72 on December 16. The next day, a negative analyst
+commentary caused the share price to slip 3.3% to €120.56. SAP
+stock ultimately ended the reporting year on December 30 up
+38.4% at €120.32.
+announced it had taken a stake in the Company. SAP stock
+remained strong at this new share price level in May and June, and,
+buoyed by an upbeat industry environment, clearly outperformed
+all relevant comparator indexes, hitting new records. This trend
+continued until July 3, pushing the share price to an interim high of
+€124.38.
+Percent
+12
+SAP Stock Climbs to New All-Time High
+The global economic environment remained difficult in 2019,
+characterized by fears of a recession, the ongoing Brexit tug-of-war,
+the political crisis in Italy, and the trade dispute between the United
+States and China. Despite the nervousness, a general hope for
+amicable conflict resolution prevailed. Enjoying the predominately
+positive mood on global stock markets, SAP stock gained 38.4%,
+once again outperforming the benchmark indexes DAX 30 and
+NASDAQ 100, which grew 25.5% and 38.0%, respectively. With a
+market capitalization of €147.8 billion, SAP continues to be the most
+valuable DAX company by far.
+Stock Markets on the Rise -
+Remains Most Valuable DAX Company
+SAP
+-
+After closing at €86.93 on the Xetra trading system at the end of
+2018, the SAP share price fell to €84.31, its lowest level for the year,
+on January 3. In the first few months of 2019, SAP stock traded
+parallel to the DAX, which profited from improved domestic and
+global economic prospects as well as a persistently weak euro. SAP
+stock dipped briefly at the end of January following publication of
+our full-year results for 2018, as shareholders were disappointed
+that profitability was below market expectations. Publication of our
+proposed dividend of €1.50 per share on February 21, however, soon
+gave SAP stock new momentum, and on March 21, our stock
+passed the €100 mark again for the first time since October 2018.
+On presentation of our results for the first quarter on April 24,
+the price of SAP stock climbed 12.5% to a temporary all-time high
+of €114.62 - its greatest single-day performance in more than a
+decade. The stock markets rewarded SAP not only on our excellent
+quarterly figures and raised earnings forecast through to 2023, but
+they also acknowledged that a prominent U.S.-based investor had
+0
+Non-Current
+650
+Total
+Non-Current
+Current
+Total
+Prepaid expenses primarily consist of prepayments for operating leases, support services, and software royalties. Other tax assets
+primarily consist of VAT.
+Other non-financial liabilities
+2018
+2019
+other non-financial liabilities
+as % of
+Other tax liabilities
+Other tax liabilities
+€ millions
+(G.2) Other Tax Liabilities
+650
+Current
+541
+12
+541
+Further, the expected timing of any resulting outflows of economic
+benefits from these lawsuits and claims is typically uncertain and not
+estimable, as it depends generally on the duration of the legal
+proceedings and settlement negotiations required to resolve them.
+financial position, profit, cash flows, or reputation. Most of the
+lawsuits and claims are of a very individual nature and claims are
+either not quantified by the claimants or the claim amounts
+quantified are, based on historical evidence, not expected to be a
+good proxy for the expenditure that would be required to resolve the
+case concerned. The specifics of the jurisdictions where most of the
+claims are located further impair the predictability of the outcome of
+the cases. Therefore, it is typically not practicable to reliably estimate
+the financial effect that these lawsuits and claims would have if SAP
+were to incur expenditure for these cases.
+The outcome of litigation and claims is intrinsically subject to
+considerable uncertainty. Management's view of these matters may
+also change in the future. Actual outcomes of litigation and claims
+may differ from the assessments made by management in prior
+periods, which could result in a material impact on our business,
+The policies outlined in Note (A.4) for customer-related provisions,
+which include provisions for customer-related litigation cases and
+claims, equally apply to our other litigation, claims, and legal
+contingencies disclosed in this Note.
+> Uncertainty in Context of Legal Matters
+This Note discloses information about intellectual property-
+related litigation and claims, tax-related litigation other than income
+tax-related litigation (see Note (C.5)), and anti-bribery and export
+control matters.
+(G.3) Other Litigation, Claims, and Legal
+Contingencies
+Other tax liabilities primarily consist of VAT, payroll tax, sales tax,
+and withholding tax.
+as % of other non-financial assets
+0
+0
+12
+○
+13
+4,622
+501
+4,120
+5,632
+814
+4,818
+13
+32
+Loans
+AC
+15
+15
+15
+FVTPL
+Call option on equity shares
+95
+95
+95
+95
+FVTPL
+Call options for share-based payments
+33
+33
+33
+33
+FVTPL
+FX forward contracts
+Not designated as hedging instrument
+We are subject to a variety of claims and lawsuits that arise from
+time to time in the ordinary course of our business, including
+proceedings and claims that relate to companies we have acquired.
+We will continue to vigorously defend against all claims and lawsuits
+against us. The provisions recorded for these claims and lawsuits as
+Liabilities
+Trade and other payables
+Trade payables¹)
+Other payables²)
+Private placements
+-10,003
+-10,003
+-9,433
+-9,433
+AC
+Bonds
+-3,116
+-3,116
+18
+-3,116
+AC
+Non-derivative financial liabilities
+-16,196
+-306
+-1,283
+-1,283
+AC
+-1,589
+Financial liabilities
+-3,116
+15
+Level 2
+To Our
+Stakeholders
+At fair value through profit or loss
+FVTPL
+-65
+-65
+At amortized cost
+AC
+Financial liabilities
+-12,866
+194
+Section F - Management of Financial Risk Factors
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+-12,866
+13,978
+13,978
+AC
+-17,398
+-17,398
+Fair Values of Financial Instruments by Instrument Classification
+€ millions
+Category
+12/31/2018
+Carrying Amount
+At Amortized Cost
+At Fair Value
+Financial assets
+At fair value through profit or loss
+FVTPL
+2,617
+2,617
+At amortized cost
+Further Information on Economic,
+Environmental, and Social Performance
+-55
+Additional
+Information
+A description of the valuation techniques and the inputs used in the fair value measurement is given below:
+Financial Instruments Measured at Fair Value on a Recurring Basis
+Level 2
+333
+ΝΑ
+Unlisted equity
+securities
+Level 3
+Call options for share-
+based payment plans
+NA
+Level 2
+Level 3
+Quoted prices in an active market deducting NA
+a discount for the disposal restriction
+derived from the premium for a respective
+put option.
+Market approach. Comparable company
+valuation using revenue multiples derived
+from companies comparable to the investee.
+Peer companies used
+(revenue multiples range from
+3.0 to 9.1)
+Revenues of investees
+Discounts for lack of
+marketability (10% to 30%)
+The estimated fair value would
+increase (decrease) if:
+Call option on equity
+shares
+Quoted prices in an active market
+Level 1
+Listed equity
+securities
+Туре
+Fair Value
+Hierarchy
+Determination of Fair Value/
+Valuation Technique
+Significant Unobservable
+Inputs
+Interrelationship Between
+Significant Unobservable
+Inputs and Fair Value
+Measurement
+Other financial assets
+Money-market and
+similar funds
+Level 1
+Quoted prices in an active market
+NA
+NA
+Debt securities
+Level 1
+Quoted prices in an active market
+ΝΑ
+Determination of Fair Values
+-The revenue multiples were
+higher (lower)
+-55
+11,834
+FX forward contracts
+Interest rate swaps
+-9
+-3
+-9
+-9
+Designated as hedging instrument
+-9
+-3
+-3
+Not designated as hedging instrument
+FX forward contracts
+Total financial instruments, net
+FVTPL
+-3
+Derivatives
+-298
+-1,035
+-58
+-58
+-58
+Bonds
+AC
+-10,204
+Private placements
+AC
+Other non-derivative financial liabilities
+AC
+-1,041
+-298
+-10,204
+-1,041
+-298
+-10,365
+-10,365
+-1,035
+-298
+-65
+3.486
+3,798
+-65
+At Amortized Cost
+At Fair Value
+Financial assets
+At fair value through profit or loss
+FVTPL
+3,486
+Carrying Amount
+At amortized cost
+11,834
+Financial liabilities
+At fair value through profit or loss
+At amortized cost
+FVTPL
+AC
+AC
+12/31/2019
+Category
+Additional
+Information
+-65
+-65
+2,553 -9,041 -1,006
+1,201 -8,845
+1) We do not separately disclose the fair value for cash and cash equivalents, trade receivables, and accounts payable as their carrying amounts are a reasonable approximation of their fair
+values.
+2) Since the line items trade receivables, trade payables, and other financial assets contain both financial and non-financial assets or liabilities (such as other taxes or advance payments),
+the carrying amounts of non-financial assets or liabilities are shown to allow a reconciliation to the corresponding line items in the Consolidated Statements of Financial Position.
+3) For lease liabilities, included in the line item other non-derivative financial liabilities, separate disclosure of fair value is not required.
+Section F - Management of Financial Risk Factors
+193
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Fair Values of Financial Instruments by Instrument Classification
+€ millions
+1,112
+-58
+-The investees' revenues were
+higher (lower)
+NA
+This section provides additional disclosures on miscellaneous topics, including information pertaining to the Executive Board, Supervisory
+Board, related party transactions, and other corporate governance topics.
+Section G - Other Disclosures
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+(G.1) Prepaid Expenses and Other Tax Assets
+Combined Group
+Section F - Management of Financial Risk Factors
+196
+Transfers out of Level 3 are due to initial public offerings of the
+respective investee. Changing the unobservable inputs to reflect
+reasonably possible alternative assumptions would not have a
+material impact on the fair values of our unlisted equity securities
+held as FVTPL as at the reporting date.
+117
+318
+Change in unrealized gains/losses in profit or loss for equity investments held at the
+end of the reporting period
+To Our
+Stakeholders
+€ millions
+2019
+2018
+436
+131
+305
+606
+179
+427
+Total
+Other tax assets
+Prepaid expenses
+Total
+Non-Current
+Current
+Total
+Non-Current
+Current
+12/31
+225
+1,202
+Included in exchange differences in other comprehensive income
+Future cash outflows for fixed interest and principal are
+discounted over the term of the respective contracts
+using the market interest rates as at the reporting date.
+Discounted cash flows
+Quoted prices in an active market
+Included in financial income, net in profit or loss
+Gains/losses
+Sales
+€5 million in 2019 (2018: €46 million), while transfers from
+Level 1 to Level 2 did not occur at all.
+Purchases
+Into Level 3
+Transfers
+1/1
+€ millions
+Reconciliation of Level 3 Fair Values
+Transfers of equity securities from Level 2 to Level 1, which
+occurred because disposal restrictions lapsed and deducting a
+discount for such restriction was no longer necessary, were
+Out of Level 3
+Level 3 Fair Value Disclosures
+The following table shows the reconciliation of fair values from
+the opening to the closing balances for our unlisted equity
+securities and call options on equity shares classified as Level 3
+fair values:
+2019
+38
+18
+168
+411
+-143
+-183
+409
+487
+-12
+-39
+0
+0
+742
+1,202
+2018
+1,896
+- The liquidity discounts were
+lower (higher)
+87
+170
+2018: The estimated fair value
+would increase (decrease) if:
+- The revenue multiples were
+higher (lower)
+- The investees' revenue were
+higher (lower)
+NA
+Other financial assets/Financial liabilities
+2019: Market approach. Venture capital
+method evaluating a variety of quantitative
+and qualitative factors such as actual and
+forecasted results, cash position, recent or
+planned transactions, and market
+comparable companies.
+FX forward contracts
+NA
+Level 2
+NA
+NA
+Interest rate swaps
+Level 2
+NA
+Discounted cash flow. Expected future cash NA
+flows are estimated based on forward
+interest rates from observable yield curves
+and contract interest rates, discounted at a
+rate that reflects the credit risk of the
+counterparty.
+Discounted cash flow using par method.
+Expected future cash flows based on
+forward exchange rates are discounted over
+the respective remaining term of the
+contracts using the respective deposit
+interest rates and spot rates.
+ΝΑ
+2018: Revenue multiples used
+revenue of the investee
+ΝΑ
+Market approach. Venture capital method
+evaluating a variety of quantitative and
+qualitative factors such as actual and
+forecasted results, cash position, recent or
+ΝΑ
+planned transactions, and market
+comparable companies.
+Last financing round valuations
+NA
+NA
+Liquidation preferences
+ΝΑ
+ΝΑ
+Net asset value/fair market value as
+reported by the respective funds
+ΝΑ
+NA
+Monte Carlo model. Calculated considering
+risk-free interest rates, the remaining term
+of the derivatives, the dividend yields, the
+share price, and the volatility of our share.
+2018: Market approach. Company valuation
+using revenue multiples based on actual
+results derived from the investee.
+Section F - Management of Financial Risk Factors
+312
+195
+Combined Group
+1,301
+889
+2,889
+1,701
+1,188
+Other non-financial assets
+2,191
+704
+475
+918
+266
+652
+268
+98
+229
+Prepaid expenses and other tax assets
+55
+16
+Management Report
+Consolidated Financial
+Statements IFRS
+Financial Instruments Not Measured at Fair Value
+Financial liabilities
+Type
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+Fair Value Hierarchy
+Determination of Fair Value/Valuation Technique
+Fixed-rate bonds (financial liabilities) Level 1
+Fixed-rate private placements/
+loans (financial liabilities)
+Level 2
+53
+32
+16
+To Our
+Stakeholders
+AC
+Loans
+Non-derivative financial liabilities
+Diane Greene 4), 6)
+Board of Directors, Stripe Inc., San Francisco, CA, United States
+Board of Directors, Alphabet, Inc., Mountain View, CA, United States
+(until June 19, 2019)
+Prof. Dr. Gesche Joost 4), 7)
+Professor for Design Research and Head of the Design Research Lab,
+University of Arts Berlin
+Supervisory Board, Ottobock SE & Co. KGaA, Duderstadt, Germany
+Supervisory Board, ING-DiBa AG, Frankfurt, Germany
+Monika Kovachka-Dimitrova (from May 15, 2019) ¹
+Chief Project Expert Development
+Additional
+Information
+Member of SAP SE Works Council (Europe)
+Head of Sponsorships Europe and Asia
+1), 4), 7)
+Supervisory Board, Rhein-Neckar Loewen GmbH, Kronau, Germany
+Bernard Liautaud 2). 4), 6)
+Managing Partner Balderton Capital, London, United Kingdom
+Board of Directors, nlyte Software Ltd., London, United Kingdom
+Board of Directors, Vestiaire Collective SA, Levallois-Perret, France
+Board of Directors, Dashlane, Inc., New York, NY, United States
+Board of Directors, Recorded Future, Inc., Cambridge, MA, United
+States (until July 3, 2019)
+Lars Lamadé 1). 2), 4)
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Supervisory Board, HeidelbergCement AG (from May 9, 2019)
+Jürgen Müller (from January 1, 2019)
+Chief Technology Officer
+Technology & Innovation
+Technology and Innovation Strategy, SAP HANA,
+SAP Cloud Platform, SAP Leonardo, SAP Analytics
+Chairman of the Board of Directors, Sanoma Corporation, Helsinki,
+Finland
+Chairman of the Board of Directors, Netcompany A/S, Copenhagen,
+Denmark (until August 20, 2019)
+Panagiotis Bissiritsas ¹), 2), 3), 5)
+Member of SAP SE Works Council and Member of SAP SE Works
+Council (Europe)
+Aicha Evans 2), 4), 7)
+Chief Executive Officer and Member of the Board of Directors, Zoox,
+Inc., Foster City, CA, United States
+Section GOther Disclosures
+199
+To Our
+Combined Group
+Stakeholders
+Board of Directors, eWise Group, Inc., Redwood City,
+CA, United States
+Global Finance and Administration including Investor Relations,
+Internal Audit, and Data Protection & Privacy
+Board of Directors, Qubit Digital Ltd., London, United Kingdom
+Board of Directors, Aircall.io, New York City, NY, United States
+Board of Directors, Virtuo Technologies, Paris, France
+Board of Directors, The Hut Group, Manchester, United Kingdom
+Board of Directors, Peakon Aps, Copenhagen, Denmark
+Board of Directors, Tim Talent SAS, Paris, France
+Board of Directors, Containous SAS, Lyon, France (from
+December 16, 2019)
+Dr. Erhard Schipporeit (until May 15, 2019)
+Robert Schuschnig-Fowler (until May 15, 2019)
+Dr. Sebastian Sick (until May 15, 2019)
+Pierre Thiollet (until May 15, 2019)
+¹) Appointed by the SAP SE Works Council (Europe)
+2) Member of the Company's General and Compensation Committee
+3) Member of the Company's Audit Committee
+4) Member of the Company's Technology and Strategy Committee
+Supervisory Board Members Who Left During 2019
+Martin Duffek (until May 15, 2019)
+Andreas Hahn (until May 15, 2019)
+5) Member of the Company's Finance and Investment Committee
+Level 3
+200
+Section GOther Disclosures
+-1,067
+-1,067
+-1,078
+6) Member of the Company's Nomination Committee
+Chairman of SAP SE Works Council and Member of SAP SE Works
+Council (Europe)
+Ralf Zeiger (from May 15, 2019) ¹), 2), 7)
+James Wright (from May 15, 2019) ¹), 3), 4), 5)
+Chairman of SAP SE Works Council (Europe)
+Gerhard Oswald (from January 1, 2019) 3), 4), 5), 7)
+Managing Director of Oswald Consulting GmbH, Walldorf, Germany
+Advisory Board, TSG 1899 Hoffenheim Fußball-Spielbetriebs GmbH,
+Sinsheim, Germany
+Christine Regitz ¹), 2), 4), 5)
+Vice President User Experience
+Chief Product Expert
+Dr. Friederike Rotsch 2), 3), 5)
+Group General Counsel and Head of Group Legal & Compliance,
+Merck KGaA, Darmstadt, Germany
+Heike Steck (from May 15, 2019) ¹), 4), 7)
+Senior Operations Manager
+Member of SAP SE Works Council and Member of SAP SE Works
+Council (Europe)
+Christa Vergien-Knopf (from May 15, 2019) ¹), 4, 7)
+Member of SAP SE Works Council and Member of SAP SE Works
+Council (Europe)
+Dr. Gunnar Wiedenfels (from May 15, 2019) ³), 5)
+Chief Financial Officer, Discovery Communications, Inc., New York,
+NY, United States
+Board of Directors, Motor Trend Group, LLC, El Segundo, CA, United
+States
+Board of Directors, OWN LLC, West Hollywood, CA, United States
+Board of Directors, Scripps Networks Interactive (Asia) Pte. Ltd.,
+Singapore (until April 1, 2019)
+Board of Directors, Citymapper Ltd., London, United Kingdom
+Board of Directors, Toucan Toco SAS, Paris, France (from
+November 14, 2019)
+-1,078
+Chief Financial Officer
+Chairman of the Board of Directors, Huhtamäki Oyj,
+Espoo, Finland
+Furthermore, we continue to investigate separate allegations
+regarding conduct that certain SAP partners violated SAP
+contractual terms and sold SAP products and services in embargoed
+countries. These SAP partners presumably did not adhere to SAP's
+strict procedures for indirect business activities. To the extent any
+company independent from SAP chooses not to follow SAP'S
+licensing procedures, SAP is ultimately limited in its ability to stop
+their activities. SAP devotes considerable resources to prevent and
+mitigate such activities should they occur. We are also investigating
+allegations regarding direct sales from SAP to certain customers,
+who may have engaged in unauthorized activities in embargoed
+countries. The investigations are being conducted by SAP's OEC and
+SAP's Export Control team, with the assistance of an external law
+firm and forensic advisors.
+In this context, SAP voluntarily self-disclosed potential export
+controls and economic sanctions violations to the U.S. DOJ and the
+U.S. Department of Treasury's Office of Foreign Assets Control
+(OFAC) in September 2017. At the same time, SAP provided
+notification to the U.S. SEC and responded to an SEC comment letter
+on export restriction matters in October 2017. SAP has also provided
+disclosure to the U.S. Department of Commerce's Bureau of Industry
+and Security (BIS) based on the same alleged facts. Finally, pursuant
+to Section 219 of the U.S. Iran Threat Reduction and Syria Human
+Rights Act of 2012 and Section 13(r) of the U.S. Securities Exchange
+Act of 1934, SAP has filed the required Iran Notice with the U.S. SEC.
+The alleged conduct may result in monetary penalties or other
+sanctions under U.S. sanctions and export control laws.
+The comprehensive and exhaustive investigations and the
+corresponding remediation activities are ongoing, and considering
+the complexity of individual factors and the large number of open
+questions, it is impossible at this point in time to assess the risks.
+For the reasons outlined above, it is impossible at this point in time
+to determine whether the potential anti-bribery law violations and the
+potential export restriction violations represent present obligations of
+SAP and, if so, to reliably estimate the amount of these obligations. As
+a consequence, no provisions have been recognized for these potential
+violations in our consolidated financial statements 2019. It is also not
+practicable to estimate the financial effect of any contingent liabilities
+that may result from these potential violations.
+198
+Section GOther Disclosures
+To Our
+The alleged conduct may result in monetary penalties or other
+sanctions under the FCPA and/or other anti-bribery laws. In addition,
+SAP's ability to conduct business in certain jurisdictions could be
+negatively impacted. The comprehensive and exhaustive
+investigations and the corresponding remediation activities are still
+ongoing. Considering the complexity of individual factors and the
+large number of open questions, it is impossible at this point in time
+to assess the risk of a financial impact.
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+(G.4) Board of Directors
+Executive Board
+Stakeholders
+SAP has received communications and whistleblower information
+alleging conduct that may violate anti-bribery laws in the United
+States (including the U.S. Foreign Corrupt Practices Act (FCPA)), and
+other countries. The Office of Ethics and Compliance (OEC),
+formerly the Legal Compliance and Integrity Office, of SAP is
+conducting investigations with the assistance of an external law firm
+and voluntarily advised the U.S. Securities and Exchange
+Commission (U.S. SEC) and the U.S. Department of Justice
+(U.S. DOJ), as well as local authorities where potential violations are
+being investigated. The investigations and dialogue between SAP and
+the local authorities and the U.S. SEC and U.S. DOJ are ongoing.
+Anti-Bribery and Export Control Matters
+For information about income tax-related litigation, see
+Note (C.5).
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+at December 31, 2019, are neither individually nor in the aggregate
+material to SAP.
+Among the claims and lawsuits disclosed in this Note are the
+following classes:
+Intellectual Property-Related Litigation and
+Claims
+Intellectual property-related litigation and claims are cases in
+which third parties have threatened or initiated litigation claiming
+that SAP violates one or more intellectual property rights that they
+possess. Such intellectual property rights may include patents,
+copyrights, and other similar rights.
+Contingent liabilities exist from intellectual property-related
+litigation and claims for which no provision has been recognized.
+Generally, it is not practicable to estimate the financial impact of
+these contingent liabilities due to the uncertainties around the
+litigation and claims, as outlined above. The total amounts claimed
+by plaintiffs in those intellectual property-related lawsuits or claims
+in which a claim has been quantified were not material to us as at
+December 31, 2019 and 2018. Based on our past experience, most of
+the intellectual property-related litigation and claims tend to be
+either dismissed in court or settled out of court for amounts
+significantly below the originally claimed amounts. We currently
+believe that resolving the intellectual property-related claims and
+lawsuits pending as at December 31, 2019, will neither individually
+nor in the aggregate have a material adverse effect on our business,
+financial position, profit, or cash flows.
+Individual cases of intellectual property-related litigation and
+claims include the following:
+In June 2018, Teradata Corporation, Teradata US, Inc. and
+Teradata Operations, Inc. (collectively "Teradata") filed a civil lawsuit
+against SAP SE, SAP America, Inc. and SAP Labs, LLC in U.S. federal
+court in California. Teradata alleges that SAP misappropriated trade
+secrets of Teradata, infringed Teradata's copyrights, and violated U.S.
+antitrust laws. Teradata seeks unspecified monetary damages and
+injunctive relief. Trial is scheduled for late 2021.
+In February 2010, United States-based TecSec, Inc. (TecSec)
+instituted legal proceedings in the United States against SAP
+(including its subsidiary Sybase) and many other defendants. TecSec
+alleged that SAP's and Sybase's products infringe one or more of the
+claims in five patents held by TecSec. In its complaint, TecSec seeks
+unspecified monetary damages and permanent injunctive relief. The
+trial for SAP (including its subsidiary Sybase) has not yet been
+scheduled, but is anticipated for 2020.
+Tax-Related Litigation
+We are subject to ongoing audits by domestic and foreign tax
+authorities. In respect of non-income taxes, we are involved in various
+proceedings with only a few foreign tax authorities regarding
+assessments and litigation matters on intercompany royalty payments
+and intercompany services. The total potential amount in dispute
+related to these matters for all applicable years is approximately
+€189 million (2018: €95 million). We have not recorded a provision for
+these matters, as we believe that we will prevail.
+Memberships on supervisory boards and other comparable
+governing bodies of enterprises, other than subsidiaries of SAP, on
+December 31, 2019
+Luka Mucic
+Christian Klein
+Intelligent Enterprise Group
+Supervisory Board
+Memberships on supervisory boards and other comparable
+governing bodies of enterprises, other than subsidiaries of SAP, on
+December 31, 2019
+Prof. Dr. h.c. mult. Hasso Plattner 2), 4), 6)
+Chairman
+Margret Klein-Magar ¹), 2), 3)
+Deputy Chairperson
+Vice President, Head of SAP Alumni Relations
+Bill McDermott (until November 15, 2019)
+Chairperson of the Spokespersons' Committee of Senior Managers
+of SAP SE
+SAP Digital Business Services
+Global Services Delivery, Regional Field Services
+Supervisory Board, innogy SE, Essen, Germany (until
+October 4, 2019)
+Board of Partners, E. Merck KG, Darmstadt, Germany (from
+January 27, 2019)
+Supervisory Board, Merck KGaA, Darmstadt, Germany (from
+April 26, 2019)
+Pekka Ala-Pietilä 2), 6), 7)
+Michael Kleinemeier
+Bernd Leukert (until March 31, 2019)
+Executive Board Members Who Left During 2019
+Robert Enslin (until April 5, 2019)
+Global Responsibility for all SAP Applications, Product Development
+and Delivery as well as Product Management for SAP S/4HANA,
+Supply Chain, SME, and Industry Solutions
+Global Business Operations, IT Services
+Jennifer Morgan
+Co-Chief Executive Officer
+Cloud Business Group
+Intelligent Spend Group, Qualtrics, CX Product Engineering and
+Product Management
+Board of Directors, Bank of New York Mellon, New York, NY, United
+States
+Adaire Fox-Martin
+Global Customer Operations
+Global Sales, Regional Field Organizations, Line of Business
+Solutions Sales
+Board of Directors, Equinix, Inc., Redwood City, CA, United States
+(from January 1, 2020)
+Stefan Ries
+Chief Human Resources Officer, Labor Relations Director
+HR Strategy, Business Transformation, Leadership Development,
+Talent Development
+Supervisory Board, Rhein-Neckar Loewen GmbH, Kronau, Germany
+Thomas Saueressig (from November 1, 2019)
+SAP Product Engineering
+Co-Chief Executive Officer
+Other non-derivative financial liabilities³)
+AC
+-2,498
+134
+134
+Financial instruments related to employee benefit
+plans²)
+165
+Loans and other financial receivables
+AC
+134
+147
+147
+147
+Derivative assets
+Designated as hedging instrument
+FX forward contracts
+Interest rate swaps
+147
+134
+AC
+Time deposits
+1,984
+AC
+77
+77
+77
+Equity securities
+FVTPL
+1,248
+1,248
+52
+77
+1,196
+1,248
+Investments in associates²)
+26
+2
+293
+2
+2
+FVTPL
+5
+5
+5
+5
+Liabilities
+Call option on equity shares
+Trade and other payables
+Other payables²)
+Financial liabilities
+-1,614
+AC
+-1,265
+-350
+-11,678
+-1,265
+Trade payables¹)
+68
+68
+100
+11
+11
+11
+11
+Not designated as hedging instrument
+FX forward contracts
+FVTPL
+100
+100
+100
+Call options for share-based payments
+FVTPL
+68
+68
+88
+2
+Debt securities
+Other financial assets
+Other receivables²)
+FVTPL
+-55
+-1,801
+-5,564
+-55
+3,416
+-55
+-55
+192
+-8,604 -4,086
+-10,793
+Section F - Management of Financial Risk Factors
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+1,896
+Total financial instruments, net
+FX forward contracts
+-16
+-2,498
+-296
+-296
+Derivatives
+Designated as hedging instrument
+FX forward contracts
+Interest rate swaps
+Not designated as hedging instrument
+-11
+-11
+-11
+-11
+-16
+-16
+-16
+Further Information on Economic,
+Environmental, and Social Performance
+Fair Values of Financial Instruments and Classification Within the Fair Value Hierarchy
+€ millions
+Assets
+AC
+4,514
+4,514
+Money market and similar funds
+FVTPL
+1,195
+1,195
+1,195
+1,195
+Trade and other receivables
+6,480
+Trade receivables¹)
+AC
+6,188
+6,188
+Time deposits¹)
+197
+2,918
+AC
+Additional
+Information
+Category
+12/31/2018
+Carrying Measurement Categories
+Amount
+Fair Value
+At
+Amortized
+Cost
+At Fair
+Value
+Level 1
+Level 2
+Level 3
+Total
+Cash and cash equivalents
+8,627
+Cash at banks¹)
+2,918
+Section GOther Disclosures
+7) Member of the Company's People and Organization Committee
+9
+33
+100
+Cash outflows
+For other non-derivative financial assets/liabilities and
+variable rate financial debt, it is assumed that their carrying value
+reasonably approximates their fair values.
+-3,442
+○
+-4,025
+0
+Cash inflows
+3,468
+Currency derivatives not designated as hedging
+instruments
+0
+0
+Currency derivatives designated as hedging instruments
+3
+2
+Cash outflows
+-114
+о
+-203
+0
+Cash inflows
+4,076
+Derivative financial assets
+-12
+-61
+Cash inflows
+401
+0
+330
+0
+Interest rate derivatives designated as hedging instruments
+-16
+-3
+Cash outflows
+-28
+-536
+-15
+-27
+Cash inflows
+36
+515
+13
+26
+Total of derivative financial liabilities
+-82
+-55
+-24
+-76
+117
+0
+202
+0
+(F.2) Fair Value Disclosures on Financial
+Instruments
+Level Transfers
+It is our policy that transfers between the different levels of the fair
+value hierarchy are deemed to have occurred at the beginning of the
+period of the event or change in circumstances that caused the
+transfer.
+Fair Value of Financial Instruments
+We use various types of financial instruments in the ordinary
+course of business, which are classified as either amortized cost
+(AC) or fair value through profit or loss (FVTPL). For those financial
+instruments measured at fair value or for which fair value must be
+disclosed, we have categorized the financial instruments into a
+three-level fair value hierarchy depending on the inputs used to
+determine fair value and their significance for the valuation
+techniques.
+Section F - Management of Financial Risk Factors
+191
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Fair Values of Financial Instruments and Classification Within the Fair Value Hierarchy
+€ millions
+Assets
+Additional
+Information
+Category
+12/31/2019
+Carrying Measurement Categories
+Amount
+At
+Amortized
+Cost
+At Fair
+Value
+Level 1
+-11
+0
+0
+-18
+Interest rate derivatives designated as hedging instruments
+9
+11
+Cash outflows
+-14
+-18
+-8
+-14
+Cash inflows
+17
+24
+19
+15
+Total of derivative financial assets
+44
+32
+6
+113
+61
+1
+Total of derivative financial liabilities and assets
+-37
+-23
+37
+-340
+Transfers Between Levels 1 and 2
+-415
+454
+Other financial assets
+2,633
+Debt securities
+AC
+27
+22
+Equity securities
+FVTPL
+1,996
+27
+Other receivables²)
+27
+1,996
+25
+89
+1,882
+1,996
+Investments in associates²)
+16
+Time deposits
+AC
+41
+41
+27
+7,582
+7,582
+AC
+Further Information on Economic,
+Environmental, and Social Performance
+0
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+Fair Value
+Total
+Cash and cash equivalents
+5,314
+Cash at banks¹)
+AC
+2,877
+2,877
+Time deposits¹)
+AC
+1,090
+1,090
+Money market and similar funds
+FVTPL
+1,347
+1,347
+1,347
+1,347
+Trade and other receivables
+Trade receivables¹)
+41
+41
+8,037
+183
+2020
+Thereafter
+Carrying
+Amount
+12/31/2018
+Contractual Cash Flows
+2019
+Thereafter
+Derivative financial liabilities and assets
+Derivative financial liabilities
+Currency derivatives not designated as hedging
+instruments
+-55
+Cash outflows
+12/31/2019
+-2,865
+-2,111
+-11
+Cash inflows
+2,816
+0
+2,062
+0
+Currency derivatives designated as hedging instruments
+-11
+Financial instruments related to employee benefit
+plans²)
+-9
+-3
+Contractual Cash Flows
+-64
+Additional
+Information
+Loans and other financial receivables
+AC
+Carrying
+Amount
+217
+217
+217
+217
+Derivative assets
+Designated as hedging instrument
+FX forward contracts
+3
+3
+9
+Interest rate swaps
+3 9
+€ millions
+3
+Cash outflows
+9
+Contractual Maturities of Derivative Financial Liabilities and Financial Assets
+SAP Japan Co., Ltd., Tokyo, Japan
+SAP Labs India Private Limited, Bangalore, India
+SAP Italia Sistemi Applicazioni Prodotti in Data Processing S.p.A.,
+Vimercate, Italy
+1,291
+290,021
+108,649
+100.0
+100.0
+582,698
+29,934
+336,995
+720
+100.0
+1,167,363
+577,030
+1,803
+173,224
+100.0
+427,159
+19,211
+37,109
+886
+SAP National Security Services, Inc., Newtown Square, PA, United
+States
+43,225
+323
+426,810
+-61,161
+649,577
+100.0
+SAP Labs, LLC, Palo Alto, CA, United States
+8,466
+SAP México S.A. de C.V., Mexico City, Mexico
+879,257
+724
+679,636
+SAP France, Levallois Perret, France
+271,147
+34,834
+542,651
+100.0
+SAP España - Sistemas, Aplicaciones y Productos en la Informática,
+S.A., Madrid, Spain
+100.0
+7). 9)
+SAP Deutschland SE & Co. KG, Walldorf, Germany
+100.0
+4,538,364
+750,926
+1,614,340
+4,763
+100.0
+1,151,489
+124,438
+1,588,563
+100.0
+SAP Industries, Inc., Newtown Square, PA, United States
+2,045
+382,053
+71,940
+637,052
+100.0
+SAP India Private Limited, Bangalore, India
+952
+19,270
+-572
+124,890
+100.0
+SAP Hungary Rendszerek, Alkalmazások és Termékek az
+Adatfeldolgozásban Informatikai Kft., Budapest, Hungary
+1,503
+174,268
+699,688
+49.0 4).5)
+496,277
+Ambin Properties Proprietary Limited, Johannesburg,
+South Africa
+16)
+Cleartrip Travel & Holidays LLC, Dubai, United Arab
+Emirates
+100.0
+Abakus Ukraine Limited Liability Company, Kiev, Ukraine
+100.0
+100.0
+Clear Trip Private Limited, Mumbai, India
+110405, Inc., Newtown Square, PA, United States
+100.0
+Cleartrip Packages and Tours Private Limited, Mumbai,
+India
+100.0
+"SAP Kazakhstan" LLP, Almaty, Kazakhstan
+%
+100.0
+Clicktools Limited, Dorset, United Kingdom
+100.0
+10)
+Ariba International Singapore Pte Ltd, Singapore,
+Singapore
+100.0
+Ariba International Holdings, Inc., Wilmington, DE, United
+States
+100.0
+Concur (France) SAS, Paris, France
+100.0
+Ariba India Private Limited, Gurgaon, India
+100.0
+Concur (Canada), Inc., Toronto, Canada
+100.0
+Ariba Czech s.r.o., Prague, Czech Republic
+100.0
+CNQR Operations Mexico S. de. R.L. de. C.V., San Pedro.
+Garza Garcia, Mexico
+100.0
+Apex Expert Solutions LLC, Arlington, VA, United States
+note
+169,664
+ship
+Owner-
+1,615
+81,315
+16,186
+201,427
+100.0
+SAP Service and Support Centre (Ireland) Limited, Dublin, Ireland
+SuccessFactors, Inc., South San Francisco, CA, United States
+100.0
+11)
+195,122
+356,717
+670,660
+100.0
+SAP Nederland B.V., 's-Hertogenbosch, the Netherlands
+475
+589
+881,532
+510,682
+4,182,900
+%
+note
+Name and Location of Company
+Owner- Foot-
+ship
+Name and Location of Company
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Other Subsidiaries³)
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+203
+Section GOther Disclosures
+941
+Foot-
+5,619
+SAP Brasil Ltda, São Paulo, Brazil
+-4,633
+Total
+0
+0
+0
+0
+0
+0
+0
+0
+0
+All other fees
+0
+0
+0
+0
+0
+0
+0
+0
+0
+Tax fees
+0
+0
+3
+0
+8
+3
+Disposals
+Additions
+December 31, 2019, that have a material impact on the Company's
+Consolidated Financial Statements.
+Other than that, no events have occurred since
+At the beginning of 2020, SAP modified its organizational
+structure to strengthen the focus on customer success and
+employee engagement while driving innovation and simplicity. The
+set-up moving forward aims at raising synergies, reducing
+complexity while initiating key steps towards further integration. The
+organizational changes will also affect SAP's segment reporting. SAP
+has already started the process of redefining its management
+reporting under the new organizational structure, which the segment
+reporting will follow.
+(G.8) Events After the Reporting Period
+264
+-21
+20
+265
+-21
+59
+227
+Total
+12/31/2017
+Entities Consolidated in the Financial Statements
+(G.9) Scope of Consolidation,
+Subsidiaries and Other Equity
+Investments
+Audit fees are the aggregate fees charged by KPMG for auditing
+our consolidated financial statements and the statutory financial
+statements of SAP SE and its subsidiaries. Audit-related fees are
+fees charged by KPMG for assurance and related services that are
+reasonably related to the performance of the audit as well as fees
+charged by KPMG for service organization attestation procedures.
+10
+7
+3
+9
+6
+10
+0
+0
+0
+€ millions
+At the Annual General Meeting of Shareholders held on
+May 15, 2019, our shareholders elected KPMG AG
+Wirtschaftsprüfungsgesellschaft (KPMG) as SAP's independent
+auditor for 2019. KPMG has been the Company's principal auditor
+since the fiscal year 2002. Bodo Rackwitz has signed as auditor
+responsible for audit of the financial reporting and the group
+reporting of SAP SE since the fiscal year 2018. KPMG and other firms
+in the global KPMG network charged the following fees to SAP for
+audit and other professional services related to 2019 and the
+previous years:
+(G.7) Principal Accountant Fees and
+Services
+For information about the compensation of our Executive Board
+and Supervisory Board members, see Note (G.5).
+(2018: €0 million). All of these balances are unsecured and interest-
+free and settlement is expected to occur in cash.
+In total, we sold services to members of the Executive Board and
+the Supervisory Board in the amount of €0 million (2018:
+€0 million), and we received services from members of the
+Supervisory Board (including services from employee
+representatives on the Supervisory Board in their capacity as
+employees of SAP) in the amount of €2 million (2018: €1 million).
+Amounts owed, but not yet paid, to Supervisory Board members
+from these transactions were €0 million as at December 31, 2019
+in the amount of €4 million (2018: €4 million). Outstanding balances
+at year end from transactions with such companies were €0 million
+(2018: €3 million) for amounts owed to such companies and
+€0 million (2018: €28 million) for amounts owed by such companies.
+All of these balances are unsecured and interest-free and settlement
+is expected to occur in cash. Commitments (the longest of which is
+for four years) made by us to purchase further goods or services
+from these companies and to provide further sponsoring and other
+financial support amount to €14 million as at December 31, 2019
+(2018: €191 million).
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+201
+Section GOther Disclosures
+In total, we sold products and services to companies controlled by
+members of the Supervisory Board in the amount of €9 million
+(2018: €37 million), we bought products and services from such
+companies in the amount of €2 million (2018: €3 million), and we
+provided sponsoring and other financial support to such companies
+All amounts related to the abovementioned transactions were
+immaterial to SAP in all periods presented.
+Occasionally, members of the Executive Board of SAP SE obtain
+services from SAP for which they pay a consideration consistent with
+those negotiated at arm's length between unrelated parties.
+Companies controlled by Hasso Plattner, Chairman of the
+Supervisory Board of SAP SE and Chief Software Advisor of SAP,
+engaged in the following transactions with SAP: providing consulting
+services to SAP, receiving sport sponsoring from SAP, making
+purchases of SAP products and services, and purchasing a house
+from SAP.
+Certain Supervisory Board members of SAP SE currently hold, or
+held within the last year, positions of significant responsibility with
+other entities. We have relationships with certain of these entities in
+the ordinary course of business, whereby we buy and sell products,
+assets, and services at prices believed to be consistent with those
+negotiated at arm's length between unrelated parties.
+(G.6) Related Party Transactions Other
+Than Board Compensation
+148
+192
+2019
+2018
+2017
+KPMG AG
+(Germany)
+1
+1
+0
+Audit-related fees
+10
+7
+3
+9
+6
+3
+10
+12/31/2018
+7
+Audit fees
+KPMG Firms
+Total
+Foreign
+KPMG AG
+(Germany)
+KPMG Firms
+Total
+Foreign
+KPMG AG
+(Germany)
+Total
+Foreign
+KPMG Firms
+3
+-196,735
+Additions
+The additions relate to legal entities added in connection with
+acquisitions and foundations. The disposals are mainly due to
+mergers and liquidations of legal entities.
+SAP Asia Pte Ltd, Singapore, Singapore
+16)
+918
+16,846
+-34,937
+158,007
+100.0
+SAP Argentina S.A., Buenos Aires, Argentina
+8,162
+19,587,457
+-781,584
+6,152,418
+100.0
+SAP America, Inc., Newtown Square, PA, United States
+10)
+1,762
+10,166
+41,886
+1,246,454
+100.0
+SAP (UK) Limited, Feltham, United Kingdom
+769
+145,085
+100.0
+99,481
+515,034
+-14,925
+1,019,778
+100.0
+SAP China Co., Ltd., Shanghai, China
+2,946
+507,722
+38,905
+965,891
+100.0
+2,029
+-216
+-35,373
+556,269
+100.0
+SAP Canada Inc., Toronto, Canada
+100.0
+1,274
+28,411
+-11,496
+738,223
+100.0
+SAP Australia Pty Ltd, Sydney, Australia
+16)
+1,178
+-32,511
+924,676
+100.0
+SAP (Schweiz) AG, Biel, Switzerland
+12/31/2019²)
+for 2019¹)
+Foot-
+note
+Employees as at
+After Tax at 12/31/2019¹)
+in 2019¹)
+Number of
+Total Equity as
+Profit/Loss (-)
+Total Revenue
+Owner
+-ship
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Name and Location of Company
+Major Subsidiaries
+Subsidiaries
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined Group
+To Our
+Section GOther Disclosures
+202
+%
+Ariba, Inc., Palo Alto, CA, United States
+100.0
+€ thousands
+1,304,139
+4)
+2,112
+6,124,414
+-535,867
+418,420
+100.0
+Qualtrics, LLC, Wilmington, DE, United States
+822
+47,192
+-21,171
+482,524
+Disposals
+12/31/2019
+100.0
+3,788
+7,680,075
+258,770
+1,804,158
+100.0
+Concur Technologies, Inc., Bellevue, WA, United States
+1,928
+4,376,579
+332,200
+€ thousands
+€ thousands
+LLC SAP CIS, Moscow, Russia
+Concur (Germany) GmbH, Frankfurt am Main, Germany
+Concur (Japan) Ltd., Tokyo, Japan
+13)
+8). 9)
+51.0
+SAP Business Services Center Nederland B.V., 's-
+Hertogenbosch, the Netherlands
+100.0
+11)
+OrientDB Limited, London, United Kingdom
+100.0
+10)
+SAP Chile Limitada, Santiago, Chile
+100.0 16)
+Outerjoin, Inc., Dublin, CA, United States
+100.0
+SAP China Holding Co., Ltd., Beijing, China
+100.0
+Outlook Soft Deutschland GmbH, Walldorf, Germany
+100.0
+8). 9)
+SAP Colombia S.A.S., Bogotá, Colombia
+100.0
+16)
+Plat. One Inc., Palo Alto, CA, United States
+100.0
+SAP Commercial Services Ltd., Valletta, Malta
+100.0
+100.0
+Plat. One Lab Srl, Bogliasco, Italy
+Nihon Ariba K.K., Tokyo, Japan
+Noteshark, LLC, Chantilly, VA, United States
+SAP Bulgaria EOOD, Sofia, Bulgaria
+100.0 4). 10)
+Learning Seat Group Pty. Ltd., Sydney, Australia
+100.0
+Learning Seat Holdings Pty. Ltd., Sydney, Australia
+100.0
+SAP (Beijing) Software System Co., Ltd., Beijing, China
+SAP Andina y del Caribe C.A., Caracas, Venezuela
+100.0
+100.0 16)
+Learning Seat Pty. Ltd., Sydney, Australia
+100.0
+SAP AZ LLC, Baku, Azerbaijan
+100.0
+LLC "SAP Labs", Moscow, Russia
+100.0
+LLC "SAP Ukraine", Kiev, Ukraine
+100.0
+16)
+SAP Belgium - Systems, Applications and Products SA,
+Brussels, Belgium
+100.0
+SAP Beteiligungs GmbH, Walldorf, Germany
+100.0
+Merlin Systems Oy, Espoo, Finland
+100.0
+100.0
+100.0
+SAP Costa Rica, S.A., San José, Costa Rica
+100.0
+100.0
+SAP Middle East and North Africa L.L.C., Dubai, United
+Arab Emirates
+49.0
+5), 16)
+SAP Danmark A/S, Copenhagen, Denmark
+100.0
+SAP Nederland Holding B.V., 's-Hertogenbosch, the
+Netherlands
+100.0
+11)
+SAP Dritte Beteiligungs- und Vermögensverwaltungs
+100.0
+GmbH, Walldorf, Germany
+SAP New Zealand Limited, Auckland, New Zealand
+100.0
+SAP East Africa Limited, Nairobi, Kenya
+100.0 16)
+SAP Norge AS, Lysaker, Norway
+100.0
+SAP Egypt LLC, Cairo, Egypt
+100.0
+16)
+SAP North West Africa Ltd, Casablanca, Morocco
+100.0
+SAP d.o.o., Zagreb, Croatia
+100.0
+SAP MENA FZ L.L.C., Dubai, United Arab Emirates
+100.0
+16)
+PT SAP Indonesia, Jakarta, Indonesia
+99.0
+SAP ČR, spol. s r.o., Prague, Czech Republic
+100.0
+Section GOther Disclosures
+205
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+QUL Technologies Limited, London, United Kingdom
+Further Information on Economic,
+Environmental, and Social Performance
+Name and Location of Company
+Owner-
+ship
+Foot-
+Name and Location of Company
+Owner-
+note
+ship
+Foot-
+note
+%
+%
+SAP Cyprus Limited, Nicosia, Cyprus
+Additional
+Information
+100.0
+Learning Seat Borrowings Pty. Ltd., Sydney, Australia
+4)
+Name and Location of Company
+Owner-
+Foot-
+ship
+note
+%
+%
+EssCubed Procurement Pty. Ltd., Johannesburg, South
+Africa
+100.0
+Extended Systems, Inc., San Ramon, CA, United States
+Fieldglass Europe Limited, London, United Kingdom
+100.0
+Q (AGF2) Inc., Wilmington, DE, United States
+QAL Technologies Pty Ltd, Sydney, Australia
+QCL Techonologies Ltd., Toronto, Canada
+100.0
+100.0
+100.0
+4)
+100.0 10)
+Financial Fusion, Inc., San Ramon, CA, United States
+100.0
+QDL Technologies GmbH, Munich, Germany
+QFL Technologies Sarl, Paris, France
+100.0
+100.0
+କ
+Foot-
+note
+Owner-
+ship
+Name and Location of Company
+Additional
+Information
+10)
+Datahug Limited, Dublin, Ireland
+100.0
+C-Learning Pty. Ltd., Sydney, Australia
+100.0
+Delighted, LLC, Wilmington, DE, United States
+100.0
+Clear Trip Inc. (Mauritius), Ebene, Mauritius
+100.0
+Dorset Acquisition Corp., Dublin, CA, United States
+100.0
+Flyin Holding Limited, Dubai, United Arab Emirates
+Clear Trip Inc., George Town, Cayman Islands
+Ebreez Egypt LLC, Cairo, Egypt
+100.0
+Cleartrip MEA FZ LLC, Dubai, United Arab Emirates
+100.0
+204
+Section GOther Disclosures
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+57.0
+16)
+100.0
+100.0 4)
+100.0 8).9)
+Quadrem Overseas Cooperatief U.A., Amsterdam, the
+Netherlands
+100.0
+11)
+Quadrem Peru S.A.C., Lima, Peru
+100.0
+100.0
+Qualtrics International Inc., Wilmington, DE, United States
+100.0
+4)
+100.0
+4)
+Qualtrics Japan LLC, Tokyo, Japan
+100.0
+LeadFormix, Inc., Dublin, CA, United States
+100.0
+Qualtrics Sweden AB, Stockholm, Sweden
+100.0
+Learning Heroes Ltd., Cheshire, United Kingdom
+100.0
+10)
+Qualtrics Technologies Spain, S.L.U., Madrid, Spain
+100.0
+100.0
+11)
+100.0
+Quadrem Netherlands B.V., Amsterdam, the Netherlands
+Flyin Travel and Tourism Private Limited, Hyderabad,
+India
+100.0
+QPL Technologies sp. z o.o., Kraków, Poland
+100.0 4)
+Flyin Travel Limited, Limassol, Cyprus
+100.0
+QSL Technologies Pte. Ltd., Singapore, Singapore
+100.0 4)
+Flyin Travel S.A.E, Cairo, Egypt
+100.0
+FreeMarkets Ltda., São Paulo, Brazil
+QIL Technologies Limited, Dublin, Ireland
+100.0
+Inxight Federal Systems Group, Inc., Wilmington, DE,
+United States
+IP Asset Holdings, LLC, Provo, UT, United States
+100.0 10), 16)
+Quadrem Africa Pty. Ltd., Johannesburg, South Africa
+Quadrem Brazil Ltda., Rio de Janeiro, Brazil
+Quadrem Chile Ltda., Santiago de Chile, Chile
+100.0
+100.0
+100.0
+100.0 10)
+Quadrem International Ltd., Hamilton, Bermuda
+100.0
+100.0
+Gigya UK Ltd, London, United Kingdom
+GlobalExpense Limited, London, United Kingdom
+Hipmunk, Inc., San Francisco, CA, United States
+hybris (US) Corp., Wilmington, DE, United States
+hybris GmbH, Munich, Germany
+SAP EMEA Inside Sales S.L., Madrid, Spain
+100.0
+SAP Österreich GmbH, Vienna, Austria
+100.0
+100.0
+100.0
+Christie Partners Holding C.V., 's-Hertogenbosch, the
+Netherlands
+12)
+100.0
+Crystal Decisions Holdings Limited, Dublin, Ireland
+100.0
+CallidusCloud Pty. Ltd., Sydney, Australia
+12)
+100.0
+Crystal Decisions (Ireland) Limited, Dublin, Ireland
+100.0
+CallidusCloud Holdings Pty. Ltd., Sydney, Australia
+100.0
+ConTgo Pty. Ltd., Sydney, Australia
+100.0
+CallidusCloud (Malaysia) Sdn. Bhd., Kuala Lumpur,
+Malaysia
+10)
+100.0
+100.0 10)
+ConTgo Consulting Limited, London, United Kingdom
+ConTgo Limited, London, United Kingdom
+100.0
+Sybase Software (India) Private Ltd., Mumbai, India
+Sybase, Inc., San Ramon, CA, United States
+100.0
+SAP Türkiye Yazilim Üretim ve Ticaret A.Ş., Istanbul,
+Turkey
+100.0
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+Name and Location of Company
+Owner-
+ship
+Foot-
+Name and Location of Company
+note
+%
+Owner-
+CallidusCloud (India) Pvt. Ltd., Hyderabad, India
+Foot-
+note
+%
+SAP Taiwan Co., Ltd., Taipei, Taiwan
+100.0
+Sybase International Holdings Corporation, LLC, San
+Ramon, CA, United States
+100.0
+SAP Technologies Inc., Palo Alto, CA, United States
+100.0
+Sybase Philippines, Inc., Makati City, Philippines
+100.0
+SAP Training and Development Institute FZCO, Dubai,
+United Arab Emirates
+ship
+Combined Group
+100.0
+100.0 10)
+11)
+100.0
+Ariba Technologies Netherlands B.V., 's-Hertogenbosch,
+the Netherlands
+100.0
+Concur Holdings (France) SAS, Paris, France
+100.0
+Ariba Technologies India Private Limited, Bangalore, India
+100.0
+Concur Czech (s.r.o.), Prague, Czech Republic
+215
+100.0
+Concur (Switzerland) GmbH, Zurich, Switzerland
+100.0
+Ariba Software Technology Services (Shanghai) Co., Ltd.,
+Shanghai, China
+100.0
+14)
+100.0
+Concur (New Zealand) Limited, Wellington, New Zealand
+Concur (Philippines) Inc., Makati City, Philippines
+100.0
+Ariba Slovak Republic, s.r.o., Košice, Slovakia
+100.0
+Ariba International, Inc., Wilmington, DE, United States
+73.6
+Concur Holdings (Netherlands) B.V., Amsterdam, the
+Netherlands
+100.0
+11)
+Beijing Zhang Zhong Hu Dong Information Technology
+Co., Ltd., Beijing, China
+Concur Technologies (UK) Limited, London, United
+Kingdom
+10)
+100.0
+Callidus Software Ltd., London, United Kingdom
+16)
+100.0
+Concur Technologies (Singapore) Pte Ltd, Singapore,
+Singapore
+100.0
+Callidus Software Inc., Dublin, CA, United States
+100.0
+Business Objects Software Limited, Dublin, Ireland
+Callidus Software Pty. Ltd., Sydney, Australia
+India
+Concur Technologies (India) Private Limited, Bangalore,
+100.0
+Business Objects Option LLC, Wilmington, DE, United
+States
+100.0
+Concur Technologies (Hong Kong) Limited, Hong Kong,
+China
+11)
+100.0
+100.0
+Concur Technologies (Australia) Pty. Limited, Sydney,
+Australia
+Business Objects Holding B.V., 's-Hertogenbosch, the
+Netherlands
+0
+100.0
+100.0
+To Our
+Stakeholders
+206
+SAP Global Marketing, Inc., New York, NY, United States
+100.0
+SAP Hellas S.A., Athens, Greece
+100.0
+SAP Portugal - Sistemas, Aplicações e Produtos
+Informáticos, Sociedade Unipessoal, Lda., Porto Salvo,
+Portugal
+100.0
+SAP Hong Kong Co., Ltd., Hong Kong, China
+100.0 16)
+SAP Projektverwaltungs- und Beteiligungs GmbH,
+Walldorf, Germany
+100.0
+SAP Hosting Beteiligungs GmbH, St. Leon-Rot, Germany
+100.0 8). 9)
+SAP Public Services, Inc., Washington, DC, United States
+100.0
+SAP India (Holding) Pte Ltd, Singapore, Singapore
+100.0
+SAP Puerto Rico GmbH, Walldorf, Germany
+100.0 8). 9). 16)
+SAP International Panama, S.A., Panama City, Panama
+100.0
+SAP International, Inc., Miami, FL, United States
+100.0
+SAP Retail Solutions Beteiligungsgesellschaft mbH,
+Walldorf, Germany
+100.0
+SAP Portals Israel Ltd., Ra'anana, Israel
+100.0
+SAP France Holding, Levallois Perret, France
+100.0
+SAP Erste Beteiligungs- und Vermögensverwaltungs
+GmbH, Walldorf, Germany
+100.0
+8). 9)
+SAP Perú S.A.C., Lima, Peru
+100.0
+16)
+SAP Estonia OÜ, Tallinn, Estonia
+100.0
+SAP Philippines, Inc., Makati, Philippines
+100.0
+100.0
+16)
+100.0
+SAP Polska Sp. z o.o., Warsaw, Poland
+100.0
+SAP Finland Oy, Espoo, Finland
+100.0
+SAP Portals Europe GmbH, Walldorf, Germany
+100.0
+SAP Foreign Holdings GmbH, Walldorf, Germany
+100.0
+SAP Portals Holding Beteiligungs GmbH, Walldorf,
+Germany
+100.0
+SAP Financial, Inc., Toronto, Canada
+Section GOther Disclosures
+SAP Romania SRL, Bucharest, Romania
+SAP Investments, Inc., Wilmington, DE, United States
+SAP sistemi, aplikacije in produkti za obdelavo podatkov
+d.o.o., Ljubljana, Slovenia
+100.0
+SAP Labs Israel Ltd., Ra'anana, Israel
+100.0
+SAP Slovensko s.r.o., Bratislava, Slovakia
+100.0
+SAP Labs Korea, Inc., Seoul, South Korea
+100.0
+SAP Software and Services LLC, Doha, Qatar
+49.0
+5), 16)
+SAP Latvia SIA, Riga, Latvia
+100.0
+SAP Svenska Aktiebolag, Stockholm, Sweden
+100.0
+SAP Malaysia Sdn. Bhd., Kuala Lumpur, Malaysia
+100.0
+SAP System Application and Products Asia Myanmar
+Limited, Yangon, Myanmar
+100.0
+SAP Malta Investments Ltd., Valletta, Malta
+100.0
+SAP Systems, Applications and Products in Data
+Processing (Thailand) Ltd., Bangkok, Thailand
+100.0
+100.0
+SAP Labs France SAS, Mougins, France
+100.0
+SAP Labs Finland Oy, Espoo, Finland
+100.0
+SAP Ireland Limited, Dublin, Ireland
+100.0
+12)
+SAP Saudi Arabia Software Services Ltd, Riyadh,
+Kingdom of Saudi Arabia
+100.0
+SAP Ireland US - Financial Services Designated Activity
+Company, Dublin, Ireland
+100.0
+SAP Saudi Arabia Software Trading Ltd, Riyadh, Kingdom
+of Saudi Arabia
+75.0
+SAP Israel Ltd., Ra'anana, Israel
+100.0
+100.0 16)
+100.0
+8). 9)
+SAP Korea Ltd., Seoul, South Korea
+100.0
+SAP Services s.r.o., Prague, Czech Republic
+100.0
+SAP Labs Bulgaria EOOD, Sofia, Bulgaria
+100.0
+SAP Siebte Beteiligungs- und Vermögensverwaltungs
+GmbH, Walldorf, Germany
+100.0
+8).9)
+SAP Sechste Beteiligungs- und Vermögensverwaltungs
+GmbH, Walldorf, Germany
+100.0
+Crystal Decisions UK Limited, London, United Kingdom
+(G.5) Executive and Supervisory Board
+Compensation
+2,081
+2,054
+1,997
+44,586
+38,374
+39,993
+SAP did not grant any compensation advance or credit to, or
+enter into any commitment for the benefit of, any member of the
+Executive Board or Supervisory Board in 2019, 2018, or 2017.
+Detailed information about the different elements of the
+compensation are disclosed in the Compensation Report, which is
+part of our Integrated Report and of our Annual Report on Form 20-F,
+both of which are available on SAP's Web site.
+2019
+Number of RSUs granted
+137,619
+Number of PSUs granted
+206,428
+Total expense in € thousands
+44,447
+2017
+2018
+118,072
+177,106
+8,054
+The defined benefit obligation (DBO) for pensions to Executive
+Board members and the annual pension entitlement of the members
+of the Executive Board on reaching age 62 based on entitlements
+from performance-based and salary-linked plans were as follows:
+Retirement Pension Plan for Executive Board
+Members
+€ thousands
+2019
+2018
+2017
+DBO 12/31
+5,497
+3,441
+3,191
+Annual pension entitlement
+Data Collective II L.P., San Francisco, CA, United States
+Data Collective III L.P., San Francisco, CA, United States
+Data Collective IV, L.P., San Francisco, CA, United States
+DataRobot, Inc., Boston, MA, United States
+Costanoa Venture Capital II L.P., Palo Alto, CA, United States
+Costanoa Venture Capital III L.P., Palo Alto, CA, United States
+Costanoa Venture Capital QZ, LLC, Palo Alto, CA, United States
+Culture Amp, Inc., San Francisco, CA, United States
+Clari, Inc., Sunnyvale, CA, United States
+Contentful GmbH, Berlin, Germany
+2017
+117,929
+176,886
+19,068
+Char Software, Inc., Boston, MA, United States
+2018
+Share-Based Payment for Executive Board
+Members
+18,652
+16,634
+Share-based payment¹)
+32,393
+€ thousands
+23,646
+25,723
+Subtotal¹)
+49,771
+42,298
+42,357
+Payments
+DBO 12/31
+Post-employment benefits
+2019
+2,825
+1,312
+Thereof defined-benefit
+2,056
+250
+423
+Thereof defined-contribution
+769
+856
+889
+Total¹)
+52,596
+43,404
+43,669
+1) Portion of total executive compensation allocated to the respective year
+1,106
+17,378
+Catchpoint Systems, Inc., New York, NY, United States
+Name and Location of Company
+100.0
+Sybase Angola, LDA, Luanda, Angola
+100.0
+Sybase 365, LLC, San Ramon, CA, United States
+100.0
+Sybase 365 Ltd., Tortola, British Virgin Islands
+Islands
+100.0
+SuccessFactors Cayman, Ltd., Grand Cayman, Cayman
+100.0 16)
+SuccessFactors (Philippines), Inc., Pasig City, Philippines
+4)
+100.0
+Statwing, LLC, Wilmington, DE, United States
+15), 16)
+100.0
+Saudi Ebreez Company for Electronic Services LLC,
+Riyadh, Kingdom of Saudi Arabia
+100.0
+SAPV (Mauritius), Ebene, Mauritius
+0
+Sapphire Ventures Fund IV, L.P., Palo Alto, CA, United
+States
+1)
+6)
+0
+Sapphire Ventures Fund III, L.P., Palo Alto, CA, United
+States
+100.0
+Webcom, Inc., Dublin, CA, United States
+о
+6
+Sapphire Ventures Fund II, L.P., Palo Alto, CA, United
+States
+3)
+Name and Location of Company
+Sybase Iberia S.L., Madrid, Spain
+8)
+Other Equity Investments
+16) Entity with support letter issued by SAP SE.
+Follow Analytics, Inc., San Francisco, CA, United States
+October 1, 2013, the entity does not qualify as being a Large Taxpayer and
+therefore is exempt from having its financial statements audited in respect of its
+financial year ended December 31, 2019.
+15) Pursuant to Angola Tax Law and Presidential Decree no. 147/13 of
+14) Pursuant to section 211 (3) of the New Zealand Companies Act 1993 and section
+45 (2) of the Financial Reporting Act 2013, the entity had approved exclusions
+and is not required to lodge audited financial statements in respect of its financial
+year ended September 30, 2019.
+13) Pursuant to article 727a, paragraph 2 of the Swiss Code of Obligations, the entity
+is exempt from having its financial statements audited in respect of its financial
+year ended December 31, 2019, or in respect of its financial year ended
+September 30, 2019, respectively.
+12) Pursuant to Irish Companies Act 2014, chapter 16 of Part 6, section 365, the
+entity is exempt from having its financial statements audited on the grounds that
+the entity is entitled to the benefits from a dormant entity exemption in respect
+of its financial year ended December 31, 2019.
+11) Pursuant to article 2:403 of the Dutch Civil Code, the entity is exempt from
+applying certain legal requirements to their statutory stand-alone financial
+statements including the requirement to prepare the financial statements, the
+requirement of independent audit, and the requirement of public disclosure, on
+the basis that SAP SE has provided a guarantee of the entity's liabilities in
+respect of its financial year ended December 31, 2019, or in respect of its
+financial year ended September 30, 2019, respectively.
+10) Pursuant to sections 479A to 479C of the UK Companies Act 2006, the entity is
+exempt from having its financial statements audited on the basis that SAP SE has
+provided a guarantee of the entity's liabilities in respect of its financial year ended
+December 31, 2019, or in respect of its financial year ended September 30, 2019,
+respectively.
+statements and a review of operations, the requirement of independent audit,
+and the requirement of public disclosure.
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+100.0
+Management Report
+To Our
+Stakeholders
+207
+Section GOther Disclosures
+9) Pursuant to HGB, section 264 (3) or section 264b, the subsidiary is exempt from
+applying certain legal requirements to their statutory stand-alone financial
+statements including the requirement to prepare notes to the financial
+7) Entity whose personally liable partner is SAP SE.
+6) SAP SE has the following structured entities: SAP.io Fund, L.P., Sapphire Fund
+Investments II Holdings, LLC, Sapphire Fund Investments II, L.P., Sapphire Fund
+Investments III, L.P., Sapphire SAP HANA Fund of Funds, L.P., Sapphire Ventures
+Fund I, L.P., Sapphire Ventures Fund II, L.P., Sapphire Ventures Fund III, L.P,
+Sapphire Ventures Fund IV, L.P., SAPV (Mauritius). The results of operations of
+these entities are included in SAP's consolidated financial statements in
+accordance with IFRS 10 (Consolidated Financial Statements).
+5) Agreements with the other shareholders provide that SAP SE fully controls the
+entity.
+4) Consolidated for the first time in 2019.
+Figures for profit/loss after tax and total equity pursuant to HGB, section 285
+and section 313 are not disclosed if they are of minor significance for a fair
+presentation of the profitability, liquidity, capital resources, and financial position
+of SAP SE, pursuant to HGB, section 313 (2) sentence 3 no. 4 and section 286 (3)
+sentence 1 no. 1.
+2) As at December 31, 2019, including managing directors, in FTE.
+These figures are based on our local IFRS financial statements prior to
+eliminations resulting from consolidation and therefore do not reflect the
+contribution of these companies included in the Consolidated Financial
+Statements. The translation of the equity into Group currency is based on period-
+end closing exchange rates, and on average exchange rates for revenue and net
+income/loss.
+100.0
+Sybase India Ltd., Mumbai, India
+Entity with (profit and) loss transfer agreement.
+Combined Group
+Short-term employee benefits
+2017
+2018
+Mosaic Ventures I, L.P., London, United Kingdom
+MVP Strategic Partnership Fund GmbH & Co. KG, Munich, Germany
+Narrative Science, Inc., Chicago, IL, United States
+Nor1, Inc., Santa Clara, CA, United States
+Notation Capital II, L.P., Brooklyn, NY, United States
+Notation Capital, L.P., Brooklyn, NY, United States
+OpenX Software Limited, Pasadena, CA, United States
+208
+Section GOther Disclosures
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+Name and Location of Company
+Ops Ramp, Inc., San Jose, CA, United States
+Mango Capital 2018, L.P., Los Altos, CA, United States
+Matillion Ltd., Altrincham, United Kingdom
+Outreach Corporation, Seattle, WA, United States
+Pendo.io, Inc., Raleigh, NC, United States
+Pheonix Labs Canada, ULC, Burnaby, BC, Canada
+PivotNorth Early Fund I, L.P., Atherton, CA, United States
+Point Nine Annex GmbH & Co. KG, Berlin, Germany
+Project 44, Inc., Chicago, IL, United States
+PubNub, Inc., San Francisco, CA, United States
+Punchh, Inc., San Mateo, CA, United States
+Realize Corporation, Tokyo, Japan
+Reltio, Inc., Redwood Shores, CA, United States
+Ridge Ventures IV, L.P., San Francisco, CA, United States
+SASS Labs, Inc., Palo Alto, CA, United States
+Scryer, Inc., New York, NY, United States
+Side, Inc., San Francisco, CA, United States
+Smart City Planning, Inc., Tokyo, Japan
+Sports Tech Fund, L.P., Palo Alto, CA, United States
+Sports Tech Parallel Fund, L.P., Palo Alto, CA, United States
+Spring Mobile Solutions, Inc., Reston, VA, United States
+Storm Ventures V, L.P., Menlo Park, CA, United States
+SumoLogic, Inc., Redwood City, CA, United States
+Sun Basket, Inc., San Francisco, CA, United States
+SV Angel IV, L.P., San Francisco, CA, United States
+Point Nine Capital Fund II GmbH & Co. KG, Berlin, Germany
+Point Nine Capital Fund III GmbH & Co. KG, Berlin, Germany
+Point Nine Capital Fund IV GmbH & Co. KG, Berlin, Germany
+Portworx Inc., Los Altos, CA, United States
+T3C Inc., San Jose, CA, United States
+Local Globe VIII, L.P., St. Peter Port, Guernsey, Channel Islands
+Localglobe X Limited, Guernsey, Channel Islands
+LeanData, Inc., Sunnyvale, CA, United States
+Greater Pacific Capital (Cayman) L.P., Grand Cayman, Cayman Islands
+Haystack Ventures V, L.P., Mill Valley, CA, United States
+IDG Ventures USA III, L.P., San Francisco, CA, United States
+Owner-
+ship
+%
+IEX Group, Inc., New York, NY, United States
+Joint Arrangements and Investments in Associates
+InfluxData, Inc., San Francisco, CA, United States
+China DataCom Corporation Limited, Guangzhou, China
+28.30
+Innovation Lab GmbH, Heidelberg, Germany
+Convercent, Inc., Denver, CO, United States
+37.12
+Procurement Negócios Eletrônicos S/A, Rio de Janeiro, Brazil
+Local Globe VII, L.P., St. Peter Port, Guernsey, Channel Islands
+17.00
+4.50
+Name and Location of Company
+Equity Investments with Ownership of at Least 5%
+83North IV, L.P., Hertzalia, Israel
+Alation, Inc., Redwood City, CA, United States
+Alchemist Accelerator Fund I LLC, San Francisco, CA, United States
+All Tax Platform - Solucoes Tributarias S.A., São Paulo, Brazil
+Amplify Partners II L.P., Menlo Park, CA, United States
+Amplify Partners III, L.P., Menlo Park, CA, United States
+Amplify Partners, L.P., Menlo Park, CA, United States.
+AP Opportunity Fund, LLC, Menlo Park, CA, United States
+Auth0, Inc., Bellevue, WA, United States
+Blue Yard Capital | GmbH & Co. KG, Berlin, Germany
+Brightfield Holdings, Inc., New York, NY, United States
+BY Capital 2 GmbH & Co. KG, Berlin, Germany
+innoWerft Technologie- und Gründerzentrum Walldorf Stiftung GmbH,
+Walldorf, Germany
+JFrog, Ltd., Netanya, Israel
+Kaltura, Inc., New York, NY, United States
+Kavacha TopCo LLC, New York, NY, United States
+Landlog Limited, Tokyo, Japan
+Visage Mobile, Inc., Milwaukee, WI, United States
+The Currency Cloud Group Limited, London, United Kingdom
+The SaaStr Fund, L.P., Palo Alto, CA, United States
+Third Kind Venture Capital II, L.P., New York, NY, United States
+Additional
+Information
+Dharma Platform, Inc., Washington DC, United States
+Digital Hub Rhein-Neckar GmbH, Ludwigshafen, Germany
+EIT ICT Labs Germany GmbH, Berlin, Germany
+FeedZai S.A., Lisbon, Portugal
+Accounting Policy
+The share-based payment amounts disclosed below in the table
+"Executive Board Compensation" are based on the grant date fair
+value of the restricted share units (RSUs) and performance share
+units (PSUs), respectively, issued to Executive Board members
+during the reporting period under the LTI 2016 Plan.
+In the table "Share-Based Payment for Executive Board Members,”
+the share-based payment expense is the amount recorded in profit
+or loss under IFRS 2 (Share-Based Payment) in the respective
+period.
+The total compensation of the Executive Board members for each
+of the years 2019, 2018, and 2017 was as follows:
+Executive Board Compensation
+The total annual compensation of the Supervisory Board
+members is as follows:
+Supervisory Board Compensation
+€ thousands
+2019
+2018
+2017
+Total compensation
+Further Information on Economic,
+Environmental, and Social Performance
+3,770
+3,663
+Thereof fixed compensation
+3,218
+3,162
+3,135
+Thereof committee
+553
+540
+528
+remuneration
+The Supervisory Board members do not receive any share-based
+payment for their services. As far as members who are employee
+representatives on the Supervisory Board receive share-based
+payment, such compensation is for their services as employees only
+and is unrelated to their status as members of the Supervisory
+Board.
+Payments to/DBO for Former Executive Board
+Members
+€ thousands
+2019
+3.702
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+UJET, Inc., San Francisco, CA, United States
+Upfront V, L.P., Santa Monica, CA, United States
+Wandera, Inc., San Francisco, CA, United States
+(G.10) German Code of Corporate
+Governance
+The German federal government published the German Code of
+Corporate Governance in February 2002 and introduced a
+commission that amends the Code from time to time. The Code
+contains statutory requirements and a number of recommendations
+and suggestions. Only the legal requirements are binding for German
+companies. With regard to the recommendations, the German Stock
+Corporation Act, section 161, requires that every year, listed
+companies publicly state the extent to which they have implemented
+them. Companies can deviate from the suggestions without having
+to make any public statements.
+In 2019 and 2018, the Executive Board and Supervisory Board of
+SAP SE issued the required declarations of implementation. The
+declaration for 2019 was issued at the end of October 2019. These
+statements are available on our Web site:
+www.sap.com/corporate/en/investors/governance.
+Section GOther Disclosures
+209
+To Our
+Combined Group
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Walldorf, February 18, 2020
+SAP SE
+Walldorf, Baden
+To Our
+Stakeholders
+210
+Section GOther Disclosures
+Thomas Saueressig
+Jürgen Müller
+Stefan Ries
+100.0
+Luka Mucic
+Adaire Fox-Martin
+Jennifer Morgan
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Christian Klein
+The Executive Board
+Michael Kleinemeier
+Volume Integration, Inc., VA, United States
+Felix Capital Fund III, L.P., London, United Kingdom
+0
+100.0
+Technology Management Associates Inc., Herndon, VA,
+United States
+100.0
+SAP Zweite Beteiligungs- und Vermögensverwaltungs
+GmbH, Walldorf, Germany
+100.0
+8). 9)
+Temkin Group, LLC, Wilmington, DE, United States
+SAP West Balkans d.o.o., Belgrade, Serbia
+100.0
+0
+6)
+TM Property Holdings, LLC, Wilmington, DE, United
+States
+100.0
+4)
+Sapphire Fund Investments II Holdings, LLC, Palo Alto,
+CA, United States
+100.0
+SAP.io Fund, L.P., San Francisco, CA, United States
+Tomorrow Now, Inc., Bryan, TX, United States
+100.0
+Systems Applications Products Nigeria Limited, Victoria
+Island, Nigeria
+6)
+SAP UAB, Vilnius, Lithuania
+100.0
+Systems Applications Products (Africa Region)
+Proprietary Limited, Johannesburg, South Africa
+SAP Ventures Investment GmbH, Walldorf, Germany
+100.0
+8).9)
+16)
+Systems Applications Products (Africa) Proprietary
+Limited, Johannesburg, South Africa
+SAP Vierte Beteiligungs- und Vermögensverwaltungs
+GmbH, Walldorf, Germany
+100.0
+Systems Applications Products (South Africa)
+Proprietary Limited, Johannesburg, South Africa
+70.0
+16)
+SAP Vietnam Company Limited, Ho Chi Minh City,
+Vietnam
+100.0
+100.0
+100.0
+100.0
+0
+100.0
+TRX, Inc., Bellevue, WA, United States
+10)
+Sapphire Ventures Fund I, L.P., Palo Alto, CA, United
+States
+100.0
+TRX UK Limited, London, United Kingdom
+0
+100.0
+Sapphire SAP HANA Fund of Funds, L.P., Palo Alto, CA,
+United States
+6
+10)
+100.0
+TRX Europe Limited, London, United Kingdom
+0
+Sapphire Fund Investments III, L.P., Palo Alto, CA, United
+States
+TRX Technologies India Private Limited, Raman Nagar,
+India
+Sapphire Fund Investments II, L.P., Palo Alto, CA, United
+States
+According to the Global Workforce Study (2012), the "chances to
+advance the career" is the second-most important driver of
+employee retention. 20) By promoting and thus growing from within,
+SAP creates career opportunities for our employees. In turn, it is our
+expectation that this opportunity leads to an increase in employee
+retention.
+21)
+Because it is closely linked to how much a company develops its
+employees and supports their careers, internal hiring to
+management and expert positions positively affects employees'
+commitment and loyalty. This hypothesis was confirmed by a study
+by Bedarkar & Pandita (2014), which identified "career
+opportunities" as the key driver of employee engagement.
+Capability Building > Women in Management
+Capability Building > Employee Engagement
+Capability Building > Employee Retention
+Capability Building
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+BHCI > Women in Management
+McKinsey (2013) found that different elements of the BHCI, such
+as flexible working hours, the ability to work from home, and career
+flexibility, can make it easier for employees to balance work and
+family life.13) This leads us to conclude that the higher our BHCI, the
+more attractive SAP becomes to women who are also seeking
+management positions.
+Women in Management > Growth
+Studies show that companies with a relatively high percentage of
+women in upper management or as board members achieve
+stronger financial performance compared to those with a relatively
+low percentage (Catalyst, 2013). 14) We believe that having a higher
+share of women in management positions will increase our revenue
+as it helps us better serve our diverse customer base.
+Women in Management > Customer Loyalty
+Diversity programs - including those focused on the promotion
+of women to management positions - have a direct and positive
+impact on customer satisfaction (Catalyst, 2013).15)
+Women in Management > Profitability
+Studies show that companies with a high level of gender
+diversity outperform companies with an average level in terms of
+return on equity (11.4% versus an average 10.3%); operating results
+(EBIT 11.1% versus 5.8%); and stock price increases (64% versus
+47% over the period 2005-2007) (McKinsey, 2007).16) It is
+therefore likely that having a higher share of women in management
+positions will result in higher profit for SAP.
+Social Investment
+Social investment reflects SAP's activities in volunteering and
+technology as well as cash donations.
+Social Investment > BHCI
+We believe that by supporting our employees in engaging in
+activities with a positive social impact, such as skills-based
+volunteering, we are enhancing the meaning they find in work. This
+sense of purpose helps create a richer and more rewarding work
+environment that reduces stress and promotes satisfaction and
+well-being. Additionally, volunteering can increase overall employee
+health, which is shown in a study by S. S. Johnson (2017).17)
+Social Investment > Employee Engagement
+By engaging our employees in social sabbaticals, their creating
+of significant social impact led to increased employee engagement.
+Mueller et al. (2012) have found that employees' perception of a
+company's commitment to corporate social responsibility is
+positively linked to their own commitment to the organization. 18)
+Social Investment > Growth
+A study by Muritala (2013) suggests that corporate social
+responsibility (or what we characterize as social investment) is
+likely to have a positive impact on an organization's financial
+performance. 19) In our experience, social investments do, in fact,
+have a positive impact on our ability to acquire new customers,
+especially in emerging markets.
+Profitability > Social Investment
+It is a common practice for companies to invest a certain
+percentage of their annual profits in programs and activities that
+create a positive social impact. We believe that higher profit is
+therefore likely to lead SAP to make greater social investments.
+Capability building is the internal hiring rate (promotions only)
+into management or expert positions as compared to the external
+hiring rate into such positions.
+Like many of our IT industry peers, SAP has less women than
+men in senior positions. Given our significant pool of talent, we
+assume that internal promotions will increase the percentage of
+women in management positions.
+22) Muritala, T. (2013): Does CSR Improve Organization Financial Performance?
+Evidence from Nigeria Using Triangulation Analysis. In: Economics and Applied
+Informatics, Issue 3, pp. 41-46.
+Consolidated Financial
+Statements IFRS
+Growth > Profitability
+Reichheld (2003) found a strong correlation between
+companies' Customer NPS results and their revenue growth
+rates. 27) We support this view, as we believe that loyal SAP
+customers are likely to recommend SAP products to other
+companies, which is likely to result in increased sales and stronger
+revenue.
+Customer Loyalty > Growth
+We believe that a higher revenue will have a positive impact on a
+company's work environment, thereby increasing employee pride
+and loyalty. This is also stated in a study of Harter et al. (2010),
+stating that improving financial performance appears to increase
+general satisfaction and some specific work perceptions.26)
+Growth > Employee Engagement
+From 2014 to 2018, we used real data from SAP to analyze and
+prove the financial impact of employee engagement. We were able
+to prove a significant positive correlation between employee
+engagement and revenue.
+Lowering SAP's carbon emissions could have a positive impact
+on SAP's revenue because customers increasingly ask their
+suppliers to act sustainably. This reasoning is supported by a study
+by PwC (2013) confirming the existence of a positive correlation
+between a company's environmental performance and financial
+performance. 25) On the other hand, where additional travel is
+conducted to generate additional business, the resulting increase in
+SAP's carbon emissions could have positive impact on growth.
+Employee Engagement > Growth
+Carbon Emissions > Growth
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+Connectivity of Financial and Non-Financial Indicators
+Meifert (2005) stated a clear relationship between employee
+retention and the company's revenue and margin. 24)
+Employee Retention > Growth
+From 2014 to 2018, we used real data from SAP to analyze and
+prove the financial impact of the BHCI. We were able to prove a
+significant positive correlation between the BHCI and revenue.
+Studies show that companies with a relatively high percentage of
+women in upper management ranks or as board members achieve
+stronger financial performance compared to those with a relatively
+low percentage (Catalyst, 2013). 23) We believe that having a higher
+share of women in management positions will increase our revenue
+as it helps us to better serve our diverse customer base.
+BHCI > Growth
+Women in Management > Growth
+A study by Muritala (2013) suggests that corporate social
+responsibility (or what we characterize as social investment) is
+likely to have a positive impact on an organization's financial
+performance.22) In our experience, social investments do, in fact,
+have a positive impact on our ability to acquire new customers,
+especially in emerging markets.
+Social Investment > Growth
+Growth is one of our strategic objectives. We measure it through
+several KPIs, for example total revenue that SAP receives from the
+sale of our products and services.
+Growth
+Combined Group
+Management Report
+To Our
+Stakeholders
+Connectivity of Financial and Non-Financial Indicators
+The VBA was founded by eight international companies: BASF,
+Bosch, Deutsche Bank, LafargeHolcim, Novartis, Philip Morris
+International, SAP, and SK. It is supported by Deloitte, EY, KPMG,
+PwC, the Organisation for Economic Co-operation and Development
+(OECD), and leading universities, together with stakeholders from
+governments, civil societies, and standard-setting organizations.
+Targeting widespread adoption by other companies, VBA will make
+its work available to the public.
+Its objective is to create a standard for measuring and disclosing
+the environmental, human, social, and financial value that
+companies provide to society.
+Being part of this alliance will allow SAP to work with like-minded
+companies to create the foundation to transform the way
+businesses measure and value their overall societal impacts,
+dependencies along the value chain, and monetary effect on a
+company's value. The move is a further step forward in delivering on
+SAP's purpose to help the world run better and improve people's
+lives.
+Details: How Our Non-Financial and
+Financial Performance Indicators Are
+Interconnected
+Employee Engagement
+Employee engagement is the level of employee commitment,
+pride, and loyalty, as well as the feeling of employees of being
+advocates for their company.
+Building on our many years of experience in connecting financial
+and non-financial measures and documenting their impact on
+corporate steering, we co-founded the "Value Balancing Alliance
+(VBA)" in June 2019 as the next logical step in our approach.
+Capability Building > Employee Engagement
+By engaging our employees in social sabbaticals, their creating
+of significant social impact led to increased employee engagement.
+Mueller et al. (2012) have found that employees' perception of a
+company's commitment to corporate social responsibility is
+positively linked to their own commitment to the organization.²)
+Employee Engagement > Profitability
+From 2014 to 2018, we used real data from SAP to analyze and
+proof the financial impact of employee engagement. We showed
+what a change by 1pp of employee engagement would mean for
+SAP's operating profit.
+Profitability > Employee Engagement
+In our view, a high operating profit, as great business news, can
+raise employee morale, encourage identification with our purpose,
+and thus drive employee engagement. On the other hand, we
+believe that a high profit can also have a negative impact on
+employee engagement. For example, if cost savings and budget cuts
+are implemented to reach an ambitious profit target, employees
+might feel constrained and dissatisfied.
+Business Health Culture Index (BHCI) > Employee
+Engagement
+Because it is closely linked to how much a company develops its
+employees and supports their careers, internal hiring to
+management and expert positions positively affects employees'
+commitment and loyalty. This hypothesis was confirmed by a study
+by Bedarkar & Pandita (2014), which identified "career
+opportunities" as the key driver of employee engagement.¹)
+Social Investment > Employee Engagement
+Since 2014, we have been using real data from SAP to analyze
+and prove the financial impact of the BHCI. We have been able to
+prove a significant positive correlation between the BHCI and
+employee engagement. The BHCI positively influences the
+Leadership Trust Index, which positively influences the Employee
+Engagement Index; all correlations are significant. This hypothesis
+was also confirmed by several studies, for example by Johnson,
+Sheena et al. (2018).³)
+The Next Logical Step
+A New and Broader Focus
+Carbon Emissions > BHCI
+Many of SAP's carbon emissions are caused by business travel
+and commuting, which we believe can have both negative and
+positive impacts on employee health. Some people may experience
+greater stress from more travel because they have less time to
+spend at home, suffer from jetlag, or lose valuable working time;
+others may enjoy travel because it enables them to experience
+other places and cultures as well as meet new people. Studies show
+that business travel potentially increases stress and poses a threat
+to employees' mental and physical health: see, for example, the
+study by Rundle, Revenson & Friedman (2017).8)
+BHCI > Customer Loyalty
+From 2014 to 2018, we used real data from SAP to analyze and
+prove the financial impact of the BHCI. We were able to prove a
+significant positive correlation between the BHCI and customer
+loyalty. Recent studies, for example by Reed, Goolsby & Johnston
+(2016) also suggest this correlation.⁹)
+We will continue to share our approach and methodology with
+our customers to help them win in the marketplace. We believe that
+companies achieve higher profits - resulting from both greater cost
+efficiency as well as revenue growth - by addressing economic,
+social, and environmental considerations in a holistic and integrated
+manner. More importantly, these companies are better equipped to
+lead in the future, as they navigate the world's most pressing
+challenges and help to bring about long-term sustainable change.
+Using the connectivity model, we have been able to embed non-
+financial KPIs into our solutions, including, for example, SAP Digital
+Boardroom. This integrated approach to financial and non-financial
+performance therefore not only helps SAP but also our customers.
+So far, our connectivity model has focused primarily on the
+cause-and-effect chains at SAP. However, we are working to
+enhance our model to include the social, environmental, and
+economic impacts of SAP software and services when they are used
+by our customers. In 2017, we conducted a research project to
+identify and quantify examples of relevant external (societal)
+impacts along SAP's value chain. For example, we estimate that our
+purchases of goods and services from suppliers generated
+employment for approximately 120,000 fulltime equivalents (FTEs)
+in 2017 in these suppliers. Furthermore, total carbon emissions
+from our supply chain were approximated to cumulated annual
+societal costs of approximately €160 million in 2017.
+214
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+Connectivity of Financial and Non-Financial Indicators
+Profit (or loss) is the total of income less expenses; if revenue as
+the main part of total income grows at a higher rate than costs, it
+will lead to greater profit.
+Employee Engagement > Employee Retention
+Carbon Emissions > Employee Engagement
+According to the Global Workforce Study (2012), the "chances to
+advance the career" is the second-most important driver of
+employee retention. 10) By promoting and thus growing from within,
+SAP creates career opportunities for our employees. In turn, it is our
+expectation that this opportunity leads to an increase in employee
+retention.
+Employee Engagement > Employee Retention
+From 2014 to 2018, we used real data from SAP to analyze and
+prove the financial impact of employee engagement. We were able
+to prove a significant positive correlation between employee
+engagement and employee retention.
+Employee Retention > Growth
+Meifert (2005) stated a clear relationship between employee
+retention and a company's revenue and margin.11)
+Employee Retention > Customer Loyalty
+Koys (2001) has found evidence that employee turnover has a
+negative impact on customer satisfaction. 12) We believe this effect
+stems from the fact that experienced employees work more
+efficiently, have better product knowledge, and can build trusting
+relationships with colleagues and customers, so therefore have the
+ability to better serve customers' needs.
+Capability Building > Employee Retention
+Employee Retention > Profitability
+Women in Management
+"Women in Management" means the share of women in
+management positions (managing teams, managing managers,
+board members) as compared to the total number of managers.
+Capability Building > Women in Management
+Like many of our IT industry peers, SAP has less women than
+men in senior positions. Given our significant pool of talent, we
+assume that internal promotions will increase the percentage of
+women in management positions.
+Women in Management > BHCI
+We believe that a balance of men and women in management
+helps create a more balanced working environment, one in which
+diversity is valued and people feel free to express their individual
+styles. It is our expectation that such an environment will positively
+affect our BHCI.
+216
+We used real data from SAP to analyze and prove the financial
+impact of employee retention. We showed what a change by 1pp of
+employee retention would mean for SAP's operating profit.
+From 2014 to 2018, we used real data from SAP to analyze and
+prove the financial impact of employee engagement. We were able
+to prove a significant positive correlation between employee
+engagement and employee retention.
+Employee retention is the ratio of the average headcount
+(expressed in full-time equivalents), minus employee-initiated
+terminations (turnover), divided by the average headcount, taking
+into account the past 12 months.
+Additional
+Information
+We believe that lowering SAP's carbon emissions can have a
+positive impact on employee engagement because loyalty should
+rise as employees see their company act responsibly towards the
+environment. However, because lowering emissions also brings
+certain restrictions, such as on business travel, it may also have a
+negative impact on employee engagement.
+Employee Engagement > Carbon Emissions
+We believe that engaged employees are more likely to want to
+help SAP achieve our own target in lowering carbon emissions. Yet
+another possible outcome is that a higher level of employee
+engagement may lead to more business activity requiring travel,
+and therefore could lead to an increase in carbon emissions.
+Employee Engagement > Growth
+From 2014 to 2018, we used real data from SAP to analyze and
+prove the financial impact of employee engagement. We were able
+to prove a significant positive correlation between employee
+engagement and revenue.
+Growth > Employee Engagement
+Employee Retention
+We believe that higher revenue has a positive impact on a
+company's work environment, thereby increasing employee pride
+and loyalty. This is also stated in a study of Harter et al. (2010),
+215
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Connectivity of Financial and Non-Financial Indicators
+Profitability
+Studies show that companies with a high level of gender
+diversity outperform companies with an average level in terms of
+return on equity (11.4% versus an average 10.3%); operating results
+(EBIT 11.1% versus 5.8%); and stock price increases (64% versus
+47% over the period 2005-2007) (McKinsey, 2007). 28) It is
+therefore likely that having a higher share of women in management
+positions will result in higher profit for SAP.
+BHCI > Profitability
+7) Johnson, Sheena et al. (2018): WELL-BEING: Productivity and Happiness at
+Work 2. ed. 2018., Cham: Springer International Publishing Imprint: Palgrave
+Macmillan.
+6) Johnson, S.S. (2017): The Art of Health Promotion ideas for improving health
+outcomes. American Journal of Health Promotion, 31(2), pp. 163-164.
+2016].
+matter/WomenMatter%202013%20Report%20(8).ashx [Accessed December 16,
+5) McKinsey & Company (2013): Women Matter. Gender diversity in top
+management: Moving corporate culture, moving boundaries. Available at:
+http://www.mckinsey.com/-/media/McKinsey/Global%20Themes/Women%20
+4) Harter, J., Schmidt, F., Asplund, J., Kilham, E., Agrawal, S. (2010): Causal Impact
+of Employee Work Perceptions on the Bottom Line of Organizations. In:
+Perspectives on Psychological Science, Vol. 5(4), pp. 378–389.
+3) Johnson, Sheena et al. (2018): WELL-BEING: Productivity and Happiness at
+Work 2. ed. 2018., Cham: Springer International Publishing Imprint: Palgrave
+Macmillan.
+2) Mueller, K., Hattrup, K., Spiess, S., Lin-Hi, N. (2012): The effects of corporate
+social responsibility on employees' affective commitment: A cross-cultural
+investigation. In: Journal of Applied Psychology, Vol. 97(6), pp. 1186-1200.
+1) Bedarkar, M., Pandita, D. (2014): A Study on the drivers of employee
+engagement impacting employee performance. In: Procedia - Social and
+Behavioral Sciences, Vol. 133, pp. 106-115.
+The emissions caused by SAP's energy consumption add
+directly to the corporate carbon emissions if they are not reduced
+through offsets or - for electricity consumption - renewable energy
+certificates (RECs).
+Total Energy Consumed > Carbon Emissions
+We have found that reduced energy consumption is strongly
+correlated with a reduction in costs. The cost avoidance thus
+achieved has a positive impact on our profit.
+Total Energy Consumed > Profitability
+Total energy consumed is the sum of all energy consumed
+through SAP's own operations, including energy from renewable
+sources.
+Total Energy Consumed
+We are using real data from SAP to analyze and prove the
+financial impact of the carbon emissions, as detailed in the Energy
+and Emissions section.
+Carbon Emissions > Profitability
+The emissions caused by SAP's energy consumption add
+directly to the corporate carbon emissions if they are not reduced
+through offsets or - for electricity consumption - renewable energy
+certificates (RECs).
+Total Energy Consumed > Carbon Emissions
+We believe that lowering SAP's carbon emissions has a positive
+effect on our reputation, thereby enhancing SAP's standing with our
+customers.
+by PwC (2013) confirming the existence of a positive correlation
+between a company's environmental performance and financial
+performance. 34) On the other hand, where additional travel is
+conducted to generate additional business, the resulting increase in
+SAP's carbon emissions could have positive impact on growth.
+Carbon Emissions > Customer Loyalty
+Lowering SAP's carbon emissions could have a positive impact
+on SAP's revenue because customers increasingly ask their
+suppliers to act sustainably. This reasoning is supported by a study
+Carbon Emissions > Growth
+We believe that engaged employees are likely to want to help
+SAP achieve our target in lowering carbon emissions. Yet another
+possible outcome is that a higher level of employee engagement
+may lead to more business activity requiring travel, and therefore
+could lead to an increase in carbon emissions.
+Employee Engagement > Carbon Emissions
+We believe that lowering SAP's carbon emissions can have a
+positive impact on employee engagement because loyalty should
+rise as employees see their company act responsibly towards the
+environment. However, because lowering emissions also brings
+certain restrictions, such as on business travel, it may also have a
+negative impact on employee engagement.
+Many of SAP's carbon emissions are caused by business travel
+and commuting, which we believe can have both negative and
+positive impacts on employee health. Some people may experience
+greater stress from more travel because they have less time to
+spend at home, suffer from jetlag, or lose valuable working time;
+others may enjoy travel because it enables them to experience
+other places and cultures as well as meet new people. Studies show
+that business travel potentially increases stress and poses a threat
+to employees' mental and physical health, see for example the
+study by Rundle, Revenson & Friedman (2017).33)
+Carbon Emissions > Employee Engagement
+8) Rundle, A. G., Revenson T. A. & Friedman, M. (2017): Business travel and
+behavioral and mental health. Journal of Occupational and Environmental
+Medicine, 1 DOI: 10.1097/JOM.0000000000001262.
+9) Reed, Goolsby & Johnston (2016): Listening in and out: Listening to customers
+and employees to strengthen an integrated market-oriented system. Journal of
+Business Research, 69(9), pp. 3591-3599.
+Connectivity of Financial and Non-Financial Indicators
+219
+21) Bedarkar, M., Pandita, D. (2014): A Study on the drivers of employee
+engagement impacting employee performance. In: Procedia - Social and
+Behavioral Sciences, Vol. 133, pp. 106-115.
+Results/2012/07/Towers-Watson-Global-Workforce-Study-2012-
+Deutschlandergebnisse [Accessed December 16, 2016].
+20) Towers Watson (2012): Global Workforce Study. Geld, Karriere, Sicherheit?
+Was Mitarbeiter motiviert und in ihrem Unternehmen hält. Available at:
+https://www.towerswatson.com/de-AT/Insights/IC-Types/Survey-Research-
+19) Muritala, T. (2013): Does CSR Improve Organization Financial Performance?
+Evidence from Nigeria Using Triangulation Analysis. In: Economics and Applied
+Informatics, Issue 3, pp. 41-46.
+18) Mueller, K., Hattrup, K., Spiess, S., Lin-Hi, N. (2012): The effects of corporate
+social responsibility on employees' affective commitment: A cross-cultural
+investigation. In: Journal of Applied Psychology, Vol. 97(6), pp. 1186-1200.
+17) Johnson, S.S. (2017): The Art of Health Promotion ideas for improving health
+outcomes. American Journal of Health Promotion, 31(2), pp. 163-164.
+Women_matter_oct2007_english.ashx [Accessed December 16, 2016].
+ation/Our%20Insights/Women%20matter/
+http://www.mckinsey.com/-/media/McKinsey/Business%20Functions/Organiz
+16) McKinsey & Company (2007): Women Matter. Gender diversity, a corporate
+performance driver. Available at:
+[Accessed December 16, 2016].
+15) Catalyst Information Center (2013): Why Diversity Matters. Available at:
+http://www.catalyst.org/system/files/why_diversity_matters_catalyst_0.pdf
+[Accessed December 16, 2016].
+Carbon Emissions > BHCI
+14) Catalyst Information Center (2013): Why Diversity Matters. Available at:
+http://www.catalyst.org/system/files/why_diversity_matters_catalyst_0.pdf
+matter/WomenMatter%202013%20Report%20(8).ashx [Accessed December 16,
+http://www.mckinsey.com/-/media/McKinsey/Global%20Themes/Women%20
+13) McKinsey & Company (2013): Women Matter. Gender diversity in top
+management: Moving corporate culture, moving boundaries. Available at:
+12) Koys, D. (2001): The effects of employee satisfaction, organizational citizenship
+behavior, and turnover on organizational effectiveness: A unit-level, longitudinal
+study. In: Personnel Psychology, Vol. 54(1), pp. 101-114.
+11) Meifert, M. (2005): Mitarbeiterbindung: eine empirische Analyse betrieblicher
+Weiterbildner in deutschen Großunternehmen. München and Mering: Hampp
+Verlag.
+Results/2012/07/Towers-Watson-Global-Workforce-Study-2012-
+Deutschlandergebnisse [Accessed December 16, 2016].
+10) Towers Watson (2012): Global Workforce Study. Geld, Karriere, Sicherheit?
+Was Mitarbeiter motiviert und in ihrem Unternehmen hält. Available at:
+https://www.towerswatson.com/de-AT/Insights/IC-Types/Survey-Research-
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+2016].
+Profitability is one of our strategic objectives. We measure it
+through operating profit. Profit (or loss) is the total of income less
+expenses.
+Our carbon emissions are the sum of all greenhouse gas
+emissions measured and reported, including renewable energy and
+third-party reductions, for example, offsets.
+From 2014 to 2018, we have been using real data from SAP to
+analyze and prove the financial impact of the BHCI. We have been
+able to prove a significant positive correlation between the BHCI
+and customer loyalty. Recent studies, for example by Reed, Goolsby
+& Johnston (2016) also suggest this correlation. 32)
+wissen.de/pwc/de/shop/publikationen/Low+Carbon+Economy+Index+2013/?ca
+rd=12994 [Accessed December 16, 2016].
+220
+Connectivity of Financial and Non-Financial Indicators
+From 2014 to 2018, we used real data from SAP to analyze and
+prove the financial impact of the BHCI. We were able to prove a
+significant positive correlation between the BHCI and revenue.
+Koys (2001) has found evidence that employee turnover has a
+negative impact on customer satisfaction. 30) We believe this effect
+stems from the fact that experienced employees work more
+efficiently, have better product knowledge, and can build trusting
+relationships with colleagues and customers, so therefore have the
+ability to better serve customers' needs.
+Diversity programs - including those focused on the promotion
+of women to management positions - have a direct and positive
+impact on customer satisfaction (Catalyst, 2013).29)
+Employee Retention > Customer Loyalty
+Women in Management > Customer Loyalty
+Customer loyalty is measured with the Net Promoter Score:
+Percentage of customers that are likely to recommend SAP to
+friends or colleagues minus the percentage of customers that are
+unlikely to do so.
+Customer Loyalty
+We are using real data from SAP to analyze and prove the
+financial impact of our carbon emissions, as detailed in the Energy
+and Emissions section.
+Carbon Emissions > Profitability
+We believe that positive experiences among our customers can
+significantly increase business with existing customers, as well as
+help attract new customers. Both results can lower the cost of
+sales, thereby increasing our profit.
+Customer Loyalty > Profitability
+Profit (or loss) is the total of income less expenses; if revenue as
+the main part of total income grows at a higher rate than costs, it
+will lead to greater profit.
+Growth > Profitability
+We have found that reduced energy consumption is strongly
+correlated with a reduction in costs. Therefore, any cost avoidance
+achieved has a positive impact on our profit.
+Total Energy Consumed > Profitability
+We used real data from SAP to analyze and prove the financial
+impact of employee retention. We showed what a change by 1pp of
+employee retention would mean for SAP's operating profit.
+It is a common practice for companies to invest a certain
+percentage of their annual profits in programs and activities that
+create a positive social impact. We believe that a higher profit is
+therefore likely to lead SAP to make greater social investments.
+Employee Retention > Profitability
+Profitability > Social Investment
+23) Catalyst Information Center (2013): Why Diversity Matters. Available at:
+http://www.catalyst.org/system/files/why_diversity_matters_catalyst_0.pdf
+Women in Management > Profitability
+In our view, high profits, as great business news, can raise
+employee morale, encourage identification with our purpose, and
+help increase employee engagement. On the other hand, we believe
+that a high profit expectation can also have a negative impact on
+employee engagement. If cost savings and budget cuts are
+implemented to reach an ambitious profit target, employees might
+feel constrained and dissatisfied.
+Profitability > Employee Engagement
+From 2014 to 2018, we used real data from SAP to analyze and
+prove the financial impact of employee engagement. We showed
+what a change by 1pp of employee engagement would mean for
+SAP's operating profit.
+Employee Engagement > Profitability
+From 2014 to 2018, we used real data from SAP to analyze and
+prove the financial impact of the BHCI. We showed what a change
+by 1pp of the BHCI would mean for SAP's operating profit.
+34) PwC (2013): Busting the carbon budget - Low Carbon Economy Index 2013.
+Available at: https://www.pwc-
+33) Rundle, A. G., Revenson T. A. & Friedman, M. (2017): Business travel and
+behavioral and mental health. Journal of Occupational and Environmental
+Medicine, 1 DOI: 10.1097/JOM.0000000000001262.
+32) Reed, Goolsby & Johnston (2016): Listening in and out: Listening to customers
+and employees to strengthen an integrated market-oriented system. Journal of
+Business Research, 69(9), pp. 3591-3599.
+31) Reichheld, F. (2003): The One Number You Need to Grow. In: Harvard Business
+Review, Vol. 81(12), pp. 46-54.
+BHCI > Customer Loyalty
+We believe that positive experiences among our customers can
+significantly increase business with existing customers, as well as
+help attract new customers. Both results can lower the cost of
+sales, thereby increasing our profit.
+Customer Loyalty > Profitability
+Reichheld (2003) found a strong correlation between
+companies' Customer NPS results and their revenue growth rates. 31)
+We support this view, as we believe that loyal SAP customers are
+likely to recommend SAP products to other companies, which is
+likely to result in increased sales and stronger revenue.
+Customer Loyalty > Growth
+We believe that lowering SAP's carbon emissions has a positive
+reputational effect, thereby enhancing SAP's standing with its
+customers.
+Carbon Emissions > Customer Loyalty
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+Carbon Emissions
+Connectivity of Financial and Non-Financial Indicators
+[Accessed December 16, 2016].
+24) Meifert, M. (2005): Mitarbeiterbindung: eine empirische Analyse betrieblicher
+Weiterbildner in deutschen Großunternehmen. München and Mering: Hampp
+Verlag.
+25) PwC (2013): Busting the carbon budget - Low Carbon Economy Index 2013.
+Available at: https://www.pwc-
+wissen.de/pwc/de/shop/publikationen/Low+Carbon+Economy+Index+2013/?ca
+rd=12994 [Accessed December 16, 2016].
+26) Harter, J., Schmidt, F., Asplund, J., Kilham, E., Agrawal, S. (2010): Causal
+Impact of Employee Work Perceptions on the Bottom Line of Organizations. In:
+Perspectives on Psychological Science, Vol. 5(4), pp. 378–389.
+27) Reichheld, F. (2003): The One Number You Need to Grow. In: Harvard Business
+Review, Vol. 81(12), pp. 46-54.
+28) McKinsey & Company (2007): Women Matter. Gender diversity, a corporate
+performance driver. Available at:
+http://www.mckinsey.com/-/media/McKinsey/Business%20Functions/Organiz
+ation/Our%20Insights/Women%20matter/
+Women_matter_oct2007_english.ashx [Accessed December 16, 2016].
+29) Catalyst Information Center (2013): Why Diversity Matters. Available at:
+http://www.catalyst.org/system/files/why_diversity_matters_catalyst_0.pdf
+[Accessed December 16, 2016].
+30) Koys, D. (2001): The effects of employee satisfaction, organizational
+citizenship behavior, and turnover on organizational effectiveness: A unit-level,
+longitudinal study. In: Personnel Psychology, Vol. 54(1), pp. 101–114.
+218
+From 2014 to 2018, we used real data from SAP to analyze and
+prove the financial impact of the BHCI. We were able to prove a
+significant positive correlation between the BHCI and employee
+engagement. The BHCI positively influences the Leadership Trust
+Index, which positively influences the Employee Engagement Index;
+all correlations are significant. This hypothesis was also confirmed
+by several studies, for example by Johnson, Sheena et al. (2018).")
+BHCI > Growth
+217
+Social Investment > BHCI
+About This Further Information on Economic, Environmental, and Social Performance
+Connectivity of Financial and Non-Financial Indicators..
+Materiality
+Stakeholder Engagement..
+Sustainability Management and Policies
+Our Contribution to the UN Sustainable Development Goals
+Human Rights and Labor Standards
+Sustainable Procurement
+Waste and Water.
+Public Policy
+Memberships
+Further Information on Economic,
+Environmental, and Social Performance
+Non-Financial Notes: Social Performance
+GRI Index and UN Global Compact Communication on Progress
+Task Force on Climate-Related Financial Disclosure (TCFD)
+Management's Acknowledgement of the SAP Integrated Report 2019.
+Assurance Report of the Independent Auditor regarding Sustainability Information...
+.213
+214
+.221
+223
+224
+226
+228
+Non-Financial Notes: Environmental Performance.
+.230
+Additional
+Information
+Consolidated Financial
+Statements IFRS
+We believe that by supporting our employees in engaging in
+activities with a positive social impact, such as skills-based
+volunteering, we are enhancing the meaning they find in work. This
+sense of purpose can help create a richer and more rewarding work
+environment that reduces stress and promotes satisfaction and
+well-being. Additionally, volunteering can increase overall employee
+health, which is shown in a study by S. S. Johnson (2017).6)
+BHCI > Employee Engagement
+which states that improving financial performance appears to
+increase general satisfaction and some specific work perceptions. 4)
+Business Health Culture Index (BHCI)
+Our Business Health Culture Index assesses the health of both
+our organizational culture and our employees.
+Women in Management > BHCI
+We believe that a balance of men and women in management
+roles helps create a more balanced working environment, one in
+which diversity is valued and people feel free to express their
+individual styles. It is our expectation that such an environment will
+positively affect our BHCI.
+BHCI > Women in Management
+McKinsey (2013) found that different elements of the BHCI, such
+as flexible working hours, the ability to work from home, and career
+flexibility, can make it easier for employees to balance work and
+family life. 5) This leads us to conclude that the higher our BHCI, the
+more attractive SAP becomes to women who are also seeking
+management positions.
+To Our
+Combined Group
+Stakeholders
+Management Report
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Additional
+Information
+Management's Annual Report on
+Internal Control over
+Financial Reporting in the Consolidated
+Financial Statements
+U.S. law requires that management submit a report on the
+effectiveness of internal control over financial reporting in the
+consolidated financial statements. For 2019, that report is as follows:
+The management of SAP is responsible for establishing and
+maintaining adequate internal control over financial reporting as
+such term is defined in Rules 13a-15(f) and 15d-15(f) under the
+U.S. Securities Exchange Act of 1934. SAP's internal control over
+financial reporting is a process designed under the supervision of
+SAP's Co-CEOs and CFO to provide reasonable assurance regarding
+the reliability of financial reporting and the preparation of financial
+statements for external reporting purposes in accordance with
+International Financial Reporting Standards as issued by the
+International Accounting Standards Board.
+SAP's management assessed the effectiveness of the Company's
+internal control over financial reporting as at December 31, 2019. In
+making this assessment, it used the criteria set forth by the
+Committee of Sponsoring Organizations of the Treadway
+Commission in Internal Control - Integrated Framework (2013).
+Based on the assessment under these criteria, SAP management
+has concluded that, as at December 31, 2019, the Company's
+internal control over financial reporting was effective.
+KPMG AG Wirtschaftsprüfungsgesellschaft, our independent
+registered public accounting firm, has issued its attestation report
+on the effectiveness of SAP's internal control over financial
+reporting. It is included in the independent auditor's report on the
+Consolidated Financial Statements as at December 31, 2019.
+Management's Annual Report on Internal Control over Financial Reporting in the Consolidated Financial Statements
+211
+To Our
+Stakeholders
+Combined Group
+Management Report
+Further Information on Economic,
+Environmental, and Social Performance
+232
+At SAP, we put a monetary value on how selected non-financial
+indicators have impacted our operating profit. For example, how
+well we engage with our employees and inspire them to commit to
+our purpose and strategy, support a healthy business culture, and
+succeed in reducing our carbon emissions.
+235
+BHCI
+Employee
+Engagement
+Employee
+Retention
+Women in
+Management
+Growth
+Profitability
+Customer
+Loyalty
+Social
+Investment
+Capability
+Building
+Carbon
+Emissions
+Total Energy
+Consumed
+BHCI > Profitability
+Figure 1: Connectivity Between Social, Environmental, and Economic
+Performance. SAP's main KPIs are marked in orange.
+By doing so, we established more than just a correlation between
+non-financial and financial indicators. It also reveals why and how
+something such as employee engagement ultimately leads to gains
+or losses in business performance. We believe that such insights are
+a prerequisite for fully modeling the financial impact of non-
+financial performance.
+Magnitude of Financial Impact
+From 2014 to 2018, SAP used techniques such as linear
+regression analysis to document the financial impact of four non-
+financial indicators: Business Health Culture Index, Employee
+Engagement Index, Employee Retention, and Carbon Emissions. In
+the past, we assessed each indicator to see what a change of one
+percentage point (pp) (or 1% for carbon emissions) would mean for
+our operating profit. The results for 2018, for example, showed that
+a 1pp change in the Business Health Culture Index affected our
+operating profit by €90 million to €100 million (non-IFRS).
+234
+Having illustrated this impact with concrete numbers, we are
+now turning our focus to a broader perspective of impact (for
+example, see Our Contribution to the UN Sustainable Development
+Goals and The Next Logical Step). We still strongly believe in the
+fundamental conclusions of the analysis, but do not see a need to
+continuously update specific monetary values on the well-
+established connections, since the values have not been subject to
+any large fluctuations over the years. Instead, they have increased
+steadily, as expected.
+What We Have Achieved: Promoting
+Sustainability Measures as a Way to
+Boost Financial Performance
+Documenting the financial impact of non-financial indicators has
+helped us move closer to achieving our sustainability goals. Rather
+than simply stating the business case for social or environmental
+change, we also have the numbers to back it up.
+Our findings have helped us shift the conversation for managers,
+investors, employees, and other key stakeholders, and firmly
+establish non-financial indicators as playing a crucial role in our
+financial success. As a result, engaging employees or reducing our
+emissions is no longer seen as a nice-to-have, but rather as
+essential to carrying out a successful business strategy.
+By embedding this approach into our decision-making and
+quarterly business reviews, our sustainability performance steers
+our business alongside factors such as revenue and profit. Our goal
+is for all senior managers and experts at SAP to recognize - and be
+held accountable for - the fact that improving such measures as
+employee engagement also boosts financial performance.
+Embedding Non-Financial Performance
+Indicators into Our Solutions
+To achieve this, we created cause-and-effect chains that show
+how specific actions we take at SAP lead to shifts in behavior. This
+behavior impacts on our business and has a financial consequence.
+Where We Come From: Putting a Value on
+Non-Financial Performance Indicators
+From 2014 to 2018, we used real data from SAP to analyze and
+prove the financial impact of the BHCI. We showed what a change
+by 1pp of the BHCI would mean for SAP's operating profit.
+Connectivity of Financial and Non-
+Financial Indicators
+Additional
+Information
+249
+248
+247
+242
+.237
+236
+212
+Further Information on Economic, Environmental, and Social Performance
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+To Our
+Stakeholders
+Additional
+Information
+About This Further Information on
+Economic, Environmental, and Social
+Performance
+Further Information on Economic,
+Environmental, and Social Performance
+The social and environmental data and information included in
+the SAP Integrated Report has been prepared in accordance with
+the GRI Standards: Core option. This option indicates that a report
+contains the minimum information needed to understand the
+nature of the organization, its material topics and related impacts,
+and how these are managed.
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+The Further Information on Economic, Environmental, and Social
+Performance includes information that is required to comply with
+the GRI Standards. In addition, we present our Connectivity model
+that shows the interrelations between social, environmental, and
+financial performance. We also report on our contribution towards
+the United Nations Sustainable Development Goals (SDGs).
+To Our
+Stakeholders
+Further Information on Economic,
+Environmental, and Social Performance
+213
+About This Further Information on Economic, Environmental, and Social Performance
+Collective bargaining agreements with unions are only made in
+countries where legally required. Overall, about 52% of our
+employees are represented by works councils, an independent
+trade union, or are covered by collective bargaining agreements.
+These employee representation bodies consist of elected union
+members and non-union members, and are consulted by SAP
+management on topics that define the work environment and work
+processes. These topics include HR initiatives, talent development,
+payment and benefits, equal opportunities, changes in work or IT
+processes, privacy, and health and safety protection.
+Our Supervisory Board comprises 50% employee
+representation, and we strive for constructive labor relations across
+the world, working within each country's requirements. We currently
+have works councils in place in Belgium, France, Germany, Israel,
+the Netherlands, Slovakia, Slovenia, and Spain. In Italy, there is a
+union representative in place. In the United Kingdom and Ireland,
+employee consultation forums represent the employees' interests.
+In Romania and Sweden, union stewards serve this purpose. The
+majority of the SAP employees in Canada is represented by a Joint
+Health & Safety Committee. Furthermore, employee
+representatives are in place at SAP Japan Co. Limited. Employees of
+SAP Austria decided to be represented by an ombudsteam. In the
+Czech Republic, labor unions have been established in all SAP
+entities. In China, a trade union for employees employed under the
+SAP China Beijing branch has been formed. At SAP Korea, a labor
+union has been established. In addition, we have an SE Works
+Council Europe that represents SAP employees in the 28 countries
+of the European Economic Area.
+We survey employees annually. For the results of our latest
+employee survey and action items resulting from it, see the
+Employees and Social Investments section.
+Employees
+Financial Analysts and Investors
+In addition, the Executive Board answers employees' questions
+in quarterly all-hands meetings. In regular coffee corner sessions,
+senior executives explain our strategy to employees and answer
+their questions directly.
+For more information about our dialog with investors, see the
+Investor Relations section.
+Our dialog with NGOs, NPOs, and academic institutions helps us
+understand how we can address today's most pressing issues with
+our solutions and what is expected from us as a corporation. For
+more information about how we engage with NGOs and academia,
+see the Employees and Social Investments section.
+For more information about our dialog with governments, see
+the Public Policy section.
+Industry Analysts
+Our Analyst Relations team, the Executive Board, and executives
+have strong relations and work strategically with IT analysts on a
+frequent basis. We engage with these analysts on key SAP topics
+including Intelligent Enterprise in the experience economy,
+SAP HANA, ERP and SAP S/4HANA, CRM and SAP C/4HANA on
+SAP Cloud Platform, SAP Leonardo, industry solutions, cloud
+solutions, ecosystem, and services. The latest industry-positioning
+material integrates economic, social, and environmental impact
+creation.
+Non-Governmental Organizations
+(NGOs), Non-Profit Organizations
+(NPOs), and Academia
+For more information about our customer engagement
+programs, see the Customers section.
+Partners
+With more than 20,000 partners around the world, the SAP
+ecosystem is vital to our success. We take a multifaceted approach
+to partner engagement that begins with the dedicated, interactive
+partner portal, SAPPartnerEdge.com. Partners receive a weekly,
+customized newsletter with the latest announcements, training
+offers, and thought leadership information relevant to their specific
+partnership type. Additionally, partner-dedicated focus groups and
+events such as the SAP Global Partner Summit are held throughout
+the year, around the globe, to educate partners and further gauge
+their feedback on how SAP can continuously improve. For more
+information about our ecosystem, see the section Products,
+Research & Development, and Services.
+Sustainability Advisory Panel
+Our sustainability advisory panel consists of expert
+representatives from our customers, investors, partners, NGOs, and
+academia. In 2019, members of the panel attended our external
+stakeholder dialogue event to celebrate the 10th anniversary of
+SAP's sustainability journey. Together with other speakers and
+participants, they discussed with us, for example, how to better
+embed sustainability into our core business.
+Stakeholder Engagement
+Governments
+Customers
+To Our
+Stakeholders
+For SAP, stakeholder engagement and collaboration are deeply
+embedded into our process of innovation and the development of
+our products and services. Before we can design a new solution, we
+must first understand the issue we are addressing. For this reason,
+design thinking and co-innovation are essential.
+The climate and energy category, which looks at the way in
+which SAP reduces emissions and energy consumption in our
+own operations, had the lowest response rates and scores.
+Despite these results, we acknowledge that societal awareness
+and expectations related to climate change have increased since
+2016. This is why we have strengthened our environmental
+-
+targets (climate-neutral by 2025; science-based target) in recent
+years and will also make our carbon impact relevant for
+Executive Board compensation starting 2020. For more
+information, see the Energy and Emissions and Performance
+Management System sections.
+In evaluating our impact on society through the SAP portfolio,
+our stakeholders identified seven SDGs as material:
+SDG 9 Industry, innovation, and infrastructure
+223
+SDG 3 Good health and well-being
+•
+SDG 8 Decent work and economic growth
+"
+SDG 13 Climate action
+"
+SDG 17 Global partnerships
+"
+■
+SDG 12 Responsible consumption and production
+SDG 4 Quality education
+222
+Materiality
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+Stakeholder Engagement
+To be able to innovate, we regularly engage with the stakeholder
+groups described below, including our sustainability advisory panel.
+We selected these groups as they are critical to our value creation.
+■
+For information about our management approach on human and
+digital rights, see the Security, Data Protection, and Privacy section
+and the Human Rights and Labor Standards section.
+Combined Group
+Management Report
+Innovation and Customer Loyalty
+Every Executive Board member is responsible for innovation in
+their area. For more information about our software and services
+innovation efforts, see the Products, Research & Development, and
+Services section.
+224
+Sustainability Management and Policies
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+Our global CSR policy offers all SAP employees the opportunity
+to volunteer for up to eight working hours each year at a CSR event.
+For more information about our CSR governance, events, and
+activities, see the Employees and Social Investments section.
+For more information about customer loyalty and our efforts to
+improve the customer experience, see the Customers section.
+Employee engagement is essential, as the ideas and
+commitment of our staff help drive change throughout SAP. We run
+a number of programs to help employees understand how
+sustainability is engrained in our purpose, and how they can
+contribute.
+In 2019, we ran a campaign to celebrate the 10th anniversary of
+SAP's sustainability journey, leveraging the occasion to review
+achievements and lessons learned while inviting employees and
+external stakeholders alike to join the dialogue about shaping our
+roadmap for the next decade. Our campaign encompassed live and
+virtual events, mails, blogs, or polls.
+SAP continues to include sustainability in its onboarding training
+for new hires. Furthermore, employees can take openSAP online
+courses on sustainability including the latest one on "Sustainability:
+Learning from Leading Companies," which are also available to the
+general public.
+We have encouraged employee engagement through ongoing
+initiatives such as an online SDG quiz or the "What's your goal?"
+challenge, with SAP staff submitting stories about how they
+contribute to the SDGs. Furthermore, programs such as the "Bike to
+Work" and "Fit@SAP" schemes connect health and environmental
+goals by linking fitness activities with financial contributions to
+organizations such as Plant-for-the-Planet, which educates people
+about climate change.
+Focusing on Transparency and Building
+Awareness
+Change starts with transparency and awareness. To gain a
+holistic overview of our performance, our Executive Board and
+Supervisory Board have access to our SAP Digital Boardroom
+solution that includes key financial and non-financial data such as
+human capital indicators.
+In addition, employees can access a dashboard detailing the
+environmental and social performance for our company as a whole,
+single sites, or departments. For example, data on employee
+retention and women in management helps create transparency
+with regard to the social performance of our company. Our
+environmental performance is shown through greenhouse gas
+emissions. A personalized app also provides employees with
+statistics about their personal environmental and financial impact
+through driving a company car.
+We measure the success of our initiatives through our annual
+employee engagement survey, under the theme "#Unfiltered." In
+2019, 94% of our employees agreed with the statement "It is
+important for SAP to pursue sustainability." This was slightly up
+from 93% in 2018 (2009: 77%). Furthermore, 87% of our
+employees stated “I actively contribute to sustainability goals at
+SAP." This is up from 83% in 2018 and up from 47% in 2009 when
+we introduced the question.
+Results of the Employee Engagement Survey
+Changing Our Behavior and Culture
+To Our
+Stakeholders
+In addition, we pursue partnerships with the World Economic
+Forum (WEF), UNICEF, United Nations Technology Innovation Labs
+(UNTIL), UN Development Program, UN Women, UN Global
+Compact, and the Ellen MacArthur Foundation, as well as other
+organizations and non-governmental organizations. In this way, we
+drive ideas, innovation, execution, and adoption for solutions to
+achieve the UN's 2030 Agenda for Sustainable Development.
+When assessing our impact on society, we consider two key
+areas: Firstly, we look at the contribution we make towards the
+fulfilment of the United Nations Sustainable Development Goals
+(SDGs, also called UN Global Goals) through our software solutions;
+and secondly, we consider our efforts to make the world a better
+place through our corporate social responsibility (CSR) and other
+programs.
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+Sustainability Management and Policies
+Putting Sustainability at the Heart of Our
+Strategy
+At SAP, we believe that it is not enough to simply have a
+sustainability strategy but that, instead, our overall corporate
+strategy must itself be sustainable. Only by achieving this can we
+fulfill our purpose to help the world run better and improve people's
+lives. We therefore strive to promote sustainability across our entire
+business.
+Led by our chief sustainability officer, a dedicated team works to
+embed sustainability into our corporate strategy and drives new
+sustainability initiatives across the organization. We also aim to
+integrate measures with positive economic, social, and
+environmental impacts within our existing solutions, processes, and
+operations.
+Our CFO is the sponsor for sustainability on the Executive Board,
+and we also have at least one dedicated senior executive in charge
+of sustainability in each Board area. These individuals form our
+Sustainability Council and are responsible for embedding
+sustainability in their business practices, for example, by setting
+relevant targets and implementing related programs. The members
+of the Sustainability Council are held accountable for their
+achievements, in review meetings with the CFO and the chief
+sustainability officer that take place twice a year.
+Managing Our Response to Our Material
+and Other Reported Topics
+SAP has dedicated personnel addressing the material topics
+identified in our materiality analysis. For each topic, we look at ways
+in which we can manage our response, and how we can evaluate
+whether our approach is effective.
+Our contribution to the SDGs is a cross-company effort driven by
+experts from almost every board area. These experts are connected
+through an SDG Network to align and consolidate initiatives and
+create synergies. We illustrate examples of our existing engagement
+with customers and other activities contributing to the SDGs in our
+continuously updated Web book SAP and the UN Global Goals and
+the 2019 Run with Purpose brochure. While we are committed to
+the UN Global Goals framework as a whole, we recognize the
+importance of focusing on SDGs that have a material link to our
+own operational activities or the use of our software by customers
+(for more information see the Our Contribution to the UN
+Sustainable Development Goals section). For example, goal 12
+"responsible consumption and production," is a priority based on
+our ambition to drive resource productivity with an aspiration to a
+zero-waste, circular economy.
+Business Conduct
+Climate and Energy
+For information about our climate and energy management
+approach, see the Energy and Emissions section.
+Financial Performance
+The Executive Board retains ultimate responsibility for revenue
+growth, profitability, and the financial stability of SAP. For more
+information, see the Corporate Governance Report and the Report
+by the Supervisory Board.
+Human and Digital Rights
+The innovation and customer loyalty, business conduct, and
+human capital categories received the highest scores and
+response rates.
+Human Capital
+Our key policies include a global health and safety management
+policy and a diversity and inclusion policy. The global health and
+safety management policy aims to nurture our employees' long-
+term employability, engagement, and creativity by integrating
+health, occupational safety, well-being, and stress management
+topics. The diversity and inclusion policy provides a framework for
+an inclusive working environment.
+For more information about our human capital management
+approach, see the Employees and Social Investments section.
+Impact on Society
+For information about our compliance management approach,
+see the Business Conduct section.
+Key points of our materiality assessment results include:
+Stakeholders saw financial performance as a mandatory part of
+reporting. As a result, in several interviews, its materiality was
+not expressly discussed. However, this category received high
+individual scores.
+SAP Plastics Challenge
+Additional
+Information
+Innovation and
+customer loyalty
+Human and
+digital rights
+Business
+conduct
+Human capital
+Next, we conducted semi-structured interviews with selected
+stakeholders to validate the shortlisted topics. We asked
+stakeholders to rate topics on a scale from 0 to 5 (where O is not
+important at all and 5 is very important) based on the following
+questions for the first six categories:
+Human Rights and Labor Standards
+228
+We expect all our business partners to respect human rights and
+to avoid complicity in human rights abuses. Our codes of conduct
+for suppliers and partners require them to uphold labor rights and
+to provide a safe and healthy work environment for all employees. In
+addition, we carry out due diligence regularly to assess their human
+rights performance.
+Maintaining High Standards Across Our
+Supply Chain
+Our global ombudsperson also receives employee complaints
+and mediates fair settlements. The ombudsperson also helps the
+Executive Board analyze HR-related complaints and consider ways
+to address potential issues before they occur.
+Impact on
+society
+We encourage all employees, including vulnerable groups such
+as temporary external staff, who feel they are subjected to conduct
+that violates our antidiscrimination policies to report it. Employees
+can reach out confidentially to their managers, HR officers,
+compliance officers, or colleagues who are trained to be part of our
+internal mediation pool. In addition, since 2019 every affected
+person can now use an e-mail inbox as well as a Compliance Hotline
+to report human rights violations to SAP globally.
+Respecting the Rights of Our Employees
+This year, we also used our own SAP Qualtrics solution during
+the audits to survey as many local employees as possible. This way
+we get a more complete picture of the local working conditions.
+To assess our human rights measures, we consider external
+benchmarks, performance ratings, audit results, and stakeholder
+feedback. In addition, since 2012, we have conducted regular
+internal audits to check internal compliance with our policies and
+verify that our subsidiaries adhere to our human rights standards.
+In 2019, we conducted labor audits in Mexico and Colombia, in
+which we reviewed labor conditions, wages and hours, health and
+safety, the environment, management system, and business
+practices. While we did not encounter any labor rights abuses, the
+audits revealed inadequate emergency health processes as well as
+security concerns in Colombia, and lack of sufficient HR process
+preparedness to fulfill upcoming Mexican labor laws. We took steps
+to address these shortcomings by initiating a change in office
+locations and creating a management plan to address new
+regulations.
+Enforcing Our Standards
+To understand how effective our human rights due diligence is,
+grievance mechanisms must be accessible and simple. Therefore,
+we reviewed our grievance mechanisms to ensure that external
+groups have access.
+We have started to use the SAP Ariba Supplier Risk solution to
+continuously monitor suppliers' exposure to social, environmental,
+reputational, compliance, financial, and operational risks.
+SAP firmly believes that our software solutions should be
+designed in a way that prevents possible human rights violations. In
+2019, we started a pilot project with our product development to
+analyze the status quo and suggest possible changes.
+SAP undertook a human rights risk and capacity assessment in
+2017 to analyze processes and ongoing due diligence activity. With
+help from an external consulting company, we reviewed and
+mapped SAP documents against best-practice human rights
+initiatives and frameworks. We conducted internal consultations
+and external stakeholder interviews to identify key strengths and
+opportunities for improvement.
+Understanding Our Strengths and
+Weaknesses
+Our commitment statement applies to all our operations and
+SAP entities globally and is reviewed every two years. It also
+contains references to our other guidelines such as health and
+safety management, and data protection and privacy. To
+communicate and enforce this commitment statement, SAP
+established a governance structure for human rights. This includes
+a steering committee and allocates responsibility for maintaining
+human rights standards across Board areas.
+We have a long-standing policy of nondiscrimination in dealings
+with all employees and provide training on human rights issues that
+are most relevant to our business. These include security, privacy,
+and antidiscrimination.
+Very High
+Importance to the business relationship with SAP
+Results
+Human Rights and Labor Standards
+When designing any software solutions, our development teams
+ensure that the product complies with standards that respect or
+support human rights. For example, accessibility is a key area of
+focus and we follow Web content accessibility guidelines such as
+the Section 508 standards to ensure inclusive design in all our
+software. The protection of personal information is another key area
+of focus for our development teams. To help ensure that our
+products enable our customers to respect digital rights, we adhere
+to robust privacy and security standards. These are defined in our
+global product development, quality, product standards, and data
+protection and privacy policies.
+SAP sees a responsibility to lead a broad social discourse on the
+handling of innovative digital technologies. Thus, SAP supports the
+efforts of the German Federal Ministry of Justice and Consumer
+Protection in developing guidelines and principles for corporate
+digital responsibility.
+conjunction with an external advisory panel. Our guiding principles
+mark a starting point for a deep and continuous engagement with
+the wider challenges of Al and are an evolving reflection on these
+discussions and the ever-changing technological landscape.
+As reflected in our human rights risk assessment, we are
+committed to respecting human rights throughout the lifecycle of
+our products - from design through development to use. We
+develop innovative solutions that help customers embed human
+rights standards into their business and supply chain strategies. For
+example, our customers can use the SAP Ariba Supplier Risk
+solution to gain the intelligence and transparency they need to
+understand human rights risks within their supply chains. They can
+then make informed procurement decisions that may improve lives.
+SAP is also looking at the ethical and societal implications of the
+latest advances in technology, such as artificial intelligence (AI), and
+is contributing to the public debate about these subjects. Our
+objective is to continue creating software that allows users to reach
+their full intellectual potential. Hence, SAP has created a set of
+guiding principles on A/that are intended to steer the development
+and deployment of our Al software. These guidelines were
+formulated through the expertise of an internal group of SAP
+executives and will continue to be evaluated and updated in
+Respecting Human Rights Throughout
+Our Product Lifecycle
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+Innovation and customer loyalty
+Impact on society
+How important is that topic for you to engage in a business
+relationship with SAP?
+To assess the category "impact on society," we asked
+stakeholders the following questions:
+How high is the potential of SAP to enable our customers to
+achieve the SDGs?
+How important is our ability to do this for you to engage in a
+business relationship with SAP?
+We have included in our materiality matrix all topics with
+stakeholder ratings in the upper 50% for both questions
+respectively.
+Validation
+As part of our materiality assessment process in 2016, the
+results of the materiality analysis were reviewed and confirmed by
+our steering committee for integrated reporting and our
+sustainability advisory panel. The results were also reviewed by our
+chief financial officer, who is the board sponsor for sustainability
+and integrated reporting.
+Review
+Feedback on and analysis of the SAP Integrated Report will serve
+as an input for future materiality assessments.
+The SAP Global Human Rights Commitment Statement details
+our response to the international standards mentioned above and is
+our public commitment to becoming a role model of sustainability.
+Based on the SAP Code of Business Conduct and approved by our
+Executive Board, the statement focuses on three main areas: our
+employees, our ecosystem of partners and suppliers, and our
+solutions.
+-
+Making a Commitment
+Whether within SAP, across our extended supply chain, or
+through the impact of our solutions, we are committed to
+respecting human rights. We maintain high ethical standards and
+establish fairness, diversity, and inclusion across our business
+operations. In this way, we believe we can better attract and keep
+top talent, increase innovation and productivity, and enhance our
+reputation. SAP is a signatory of the United Nations (UN) Global
+Compact initiative. This is a voluntary undertaking to align our
+strategy and operations with universal principles on human rights,
+labor, the environment, and anticorruption.
+Beyond single-use plastic initiative; Supplier Code
+of Conduct; Sustainable Procurement; e-waste
+recycling
+Direct:
+We drive resource
+productivity with
+an aspiration to a
+world with zero
+waste.
++ Train and educate SAP employees
+Direct:
+SDG 4 Quality Education
+automation may be counteracted (rebound effect)
+consumption because efficiency gains through
+Increase absolute resource and energy
+High
+Indirect:
+To what degree does this topic influence SAP's ability to create
+value?
+Very High
+(as an organization or through SAP solutions)
+Materiality Matrix Non-Financial Topics (the chart only shows topics
+with high or very high scores)
+Materiality
+221
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Influence on SAP's ability to create value
+77
+Energy and Emissions
+Waste and Water
+Sustainable Procurement
+SAP & SDG12
+SAP Leonardo Plastics Challenge
+New marketplace for recycled
+plastics and plastics alternatives
+SAP and Google Cloud Circular
+Economy 2030 Challenge
+Phase out single-use plastics
+Upholding High Standards
+Additional
+Information
+Human Rights and Labor Standards
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+227
+Our Contribution to the UN Sustainable Development Goals
+Indirect:
+openSAP; CSR digital literacy programs
+customers
+Build capability in our ecosystem and among our
+Indirect:
+young adults in
+digital skills and
+coding programs by
+2020
+Direct:
+Engaging four million
+children, youth, and
+Powering Opportunity Through
+Digital Inclusion
+SAP Learning for Life
+SAP & SDG4
+Employees and Social Investments
+Cloud-based learning management system for
+employees
+By integrating human rights considerations into our standard
+business practices, we also support the values of the Universal
+Declaration of Human Rights, the OECD Guidelines for Multinational
+Enterprises, and the International Labor Organization Declaration
+on Fundamental Principles and Rights at Work. To ensure that our
+commitment to human rights translates into practice, we take
+guidance from the UN "Protect, Respect and Remedy" framework.
+47
+Management Report
+% favorable responses
+Direct:
+Become carbon
+neutral by 2025
+SDG 17 Partnerships for the Goals
+Increase customers' energy consumption through
+use of software
+climate change relevant parameter
+Enable holistic operational steering by integrating
+Contribute to climate change mitigation and
+strengthen resilience and adaptive capacity to
+climate-related hazards and natural disasters of our
+customers
+To Our
+Stakeholders
+Combined Group
+Management Report
+Global Environmental Policy; Report and reduce
+CO2 emissions and energy consumption; Procure
+100% renewable electricity; Carbon impact
+relevance for Executive Board compensation
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+Defining Key Priorities for Our Non-
+Financial Reporting
+By understanding which environmental, social, and governance
+issues are key priorities for our stakeholders, we are better able to
+allocate time, budget, and resources accordingly within our
+integrated reporting. In 2016, we completed our latest
+comprehensive materiality assessment to help identify and validate
+those topics which are the most relevant to our stakeholders such
+as employees, investors, and customers. The assessment also
+highlights those topics which contribute most to value creation both
+in our own operations and in those of our customers.
+Our materiality assessment process combined the GRI G4
+guidelines for sustainability reporting and the International
+Integrated Reporting Framework. Key stages of the process are
+detailed below.
+While the last systematic materiality process took place in 2016,
+we continuously update our strategy and engagement focus
+internally.
+Identification
+During this stage, we drew up a long list of potential topics based
+on guidance from GRI G4 and the Sustainability Accounting
+Standards Board (SASB), as well as our existing material topics. We
+also considered a materiality assessment for the ICT industry by the
+Global E-Sustainability Initiative (GeSI) as well as the United
+Nations' Sustainable Development Goals (SDGs).
+When identifying our key topics and their boundaries, we looked
+first at areas related to our operations and supply chain. Second, we
+looked at topics related to how our software can help our customers
+contribute to the achievement of the SDGs.
+Prioritization
+Materiality
+During the prioritization stage, we looked at the extent to which
+each individual topic affects our ability to create value at SAP. We
+assessed whether this value was financial, operational, strategic,
+reputational, or regulatory. All topics that were identified as
+delivering value in three or more areas were then included on our
+short list of seven categories, as follows:
+Indirect:
+Energy and Emissions
+Compensation Report
+Environmental Policy
+SDG 13 Climate Action
+Direct:
++ Assume responsibility for products in use-related
+emissions by running customer applications in the
+SAP green Cloud
++ Decouple economic prosperity from resource
+consumption by enabling transparency and
+optimizing resource productivity in linear or circular
+economies
+Indirect:
+Use energy, water, and resources; produce waste
++Drive sustainable business practices and integrated
+reporting
+Direct:
+SDG 12 Responsible Consumption and Production
+Green Cloud; Business ambition for 1.5°C
+SDG Ambition
+Ocean Plastics Leadership Summit
+SAP joined the Global Alliance for
+YOUth
+SAP Founding Member of Value
+Balancing Alliance
+Employees and Social Investment
+SAP & SDG17
+SAP & UNICEF
+SAP & UNTIL
+Engage in UN Global Compact, UN Development
+Program, UNICEF, Social World Enterprise Forum,
+UN Technology and Innovation Labs (UNTIL),
+Global Alliance for YOUth, Value Balancing
+Alliance, Ocean Plastics Leadership Summit, Global
+Partnership for Development Data, IMPACT 2030,
+WEF Platform for Accelerating the Circular
+Economy, Global Battery Alliance, SDG Ambition
+NA
+Build capacity throughout our broader ecosystem
+Direct:
+emissions reduction targets aligned
+with a net-zero future
+Climate Change: What SAP Is Doing
+SAP sets 1.5°C science-based
+SAP & SDG13
+Global Battery Alliance
+Platform for Accelerating the
+Circular Economy
+Business conduct
+-
+Climate and energy
+21%
+21%
+32%
+Supplier Locations
+Percent of total spend
+APJ
+20%
+Americas
+28%
+EMEA
+52%
+Procuring with Purpose
+21%
+Understanding the importance of purpose-driven topics such as
+diversity and sustainability, we believe that diverse and sustainable
+businesses bring significant added value to SAP, for example
+through their flexibility and high innovation potential.
+Driven by our Global Procurement Organization (GPO), our
+supplier diversity program is an integral part of our supplier
+management program. It strives to ensure that diverse businesses
+have a fair chance at competing for contracts and are treated
+equally with other SAP suppliers.
+Targeted to reach a 5% spend ratio for diversity suppliers in
+selected countries by 2020, GPO proactively involves diversity
+suppliers in all categories into our sourcing process.
+In 2018, based on a successful pilot, GPO implemented a
+supplier diversity task force that comprises dedicated buyers from
+all categories, aimed at identifying and including potential diversity-
+certified suppliers for all requests for proposals. Currently, we are
+investigating an extension of our supplier diversity program to also
+include Tier 2 suppliers into our supplier diversity program and
+further enhance our fraction of diversity suppliers.
+As part of its current supplier diversity program, SAP is currently
+a corporate member of the following minority supplier certification
+organizations in 2019:
+-
+National Minority Supplier Development Council (NMSDC)
+WEConnect International
+US Business Leadership Network (USBLN)
+Leveraging our partnership with the Social Enterprise World
+Forum, in April 2019, SAP partnered with Social Enterprise UK
+(SEUK) to participate in the Buy Social Corporate Challenge, an
+initiative through which leading corporate entities integrate social
+enterprises into their supply chains with the aim of achieving a
+combined £1 billion spend by year end 2020. For SAP, the objective
+230
+Sustainable Procurement
+Establishing an inclusive supplier network - that is, minority
+enterprises defined by gender, ethnicity, disability, sexual
+orientation, and other characteristics - has become a key priority
+for SAP. We believe that our commitment to an inclusive, bias-free
+culture in our workplace must be mirrored in our approach to our
+supplier base.
+Workplace Infrastructure
+Professional Services
+Marketing & Travel
+-
+Financial performance
+Human and digital rights
+Human capital
+Indirect:
+Emit greenhouse gases
+229
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+Sustainable Procurement
+Making Our Supply Chain More
+Sustainable
+A significant part of our social and environmental impact is
+delivered through our supply chain. At SAP, we work hard to
+minimize any negative impacts associated with our supply chain.
+From eliminating single-use plastics, decreasing CO2 emissions, and
+reducing oversized packages to an asset upcycling model for our
+cloud assets, close collaboration with our supplier network is
+paramount in ensuring that our supply chain is sustainable.
+What We Buy and Where We Buy It From
+We consider our suppliers to be key partners in our business
+success. In 2019, we spent approximately €5.3 billion in purchases
+from more than 18,500 suppliers worldwide (2018: approximately
+€5.9 billion from more than 17,000 suppliers worldwide). Within our
+five categories and our Sourcing Excellence Champions unit, we
+approach sustainability from different angles: Workplace
+Infrastructure (example: reduced plastics and packaging),
+Professional Services (example: CO2-reduced mobility concepts,
+electronic contracts), Marketing & Travel (example: sustainable
+merchandise and events), IT Infrastructure (example: sustainable
+cooling of data centers), and Car Fleet (example: sustainable
+mobility concepts). ¹)
+1)
+Suppliers by Category (Tier 1)
+Percent of total spend
+Car Fleet
+5%
+IT Infrastructure
+Decouple societal groups from entire areas of
+employment through an accelerated digital divide
+and lack of digital skills
+Fuel negative effects on employment through
+digitalization and automation; potentially increase
+precarious jobs
+-
++ Combat forced and child labor throughout supply
+chains
+Our Contribution to the UN Sustainable
+Development Goals
+The 17 United Nations Sustainable Development Goals (SDGs)
+provide a globally accepted framework which we use for
+communicating our purpose to "help the world run better and
+improve people's lives." We strive to execute on this purpose by
+being a role model for sustainable, purpose-led operations and by
+enabling our customers to operate in a sustainable way.
+Following the adoption of the SDGs by world leaders in
+September 2015, we identified and aligned existing initiatives with
+all 17 SDGs. For example, we looked at the environmental and social
+impacts of customers using SAP technology and applications,
+linking these impacts to the SDGs. The resulting Web book
+(www.sap.com/unglobalgoals) was published in early 2016 and has
+been updated regularly.
+To validate and refine the focus of our impact through our
+operations and solutions, we included the SDGs in our 2016
+materiality analysis and discussed them with our external
+sustainability advisory panel. This highlighted the importance of
+focusing on SDGs for which there is a tangible and material link
+between our own operational activities or the use of our software by
+customers. For more information, see the Materiality section.
+The following table describes the potential positive and negative
+direct or indirect impacts of our company and of our products and
+services related to SDGs that have received a high ranking in our
+materiality analysis. We use "direct" when we refer to impacts
+through our own operations; "indirect" describes impacts through
+the use of our solutions and technology or in our ecosystem.
+Our Potential Direct and Indirect Impact
+Our KPIs and
+Targets
+Our Policies and Selected Activities and
+Programs to Enhance Positive Impacts and
+Mitigate Negative Impacts
+Where You Can Find More
+Information in the SAP
+Integrated Report and Other
+Sources
+SDG 9 Industry, Innovation, and Infrastructure
+Additional
+Information
+Direct:
++ Increase inclusive and sustainable industrialization
+through SAP's investments in research and
+development (including in developing countries)
+Indirect:
+Support providers of infrastructure, financial
+services and clean technologies
+Provide "Best Practice" business processes through
+standard software solutions
++ Integrate small and medium-sized enterprises into
+global value chains and markets
+SDG 3 Good Health and Well-Being
+Direct:
+ΝΑ
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Combined Group
+92
+93
+93
+94
+87
+84
+82
+83
+80
+888
+It is important for SAP to pursue sustainability
+I actively contribute to SAP's sustainability
+goals
+2009
+2015
+2016
+2017
+2018
+2019
+Nurturing a Network of Sustainability
+Champions
+To help drive progress in our sustainability initiatives, we need
+the support of employees in every part of SAP. We have a global
+internal network of more than 200 sustainability champions who
+represent different regions and areas of the business at SAP. Not
+only do they act as role models, they also tailor sustainability
+engagement activities to local and lines-of-business needs and
+interests and share best practices.
+Sustainability Management and Policies
+225
+To Our
+Stakeholders
++ Provide access to a healthy lifestyle and a safe and
+healthy working environment for our employees
+90
+Indirect:
+Increase transparency of physical, medical, and
+health conditions of individuals, which might be
+abused
+Direct:
+SAP recruiting programs; Diversity & Inclusion
+policy and programs including EDGE certification
+Indirect:
+SAP Rural Sourcing Management; SAP Ariba
+Supplier Risk in cooperation with Made In A Free
+World; Partnership with Social Enterprise UK
+Employees and Social Investments
+Sustainable Procurement
+SAP & SDG8
+Diversity & Inclusion
+Powering Opportunity Through
+Digital Inclusion
+SAP Rural Sourcing Management
+SAP Ariba
+SAP Ariba and Social Enterprise UK
+Number of
+employees
+Our Contribution to the UN Sustainable Development Goals
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Our Potential Direct and Indirect Impact
+Our KPIs and
+Targets
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+Our Policies and Selected Activities and
+Programs to Enhance Positive Impacts and
+Mitigate Negative Impacts
+Where You Can Find More
+Information in the SAP
+Integrated Report and Other
+Sources
+To Our
+Stakeholders
+226
+Enable an inclusive economy
+on a 2017 study by SAP and PwC)
+Business Health
+Culture Index
+Direct:
+SAP Labs Network; One Billion Lives initiative
+fostering purpose-driven innovation
+Indirect:
+SAP support for startups through various programs
+Products, Research & Development,
+and Services
+Employees and Social Investments
+SAP & SDG9
+SAP Innovation
+SAP Partnering with Social
+Enterprise Forum
+One Billion Lives Initiative
+SAP.io
+Direct:
+Global Health and Safety Management Policy;
+Employee Assistance Program; Corporate
+Oncology Program for Employees
+Indirect:
+SAP Solutions for Healthcare, SAP Environment,
+Health and Safety Management, SAP
+SuccessFactors Well-Being Management by Virgin
+Pulse
+Employees and Social Investments
+SAP & SDG3
+Healthcare
+SAP Environment, Health and Safety
+Management
+SAP SuccessFactors Well-Being
+Management by Virgin Pulse
+SDG 8 Decent Work and Economic Growth
+Direct:
++ Create decent jobs at SAP through our growth
+plans, specifically in developing markets
+Indirect:
++ Create three million jobs in our ecosystem (based
+Enhance safe and healthy working conditions,
+healthcare, and personalized medicine on a global
+scale
+-
+We have also successfully changed working behavior to
+significantly reduce the number of pages that our employees print.
+A secure pull-printing system requires that employees bring their ID
+badges to a printing device to activate a job. This ensures better
+document security, and makes people think about whether the
+printout is really needed. More than 89,000 employees are
+currently using this system. Through all of these initiatives, our
+printing volume has gone down by 25.8 million pages in total since
+2014. SAP employees can access a printing dashboard that shows
+the company's progress in reducing paper consumption at global,
+regional, and country levels.
+Consolidated Financial
+Statements IFRS
+Non-Financial Notes:
+Social Performance
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+General Information About Social
+Indicators
+Boundaries
+Our reporting takes two different perspectives into account: SAP
+as a company, which includes all our legal entities and operations
+and supply chain, and SAP as a solution provider enabling our
+customers. These boundaries are listed in detail in the GRI Standard
+Content Index.
+Social Indicators
+Data for our social indicators is collected and reported on a
+quarterly or annual basis and is audited at a reasonable assurance
+level.
+Employee Retention
+We define employee retention as a ratio that puts emphasis on
+employee-initiated turnover - in other words, we seek to measure
+how many employees choose to stay with SAP. As opposed to
+keeping a low turnover rate - which companies generally seek to do
+- we aim to keep our retention rate high. A higher retention rate
+signifies that fewer employees are choosing to leave SAP. The
+number of voluntarily departed employees now excludes the
+voluntary part of restructuring-related departures for more
+transparency and precise headcount management purposes.
+Women in Management
+We define "women in management" as the share of women in
+management positions as compared to the total number of
+managers.
+At SAP, we differentiate between the following categories of
+managers:
+-
+-
+Managers managing teams: Refers to managing teams of at
+least one employee or vacant positions
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+Stakeholders
+Schmalenbach-Gesellschaft für Betriebswirtschaft e.V.
+Society of Corporate Compliance & Ethics
+The Conference Board, Inc.
+The Sustainability Consortium
+The Wall Street Journal CEO Council
+-
+TRACE International
+-
+Managers managing managers: Refers to managing managers
+who manage teams
+Transparency International Germany
+Value Balancing Alliance e.V.
+-
+World Economic Forum
+Memberships
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+235
+To Our
+United Nations Global Compact (since 2000)
+Organization for International Investment
+Board members
+The Business Health Culture Index (BHCI) is an indicator of the
+extent to which SAP successfully offers employees a working
+environment that promotes health supporting their long-term
+employability and their active engagement in reaching our
+ambitious corporate goals. The index covers questions concerning
+how employees rate their personal well-being and the working
+conditions at SAP, including our leadership culture.
+Our reporting takes two different perspectives into account: SAP
+as a company, which includes all our legal entities and operations
+and supply chain, and SAP as a solution provider enabling our
+customers. These boundaries are listed in detail in the Content
+Index of the Global Reporting Initiative (GRI).
+Reporting Approach
+Data for our environmental indicators is collected and reported
+on a quarterly basis and is subject to external assurance for annual
+reporting.
+Reporting on total energy consumed and data center energy is
+based on the data collected for the calculation of our carbon
+emissions. All numbers are based on the metric system. Whenever
+we state "tons," we mean metric tons.
+The indicators carbon emissions per employee and total energy
+consumed per employee are calculated on the basis of an average
+number of employees. This average is calculated by adding the
+FTEs at the end of each quarter and then dividing the result by four.
+Carbon Emissions
+Definition
+We define the carbon emissions as the sum of all greenhouse
+gas emissions measured and reported for SAP, including the
+compensation with renewable energy or offsets.
+Reporting Principles
+SAP's preparation of the carbon emissions is based on the
+Corporate Accounting and Reporting Standard (Scope 1 and 2) and
+the Corporate Value Chain (Scope 3) Standard of the World
+Resources Institute/World Business Council for Sustainable
+Development. This approach conforms to the requirements of GRI
+Standard indicators 302-1, 302-2, 305-1, 305-2, and 305-3.
+In more detail, SAP reports our net carbon emissions according
+to the GHG (Greenhouse Gas) Protocol Scope 2. In this context, two
+different calculation approaches are possible: the classic location-
+based method and the recently introduced market-based method,
+which is an amendment to the GHG Protocol Scope 2.
+Organizational Boundaries
+SAP defines our organizational boundaries by applying the
+operational control approach as set out in the GHG Protocol.
+Operational control is established when SAP has the full
+authority to introduce and implement its operating policies. The
+emissions of all operations over which the company has operational
+control and all owned, leased facilities, co-location data centers, and
+vehicles that the company occupies or operates are accounted for
+in the carbon emissions. They are based either on measurements
+or, where no measured data is available, on estimations and
+extrapolations.
+A portion of SAP's leased facilities operates under full-service or
+multitenant leases, where SAP does not have access to actual
+energy consumption information. SAP includes these facilities in
+our definition of operational control and accounts for them by
+estimating related energy consumption.
+Non-Financial Notes: Environmental Performance
+237
+To Our
+Stakeholders
+Boundaries
+We consider the principle of Sustainability Context (the
+performance of the organization in the context of the limits and
+demands placed on environmental or social resources at the
+sectoral, local, regional, or global level) in a number of ways, such as
+by looking at global issues or trends including climate change and
+demographic shifts. For example, we assess our carbon emissions
+in the context of the emissions of the entire information and
+communications technology landscape, with particular focus on the
+abatement potential of the industry. When it comes to
+completeness, we recognize that while we comply with this principle
+in reporting on our own operations, we are still developing
+methodologies to reliably quantify our impact through our
+solutions.
+General Information
+Our net carbon emissions are calculated by deducting
+purchased renewable energy certificates and carbon offsets from
+our gross carbon emissions in the respective reporting period. Our
+gross carbon emissions for 2019 were 794 kilotons of CO2
+equivalents (CO2e) (2018: 734 kilotons CO2e), including all carbon
+emission categories in Scope 1 and 2, as well as selected categories
+of Scope 3 as outlined in figure 1.
+The BHCI is calculated based on the results of our annual
+employee survey #Unfiltered powered by Qualtrics. All employees
+were invited to take part in the 2019 People Survey and
+approximately 71,783 employees participated (response rate: 71%).
+The BHCI score for 2014 was recalculated from 70% to 72% based
+on two updated questions in the survey concerning work-life
+balance. The changes were carried out to simplify the questionnaire
+and to better compare against external benchmarks.
+Employee Engagement
+We define employee engagement as a score for the level of
+employee commitment, pride, and loyalty, as well as our employees'
+feeling of advocacy for SAP.
+It is calculated based on the results of our annual employee
+survey #Unfiltered.
+236
+Non-Financial Notes: Social Performance
+To Our
+Stakeholders
+Combined Group
+Business Health Culture Index
+Management Report
+Further Information on Economic,
+Environmental, and Social Performance
+Non-Financial Notes:
+Environmental Performance
+Additional
+Information
+Environmental Performance
+We understand environmental performance as the measurable
+outcome of SAP's ability to meet environmental objectives and
+targets set forth in our environmental policy. In this context, we
+determine SAP's greenhouse gas footprint (in the following called
+carbon emissions), total energy consumed, and data center energy
+as the three key environmental performance indicators.
+Furthermore, we realize external reductions by purchasing offsets
+and renewable energy which is partly self-generated in SAP
+locations but primarily purchased in the form of Renewable Energy
+Certificates (RECs). Plus, we identify SAP's waste and water
+consumption as additional environmental aspects.
+By looking at the energy usage and emissions throughout our
+entire value chain, we gain insights to help us manage our
+environmental performance and, in turn, help our customers to do
+the same.
+The activities and trends behind our results for 2019 are detailed
+below. This includes information about the areas in which we
+consume the most purchased electricity, as well as the impact
+caused by the use of our products.
+Consolidated Financial
+Statements IFRS
+Mechanical Engineering Industry Association
+International Integrated Reporting Council
+National Chambers of Commerce
+13%
+9%
+NIN
+-1%
+-3%
+2015
+2016
+2017
+2018
+2019
+Waste and Water
+233
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Public Policy
+16%
+1,049
+1,060
+1,185
+At our headquarter cafeterias in Walldorf and St. Leon-Rot, we
+implemented a smart technology to analyze, measure, monitor, and
+reduce food waste. This allows us to better plan meals. In 2019, we
+were able to avoid 16.8 tons of food waste. In St. Leon-Rot, we have
+also collaborated with Foodsharing, an initiative of volunteers who
+collect leftover food and distribute it in the local communities.
+Finding Alternatives to Single-Use Plastic
+In 2019, SAP published its latest global environmental policy,
+which now also includes a goal to phase out single-use plastics by
+the end of 2020. We therefore launched the 'beyond single-use
+plastics' initiative to identify and eliminate single-use plastics and
+introduce sustainable alternatives. Successful projects such as the
+reduction of single-use plastics in Dublin and Galway or the recent
+introduction of reusable coffee mugs in Buenos Aires and New York
+City serve as best practices. In October 2019, we launched the 'no
+time to waste' employee campaign to actively involve employees in
+the project and raise awareness of the global plastics crisis.
+Furthermore, we have already been able to reduce the use of
+plastic water bottles in some of our locations, such as Brussels,
+Caen, Perth, Walldorf, and St. Leon-Rot. At SAP Perth alone, SAP
+was able to avoid over 3,000 bottles per year.
+232
+Waste and Water
+To Our
+Stakeholders
+Combined Group
+Management Report
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Additional
+Information
+Using Water Efficiently
+While our operations are not water-intensive, we continue to use
+water as efficiently as possible. For example, we use rain and run-off
+water for irrigation and toilets in our headquarters in Walldorf,
+Germany, and other office locations.
+A number of our offices are located in areas with significant
+water scarcity. In Johannesburg, South Africa and Manila,
+Philippines, we have been addressing this issue with dedicated
+water management efforts. These include, for example, water-
+saving faucets and boreholes to save clean, fresh water.
+Global Water Usage
+Thousand cubic meters
+1,376
+1,332
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+SAP has developed trusting relationships with governments
+worldwide by exploring the potential for information and
+communications technology (ICT) to spur economic growth, create
+jobs, and address societal challenges. This includes governments in
+their role as our customers, by supporting their digital
+transformation to become more efficient, effective, and citizen-
+oriented.
+Consolidated Financial
+Statements IFRS
+Memberships
+To better understand and enable sustainable performance on a
+global level, both for our company and customers, SAP subscribes
+to and routinely engages in a range of third-party organizations,
+including:
+-
+-
+-
+-
+Advancing Women Executives
+Management Report
+Alliance for Integrity
+Business for Social Responsibility
+Cellular Telephone Industries Association
+Deutschland sicher im Netz e.V.
+DIGITALEUROPE
+econsense e.V.
+Federation of German Industries
+Industrial Internet Consortium
+Information Technology Industry Council
+Bitkom e.V.
+Combined Group
+Stakeholders
+To Our
+SAP engages with governments around the globe on a number of
+public policy issues, including the creation of reasonable framework
+conditions for new technologies or business models such as cloud
+computing, the Internet of Things, and Big Data.
+SAP has created an eleven-point plan for the digitalization of
+Germany. This plan is available at
+https://discover.sap.com/government-relations/de-de/index.html
+(English version:
+https://assets.dm.ux.sap.com/digitalhub/government_relations/pd
+fs/sap-politikbrief_jun2019-en.pdf), and calls for the following:
+1. Digitalizing Germany's education system to better prepare
+people for the future of work
+2. Fostering artificial intelligence (AI) as a growth driver while
+keeping the integrated and human-centric approach of the
+German government's Al strategy
+3. Improving conditions for startups
+4. Expanding the gigabit infrastructure and digital testbeds
+5. Making the EU General Data Protection Regulation (GDPR)
+innovation-friendly and promoting digital business models
+Combined Group
+6. Harnessing technological potential to benefit data policies in
+the health sector to improve healthcare
+9. Making enterprise tax law more competitive to encourage
+innovation and investment
+10. Fostering the free flow of data to safeguard the long-term
+competitiveness of European ICT companies
+11. Harmonizing export control standards internationally.
+SAP believes in transparency in the political process.
+Accordingly, we are registered in the European Transparency
+Register for interest representatives. In the United States, our
+company is registered and reports in compliance with the Lobbying
+Disclosure Act.
+Political Contributions
+In line with the SAP Code of Business Conduct, SAP does not
+support any political parties. Under the laws of the United States, a
+number of SAP employees exercise their right to create a political
+action committee (PAC). The SAP America PAC is an independent,
+registered, and strictly regulated organization that allows eligible
+employees in the United States to support political candidates at
+the state and federal levels. Consistent with U.S. law, SAP exercises
+no control over or influence on the SAP America PAC. SAP America
+PAC expenditures are transparent and available on the U.S. Federal
+Election Commission Web site.
+234
+Public Policy
+7. Avoiding the overregulation of digital B2B platforms
+8. Digitalizing public administration to improve efficiency and
+citizen-centricity
+Management Report
+External Reduction
+Further Information on Economic,
+Environmental, and Social Performance
+-
+-
+-
+Type of Renewable Electricity: SAP considers solar, wind,
+biogas, geothermal, and hydro power as renewable electricity. In
+2019, we sourced only wind and solar energy.
+Installation: The power plant producing the renewable energy
+shall not be older than 10 years. In case of a renovation of an old
+power plant, the 10-year rule applies only to the additional
+electricity output due to efficiency increase. Furthermore, SAP
+does not consider RECS from government supported power
+plants.
+Vintage: The renewable electricity must be produced in the
+same year or the year preceding the reporting period to which it
+will be applied.
+Accounting: SAP uses the grid-specific emissions factor to
+calculate the carbon reduction achieved by the RECs. As RECS
+are considered independently to the electricity achieved through
+their procurement, they can be allocated to any location globally
+All energy outside the aforementioned categories falls within
+conventional energy. We define conventional energy as electricity
+coming from the standard electricity grid. The electricity grid
+provides a country-specific energy mix including all available
+sources, either fossil, nuclear, or renewable. Energy from renewable
+sources as part of the local grid is calculated as conventional energy
+and not displayed as part of renewable energy.
+We define renewable energy as electricity coming from
+renewable energy sources such as wind, solar, hydro, and
+geothermal. The shares of renewable energy used by SAP are
+calculated by adding the amount of renewable energy specifically
+sourced, produced onsite by our own solar cells, and covered by
+Renewable Energy Certificates (RECs). We have developed a quality
+standard that defines key criteria for the procurement of RECs to
+drive change in the electricity market and to avoid the risk caused
+by low-quality products. The key characteristics of our renewable
+energy purchasing guidelines are as follows:
+To calculate the carbon reductions of the RECs, the amount of
+purchased electricity is multiplied by the grid-specific carbon factor
+derived from the location where the renewable energy was
+produced. However, data is only valid with an official certificate or
+written confirmation of the electricity supplier (100% data
+coverage).
+Offsets
+We compensate our Scope 3 emissions by investing in the
+Livelihood Funds and their high-quality carbon credits, which are
+included in our overall net carbon emissions. By using this
+investment, the Fund aims to abate emissions or sequester carbon
+from the atmosphere, while at the same time ensuring additional
+social benefits for developing countries.
+On top of this, SAP invests in carbon emission offsets for air
+travel by charging an internal carbon price which is later invested in
+sustainable projects worldwide. Furthermore, for employees who
+own a so-called climate neutral fuel card for their company car, SAP
+pays a small additional fee per liter gas purchased, which is then
+invested in Gold Standard certified compensation projects or
+equivalent very high quality standards.
+240
+Non-Financial Notes: Environmental Performance
+Cutting Down on Landfill Waste
+2019
+In the net carbon emissions, the purchased as well as the
+produced renewable electricity is already deducted from our
+Scope 2 emissions.
+Renewable Electricity
+SAP uses external reductions, such as purchases of renewable
+energy and certified voluntary "offsets," to achieve its carbon
+targets. Emission reductions are subtracted from gross Scope 1 to 3
+emissions to achieve a net carbon inventory.
+In 2019, we continued to improve waste segregation, evolve our
+processes, and reduce waste at many offices across the globe. As
+part of our ISO 14001 program, SAP sites such as Dublin, Sofia,
+Vancouver, Walldorf, and other locations improved recycling
+through waste diversion programs or new waste bin systems.
+Electricity External Data Centers: An external data center (co-
+location) is a local computing center with server units running
+SAP software that is operated by an external partner. CO2
+conversion factors are updated annually based on country
+specific grid factors and include CH4 and N2O factors. Electricity
+consumption for external data centers is extrapolated based on
+the data center capacity, a utilization factor, and a power usage
+effectiveness (PUE) factor. As the utilization and PUE factors are
+not available for all external data centers, average factors are
+determined as follows: The utilization factor for external data
+centers is calculated as the sum of all actual consumptions
+divided by the sum of contracted server power of these data
+centers. The average PUE is calculated as the sum of all provided
+PUES divided by the number of data centers that have provided
+this factor (100% data coverage).
+Electricity Hyperscale Data Centers: Hyperscale data centers
+enable massive, efficient, and robust scalability of computing,
+system, and server architecture in order to respond to the
+increasing demand for cloud computing and Big Data solutions.
+Electricity consumption is calculated based on the average
+allocated server memory size (RAM) of all hyperscale services. A
+power conversion factor is used to convert the allocated RAM
+value into a server power value. Data center utilization factor and
+PUE factors are used to extrapolate the total hyperscale service
+electricity. As these factors are not known, the average factors of
+external data centers are used (100% data coverage).
+Logistics: Calculation is based on the actual number of parcels
+and mail sent from our logistics center in Germany and is
+extrapolated globally (22% data coverage).
+We reduced our paper usage by 43% since 2009. Initiatives such
+as our global printing optimization have supported this decrease,
+despite a 110.8% increase in employee headcount over the same
+period. Among other improvements, this initiative sets printers to
+produce double-sided, black-and-white printouts by default. In
+2019, we continued our approach of paperless contracting. By using
+the SAP Signature Management application by DocuSign, which
+enables electronic signatures, we were able to cut down the printing
+of paper-based contracts by more than 190,000 pages in 2019
+(2018: 194,000 pages).
+Non-Financial Notes: Environmental Performance
+239
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+updated in 2019 due to a new assessment methodology applied
+by the Environmental Paper Network (whose emissions
+calculation tool we use). As a result, the factor has increased by
+about 3.5 times.
+Additionally, each year we measure and publish the following
+Scope 3 carbon emissions based on the GHG Protocol's Corporate
+Value Chain (Scope 3) Accounting and Reporting Standard. These
+emissions are not included in our corporate target and are meant
+for indicative purposes only.
+Upstream
+Due to the link of our upstream emissions to operating expenses,
+for 2019, we extrapolated our upstream figures by multiplying our
+four key contributors to our upstream emissions from 2018 with the
+year-over-year increase of operating expenses between 2018 and
+2019.
+Downstream
+Use of Sold Products: The vast majority of our overall emissions
+stem from the use of our software. When SAP software runs on
+our customers' hardware and on their premises, the resulting
+carbon emissions are about 40 times the size of our own net
+carbon emissions (12.1 million tons in 2019). SAP is eager to
+cooperate with customers to optimize their on-premise
+landscapes. However, given that we have no control over our
+customers' IT landscapes as they usually contain a lot of third-
+party products, we share this responsibility with others.
+Resource need per year is determined using a landscape
+simulation. It is extrapolated globally based on the number of
+productive installations and power usage effectiveness (PUE).
+We use a PUE factor of 1.58, which is the average PUE of our
+external data centers. Emissions are calculated using a global
+electricity emission factor. Due to the special characteristics of
+software products, we chose an assessment of resource need
+per year. This deviates from the minimum boundaries as defined
+by the GHG Protocol's Corporate Value Chain (Scope 3)
+Accounting and Reporting Standard, which requires assessment
+and disclosure of “direct use-phase emissions of sold products
+over their expected lifetime." The calculation covers all of our
+major solutions, including on-premise software. Cloud solutions
+are not included, as they are part of our Scope 2 emissions.
+Mobile solutions (for example, SAP apps running on customer IT
+equipment) are also not included. Calculation parameters will be
+adapted when significant technology changes occur.
+Other Scope 3 Emissions Not Included: Upstream
+Transportation and Distribution (due to data complexity and de
+minimis); Upstream Leased Assets (not applicable); Processing
+of Sold Products (not applicable); End-of-Life Treatment of Sold
+Products (not applicable); Downstream Leased Assets (not
+applicable); Franchises (not applicable); and investments (not
+applicable).
+2018
+9%
+2017
+2016
+Sustainable Procurement
+1) Car Fleet includes procurement relating to the global company car fleet. IT
+Infrastructure procures products and services for SAP's cloud business such as
+network services and data center and co-location goods and services. Marketing &
+Travel supports topics related to SAP's marketing, events, merchandise, and
+business travel areas. Professional Services includes application and development
+services as well as financial and legal services. Sourcing Excellence Champions are
+responsible for the seamless execution of procurement and sourcing activities and
+are drivers for customer satisfaction and end user success. Workplace
+Infrastructure includes procurement for areas such as facility services, client
+services, and equipment, communication, and collaboration services.
+Our chief procurement officer and chief sustainability officer
+meet each quarter to discuss progress and challenges related to
+embedding sustainability in our procurement practices.
+Similar to our supplier diversity task force, we have also set up a
+cross-category task force of GPO buyers that is dedicated to
+actively improving our sustainability practices and initiating close
+collaboration with suppliers to find new and innovative ways to
+make our supply chain more sustainable.
+Governance
+Additionally, this innovative solution helps SAP measure due
+diligence activity and report on information-sharing programs
+across the supply chain. By providing insights into supplier risk, the
+solution enables us to detect early warning signals, minimize costly
+disruptions, and proactively monitor risk factors for each supplier.
+In this way, we can prioritize our corporate responsibilities, quantify
+the impact we want our business to have, and identify the critical
+issues affecting the supply chain.
+use of child labor, human trafficking, and environmental disasters
+such as oil spills and radioactive contamination.
+In 2019, we went live with the SAP Ariba Supplier Risk solution to
+incorporate supplier risk management in our daily business
+operations. This enables us to identify, manage, mitigate, and avoid
+sustainability risks within our supply chain. These risks include, for
+example, workplace discrimination, workplace safety neglect, the
+Improving Sustainability Through
+Technology
+In 2019, we updated our Supplier Code of Conduct to include our
+environmental policy. Our supplier code of conduct also contains
+provisions on the Modern Slavery Act, diversity and inclusion, and a
+labor standards chapter that expressly refers to human rights.
+Furthermore, we recommend SAP suppliers to deliver goods and
+services that are accessible to everyone, including people with
+disabilities.
+Our supplier code of conduct is included in our standard supplier
+contracts and is an essential part of our supplier registration. This
+supplier registration ensures that potential suppliers of SAP are
+aware of SAP's basic code of acceptable conduct. We review and
+update our supplier code of conduct regularly to maintain high
+standards within our supplier network. This strengthens the code's
+enforceability and sends a clear signal about its importance for SAP.
+of joining this initiative is to improve social welfare and connect
+corporate buyers with social-enterprise suppliers to help them
+prosper and grow. Within this partnership, SAP also explores the
+use of SAP technology to help social enterprises run better.
+Upholding High Standards Across Our
+Supply Chain
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+To Our
+Stakeholders
+231
+Employee Commuting: A system-integrated commuting survey
+about the distance to work and the mode of transport is
+regularly conducted for SAP globally. Approximately
+28,000 employees responded to the survey in 2018. These
+survey responses are the basis for carbon calculation of
+employee commuting in 2019. Commuting data for non-
+responding employees and quarterly updates are extrapolated
+based on the number of FTEs excluding those employees who
+own a company car (26% data coverage).
+To Our
+Stakeholders
+Management Report
+6%
+ни
+145
+25%
+133
+106
+71%
+248
+tons
+Our e-waste comes from data center servers and from IT
+equipment including PCs, peripherals, and mobile devices. In
+multiple SAP locations, we cooperate with international and local e-
+waste disposal partners to refurbish and recycle our e-waste.
+In addition, we support the reuse of IT equipment internally
+through used-equipment shops in some country locations.
+E-Waste
+Managing Our E-Waste
+Our waste and water strategy aims to continuously reduce SAP's
+impact on the environment. By promoting company-wide initiatives,
+we dispose less waste and reduce the amount of water we use in
+locations worldwide. A global approach combined with local targets
+and initiatives allow for optimizing our environmental performance.
+Taking steps to recycle our waste and save water also
+contributes to our business performance. Through ongoing
+initiatives at SAP sites, we reduce our operational costs while
+engaging our employees in our efforts.
+Taking a Global Approach
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Waste and Water
+Consolidated Financial
+Statements IFRS
+Combined Group
+Business Trips with Private Cars: Carbon calculation is based
+on distance traveled with a private car; extrapolation is based on
+FTE (100% data coverage). Company car trips are excluded from
+this activity type.
+Data Download: Due to missing data in 2019, carbon calculation
+is extrapolated based on the data volume downloaded by our
+customers globally in the previous year (0% data coverage).
+Paper Consumption: Calculation of emissions caused by the
+consumption of printing paper is based on printer tracker data
+(100% data coverage). The emissions factor for paper was
+Rental Cars: Average emission factors from rental cars are
+calculated based on actual distance and actual costs spent
+(78% data coverage). These factors are used for extrapolation
+based on the controlling costs.
+쇠해
+Methodology & Further Details
+We are reporting all our carbon emissions in CO2 equivalents
+(CO2e) including the impact from CH 4, N2O, and HFCs in our Scope 1
+and 2 emissions. As SF6 and PFCs mainly occur in chemical
+processes, they are not relevant for us.
+Below you will find the different parameters contributing to our
+carbon emissions. We use CO2 and CO₂e as synonyms in the
+following sections. The methodology explanation will be
+complemented by activities and trends.
+Scope 1
+Refers to direct carbon emissions and is defined as emissions
+from sources that are owned or controlled by the organization. At
+SAP, the following areas are covered by Scope 1:
+-
+Scope 2
+Emissions from purchased
+energy/utilities
+-
+Employee
+business travel
+Product
+use
+Contractor-
+Train Travel: Average emission factors from train travel are
+calculated based on actual distance traveled and actual costs
+spent (36% data coverage). These factors are used for
+extrapolation based on the controlling costs.
+Waste
+disposal
+Outsourced
+activities
+Scope 1
+Emissions from direct
+on-site sources
+for own use
+Purchased electricity
+Additional
+Information
+To support the growing demand for SAP's cloud offerings, we
+subcontract computation power in local third-party data centers.
+Carbon emissions are approximated and included based on the
+consumed computation power.
+In most instances, however, SAP has 100% ownership of its
+subsidiaries. Accordingly, the difference between applying the
+control versus the equity approach is about 0.6% based on SAP
+revenue. If investments in associates were included, the difference
+would be even smaller, about 0.5%.
+Data Consistency
+Comparability
+SAP uses a significance threshold of 5% for structural or
+organizational changes and 1% for methodology changes of total
+current-year emissions. A structural or organizational change that
+increases or decreases the total carbon inventory by 5% or more
+will trigger an adjustment of past years. A structural or
+organizational change that increases or decreases the total
+inventory by less than 5% will be considered insignificant and thus
+no adjustment will be made.
+CO2
+SF6
+CH4
+N₂O
+HFCs PFCs
+Scope 2
+indirect
+Scope 3
+lindirect
+Scope 1
+direct
+Company-owned
+vehicles
+Fuel combustion
+Production
+of purchased
+owned vehicles
+RECS
+continue to offer incentives to our employees to purchase electrical
+cars. As an example of additional transportation alternatives for our
+employees, we offer a company bike program in Germany, where
+employees can now also use a bicycle in addition to their company
+car to commute to work. A further commuting alternative to a
+company car in Germany is participation in a national reduced train
+fare program called "BahnCard 100."
+Scope 2
+materials
+-
+Electricity Office: Calculation of emissions is based on building
+electricity consumption. Emission factors are updated annually.
+Where no measured data is available, stable values (kWh/m²)
+based on SAP's 2018 carbon emissions data are used for
+extrapolation (73% data coverage).
+Electricity Data Centers: This category refers to SAP-owned
+and SAP-managed data centers coming from acquisitions.
+Calculation of emissions is based on data center electricity
+consumption. Emission factors are updated annually. Where no
+data is available, electricity consumption for internal data
+centers is extrapolated based on the number of server units
+(95% data coverage). The stable values are based on SAP's 2018
+carbon emissions data.
+Purchased Chilled and Hot Water, Steam: Calculation of
+emissions is based on consumption of district heating. Emission
+factors are updated annually. Where no measured data is
+available, stable values (kWh/m²) based on SAP's 2018 carbon
+emissions data are used for extrapolation (62% data coverage).
+We continued a wide range of efficiency projects to reduce our
+electricity usage, including facility upgrades and new LEED
+certifications. We also expanded the management of our
+environmental performance through ISO 14001. In addition, we are
+one of the global corporations that have signed on to the RE100
+initiative. Led by The Climate Group in partnership with CDP
+(formerly Carbon Disclosure Project), the goal of the RE100
+campaign is to have 100 of the world's most influential businesses
+committed to 100% renewable electricity.
+Scope 3
+Refers to other indirect carbon emissions and is defined as
+emissions that are a consequence of operations of an organization,
+but are not directly owned or controlled by the organization.
+Scope 3 emissions are divided into upstream and downstream
+emissions.
+Only selected upstream emissions are measured directly and
+hence included in our corporate target. The additional upstream
+emissions such as products and services or grey energy of our
+buildings are based on an estimate. Together, our upstream
+emissions including these estimates are responsible for about 12%
+of SAP's total carbon emissions.
+The following Scope 3 carbon emissions are included in our
+corporate carbon target:
+Business Flights: Calculation of emissions is based on actual
+distance travelled and actual costs spent (55% data coverage).
+This data is used to determine average emission factors for
+short, medium, and long-haul flights. For CO2 calculation, these
+-
+-
+-
+-
+-
+factors are applied to actual controlling costs for business
+flights. Emission factors for business flights do not consider the
+radiative forcing factors.
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Refers to indirect carbon emissions and is defined as emissions
+from the consumption of purchased electricity, steam, or other
+sources of energy generated upstream from the organization. At
+SAP, the following areas are covered by Scope 2:
+Combined Group
+Management Report
+Offsets
+Scope 3
+Indirect emissions from
+supply chain or services
+External
+reductions
+Additionally, we annually measure the cumulative cost avoidance
+of our carbon emissions, compared to a business-as-usual scenario.
+Since 2015, we apply a cumulative cost avoidance calculation
+approach using a triennial rolling method. This leads to additional
+comparability.
+Consolidated Financial
+Statements IFRS
+The calculation of the carbon emissions is based on factors for
+conversion and extrapolation provided, among others, by IEA, WRI,
+US EPA, UK DEFRA, DEHSt, Environment Canada, GHG Protocol,
+and SAP's own measurements.
+Where relevant, our CO2 emissions factors consider all CO2
+equivalents (CO2e) for all greenhouse gases. Global Warming
+Potential factors are based on the Fifth Assessment Report of the
+Intergovernmental Panel on Climate Change (IPCC).
+Since 2016, we annually update all our emissions and
+extrapolation factors. Before 2016, the factors were stable each
+year as they were based on calculations from 2009.
+CO2 Emission Factors
+Stationary Combustion Facilities: Emission calculation is based
+on building gas or oil consumption in kWh. Where no measured
+data is available, stable values (kWh/m²) are used for
+extrapolation of buildings (59% data coverage). In cases where
+no specific information is available, natural gas reported by local
+sites is assumed to be reported in Lower Heating Value. Besides
+gas and oil, we also began using wood pellets to produce thermal
+heat for our buildings. The Scope 1 emissions of wood pellets can
+be set to net '0', since the wood itself absorbs an equivalent
+amount of CO2 during the growth phase as the amount of CO2
+released through combustion. Still, to ensure complete
+accounting for all emissions caused, we document the direct
+carbon dioxide impact of burning wood pellets as 'outside of
+scopes' CO2 emissions. In 2019, these emissions accounted for
+872 tons of CO2.
+Refrigerants Facilities: Refrigerant data is reported for
+completeness of our carbon emissions, but HFC emissions are
+fully estimated (0% data coverage) based on the number of
+server units and office space with an air conditioning (A/C)
+system; all refrigerants are assumed to be HFC134a.
+Mobile Combustion Corporate Cars: In the context of carbon
+reporting, the term company car refers to all cars for which SAP
+covers the fuel costs. Emission calculation is based on fuel
+consumption. In 2019, 26 countries reported actual fuel data
+(92% data coverage); for other countries, stable values
+(liters/car) are used for extrapolation based on the number of
+corporate cars reported. The stable values for extrapolation are
+based on SAP's 2018 carbon emissions data.
+Refrigerants Corporate Cars: Refrigerant emissions are based
+on an estimate of HFC emissions per car and are extrapolated
+based on the number of corporate cars reported (0% data
+coverage).
+Mobile Combustion Corporate Jets: Emission calculation for
+SAP's own jets is based on actual fuel consumption (100% data
+coverage).
+Consumption of fuel for our company cars remains the single
+greatest contributor to our Scope 1 emissions. In 2019, we
+continued to enhance our car policy by linking emissions caps to
+efficiency improvements of the automotive industry. In addition, we
+focused on greater shifts in commuting habits. We continued the
+global rollout of TwoGo by SAP, our car-sharing solution, which is
+now available in 119 SAP locations worldwide. To increase the scale
+and attractiveness of TwoGo, we make the solution available to the
+public free of charge. As part of our initiative to increase the
+proportion of electric vehicles in our car fleet to 20% by 2020, we
+238
+Non-Financial Notes: Environmental Performance
+To Our
+Stakeholders
+-
+(https://www.kpmg.de/bescheinigungen/lib/aab_english.pdf).
+By reading and using the information contained in this report,
+each recipient confirms notice of provisions of the General
+Engagement Terms (including the limitation of our liability for
+negligence to EUR 4 million as stipulated in No. 9) and accepts the
+validity of the General Engagement Terms with respect to us.
+Munich, February 19, 2020
+Assurance Report of the Independent Auditor regarding Sustainability Information
+Hell
+ppa. Dollhofer
+250
+KPMG AG Wirtschaftsprüfungsgesellschaft
+2017
+Health Culture
+Index
+This report is issued for purposes of the Executive Board of SAP
+SE, Walldorf, only. We assume no responsibility with regard to any
+third parties.
+Risk Management and Risks
+10
+16
+SAP
+205-1
+V
+Business Conduct;
+V
+Business Conduct
+103-3
+10
+Business Conduct
+103-2
+V
+GRI Index
+V
+V
+103-1
+Other Litigation, Claims, and Legal
+206-1
+103-3
+Sustainability Management and Policies
+103-2
+Energy and Emissions;
+GRI Index
+103-1
+Energy and Emissions;
+V
+Material Topic: Climate and Energy
+16
+V
+Public Policy
+415-1
+Contingencies
+16
+SAP
+10
+Energy and Emissions;
+Business Conduct;
+UN Global
+Compact
+Principles
+Disclosures
+Specific
+Links and Content
+Topic
+About This Report
+102-56
+Management's Acknowledgement of the SAP Integrated Report 2019;
+Material Topic: Business Conduct
+Independent Assurance Report;
+102-55
+About This Report
+102-54
+Investor Services
+102-53
+Annual Reporting Cycle
+102-52
+GRI Content Index
+V
+Omissions
+V
+Goal
+Development
+Sustainable
+External
+Assurance
+Additional
+Information
+V
+V
+Boundaries
+V
+V
+V
+V
+V
+V
+V
+V
+V
+Sustainability Management and Policies
+302-1
+Energy and Emissions;
+Chart Generator
+Non-Financial Notes:
+Energy and Emissions;
+305-2
+Chart Generator
+Non-Financial Notes;
+Energy and Emissions;
+305-3
+305-1
+Energy and Emissions;
+302-4
+Statements IFRS
+Management Report
+Stakeholders
+Combined Group
+To Our
+Non-Financial Notes
+Information
+Energy and Emissions;
+Chart Generator
+Expected Developments and Opportunities;
+Report by the Supervisory Board
+Sustainability Management and Policies;
+GRI Index
+Not only do we create financial value for SAP and
+our shareholders, we also create wealth for a
+broad range of stakeholders. We do this through
+employee wages and benefits, payments to our
+value chain and ecosystem, and tax payments to
+local governments and economies, for example.
+We are working on understanding the impact our
+solutions have on our customers' success, and
+we document this impact in case studies.
+SAP does not conduct community assessment
+programs.
+103-3
+103-2
+103-1
+Non-Financial Notes;
+Material Topic: Financial Performance
+Chart Generator
+Non-Financial Notes;
+Energy and Emissions;
+305-5
+Non-Financial Notes
+Chart Generator;
+305-4
+305-6
+Additional
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+V
+V
+V
+GRI Index and UN Global Compact Communication on Progress
+the organization.
+The ratio uses only energy consumption within
+Five-Year Summary
+7,8
+Chart Generator;
+Energy and Emissions;
+Non-Financial Notes
+302-3
+Energy and Emissions;
+302-2
+Chart Generator
+Non-Financial Notes;
+Non-Financial Notes;
+V
+V
+V
+243
+V
+V
+8
+7, 8, 12, 13
+V
+SAP
+V
+7,8
+7, 8, 12, 13
+V
+SAP +
+external
+parties
+V
+78
+7, 8, 12, 13
+V
+SAP
+February 28, 2019
+102-51
+About This Report
+102-50
+Headcount and Personnel Expense;
+www.sap.com/industries.html
+102-7
+Strategy and Business Model;
+102-6
+Financial Performance: Review and Analysis;
+Strategy and Business Model
+Consolidated Financial Statements IFRS;
+102-5
+102-4
+Strategy and Business Model
+102-3
+Strategy and Business Model
+102-2
+Strategy and Business Model
+102-1
+Strategy and Business Model
+Disclosures
+Scope of Consolidation, Subsidiaries and Other Equity Investments;
+External
+Assurance
+6
+102-8
+Chart Generator;
+V
+V
+V
+V
+Financial Performance: Review and Analysis
+V
+V
+V
+V
+V
+V
+Compact
+Principles
+UN Global
+V
+Links and Content
+Standard
+General
+Data Center Electricity
+We define total energy consumed as the sum of all energy
+consumed through SAP-own operations, including energy from
+renewable sources. It is calculated based on the consumption data
+obtained through our measurements for the carbon emissions and
+is the sum of energy consumption from stationary combustion
+facilities, mobile combustion corporate cars, mobile combustion
+corporate jets, electricity offices, electricity data centers, purchased
+chilled water, purchased hot water, and purchased steam.
+Total Energy Consumed
+Permanent: The carbon reductions are permanent or have
+guarantees to ensure that any losses are replaced in the future.
+Verifiable: The performance of the carbon reduction projects
+can be readily and accurately quantified, monitored, and verified.
+In the net carbon emissions, purchased offsets are already
+deducted from our gross emissions.
+Additional: The carbon reductions are surplus to regulation and
+would not have happened without the offset.
+Real: The carbon reductions represent actual emission
+reductions that have already occurred.
+-
+We define data center electricity as the sum of electricity
+consumed to provide internal and external computation power in
+SAP data centers, contracted third-party data centers, and
+-
+The investments in sustainable projects are equivalent to a
+certain amount of carbon reductions.
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+A requirement for carbon offsets is the application of the
+Voluntary Carbon Standard (VCS) and equally very high quality
+standards. SAP ensures that the quantified carbon emission
+reductions from offsets are credible and that they meet four key
+accounting principles:
+hyperscale data centers. A data center is any global, regional, or
+local computing center (location with any number of server units)
+that is part of our global IT infrastructure strategy. In 2019, we
+continued to analyze and report internal and external data center
+energy consumption intensity against our non-IFRS revenue.
+Data center energy consumption per euro is calculated by
+dividing the electricity consumption of all internal and external data
+centers measured for the calculation of our carbon emissions by
+our revenue.
+The social and environmental data and information included in the SAP Integrated Report 2019 has been prepared in accordance with the
+GRI Standards: Core option.
+Additional
+Information
+GRI Index and UN Global Compact
+Communication on Progress
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+241
+Non-Financial Notes: Environmental Performance
+By e-waste, we mean any discarded electric devices used in our
+offices and data centers. Data is based on the weight of the devices
+(96% data coverage).
+E-Waste
+By water, we mean the total amount of freshwater withdrawn for
+our facilities. Data is based on estimations from sites and is largely
+extrapolated. Data was provided (estimated) for 53% of the total
+space; remaining data is extrapolated based on square meter
+footage.
+Water
+Additional Environmental Aspects
+As we expect that emissions from external data centers will
+continue to grow in the future, SAP committed to a green cloud
+strategy and to compensate the emissions with renewable
+electricity certificates. By referring to the green cloud, we mean that
+SAP's cloud is carbon neutral due to purchasing 100% renewable
+electricity certificates and compensation by offsets.
+We will continuously improve the data quality of energy
+consumption of external data centers.
+Non-Financial Notes
+Report by the Supervisory Board
+V
+Sustainable Procurement
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined Group
+To Our
+GRI Index and UN Global Compact Communication on Progress
+V
+Further Information on Economic,
+Environmental, and Social Performance
+V
+V
+V
+V
+242
+Stakeholder Engagement;
+Customers
+102-43
+Stakeholder Engagement
+V
+102-42
+Stakeholder Engagement;
+Customers;
+Non-Financial Notes
+102-49
+Non-Financial Notes
+102-48
+Materiality
+102-47
+Non-Financial Notes
+102-44
+102-46
+V
+✓
+V
+V
+Scope of Consolidation, Subsidiaries and Other Equity Investments
+All entities are covered by the report.
+Employees and Social Investments
+102-45
+Materiality;
+Stakeholder Engagement
+102-41
+Stakeholder Engagement
+102-13
+102-12
+7
+V
+We support a precautionary approach towards environmental management. While we see little apparent risk for
+our own operations, we do see an opportunity to help our customers anticipate and manage this risk in a more
+agile and responsive fashion through effective product lifecycle management and sustainable design.
+Risk Management and Risks
+102-11
+✓
+102-14
+Sustainable Procurement
+Assets (IFRS)
+102-10
+V
+V
+There were no changes with significant impacts regarding our own organization or our supply chain.
+Strategy and Business Model
+3
+V
+V
+Letter from the Co-CEOs
+Business Conduct;
+102-16
+102-40
+Sustainability Management and Policies
+Corporate Governance Report;
+102-18
+10
+10
+V
+V
+V
+V
+V
+V
+Memberships
+Memberships
+Strategy and Business Model
+Sustainability Management and Policies
+Employees and Social Investments
+102-9
+The emission of ozone-
+depleting substances
+(ODS) is not material to us
+as a software company.
+SAP
+V
+V
+V
+80
+V
+V
+SAP
+Employees and Social Investments
+External
+parties
+Investments
+Goals
+Our Contribution to the UN SDGs
+Strategy and Business Model;
+Development
+Sustainable
+UN
+Sustainability Management and Policies
+Social
+103-3
+V
+SAP +
+external
+parties
+SAP's governance of climate-related risks and opportunities.
+Content
+Governance
+Area
+The TCFD recommends companies to disclose their climate-related financial risks to investors, lenders, insurers, and other stakeholders. SAP
+started to report in alignment with the TCFD recommendations in 2018. For more information, see the table below.
+Task Force on Climate-Related
+Financial Disclosure (TCFD)
+Additional
+Information
+1 to 17
+Further Information on Economic,
+Environmental, and Social Performance
+Management Report
+Combined Group
+To Our
+Stakeholders
+GRI Index and UN Global Compact Communication on Progress
+246
+4
+V
+Consolidated Financial
+Statements IFRS
+Sustainability Management and Policies
+Powering Opportunity Through Digital Inclusion
+GRI Index
+Strategy and Business Model;
+SAP
+16
+V
+SAP +
+external
+parties
+V
+8,16
+V
+V
+V
+Security, Data Protection, and Privacy;
+Human Rights and Labor Standards
+Security, Data Protection, and Privacy;
+Human Rights and Labor Standards
+Security, Data Protection, and Privacy;
+Human Rights and Labor Standards;
+GRI Index
+418-1
+103-3
+103-2
+103-1
+Security, Data Protection, and Privacy
+00
+8
+407-1
+We believe that digital technologies will help
+companies and organizations contribute to the
+United Nations' 17 SDGs. We provide our
+customers and partners with the solutions that
+help them make a difference. This may be
+through empowering those disadvantaged in
+society, by offering financial services, building
+infrastructure, or combating climate change.
+As well as creating positive impacts through our
+solutions, SAP is deeply committed to
+empowering the world's youth, working adults,
+differently-abled people, and the unemployed
+with the right skills they need to thrive in the
+digital economy.
+103-2
+103-1
+Material Topic: Impact on Society
+We are not aware of any operations or suppliers
+as having significant risk for incidents of forced
+or compulsory labor.
+Human Rights and Labor Standards
+We are not aware of any operations or suppliers
+as having significant risk for incidents of child
+labor.
+409-1
+408-1
+5
+8,16
+V
+SAP
+Human Rights and Labor Standards
+We are not aware of any operations or suppliers
+in which the right to exercise freedom of
+association and collective bargaining may be at
+significant risk.
+3
+Human Rights and Labor Standards
+Chapter
+Material Topic: Human and Digital Rights
+Energy and Emissions
+Actual and potential impacts of climate-related risks and opportunities on SAP's
+businesses, strategy, and financial planning where such information is material.
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+249
+the evidence gathering procedures are more limited than in a
+reasonable assurance engagement and therefore significantly less
+assurance is obtained than in a reasonable assurance engagement.
+The choice of assurance procedures is subject to the auditor's own
+judgement.
+Assurance Report of the Independent Auditor regarding Sustainability Information
+We conducted our work in accordance with the International
+Standard on Assurance Engagements (ISAE) 3000 (Revised):
+"Assurance Engagements other than Audits or Reviews of Historical
+Financial Information" of the International Auditing and Assurance
+Standards Board (IAASB).
+Our responsibility is to express a conclusion based on our work
+performed on the aforementioned sustainability indicators and the
+sustainability disclosures.
+Practitioner's Responsibility
+Our audit firm applies the national statutory provisions and
+professional pronouncements for quality assurance, in particular
+the Professional Code for German Public Auditors and Chartered
+Accountants (in Germany) and the quality assurance standard of
+the German Institute of Public Auditors (Institut der
+Wirtschaftsprüfer, IDW) regarding quality assurance requirements
+in audit practice (IDW QS 1).
+We are independent from the entity in accordance with the
+requirements of independence and quality assurance set out in
+legal provisions and professional pronouncements and have fulfilled
+our additional professional obligations in accordance with these
+requirements.
+Independence and quality assurance on
+the part of the auditing firm
+This responsibility of the legal representatives includes the
+selection and application of appropriate methods to prepare the
+Report and the use of assumptions and estimates for individual
+qualitative and quantitative sustainability disclosures, which are
+reasonable under the circumstances. Furthermore, this
+responsibility includes designing, implementing and maintaining
+systems and processes relevant for the preparation of the Report in
+a way that is free of - intended or unintended - material
+misstatements.
+This standard requires that we plan and perform the assurance
+engagement to obtain reasonable assurance that the
+aforementioned sustainability indicators for the business year
+January 1 to December 31, 2019 have been prepared, in all material
+respects, in accordance with the Reporting Criteria; and to obtain
+limited assurance whether no matters have come to our attention
+that cause us to believe that the sustainability disclosures of the
+entity for the business year January 1 to December 31, 2019 have
+not been prepared, in all material respects, in accordance with the
+Reporting Criteria. We do not, however, provide a separate
+conclusion on each disclosure. In a limited assurance engagement
+Environmental Performance' as Reporting Criteria (further:
+"Reporting Criteria").
+Within the scope of our engagement, we performed amongst
+others the following assurance procedures:
+-
+Restriction of use / Clause on General
+Engagement Terms
+Based on the procedures performed and evidence received to
+obtain limited assurance, nothing has come to our attention that
+causes us to believe that the sustainability disclosures for the
+business year from January 1 to December 31, 2019, published in
+the Report, are not prepared, in all material respects, in accordance
+with the Reporting Criteria.
+Based on the procedures performed and evidence received to
+obtain reasonable assurance, the sustainability indicators for the
+business year from January 1 to December 31, 2019, published in
+the Report, including the Non-Financial Notes supplementing these
+indicators, are, in all material respects, presented in accordance
+with the Reporting Criteria.
+Conclusions
+Conducting site visits to Walldorf, St. Leon Rot (both Germany)
+and Newtown Square (USA) to assess the quality of information
+management systems and the reliability of the data as reported
+to corporate level.
+Substantive assurance procedures using internal and external
+documentation in order to determine in detail whether the
+sustainability indicators correspond to relevant underlying
+sources
+Performing control-based assurance procedures to assess the
+design, implementation and effectiveness of internal controls
+used to collect and process data reported for the sustainability
+indicators, including the consolidation of the data on corporate
+and site level
+-
+Reviewing the consistency of GRI Standard's in accordance with
+'Core Option' as declared by SAP with sustainability
+performance information presented in the Report
+Inquiries of personnel on corporate level responsible who are
+responsible for providing the data, for conducting internal
+controls and consolidation of the sustainability indicators,
+including the 'Non-Financial Notes'
+Evaluation of the design and implementation of the systems and
+processes for the collection, processing and monitoring of the
+sustainability indicators and sustainability disclosures included
+in the scope of this engagement
+Interviewing management at corporate level responsible for
+sustainability performance goal setting and monitoring process
+Assessing the suitability of the internally developed Reporting
+Criteria
+A risk analysis, including a media search, to identify relevant
+sustainability information on SAP's sustainability performance in
+the reporting period
+Inquiries of personnel on corporate level, who are responsible for
+the materiality analysis, in order to gain an understanding of the
+processes for determining material sustainability topics and
+respective reporting boundaries of SAP
+-
+-
+Analytical evaluation of data and trends of the sustainability
+indicators and sustainability disclosures
+The legal representatives of SAP are responsible for the
+preparation of the Report in accordance with the Reporting Criteria.
+SAP applies the principles and standard disclosures of the Global
+Reporting Initiative (GRI) Sustainability Reporting Standards, the
+Corporate Accounting and Reporting Standard (Scope 1 and 2) and
+the Corporate Value Chain (Scope 3) Standard of the Greenhouse
+Gas Protocol Initiative by the World Resources Institute and the
+World Business Council for Sustainable Development, in
+combination with internal guidelines, as described in the 'Non-
+Financial Notes: Social Performance' and the 'Non-Financial Notes:
+Management's Responsibility
+Selected sustainability disclosures included in the scope of our
+assurance engagement are marked in the GRI Content Index with
+the following symbol: „V“.
+Management's Acknowledgement of
+the SAP Integrated Report 2019
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+To Our
+Stakeholders
+247
+The International Integrated Reporting (<IR>) Framework
+launched by the International Integrated Reporting Council in
+December 2013 has a provision that an integrated report should
+include a statement in which management acknowledges its
+responsibility for the report. Our respective statement for 2019 is as
+follows:
+Task Force on Climate-Related Financial Disclosure (TCFD)
+Risk Management and Risks;
+Metrics and targets that SAP uses to assess and manage relevant climate-related risks Energy and Emissions;
+and opportunities where such information is material.
+Metrics and Targets
+Risk Management and Risks
+Risk Management and Risks;
+Strategy and Business Model;
+Energy and Emissions
+How does SAP identify, assess, and manage climate-related risks?
+Risk Management
+Chart Generator
+The Executive Board is aware of its responsibility to ensure the
+integrity of the SAP Integrated Report 2019. The members of the
+Executive Board have applied their collective mind to the
+preparation and presentation of our integrated report.
+Similar to previous reports, we have applied the Guiding
+Principles of the <IR> Framework, but we also must ensure our
+compliance with legal requirements, such as the provisions
+regarding financial reporting in the German Commercial Code as
+set out in detail in the German Accounting Standard 20 Group
+Management Report, while balancing other reporting standards
+such as the GRI Standards of the Global Sustainability Standards
+Board, with the <IR> Framework.
+For the following selected qualitative and quantitative
+sustainability disclosures included in About This Report, in the
+'Combined Management Report' (sections: SAP's Impact; Security,
+Data Protection, and Privacy; Employees and Social Investments;
+Energy and Emissions; and Business Conduct), in 'Further
+Information on Economic, Environmental, and Social Performance'
+(sections: Materiality; Stakeholder Engagement; Sustainability
+Management and Policies; Human Rights and Labor Standards;
+Sustainable Procurement; Waste and Water; Public Policy; GRI
+Index), including the Non-Financial Notes: Social Performance and
+the Non-Financial Notes: Environmental Performance (further
+"sustainability disclosures") a limited assurance engagement was
+performed.
+For the selected quantitative sustainability indicators Business
+Health Culture Index; Employee Engagement Index; Employee
+Retention Rate; Ratio of Women in Management; Total Gross and
+Net Carbon Emissions (Scope 1, Scope 2 and selected Scope 3
+emissions); Renewable Energy Certificates; Total Energy
+Consumption; and Customer Net Promoter Score, including the
+explanatory notes supplementing these indicators (further
+"sustainability indicators"), a reasonable assurance engagement
+was performed.
+https://www.sap.com/integrated-reports/2019/en.html.
+We have been engaged to perform an independent assurance
+engagement on selected qualitative and quantitative sustainability
+disclosures as well as on selected quantitative sustainability
+indicators included in the Integrated Report (further "Report") for
+the business year from January 1 to December 31, 2019 of SAP SE,
+Walldorf (further "SAP"), published under
+To the Executive Board of SAP SE, Walldorf
+Information
+Assurance Report of the Independent
+Auditor regarding Sustainability
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+Management's Acknowledgement of the SAP Integrated Report 2019
+248
+Our Executive Board believes that this integrated report is
+presented in accordance with the <IR> Framework as far as
+possible given the aforementioned restrictions. Should the
+aforementioned restrictions ever cease to apply, we will continue to
+strive for further alignment with the <IR> Framework in future
+reports.
+Our Executive Board has reviewed the SAP Integrated Report
+2019, including the consolidated financial statements, the
+combined management report, and the further information on
+economic, environmental, and social performance.
+Strategy
+Our assignment for the Executive Board of SAP SE, Walldorf, and
+professional liability is governed by the General Engagement Terms
+for Wirtschaftsprüfer and Wirtschaftsprüfungsgesellschaften
+(Allgemeine Auftragsbedingungen für Wirtschaftsprüfer und
+Wirtschaftsprüfungsgesellschaften) in the version dated January 1,
+V
+Products, Research & Development, and
+Services
+1,3,8
+External
+parties
+V
+244
+Employees and Social Investments
+Sustainability Management and Policies;
+Employees and Social Investments
+Sustainability Management and Policies;
+Employees and Social Investments
+9
+Nothing has a greater impact on our long-term
+success than the creativity, talent, and
+commitment of our people. Their ability to
+innovate and understand the needs of our
+customers delivers sustainable value to our
+company and our society.
+GRI Index
+103-3
+103-2
+103-1
+Material Topic: Human Capital
+www.sap.com/corporate/en/purpose.html
+Strategy and Business Model;
+203-2
+Employee
+Engagement
+The amount of these
+investments is not
+material for SAP.
+V
+1,2,6
+Employees and Social Investments
+Business
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+V
+Stakeholders
+GRI Index and UN Global Compact Communication on Progress
+6
+V
+SAP
+V
+V
+V
+To Our
+203-1
+Profitability
+V
+3, 12, 13, 14, 15
+V
+External
+parties
+V
+78
+3, 12, 13, 14, 15
+V
+78
+SAP
+7,8
+3, 12, 13, 14, 15
+V
+SAP
+V
+8
+7,8,13
+V
+V
+SAP +
+external
+13, 14, 15
+SAP
+Financial Performance: Review and Analysis
+Growth and
+V
+V
+V
+V
+✓
+3, 12, 13
+V
+external
+parties
+8,9
+13, 14, 15
+SAP +
+parties
+V
+8
+Injuries, diseases, lost
+days, or absenteeism are
+not a material issue for
+SAP, as we track our
+Business Health Culture
+Index on a global basis.
+SAP
+SAP
+3
+4,5,8,10
+V
+SAP
+V
+V
+V
+V
+SAP
+V
+V
+V
+V
+5,8
+SAP
+3.8
+GRI Index and UN Global Compact Communication on Progress
+V
+Training hours split by
+gender and employee
+category are not a
+material issue for SAP, as
+we align our training
+activities according to the
+needs of each employee
+and do not tolerate
+discrimination.
+V
+8
+R&D and
+Local
+Innovation
+5,8,10
+V
+SAP
+The split by gender is
+proprietary information for
+SAP.
+Employees and Social Investments
+404-3
+00
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined Group
+To Our
+245
+Additional
+incidences or high risk of
+diseases due to their work
+within SAP.
+a high number of
+there are no workers with
+Corporate Governance Statement;
+There are no workers with a high number of
+incidences or a high risk of diseases due to their
+work within SAP.
+405-1
+403-3
+health and safety
+management/worker
+8
+www.sap.com/investors/en/investors/governa
+V
+Workers' representation in
+formal joint
+403-1
+6
+✓
+SAP
+Employees and Social Investments
+Leadership
+SAP
+nce.html
+Chart Generator
+Material Topic: Innovation and Customer Loyalty
+material topic to SAP, as
+committees is not a
+Employees and Social Investments
+For continued employability issues and
+managing career endings, SAP has dedicated
+staff to support generational intelligence. These
+experts work to continuously improve processes
+and design programs that sustain employability
+for as long as possible. They provide training for
+cross-generation collaboration, facilitate flexible
+career endings for employees (for example, part-
+time options), and keep employees connected
+with the company after retirement. SAP also
+participates in external research studies and
+networks on workforce demographics to share
+and learn about best practices in this field.
+404-2
+Employees and Social Investments
+Performance Management System
+Customers;
+Sustainability Management and Policies;
+Stakeholder Engagement
+Sustainability Management and Policies;
+Customers;
+GRI Index
+Strategy and Business Model;
+At SAP, we are committed to our purpose of
+helping the world run better and improving
+people's lives. To help achieve this, we create
+innovations that help accelerate economic
+prosperity, drive positive social impact, and
+safeguard the planet. Our customers inspire
+what we do, from the first spark of innovation to
+the design and completion of new products, not
+to mention the way in which we serve their needs
+over time.
+404-1
+103-3
+103-2
+103-1
+V
+V
+4,046
+76,986
+11,564
+11,930
+16,620
+15,213
+5,362
+6,050
+6,017
+6,480
+9,739
+8,037
+Goodwill
+Total current assets
+Assets, Equity and Liabilities
+71
+74
+70
+70
+71
+Total non-current assets
+29,162
+23,736
+21,271
+10,228
+8,205
+6,759
+12,138
+14,931
+Total non-current liabilities (including contract liabilities/deferred income)
+7,867
+9,674
+10,210
+10,486
+14,462
+Total current liabilities (including contract liabilities/deferred income)
+31,651
+32,713
+30,554
+34,881
+45,002
+22,689
+23,311
+Days sales outstanding (DSO, in days)
+-5,615
+-3,153
+-1,479
+3,702
+4,011
+8,627
+5,314
+Cash and cash equivalents
+(net cash flows from operating activities in % of profit after tax)
+119
+128
+125
+105
+104
+Cash conversion rate
+14
+16
+16
+12
+8
+Free cash flow in % of total revenue
+3,001
+3,411
+Total equity (including contract liabilities/deferred income)
+Total assets
+Short-term investments
+211
+-2,493
+-8,286
+Net liquidity (net debt)
+-9,174
+-7,826
+-6,264
+-11,331
+-13,668
+Financial debts
+(cash and cash equivalents/short-term investments/restricted cash)
+3,559
+4,673
+4,785
+8,838
+5,382
+Group liquidity
+148
+971
+774
+67
+30,822
+28,877
+25,515
+1,790
+1,886
+Total dividend distributed³)
+1.15
+1.25
+1.40
+1.50
+1.58
+Dividend per share³) (in €)
+2.56
+3.04
+3.35
+3.42
+2.78
+Earnings per share, diluted (in €)
+3.77
+3.77
+4.43
+4.35
+1,671
+5.11
+1,498
+Total dividend distributed³) (in % of profit after tax)
+Five-Year Summary
+254
+74.85
+82.81
+100.35
+108.02
+124.72
+SAP share price - peak (in €)
+73.38
+82.81
+93.45
+86.93
+120.32
+SAP share price" (in €)
+45
+41
+41
+44
+56
+1,378
+3,627
+Earnings per share, basic (non-IFRS, in €)
+3.04
+56
+60
+60
+56
+51
+Equity ratio (total equity in % of total assets)
+2,001
+2,383
+2,771
+3,028
+4,266
+Contract liabilities/Deferred income - current (IFRS)")
+41,390
+44,277
+42,484
+51,502
+60,215
+23,295
+26,397
+Debt ratio (total liabilities²) in % of total assets)
+2.56
+49
+40
+3.35
+3.42
+2.78
+Earnings per share, basic (in €)
+1,229
+1,229
+1,229
+1,229
+1,229
+Issued shares" (in millions)
+Key SAP Stock Facts
+676
+1,145
+1,630
+3,715
+8,090
+Investments in goodwill, intangible assets, or property, plant, and equipment
+(including capitalizations due to acquisitions)
+44
+40
+44
+3,770
+2,844
+2.276
+182
+19
+1,130
+724
+785
+1,120
+830
+1,835
+738
+680
+587
+577
+689
+11
+5
+3
+33
+81
+Segment Results
+28
+Adjustment for restructuring
+621
+Segment revenue
+41
+42
+Segment margin (Segment profit in % of Segment revenue)
+75
+8,159
+8,510
+8,587
+8,922
+9,868
+Segment profit
+75
+74
+73
+74
+Segment gross margin (in % of corresponding revenue)
+18,854
+19,847
+20,857
+21,753
+23,544
+Applications, Technology & Services
+41
+Adjustment for share-based payment expenses
+Revenue adjustments
+New cloud bookings
+Order Entry
+14
+15
+16
+15
+11
+Return on equity (profit after tax in percentage of average equity)
+26.1
+26.9
+22.8
+26.3
+26.2
+Effective tax rate (non-IFRS, in %)
+23.4
+25.5
+19.5
+27.0
+26.7
+2,268
+Adjustment for acquisition-related charges
+1,814
+1,147
+Non-IFRS Adjustments
+40
+38
+40
+39
+35
+27
+29
+30
+29
+32
+Share of software orders greater than €5 million (in % of total software order entry)
+Share of software orders less than €1 million (in % of total software order entry)
+57,439
+57,291
+59,147
+58,530
+52,584
+Orders - number of on-premise software deals (in transactions)
+874
+1,448
+To Our
+Stakeholders
+43
+Intelligent Spend Group
+Net cash flows from investing activities
+Net cash flows from operating activities
+Liquidity and Cash Flow
+ΝΑ
+NA
+NA
+NA
+NA
+NA
+NA
+NA
+3 3 3 3
+NA
+NA
+NA
+NA
+3 3 3 3
+ΝΑ
+3333
+Net cash flows from financing activities
+2
+3,496
+5,045
+-636
+-1,001
+-1,275
+-1,458
+-817
+Free cash flow10)
+Capital expenditure
+-3,356
+-2,705
+-3,406
+3,283
+102
+-334
+-1,799
+-1,112
+-3,066
+-7,021
+3.638
+4,628
+4,303
+43
+Segment margin (Segment profit in % of Segment revenue)
+Segment profit
+253
+Five-Year Summary
+317
+340
+388
+531
+696
+68
+68
+68
+69
+70
+Segment gross margin (in % of corresponding revenue)
+Segment profit
+1,616
+1,925
+2,261
+2,629
+3,184
+Segment revenue
+To Our
+Stakeholders
+8
+Combined Group
+Consolidated Financial
+Statements IFRS
+78
+Segment gross margin (in % of corresponding revenue)
+508
+Segment revenue
+Qualtrics
+20
+18
+17
+20
+22
+Segment margin (Segment profit in % of Segment revenue)
+2015
+2016
+2017
+2018
+2019
+€ millions, unless otherwise stated
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Management Report
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+continuous success - Category of services from SAP Digital
+Business Services that support our cloud solutions and on-premise
+software to help customers move to the cloud and make SAP
+S/4HANA their Intelligent ERP of choice.
+connectivity - - Framework that describes the interrelatedness
+of SAP's social, environmental, and financial performance. Based on
+statistical analysis, it allowed us to quantify the impact of non-
+financial measures on the operating profit offering a holistic
+understanding of SAP's value creation. We do not quantify financial
+impact in the SAP Integrated Report 2019.
+cloud solutions from SAP - Category used to communicate all
+of SAP offerings and efforts related to the cloud, including platform,
+managed services, solutions, technology, and infrastructure.
+Code of Business Conduct - Global compliance document
+communicated to all SAP employees globally that contains a
+fundamental set of rules that define how we conduct our business
+and require the highest levels of integrity and ethics. The Code sets
+the standard for our dealings with customers, partners,
+competitors, and vendors, and each of our employees is bound by
+it. It is adapted locally and translated into local languages. We also
+expect our partners and suppliers to commit to meeting our high
+standards of integrity and sustainability through the SAP Partner
+Code of Conduct and the SAP Supplier Code of Conduct.
+Concur Technologies - see "SAP Concur."
+cloud service - "As-a-service" offerings where cloud services
+are offered as infrastructure as a service (IaaS), platform as a
+service (PaaS), or software as a service (SaaS). Also called cloud
+service model.
+Cloud Foundry - Open source platform as a service backed by
+the largest technology companies in the world, including Cisco, Dell
+EMC, Google, Hewlett Packard Enterprise, IBM, Microsoft, Pivotal,
+SAP, and SUSE. Its container-based architecture runs apps in any
+language on any choice of cloud platform; a Cloud Foundry
+environment is available for SAP Cloud Platform. See "platform as a
+service (PaaS)."
+cloud computing - Generic term for flexible, IT-related services
+available through, or hosted on, the Internet for consumers and
+business, including storage, computing power, software
+development environments, and applications, combined with
+service delivery. Accessed as needed “in the cloud," these services
+eliminate the need for in-house IT resources. See "cloud service."
+cloud credit(s) - As part of the consumption-based commercial
+model for SAP Cloud Platform, cloud credits are the monetary value
+for prepaid service consumption. These credits are acquired
+through the SAP Cloud Platform Enterprise Agreement through a
+pre-investment. With cloud credits as a payment equivalent,
+customers can consume the cloud services they need. See "SAP
+Cloud Platform" and "SAP Cloud Platform Enterprise Agreement."
+Cloud ERP - See "Intelligent ERP."
+carbon neutral - Goal or state of emitting net zero greenhouse
+gases for certain activities. This includes reducing emissions, but
+also using renewable electricity certificates or carbon credits.
+carbon impact - Term used for SAP's ambitious short-term and
+long-term carbon reduction targets. We measure our net carbon
+footprint according to Greenhouse Gas (GHG) Protocol. The net
+carbon footprint is calculated by deducting emission savings such
+as renewable electricity and carbon offsets from our gross carbon
+footprint.
+carbon emission offset - Unit of carbon dioxide-equivalent
+(CO2 equivalent) that is reduced, avoided, or sequestered to
+compensate for emissions occurring elsewhere.
+carbon credit - A tradable certificate that allows the holder to
+emit one ton of CO2 or the respective equivalent of any other
+greenhouse gas.
+Call to Lead - SAP program that brings together thought
+leaders and executives from across industries to share personal
+experiences and best practices for creating and supporting diverse
+and inclusive communities. Call to Lead Unplugged is the
+companion event series for executives to network and share their
+stories about thought leadership and customer experience.
+Callidus Software - Sales performance management company
+acquired by SAP in April 2018 known for lead-to-cash and configure,
+price, quote (CPQ) solutions. Former Callidus Cloud solutions are
+now part of the broader SAP C/4HANA suite, most available in SAP
+Sales Cloud. See "SAP C/4HANA" and "SAP Sales Cloud."
+Callidus Cloud - See "Callidus Software."
+C
+Enterprise strategy. See "SAP Cloud Platform" and "Intelligent
+Enterprise."
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Coresystems - Crowd sourcing and field service management
+company acquired by SAP in November 2018. Coresystems
+software is now integrated in SAP offerings. See "SAP C/4HANA",
+SAP Field Service Management," and "SAP Leonardo loT."
+Combined Group
+Corporate Oncology Program for Employees - Available in
+Australia, Canada, Germany, United Kingdom, and the United
+States, the program provides SAP employees facing cancer with
+access to an individual molecular genetic tumor analysis and
+interpretation.
+Customer First - Global cross-Board initiative that focuses on
+efforts to improve the way everyone at SAP works and cares for our
+customers by ensuring we provide a consistent, positive, end-to-
+end experience that delivers successful outcomes.
+Employee Engagement Index - Score for the level of employee
+commitment, pride, and loyalty, as well as the feeling of employees
+of being advocates for their company. The index is calculated based
+on the results of regular employee surveys.
+Embrace - A collaborative initiative between SAP, Microsoft, and
+global strategic service partners to help bring existing SAP ERP
+customers to an SAP S/4HANA-centric application landscape in the
+cloud.
+ecosystem - Construct encompassing SAP and our customers
+and partners that extends the value SAP can provide. By bringing
+together community-based insight, innovative partner solutions,
+and industry-leading collaboration and co-innovation, the
+ecosystem enables customers to extract the greatest possible value
+from their SAP investments. Our ecosystem currently consists of
+more than 20,000 partners worldwide that build, sell, service, and
+run SAP solutions and technology.
+E
+DSAG-Abbreviation for Deutschsprachige SAP-
+Anwendergruppe (German-Speaking SAP Users' Group), with more
+than 60,000 members in more than 3,500-member companies in
+German-speaking countries (Austria, Germany, and Switzerland).
+society. Digital technologies empower customers and consumers in
+a way they never could before, transforming their relationship with
+brands and products. Businesses need to meet these new
+challenges or will miss the potential business success to be realized
+in the digital economy.
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+257
+Glossary (Abridged)
+digital transformation - Concept that refers to the changes
+associated with the application of digital technology in all aspects of
+data platform (as a service) - See "SAP HANA Cloud."
+data warehouse/data warehousing - Electronic collection of
+information organized for easy access by computer programs. See
+"SAP Business Warehouse" and "SAP BW/4HANA."
+digital core - See "Intelligent ERP."
+data center energy - Amount of energy consumed in SAP's own
+and external data centers. An external data center is a local
+computing center with server units running SAP software that is
+operated by an external partner.
+D
+Customer Net Promoter Score (NPS) - Metric that describes
+the willingness of customers to recommend or promote an
+organization or company to others. It is defined as the percentage
+of customers that are likely to recommend an organization or
+company to friends or colleagues (promoters) minus the
+percentage of customers that are unlikely to do so.
+corporate social responsibility (CSR) - see "SAP Corporate
+Social Responsibility."
+employee retention - The ratio of the average number of
+employees minus the employees who voluntarily departed
+(excluding restructuring-related terminations) to the average
+number of employees (in full-time equivalents or FTEs).
+end-to-end process
+To Our
+Stakeholders
+256
+To Our
+Stakeholders
+255
+Five-Year Summary
+10) As at January 1, 2019, we changed our free cash flow definition to avoid effects resulting from the adoption of IFRS 16.
+9) Due to changes in sampling in 2018, Customer NPS is not fully comparable to the prior-years scores.
+8) Data center energy consumption normalized against € revenuerepresents the required energy to develop and operate solutions in internal and external data
+center.
+"Numbers at year end.
+6) Relates to different levels of management position.
+5) Full-time equivalents
+4) Average annual return assuming all dividends are reinvested.
+3) Numbers are based on the proposed dividend and on level of treasury stock at year end.
+2) As sum of current and non-current liability
+"SAP Group. Amounts according to IFRS, unless otherwise stated.
+100
+100
+100
+100
+100
+Renewable energy sourced (in %)
+Combined Group
+Glossary (Abridged)
+Management Report
+Glossary (Abridged)
+Business Technology Platform - Introduced in 2019, this
+portfolio represents a set of applications, services, technology,
+analytics, intelligent technologies, and tools. It addresses four key
+technology areas: database and data management; application
+development and integration; intelligent technologies; and an
+open cloud platform. It helps customers manage data
+orchestration across their entire landscape, providing real-time
+visibility into distributed data silos with data management solutions
+as well as an open cloud platform for integration and business
+process innovation. It is a core element of SAP's Intelligent
+business process - Set of logically related activities performed
+within an organization to complete a defined business task. SAP
+provides software and technology that enable and support business
+processes. Order processing and payroll are typical examples. SAP
+offers solutions that address end-to-end business processes. See
+"end-to-end process."
+business intelligence (BI) - Software that enables users to
+analyze an organization's raw data and make fact-based decisions.
+Bl-related processes include data mining, analytical processing,
+querying, and reporting. BI offerings from SAP include SAP
+BusinessObjects BI solutions, SAP Crystal Reports, as well as the
+SAP BusinessObjects BI platform. See "SAP Business Objects
+Business Intelligence."
+Business Health Culture Index (BHCI) - Score for the general
+cultural conditions in an organization that enable employees to stay
+healthy and balanced. The index is calculated based on the results
+of regular employee surveys.
+business data platform - See "SAP HANA."
+Build Customers for Life - Program that helps harmonize the
+customer experience in postsales with ongoing implementation
+projects, including customer success management, customer
+service management, outage management, and one customer
+portal. See "SAP for Me."
+blockchain - Based on distributed ledgers, blockchain
+technology securely records information across peer-to-peer
+networks. Although originally created for trading Bitcoin, the
+potential of blockchain reaches far beyond cryptocurrency.
+Blockchain ledgers can include land titles, loans, identities, logistics
+manifests - almost anything of value. The technology is still
+developing and areas for business application are growing. See
+"SAP Leonardo Blockchain."
+Big Data - In general, the term refers to the large volume of data
+created by billions of connected devices and people generating a
+tremendous amount of information about their behavior, location,
+and activity. This availability of massive amounts of data requires
+companies to rethink technology architecture and database
+structures. SAP technology can help manage Big Data through
+distributed storage and computing, real-time insight discovery, and
+insights embedded into business processes. See "SAP Cloud
+Platform Big Data Services."
+customers automate common business processes through
+software and technology. See "SAP Best Practices."
+best practices - A management concept that involves devising a
+method of process that most effectively produces a desired
+outcome. SAP applications use business best practices to help
+B
+Autism at Work - Outreach program connects people on the
+autism spectrum with SAP employment resources with an
+emphasis on careers in technology. In 2019, SAP onboarded people
+with autism in 27 different roles, in 14 countries, and 31 locations
+through this program.
+artificial intelligence (AI) - The standard definition of Al refers
+to the simulation of human intelligence processes by machines and
+computer systems. These processes include learning through the
+acquisition of information and rules for using information;
+reasoning through using the rules to reach approximate or definite
+conclusions; and by self-correction. Al capabilities are built into
+SAP's intelligent technologies. See "SAP Leonardo Artificial
+Intelligence" and "intelligent technologies."
+Ariba Network - Business commerce network where companies
+of all sizes can connect to their trading partners anywhere, at any
+time from any application or device to buy, sell, and manage their
+cash more efficiently and effectively than ever before. Companies
+around the world use Ariba Network to simplify interenterprise
+commerce and enhance the results they deliver. In 2019,
+partnerships with Barclaycard Commercial Payments, American
+Express, and Standard Chartered Bank helped establish new
+payment and financial supply chain solutions on Ariba Network. See
+"SAP Business Network."
+analytics - Discovery and communication of meaningful
+patterns in data. It is applied to business data to describe, predict,
+and improve business performance; recommend action; and guide
+decision making across all organizations and functions in a
+company. Analytics helps companies gain new insight and
+understanding of their business performance based on data and
+statistical methods. See "SAP Analytics" and "SAP Analytics Cloud."
+Ariba See "SAP Ariba."
+accessibility - Umbrella term for our efforts to ensure that the
+environment at SAP and large global events hosted by SAP are
+accessible for differently-abled people, such as by adding live and
+closed captioning on videos and keynote screens. We also endeavor
+to ensure that our software is accessible to the differently-abled.
+Americas' SAP Users' Group (ASUG) - Non-profit organization
+comprising customer companies dedicated to providing
+educational and networking opportunities in support of SAP
+software and implementation. User groups are established in
+regions around the world to share knowledge and influence SAP
+development efforts. ASUG is the largest user group with more than
+100,000 members from thousands of companies across the SAP
+ecosystem.
+A
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+12
+-
+engagement survey - SAP's annual engagement survey under
+the theme of #Unfiltered in 2019 started a new era of feedback
+experience using Qualtrics technology. Formerly called "People
+Survey."
+Next Generation Partnering - A multiyear transformative
+movement with new initiatives, programs, tools and a magnified
+focus on the ecosystem. Empowering partners to innovate, with
+unparalleled economic opportunity and a frictionless business
+experience is our priority. We will help our joint customers realize
+the power of the intelligent enterprise and lead the experience
+economy together.
+N
+managed cloud - Deployment model that implies resources are
+dedicated to one customer and accessed through a VPN. The
+infrastructure is owned, managed, and operated by the cloud
+provider in the cloud provider's data center. SAP HANA Enterprise
+Cloud is SAP's managed cloud service. See "SAP HANA Enterprise
+Cloud."
+machine learning - Technology that teaches computers how to
+perform tasks by learning from data - instead of being explicitly
+programmed. It uses sophisticated algorithms to "learn" from
+massive volumes of Big Data. Machine learning describes
+algorithms that learn from data and support employees to focus on
+higher value work, thus empowering enterprises to scale innovative
+solutions and make their organization intelligent.
+M
+functional areas currently into 12 LoBs: asset management,
+commerce, finance, human resources, manufacturing, marketing,
+R&D/engineering, sales, service, sourcing and procurement, supply
+chain management, and sustainability.
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+259
+Glossary (Abridged)
+line of business (LoB) - Internal organizational area or business
+unit in a company (division) that combines all responsibilities for a
+product, group, or set of processes, such as sales, purchasing,
+human resources, finance, marketing, and so on. SAP organizes its
+Learning for Life - Program for all skill building initiatives from
+SAP Corporate Social Responsibility (SAP CSR). This program
+helps support future workforce needs, reskilling efforts, and
+underserved people in the education/tech space including: women
+and those from culturally diverse backgrounds.
+Leadership Trust Score - Based on the Net Promoter Score
+(NPS) methodology that results from a question in our annual
+global employee survey that gauges employees' trust in our leaders.
+It measures our collective effort to foster a work environment based
+on trust. We use this score to further enhance accountability for our
+leaders and executive management.
+L
+key performance indicator (KPI) - Performance figure for
+which threshold values are defined and against which validation is
+executed.
+on demand - Model of software deployment whereby providers
+license software for use as a service, usually in the cloud, so
+customers can use it when they need it, that is, "on demand." It
+eliminates the need for IT resources to manage infrastructure and
+thereby reduces operational expenses. See "cloud solutions from
+SAP."
+K
+on premise - Deployment model where a software license is
+purchased and deployed on the servers at a customer location. The
+customer manages and controls the software. SAP uses "on
+premise" as its standard term and not "on premises".
+operational data (O-data) - Data that shows what is happening
+in your business. See “Experience Management (XM)."
+Glossary (Abridged)
+260
+Qualtrics Partner Network - Group of partners carefully
+selected for their deep industry knowledge, unique expertise,
+experience and insights. This group has been expanded to more
+than 120 member companies, including EY, Deloitte Digital, and
+Korn Ferry.
+Qualtrics EmployeeXM - Solution that has capabilities to gather
+employee feedback and propose actions for HR to help improve the
+employee experience.
+Qualtrics Customer XM - Solution that has capabilities to
+support specific use cases and help process customer feedback.
+Qualtrics Developer Platform - Business platform that helps
+organizations embed Qualtrics solutions into existing software
+installations, automate business processes, and bring experience
+data (X-data) from other channels into Qualtrics.
+Qualtrics CoreXM - Solution that provides a foundation for
+experience management (XM) and is designed to help customers
+analyze experience data (X-data), improve feedback quality, and
+take real-time action on insights.
+Qualtrics BrandXM - Solution that aims to make visible
+consumer sentiment towards a brand.
+Qualtrics - SAP acquired Qualtrics International, Inc., in January
+2019, the global pioneer of Experience Management (XM) software.
+The company, with headquarters in Provo, Utah, and Seattle,
+Washington, serves more than 9,000 enterprises worldwide with a
+technology platform that organizations use to collect, manage, and
+act on experience data. More than 11,000 customers in over 100
+countries currently use Qualtrics software. See "Experience
+Management (XM)."
+Q
+public cloud - Cloud deployment that provides consumers
+access to a provider's software applications running in a cloud
+infrastructure. The resources are located on the premises of the
+cloud provider, not of the customer, and are shared by multiple
+customers accessing them through the Internet.
+project success - Category of services from SAP Digital
+Business Services that supports the adoption of SAP products and
+technologies, use of emerging technologies and implementation of
+or transition to SAP S/4HANA.
+private edition - See "single tenant edition."
+private option - See "single tenant edition."
+premium success - Category of services from SAP Digital
+Business Services that supports large-scale transformation
+initiatives through a single, strategic, and customized on-site
+engagement. See "SAP Digital Business Services."
+powered by SAP HANA - An SAP offering powered by SAP
+HANA runs on the SAP HANA database. Partner solutions or
+applications that are powered by SAP HANA are certified by SAP to
+run on SAP HANA. These applications take advantage of distinctive
+capabilities that deliver key benefits, such as simpler
+administration, reduced overhead, and better business intelligence
+over conventional and traditional technology platforms. See "SAP
+HANA."
+consumer-created or acquired applications. PaaS consumers do
+not manage underlying cloud infrastructure but have control over
+deployed applications. SAP Cloud Platform is the PaaS offering
+from SAP. See "SAP Cloud Platform."
+platform as a service (PaaS) - Cloud infrastructure, operating
+system, programming languages, libraries, services, tools and
+typically a defined level of support for consumers to deploy
+People Survey - See “engagement survey."
+P
+Own SAP - Share purchase plan for SAP employees. In 2019,
+68% of our employees participated in Own SAP purchasing a total
+of 5.2 million shares.
+open source - Software based on the concept of software
+developers coming together to build a virtual community and
+solving a common problem by developing working software that
+everyone has a right to change. Successful development projects
+under the open source model include Linux, a free operating system
+supported by SAP.
+Set of activities supporting defined
+management, core, or support processes. Customers can use these
+activities as a reference to map their own processes. See "business
+process."
+intelligent technologies - Term used to describe tools and
+technology designed to turn intelligence and insight into business
+outcomes such as machine learning, artificial intelligence, Internet
+of Things, and blockchain. Intelligent technologies are embedded
+within our intelligent suite of applications and applied to processes
+that integrate both SAP and third-party data and applications.
+Formerly called SAP Leonardo intelligent technologies.
+Intelligent Spend Management - A program and initiative that
+brings together the best from SAP Ariba, SAP Fieldglass, and SAP
+Concur solutions in the areas of finance, sourcing, and
+procurement. The term refers to the capture of every source of
+spend, across each category (such as direct and indirect spending,
+travel and expense spending, as well as services and external labor
+spending), for one unified view; freeing businesses to focus on more
+important challenges.
+industry - An economic sector characterized by a typical value
+chain, business processes, and set of products and services that
+the companies operating in it have in common. At SAP, "industries"
+is also used as a term to differentiate between line-of-business
+functions such as marketing, procurement, and finance, and those
+functions specific to an industry. The SAP portfolio addresses the
+hybrid landscape - Mix of on-premise and any cloud
+deployment models. Alternatively referred to as an "on premise to
+cloud" or "hybrid environment."
+hybrid cloud - Deployment model that uses resources
+comprised of a mix of two or more distinct cloud deployment
+models that are integrated by standardized or proprietary
+technology enabling data and application portability. Also called
+"hybrid cloud deployment model."
+"How We Run" - Corporate behaviors (core values) that
+describe how we get things done at SAP and what makes our
+culture unique. These five behaviors are a cornerstone of our value-
+driven culture: tell it like it is; stay curious; embrace differences;
+keep the promise; build bridges, not silos.
+Hasso Plattner Founders' Award - Introduced in 2014, this
+award represents the most prestigious employee recognition at SAP
+for delivering our vision and strategy, presented annually to an
+individual or a team. The award is named after one of the original
+founders of SAP and current chairman of the SAP Supervisory
+Board, Prof. Dr. Hasso Plattner.
+H
+green cloud - Term to describe our strategy to run all internal,
+external, and hyperscale data centers with 100% renewable
+electricity through the purchase of Renewable Energy Certificates.
+See "Renewable Energy Certificates (RECs)."
+Global Customer Reference Program - Program offering
+detailed information about reference customers from around the
+world using a database that channel partners can access to help
+close a deal with a new SAP customer. Reference customers have
+agreed to participate in one or more reference activities on behalf of
+SAP.
+Gigya - Company acquired by SAP in 2017 that offers customer
+identity technology and access management solutions designed to
+meet privacy, compliance, and security best practices. Gigya
+solutions are now included in the SAP Customer Data Cloud
+solution as part of the SAP C/4HANA suite. See "SAP C/4HANA"
+and "SAP Customer Data Cloud."
+General Data Protection Regulation (GDPR) - Set of laws that
+came into force on May 25, 2018, which affects data privacy
+practices throughout the European Union (EU).
+Fieldglass - See "SAP Fieldglass."
+G
+F
+customers and stakeholders. The term refers to both the
+technology as well as the discipline of seeking out and closing the
+gaps found in the four core experiences of business - customer,
+product, employee, and brand. See "Qualtrics XM Platform."
+Experience Management (XM) - Experience Management (XM)
+solutions combine experience data (X-data) and operational data
+(O-data) to measure and improve the experiences provided to
+experience data (X-data) - Data that shows you what your
+customers feel about your products and services. See "Experience
+Management (XM)."
+Experience Company powered by the Intelligent Enterprise -
+The SAP strategy that asserts every digital interaction is an
+opportunity for a company to positively influence someone.
+Through these interactions, companies can measure "experiences"
+- such as customer satisfaction, employee engagement, partner
+collaboration, and brand impact, for example. We want to help every
+SAP customer thrive in the "experience economy" by equipping
+them with the technologies they need to become intelligent
+enterprises. See "Intelligent Enterprise."
+e-waste (electronic waste) - Any discarded electric devices
+used in our offices and data centers, such as computers, computer
+monitors, or mobile devices.
+enterprise resource planning - See "SAP ERP."
+258
+intelligent suite - Suite of LoB applications that include ERP
+and digital supply chain management, as well as solutions for
+customer experience, intelligent spend management, and human
+experience management. The suite is differentiated through
+industry-specific business processes for end-to-end scenarios. It is
+a core element of SAP's Intelligent Enterprise strategy. See
+"Intelligent Enterprise."
+Glossary (Abridged)
+Combined Group
+Intelligent ERP - Term is used to message our ERP offerings
+that now go beyond core ERP and enterprise management to
+include functionality from selected finance and digital supply chain
+solutions. It speaks to the added value and differentiator of our on-
+premise and cloud-based ERP solutions, including SAP ERP, SAP
+S/4HANA, and SAP S/4HANA Cloud. It replaces the terms "digital
+core" and "Cloud ERP" used in the past. It is not the name of an
+individual product, suite, or portfolio.
+learning, blockchain, Internet of Things, and analytics capabilities to
+help scale innovation. Our software, technologies, and services
+address the core elements of experience, intelligence, and
+operations for the 25 industries and the 12 lines of business (LoBs)
+we serve with our portfolio. See “intelligent suite," "Business
+Technology Platform," and "Experience Management (XM)."
+Intelligent Enterprise - SAP's strategy for an event-driven, real-
+time business powered by technology that includes machine
+Insight to Actions - A cross-Board collaboration that identified
+over 20 initiatives to address systemic customer feedback. See
+"Experience Management (XM)"
+Innovation Score - Measure from our yearly employee survey
+that focuses on how the innovation culture at SAP is perceived by
+our employees.
+innovation - SAP invests in three types of product and service
+innovation: continuous innovation, which involves incremental
+improvements to existing offerings; adjacent innovation, which are
+enhancements to the existing portfolio using new technologies or
+applying existing knowledge to new markets; and transformative
+innovation, which occurs as a result of new trends, technologies,
+and business models.
+in-memory database - Database that keeps all active records in
+main memory rather than on disk. Accessing in-memory records is
+considerably faster than retrieving them from the disk, significantly
+increasing performance. SAP HANA is a groundbreaking database
+that allows businesses to take advantage of in-memory computing.
+See "SAP HANA."
+in-memory computing - Major advance in information
+technology that creates a dramatic change in computing, analytics,
+and data storage. Combining advances in multicore processing with
+more affordable servers, in-memory computing allows information
+to be stored in the main memory rather than in relational databases
+to greatly accelerate processing times. It disrupts the traditional IT
+stack comprised of hardware, middleware, and software, where
+disk-based relational databases can become bottlenecks.
+infrastructure as a service (laaS) - Term referring to the
+processing, storage, network, and other computing resources as
+well as a defined level of support for consumers to deploy software
+(such as operating systems and applications). IaaS consumers do
+not manage underlying cloud infrastructure but may control
+networking components (such as host firewalls).
+industry segment - An economic subsector within an industry
+that is characterized by a typical value chain, business processes,
+and set of products and services that the companies operating in it
+have in common. Examples include agribusiness and fashion.
+industry portfolios - Software portfolios that address the
+business needs of 25 different industries. These portfolios are
+included under their separate names, starting with "SAP for
+Aerospace & Defense (SAP for A&D)."
+Industry 4.Now - Board-sponsored and funded program aims
+to refocus SAP's market presence and increase revenue in the areas
+covered by Industry 4.0 and to grow awareness of SAP solutions in
+this space. The program includes go-to-market strategy and further
+software development.
+Industry 4.0 - Current trend of automation and data exchange
+in manufacturing technologies. It includes cyberphysical systems,
+the Internet of Things (IoT), industrial loT (lloT), cloud computing,
+cognitive computing, and artificial intelligence. See "Industry
+4.Now."
+industry cluster - A broad economic sector whose industries
+have certain aspects of their value chain, business processes, or a
+set of products and services in common. Examples include
+consumer or discrete manufacturing.
+needs of 25 industries and additional subsegments. See "industry
+segment."
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+To Our
+Stakeholders
+Effective tax rate (IFRS, in %)
+11
+13
+10,765
+13,035
+Personnel expenses - excluding share-based payments
+10,170
+10,229
+11,643
+11,595
+14,870
+Personnel expenses
+20,938
+23,363
+24,872
+27,060
+27,634
+Number of employees in research and development 5). 7)
+75,180
+80,609
+86,999
+93,709
+10,523
+99,157
+9,444
+Personnel expenses per employee - excluding share-based payments (in €
+thousands)
+26.4
+Women in management (total, in % of total number of employees)
+31.0
+32.4
+32.8
+33.0
+33.5
+Women working at SAP (in %)
+57
+64
+56
+61
+45
+Operating profit per employee (in € thousands)
+126
+117
+121
+115
+131
+9,446
+25.7
+Number of employees, annual average 5)
+88,543
+101.73
+114.80
+106.80
+147.81
+Market capitalization" (in € billions)
+54.53
+64.90
+82.43
+82.47
+84.31
+2015
+2016
+2017
+2018
+2019
+SAP share price - low (in €)
+€ millions, unless otherwise stated
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+90.18
+84,183
+Return on SAP shares 4), 1-year investment period (in %)
+-7.0
+96,498
+100,330
+Number of employees 5). 7)
+Employees and Personnel Expenses
+6.7
+9.2
+10.2
+13.2
+13.9
+Return on SAP shares), 10-year investment period (in %)
+14.0
+17.3
+9.0
+6.9
+15.6
+Return on SAP shares 4), 5-year investment period (in %)
+25.9
+14.7
+12.8
+38.4
+11
+25.4
+23.6
+12.6
+10.9
+Greenhouse gas emissions per € revenue (in grams)
+6.0
+4.7
+3.8
+3.3
+3.0
+Greenhouse gas emissions per employee 5) (in tons)
+455
+380
+325
+310
+300
+Net greenhouse gas emissions (in kilotons)
+22.4
+19.2
+17.8
+-5.0
+13.9
+-6.0
+17.3
+Total energy consumption (in GWh)
+12
+Data center energy per € revenue) (in Wh)
+249
+243
+265
+318
+338
+Total data center electricity (in GWh)
+12,500
+11,800
+10,600
+9,800
+9,600
+Energy consumed per employee 5) (in kWh)
+965
+950
+920
+919
+955
+21.9
+24.5
+11.1
+7.9
+Customer Net Promoter Score⁹)
+Customer
+Total turnover rate (in %)
+Employee retention (in %)
+Leadership Trust Index (LTI, as NPS)
+Business Health Culture Index (BHCI, in %)
+Employee Engagement Index (in %)
+25.3
+25.9
+26.8
+27.5
+27.8
+Women managing teams6). 7) (in %)
+19.2
+20.8
+21.7
+21.1
+22.5
+Women managing managers6). 7) (in %)
+Environment
+7.7
+83
+85
+7.6
+10.7
+92.9
+94.3
+94.6
+93.9
+93.3
+52
+57
+61
+60
+59
+75
+78
+79
+78
+80
+82
+85
+84
+3,056
+Trade and other receivables
+To Our
+General and administration (IFRS)
+-5,782
+-6.265
+-6,924
+-6,781
+-7,693
+Sales and marketing (IFRS)
+17.2
+18.0
+18.0
+19.1
+18.6
+Research and development (in % of total operating expenses, IFRS)
+13.7
+13.8
+14.3
+14.7
+-1,629
+-1,098
+-1,075
+-1,005
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Cloud gross margin (in % of corresponding revenue, IFRS)
+Profits and Margins
+€ millions, unless otherwise stated
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+15.6
+Combined Group
+252
+-1,289
+-1,268
+-1,272
+-1,362
+-1,872
+Depreciation and amortization (IFRS)
+-1,048
+Five-Year Summary
+Research and development (in % of total revenue, IFRS)
+-2,845
+-3,044
+-3,408
+151
+254
+-2,797
+-2,932
+-3,010
+-3,089
+-3,471
+-3,158
+-3,302
+-3,662
+-3,151
+Non-IFRS adjustments
+Cost of services (non-IFRS)
+Non-IFRS adjustments
+Cost of services (IFRS)
+-3,817
+-4,247
+Cost of cloud and software (non-IFRS)
+516
+485
+Total cost of revenue (IFRS)
+2019
+166
+-2,991
+167
+-3,352
+-5,562
+-5,985
+683
+598
+-6,245
+-6,583
+-7,051
+589
+-6,462
+113
+494
+-6,969
+-3,624
+Research and development (IFRS)
+-7,655
+Total cost of revenue (non-IFRS)
+700
+-7,462
+-8,355
+-2,765
+-2,976
+-4,292
+423
+2018
+2016
+Non-IFRS adjustments
+Operating profit (IFRS)
+73.3
+72.9
+72.5
+71.8
+72.3
+Gross margin (in % of total revenue, non-IFRS)
+70.0
+70.2
+69.9
+69.8
+69.7
+86.6
+87.4
+87.0
+87.4
+4,473
+5,703
+4,877
+5,135
+20.5
+23.3
+20.8
+23.1
+16.2
+Operating margin (in % of total revenue, IFRS)
+6,348
+6,633
+87.4
+6,769
+8,208
+Operating profit (non-IFRS)
+2,095
+1,498
+1,892
+1,459
+3,735
+4,252
+7,163
+84.7
+85.9
+85.8
+80.8
+81.0
+80.1
+79.8
+79.6
+Cloud and software gross margin (in % of corresponding revenue, IFRS)
+65.6
+64.4
+Cloud and software gross margin (in % of corresponding revenue, non-IFRS)
+Services gross margin (in % of corresponding revenue, IFRS)
+62.2
+68.2
+Cloud gross margin (in % of corresponding revenue, non-IFRS)
+55.3
+56.1
+56.0
+58.6
+63.5
+2015
+63.1
+2017
+81.6
+82.2
+86.6
+86.6
+Gross margin (in % of total revenue, IFRS)
+Software and support gross margin (non-IFRS, in %)
+Software and support gross margin (IFRS, in %)
+22.7
+18.2
+23.5
+81.5
+22.9
+Services gross margin (in % of corresponding revenue, non-IFRS)
+18.1
+15.1
+19.3
+19.2
+19.4
+83.8
+83.7
+25.0
+-2,008
+-3,313
+-1,944
+-3,495
+-3,893
+18,427
+17,226
+Services (IFRS = non-IFRS)
+Total revenue (IFRS)
+4,541
+27,553
+4,086
+24,708
+3,912
+23,461
+3,639
+22,062
+3,579
+20,793
+81
+33
+3
+5
+11
+27,634
+24,741
+19,552
+20,655
+23,093
+Cloud and software (non-IFRS)
+Software support (non-IFRS)
+11,548
+10,982
+10,908
+10,572
+10,094
+Cloud and software (IFRS)
+23,012
+23,464
+20,622
+18,424
+17,214
+Non-IFRS adjustments
+81
+33
+3
+3
+11
+19,549
+22,067
+20,805
+67
+-1,022
+Cost of cloud (non-IFRS)
+-2,228
+-1,855
+Cost of software licenses and support (IFRS)
+-2,159
+-2,092
+-1,427
+-2,234
+-1,313
+247
+-1,066
+-2,182
+-789
+-2,291
+Non-IFRS adjustments
+141
+130
+190
+238
+283
+232
+0
+-1,660
+233
+305
+65
+63
+61
+60
+67
+65
+63
+61
+213
+60
+Total revenue (non-IFRS)
+Share of more predictable revenue (IFRS, in %)
+Share of more predictable revenue (non-IFRS, in %)
+Operating Expenses
+Cost of cloud (IFRS)
+-2,534
+-2,068
+Non-IFRS adjustments
+Non-IFRS adjustments
+1
+0
+0
+.270
+Additional Information
+251
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+269
+Five-Year Summary¹)
+Revenues
+Cloud (IFRS)
+Additional
+Information
+2019
+2018
+2017
+2016
+2015
+€ millions, unless otherwise stated
+6.933
+268
+252
+-4,160
+343
+446
+Non-IFRS adjustments
+-4,692
+Cost of cloud and software (IFRS)
+-2,044
+To Our
+Stakeholders
+Combined Group
+256
+Management Report
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+Additional Information
+Five-Year Summary
+Glossary (Abridged)
+Financial Calendar and Addresses
+Financial and Sustainability Publications.
+Publication Details
+Consolidated Financial
+Statements IFRS
+Operating margin (in % of total revenue, non-IFRS)
+4,993
+2,993
+0
+-1,962
+2
+1
+Software licenses (non-IFRS)
+4,533
+4,647
+4,872
+0
+4,862
+Software support (IFRS)
+11,547
+10,981
+10,908
+10,571
+10,093
+Non-IFRS adjustments
+0
+4,836
+3,769
+0
+4,835
+2.286
+Non-IFRS adjustments
+81
+33
+2
+2
+10
+Cloud (non-IFRS)
+Non-IFRS adjustments
+7,013
+3,771
+2,995
+2,296
+Software licenses (IFRS)
+4,533
+4,647
+4,872
+4,859
+5,027
+Cost of software licenses and support (non-IFRS)
+29.7
+28.9
+29.0
+3,629
+4,088
+3,370
+Profit after tax
+-935
+-1,242
+-983
+-1,511
+-1,226
+Income tax expense
+19.2
+22.1
+21.4
+22.7
+-2,018
+PBT margin (in % of revenues)
+30.5
+16.7
+Financial income, net
+198
+-47
+188
+-29
+30.1
+Profit before tax (PBT)
+4,596
+5,600
+5,029
+-5
+4,872
+3,991
+Dividend payment
+May 26
+Mannheim, Germany
+Annual General Meeting of Shareholders,
+Results for the first quarter of 2020
+May 20
+April 21
+Additional
+Information
+Financial Calendar
+July 27
+Financial Calendar and Addresses
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+2020
+Results for the second quarter and half-year 2020
+2021
+Results for the third quarter of 2020
+Fax +49 6227 74 08 05
+Tel. +49 6227 76 73 36
+Investor Relations
+For more information about the matters discussed in the report,
+contact:
+The addresses of all our international subsidiaries and sales
+partners are available on our public Web site at
+www.sap.com/directory/main.html.
+Web site www.sap.com
+Fax +49 6227 75 75 75
+E-mail info@sap.com
+October 26
+Tel. +49 6227 74 74 74
+Dietmar-Hopp-Allee 16
+SAP SE
+Group Headquarters
+267
+Addresses
+Results for the fourth quarter and full-year 2020
+January 29
+69190 Walldorf
+Germany
+Glossary (Abridged)
+total energy consumed - Sum of all energy consumed through
+SAP's own operations, including energy from renewable sources. It
+covers all Scope 1 and Scope 2 emissions.
+women in management - Term used to refer to the percentage
+of women in management positions (managing teams, managing
+managers, executive boards) as compared to the total number of
+managers, expressed by the number of individuals and not full-time
+equivalents (FTEs). Throughout 2019, SAP sponsored and hosted
+events to attract, develop, and support women around the world.
+Ongoing initiatives include Women's Professional Growth Webinar
+series, our grassroots Business Women's Network, and our
+Women@SAP online community.
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+Glossary (Abridged)
+266
+SAP Together - Global internal program that uses the Benivity
+online platform to help SAP employees engage in social causes. It is
+part of SAP CSR efforts.
+SAP SuccessFactors Human Experience Management (HXM)
+Suite - In 2019, SAP changed the name of SAP SuccessFactors
+Human Capital Management Suite to SAP SuccessFactors Human
+Experience (HXM) Suite to include employee experience
+capabilities and XM functionality from Qualtrics. This suite of HR
+solutions includes offerings for core HR and payroll, talent
+management, employee experience, people analytics, and
+workforce planning.
+SAP Success Factors HCM Suite - See "SAP SuccessFactors
+Human Experience Management Suite."
+SAP SuccessFactors Employee Central Payroll - Cloud
+solution that extends the SAP SuccessFactors HXM Suite to include
+payroll accounting and management. See "SAP SuccessFactors
+Human Experience Management Suite."
+SAP SuccessFactors Employee Central - Solution that is the
+foundation of the SAP SuccessFactors HXM Suite, offering core HR
+software delivered securely as a service from the cloud. It offers one
+global system of record, complete workforce overview combining
+HR and talent data, powerful analytics, and social collaboration fine-
+tuned to meet local needs. See "SAP SuccessFactors Human
+Experience Management Suite."
+SAP SuccessFactors - Cloud solutions that help organizations
+increase the value of their workforce by developing, managing,
+engaging, and empowering their people. These solutions address all
+aspects of human resources (HR), from core HR, payroll, and talent
+management to people analytics and workforce planning. See "SAP
+SuccessFactors Human Experience Management Suite."
+SAP solutions for sustainability - Category of solutions that
+helps companies measure sustainability key performance
+indicators; energy and carbon management; and environment,
+health, and safety. SAP solutions for sustainability help
+organizations tackle energy consumption and greenhouse gas
+emissions, as well as support efforts in product safety, health care,
+and sustainability performance management.
+SAP solutions for small businesses and midsize companies -
+Category of solutions that combine business management and
+business intelligence software for small and midsize enterprises
+(SMEs). It currently includes Intelligent ERP solutions, Edge editions
+of SAP BusinessObjects BI solutions, and other SME services. As
+with large enterprises, SMEs seek to streamline business processes,
+cut costs, drive growth, and increase profitability by receiving the
+right information at the right time - across all operations.
+SAP Solution Manager - End-to-end application lifecycle
+management solution to help streamline business processes and
+proactively address improvement options, increasing efficiency and
+decreasing risk with the SAP maintenance agreement. Customers
+can centralize, enhance, automate, and improve the management of
+their entire system landscape (SAP and third party), thus reducing
+total cost of ownership. The solution includes features such as
+diagnostics, testing, root cause analysis, and solution monitoring.
+SAP solutions for enterprise information management (EIM)
+- these solutions provide capabilities to understand, integrate,
+cleanses, manage, associate, and archive data. The data landscape
+can include SAP software systems (such as SAP S/4HANA, SAP
+C/4HANA, and SAP BW/4HANA. See "SAP Data Hub" and "SAP
+Data Intelligence."
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+SAP Women Forward - Externally-facing women's initiative
+(https://discover.sap.com/women-forward/en-us/index.html) that
+includes an online community, newsletter, and annual events
+(#WomenForward).
+Scope 1 (emissions) - Direct greenhouse gas emissions from
+sources that are owned or controlled by the reporting company, for
+example, fuel burned in corporate cars.
+W
+user experience (UX) - In general terms, UX represents the
+quality of a user's interaction with and perceptions of a system. UX
+at SAP is a characteristic of solutions or products that use SAP Fiori
+UX technology and follow SAP Fiori UX guidelines to offer a next-
+generation experience to our users. See "SAP Fiori user experience."
+UN Sustainable Development Goals (SDGs or UN Global
+Goals) - Set of 17 global development goals by the United Nations,
+which are aimed to ensure an environmentally, socially, and
+economically sustainable future by tackling adverse challenges to
+humanity like poverty, hunger, and inequality.
+UN Protect, Respect and Remedy - Framework provided by the
+United Nations, which offers states and companies guidance
+regarding the fulfillment of their duty to protect, respect and
+remedy human rights.
+U
+E-mail investor@sap.com
+enables organizations to become more agile in responding to
+change. See "Business Technology Platform."
+works council - As dictated by the German Works Council
+Constitution Act, a works council is a legal body for representing
+employees' interests to the employer and codetermining the works
+in private companies. On June 21, 2006, the SAP AG employees
+working in Germany elected its first works council. A European
+works council was created in the spring of 2012. The SAP AG works
+council evolved to become the SAP SE works council in 2014 to
+reflect the legal entity of SAP SE.
+technology platform - Technical foundation for a business-
+driven software architecture that increases the adaptability,
+flexibility, openness, and cost-efficiency of IT operations and
+environmental, and economic value for long-term business success
+and responsible global development.
+sustainability - Concept to create positive social,
+solution - Business software that enables a customer to meet a
+challenge or take advantage of an opportunity and are built or
+assembled by flexibly combining software products and technology.
+SAP solutions may include support for best business practices and
+be aided by consulting and ongoing support. They may also be
+enhanced or extended by applications and services from partners.
+SuccessFactors - See "SAP SuccessFactors."
+software as a service (SaaS) - Software that is provided
+literally "as a service." Software applications are delivered and
+managed remotely over a secure Internet connection and a
+standard Web browser. Access is charged on a subscription basis
+usually on a dedicated time basis and with expandable feature
+access options. Typically, a defined level of support is included. See
+"cloud computing."
+single tenant edition - Deployment model that implies
+resources are dedicated to one customer and accessed through the
+Internet. The infrastructure is owned, managed and operated by the
+customer, a third-party, or both, and is on the premises of the
+customer, cloud provider, or a third party. Formerly called private
+option or private edition.
+Scope 3 (emissions) - Indirect emissions that are a
+consequence of the activities of the reporting company but occur
+from sources owned or controlled by another company, such as
+business flights.
+Scope 2 (emissions) - Indirect greenhouse gas emissions from
+consumption of purchased electricity, heat, or steam.
+T
+Web site www.sap.com/investor
+To Our
+Stakeholders
+Tel. +49 6227 74 63 15
+In Memoriam
+Publication Details
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+269
+We dedicate this report to our dear colleague Sabine Vogler, a
+valued member of the SAP Integrated Report project team for many
+years. She passed away suddenly and unexpectedly in January
+Financial and Sustainability Publications
+SAP Supplier Code of Conduct
+SAP's Guiding Principles for Artificial Intelligence
+SAP Global Diversity and Inclusion Commitment Statement
+SAP Global Anti-Discrimination Policy
+-
+SAP Environmental Policy
+-
+SAP Partner Code of Conduct
+SAP Global Health and Safety Management Policy
+2020. She will be dearly missed.
+SAP SE
+Publication Details
+270
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+SAP and other SAP products and services mentioned herein as well
+as their respective logos are trademarks or registered trademarks
+of SAP SE (or an SAP affiliate company) in Germany and other
+countries. All other product and service names mentioned are the
+trademarks of their respective companies. Please see
+www.sap.com/about/legal/copyright.html for additional trademark
+information and notices.
+© 2020 SAP SE or an SAP affiliate company. All rights reserved. No
+part of this publication may be reproduced or transmitted in any
+form or for any purpose without the express permission of SAP SE
+or an SAP affiliate company.
+Germany
+Publisher
+69190 Walldorf
+SAP SE
+Copyright
+ABC Druck, Heidelberg, Germany
+Printing
+SAP Integrated Report project team
+with the support of SAP software
+Concept and Realization
+Investor Relations
+Dietmar-Hopp-Allee 16
+SAP Human Rights Commitment Statement
+-
+www.sap.com/corporate-sustainability.
+SAP SE Statutory Financial Statements and Review of
+Operations (HGB, in German)
+SAP Integrated Report (PDF)
+-
+The following publications are available in English at
+www.sap.com/investor, or in German at www.sap.de/investor.
+Annual Report on Form 20-F (IFRS, in English)
+We present our financial, social, and environmental performance
+in the SAP Integrated Report 2019, which is available at
+www.sapintegrated report.com. This SAP Integrated Report 2019
+comprises all of the information required by accounting and
+disclosure standards applicable to us.
+Additional
+Information
+Financial and Sustainability
+Publications
+Half-Year Reports (in English and German)
+Further Information on Economic,
+Environmental, and Social Performance
+Management Report
+Combined Group
+SAP Social Sabbatical - Umbrella name for an SAP CSR
+program that allow SAP employees to contribute their time and
+talent to helping entrepreneurs and small businesses in various
+markets. Program options exist for global, local, and regional
+engagement. In 2019, we expanded the program to include an
+option for executive engagement where selected strategic
+customers and partners were invited to join.
+Financial Calendar and Addresses
+268
+Web site www.sap.com/press
+E-mail press@sap.com
+Consolidated Financial
+Statements IFRS
+Complete information on the governance of SAP is available at
+www.sap.com/corpgovernance. Materials include:
+-
+-
+Additional SAP policies are made public at
+Profile of Skills and Expertise for the Supervisory Board
+Rules of Procedure for the Supervisory Board
+Corporate Governance Report
+Commercial Code, Section 289f
+Corporate Governance Statement pursuant to the German
+Code of Business Conduct for Employees
+Corporation Act, Section 161
+Declaration of Implementation pursuant to the German Stock
+German Code of Corporate Governance
+Agreement on the Involvement of Employees in SAP SE
+Articles of Incorporation
+Details of the managers' transactions in SAP shares
+Shareholder meeting documents and ballot results
+Information about the management of the company, including
+the members of the Executive Board and the Supervisory Board
+and their curriculum vitae
+-
+SAP INVESTOR, SAP's quarterly shareholder magazine
+(in German)
+-
+Press
+SAP S/4HANA Movement - SAP program and initiative to
+promote and accelerate adoption of SAP S/4HANA. This is an easy-
+to-use adoption starter engagement that helps customers structure
+and assess their transformation to SAP S/4HANA.
+Additional
+Information
+SAP S/4HANA Finance - Global financial solution available in
+the SAP S/4HANA suite as one of the SAP S/4HANA Line-of-
+Business (LoB) Solutions.
+SAP Design Thinking - Methodology for routine innovation that
+brings together the right side of the brain (creative) with the left
+side of the brain (analytical).
+SAP Data Warehouse Cloud - Data warehouse solution in the
+cloud designed for business and IT users with capabilities for data
+integration, database, data warehousing, and analytics. reduced
+deployment complexity, flexible pricing with integration to solutions
+in the intelligent suite, SAP Analytics Cloud, SAP Cloud Platform
+services, partner solutions, and open source technologies. It is one
+of the offerings in the SAP HANA Cloud Services suite. See "SAP
+HANA Cloud Services."
+SAP Data Intelligence - Cloud service designed to help
+businesses connect their siloed data assets and manage the
+discovery, refinement, governance, and orchestration of all data
+across a distributed data landscape. It is one of the SAP solutions
+for enterprise information management. See "SAP Data Hub."
+SAP Data Hub - On-premise data management solution that
+enables data orchestration, pipelining, and governance as well as
+agile sharing of all data across a connected data landscape. This
+solution enables businesses to manage data from numerous
+sources - SAP or third party - without having to centralize data into
+one location. The solution lets companies safely and effectively
+move and share their data to enable agile data operations across
+the enterprise. A cloud service is available as "SAP Data
+Intelligence." See "SAP Data Intelligence."
+SAP data center - Physical facilities around the world used to
+house computer systems and associated components and meet
+the highest security standards. Comprised of various
+interconnected elements, a data center is the nerve center of a
+company. SAP data centers are currently located in Australia, Brazil,
+China, Europe, Japan, the Middle East, and across the United
+States.
+SAP Customer Experience - Extensible portfolio of customer
+experience solutions that speaks directly to the business benefits
+we seek to deliver to our C-suite audiences and shows category of
+solutions has evolved from traditional customer relationship
+management (CRM) to greater customer centricity. Launched at
+SAPPHIRE NOW in 2018, this portfolio brings together our SAP
+Hybris, CallidusCloud, Gigya, and Coresystems solutions under one
+umbrella, SAP C/4HANA is the name of the unified, front-office
+suite of customer experience solutions that is the basis for this
+portfolio. See "SAP C/4HANA."
+SAP Customer Data Cloud - One of the five solution categories
+within the SAP Customer Experience portfolio and in the SAP
+C/4HANA suite. It encompasses all products across the customer
+experience that enable the collection, transparency, and harnessing
+of customer information. Individual offerings within this portfolio
+include solutions from acquired company Gigya, renamed SAP
+Customer Consent, SAP Customer Identity, and SAP Customer
+Profile. See "Gigya" and "SAP C/4HANA."
+enterprises; and connecting employees with purpose. See
+"SAP4Good."
+SAP Corporate Social Responsibility (SAP CSR) -
+Organization and overall efforts for corporate social responsibility
+(CSR) and related social investments at SAP that puts our purpose
+to help the world run better and improve people's lives into action
+through its mission - powering opportunity through digital
+inclusion. SAP CSR efforts focus on three strategic program pillars:
+building digital skills; accelerating best-run non-profits and social
+SAP Concur - Cloud solutions that help deliver a connected
+spend management system encompassing travel, expense, invoice,
+compliance, and risk. Close to 66 million users worldwide use SAP
+Concur solutions today.
+SAP Commerce Cloud - One of the five solution categories
+within the SAP Customer Experience portfolio and in the SAP
+C/4HANA suite. This digital business solution helps integrate digital
+and physical customer touchpoints onto a single, robust platform,
+helping companies deliver a superior omnichannel commerce
+experience with state-of-the-art security and authentication
+technology. Individual offerings combine capabilities for product
+and Web content management, order management,
+personalization, bundling, and accelerators - all through a built-in
+omnichannel storefront. Formerly called SAP Hybris Commerce
+Cloud. See "SAP C/4HANA."
+SAP Cloud Platform Integration Suite - Umbrella term for all
+SAP Cloud Platform Integration offerings. This suite integrates
+cloud applications, data, devices, and people with on-premise and
+cloud solutions from SAP and third-party vendors. Users with
+different skillsets can apply a variety of integration approaches,
+intuitive tools, and prepackaged content to achieve results faster
+and to gain business agility with this versatile, dynamic, and
+enterprise-grade cloud integration platform.
+SAP Cloud Platform Extension Factory - Enterprise-class
+extension framework that helps reduce the complexity of
+configuring and managing cloud solutions. Customers use one
+framework to connect systems and extend cloud applications from
+SAP using the capabilities of SAP Cloud Platform, allowing them to
+focus on business logic and user experience to build extensions
+without disruption to the business.
+SAP Cloud Platform Enterprise Agreement - Agreement
+between SAP and customers use to purchase cloud credits as part
+of the consumption-based commercial model for SAP Cloud
+Platform. See "cloud credit(s)."
+SAP Cloud Platform Blockchain service - Embedded in SAP
+Cloud Platform, this service provides registered customers with an
+easy way to use distributed ledger technology to build block
+applications or networks. By eliminating the need for a large upfront
+capital investment, it offers a gateway to enterprise blockchain
+adoption.
+SAP Digital Boardroom - Premier solution that contextualizes
+the boardroom, business locations, and devices into a real-time
+digital experience. Powered by SAP HANA with capabilities from
+SAP S/4HANA and SAP Analytics Cloud, it gives top decision
+makers real-time, accessible insight into integrated LoB data from
+SAP and third-party applications. See "SAP Analytics Cloud."
+262
+Glossary (Abridged)
+To Our
+Stakeholders
+SAP for Automotive - Solution portfolio designed to meet the
+specific needs of the automotive industry. Its capabilities help link
+complex business processes into a logical flow, maximizing
+efficiency and profitability and satisfying customers' expectations.
+SAP for Banking - Solution portfolio that enables banks to
+obtain all customer information at a glance and offers a full
+complement of high-performance capabilities for strategic
+planning, financial accounting, costing, and enterprise-wide control.
+It also features key industry-specific applications for profitability
+management, risk management, customer relationship
+management, and integrated customer account systems.
+SAP for Aerospace & Defense (SAP for A&D) - Solution
+portfolio specifically designed to meet the needs of the aerospace
+and defense industry. It offers capabilities for maintenance, repair
+and overhaul, airline operations, defense, manufacturing, contract
+and program management, and business acquisitions.
+SAP Fiori user experience (UX) - Umbrella term for the user
+experience for SAP software. Based on modern design principles, it
+represents a consumer-like, consistent experience across devices,
+including tablets and smartphones.
+SAP Fiori - First developed as a set of extensible HTML5 apps
+specific to key user roles, offering a seamless user experience
+across devices using responsive design principles. SAP Fiori apps
+target all employees of existing SAP customers, addressing the
+most common business functions, such as workflow approvals,
+information lookups, and self-service tasks. A free launchpad allows
+users to access their SAP Fiori apps from one single entry point. A
+cloud version is available as SAP Fiori Cloud.
+SAP Field Service Management - This cloud solution from
+acquired company Coresystems supports field service technicians
+with real-time, automated workforce scheduling, planning, and
+dispatching for employees and provides self-service options for
+field service needs. The offering provides customer businesses with
+an end-to-end field service management solution that lets end
+users discover answers on their own, schedule appointments, and
+get estimated time of arrival (ETA) data on technician status. It also
+grants managers more visibility into their field service teams.
+SAP Executive Board - The official governing body of SAP,
+overseeing and deciding on the activities of the company. Subject to
+the requirements of stock corporation law, the SAP Executive Board
+is committed to the interests of SAP and bound by company policy.
+It provides the SAP Supervisory Board with regular, prompt, and
+comprehensive reports about all essential issues of business,
+corporate strategy, and potential risks. Membership in the SAP
+Executive Board is included in the official titles for these members.
+SAP Fieldglass - Cloud-based applications for contingent
+workforce management and services procurement, including the
+signature SAP Fieldglass Vendor Management System. In 2019, SAP
+Fieldglass solutions connected customers with 6.5 million active
+external workers and more than 162,000 suppliers in over 180
+countries and territories. See "Intelligent Spend Management."
+SAP ERP - Application designed to optimize business and IT
+processes by reducing IT complexity, increasing adaptability, and
+delivering more IT value at a lower cost than traditional ERP
+solutions. It can support mission-critical, end-to-end business
+processes for finance, human capital management, asset
+management, sales, procurement, and other essential corporate
+functions. SAP ERP can also support industry-specific processes by
+providing industry-specific business functions that can be activated
+selectively via the switch framework, keeping the application core
+stable and helping ensure maximum performance.
+SAP Cloud Platform Big Data Services - Managed cloud
+services that meets rigorous demands for reliability, scalability, and
+security in a full-service cloud based on Hadoop and Spark.
+SAP Endorsed Apps - Web or mobile apps developed by
+independent software vendors and endorsed by SAP to support and
+complete our vision of the Intelligent Enterprise and are sold on SAP
+App Center with post-royalty expense revenues coming back to
+SAP.
+SAP Digital Supply Chain - Portfolio offering enterprises an
+integrated set of digital supply chain solutions to plan, design,
+manufacture, deliver, and operate their products. With these
+solutions, customers can blend the physical and the digital world
+throughout the complete supply chain - from design, planning, and
+manufacturing to logistics and ongoing maintenance - embedding
+intelligence and ensuring their customers are central to every phase
+of their business. The SAP Leonardo Internet of Things (IoT)
+solution and related loT offerings are no longer part of this portfolio.
+SAP Digital Supply Chain is also the name of the organization
+responsible for this portfolio.
+SAP Digital Business Services - Portfolio of services and
+support offerings (and organization of the same name) that helps
+customers maximize the value of their SAP solutions in on-premise,
+cloud, and hybrid environments. In 2019, we continued the
+simplification process begun in 2017 to bring our offerings into
+three categories (premium success, project success, and
+continuous success). We also expanded our range of intelligent
+tools to underpin services and support offerings for intelligent
+enterprises, including XM services. See "premium success," "project
+success," and "continuous success."
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+SAP Early Talent - A global internal program at SAP that
+identifies, hires, and trains new employees with up to two years
+post-graduation and non-professional experience to become
+successful in the SAP community and to give them a high-level
+overview of SAP. The SAP Early Talent program provides a common
+platform that aligns with SAP's digital strategy and to build
+aspiration for continued success, develop key skills and
+competencies, interact with each other, and learn about SAP's
+strategy, products, and customers.
+SAP Cloud Platform - An open cloud platform that provides an
+integration and extension platform for customers to build solutions
+as cloud services, with intuitive tools and support to address
+industry and LoB processes. SAP Cloud Platform is available by
+subscription or through a consumption-based commercial model.
+See "SAP Cloud Platform Enterprise Agreement" and "cloud
+credit(s)."
+SAP Cloud - See "cloud solutions from SAP."
+Additional
+Information
+SAP Analytics Hub - Solution that provides a single access
+point to all analytics offerings from SAP and our ecosystem
+partners within a company in a portal-like interface. Users can
+describe, categorize, and promote reports as well as get
+personalized recommendations from the solution on cloud and on-
+premise offerings.
+SAP Analytics Cloud - Cloud analytics solution running on SAP
+HANA that brings together business intelligence (BI), predictive
+capabilities, and enterprise planning. The solution allows customers
+to discover, analyze, plan, and predict in one solution and make end-
+to-end business decisions with Al-driven insights. subscribe to SAP
+Analytics Cloud as a single solution with specific capabilities that
+can be licensed separately or together. It is one of the offerings in
+the SAP HANA Cloud Services suite. The SAP Digital Boardroom
+solution is based on SAP Analytics Cloud. See "SAP HANA Cloud
+Services" and "SAP Digital Boardroom."
+SAP Analytics - Portfolio of solutions that includes offerings for
+business intelligence (BI), including data visualization; cloud
+analytics; enterprise performance management (EPM);
+governance, risk, and compliance (GRC); and predictive analytics. It
+provides business analytics tools that help customers get insights
+to enable them to adapt their businesses in real time.
+SAP Alumni Network - Network and online community that
+provides a platform to reconnect with former colleagues and to
+unleash the power of a trusted network for the benefit of SAP and
+our ecosystem. In 2019, community members included 8,091
+former and 4,243 current SAP employees.
+S
+renewable energy - Shares and types of electricity obtained
+from renewable sources such as hydro, wind, solar, geothermal, and
+biomass. It is calculated by adding the amount of renewable energy
+specifically sourced, produced on-site by our own solar cells and
+covered by Renewable Energy Certificates (RECs). See "Renewable
+Energy Certificates (RECs)."
+Renewable Electricity Certificates (RECs) - Certificates that
+prove that energy has been generated from renewable sources such
+as solar or wind power. Each REC represents the environmental
+benefits of 1MWh of renewable energy generation. By purchasing
+RECS, renewable energy is generated on your behalf.
+SAP App Center - One-stop shop (www.sapappcenter.com)
+where customers, partners, and developers can find, buy, and sell
+solutions developed on SAP HANA. It provides links to SAP Store,
+where transactions take place. Formerly called SAP HANA App
+Center.
+R
+Qualtrics Product XM - Solution that identifies consumers'
+favorite products, based on feedback from users.
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+Qualtrics XM Platform - The technology platform from
+Qualtrics.
+SAP for Chemicals - Solution portfolio that delivers support for
+specific processes and tools that chemical companies require.
+Industry-specific capabilities include recipe management, batch
+management, and version control.
+SAP AppHaus - Co-innovation and training workplace for
+developers and business professionals with a focus on creative and
+agile work methodologies and workshops. SAP AppHaus has
+locations in Germany, Korea, and the United States. Formerly called
+SAP Design AppHaus.
+solutions offer an online business-to-business marketplace
+connecting more than 4.6 million sellers in more than 190 countries.
+See "Ariba Network."
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+261
+Glossary (Abridged)
+SAP Ariba - Our portfolio of cloud solutions for procurement,
+financials, and sourcing and the signature Ariba Network. SAP Ariba
+SAP C/4HANA - Fourth-generation, in-memory suite of
+customer experience (CX) solutions. It brings together customer
+data, machine learning technology, and microservices to power
+real-time customer engagements across sales, service, marketing,
+commerce, customer data, and beyond. SAP C/4HANA comprises
+five cloud solution portfolios: SAP Customer Data Cloud; SAP
+Marketing Cloud; SAP Commerce Cloud; SAP Sales Cloud; and SAP
+Service Cloud. The suite includes individual offerings from acquired
+companies Callidus Software, Coresystems, and Gigya. See "SAP
+Customer Experience."
+SAP Business Warehouse (SAP BW) - Application that
+provides a complete view of a company and the tools needed to
+make the right decisions, optimize processes, and measure
+strategic success, such as business-critical factors and
+benchmarks.
+SAP Business One - ERP solution designed for small
+businesses with up to 100 employees, providing a single, integrated
+solution for managing the entire business across all functions. A
+cloud version is available as SAP Business One Cloud and is
+addressed by our "Intelligent ERP" efforts.
+SAP BusinessObjects Business Intelligence - Suite of business
+intelligence (BI) solutions and a BI platform that provides flexible
+and scalable self-service BI tools, designed to give customers
+discovery and insights in real time.
+SAP Business Network - Online service that integrates non-
+SAP and SAP data (including that from SAP Ariba, SAP Concur, SAP
+Fieldglass, and other on-premise and cloud solutions from SAP)
+across systems and across companies, offering a complete view of
+global B2B commerce. The network is available as a platform as a
+service on Amazon AWS and (in the future) on SAP Cloud Platform
+so that application developers, partners, and customers can use
+SAP Business Network services to create innovative solutions and
+applications that meet the ever-changing needs of our global
+customer base. See "Ariba Network."
+SAP Business By Design - Complete, integrated business
+solution delivered in the cloud, ideally suited for growing small to
+midsize companies and subsidiaries. The affordable suite connects
+and runs all business processes, including financials, HR, sales,
+procurement, customer service, and supply chain. The solution is
+available through a monthly software-as-a-service (SaaS) model.
+See "Intelligent ERP."
+SAP Business All-in-One - Comprehensive and flexible
+business management solution targeted to midsize companies with
+up to 2,500 employees that are looking for a comprehensive,
+integrated industry-specific ERP solution with built-in best
+practices.
+SAP Best Practices - Packages that provide proven methods
+and tools for organizations to implement best business practices in
+key areas and a range of industries using SAP software. The
+packages deliver methodology, documentation, and
+preconfiguration that enable rapid, reliable deployment with quick
+return on investment. See “best practices."
+SAP BW/4HANA - Data warehouse solution built entirely on
+SAP HANA that includes an analytics layer that processes data
+directly in-memory on the database instead of at the application
+layer, as is the case with traditional analytical engines.
+SAP S/4HANA Line-of-Business Solutions - Solutions that
+combine the core capabilities included in the SAP S/4HANA
+Enterprise Management solution with the solutions in the SAP
+portfolio (on premise and cloud) for a specific line of business, such
+as asset management, finance, manufacturing, sales, sourcing and
+procurement, and supply chain. See "SAP S/4HANA Finance."
+SAP for Consumer Products - Solution portfolio that supports
+the integration of every step of the consumer product value chain -
+from suppliers to consumers. Key capabilities include mobile and
+Internet sales, trade promotion management, inventory
+management, brand and channel management, and demand signal
+management.
+Glossary (Abridged)
+SAP Leonardo Analytics - See "SAP Analytics."
+SAP Leonardo Artificial Intelligence - SAP's artificial
+intelligence (AI) functionality has been integrated in the SAP
+portfolio, providing intelligent capabilities in SAP S/4HANA, SAP
+C/4HANA, SAP Concur, SAP Fieldglass, and SAP SuccessFactors
+solutions, among others. See “intelligent technologies."
+SAP Leonardo - Name given to the initiative as well as
+technology and services launched in 2017 to address innovative
+technologies and capabilities for analytics, artificial intelligence,
+blockchain, Big Data, data intelligence, Internet of Things, and
+machine learning. In 2019, the intelligent technologies marketed
+under SAP Leonardo are now mostly embedded in our individual
+solutions and innovative technology. See "intelligent technologies,"
+"SAP Leonardo Artificial Intelligence," "SAP Leonardo Blockchain,"
+and "SAP Leonardo Internet of Things."
+SAP.IO Venture Studio - This initiative identifies high-potential
+entrepreneurial employees at SAP and helps develop them into
+successful leaders, with the objective to build new ventures that will
+have a massive impact on business and society. In 2019, the SAP.iO
+Venture Studio engaged more than 7,500 employees and were able
+to jump-start close to 400 venture ideas.
+SAP.IO Fund - Managed by Sapphire Ventures, this fund focuses
+on strategic early-stage investments in enterprise software
+startups. SAP has committed to invest up to 40% of the investable
+capital in underrepresented groups to foster diversity and inclusion,
+including startups founded by women. See "Sapphire Ventures."
+SAP.IO - SAP's startup incubation engine and related program
+that helps innovators inside and outside of SAP build products, find
+customers, and ultimately change industries. The SAP.IO team
+works with the best entrepreneurs, developers, designers, and data
+scientists to upend how business works.
+SAP Intelligent Asset Management - A group of five SAP
+solutions that help organizations define, plan, and monitor a service
+and maintenance strategy for physical products and assets along
+the manufacturing lifecycle. The five offerings are SAP Asset
+Intelligence Network; SAP Predictive Maintenance and Service; SAP
+Mobile Asset Management; SAP Asset Strategy and Performance
+Management; and SAP Predictive Engineering Insights.
+SAP Leonardo Blockchain - Innovative technology designed to
+enable open business collaboration across company boundaries in
+decentralized networks. These blockchain capabilities are
+integrated into SAP Cloud Platform.
+SAP Integrated Business Planning for Supply Chain -
+Powered by SAP HANA, this solution delivers real-time supply chain
+planning capabilities for sales and operations, demand and supply
+planning, and inventory optimization in the cloud. It provides the
+necessary information to make business decisions using embedded
+analytics, simulation, prediction, and decision support.
+SAP HANA Data Management Suite - See "SAP HANA Cloud
+Services."
+outcomes.
+Warehouse Cloud, and SAP HANA Cloud, which together offer a set
+of interconnected services to solve decision-making needs by
+connecting many elements of data-centric processing which can be
+deployed on premise, in the cloud, or hybrid to deliver real business
+Additional
+Information
+SAP for Defense & Security - Solution portfolio that offers a
+variety of capabilities that meet the critical needs of the defense
+and security sector. Key industry-specific capabilities include
+acquisition and materials management; force planning;
+maintenance, repair, and overhaul (MRO); personnel and
+organization; infrastructure management; planning and support for
+deployed operations; in-service support; and line maintenance.
+SAP for Engineering, Construction & Operations (SAP for
+EC&O)- Solution portfolio designed to meet the specific
+requirements of project-oriented enterprises that offers capabilities
+for industrial plant construction, construction of commercial and
+private buildings, and shipbuilding.
+Consolidated Financial
+Statements IFRS
+SAP HANA Enterprise Cloud - This service enables customers
+to access solutions in the cloud. It contains managed cloud
+applications, in-memory infrastructure, managed services, and
+through an additional license, SAP Cloud Platform to build custom
+applications in the cloud. On-premise applications from SAP can be
+delivered to customers through SAP HANA Enterprise Cloud.
+SAP Hybris - See "SAP Customer Experience."
+SAP Leonardo Internet of Things - Solution that provides
+industry-specific business services and capabilities, designed to
+embed device and telemetry data into SAP applications. It offers
+prepackaged scenarios in the SAP Field Service Management
+solution in the SAP C/4HANA suite, business scenario content
+templates, and interoperability with hyperscalers, such as Amazon
+Web Services loT Core and Microsoft Azure IoT Hub.
+SAP Marketing Cloud - One of the five solution categories
+within the SAP Customer Experience portfolio and in the SAP
+C/4HANA suite. It includes all marketing solutions to support
+developing a single view of the customer, gaining deeper customer
+insights, enabling consent-based marketing, delivering
+individualized marketing experiences, lead and account
+management, and optimizing marketing through closed loop
+planning, execution, and measurement. See "SAP C/4HANA."
+SAP Next-Gen - Program that enables corporations,
+governments, and NGOs to connect with academic thought leaders
+and researchers, students, startups, accelerators, tech community
+partners, venture firms, purpose-driven partners, futurists, and SAP
+experts. This purpose-driven innovation university and community
+supports SAP's commitment to the 17 UN Global Goals for
+sustainable development, providing an innovation platform that
+comprises more than 3,700 educational institutions in 116
+countries. It manages more than 110 SAP Next-Gen Labs at
+universities and at partner and SAP locations, and more than 90
+SAP Next-Gen Chapters. The SAP Next-Gen program has been
+extended beyond enterprises and universities to citizens, partners,
+and young thinkers.
+SAP One Billion Lives - Program that invites SAP colleagues to
+propose and gain support for projects that would benefit the public
+sector, specifically in the areas of education, health care, and
+disaster management and response. "SAP 1BLives" is used to refer
+to the program on social media.
+SAP S/4HANA Enterprise Management - Core on-premise
+solution in the SAP S/4HANA suite covering all mission-critical
+processes of an enterprise. It is natively built on SAP HANA and
+designed with SAP Fiori UX.
+SAP S/4HANA Cloud - SAP's flagship next-generation
+Intelligent ERP suite in the cloud provides functionality that allows
+companies to run integrated and intelligent digital businesses in real
+time. SAP S/4HANA Cloud is built on SAP Cloud Platform with an
+open architecture that helps connect it to the wider SAP portfolio.
+SAP S/4HANA Cloud offers the advantages of SaaS, such as
+scalability and quarterly innovation updates. See "SAP S/4HANA"
+and "Intelligent ERP."
+SAP S/4HANA - SAP's next-generation Intelligent ERP suite
+runs on SAP HANA and includes intelligent technologies and
+integrated business processes with real-time analytics to support
+rapid decision-making. The suite provides capabilities for HR, sales,
+service, procurement, manufacturing, asset management, as well
+as research and development. More than 13,800 customers across
+25 industries have chosen the suite to support their digital
+transformation. In 2019, we updated the definition of SAP S/4HANA
+to more closely reflect categories covered by ERP by including
+elements of digital supply chain management, finance, and risk
+management. SAP S/4HANA is available in various deployments:
+software as a service (SaaS), on premise, in a private cloud, or as a
+hybrid. See "Intelligent ERP" and "SAP S/4HANA Cloud."
+SAP Service Cloud - One of the five solution categories within
+the SAP Customer Experience portfolio and in the SAP C/4HANA
+suite. It encompasses all products across the customer experience
+that help secure customer satisfaction in support of ongoing loyalty.
+Individual offerings target sales and service organizations with
+designed-in social collaboration to help transform social media
+conversations into business insight. See "SAP C/4HANA."
+SAP Sales Cloud - One of the five solution categories within the
+SAP Customer Experience portfolio and in the SAP C/4HANA suite.
+Individual offerings help companies improve sales with better
+selling experiences, enhancing sales reps' daily work experience,
+while improving customer experiences and accelerating the buying
+process. It includes the former SAP Cloud for Sales solution. See
+"SAP C/4HANA."
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+265
+Glossary (Abridged)
+Sapphire Ventures - SAP supports entrepreneurs that aspire to
+build industry-leading businesses through venture capital funds
+managed by Sapphire Ventures. Sapphire Ventures pursues
+opportunities where it can help fuel enterprise growth by adding
+expertise, relationships, geographic reach, and capital.
+SAPPHIRE NOW - SAP's signature business technology event
+and the largest SAP customer-driven conference is held annually in
+several locations around the globe. The global event in the United
+States is co-located with the Americas' SAP Users' Group (ASUG)
+annual conference. Attendees discover new initiatives, solutions,
+products, and services, as well as unique access to the latest
+business strategies and industry best practices from SAP
+customers, partners, executives, and industry experts to help them
+drive business results across all levels.
+SAP PartnerEdge - Global, partner-to-partner business
+collaboration network where SAP partners can share expertise,
+development capabilities, solutions, and knowledge to extend their
+market reach. Available online at www.sappartneredge.com, the site
+gives partners access to information, product and business news,
+tools, training, and business resources to order products. Partners
+can also manage their relationship with SAP and collaborate with
+other SAP partners through SAP PartnerEdge.
+Combined Group
+Management Report
+To Our
+Stakeholders
+Further Information on Economic,
+Environmental, and Social Performance
+264
+SAP for Me - Portal that gives SAP customers information
+about their software portfolio and helps them with such processes
+as provisioning, outage notifications, contract and licenses
+management. It also offers recommendations for SAP events,
+learning paths, trial options, and other SAP products. Introduced as
+part of the Build Customers for Life program. See "Build Customers
+for Life."
+SAP for Life Sciences - Solution portfolio that meets the
+requirements of pharmaceutical, biotechnology, and diagnostics
+companies, as well as manufacturers of medical devices and
+products.
+Glossary (Abridged)
+SAP for Industrial Machinery & Components (SAP for IM&C)
+- Solution portfolio that coordinates the entire scope of business
+activities (estimating, order entry, project management, and
+production planning) for the industrial sector and supports areas
+ranging from maintenance and services to billing and profitability
+analysis.
+SAP for High Tech - Solution portfolio that meets the demands
+of high-tech industries, including RosettaNet support.
+SAP for Higher Education and Research (SAP for HE&R) -
+Solution portfolio that supports organizational processes and
+unique needs of public and private universities, multicampus
+institutions, research agencies, and medical colleges, including
+campus management, grants management, student lifecycle
+management, financials, operations, human capital management,
+procurement, analytics, research, and asset management.
+SAP for Media - Solution portfolio that supports processes
+specific to the media industry with capabilities that include sales
+and distribution, advertising management, product development,
+and intellectual property management.
+SAP for Healthcare - Solution portfolio that aims to help
+healthcare institutions and providers improve patient outcomes,
+while providing cost-effective care through a digital network. A
+consumer-centric healthcare ecosystem helps transform
+healthcare for patients and providers alike with offerings addressing
+patient care and care collaboration, as well as healthcare analytics
+and research. Formerly called SAP Health.
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+263
+Additional
+Information
+SAP for Mill Products - Solution portfolio for manufacturers of
+building materials, the paper and timber industry, metal and
+primary metal producers, and textile and furniture manufacturers.
+SAP for Mining - Solution portfolio that supports processes
+specific to the mining industry, including mining operations and
+asset performance; sales and supply chain management;
+operational risk and compliance; as well as human resources;
+finance; procurement; and IT management.
+SAP for Insurance - Solution portfolio that integrates steps in
+the insurance business process, including capabilities for customer
+contact, policy and product management, collections and
+disbursement, and claims management.
+SAP for Professional Services - Solution portfolio that delivers
+integrated tools, best practices, and support for automated
+processes designed specifically for the demands of the professional
+services industry, including management consultancies as well as
+accounting and legal firms.
+SAP for Public Sector - Solution portfolio for public
+administration, providing an electronic framework that enables
+online communication through various applications for the public,
+government authorities, and related entities.
+SAP for Retail - Solution portfolio that offers multichannel
+applications designed specifically to provide the best retail services
+to a large customer base.
+SAP for Sports & Entertainment - Solution portfolio that
+comprises solutions for sports teams, leagues, and venues,
+designed to help them deepen fan engagement, drive on-field
+performance, and optimize business efficiency.
+SAP for Telecommunications - Solution portfolio that provides
+telecommunications enterprises of all types and sizes a range of
+industry-specific capabilities, including support for convergent
+invoicing and contract accounting.
+SAP HANA Cloud Services - A suite of data management and
+analytics products designed to simplify access to heterogeneous
+data landscapes providing a single gateway to all data. The suite
+comprises three offerings: SAP Analytics Cloud, SAP Data
+SAP HANA Cloud - SAP's next-generation data platform-as-a-
+service. It brings the power and performance of SAP HANA and
+offers it natively in the cloud with full capabilities to manage data
+storage and federation as well as run powerful applications. SAP
+HANA Cloud connects customers to all of their information without
+requiring it to be loaded into a single storage solution. It is one of
+the offerings in the SAP HANA Cloud Services suite. See "SAP
+HANA Cloud Services."
+Cloud."
+SAP HANA - SAP's flagship in-memory database, available both
+on premise and as a service in the cloud with SAP Cloud Platform.
+The innovative architecture in SAP HANA allows both transactional
+processing for data capture and retrieval and analytical processing
+for business intelligence and reporting as well as reduces time-
+consuming database and data management tasks. It enables
+businesses to process and analyze live data and make business
+decisions based on the most up-to-date information, a requirement
+in today's digital economy. Released in 2019, SAP HANA innovations
+include enhanced capabilities in data anonymization and
+hyperconverged infrastructure (HCI) certification. See "SAP HANA
+SAP Global Partner Summit - Exclusive event held for all SAP
+partners on the day prior to SAPPHIRE NOW. A day full of
+practical business-building insights, strategies, innovations,
+enablement, business opportunities, and networking dedicated to
+all things partner, helping maximize the SAP partnership.
+SAP4Good - Name used in social media channels to
+communicate the activities of the SAP Corporate Social
+Responsibility as well as the work SAP is doing in areas such as
+sustainability, diversity, and inclusion. See “SAP Corporate Social
+Responsibility."
+SAP for Oil & Gas (SAP for O&G) - Solution portfolio that
+meets the demands of oil and gas companies of all sizes.
+SAP for Wholesale Distribution - Solution portfolio that
+addresses the needs of midsize and large wholesale distribution
+businesses in a wide range of segments. Industry-specific
+capabilities support new business models and strategies that meet
+the needs of an important supply sector.
+SAP for Travel & Transportation - Solution portfolio that covers
+the unique business needs of postal services, railways, airlines, and
+toll collection companies, as well as logistics service providers, to
+optimize supply chain and planning.
+SAP for Utilities - Solution portfolio for all supply and energy
+industries, with capabilities ranging from call centers and Internet
+communications to consumption billing.
+SAP
+THE BEST RUN
+www.sap.com/investor
+Dietmar-Hopp-Allee 16
+69190 Walldorf
+Germany
+SAP SE
+Group Headquarters
+Ⓡ
+www.sap.com
++10%
+Peer Group Index performance
+Compensation Report
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+Difference
+Performance factor with doubled difference
+Final number of PSUs
++18% (+10%)
+(+8% x 2)+100%
+116% x 1,000
++8%
+116%
+1,160
+SAP share price performs much higher than Peer Group Index;
+cap is triggered
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+The Peer Group Index currently includes the following major
+international competitors of SAP: Adobe, Microsoft, IBM,
+Salesforce, Oracle, VMWare, Service Now, Workday, and
+NortonLifeLock (formerly Symantec). The Supervisory Board has
+defined this group based on internal and external recommendations
+and, if necessary, adjusts the group. In 2019, Tableau was delisted
+and therefore removed without replacement from the group. The
+Peer Group Index is calculated as a price index based on weighted
+market capitalization. The weighting is adjusted quarterly, applying
+a cap of 15%. Consequently, the weight of smaller, more volatile
+competitors is increased in relation to their size, resulting in a highly
+ambitious index. The index is calculated daily by Deutsche Börse
+Group and can be tracked under ISIN DE000A2BLEB9.
+Further Information on Economic,
+Environmental, and Social Performance
+Composition and Weighting of Peer Group Index
++30%
+Peer Group Index performance
+-5%
+Adobe
+Difference
++30% - (-5%)
++35%
+16%
+Performance factor with doubled difference
+(+35% x 2) + 100%
+170%
+Microsoft
+15%
+SAP share price performance
+Additional
+Information
+win talented employees and the media it currently used to do so.
+During this discussion, the Committee members were given an
+initial look at the structure and curriculum of the new SAP
+Academy for Engineering training program, which prepares
+students for a career in the SAP ecosystem.
+Regular reports from the committees ensured that we were kept
+fully informed of all matters covered by the committees and were
+able to discuss them thoroughly.
+The Supervisory Board also thanks the current members of the
+Executive Board and all SAP employees for their great commitment
+and dedication in 2019.
+The Supervisory Board would like to sincerely thank its
+members, as well as the Executive Board members who
+relinquished their functions in the year under review, for their
+invaluable contribution to the success of the Company.
+Jürgen Müller joined to the Executive Board on January 1, 2019,
+and is responsible for the Board area Technology & Innovation.
+Bernd Leukert and Rob Enslin resigned from the Executive Board
+effective March 31, 2019, and April 5, 2019, respectively. On
+October 10, 2019, the Executive Board members Jennifer Morgan
+and Christian Klein were appointed as Co-CEOs of SAP. Bill
+McDermott left the Executive Board at his own request on
+November 15, 2019, after previously stepping down as CEO on
+October 10, 2019. Thomas Saueressig was appointed to the
+Executive Board effective November 1, 2019, and oversees SAP's
+product development.
+The Supervisory Board mandate of Erhard Schipporeit ended at
+the close of the Annual General Meeting of Shareholders on
+May 15, 2019. On that day, the Annual General Meeting reelected all
+other Supervisory Board members standing for election by it, and
+appointed Gunnar Wiedenfels as a new member to the Supervisory
+Board. On the employee representatives' side, Martin Duffek,
+Andreas Hahn, Pierre Thiollet, Sebastian Sick, and Robert
+Schuschnig-Fowler left the Supervisory Board at the end of the
+May 15, 2019, Annual General Meeting. Monika Kovachka-Dimitrova,
+Heike Steck, Christa Vergien-Knopf, James Wright, and Ralf Zeiger
+were elected as their successors and took up their mandates that
+same day.
+Changes on the Supervisory and
+Executive Boards
+the Supervisory Board. The Supervisory Board's opinion of the
+Company and the Group coincided with that of the Executive Board
+as set out in the combined management report. The Supervisory
+Board considered the proposal presented by the Executive Board
+concerning the appropriation of retained earnings. We had regard to
+the requirements of dividends policy, the effects on the liquidity of
+SAP SE and the Group, and the interests of the shareholders. We
+also discussed these matters with the auditor. We then endorsed
+the Executive Board's proposal concerning the appropriation of
+retained earnings, in accordance with the Audit Committee's
+recommendation. Finally, we approved this present Report.
+The Audit Committee and the Supervisory Board satisfied
+themselves that KPMG had conducted the audit properly. In
+particular, they concluded that both the audit reports and the audit
+itself fulfilled the legal requirements. On the basis of the report and
+the Audit Committee's recommendation, the Supervisory Board
+approved the audit and, since there were no findings from our own
+examination, we gave our consent to the SAP SE financial
+statements, the consolidated financial statements, and the
+combined management report, as well as the combined non-
+financial report pursuant to the German Commercial Code,
+sections 315b and 289b. The financial statements and combined
+management report were thus formally adopted upon approval by
+The Committee also reported that KPMG had told it that no
+circumstances had arisen that might give cause for concern about
+KPMG's impartiality, and informed us about the services KPMG had
+provided that were not part of the audit. The Committee reported
+that it had examined the auditor's independence, taking the non-
+audit services it had rendered into consideration, and stated that in
+the Committee's opinion the auditor possessed the required degree
+of independence and expertise.
+The Executive Board explained the financial statements of
+SAP SE and the SAP Group and its proposal concerning the
+appropriation of retained earnings at the meeting of the Audit
+Committee on February 18, 2020 (based on the drafts identical to
+the final documents) and at the meeting of the Supervisory Board
+on February 19, 2020. Members of the Executive Board answered
+questions from the Audit Committee and the Supervisory Board. At
+the Audit Committee meeting, they also explained the Annual
+Report on Form 20-F prepared in accordance with the applicable
+U.S. standards as well as the combined non-financial report.
+After the Executive Board had explained them, the Audit
+Committee and the Supervisory Board reviewed the financial
+statement documents (based on drafts identical to the final
+documents) along with the combined non-financial report, taking
+KPMG's audit reports (or the drafts identical to the final
+documents) into account. The representatives of the auditor who
+attended presented full reports on the audit and the results of the
+audit to the Audit Committee and Supervisory Board meetings and
+explained its audit reports (or final drafts thereof). The auditor also
+reported that it had not identified any material weaknesses in SAP's
+internal control and risk-management systems for financial
+reporting. Both the Audit Committee and the Supervisory Board
+asked detailed questions about the form, scope, and results of the
+audit. The Audit Committee reported to the Supervisory Board on
+its own review of the financial statements of SAP SE and the
+SAP Group, its discussions with the Executive Board and with the
+auditor, and its supervision of the financial reporting process. It
+confirmed that as part of its supervisory work, it had addressed the
+SAP Group's internal control, risk management, and internal
+auditing systems, and found the systems to be effective.
+combined non-financial report and submitted them without delay to
+the Supervisory Board.
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+22
+22
+21
+Report by the Supervisory Board
+On February 18, 2020, the Executive Board prepared the
+financial accounts of SAP SE and the Group for 2019, comprising
+the SAP SE financial statements, the consolidated financial
+statements, and the combined management report, as well as the
+KPMG audited the SAP SE and consolidated financial reports for
+2019. The Annual General Meeting of Shareholders elected KPMG
+as the SAP SE and SAP Group auditor on May 15, 2019. The
+Supervisory Board proposed the appointment of KPMG on the
+recommendation of the Audit Committee. Before proposing KPMG
+to the Annual General Meeting of Shareholders as auditor for the
+year, the chairperson of the Supervisory Board and the Audit
+Committee obtained confirmation from KPMG that circumstances
+did not exist that might prejudice or raise any doubt concerning its
+independence as the Company's auditor. In that connection, KPMG
+informed us of the volume of the services that were not part of the
+audit which it had either provided to the Group in the past year or
+was engaged to provide in the year to come. The Supervisory Board
+has agreed with KPMG that the auditor should report to the
+Supervisory Board and record in the auditor's report any fact found
+during the audit that is inconsistent with the declaration given by
+the Executive Board and the Supervisory Board concerning
+implementation of the German Corporate Governance Code. KPMG
+examined the SAP SE financial statements prepared in accordance
+with the German Commercial Code, the consolidated financial
+statements prepared in accordance with International Financial
+Reporting Standards (IFRSS) as required by the German
+Commercial Code, section 315e, and the combined SAP Group and
+SAP SE management report prepared in accordance with the
+German Commercial Code, and certified them without qualification.
+The auditor thus confirmed that, in its opinion and based on its
+audit in accordance with the applicable accounting principles, the
+SAP SE and consolidated financial statements give a true and fair
+view of the net assets, financial position, and results of operations
+of SAP SE and the SAP Group. The auditor also confirmed that the
+combined SAP SE and SAP Group management report is consistent
+with the corresponding financial statements and as a whole gives a
+suitable view of the position of SAP SE and the SAP Group and of
+foreseeable opportunities and risks. KPMG also audited SAP's
+internal control over financial reporting and certified without
+qualification that it complies with the applicable U.S. standards. The
+auditor stated in its opinion that it considers SAP's internal controls
+with respect to the consolidated financial statements to be effective
+in all material respects. Additionally, it provided assurance on
+selected qualitative and quantitative sustainability disclosures
+included in the Integrated Report but outside of the Management
+Report. All Audit Committee and Supervisory Board members
+received - initially in the form of drafts that were identical to the
+final documents - the documents concerning the financial
+statements mentioned above, the audit reports prepared by KPMG,
+and the Executive Board's proposal concerning the appropriation of
+retained earnings in good time.
+SAP SE and Consolidated Financial
+Reports for 2019
+enhance their technical knowledge of artificial intelligence,
+SAP S/4HANA, and analytics, as well as gain a better understanding
+of the individual regions in which SAP operates. Besides this, a
+number of presentations were offered focusing specifically on
+committee work, for example on audit committee activities.
+The members of the Supervisory Board engaged in continuous
+training and professional development throughout the year, with
+sufficient support from the Company. In July and October 2019, for
+example, in follow-up to the Supervisory Board elections, the
+Company organized a number of information sessions for the
+newly-elected Supervisory Board members, which reelected
+members also attended. Among other things, the sessions included
+presentations by the internal departments as well a presentation
+from an external consultant explaining the corporate governance
+fundamentals for European stock corporations, accounting and
+reporting, internal audit, investor relations, risk management,
+compliance, and cybersecurity. In addition, dedicated training
+events in October 2019 enabled the Supervisory Board members to
+Training and Professional Development
+In connection with the combined SAP Group and SAP SE
+management report, the Supervisory Board closely examined the
+Corporate Governance Statement, which also includes the
+Corporate Governance Report. We approved the Statement on
+February 12, 2020, by correspondence vote.
+SAP's corporate governance and insider trading compliance
+officer monitored our compliance with those recommendations in
+the Code with which we claim to comply in SAP SE's declaration,
+and reported in full to the General and Compensation Committee.
+Detailed information about compliance with the Code, as required
+by section 3.10 of the Code, is available in the Executive and
+Supervisory Boards' Corporate Governance Statement, which also
+includes the Corporate Governance Report. Members of the
+Executive Board and of the Supervisory Board had no conflicts of
+interest that sections 4.3.3 and 5.5.2 of the Code require to be
+disclosed to the Supervisory Board. Some Supervisory Board
+members currently have business dealings with SAP or hold senior
+positions or material equity in companies that currently have
+business dealings with SAP, or had done so in the course of the year.
+SAP's business dealings with these persons or companies are at
+arm's length. In the Supervisory Board's view, especially given the
+limited scope and materiality of those dealings, they did not affect
+the independence of the Supervisory Board members concerned
+and do not give rise to any substantial and not merely temporary
+conflict of interest in the meaning of the Code. There were a number
+of transactions involving members of the Executive Board in 2018
+which were all consistent with industry standards and immaterial.
+These transactions were approved by the General and
+Compensation Committee during the year under review. Other than
+those contracts mentioned in this report, the Company made no
+other contracts with members of the Executive Board or
+Supervisory Board that would have required a resolution of the
+Supervisory Board.
+Corporate Governance
+Capped at
+For the Supervisory Board
+150%
+15%
+Final number of PSUs
+0% x 1,000
+0
+LTI Forfeiture Rules
+If an Executive Board member's service contract is terminated
+before the end of the third year following the year in which the Share
+Units were granted, both the PSUs and RSUs are forfeited in whole
+or in part, depending on the circumstances of the relevant
+resignation from office or termination of the service contract. In
+case PSUs and RSUs are forfeited in part, the percentage of the
+forfeiture is proportional to the four-year vesting period of each
+grant. This means that 25% of the grant is earned each year of the
+vesting period. Unearned grants are forfeited.
+26
+26
+Compensation Report
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+LTI Forfeiture Rules
+-10%
++50%
+-60%
+40%
+0%
+Executive Board
+from office
+without cause
+Executive Board member
+starts working for an SAP
+competitor²) before the
+end of the vesting period
+Supervisory Board terminates the Executive Board member's
+service contract for cause
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+PSUs and RSUs forfeit
+in their entirety
+Example Calculation¹)
+forfeited grants
+100%
+100%
+Member resigns
+-10% - (+50%)
+-60% +100%
+Hurdle is 50%
+Performance factor
+Difference
+Final number of PSUs
+150% x 1,000
+1,500
+Salesforce
+15%
+Peer Group Index performs better than SAP share price
+Oracle
+VMWare
+14%
+9%
+SAP share price performance
+Peer Group Index performance
++5%
++10%
+ServiceNow
+8%
+Difference
++5% - (+10%) -5%
+Workday
+6%
+Performance factor
+Final number of PSUs
+-5% +100%
+95% x 1,000
+95%
+NortonLifeLock
+2%
+as at December 31, 2019
+950
+Peer Group Index performs better than SAP share price;
+low hurdle is triggered
+SAP share price performance
+Peer Group Index performance
+IBM
+Professor Hasso Plattner
+(Chairperson)
+Report by the Supervisory Board
+To Our
+Stakeholders
+Peer Group Index
+performs better
+than SAP share
+price
+40%
+resulting in
+into PSUs and RSUs
+Grant amount is converted
+100% = same performance of SAP share price and Peer Group
+Index
+SAP share price performance relative
+to Peer Group Index performance
+60% PSUs
+Originally granted
+of the target amount set in the Executive Board member's
+contract
+80% to 120%
+Supervisory Board determines grant amount for current
+financial year, based on operating profit target achievement
+(non-IFRS, at constant currency) set for the previous year,
+Additional
+Information
+PSU Calculation
+decreased by percentage
+points of outperformance of
+Peer Group Index
+Further Information on Economic,
+Environmental, and Social Performance
+Management Report
+Combined Group
+LTI Grant Process
+Stakeholders
+To Our
+Compensation Report
+24
+24
+1) Home currency is the currency of the Executive Board member's primary place of
+residence.
+All Share Units granted in this way, comprising 60%
+Performance Share Units (PSUs) and 40% Retention Share Units
+(RSUS), have a vesting period of approximately four years, during
+which the Executive Board member must actively contribute to the
+Company's operations. The value of the Share Units varies
+positively and negatively with the performance of SAP's share price.
+At the end of the vesting period, the corresponding Share Units are
+non-forfeitable.
+This grant amount is converted into virtual shares (Share Units),
+so that Executive Board members participate in further share price
+developments. The grant price is the arithmetic mean of the XETRA
+closing prices of SAP stock on the 20 trading days following
+publication of SAP's fourth-quarter results. The grant date of the
+2019 tranche was February 20, 2019.
+Under the plan, a new LTI tranche is granted annually. Each grant
+starts with determining a grant amount in euros. This grant amount
+is based on the Executive Board members' contractual LTI target
+amount and the operating profit target achievement (non-IFRS, at
+constant currency) for the previous year. Taking this target
+achievement into account, the grant amount can be adjusted
+upwards or downwards in the range of 80% to 120% of the
+contractual LTI target amount. The 2018 operating profit target
+achievement was 101.9%. Considering this, the Supervisory Board
+set the grant amount of the 2019 tranche at 101.9% of the
+contractual LTI target amount.
+The LTI 2016 plan came into effect on January 1, 2016. It is a
+virtual share program with a term of four years per tranche.
+Consolidated Financial
+Statements IFRS
+SAP share price
+performs better
+than Peer Group
+Index
+increased by percentage
+points of outperformance.
+If payout price is higher than
+grant price, percentage
+points are doubled
+60% PSUs
++18%
+SAP share price performance
+SAP share price performs better than Peer Group Index
+The following examples of the PSU calculation illustrate possible
+outcomes assuming 1,000 PSUs granted:
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+25
+25
+Compensation Report
+SAP's share price performance is measured by comparing the
+grant price against the payout price. We calculate the difference
+between SAP's share price performance and the Peer Group Index
+performance. In case of an increased SAP share price and an
+outperformance against the Peer Group Index, the calculated
+difference is doubled to reward positive performance.
+Originally granted number x performance factor (%)
+Final number of PSUs
+The number of Share Units that will finally result in payments to
+the Executive Board members can and will likely differ from the
+number originally granted. The number of PSUs ultimately paid out
+changes depending on the performance of the SAP share relative to
+the Peer Group Index at the end of the vesting period. This places
+more weight on SAP's performance within the industry. In contrast,
+the final number of RSUs is fixed. However, both types of Share
+Units may expire during the entire term of a tranche under certain
+conditions (see the "LTI Forfeiture Rules" graphic below).
+The payout price used for the settlement is the simple arithmetic
+mean of the XETRA closing prices of SAP stock on the 20 trading
+days following the publication of SAP's fourth-quarter results
+subsequent to the end of the vesting period. The payout price is
+capped at 300% of the grant price. The LTI tranche is paid in euros
+after the Annual General Shareholders' Meeting of the
+corresponding year. Any potential foreign currency exchange rate
+risk is borne by the Executive Board members themselves.
+max. 150%
+50% to 150%
+0%
+Performance factor
+resulting in a
+Final number of PSUs and RSUs x payout price (€)
+Cap of payout price = 300% of grant price
+Payout after four years
+PSU calculation
+cap at 50% increase
+hurdle at 50% decrease
+RSUS
+Retention
+Share Units
+Units
+Performance Share
+The purpose of the long-term, multi-year performance-based
+compensation (Long-Term Incentive, LTI) is to reward the annual
+achievement of the non-IFRS constant currency operating profit, to
+ensure long-term retention of our Executive Board members
+(Retention), and to reward them for a long-term SAP share price
+performance (Performance) as compared to its main peer group
+(Peer Group).
+Long-Term Incentive
+The STI compensation for 2019 will be paid out after the Annual
+General Meeting of Shareholders in May 2020. It is paid in the
+Executive Board member's home currency ¹). All Executive Board
+members are obliged to purchase SAP shares worth at least 5% of
+the actual payout amount in accordance with appropriate trading
+period regulations. These shares are subject to a three-year holding
+period.
+On February 19, 2020, the Supervisory Board assessed SAP's
+performance against the agreed targets and determined the
+amount of the STI 2019 for the entire Executive Board. This resulted
+in a target achievement of 82.4% (cloud and software revenue
+growth of 106.4%, operating margin increase of 130.8%, and new
+cloud bookings of 31.2%).
+Fringe Benefits
+The fixed compensation is paid monthly in 12 equal installments
+in the Executive Board member's home currency¹).
+Fixed Compensation
+Non-Performance-Based Compensation
+The individual elements of SAP's Executive Board compensation
+are described in more detail below.
+In the case of any extraordinary, unforeseeable events, the
+Supervisory Board is entitled, at its reasonable discretion, to adjust
+the performance-based compensation before payout upwards or
+downwards in the interest of SAP. No corrections to the payout
+amounts paid in May 2019 were made.
+The compensation system is designed to support the growth in
+value for the Company over the long term. The long-term incentive
+element therefore has significant weighting, making up about two-
+thirds of the Co-CEOs' compensation target, and more than 50% of
+each Executive Board member's compensation target.
+The Supervisory Board sets the individual total target
+compensation for each Executive Board member, comprised of the
+fixed compensation element and the two performance-based
+elements. This target compensation is benchmarked based on
+SAP's global strategy, market position, business performance and
+future prospects of economy, and the compensation paid at
+comparable national and international companies. The Supervisory
+Board also considers the compensation systems applicable for the
+rest of the Company, comparing Executive Board pay with the pay
+of SAP executives and non-executive SAP employees. The
+performance-based elements each correspond to a target
+achievement of 100% of all KPIs. The Supervisory Board reviews,
+assesses, and sets these compensation targets, in its first meeting
+of each fiscal year (February 20, 2019, for 2019). The Supervisory
+Board is of the opinion that this approach ensures that the
+compensation is appropriate.
+The amount of performance-based compensation depends
+primarily on SAP's performance against predefined financial target
+values (Key Performance Indicators, KPIs) and on the SAP share
+price, and is subject to hurdles and caps. These KPIs and their
+target values as well as their weighting are set by the Supervisory
+Board each plan year and are aligned to the SAP budget for that
+year.
+Short-term incentive
+STI
+Performance-based compensation
+Fringe benefits
+Fixed compensation
+Non-performance-based compensation
+Compensation
+The Supervisory Board - supported by its General and
+Compensation Committee - determines the compensation for each
+Executive Board member based on their individual role and
+performance in its first regular meeting of each fiscal year. For more
+information about the work of the Supervisory Board and its
+committees, see the Report by the Supervisory Board. As pictured
+below, the compensation contains performance-based elements
+and non-performance-based elements:
+The compensation for Executive Board members is intended to
+reflect the demanding role of Executive Board members leading a
+global company in a rapidly evolving sector. The compensation level
+is aimed to be competitive to support SAP in the global market for
+highly skilled executives, especially in the context of the software
+industry. It is our goal that our Executive Board compensation
+provides sustainable incentive for committed, successful work in a
+dynamic business environment.
+Compensation System for 2019
+Compensation for Executive Board
+Members
+This compensation report describes the compensation system,
+outlines the criteria that apply to the compensation for Executive
+Board and Supervisory Board members for the year 2019, and
+discloses the amount of compensation. In addition, it discloses an
+outlook of the changes to the compensation system for the year
+2020.
+Compensation for Executive and
+Supervisory Board Members
+Note: This compensation report is part of the audited management report.
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Compensation Report
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+The contractually guaranteed fringe benefits mainly comprise
+additional benefits such as insurance contributions, benefits in kind,
+expenses for maintenance of two households, use of aircraft, and
+tax gross-ups according to local conditions.
+100%
+LTI
+¹) Home currency is the currency of the Executive Board member's primary place of
+residence.
+If the weighted target achievement for the financial KPIs is below
+75%, there is no STI payout. In this case, the target achievement for
+these KPIs is set to zero.
+For the STI 2019, the financial KPIs are: Constant currency new
+cloud bookings in 2019, year-over-year growth in non-IFRS constant
+currency cloud and software revenue in 2019, and non-IFRS
+constant currency operating margin in 2019. The KPIs and their
+respective target values are derived from SAP's budget for that year.
+For more information about financial KPIs, see the Performance
+Management System section.
+The short-term, one-year performance-based compensation
+(Short-Term Incentive, STI) is determined based on a set of financial
+targets (KPIs).
+STI target achievement (%) x STI target amount (€)
+75% to 140%
+STI compensation
+0%
+0% if weighted achievement is below a 75% hurdle
+Target achievement
+(non-IFRS, at constant currency)
+(non-IFRS, at constant currency)
+Operating margin increase
+25%
+35%
+40%
+Cloud and software revenue growth
+(at constant currency)
+New cloud bookings
+100%
+Financial KPIs 2019
+Short-Term Incentive
+Performance-Based Compensation
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+23
+Compensation Report
+Long-term incentive
+100%
+Additional
+Information
+2017
+Cloud and
+growth
+(non-IFRS¹), at
+constant currency)
+Operating margin
+increase
+(non-IFRS¹), at
+constant currency)
+Sustainability
+KPIs 2020
+20%
+6.67% Customer Net
+Promoter Score
+(NPS)
+6.67% Employee
+software revenue
+Engagement Index
+(EEI in %)
+Each underlying KPI includes a hurdle and a cap in addition to
+the overall hurdle of 75% and the overall cap of 140%. In the event
+that the hurdle for the individual KPIs is missed and results in the
+weighted target achievement also falling below the overall hurdle of
+75%, the individual hurdle for the respective KPI will be ignored.
+Long-Term Incentive
+The Supervisory Board introduced a new long-term multi-year
+performance-based compensation plan effective from 2020 and
+onwards: the SAP Long Term Incentive Program 2020 (LTI 2020).
+The LTI 2020 reflects SAP's strategy, rewards the development
+of SAP's total shareholder return (TSR) in comparison to the
+market, and has a retention element. It is a financially rewarding
+instrument for attracting and retaining SAP's Executive Board
+members, who play a key role in increasing the earnings power and
+in enhancing the value of SAP over the long term.
+The major differences in the LTI 2020 compared to the previous
+LTI plan are as follows:
+-
+-
+-
+-
+The discretion element in determining the grant amount has
+been eliminated. Therefore, the grant amount is the
+contractually agreed target amount.
+SAP's performance of the Market Performance Share Units
+(MSUS) is now measured based on total shareholder return
+(previous plan: share price) and compared against the NASDAQ-
+100 Index (previous plan: SAP Peer Group Index) over three
+years (previous plan: four years).
+The achievement of financial targets is rewarded with Financial
+Performance Share Units (FSUs) with a performance period of
+three years. The financial targets are set in line with SAP's
+communicated mid-term ambition for 2023. (previous plan: no
+FSUs).
+The RSU component has been reduced to 33.3% (previous plan:
+40%).
+The payout will include the share price as well as dividends
+(previous plan: only share price).
+The payout is capped at 200% of the grant price (previous plan:
+300%).
+6.67% Carbon Impact
+(greenhouse gas
+emissions in kt CO2)
+constant currency)
+(non-IFRS¹), at
+25%
+76.8
+233.8
+12/31/2018
+ΝΑ
+90.9
+82.6
+55.5
+233.8
+1) Consideration of theoretical payout amounts based on SAP's share price at year end
+2) Consideration of individual adjustment factor in addition to target achievement 2015
+ranging between 31.62% and 37.38%
+Compensation Report
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+Changes to Compensation System for 2020
+General
+For 2020 and beyond, the Supervisory Board established
+changes to the STI and LTI to align compensation to support SAP's
+strategy, including business transformation and medium-term
+prospects. The changes were based on analysis of market best
+practice and feedback from investors.
+Short-Term Incentive
+The major differences in the STI 2020 compared to the previous
+STI are as follows:
+Introduction of sustainability targets (sustainability KPIs) with a
+total weighting of 20% in addition to the financial targets
+(financial KPIs). The sustainability KPIs are: Customer Net
+Promoter Score, which measures SAP's customer loyalty;
+Employee Engagement Index, which measures SAP's employee
+commitment, pride, and loyalty; and Carbon Impact, which
+measures SAP's greenhouse gas emissions.
+Replacement of the financial KPI new cloud bookings by current
+cloud backlog, which includes new contracts as well as renewals
+of existing contracts and thus reflects cloud growth more
+holistically than the cloud bookings metric.
+Limitation of the Supervisory Board's discretion to adjust the
+performance-based compensation for the STI before payout
+upwards or downwards in the interest of SAP for cases of
+extraordinary, unforeseeable events, to a range of +/-20%.
+Financial
+KPIs 2020
+80%
+30%
+Current cloud
+backlog
+25%
+In case of death or disability, the unearned grant will vest in full
+according to the payout schedule (previous plan: forfeits on a
+pro rata temporis basis).
+The Supervisory Board limited the extent of the discretion to
+adjust the performance-based compensation for the LTI before
+payout upwards or downwards in the interest of SAP for cases of
+extraordinary, unforeseeable events, to a range of +/-10%
+(previous plan: no limitation).
+Target achievement
+0% if weighted achievement is below a 75% hurdle
+Final number of all Share Units
+x (payout price (€) + dividend amount per share (€))
+Cap of payout per share = 200% of grant price
+Further Information on Economic,
+Environmental, and Social Performance
+MSU Calculation
+Additional
+Information
+1/2 MSUS
+Originally granted
+TSR performance: SAP relative to
+Index
+100% = SAP is ranked to the median of the index companies
+Index TSR
+performs better
+than SAP TSR
+SAP is ranked less than the
+median of the index
+companies
+SAP TSR
+performs better
+than Index TSR
+SAP is ranked better than
+the median of the index
+companies.
+Performance factor is only
+higher than 100% when
+SAP TSR performance is
+positive.
+The vesting period of four years remains unchanged. In
+connection with Michael Kleinemeier's contract extension, a vesting
+period of one year has been agreed for his 2020 tranche.
+resulting in a
+Market performance factor
+200%
+150%
+100%
+50%
+0%
+P-25 Median
+P-75
+Final number of MSUs after three years
+Originally granted number x market performance factor (%)
+SAP's total shareholder return (TSR) performance is measured
+over the three-year measurement period and ranked in relation to
+the TSR performance of the companies of the NASDAQ-100 Index.
+TSR means the performance of the share combining share price
+development and granted and reinvested dividends. The market
+performance factor has a cap at 150% at the 75th percentile (P-75)
+and a hurdle of 50% at 25th percentile (P-25), below the hurdle no
+MSUs are considered.
+2016
+Payout after four years
+110.5
+calculation
+FSU
+0%
+75% to 140%
+STI compensation
+STI target achievement (%) x STI target amount (€)
+¹) Based on SAP's non-IFRS metrics as defined for use in SAP's 2019 full year
+external financial reporting
+Compensation Report
+29
+29
+30
+30
+To Our
+Combined Group
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+LTI Grant Process
+Grant amount is converted
+= grant amount (€) ÷ grant price (€)
+1/3 MSUS
+1/3 FSUS
+1/3 RSUs
+Market
+Performance
+Financial
+Performance
+Retention
+Share Units
+Share Units
+Share Units
+MSU
+calculation
+126.4
+into Share Units
+12/31/2019
+2016
+2018
+2019
+2017
+Total four-year: 18.75% forfeiture
+1) Example calculation with four tranches (grant allocation of 100%, stable share price from grant to vest, and no consideration of performance condition);
+Executive Board member's contract terminates after year four (December 31, 2019).
+2) As defined in the individual Executive Board members' contracts; this is not equal to the companies listed in the Peer Group Index.
+3) For the definition, see the Early End-of-Service Undertakings section.
+The change from the previous RSU Milestone Plan to the
+LTI 2016 Plan required a transition rule in order to avoid unjustified
+disadvantages for Executive Board members. In the event an
+Executive Board member leaves the company, the disadvantage
+arises from the difference in the one-year vesting period in the RSU
+Milestone Plan in comparison to the four-year vesting period in the
+LTI 2016 Plan. In order to compensate for this disadvantage related
+to the vesting periods, an individual equalization amount was
+determined for Executive Board members who participated in the
+RSU Milestone Plan.
+The equalization amount has been subject to:
+A target achievement of at least 60% of the non-IFRS constant
+currency operating profit target, and
+An ongoing employment relationship in 2016, 2017, and, in one
+case, in 2018.
+In the event an Executive Board member leaves the company
+and PSUs would otherwise be forfeited on a pro rata basis, the
+Executive Board member is entitled to PSUs equal to the
+equalization amount. The following graphic gives an example of how
+the equalization amount was derived, assuming a grant of €1,000
+for the RSU Milestone Plan, a grant of €1,500 for the LTI 2016 Plan,
+and a forfeiture of the grants on a pro rata temporis basis on
+December 31, 2019:
+1,000
+earned grants
+■equalization amount
+forfeited grants
+1,500
+250
+1,125
+625
+750
+375
+2015
+2016
+2017
+2018
+2019
+RSU Milestone Plan
+LTI 2016 Plan
+37.5%
+Compensation Report
+25.0%
+0.0%
+2018
+156.6
+2019
+Total four-year: 100% forfeiture
+Executive Board
+Member resigns
+from office
+without cause
+Executive Board member
+does not start working for
+an SAP competitor²)
+before the end of the
+vesting period
+PSUs and RSUs forfeit
+■earned grants
+forfeited grants
+0%
+25%
+50%
+75%
+on a pro rata temporis
+basis
+Executive Board member's service contract expires due to
+mutual consent, resignation, retirement, or death
+Change of
+control³)
+2016
+2017
+2018
+2019
+Total four-year: 37.5% forfeiture
+PSUs and RSUs are paid
+plus 50%
+forfeited grants
+out immediately
+on a pro rata temporis
+basis plus 50% which
+otherwise would be
+forfeited
+12.5%
+22
+■earned grants
+To Our
+Co-CEO
+Executive Board
+(other than Co-CEO)
+The maximum possible payout amount of the LTI is reached if all
+of the following conditions are cumulatively met:
+The grant amount for the LTI tranche has been set at its capped
+maximum of 120% of the contractual target amount.
+SAP's share price outperforms the Peer Group Index by at least
+25 percentage points (reaching the capped maximum 150% of
+the initial PSU allocation for that year).
+In the event of the maximum LTI payout for the entire Executive
+Board of €117 million in 2023, the shareholders would also benefit
+through the strong increase in market capitalization, which would
+be at least €200 billion from 2019 to 2023.
+Overview of the Relations Between Target and Payout for
+Performance-Based Compensation
+The total target achievements of STI reflect the relation between
+the target amount and the payout amount. The STIs for the years
+2015 to 2018 were already paid out.
+STI Total Target Achievement
+Percentage
+2019
+2018
+2017
+2016
+2015
+82.4
+93.0
+88.2 104.4
+147.5
+The relation between the LTI target amounts for the 2016 to
+2019 tranches and the theoretical payout amounts are based on
+SAP's share price at year end. The 2015 tranche discloses the
+relation between the respective target amount and the actual
+payout amount in May 2019.
+Relation Between Target Amount and Payout Amount of the LTI
+Percentage
+28
+LTI 2016 Plan
+RSU
+Milestone
+Plan 2015
+2019
+Tranche¹)
+2018
+Tranche¹)
+2017
+Tranche¹
+27
+2016
+Tranche¹)
+Max
+Target
+The SAP share price has at least tripled (corresponding to an
+average annual increase of approximately 32%) compared to the
+grant price (cap on share price development).
+Max
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+Clawback Provisions
+SAP has the contractual right to request that the Executive
+Board member returns any payments made from STI or LTI if it
+subsequently emerges that the payment was not justified in whole
+or in part because targets were not achieved at all or not achieved in
+the scope assumed when calculating the payment amount due on
+account of false information having been provided. In such case, the
+Executive Board member is obliged to repay to SAP the amount by
+which the payment actually made exceeds the payment amount
+due on the basis of the targets actually achieved. Such
+contractually agreed claim to repayment supplements the claim for
+restitution of unjustified enrichment pursuant to section 812 of the
+German Civil Code (BGB).
+Minimum and Maximum Compensation
+Min
+The maximum compensation amount is capped at 347% (Co-
+CEO) and 317% (Executive Board member other than Co-CEO) of
+the total target compensation of the Executive Board members who
+were employed at year end. Due to the change during the year, we
+have annualized the compensation for our calculation. This would
+be achieved in the event of the maximum possible payout amount
+of the STI and the LTI, as follows:
+The following graphic illustrates the relation of the fixed and
+performance-based compensation elements in the Executive Board
+members' target compensation for 2019 based on € amounts, as
+well as the minimum and maximum possible compensation. The
+height of the bars is not indicative of the absolute compensation
+amount.
+Compensation Scheme 2019
+■LTI (long-term
+incentive)
+■STI (short-term
+incentive)
+■Fixed
+The minimum compensation amount reflects the fixed
+compensation amount and an LTI and STI payout of zero.
+100%
+347%
+Target
+100%
+317%
+-
+2015
+Tranche²)
+The maximum possible payout amount of the STI is reached
+when the target achievement of all financial KPIs is 140%.
+The maximum possible payout amount for the LTI tranche is
+468% of the contractual target amount.
+compensation
+13%
+17%
+Min
+700.0
+700.0
+700.0
+700.0
+1,314.7
+700.0
+700.0
+794.7
+1,123.6 1,123.6 1,123.6
+2,335.6 2,335.6 2,335.6
+2,109.4
+794.7 1,123.6
+2,335.6 2,109.4
+12.0
+1,212.0
+12.0
+11.8
+12.0
+Total
+1,314.7
+2019
+(Min)
+1,212.0
+Benefits Received
+Benefits Granted
+Benefits Received
+2019¹)
+12.0
+2019
+(Max)
+2018¹)
+2019¹)
+2018¹)
+2019
+2019
+2019
+2018
+2019
+2018
+(Min)
+(Max)
+Fixed compensation
+Fringe benefits²)
+1,212.0
+1,212.0
+11.8
+12,281.3
+712.0
+5,251.0
+3,732.5
+949.5
+Total
+2,335.6 35,944.4
+Service cost
+486.5
+486.5
+10,315.3
+486.5
+486.5
+11,179.0 14,690.4 9,207.1 4,224.7
+568.3
+712.0
+Total according to
+GCGC
+Benefits Granted
+5,491.4 2,654.2
+3,966.4
+11,723.6
+568.3
+RSU Milestone
+Plan 2015
+2,128.8
+0 9,435.6
+712.0
+711.8
+712.0
+711.8
+One-year variable
+compensation
+Multi-year variable
+compensation
+2,235.2
+0 3,129.3
+2,193.0
+2,039.5
+1,846.7 1,125.8
+0 1,576.1
+1,125.8
+1,046.9
+992.9
+LTI 2016 Plan
+7,710.6
+0 30,479.5
+6.876.6
+2,387.0
+712.0
+member of the Executive Board until 11/15/2019)
+729.0
+(CEO until 10/10/2019,
+729.0
+729.0
+729.1
+729.0
+729.1
+177.3
+177.3
+177.3
+Total
+710.3
+710.3
+One-year variable
+1,125.8
+0 1,576.1 1,125.8
+1,046.9
+992.9
+1,125.8
+0 1,576.1
+177.3
+1,125.8
+10.3
+10.3
+175.0
+700.0
+175.0
+12,767.8
+175.0
+700.0
+175.0
+700.0
+2.3
+Fringe benefits²)
+29.0
+29.0
+29.1
+29.0
+29.1
+2.3
+2.3
+2.3
+29.0
+Member of the Executive Board
+1,046.9
+compensation
+729.0 11,740.6 3,983.7
+2,249.7
+1,722.0 3,991.6
+177.3
+12,381.3
+4,233.8 4,997.4 2,952.0
+GCGC
+Compensation Report
+4,241.7
+33
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+German Corporate Governance Code
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+€ thousands
+Bill McDermott
+Luka Mucic
+To Our
+Stakeholders
+992.9
+Total according to
+4,233.8 4,997.4 2,952.0
+Multi-year variable
+compensation
+LTI 2016 Plan
+2,387.0
+0 9,435.6 2,128.8
+2,688.6
+0 10,627.9 2,397.7
+RSU Milestone
+Service cost
+473.8
+Plan 2015
+Total
+4,241.7
+729.0 11,740.6 3,983.7
+2,249.7
+1,722.0 3,991.6
+177.3
+12,381.3
+3,773.2 1,248.8
+2,822.1 36,430.9 11,747.3 15,176.9 9,775.4 4,224.7
+6,775.3
+11,723.6
+2019
+2018
+Benefits Received
+2019
+Benefits Granted
+2018
+2019
+2018
+Benefits Received
+2019
+2019
+2018
+(Max)
+Fixed compensation
+116.7
+116.7
+116.7
+116.7
+6,949.2
+6,775.3
+(Min)
+6,949.2
+2019
+Member of the Executive Board (from 11/1/2019)
+713.5 10,930.1
+0
+713.5
+0
+3,858.3
+721.8 10,246.2 3,640.9 1,768.7 1,714.8
+GCGC
+34
+Benefits Granted
+Compensation Report
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+German Corporate Governance Code
+€ thousands
+Thomas Saueressig
+Total Executive Board
+To Our
+Stakeholders
+4,025.1
+Fringe benefits²)
+2.1
+8,197.1
+compensation
+Multi-year variable
+compensation
+LTI 2016 Plan
+515.2
+0 1,444.0
+32,392.7
+11,327.1 10,534.0
+23,646.2
+21,923.4
+8,698.1
+Plan 2015
+Total
+822.1
+118.8
+700.0
+1,826.2
+RSU Milestone
+2.1
+13,083.9
+0
+2.1
+2.1
+1,578.0
+1,169.0
+1,578.0
+1,169.0
+Total
+118.8
+263.4
+118.8
+0
+118.8
+0
+8,353.2
+8,118.2 8,353.3
+8,118.2
+One-year variable
+188.1
+118.8
+712.0
+Total according to
+1,714.8
+(Min)
+(Max)
+(Min)
+(Max)
+Fixed compensation
+700.0
+700.0
+700.0
+2018
+700.0
+700.0
+700.0
+700.0
+700.0
+700.0
+Fringe benefits²)
+13.5
+13.5
+700.0
+13.5
+2019
+2019
+3,966.4
+5,491.4 2,654.2
+€ thousands
+Jürgen Müller
+Stefan Ries
+Member of the Executive Board (from 1/1/2019)
+Member of the Executive Board
+Benefits Granted
+2018
+2019
+2019
+2018
+Benefits Received
+2019
+Benefits Granted
+Benefits Received
+2018
+2019
+2019
+2019
+Service cost
+13.5
+713.5
+compensation
+Multi-year variable
+compensation
+LTI 2016 Plan
+2,185.8
+0 8,640.5
+2,010.7
+0 7,948.3 1.793.2
+992.9
+RSU Milestone
+Total
+4,025.1
+713.5 10,930.1
+0
+713.5
+0
+3,858.3
+721.8 10,246.2 3,640.9 1,768.7
+Plan 2015
+Total
+0 1,576.1 1,125.8 1,046.9
+0 1,576.1
+713.5
+713.5
+0
+713.5
+0
+21.8
+721.8
+21.8
+21.8
+1,125.8
+21.9
+21.9
+721.8
+721.8
+721.9
+721.8
+721.9
+One-year variable
+1,125.8
+21.8
+700.0
+141.3
+700.0
+2019
+2018
+2019
+2018
+2019¹)
+2019
+2019
+2018¹)
+2019
+2019¹)
+(Min)
+(Max)
+(Min)
+(Max)
+Fixed compensation
+789.9
+789.9
+789.9
+2018¹)
+700.0
+2019
+Benefits Granted
+Min
+Target
+Max
+Co-CEO
+Executive Board
+(other than Co-CEO)
+Executive Board Members' Compensation
+German Corporate Governance Code
+Further Information on Economic,
+Environmental, and Social Performance
+Benefits Received
+Additional
+Information
+We present the Executive Board compensation disclosures in
+accordance with the recommendations of the German Corporate
+Governance Code ("GCGC"). Furthermore, the tables below provide
+a reconciliation statement following the requirements of
+sections 314 and 315 of the German Commercial Code
+(Handelsgesetzbuch, or "HGB") as specified in the German
+Accounting Standards ("GAS 17"). Pursuant to the
+recommendations of the GCGC, the value of benefits granted for
+the year under review as well as the benefits received, that is, the
+amounts disbursed for the year under review, are disclosed below
+based on the reference tables recommended in the GCGC. In
+contrast to the disclosure rules stipulated in the German HGB and
+GAS 17, the GCGC includes the pension expense, that is, the service
+cost according to IAS 19, in the Executive Board compensation and
+requires the additional disclosure of the target value for the one-
+year variable compensation and the maximum and minimum
+compensation amounts achievable for the variable compensation
+elements.
+€ thousands
+Christian Klein
+Jennifer Morgan
+(Co-CEO from 10/10/2019)
+(Co-CEO from 10/10/2019)
+Benefits Granted
+Benefits Received
+Amount of Compensation for 2019
+Max
+789.9
+762.1
+713.1
+804.7
+713.1
+887.9
+887.9
+887.9
+762.7
+887.9
+804.7
+762.7
+1,301.8
+0 1,822.5 1,125.8
+1,046.9
+1,251.5
+0 1,752.1 1,052.0
+978.4
+594.6
+compensation
+One-year variable
+700.0
+804.7
+Total
+762.1
+762.1
+634.3
+762.1
+634.3
+Fringe benefits²)
+14.8
+14.8
+804.7
+14.8
+14.8
+13.1
+125.8
+125.8
+125.8
+128.4
+125.8
+128.4
+13.1
+Multi-year variable
+Target
+16%
+100% = SAP achieves 100% of the three equally-weighted
+financial targets
+1/3
+Cloud
+revenue
+Performance factor
+55th percentile
+110%
+(non-IFRS¹), at
+constant currency)
+Cap positive performance
+SAP's financial target achievement
+100%
+100% x 1,000
+1,000
+resulting in a
+13
+Total
+revenue
+(non-IFRS¹), at
+constant currency
+1/3
+Operating
+income
+(non-IFRS¹), at
+Final number of MSUS
+constant currency)
+Originally granted
+Additional
+Information
+257.0
+0
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+The following examples of the MSU calculation illustrate possible
+outcomes assuming 1,000 MSUs granted:
+SAP TSR performs better than TSR of NASDAQ-100 companies;
+cap is triggered
+1/2 FSUS
+SAP TSR performance
+Final number of MSUS
++18%
+80th percentile 160%
+Cap 75th percentile 150%
+150% x 1,000 1,500
+SAP TSR performs better than TSR of NASDAQ-100 companies;
+in a downwards market trend
+SAP TSR performance
+-5%
+Further Information on Economic,
+Environmental, and Social Performance
+FSU Calculation
+Performance factor
+Min
+Financial performance factor
+TSR of NASDAQ-100 companies perform better than SAP TSR;
+low hurdle is triggered
+31
+To Our
+Combined Group
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Compensation Scheme 2020
+217%
+The final number of FSUS changes depending on SAP's
+performance against the financial KPI targets over the entire three-
+year performance period. The financial KPIs are derived from SAP's
+communicated mid-term ambition for 2023. Cloud revenue and
+total revenue have a cap of 120% and a hurdle of 80% target
+achievement, while operating income has a cap of 110% and a
+hurdle of 90% target achievement.
+■LTI (long-term
+incentive)
+■STI (short-term
+incentive)
+■Fixed
+compensation
+13%
+100%
+100%
+206%
+200%
+¹) Based on SAP's non-IFRS metrics as defined for use in SAP's 2019 full-year
+external financial reporting
+Compensation Report
+Cloud revenue
+150%
+SAP TSR performance
+-5%
+Total revenue
+100%
+50%
+Performance factor
+Final number of FSUs after three years
+Originally granted number x financial performance factor (%)
+20th percentile
+Operating income
+Hurdle 25th percentile
+0%
+0%
+70% 80% 90% 100% 110% 120% 130%
+Final number of MSUS
+0% x 1,000
+0
+40%
+compensation
+LTI 2016 Plan
+3,407.9
+Multi-year variable
+compensation
+LTI 2016 Plan
+2,545.6
+0 10,062.8
+2,270.3
+2,823.1
+0 10,873.8 2,128.8
+compensation
+RSU Milestone
+1,248.8
+Plan 2015
+Total
+4,320.2
+421.8 12,378.5
+4,502.9
+Service cost
+177.5
+3,628.6
+177.5
+666.5
+1,576.1 1,125.8
+421.8
+905.3
+421.8
+905.3
+731.0
+731.0
+731.0
+754.6
+1,046.9
+731.0
+One-year variable
+1,352.8
+0 1,893.9
+1,327.3
+1,234.4
+1,117.7
+1,125.8
+0
+754.6
+421.8
+177.5
+5,284.8
+177.5
+2019
+2019
+2019
+2018
+2019
+2018
+2019
+2019
+Benefits Granted
+2019
+Benefits Received
+2019
+2018
+(Min)
+(Max)
+(Min)
+(Max)
+Fixed compensation
+700.0
+2018
+235.8
+Benefits Received
+Member of the Executive Board (until 3/31/2019)
+3,271.8
+4,679.9
+731.0 13,180.9
+4,009.2 1,777.9 1,421.1
+235.8
+Total according to
+GCGC
+4,497.7
+599.3
+Benefits Granted
+12,556.0
+5,462.3 3,507.6 4,679.9
+731.0
+13.180.9 4,009.2 1,777.9
+1,421.1
+€ thousands
+Michael Kleinemeier
+Bernd Leukert
+Member of the Executive Board
+4,738.7
+421.8
+Total
+54.6
+5,975.1
+992.5 16,169.4
+3,994.9
+1,970.8 1,408.7
+32
+32
+Compensation Report
+To Our
+Stakeholders
+713.1
+Combined Group
+Management Report
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+German Corporate Governance Code
+€ thousands
+Robert Enslin
+Adaire Fox-Martin
+Member of the Executive Board (until 4/5/2019)
+Member of the Executive Board
+Consolidated Financial
+Statements IFRS
+Benefits Granted
+804.7 14,887.3 3.632.1 1,851.6
+Total according to
+GCGC
+0 12,260.1 1,793.2
+3,731.2
+0 13,424.8 2,128.8
+RSU Milestone
+Plan 2015
+Total
+5,514.4
+804.7 14,887.3 3,632.1 1,851.6
+5,514.4
+713.1
+Service cost
+104.6
+104.6
+887.9 16,064.8 3.943.5 1,866.2
+104.6
+1,357.3
+51.4
+104.6
+51.4
+5,870.5
+Benefits Received
+Benefits Granted
+Benefits Received
+700.0
+700.0
+700.0
+700.0
+700.0
+700.0
+Fringe benefits²)
+202.1
+800.2
+202.1
+105.1
+202.1
+105.1
+31.0
+31.0
+31.0
+54.6
+31.0
+202.1
+219.7
+800.2
+219.7
+2019¹)
+2019
+2019
+2018¹)
+2019¹)
+2018¹)
+2019
+2019
+2019
+2018
+2019
+2018
+(Min)
+(Max)
+(Min)
+(Max)
+Fixed compensation
+219.7
+219.7
+700.0
+118.8
+(Co-CEO from 10/10/2019)
+53,829.8
+Average Annual
+Compensation
+11,785.4
+(in € thousands)
+Executives
+823
+14
+5
+99
+119
+41
+Employees
+including
+Executives
+Compensation Report
+To Our
+Stakeholders
+Combined Group
+Management Report
+Fair Value at Time of Grant
+PSUs
+(60%)
+Quantity
+Quantity
+Quantity
+RSUs
+(40%)
+Total
+Share Units
+Executive Board
+(Other Than
+CEO)
+4,090.8
+Year
+Granted
+Grants Under the LTI 2016 Plan
+Members of the Executive Board received, hold, or held share
+units issued to them under the LTI 2016 Plan and hold or held RSUs
+issued to them under the RSU Milestone Plan 2015. For more
+Share-Based Payment Information Relating to Long-Term Incentives
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+information about the terms and details of these programs, see the
+Notes to the Consolidated Financial Statements, Note (B.3).
+2016
+CEO
+Ratio
+923
+Executives
+4,196.4
+8,604.5
+3,880.0
+CEO)
+12
+Executive Board
+(Other Than
+694.8
+635.7
+419.3
+2,655.7
+12/31/2018
+Net defined benefit
+507.6
+€ per RSUs
+4
+Employees
+Executives
+Employees
+including
+41
+84
+103
+Executives
+(in € thousands)
+including
+9
+915
+Executives
+39
+111
+101
+5
+Christian Klein
+2019
+1)
+15,944
+10,630
+26,574
+2018
+2,387
+93.71
+79.01
+88.54
+10.419
+26.047
+2019
+509
+115.10
+101.98
+15.628
+2,781
+80.84
+Robert Enslin
+80.84
+79.01
+17,004
+11,336
+28,340
+2018
+2,129
+(until 4/5/2019)
+93.71
+88.54
+16,667
+11,111
+27,778
+2019
+2,546
+liability (asset)
+1,853
+2)
+93.71
+88.54
+15,628
+10,419
+26,047
+2019
+2,387
+(Co-CEO from 10/10/2019)
+€ thousands
+€ per PSUs
+139.97
+117.39
+4,678
+3,119
+7,797
+1,021
+4,634
+2018
+8,954
+2019
+835
+139.97
+117.39
+3,826
+2,552
+22,385
+6,378
+2019
+Jennifer Morgan
+1,793
+80.84
+79.01
+13,431
+1)
+-28.5
+-73.6
+-169.0
+4.8
+16.8
+12.6
+0.2
+1) The rights shown here for Bill McDermott refer solely to rights under the pension plan
+for SAP America.
+40
+23.2
+40
+Bill McDermott (CEO until
+2019
+0
+33,655
+50,483
+65,767
+Compensation Report
+35,857
+27.6
+Stefan Ries
+7.3
+Michael Kleinemeier
+20.0
+14.8
+Bernd Leukert (until 3/31/2019)
+34.7
+Thomas Sauer essig (from 11/1/2019)
+24.6
+Executive Board Member until
+90.8
+105.1
+11/15/2019)¹)
+Luka Mucic
+Jürgen Müller (from 1/1/2019)
+Bill McDermott (CEO until 10/10/2019,
+11.8
+54,228
+member until 11/15/2019)
+3,855
+0
+118,568
+Luka Mucic
+2019
+0
+0
+10,419
+0
+0
+26,047
+2018
+26,574
+0
+15,628
+10/10/2019, Executive Board
+0
+2016
+2018
+85,841
+0
+0
+45,653
+0
+122,423
+40,188
+89,217
+0
+0
+25,159
+0
+64,058
+2017
+2,270
+Adaire Fox-Martin
+4.1
+145.9
+160.6
+171.2
+363.0
+147.2
+144.9
+Plan assets change in
+1,132.8
+DBO 12/31/2019
+357.5
+391.0
+544.5
+984.9
+1,480.0
+2019
+1,018.8
+2,056.0
+251.4
+-126.4
+1.416.7
+-91.9
+-141.9
+785.4
+12/31/2018
+41.9
+DBO change in 2019
+207.6
+205.9
+416.5
+63.3
+475.0
+149.7
+244.7
+10/11/2019)
+149.7 528.8
+5,497.1
+149.7
+-35.4
+41.9
+1,708.6
+12/31/2019
+1) The values shown here only reflect the pension entitlements that Christian Klein, Adaire Fox-Martin, Michael Kleinemeier, Bernd Leukert, Luka Mucic, Jürgen
+Müller, Stefan Ries and Thomas Saueressig will receive from the retirement pension plan for Executive Board members.
+235.9
+The table below shows the annual pension entitlement earned
+during the Executive Board membership of each member of the
+Executive Board on reaching the scheduled retirement age of 62,
+based on entitlements from SAP under performance-based and
+salary-linked plans.
+These are vested entitlements. To the extent that members
+continue to serve on the Executive Board and that therefore more
+contributions are made for them in the future, pensions actually
+payable at the scheduled retirement age will be higher than the
+amounts shown in the table.
+€ thousands
+Vested on
+12/31/2019
+Vested on
+12/31/2018
+Christian Klein (Co-CEO from
+8.2
+Annual Pension Entitlement
+41.9
+1,480.0
+-134.3
+Less plan assets
+market value
+287.2
+417.6
+678.8
+1,057.8
+-72.9
+782.9
+3,788.5
+12/31/2019
+Net defined benefit
+liability (asset)
+70.3
+-26.6
+564.2
+Adaire Fox-Martin
+2019
+2)
+2017
+8,923
+0
+19,417
+0
+28,340
+29,454
+2018
+14,809
+25,972
+16,667
+11,111
+0
+2019
+16,615
+Robert Enslin (until 4/5/2019)
+0
+12,822
+18,010
+12,007
+0
+2019
+Adaire Fox-Martin
+32,947
+0
+0
+○
+0
+40,417
+2016
+16,632
+0
+7,470
+0
+18,539
+0
+Jennifer Morgan (Co-CEO from
+22,385
+0
+0
+0
+0
+2019
+22,385
+10/10/2019)
+33,844
+0
+0
+20,306
+Holding on
+12/31/2019
+2018
+0
+0
+22,235
+0
+0
+18,539
+2017
+26,574
+0
+14,824
+0
+26,574
+2018
+10/10/2019)
+37,059
+0
+0
+0
+Forfeited Balanced PSUs²)
+0
+2018
+0
+29.931
+2018
+3/31/2019)³)
+26,929
+10,443
+○
+12,852
+11,735
+0
+2019
+Bernd Leukert (until
+37,898
+0
+17,603
+0
+5,634
+27,678
+42,687
+0
+0
+0
+0
+42,687
+3,381
+2016
+0
+0
+0
+0
+31,109
+2017
+31,109
+30,017
+0
+37,898
+10,419
+0
+2019
+Michael Kleinemeier
+18,539
+0
+15,628
+0
+0
+18,539
+2017
+26,574
+0
+26,574
+0
+0
+0
+26,047
+2016
+27,619
+0
+0
+○
+0
+0
+27,619
+26,574
+0
+0
+0
+26,574
+2018
+2017
+○
+Granted
+PSUs (60%)
+2019
+2,398
+80.84
+79.01
+17,959
+11,972
+29,931
+Bill McDermott
+2018
+2,689
+93.71
+88.54
+17,603
+11,735
+29,338
+(until 3/31/2019)
+2019
+2019
+33,655
+Luka Mucic
+6,877
+80.84
+79.01
+51,505
+34,336
+84,138
+85,841
+Board member until 11/15/2019)
+(CEO until 10/10/2019, Executive
+7.711
+93.71
+88.54
+50,483
+2018
+2019
+Bernd Leukert
+80.84
+2018
+2,387
+93.71
+88.54
+15,628
+10,419
+26,574
+26,047
+436
+115.10
+101.98
+2,382
+1,588
+3,970
+2019
+2,129
+10,630
+80.84
+79.01
+15,944
+10,630
+26,574
+2018
+2,387
+79.01
+93.71
+15,628
+10,419
+26,047
+2019
+Michael Kleinemeier
+2,129
+88.54
+RSUS (40%)
+13,538
+26,047
+15,628
+177,106
+118,072
+295,178
+2018
+32,393
+206,428
+23,646
+137,619
+2019
+515
+138.96
+114.67
+2,392
+1,594
+344,047
+3,986
+¹) Additional grant due to appointment as Co-CEO
+2) Additional grant due to extension of responsibilities
+37
+Christian Klein (Co-CEO from
+Holding on
+1/1/2019
+Year
+Granted
+Quantity of Share Units
+LTI 2016 Plan
+Additional
+Information
+Compensation Report
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined Group
+To Our
+32
+Executive Board Members' Holdings
+10,419
+2019
+1,793
+9,541
+23,852
+2019
+Jürgen Müller (from 1/1/2019)
+2,129
+80.84
+14,311
+79.01
+10,630
+26,574
+2018
+2,387
+93.71
+88.54
+15,944
+Thomas Saueressig (from 11/1/2019)
+Total
+88.54
+2,186
+80.84
+79.01
+13,431
+8,954
+22,385
+2018
+93.71
+2,011
+88.54
+13,165
+8,776
+21,941
+2019
+Stefan Ries
+93.71
+0
+15,944
+26.574
+128
+Total
+44,446.5
+8,054.4
+Total expense for the share-based payment plans of Executive
+Board members was determined in accordance with IFRS 2 (Share-
+Based Payments) and consists exclusively of obligations arising
+from Executive Board activities.
+End-of-Service Benefits
+Regular End-of-Service Undertakings
+Retirement Pension Plan
+The following retirement pension agreements apply to the
+individual members of the Executive Board:
+Adaire Fox-Martin, Christian Klein, Michael Kleinemeier, Bernd
+Leukert, Luka Mucic, Jürgen Müller, Stefan Ries, and Thomas
+Saueressig are entitled to receive a retirement pension when
+they reach the retirement age of 62 and retire from their
+-
+Executive Board seat; or a disability pension depending on a
+health examination if, before reaching the regular retirement age,
+they become subject to occupational disability or permanent
+incapacity. A surviving dependent's pension is paid on the death
+of a former member of the Executive Board. The disability
+pension is 100% of the vested retirement pension entitlement
+and is payable until the beneficiary's 62nd birthday, after which
+it is replaced by a retirement pension. The surviving dependent's
+pension is 60% of the retirement pension or vested disability
+pension entitlement at death. Entitlements are enforceable
+against SAP SE. Current pension payments are reviewed
+annually for adjustments and, if applicable, increased according
+to the surplus in the pension liability insurance. If service is
+ended before the retirement age of 62, pension entitlement is
+reduced in proportion as the actual length of service stands in
+relation to the maximum possible length of service. The applied
+retirement pension plan is contributory. The contribution is 4%
+of applicable compensation up to the applicable income
+threshold plus 14% of applicable compensation above the
+applicable income threshold. For this purpose, applicable
+compensation is 180% of annual base salary. The applicable
+income threshold is the statutory annual income threshold for
+the state pension plan in Germany (West), as amended from
+time to time.
+Bill McDermott has rights to future benefits under the portion of
+the pension plan for SAP America classified as "Non-Qualified
+Retirement Plan" according to the U.S. Employee Retirement
+Income Security Act (ERISA). This "Non-Qualified" pension plan
+is a cash balance plan that provides either monthly pension
+payments or a lump sum on retirement. The pension becomes
+available from the beneficiary's 65th birthday. Subject to certain
+conditions, the plan also provides earlier payment or invalidity
+benefits. The "Non-Qualified" pension plan closed with effect
+from January 1, 2009. Interest continues to be accrued on the
+earned rights to benefits within this plan. The rights were
+partially earned before Bill McDermott became a member of the
+SAP Executive Board.
+SAP made contributions to a third-party pension plan for Bill
+McDermott, Robert Enslin, and Jennifer Morgan, as disclosed in
+the tables 'German Corporate Governance Code' SAP's
+matching contributions are based on payments by Bill
+McDermott, Robert Enslin, and Jennifer Morgan into this pension
+plan.
+Compensation Report
+39
+To Our
+Stakeholders
+Thomas Sauer essig (from 11/1/2019)
+Combined Group
+Management Report
+772.0
+Stefan Ries
+Adaire Fox-Martin
+2,667
+796.1
+Michael Kleinemeier
+3,253
+914.2
+Bernd Leukert (until 3/31/2019)
+8,606
+775.2
+Bill McDermott (CEO until 10/10/2019,
+Executive Board member until 11/15/2019)
+14,689
+2,155.8
+Luka Mucic
+3,391
+675.8
+Jürgen Müller (from 1/1/2019)
+768
+2,646
+727.0
+Consolidated Financial
+Statements IFRS
+Additional
+Information
+Executive Board
+Member until
+11/15/2019)
+93.5
+271.9
+584.5
+100.7
+345.9
+540.9
+1,310.5
+585.9
+344.6
+3,190.9
+490.7
+275.8
+1,754.0
+market value 1/1/2018
+11/1/2019)¹)
+Further Information on Economic,
+Environmental, and Social Performance
+1/1/2019)¹)
+(from
+Total Defined Benefit Obligations (DBO) and Net Defined Benefit Liability (Asset) to Executive Board
+Members
+€ thousands
+DBO 1/1/2018
+Less plan assets
+Christian
+Klein
+(Co-CEO from
+10/10/2019)¹)
+Adaire
+Michael
+Fox- Kleinemeier¹)
+Martin¹)
+Bernd
+Leukert
+(until
+Bill
+McDermott
+Luka Jürgen Stefan
+Mucic¹)
+Müller
+Ries ¹)
+Thomas
+Saueressig
+Total
+3/31/2019)¹)
+(CEO until
+10/10/2019,
+(from
+Net defined benefit
+3,480
+796.1
+"Forfeiture according to leaver rules
+2) To balance disadvantages from leaver rules under the LTI 2016 Plan
+3) Forfeiture under the leaver rules assuming termination as at 3/31/2021
+The Share Units granted in 2019 have a remaining term of
+3.1 years, the share units granted in 2018 have a remaining term
+of 2.1 years, the share units granted in 2017 have a remaining
+term of 1.1 years, and the share units granted in 2016 have a
+remaining term of 0.1 years.
+38
+38
+Compensation Report
+To Our
+Combined Group
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+RSU Milestone Plan 2015
+Quantity of RSUs
+1,049,785
+Year Granted
+64,490
+206,428
+23,987
+0
+0
+0
+0
+23,987
+Thomas Sauer essig (from
+2019
+1,594
+2,392
+0
+0
+3,986
+11/1/2019)
+Total
+865,849
+137,619
+224,601
+Robert Enslin (until 4/5/2019)
+Holding on
+1/1/2019
+Holding on
+12/31/2019
+2015
+41,130
+41,130
+0
+241,581
+241,581
+0
+The table above shows the Executive Board members' holdings
+issued to them under the RSU Milestone Plan 2015. The plan was a
+cash-settled long-term incentive scheme with a payout subsequent
+to a performance period of one year (after which the RSUs become
+non-forfeitable) and an additional holding period of three years. The
+plan consisted of four plan tranches which were issued with respect
+to the calendar years 2012 through 2015.
+Total Expense for Share-Based Payment
+€ thousands
+2019
+2018
+Christian Klein (Co-CEO from 10/10/2019)
+1,925
+442.2
+Jennifer Morgan (Co-CEO from 10/10/2019)
+2,894
+Total
+Exercised
+Luka Mucic
+113,667
+Robert Enslin (until 4/5/2019)
+2015
+39,985
+39.985
+Michael Kleinemeier
+2015
+5,221
+5,221
+0
+Bernd Leukert (until 3/31/2019)
+2015
+41,578
+41,578
+0
+Bill McDermott (CEO until 10/10/2019, Executive Board
+member until 11/15/2019)
+2015
+113,667
+0
+-7.2
+-74.0
+43.6
+2018
+2019
+Thomas Saueressig
+Stefan Ries
+Total Executive Board
+Reconciliation Reporting of Total Compensation Pursuant to Section 314(1)(6a) HGB in Connection with GAS 17
+€ thousands
+Jürgen Müller
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+To Our
+Stakeholders
+36
+36
+55
+35
+Compensation Report
+2019
+3,887.5
+2018
+2018
+-13,083.9
+-188.1
+-1,125.8
+-1,125.8
+-1,125.8
+Less granted annual variable
+43,947.0
+54,598.4
+0
+822.1
+3,640.9
+3,858.3
+0
+4,025.1
+Total according to GCGC
+2018
+2019
+2019
+-11,327.1
+4,026.6
+11,655.9
+-2,193.0
+-2,235.2
+-1,125.8
+-1,125.8
+-1,125.8
+-1,125.8
+Less granted annual variable
+3,966.4
+4,224.7
+11,747.3
+12,767.8
+4,233.8
+3,991.6
+3,983.7
+4,241.7
+Total according to GCGC
+2018
+-1,125.8
+11,025.5
+-1,125.8
+Plus allocated actual annual
+4,154.9
+3,094.6
+3,904.8
+4,043.6
+Total compensation
+-568.3
+-486.5
+Less service cost
+variable compensation
+1,046.9
+927.6
+2,039.5
+1,609.7
+1,046.9
+228.7
+1,046.9
+927.6
+compensation
+compensation
+Plus allocated actual annual
+927.6
+901.7
+2018
+DBO 12/31/2018
+112.8
+183.4
+338.6
+568.4
+1,416.7
+543.8
+277.4
+3,441.1
+Less plan assets
+market value
+0
+0
+11,209.2
+Average Annual
+Compensation
+(in € thousands)
+143.5
+Average Annual
+Compensation
+145.0
+161.7
+1,310.5
+95.2
+68.8
+1,436.9
+liability (asset) 1/1/2018
+DBO change in 2018
+112.8
+89.9
+66.7
+-16.1
+106.2
+-42.1
+-67.2
+250.2
+Plan assets change in
+141.3
+156.3
+153.9
+CEO)
+Executive Board
+(Other Than Co-
+Co-CEO
+42,298.4
+-855.5
+-768.6
+49,771.3
+0
+788.9
+3,562.0
+3,660.1
+0
+3,826.9
+Total compensation
+Less service cost
+variable compensation
+10,534.0
+9,025.4
+155.0
+1,046.9
+927.6
+Vertical Pay Ratio
+The vertical pay ratio compares the total target compensation
+granted to the Co-CEOs and the Executive Board members other
+than Co-CEO with the total target compensation granted to the
+Executives and all employees collectively who were employed at
+year end. Due to the changes on the Executive Board during the
+year, we have annualized the compensation for our calculation. In
+order to ensure comparability, only fixed compensation, one-year
+and multi-year variable compensation are considered. The
+Executives comprise the first and second management levels below
+the Executive Board, that is, the Global Executive Team (GET) and
+the Senior Executive Team (SET).
+Ratio
+2018
+Ratio
+2019
+CEO
+Ratio
+2017
+40
+105
+4
+2016
+11
+Executives
+Employees
+including
+Executives
+10,384.3
+Average Annual
+Compensation
+(in € thousands)
+3.942.3
+CEO)
+(Other Than
+Executive Board
+CEO
+906
+99
+23,265
+0
+-235.8
+4,410.0
+2019
+2018
+2018
+2019
+2018
+Total according to GCGC
+5,514.4
+2018
+3,632.1
+3,994.9
+4,497.7
+4,738.7
+4,679.9
+4,009.2
+Less granted annual variable
+-1,301.8
+5,975.1
+-1,125.8
+2019
+Robert Enslin
+822.1
+118.8
+1,826.2
+0
+118.8
+0
+54,598.4
+Adaire Fox-Martin
+43,947.0
+25,868.9
+GCGC
+1) The value of the fixed and one-year variable compensation is granted in U.S. dollars. For conversion purposes from U.S. dollars into euro, for fixed compensation the average exchange
+rate and for the one-year variable compensation the year-end exchange rate of the respective period applies.
+2) Insurance contributions, the private use of company cars and aircraft, benefits in kind, compensation for unused vacation, expenses for maintenance of two households,
+reimbursement of fees for lawyers, the preparation of tax returns, and tax gross-ups according to local conditions. The fringe benefits of Bill McDermott mainly consist of expenses for
+maintenance of two households, the preparation of tax returns, and tax gross-ups according to local conditions.
+Reconciliation Reporting of Total Compensation Pursuant to Section 314(1)(6a) HGB in Connection with GAS 17
+€ thousands
+Christian Klein
+Jennifer Morgan
+41,579.2
+-1,251.5
+-1,052.0
+-1,352.8
+-177.5
+3,257.5
+4,481.7
+3,930.3
+€ thousands
+Michael Kleinemeier
+Bernd Leukert
+-51.4
+3,869.9
+Bill McDermott
+2019
+2018
+2019
+2018
+2019
+2018
+2019
+Luka Mucic
+5,650.2
+3,553.2
+5,285.3
+-1,327.3
+-1,125.8
+-1,125.8
+compensation
+Plus allocated actual annual
+1,072.7
+1,046.9
+1,031.2
+978.4
+290.1
+1,234.4
+927.6
+1,046.9
+variable compensation
+Less service cost
+-104.6
+Total compensation
+Total according to
+855.5
+2019
+855.5
+23,852
+0
+0
+14,311
+9,541
+0
+2019
+Jürgen Müller (from 1/1/2019)
+37,898
+0
+Stefan Ries
+0
+0
+37,898
+2016
+27,619
+0
+0
+0
+27,619
+2017
+768.6
+0
+2019
+0
+0
+768.6
+Service cost
+25,013.4
+43,091.5
+0
+0
+0
+0
+23,265
+2017
+40,810.6
+0
+0
+0
+22,385
+2018
+8,776
+21,941
+0
+0
+13,165
+22,385
+68.5
+ΝΑ
+Prof. Dr. Wilhelm Haarmann (until 5/17/2018)
+ΝΑ
+13.8
+NA
+82.3
+165.0
+68.8
+9.2
+77.9
+22.0
+187.0
+Prof. Dr. Gesche Joost
+112.8
+165.0
+Andreas Hahn (until 5/15/2019)
+2.8
+49
+176.0
+22.0
+33.0
+198.0
+165.0
+29.3
+194.3
+Anja Feldmann (until 12/31/2018)
+NA
+165.0
+ΝΑ
+ΝΑ
+165.0
+19.3
+184.3
+Diane Greene (from 5/17/2018)
+165.0
+11.0
+110.0
+187.0
+Mannheim, February 19, 2020
+22.0
+The German Public Auditor responsible for the engagement is
+Bodo Rackwitz.
+KPMG AG
+Wirtschaftsprüfungsgesellschaft
+[Original German version signed by:]
+Rackwitz
+Wirtschaftsprüfer
+[German Public Auditor]
+Schneider
+Wirtschaftsprüferin
+[German Public Auditor]
+50
+50
+22.0
+Independent Auditor's Report
+165.0
+187.9
+22.9
+165.0
+Lars Lamadé
+203.5
+ΝΑ
+165.0
+German Public Auditor Responsible for the
+Engagement
+In addition to the financial statement audit, we have provided to
+group entities the following services that are not disclosed in the
+consolidated financial statements or in the Group Management
+Report:
+187.0
+Monika Kovacka-Dimitrova (from 5/15/2019)
+110.0
+14.7
+124.7
+ΝΑ
+ΝΑ
+49
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+Further Information pursuant to Article 10 of the
+EU Audit Regulation
+We were elected as group auditor at the annual general meeting
+on May 15, 2019. We were engaged by the Chairman of the Audit
+Committee of the Supervisory Board of SAP SE on May 23, 2019,
+and this engagement was confirmed on July 31, 2019. We have been
+the group auditor of SAP SE without interruption since the financial
+year 2002.
+We declare that the opinions expressed in this auditor's report
+are consistent with the additional report to the audit committee
+pursuant to Article 11 of the EU Audit Regulation (long-form audit
+report).
+We audited the financial statements of SAP SE and performed
+various financial statement audits at subsidiaries. Furthermore,
+other assurance services required by law or on a contractual basis
+were performed, including an assurance engagement on selected
+qualitative and quantitative sustainability disclosures of the
+Integrated Report 2019 and an EMIR assurance service pursuant to
+section 20 of German Securities Trading Act [WPHG] and service
+organization attestation procedures.
+38.5
+To Our
+Stakeholders
+84.8
+Supervisory Board members' compensation is governed by our
+Articles of Incorporation, section 16.
+Each member of the Supervisory Board receives, in addition to
+the reimbursement of their expenses, an annual basic
+compensation of €165,000. The chairperson receives €275,000
+and the deputy chairperson €220,000 annually. In addition, we
+reimburse members of the Supervisory Board for the value-added
+tax payable on their compensation.
+For membership of the Audit Committee, Supervisory Board
+members receive an additional fixed annual compensation of
+€16,500, and for membership of any other Supervisory Board
+committee €11,000, provided that the committee concerned has
+met in the year. The chairperson of the Audit Committee receives
+€27,500, and the chairpersons of the other committees receive
+€22,000. The fixed remuneration is payable after the end of the
+year.
+Any members of the Supervisory Board who have served for less
+than the entire year receive one-twelfth of the annual remuneration
+for each month of service commenced. This also applies to the
+increased compensation of the chairperson and the deputy
+chairperson(s) and to the remuneration for the chairperson and the
+members of a committee.
+42
+Compensation Report
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Independent Auditor's Report
+Supervisory Board Members' Compensation in 2019
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+€ thousands
+2019
+Compensation System
+2018
+Compensation for Supervisory Board
+Members
+As far as the law permits, SAP SE and its affiliated companies in
+Germany and elsewhere indemnify and hold harmless their
+respective directors and officers against and from the claims of
+third parties. To this end, we maintain directors' and officers' (D&O)
+group liability insurance. The policy is annual and is renewed from
+year to year. The insurance covers the personal liability of the
+insured group for financial loss caused by its managerial acts and
+As compensation for the LTI tranches 2020 and 2021 which are
+not granted due to early termination, a one-time gross payment
+of €999,412.
+For a period of 24 months, monthly abstention compensation for
+the postcontractual non-compete period totaling €4,723,398.
+One-time payment to his retirement account in the amount of
+€336,720.
+Bill McDermott resigned from his position as Executive Board
+member on his own accord with effect from November 15, 2019,
+therefore no severance payment was made. The STI 2019 and the
+granted rights under the LTI 2016 Plan were handled according to
+Compensation Report
+41
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+plan terms. Negotiations regarding abstention compensation for
+post-contractual non-compete obligations are still ongoing.
+Permanent Disability
+In case of permanent disability, an Executive Board member's
+contract will end at the end of the quarter in which the permanent
+inability to work was determined. The Executive Board member
+receives, in addition to a potential disability pension under the
+retirement plan described above, the monthly basic salary (fixed
+compensation) for a further 12 months starting from the date the
+permanent disability is determined.
+Payments to Former Executive Board Members
+In 2019, we paid pension benefits of €2,081,100 to Executive
+Board members who had retired before January 1, 2019 (2018:
+€2,054,300). At the end of 2019, the DBO for former Executive
+Board members who had retired or left SAP before January 1, 2019
+was €44,306,300 (2018: €38,373,500). Plan assets of €31,074,600
+are available to meet these obligations (2018: €31,615,100).
+Executive Board: Other Information
+We did not grant any compensation advance or credit to, or
+enter into any commitment for the benefit of, any member of our
+Executive Board in 2019 or the previous year.
+omissions. The current D&O policy includes an individual deductible
+for Executive Board members of SAP SE as required by
+section 93 (2) of the German Stock Corporation Act.
+165.0
+Fixed
+Compensation
+for Commit-
+Pekka Ala-Pietilä
+Panagiotis Bissiritsas
+Martin Duffek (until 5/15/2019)
+Aicha Evans
+165.0
+18.3
+183.3
+165.0
+205.3
+165.0
+39.4
+204.4
+165.0
+38.5
+203.5
+68.8
+16.0
+242.0
+Compensation
+22.0
+246.6
+Total
+Fixed
+Compensation
+Compensation
+for Commit-
+Total
+tee Work
+tee Work
+Prof. Dr. h.c. mult. Hasso Plattner (chairperson)
+275.0
+53.2
+328.2
+275.0
+88.0
+363.0
+Margret Klein-Magar (deputy chairperson)
+220.0
+26.6
+220.0
+Combined Group
+We believe that the audit evidence we have obtained is sufficient
+and appropriate to provide a basis for our opinion.
+Auditor's Responsibility for the Internal Control
+over Financial Reporting in the Consolidated
+Financial Statements
+187.0
+22.0
+165.0
+195.3
+30.3
+165.0
+Dr. Friederike Rotsch (from 5/17/2018)
+Christine Regitz
+ΝΑ
+NA
+217.3
+52.3
+165.0
+Gerhard Oswald (from 1/1/2019)
+NA
+165.0
+43.1
+208.1
+165.0
+77.9
+9.2
+68.8
+Robert Schuschnig-Fowler (until 5/15/2019)
+211.8
+46.8
+165.0
+89.4
+20.6
+68.8
+Dr. Erhard Schipporeit (until 5/15/2019)
+128.3
+18.3
+110.0
+198.0
+22.0
+33.0
+187.0
+Luka Mucic
+Jürgen Müller
+Stefan Ries
+Thomas Saueressig
+44
+Responsibility Statement
+Michael Kleinemeier
+To Our
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+Independent Auditor's Report
+For the consolidated financial statements and Group Management Report we have
+issued an unqualified auditor's report. The English language text below is a
+translation of the independent auditor's report.
+Combined Group
+Adaire Fox-Martin
+Jennifer Morgan
+Christian Klein
+22.0
+165.0
+Bernard Liautaud
+187.0
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+Responsibility Statement
+To the best of our knowledge, and in accordance with the
+applicable reporting principles, the Consolidated Financial
+Statements give a true and fair view of the assets, finances, and
+operating results of the SAP Group, and the management report of
+the Group and SAP SE includes a fair review of the development and
+performance of the business and the position of the Group and SAP
+SE, together with a description of the principal opportunities and
+risks associated with the expected development of the Group and
+SAP SE.
+Walldorf, February 18, 2020
+SAP SE
+Walldorf, Germany
+Executive Board of SAP SE
+Granted rights under the LTI 2016 Plan were handled according
+to plan terms with respect to the performance criteria and the
+payout schedule.
+165.0
+TO SAP SE, Walldorf
+187.0
+68.8
+124.7
+14.7
+110.0
+Ralf Zeiger (from 5/15/2019)
+75.4
+6.9
+NA
+68.5
+NA
+NA
+Prof. Dr.-Ing. Dr.-Ing. E.h. Klaus Wucherer
+(until 5/17/2018)
+NA
+NA
+NA
+NA
+NA
+NA
+Total
+23
+43
+Compensation Report
+As far as the law permits, we indemnify Supervisory Board
+members against, and hold them harmless from, claims brought by
+third parties. To this end, we maintain directors' and officers' (D&O)
+group liability insurance. In accordance with section 3.8 of the
+GCGC, each member of the Supervisory Board will bear a
+deductible of at least 10% of any loss. The deductible is capped at
+1.5 times a member's fixed annual compensation.
+Hasso Plattner, the chairperson of the Supervisory Board,
+entered into a consulting contract with SAP after joining the
+Supervisory Board in May 2003. The contract does not provide for
+any compensation. The only cost we incurred under the contract
+was the reimbursement of expenses.
+We did not grant any compensation advance or credit to, or
+enter into any commitment for the benefit of, any member of our
+Supervisory Board in 2019 or the previous year.
+Supervisory Board: Other Information
+Long-Term Incentives for the Supervisory Board
+We do not offer members of the Supervisory Board share-based
+payment for their Supervisory Board work. Any share-based
+payment awards received by employee-elected members relate to
+their position as SAP employees and not to their work on the
+Supervisory Board.
+In 2019, we received services from members of the Supervisory
+Board (including services from employee representatives on the
+Supervisory Board in their capacity as employees of SAP) in the
+amount of €1,976,000 (2018: €1,206,500).
+3,702.4
+540.4
+3,162.0
+3,770.2
+552.7
+3,217.5
+135.7
+Dr. Sebastian Sick (until 5/15/2019)
+25.7
+James Wright (from 5/15/2019)
+68.8
+Pierre Thiollet (until 5/15/2019)
+NA
+NA
+NA
+124.7
+4.6
+14.7
+Heike Steck (from 5/15/2019)
+187.0
+22.0
+165.0
+77.9
+9.2
+110.0
+73.3
+165.0
+11.0
+NA
+NA
+NA
+135.7
+25.7
+110.0
+Dr. Gunnar Wiedenfels (from 5/15/2019)
+ΝΑ
+ΝΑ
+NA
+124.7
+14.7
+110.0
+Christa Vergien-Knopf (from 5/15/2019)
+176.0
+110.0
+Our responsibility is to express an opinion on the internal control
+over financial reporting in the consolidated financial statements
+based on our audit. We conducted our audit in accordance with the
+standards of the Public Company Accounting Oversight Board
+(United States). Those standards require that we plan and perform
+the audits to obtain reasonable assurance about whether effective
+internal control over financial reporting in the consolidated financial
+statements was maintained in all material respects. Our audit of
+internal control over financial reporting in the consolidated financial
+statements included obtaining an understanding of internal control
+over financial reporting, assessing the risk of material deficiencies
+in internal control, testing and evaluating the design and operating
+effectiveness of internal control based on this assessment, and
+performing such other procedures as we considered necessary in
+the circumstances.
+Report on the Audit of the Consolidated
+Financial Statements and of the Group
+Management Report
+We have audited the consolidated financial statements of SAP
+SE, Walldorf, and its subsidiaries (the Group), which comprise the
+consolidated statements of financial position as at December 31,
+2019, consolidated income statements, consolidated statements of
+comprehensive income, consolidated statements of changes in
+equity and consolidated statements of cash flows for the financial
+year from January 1 to December 31, 2019 and notes to the
+consolidated financial statements, including a summary of
+significant accounting policies.
+In connection with our audit, our responsibility is to read the
+other information and, in so doing, to consider whether the other
+information
+-
+is materially inconsistent with the consolidated financial
+statements, with the Group Management Report information
+audited for content or our knowledge obtained in the audit, or
+Independent Auditor's Report
+47
+To Our
+Stakeholders
+Our opinions on the consolidated financial statements and on
+the Group Management Report do not cover the other information
+and consequently we do not express an opinion or any other form of
+assurance conclusion thereon.
+Combined Group
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+otherwise appears to be materially misstated.
+If, based on the work we have performed, we conclude that there
+is a material misstatement of this other information, we are
+required to report that fact. We have nothing to report in this regard.
+In addition, we were engaged to perform an independent
+assurance engagement on selected qualitative and quantitative
+sustainability disclosures of the integrated report 2019. In regard to
+the nature, extent and conclusions of this independent assurance
+engagement we refer to our Independence Assurance Report dated
+on February 19, 2020.
+Responsibilities of the Executive Board and the
+Supervisory Board for the Consolidated Financial
+Statements and the Group Management Report
+Management Report
+The other information does not include the consolidated
+financial statements, group management report information and
+our auditor's report thereon.
+The other information also includes the annual report on Form
+20-F and remaining parts of the annual report.
+Information extraneous to the Group Management Report and
+marked as unaudited.
+SAP performed the annual goodwill impairment test at the level
+of its operating segments as there are no lower levels within SAP at
+which goodwill is monitored for internal management purposes.
+SAP's acquisition executed in the current period led to a material
+goodwill in the Qualtrics Segment in which SAP mainly develops,
+markets and sells its SAP Qualtrics offerings. Goodwill allocated to
+the Qualtrics Segment is EUR 2,882 Mio as of December 31, 2019
+(4.8% of consolidated balance sheet total).
+The respective impairment test is complex and involves
+significant judgment. The estimated recoverable amount of the
+Qualtrics Segment approximated its carrying amount, indicating a
+higher risk that the goodwill may be impaired. The key assumptions
+relate to the budgeted revenue growth, budgeted operating margin,
+and discount rate, whereas minor changes to those assumptions
+have a significant effect on the estimated recoverable amount.
+SAP engaged an external valuation expert to perform the
+goodwill impairment test.
+Our Audit Approach
+SAP performed the annual goodwill impairment test at the level
+of its operating segments as there are no lower levels within SAP at
+which goodwill is monitored for internal management purposes.
+SAP's acquisition executed in the current period led to a material
+goodwill in the Qualtrics Segment in which SAP mainly develops,
+markets and sells its SAP Qualtrics offerings. Goodwill allocated to
+the Qualtrics Segment is EUR 2,882 Mio as of December 31, 2019
+(4.8% of consolidated balance sheet total).
+The respective impairment test is complex and involves
+significant judgment. The estimated recoverable amount of the
+Qualtrics Segment approximated its carrying amount, indicating a
+higher risk that the goodwill may be impaired. The key assumptions
+relate to the budgeted revenue growth, budgeted operating margin,
+and discount rate, whereas minor changes to those assumptions
+have a significant effect on the estimated recoverable amount.
+SAP engaged an external valuation expert to perform the
+goodwill impairment test.
+Our Observations
+The approaches underlying the impairment testing of good will
+are appropriate and consistent with the applicable accounting and
+valuation principles. SAP applied a balanced set of assumptions in
+determining the recoverable amount.
+Other Information
+The Executive Board and the Supervisory Board, respectively, of
+SAP SE is responsible for the other information. The other
+information comprises the following unaudited information in the
+Group Management Report:
+-
+-
+the combined non-financial report, included in section "General
+Information About This Management Report" of the Group
+Management Report,
+the corporate governance statement, included in section
+"Corporate Governance Fundamentals" of the Group
+Management Report, and
+The Executive Board of SAP SE is responsible for the preparation
+of the consolidated financial statements that comply, in all material
+respects, with IFRSS as adopted by the EU and the additional
+requirements of German commercial law pursuant to Section 315e
+(1) HGB as well as IFRS as adopted by the International Accounting
+Standards Board and that the consolidated financial statements, in
+compliance with these requirements, give a true and fair view of the
+assets, liabilities, financial position, and financial performance of the
+Group. In addition, the Executive Board is responsible for such
+internal control as the Executive Board has determined necessary
+to enable the preparation of consolidated financial statements that
+are free from material misstatement, whether due to fraud or error.
+In preparing the consolidated financial statements, the Executive
+Board is responsible for assessing the Group's ability to continue as
+a going concern. The Executive Board also has the responsibility for
+disclosing, as applicable, matters related to going concern. In
+addition, the Executive Board is responsible for financial reporting
+based on the going concern basis of accounting unless there is an
+intention to liquidate the Group or to cease operations, or there is
+no realistic alternative but to do so.
+The Financial Statement Risk
+Furthermore, the Executive Board is responsible for the
+preparation of the Group Management Report that, as a whole,
+provides an appropriate view of the Group's position and is, in all
+material respects, consistent with the consolidated financial
+statements, complies with the German legal requirements and
+appropriately presents the opportunities and risks of future
+development. In addition, the Executive Board is responsible for
+such arrangements and measures (systems) as the Executive
+Board has considered necessary to enable the preparation of the
+Group Management Report that is in accordance with the
+applicable German legal requirements, the German Accounting
+Standards number 17 and 20 (GAS 17, GAS 20) and the IFRS
+Practice Statement Management Commentary and to be able to
+provide sufficient appropriate evidence for the assertions in the
+Group Management Report.
+Our objectives are to obtain reasonable assurance about
+whether the consolidated financial statements as a whole are free
+from material misstatement, whether due to fraud or error, and
+whether the Group Management Report as a whole provides an
+We communicate with the Supervisory Board regarding, among
+other matters, the planned scope and timing of the audit and
+significant audit findings, including any significant deficiencies in
+internal control that we identify during our audit.
+We also provide the Supervisory Board with a statement that we
+have complied with relevant independence requirements, and
+communicate with them all relationships and other matters that
+may reasonably be thought to bear on our independence, and
+where applicable the related safeguards.
+From the matters communicated with the Supervisory Board, we
+determine those matters that were of most significance in the audit
+of the consolidated financial statements of the current period and
+are therefore the key audit matters. We describe these matters in
+our auditor's report, unless law or regulation precludes public
+disclosure about the matter.
+Other Legal and Regulatory
+Requirements
+Report on Internal Control over Financial
+Reporting in the Consolidated Financial
+Statements pursuant to PCAOB
+Opinion on Internal Control over Financial
+Reporting in the Consolidated Financial
+Statements
+German law, and the view of the Group's position it provides.
+Perform audit procedures on the prospective information
+presented by the Executive Board in the Group Management
+Report. On the basis of sufficient appropriate audit evidence we
+evaluate, in particular, the significant assumptions used by the
+Executive Board as a basis for the prospective information, and
+evaluate the proper derivation of the prospective information
+from these assumptions. We do not express a separate opinion
+on the prospective information and on the assumptions used as
+a basis. There is a substantial unavoidable risk that future events
+will differ materially from the prospective information.
+We have audited the internal control over financial reporting in
+the consolidated financial statements of SAP SE, Walldorf, and its
+subsidiaries in place as at December 31, 2019. This control system
+is based on criteria set out in the Internal Control - Integrated
+Framework (2013) issued by the Committee of Sponsoring
+Organizations of the Treadway Commission (COSO).
+the Internal Control - Integrated Framework (2013) issued by the
+COSO.
+Executive Board's and Supervisory Board's
+Responsibility for the Internal Control over
+Financial Reporting in the Consolidated Financial
+Statements
+SAP SE's Executive Board is responsible for maintaining
+effective internal control over financial reporting in the consolidated
+financial statements and assessing its effectiveness, which is
+included in the Executive Board's report on the internal control over
+consolidated financial reporting.
+A company's internal control over financial reporting in the
+consolidated financial statements is a process designed to provide
+reasonable assurance regarding the reliability of financial reporting
+in the consolidated financial statements and the preparation of
+financial statements for external purposes in accordance with
+generally accepted accounting principles. A company's internal
+control over financial reporting in the consolidated financial
+statements includes policies and procedures to (1) ensure an
+accounting system that in reasonable detail accurately and fairly
+reflects the transactions and dispositions of the company's assets,
+(2) provide reasonable assurance that transactions are recorded as
+necessary to permit preparation of financial statements in
+accordance with generally accepted accounting principles, and (3)
+provide reasonable assurance regarding prevention or timely
+detection of unauthorized acquisition, use or disposition of the
+company's assets that could have a material effect on the financial
+statements.
+Because of its inherent limitations, internal control over financial
+reporting may not prevent or detect material misstatements. Also,
+projections of any evaluation of effectiveness to future periods are
+subject to the risk that controls may become inadequate because
+of changes in conditions, or that the degree of compliance with the
+policies or procedures may deteriorate.
+The Supervisory Board is responsible for overseeing the Group's
+internal control over financial reporting in the consolidated financial
+statements.
+In our opinion, SAP maintained, in all material respects, effective
+internal control over financial reporting in the consolidated financial
+statements as at December 31, 2019 based on the criteria set out in
+the Group in compliance with IFRSS as adopted by the EU as well
+as with IFRSS as adopted by the International Accounting
+Standards Board and the additional requirements of German
+commercial law pursuant to Section 315e(1) HGB.
+Obtain sufficient appropriate audit evidence regarding the
+financial information of the entities or business activities within
+the Group to express opinions on the consolidated financial
+statements and on the Group Management Report. We are
+responsible for the direction, supervision and performance of
+the group audit. We remain solely responsible for our opinions.
+Evaluate the consistency of the Group Management Report with
+the consolidated financial statements, its conformity with
+-
+Additional
+Information
+appropriate view of the Group's position and, in all material
+respects, is consistent with the consolidated financial statements
+and the knowledge obtained in the audit, complies with the German
+legal requirements and appropriately presents the opportunities
+and risks of future development, as well as to issue an auditor's
+report that includes our opinions on the consolidated financial
+statements and on the Group Management Report.
+Reasonable assurance is a high level of assurance, but is not a
+guarantee that an audit conducted in accordance with Section 317
+HGB and the EU Audit Regulation and in compliance with German
+Generally Accepted Standards for Financial Statement Audits
+promulgated by the Institut der Wirtschaftsprüfer (IDW) as well as
+in supplementary compliance with ISAs and guidelines of the Public
+Company Accounting Oversight Board (United States) will always
+detect a material misstatement. Misstatements can arise from
+fraud or error and are considered material if, individually or in the
+aggregate, they could reasonably be expected to influence the
+economic decisions of users taken on the basis of these
+consolidated financial statements and this Group Management
+Report.
+We exercise professional judgment and maintain professional
+scepticism throughout the audit. We also:
+-
+-
+Identify and assess the risks of material misstatement of the
+consolidated financial statements and of the Group
+Management Report, whether due to fraud or error, design and
+perform audit procedures responsive to those risks, and obtain
+audit evidence that is sufficient and appropriate to provide a
+basis for our opinions. The risk of not detecting a material
+misstatement resulting from fraud is higher than for one
+resulting from error, as fraud may involve collusion, forgery,
+intentional omissions, misrepresentations, or the override of
+internal control.
+Obtain an understanding of internal control relevant to the audit
+of the consolidated financial statements and of arrangements
+and measures (systems) relevant to the audit of the Group
+Management Report in order to design audit procedures that are
+appropriate in the circumstances.
+Evaluate the appropriateness of accounting policies used by the
+Executive Board and the reasonableness of accounting
+estimates made by the Executive Board and related disclosures.
+Conclude on the appropriateness of the Executive Board's use of
+the going concern basis of accounting and, based on the audit
+evidence obtained, whether a material uncertainty exists related
+to events or conditions that may cast significant doubt on the
+Group's ability to continue as a going concern. If we conclude
+that a material uncertainty exists, we are required to draw
+attention in the auditor's report to the related disclosures in the
+consolidated financial statements and in the Group
+Management Report or, if such disclosures are inadequate, to
+modify our respective opinions. Our conclusions are based on
+the audit evidence obtained up to the date of our auditor's
+report. However, future events or conditions may cause the
+Group to cease to be able to continue as a going concern.
+Evaluate the overall presentation, structure and content of the
+consolidated financial statements, including the disclosures, and
+whether the consolidated financial statements present the
+underlying transactions and events in a manner that the
+consolidated financial statements give a true and fair view of the
+assets, liabilities, financial position and financial performance of
+48
+Independent Auditor's Report
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+The Supervisory Board is responsible for overseeing the Group's
+financial reporting process for the preparation of the consolidated
+financial statements and of the Group Management Report.
+Auditor's Responsibilities for the Audit of the
+Consolidated Financial Statements and of the
+Group Management Report
+Opinions
+Refer to note (D.2) - Goodwill.
+The approaches underlying the identification and valuation of
+the assets acquired are appropriate and consistent with the
+applicable accounting and valuation principles. SAP applied a
+balanced set of key assumptions and parameters. The disclosures
+in the notes to the consolidated financial statements are
+appropriate.
+45
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Independent Auditor's Report
+Additional
+Information
+SAP derives its revenue from different revenue classes. SAP is
+using a Revenue Accounting and Reporting software solution for all
+revenue streams which aims at increasing the level of automation in
+SAP's revenue accounting processes. Primarily due to the high
+number and complexity of SAP's customer contracts, the software
+solution as well as the application of the processes to these
+contracts bear a significant risk of error. In response to this
+significant risk of error, SAP established processes and manual
+controls to ensure the accurate revenue recognition in the
+consolidated financial statements. An internal task force was
+established by SAP to prevent and remediate issues. The additional
+processes and controls focused on agreeing revenues processed
+through the Revenue Accounting and Reporting software solution to
+underlying source documentation such as sales orders or billing
+plans. Thresholds were determined to focus the control
+performance on significant deviations.
+There is the financial statement risk that revenue recognition
+cut-off as at the balance sheet date is incorrect and that revenues
+are allocated incorrectly.
+Our Audit Approach
+On software revenue recognition, we evaluated the compliance
+of SAP's accounting policies with the IFRS Framework and IFRS 15.
+We tested certain internal controls within the revenue process to
+identify interrelated contracts and separate performance
+obligations, to develop estimates of stand-alone selling prices to
+allocate the transaction price.
+For a sample of customer contracts, which were selected using a
+statistical approach, we also:
+-
+(iii) the standalone selling price used to allocate the transaction
+price of a customer contract to the performance obligations in
+the contract
+(ii) whether product and services qualify as separate
+performance obligations, and
+-
+(i) whether various contracts are interrelated,
+In addition, we have audited the combined Group Management
+Report by the SAP Group and the management report of SAP SE,
+Walldorf ("Group Management Report") for the financial year from
+January 1 to December 31, 2019. In accordance with German legal
+requirements, we have not audited the content of those
+components of the Group Management Report specified in the
+"Other Information" section of our auditor's report.
+In our opinion, on the basis of the knowledge obtained in the
+audit,
+-
+the accompanying consolidated financial statements comply, in
+all material respects, with the IFRSS as adopted by the EU and
+the additional requirements of German commercial law pursuant
+to Section 315e (1) HGB [Handelsgesetzbuch: German
+Commercial Code], as well as the IFRSS as adopted by the
+International Accounting Standards Board and, in compliance
+with these requirements, give a true and fair view of the assets,
+liabilities and financial position of the Group as at December 31,
+2019, and of its financial performance for the financial year from
+January 1 to December 31, 2019 and
+the accompanying Group Management Report as a whole
+provides an appropriate view of the Group's position. In all
+material respects, this Group Management Report is consistent
+with the consolidated financial statements, complies with
+German legal requirements and appropriately presents the
+opportunities and risks of future development. Our opinion on
+the Group Management Report does not cover the content of
+those components of the Group Management Report specified
+in the "Other Information" section of the auditor's report.
+Pursuant to Section 322 (3) sentence 1 HGB, we declare that our
+audit has not led to any reservations relating to the legal
+compliance of the consolidated financial statements and of the
+Group Management Report.
+Basis for the Opinions
+We conducted our audit of the consolidated financial statements
+and of the Group Management Report in accordance with Section
+317 HGB and the EU Audit Regulation No. 537/2014 (referred to
+subsequently as "EU Audit Regulation") and in compliance with
+German Generally Accepted Standards for Financial Statement
+Audits promulgated by the Institut der Wirtschaftsprüfer [Institute
+of Public Auditors in Germany] (IDW) as well as in supplementary
+compliance with the International Standards on Auditing (ISAs) and
+guidelines of the Public Company Accounting Oversight Board
+(United States).
+Our responsibilities under those requirements, principles and
+standards are further described in the "Auditor's Responsibilities for
+the Audit of the Consolidated Financial Statements and of the
+Group Management Report" section of our auditor's report. We are
+independent of the group entities in accordance with the
+requirements of European law and German commercial and
+professional law, and we have fulfilled our other German
+professional responsibilities in accordance with these requirements.
+In addition, in accordance with Article 10 (2) point (f) of the EU
+Audit Regulation, we declare that we have not provided non-audit
+services prohibited under Article 5 (1) of the EU Audit Regulation.
+We believe that the evidence we have obtained is sufficient and
+appropriate to provide a basis for our opinions on the consolidated
+financial statements and on the Group Management Report.
+Key Audit Matters in the Audit of Consolidated
+Financial Statements
+Key audit matters are those matters that, in our professional
+judgment, were of most significance in our audit of the consolidated
+financial statements for the financial year from January 1 to
+December 31, 2019. These matters were addressed in the context of
+our audit of the consolidated financial statements as a whole, and in
+forming our opinion thereon, we do not provide a separate opinion
+on these matters.
+Revenue
+Refer to note (A.1) - Revenue and Group Management Report,
+section Risk Management and Risks.
+The Financial Statement Risk
+In the financial year 2019 SAP generated revenue of EUR 27.6
+billion, of which EUR 16.1 billion relate to revenues from sales of
+software licenses and support services.
+The evaluation of software licenses revenue recognition bears an
+inherent risk of errors as SAP's software customer contracts are
+complex. SAP defined detailed policies, procedures and processes
+to manage the accounting for its customer contracts, which are also
+described in the notes. Applying them often requires significant
+judgments, in particular in the assessment of the following:
+-
+Recoverability of the carrying amount of goodwill for Qualtrics
+Segment
+inspected the underlying contractual agreements and other
+related documents as well as inquiries with SAP's accounting
+and/or sales representatives to evaluate SAP's assessment of
+whether contracts were interrelated as well as identified
+performance obligations and allocation of transaction price;
+obtained and inspected external confirmations of the key terms
+and conditions from the respective customers to test the
+contract identification as well as the performance obligations
+and the transaction price and
+We evaluated the stand-alone selling prices for each of the
+deliverables that qualified as a separate performance obligation by
+assessing the methodology applied, testing mathematical accuracy
+of the underlying calculations, and testing a sample of customer
+contracts to evaluate the underlying transaction data.
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+SAP engaged an external valuation expert to determine and
+measure the identifiable assets acquired.
+The recognition and initial measurement of the assets acquired
+is complex and is based on the Executive Board's judgmental
+assumptions. Significant assumptions used in the measurement of
+intangible assets acquired comprise the projections of the acquired
+business's revenues and margins, asset-specific revenue and
+margin adjustments, estimated useful lives, royalty and attrition
+rates, as well as the cost of capital.
+Combined Group
+The risk for the consolidated financial statements relates to
+insufficient recognition or incorrect measurement of the assets
+acquired and the liabilities assumed. In addition, there is the risk
+that the disclosures in the notes to the consolidated financial
+statements are not accurate.
+We tested certain internal controls over the Company's
+acquisition-date valuation process including controls over the
+identification of intangible assets separate from goodwill and
+controls to develop the relevant assumptions mentioned above.
+We involved our valuation professionals with specialized skills
+and knowledge, who assisted in testing the assumptions as listed
+above by comparing them to our own expectations based on our
+knowledge of the acquired business, our experience in the software
+industry, and taking into account recent comparable transactions.
+The assumptions and parameters underlying the cost of capital
+were compared with own assumptions and publicly available data.
+We agreed the total purchase price with the underlying purchase
+agreement and evidence of payment.
+We assessed the competency, skills and objectivity of the
+external valuation expert engaged by SAP.
+To assess the mathematical accuracy we recalculated amounts
+selected using a risk-oriented approach.
+Finally, we assessed whether the disclosures in the notes to the
+consolidated financial statements with respect to the acquisition of
+Qualtrics are accurate.
+Our Observations
+Our Audit Approach
+To Our
+Stakeholders
+Independent Auditor's Report
+46
+On the Revenue Accounting and Reporting software solution and
+the related process we tested the design and operating
+effectiveness of the manual controls that were implemented to
+agree revenues processed through the Revenue Accounting and
+Reporting software solution to underlying source documentation. In
+this regard, we also assessed whether the reports used by SAP to
+perform the controls were complete and accurate and evaluated
+the results of management's testing. For the majority of software
+support revenue, we compared the actual support revenue with the
+support revenue that is expected based on last year's support
+revenue, the loss rate of last year's support contracts and the
+current year software sales that trigger additional support revenue.
+For all other significant revenue streams we selected samples to
+determine the accurate revenue recognition.
+Our Observations
+SAP has developed an adequate framework for determining the
+accounting treatment for its revenue. For the vast majority of the
+software arrangements entered into during 2019, it was clear which
+of SAP's revenue recognition policies should be applied. Where
+there was room for interpretation, SAP's judgment was balanced
+and appropriate. SAP established adequate processes and manual
+controls to ensure accurate revenue recognition in the consolidated
+financial statements.
+Assessment of the Group's tax uncertainties
+Refer to note (C.5) - Income Taxes, and Group Management
+Report section Risk Management and Risks.
+The Financial Statement Risk
+SAP operates in multiple tax jurisdictions with complexities and
+uncertainties due to different interpretations of tax laws, such as
+those involving revenue sharing and cost reimbursement
+arrangements. The determination of provisions for tax uncertainties
+requires SAP to make judgments on tax issues and develop
+estimates regarding SAP's exposure to tax risks. SAP regularly
+engages external experts to provide tax opinions to support their
+own risk assessment. The risk for the consolidated financial
+statements relates to the completeness, measurement and
+disclosure of the provision for uncertain tax treatments. As at
+December 31, 2019 SAP disclosed contingent liabilities relating to
+tax uncertainties of EUR 2,013 million.
+Our Audit Approach
+We tested certain internal controls over the tax process including
+controls over the Group's assessment of tax law and the process to
+estimate the related exposures. We assessed the competency, skill
+and objectivity of the external experts as well as the opinions they
+prepared. We inquired of the Group's tax department and inspected
+correspondence with the responsible tax authorities. We involved
+our tax professionals with specialized skills and knowledge, who
+assisted in evaluating SAP's conclusion´s over the estimate of tax
+uncertainties based on knowledge and experience regarding the
+application of relevant legislation by tax authorities and the courts.
+Our Observations
+SAP's judgments as to the amounts recognized as tax provisions
+for tax uncertainties as at December 31, 2019 are appropriate.
+Accounting for the acquisition of Qualtrics International Inc.,
+Provo/USA
+Refer to note (D.1) - Business Combinations.
+The Financial Statement Risk
+On January 23rd, 2019 SAP acquired Qualtrics International Inc.,
+Provo, USA ("Qualtrics"). The purchase price amounted to EUR
+6,449 million. In allocating the purchase price to identifiable assets
+acquired and liabilities assumed, SAP recognised net assets in the
+amount of EUR 1,434 million, and goodwill in the amount of EUR
+5,015 million.
+46
+evaluated whether the revenue recognition policies applicable to
+each separate performance obligation were applied
+appropriately to ensure that revenue is recognized in the correct
+period.
+Discounted severance payment equaling the appropriately
+discounted target salary (base salary plus target STI) totaling
+€3,646,393.
+40,3
+-
+Payment¹
+Christian Klein (Co-CEO from
+4/30/2025
+2,607
+10/10/2019)
+Jennifer Morgan (Co-CEO from
+Abstention
+4/30/2025
+10/10/2019)
+Adaire Fox-Martin
+4/30/2025
+2,211
+Michael Kleinemeier
+12/31/2020
+2,787
+2,024
+Non-Compete
+Combined Group
+Net Present
+Value of
+Postcontractual
+Contract
+Term Expires
+€ thousands
+Net Present Values of the Postcontractual Non-
+Compete Abstention Payments
+Actual postcontractual non-compete payments will likely differ
+from these amounts depending on the time of departure and the
+compensation levels and target achievements at the time of
+departure.
+Their final average contractual compensation prior to their
+departure equals their compensation in 2019.
+To Our
+Stakeholders
+The Executive Board member leaves SAP at the end of their
+respective current contract term.
+Each Executive Board member's contract includes a 12-month
+postcontractual non-compete agreement. During this non-compete
+period, Executive Board members receive abstention payments
+corresponding to 50% of their average contractual compensation
+as members. This average is calculated on the basis of the
+preceding three years. Any other occupational income generated by
+the Executive Board member is deducted from their compensation.
+The following table presents the theoretical amounts for the net
+present values of the postcontractual non-compete abstention
+payments. The calculation assumes the following:
+Postcontractual Non-Compete Provisions
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+-
+Luka Mucic
+-
+-
+3/31/2024
+Stefan Ries
+A control or profit transfer agreement is concluded with SAP SE
+as the dependent company.
+SAP SE merges with another company and becomes the
+subsumed entity;
+A third party is required to make a mandatory takeover offer to
+the shareholders of SAP SE under the German Securities
+Acquisition and Takeover Act;
+-
+1,817
+Severance Payments
+If an Executive Board member's appointment to the Executive
+Board expires or ceases to exist because of, or as a consequence of,
+change or restructuring, or due to a change of control, SAP SE and
+each Executive Board member has the right to terminate the
+employment contract within eight weeks of the occurrence by
+giving six months' notice. A change of control is deemed to occur
+when:
+member of the Executive Board for at least one year or if they leave
+SAP SE for reasons for which they are responsible. Upon the
+appointment of Jürgen Müller and Thomas Saueressig to the
+Executive Board, the Supervisory Board abstained from the waiting
+period of one year in consideration of their long-term successful
+tenures with SAP.
+The standard contract for all Executive Board members provides
+that on termination before full term (for example, by the Company
+without cause where the member's appointment is revoked, where
+the member becomes occupationally disabled, or in connection
+with a change of control), SAP SE will pay to the member the
+outstanding part of the compensation target for the entire
+remainder of the term, appropriately discounted for early payment.
+Starting 2018, in accordance with the German Corporate
+Governance Code (GCGC), section 4.2.3, payments made to an
+Executive Board member due to early termination must not exceed
+twice the annual total compensation, or 150% of the severance
+payment cap in case of change of control. Members are not entitled
+to that severance payment if they have not served SAP as a
+3/31/2021
+2,016
+Jürgen Müller (from 1/1/2019)
+-
+Thomas Sauer essig (from 11/1/2019)
+10/31/2022
+394
+-
+Bernd Leukert reached a mutual agreement with the
+Supervisory Board to end his employment at SAP with immediate
+effect on March 31, 2019. He received the following payments in
+connection with his retirement for the remainder of the term of
+appointment until March 31, 2021:
+Robert Enslin resigned from his position as Executive Board
+member on his own accord with effect from April 5, 2019, therefore
+no severance payment was made. The STI 2019 and the granted
+rights under the LTI 2016 Plan were handled according to plan
+terms. The post contractual non-compete provision was canceled
+without compensation.
+Payments to Executive Board Members Resigning
+in 2019
+Abstention compensation for the postcontractual non-compete
+period as described above is also payable on early contract
+termination.
+Postcontractual Non-Compete Provisions
+An Executive Board member's contract can also be terminated
+before full term if their appointment as an Executive Board member
+of SAP SE is revoked in connection with a change of control.
+1,915
+Early End-of-Service Undertakings
+"For the purpose of this calculation, the following discount rates have been applied:
+Christian Klein 0.26%; Jennifer Morgan 0.26%; Adaire Fox. Martin 0.26%; Michael
+Kleinemeier -0.13%; Luka Mucic -0.12%; Jürgen Müller -0.05%; Stefan Ries 0.17%;
+Thomas Saueressig 0.03%.
+15,771
+Total
+12/31/2021
+* The outlook was communicated in January 2019 and financial targets were raised in April. The 2019 outlook numbers above reflect the raised outlook from April 2019.
+Note: A reconciliation of non-IFRS results to IFRS equivalent is available in the Performance Management System section.
+300 kt
+83%
+Outlook for 2020
+Customer loyalty
+285 kt
+Net greenhouse gas emissions
+Carbon Impact
+84% to 86%
+Employee Engagement Index
+Employee Engagement
++1
+Customer Net Promoter Score
+Customer Loyalty
+-6
+€7.95 billion
+€7.85 billion to €8.05 billion
+Operating profit
+€26.91 billion
+Strategic Objective
+ΚΡΙ
+€23.09 billion
+2020 Outlook
+Employee Engagement
+Employee Engagement Index
+83%
+84% to 86%
+Carbon Impact
+Net greenhouse gas emissions
+Increase by three to five points
+300 kt
+Note: A reconciliation of non-IFRS results to IFRS equivalent is available in the Performance Management System section.
+1 Carbon emissions are part of the short-term incentive in Executive Board compensation as of fiscal year 2020.
+58
+Strategy and Business Model
+To Our
+Combined Group
+238 kt
+-6.0
+Customer Net Promoter Score
+Customer Loyalty
+(non-IFRS, at constant currencies)
+€8.7 billion to €9.0 billion
+Cloud revenue
+€7.01 billion
+Growth
+Cloud and software revenue
+Strong increase, at a rate lower than
+operating profit
+€24.7 billion to € 25.1 billion
+Total revenue
+€27.63 billion
+€29.2 billion to €29.7 billion
+Profitability
+Operating profit
+€8.21 billion
+€8.9 billion to €9.3 billion
+2019 Results
+(non-IFRS)
+Total revenue
+Cloud revenue
+€22.4 billion to €22.7 billion
+5 (Gender Equality); 7 (Affordable and Clean Energy);
+11 (Sustainable Cities and Communities); and 16 (Peace, Justice,
+56
+56
+Strategy and Business Model
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+and Strong Institutions) by helping create a peaceful and just
+society through better healthcare, education, and access to
+technology. For example:
+We are also deeply committed to empowering the world's youth,
+working adults, differently-abled people, and the unemployed
+with the right skills to thrive in the digital economy.
+Cities are facing growing populations and aging infrastructures.
+SAP solutions for the Internet of Things can help manage and
+monitor resources so that cities can run more sustainably and
+help citizens enjoy more enjoyable, safer lives.
+Environment
+SAP software supports the UN SDGs 6 (Clean Water and
+Sanitation); 13 (Climate Action); 14 (Life Below Water); and 15 (Life
+on Land) and helps protect the environment by addressing the need
+for water, clean energy, and responsible development. For example:
+We are all affected by climate change. SAP technology is helping
+our customers increase their overall resource productivity and
+transform their businesses to reduce carbon outputs.
+With the world population growing steadily, humanity will need to
+provide water, food, and shelter to billions of people in the
+coming years. SAP solutions help our customers reduce water
+waste and support sustainable management of water and
+sanitation for all.
+Furthermore, we know there is power in collaboration and we
+engage in a wide range of partnerships to address
+SAP software supports the UN SDGs 1 (No Poverty); 2 (Zero
+Hunger); 3 (Good Health and Well-Being); 4 (Quality Education);
+SDG 17 (Partnerships for the Goals).
+Society
+-
+Products and
+services from
+our ecosystem
+IT infrastructure
+Deliver cloud and
+support
+Environment
+We innovate software and technology solutions that help
+empower our customers to become intelligent enterprises. For us,
+delivering an intelligent enterprise and helping our customers thrive
+in the experience economy are essential for a better, more
+productive world. By helping unlock the potential of innovation, we
+support businesses and governments with having a positive impact
+on the economies, societies, and environments in which they exist.
+In this way, we aim to fulfill our purpose of helping the world run
+better and improving people's lives.
+Our Business Model
+We create value by identifying the business needs of our
+customers, then developing and delivering software, services, and
+support that address these business needs. Through close
+collaboration with our customers and partners, we aim to ensure
+that our software creates value for our customers. By obtaining
+customer feedback, we strive to continuously improve our
+solutions, identify further business needs, and deliver enhanced
+value to our customers.
+Results
+By developing software, providing our software and services to
+our customers, and engaging them in feedback, we generate results
+for SAP such as growth, profitability, employee engagement, and
+customer loyalty.
+Inputs
+This process does not happen in a vacuum. It is enabled by
+internal and external inputs, most importantly customer insights
+and broader stakeholder dialogue, financial capital, employees'
+expertise, and intellectual property, products and services from our
+partner ecosystem, as well as the IT infrastructure we rely on.
+Impact
+Our solutions enable impact at our customers and - through
+them - in the world. The following are some examples of our impact
+in various areas.
+Economy
+SAP software supports the UN SDGs 8 (Decent Work and
+Economic Growth); 9 (Industry, Innovation, and Infrastructure);
+10 (Reduced Inequalities); and 12 (Responsible Consumption and
+Production) by helping companies provide jobs and strengthening
+industries and infrastructure. For example, SAP software helps:
+Companies work better to bring economic prosperity and fairly
+paid jobs to people around the world.
+Organizations optimize resource utilization, aspiring for a world
+with zero waste.
+€22.49 billion
+Trade-Offs
+-
+Customer loyalty
+-
+Employee engagement
+The table below provides an overview of the specific key performance indicators (KPIs) used to measure performance within these
+objectives and compares this performance with our goals. In addition, we are committed to become carbon neutral in 2025 and therefore
+regularly report and analyze the reduction in our carbon footprint.¹
+Outlook and Results for 2019
+Strategic Objective
+Growth
+Profitability
+ΚΡΙ
+2019 Outlook*
+2019 Results
+(non-IFRS, at constant currencies)
+(non-IFRS, at constant currencies)
+€6.7 billion to €7.0 billion
+€6.77 billion
+Stakeholders
+Cloud and software revenue
+-
+At the same time, we are aware of potential negative impacts of our
+business activities and strive to mitigate these. For example:
+Profitability
+-
+-
+An acceleration of the digital divide could decouple societal
+groups from entire segments of the economy, impacting
+employment potential. SAP focuses our social investment
+activities on providing digital skills to underprivileged people. For
+more information, see the Employees and Social Investments
+section.
+We expect increasing energy consumption due to our own
+growth and increasing digitization globally. We offer a green
+cloud to help reduce CO2 footprint. For more information, see the
+Energy and Emissions section.
+QAudit Scope
+The content of this section was not subject to the statutory audit of
+our combined group management report. However, our external
+auditor, KPMG, performed an independent limited assurance
+engagement on the contents of this section.
+Strategy and Business Model
+57
+40
+To Our
+Combined Group
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+Measuring Our Success
+We use the following financial and non-financial objectives to steer our company:
+Growth
+Management Report
+Cloud revenue
+Further Information on Economic,
+-
+-
+-
+Create a new end-to-end customer experience through a
+platform for Experience Management that allows businesses to
+collect, understand, and act on feedback across their customers,
+employees, products, and brands in real time. In particular, we
+enable companies to enhance feedback with analytics, so they
+not only can understand what is being said, but also why.
+Achieve a step change in productivity through the next level of
+automation in business processes powered by artificial
+intelligence/machine learning (AI/ML) embedded in every part
+of the business process (across financials, supply chain,
+manufacturing, procurement, travel, and human resources). Al is
+defined as algorithms that learn from data without being
+explicitly programmed, thus empowering enterprises to scale by
+automating business processes. The key to doing so is improving
+the cycle time of business processes and injecting speed and
+increasing quality wherever possible.
+Help companies engage their workforces by delivering total
+workforce engagement across full-time and contingent labor.
+At SAP, our commitment to our customers is to help them meet
+today's challenges and prepare for anticipated challenges of the
+future. SAP aims to deliver on these objectives by leveraging the
+power of data in SAP software with technologies such as AI/ML to
+build powerful intelligent applications.
+Becoming the "Experience Company powered
+by the Intelligent Enterprise"
+Our vision for the intelligent enterprise, an event-driven, real-
+time business, focuses on three key objectives:
+Our software, technologies, and services address the three core
+elements of the intelligent enterprise for the 25 industries and the
+12 lines of business (LoBs) we serve:
+-
+An intelligent suite of LoB applications that includes enterprise
+resource planning (ERP) and digital supply chain management,
+as well as solutions for customer experience, intelligent spend
+management, and human experience management. The
+intelligent suite is integrated and differentiated through industry-
+specific business processes for end-to-end scenarios.
+A business technology platform to help customers manage
+data orchestration across their entire application footprint. This
+includes real-time visibility into distributed data silos using data
+management solutions and an open cloud platform as a
+business platform for integration and business process
+innovation.
+An Experience Management (XM) platform, bringing together
+experience data (X-data) and operational data (O-data) to help
+organizations manage four core experiences - customer,
+employee, product, and brand. This includes using API-based
+integration between XM and the intelligent suite to connect X-
+data with relevant O-data.
+For more information about the products and solutions offered
+as part of our strategy framework, see the Products, Research &
+Development, and Services section.
+54
+54
+-
+SAP's strategy is to be the Experience Company powered by
+the Intelligent Enterprise. 2) We believe every digital interaction is
+an opportunity for a company to positively influence a customer.
+Through these interactions, companies can measure "experiences"
+- such as customer satisfaction, employee engagement, partner
+collaboration, and brand impact. These interactions are also
+opportunities for companies to understand how end users and
+customers perceive a vendor or a product. We want to help every
+SAP customer thrive in today's "experience economy" by equipping
+them with the technologies to become intelligent enterprises.
+Our Strategy
+In line with our purpose, we are committed to supporting the
+United Nations Sustainable Development Goals (UN SDGs).
+Technology-driven innovation underpins how SAP, together with our
+customers and our partner ecosystem, can execute initiatives
+across all 17 of the UN SDGs. Our goal is to lead the evolution of
+technology while also helping ensure that the focus remains on
+taking responsibility for its outcomes and societal effects. Examples
+of how we are doing this include the focus of social investments on
+building digital skills and our guiding principles for artificial
+intelligence and governance.
+General Information About This Management Report
+53
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+Strategy and Business Model
+Overview of SAP
+Founded in 1972, SAP is a global company headquartered in
+Walldorf, Germany. Our legal corporate name is SAP SE. SAP is the
+market leader in enterprise application software¹) and also the
+leading experience management, analytics, and business
+intelligence company. The SAP Group has a global presence and
+employs more than 100,000 people.
+Our ordinary shares are listed on the Frankfurt Stock Exchange.
+American Depositary Receipts (ADRs) representing SAP SE
+ordinary shares are listed on the New York Stock Exchange (NYSE).
+SAP is a member of Germany's DAX and TecDAX as well as the Dow
+Jones EURO STOXX 50, the Dow Jones Sustainability Index World,
+and the Dow Jones Sustainability Index Europe. As at
+December 31, 2019, SAP was the most valuable company in the
+DAX and the 49th most valuable company globally based on market
+capitalization. SAP was ranked as the most sustainable software
+company in the Dow Jones Sustainability Indices for the thirteenth
+consecutive year.
+SAP SE is the parent company of the SAP Group. As at
+December 31, 2019, the SAP Group comprised 264 companies that
+develop, distribute, and provide our products, solutions, and
+services. For a list of our subsidiaries, associates, and other equity
+investments, see the Notes to the Consolidated Financial
+Statements, Note (G.9).
+Our Purpose
+At SAP, our purpose is to "help the world run better and improve
+people's lives" by empowering our customers to create a better
+economy, society, and environment for the world.
+Strategy and Business Model
+To Our
+Stakeholders
+Combined Group
+Management Report
+Customer
+insights and
+stakeholder
+dialogue
+Financial capital
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+SAP's Impact
+Business Model
+Develop
+solutions
+Impact
+Economy
+Results
+Employees'
+expertise and
+intellectual
+Identify
+business
+needs
+Inputs
+Additional
+Information
+Consolidated Financial
+Statements IFRS
+Combined Group
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+Our people are critical to delivering our strategy, as they are key
+in delivering innovations to help our customers transform. For more
+information, see the Employees and Social Investments section.
+Acquisitions
+We will continue to focus on organic investments in technology
+and innovations that ensure sustainable growth of our solution
+portfolio to drive our short-term, mid-term, and long-term
+ambitions. Additionally, we may make targeted acquisitions to
+complement our solution offerings and improve coverage in key
+strategic markets.
+In January 2019, we acquired Qualtrics International, Inc., a
+leader in the Experience Management (XM) software category that
+enables organizations to thrive in today's economy. The acquisition
+closed on January 23, 2019. Together, SAP and Qualtrics are
+working to accelerate the new XM category by combining
+experience data and operational data to power the experience
+economy. For more information about the Qualtrics segment, see
+the Notes to the Consolidated Financial Statements, Note (C.1).
+For more information about the acquisition of Qualtrics
+International Inc., see the Notes to the Consolidated Financial
+Statements, Note (D.1).
+Sapphire Ventures
+In addition to our investments in organic growth and
+acquisitions, SAP also supports entrepreneurs that aspire to build
+industry-leading businesses, through venture capital funds
+managed by Sapphire Ventures. Sapphire Ventures manages over
+US$3.5 billion and has invested in more than 160 companies. These
+include growth-stage technology companies and early-stage
+venture capital funds. Sapphire Ventures pursues opportunities in
+which it can help fuel enterprise growth by adding expertise,
+relationships, geographic reach, and capital. It places a particular
+focus on companies in Europe, Israel, and the United States. In
+addition to our venture investments through Sapphire Ventures,
+SAP also has the SAP.IO Fund, managed by Sapphire Ventures, that
+focuses on strategic early-stage investments in enterprise software
+startups. As a part of the SAP.IO Fund, SAP has also committed to
+invest up to 40% of the investable capital in underrepresented
+groups in enterprise software to foster diversity and inclusion, such
+as startups founded or led by female entrepreneurs.
+1) Enterprise application software is computer software specifically developed to
+support and automate business processes.
+2) An "intelligent enterprise" is an event-driven, real-time business powered by
+technology that includes machine learning, blockchain, the Internet of Things, and
+analytics capabilities to help scale innovation.
+Strategy and Business Model
+55
+59
+To Our
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+sources is subject to risks and uncertainties, and subject to change
+based on various factors, including those described above, in the
+Risk Management and Risks section, and elsewhere in this report.
+These and other factors could cause our results to differ materially
+from those expressed in the estimates made by third parties and
+General Information About This Management Report..
+Strategy and Business Model
+Performance Management System
+Products, Research & Development, and Services.
+Security, Data Protection, and Privacy
+Customers..
+Additional
+Information
+Employees and Social Investments.
+Financial Performance: Review and Analysis
+Corporate Governance Fundamentals.
+Business Conduct.
+Risk Management and Risks
+Expected Developments and Opportunities.
+.52
+Energy and Emissions
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Management Report Statements IFRS
+Combined Group
+Environmental, and Social Performance
+Ambitions for 2023
+Additional
+Information
+Strategic Objective
+Growth
+Profitability
+Customer Loyalty
+Employee Engagement
+Carbon Impact
+ΚΡΙ
+Employee engagement
+Total revenue
+Operating margin
+Customer Net Promoter Score
+To Our
+Stakeholders
+.54
+60
+.67
+71
+Basis of Presentation
+This combined group management report by the SAP Group
+(collectively, "we," "us," "our," "SAP," "Group," or "Company") and the
+management report of SAP SE have been prepared in accordance
+with sections 289, 289a, 289f, 315, 315a, and 315d of the German
+Commercial Code and German Accounting Standards (GAS) No. 17
+and 20. The management report is also a management
+commentary complying with the International Financial Reporting
+Standards (IFRS) Practice Statement "Management Commentary".
+German Commercial Code, sections 289b and 315b, requires us
+to prepare, for both SAP SE and the SAP Group, a non-financial
+statement within the management report or a non-financial report
+outside of the management report in which we report on social,
+environmental, and other non-financial matters. The required
+disclosures can be, but do not need to be, a separate section in our
+management report. Instead, the information required can also be
+provided, in an integrated manner, in the different sections of the
+management report. SAP released a combined non-financial report
+outside of the combined management report but within our online
+integrated report with references to the sections of our combined
+management report. This combined non-financial report is available
+at http://www.sap.com/investors/sap-2019-combined-non-
+financial-report. We believe that this approach is best aligned with
+SAP's integrated reporting strategy, also taking into account that all
+non-financial information stipulated in the German Commercial
+Code, sections 289c and 315c, that is relevant to understand SAP's
+development, business performance, and the position of the Group
+and SAP SE is included in our combined management report.
+Our auditor, KPMG AG Wirtschaftsprüfungsgesellschaft (KPMG),
+audited SAP's combined group management report, except for
+information that was not subject to the statutory audit of our
+combined group management report, but on which a limited
+assurance engagement was performed as stated in the following in
+this paragraph. Additionally, KPMG performed an independent
+assurance engagement on selected qualitative and quantitative
+sustainability disclosures. The SAP's Impact, Security, Data
+Protection, and Privacy, Employees and Social Investments, Energy
+and Emissions, and Business Conduct sections include information
+that was not subject to the statutory audit of our combined group
+management report, but on which a limited assurance engagement
+was performed. These sections contain further explanations about
+the audit scope in an info box at the end of the respective section
+marked by the symbol Q. For more information about the scope of
+the assurance and the underlying reporting criteria, see KPMG's
+Independent Auditor's Report and the Assurance Report of the
+Independent Auditor on Selected Qualitative and Quantitative
+Sustainability Disclosures in the SAP Integrated Report.
+All of the information in this report relates to the situation as at
+December 31, 2019, or the fiscal year ended on that date, unless
+otherwise stated.
+Forward-Looking Statements
+This management report contains forward-looking statements
+and information based on the beliefs of, and assumptions made by,
+SAP management using information currently available to them.
+Any statements contained in this report that are not historical facts
+are forward-looking statements as defined in the U.S. Private
+Securities Litigation Reform Act of 1995. We have based these
+forward-looking statements on our current expectations,
+assumptions, and projections about future conditions and events.
+As a result, our forward-looking statements and information are
+subject to uncertainties and risks, many of which are beyond our
+control. If one or more of these uncertainties or risks materializes,
+or if management's underlying assumptions prove incorrect, our
+actual results could differ materially from those described in or
+inferred from our forward-looking statements and information. We
+describe these risks and uncertainties in the Risk Management and
+Risks section.
+The words "aim," "anticipate," "assume," "believe," "continue,"
+"could," "counting on," "is confident," "development," "estimate,"
+"expect," "forecast," "future trends," "guidance," "intend," "may,"
+"might," "outlook,” “plan,” “predict," "project," "seek," "should,"
+"strategy," "want," "will," "would," and similar expressions as they
+relate to us are intended to identify such forward-looking
+statements. Such statements include, for example, those made in
+the Operating Results section, our quantitative and qualitative
+disclosures about market risk pursuant to the International
+Financial Reporting Standards (IFRS), namely IFRS 7 and related
+statements in our Notes to the Consolidated Financial Statements;
+Expected Developments and Opportunities section; Risk
+Management and Risks section; and other forward-looking
+information appearing in other parts of this report. To fully consider
+the factors that could affect our future financial results, both this
+report and our Annual Report on Form 20-F should be considered,
+as well as all of our other filings with the U.S. Securities and
+Exchange Commission (SEC). Readers are cautioned not to place
+undue reliance on these forward-looking statements, which speak
+only as of the date specified or the date of this report. We undertake
+no obligation to publicly update or revise any forward-looking
+statements as a result of new information that we receive about
+conditions that existed upon issuance of this report, future events,
+or otherwise unless we are required to do so by law.
+This report includes statistical data about the IT industry and
+global economic trends that comes from information published by
+sources including International Data Corporation (IDC), Gartner, the
+European Central Bank (ECB), and the International Monetary Fund
+(IMF). This type of data represents only the estimates of IDC,
+Gartner, the ECB, the IMF, and other sources of industry data. SAP
+does not adopt or endorse any of the statistical information
+provided by sources such as IDC, Gartner, the ECB, the IMF, or other
+similar sources that is contained in this report. The data from these
+52
+59
+General Information About This Management Report
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Additional
+Information
+SAP. We caution readers not to place undue reliance on this data.
+General Information About This
+Management Report
+Consolidated Financial
+Statements IFRS
+.74
+.75
+80
+83
+Society
+Deliver
+software
+and
+services
+.101
+.103
+.105
+.126
+Combined Group Management Report
+51
+To Our
+Stakeholders
+Combined Group
+Management Report
+Further Information on Economic,
+Environmental, and Social Performance
+Combined Group Management Report
+Profitability
+Growth
+Increase the non-IFRS operating margin by one percentage point per year on average,
+representing a total expansion of approximately 500 basis points compared to 2018
+In 2019, we used the following key measures to manage our
+operating financial performance:
+Measures to Manage Our Operating Financial
+Performance
+Measures to Manage Our Financial
+Performance
+We use various performance measures to manage our
+performance with regard to our primary financial objectives, which
+are growth and profitability, and our primary non-financial
+objectives, which are customer loyalty and employee engagement.
+We view growth and profitability as indicators of our current
+performance, while we see customer loyalty and employee
+engagement as indicators of our future performance.
+Performance Management System
+Additional
+Information
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+To Our
+Stakeholders
+59
+Strategy and Business Model
+Note: A reconciliation of non-IFRS results to IFRS equivalent is available in the Performance Management System section.
+95 kt, with the goal of becoming carbon neutral by 2025
+84% to 86%
+Steadily increase
+More than €35 billion
+More than triple compared to 2018
+2023 Ambition
+(non-IFRS)
+Net greenhouse gas emissions
+Employee Engagement Index
+property
+Cloud revenue (non-IFRS): This revenue driver comprises the
+main revenues of our fast-growing cloud business. Revenue from
+cloud is derived from fees earned from providing customers with
+any of the following:
+-
+Further Information on Economic,
+Environmental, and Social Performance
+Software as a service (SaaS)
+Performance Management System
+00
+60
+Financial income, net: This measure provides insight into the
+return on liquid assets and capital investments and the cost of
+borrowed funds. To manage our financial income, net, we focus on
+cash flow, the composition of our liquid assets and capital
+-
+Measures to Manage Our Non-Operating
+Financial Performance
+Starting in 2020, new cloud bookings will be replaced by current
+cloud backlog (CCB), both in actual and at constant currencies, to
+manage our operating financial performance. We intend to use that
+measure to evaluate our overall go-to-market success in the
+committed cloud business. CCB is the contractually committed
+cloud revenue we expect to recognize over the upcoming 12 months
+as of a specific key date. Thus, it is a subcomponent of our overall
+remaining performance obligations following IFRS 15.120. For CCB,
+we take into consideration committed deals only. CCB can be
+regarded as a lower boundary for cloud revenue to be recognized
+over the next 12 months, as it excludes utilization-based models
+without pre-commitments and committed deals closed after the
+key date. For our committed cloud business, we believe the
+expansion of CCB over a period is a valuable indicator of go-to-
+market success, as it reflects both new contracts closed as well as
+existing contracts renewed.
+Operating margin (non-IFRS): We use operating margin to
+measure our overall operational efficiency. Operating margin (non-
+IFRS) is the ratio of our operating profit (non-IFRS) to total revenue
+(non-IFRS), expressed as a percentage.
+Cloud gross margin (non-IFRS): We use our cloud gross margin
+(non-IFRS) to measure our process efficiency in our cloud business.
+Cloud gross margin (non-IFRS) is the ratio of our cloud gross profit
+(non-IFRS) to cloud revenue (non-IFRS), expressed as a
+percentage.
+Operating profit (non-IFRS): We use operating profit (non-IFRS)
+expressed in both actual currencies and constant currencies to
+measure our overall operational process efficiency and overall
+business performance.
+Cloud backlog: In addition to new cloud bookings, we use the
+measure "cloud backlog" to evaluate our sales success in the cloud
+business. We define cloud backlog as a measure that represents
+expected future cloud revenue that, as of period end, is contracted
+but not yet billed.
+We use the following measures to manage our non-operating
+financial performance:
+New cloud bookings: For our cloud activities, we also look at
+new cloud bookings (both in actual currencies and constant
+currencies). This measure reflects the committed order entry from
+Platform as a service (PaaS)
+new customers and from incremental purchases by existing
+customers for offerings that generate cloud revenue. For new cloud
+bookings we take into consideration committed deals only, meaning
+utilization-based payments are not included in this measure. In this
+way, it is an indicator of cloud-related sales success in a given
+period and of secured future cloud revenue. We focus primarily on
+the average contract value variant of the new cloud bookings
+measure that generally takes into account annualized amounts for
+contracts. There are no comparable IFRS measures for these
+bookings metrics.
+Infrastructure as a service (laaS)
+For more information regarding cloud revenue and a description of
+these services, see the Notes to the Consolidated Financial
+Statements, Note (A.1).
+We use the cloud revenue (non-IFRS) measure at both actual
+currencies and constant currencies.
+Premium cloud support beyond regular support embedded in
+cloud offerings.
+Total revenue (non-IFRS): We use total revenue (non-IFRS) to
+measure our growth at both actual currencies and constant
+currencies. The total of cloud revenue and support revenue divided
+by total revenue is the share of more predictable revenue. This
+measure provides additional insight into our sustained business
+success.
+Cloud and software revenue (non-IFRS): We use cloud and
+software revenue (non-IFRS) expressed in both actual currencies
+and constant currencies to measure our revenue growth. Our cloud
+and software revenue includes cloud revenue plus software licenses
+and support revenue. Cloud revenue and software revenue are our
+key revenue drivers because they tend to affect our other revenue
+streams. Generally, customers that buy software licenses also enter
+into related support contracts, and these generate recurring
+support revenue after the software sale. Support contracts cover
+standardized support services and unspecified future software
+updates and enhancements. Cloud and software revenue also tends
+to stimulate services revenue, which is earned by providing
+customers with professional services, premium engagement
+services, training services, messaging services, and payment
+services.
+SAP Data Warehouse Cloud
+SAP Analytics Cloud
+Released in 2019, SAP Data Warehouse Cloud is a cloud data
+warehouse solution designed for business and IT users with
+capabilities for data integration, database, data warehousing, and
+analytics. It is an open solution built on SAP HANA.
+SAP BusinessObjects Business Intelligence (BI) suite is a set of
+flexible and scalable self-service BI tools, designed to give
+customers discovery and insights in real time.
+SAP BusinessObjects Business Intelligence
+SAP Analytics Cloud is a cloud analytics solution running on
+SAP HANA that brings together the domains of business
+intelligence, predictive capabilities, and enterprise planning.
+Customers can discover, analyze, plan, and predict in one solution
+and make decisions. It provides a single user experience across all
+devices to help customers make end-to-end business decisions.
+Business analytics tools from SAP help customers get insights
+to enable them to adapt their businesses in real time.
+memory. As part of SAP's own digital transformation, SAP
+completed the move of SAP SuccessFactors solutions to SAP HANA
+in 2019.
+SAP solutions for enterprise information management (EIM)
+provide capabilities to understand, integrate, cleanse, manage,
+associate, and archive data. This includes the on-premise solution
+SAP Data Hub and the cloud service SAP Data Intelligence, which
+have been designed to help businesses connect their siloed data
+assets and manage the discovery, refinement, governance, and
+orchestration of all data across a distributed data landscape. The
+data landscape can include SAP software systems (such as
+SAP S/4HANA, SAP C/4HANA, and SAP BW/4HANA) as well as
+third-party systems. SAP Data Intelligence also includes machine
+learning (ML) services and tooling.
+Enterprise Information Management
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+SAP BW/4HANA
+Analytics
+SAP BW/4HANA is our on-premise data warehouse solution built
+entirely on SAP HANA. It includes an analytics layer that processes
+data directly in-memory on the database, instead of at the
+application layer, as is the case with traditional analytical engines.
+Application Development and Integration
+Reconciliations of IFRS to Non-IFRS Financial Measures for the Years 2019 and 2018
+SAP Cloud Platform provides an integration and extension
+platform that allows customers to build solutions as cloud services,
+with intuitive tools and support to address industry and line-of-
+business (LoB) processes.
+Combined Group
+SAP S/4HANA
+XM capabilities from Qualtrics have been integrated across the
+suite, specifically within our commerce, marketing, sales, and
+service offerings.
+SAP C/4HANA is our customer experience suite. All five cloud
+areas commerce, marketing, service, sales, and customer data -
+have been recognized by industry analysts as leaders in their
+respective categories.
+SAP C/4HANA
+Customer
+Integrated with SAP S/4HANA and built on an open cloud
+platform to enable integration across heterogeneous environments,
+our operations offerings can connect to third-party applications and
+data. Following the acquisition of Qualtrics in 2019, we added
+Experience Management (XM) capabilities to our operations
+solutions.
+Our open Business Technology Platform helps customers extend
+and integrate SAP applications with third-party solutions and build
+new business applications with intelligent capabilities at scale.
+SAP Cloud Platform
+Operations
+The SAP Leonardo Artificial Intelligence (AI) functionality has
+already been integrated in the SAP portfolio, providing intelligent
+capabilities in SAP S/4HANA, SAP C/4HANA, SAP Concur,
+SAP Fieldglass, and SAP SuccessFactors solutions, among others.
+SAP Leonardo Blockchain
+SAP Leonardo Artificial Intelligence
+The SAP Leonardo loT solution provides industry-specific
+business services and capabilities, designed to embed device and
+telemetry data into SAP applications. It also offers prepackaged
+scenarios in the SAP Field Service Management solution in the
+SAP C/4HANA suite, business scenario content templates, and
+interoperability with hyperscalers, such as Amazon Web Services
+loT Core and Microsoft Azure IoT Hub.
+SAP Leonardo Internet of Things
+technologies are embedded within our operations suite of
+applications and applied to processes that integrate both SAP and
+third-party data and applications.
+SAP uses the term intelligent technologies to describe tools and
+technology designed to turn intelligence into business outcomes
+such as ML, AI, Internet of Things (IoT), and blockchain. Intelligent
+Intelligent Technologies
+SAP Leonardo Blockchain capabilities are designed to enable
+open business collaboration across company boundaries in
+decentralized networks. These blockchain technologies are
+integrated into SAP Cloud Platform.
+To Our
+Stakeholders
+Data
+Products, Research & Development, and Services
+Supply Chain
+Manufacturing
+SAP S/4HANA is our next-generation Intelligent ERP suite.
+Running on SAP HANA, SAP S/4HANA includes intelligent
+technologies and integrated business processes with real-time
+analytics to support rapid decision-making. Approximately 13,800
+customers across 25 industries have chosen SAP S/4HANA. This
+represents a 24% increase year over year, up from 8,500 in 2017
+and 11,100 in 2018. The suite provides software capabilities for
+human resources, sales, service, procurement, manufacturing,
+asset management, as well as research and development. In
+Q4/2019, SAP updated the definition of SAP S/4HANA to more
+closely reflect categories commonly covered by ERP. These
+categories include elements of digital supply chain management,
+finance/controlling, and risk management. SAP S/4HANA is built
+with an open architecture to connect to the entire SAP portfolio and
+beyond.
+Operations
+Finance
+HR
+& Integration
+Data Management
+Application Development
+Database &
+Intelligence
+Intelligent
+Technologies
+Customer
+Brand
+Product
+Procurement
+Bringing Experience Management to the
+Intelligent Enterprise
+Product Innovation Strategy
+-
+The innovative architecture in SAP HANA allows both
+transactional processing for data capture and retrieval, and
+analytical processing for business intelligence and reporting. It
+enables businesses to process and analyze live data and make
+business decisions based on the most up-to-date information.
+SAP HANA is available both on premise and as a service in the cloud
+with SAP Cloud Platform across multiple cloud environments. In
+2019, we released the latest SAP HANA innovations including
+enhanced capabilities in our data anonymization functionality and
+hyperconverged infrastructure (HCI) certification. SAP HANA is also
+the first major database optimized for Intel Optane DC persistent
+SAP HANA
+Database and Data Management
+The Business Technology Platform was introduced in 2019. It
+provides solutions across four key technology areas: database and
+data management (SAP HANA); analytics (SAP Analytics Cloud);
+application development and integration (SAP Cloud Platform); and
+intelligent technologies (Internet of Things, machine learning, and
+blockchain) on an open cloud platform, running in SAP data centers
+and on selected hyperscalers. The platform's business-centric
+technologies are designed to enable integration and innovation
+across the entire intelligent suite.
+Intelligence
+Qualtrics BrandXM aims to make visible consumer sentiment
+towards a brand.
+Qualtrics ProductXM identifies consumers' favorite products
+based on feedback from users.
+67
+-
+Qualtrics XM Platform includes the following:
+-
+Experience Management (XM) refers both to the discipline of
+seeking out and closing the gaps found in the four core experiences
+of business - customer, product, employee, and brand - as well as
+technology. Qualtrics XM Platform represents the technology that
+came to SAP with the acquisition of Qualtrics International, Inc., in
+2019.
+Experience
+Transformative innovation occurs as a result of new trends,
+technologies, and business models.
+Adjacent innovation describes enhancements to the existing
+portfolio using new technologies or applying existing knowledge
+to new markets to gain new customers.
+SAP invests in the following three types of innovation:
+Continuous innovation involves incremental improvements to
+existing offerings.
+Qualtrics CoreXM provides a foundation for XM and aims to
+help analyze experience data (X-data).
+Qualtrics Customer XM brings new capabilities to support
+specific use cases and help process customer feedback.
+Qualtrics Employee XM delivers new capabilities to gather
+employee feedback and propose actions for human resources
+(HR) to help improve the employee experience.
+68
+In addition to software and technology, SAP provides an entire
+portfolio of services and support offerings designed to help
+customers maximize the value of their SAP solutions in on-premise,
+cloud, and hybrid environments. In 2019, we continued a process
+that began in 2017 to simplify the SAP services and support
+portfolio and expand our range of intelligent tools to underpin
+services and support offerings for the intelligent enterprise,
+including XM services. This simplification established three portfolio
+categories to address customers' needs for as long as they use SAP
+software premium success, project success, and continuous
+success.
+To Our
+Stakeholders
+2016
+2015
+5%
+7%
+8%
+10%
+2,845
+3,044
+3,352
+3,624
+€ millions | change since previous year
+expenditures (see figure below).
+SAP's strong commitment to R&D is reflected in our
+Investment in R&D
+Consolidated Financial
+Statements IFRS
+4,292
+Management Report
+18%
+2018
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+0
+70
+While our intellectual property is important to our success, we
+believe our business as a whole is not dependent on any particular
+patent or a combination of patents.
+SAP actively seeks intellectual property protection for
+innovations and proprietary information. Our software innovations
+continue to strengthen our market position as a leader in business
+solutions and services. Our investment in R&D has resulted in
+numerous patents. As at December 31, 2019, SAP held a total of
+more than 10,270 validated patents worldwide. Of these, 924 were
+granted and validated in 2019.
+Patents
+Professional development of our R&D workforce
+Consulting related to our product strategy
+Patent attorney services and fees
+Obtaining certification for products in different markets
+Translating, localizing, and testing products
+Total R&D expense not only includes our own personnel costs
+but also the external costs of work and services from the providers
+and cooperation partners we work with to deliver and enhance our
+products. We also incur external costs for the following:
+In 2019, our IFRS R&D ratio, reflecting R&D expenses as a
+portion of total operating expenses, decreased by 0.5 percentage
+points (pp) to 18.6% (2018: 19.1%). Our non-IFRS R&D ratio
+increased by 0.4pp to 19.8% year over year (2018: 19.4%). At the
+end of 2019, our total full-time equivalent (FTE) headcount in
+development work was 27,634 (2018: 27,060). Measured in FTEs,
+our R&D headcount was 28% of total headcount (2018: 28%).
+2019
+2017
+Stakeholders
+Combined Group
+To Our
+Our Intelligent Spend Management program brings together
+SAP Ariba, SAP Concur, and SAP Fieldglass solutions. In 2019, we
+strengthened integration between these solutions and
+SAP S/4HANA to help customers manage the three primary
+categories of supplier spending: procurement of indirect and direct
+goods; travel and expense; and external workforce management.
+SAP Ariba
+SAP SuccessFactors solutions aim to increase the value of a
+workforce by developing, managing, engaging, and empowering
+people. In 2019, SAP changed the name of SAP SuccessFactors
+HCM Suite to SAP Success Factors Human Experience
+Management (HXM) Suite, as XM functionality from Qualtrics has
+been integrated into the software. Further, HXM solutions from SAP
+provide offerings for core HR and payroll, talent management,
+employee experience, people analytics, and workforce planning.
+Procurement
+SAP SuccessFactors
+SAP Intelligent Asset Management solutions aim to help define,
+plan, and monitor a service and maintenance strategy for physical
+products and assets along the manufacturing lifecycle.
+Human Resources (HR)
+SAP Integrated Business Planning for Supply Chain is a cloud-
+based solution powered by SAP HANA and designed to deliver real-
+time supply chain planning capabilities for sales and operations,
+demand, response and supply planning, and inventory optimization.
+Manufacturing
+Integrated Business Planning
+The SAP Digital Supply Chain portfolio offers an integrated suite
+of solutions to help plan, design, manufacture, deliver, and operate
+products.
+Supply Chain
+In 2019, we also announced a go-to-market partnership with
+Microsoft called "Embrace" to accelerate customer adoption of
+SAP S/4HANA and SAP Cloud Platform on Microsoft Azure.
+SAP offers a choice of SAP S/4HANA deployments - software as
+a service (SaaS), on premise, in a private cloud, or as a hybrid
+deployment. SAP S/4HANA Cloud offers the advantages of SaaS,
+such as scalability and quarterly innovation updates, whereas
+SAP S/4HANA on premise delivers updates on an annual cycle.
+Flexible Deployment Options
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+SAP Ariba solutions offer an online business-to-business
+marketplace. In 2019, we announced partnerships with Barclaycard
+Commercial Payments, American Express, and Standard Chartered
+Bank, establishing new payment and financial supply chain
+solutions on Ariba Network.
+SAP Fieldglass
+SAP Fieldglass solutions are cloud-based applications for
+contingent workforce management and services procurement.
+SAP Concur
+69
+Products, Research & Development, and Services
+Our partner ecosystem drives the bulk of SAP's presence among
+small and midsize enterprise (SME) customers. In 2019, SAP
+announced a new initiative, Next-Generation Partnering, aimed to
+make partnerships simpler and more profitable for the ecosystem.
+Next-Generation Partnering emphasizes partner innovation and
+monetization through SAP App Center, where customers can
+discover, try, buy, manage, and deploy trusted partner applications
+that extend their existing SAP technology and solutions.
+Extending Our Reach Through a Broad Ecosystem
+SAP's ecosystem consists of more than 20,000 partners
+worldwide that build, sell, service, and run SAP solutions and
+technology.
+Ecosystem
+We also provide intelligent tools to help guide and deliver
+application management and administrative support for our service
+offerings.
+Intelligent Tools
+Products, Research & Development, and Services
+Our continuous success services support our cloud solutions
+and on-premise software. We offer services to provide proactive,
+predictive, and preventive support across hybrid landscapes to help
+customers move to the cloud and make SAP S/4HANA their
+Intelligent ERP of choice as well as bundled customer success
+activities to accelerate cloud adoption.
+Our project success services support the adoption of SAP
+products and technologies. These include services to help deliver a
+digital business strategy, preconfigured content for multiple
+industries or lines of business, best practices, methodologies, and
+tools. Further, these offerings also support the use of emerging
+technologies and the implementation of or transition to
+SAP S/4HANA.
+Project Success
+Our premium success services support large-scale
+transformation initiatives through a single, strategic, and
+customized on-site engagement. Our team of SAP experts help
+customers design, deploy, adopt, and operate SAP solutions on
+premise, hybrid, or in the cloud. The offerings differ based on size of
+customer and intensity of engagement.
+Premium Success
+Experience
+SAP Digital Business Services
+SAP Concur solutions aim to deliver a connected spend
+management system that encompasses travel, expense, invoice,
+compliance, and risk.
+Continuous Success
+Employee
+Total operating expenses
+X
+Data
+0
+210
+9
+-3,624
+-3,854
+0
+429
+9
+-4,292
+Research and development
+-3,151
+0
+142
+9
+-3,302
+-3.406
+-3,408
+Sales and marketing
+348
+Earnings per share, basic (in €)
+16.2
+26.7
+2.78
+29.7
+29.6
+23.1
+29.0
+26.2
+27.0
+26.3
+5.11
+3.42
+4.35
+562
+-7,693
+0
+246
+9
+SBP¹)
+Acqui-
+IFRS
+2019
+2018
+€ millions
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Non-IFRS Adjustments by Functional Areas
+Combined Group
+Consolidated Financial
+Management Report Statements IFRS
+To Our
+Stakeholders
+99
+66
+99
+65
+Restruc-
+Non-IFRS
+IFRS
+sition-
+Related
+-3,662
+Cost of services
+-3,817
+0
+78
+264
+-4,160
+Effective tax rate (in %)
+-4,247
+138
+308
+-4,692
+Cost of cloud and software
+SBP¹) Restruc- Non-IFRS
+turing
+Acqui-
+sition-
+Related
+turing
+0
+Operating margin (in %)
+Key ratios
+6
+689
+-23,081
+Products, Research & Development, and Services
+income/expense, net
+-20
+0
+0
+○
+-20
+18
+0
+0
+0
+18
+Other operating
+1,835
+1,130
+-19,426
+-19,005
+Customer
+The Intelligent Enterprise Framework illustrates a high-level view of our product portfolio.
+The Intelligent Enterprise Framework
+Products, Research & Development,
+and Services
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+0
+Management Report
+To Our
+Stakeholders
+Performance Management System
+1) Share-based payments
+-17,579
+19
+830
+577
+Combined Group
+Analytics
+19
+0
+312
+277
+-6,781
+-6,784
+0
+6,102
+4,083
+1,111
+5,193
+Attributable to non-controlling interests
+50
+0
+50
+6
+0
+0
+-6,192
+General and administration
+-1,629
+-19
+0
+1,130
+0
+0
+-1,130
+Restructuring
+0
+-992
+88
+18
+-1,098
+-1,152
+0
+461
+16
+0
+2,781
+3,321
+Attributable to owners of parent
+19,199
+781
+19,979
+17,246
+527
+17,773
+Research and development
+-4,292
+Gross profit
+438
+-3,624
+219
+-3,406
+Sales and marketing
+-7,693
+909
+-6,784
+-6,781
+-3,854
+589
+-6,969
+-7,462
+Cost of cloud and software
+-4,692
+446
+-4,247
+-4,160
+343
+-3,817
+Cost of services
+494
+-3,662
+-3,408
+-3,302
+151
+-3,151
+Total cost of revenue
+-8,355
+700
+-7,655
+254
+-6,192
+General and administration
+-1,629
+474
+-18,953
+-19,005
+1,426
+-17,579
+Profit numbers
+Operating profit
+4,473
+-19,426
+3,735
+-255
+7,953
+5,703
+1,459
+7,163
+Other non-operating income/expense, net
+-74
+0
+8,208
+3,654
+-23,081
+Total operating expenses
+477
+-1.152
+-1,098
+106
+-992
+Restructuring
+-1,130
+1,130
+0
+-19
+19
+0
+Other operating income/expense, net
+18
+0
+18
+-20
+0
+-20
+-1,962
+130
+-2,092
+-2,018
+Software licenses
+4,533
+0
+4,533
+-101
+4,431
+4,647
+0
+5,027
+4,647
+11,547
+0
+11,548
+-263
+11,285
+10,981
+0
+10,982
+Software support
+33
+4,993
+6,773
+€ millions, unless otherwise stated
+Revenue measures
+Additional
+Information
+2019
+2018
+IFRS
+Adj. Non-IFRS
+Currency
+Non-IFRS
+IFRS
+Adj.
+Non-IFRS
+Impact
+Constant
+Currency
+Cloud
+6,933
+81
+7,013
+-240
+Software licenses and support
+Consolidated Financial
+Statements IFRS
+16,080
+-364
+4,417
+26,906
+4,086
+0
+4,086
+24,708
+33
+24,741
+Operating expense measures
+-728
+Cost of cloud
+305
+-2,228
+-2,068
+213
+-1,855
+Cost of software licenses and support
+-2,159
+141
+-2.534
+27,634
+81
+27,553
+15,716
+15.628
+0
+15,629
+Cloud and software
+23,012
+81
+23,093
+-604
+22,489
+20,622
+33
+20,655
+Services
+4,541
+0
+4,541
+-124
+Total revenue
+16,080
+Further Information on Economic,
+Environmental, and Social Performance
+-56
+-56
+To Our
+Stakeholders
+61
+Performance Management System
+SAP's long-term strategic plans are the point of reference for our
+short-term and mid-term planning and controlling processes. We
+initially identify future growth and profitability drivers at a highly
+aggregated level. In a first step, the resulting financial plan is broken
+down into (i) our deployment models "On Premise", "Software as a
+Service/Platform as a Service", "Infrastructure as a Service", and
+"Intelligent Spend Management"; and (ii) functions such as
+development, sales, and administration. In a second step, the
+planned total revenues and total expenses are generally allocated to
+the areas of functional responsibility of the individual members of
+the Executive Board (the Board areas). If a Board area represents
+not only a functional department but also has a responsibility for
+operating segments within this Board area (for example, Intelligent
+Spend Group segment and Qualtrics segment), the allocation is
+done at the lower segment level. Budget adjustments may be
+applied during the year to reflect changes in priorities, to achieve
+efficiency targets, and to reflect endogenous and exogenous
+factors. Such budget adjustments, as well as the assessment of the
+Executive Board's performance, are handled at the Board area level
+if the Board area is part of a segment, or at the segment level if the
+Board area comprises several segments. It is then the individual
+Board member's responsibility to break down the allocated budget
+adjustments within the segment budget boundary. Based on an
+integrated portfolio process running in parallel to the budgeting
+process, we ensure aligned investment behavior across Board areas
+with regards to specific solutions or solution areas. In a final step,
+customer-facing revenue targets and cost-of-sales and marketing
+targets are broken down into sales regions.
+Our holistic view of the performance measures described above,
+together with our associated analyses, comprises the information
+we use for value-based management. We use planning and control
+processes to manage the compilation of these key measures and
+their availability to our decision-makers across various
+management levels.
+Value-Based Management
+Starting in 2020, we will also use carbon emissions to manage
+our non-financial performance. It is used as a metric to strengthen
+our ambitious short-term and long-term carbon reduction targets.
+We measure our net carbon emissions according to the Greenhouse
+Gas (GHG) Protocol. The net carbon emissions are calculated by
+deducting emission savings such as renewable energy and carbon
+offsets from our gross carbon emissions.
+Leadership Trust Score: We use this score to further enhance
+accountability and to measure our collective effort to foster a work
+environment based on trust. It is derived from a question in our
+annual global employee survey that gauges employees' trust in our
+leaders. We measure leadership trust by using the same NPS
+methodology that we use to compute the Customer NPS.
+Combined Group
+Employee Engagement Index: We use this index to measure the
+motivation and loyalty of our employees, how proud they are of our
+company, and how strongly they identify with SAP. The index is
+derived from an annual survey of our employees. Applying this
+measure is recognition that our growth strategy depends on
+engaged employees.
+Customer Net Promoter Score (Customer NPS): This score
+measures the willingness of our customers to recommend or
+promote SAP to others. It is derived from ongoing customer surveys
+and identifies, on a scale of 0-10, whether a customer is likely to
+recommend SAP to friends or colleagues, is neutral, or is unwilling
+to recommend. We introduced this measure in 2012, as we are
+convinced that we can achieve our financial goals only when our
+customers are loyal to, and satisfied with, SAP and our solutions. To
+derive the Customer NPS, we start with the percentage of
+"promoters" of SAP, that is, those giving us a score of 9 or 10 on a
+scale of 0-10. We then subtract the percentage of "detractors," that
+is, those giving us a score of 0 to 6. The method ignores "passives,"
+In 2019, we used the following key measures to manage our non-
+financial performance in the areas of customer loyalty, employee
+engagement, and leadership trust:
+Measures to Manage Our Non-Financial
+Performance
+Operating, investing, and financing cash flows and free cash
+flow: Our consolidated statement of cash flows provides insight into
+how we generate and use cash and cash equivalents. When applied
+in conjunction with the other primary financial statements, it
+provides information that helps us evaluate the changes in our net
+assets, our financial structure (including our liquidity and solvency),
+and our ability to affect the amounts and timing of cash flows to
+adapt to changing circumstances and opportunities. We use our
+free cash flow measure to determine the cash flow remaining after
+all expenditures required to maintain or expand our organic
+business have been paid off. This measure provides management
+with supplemental information to assess our liquidity needs. We
+calculate free cash flow as net cash from operating activities minus
+purchases (other than purchases made in connection with business
+combinations) of intangible assets and property, plant, and
+equipment, as well as payments for lease liabilities.
+Effective tax rate (IFRS and non-IFRS): We define our effective
+tax rate as the ratio of income tax expense to profit before tax,
+expressed as a percentage.
+Earnings per share (EPS) (IFRS and non-IFRS): EPS measures
+our overall performance because it captures all operating and non-
+operating elements of profit as well as income tax expense. It
+represents the portion of profit after tax allocable to each SAP share
+outstanding. EPS is influenced not only by our operating and non-
+operating business and income taxes but also by the number of
+shares outstanding.
+We use the following measures to manage our overall financial
+performance:
+Measures to Manage Overall Financial
+Performance
+that is, those giving us a score of 7 or 8. Consequently, the range of
+achievable scores is -100 to +100, with the latter being the best
+achievable score for customer loyalty as measured by the Customer
+NPS methodology.
+Days Sales Outstanding (DSO): We manage working capital by
+controlling the DSO of trade receivables. DSO measures the average
+number of days from the raised invoice to cash receipt from the
+customer. We calculate DSO by dividing the average invoiced trade
+receivables balance of the last 12 months by the average monthly
+cash receipt of the last 12 months.
+Management Report
+Further Information on Economic,
+Environmental, and Social Performance
+recurring revenue that we are not permitted to record as revenue
+under IFRS due to fair value accounting for the contracts in effect at
+the time of the respective acquisitions.
+Non-IFRS revenue measures have been adjusted from the
+respective IFRS financial measures by including the full amount of
+software support revenue, cloud revenue, and other similarly
+Revenue (Non-IFRS)
+Our non-IFRS financial measures reflect adjustments based on
+the items below, as well as adjustments for the related income tax
+effects.
+measures.
+Both our internal performance targets and the guidance we
+provide to the capital markets are based on non-IFRS revenue
+and profit measures rather than the respective IFRS financial
+All forecast and performance reviews with all senior managers
+globally are based on these non-IFRS measures, rather than the
+respective IFRS financial measures.
+The annual budgeting process for all management units is based
+on revenue (non-IFRS) and operating profit (non-IFRS) numbers
+rather than the respective IFRS financial measures.
+Consolidated Financial
+Statements IFRS
+The variable components of our Executive Board members' and
+employees' remuneration are based on revenue (non-IFRS),
+operating profit (non-IFRS), operating margin (non-IFRS), as
+well as new cloud bookings measures rather than the respective
+IFRS measures.
+-
+-
+We believe that the disclosed supplemental historical and
+prospective non-IFRS financial information provides useful
+information to investors because management uses this
+information, in addition to financial data prepared in accordance
+with IFRS, to attain a more transparent understanding of our past
+performance and our anticipated future results. We use non-IFRS
+revenue and profit measures consistently in our internal planning
+and forecasting, reporting, and compensation, as well as in our
+external communications, as follows:
+We disclose certain financial measures such as revenue (non-
+IFRS), expense (non-IFRS), and profit measures (non-IFRS) that are
+not prepared in accordance with IFRS and are therefore considered
+non-IFRS financial measures. Our non-IFRS financial measures may
+not correspond to non-IFRS financial measures that other
+companies report. The non-IFRS financial measures that we report
+should only be considered in addition to, and not as substitutes for,
+or superior to, our IFRS financial measures.
+Explanation of Non-IFRS Measures
+Non-IFRS Financial Measures Cited in
+This Report
+Based on our detailed annual plans, we determine the budget for
+the respective year. We also have processes in place to forecast
+revenue and profit on a quarterly basis, to quantify whether we
+expect to realize our financial goals, and to identify any deviations
+from plan. We continuously monitor the affected units in the Group
+to analyze these developments and define any appropriate actions.
+Our entire network of planning, control, and reporting processes is
+implemented in integrated planning and information systems,
+based on SAP software, across all organizational units so that we
+can conduct the evaluations and analyses needed to make informed
+decisions.
+Additional
+Information
+Our management primarily uses these non-IFRS measures
+rather than IFRS measures as the basis for making financial,
+strategic, and operating decisions.
+investment portfolio, and the average rate of interest at which
+assets are invested. We also monitor average outstanding
+borrowings and associated finance costs.
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+8,331
+5,600
+1,459
+7,059
+Income tax expense
+-1,226
+-954
+-2,180
+3,735
+-1,511
+-1,860
+Profit after tax
+3,370
+2,781
+6,152
+4,088
+1,111
+5,199
+-349
+4,596
+Profit before tax
+-47
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+To Our
+Stakeholders
+787
+371
+0
+371
+Finance costs
+-589
+0
+-589
+-418
+-418
+Financial income, net
+198
+0
+198
+-47
+0
+Under IFRS, we record at fair value the contracts in effect at the
+time entities were acquired. Consequently, our IFRS software
+support revenue, IFRS cloud revenue, IFRS cloud and software
+revenue, and IFRS total revenue for periods subsequent to
+acquisitions do not reflect the full amount of revenue that would
+have been recorded by entities acquired by SAP had they remained
+stand-alone entities. Adjusting revenue numbers for this revenue
+impact provides additional insight into the comparability of our
+ongoing performance across periods.
+Operating Expense (Non-IFRS)
+Operating expense numbers that are identified as operating
+expenses (non-IFRS) have been adjusted by excluding the following
+expenses:
+Acquisition-related charges
+The remaining acquisition-related charges that we eliminate
+in deriving our profit (non-IFRS) numbers are likely to recur
+should SAP enter into material business combinations in the
+future. Similarly, the restructuring expenses that we eliminate
+in deriving our profit (non-IFRS) numbers are likely to recur
+should SAP perform restructurings in the future.
+The revenue adjustment for the fair value accounting of the
+acquired entities' contracts and the expense adjustment for
+acquisition-related charges do not arise from a common
+conceptual basis. This is because the revenue adjustment
+aims to improve the comparability of the initial post-
+acquisition period with future post-acquisition periods, while
+the expense adjustment aims to improve the comparability
+between post-acquisition periods and pre-acquisition
+periods. This should particularly be considered when
+evaluating our operating profit (non-IFRS) and operating
+margin (non-IFRS) numbers as these combine our revenue
+(non-IFRS) and expenses (non-IFRS) despite the absence of
+a common conceptual basis.
+The acquisition-related amortization expense that we
+eliminate in deriving our profit (non-IFRS) numbers is a
+recurring expense that will impact our financial performance
+in future years.
+While we adjust for the fair value accounting of the acquired
+entities' recurring revenue contracts, we do not adjust for the
+fair value accounting of deferred compensation items that
+result from commissions paid to the acquired company's
+sales force and third parties for closing the respective
+customer contracts.
+While our profit (non-IFRS) numbers reflect the elimination of
+certain acquisition-related expenses, no eliminations are
+made for the additional revenue or other income that results
+from the acquisitions.
+•
+■
+"
+•
+Our restructuring charges resulted in significant cash
+outflows in the past and could do so in the future. The same
+applies to our share-based payment expense because most
+of our share-based payments are settled in cash rather than
+shares.
+•
+We believe that our non-IFRS financial measures described
+above have limitations including, but not limited to, the following:
+Without being analyzed in conjunction with the corresponding
+IFRS measures, the non-IFRS measures are not indicative of our
+present and future performance, foremost for the following
+reasons:
+Limitations of Non-IFRS Measures
+Non-IFRS and non-GAAP measures are widely used in the
+software industry. In many cases, inclusion of our non-IFRS
+measures may facilitate comparison with our competitors'
+corresponding non-IFRS and non-GAAP measures.
+The non-IFRS measures provide investors with additional
+information that enables a comparison of year-over-year
+operating performance by eliminating certain direct effects of
+acquisitions, share-based compensation plans, and
+restructuring plans.
+Our revenue (non-IFRS), expense (non-IFRS), and profit (non-
+IFRS) measures, along with the "new cloud bookings" and "cloud
+backlog" measures (see above) provide investors with insight
+into management's decision-making because management uses
+these measures to run our business and make financial,
+strategic, and operating decisions. We include the revenue
+adjustments outlined above and exclude the expense
+adjustments outlined above when making decisions to allocate
+resources. In addition, we use these non-IFRS measures to
+facilitate comparisons of SAP's operating performance from
+period to period.
+-
+We believe that our non-IFRS measures are useful to investors
+for the following reasons:
+Usefulness of Non-IFRS Measures
+"
+The valuation of our cash-settled share-based payments
+could vary significantly from period to period due to the
+fluctuation of our share price and other parameters used in
+the valuation of these plans.
+In the past, we have issued share-based payment awards to
+our employees every year and we intend to continue doing so
+in the future. Thus, our share-based payment expenses are
+recurring, although the amounts usually change from period
+to period.
+We believe that constant currencies measures have limitations,
+particularly as the currency effects that are eliminated constitute a
+significant element of our revenue and expenses and could
+materially impact our performance. Therefore, we limit our use of
+constant currencies measures to the analysis of changes in volume
+Finance income
+787
+0
+Performance Management System
+Management Report
+Combined Group
+To Our
+Stakeholders
+Performance Management System
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+64
+Despite these limitations, we believe that the presentation of our
+non-IFRS measures and the corresponding IFRS measures,
+together with the relevant reconciliations, provide useful
+information to management and investors regarding present and
+future business trends relating to our financial condition and results
+of operations.
+as one element of the full change in a financial measure. We do not
+evaluate our results and performance without considering both
+constant currencies and nominal measures of revenue (non-IFRS)
+and operating profit (non-IFRS) measures on the one hand, and
+changes in revenue, operating expenses, operating profit, or other
+measures of financial performance prepared in accordance with
+IFRS on the other. We caution the readers of our financial reports to
+follow a similar approach by considering nominal and constant
+currencies non-IFRS measures only in addition to, and not as a
+substitute for or superior to, changes in revenue, operating
+expenses, operating profit, or other measures of financial
+performance prepared in accordance with IFRS.
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+To Our
+Stakeholders
+83
+63
+Performance Management System
+-20
+0
+2,844
+NA
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+Performance Management System
+62
+62
+We believe it is important for investors to have information that
+provides insight into our sales. Revenue measures determined
+Further Information on Economic,
+Environmental, and Social Performance
+Constant Currencies Information
+Operating Profit (Non-IFRS), Cloud Gross Margin
+(Non-IFRS), Operating Margin (Non-IFRS),
+Effective Tax Rate (Non-IFRS), and Earnings per
+Share (Non-IFRS)
+We exclude certain acquisition-related expenses for the purpose
+of calculating operating profit (non-IFRS), operating margin (non-
+IFRS), and earnings per share (non-IFRS) when evaluating SAP's
+continuing operational performance because these expenses
+generally cannot be changed or influenced by management after
+the relevant acquisition other than by disposing of the acquired
+assets. Since management at levels below the Executive Board does
+not influence these expenses, we generally do not consider these
+expenses for the purpose of evaluating the performance of
+management units. For similar reasons, we eliminate share-based
+payment expenses as these costs are impacted by share price
+developments and other factors outside our control. We also
+eliminate restructuring expenses because they are volatile and
+mostly cannot be influenced by management at levels below the
+Executive Board.
+Restructuring expenses, that is, expenses resulting from
+measures which comply with the definition of restructuring
+according to IFRS.
+Share-based payment expenses
+Acquisition-related third-party expenses
+Settlements of preexisting business relationships in
+connection with a business combination
+Amortization expense/impairment charges for intangibles
+acquired in business combinations and certain stand-alone
+acquisitions of intellectual property (including purchased in-
+process research and development)
+■
+Operating profit, cloud gross margin, operating margin, effective
+tax rate, and earnings per share identified as operating profit (non-
+IFRS), cloud gross margin (non-IFRS), operating margin (non-IFRS),
+effective tax rate (non-IFRS), and earnings per share (non-IFRS)
+have been adjusted from the respective IFRS measures by adjusting
+for the aforementioned revenue (non-IFRS) and operating expenses
+(non-IFRS) and the income tax effects thereon.
+Additional
+Information
+under IFRS provide information that is useful in this regard.
+However, both sales volume and currency effects impact period-
+over-period changes in sales revenue. We do not sell standardized
+units of products and services, so we cannot provide relevant
+information on sales volume by providing data on the changes in
+product and service units sold. To provide additional information
+that may be useful to investors in breaking down and evaluating
+changes in sales volume, we present information about our revenue
+and various values and components relating to operating profit that
+are adjusted for foreign currency effects.
+We calculate constant currencies measures by translating
+foreign currencies using the average exchange rates from the
+comparative period instead of the current period. Constant
+currency measures on revenue backlog use the closing exchange
+rate from the previous year's corresponding keydate instead of the
+average exchange rate.
+-403
+Free cash flow
+Payments of lease liabilities
+(without acquisitions)
+property, plant, and equipment
+-44
+-1,458
+-817
+Purchase of intangible assets and
+activities
+Net cash flows from operating
+€ millions
+A in %
+-19
+4,303
+3,496
+2018
+2019
+Among other measures, we use free cash flow to manage our
+overall financial performance. We have modified the free cash flow
+metric by subtracting payments of leasing liabilities in order to
+eliminate the impact of increasing net cash flows from operating
+activities, following the adoption of IFRS 16.
+Free Cash Flow
+2,276
+-74
+Note: Due to rounding, the sum of the numbers presented in the table above might not precisely equal the totals we provide.
+Approaching Our Customers with
+Empathy
+4,918
+9,452
+9,843
+25,781
+5,209
+10,368
+10,205
+Sales and
+development
+24,872
+8,273
+5,250
+27,060 11,349
+8,930
+5,651
+12,478
+27,634
+9,131
+5,793
+12,710
+Research and
+17,379
+4,965
+24,213
+4,878
+9,196
+4,854
+3,859
+654
+27,571 100,330
+984
+29,712
+43,048
+SAP Group (12/31)
+2,220
+Infrastructure
+administration
+5,504
+1.047
+1,781
+2,676
+6,024
+1,147
+1,970
+2,906
+6,530
+1,246
+2,123
+3,161
+General and
+marketing
+23,219
+9,169
+2,160
+41,848
+7,536
+5,620
+Total
+APJ
+Ame-
+EMEA
+Total
+APJ
+Ame-
+EMEA
+equivalents (FTES)
+12/31/2017
+12/31/2018
+12/31/2019
+Full-time
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Employee Headcount by Region and Function
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+77
+Employees and Social Investments
+For more information about employee compensation and a
+breakdown of the components of personnel expense, see the Notes
+to the Consolidated Financial Statements, Note (B.2).
+EMEA
+19,476
+Ame-
+Total
+5,736
+8,120
+20,239
+5,971
+6,018
+8,250
+Services
+14,482
+4,719
+3,895
+5,869
+15,983
+5.374
+4,268
+6,341
+16,288
+5,361
+4,426
+6,501
+Cloud and software
+ricas
+ricas
+ricas
+APJ
+951
+28,029
+631
+3,742
+kilotons CO2
+Total Net Carbon Emissions
+certificates and carbon credits enables us to support sustainability
+projects across the globe.
+A number of initiatives harness innovative technologies to help us
+run our operations in a way that reduces our impact on the
+environment. In addition, our investment in renewable electricity
+Furthermore, in 2017, SAP joined the Science Based Targets
+initiative (SBTi) as the first German company to do so. We comply
+with the initiative's ambitious requirements and are committed to
+reducing emissions by 85% by 2050 compared to the base-year level
+2016, including energy consumption of our products in use at our
+customers. This target reflects the level of decarbonization required
+to keep the global temperature increase below 1.5°C compared to
+pre-industrial temperatures.
+We are committed to making our operations carbon neutral by
+2025. This target includes all direct emissions from running our
+business as well as a selected subset of indirect emissions from
+supply chains and services.
+Cutting Carbon Emissions
+To be able to innovate and embed sustainability further, we
+regularly engage with various stakeholder groups such as non-
+governmental organizations (NGOs), non-profit organizations
+(NPOs), and academia. This notably includes an external
+sustainability advisory panel comprised of expert representatives
+from our customers, investors, partners, NGOs, and academia.
+To enable continuous improvement and to protect the
+environment, we are gradually introducing an ISO 14001-certified
+environmental management system (EMS) at SAP sites worldwide.
+In 2019, our global EMS covered 55 sites in 30 countries. In 2025,
+SAP aims to run an ISO 14001-certified EMS at 100% of its company-
+owned sites. An energy management system certified by the
+ISO 50001 standard is integrated with the existing environmental
+management system at SAP's headquarters in Germany.
+The SAP Executive Board sponsor for sustainability, including
+climate change, is our chief financial officer (CFO). Our chief
+sustainability officer and our dedicated sustainability organization
+coordinate our response to climate change, which includes assessing
+and managing climate-related risks and opportunities. Facilities
+management staff design and operate our facilities based on robust
+environmental standards. In addition, our IT operations personnel is
+committed to optimizing energy consumption in our data centers.
+We assess our environmental performance and risks in quarterly
+management reviews.
+Our global environmental policy promotes a more productive use
+of resources by providing transparency in environmental issues,
+driving efficiency, and leveraging transformational strategies. It also
+outlines our environmental goals.
+SAP takes its environmental responsibilities seriously and strives
+to be a role model for sustainable business operations by running
+our own operations cleaner and greener. In addition, we aim to
+enable our customers to reduce their overall carbon emissions
+through our software.
+Being a Front-Runner for a Greener Way
+of Working
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Energy and Emissions
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+12
+79
+Employees and Social Investments
+Not all information in this section was part of the statuatory audit of
+our combined group management report by our external auditor
+KPMG. The quantitative indicators Business Health Culture Index,
+Employee Engagement Index, Employee Retention, Women in
+Management, as well as Headcount and Personnel Expense are
+audited at a reasonable assurance level. For the remaining
+qualitative and quantitative disclosures in this chapter, KPMG
+performed a limited assurance engagement.
+455
+QAudit Scope
+380
+310
+0%
+4%
+5%
+919
+920
+955
+950
+965
+GWh
+Total Energy Consumption
+Our focus on carbon emissions has contributed to a cumulative
+cost avoidance of €298.6 million in the past three years, compared
+to a business-as-usual scenario based on 2007. We achieved 34% of
+this cost avoidance in 2019. In 2020, we plan to re-evaluate the
+calculation approach.
+In addition to our commitment to carbon neutrality, we have
+derived annual targets for our internal operational steering.
+Compared to 2018, our carbon emissions slightly decreased,
+although our number of employees increased by 5.5%. While we
+continued our strategy to avoid and reduce our emissions wherever
+possible, we did see a significant increase in business flights, due to
+business growth, which we only partially compensated for with
+carbon offsets. In 2019, our carbon emissions target of 285 kilotons
+(kt) was exceeded by 15 kt.
+2019
+2018
+2017
+2016
+2015
+-16%
+-14%
+-9%
+-5%
+-3%
+300
+325
+2018 with BMW, we expanded the program in 2019 to invite
+selected strategic customers and partners to join. As a result, we
+teamed up with EY and Nestlé for the SAP Social Sabbatical for
+executive engagement programs in Brazil and Rwanda to bring an
+added dimension of impact to our client organizations with three
+executives from these companies joining us.
+Increasingly, SAP CSR is collaborating with like-minded
+customers and partners to create collective impact through
+exemplary initiatives such as Global Alliance for YOUth, Corporate
+Champions for Education, and the SAP Social Sabbatical for
+executive engagement program. SAP, together with 19 international
+private companies, has joined forces in Global Alliance for YOUth,
+for example, tackling issues such as automation and the global
+skills gap and building a better future for younger generations.
+Building on the success of our multicompany SAP Social
+Sabbatical for executive engagement program option piloted in
+Collaborating for Impact
+42,697
+SAP Group
+acquisitions
+289
+7
+133
+149
+2,043
+434
+952
+657
+2,113
+137
+1,638
+338
+Thereof
+3,087
+88,543
+501
+24,359
+855
+25,827
+38,357
+96,498
+26,620
+1,732
+29,368
+27,092
+99,157
+40,496
+including training, a new cloud-based employee engagement
+platform called SAP Together, as well as funding. In this way, we
+foster employee engagement and societal impact. In 2019, SAP
+employees around the world dedicated more than 270,000 hours of
+service to causes important to them.
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+To Our
+Stakeholders
+Employees and Social Investments
+78
+We empower our employees to take action around causes that
+matter to them personally through easy-to-digest resources
+Connecting Employees with Purpose
+Social enterprises represent a powerful vehicle for a more caring,
+inclusive, and sustainable economy due to the nature of their
+socially driven business models. In 2019, we extended investment in
+this area by entering into a long-term partnership with Social
+Enterprise UK to open up annual transaction value of £65 billion
+(€77 billion) in the United Kingdom and help corporate buyers
+spend better with certified social enterprises.
+Our average personnel expense for each employee increased to
+approximately €150,000 in 2019 (2018: approximately €124,000).
+This increase is primarily attributable to an increase of share-based
+payment and restructuring expenses. The personnel expense for
+each employee is defined as the overall personnel expense divided
+by the average number of employees.
+SAP CSR's non-profit and social enterprise partners are selected
+because of their significant impact in areas of quality education and
+workforce preparedness. We provide unique skills, expertise,
+products, and financial support to partners that, in turn, accelerate
+their ability to drive sustainable social impact. In 2019, SAP built
+capacity for over 1,200 innovative non-profit organizations and
+social enterprises resulting in a social investment of €3.4 million,
+impacting 950,000 lives.
+SAP recognizes the responsibility of meeting people where they
+are on their employment journey. As such, SAP's educational
+initiatives aim to help people - regardless of age or background -
+attain the relevant 21st-century skills to thrive, innovate, and secure
+meaningful work (including entrepreneurial pursuits) in a digital
+world. In 2019, SAP digital skills and coding programs trained
+56,000 teachers, engaged 4.5 million young people, and spanned
+105 countries.
+Building Digital Skills
+education models. The partnership will address several strategic
+areas including standardizing national curricula, workforce
+readiness programs, and in-depth research to better inform and
+connect the private sector with future talent.
+In 2019, SAP donated €23 million to education and workforce
+development programs, as well as youth entrepreneurship projects.
+These programs, focused on digital skills, expanded operations into
+more than 105 countries. Additionally, SAP announced a
+multimillion, multiyear partnership with UNICEF in September 2019
+focused on global workforce inclusion initiatives to help 1.5 million
+young people thrive and provide organizations with a prepared
+workforce. By bringing together businesses, governments and non-
+governmental organizations, together we will build sustainable
+SAP CSR efforts focus on three strategic program pillars:
+building digital skills; accelerating best-run non-profits and social
+enterprises; and connecting employees with purpose. Our Global
+CSR Governance Committee, consisting of executive level
+representatives from different board areas at SAP, advises and
+approves the strategic direction of our overall CSR mission. In
+addition, regional CSR governance committees advise and approve
+all major CSR partnerships and efforts. Led by our head of global
+CSR, our global CSR team is part of the Corporate Affairs
+organization in the Office of the Co-CEOs Board area. There is also a
+regional CSR lead for each of our major SAP regions. On a group
+level, we ensure that donations are made in an appropriate manner
+through financial and compliance control processes described in
+our global CSR policy, and we monitor all major CSR programs for
+social impact.
+As technology and innovation rapidly change the competencies
+needed to succeed in today's digital world, our global corporate
+social responsibility (CSR) program is tackling this skills gap head-
+on, putting SAP's purpose to help the world run better and improve
+people's lives into action through its mission - powering
+opportunity through digital inclusion. As such, our initiatives
+consider issues including access, adoption, and application of skills
+to ensure everyone can benefit from and participate in the digital
+economy.
+Powering Opportunity Through Digital
+Inclusion
+(months' end
+average)
+86,999
+37,512 25,459 24,029
+27,454 25,759 93,709
+Accelerating Best-Run Non-Profit Organizations
+and Social Enterprises
+We define headcount in FTE as the number of people on
+permanent employment contracts considering their staffing
+percentage. Students, individuals employed by SAP currently not
+working for reasons such as maternity leave, and temporary
+employees on limited contracts of less than six months are
+excluded from our figures. The number of temporary employees is
+not material.
+As at December 31, 2019, we had 100,330 full-time equivalent
+(FTE) employees worldwide (2018: 96,498). This represents an
+increase in headcount of 3,832 FTEs (thereof 2,113 from
+acquisitions) in comparison to 2018. The average number of
+employees in 2019 was 99,157 (2018: 93,709).
+Like similar restructuring programs in the past, this program was
+not about reducing the size of SAP. We are growing and continuing
+to focus on delivering the intelligent enterprise. As part of the
+restructuring program we offered our voluntary program in certain
+countries. It was built on "double voluntariness," meaning SAP has
+reserved the right to reject the participation of individual
+employees, if their knowledge was considered business critical. In
+addition, we were monitoring our hiring patterns through 2019 to
+realize the structural effects of our restructuring efforts.
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined Group
+To Our
+73
+Security, Data Protection, and Privacy
+The content of this section was not subject to the statutory audit of
+our combined group management report. However, our external
+auditor KPMG performed an independent limited assurance
+engagement on the contents of this section.
+QAudit Scope
+protection laws and were reported to the competent authorities.
+In 2019, SAP experienced three significant incidents in
+processing personal data - on our own behalf and on behalf of our
+customers - that were subject to GDPR or other applicable data
+unauthorized access and processing, as well as from accidental loss
+or destruction. Also, we are developing our products to support our
+customers in applying data protection requirements, including
+GDPR.
+We have implemented a wide range of measures intended to
+protect data controlled by SAP and SAP customers from
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+Security, Data Protection, and Privacy
+72
+Our DPMS conforms to the targets of the globally-recognized
+standard for data protection management systems, BS 10012:2017.
+Initially implemented at our global support organization, the DPMS
+has been successively rolled out and is now in place in all areas
+critical to data protection. It covers almost all areas and countries in
+which SAP has operations and will be introduced in all acquired
+companies. It is audited and certified on a yearly basis by the British
+Standards Institute and this audit last took place in 2019.
+Furthermore, we have renewed our global data protection and
+privacy coordinator network ("DPPC network") across all SAP
+entities that process personal data. This DPPC network is designed
+to ensure data protection and privacy compliance on local level.
+Additional regional data protection and privacy coordinators
+support the DPPC network in the assigned region to help drive
+compliance with local data protection and privacy laws while
+monitoring changes to applicable laws.
+increase the score through 2023 and beyond.
+With our mandatory global data protection and privacy training
+established across SAP, covering all lines of businesses, we aim to
+drive data protection and privacy awareness of our employees.
+In 2019, 68% of customers gave us a score of 7 or higher. This
+means that a large majority of customers are satisfied or highly
+satisfied with SAP. Because the percentage of customers that rated
+us 9 or 10 is slightly smaller than the percentage of customers who
+rated us 6 or below, our Customer NPS for 2019 is -6 (2018: -5).
+We did not reach our target of +1 in 2019. While we have reported
+Customer Net Promoter Score since 2012, we revamped our
+program in 2018 with 2019 as the first full year of results. For 2019,
+SAP set a very aggressive target against a stringent metric. As we
+gather more insight on how the number reacts to the improvements
+we are making, we will continue to get better in forecasting the
+results. With our Experience Management (XM) innovations from
+Qualtrics, we have more information from our customers than ever
+and can react to it faster, helping us make changes that customers
+can see and feel in their interactions with SAP and our software.
+As we continue to receive open and direct feedback from our
+customers, we are also incorporating XM across the company. In
+particular, programs such as Customer First, Build Customers for
+Life, and Insights to Action will continue to drive improvements. We
+expect this continuous feedback to help us achieve our goal of
+improving customer loyalty. Therefore, we aim to increase
+Customer NPS by three to five points in 2020 and to steadily
+To achieve this, we have implemented extensive programs to
+deepen our relationship with our customers to ensure we
+understand what works well and what can be improved in their
+partnership with SAP.
+To meet these expectations and to provide smart, enjoyable, and
+meaningful experiences and services for our people, we
+continuously evolve our Human Resources (HR) strategy. Our HR
+strategy details out people implications, derived from the corporate
+strategy, into areas of strategic investment that span the entire
+employee lifecycle. It allows us to create a working culture that
+deals successfully with the agility and scope of a digital workplace
+built on our purpose to help the world run better and improve
+people's lives. This culture encourages the open sharing of ideas, it
+leads change, and ultimately it creates a great employee
+experience.
+Our people are key in enabling our customers to successfully
+become intelligent enterprises. For this reason, we strive to
+understand the needs of today's employee and how a 21st-century
+organization must evolve to keep attracting, retaining, and growing
+current and future talent.
+Becoming an Experience Company Driven
+by Engaged People
+Additional
+Information
+Employees and Social Investments
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+To Our
+Stakeholders
+Customers
+74
+Integrating XM across the organization, we significantly
+increased our capabilities to take actions from customer insights to
+deliver business change. We launched the Insights to Action
+program, a comprehensive collaboration that identified over 20
+initiatives to address systemic customer feedback.
+With our global cross-Board initiative Customer First, efforts
+have been made to improve the way we work and care for our
+customers by supporting the organization in providing a consistent,
+positive, end-to-end experience.
+The Build Customers for Life program helps harmonize the
+customer experience in postsales with ongoing implementation
+projects, including customer success management, customer
+service management, outage management, and one customer
+portal.
+Building Programs to Facilitate Customer
+Feedback
+For more information about the Customer NPS, see the
+Performance Management System section.
+Compensation Report section.
+Starting in 2020, Customer NPS is included as a KPI in Executive
+Board remuneration as part of the short-term incentive component.
+For more information about executive compensation, see the
+SAP's security compliance strategy is also focused on
+integrating the increasingly complex cybersecurity and data
+privacy-related laws and regulations around the world. SAP has
+established an internal control framework for DevOps and is
+undergoing many external certification audits, such as System and
+Organization Control (SOC) and International Organization for
+Standardization audits (ISO 9001, 27001, 27017, 27018, and 22301).
+This is important for us to build the necessary trust level for SAP's
+customers and regularly increase the security and compliance level
+through the organization.
+Customers
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+We want our customers to see SAP as a company that listens
+and responds to their needs. We want to design and develop with
+their needs in mind. We want them to experience a constantly
+improving SAP.
+Measuring customer loyalty is a part of this program, and we use
+the Customer Net Promoter Score (Customer NPS) as one
+feedback mechanism to do so. This allows us to directly understand
+what our customers are thinking and identify key pain points for
+action. Reflecting the importance of customers to SAP, it is only
+logical that Customer NPS is one of our main KPIs.
+Our policy outlines a group-wide minimum standard for data-
+protection-compliant processing of personal data. It defines
+requirements for business processes that involve personal data and
+assigns clear responsibilities. The principles established by this
+policy take into account the requirements of the EU General Data
+Protection Regulation (GDPR). They apply generally and globally to
+all SAP Group affiliates. Additional data protection and privacy
+requirements, if applicable, are adopted on a local level as
+necessary. We actively monitor changes to applicable laws and
+regulations so that we can update our standards on an ongoing
+basis.
+Our global data protection and privacy policy, mandatory global
+data protection and privacy training for employees, global data
+protection and privacy coordinator network, and the global data
+protection management system (DPMS) are designed to ensure
+that we comply with applicable data protection laws.
+SAP respects and protects the fundamental right to data
+protection and privacy when processing the personal data of
+employees, applicants, customers, suppliers, and partners. SAP
+must comply with relevant laws when processing personal data.
+While implementing appropriate security measures, we develop and
+pursue our data protection and privacy strategy in accordance with
+our business strategy. This strategy consists of four pillars that have
+been implemented to help meet compliance with applicable data
+protection laws.
+To Our
+Stakeholders
+71
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+Security, Data Protection, and Privacy
+Meeting Today's Data Protection
+Challenges
+Every day, organizations around the world trust SAP with their
+data - either on their own premises, in the cloud, or when using
+mobile devices while on the move. Our customers need to know that
+we will keep that data safe, process it in a manner that complies
+with local legislation, and protect it from malicious use.
+For this reason, data protection and IT security are of paramount
+importance to us. We have implemented safeguards to help protect
+the fundamental rights of everyone whose data is processed by
+SAP, whether they are our customers, prospects, employees, or
+partners. In addition, we work towards compliance with all relevant
+legal requirements for data protection. Our chief security officer and
+our data protection officer (DPO) monitor the compliance of all
+activities in these areas. In 2019, the chief security officer and the
+DPO both reported to SAP's chief financial officer (CFO). Starting in
+2020, the chief security officer will report directly to our Co-CEO
+Christian Klein.
+To meet and ensure consistent data protection compliance and
+security, SAP has implemented a formal governance model in both
+areas that assigns clear responsibilities across the SAP Group.
+Relevant security topics are discussed during steering committee
+meetings attended by individual or multiple board members
+numerous times each year. Our chief security officer also reports
+regularly to the Audit Committee of the Supervisory Board of SAP.
+Facing Increasing Risks in IT Security
+Safeguarding data is an increasingly challenging task today.
+Companies are collecting and storing more data than ever before
+from more varied sources. Data now proliferates outside the four
+walls of businesses with multiple exposed endpoints vulnerable to
+attack. Moreover, the sheer number and sophistication of attacks
+facing businesses are at an all-time high and are increasing. We are
+seeing the "commercialization of hacking," while at the same time,
+new advanced persistent threats can bypass many traditional
+security protection techniques.
+Establishing a Comprehensive Security
+Vision
+For SAP and for our customers, security means more than just
+addressing compliance demands. Companies need to be proactive
+when securing business-critical data and core information assets.
+Several of our security measures extend across the entire
+company and thus to all of our products and services. These
+measures include, among other things, the regular training of our
+employees on IT security, data protection, and privacy, including the
+handling of confidential information and ensuring controlled and
+restrictive access to customer information. In addition, we operate
+on a security strategy that is based on three cornerstones
+concentrating on the security of our applications, operations, and
+organization:
+Secure Applications: Championing Application
+Security
+Businesses use SAP applications to process mission-critical
+data, which can be highly attractive to cyberattackers. Our secure
+applications approach focuses on security processes and controls
+intended to ensure the secure design and architecture of our
+applications. These processes are vital to avoid or detect and
+mitigate vulnerabilities at the earliest possible time and minimize
+the risk of a security breach.
+Our secure software development lifecycle is at the heart of this
+strategy. It provides a comprehensive methodological approach for
+incorporating security properties and capabilities into our
+applications, following a risk-based approach. We strive to align our
+secure software development lifecycle to the recommendations of
+the ISO/IEC 27034-1 standard for application security. Furthermore,
+for all solutions included in SAP's innovation cycle, our process
+framework for developing standard software as well as our controls
+for developing secure software are certified to comply with the
+ISO 27001:2013 and ISO 9001 standards.
+Secure Operations Strategy: Running Secure
+Operations
+Our secure operations strategy focuses on the security
+principles of "confidentiality, integrity, and availability" to support
+the overall protection of our business and our customers'
+businesses. To help us achieve our mission to become the
+Experience Company powered by the Intelligent Enterprise, we seek
+to mitigate cybersecurity challenges through a comprehensive IT
+operations security framework. This includes system and data
+access, system security configuration, and security patch
+management, as well as proactive security event management,
+threat hunting, and incident handling.
+Our secure operations strategy involves the implementation of
+key security measures across all layers, including physical access
+and process-integrated controls. Furthermore, our secure
+operations approach concentrates on the early identification of
+deviations from the standards defined in our security framework.
+Deviations are identified through a combination of automated and
+manual reviews that are performed by third parties as well as SAP
+employees.
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Complying with Data Protection and
+Privacy Legislation
+Talent and execution excellence: We build new skill sets and
+awareness among security experts, non-security experts, and
+non-technical professionals.
+Transparent and risk-based approach: We strive to manage and
+communicate SAP's current and future cyberstates based on a
+risk-based approach. This includes the creation of an end-to-end
+supplier security assessment framework mitigating third party
+risks.
+Cloud readiness: We will focus on cloud-centricity, both
+internally and externally, through secure by design agile product
+development across all SAP areas.
+-
+-
+Services driven: We enable security through a simple but
+thorough service catalog based on agile practices and increased
+automation.
+Customer focused: Among other enhancements, we will further
+define and build a standard set of security features across
+products.
+Fundamentals secured: We will enhance incident, crisis, and
+disaster resiliency capabilities.
+-
+-
+Overall responsibility for our HR strategy lies with the Executive
+Board under the leadership of our Chief Human Resources Officer,
+Stefan Ries.
+The progressing transition from on premise to cloud-based
+business transfers additional responsibility to SAP and forms a
+higher sensitivity for security in our customer base, especially in
+light of shifting national and international regulatory requirements.
+As a result, we are evolving our strategy to focus even more on the
+following strategic commitments going forward, and we have begun
+taking steps to implement them. These commitments include (but
+are not limited to):
+Furthermore, our SAP Trust Center site provides transparency
+for our customers about how SAP helps to improve security,
+privacy, and compliance in cloud and on-premise landscapes. The
+site also provides secure feedback mechanisms, for example to
+report a potential security issue and invoke our incident or
+vulnerability management processes.
+Our solution portfolio, also available for customers, includes
+identity and access management tools, a tool for detecting
+potential threats, an ABAP code vulnerability scanner, and solutions
+for governance, risk, and compliance.
+landscape, we offer a portfolio of security products, services, and
+secure support as well as security consulting. These offerings help
+our customers build security, data protection, and privacy
+capabilities into their businesses.
+In addition to these important measures, our security
+mechanisms, such as authentication, authorization, and encryption,
+serve as a first line of defense. To secure the SAP software
+Business continuity: We maintain a corporate continuity
+framework aimed at having robust governance in place at all
+times and we review this framework on an annual basis to adapt
+to new or changed business needs.
+Secure environments: Industry-standard physical security
+measures are in place to ensure the security of our data centers
+and development sites so that we can protect buildings and
+facilities effectively.
+Security culture: Training, assessments, and reporting on these
+efforts foster awareness and compliance with our security policy
+and standards.
+-
+At SAP, we take a holistic approach to the security of our
+company, encompassing processes, technology, and employees. At
+the heart of our secure company strategy are an information
+security management system and a security governance model
+that bring together different aspects of security. These include the
+following three main areas:
+Secure Company: Taking a Holistic Approach to
+the Security of Our Business
+Additional
+Information
+Shifting Customer and Regulatory
+Requirements Demand an Integrated and
+Sophisticated Approach
+-2%
+Improving Our Working Culture Through
+Unfiltered Feedback from Our People
+The survey results remained high in 2019. The Employee
+Engagement Index was at a strong 83%, but slightly below our
+target range. For 2020 throughout to 2023, we aim to lift employee
+engagement and keep it between 84% and 86% as in the years
+before.
+76
+For SAP, gender equality is a core company value and a strategic
+priority. In 2016, SAP was the first IT company to certify with EDGE
+(Economic Dividends for Gender Equality), an independent third-
+party certification analyzes policies, practices, and data that ensure
+a sustainable approach to diversity and inclusion. In 2018, SAP
+recertified with the organization. The results of going through the
+EDGE certification have helped us to identify gaps and set the
+course for where we want to go in the future. As such, following
+recommendations from EDGE, SAP ran an awareness campaign in
+12 countries (representing 80% of our employees worldwide) in
+Increasing Gender Diversity
+An inclusive, bias-free workplace helps us attract, motivate, and
+retain employees and better serve the needs of a diverse workforce.
+It also increases innovation, employee engagement, and group
+performance and helps us think through challenges in new ways. At
+SAP, we are committed to helping employees acknowledge and
+reduce bias to make more objective decisions.
+Fostering a Diverse and Inclusive Culture
+Build bridges,
+not silos
+How We Run
+SAP
+TIT
+Embrace
+differences
+Keep the
+promise
+0000
+Stay curious
+Tell it like it is
+Our "How We Run" Behaviors
+How We Run: Our corporate behaviors continue to be the
+cornerstone of our value-driven culture.
+Hasso Plattner Founders' Award: This prestigious award
+provides the highest internal employee recognition at SAP for
+delivering our vision and strategy. For 2019, the award went to
+Nicolas Neumann in Global Finance & Administration. The
+individual nomination was chosen from 157 nominations and
+with a total of 1,099 employees participating from 34 countries.
+SAP.IO Venture Studio: This initiative identifies high-potential
+entrepreneurial employees at SAP and helps develop them into
+successful leaders, with the objective of building new ventures
+that will have a positive impact on business and society. In 2019,
+SAP.IO Venture Studio engaged more than 7,500 employees and
+was able to jump-start close to 400 venture ideas.
+SAP Alumni Network: This growing network and online
+community provides a platform to reconnect with former
+colleagues and to unleash the power of a trusted network for the
+benefit of SAP and our ecosystem. In 2019, community
+members included 8,091 former and 4,243 current SAP
+employees.
+-
+-
+Own SAP: Our share purchase plan for SAP employees. In 2019,
+70% of our employees participated in Own SAP, purchasing a
+total of 5.24 million shares. For more information, see the Notes
+to the Consolidated Financial Statements, Note (B.3).
+-
+in nurturing an attractive workplace:
+The following selection of benefits and activities are paramount
+Creating a Workplace That Drives
+Innovation, Performance, and
+Engagement
+Employees and Social Investments
+At SAP, learning happens on the job, through interactions with
+colleagues, and through formal learning activities. Self-paced online
+programs, plus technical and soft skills training courses, are open to
+all employees. Our peer-to-peer learning portfolio encompasses
+coaching, mentoring, job shadowing, and facilitation opportunities.
+In 2019, we provided more than 1,199,000 courses (not including
+compliance trainings) to 96% of our employees.
+To Our
+Stakeholders
+Management Report
+SAP is constantly adapting to new market conditions and
+changing customer requirements. As part of this ongoing
+transformation, we launched a company-wide restructuring
+program in 2019. Our aim was to further simplify our structures and
+processes and invest in key strategic growth areas. With that, we
+endeavor to ensure that our organizational setup, skillsets, and
+resource allocation continue to meet customer demand. For more
+information about the numbers of employees who left SAP as part
+of the restructuring program and its financial impact, see the Notes
+to the Consolidated Financial Statements, Note (B.6).
+Headcount and Personnel Expense
+Healthy leadership: Various offerings are available to support
+SAP leaders in fostering a healthy mindset and culture, such as
+healthy leadership training and a personalized executive health
+and well-being program.
+Corporate Oncology Program for Employees: Available in
+Australia, Canada, Germany, United Kingdom, and the United
+States, the program provides SAP employees facing cancer with
+access to an individual molecular genetic tumor analysis and
+interpretation.
+-
+-
+Mindfulness practice: Various offerings support employees in
+bringing more mindfulness into their daily personal and
+professional life to increase well-being, productivity, self-
+management, and leadership skills.
+Our programs include:
+SAP fosters a culture that empowers people to run at their best
+supported by providing innovative health and well-being programs
+and solutions. When people are healthy, respected, and cared for, it
+results in higher productivity, engagement, innovation, and
+customer satisfaction. We measure the progress of these activities
+through the Business Health Culture Index. For more information,
+see Improving Our Working Culture Through Unfiltered Feedback of
+Our People above.
+Caring for the Health and Well-Being of
+Our People
+"Focus on Insight" Diversity and Inclusion: This award-winning
+training program contributes to a shared understanding of the
+importance and benefits of a diverse workplace.
+Autism at Work: In 2019, SAP had 180 employees with autistic
+spectrum in 27 different types of roles, in 14 countries, and 31
+locations.
+Exemplary activities to ensure an inclusive environment are:
+Accessibility: These efforts ensure that the environment at SAP
+and large global events hosted by SAP are accessible for
+differently-abled people. Adding live and closed captioning on
+videos and keynote screens improves the accessibility for people
+who use screen readers.
+-
+SAP supports numerous global employee network groups that
+offer programs to help attract, retain, train, and promote people
+with diverse backgrounds. In 2019, we conducted enablement and
+leadership development programs to increase cultural intelligence
+and awareness. For example, for our efforts in support of the
+lesbian, gay, bisexual, and transgender (LGBT) community, SAP was
+among the first supporters of the United Nations Global LGBTI
+Standards of Conduct for Business and has been recognized by
+organizations including Human Rights Campaign, Stonewall, and
+Workplace Pride.
+Strengthening an Inclusive Environment
+Throughout 2019, we sponsored and hosted events to attract,
+develop, and support women at SAP around the world. Ongoing
+initiatives include the Women's Professional Growth Webinar series,
+our grassroots Business Women's Network (BWN), and our
+Women@SAP online community.
+Our key indicator, the ratio of women in management positions,
+continued its upward trajectory from 25.7% in 2018 to 26.4% as at
+December 31, 2019. This is slightly below our 2019 target of 27%.
+The Executive Board continues its commitment to increase the
+percentage of women in management positions by 1pp each year
+with a target of 30% by year-end 2022.
+Furthermore, SAP continues to create and enhance our flexible
+work options, offer part time opportunities, audit our pay practices
+to ensure we pay equitably, cultivate a culture that is inclusive, and
+provide opportunities for all our employees to excel and develop
+their careers.
+2019 to encourage the uptake of parental leave for men, which has a
+direct correlation with gender equality.
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Combined Group
+Making Life-Long Learning the Key to
+Success
+Building trust in leaders is essential for continuously high
+employee engagement. We offer a career path for experts in parallel
+to our management development track. By the end of 2019, 5,152
+SAP people managers (52%) and 4,407 SAP experts (19%) had
+completed our flagship development program. In 2019, Leadership
+Trust remained at a strong score of 59 (2018: 60). For more
+information about the measurement of the leadership trust, see the
+Performance Management System section.
+Employees need to constantly acquire new skills to meet the
+demands of today's workplace. Our career framework helps
+employees discover who they are, identify the areas where they
+want to grow, and develop an action plan to get there. During 2019,
+we further evolved our performance management approach called
+SAP Talk to a needs-driven and flexible dialogue between
+employees and managers, instead of calendar-driven checkpoints
+once a quarter.
+78
+percent | change since previous year
+Business Health Culture Index
+Our workplace culture supports people's well-being, work-life
+balance, and organizational health, which are shown in the
+increasing Business Health Culture Index (BHCI) score, resulting in
+80% (+2pp compared to 2018) and thus reaching our target range.
+In particular, the topic of work-life balance increased by +5pp YoY.
+The ambitions for the BHCI stays at 78% to 80% from 2020
+through 2023.
+During 2019, we primarily focused on innovation and process
+simplification. Our efforts translated into positive results: the
+innovation score increased by +1pp to 79%, whereas process
+simplification score even increased by +9pp to 64% compared to
+2018. The result shows that we continuously adjust our processes in
+an easy-to-use setup and develop them innovatively and
+sustainably. For 2020, we will primarily focus on three topics:
+innovation; strategy; and becoming simpler and more agile in our
+organization to improve our customer success supported by our
+employees and leaders.
+*The EEI score for 2015 was recalculated from 81% to 82% based on updated questions.
+2016
+2015*
+-1%
+2019
+2018
+2017
+-1%
+0%
+4%
+4%
+83
+84
+85
+82
+82
+85
+percent | change since previous year
+Employee Engagement Index
+75
+79
+78
+80
+Engaging Our People Through Meaningful
+Career Paths and Passionate Leaders
+Also, the average tenure with SAP remains at the same high level
+(7.3 years in 2019 and 7.2 years in 2018). The loyalty of our people is
+an additional indication that SAP is regarded as an employer of
+choice.
+In 2019, more than 1,000 students were enrolled in SAP's
+vocational training program (in Brazil, China, Germany, Hungary,
+India, Ireland, Japan, Singapore, Australia, Switzerland, and the
+United States). Overall, we measured a conversion rate (number of
+students who stayed with SAP after completing their dual studies)
+for vocational training students of 71% in 2019 (2018: 73%).
+We are passionate about developing deep and lasting
+relationships with all our employees. Our overall retention rate in
+2019 was 93.3% compared to 93.9% in 2018. We define retention
+as the ratio of the average number of employees minus the
+employees who voluntarily departed (excluding restructuring-
+related terminations) to the average number of employees (in full-
+time equivalents or FTEs). In 2019, we had 2,859 restructuring-
+related terminations (2.9%) compared to 305 in 2018 (0.3%).
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+75
+Employees and Social Investments
+Our annual engagement survey, under the theme "#unfiltered",
+was the starting point of a new feedback experience with Qualtrics.
+We continue to listen to, understand, and act upon the feedback of
+our employees and make use of the technology available through
+our acquisition.
+To position SAP to future talent, we work closely with over 3,800
+universities on events, executive lectures, office visits, competitions,
+student club sponsorships, and Webinars to recruit top students
+and graduates as well as to integrate the latest SAP technologies
+into the curriculum.
+Hiring and Retaining the Best People
+2019
+2016
+2015
+2018
+2017
+-1%
+1%
+3%
+4%
+4%
+In line with our overall growth plan, we continued to increase our
+workforce in 2019: 12,833 employees were hired externally, thereof
+21.4% were "Early Talents" and 37.5% were women. We also remain
+focused on building a highly inclusive workforce across various
+demographic aspects (generations, gender, and so on). We have
+been very successful again in positioning SAP as a talent magnet,
+despite the restructuring efforts during 2019. SAP has earned over
+200 employer awards. SAP America was on Fortune's 100 Best
+Workplaces for Women, and the Best Places to Work on Glassdoor's
+annual ranking. SAP was also ranked as one of the best brands to
+work for on seven out of nine of the annual Glassdoor Employees'
+Choice Best Places to Work 2020 country lists.
+-3%
+Security, Data Protection, and Privacy
+2016
+2017
+2018
+2019
+80
+88
+Energy and Emissions
+2015
+5,135
+4,877
+5,703
+4,252
+21%
+17%
+-22%
+-5%
+4,473
+€ millions | change since previous
+2015
+2016
+2017
+-2%
+As a result of these effects, our operating profit decreased by
+22% to €4,473 million (2018: €5,703 million) and our operating
+margin decreased by 6.9pp to 16.2% (2018: 23.1%).
+Operating Profit
+138
+249
+243
+2018
+161
+60
+86
+65
+189
+178
+179
+180
+177
+2015
+2016
+We see the increased operating expenses largely as investments
+in the future that will help secure our operating profit in the long
+term.
+2019
+23.1
+Percent change since previous year
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+Financial Performance: Review and Analysis
+88
+We were able to increase our services revenue by 11% year over
+year to €4,541 million in 2019 (2018: €4,086 million). As our service
+Cost of services consists primarily of the cost of consulting,
+premium services and training courses and the cost of bought-in
+consulting and training resources.
+Cost of Services
+A 3% increase in software licenses and software support revenue
+to €16,080 million (2018: €15,628 million) and a corresponding
+increase of 3% in the software licenses and software support costs
+to €2,159 million (2018: €2,092 million) saw our software licenses
+and software support margin remain constant at 86.6% (2018:
+86.6%) The gross margin on cloud and software, defined as cloud
+and software profit as a percentage of cloud and software revenue,
+narrowed by 0.2pp in 2019 to 79.6% (2018: 79.8%). This decline
+was mainly driven by the change in the revenue mix, which now has
+a higher proportion of cloud revenues. Due to infrastructure costs,
+these revenues currently deliver a lower margin simultaneously with
+a declining proportion of higher-margin software and support
+revenues.
+Significant costs arose through the expansion of the cloud
+business in response to strong customer demand, leading to the
+cost of delivering and operating our cloud applications increasing
+by an additional €466 million year over year. These investments
+contributed to revenue growth. Our cloud margin widened by 4.9pp
+from 58.6% in 2018 to 63.5% in 2019. This improvement in margin
+is attributable to strong growth in cloud revenue of 39% to
+€6,933 million (2018: €4,993 million) with a lower increase in cost
+of cloud of 22% to €2,534 million (2018: €2,068 million). Additional
+positive impacts on the cloud margin resulted from our Qualtrics
+acquisition and completion of the SuccessFactors migration to
+SAP S4/HANA.
+In 2019, the cost of cloud and software increased 13% to
+€4,692 million (2018: €4,160 million).
+Cost of cloud and software consists primarily of costs for
+deploying and operating cloud solutions, the cost of developing
+custom solutions that address customers' specific business
+requirements and customer support costs.
+Cost of Cloud and Software
+Changes to the individual elements in our cost of revenue were as
+follows:
+2019
+23.3
+2017
+20.8
+20.5
+2.8pp
+2.3pp
+Operating Margin
+16.2
+-4.2pp
+6.9pp
+2015
+2016
+2017
+2018
+-2.5pp
+2018
+reduce their energy usage and emissions is by managing their SAP
+systems through cloud services provided by our carbon-neutral
+green cloud offerings. In addition, the solutions in our portfolio, such
+as SAP Environment, Health, and Safety Management, enable our
+customers to manage their resources, such as electricity, more
+efficiently.
+Helping Our Customers Run Greener
+Operations
+2,865
+3,124
+3,310
+3,629
+■Cloud
+€ millions
+■Software & Support
+2019
+2018
+2017
+2016
+2015
+8,096
+7,898
+7,730
+7,489
+7,115
+APJ: Cloud and Software Revenue
+8,193
+2,115
+7,622
+507
+1,029
+1,441
+703
+872
+2015
+2017
+2018
+2019
+Cloud revenue in the Americas region rose 34% to
+€3,945 million in 2019 (2018: €2,941 million). Software licenses and
+software support revenue was €5,227 million in 2019 (2018:
+€5,032 million).
+APJ Region
+In 2019, 15% (2018: 16%) of our total revenue was generated in
+the APJ region. Total revenue in the APJ region increased 9% to
+€4,254 million. In Japan, revenue increased 23% to €1,180 million.
+Revenue from Japan was 28% (2018: 25%) of all revenue generated
+in the APJ region. In the remaining countries of the APJ region,
+revenue increased 5%. Revenue in the remaining countries of the
+APJ region was generated primarily in Australia, China, and India.
+Cloud and software revenue in the APJ region totaled €3,629 million
+(2018: €3,310 million). That was 85% of all revenue from the region
+(2018: 85%).
+2016
+2019
+2,663
+200
+419
+The vast majority of our overall carbon emissions result from the
+use of our software. When our customers run SAP software on their
+hardware and on their premises, the resulting carbon emissions are
+about 40 times the size of our own net carbon emissions. To address
+this, we have developed a downstream emissions strategy to help
+our customers, hardware providers, and others run greener
+operations. One of the most important ways we help our customers
+Additional
+Information
+The SAP HANA platform contributes to helping our customers
+cut their energy consumption. By combining the worlds of analytic
+and transactional data into one real-time, in-memory platform, it can
+help to simplify system landscapes, increase their efficiency, and
+create leaner operations.
+With the new SAP Profitability and Performance Management
+application powered by SAP HANA, we have integrated value chain
+sustainability management and carbon footprint management to
+support our customers on their path to increased transparency and
+help them combine non-financial and financial data into their
+reporting and steering. For example, customers can improve their
+real-time energy demand response for power demand management.
+SAP also works with customers to optimize their on-premise
+landscapes so that they consume less energy. We achieve this by
+helping them decommission legacy systems, archive unused data,
+consolidate business applications, and virtualize their system
+landscape.
+On the other hand, our operating expenses increased
+€4,076 million, or 21%, to €23,081 million (2018: €19,005 million).
+The main contributors to that increase were the costs of the SAP
+restructuring program, totaling €1,130 million (2018: €19 million),
+our continued investment in research and development, and our
+revenue-related cloud subscriptions and support activities. We also
+continued our investments in the Services area in line with the
+increased revenue. Acquisition-related charges of € 689 million
+(2018: €577 million) and share-based compensation of
+€1,835 million (2018: €830 million), arising chiefly from the
+acquisition of Qualtrics, also had a negative impact on operating
+profit. Our employee headcount (measured in full-time equivalents,
+or FTEs) grew by 3,832 FTEs year over year to 100,330.
+SAP posted record revenues in 2019, particularly in Cloud and
+Services. Total revenue grew 12% to €27,553 million (2018:
+€24,708 million), representing an increase of €2,845 million.
+Operating Profit and Operating Margin
+revenue increased from €2,699 million in 2018 to €2,757 million in
+2019. This reflects a rise of 2%.
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+87
+Financial Performance: Review and Analysis
+Cloud revenue in the APJ region rose 43% to €872 million in
+2019 (2018: €611 million). Software licenses and software support
+290
+Cloud revenue in the EMEA region rose 47% to €2,115 million in
+2019 (2018: €1,441 million). Software licenses and software support
+revenue rose 3% to €8,096 million in 2019 (2018: €7,898 million).
+Americas Region
+In 2019, 41% of our total revenue was generated in the Americas
+region (2018: 39%). Total revenue in the Americas region increased
+15% to €11,194 million; revenue generated in the United States
+increased 15% to €9,085 million. The United States contributed
+81% (2018: 81%) of all revenue generated in the Americas region. In
+the remaining countries of the Americas region, revenue increased
+2,463
+2,575
+611
+2,705
+2,757
+2015
+2016
+2017
+2018
+2019
+2,699
+business trends away from traditional software licensing and
+consulting revenue toward more subscription revenue from cloud
+solutions, we continue to invest by expanding capacities to meet the
+higher demand. As a result, cost of services rose 11% to
+€3,662 million (2018: €3,302 million). Our gross margin on
+services, defined as services profit as a percentage of services
+revenue, increased slightly to 19.4% (2018: 19.2%).
+Sales and Marketing Expense
+Our research and development (R&D) expense consists
+primarily of the personnel cost of our R&D employees, costs
+incurred for independent contractors we retain to assist in our R&D
+activities, and amortization of the computer hardware and software
+we use for our R&D activities.
+Actual
+Currency
+2,178
+2,585
+2,693
+Cloud revenue - SaaS/PaaS¹)
+Constant
+Currency
+Actual
+Currency
+2018
+2019
+nevertheless increased owing to the growth in revenue. Whereas
+the SaaS/PaaS cloud gross margin within the Applications,
+Technology & Services segment grew 5.7pp (5.8pp at constant
+currencies), our laaS business ended the fiscal year with a cloud
+gross margin growth of 16.9pp (16.4pp at constant currencies).
+(Non-IFRS)
+€ millions, unless otherwise stated
+Intelligent Spend Group Segment
+The segment's cost of revenue during the same period
+increased 7% (5% at constant currencies) to €6,228 million (2018:
+€5,823 million). This increase in expenses was primarily the result
+of greater investment in expanding our cloud infrastructure and in
+providing and operating our cloud applications. This applied to both
+the SaaS/PaaS and the laaS business, whose cloud gross margins
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+0.3pp
+8
+41.9
+41.8
+41.0
+0.9pp
+A in %
+Actual
+Currency
+0.7pp
+currencies) below the prior-year level due to the shift toward cloud
+revenue, we achieved a total software licenses and support revenue
+of €16,054 million in 2019.
+Overall, the revenue share of more predictable revenue streams
+in this segment increased 2.3pp from 63.5% in 2018 to 65.7% in
+2019.
+Financial Performance: Review and Analysis
+89
+To Our
+Stakeholders
+Combined Group
+The Applications, Technology & Services segment recorded a
+strong increase in cloud revenue in 2019. SaaS/PaaS revenue within
+the segment increased 38% (34% at constant currencies),
+primarily as a result of high demand in our Intelligent ERP solutions.
+Our software support revenue improved slightly in 2019. It rose
+5% (3% at constant currencies) to €11,532 million. Including
+software licenses revenue, which remained 3% (5% at constant
+0.3pp
+11
+A in %
+24
+The Intelligent Spend Group segment, which comprises cloud
+solutions from SAP Ariba, SAP Concur, and SAP Fieldglass, was
+able to improve its cloud gross margin by 0.2pp to 78.1%. The
+segment's cost of revenue increased 17% in 2019 (13% at constant
+currencies) to €953 million (2018: €813 million). Segment revenue
+1) Software as a service/platform as a service
+Segment margin (in %)
+Segment profit
+Segment gross margin (in %)
+Segment revenue
+16
+21
+2,629
+3,057
+3,184
+Cloud gross margin (in %)
+0.2pp
+0.2pp
+77.8
+78.0
+78.1
+19
+Cloud gross margin
+SaaS/PaaS) (in %)
+78.1
+78.0
+77.8
+Constant
+Currency
+0.2pp
+2,693
+2,585
+2,178
+24
+19
+Cloud revenue
+0.2pp
+Research and Development
+6
+21,753
+73.2
+8,922
+Actual
+Currency
+Constant
+Currency
+Actual
+Currency
+2018
+2019
+2) Infrastructure as a service
+1) Software as a service/platform as a service
+Segment margin (in %)
+Segment profit
+Segment gross margin (in %)
+Segment revenue
+Cloud gross margin (in %)
+Cloud revenue
+Cloud gross margin - laaS2) (in %)
+Cloud revenue - laas²)
+Cloud gross margin - SaaS/PaaS¹) (in %)
+Cloud revenue - SaaS/PaaS¹)
+Due to growing personnel costs driven by a 4% increase on
+average for the year in our R&D headcount, and due to a higher
+proportion of employees in more cost-intensive countries as a result
+of the acquisition of Qualtrics, our R&D expense rose by 18% to
+€4,292 million in 2019 from €3,624 million in 2018. R&D expense as
+a percentage of total revenue thus increased to 15.6% in 2019
+(2018: 14.7%). For more information, see the Products, Research &
+Development, and Services section.
+8,759
+Sales and marketing expense consists mainly of personnel costs,
+direct sales costs, and the cost of marketing our products and
+services.
+Our sales and marketing expense rose 13% from €6,781 million
+in 2018 to €7,693 million in 2019. This increase is mainly
+attributable to the expansion of the global sales force, partly as a
+Applications, Technology & Services Segment
+€ millions, unless otherwise stated
+(Non-IFRS)
+A in %
+Actual
+Currency
+result of acquiring Qualtrics, and to greater expenditure on bonus
+payments prompted by strong revenue growth.
+General and Administration Expense
+Our general and administration expense consists mainly of
+personnel costs to support our finance and administration
+functions.
+General and administration expense rose 48% from
+€1,098 million in 2018 to €1,629 million in 2019, despite careful cost
+management. This increase is primarily the result of higher
+personnel costs related to job creation in administrative areas,
+based on the increased business volume related to our growth. The
+ratio of general and administration expense to total revenue rose by
+1.5pp year over year to 5.9% (2018: 4.4%).
+Segment Information
+At the end of 2019, SAP had three reportable segments:
+Applications, Technology & Services segment; Intelligent Spend
+Group segment; and Qualtrics segment. Since we acquired
+Qualtrics on January 23, 2019, financial data for the Qualtrics
+segment is only presented from this acquisition date onwards. For
+more information about our segment reporting and the changes in
+the composition of our reportable segments in 2019, see the Notes
+to the Consolidated Financial Statements, Notes (C.1) and (C.2),
+and the Performance Management System section.
+A in %
+Constant
+Currency
+Accordingly, the ratio of sales and marketing expense to total
+revenue, expressed as a percentage, rose to 27.9% in 2019 (2018:
+27.4%), an increase of 0.5pp.
+8
+3,243
+2,347
+9,597
+9,868
+73.5
+73.5
+22,980
+23,544
+7.4pp
+51.4
+58.9
+58.9
+35
+39
+2.835
+3,825
+3,938
+16.4pp
+16.9pp
+38
+34
+65.3
+65.4
+59.6
+5.7pp
+3,152
+695
+488
+43
+5.8pp
+38
+29.1
+28.5
+12.2
+673
+9.339
+€ millions
+■Cloud
+Investment in Carbon Credits
+In 2019, we continued to realize the benefits of our investment in
+the Livelihoods Fund. Several years ago, we made a commitment to
+invest €3 million covering a 20-year participation in a fund that
+supports social causes as well as the sustainability of agricultural
+and rural communities worldwide. The returns from this unique
+investment in the Livelihoods Fund consist of high-quality carbon
+credits. Following the success of this scheme, we now also invest in a
+second Livelihoods Fund, committing another €3 million over the
+next 30 years and thus increasing our commitment to sustainable
+Profitability in our software as a service/platform as a service
+(SaaS/PaaS) cloud offering was 68% at constant currencies (non-
+IFRS) for 2019. Despite ongoing investments in the further
+development and harmonization of our various software as a
+service/platform as a service offerings on a single platform, we were
+able to increase the margin by 8.5pp.
+The cloud gross margin (non-IFRS) on our infrastructure as a
+service (IaaS) cloud offering continued to develop well in 2019. The
+corresponding gross margin improved by 16.4pp on a constant
+currency basis in 2019 to achieve a cloud gross margin (non-IFRS)
+of 29%.
+The cloud gross margin (non-IFRS) on our Intelligent Spend
+Group segment improved slightly by 0.2pp (on a constant currency
+basis), resulting in 78% for 2019.
+All cloud gross margins on our various cloud offerings developed
+positively in 2019:
+Our expense base in 2019 continued to be impacted by our
+transformation to a fast-growing cloud business. In our outlook for
+2019, we continued to expect to see the benefits from efficiency-
+based investments, and thus an increasing cloud gross margin. The
+cloud gross margin for 2019 was 68%, an increase of 5.0pp on a
+constant currency basis year over year. Despite continued
+investment in our business transformation, the margin
+improvement was primarily driven by increasing efficiency of our
+cloud offerings.
+Additional
+Information
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+Financial Performance: Review and Analysis
+We only invest in carbon offset projects with Gold Standard or
+other high-quality standards. In 2019, our offset effort resulted in a
+compensation of 240 kt of emissions.
+==
+Operating expenses (non-IFRS) in 2019 on a constant currency
+basis were €18.95 billion (2018: €17.58 billion), an increase of 8%.
+Our total revenue (non-IFRS) on a constant currency basis rose
+9% in 2019 to €26.91 billion (2018: €24.74 billion). Total revenue
+(non-IFRS) therefore grew at a rate lower than operating profit
+(non-IFRS) as forecasted, which increased 11% at constant
+currencies in 2019.
+Cloud and software revenue (non-IFRS) grew 9% at constant
+currencies to €22.49 billion (2018: €20.66 billion), and thus ended
+within our guidance range for 2019. This increase was mainly driven
+by strong cloud revenue growth as mentioned before. Software
+licenses revenue decreased by 5% at constant currencies.
+existing cloud contracts) reached €12.4 billion (2018: €10.1 billion).
+This is an increase of 23% (20% on a constant currency basis).
+Our new cloud bookings, which are one of our measures for
+cloud-related sales success and for future cloud revenue, increased
+in 2019 to €2.27 billion (2018: €1.81 billion). This is an increase of
+25% (21% on a constant currency basis). In addition to this strong
+growth, our cloud backlog (unbilled future revenue based on
+At constant currencies, non-IFRS cloud revenue grew from
+€5.03 billion in 2018 to €6.77 billion in 2019 and therefore ended in
+our guidance range of €6.70 billion to €7.00 billion. That represents
+an increase of 35% at constant currencies.
+Despite economic and diplomatic tensions, arising particularly
+from the trade conflict between China and the United States, and
+uncertainties regarding the possible outcome and effects of the
+Brexit negotiations, our new and existing customers in 2019
+continued to show a strong willingness to invest in our solutions and
+services.
+26.7%
+26.2%
+€7.95 billion
+€26.91 billion
+strong increase, albeit at lower
+rate than operating profit
+€7.85 billion
+to €8.05 billion
+to €22.70 billion
+€22.49 billion
+€22.40 billion
+84
+In addition to avoiding business flights by investing in virtual
+collaboration and communication technologies, we invest in carbon
+emission offsets for air travel in the majority of countries we travel
+from by charging an internal carbon price.
+Internal Carbon Pricing for Business Flights
+Additional
+Information
+18%
+20,793
+22,062
+23,461
+24,708
+27,553
+€ millions | change since previous
+Total revenue increased from €24,708 million in 2018 to
+€27,553 million in 2019, representing an increase of €2,845 million,
+or 12%.
+Total Revenue
+Revenue
+We break our operations down into three regions: the Europe,
+Middle East, and Africa (EMEA) region, the Americas region, and the
+Asia Pacific Japan (APJ) region. We allocate revenue amounts to
+each region based on where the customer is located. For more
+information about revenue by geographic region, see the Notes to
+the Consolidated Financial Statements, Note (A.1).
+This section on operating results (IFRS) discusses results only in
+terms of IFRS measures, so the IFRS numbers are not expressly
+identified as such.
+Operating Results (IFRS)
+We achieved an effective tax rate (IFRS) of 26.7% and an
+effective tax rate (non-IFRS) of 26.2%, which is at the lower end of
+the range of 26.5% to 27.5% (IFRS) and 26.0% to 27.0% (non-
+IFRS).
+We saw efficiency improvements in both our cloud and
+traditional on-premise business, which drove continued operating
+profit expansion. Non-IFRS operating profit in 2019 was
+€7.95 billion on a constant currency basis (2018: €7.16 billion),
+reflecting an increase of 11%. As a result, we were able to surpass
+our excellent results from 2018, despite our continued investment in
+our business transformation during the reporting year. The positive
+development of our operating profit was largely influenced by
+investment decisions focused on customers and products which,
+among other things, resulted in an increase in our overall headcount
+by 3,832 full-time equivalents (thereof 1,719 organic), primarily in
+research and development, services, cloud, and sales. With these
+additional resources, we continued to make targeted investments in
+our innovation areas and growth markets. Thus, constant currency
+non-IFRS operating profit amounting to €7.95 billion was within our
+outlook range raised in April (€7.85 billion to €8.05 billion).
+Driving Environmental Initiatives
+Throughout SAP
+We continuously pursue strategies to help us achieve our goal of
+reducing emissions at a time of ongoing growth in our business. Key
+initiatives for 2019 included the following:
+Further Information on Economic,
+Environmental, and Social Performance
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+82
+€6.77 billion
+88
+Energy and Emissions
+All electric company cars charged at SAP are powered with 100%
+renewable electricity. In addition, in Germany we provide employees
+with an incentive to switch to electric alternatives by offering a
+battery subsidy that partially offsets the higher costs of an electric
+vehicle. Furthermore, we continously expand and enhance the
+charging infrastructure for our employees (2019: 750 charging
+stations; 2018: 550 charging stations).
+As a result of our business expansion, the number of SAP
+employees eligible for a company car has increased annually. We
+want to ensure that the resulting growth in our car fleet does not
+undo our successes in cutting carbon emissions. To help address
+this, SAP aims to increase the number of electric vehicles (battery
+electric vehicles and plug-in hybrid electric vehicles) in our company
+car fleet from 9.6% at the end of 2019 (2018: 7%) to 20% by the end
+of 2020. Our aim is that by 2025, one-third of all company cars will
+be more eco-friendly vehicles, such as electric or fuel cell cars.
+Electric Vehicles
+Most of our renewable electricity is purchased on the electricity
+market and is not produced by SAP. As recommended by the
+Greenhouse Gas Protocol and CDP, we actively look for the best
+available quality. Therefore, all of our purchased renewable electricity
+is EKOenergy-certified. EKOenergy is a high-quality, internationally
+recognized not-for-profit ecolabel for energy. It certifies electricity
+from renewable energy installations that fulfill additional
+sustainability criteria. Through the purchase of EKOenergy-certified
+electricity, we also contribute to EKOenergy's Climate Fund, which
+finances solar projects tackling energy poverty.
+EKOenergy Certification
+81
+€6.70 billion
+to €7.00 billion
+(Q1 Quarterly Statement)
+Results
+for 2019
+Overall Financial Position
+Despite macroeconomic uncertainties, SAP again demonstrated
+resilience, enjoying sustained growth and continued market
+adoption. Benefitting from the ongoing digital transformation of its
+customers, the rich portfolio of solutions, innovative and advanced
+technologies as well as the freedom of choice for customers to run
+their business in the cloud, on-premise or in a hybrid model,
+resulted in a remarkable full-year performance.
+Impact on SAP
+4) IDC FutureScape: Worldwide Intelligent ERP 2020 Predictions, Doc
+US44646019, October 2019
+3) IDC FutureScape: Worldwide Digital Transformation 2020 Predictions, Doc
+#US45569118, October 2019
+2) IDC FutureScape: Worldwide IT Industry 2020 Predictions, Doc #US45599219,
+October 2019
+(https://www.ecb.europa.eu/pub/pdf/ecbu/eb201908.en.pdf)
+¹) European Central Bank, Economic Bulletin, Issue 8/2019, Publication Date:
+December 27, 2019
+Sources:
+The driving factors of these developments in 2019, according to
+IDC, were data, analytics, and machine learning. They revolutionized
+operations, providing major increases in productivity and efficiency
+and thus value. Real-time data from mobile devices, the Internet of
+Things (IoT), and other devices at the edge, combined with
+historical data, global information, artificial intelligence (AI), and
+machine learning, continually enabled organizations to spread
+intelligence from the core to the edge and maximize their business
+outcomes.³)
+leading organisations shifted to platform thinking in order to evolve
+their business models and manage their technology architecture. At
+the same time, several "megaplatforms" competed to own
+infrastructure and developmental environments for providing
+infrastructure as a service (laaS).4)
+Furthermore, IDC describes a "platform economy" fueled by
+tools, capabilities, and frameworks based upon the power of
+information, cognitive computing, and ubiquitous access. In 2019,
+At the end of 2019, technology required for digital
+transformation was no longer expensive and restricted to those
+businesses that could afford it. Instead, enterprise applications had
+become fundamental, says International Data Corporation (IDC), a
+U.S.-based market research firm, in recent publications.²)
+Enterprises were now required to continuously adapt to or drive
+disruptive changes in their operations, customers, and markets.
+They had to balance digital and physical competencies and master
+them at scale, creating new business models and digitally enabled
+products and services.³)
+The IT Market
+In the Americas region, the ECB saw economic activity expand
+steadily in the United States due to a strong labor market and
+supportive financial conditions. The resumption of trade
+negotiations between the United States and China in the last
+quarter of 2019 brought about a first trade deal and hopes of de-
+escalation, but trade tensions between the United States on the one
+side and the EU and Latin America on the other side remained
+unsolved. In Brazil, despite some improvements in early 2019 and
+against expectations, growth remained fragile throughout the year.
+In the Asia Pacific Japan (APJ) region, the Japanese economy
+expanded on a steady but muted level all year, reports the ECB.
+Solid domestic demand especially ahead of the value-added tax
+increase effective October 1, 2019, posed as the main stabilizer of
+growth. In China, economic activity slowed gradually over the year,
+caused by lower-than-expected investment and the trade conflict
+with the United States.
+For the Europe, Middle East, and Africa (EMEA) region, the ECB
+reports that growth in the euro area remained weak throughout the
+year at 1.2%. Some initial signs of stabilization - in line with
+previous expectations - materialized only toward the end of the
+year. In central and eastern Europe, economic activity continued to
+be supported by solid consumer spending despite tight labor
+markets. The Russian economy performed better than expected in
+the third quarter of 2019.
+According to the European Central Bank (ECB), global economic
+growth decreased during the first half of 2019, marking the weakest
+period since the global financial crisis, but signs of stabilization
+started to emerge towards the end of the year. ¹) In our 2019 half-
+year report, we mentioned that the ECB had expected a longer
+phase until recovery. Escalating trade tensions and Brexit-related
+uncertainties, however, continued to impair economic growth
+during the second half of the year.
+initiatives. In 2019, the carbon credits we received from these funds
+helped us to offset our carbon emissions by 30 kt.
+At the beginning of 2018, SAP pledged to plant five million trees
+by 2025 in collaboration with various non-governmental
+organizations. In 2019, we invested in 500,000 trees as part of our
+carbon offsetting initiatives.
+QAudit Scope
+The content of this section was not subject to the statutory audit of
+our combined group management report. However, our auditor
+KPMG has performed an independent assurance engagement on the
+contents of this section. Under this engagement, the quantitative
+indicators carbon emissions (Scope 1 and 2 as well as selected
+Scope 3 emissions including business flights and employee
+commuting), Renewable Energy, and Total Energy Consumed were
+audited at a reasonable assurance level. For the remaining qualitative
+and quantitative disclosures in this section, KPMG performed a
+limited assurance engagement.
+Energy and Emissions
+To Our
+Stakeholders
+Executive Board's Assessment
+Combined Group
+Consolidated Financial
+Statements IFRS
+Financial Performance:
+Review and Analysis
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+Economy and the Market
+Global Economic Trends
+Management Report
+12%
+In 2019, we met all our revenue and profit targets. Despite the
+expected decrease in software license revenue, total revenue
+increased again in 2019. This increase was mainly driven by double-
+digit growth rates in cloud revenue (39% IFRS and 40% non-IFRS).
+In line with our expectations, IFRS operating profit, operating
+margin and earnings per share were negatively impacted by higher
+acquisition-related charges due to the Qualtrics acquisition and the
+charges from SAP's global restructuring program announced in
+early 2019. In addition, IFRS results were negatively affected by
+higher share-based compensation (due to the Qualtrics acquisition
+and the strong SAP share price increase over the year). Adjusted by
+excluding these effects, there was solid growth in non-IFRS
+operating profit, non-IFRS operating margin, and non-IFRS earnings
+83
+for 2019
+Revised Outlook
+to €8.00 billion
+26.5% to 27.5%
+26.0% to 27.0%
+€7.70 billion
+strong increase, at slightly lower
+rate than operating profit
+€22.40 billion
+to €22.70 billion
+€6.70 billion
+to €7.00 billion
+Outlook for 2019
+(as Reported in
+Integrated Report 2018)
+Effective tax rate (IFRS)
+Effective tax rate (non-IFRS)
+(non-IFRS, at constant currencies)
+Operating profit
+(non-IFRS, at constant currencies)
+Total revenue
+Cloud and software revenue
+(non-IFRS, at constant currencies)
+(non-IFRS, at constant currencies)
+Cloud revenue
+Comparison of Outlook and Results for 2019
+883
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+Financial Performance: Review and Analysis
+per share. Given the continuous increase in cloud revenue and in
+new cloud and software license order entry, we are confident that
+we will deliver on our operational outlook for 2020 and on our 2023
+mid-term ambitions.
+As in previous years, our 2019 operating profit-related goals and
+published outlook were based on our non-IFRS financial measures
+at constant currencies. For this reason, in the following section we
+discuss performance against our outlook only in terms of non-IFRS
+numbers at constant currencies derived from IFRS measures. The
+subsequent section about IFRS operating results discusses
+numbers only in terms of the International Financial Reporting
+Standards (IFRSs), so the numbers in that section are not expressly
+identified as IFRS numbers.
+Outlook for 2019 (Non-IFRS)
+At the beginning of 2019, we projected that our 2019 non-IFRS
+cloud revenue would be between €6.70 billion and €7.00 billion at
+constant currencies (2018: €5.03 billion). This range represents a
+growth rate of 33% to 39% at constant currencies. The Company
+expected full-year 2019 non-IFRS cloud and software revenue to be
+in a range of €22.40 billion to €22.70 billion at constant currencies
+(2018: €20.66 billion). This range represents a growth rate of 8.5%
+to 10% at constant currencies. We also projected our full-year non-
+IFRS operating profit for 2019 would end between €7.70 billion and
+€8.00 billion (2018: €7.16 billion) at constant currencies. This
+range represents a growth rate of 7.5% to 11.5% at constant
+currencies. We expected a full-year 2019 effective tax rate (IFRS) of
+26.5% to 27.5% (2018: 27.0%) and an effective tax rate (non-IFRS)
+of 26.0% to 27.0% (2018: 26.3%).
+In light of our first-quarter 2019 results and SAP's new initiatives
+to accelerate its operational excellence and value creation, we
+adjusted, in April 2019, our outlook for full-year non-IFRS operating
+profit for 2019 upward to range between €7.85 billion and
+€8.05 billion at constant currencies. This range represents a
+growth rate of 9.5% to 12.5% at constant currencies. In addition,
+SAP expected total revenues to increase strongly, albeit at a rate
+lower than operating profit (previously: slightly lower). Our
+projections for cloud revenue (non-IFRS, at constant currencies)
+and for cloud and software revenue (non-IFRS, at constant
+currencies) remained unchanged.
+2019 Actual Revenue and Profit Performance Compared to Outlook (Non-IFRS)
+We hit the raised outlook for revenue and operating profit that we published in April.
+Performance Against Our Outlook for
+2019 (Non-IFRS)
+6%
+6%
+5%
+Revenue by Region
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined Group
+To Our
+Financial Performance: Review and Analysis
+98
+86
+A solid market demand led to a 10% increase of €340 million in
+consulting revenue and premium support revenue from
+€3,356 million in 2018 to €3,696 million in 2019. In 2019, consulting
+and premium support revenue contributed 81% of the total services
+revenue (2018: 82%) and 13% of total revenue (2018: 14%).
+Revenue from other services increased €114 million, or 16%, to
+€845 million in 2019 (2018: €731 million).
+Services revenue increased €455 million, or 11%, from
+€4,086 million in 2018 to €4,541 million in 2019.
+Services revenue combines revenue from consulting services,
+premium support services, and other services such as training
+services and messaging services. Consulting services primarily
+relate to the implementation of our cloud subscriptions and on-
+premise software products. Our premium support offering consists
+of high-end support services tailored to customer requirements.
+Messaging services are primarily the transmission of electronic text
+messages from one mobile phone provider to another.
+Services Revenue
+Our software licenses revenue declined by €114 million from
+€4,647 million in 2018 to €4,533 million in 2019. Our customer base
+continued to expand in 2019. Based on the number of contracts
+concluded, 13% of the orders we received for software licenses in
+2019 were from new customers (2018: 15%). The total value of
+software licenses orders received decreased 5% year over year. The
+total number of contracts signed for new software licenses
+decreased 10% to 52,584 (2018: 58,530), with an average order
+value of €87 thousand in 2019 (2018: €82 thousand). Of all our
+software licenses orders received in 2019, 32% were attributable to
+deals worth more than €5 million (2018: 29%), while 35% were
+attributable to deals worth less than €1 million (2018: 39%).
+Our stable customer base, the continued demand for our
+software throughout 2019 and the previous years, and the
+continued interest in our support offerings resulted in an increase in
+support revenue from €10,981 million in 2018 to €11,547 million in
+2019. The SAP Enterprise Support offering was the largest
+contributor to our software support revenue. The €566 million, or
+5%, growth in software support revenue is primarily attributable to
+our SAP Product Support for Large Enterprises services and our
+SAP Enterprise Support services.
+2019
+2018
+2017
+2016
+2017
+2018
+2019
+4,993
+3,769
+(based on customer location)
+2,993
+39%
+31%
+32%
+26%
+2015
+2016
+2,286
+2015
+€ millions
+15%
+■Software & Support
+increased by 21% (16% at constant currencies) to €3,184 million.
+As a result, the Intelligent Spend Group segment achieved a
+segment gross margin of 70.1% (69.9% at constant currencies) in
+2019, reflecting an increase of 1.0pp (0.9pp at constant currencies).
+EMEA: Cloud and Software Revenue
+In 2019, the EMEA region generated €12,105 million in revenue
+(2018: €11,104 million), which was 44% of total revenue (2018:
+45%). This represents a year-over-year increase of 9%. Revenue in
+Germany increased 8% to €3,948 million (2018: €3,658 million).
+Germany contributed 33% (2018: 33%) of all EMEA region revenue.
+The remaining revenue in the EMEA region was primarily generated
+in the United Kingdom, France, Switzerland, the Netherlands, and
+Italy. Cloud and software revenue generated in the EMEA region
+totaled €10,211 million (2018: €9,339 million). That was 84% of all
+revenue from the region (2018: 84%).
+EMEA Region
+5,227
+5,032
+5,345
+5,366
+5,350
+2,941
+2,321
+2,000
+1,579
+44%
+11.194
+41%
+3,945
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+15% to €2,109 million. Revenue in the remaining countries of the
+Americas region was generated primarily in Canada, Brazil, and
+Mexico. Cloud and software revenue generated in the Americas
+region totaled €9,172 million (2018: €7,973 million). That was 82%
+of all revenue from the region (2018: 82%).
+Americas: Cloud and Software Revenue
+€ millions
+Software & Support
+■Cloud
+APJ
+4,254
+9,172
+7,666
+EMEA
+7,366
+Americas
+6,929
+12,105
+7,973
+10,211
+6,933
+10,981
+23,012
+20%
+17,214
+18,424
+19,549
+€ millions | change since previous
+Cloud and Software
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+To Our
+Stakeholders
+85
+Financial Performance: Review and Analysis
+Cloud and software revenue grew from €20,622 million in 2018
+to €23,012 million in 2019, an increase of 12%.
+Cloud revenue refers to the income earned from contracts that
+permit the customer to access specific software solutions hosted
+by SAP during the term of its contract with SAP. Software licenses
+revenue results from the fees earned from selling or licensing
+software to customers. Support revenue represents fees earned
+from providing customers with technical support services and
+unspecified software upgrades, updates, and enhancements. For
+more information about our revenue types, see the Notes to the
+Consolidated Financial Statements, Note (A.1).
+Cloud and Software Revenue
+For more information about our regional performance, see the
+Revenue by Region section below.
+11,547
+2015
+2016
+2017
+2018
+2019
+The growth in revenue resulted primarily from a €1,939 million
+increase in cloud revenue to €6,933 million. Cloud and software
+revenue represented 84% of total revenue in 2019 (2018: 83%).
+Service revenue increased 11% from €4,086 million in 2018 to
+€4,541 million in 2019, which was 16% of total revenue (2018: 17%).
+Revenue by Revenue Type
+20,622
+€ millions
+Software Licenses
+4,533
+Software Support
+Services
+4,541
+6,933
+Cloud
+11,547
+12%
+6%
+10,908
+10,571
+10,093
+€ millions | change since previous
+110%
+Cloud Revenue
+2,286
+2,993
+Cloud revenue increased from €4,993 million in 2018 to
+€6,933 million in 2019.
+3,769
+4,993
+12,379
+6,933
+13,564
+14,677
+2019
+2018
+5%
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+Software licenses and software support revenue rose
+€452 million, or 3%, from €15,628 million in 2018 to
+€16,080 million in 2019.
+We define more predictable revenue as the sum of our cloud
+revenue and our software support revenue. Compared to the
+previous year, our more predictable revenue increased from
+€15,975 million in 2018 to €18,480 million in 2019. This reflects a
+rise of 16%. More predictable revenue accounted for 67% of our
+total revenue in 2019 (2018: 65%).
+More Predictable Revenue
+7%
+€ millions
+■Cloud
+18,480
+2015
+2016
+2017
+15,975
+■Software Support
+70.1
+7.4pp
+31
+21.9
+21.6
+20.2
+1.7pp
+1.4pp
+Qualtrics Segment
+€ millions, unless otherwise stated
+(Non-IFRS)
+Cloud revenue - SaaS/PaaS¹)
+Cloud gross margin - SaaS/PaaS¹) (in %)
+0.9pp
+25
+Cloud revenue
+Segment revenue
+Segment gross margin (in %)
+Segment profit
+Segment margin (in %)
+2019
+Actual
+Currency
+Constant
+Currency
+2018²)
+Actual
+Currency
+A in %
+Actual
+Currency
+Cloud gross margin (in %)
+A in %
+531
+696
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on Economic,
+Environmental, and Social Performance
+Additional
+Information
+Strengthening Our "Green Cloud"
+At SAP, we have tied our business strategy to our environmental
+strategy by creating a "green cloud" powered by 100% renewable
+electricity. As more business moves to the cloud, data centers are a
+key part of how SAP provides solutions to our customers. By using
+our green cloud services, customers can significantly reduce their
+carbon emissions. Given the increasing data center capacity and an
+increasing energy consumption, our data centers have become a
+primary focus of our carbon reduction efforts. The term data center
+refers to both SAP-owned and external data centers (co-location and
+hypercale data centers).
+We have introduced initiatives to drive efficiency and innovation
+with respect to our buildings, data center operations, and
+infrastructure. This allowed us to maintain an efficient power usage
+effectiveness (PUE) of 1.36 in our data centers in St. Leon-Rot,
+Germany. The PUE is a ratio that describes the efficiency of a data
+center, with 1.0 being the ideal. Furthermore, in 2019, SAP opened its
+new state-of-the-art data center in Walldorf, Germany.
+661
+Committing to 100% Renewable
+Electricity
+Total Data Center Electricity
+GWh
+■Internal External
+338
+318
+265
+69.9
+69.1
+1.Opp
+Our commitment to 100% renewable electricity is crucial to
+making our operations more sustainable. While SAP produces a
+small amount of renewable electricity through solar panels in some
+locations, we rely primarily on the purchase of renewable energy
+certificates (RECs) to achieve our target of 100% renewable
+electricity. We only invest in RECs with very high quality standards,
+which support renewable energy projects that meet robust criteria in
+terms of environmental integrity, stakeholder inclusivity, and
+reporting and verification.
+Constant
+Currency
+1) Software as a service/platform as a service
+353
+78.3
+78.1
+ΝΑ
+ΝΑ
+371
+ΝΑ
+8
+9
+NA
+90
+ΝΑ
+1.6
+2.0
+ΝΑ
+ΝΑ
+NA
+2) There are no prior-period numbers for the Qualtrics segment presented, since we acquired Qualtrics in 2019.
+We acquired Qualtrics on January 23, 2019, as the leading
+provider of Experience Management (XM) solutions. The product
+portfolio comprises the Qualtrics XM Platform, which is designed to
+help organizations measure, prioritize, and optimize the four core
+experiences of business - customer, product, employee, and brand
+- on one platform. The Qualtrics segment, however, does not
+comprise the full impact of the acquisition since some functions of
+Qualtrics have already been integrated into SAP's corporate
+functions.
+In 2019, the Qualtrics segment realized cloud revenue of
+€371 million (€353 million at constant currencies) with a cloud gross
+margin of 91.1% (91.1% at constant currencies). Including the
+services revenue, total segment revenue was €508 million
+(€483 million at constant currencies), whereas the segment's cost
+of revenue was €110 million (€106 million at constant currencies). As
+a result, the Qualtrics segment achieved a segment gross margin of
+78.3% (78.1% at constant currencies) in 2019.
+90
+NA
+NA
+NA
+NA
+NA
+ΝΑ
+NA
+91.1
+91.1
+ΝΑ
+ΝΑ
+NA
+371
+353
+NA
+NA
+91.1
+91.1
+ΝΑ
+ΝΑ
+ΝΑ
+508
+483
+NA
+Financial Performance: Review and Analysis
+Gross margin (in % of total revenue, IFRS)
+Gross margin (in % of total revenue, non-IFRS)
+0
+71.2
+71.5
+-1
+80.6
+73.1
+1
+Applications, Technology & Services Segment gross margin (in % of corresponding revenue)
+79.5
+-1
+81.2
+73.7
+80.5
+Dear Fellow Shareholders,
+-1
+Qualtrics Segment gross margin (in % of corresponding revenue)
+Letter from the CEO
+7
+-4,698
+-4,362
+8
+-7,946
+-7,886
+1
+-7,328
+-7,362
+0
+-5,190
+-4,454
+Cloud and software gross margin (in % of corresponding revenue, non-IFRS)
+17
+66.6
+1
+69.5
+69.7
+0
+86.9
+86.7
+0
+87.6
+87.4
+0
+Cloud and software gross margin (in % of corresponding revenue, IFRS)
+79.1
+79.7
+67.0
+79.6
+Net liquidity (net debt)
+2
+SAP Integrated Report 2021
+€ millions, unless otherwise stated
+-5,030
+Equity ratio (total equity in % of total assets)
+Effective tax rate (IFRS, in %)
+Effective tax rate (non-IFRS, in %)
+Current cloud backlog
+Current cloud backlog
+Key SAP Stock Facts
+Earnings per share, basic (in €)
+Earnings per share, basic (non-IFRS, in €)
+2021
+2020
+A in %
+-1,563
+-6,503
+-76
+58
+51
+14
+21.5
+SAP
+3/338
+-16
+6,000
+Services Segment gross margin (in % of corresponding revenue)
+34.1
+31.5
+8
+Operating profit (IFRS)
+Operating profit (non-IFRS)
+Operating margin (in % of total revenue, IFRS)
+Operating margin (in % of total revenue, non-IFRS)
+Free cash flow
+4,656
+77.6
+6,623
+8,230
+8,287
+-1
+16.7
+24.2
+-31
+29.6
+30.3
+-2
+5,049
+-30
+-5
+36
+-1,822
+Software licenses (IFRS)
+Software licenses (non-IFRS)
+Software support (IFRS)
+Software support (non-IFRS)
+Cloud and software (IFRS)
+Cloud and software (non-IFRS)
+2021
+2020
+A in %
+9,418
+8,080
+17
+9,418
+8,085
+16
+3,248
+3,642
+-11
+3,248
+3,642
+-11
+11,412
+11,506
+-1
+11,412
+Cloud (non-IFRS)
+Cloud (IFRS)
+Revenues
+€ millions, unless otherwise stated
+SAP Integrated Report
+2021
+SAP
+2/338
+SAP
+SAP Integrated Report 2021
+About This Report
+Content
+The SAP Integrated Report 2021 presents our full-year financial, social, and environmental
+performance in one integrated report ("SAP Integrated Report") available at
+www.sapintegratedreport.com.
+The SAP Integrated Report also serves as our United Nations (UN) Global Compact progress report.
+We also report on our contribution to the UN Sustainable Development Goals (SDGs) and embedded
+the recommended disclosures of the Task Force on Climate-Related Financial Disclosures (TCFD), of
+the SASB standards, and of the World Economic Forum (WEF) stakeholder capitalism metrics.
+Basis of Presentation
+11,506
+Our combined management report is prepared in accordance with the German Commercial Code
+and the relevant German Accounting Standards. The combined management report is also a
+management commentary complying with the International Financial Reporting Standards (IFRS)
+Practice Statement Management Commentary.
+The social and environmental data and information included in the SAP Integrated Report is prepared
+in accordance with the GRI Standards: Core option. This GRI option indicates that a report contains
+the minimum information needed to understand the nature of the organization, its material topics and
+related impacts, and how these are managed. We apply the GRI principles (sustainability context,
+stakeholder inclusiveness, materiality, and completeness) for defining report content. We also report
+on SDGs identified as material to our strategy.
+Greenhouse gas data is prepared based on the Greenhouse Gas Protocol.
+Data
+All financial and non-financial data and information for the reporting period is reported utilizing SAP
+software solutions and sourced from the responsible business units.
+The reporting period is fiscal year 2021. The report encompasses SAP SE and all subsidiaries of the
+SAP Group. To make this report as current as possible, we have included relevant information
+available up to the auditor's opinion dated February 23, 2022. The report is available in English and
+German.
+Independent Audit and Assurance
+KPMG AG Wirtschaftsprüfungsgesellschaft has audited our consolidated financial statements and our
+combined management report. Information relating to the non-financial statement included in SAP's
+management report has been audited with limited assurance by KPMG. Additionally, KPMG has
+provided assurance on selected sustainability information in accordance with the International
+Standard on Assurance Engagements (ISAE) 3000, a pertinent standard for the assurance of
+sustainability reporting. The Independent Auditor's Report and the Assurance Reports of KPMG for the
+non-financial statement and selected sustainability information are available in the Independent
+Auditor's Report section, the Limited Assurance Report of the Independent Auditor regarding the
+Combined Non-Financial Statement section and the Assurance Report of the Independent Auditor
+regarding Sustainability Information section.
+Concept and Realization
+This report was designed by SAP and created with SAP S/4HANA software and the SAP Disclosure
+Management application.
+SAP
+SAP Integrated Report 2021
+Key Facts
+Our consolidated financial statements are prepared in accordance with IFRS. Our executive
+management has confirmed the effectiveness of our internal controls over financial reporting.
+-1
+24,078
+23,228
+72
+4
+Operating Expenses
+Cost of cloud (IFRS)
+Cost of cloud (non-IFRS)
+Cost of software licenses and support (IFRS)
+Cost of software licenses and support (non-IFRS)
+Cost of cloud and software (IFRS)
+Cost of cloud and software (non-IFRS)
+Total cost of revenue (IFRS)
+Total cost of revenue (non-IFRS)
+Research and development (IFRS)
+75
+Profits and Margins
+Cloud gross margin (in % of corresponding revenue, non-IFRS)
+Software and support gross margin (IFRS, in %)
+Software and support gross margin (non-IFRS, in %)
+-3,105
+-2,699
+15
+-2,876
+-2,451
+17
+-1,925
+-2,008
+-4
+Cloud gross margin (in % of corresponding revenue, IFRS)
+-1,911
+Share of more predictable revenue (non-IFRS, in %)
+72
+4
+24,078
+23,233
+4
+Total revenue (IFRS)
+27,842
+27,338
+2
+Total revenue (non-IFRS)
+27,842
+27,343
+2
+4
+Applications, Technology & Support Segment revenue
+22,965
+2
+Qualtrics Segment revenue
+929
+681
+26.8
+Services Segment revenue
+3,234
+3,379
+-4
+Share of more predictable revenue (IFRS, in %)
+75
+23,502
+-20
+-4,707
+26.5
+337
+335
+334
+330
+329
+Publication Details
+SAP
+Financial and Sustainability Publications.......
+Five-Year Summary.
+Additional Information
+328
+Task Force on Climate-Related Financial Disclosure (TCFD)....
+327
+SASB Index..
+Financial Calendar and Addresses.
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+2
+Additional
+Information
+Independent Auditor's Report
+Responsibility Statement
+Report by the Supervisory Board
+Investor Relations
+SAP Executive Board
+Letter from the CEO
+To Our Stakeholders
+About This Report
+To Our Stakeholders
+Further Information on
+Sustainability
+Stakeholders
+To Our
+SAP Integrated Report 2021
+325
+7
+Stakeholder Capitalism Metrics..
+GRI Content Index and UN Global Compact Communication on Progress.......
+Materiality.
+.278
+Connectivity of Financial and Non-Financial Indicators
+277
+About This Further Information on Economic, Environmental, and Social Performance
+276
+282
+and Social Performance
+.275
+Management's Annual Report on Internal Control over Financial Reporting in the
+Consolidated Financial Statements..
+252
+Section GOther Disclosures.......
+234
+Section F - Management of Financial Risk Factors
+Further Information about Economic, Environmental,
+Stakeholder Engagement.
+286
+Sustainability Management...
+304
+Non-Financial Notes: Environmental Performance.
+302
+Non-Financial Notes: Social Performance.
+.300
+Memberships, Partnerships, and Commitments.
+.299
+Public Policy
+.296
+Waste and Water
+293
+Sustainable Procurement
+289
+Our Contribution to the UN Sustainable Development Goals.
+288
+313
+SAP Integrated Report 2021
+11
+18
+Our non-financial performance also remained strong. Our constant focus on customers led to a six-
+point increase in the Customer Net Promoter Score to a score of 10, the second subsequent year of
+significant improvement. The Employee Engagement Index remained exceptionally strong at 83%, one
+percentage point below our ambitious target range. We decreased our net greenhouse gas emissions
+by 25 kt to 110 kt. And just in January this year, we announced that we will accelerate our goal to
+achieve net-zero emissions across our value chain by 2030, rather than 2050 - achieving our net-zero
+target 20 years earlier than we originally planned.
+We take our social and environmental responsibilities and the opportunity we have to make a
+difference seriously.
+―
+We significantly contributed to the fight against COVID-19 by helping 17 of the 20 largest vaccine
+producers ensure production and logistics for the vaccine supply at an unprecedented speed.
+The Corona-Warn-App for contact tracing has been downloaded 42 million times and is key to
+breaking infection chains.
+Fostering diversity is key: The share of women in management increased to 28.3%, and we want to
+reach 30% by the end of 2022. We remain committed to advancing the share of underrepresented
+minorities at SAP. And last year, we celebrated 20 years of Pride@SAP, our global employee
+network for LGBTQ+ colleagues and allies.
+Our share price gained over the course of 2021, growing 16.5%, ahead of the DAX which grew 15.8%.
+With a market capitalization of €153.4 billion, SAP ended the year as the second most valuable
+company in the DAX40. We want our shareholders to participate in our success. Therefore, we have
+proposed an annual dividend of €2.45 per share,³ an increase of approximately 32%. This includes a
+special dividend of €0.50 per share to celebrate our 50th anniversary.
+We have joined Generation Unlimited as a founding member to provide over 500 million young
+people with access to opportunities and training for employment, entrepreneurship, and social
+impact by 2025.
+First, we enable every enterprise to become an intelligent, sustainable enterprise. The RISE
+with SAP offering is designed to support our customers as they transform their businesses while at
+the same time moving to the cloud. We help them benchmark their processes against best
+practices we gathered from working with hundreds of thousands of customers across 25 industries,
+move to a modular, agile ERP, and connect them to latest innovations such as our industry cloud,
+SAP Business Network, and SAP Cloud for Sustainable Enterprises solutions.
+-
+Second, we bring enterprises together in a global business network. With our SAP Business
+Network – the largest B2B network in the cloud - we are truly scaling the power of our companies,
+connecting intelligent enterprises across supply chains so everyone can respond to any disruptions
+in real-time.
+1 At constant currencies
+2 Non-IFRS
+3 Pending approval of Annual General Meeting of Shareholders
+For 50 years, SAP has revolutionized the way business is done. Building on this heritage, we will now
+take our purpose to help the world run better and improve people's lives to the next level. Based on
+the biggest issues our customers face worldwide, our vision has three goals:
+- Operating cash flow of €6.22 billion, while free cash flow was €5.05 billion.
+Operating profit increased by 1%,1,2
+Total revenue grew 3%.¹
+2021 was another extraordinary year. For all of us, it was a time of challenges, but also of hope. In the
+face of the ongoing pandemic, disrupted global supply chains, and extreme weather events, we also
+witnessed the best of humanity. We have seen solidarity in times of crisis, with individuals,
+organizations, and nations coming together and stepping up to provide social, financial, and material
+support when it has mattered most.
+SAP is no exception. We have supported companies and organizations around the globe that are at
+the forefront of the fight against the pandemic. We have helped businesses not only keep running but
+also truly transform, enabling them to become intelligent, networked, and sustainable enterprises. We
+have moved the world closer to zero emissions, zero waste, and zero inequality. These are just a few
+examples. There are many more.
+2021 also marked the first anniversary of our revised strategy, and we can confidently say that the
+bold strategic moves we have taken are paying off. Despite the ongoing headwinds of the pandemic
+and economic uncertainties, our customers recognize the way SAP can help them drive their business
+transformation. We delivered an exceptional year, with record cloud growth, exceeding our outlook for
+cloud and software revenue and operating profit.
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+Our exceptional 2021 results at a glance:
+―
+Cloud revenue continued to be our main growth driver, increasing 19%.1
+Current cloud backlog increased by 26%.1
+9/338
+13
+10/338
+SAP Integrated Report 2021
+To Our
+SAP Integrated Report 2021
+SAP
+8/338
+7/338
+Sustainability Information
+Stakeholders
+Assurance Report of the Independent Auditor regarding
+the combined non-financial statement
+Limited Assurance Report of the Independent Auditor regarding
+446
+46
+2003 3
+33
+43
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+To Our
+Stakeholders
+Combined Group
+20.0
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+Third, we create a sustainable world together. Our customers trust us with their most mission-
+critical and energy-intense processes. We have the end-to-end transparency and solution portfolio
+to turn our customers into sustainable enterprises. SAP Cloud for Sustainable Enterprises allows
+companies to integrate sustainability metrics seamlessly into how they manage their business.
+Net-net: At SAP, we help our customers manage their green line together with their top and bottom
+lines. We are helping them to become intelligent, networked, and sustainable enterprises, and we
+accompany them along this journey, based on a half-century of experience, innovation, and trusted
+collaboration to create a sustainable world together.
+2022 is a particularly special year for us at SAP. First, we celebrate our 50th anniversary – a milestone
+in the history of German technology development. Second, 2022 will be crucial in our own
+transformation as we intensify our focus on our cloud goals across the company. The strong
+performance that has followed since we announced our revised strategy to accelerate our growth in
+the cloud shows that we are right on track. For us, it is now all about continuing to execute on our
+strategy and keeping our promise of delivering innovation to our customers that allows them to tackle
+any challenge today and in the future.
+We've had a record year at SAP, and this is just the beginning. We are strongly positioned to deliver on
+our targets, and our strategy will continue to create opportunities for unceasing and accelerated
+growth both for our customers and SAP.
+Thank you for your ongoing trust in SAP. You have my word that we will continue to deliver
+outstanding customer and shareholder value. At the end of the day, it's the more than 100,000 people
+behind the name SAP who drive us forward and are key to our success. It is a privilege to head this
+company, and I can't wait for the amazing things we will achieve in 2022 and beyond.
+Sincerely,
+Christian Klein
+CEO, SAP SE
+Additional
+Information
+Further Information on
+Sustainability
+SAP
+SAP
+Management Report
+5/338
+Customer
+Employee retention (in %)
+Leadership Trust Index (LTI, as NPS)
+-3
+95.3
+92.8
+Customer Net Promoter Score
+8
+67
+1
+80
+81
+Business Health Culture Index (in %)
+-3
+62
+Environment
+Net carbon emissions (in kilotons)
+Total energy consumption 5 (in GWh)
+429
+7
+879
+941
+-19
+135
+110
+>100
+4
+10
+4 In CO2 equivalents.
+3 Full-time equivalents.
+2 Numbers are based on the proposed dividend and on level of treasury stock at year-end.
+1 Numbers based on year end.
+Total data center electricity consumption (in GWh)
+86
+83
+Employee Engagement Index (in %)
+3
+1.85
+2.45
+24
+5.41
+6.73
+2
+4.35
+4.46
+Market capitalization¹ (in € billions)
+Dividend per share² (in €)
+32
+7,155
+9,447
+6/338
+-24
+32
+361
+153.4
+16
+27.5
+28.3
+Women in management¹ (total, in % of total number of employees)
+0
+33.6
+34.3
+Women working at SAP (in %)
+1
+122
+122
+Personnel expenses per employee - excluding share-based payments (in € thousands)
+5
+102,430
+Number of employees 1, 3
+Employees and Personnel Expenses
+131.7
+19
+107,415
+4/338
+Risk Management and Risks
+Human Rights and Labor Standards.
+Business Conduct
+123
+116
+108
+Expected Developments and Opportunities.
+.107
+Corporate Governance Fundamentals.
+Energy and Emissions
+Employees and Social Investments..
+Customers.
+Security, Data Protection, and Privacy
+99
+103
+Consolidated Financial Statements IFRS
+Notes
+Section A Customers....
+Section E Capital Structure, Financing, and Liquidity
+226
+5 Before 2021, our total energy consumption covered direct energy consumption (Scope 1) and selected indirect energy consumption (Scope 2). In 2021, we added indirect
+energy consumption of our value chain (Scope 3) to all years shown.
+209
+Section D Invested Capital.
+198
+Section C - Financial Results..
+184
+Section B Employees.
+175
+170
+163
+131
+129
+126
+74
+Non-Financial Statement Including Information on Sustainable Activities
+155
+68
+8
+2
+combined non-financial statement
+Limited Assurance Report of the Independent Auditor regarding the
+Independent Auditor's Report.
+Responsibility Statement...
+Report by the Supervisory Board
+SAP Executive Board
+Letter from the CEO.
+To Our Stakeholders
+About This Report.
+Financial Performance: Review and Analysis
+SAP
+SAP Integrated Report 2021
+Contents
+00
+11
+Investor Relations...
+Strategy
+59
+Products, Research & Development, and Services..
+Performance Management System.
+49
+General Information About This Management Report
+52
+46
+Combined Group Management Report
+.43
+50
+33
+32
+18
+Assurance Report of the Independent Auditor regarding Sustainability Information...
+13
+5,248
+6,635
+Prepaid expenses and deferred charges
+36,050
+1,487
+Deferred taxes
+512
+514
+979
+Short-term assets
+Accounts receivable and other assets
+1,391
+Marketable securities and liquid assets
+4,544
+5,244
+1
+1
+37,672
+39,192
+Surplus arising from offsetting
+34,857
+1,417
+703
+1
+29,372
+Total assets
+Liabilities increased €1,632 million to €29,372 million (2020: €27,740 million). This increase mainly
+resulted from a €1,787 million increase in liabilities to affiliated companies, primarily due to higher
+cash contributions by subsidiaries through SAP SE's centralized management of finance and liquidity.
+Provisions increased €187 million to €2,233 million (2020: €2,046 million). Other provisions increased
+€235 million to €1,529 million (2020: €1,294 million), primarily as a result of an increase in other
+obligations toward employees. In contrast, provisions for tax decreased €50 million to €689 million
+(2020: €739 million).
+1,350
+Marketable securities and liquid assets increased €687 million to €1,391 million (2020: €703 million).
+SAP SE shareholders' equity increased 4% to €15,693 million (2020: €15,122 million). Against outflows
+of €2,182 million associated with the payment of the dividend, there was a €2,692 million increase
+due to net income for 2021. The equity ratio (that is, the ratio of shareholders' equity to total assets) is
+33% (2020: 34%).
+The increase of €700 million in accounts receivable and other assets was primarily the result of a
+€479 million increase in receivables from affiliated companies and a €198 million increase in
+tax assets.
+Financial assets increased €1,193 million year over year to €36,050 million (2020: €34,857 million),
+mainly due to capital contributions to subsidiaries and the acquisition of AppGyver Inc.
+Intangible assets increased €395 million year over year to €1,792 million (2020: €1,398 million). This
+increase was mainly caused by the addition of €632 million in goodwill and additions of €71 million in
+intellectual property and other similar rights in connection with the Signavio merger.
+44,922
+47,320
+13
+22
+1
+27,740
+2,233
+15,122
+15,693
+Total shareholders' equity and liabilities
+Deferred income
+Liabilities
+Provisions
+Shareholders' equity
+Equity and liabilities
+44,922
+47,320
+2,046
+1,398
+-12
+2020
+2,485
+2,692
+-15
+2,500
+2,703
+-625
+-583
+3,125
+3,286
+1,724
+2,530
+1,401
+756
+-2,573
+-2,298
+-606
+-719
+-2,362
+-2,765
+-9,112
+-9,859
+1,385
+97/338
+The total revenue of SAP SE in 2021 was €15,370 million (2020: €14,669 million), an increase of 5%.
+Product revenue increased 2% to €12,211 million (2020: €11,943 million). As in previous years,
+product revenue was primarily generated from license fees paid by subsidiaries of SAP SE.
+Service revenue increased 86% to €845 million in 2021 (2020: €453 million), other revenue increased
+2% to €2,314 million (2020: €2,273 million).
+SAP SE operating profit decreased 46% to €756 million (2020: €1,401 million). Other operating
+income decreased €358 million to €1,026 million (2020: €1,385 million). The year-over-year decrease
+is primarily due to a €494 million decrease in gains from currency effects, partly offset by the disposal
+gain relating to the transfer of the business to SAP Fioneer of €117 million.
+SAP SE cost of services and materials increased 8% to €9,859 million (2020: €9,112 million). Services
+received increased €724 million to €7,715 million (2020: €6,991 million), mainly due to increased
+services received in the context of intra-Group cost allocations. The costs for licenses and
+commissions increased €17 million to €2,111 million (2020: €2,094 million).
+2021
+German Commercial Code (Short Version)
+-
+Inventories
+Fixed assets
+Financial assets
+Property, plant, and equipment
+Intangible assets
+Assets
+€ millions
+SAP SE Balance Sheet as at December 31
+1,792
+Additional
+Information
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+In 2021, SAP SE total assets closed at €47,320 million (2020: €44,922 million).
+SAP SE income before taxes increased €161 million to €3,286 million (2020: €3,125 million). Income
+taxes decreased €43 million to €583 million (2020: €626 million). After deducting taxes, the resulting
+net income was €2,692 million (2020: €2,485 million), an increase of €207 million year over year.
+Assets and Financial Position
+Finance income was €2,530 million (2020: €1,724 million), representing a year-over-year increase of
+€806 million. This increase is primarily due to a €120 million increase in income from investments, a
+€770 million increase in results from profit and loss transfer agreements, and an offsetting effect of
+€78 million increase in write-downs on financial assets.
+Other operating expenses decreased €275 million to €2,298 million (2020: €2,573 million). This
+decrease is mainly attributable to a €495 million decrease in currency exchange losses and a
+€47 million decrease in impairment of receivables. The decrease in other operating expenses was
+partly offset by a €122 million increase in services purchased and a €63 million increase in other
+services expense.
+SAP SE personnel expenses, mainly the labor cost of software developers, service and support
+employees, and administration staff employed by SAP SE, increased by 17% to €2,765 million
+(2020: €2,362 million), primarily due to an increase in shared-based compensation expenses and
+headcount increase over the year.
+Further Information on
+Sustainability
+98/338
+Security, Data Protection, and Privacy:
+Vision and Strategy; Due Diligence for
+Security Topics; Due Diligence for
+Data Protection Topics
+SAP Integrated Report 2021
+Notes to the Consolidated Financial
+Statements, Section A - Customers
+Security, Data Protection, and Privacy:
+How We Measure and Manage Our
+Performance
+Expected Developments and Opportunities
+Financial Performance: Review and Analysis
+Strategy: Measuring Our Success
+How We Measure and Manage Our
+Performance
+Customers:
+Main KPI: Customer Net Promoter Score,
+Revenues
+Vision and Strategy; Due Diligence
+Customers:
+Notes to the Consolidated Financial
+Statements, Note (G.3)
+Notes to the Consolidated Financial
+Statements, Section B - Employees
+References to Financial Statements and
+Notes
+How We Measure and Manage Our
+Performance
+Business Conduct:
+Expected Developments and Opportunities
+Strategy: Measuring Our Success
+How We Measure and Manage Our
+Performance
+Energy and Emissions:
+Main KPI: Net carbon emissions
+Expected Developments and Opportunities
+Strategy: Measuring Our Success
+Main KPI: Employee Engagement Index
+Employees and Social Investments:
+How We Measure and Manage Our
+Performance
+Consolidated Income Statements - Total
+Revenue
+Sustainable Finance: EU Taxonomy Disclosures
+€ millions, unless otherwise stated
+2021
+1,026
+In 2021, we identified the activity “8.1 Data processing, hosting, and related activities" as our only
+relevant Taxonomy-eligible economic activity contributing to climate change mitigation. SAP has
+Eligibility Assessment
+Accounting Policy and Contextual Information
+15%
+14%
+33%
+Proportion of eligible activities (in %)
+-1,733
+-6,400
+27,842
+Measures and Results, Including Main
+KPIs
+Total
+-5,502
+18,625
+Non-eligible activities
+-261
+-898
+9,217
+(contributing to climate change
+mitigation)
+8.1 Data Processing and Hosting
+Capital Expenditures
+Operational
+Expenditures
+Revenue
+-1,472
+SAP
+Vision and Strategy; Due Diligence
+Vision and Strategy; Due Diligence
+Additionally, following Article 8 of Regulation 2020/852 of the European Parliament and of the Council
+of the European Union (EU Taxonomy), we have included information on how and to what extent
+SAP's activities are associated with economic activities that qualify as environmentally sustainable
+under this regulation.
+With this section and the information referenced to in this section, SAP SE fulfills its duty to produce a
+non-financial statement (NFS) for the holding company, pursuant to section 289b–e of the German
+Commercial Code (HGB), and a non-financial group statement, pursuant to section 315b-c in
+conjunction with section 289c-e of the German Commercial Code (HGB), in the form of a combined
+non-financial statement. The relevant non-financial matters are referenced in the table below and can
+be found in the relevant sections of our combined management report.
+Non-Financial Statement
+Including Information on
+Sustainable Activities
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined Group
+To Our
+SAP Integrated Report 2021
+SAP
+Opportunities section.
+SAP SE is subject to essentially the same opportunities and risks as the SAP Group. For more
+information, see the Risk Management and Risks section and the Expected Developments and
+Opportunities and Risks
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined Group
+To Our
+For more information, see the Sustainable Finance: EU Taxonomy Disclosures subsection.
+Reporting Framework
+The social and environmental data and information included in the SAP Integrated Report has been
+prepared in accordance with the Global Reporting Initiative (GRI) Standards: Core Option.
+Business Model
+Energy and Emissions:
+Opportunities from Our Employees
+Expected Developments and
+Opportunities:
+Employees and Social Investments:
+Vision and Strategy; Due Diligence
+Due Diligence; Policies and
+Guidelines (Concepts)
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+Stakeholders
+Business Conduct:
+To Our
+SAP
+100/338
+Security, Data
+Protection, and
+Privacy
+Customer Matters
+Anti-Corruption and
+Bribery Matters
+Environmental
+Employee Matters
+99/338
+SAP determines which non-financial information has to be disclosed based on a materiality analysis
+we perform using internal and external input. The individual non-financial aspects to be covered by
+the non-financial statement are addressed in the following sections of our combined management
+report if material. The aspects human rights and social matters have not been identified as material
+topics according to section 289c (3) HGB. Nevertheless, these topics are important for SAP and
+discussed in the Human Rights and Labor Standards and Social Investments sections in our
+combined management report. No material risks according to section 289c (3) sentence nos. 3
+and 4 HGB have been identified.
+Non-Financial Disclosures in SAP's Combined Management Report
+SAP's business model is described in the Strategy section of the combined management report. Good
+governance is a prerequisite for continued success and is described throughout the combined
+management report. Therefore, we do not explicitly list this material topic in our non-financial
+statement.
+SAP Integrated Report 2021
+14,669
+Matters
+2020
+PY: -8,286
+Operating
+Cash
+Flow
++7,194
+Capital
+Expen-
+diture
+Lease
+Payments
+-816
+-378
+Business
+Combi-
+nations
+-664
+Net
+Debt
+12/31/2020
+Dividends
+Other
+Net
+Debt
+12/31/2021
+-1,864
++95
+-1,784
+-6,503
+92/338
+Proceeds from
+IPO
+Analysis of Consolidated Statements of Cash Flow
+-1,563
++2,828
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Development of Net Debt
+-6,503
++6,223
+Combined Group
+Management Report
++390
+Consolidated Financial
+Statements IFRS
+Additional
+Information
+€ millions
+-800
+-374
+-1,145
+-2,182
+Free Cash Flow +5,049
+Further Information on
+Sustainability
+SAP
+€ millions
+2020
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+Assets (IFRS)
+SAP Integrated Report 2021
+Analysis of Consolidated Statements of Financial Position
+2021
+2020
+Assets
+Percent
+■Non-current
+Current
+72
+74
+Total assets increased 22% year over year to €71,169 million.
+2021
+SAP
+Net cash outflows from financing activities were €56 million in 2021, compared to €3,997 million in
+2020. In 2021. we received €2.8 billion in proceeds from the public offerings of Qualtrics shares and
+repaid €1.25 billion of the acquisition term loan for Qualtrics, prior to its final maturity date in 2022.
+Further, we repaid €0.5 billion in Eurobonds, and €0.15 billion of a commercial paper program
+(Commercial Paper). In 2021, we drew two short-term loans of €0.95 billion and €0.5 billion
+respectively, as well as €0.15 billion in Commercial Paper. The cash outflows in 2020 resulted from the
+buyback of treasury shares with a volume of €1.5 billion, repayments of €1.15 billion in Eurobonds
+when they matured, the repayment of €0.75 billion in the acquisition term loan for Qualtrics, the
+repayment of US$0.29 billion in U.S. private placements when they matured, and the repayment of
+€0.17 billion in Commercial Paper.
+A in %
+Net cash flows from operating activities
+6,223
+7,194
+-13
+Net cash flows from investing activities
+Net cash flows from financing activities
+The dividend payment of €2,182 million made in 2021 exceeded the amount paid the preceding year
+(€1,864 million), while the dividend paid per share increased from €1.58 to €1.85.
+-3,063
+3
+-56
+-3,997
+-99
+In 2021, cash inflows from operating activities decreased €971 million to €6,223 million
+(2020: €7,194 million). This is particularly due to higher income tax payments (€2.1 billion in 2021
+compared to €1.2 billion in 2020) and lower payments related to restructuring (€0.0 billion in 2021
+compared to €0.2 billion in 2020). Cash collected from customer contracts was at a similar level as in
+2020.
+Cash outflows from investing activities were €3,063 million in 2021 (2020: €2,986 million). We paid, net
+of cash received, a total of €1.1 billion mainly for the Signavio and Clarabridge acquisitions in 2021,
+compared to €0.6 billion mainly for the Emarsys acquisition in 2020. Capital expenditure on intangible
+assets and property, plant, and equipment remained at a comparable level. For more information
+about current and planned capital expenditures, see the Assets section and the Investment Goals
+section.
+In 2021, free cash flow decreased to €5,049 million (2020: €6,000 million). The free cash flow
+conversion rate, defined as free cash flow as a percentage of profit after tax, decreased to 94%
+compared to 114% in 2020.
+-2,986
+28
+91/338
+Net debt is group liquidity less financial debt. For more information about our liquidity, see the Notes
+to the Consolidated Financial Statements, Note (E.3).
+7.2
+Around 6.0
+6.2
+-0.8
+Modest increase
+-0.8
+6.0
+2021 Results
+Above 4.5
+-1.2
+Higher
+-2.1
+1 The 2021 outlook was communicated in January 2021 and was updated in April 2021. The 2021 outlook numbers above reflect the
+updated outlook from April 2021.
+Group Liquidity and Net Debt
+€ millions
+2021
+5.0
+2020
+2021 Outlook¹
+Income taxes payouts
+15,370
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+2020 Results
+Further Information on
+Sustainability
+Cash Flows and Liquidity
+2021 Actual Cash Flow and Liquidity Performance Compared to Outlook
+We met or exceeded the outlook for 2021.
+€ billions
+Operating cash flows
+Capital expenditure
+Free cash flow
+Additional
+Information
+For information about the impact of cash, cash equivalents, current investments, and our financial
+liabilities on our income statements, see the analysis of our financial income, net, in the Operating
+Results (IFRS) section.
+Δ
+8,898
+-13,094
+-13,283
+189
+-1,563
+-6,503
+4,939
+Lease liability
+Net debt (-)
+Net debt including lease liability
+-2,120
+-23
+-3,706
+-8,623
+4,916
+Group liquidity consists of cash and cash equivalents (for example, cash at banks, money market
+funds, and time deposits with original maturity of three months or less) and current investments (for
+example, time deposits and debt securities with original maturities of greater than three months, and
+remaining maturities of less than one year included in current other financial assets). Group liquidity
+on December 31, 2021, primarily comprised amounts in euros and U.S. dollars.
+The increase in group liquidity compared to 2020 was mainly due to the cash inflows from our
+operations and the proceeds from the public offerings of Qualtrics shares.
+-2,143
+Cash and cash equivalents
+Financial debt
+-11,801
+5,311
+3,587
+Current time deposits and debt securities
+2,632
+1,470
+1,162
+Group liquidity
+2,463
+11,530
+4,750
+Current financial debt
+-3,755
+-1,482
+-2,273
+Non-current financial debt
+-9,338
+6,781
+26
+September 2026
+Investment in Goodwill, Intangible Assets, and Property, Plant,
+and Equipment
+4
+Bulgaria
+Sofia
+New office building for approx. 1,200
+employees¹
+54
+54
+46
+March 2023
+India
+Bangalore
+New office building for approx. 3,500
+employees
+86
+0
+December 2025
+Japan
+Tokyo
+New office building for approx. 1,500
+employees
+29
+1
+August 2022
+94/338
+219
+For more information about planned investment expenditures, see the Investment Goals section.
+There were no material divestitures of facilities within the reporting period.
+General renovation of headquarters
+building for approx. 1,500 employees
+Germany
+Principal Investments and Divestitures Currently in Progress
+In 2021, we finalized various construction projects and continued and started new construction
+activities in several locations. We plan to finance all of these projects from operating cash flow. Our
+most important projects are listed below.
+Country
+Location of Facility
+Short Description
+Germany
+Berlin
+New office building for approx. 1,250
+employees
+Estimated Total
+Cost
+Costs Incurred as at
+12/31/2021
+Estimated
+Completion Date
+50
+3
+November 2023
+Germany
+Munich
+New office building for approx. 600
+employees
+94
+15
+September 2023
+Walldorf
+€ millions
+SAP
+To Our
+Stakeholders
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+SAP SE Income Statement
+€ millions
+Total revenue
+Other operating income
+Cost of services and materials
+Personnel expenses
+Depreciation and amortization
+Other operating expenses
+Operating profit
+Finance income
+Income before taxes
+Income taxes
+Income after taxes
+Other taxes
+Net income
+-
+German Commercial Code (Short Version)
+Total current assets increased 33% in 2021 from €15,069 million to €20,044 million, mainly driven by
+an increase in cash and cash equivalents.
+2021
+Management Report
+SAP Integrated Report 2021
+Combined Group
+To Our
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+Competitive Intangibles
+The majority of (intangible) resources that are the basis for our current as well as future success does
+not appear in the Consolidated Financial Statements. This is apparent from a comparison of the
+market capitalization of SAP SE (based on all issued shares), which was €153.4 billion at the end of
+2021 (2020: €131.7 billion), with the book value of our equity in the Consolidated Financial
+Statements, which was €41.5 billion (2020: €29.9 billion). This means that the market capitalization of
+our equity is more than three times higher than the book value. The difference is mainly due to certain
+internally generated intangible resources that the applicable accounting standards do not allow to be
+recorded (at all or at fair value) in the Consolidated Financial Statements. These resources include
+customer capital (our customer base and customer relations); employees and their knowledge and
+skills; our ecosystem of partners; the majority of internally developed software; our ability to innovate;
+the brands we have built up, in particular, the SAP brand itself; and our organization.
+On December 31, 2021, SAP was the second most valuable company in the German DAX 40 in terms
+of market capitalization based on all issued shares.
+In 2021, SAP's brand value increased compared to 2020. According to the Interbrand “Best Global
+Brands" annual survey, SAP ranked as the 20th most valued brand in the world (2020: 18th). Against
+other German brands, the SAP brand ranks third behind Mercedes-Benz and BMW, and third globally
+against other brands in the business services sector. Interbrand determined our brand value to be
+US$30 billion, an increase of 7% compared to the previous year (2020: US$28 billion). Kantar BrandZ
+recognized SAP as the world's 26th most valuable brand in the Kantar BrandZ 2021 Most Valuable
+Global Brands ranking (2020: 17th). The ranking estimates SAP's brand value at US$69 billion
+(2020: US$58 billion), an increase of 20% compared to the previous year.
+Report on the Economic Position of SAP SE
+SAP SE is headquartered in Walldorf, Germany, and is the parent company of the SAP Group, which
+comprises 290 companies. SAP SE is the Group holding company and employs most of the Group's
+Germany-based development and service and support personnel.
+As the owner of the intellectual property in most SAP software, SAP SE derives its revenue mainly
+from software license fees and bears the Group-wide research and development expenses for the
+most part.
+On March 5, 2021, SAP SE completed the acquisition of Signavio GmbH, Berlin, Germany ("Signavio"),
+a leader in the enterprise business process intelligence and process management space.
+Subsequently, based on the merger agreement concluded on October 25, 2021, SAP SE took over all
+assets and liabilities of Signavio with effect from January 1, 2021. The difference between the
+acquisition cost of the Signavio shares and the assets and liabilities carried at fair value has been
+recognized as goodwill on the balance sheet.
+On April 13, 2021, SAP SE and investment company Dediq GmbH, Munich, Germany, ("Dediq")
+announced that they had agreed to enter into a partnership in the area of financial services. Following
+the close of the transaction in September 2021, SAP SE and Dediq jointly own the new "SAP Fioneer"
+entity (with SAP owning a minority share). The disposal gain relating to the transfer of the business
+(predominantly IP and employees) is included in Other operating income.
+The SAP SE annual financial statements are prepared in accordance with the reporting standards in
+the German Commercial Code and the German Stock Corporation Act. The full SAP SE annual
+financial report and unqualified audit report are submitted to the operator of the Elektronischer
+Bundesanzeiger (Online German Federal Gazette) for publication and inclusion in the
+Unternehmensregister (German Business Register). It is available from SAP SE on request.
+Income
+SAP SE's income statement is classified following the nature of expense method and presents
+amounts in millions of euros.
+95/338
+96/338
+SAP
+SAP Integrated Report 2021
+Stakeholders
+Construction Projects
+1 In Sofia we bought a building under construction and plan to complete it.
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Current liabilities grew 26% to €16,136 million in 2021 (2020: €12,842 million). This was mainly due to
+an increase in current financial liabilities. For more information about our financing activities in 2021,
+see the Finances (IFRS) section.
+22
+23
+Current
+19
+27
+58
+51
+■Non-current
+■Shareholder's equity
+Percent
+Liabilities
+2020
+2021
+Total non-current assets grew 18% to €51,125 million (2020: €43,395 million). Among other effects,
+this change was mainly due to an increase in goodwill resulting from foreign-exchange-related
+revaluations as well as the Clarabridge and Signavio acquisitions and an increase in listed and
+unlisted equity investments resulting from fair value increases and purchases.
+2021
+2020
+1,780
+-78%
+3,522
+98%
+118%
+Total non-current liabilities decreased 14% to €13,510 million in 2021 compared to the previous year's
+figure of €15,696 million. This was mainly due to a decrease in non-current financial liabilities. For
+more information about our financing activities in 2021, see the Finances (IFRS) section.
+8,090
+93/338
+SAP Integrated Report 2021
+2021
+2020
+Opp
+7pp
+51
+58
+2019
+2018
+2017
+-5pp
+-4pp
+Opp
+51
+56
+60
+Percent change since previous year
+Equity Ratio
+The equity ratio (that is, the ratio of shareholders' equity to total assets) grew 7pp to 58% (2020: 51%).
+Additional
+Information
+Combined Group
+Management Report
+To Our
+Stakeholders
+SAP
+2018
+2019
+1,630
+3,715
+42%
+2017
+128%
+€ millions | change since previous year
+(Incl. Additions from Business Combinations)
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+110/338
+109/338
+15 The index consists of four items showing to what extent employees feel encouraged and supported to innovate.
+16 The index consists of seven items showing ease of understanding and use of our processes at SAP.
+With our global product and services portfolio, SAP aims to protect the rights of individuals involved
+and meet relevant local requirements when processing personal data. In addition, we strive to
+strengthen SAP's reputation in the long term as a sustainable and trustworthy partner in the market.
+We have implemented safeguards to help protect the fundamental rights of everyone whose data is
+processed by SAP, whether they are customers, suppliers, partners, prospects, employees, or
+applicants.
+14 The index covers questions concerning how employees rate their personal well-being and the working conditions at SAP, including our
+leadership culture.
+13 We define employee engagement as an index score of five items measuring the satisfaction and commitment of our employees, how
+proud they are of our company, and how strongly they identify with SAP.
+Attracting, hiring, and onboarding the best and most diverse talent is key for the future success of SAP.
+After a unique 2020 shaped by the global pandemic, in 2021, we saw a significantly increased
+competition for talent all over the globe. Our refreshed employer value proposition - including a
+This policy provides high-level requirements for numerous security domains. These include, but are
+not limited to, access control, physical security, network security management, incident response, and
+acceptable use. These requirements apply to all SAP employees, our contractors, consultants, as well
+as external parties that are granted access to SAP information and information assets. SAP reviews
+the SAP Global Security Policy annually and enacts modifications as deemed appropriate and
+necessary to protect SAP and our own and our customers' data and assets where new threats or
+vulnerabilities are identified.
+Data Protection
+SGS supports key stakeholders in our lines of business (LoBs), IT, and the presales organization in
+securing solutions, and drives operational excellence for security across the enterprise. To protect the
+organization's data and assets and support high-quality risk management and reporting, SGS regularly
+reviews and adapts our security policies, standards, and frameworks.
+The SAP strategy is focused on helping customers transform into intelligent and sustainable
+enterprises. Our SAP Global Security (SGS) organization supports this journey with its goal of
+reducing risk and promoting regulatory compliance, and by aligning people, procedures, and
+technology to protect business processes and data. The organization embraces and encourages a
+security-minded culture that embeds security in our development and deployment processes and
+helps secure digital transformation.
+Cloud solutions and services are increasingly important to many companies' daily operations. The
+COVID-19 pandemic has shown that digital solutions are critical to business resilience. As a result,
+digital transformation is accelerating and cybersecurity is now even more crucial to IT security
+professionals and business leaders, particularly in those enterprises that have moved their core
+processes to the cloud.
+SAP Integrated Report 2021
+Information
+-
+stronger focus on “Early Talents” (defined as hires with 0-3 years of experience in a professional
+setting hired into professional roles 18) and innovation is key to us attracting people with the right fit.
+SAP Global Security
+-
+103/338
+104/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+We develop and pursue our global data protection and privacy strategy in accordance with our
+business strategy. Our global data protection and privacy strategy is to constantly monitor the global
+regulatory data protection compliance landscape, identify relevant stakeholders, and enable them to
+take necessary measures for their adoption. It is also designed to safeguard the processing of
+personal data. The strategy consists of four pillars to help meet compliance with applicable data
+protection laws and regulations. These pillars comprise the global data protection and privacy policy;
+mandatory global data protection and privacy training for employees; our global data protection and
+privacy coordinator network; and the global data protection management system – and are all aiming
+to ensure that we comply with applicable data protection laws.
+Further Information on
+Sustainability
+18 In 2021, we adjusted the definition of Early Talents In the past, the term referred to external hires of graduates with up to two years'
+professional experience post graduation.
+It is critical that our employees see the link between their individual contribution and SAP's future
+success. Early in 2021, SAP's top leadership set goals for their organization and made them visible to
+With our next-generation performance management approach, we aim to establish a high-
+performance culture, by linking business goals to the impact of individuals and teams with
+development opportunities and meaningful reward packages. Smart and transparent goal-setting
+approaches and continuous review processes, as well as equitable, competitive, and differentiated
+compensation structures, are a necessary foundation to drive high performance.
+Driving SAP's Winning Culture
+The successful delivery of our strategy also requires a robust succession management process.
+Therefore, in 2021, we launched a systematic approach focusing on our most critical and highest
+value-generating roles. It incorporates a clearly defined succession pipeline and targeted
+development and exposure for incumbents and successors to these roles.
+At SAP, learning mainly happens on the job, through interactions with colleagues and formal learning
+activities. Self-paced online programs and live interactive training, including courses for technical,
+functional, and professional skills, are open to all employees. Our peer-to-peer learning portfolio
+encompasses coaching, mentoring, job shadowing, and facilitation opportunities. In 2021, 97% of our
+employees participated in learning and logged more than three million hours of trackable learning.
+Additionally, 22,574 of our employees went through targeted upskilling programs tied to SAP's cloud
+journey.
+As part of our strategic pillar "building the skills for the future," we focus on our skill transformation.
+SAP expects a shift in current skills that will cease to exist and new capabilities that will be needed in
+the future. In some cases, this shift is predictable, while in others it will require an adaptive workforce
+management approach focusing on continuous skill transformation to ensure our people are
+equipped to support future work requirements.
+Even when employees leave SAP, it is important that we stay connected. Our SAP Alumni Network
+offers a program to keep our former colleagues connected and foster a trusted network for the benefit
+of SAP and our ecosystem. In 2021, our alumni community included 14,909 former (2020: 9,096) and
+4,379 current (2020: 4,082) SAP employees.
+The average tenure remained at the same high level (2021: 8.0 years; 2020: 7.6 years).
+We strive to position SAP as a talent magnet. SAP has earned 160 (2020: 125) employer recognitions,
+most notably the World's Best Workplaces by Great Place to Work, World's Most Attractive
+Employer by Universum and LinkedIn Talent Award – Best Employer Brand by LinkedIn.
+Additionally, we worked closely with more than 2,700 academic institutions on events, executive
+lectures, office visits, competitions, student club sponsorships, and workshops to attract students and
+graduates. Our universal SAP Internship Experience Program has continued to expand and now
+exists in 22 countries with a total of 1,461 (2020: 597) participants around the world. In 2021, more
+than 1,200 students were enrolled in SAP's vocational training program (in Australia, Brazil, China,
+Germany, Hungary, India, Ireland, Japan, New Zealand, Singapore, South Korea, Switzerland, and the
+United States). The conversion rate (number of students who stayed with SAP after completing their
+dual studies) for vocational training students was 75% in 2021 (2020: 67%).
+Despite ongoing challenges due to the pandemic, we were still able to make advancements in
+building a highly inclusive workforce across various demographic aspects (among others, e.g.
+generations, gender, nationalities). Overall, we externally hired 13,854 (2020: 8,486) employees, of
+whom 33.1% (2020: 29.4%) were Early Talents and 38.1% (2020: 35.5%) women.
+Additional
+Every day, organizations around the world trust SAP with their data – either on premise at their
+physical locations, in the cloud, or when using mobile devices while on the move. Our customers
+need to know that our goal is to keep their data safe, process it in a manner that complies with local
+legislation, and protect it from malicious use. For this reason, cybersecurity and security, as well as
+data protection and privacy, are of paramount importance to us.
+SAP Integrated Report 2021
+Security, Data Protection, and
+Privacy
+For a detailed description of the development and key drivers of SAP's revenue, see the Performance
+Against Our Outlook for 2021 (Non-IFRS) and Operating Results (IFRS) sections in the combined
+management report.
+Operational Expenditures
+We have designated those costs as Taxonomy-eligible that relate to assets and processes associated
+with the Taxonomy-eligible activity "8.1 Data processing, hosting, and related activities." We considered
+materiality aspects in the identification process of relevant costs and activities. The costs connected to
+101/338
+102/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Total revenue was determined according to IFRS, specifically IFRS 15, and matches total revenue
+presented in SAP's Consolidated Income Statements. For more information about how we recognize
+revenue and the components of revenue, see the Notes to the Consolidated Financial Statements,
+Note A.1.
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Information
+this activity mainly include expenses for maintenance and repair relating to SAP's own cloud
+infrastructure as well as leasing expenses for hosting services provided by third parties.
+Total operating expenses according to the EU Taxonomy mainly include the following non-capitalized
+cost elements: research and development, short-term lease, and maintenance and repair relating to
+property, plant, and equipment. Other major expense components in SAP's Consolidated Income
+Statement, such as, for instance, depreciation, utilities (for example, costs for heating and electricity
+consumption), as well as most general and administrative cost, restructuring, and sales and marketing
+cost do not fall in scope of the definition of operating expenses according to the EU Taxonomy and
+are therefore excluded.
+For a detailed description of the development and key drivers of all operating expenses, see the
+Performance Against Our Outlook for 2021 (Non-IFRS) and Operating Profit and Operating Margin
+sections in our combined management report.
+Capital Expenditures
+In line with the EU Taxonomy regulation, total capital expenditures presented in this section include
+additions to tangible and intangible assets accounted for based on IAS 16, IAS 38, and IFRS 16, as
+well as additions to tangible and intangible assets (excluding additions to goodwill) resulting from
+business combinations.
+Taxonomy-eligible capital expenditures relate to assets and processes that are associated with the
+economic activity "8.1 Data processing, hosting, and related activities." We also considered materiality
+aspects in the identification process of relevant costs and activities. These expenses comprise mostly
+investments in SAP's cloud infrastructure.
+QAudit Scope
+The content of the non-financial statement was not subject to the statutory audit of the combined
+group management report. However, our external auditor carried out an independent limited
+assurance engagement on the non-financial statement including the EU Taxonomy disclosures. In
+addition, all non-financial aspects referenced to in the table Non-Financial Disclosures in SAP's
+Combined Management Report are assured by our external auditor, however, on different audit
+assurance levels (reasonable or limited). The Audit Scope box at the end of the respective
+chapters in the management report explains the audit scope of the disclosures in the respective
+chapter.
+SAP
+Additional
+These services conform with the description of activity 8.1. Therefore, we have designated the revenue
+resulting from these services as eligible for the EU Taxonomy. Other revenues that qualify as cloud
+revenue but cannot be classified as Taxonomy-eligible have been excluded.
+Infrastructure as a service (laaS)
+Platform as a service (PaaS)
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Building the Skills for the Future
+Combined Group
+SAP
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+evaluated the description of the activity 8.1 provided in the Annex 1 to the EU Taxonomy Climate
+Delegated Act of June 4, 2021, and concluded that the operation of SAP's cloud infrastructure
+comprising both SAP's own data centers and third parties engaged by SAP match the description of
+the activity "8.1 Data processing, hosting, and related activities" and is therefore considered as
+Taxonomy-eligible.
+We also evaluated the relevance of the economic activity "8.2 Data-driven solutions for GHG
+emissions reductions." In light of our strategic commitment to sustainability management solutions
+that, for example, help our customers minimize carbon footprints and reduce waste through
+responsible supply chain management, we expect the share of associated revenues, operational
+expenditures, and capital expenditures to increase over the next years. In 2021, however, SAP has not
+recognized material revenues, operational expenditures, and capital expenditures associated to this
+activity that could be classified as Taxonomy-eligible. For more information about our sustainability
+management portfolio, see the Environment and Emissions section.
+In addition, we performed an eligibility assessment of the activity "8.2 Computer programming,
+consultancy and related activities" relating to climate change adaptation. According to the EU
+Taxonomy regulation, only activities that are classified as "enabling,” that is, activities that help other
+activities substantially contribute to climate change adaptation, can be included in the turnover KPI.
+Activity 8.2 is not categorized as an “enabling" activity and therefore we cannot attribute any turnover
+to this activity. Based on our current understanding of the FAQ document published by the European
+Commission on February 2, 2022, regarding the interpretation of certain legal provisions of the
+Delegated Act under Article 8 of the EU Taxonomy Regulation of July 6, 2021, we also concluded that
+operating and capital expenditures relating to activity 8.2 (climate change adaptation) are not
+Taxonomy-eligible.
+Revenue
+As outlined above, we have identified only one activity as a relevant Taxonomy-eligible economic
+activity to which revenues can be attributed. We considered materiality aspects in this process. While
+SAP may conduct more activities that could be designated as Taxonomy-eligible, currently only "8.1
+Data processing, hosting, and related activities" was identified as material in terms of associated
+revenues. This may change in the future as SAP is aiming to extend our sustainability management
+product portfolio and increase the corresponding revenue share.
+As described in the Notes to the Consolidated Financial Statements, Note A.1, in detail, SAP's cloud
+revenue consists mainly of fees earned from providing the following services:
+Software as a service (SaaS)
+Vision and Strategy
+Below is an overview of how we put the three themes of our people strategy and overall KPIs into
+practice.
+17 This includes manager managing teams, manager managing managers, Executive Board members.
+92.8-2.5pp
+Stakeholders
+The purpose of the SAP Global Security Policy is to provide governance and structure for an
+appropriate and effective level of information security within SAP and our affiliated businesses.
+Aligned with the overall SAP corporate strategy and vision, it details the management intent,
+expectations, and strategic goals and objectives for SAP security.
+Guidelines and Policies
+Our commitment to customers is to be open and transparent about security vulnerabilities. To ensure
+this, we work with several external stakeholder groups including SAP user groups for the Americas
+and for German-speaking countries.
+To Our
+The SAP Security Governance Model is designed to ensure executive engagement and facilitates
+shared responsibility in semiannual SAP Security Advisory Board and monthly Security Council
+meetings, as well as in biweekly updates to the Executive Board.
+SGS is led by a chief security officer who reports directly to the SAP CEO. SGS divisions are
+responsible for areas such as product and application security, cyberdefense, operational security risk
+management, security compliance, executive protection, physical security, and a Trust Office that
+supports customers and partners with security-related issues.
+Governance
+Combined Group
+Management Report
+Due Diligence for Security Topics
+SAP
+The content of the section Security, Data Protection, and Privacy was not subject to the statutory audit
+of our combined group management report. However, our external auditor performed an independent
+limited assurance engagement for the content of this section.
+QAudit Scope
+For related risks, see the Risk Management and Risks section, specifically the Cybersecurity and
+Security and Data Protection and Privacy subsections.
+Related Risks for SAP
+In 2021, SAP experienced two significant incidents in processing personal data - on our own behalf –
+that were subject to GDPR only and were reported to the supervisory authorities.
+SAP respects the rights of the data subjects to obtain information as to whether or not personal data
+concerning them is being processed. All necessary information is made available to the data subjects
+within the framework of the privacy statements on the respective SAP Web sites.
+SAP's own quality standards and international regulations require careful selection and monitoring of
+subprocessors processing personal data on behalf of SAP and SAP customers. With the goal that all
+subprocessors meet protection and security requirements for the processing of personal data, SAP
+has implemented a subprocessor verification process. All of SAP's subprocessors (for example,
+suppliers, vendors, and partners) are subject to this process. The process comprises three main
+compliance criteria for data protection-relevant subprocessors: (i) contractual compliance; (ii) self-
+assessments based on a questionnaire including transfer impact assessments on international data
+transfers to third countries; and (iii) remote and/or on-site audits.
+SAP Integrated Report 2021
+We also track the quality of our data protection compliance level based on the annual recertification
+of our DPMS by the British Standards Institution (BSI). SAP has been audited by the BSI annually and
+awarded certifications according to BS 10012 since 2011. The most recent certification is valid until
+2022.
+Consolidated Financial
+Statements IFRS
+Additional
+Information
+For more information about the Customer NPS, see the Performance Management System section.
+Related Risks for SAP
+Customer NPS is a KPI in Executive Board remuneration as part of the short-term incentive
+component.
+We aim to continue to increase our Customer NPS to a range of 11 to 15 points in 2022. Further, we
+want to see continuous improvements and increase the score steadily in the medium term.
+In 2021, our Customer NPS 11 increased 6 points year over year to 10 (2020: 4), achieving the upper
+end of our target range of 5 to 10.
+We use the Customer Net Promoter Score (NPS) as a feedback mechanism to measure customer
+loyalty. This and other results from the customer survey allow us to directly understand what our
+customers are thinking and identify key pain points for action. Because of the importance of
+customers to SAP, Customer NPS is one of our main KPIs.
+How We Measure and Manage Our Performance
+Numerous policies govern our relationships with our customers, including the Employee Code of
+Conduct, SAP Human Rights Commitment statement, and applicable General Terms and
+Conditions for our products.
+Guidelines and Policies
+Further Information on
+Sustainability
+The head of Customer Success leads customer-facing engagements across SAP's business. The Chief
+Marketing & Solutions Officer leads the development of our solution value propositions to provide
+clarity on SAP's core differentiators. The People & Operations Board area is responsible for
+conducting the Company-Wide XM program, including conducting the Customer Net Promoter
+Score (NPS) survey.
+Due Diligence
+To further address and improve on customer feedback through research conducted using Qualtrics
+solutions, we developed the Company-Wide Experience (XM) program. This is an example of a
+program we have implemented aiming to achieve a consistent end-to-end experience for our
+customers. This program includes standardizing experience initiatives and methodologies to help
+identify and improve experience gaps across SAP.
+Company-Wide Experience (XM) Program
+customers.
+We aim to maximize the value our customers derive from their investment in and relationship with
+SAP at every touchpoint in their experience with us over the engagement lifecycle. Our focus on value
+and experience drives our customers' success. Our customer-facing teams - across solutions, sales,
+services, customer engagement, ecosystem, and others – work together along an operating model
+that aims to harmonize internal processes with the goal of delivering improved outcomes for our
+Focusing on Customer Success
+Vision and Strategy
+Customers
+Governance
+We monitor compliance of data protection-relevant procedures across SAP. We maintain a record of
+processing activities ("procedure enrollment tool"), in which procedures that process personal data
+must be documented. The record entries contain general information about the procedure according
+to defined criteria necessary to meet proper documentation. The record entries are reportable and
+regularly reviewed.
+To help ensure necessary knowledge about data protection, global data protection and privacy
+training is mandatory for SAP employees. The latest training was rolled out in 2021 as per the two-
+year renewable cycle.
+Data Protection
+The SAP Global Data Protection and Privacy Policy outlines a group-wide minimum standard for data
+protection-compliant processing of personal data. It defines requirements for business processes that
+involve personal data, and assigns clear responsibilities. The principles established by this policy take
+into account the requirements of the EU GDPR. They apply generally and globally to SAP Group
+affiliates. Additional data protection and privacy requirements, if applicable, are adopted on a local
+level as necessary. We actively monitor changes to applicable laws and regulations so that we can
+update our standards on an ongoing basis as necessary to meet data protection compliance. The
+policy was last updated in 2019.
+Global data protection and privacy training is conducted globally every two years and mandatory for
+SAP employees. This training helps our workforce handle personal data with due care and in
+accordance with the law and to maintain compliance with data protection requirements in their work.
+SAP has implemented a data protection management system (DPMS) for our organization. The
+DPMS is set according to the generally recognized standard for data protection management systems
+as defined in the British Standard BS 10012, which comprises the data protection requirements of the
+European Union (EU) General Data Protection Regulation (GDPR) since version 10012:2017. The
+DPMS covers almost all LoBs (excluding Qualtrics) and is planned to be implemented in all acquired
+companies as well. It is designed as a framework covering all aspects of data protection compliance
+of SAP organizations and employees. The DPMS is used as SAP standard methodology to ensure
+compliance with data protection legislation. The maintenance of the framework is subject to
+certification from the British Standards Institution that confirms data protection compliance annually.
+Guidelines and Policies
+legislative process. In this regard, SAP is participating in external working groups to help align industry-
+specific interests with respective governments.
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+How We Measure and Manage Our Performance
+Combined Group
+SAP Integrated Report 2021
+SAP
+SAP has established a global network of data protection and privacy coordinators (DPPCs) across all
+SAP Group entities that process personal data. This DPPC network is aimed to ensure data
+protection and privacy compliance on a local level. Local DPPCs increase awareness by conducting
+local training. Where new data protection laws evolve, they also help the Data Protection and
+Privacy (DPP) team acting on behalf of the DPO identify and analyze them. If this requires
+compliance activities, they align with the affected LoBs and help drive the relevant implementation.
+Additional regional DPPCs further support and monitor changes to applicable laws. The DPPC
+network regularly engages with SAP's government relations team to represent SAP's interests in the
+To meet and ensure consistent security and data protection compliance, SAP has implemented a
+formal governance model that assigns clear responsibilities across the SAP Group. Upon request, the
+DPO attends steering committee meetings and reports on matters relevant to data protection to the
+Audit and Compliance Committee of the SAP Supervisory Board.
+Within the scope of their responsibilities, our global data protection officer (DPO) monitors the
+compliance of activities involving the processing of personal data. The DPO reports to the SAP CFO.
+Within the Executive Board, the SAP CFO is responsible for compliance and enforcement of data
+protection and privacy. The DPO owns the SAP Global Data Protection and Privacy Policy that
+addresses SAP's data protection governance, and regularly informs the CFO about the status of data
+protection compliance in the SAP Group.
+Governance
+Due Diligence for Data Protection Topics
+All SAP employees are required to read and adhere to this internal policy. The SAP Security Policy
+Framework consists of several levels of security documents that support the requirements described
+in the policy. In addition, the different LoBs at SAP may have supporting policies, standards,
+procedures, and practices.
+To Our
+Stakeholders
+Security
+Compliance processes at SAP adhere to trust-service criteria established by the American Institute of
+Certified Public Accountants (AICPA). Our security, availability, privacy, confidentiality, and processing
+integrity controls are designed to achieve the appropriate control objectives. In addition, independent,
+external auditing partners regularly conduct security compliance audits.
+SAP discloses vulnerabilities on the second Tuesday of every month ("Patch Day"). This disclosure
+mechanism provides customers with authoritative, public information about SAP software
+vulnerabilities from SAP that can be integrated with their existing risk management processes and
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+106/338
+105/338
+Let external, internationally accredited auditors assess and certify our cloud services according to
+various reporting standards and ISO certifications, such as ISO 9001, ISO 27001, ISO 27017,
+ISO 27018, and ISO 22301, in addition to BS 10012
+Offer service organization control (SOC) reports – such as SOC 1 Type II/ISAE 3402 and SOC 2
+Type II/ISAE 3000 - to provide insights into the design and operating effectiveness of internal
+control systems implemented within cloud delivery units
+-
+Monitor and support our cloud and IT units with 1,700 controls that are audited and tested for
+design and operating effectiveness
+- Engage in approximately 130 internal and external audits across SAP globally
+SAP strives to reduce risk by continuously improving our processes for detecting and remediating
+attacks and vulnerabilities. To that end, we:
+tools.
+For related risks, see Sales and Services in the Risk Management and Risks section.
+11 As part of a multi-year harmonization process, the survey question used to measure NPS was adjusted in 2021. Therefore, the results
+may not be fully comparable. For more information, see the Performance Management System section.
+107/338
+108/338
+Leadership Trust
+Net Promoter Score
+83
+83
+84
+85
+86
+Business Health
+Culture Index
+percent
+percent
+Our Key People-Related KPIs at a Glance
+In addition, we measured a Retention Rate of 92.8% (2020: 95.3%). We define retention as the ratio
+of the average number of employees, minus employees who voluntarily departed (excluding
+restructuring-related terminations), to the average number of employees (in full-time equivalents or
+FTES). The rate of Women in Management 17 increased to 28.3% compared to 27.5% in 2020.
+Through 2022, our ambition remains to increase the rate of women in management to 30%.
+We measure the progress of individual employee and organizational health through the Business
+Health Culture Index 14 (BHCI). In 2021, the BHCI was 81% (2020: 80%) and exceeded the upper
+end of our target range. For 2022 through 2025, our ambition remains to keep the BHCI between 78%
+and 80%. We continuously monitor our innovation culture and simplification of processes. We
+adjusted the composition of both indices to better reflect the dimensions we would like to improve,
+even though we consider the scores comparable. In 2021, we achieved a very strong Innovation
+Culture Index 15 of 89% (last measured in 2019 based on different survey questions and reported as
+an Innovation Score of 79%). After a slight dip in 2020 (58%), the Simplification of Processes
+Index 16 rebounded to 66% in 2021, indicating that our investments in this area took effect.
+The Employee Engagement Index 13 decreased to 83% (-3 pp compared to 2020) and is slightly
+below our target range. For 2022 through 2025, our ambition remains to keep the Employee
+Engagement Index score between 84% and 86%. Our Leadership Trust NPS reached an all-time
+high of 67 in 2021 (2020: 62) since its introduction in 2013. For more information about the
+measurement of leadership trust, see the Performance Management System section.
+and leadership trust, twice over the year. The average scores from both data collections were used as
+the full-year Employee Engagement Index and Leadership Trust Net Promoter Score (NPS).
+28.37+0.8pp
+Employee Engagement Index
+Information
+2017
+2019
+667+8pp
+897+10pp
+Management
+percent
+Women in
+81 7+1pp
+Employee
+Retention
+percent
+2018
+67 7+5pp
+percent
+Innovation Index
+\-3pp
+83
+2021
+2020
+Simplification of
+Processes
+percent
+Additional
+To Our
+Further Information on
+Sustainability
+SAP is committed to ensuring a fair and equal treatment of all employees in a sustainable manner.
+For that reason, we established comprehensive policies that guide us in our daily business. Examples
+are our Global Anti-Discrimination Policy and Global Health & Safety Policy.
+Guidelines and Policies
+To best support our People Strategy, we reshaped our HR organization in 2021 and it now includes
+the following functional areas: a newly introduced Future of Work team (including Global Health &
+Well-Being); Global Diversity & Inclusion; SAP Learning; Talent Attraction; and Total Rewards. In
+addition, Global People Success Services combines the HR Business Partner organization with Global
+HR Service Delivery.
+Since January 1, 2021, Sabine Bendiek has served as Chief People Officer and Labor Relations
+Director and led our HR organization. On July 1, 2021, she also became Chief Operating Officer and
+has since been responsible for the Executive Board area People & Operations as Chief People &
+Operating Officer.
+Governance
+Due Diligence
+Changing the Way We Lead by driving for accountability and empowerment, in a healthy,
+inclusive, and diverse environment
+Driving SAP's Winning Culture by fostering a culture enabling and rewarding impact and
+business outcomes
+Building the Skills for the Future by attracting the best and most diverse talent and continuously
+up-/reskilling our people
+Interwoven with our product and go-to-market strategies, our People Strategy is centered around the
+employee journey and their experience. Just as we help our customers digitalize and simplify their
+processes, we strive to do the same for our employees by empowering them to bring value to our
+customers. We continue to evolve and execute along seven strategic pillars from 2020 that contribute
+to our business strategy and value generation. We summarize this value generation across three
+themes, powered by operational excellence to showcase Human Experience Management:
+People are at the heart of our organization. Aiming for a highly engaged, diverse, future-fit workforce
+equipped with the right skills helps SAP attract the best talent.
+Vision and Strategy
+Investments
+Employees and Social
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined Group
+To Our
+SAP Integrated Report 2021
+SAP
+How We Measure and Manage Our Performance
+Information
+The impact of our people strategy is measured by seven KPIs. 12 Five out of the seven KPIs are based
+on the results of our engagement survey program “#Unfiltered."
+12 In the Employees and Social Investments section, the metrics Employee Retention, External Hires, Female External Hires, Headcount,
+Women in Management, and Women in Workforce include Qualtrics data. All other metrics are reported excluding Qualtrics.
+SAP Integrated Report 2021
+SAP
+To Our
+Stakeholders
+Combined Group
+Consolidated Financial
+Statements IFRS
+With #Unfiltered, we strengthen our commitment to listen regularly to our employees and act together
+on their feedback. In 2021, we defined strategy, health and well-being, and equality as areas where
+we increased our focus. We gauged the sentiment on these topics, as well as employee engagement
+Management Report
+Health and Well-Being: When people are healthy, respected, and cared for, it results in greater
+productivity, engagement, innovation, and customer satisfaction. The global pandemic has enforced
+changes to societal living that are resulting in increasing trends of mental health challenges and
+sedentary lifestyles. Listening to employees' feedback in the #Unfiltered survey, we have enhanced
+health offerings that support a healthy workplace and work culture.
+In addition to our new leadership culture, one further strategic pillar is to pursue an agile,
+entrepreneurial, healthy, and innovative organization. With the COVID-19 pandemic already into a
+second year, our environment is changing at an increasing pace and the needs of our customers are
+shifting quickly. To deliver our business ambitions in this environment, SAP will continue to evolve our
+organization toward greater agility and innovation. It is our ambition to foster a culture that enables
+people to run at their best, by providing innovative health and well-being programs and solutions.
+Future of Work: In June, the Executive Board announced “Pledge to Flex," an SAP-wide
+commitment that empowers our employees to choose when and where to work best as their roles
+and tasks allow. Flexibility at work is considered a critical factor to attract and retain talent in the tech
+industry; Pledge to Flex also strengthens SAP's employer brand. The local implementation of flex work
+along aligned guidelines and country-specific legal regulations is essential to providing an engaging
+and collaborative working environment. These activities are complemented by efforts to leverage
+advanced technologies and new facility concepts in frontrunner locations such as Dublin/Galway,
+London, Montréal, and Zurich.
+In 2021, we focused on a more consistent enablement of our people managers. We scaled the
+delivery of our flagship leadership programs, and focused on training on psychological safety across
+our organization. We report that 29.4% of SAP's people managers have completed these leadership
+development training sessions.
+Strong, future-oriented leadership is key for successfully executing our strategy and becoming more
+agile, ethical, inclusive, and accountable. To guide our leaders, support their development, and move
+our organization forward in our journey to the cloud, we began the rollout in 2021 of a refreshed
+leadership culture and credo: “Do what's right. Make SAP better for generations to come." This
+empowers our leaders to make decisions and holds them accountable while focusing on the future of
+SAP. Our leadership culture is reinforced by traditional, peer, and experiential learning journeys. These
+journeys focus on building management, leadership, and cloud skills to promote a shared
+understanding and reinforce leadership behavior and accountability.
+Changing the Way We Lead
+Furthermore, in 2021, we also launched an equity-based COVID-19 Recognition Plan for all non-
+executive employees to recognize their resilience and commitment to business continuity during this
+difficult period.
+To strengthen the link between employees' compensation and SAP's corporate success, we also
+increased our investment in Move SAP, our long-term share-based incentive plan that rewards
+employees who provide a significant impact to SAP's business success. Another model component of
+our equity offering is Own SAP, a global share purchase plan, where 78% of our employees overall
+participated with an investment of 5,655,937 shares.
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP
+SAP Integrated Report 2021
+all employees. During a newly established “People Day," all employees at SAP were given time to
+reflect on SAP's strategy and connect their goals and development to our direction. During "SAP Talk"
+dialogues, goals are set and viewed by the employees together with their managers.
+For more information, see the Notes to the Consolidated Financial Statements, Note (B.3).
+114/338
+-19%
+20 Scope 1 includes: Stationary Combustion and Refrigerants in Facilities, Mobile Combustion and Refrigerants in Corporate Cars, Mobile
+Combustion in Corporate Jets. Scope 2 includes: Electricity in Offices, Electricity in Data Centers, Purchases of Chilled and Hot Water,
+Steam.
+As a result of the ongoing COVID-19 pandemic, as well as the introduction of a more flexible working
+model at SAP, carbon-intensive business activities, in particular business travel-related activities,
+increased moderately during the year, but remained at a low level overall. As a result, our carbon
+emissions have continued to decrease. Even though our employee headcount increased by 4.9%, our
+net carbon emissions dropped to 110 kilotons 22 (kt), representing a year-over-year decrease of 18.5%
+(2020: 135 kt). In July 2021, we had already reduced our carbon emissions outlook for 2021 from
+145 kt to a range of 90 kt to 110 kt to reflect the expected impact of the COVID-19 pandemic on SAP's
+business results.
+Performance and Measures to Progress
+Since 2017, we have complied with the requirements of the Science Based Targets initiative (SBTI)
+and are committed to reducing emissions by 85% by 2050 compared to the base-year level 2016,
+including our entire Scope 3 value chain emissions such as our products-in-use emissions at our
+customers. Confirmed by the SBTI in a 2019 reassessment, this target reflects the level of
+decarbonization required to keep the global temperature increase below 1.5 degrees Celsius
+compared to preindustrial temperatures. However, to meet a net-zero future, in 2022 we aim to further
+accelerate our climate ambitions by committing to achieve net zero across our entire value chain
+by 2030 in alignment with the SBTi Net-Zero Standard - 20 years earlier than originally planned.
+To achieve our carbon neutral target and to track its progress, we have derived annual targets for our
+internal operational steering. Since the beginning of 2020, these annual targets have been integrated
+in the Executive Board's short-term performance-based compensation.
+This target refers to our total net carbon emissions, which are calculated by deducting purchased
+renewable energy certificates, self-generated renewable energy, and carbon offsets from our gross
+carbon emissions in the respective reporting period. Our carbon neutral target includes all direct and
+indirect emissions from running our business (Scope 1 and Scope 2) 20 as well as a selected subset of
+indirect emissions from our value chain (Scope 3). 21 This objective is key to reducing SAP's own
+environmental footprint and to combatting climate change – one important step towards contributing
+to SAP's overarching purpose.
+In 2017, we set our leading environmental target of making our operations carbon neutral by 2025.
+However, to consider the impact of the COVID-19 pandemic on our carbon emissions, to strive toward
+a role model position in sustainability, and to maintain our ambition level, we decided to revise and
+accelerate our carbon neutral target: We now aim to become carbon neutral in our own
+operations by 2023 – two years earlier than what we had aimed for thus far.
+Our Targets
+How We Measure and Manage Our Performance
+Information
+Additional
+Further Information on
+Sustainability
+21 Scope 3 includes: Rental Cars, Business Flights, Train Travel, Business Trips with Private Cars, Employee Commuting, Electricity
+External Data Centers, Electricity Used by Hyperscale Services, and Logistics.
+Consolidated Financial
+Statements IFRS
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+Our global environmental policy provides the core framework for how we manage our environmental
+impact in our own operations and with our customers. Updated regularly and approved by the CFO,
+this policy guides our efforts to reduce our ecological footprint, provide environmental performance
+transparency, and demonstrate sustainable leadership through transformational strategies. In addition,
+it helps us to comply with internationally recognized sustainability standards as well as stakeholder
+expectations, primarily those of customers, investors, and employees.
+Guidelines and Policies
+To be able to innovate and embed sustainability further, we regularly engage externally with various
+stakeholder groups such as non-governmental organizations (NGOs), non-profit organizations (NPOs),
+and academia. This notably includes an external sustainability advisory panel comprised of expert
+representatives from our customers, investors, partners, NGOs, and academia, which provide us with
+valuable outside-in feedback and advice.
+The Executive Board sponsor for sustainability, including climate action, is the SAP CFO. The
+responsibility for driving SAP's holistic, cross-company sustainability agenda is shared between the
+core sustainability team and the Sustainability Council, which are both chaired and led by the chief
+sustainability officer (CSO). The CSO's team coordinates SAP's response to climate change (including
+assessing and managing climate-related risks through a quarterly risk review, setting reduction targets,
+measuring and monitoring carbon emissions on a quarterly basis, and embedding sustainability-
+related initiatives across SAP), while it is the Council members' responsibility to integrate sustainability
+into the core business of their particular Board area, measure and report on their Board areas'
+progress, act as an ethical advisory board for the Company, and communicate with internal and
+external audiences on the business relevance of the topic. This happens in close cooperation with
+various other departments such as the global procurement organization, which aims to ensure that
+the Company purchases energy-efficient, sustainable products and services. The global facilities
+management team designs and operates our facilities based on robust environmental standards such
+as ISO 14001. Our global cloud services organization considers the optimization of the energy
+consumption in our data centers, while SAP's IT operations personnel is encouraged to use IT
+equipment and business software responsibly.
+Governance
+Due Diligence
+Our strategy to create positive impact and to address climate action is implemented through a dual
+approach: (1) SAP as enabler: We aim to provide products and services to our customers to reduce
+their carbon emissions and pave the way towards a low-carbon future together; and (2) SAP as
+exemplar: To live up to our corporate responsibility and to build climate resilience, we strive towards
+leading by example in SAP's business operations and practices by running our own operations more
+sustainably.
+To bring SAP's purpose of "helping the world run better and improving people's lives" to life, our
+sustainability activities and programs are aimed at creating positive economic, environmental, and
+social impact within planetary boundaries. In light of the aggravating climate change impacts and
+other intensifying global challenges, such as biodiversity loss and population growth, climate action
+has been put at the top of SAP's corporate sustainability agenda – which was also reconfirmed by the
+latest conducted materiality analysis.
+Management Report
+Vision and Strategy
+22 We report all our carbon emissions in CO2 equivalents (CO₂e).
+118/338
+2021
+2020
+-55%
+113/338
+2019
+2018
+2017
+110
+135
+-14%
+-3%
+-5%
+117/338
+300
+Total Net Carbon Emissions
+310
+325
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+Kilotons CO2e
+1,055
+Energy and Emissions
+Further Information on
+Sustainability
+SAP set out to bring our pro bono consulting to the next level, scaling virtual models that were tested
+in 2020. For example, SAP and PYXERA Global launched a new program called Pro Bono for
+Economic Equity to support social and racial justice. Through the program, SAP provides expertise
+via pro bono consulting to help Black-owned businesses and social enterprises address systemic and
+business challenges. Further, SAP and MovingWorlds launched the Acceleration Collective, a
+support network to help social enterprises grow their organizations and impact, while helping SAP
+SAP provides skills, expertise, products, and financial support to social businesses that, in turn,
+accelerate their ability to drive sustainable social impact. In 2021, SAP built capacity for over 2,000
+innovative non-profit organizations and social enterprises through in-kind contributions of
+US$1.8 million (€1.58 million) 19.
+Accelerate Social Business
+-
+Focus Area
+We measure the performance and impact of our CSR engagements and investments regularly and
+report the following output indicators for all initiatives and regions: number of employees engaged,
+volunteering projects delivered, lives impacted, engagements with customers and partners, non-profit
+organizations and social enterprises enabled, and employees on our SAP Together employee
+engagement and donation platform. In addition, every signature initiative follows a dedicated impact
+measurement framework and logic model. In 2021, SAP donated €25.5 million.
+How We Measure and Manage Our Performance
+The guidelines in our internal CSR policy aim to ensure lawful, compliant donations and good
+stewardship of SAP's social investment budget to create a positive, sustainable impact. They articulate
+our strategic focus areas, set the standards and policies under which we operate, and explain the
+different roles and responsibilities between global CSR, regional CSR, and line of business activities.
+Our Global Head of CSR leads the global SAP CSR team, which is part of the Marketing & Solutions
+Board area. SAP has established a Global CSR Governance Committee consisting of executive-
+level representatives from different Board areas at SAP to advise, supervise, and approve the direction
+of our overall CSR strategy. In addition, Regional CSR Governance Committees advise and approve
+all major CSR partnerships and efforts with the respective regional SAP CSR lead.
+Governance, Guidelines, and Policies
+SAP's CSR strategy is linked to our core business, meaning that we integrate social innovations into
+our own value chain through, for example, dedicated social procurement initiatives. In addition, we are
+offering a broad portfolio of corporate volunteering opportunities and pro bono consulting programs to
+deploy the professional skills of our employees for a good cause..
+Connect employees with purpose
+19 Exchange rate date: December 31, 2021.
+Build future skills
+The pace of innovation and technology progress impacts people, organizations, and communities
+globally. As a result, the competencies and skills needed for people and businesses to succeed in
+today's digital world are rapidly changing. Our corporate social responsibility (CSR) strategy puts
+SAP's purpose to help the world run better and improve people's lives into action. As such, SAP CSR
+considers issues including the access, adoption, and application of 21st century skills for under-
+resourced people, communities, and nations, and the acceleration of social enterprises through
+innovation, adoption of organizational best practices, and market development. SAP CSR has three
+focus areas that create equitable access to economic opportunity, quality education, and
+employment:
+Vision and Strategy
+Social Investments
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+Accelerate social business
+Additional
+Information
+SAP
+To Our
+Stakeholders
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined Group
+To Our
+SAP Integrated Report 2021
+SAP
+116/338
+115/338
+The majority of the information in the Employees and Social Investments section was not part of the
+statuatory audit of our combined group management report by our external auditor. Only the
+quantitative indicators Business Health Culture Index, Employee Engagement Index, Employee
+Retention, Women in Management, as well as Headcount and Personnel Expense are audited at a
+reasonable assurance level. For the remaining content of the Employees and Social Investments
+section, our auditor performed a limited assurance engagement.
+QAudit Scope
+No material risks were identified through our framework which is detailed in the Risk Management
+Methodology and Reporting section.
+SAP Integrated Report 2021
+Related Risks for SAP
+Connect Employees with Purpose
+Focus Area
+In 2021, digital skill-building and coding programs trained 119,000 teachers and engaged 3.5 million
+underserved youth, of which 50% were girls. As part of the multi-stakeholder initiative Generation
+Unlimited (GenU), SAP and UNICEF have addressed several strategic areas within education since
+2019. The partnership continued to equip and empower young people with the 21st century digital
+and life skills they need to find suitable work. In 2021, SAP became a Founding Member of GenU,
+with SAP CEO Christian Klein joining the GenU Board. In India, under the umbrella of Code Unnati,
+SAP announced a partnership with Microsoft called TechSaksham. The program aims to provide
+62,000 young graduating women and 1,500 teachers with Industry 4.0 skills for careers in emerging
+technology by the end of 2022.
+Focus Area - Build Future Skills
+The pandemic accelerated the importance of collaboration and partnerships on a macro level in
+creating opportunities to build sustainable, resilient value chains. In support of SAP's 5 & 5 by '25
+social procurement initiative, SAP continued efforts to build capacity for social enterprises seeking to
+enter corporate supply chains through MovingWorlds' S-GRID program and engagement with the
+COVID-19 Response Alliance for Social Entrepreneurs.
+employees develop their leadership and social innovation skills by solving organizational challenges
+and offering business coaching.
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+In 2021, globally, SAP employees dedicated more than 100,000 volunteer hours, of which 76% were
+skills-based. SAP Together has 37,741 employees registered and offers 548 virtual volunteering
+projects. SAP CSR's employee engagement campaign, Month of Service, evolved to become
+Moments of Service. The campaign has a renewed focus on learning by offering employees virtual
+and on-site volunteering opportunities and speaker sessions with inspiring leaders inside and outside
+SAP. With a focus on year-round volunteering, employees can take action and deepen their
+understanding of social and environmental issues, what SAP is doing about them, and their capacity
+to impact as an individual.
+1,005
+Due to the COVID-19 pandemic and SAP's pledge to flexible, trust-based working styles, electricity
+consumption in our offices continued to be low as the majority of employees remained in a remote
+working model. Our total energy consumption 23 remains lower than before the COVID-19 pandemic.
+However, in light of an increasing external data center electricity consumption (including hyperscale
+services), the total amount of energy consumption has slightly increased year over year.
+Gigawatt hours (GWh)
+In addition, SAP supports numerous global Employee Network Groups that offer activities and
+events from which SAP can help attract and retain people from diverse backgrounds.
+Accessibility: SAP is designing a work experience where all employees feel that they belong and can
+contribute to a culture of equality and inclusion. A major component of this effort is creating
+accessibility in the workplace that removes barriers for differently abled persons. New technologies,
+such as eye-tracking are in our focus and will be continuously evaluated and implemented.
+Pushing Operational Excellence and Showcasing Human Experience
+Management to Customers
+Delivering engaging experiences for SAP's customers starts with our own workforce. A continued
+emphasis on operational excellence and experience management is key to delivering our human
+experience management (HXM) solutions and services efficiently, with both empathy and compliance.
+SAP runs SAP SuccessFactors-branded solutions as our global software to manage people data.
+Additionally, the adoption of Qualtrics solutions integrated with SAP SuccessFactors solutions enables
+us to determine ways to improve the experience of our candidates and employees along the
+employee journey. Such data insights are the fuel to leverage intelligent technologies such as
+SAP Conversational Al services on our SAP Careers site along with Brilliant Hire by SAP as a
+skills and interest-based matching engine for candidates to receive job recommendations from SAP.
+Our internal HR chatbot provides instant responses to HR-related questions to all SAP employees
+around the world, 24x7. Machine learning capabilities are leveraged to analyze the skills needed for
+the future, based on external and internal data sources to provide a decision framework for hiring and
+learning programs.
+Related Risks for SAP
+No material risks were identified through our framework which is detailed in the Risk Management
+Methodology and Reporting section.
+Headcount and Personnel Expense
+As at December 31, 2021, we employed 107,415 full-time equivalent (FTE) employees worldwide
+(2020: 102,430). This represents an increase in the workforce of 4,985 FTEs (914 thereof from
+acquisitions) in comparison to 2020. The average number of employees in 2021 was 104,364
+(2020: 101,476).
+We define headcount in FTE as the number of people on permanent employment contracts, taking
+into account their staffing percentage. Numbers disclosed in the Employees and Social Investment
+section are based on FTE or headcount. Students, individuals employed by SAP but currently not
+working for reasons such as maternity leave, and temporary employees on limited contracts of less
+than six months, are excluded from our figures. The number of temporary employees is not material.
+Our average personnel expense for each employee grew to approximately €149,000 in 2021 (2020:
+approximately €132,000). This increase is primarily due to an increase of share-based payment
+expenses. The personnel expense for each employee is defined as the overall personnel expense
+divided by the average number of employees. In 2021, we had 128 restructuring-related terminations
+(0.1%) compared to 1,037 in 2020 (1%).
+For more information about employee compensation and a breakdown of the components of
+personnel expense, see the Notes to the Consolidated Financial Statements, Note (B.1) and
+Note (B.2).
+26 Zero emission vehicles refer to a vehicle that does not emit exhaust gas or other pollutants from the onboard source of power.
+To generate a shift in alternative commuting habits, we continue to offer a company bike program in
+Germany, where employees can lease bicycles with the option of purchasing them after three years.
+In 2021, we expanded the mobility budget pilot to the whole of Germany to foster inter-/multimodal
+mobility. A pilot group of employees receives a monthly fixed mobility budget at their free disposal to
+use any mode of transport to commute to work or in their leisure time (bike, e-scooter, rental car, train,
+bus, and so on).
+inclusion efforts. The employee-driven Pride@SAP LGBTQ+ network also celebrated its 20th
+anniversary in 2021.
+We continuously expand SAP's global charging infrastructure (2021: >970 charging stations;
+2020: >900 charging stations).
+In selected locations, we offer employees a subsidy to install a charging point at home which
+deploys the new SAP E-Mobility solution to ease billing of the consumed electricity for both car
+fleet managers and employees.
+Consumption of fuel for our company cars remains the single greatest contributor to our direct
+emissions (Scope 1). To counteract this emission source, SAP released a new commitment in
+Q4/2021. We aim to enhance our climate protection measures by transitioning our global car fleet to
+electric or zero-emission 26 vehicles. From 2025 onwards, employees will no longer be able to order
+vehicles with internal combustion engines (ICEV) or plug-in hybrid electric vehicles (PHEV) as
+company cars. To ensure a carbon-neutral car fleet reflecting this new commitment, we continue to
+power all charging stations at SAP locations with 100% renewable electricity. We also continue and
+strengthen our incentive offers for our employees, for example:
+Corporate Cars and Commuting
+SAP also works with customers to optimize their on-premise landscapes so that they consume less
+energy. We achieve this by helping them decommission legacy systems, archive unused data,
+consolidate business applications, and virtualize their system landscape. In 2021, we started to
+develop a carbon footprint sizing approach with the aim of enabling our customers to gain
+transparency on the carbon impact of their SAP applications that run in SAP's internal and external
+data centers, answering the question of how much our customers can reduce their environmental
+footprint by running SAP solutions on SAP's green cloud compared to a cloud that is not powered by
+100% renewable electricity.
+The vast majority of our overall carbon emissions result from the use of our software. To address this,
+we have developed a downstream emissions strategy to help our customers, hardware providers, and
+others run greener operations. One of the most important ways we help our customers reduce their
+energy usage and emissions is by managing their SAP systems through cloud services provided by
+our carbon-neutral green cloud offerings. In addition, our SAP Cloud for Sustainable Enterprises
+offering bundles a broad portfolio of sustainability-related solutions, such as SAP Sustainability
+Control Tower, SAP Environment, Health, and Safety Management, and SAP Product
+Footprint Management, which enable our customers to collect, organize, and report financial and
+non-financial metrics or to manage their greenhouse gas footprint and resources, such as electricity,
+more efficiently.
+Sustainable Solutions and Products in Use
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+To Our
+Stakeholders
+Total Energy Consumption
+In Germany, we offer employees a battery subsidy that partially offsets the higher costs of an
+electric vehicle, and introduced "Charge at Home," a program to reimburse the employee's
+electricity costs for charging at home.
+Information
+Additional
+Further Information on
+Sustainability
+In 2021, SAP's Global Pandemic Taskforce continued to coordinate and adjust countermeasures
+against the pandemic around the globe, utilizing employee feedback based on regular remote pulse
+checks on how employees experience their individual situation. Another focus was on COVID-19
+111/338
+112/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+Vaccination Programs in many SAP locations, where we offered vaccinations free of charge to SAP
+employees, their dependents, and, in some instances, to the general public.
+Seeing the need for employees to unplug, April 27, 2021, was dedicated as Mental Health Day, a
+company-sponsored global vacation day for all employees. SAP provided the opportunity for all
+employees to take the time off for themselves and their families.
+In addition, SAP participates in the Healthy Workplaces Lighten the Load campaign by the
+European Agency for Safety and Health at Work, which enables leaders and employees to discover
+new ways to lighten the load of life's stressors by fostering healthy working and lifestyle habits for
+good physical and mental health.
+Innovation: In support of our entrepreneurial journey, SAP.IO accelerates, incubates, and scales
+startup innovation and explores new business models for SAP. In 2021, the SAP.IO intrapreneurship
+program continued to help identify high-potential entrepreneurial employees at SAP and was able to
+jump-start 275 venture ideas, seeking investment by the SAP.IO Venture Studio.
+Another initiative to foster innovation is the prestigious Hasso Plattner Founders' Award. It provides
+the highest internal employee recognition at SAP, based on the three categories: Go-To-Market,
+Operational Excellence, and Products and Technology. For 2021, the awards went to "Support
+Assistant: Delighting Customers by Solving Issues Faster" (Go-To-Market); “Cloud Health Score Based
+on Machine Learning" (Operational Excellence); and "SAP Information Collaboration Hub for Life
+Sciences" (Products and Technology). Winners were chosen from 192 nominations, with a total of
+1,260 employees participating from 42 countries.
+At SAP, we are always striving for inclusion and reflecting the diversity of society. As a global
+organization with 161 nationalities in our workforce, our aspiration is that SAP's employees mirror the
+diversity in society that includes the gender parity and demographics of all of the regions where we
+have employees. With our Diversity and Inclusion Strategy, we set our long-term focus to ensure
+we cover critical areas such as providing inclusive career journeys, creating a culture of inclusive
+collaboration, and improving our diverse ecosystem through supplier diversity efforts, an inclusive
+language campaign, and accessibility efforts.
+Gender inclusion, advancement, and equality: Currently, SAP's representation of women in the
+overall workforce is 34.3% (2020: 33.6%), with the representation of women in management roles at
+28.3% (2020: 27.5%). We continue to advance workplace equity through promoting inclusive policies
+on flexible work arrangements, enhanced parental leave benefits, and a focus on fair pay. We are
+present in the Bloomberg Gender-Equality Index in 2019, 2020, and again in 2021, confirming our
+commitment to gender equity.
+Autism inclusion: The Autism at Work program supports a workforce that includes 217 colleagues
+on the autism spectrum in 16 countries. The Autism Inclusion Network is an employee-led network
+group focused on spreading autism acceptance. The SAP Autism Inclusion Pledge extends SAP's
+autism inclusion endeavors by sharing what we have learned with our customer and partner
+ecosystem.
+Race and ethnicity: Back in 2016, SAP identified challenges with underrepresentation of Black,
+African American, Latinx, and Native American employees in the workforce. We created reporting to
+track our progress toward a better representation in accordance with required regulations in different
+countries and in line with our diversity and inclusion objectives. Among many efforts across the globe,
+this included the establishment of a new goal kicked off in 2020 to double the share of Black and
+African American employees in the workforce in the United States within the next three years. Built on
+the "Equality for All" initiative by the Human Rights Campaign, SAP supported the Spotlight Black
+Businesses program to showcase and promote small Black-owned businesses and introduce them
+to new audiences.
+LGBTQ+ inclusion: SAP was among the first supporters of the United Nations Global LGBTI
+Standards of Conduct for Business and has been named again the Top #1 employer in Germany's
+Pride Index. SAP has also been recognized by organizations including the Human Rights Campaign in
+the United States, the Pride Business Forum in the Czech Republic, and the Swiss LGBTI Label for our
+SAP Integrated Report 2021
+SAP
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+SAP
+120/338
+SAP Integrated Report 2021
+25 We formerly used the term „,Renewable Energy Certificates" (RECs) to refer to Energy Attribute Certificates.
+119/338
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP
+SAP Integrated Report 2021
+23 Before 2021, our total energy consumption graph covered direct energy consumption (Scope 1) and selected indirect energy
+consumption (Scope 2). In 2021, we added indirect energy consumption of our value chain (Scope 3) to all years shown.
+To become carbon neutral even in times of ongoing growth in our business, we continue to drive our
+three-pillar strategy of "avoid - reduce - compensate." In 2021, key initiatives following this approach
+included:
+To lead by example and continually improve the environmental footprint of its own operations, SAP
+has thus far implemented an environmental management system (EMS) at more than 50 sites in
+around 30 countries worldwide. The EMS is certified by the renowned ISO 14001:2015 standard and
+successfully maintained its certification in 2021. Its scope will be gradually increased from currently
+77% to 100% of SAP's major company-owned sites by 2025. To further increase our energy efficiency,
+selected sites such as SAP's headquarters in Germany also operate an ISO 50001:2018-certified
+energy management system.
+Our focus on climate action has contributed to a cumulative cost avoidance of €743.5 million in the
+past three years. We achieved 55% of this cost avoidance in 2021. Cost avoidance is a financial key
+figure that indicates the financial benefits of SAP's engagement in sustainability measures compared
+to a business-as-usual scenario where no sustainability measures have been implemented (base
+year: 2016).
+2020
+-21%
+7%
+879
+941
+2019
+2018
+2017
+-1%
+6%
+5%
+1,115
+2021
+As more business moves to the cloud, data centers play an increasing key role in SAP providing
+solutions to our customers. Running solutions on SAP data centers and completing thousands of
+cloud solution transactions per day requires central processing units (CPUs), memory, storage, and
+cooling, and therefore electricity - which ultimately results in carbon emissions. This is why our
+internal data centers have become a primary focus of our carbon reduction efforts.
+Facilities, Data Centers, and Renewable Electricity
+In 2014, SAP strengthened the integration of our environmental strategy into our business strategy by
+creating a "green cloud" - running all data centers with 100% renewable electricity. 24 This is one
+major step towards achieving carbon neutrality and upholding our commitment towards the RE100
+initiative. The term “data center" refers to both SAP-owned and external data centers (co-location data
+centers and hyperscalers).
+24 We also run all our SAP office facilities with 100% renewable electricity.
+2021
+2020
+2019
+2018
+2017
+157
+176
+177
+180
+We have introduced initiatives to drive efficiency and innovation with respect to our buildings, data
+center operations, and infrastructure (such as the installment of new co-generation units and the
+replacement of old back-up batteries with more efficient lithium-ion batteries in the data centers in
+St. Leon-Rot, Germany). At our SAP headquarters in Germany and North America, we operate our
+own data centers with an efficient power usage effectiveness (PUE) of 1.38. The PUE is a ratio that
+describes the efficiency of a data center, with 1.0 being the ideal.
+86
+185
+179
+138
+We realize our green cloud by using two strategic levers: On the one hand, by investing in very high-
+quality, EKOenergy-certified energy attribute certificates (EACs) 25 to foster renewable energy
+generation; and on the other hand, by producing renewable electricity in selective SAP locations
+worldwide through solar panels (such as Palo Alto, CA, in the United States, and Bangalore, India).
+Operating all our facilities and data centers with 100% renewable electricity allows us to compensate
+our entire electricity consumption-related emissions (2021: 219.5 kt). This is why customers can
+reduce their carbon emissions (Scope 3) by using our green cloud solutions and services.
+Total Data Center Electricity
+161
+Internal
+■ External
+Gigawatt hours (GWh)
+429
+361
+318
+265
+272
+338
+For more information, see the Security, Data Protection, and Privacy section.
+We expect suppliers and partners to respect human rights, and our codes of conduct require them to
+uphold labor rights and provide a safe and healthy work environment for all employees.
+For more information, see the Sustainable Procurement section.
+Product Development
+We seek to respect human rights throughout the product lifecycle – from design through development
+to use. Protection of personal information and accessibility are key areas of focus.
+Our innovative solutions help customers embed human rights standards into their own business. For
+example, they can use the SAP Ariba Supplier Risk solution to gain the intelligence and
+transparency to understand human rights risks within their supply chains.
+Suppliers and Partners
+To steer the ethical development, deployment, and sale of our Al solutions, we created SAP's Guiding
+Principles for Artificial Intelligence that we continue to evaluate and update in conjunction with an
+external advisory panel. Our guiding principles are an evolving reflection on the challenges of Al in an
+everchanging technological landscape. In January 2022, we rolled out a Global Al Ethics Policy to
+help ensure that our Al systems are developed, deployed, and sold in line with the ethical standards
+laid out in our guiding principles.
+Related Risks
+No material risks were identified through our framework which is detailed in the Risk Management
+Methodology and Reporting section.
+QAudit Scope
+The content of the section Human Rights and Labor Standards was not subject to the statutory audit
+of the combined group management report. However, our external auditor performed an independent
+limited assurance engagement for the content of this section.
+Al Ethics
+We encourage all employees, including groups at heightened risk of becoming disadvantaged or
+marginalized (also called “vulnerable groups") such as temporary external staff, to report conduct that
+violates our policies. Employees can reach out to their managers, HR officers, compliance officers, or
+colleagues who are trained to be part of our internal mediation pool. Our global ombudsperson also
+receives employee complaints and mediates fair settlements as well as helps our Executive Board
+analyze HR-related complaints and issues. Our complaints mechanisms (for example, our Speak Out
+at SAP tool) are also accessible to external groups.
+Assessing Human Rights Measures
+Employees
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+DAX Chief Compliance Officer Round Table. SAP is also a Corporate Member of the Association of
+Certified Fraud Examiners (ACFE).
+Guidelines and Policies
+Our Code of Business Conduct (COBC) provides the primary ethical and legal framework within
+which we conduct business and remain on course for success. It is adapted locally and translated into
+over 20 languages.
+We also expect our partners and suppliers to commit to meeting our high standards of integrity and
+sustainability. For this reason, we have the SAP Partner Code of Conduct and the SAP Supplier Code
+of Conduct in place so that partners and suppliers understand what is expected of them.
+How We Measure and Manage Our Performance
+Enforcing Policies and Guidelines
+The COBC is communicated to employees globally and contains a fundamental set of rules that
+define how we conduct our business. It sets SAP's standard for our dealings with each other and with
+customers, partners, competitors, and vendors. All of our employees are bound by it. In 2021, the
+policy was reviewed and revised. It is now called the Code of Ethics and Business Conduct and was
+rolled out globally in January 2022.
+Communication
+The OEC's dedicated communications team promotes a consistent distribution of integrity-related
+communications, at all levels of the Company - including senior leaders, managers, and front-line
+employees. Executive Board members and senior leaders regularly host all-hands meetings as well as
+leadership team meetings and smaller gatherings, which include integrity-focused topics,
+demonstrating their dedication to ethical business.
+All Board areas have re-committed their support for OEC's Compliance Ambassador Program and
+have nominated employees to participate in it. In 2021, a fourth cohort was introduced, bringing the
+number of participants from 177 in 2020 to over 500 in 2021. The program is designed to give
+employees a further point of contact in the business when compliance matters arise. Ambassadors
+participate in an extensive curriculum of monthly on-boarding sessions over a two-year period and are
+expected to cascade and transfer information on the importance of compliance and ethics throughout
+their teams and lines of business.
+Quarterly OEC newsletters provide all employees with information on a range of compliance-related
+topics. We also include at least one business ethics and compliance-related question in our annual
+employee engagement survey and in company-wide polls throughout the year. Employees can use
+the SAP One employee portal at any time to access all global policies, guidelines, and additional
+information. The SAP Compliance mobile app also provides convenient, ongoing access to
+compliance-related information.
+Training Offerings
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+Business Conduct
+126/338
+Vision and Strategy
+In an increasingly complex business environment, making the right decisions and abiding by ethical
+choices has never been more important. As a company operating in numerous countries across the
+globe, SAP is required to adhere to strict international legislation that defines acceptable business
+conduct and practices.
+Our training programs cover topics such as anticorruption and antibribery, competition law,
+governance for customer commitments, intellectual property, and information security.
+At SAP, we also expect our business practices to not only meet international rules and legal
+requirements, but to adhere to our internal high standards of ethics and integrity. We understand that
+our customers expect this as well. SAP's reputation for doing business the right way is one of our most
+important assets. By striving to make ethical choices and to stay within high bounds of compliance,
+we aim to continue to grow SAP in a way that encourages and is conducive to compliant and ethical
+behavior.
+Governance
+The Office of Ethics and Compliance (OEC) contributes to SAP's success by providing trusted
+advice to SAP managers, leaders, and employees across the entire business. The OEC strives to
+advance SAP's business goals by promoting a strong culture of integrity and helping SAP to "Win the
+Right Way" by providing guidance and training that enables employees to make ethical and compliant
+choices.
+In 2021, our aim to maintain a robust compliance program, based on our corporate values and
+voluntary commitments, as well as international standards, continued. The OEC team grew for the
+fourth consecutive year, from 123 employees in 2020 to 142 employees in 2021. The group chief
+compliance officer (GCCO) continues to report directly to the group CEO.
+At SAP, ethical behavior is an integral part of our cultural values that influence our daily decision-
+making at every level of the business. To help nurture this environment, the OEC's various teams
+continually address compliance challenges and improve policies, guidelines, systems, and measures
+related to their implementation.
+The OEC has field compliance officers based all around the world, in high-risk and low-risk
+jurisdictions, and in markets where there are local language needs. Field compliance officers are often
+the first point of contact for the business regarding compliance matters. In those high-risk countries in
+which the OEC is not physically represented, the OEC operates a network of compliance stewards
+drawn largely from either our legal, finance, or human resources (HR) departments. They are
+equipped to offer advice on specific and straightforward compliance questions, and they work
+alongside our global network of compliance ambassadors (drawn from all areas of the Company) to
+amplify compliance messages and provide a further link for local employees to the relevant field
+compliance officer.
+Compliance matters are discussed with senior leadership at quarterly Audit and Compliance
+Committee meetings as well as during regular touchpoints with Executive Board and Supervisory
+Board members. Compliance matters are also discussed by the GCCO in quarterly Global
+Compliance Governance Committee meetings.
+Where appropriate, and in response to identified compliance concerns, the OEC engages external
+counsel and forensic consulting resources to perform corruption risk assessments of high-risk market
+units. This process also includes a comprehensive root cause analysis for identified risks.
+Outside SAP, the OEC regularly exchanges ideas and best practices for compliance processes with
+relevant peers in the software industry and beyond. In Germany, the OEC participates in the annual
+Due Diligence
+Our "Five Pillars of Compliance” online training is mandatory for all employees wherever legally
+permissible.
+Monitoring employee certification of the CoBC for employees worldwide continued. During the 2021
+monitoring cycle, a 99.9% certification rate was recorded for permanent SAP employees (excluding
+newly acquired companies).
+-
+QAudit Scope
+The content of the Business Conduct section was not subject to the statutory audit of the combined
+group management report. However, our external auditor performed an independent limited
+assurance engagement for the content of this section.
+SAP
+SAP Integrated Report 2021
+To Our
+Our employees receive training on human rights issues most relevant to SAP. For example, they are
+trained on our policies on discrimination, health and safety management, and data protection and
+privacy.
+Stakeholders
+Management Report
+The actions and processes to address risks in business conduct are described above. For related
+risks, see also Ethical Behavior in the Risk Management and Risks section.
+Consolidated Financial
+Statements IFRS
+Additional
+Information
+Human Rights and Labor
+Standards
+Vision and Strategy
+SAP is committed to respecting and promoting human rights across our operations, extended supply
+chain, and product lifecycle, and we are guided by the United Nations (UN) Guiding Principles on
+Business and Human Rights in doing so. We also expect all of our business partners to respect
+human rights and avoid complicity in any abuse.
+Due Diligence
+Governance
+Our cross-company agenda on human rights is driven by SAP's Sustainability team. In 2021, we
+established a new project organization to respond to increasing legal requirements such as the
+German Supply Chain Due Diligence Act. The project organization comprises executives and
+employees from various Executive Board areas who embed human rights due diligence in their areas
+of responsibility. We regularly consult experts from academia, civil society, and industry in our external
+Sustainability Panel on how SAP can generate the greatest positive social impact.
+Further Information on
+Sustainability
+Combined Group
+Related Risks for SAP
+Where appropriate, the OEC engages the assistance of an external law firm when investigating
+conduct that may violate antibribery and anticorruption laws.
+Despite restrictions caused by the COVID-19 pandemic, field compliance officers continued to hold
+training sessions – albeit virtually – for employees across the organization, from customer-facing staff
+to individuals in supporting roles, such as corporate affairs and marketing.
+127/338
+128/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+For more information about the material allegations currently being investigated by the OEC, see the
+Notes to the Consolidated Financial Statements, Note (G.3).
+Consolidated Financial
+Statements IFRS
+Additional
+Information
+Compliance Processes
+The OEC also evaluates SAP's third-party service providers to check that SAP's compliance standards
+are met. New suppliers and third parties seeking a partnership with SAP are scrutinized according to a
+risk-based compliance due diligence process, which is repeated every two years thereafter. Supplier
+and partner relationships are formally defined in contracts that outline their obligation to abide by
+SAP's compliance requirements and a "right to audit" clause. The OEC also has a team dedicated to
+conducting compliance audits of partners and suppliers to assess adherence to SAP's requirements
+and to identify and address compliance risks.
+The OEC's Compliance Monitoring & Analysis (CMA) team monitors the effectiveness of SAP's
+compliance processes and controls through regular testing of high-risk transactions, identified using a
+recently introduced data analytics tool developed with PricewaterhouseCoopers GmbH (PwC) and
+through manual sampling. The CMA team also analyzes findings from investigations and partner audit
+reports to identify potential enterprise-wide process deficiencies and patterns of misconduct that
+indicate a compliance risk. The team then conducts root cause analyses on the highest-risk topics
+and recommends remediation actions to mitigate the risks.
+Whistleblower Reporting Tool
+In 2021, SAP replaced its existing whistleblower reporting tool with one that is independently
+managed, so that any matters or concerns can continue to be reported easily and anonymously. The
+new tool - Speak Out at SAP – is available both internally to SAP employees and externally to
+concerned parties.
+Reports may be submitted either directly by the reporter through the tool, or through the multilingual
+call center by an agent acting on the reporter's behalf. In all cases, SAP continues to operate a strict
+non-retaliation policy.
+Investigating Misconduct
+Further Information on
+Sustainability
+Stakeholders
+To Our
+SAP Integrated Report 2021
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+Related Risks for SAP
+We have analyzed climate change risks and their potential impact on our largest office buildings,
+major data centers, and SAP's workforce. Risk drivers were chosen based on the Intergovernmental
+Panel on Climate Change (IPCC) reports AR5 and SR15 (that is, rising sea levels, temperature
+extremes, and tropical storms). The risk assessment was performed in accordance with the SAP
+Global Risk Management Policy as outlined in the Risk Management and Risks section. As part of our
+last analysis in 2019, no material risks have been identified potentially impacting our business
+operations, revenue, or expenditure.
+QAudit Scope
+The content of the Energy and Emissions section was not subject to the statutory audit of our
+combined group management report. However, our auditor has performed an independent assurance
+engagement on the contents of this section. Under this engagement, the quantitative indicators
+Carbon Emissions (Scope 1 and 2 as well as selected Scope 3 emissions including business flights
+and employee commuting), Renewable Electricity, and Total Energy Consumed were audited at a
+reasonable assurance level. For the remaining content of this section, our auditor performed a limited
+assurance engagement.
+Combined Group
+Management Report
+SAP
+To Our
+Combined Group
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+Corporate Governance
+Fundamentals
+SAP Integrated Report 2021
+Corporate Governance Statement
+Stakeholders
+SAP Integrated Report 2021
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+To Our
+Carbon Offsets
+A key part of SAP's carbon offsetting strategy is the long-term investment in the Livelihoods Carbon
+Funds (LCF). The funds finance much-needed climate action and sustainable development in
+developing countries through ecosystem restoration, agroforestry, biodiversity preservation, and
+clean energy projects. This has generated high-quality carbon offsets certified by internationally
+recognized and demanding standards (such as the Gold Standard) and improved people's lives. In
+2020, SAP committed to invest €3 million in the third LCF and an additional €0.6 million in the first
+LCF. Due to the strong impact of the COVID-19 pandemic on our carbon emissions, we did not
+require our financial contribution to the LCF to offset our emissions in 2021. Instead, we used an
+investment in a nature-based forest project to compensate our emissions, the majority of which
+was were caused by business flights.
+In 2021, SAP made a US$2 million (€1.76 million) 27 commitment to the LEAF (Lowering Emissions
+by Accelerating Forest finance) Coalition, a public-private initiative seeking to mobilize US$1 billion
+to protect tropical forests in joint effort with national and subnational governments and local
+communities. LEAF issues emission reduction credits (ERCs) to its corporate partners that are
+verified and validated under the ART's (Architecture for REDD+ Transactions) TREES standard (The
+REDD+ Environmental Excellence Standard) to ensure high-quality offsets. Due to the ongoing
+funding process, LEAF does not yet offer carbon offsets.
+In addition to avoiding business flights by investing in virtual collaboration and communication
+technologies, we charge an internal carbon price for business flights in the majority of countries we
+travel from, to counterbalance the carbon emissions caused. Since 2016, we invest the collected
+internal air travel fees in high-quality carbon offsets (such as the Gold Standard) to support climate
+projects worldwide and compensate the adverse impact of necessary business flights. As a result,
+this measure has tangibly impacted our progress towards achieving our emission goals.
+Investments in sustainable projects and the corresponding carbon offsets represent a unit of reduced,
+avoided, or removed greenhouse gas emissions.
+Furthermore, SAP joined the 1t.org Corporate Alliance in 2021, which mobilizes business leaders to
+responsibly conserve, restore, and grow trees worldwide while pursuing 1.5 degrees Celsius science-
+based target. Restored and protected in the right places, trees and forests are invaluable in
+maintaining planetary stability, slowing climate change, safeguarding biodiversity, and providing critical
+ecosystem services to people around the world. Thus, SAP added the goal of planting 21 million
+trees by the end of 2025 to its comprehensive portfolio of climate measures and carbon-reducing
+innovations. This will help foster the much-needed transition to a nature-positive and net-zero future.
+Since 2012, SAP has helped to plant more than 12.2 million trees and is on track to reach its 2025
+goal.
+27 Exchange rate date: December 31, 2021.
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+To offset a share of our Scope 1 and Scope 3 emissions that cannot yet be avoided, we invest in
+different offset schemes with a strategic focus on nature-based solutions to compensate for these
+emissions (2021: 17.5 kt):
+The Artificial Intelligence (AI) Ethics Steering Committee guides our internal efforts to implement
+and enforce Al ethics in our operations and policies. It comprises SAP executives from all Executive
+Board areas with supervision of topics relevant to guiding and implementing Al ethics. Also made up
+of experts from academia, industry, and public policy, our external Al Ethics Advisory Panel advises
+us on how to further develop and operationalize our guiding principles for Al.
+The German Commercial Code, section 315d in connection with section 289f, requires that, as a listed
+company, SAP SE publishes a corporate governance statement either as part of our management
+report or on our Web site. The Executive Board and the Supervisory Board of SAP SE issued the
+Corporate Governance Statement on February 22, 2022, and published it on our Web site at
+www.sap.com/corporate-en/investors/governance.
+Since January 1, 2021, Sabine Bendiek has served as chief people officer and labor relations director
+and has led the Human Resources organization. In mid-2021, she assumed additional responsibility
+and became SAP's chief people and operating officer.
+Material agreements with change-of control-provisions: SAP SE has concluded the following
+material agreements with provisions that take effect in the event of a change of control, whether
+following a takeover bid or otherwise:
+SAP Integrated Report 2021
+SAP
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+The Annual General Meeting of Shareholders on May 17, 2018, granted a power to the Executive
+Board in accordance with the German Stock Corporation Act, section 71 (1)(8), to buy back for
+treasury on or before May 16, 2023, SAP SE shares attributable in total to not more than €120 million
+of the share capital. This power is subject to the proviso that the shares repurchased, together with
+any shares that were previously acquired and are still held by SAP in treasury and any other shares
+controlled by SAP, must not in total exceed 10% of SAP's share capital. Executive Board powers, such
+as those described to issue and repurchase stock and to grant rights of conversion and subscription to
+shares of SAP, are widely followed common practice among German companies such as SAP. These
+powers give the Executive Board the flexibility it needs, in particular, the option to use SAP shares as
+consideration in equity investments, raise funds on the financial markets at short notice on favorable
+terms, or return value to shareholders during the course of the year.
+Additional
+The terms of SAP's syndicated €2.5 billion revolving credit facility include a change-of-control clause.
+For more information about this syndicated credit facility, see the Notes to the Consolidated Financial
+Statements, Note (F.1). This clause obliges SAP SE to notify the banks in case of a change of control.
+If, on receiving the notification, banks that represent at least two-thirds of the credit volume so require,
+the banks have the right to cancel the credit facility and demand complete repayment of the
+outstanding debt. If no continuation agreement is reached, the credit facility would end and the
+obligation to repay would become effective at an ascertainable time.
+SAP had bonds totaling €9.6 billion and US$0.3 billion outstanding as at December 31, 2021. For
+more information about SAP's bonds, see the Notes to the Consolidated Financial Statements,
+Note (E.3). Under the terms agreed with the buyers, we are required to notify the buyers, without
+delay, of any change of control. If there is a change of control and SAP is consequently assigned a
+lower credit rating within a defined period, buyers are entitled to demand repayment.
+Under the terms of our U.S. private placements totaling approximately US$0.87 billion as at
+December 31, 2021, we are required to offer lenders repayment of outstanding debt if there is a
+change of control and SAP is consequently assigned a lower credit rating within a defined period. For
+more information about these private placements, see the Notes to the Consolidated Financial
+Statements, Note (E.3). Lenders would have up to 30 days to accept the offer.
+To finance the acquisition of Signavio GmbH and create additional financial flexibility during the
+COVID-19 pandemic, SAP took out two bilateral bank loans amounting to €0.95 billion and €0.5 billion
+at the beginning of 2021, both of which were fully outstanding as at December 31, 2021. Both loan
+agreements contain a change-of-control clause which obliges SAP SE to notify the bank in case of a
+change of control. On receiving the notification, the bank has the right to cancel the loan agreement
+and demand complete repayment of the outstanding debt. If no continuation agreement is reached,
+the loan agreement would end and the obligation to repay would become effective at an
+ascertainable time.
+We have entered into relationships with other companies to jointly develop and market new software
+products. These relationships are governed by development and marketing agreements with the
+respective companies. Some of the agreements include provisions that, in the event of a change of
+control over one of the parties, give the other party a right to consent to the assignment of the
+agreement or to terminate it.
+Change-of-control provisions in Executive Board compensation agreements: Agreements have
+been concluded with the members of the Executive Board of SAP SE concerning compensation in the
+event of a change of control. These agreements, which are customary internationally, are described in
+the Compensation Report. We have no analogous compensation agreements with our other
+employees.
+125/338
+SAP
+Information
+Changes in Management
+Power to issue and repurchase shares: The Annual General Meeting of Shareholders on
+May 12, 2021, granted powers to the Executive Board, subject to the consent of the Supervisory
+Board, to issue convertible and/or warrant-linked bonds, profit-sharing rights and/or income bonds (or
+combinations of these instruments), and to grant conversion or option rights in respect of SAP SE
+shares representing a total attributable portion of the share capital of not more than €100 million
+secured by a corresponding amount of contingent capital. These powers will expire on May 11, 2026.
+The Executive Board is also authorized until May 19, 2025, to increase the share capital by not more
+than €250 million by issuing new shares against contributions in cash and to increase the share
+capital by not more than €250 million by issuing new shares against contributions in cash or in kind.
+For more information about the different tranches of authorized capital and the aforementioned
+contingent capital, see the Articles of Incorporation, section 4.
+Information
+In January 2021, SAP announced that Julia White and Scott Russell had been appointed to the
+Executive Board. On February 1, 2021, Scott Russell took over the Customer Success organization
+from Adaire Fox-Martin, who departed the Executive Board at the end of January 2021 and left the
+Company at the end of June 2021. Julia White joined the Executive Board effective March 1, 2021,
+and took up the newly created Board role of chief marketing and solutions officer.
+Information Concerning Takeovers
+Information required under the German Commercial Code, sections 289a (1) and 315a (1), with an
+explanatory report:
+Composition of share capital: For information about the composition of SAP SE's share capital as
+at December 31, 2021, see the Notes to the Consolidated Financial Statements, Note (E.2). Each
+share entitles the bearer to one vote. American depositary receipts (ADRs) representing our shares are
+listed on the New York Stock Exchange (NYSE) in the United States. ADRs are certificates
+representing non-U.S. shares and are traded on U.S. stock exchanges instead of the underlying
+shares. One SAP ADR corresponds to one SAP share.
+Restrictions applying to share voting rights or transfers: SAP shares are not subject to transfer
+restrictions. SAP held [48,924,892] treasury shares as at December 31, 2021 (see the Notes to the
+Consolidated Financial Statements, Note (E.2)). Treasury shares do not carry voting rights or dividend
+rights or other rights. We are not aware of any other restrictions applying to share voting rights or to
+share transfers.
+Shareholdings that exceed 10% of the voting rights: We are not aware of any direct or indirect
+SAP SE shareholdings that exceed 10% of the voting rights.
+Shares with special rights conferring powers of control: No SAP shareholder has special rights
+conferring powers of control.
+Type of control over voting rights applying to employee shareholders who do not directly
+exercise their control rights: As with other shareholders, employee holders of SAP shares exercise
+their control rights in accordance with the law and the Articles of Incorporation. In votes on the formal
+approval of their acts at the Annual General Meeting of Shareholders, employee representatives on
+the Supervisory Board, as all other members of the Supervisory Board, are prohibited from exercising
+the voting rights associated with their shares.
+Requirements concerning appointments and dismissals of members of the Executive Board
+and amendments to the Articles of Incorporation: Conditions for the appointment and dismissal
+of members of the Executive Board and amendments to the Articles of Incorporation reflect the
+relevant provisions of applicable European and German law, including Council Regulation (EC)
+No. 2157/2001 on the Statute for a European Company ("SE Regulation") and the German Stock
+Corporation Act. Under the Articles of Incorporation, the Executive Board consists of at least two
+members, who are appointed for a period of not more than five years by the Supervisory Board in
+accordance with the SE Regulation, articles 39 and 46. The number of members of the Executive
+Board is decided by the Supervisory Board. Executive Board members may be reappointed for, or
+their term of office extended by, a maximum of five years. A simple majority of the Supervisory Board
+members is required for Executive Board appointments. In the event of a tie, the chairperson of the
+Supervisory Board has the deciding vote. The Supervisory Board can appoint a chairperson of the
+Executive Board and one or more deputy chairpersons from among the members of the Executive
+Board. The Supervisory Board can revoke appointments to the Executive Board in accordance with
+the SE Regulation, article 9, and the German Stock Corporation Act, section 84, if compelling reasons
+exist, such as gross negligence on the part of the Executive Board member. If the Executive Board is
+short of a required member, one may be appointed in urgent cases by a court in accordance with the
+SE Regulation, article 9, and the German Stock Corporation Act, section 85. In accordance with the
+SE Regulation, article 59, and the German Stock Corporation Act, section 179, an amendment of the
+Articles of Incorporation requires a resolution of the General Meeting of Shareholders with a majority
+of at least three-quarters of the valid votes cast. For any amendments of the Articles of Incorporation
+that require a simple majority for stock corporations established under German law, however, the
+simple majority of the valid votes cast is sufficient if at least half of the subscribed capital is
+represented or, in the absence of such quorum, the majority prescribed by law (that is, two-thirds of
+the votes cast, pursuant to article 59 of the SE Regulation) is sufficient. Section 11 (2) of the Articles of
+Incorporation authorizes the Supervisory Board to amend the Articles of Incorporation where such
+amendments only concern the wording.
+123/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+124/338
+Guidelines
+Combined Group
+Stakeholders
+How We Measure and Manage Our Performance
+To assess our human rights measures, we consider legal requirements, performance ratings, audit
+results, and stakeholder feedback. For example, since 2012, we have conducted regular internal
+audits to help us verify that subsidiaries adhere to human rights standards, and check whether
+employees feel empowered to raise concerns.
+At the end of 2021, we started a labor audit at SAP China, whereby we reviewed labor conditions,
+wages and hours, health and safety, environmental management system, and business practices. The
+audit has been subject to finalization in the first quarter of 2022. We plan to adapt our global internal
+audit program based on recent legal requirements.
+We support the Universal Declaration of Human Rights; the Organization for Economic Co-operation
+and Development (OECD) Guidelines for Multinational Enterprises; and the International Labor
+Organization Declaration on Fundamental Principles and Rights at Work. The SAP Global Human
+Rights Commitment Statement is our public commitment to respecting and promoting human rights
+across our value chain. Overseen by our chief sustainability officer and approved by our Executive
+Board, the current version of the Human Rights Commitment Statement is available at
+www.sap.com/corporate-sustainability.
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+129/338
+To Our
+SAP Integrated Report 2021
+SAP
+130/338
+-
+SAP has established measures intended to address and mitigate the described risks and adverse
+effects, such as:
+Discriminatory, protectionist, or conflicting fiscal policies and tax laws
+Any of these events could have a material adverse effect on our operations globally or in one or more
+countries or regions, which could have a material adverse effect on our business, financial position,
+profit, and cash flows.
+As we expand into new countries and markets or extend our business activities in these markets,
+including emerging and high-risk markets, these risks could intensify. The application of the respective
+local laws and regulations to our business is sometimes unclear, subject to change over time, and
+often conflicting among jurisdictions. Additionally, these laws and government approaches to
+enforcement continue to change and evolve, just as our products and services continually evolve.
+Compliance with these varying laws and regulations could involve significant costs or require changes
+in products or business practices. Non-compliance could result in the imposition of penalties or
+cessation of orders due to alleged non-compliant activity. Governmental authorities could use
+considerable discretion in applying these statutes and any imposition of sanctions against us could be
+material.
+Expenses associated with the localization of our products and compliance with varying and
+potentially conflicting local regulatory requirements
+Information
+Further Information on
+Sustainability
+We continuously monitor new and increased regulatory requirements, updated or new enforcement
+trends, and publicly available information on compliance issues in the computer software industry,
+in the emerging markets where we invest our resources, and in the business environment in
+general to cope with an increase in regulation enforcement efforts of certain countries or state-
+driven protectionism.
+We continuously invest and strive to improve, harmonize, and standardize our global processes,
+procedures, and solutions to increase our efficiency and effectivity in meeting the various legal
+requirements to ensure compliance, while also utilizing scenario impact analyses.
+We have established a dedicated unit within our Global Legal organization that proactively
+assesses newly emerging regulatory initiatives, advises internal departments on these initiatives,
+and supports their swift adherence thereto.
+We receive guidance from external economic consultants, law firms, tax advisors, and authorities in
+the concerned countries, and take legal actions when necessary.
+Moreover, protecting and defending our intellectual property is crucial to our success. The outcome of
+litigation and other claims or lawsuits is intrinsically uncertain.
+We have in the past and believe that we will continue to be subject to claims and lawsuits, including
+intellectual property infringement claims, as our solution portfolio grows; as we acquire companies
+with increased use of third-party code including open source code; as we expand into new industries
+with our offerings, resulting in greater overlap in the functional scope of offerings; and as non-
+practicing entities that do not design, manufacture, or distribute products assert intellectual property
+infringement claims.
+Legal and IP: Claims and lawsuits against us, such as for IP infringements, or our inability to
+obtain or maintain adequate licenses for third-party technology, or if we are unable to protect
+or enforce our own intellectual property, may result in adverse outcomes.
+We cannot exclude the possibility that if risks of this risk factor were to occur, the impact could be
+business-critical. We estimate the probability of occurrence to be unlikely. We classify this risk factor
+as medium.
+OEC coordinates and provides guidance on implementation, training; and enforcement efforts with
+respect to compliance-related policies throughout SAP, including but not limited to the Third-Party
+Sales Commission Policy and accompanying training.
+Additional
+Information
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Combined Group
+Consolidated Financial
+Statements IFRS
+To Our
+Stakeholders
+SAP
+140/338
+139/338
+We regularly update and enhance our compliance programs to improve our effectiveness and to
+ensure that our employees understand and comply with the SAP Code of Business Conduct
+(COBC). This process is coordinated by the OEC.
+We continue efforts to strengthen the Export Control team and continue with our cross-Board
+project to overhaul SAP's export control and trade sanctions policies, operations, and controls, to
+safeguard compliance with applicable EU and U.S. laws in all delivery channels both on premise
+and in the cloud.
+We maintain a data protection and privacy office and associated policy.
+We have a legal and compliance office presence in various countries, with compliance safeguards
+supported and monitored by our Office of Ethics & Compliance (OEC), a team of dedicated
+resources who are tasked with managing our policy-related compliance measures.
+We conduct audits based on various audit standards on a regular basis to identify and remediate
+issues early on.
+We engage with authorities on public policy issues, including the creation of reasonable framework
+conditions for new technologies such as cloud computing, Big Data, artificial intelligence, the
+Internet of Things (IoT), and for international trade.
+SAP Integrated Report 2021
+We are subject to risks and associated consequences in the following areas, among others:
+Management Report
+To Our
+Stakeholders
+Impact Level
+Impact Definition
+Insignificant
+Minor
+Moderate
+Major
+Business-Critical
+Negligible negative impact on business, financial position, profit, and/or
+cash flows
+Limited negative impact on business, financial position, profit, and/or
+cash flows
+Additional
+Information
+Some potential negative impact on business, financial position, profit,
+and/or cash flows
+Detrimental negative impact on business, financial position, profit, and/or
+cash flows
+Impact
+From €0 to €25 million
+From €25 million to
+€50 million
+From €50 million to
+€100 million
+From €100 million to
+€500 million
+From €500 million
+The combination of the likelihood that a risk will occur and its impact on SAP's reputation, business,
+financial position, profit, and/or cash flows leads to a subsequent classification of the risk as either
+"high," "medium," or "low."
+Probability
+Considerable negative impact on business, financial position, profit,
+and/or cash flows
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+SAP Integrated Report 2021
+SAP
+Compliance with and stringent enforcement of laws and regulations (including interpretations),
+implications of government elections, lack of reforms, data protection and privacy rules, regulatory
+requirements and standards (such as the Payment Card Industry Data Security Standard [PCI
+DSS]), other compliance requirements (such as Service Organization Controls [SOC]), or
+sometimes even country-specific certifications or requirements in particular for cloud service
+provider or data center operations
+Violations of country-specific sanctions
+Protectionist trade policies, import and export regulations, and trade sanctions, counter or even
+conflicting sanctions, and embargoes including, but not limited to, country-specific software
+certification requirements
+40% to 59%
+60% to 79%
+80% to 99%
+Description
+Remote
+Unlikely
+Likely
+Highly Likely
+Near Certainty
+The period for analyzing our risks correlates with that of the respective associated business activities,
+considering a relevant forecast horizon. The period for analyzing risks that could be possible threats to
+the Group's ability to continue as a going concern is eight rolling quarters.
+133/338
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+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Claims and lawsuits might be brought against us.
+Workforce restrictions and travel bans resulting from changing laws and regulations, from political
+decisions, or through required works council involvements, labor union approvals, and immigration
+laws in different countries
+Third parties have claimed, and might claim in the future, that we infringe their intellectual property
+rights or that we are overusing or misusing licenses to these technologies.
+In accordance with the COSO framework, SAP's enterprise risk management covers risks in the areas
+of strategy, operations, finance, and compliance which also covers ethical behavior, corporate
+governance, and sustainability.
+Our Global Risk Management Governance Framework
+The risk management governance framework at SAP represents a comprehensive system of
+approaches and processes to ensure control through a clearly structured risk management system
+and a supporting risk culture. The risk culture is considered the basis of SAP's risk management
+system. Risk culture at SAP comprises a system of values, beliefs, knowledge, attitudes, and
+understanding concerning risks and risk management as part of our corporate culture. To support and
+131/338
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+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+continuously foster SAP's risk culture, we conduct risk activities for the entire SAP organization such
+as mandatory training in ethical behavior, code of conduct, and risk management.
+Our Executive Board is responsible for ensuring the effectiveness of the internal control system and
+the risk management system. The effectiveness of both systems and their implementation in the
+different Board areas is monitored by each Executive Board member. The Audit and Compliance
+Committee of the Supervisory Board regularly monitors the effectiveness of SAP's internal control and
+risk management systems. Our Global Risk & Assurance Services (GR&AS) organization regularly
+provides a status update on the internal control and the risk management systems to the Audit and
+Compliance Committee of the Supervisory Board. Every year, SAP's external auditors assess as to
+whether the SAP Group early-warning system for risk detection is adequate to identify risks that might
+endanger our ability to continue as a going concern. Additional assurance is obtained through the
+external audit of the effectiveness of our system of internal controls over financial reporting.
+Our Global Risk Management Policy
+Our risk management system is based on the framework published by the Committee of Sponsoring
+Organizations of the Treadway Commission (COSO) entitled “Enterprise Risk Management -
+Integrating with Strategy and Performance." Updated in 2017, this framework is built on four pillars,
+which include a global risk management governance framework, a dedicated risk management policy,
+a global risk management organization, and a standardized risk management methodology.
+The risk management policy, updated in June 2021, stipulates responsibilities for conducting risk
+management activities and defines reporting and monitoring structures. Our global SAP risk
+management policy clearly states that each employee is responsible for active engagement in the risk
+management process as well as for the continuous identification of risks, based upon clear rules of
+engagement in adherence to the policy. The risk management system primarily analyzes risks.
+Opportunities are assessed or analyzed where it is deemed appropriate.
+Risk Management Pillars
+Risk Management Policy and Framework
+SAP
+SAP Integrated Report 2021
+To Our
+Combined Group
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+Risk Management and Risks
+Our Risk Management
+Internal Control and Risk Management Systems
+As a global company, SAP is exposed to a broad range of risks across our business operations.
+Consequently, our Executive Board has established comprehensive internal control and risk
+management structures that enable us to identify and analyze risks early and take appropriate action.
+Our internal control and risk management systems are designed to identify potential events that could
+negatively impact the Company and to provide reasonable assurance regarding the operating
+effectiveness of our internal controls over our financial reporting.
+These systems comprise numerous control mechanisms and are an essential element of our
+corporate decision-making process; they are therefore implemented across the entire Group as an
+integral part of SAP's business processes. We have adopted an integrated internal control and risk
+management approach to help maintain effective global risk management while also enabling us to
+aggregate risks and report on them transparently.
+In addition, we have a governance model in place across the internal control and risk management
+systems to ensure both are effective, as well as a central software solution to store, maintain, and
+report all risk-relevant information.
+Legal and Regulatory Requirements
+Due to our public listings in both Germany and the United States, we are subject to both German and
+U.S. regulatory requirements that relate to internal controls and risk management over financial
+reporting, such as provisions in the German Stock Corporation Act, section 91 (2), and the U.S.
+Sarbanes-Oxley Act (SOX) of 2002, specifically sections 302 and 404. Hence, our Executive Board has
+established an early warning system (risk management system) to enable compliance with applicable
+regulations.
+The risk management policy issued by our Executive Board governs how we manage risk in line with
+the Company's risk appetite and defines a methodology that is applied uniformly across all parts of
+the Group.
+Our Global Risk Management Organization
+Our global risk management organization is responsible for the implementation of a Group-wide
+effective risk management system. Furthermore, GR&AS is responsible for the regular maintenance
+and implementation of our risk management policy, as well as the standardized internal and external
+risk reporting.
+All GR&AS risk managers, working with assigned risk contacts in the relevant business units, identify
+and assess risks associated with material business operations using a uniform approach and monitor
+the implementation and effectiveness of the measures chosen to mitigate risks.
+KO
+Risk Planning
+Based on SAP's risk management policy and framework, the risk planning phase serves to align on
+the definition and assignment of roles and responsibilities, the definition of risk-relevant business
+activities (such as processes, projects or other aspects affecting Company assets), the determination
+of objectives and value drivers, the planning of risk assessments, and the determination of adequate
+information flow.
+Risk planning and risk identification for internal and external risks are conducted jointly by GR&AS risk
+managers and the relevant business units or SAP entities.
+Risk Assessment
+A risk assessment covers the identification and analysis of a risk, as well as the determination of a
+response to that risk. We use various approaches to identify risks. For example, we have identified risk
+indicators and have developed a comprehensive risk catalog that includes risk mitigation strategies.
+Risk identification takes place at various levels of our organization to ensure that common risk trends
+are identified and end-to-end risk management across organizational borders is enabled. We apply
+both qualitative and quantitative risk analyses and other risk analysis methods such as sensitivity
+analyses and simulation techniques.
+To determine which risks pose the greatest threat to the viability of the SAP Group, we classify them
+as high, medium, or low based on the likelihood that a risk will occur within the assessment horizon
+and the impact the risk would have on SAP's business objectives if it were to occur.
+The scales for measuring these two indicators are given in the following tables.
+Probability/Likelihood of Occurrence
+1% to 19%
+20% to 39%
+Insignificant
+The outcome of litigation and other claims or lawsuits is intrinsically uncertain. Management's view of
+the litigation might also change in the future. Actual outcomes of litigation and other claims or lawsuits
+Any legal action we bring to enforce our proprietary rights could also involve enforcement against a
+partner or other third party, which might have an adverse effect on our ability, and our customers'
+ability, to use that partner's or other third party's products.
+Third parties might reverse-engineer or otherwise obtain and use technology and information that we
+regard as proprietary. Accordingly, we might not be able to protect our proprietary rights against
+unauthorized third-party copying or utilization. Adverse outcomes to some or all of the claims and
+lawsuits pending against us might result in the award of significant damages or injunctive relief against
+us or brought against us in the future that could hinder our ability to conduct our business and could
+have a material adverse effect on our reputation, brand, business, competitive or financial position,
+financial performance, profit, and cash flows. Third parties could require us to enter into royalty and
+licensing arrangements on terms that are not favorable to us, cause product shipment delays, subject
+our products to injunctions, require a complete or partial redesign of products, result in delays to our
+customers' investment decisions, and damage our reputation. Third-party claims might require us to
+make freely accessible under open source terms one of our products or third-party (non-SAP)
+software upon which we depend.
+Despite our efforts, we might not be able to prevent third parties from obtaining, using, or selling
+without authorization what we regard as our proprietary technology and information. In addition,
+proprietary rights could be challenged, invalidated, held unenforceable, or otherwise affected.
+Moreover, the laws and courts of certain countries might not offer effective means to enforce our
+legal or intellectual property rights. Finally, SAP may not be able to collect all judgments awarded
+to it in legal proceedings.
+We integrate open source software components from third parties into our software. Open source
+licenses might require that the software code in those components or the software into which they
+are integrated be freely accessible under open source terms.
+Closing
+Reporting
+Validation
+and Monitoring
+Response
+Further financial risk management activities are performed for example by our Global Treasury and
+Global Tax departments. General legal risks are managed by the Global Legal department. Sanction
+and embargo-related risks are managed by the Export Control department, harassment and other HR-
+related issues by our Global Labor & Employee Relations Office, security-related risks by our SAP
+Global Security Office, and IP risks by our Global IP Office. All risks are tracked, maintained, and
+reported within SAP's risk management system.
+During the merger and acquisition and post-merger integration phase, newly acquired companies are
+subject to risk management performed by our Corporate Development M&A function. Furthermore, for
+as long as the newly acquired companies are not integrated, existing risk management structures are
+maintained or enhanced within the acquired companies for the purposes of compliance with legal
+requirements.
+The exposure of SAP business units to potential compliance risks is reviewed on a regular basis.
+Quantitative and qualitative internal data as well as external information, such as the Transparency
+International Corruption Perceptions Index, are considered in our wider compliance risk analysis.
+Based on this information, we performed a detailed assessment for all SAP-relevant high-risk
+countries and derived local as well as global mitigations.
+The GR&AS unit, led by the Chief Risk Officer, also acting as chief audit executive, combines internal
+audit, SOX, internal controls and global governance, risk, and compliance. The Chief Risk Officer
+reports to our Group CFO and is responsible for SAP's internal control and risk management
+programs.
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+We might become dependent in the aggregate on third-party technology, including cloud and Web
+services, that we embed in our products or that we resell to our customers.
+Management Report
+Further Information on
+Sustainability
+Additional
+Information
+Risk Management Methodology and Reporting
+The illustration below describes the key elements of the risk management process under SAP's risk
+management policy.
+Risk Assessment
+Planning
+Identification
+Analysis
+Consolidated Financial
+Statements IFRS
+(€0 to €25 million)
+Additional
+Moderate
+(€50 million to
+€100 million)
+Medium
+Operational Business Risks
+Sales and Services
+Unlikely
+Major
+Medium
+Partner Ecosystem
+Likely
+Major
+Medium
+Cybersecurity and Security
+Likely
+Business-Critical
+High
+Technology and Products
+Likely
+Major
+Medium
+Strategic Risks
+Major
+Market Share and Profit
+Likely
+Corporate Governance and Compliance Risks
+Impact
+Risk Level
+Economic, Political, Social, and Regulatory Risks
+Global Economic and Political Environment
+Likely
+Major
+Medium
+International Laws and Regulations
+Unlikely
+Business-Critical
+Medium
+Legal and IP
+Likely
+Major
+Medium
+Data Protection and Privacy
+Likely
+Major
+Medium
+Ethical Behavior
+Probability
+Unlikely
+Medium
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+Any of these events could limit our ability to reach our targets, as they could have a material adverse
+effect on our business operations, our business in general, our financial position, profit, and cash
+flows.
+SAP has established measures intended to address and mitigate the described risks and adverse
+effects, such as:
+Ongoing shift to a higher share of cloud subscriptions and software support revenue streams,
+which will lead to more predictable revenue streams over time, providing increased stability against
+financial volatility
+- Internal cost discipline and a conservative financial planning
+Reshaping of our organizational structure and processes to increase flexibility and efficiency
+Monitoring and evaluation of global and political developments, supported by our global
+government affairs unit, to share insights and provide guidance to allow for proactive preparation
+and timely mitigation
+We cannot exclude the possibility that if risks of this risk factor were to occur, the impact could be
+major. We estimate the probability of occurrence to be likely. Such occurrence could exacerbate the
+other risks we describe in this report or cause a negative deviation from our revenue and operating
+profit target. We classify this risk factor as medium.
+International Laws and Regulations: Laws, regulatory requirements and standards in
+Germany, the United States, and elsewhere continue to be very stringent. Our international
+business activities and processes expose us to numerous and often conflicting laws and
+regulations, policies, standards, or other requirements and sometimes even conflicting
+regulatory requirements.
+The SAP Group has a global presence and operates in most countries of the world. As a European
+company domiciled in Germany with securities listed in Germany and the United States, we are
+subject to European, German, U.S., and other governance-related regulatory requirements of
+countries we operate in.
+Our business is subject to numerous risks inherent to international business operations. We are
+subject to risks and associated consequences in the following areas, among others:
+Changes in tax laws and changes in the interpretation of the complex tax rules in certain countries,
+impacting our business situation, financial condition, and results of operations
+Changes in external reporting standards and tax laws including, but not limited to, conflict and
+overlap among tax regimes as well as the introduction of new tax concepts that harm digitalized
+business models
+SAP
+Business-Critical
+138/338
+Regional conflicts, which may affect data centers as critical infrastructure assets
+Mergers and Acquisitions
+Unlikely
+Major
+Medium
+Innovation
+Unlikely
+Major
+Medium
+Economic, Political, Social, and Regulatory Risks
+Global Economic and Political Environment: Uncertainty in the global economy, financial
+markets, and social and political instability caused by state-based conflicts, terrorist attacks,
+civil unrest, war, or international hostilities could lead to disruptions in our business.
+As a global company, we are influenced by multiple external factors that are difficult to predict and
+beyond our influence and control. Any of these factors could have a significant adverse effect on the
+global economy as well as on our business.
+We are subject to risks and associated consequences in the following areas, among others:
+General economic, political, social, environmental, public health, and market developments, and
+general unrest
+Prolonged deterioration of global economic conditions (impact on accurate forecast) or budgetary
+constraints of national governments
+Diplomatic confrontations, frictions, trade or tariff conflicts with potential global implications as
+indicated by a prolonged and widespread economic slowdown
+Financial market volatility episodes, global economic crises, chronic fiscal imbalances, slowing
+economic conditions, or disruptions in emerging markets
+Higher credit barriers for customers, reducing their ability to finance software purchases
+Increased number of foreclosures and bankruptcies among customers, business partners, and key
+suppliers
+Terrorist attacks or other acts of violence, civil unrest, pandemics, or natural disasters, impacting
+our business
+137/338
+Minor
+(€25 million to
+€50 million)
+Overview of Risk Factors (Aggregated Statement for 2021)
+The following sections outline our risk categories and risk factors that we have identified and
+continuously track. To further streamline our integrated report, we disclose material and relevant risks
+and focus on "major" and "business-critical" risk factors as per our assessment. Thus, the following risk
+factors are not included in the Integrated Report 2021 as they do not currently fall into either the
+"major" or "business-critical” category: Corporate Governance; Sustainability; Taxation; Sales and
+Revenue Conditions; Liquidity; Use of Accounting Policies and Judgment; Currency, Interest Rate, and
+Share Price Fluctuation; Insurance and Venture Capital; Unauthorized Disclosure of Information;
+Investor Relations; Corporate Affairs; Marketing; Corporate Development; Portfolio; SAP Strategy;
+Cloud Operations; Human Workforce; and Government Security & Secrecy.
+Our internal control system consists of the internal control and risk management system for financial
+reporting (ICRMSFR), which also covers the broader business environment and is part of the overall
+risk management system of SAP. Using the current COSO Internal Control - Integrated Framework of
+2013, we have defined and implemented internal controls along the value chain on a process and
+subprocess level to ensure that sound business objectives are set in line with the organization's
+strategic, operational, financial, and compliance goals.
+The purpose of our system of internal control over financial reporting is to provide reasonable
+assurance that our financial reporting is reliable and compliant with generally accepted accounting
+principles. Because of the inherent limitations of internal control over financial reporting, it might not
+prevent or bring to light all potential misstatements in our financial statements.
+Internal Control and Risk Management System for Financial Reporting
+Risks are closed once a reassessment concludes that a risk is no longer existent or does not require
+continued monitoring. Risk closure criteria include the risk event occurring, the risk no longer being
+considered a risk, or the risk having been successfully mitigated.
+Risk Closure
+mitigation. In addition, the Executive Board is informed regularly about individual risks based on
+clearly defined qualitative reporting criteria. Newly identified or existing risks that are above a defined
+threshold, meet a qualitative criterion, or have a potential significant impact are also reported to the
+Audit and Compliance Committee and the chairperson of the Supervisory Board on a quarterly basis.
+This includes risks along our strategic portfolio for services and solutions as well as any risks to our
+ability to continue as a going concern, the latter supported by a process that analyzes those risks with
+respect to potential effects on liquidity, excessive indebtedness, and insolvency.
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+SAP'S ICRMSFR is based on our Group-wide risk management methodology. It includes
+organizational, control, and monitoring structures designed to ensure that data and information
+concerning our business is collected, compiled, and analyzed in accordance with applicable laws and
+properly reflected in our IFRS Consolidated Financial Statements.
+Management Report
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+All identified and relevant risks are reported at local, regional, and global levels in accordance with our
+risk management policy and the global risk reporting standard. At these levels, we have established
+executive risk councils that regularly discuss risks and responses and that monitor the success of risk
+Risk Reporting
+Risk assessment is followed by risk validation and risk monitoring. The risk exposure and the risk
+description, as well as the appropriateness of agreed responses, are validated by the accountable
+management. Our GR&AS risk managers work in close cooperation with the relevant business
+owners, ensuring that strategies are implemented to address identified risks. Business owners are
+responsible for continuously monitoring the risks and associated mitigation strategies, with support
+from the respective GR&AS risk managers. To ensure greater risk transparency and enable
+appropriate decision-making for business owners, we have established a risk delegation of authority
+(RDOA) for relevant parts of the organization as deemed appropriate. RDOA is a risk management
+decision-making hierarchy that helps business owners gain timely insight into business transactions
+that pose the greatest risk, so that they are better able to review the relevant information, understand
+the risk profile and associated mitigation strategies, and determine whether their approval is
+warranted. Depending on the exposure, approval is required at various levels of the Company, up to
+and including the Executive Board.
+Further Information on
+Sustainability
+Risk Validation and Monitoring
+In the final stage of the risk assessment, after identifying and analyzing the risk, we determine a
+response for each identified risk. We have different response categories such as mitigating, retaining
+for research, transferring, delegating, accepting, or avoiding, for example, by deciding not to start or
+not to continue the activity that may lead to a risk.
+H = High Risk
+Combined Group
+Our ICRMSFR also includes policies, procedures, and measures designed to ensure compliance of
+SAP's financial reports with applicable laws and standards. We analyze new statutes, standards, and
+other pronouncements concerning IFRS accounting and its impact on our financial statements and
+the ICRMSFR. Failure to adhere to these would present a substantial risk to the compliance of our
+financial reporting. Finally, the ICRMSFR has both preventive and detective controls, including, for
+example, automated and non-automated reconciliations, segregated duties with two-person
+responsibility, authorization concepts in our software systems, and corresponding monitoring
+measures.
+Our Corporate Financial Reporting (CFR) department codifies all accounting policies in our Group
+accounting and global revenue recognition guidelines. These policies and the corporate closing
+schedule, together with our process descriptions, define the closing process. Under this closing
+process, we prepare, predominately through centralized or external services, the financial statements
+of all SAP entities for consolidation by CFR. CFR and other corporate departments are responsible for
+ensuring compliance with Group accounting policies and monitor the accounting work. CFR also
+conducts reviews of our accounting processes and books. The employees who work on SAP's
+financial reporting receive training in the respective policies and processes.
+Additional
+Information
+CFO. The committee meets regularly to set the annual scope for the test of effectiveness, to assess
+and evaluate any weaknesses in the controls, and to determine measures to address them timely and
+adequately. The Audit and Compliance Committee of the Supervisory Board regularly scrutinizes the
+resulting assessments of the effectiveness of the internal controls over financial reporting with respect
+to the IFRS consolidated financial statements.
+The assessment, conducted by SAP and external audit, of the effectiveness of the ICRMSFR related to
+our IFRS consolidated financial statements concluded that, on December 31, 2021, the Group had an
+effective internal control system over financial reporting in place.
+Additionally, and in compliance with German commercial law requirements, SAP maintains an internal
+control system beyond financial reporting. This is supported through automated controls (continuous
+control monitoring) as part of our business processes.
+Supporting Software Solution
+We use our own risk management software, namely SAP Governance, Risk, and Compliance (GRC)
+solutions powered by SAP HANA, to support the governance process. GR&AS risk managers record
+and track identified risks using our risk management software online and in real time to help create
+transparency across all known risks that exist in the Group, as well as to facilitate risk management
+and the associated risk reporting. This GRC solution also supports the risk-based approach of the
+ICRMSFR. Our continuous control monitoring activities are performed utilizing our GRC software as
+well. This information is available to managers through direct access to our SAP Fiori application for
+enterprise risk reporting, and in regularly issued reports, and is consolidated and aggregated for the
+quarterly risk report to the Executive Board.
+Risk Factors
+Combined Group
+Management Report
+Despite the ongoing COVID-19 pandemic, SAP has been able to take effective measures to mitigate
+the risks arising from it. There has been no significant disruption to business operations or adverse
+effects on revenues, with some savings in operating expenses. While monitoring continues, we expect
+the remaining impact of the pandemic to be insignificant, and estimate the probability of occurrence
+of material risks of this risk factor to be remote.
+The table below provides an overview of major and business critical risk categories (together with the
+respective risk factors). Therein, risk factors are categorized with their net value (after the
+implementation of mitigations) according to our framework that is detailed in the Risk Management
+Methodology and Reporting section.
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+136/338
+135/338
+Based on an analysis of the design and operating effectiveness of our respective internal controls over
+financial reporting, a committee presents the results of the assessment on the ICRMSFR effectiveness
+with respect to our IFRS consolidated financial statements as at December 31 each year to our Group
+We have outsourced some tasks, such as valuing projected benefit obligations and share-based
+payouts, quarterly tax calculations for most entities, and purchase price allocations in the context of
+asset acquisitions and business combinations, and the local statutory financial statements for a few of
+our subsidiaries. These outsourced tasks are subject to the same stringent requirements that are
+mandated for all of our internally generated financially relevant information.
+M = Medium Risk
+Further Information on
+Sustainability
+L = Low Risk
+Additional
+Information
+H
+H
+M
+M
+L
+60% to 79%
+Impact
+H
+H
+M
+L
+80% to 99%
+Business-Critical
+(From
+€500 million)
+(€ 100 million to
+€500 million)
+Major
+40% to 59%
+L
+H
+Consolidated Financial
+Statements IFRS
+L
+M
+L
+L
+L
+1% to 19%
+M
+L
+L
+L
+L
+20% to 39%
+H
+M
+M
+M
+Corporate Governance and Compliance
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+Ethical Behavior: Our global business exposes us to risks related to unethical behavior and
+non-compliance with policies by employees, other individuals, partners, or entities
+associated with SAP.
+Combined Group
+We are subject to risks and associated consequences in the following areas, among others:
+Non-compliance with our policies and violation of compliance related rules, regulations, and
+legal requirements including, but not limited to, anti-corruption and anti-bribery legislation in
+Germany, the U.S. Foreign Corrupt Practices Act, the UK Bribery Act, and other local laws
+prohibiting corrupt conduct
+Unethical and fraudulent behavior by individual employees, other individuals, partners, or
+entities associated with SAP leading to criminal charges, fines, and claims by affected parties
+Collusion with external third parties, for example, by aiding in securing business
+Fraud and corruption, especially in countries with a low Transparency International Corruption
+Perceptions Index score and particularly in emerging markets
+Public sector transactions in territories exposed to a high risk of corruption
+Increased exposure and impact on business activities in highly regulated industries such as
+public sector, healthcare, banking, or insurance
+Any of these events could have a material adverse effect on our business, reputation, brand,
+competitive or financial position, share price, profit, and cash flows.
+SAP's leadership position in the global market is founded on the long-term and sustainable trust of
+our stakeholders worldwide. Our overarching approach is one of corporate transparency, open
+communication with financial markets, regulators, and authorities, and adherence to recognized
+standards of business integrity. This commitment to recognized standards of business integrity is
+formalized in SAP's CoBC and supporting guidelines.
+SAP has encountered situations that required clear messaging and strong action on non-compliance
+in the context of corrupt behavior that has the potential to harm our business and reputation. SAP is
+continuing to investigate its dealings with the public sector. For more information about the alleged
+violations, see the Notes to the Consolidated Financial Statements, Note (G.3).
+SAP
+Increased focus on localization needs to further meet customer demands
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+150/338
+149/338
+We cannot exclude the possibility that if risks of this risk factor were to occur, the impact could be
+business-critical. We estimate the probability of occurrence to be likely. We classify this risk factor as
+high. For more information, see the Security, Data Protection, and Privacy section.
+· Integrated enhanced security capabilities in our hosting environment, cloud platforms, and cloud
+deployment tools
+Engagement of experts to advise on appropriate cybersecurity protocols and to further increase
+attention and awareness of cybersecurity protocols and protection options
+Combined Group
+Local and regional crisis management teams to respond and minimize losses in case of crisis
+situations
+Focus on increased training, development, and retention of skilled personnel in SAP's cybersecurity
+and product security workforce
+Physical security measures such as access control systems and employee identification
+Focus on increased coordination across our various lines of business with respect to our ability to
+detect, identify, and respond to unauthorized incursions in our systems in a timely manner
+Investment in data and asset governance of SAP's global asset repository
+Measures such as technical IT security measures, identity and access management, and
+mandatory security and compliance training
+Monitoring of cybersecurity posture to gain visibility on exposed vulnerabilities of third-party
+vendors
+Focus on development and implementation of heightened cybersecurity measures designed to
+further safeguard SAP's most strategic assets
+Continuous vigilance, adaptation, standardization, and modification of our security procedures,
+such as security risk identification, threat modeling, advanced threat defense, a comprehensive
+security testing strategy, container security enhancements, mandatory security training for all
+developers, and security validation of our critical components, products, patches, and services
+before shipment
+Improved roll-out procedures for security-relevant notes, patches, and service packs to ensure easy
+and fast consumption on the customer side
+Increased employee, contractor, third-party, and partner awareness through campaigns and
+cybersecurity awareness training courses and projects, including execution of security reviews, as
+required
+Improved monitoring with respect to implementing enhancements to our cybersecurity
+infrastructure
+Management Report
+Additional
+To Our
+Stakeholders
+Combined Group
+Management Report
+-
+as:
+SAP has established measures to address and mitigate the described risks and adverse effects, such
+Any of these events could have a material adverse effect on our business, brand, competitive or
+financial position, profit, and cash flows.
+Lack of customer references for new products and solutions
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Inability to fulfil expectations of customers regarding time and quality in the defect resolution
+process
+New products, services, and cloud offerings, including third-party technologies, might not comply
+with local standards and requirements or might contain defects or might not be mature enough
+from the customer's point of view for business-critical solutions after shipment despite all the due
+diligence SAP puts into quality.
+We might not be as fast as expected in integrating our platforms and solutions, enabling the
+complete product and cloud service portfolio, harmonizing our user interface design and
+technology, integrating acquired technologies and products, or bringing packages, services, or new
+solutions based on SAP BTP to the market.
+Failure of software products and services to fully meet market needs or customer expectations
+Failure of software products and services from acquired companies to fully comply with SAP
+quality standards
+-
+-
+We are subject to risks and associated consequences in the following areas, among others:
+Technology and Products: Our technology and products may experience undetected defects,
+coding, or configuration errors, may not integrate as expected, or may not meet customer
+expectations.
+Information
+Inability to define and provide adequate solution packages and scope for all customer segments
+Inability of algorithms to correctly adapt to evolving circumstances, which may lead to adverse
+decision-making processes in the context of Al-related technologies
+SAP Integrated Report 2021
+Increased investments, coordination, and resources, including various internal initiatives, to achieve
+SAP's objective of ensuring over time that our cybersecurity infrastructure meets or exceeds
+evolving industry standards
+Certification of relevant IT-related organizations to the internationally recognized Business
+Continuity Management standard
+Any of these events could have a material adverse effect on our customers, partners, financial
+performance, profit, cash flows, operations, brand, reputation, competitive position, the perception of
+our products and services by current and prospective customers, and our business in general.
+Inaccurate or incomplete third-party or SAP audit results, certifications, or representations
+concerning the adequacy of our cybersecurity infrastructure and protocols
+Failure to maintain SAP's cybersecurity infrastructure and protocols in connection with the
+divestiture of businesses and network systems from SAP, or failure to achieve a holistic level of
+required transparency reflecting current states
+Failure to integrate SAP's cybersecurity infrastructure and protocols with other network systems
+obtained through acquisition, including addressing, identifying, and remediating cybersecurity
+defects and vulnerabilities and related breaches in acquired systems
+Material costs and time associated with enhancing our cybersecurity infrastructure, which may
+impact the ongoing pace of development and delivery of our products and services and our
+financial performance
+Insufficient investment, coordination, or resources to achieve our objective of ensuring over time
+that our cybersecurity infrastructure meets or exceeds evolving industry standards, and defending
+against the ever-evolving and emerging threat landscape
+• Inability to anticipate attacks or implement sufficient mitigating measures
+Material costs to attempt to detect, prevent, and mitigate any successful attacks, including, but not
+limited to the costs of third-party legal and cybersecurity experts and consultants, insurance costs,
+additional personnel and technologies, organizational changes, and incentives to customers and
+partners to compensate for any losses or retain their business
+In response to the increasing number of cybersecurity attacks, and because we anticipate threat actor
+techniques to continue to evolve in our cybersecurity landscape, SAP has expended significant
+resources to enhance its cybersecurity program, has increased the Executive Board and Supervisory
+Board's governance of and involvement in cybersecurity matters, and continues to investigate and
+remediate vulnerabilities.
+Expansion of cybersecurity attack surface due to increased connectivity of operational data
+A comprehensive certification program designed to ensure that relevant third-party solutions are of
+consistently high quality
+Enablement of our current product portfolio for SAP HANA, development of innovative solutions
+based on SAP HANA, and offering of comprehensive cloud-based services, supported by SAP BTP
+and intelligent technologies
+Integration and convergence of our offerings such as SAP S/4HANA, the SAP Customer Experience
+portfolio, SAP BTP, and acquired technologies
+· Ongoing maintenance of the high quality-level of our products, which is made transparent in the
+defined KPIs for quality transparency and confirmed by our satisfaction ratings as measured by our
+customer survey
+· Regular, direct customer feedback is considered in the market release decision process
+A holistic testing strategy to validate the state of quality and security for every product before
+market introduction
+Threat modelling at the beginning of every development project to identify potential risks including,
+but not limited to using centrally provided tools, also as part of information security measures
+certified to ISO 27001:2013
+A broad range of techniques, including project management, project monitoring, product standards
+and governance, and rigid and regular quality assurance measures certified to ISO 9001:2015,
+applicable to SAP's reportable segments
+Information
+A responsible disclosure process to detect vulnerabilities, as well as security patch days to rapidly
+respond to customer security needs and provide fixes
+-
+-
+-
+-
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+SAP has established measures intended to address the described risks and adverse effects, such as:
+Software security development lifecycle as a mandatory, integral part of our software development
+process, including checks on open source component coverage and enhanced development tools
+with integrated security features and functionalities
+To Our
+Stakeholders
+SAP
+Disaster recovery and business continuity plans to protect our key IT infrastructure (especially our
+data centers), including implementation of data redundancies and daily data backup strategies
+Product standard requirements such as mandatory non-erroneous modeling that takes software
+dependencies into account
+An SAP Global Security Policy that is mandatory for all employees and supported by documented
+security standards, procedures, and good practices including specific security training curricula for
+our developers
+Provision of security certifications (such as ISO/IEC 27001), security white papers, product
+documentation, and reports from independent auditors and certification bodies to our customers
+Review/audit of our certifications and representations to customers concerning our cybersecurity
+infrastructure and protocols in alignment with contractual agreements
+Alignment of our software security development lifecycle to the recommendations of
+ISO/IEC 27034, applying methods to develop secure software
+-
+-
+SAP Integrated Report 2021
+Stakeholders
+SAP has established measures intended to address and mitigate the described risks and adverse
+effects, such as:
+SAP Integrated Report 2021
+Early warning through executive risk committees on regional and global level
+Ongoing development of new commercial models to address customer flexibility needs
+Simplification, review, alignment, approval, and enforcement of contractual standard terms and
+conditions while conducting legal and operational assessments in case deviations are required
+A policy that clearly outlines communication rules on future functionalities as well as legal
+requirements for commitments to customers
+Adjustment of delivery models to support customers
+An escalation management process
+Continuous project monitoring and controlling activities
+Adequate financial planning provisions for the remaining risks
+Recommended project approaches, guidance, and best practices for customers to optimize their IT
+solutions in a non-disruptive manner
+Risk management processes that are integrated into SAP's project management methods intended
+to safeguard implementations through coordinated risk and quality management programs
+Exposure approval through an RDOA
+-
+―
+-
+-
+Any of these events could have an adverse effect on our business, financial position, profit, and cash
+flows.
+Joint innovations with partners or customers
+Statements on solution developments might be misperceived by customers as commitments on
+future software functionalities
+Deviations from standard terms and conditions, which may lead to an increased risk exposure
+Information
+-
+We cannot exclude the possibility that if risks of this risk factor were to occur, the impact could be
+major. We estimate the probability of occurrence to be unlikely. We classify this risk factor as medium.
+Partner Ecosystem: If we are unable to scale, maintain, and enhance an effective partner
+ecosystem, revenue might not increase as expected.
+An open and vibrant partner ecosystem is a fundamental pillar of our success and growth strategy. We
+have entered into partnership agreements that drive co-innovation on our platforms, profitably expand
+our routes to market to optimize market coverage, optimize cloud delivery, and provide high-quality
+services capacity in all market segments. Partners play a key role in driving market adoption of our
+entire solutions portfolio, by co-innovating on our platforms, embedding our technology, and reselling
+or implementing our software.
+We are subject to risks and associated consequences in the following areas, among others:
+Failure of partners to transform their business model in accordance with the transformation of
+SAP's business model in a timely manner
+us
+Failure of partners and their products to meet quality requirements expected by our customers or
+Failure of partners to adhere to applicable legal and compliance regulations
+Failure of partners to embed our solutions sufficiently enough to profitably drive product adoption,
+especially with innovations in SAP S/4HANA, the SAP Customer Experience portfolio, business
+process intelligence from SAP, and SAP Business Technology Platform (SAP BTP)
+-
+Information
+Additional
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+146/338
+145/338
+Failure of partners to develop sufficient innovative solutions and content on our platforms or to
+provide high-quality products or services to meet customer expectations
+Products or services model being less strategic or attractive compared to our competition
+Failure to establish and enable a network of qualified and fully committed partners supporting our
+scalability needs and speed and impact in market reach
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Additional
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+144/338
+143/338
+Requirement for mandatory CoBC training applicable to every SAP employee, providing
+practical guidance on how to avoid corrupt behavior and approach dilemma situations
+-
+Several educational, counseling, control, and investigative measures
+Internal audit of our compliance program as it relates to bribery, corruption, and substantial
+fraud
+Review of partner business models, to mitigate risks of corruption while meeting agility
+requirements
+Refraining from engaging sales agents and paying third-party sales commissions on public
+sector deals in high-risk countries
+Root cause analysis related to corrupt or fraudulent behavior, to improve associated business
+processes and prevent further and future violations
+- Expansion of the OEC's bandwidth through additional staffing
+Continuous development of our comprehensive compliance program based on the three
+pillars of prevention, detection, and response
+SAP has established measures intended to address and mitigate the described risks and adverse
+effects, such as:
+Information
+Failure of partners to comply with contract terms in embargoed or high-risk countries
+Annual reconfirmation of commitment to the CoBC by SAP's workforce (except where
+disallowed by local legal regulations)
+Guidance in our travel, entertainment, gift, and expense policies
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+Inadequate contracting and consumption models based on subscription models for services,
+support, and application management
+Unrenderable services committed during the sales stage
+Improper calculations or estimates leading to costs exceeding the fees agreed in fixed-price
+contracts
+Protracted installation or significant third-party consulting costs
+Challenges to achieve a seamlessly integrated, sufficiently automated and aligned service delivery
+in complex deliveries or implementations, for example due to lack of insights especially in the
+event of limited project involvement of SAP
+Challenges to effectively implement acquired technologies
+Insufficient or incorrect information provided by customers, subsequently leading to mismatches in
+contractual commitments, requirements, solution definition, architectures, or technologies
+Insufficient customer expectation management, including scope, integration capabilities and
+aspects, as well as lack of purposeful selection, implementation, and utilization of SAP solutions
+Lack of customer commitments and respective engagements, including insufficient commitment of
+resources or lack of solution migrations to latest offerings, leading to delays or deviations from
+recommended best practices
+We are subject to risks and associated consequences in the following areas, among others:
+Implementation risks, if, for example, implementations take longer than planned, or fail to generate
+the profit originally expected, scope deviations, solution complexity, high pace of engineering
+innovation, individual integration and migration needs or functional requirement changes, or
+insufficient milestone management and tracking leading to delays in timeline, maybe even
+exceeding maintenance cycles of solutions in scope
+A core element of our business is the successful implementation of software and service solutions.
+The implementation of SAP software and cloud-based service deliveries is led by SAP, by partners, by
+customers, or by a combination thereof.
+Sales and Services: Sales and implementation of SAP software and services, including cloud,
+are subject to several significant risks sometimes beyond our direct control.
+Operational Business Risks
+We cannot exclude the possibility that if risks of this risk factor were to occur, the impact could be
+major. We estimate the probability of occurrence to be likely. We classify this risk factor as medium.
+Despite our comprehensive and continuously evolving compliance program and established internal
+controls, intentional efforts of individuals to circumvent controls or engage in corruption, especially by
+way of collusion with other involved parties, cannot always be prevented.
+Establishment of a Partner Integrity Initiative aiming to examine the compliance programs of
+partners in SAP's ecosystem and to review the SAP-related deals closed by them
+Termination of partners that do not pass our partner compliance audit process, or remediation
+of their deficiencies
+Implementation of compliance policies and processes aimed at managing third parties and
+preventing misuse of third-party payments for illegal purposes, including the performance of
+compliance due diligence activities prior to the engagement of third parties
+If any of these risks materialize, this might have an adverse effect on the demand for our products and
+services as well as the partner's loyalty and ability to deliver. As a result, we might not be able to scale
+our business to compete successfully with other vendors, which could have an adverse effect on our
+reputation, business, financial position, profit, and cash flows.
+SAP has established measures intended to address and mitigate the described risks and adverse
+effects, such as:
+- We invest in long-term, mutually beneficial relationships and agreements with partners.
+SAP
+142/338
+141/338
+Mandatory disclosures of breaches to affected individuals, customers, and data protection
+supervisory authorities
+This could lead to increased risks for SAP, which could harm SAP's business and limit SAP's growth.
+Non-compliance with applicable data protection and privacy laws by SAP or any of the subprocessors
+engaged by SAP within the processing of personal data could lead to risks. We are subject to risks
+and associated consequences in the following areas, among others:
+As a global software and service provider, SAP is required to comply with local laws wherever it does
+business. One of the relevant European data protection laws is GDPR. International data transfers to
+third countries that do not provide for an adequate level of data protection require additional
+safeguards to justify a transfer from the EU to a third country based on the standard contractual
+clauses. In 2021, SAP experienced two significant incidents in processing personal data - on our own
+behalf - that were subject to GDPR only and were reported to the supervisory authorities.
+Furthermore, evolving regulations and laws globally (such as the California Consumer Privacy Act, the
+Brazilian General Data Protection Law, and the EU's proposed e-Privacy Regulation including data
+localization requirements) regarding data protection and privacy or other standards increasingly aimed
+at the use of personal data, such as for marketing purposes and the tracking of individuals' online
+activities, may impose additional burdens for SAP due to increasing compliance standards that could
+restrict the use and adoption of SAP's products and services (in particular cloud services) and make it
+more challenging and complex to meet customer expectations. This refers to a compliant use of new
+technology, such as machine learning (ML) and Al for product development and deployment of
+intelligent applications.
+We cannot exclude the possibility that if risks of this risk factor were to occur, the impact could be
+major. We estimate the probability of occurrence to be likely. We classify this risk factor as medium.
+We are named as a defendant in various legal proceedings for alleged intellectual property
+infringements. For more information and a more detailed report relating to certain of these legal
+proceedings, see the Notes to the Consolidated Financial Statements, Notes (A.4), (C.5), and (G.3).
+Data Protection and Privacy: Non-compliance with increasingly complex and stringent,
+sometimes even conflicting, applicable data protection and privacy laws or failure to meet
+the contractual requirements of SAP's customers with respect to our products and services
+could lead to civil liabilities and fines, as well as loss of customers.
+We rely on a combination of the protections provided by applicable statutory and common law
+rights, including trade secret, copyright, patent, and trademark laws, license and non-disclosure
+agreements, and technical measures to establish and protect our proprietary rights in our products
+and customer projects.
+We are party to certain patent cross-license agreements with third parties, which removes the risk
+of litigation with respect to the involved patents.
+- We endeavor to protect ourselves in the respective third-party software agreements by obtaining
+certain rights in case such agreements are terminated.
+We have established various internal programs, such as internal policies, processes, and
+monitoring, to assess and manage the risks associated with open source, and third-party
+intellectual property.
+Our GR&AS organization works closely with the OEC and Global Legal and is jointly responsible for
+the management and reporting of potential risks associated with third-party intellectual property.
+Our OEC sets and manages internal policies related to our CoBC.
+SAP has established measures intended to address and mitigate the described risks and adverse
+effects, such as:
+could differ from the assessments made by management in prior periods, which are the basis for our
+accounting for these litigations and claims under IFRS.
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+SAP Integrated Report 2021
+Additional
+To Our
+Stakeholders
+Management Report
+SAP
+We cannot exclude the possibility that if risks of this risk factor were to occur, the impact could be
+major. We estimate the probability of occurrence to be likely. We classify this risk factor as medium.
+We strive to provide clear governance and guidance on data handling, processing standards, and
+external communication as part of our data management framework, specifically incorporating
+aspects of new technologies such as those represented in embedded intelligence applications.
+We increase the automation of security processes and secure product development to reduce
+human error and ensure consistency and dependability of security outcomes.
+We actively monitor legal developments and engage with political stakeholders and government
+authorities, directly or through industry associations, to clarify questions relevant to SAP and SAP's
+business.
+We have a data protection management system in place in all our Board areas. Furthermore, this
+data protection management system will be continuously enhanced and extended to apply to
+newly acquired companies within the SAP Group. SAP has been awarded the British Standards
+Institution (BSI) certification for the implementation and operation of SAP's data protection
+management system, which underlines SAP's compliance with data protection laws, including
+GDPR.
+We continuously enhance our data center operations worldwide, also considering local and sector-
+specific market and legal requirements. For compliance with local legal requirements, we have
+established a network of local and regional data protection and privacy coordinators.
+We continuously review SAP's existing standards and policies to address changes to applicable
+laws and regulations.
+We have anchored data protection requirements in the mandatory product standards of SAP's
+product development lifecycle.
+We have implemented internal processes and measures to enable SAP to comply successfully and
+sufficiently with applicable data protection requirements.
+SAP has established measures intended to address and mitigate the described risks and adverse
+effects, such as:
+Any of these events could have a material adverse effect on our reputation, business, financial
+performance, competitive or financial position, profit, and cash flows.
+In addition, the German Federal Office for the Protection of the Constitution and security industry
+experts continue to warn of risks related to a globally growing number of cybersecurity attacks aimed
+at obtaining or violating company data including personal data. We anticipate cyberattack techniques
+to continue to evolve and increase in sophistication, which could make it difficult to anticipate,
+prevent, detect, and mitigate attacks and intrusions, thus leading to, for example, risks described in
+the Cybersecurity and Security section.
+Increased complexity in times of digitalization with regard to legal requirements in the context of
+cross-border data transfer and data localization requirements
+Harm to SAP's reputation
+Damage claims by customers and individuals or contract terminations and potential fines
+Investigations and administrative measures by data protection supervisory authorities, such as the
+instruction to alter or stop non-compliant data processing activities, including the instruction to stop
+using non-compliant subprocessors
+Information
+Additional
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Combined Group
+To Our
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Combined Group
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP
+SAP Integrated Report 2021
+SAP continues to grow organically and through acquisitions, delivers a full portfolio of solutions via the
+cloud, hosts or manages elements of our customers' businesses in the cloud, processes large
+amounts of data, and offers more mobile solutions to users. While SAP executes each of these areas
+either directly or through partners and other third parties, we face a progressively more complex and
+threatening cybersecurity environment. The severity of the challenges posed by this cybersecurity
+environment is amplified due to the increasingly sophisticated and malicious global cybersecurity
+threat landscape in which we operate. This includes third-party data, products, and services that we
+incorporate into SAP products and services, and the continually evolving and increasingly advanced
+techniques employed by threat actors targeting IT products and businesses in general. Such threat
+actors include, but are not limited to, highly sophisticated parties such as nation-states and organized
+criminal syndicates.
+Cybersecurity and Security: A cybersecurity attack or breach, or cybersecurity vulnerabilities
+in our products, infrastructure, or services, or economic espionage could result in significant
+legal and financial exposure.
+We cannot exclude the possibility that if risks of this risk factor were to occur, the impact could be
+major. We estimate the probability of occurrence to be likely. We classify this risk factor as medium.
+We provide customer guidance and support as required during partner dissolutions.
+We maintain a certification process for third-party solutions to ensure consistent high-quality and
+seamless integration.
+We included selected services in the free tier model as part of our Pay-as-You-Go for SAP BTP
+agreement.
+We introduced a partner delivery quality framework to monitor and safeguard the success of
+partner-led projects while ensuring that SAP quality criteria are met.
+We enable and encourage partners to leverage SAP technology, by providing guidance about
+business opportunities, architecture, and technology, such as through demo solutions, to enable
+partners to lead business value discussions on cloud and on-premise solutions with customers.
+We offer training opportunities on a wide range of resources for our partners and provide
+safeguarding services to customers and partners.
+We continue to develop and enhance a wide range of partner programs to retain existing and
+attract new partners of all types.
+-
+As a leading cloud company and service provider to some of the largest and best-known customers in
+the world, we are naturally a prominent target for cybersecurity attacks. We have observed increased
+threat activity to our products and systems, and we experience cybersecurity attacks of varying types
+and degrees on a regular basis. Should we become aware of unauthorized access to our systems, we
+have action plans in place intended to identify and remediate the source and impact of the incursions,
+and steps to comply with related necessary notification and disclosure obligations. To date, we have
+not experienced any incursions resulting in a material adverse effect on our business. However, we
+may be subject to incursions which we are not aware.
+Management Report
+In addition, while we are continually taking steps to enhance our cybersecurity defenses, increased
+investments, coordination, and resources are required to achieve our objective of ensuring over time
+that our cybersecurity infrastructure meets or exceeds evolving industry standards. Achieving this
+objective will require continued effort and vigilance, including sustained investment of money and
+management resources to support the ongoing development and maintenance of systems that meet
+these standards. As a result, we are subject to risks and associated consequences in the following
+areas, among others:
+Identified or undetected cybersecurity defects and vulnerabilities
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+148/338
+147/338
+Breach of cybersecurity measures due to, for example, but not limited to, error or wrongdoing by
+employees or affiliated persons, system vulnerabilities, code defects, malfunctions, or attempts of
+third parties to fraudulently induce employees, users, partners, or customers to gain access to our
+systems, data, or customers' data
+Operational disruptions due to an increasing number of destructive malwares, ransomware, or
+other cybersecurity attacks
+Customer systems or systems operated by SAP being compromised by vulnerabilities due to threat
+actor exploitation
+Insufficient or ineffective asset management potentially endangering secure operations
+Challenges in effectively synchronizing cybersecurity processes across our various lines of business
+in a heterogeneous environment
+-
+- Cybersecurity threats for SAP and customers due to delayed or insufficient responses to identified
+cybersecurity issues attributable to complexity, interdependencies, or other factors
+Failure of any cloud service provider to deliver cloud services securely and successfully, which
+could have a negative impact on customer trust in cloud solutions
+cybersecurity infrastructure and protocols
+Exposure of our business operations and service delivery due to threats, including virtual attack,
+disruption, damage, unauthorized access, theft, destruction, industrial or economic espionage,
+serious or organized crime, and other illegal activities, as well as violent extremism and terrorism
+State-driven economic espionage or competitor-driven industrial espionage, and criminal activities
+including, but not limited to, cyberattacks and breaches against cloud services and hosted on-
+premise software, whether managed by us or our customers, partners, or other third parties
+Disruptions to back-up, disaster recovery or business continuity management processes
+Disruptions due to exposure of our network systems to cybersecurity attacks via defects and
+vulnerabilities in the IT systems of our customers, or in the systems of third parties that facilitate our
+business activities such as cloud service providers, including those that are beyond SAP's
+-
+open
+source software components, such as Log4j vulnerabilities
+Increased complexity, risk of exploitation, and potential vulnerabilities due to utilization of
+A globally increasing number of threat actor attacks aimed at obtaining or violating Company data
+including personal data, as observed in recent prominent cases of cyberattacks where the use of
+ransomware was the preferred method of threat actors
+Scope reviews and monitoring that are adapted as required as part of a clearly defined change
+request process to support successful implementations together with respective project
+governance and steering
+Combined Group
+Management Report
+6.5
+Unfulfilled needs of the acquired company's customers or partners
+Failure to successfully integrate acquired entities, operations, cultures, or languages, all within the
+constraints of applicable local laws
+Failure to integrate acquired technologies or solutions successfully and profitably into SAP's
+solution portfolio and strategy
+Incorrect information or assumptions during the due diligence process for the acquisition, including
+information or assumptions related to the business environment or business and licensing models
+To expand our business, we acquire businesses, products, and technologies, and we expect to
+continue doing so in the future. Over time, some of these acquisitions have increased in size and in
+strategic importance for SAP. Management negotiation of potential acquisitions and the integration of
+acquired businesses, products, or technologies demands time, focus, and resources of both
+management and the workforce, and exposes us to unpredictable operational difficulties.
+We are subject to risks and associated consequences in the following areas, among others:
+Mergers and Acquisitions: We might not acquire and integrate companies effectively or
+successfully.
+We cannot exclude the possibility that if risks of this risk factor were to occur, the impact could be
+business-critical. We estimate the probability of occurrence to be unlikely. We classify this risk factor
+as medium.
+SAP Integrated Report 2021
+Continue to move SAP HANA Enterprise Cloud towards a full-stack offering and increase the share
+of high-value cloud application services to further improve the margin
+Deliver standard software and product packages that are fast, easy to install, and highly
+automated, as well as financially attractive financing and subscription models
+Enable our portfolio for hyperscalers to extend customer reach and further meet customer
+expectations
+Continue to drive the solution integration and harmonization of data models to support integrated
+business processes, applications, and technology while focusing on resilience, profitability, and
+sustainability
+Place strong focus on providing our cloud services efficiently and to customer expectations,
+including service provisioning, quality, security, and data protection and privacy
+Engage with our customers and offer a broader range of services to support and drive the digital
+transformation for our customers, for example with our RISE with SAP package and our premium
+service offerings
+Balance the allocation of our strategic investments by evolving and protecting our core businesses
+and simultaneously developing new solutions, technologies, and business models for markets,
+such as those in analytics, applications, and database and technology
+Enable and support our customers in their transition path from on-premise to cloud, for example
+through the cloud extension policy, our SAP S/4HANA Movement program (a cross-departmental
+initiative to promote the migration of our existing ERP customers to an intelligent enterprise), our
+scalable SAP S/4HANA Cloud, private edition, or the SAP HANA Enterprise Cloud advanced
+edition offerings
+Enable and encourage partners to leverage SAP technology by providing guidance about business
+opportunities, architecture, and technology, as well as a comprehensive certification program
+designed to ensure that relevant third-party solutions are of consistent high quality
+Demonstrate the benefits of our solution and services portfolio through end-to-end integration
+scenarios, consistent and compelling user interfaces, intelligent technologies, customer references,
+and success stories
+SAP
+Combined Group
+We cannot exclude the possibility that if risks of this risk factor were to occur, the impact could be
+major. We estimate the probability of occurrence to be unlikely. We classify this risk factor as medium.
+Innovation: We might not be able to compete effectively if we strategize our solution
+portfolio ineffectively or if we are unable to keep up with rapid technological and product
+innovations, enhancements, new business models, and changing market expectations.
+Our future success depends on our ability to keep pace with technological and process innovations
+and new business models, as well as on our ability to develop new products and services, enhance
+and expand our existing products and services portfolio, and integrate products and services we
+obtain through acquisitions. To be successful, we are required to adapt our products and our go-to-
+market approach to a cloud-based delivery and consumption model to satisfy increasing customer
+demand and to ensure an appropriate level of adoption, customer satisfaction, and retention.
+We are subject to risks and associated consequences in the following areas, among others:
+Process, risk, and control analyses accompanied by subsequent integration into SAP's processes
+and control framework, and supported by mitigations as required by any specific circumstances to
+subsequently increase adherence to SAP's standards and policies
+A standardized methodology for detailed integration planning, which is conducted by a dedicated
+integration team
+Identification, implementation, and tracking of risk mitigation measures for material transactions or
+integration risks
+SAP has established measures intended to address and mitigate risks and adverse effects, such as:
+Technical, operational, financial, and legal due diligence on the company or assets to be acquired
+A holistic evaluation of material transaction and integration risks
+Any of these events could have a material adverse effect on our business, brand, competitive or
+financial position, profit, and cash flows.
+Non-compliance of the acquired company with regulatory requirements, for example, accounting
+standards, export control laws, data privacy, and trade sanctions, for which SAP, through the
+acquisition, assumes responsibility and liability, including potential fines and the obligation to
+remedy the non-compliance
+To Our
+Stakeholders
+Impairment of goodwill and other intangible assets acquired in business combinations
+Incompatible practices or policies regarding compliance requirements
+Failure in implementing, restoring, or maintaining internal controls, disclosure controls and
+procedures, and policies within acquired companies
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Debt incurrence or significant unexpected cash expenditures
+Inability to bring new business models, solutions, solution enhancements, intelligent technologies,
+integrations and interfaces or services to market before our competitors or at equally favorable
+terms
+-
+Additional
+Inability to deliver fully suitable solution and transformation services to our customers on the cloud
+transformation journey, both in cloud-only and hybrid scenarios
+We are subject to risks and associated consequences in the following areas, among others:
+The market for cloud computing is increasingly competitive and is exhibiting strong growth relative to
+the market for on-premise solutions. To maintain or improve our operating results in the cloud
+business, it is important that we not only attract new customers but also that our existing customers
+renew their agreements with us when the initial contract term expires and purchase additional
+modules or additional capacity. Additionally, we need to bring innovations to the market in line with
+demands of our ecosystem and ahead of our competitors, such as solutions to support new data-
+driven applications and the extension of the intelligent suite based on SAP BTP. Innovative
+applications supporting the Intelligent Enterprise strategy include, among others, SAP Customer
+Experience solutions, SAP S/4HANA, and SAP BTP, as well as technologies such as IoT, ML, intelligent
+robotic process automation (which automates rule-based, repetitive tasks), digital assistants including
+voice recognition and interaction, and blockchain.
+Market Share and Profit: Our market share and profit could decline due to increased
+competition, market consolidation, technological innovation, and new business models in
+the software industry.
+Strategic Risks
+We cannot exclude the possibility that if risks of this risk factor were to occur, the impact could be
+major. We estimate the probability of occurrence to be likely. We classify this risk factor as medium.
+Information
+· Inability to successfully execute on our hyperscaler strategy
+Additional
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP
+SAP Integrated Report 2021
+4.8
+Economic conditions clearly influence our business, financial position, profit, and cash flows. Should
+the global economy recover faster than is reflected in our plans today, our revenue and profit may
+exceed our current outlook and medium-term prospects. Our medium-term planning considers
+changes in market conditions as a result of the ongoing COVID-19 pandemic. Although we continue
+Further Information on
+Sustainability
+Information
+Adverse, near-term revenue effects due to increasing cloud business and conversions from on-
+premise licenses to cloud subscriptions from existing SAP customers, which could have an adverse
+effect on related maintenance and services revenue
+Customers and partners reluctant or unwilling to migrate and adapt to the cloud, or customers
+considering cloud offerings from our competitors
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+Insufficient solution and service adoption together with increased complexity, as well as failures
+during the execution of our Intelligent Enterprise strategy in the context of our portfolio for solutions
+and services, which could lead to a loss of SAP's position as a leading cloud company and
+subsequently to reduced customer adoption
+152/338
+Share our overall long-term cloud strategy and our integration road map with our customers, and
+continuously implement improvements to enhance our cloud solutions through our Intelligent
+Enterprise strategy, also covering the integration of experiential and operational data
+SAP has established measures intended to address and mitigate the described risks and adverse
+effects, such as:
+Any of these events could have a material adverse effect on our business, brand, competitive or
+financial position, profit, and cash flows.
+- Inability to achieve the planned margin increase in time as planned
+Price pressure, cost increases, and loss of market share through traditional, new, and especially
+cooperating competitors and hyperscalers
+Strategic alliances among competitors or their growth-related efficiency gains in the cloud
+business, which could lead to significantly increased competition in the market with regard to
+pricing and the ability to integrate solutions
+Existing customers deciding to cancel or not renew their contracts (such as maintenance or cloud
+subscriptions) or not buy additional products and services
+151/338
+Opportunities from Economic Conditions
+Inability to develop and sell new cloud products spanning various organizations on time and in line
+with market demands due to complexity in heterogeneous technical environments
+153/338
+Regions (according to IMF taxonomy)
+Emerging Markets and Developing Economies
+Advanced Economies
+World
+%
+Economic Trends - GDP Growth Year Over Year
+Additional
+Information
+Euro Area
+Further Information on
+Sustainability
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+156/338
+155/338
+As for the APJ region, the ECB expects economic activity in Japan to rebound solidly in early 2022. In
+China, the government introduced policy actions in 2021 that should manage the slowdown and
+avoid a sharper contraction in 2022, ensuring energy security and supporting the property sector. A
+stronger slowdown in the Chinese real estate sector than currently expected by the ECB would
+dampen the economic outlook not only for China, but also worldwide.
+Consolidated Financial
+Statements IFRS
+In the Americas region, the subdued economic growth seen in the United States in the latter half of
+the previous year might extend into the first quarter of 2022. The ECB suggests that once the current
+supply bottlenecks dissipate, the United States should return to growth, supported by a fiscal
+package. However, inflationary pressures will probably remain high at the beginning of 2022. In Brazil,
+double-digit inflation is likely to continue, but decline in the course of 2022 and 2023.
+Germany
+Middle East and Central Asia
+-2.0
+3.9
+5.0
+-4.5
+4.4
+5.9
+-3.1
+Emerging and Developing Europe
+2022p
+2020
+Emerging and Developing Asia
+Japan
+Latin America and the Caribbean
+Canada
+United States
+Sub-Saharan Africa
+2021p
+Inability to anticipate and develop technological improvements or succeed in adapting SAP
+products, services, processes, and business models to technological change, changing regulatory
+requirements, emerging industry standards, and changing requirements of our customers and
+partners (especially with innovations such as industry cloud, SAP Business Network, and business
+process intelligence offerings supported by SAP BTP) to strengthen the Intelligent Enterprise
+strategy
+Concerning the EMEA region, economic activity in the euro area could exceed its pre-pandemic level
+already in the first quarter of 2022 and pick up further in the course of the year, driven by a robust
+domestic demand, an improving labor market, and ongoing policy support. Thereafter, the ECB
+expects an increasingly self-sustaining growth, as it believes the basis for an ongoing recovery in the
+euro area is intact. In central and eastern Europe, rising energy prices might put additional pressure on
+inflation over the coming months, peaking in the course of 2022 and declining gradually afterwards.
+Correspondingly, global demand for oil and gas and the associated positive terms of trade should
+support economic activity in Russia, but at the cost of high inflation.
+Future Trends in the Global Economy
+SAP has established measures intended to address and mitigate the described risks and adverse
+effects, such as:
+Any of these events could have a material adverse effect on our business, financial position, profit,
+and cash flows.
+- Inability to drive growth of references through customer use cases and demo systems
+Increasing competition from open source software initiatives or comparable models in which
+competitors might provide software and intellectual property free of charge or at terms and
+conditions unfavorable for SAP
+Our product and technology strategy might not be successful, or our customers and partners might
+not adopt our technology platforms, applications, or cloud services quickly enough or they might
+consider other competing solutions in the market, or our strategy might not match customers'
+expectations and needs, specifically in the context of expanding the product portfolio into
+additional markets.
+Lower level of adoption of our new solutions, technologies, business models, and flexible
+consumption models, or no adoption at all
+Uncertainties regarding new SAP solutions, technologies, and business models as well as delivery
+and consumption models, which might lead customers to wait for proofs of concepts or holistic
+integration scenarios through reference customers or more mature versions
+Align our organization, processes, products, delivery, commercial and consumption models, and
+services to changing markets and customer and partner demands
+Information
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+154/338
+Additional
+Supply bottlenecks, which caused disruption in 2021, will start easing from the second quarter of
+2022 and unwind fully by 2023, predicts the European Central Bank (ECB) in its current Economic
+Bulletin. (D) The ECB therefore maintains its previous optimistic projections for the full year 2022 and
+has even raised them for 2023. Persisting shortages, high commodity prices, and the emergence of
+the Omicron variant of the coronavirus might initially weigh on near-term growth prospects, though.
+According to the ECB, the future course of the pandemic remains the key uncertainty when it comes
+to projections for the global economy.
+Continuously benchmark, match, and challenge the entire portfolio at a corporate, portfolio
+category, and individual business case level
+Develop innovative technologies and solutions, such as industry cloud solutions, SAP Business
+Network, and business process intelligence offerings supported by SAP BTP
+Expected Developments and
+Opportunities
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined Group
+Focus all investment decisions related to innovative technologies and solutions on portfolio
+compatibility and readiness as well as high customer value
+To Our
+SAP
+In our view, considering their impact level and likelihood of occurrence, the risks described in our
+aggregated risk report do not individually or cumulatively threaten our ability to continue as a going
+concern. While individual risks and assessments may have changed during fiscal 2021, the overall
+situation did not change materially compared to the prior year. Management remains confident that
+the Group's earnings strength forms a solid basis for our future business development and provides
+the necessary resources to pursue the opportunities available to the Group. Based on our structured
+processes for early risk identification, we are confident that we can continue to counter the challenges
+arising from the risks in our current risk profile in 2022.
+Consolidated Risk Profile
+We cannot exclude the possibility that if risks of this risk factor were to occur, the impact could be
+major. We estimate the probability of occurrence to be unlikely. We classify this risk factor as medium.
+Make strategic acquisitions in white spots of our portfolio
+Conduct wide-ranging market and technology analyses and research or co-innovation projects,
+also in close cooperation with our customers and partners, to remain competitive
+Explore future trends as well as the latest technologies, for example through our network of
+innovation centers as part of the Technology & Innovation Board area, and adapt these to the
+market if there is a clear business opportunity for SAP and value to our customers
+SAP Integrated Report 2021
+SAP SE is the parent company of the SAP Group and earns most of its revenue from subscription
+fees, software license fees, and dividends paid by affiliates. Consequently, the opportunities described
+below also apply - directly or indirectly - to SAP SE.
+Consolidated Financial
+Statements IFRS
+Our customers choose SAP as a trusted partner for their digital business transformation. We have
+established a framework for opportunity management by evaluating and analyzing key areas such as
+current markets, external scenarios, economic conditions, and technological trends. We have also
+researched customer and product segmentation, growth drivers, and industry-specific factors for
+success. These combined insights play a key role for the Executive Board in the development of our
+market strategies. Our shareholder value relies heavily upon a fine balance of risk mitigation and
+value-driven opportunities. Therefore, our governance model helps ensure that decisions are based
+on return, investment required, and risk mitigation.
+Financial Targets and Prospects
+Information
+As far as opportunities are likely to occur, we have incorporated them into our business plans, our
+outlook for 2022, and our medium-term prospects outlined in this report. Therefore, the following
+section focuses on future trends or events that might result in an uplift of our outlook and medium-
+term prospects should they develop more positively than anticipated in our forecasts.
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined Group
+To Our
+SAP Integrated Report 2021
+SAP
+158/338
+157/338
+Despite ongoing uncertainties in the global economy and supply chain disruptions as well as the
+ongoing pandemic situation, the resurgence of the global demand is noticeable. SAP expects more
+companies will choose SAP to help them transform their businesses, build resilient supply chains, and
+become sustainable enterprises. For SAP, moving to the cloud is not an option anymore but a
+required step in business transformation for our customers. We saw this momentum reflected in the
+success of our RISE with SAP offering and are confident about further growth and even greater
+potential going forward across our complete portfolio. This is manifested in our accelerated cloud
+guidance for 2022. SAP is confident that its positive momentum will continue throughout 2022.
+Impact on SAP
+(H) IDC FutureScape: Worldwide Future of Digital Innovation 2022 Predictions, Doc #US47148621, Oct. 2021
+(G) IDC FutureScape: Worldwide IT Industry 2022 Predictions, Doc #US48312921, Oct. 2021
+(F) IDC FutureScape: Worldwide Cloud 2022 Predictions, Doc #US47241821, Oct. 2021
+(E) IDC FutureScape: Worldwide Digital Transformation 2022 Predictions, Doc #US47115521, Oct. 2021
+(D) European Central Bank, Economic Bulletin, Issue 8/2021, Publication Date: January 13, 2022
+(https://www.ecb.europa.eu/pub/pdf/ecbu/eb202108.en.pdf)
+Sources:
+Revenue and Operating Profit Targets and Prospects (Non-IFRS)
+Outlook 2022
+For 2022, SAP expects its cloud growth to continue to accelerate. The pace and scale of SAP's cloud
+momentum places the Company well on track towards its mid-term ambition.
+For the full year 2022, SAP expects:
+Restructuring
+Share-based payment expenses
+Acquisition-related charges
+€ millions
+The following table shows the estimates of the items that represent the differences between our non-
+IFRS financial measures and our IFRS financial measures.
++1pp to +3pp
+Operating profit growth (non-IFRS)
++1pp to +3pp
+Cloud and software revenue growth
++2pp to +4pp
+digital. By 2023, 90% of worldwide organizations will be prioritizing investments in digital tools to
+augment physical spaces and assets, and by 2024, 55% of all ICT investment will be linked to digital
+transformation," predicts IDC. (F) The software sector in particular will be impacted as "by 2024, the
+majority of legacy applications will receive some modernization investment, with cloud services used
+by 65% of the applications to extend functionality or replace inefficient code." IDC's rationale for the
+investments is "modernizing applications brings value to the business by increased competitiveness
+and the ability to outflank competitors.” As a result, IDC guides companies to “move proactively to
+modernize more critical applications where you can. Your competitors will be doing the same, and
+failure to invest can leave an organization in a disadvantaged competitive position."(H)
+Cloud revenue growth
+In percentage points (pp)
+While SAP's full year 2022 business outlook is at constant currencies, actual currency reported figures
+are expected to be impacted by currency exchange rate fluctuations as the Company progresses
+through the year. See the table below for the full year 2022 expected currency impacts. These
+currency expectations for the full year 2022 are based on the December 2021 level.
+To achieve a year-end current cloud backlog growth rate similar to 2021.
+A full-year effective tax rate (IFRS) of 25.0% to 28.0% (2021: 21.5%) and an effective tax rate (non-
+IFRS) of 22.0% to 25.0% (2021: 20.0%), strongly depending on the development of Sapphire
+Ventures' investments.
+Free cash flow above €4.5 billion (2021: €5.01 billion).
+The share of more predictable revenue (defined as the total of cloud revenue and software support
+revenue) is expected to reach approximately 78% (2021: 75%).
+€7.8 billion to €8.25 billion non-IFRS operating profit at constant currencies (2021: €8.23 billion), flat
+to down 5% at constant currencies.
+(2021: €24.08 billion), up 4% to 6% at constant currencies.
+€25.0 billion to €25.5 billion cloud and software revenue at constant currencies
+€11.55 billion to €11.85 billion cloud revenue at constant currencies (2021: €9.42 billion), up 23% to
+26% at constant currencies.
+FY 2022
+Proposed Dividend
+Information
+Further Information on
+Sustainability
+4.1
+4.7
+-5.2
+4.0
+5.6
+-3.4
+3.7
+4.0
+-1.7
+4.3
+4.2
+-2.8
+3.5
+6.5
+-1.8
+3.8
+2.7
+-4.6
+3.9
+5.2
+-6.4
+-6.9
+6.8
+2.4
+-4.5
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP
+SAP Integrated Report 2021
+With regard to macroeconomic factors, IDC states that “organizations continue to navigate the
+disruptions, accelerations, and crosscurrents spurred by the COVID-19 pandemic and the changing
+economic conditions. By 2022, more than half the global economy will be based on or influenced by
+Sustainability has become a top priority for corporations, and IDC highlights that "decarbonization
+initiatives will be a key goal of digital transformations; fewer than 10% of organizations say they are
+not applicable or not implementing objectives to reduce carbon by the end of 2023." Therefore,
+"carbon accounting systems will rise up the priority list for systems implementation. The adage 'you
+can't manage what you can't measure' applies to carbon emissions as well," says IDC. (E) As a
+guidance, IDC proposes: “Establish the IT organization as the provider of the data management
+foundation that collects all sustainability data company-wide with the purpose of measuring progress
+against IT and general business sustainability contribution and efficacy across each factor."(G)
+Additionally, IDC observes a shift in vendor to customer relationships and predicts that "by 2023,
+traditional distribution models will crumble as 20% of businesses in some sectors use technology to
+go direct to customers, seeking to improve customer satisfaction and product development."(H)
+Furthermore, IDC predicts that "by 2022, organizations that allocate 50%+ of their software
+development projects to customer-facing initiatives will see revenue grow 15% faster compared with
+those that focus more on internal projects.” In addition, company sales portfolios will be impacted as
+"by 2026, 30% of software development teams will be focused on turning traditional products into
+outcomes as a service," states IDC. (G)
+"2022 might be the year the global economy becomes more digital than physical," says International
+Data Corporation (IDC), a U.S.-based market research firm. (E) “Cloud in all its permutations will
+continue to play ever greater, and even dominant, roles across the IT industry as enterprises pivot to a
+digital-first economy. Entire industries want to intelligently leverage data to their advantage and can do
+so because they have faster access to digital technologies built on a cloud foundation. Cloud is now
+firmly established as an essential element of a digital-first strategy, as organizations look to automate
+operations, deliver rich customer experiences, and launch new products and services, cloud has
+become the primary accelerator of innovation," says IDC. (F)
+Outlook for 2022 and Beyond
+Additional
+The IT Market:
+p = projection
+China
+4.8
+8.1
+2.3
+5.9
+7.2
+-0.9
+3.3
+1.6
+Source: International Monetary Fund (IMF), World Economic Outlook Update January 2022, Rising Caseloads, a Disrupted Recovery,
+and Higher Inflation (https://www.imf.org/-/media/Files/Publications/WEO/2022/Update/January/English/text.ashx), p. 6.
+Estimated Amounts for Actual Amounts for
+2022
+Additional
+570-670
+In 2022, we expect a free cash flow of above €4.5 billion (compared to €5.0 billion in 2021),
+predominantly due to our expectation of flat to slightly declining operating profit. Since payouts for
+capital expenditures and leasing are expected on a level similar to the last three years, a separate
+outlook on operating cash flow is not provided. For 2025, we continue to expect around €8.0 billion in
+free cash flow.
+In 2022, we intend to repay €900 million in Eurobonds, US$445 million in U.S. Private Placements,
+and €1.45 billion in bank loans. At the date of this report, debt repayments of around €4.3 billion until
+the end of 2023 are scheduled. The ratio of net debt as at December 31, 2021, divided by the total of
+operating profit (IFRS) plus depreciation and amortization was 0.24x, therefore, already below our
+2023 target of 0.5x.
+Non-Financial Goals 2022 and Ambitions for 2025
+In addition to our financial goals, we also focus on three non-financial targets: customer loyalty,
+employee engagement, and carbon impact.
+For 2022 through 2025, we aim to maintain employee engagement, measured by the Employee
+Engagement Index, at a high level between 84% and 86% (2021: 83%).
+We measure customer loyalty using the Customer Net Promoter Score (Customer NPS). We are
+targeting to increase the Customer NPS to a score of 11 to 15 in 2022 and to steadily increase the
+Customer NPS through 2025 (2021: 10).
+159/338
+160/338
+SAP
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+We aim to reach net greenhouse gas emissions in our operations of 70 kilotons (kt) in 2022
+(2021: 110 kt) with a steady decrease further on, reaching 0 kt by 2023 and maintaining net carbon
+emissions in our own operations of 0 kt from that point onward. Further, SAP has also committed to
+achieve net-zero along our value chain in line with a 1.5 degrees Celsius future in 2030.
+Premises on Which Our Outlook and Prospects Are Based
+In preparing our outlook and prospects, we have taken into account all events known to us at the time
+we prepared this report that could influence SAP's business going forward.
+Opportunities
+Among the assumptions underlying this outlook are those presented above concerning the economy
+and our expectations for the performance of the SAP Group.
+The outlook for the SAP Group in respect to liquidity, finance, investment, and dividend are equally
+applicable to SAP SE.
+Outlook for SAP SE
+The primary source of revenue for SAP SE is the license fees it charges subsidiaries for the right to
+market and maintain SAP software solutions. Consequently, the performance of SAP SE in operating
+terms is closely tied to the cloud and the software revenue of the SAP Group.
+Based on the outlook for cloud and software revenue for the SAP Group at constant currency in non-
+IFRS in 2022, we expect product revenue for SAP SE in 2022 to increase slightly compared to 2021.
+Assuming there are no significant effects from acquisitions or other unforeseeable occurrences in
+2022, we also expect the operating profit of SAP SE to decrease moderately compared to 2021.
+The financial ambitions of the SAP Group for the years 2023 to 2025 provide for future growth of
+revenue and profit. We expect that such growth will also result in revenue and profit growth for
+SAP SE to the same degree.
+We expect that SAP SE will continue to receive investment income in the form of profit transfers and
+dividends from its subsidiaries. The growth we expect for the SAP Group should have a positive effect
+on this investment income.
+As at December 31, 2021, we had net debt of €1.6 billion. We believe that our liquid assets combined
+with our undrawn credit facilities are sufficient to meet our operating financing needs in 2022 as well,
+and, together with expected cash flows from operations, will support debt repayments and our
+currently planned capital expenditure requirements over the near and medium term.
+Goals for Liquidity and Finance
+SAP Integrated Report 2021
+Investment Goals
+623
+3,000-3,300
+2,794
+20-40
+157
+In 2022, we intend to pay a dividend of €2.45 per share (subject to shareholder approval at the
+Annual General Shareholders Meeting in May 2022). This dividend includes a special payment of
+€0.50 to celebrate SAP's 50th anniversary. For more information, see the Financial Performance:
+Review and Analysis section.
+Medium-Term Prospects
+Our planned investment expenditures for 2022 and 2023, other than for business combinations,
+consist primarily of the purchase of IT infrastructure and the construction activities described in the
+Assets (IFRS) section. We expect investments in IT infrastructure of approximately €500 million and in
+construction activities of approximately €300 million in 2022. In 2022, we expect total capital
+expenditures of approximately €850 million. In 2023, capital expenditures are expected to stay at a
+similar level as in 2022.
+In this section, all numbers (except cloud revenue and total revenue) are based exclusively on non-
+IFRS measures.
+SAP Integrated Report 2021
+SAP
+To Our
+Stakeholders
+Combined Group
+2021
+Consolidated Financial
+Statements IFRS
+Management Report
+More than €36 billion total revenue
+More than €22 billion cloud revenue
+SAP confidently reiterates its mid-term ambition published on October 25, 2020. By 2025, SAP
+continues to expect:
+SAP expects to steadily grow its more predictable revenue while increasing operating profit. We
+expect to achieve double-digit growth of non-IFRS operating profit from 2023 onwards followed by
+double-digit growth of total revenue as we approach 2025. Our strategic objectives are focused
+primarily on our main financial and non-financial objectives: growth, profitability, customer loyalty, and
+employee engagement.
+A non-IFRS cloud gross margin of approximately 80%
+More than €11.5 billion non-IFRS operating profit
+Free cash flow of approximately €8 billion
+Information
+Additional
+Further Information on
+Sustainability
+A significant expansion of the Company's more predictable revenue share to approximately 85%,
+reaching more than €30 billion
+-2
+22
+-6
+Cash flow hedges/cost of hedging, before tax
+(F.1)
+-35
+14
+Income taxes relating to cash flow hedges/cost of hedging
+Cash flow hedges/cost of hedging, net of tax
+-4
+0
+(E.2)
+-26
+10
+-1
+2,819
+-2,782
+536
+Other comprehensive income, net of tax
+4
+9
+Other comprehensive income for items that will be reclassified to profit or loss, net of tax
+2,825
+-24
+-52
+Gains (losses) on exchange differences on translation, before tax
+Reclassification adjustments on exchange differences on translation, before tax
+Exchange differences, before tax
+2,853
+-2,793
+537
+30
+0
+0
+2,855
+-2,793
+537
+Income taxes relating to exchange differences on translation
+-9
+1
+0
+Exchange differences, net of tax
+(E.2)
+2,846
+-2,792
+537
+Gains (losses) on cash flow hedges/cost of hedging, before tax
+-39
+20
+Reclassification adjustments on cash flow hedges/cost of hedging, before tax
+-2,752
+2,758
+Total comprehensive income
+Section D Invested Capital
+Cash and cash equivalents
+2020
+2021
+Notes
+€ millions
+Consolidated Statements of Financial Position of SAP Group as at December 31
+Additional
+Information
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Combined Group
+Management Report
+(E.3)
+Stakeholders
+SAP
+SAP Integrated Report 2021
+166/338
+The accompanying Notes are an integral part of these Consolidated Financial Statements.
+50
+138
+172
+Attributable to non-controlling interests
+3,804
+30
+To Our
+8,898
+5,311
+Other financial assets
+8,230
+2,531
+3,854
+Attributable to owners of parent
+8,058
+2,393
+15,069
+20,044
+210
+403
+1,321
+1,633
+(A.3), (G.1)
+6,593
+6,352
+(A.2)
+Goodwill
+Total current assets
+Tax assets
+Other non-financial assets
+Trade and other receivables
+1,635
+(D.6), (E.3)
+483
+34
+3
+-52
+2019
+2020
+2021
+Notes
+€ millions, unless otherwise stated
+■lil Consolidated Income Statements of SAP Group for the Years Ended December 31
+Additional
+Information
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Combined Group
+Management Report
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+Cloud
+275
+273
+(G.10) German Code of Corporate Governance
+262
+(G.9) Scope of Consolidation, Subsidiaries and Other Equity Investments
+261
+Events After the Reporting Period..
+(G.8)
+261
+(G.7) Principal Accountant Fees and Services
+260
+Related Party Transactions Other Than Board Compensation.
+(G.6)
+.259
+Management's Annual Report on Internal Control over Financial Reporting
+in the Consolidated Financial Statements
+Executive and Supervisory Board Compensation........
+9,418
+6,933
+Cost of cloud and software
+Cost of software licenses and support
+Cost of cloud
+27,553
+27,338
+27,842
+(A.1), (C.2)
+4,541
+4,110
+3,764
+23,012
+23,228
+24,078
+8,080
+16,080
+14,660
+11,547
+11,506
+11,412
+Total revenue
+Services
+Cloud and software
+Software licenses and support
+Software support
+4,533
+3,642
+3,248
+Software licenses
+15,148
+(G.5)
+.255
+Board of Directors......
+Non-Current Assets by Region........
+(D.7)
+.223
+Equity Investments
+(D.6)
+.222
+Leases
+(D.5)
+221
+219
+(D.4) Property, Plant, and Equipment.....
+(D.3) Intangible Assets...
+Information
+225
+Additional
+Management Report
+Combined Group
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+164/338
+163/338
+214
+(D.2) Goodwill
+209
+(D.1) Business Combinations and Divestitures
+209
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+(D.8)
+Purchase Obligations...
+225
+(G.4)
+252
+Other Litigation, Claims, and Legal Contingencies...
+(G.3)
+252
+Other Tax Liabilities
+(G.2)
+252
+Prepaid Expenses and Other Tax Assets
+(G.1)
+252
+Section G - Other Disclosures
+246
+.234
+(F.2) Fair Value Disclosures on Financial Instruments
+Financial Risk Factors and Risk Management.
+(F.1)
+234
+Section F - Management of Financial Risk Factors
+228
+(E.3) Liquidity
+226
+Total Equity..
+(E.2)
+226
+Capital Structure Management.
+(E.1)
+226
+Section E- Capital Structure, Financing, and Liquidity
+Cost of services
+Total cost of revenue
+Gross profit
+Research and development
+4.46
+(C.6)
+Earnings per share, diluted (in €)
+2.78
+4.35
+4.46
+(C.6)
+Earnings per share, basic (in €)
+50
+138
+121
+3,321
+5,145
+4.35
+5,256
+5,283
+5,376
+-1,226
+-1,938
+-1,471
+(C.5)
+4,596
+7,220
+6,847
+(C.2)
+198
+776
+2,174
+3,370
+2.78
+The accompanying Notes are an integral part of these Consolidated Financial Statements.
+165/338
+30
+34
+Remeasurements on defined benefit pension plans, net of tax
+5
+-9
+-9
+Income taxes relating to remeasurements on defined benefit pension plans
+-57
+39
+43
+Remeasurements on defined benefit pension plans, before tax
+Items that will not be reclassified to profit or loss
+3,370
+5,283
+5,376
+2019
+2020
+2021
+Notes
+Il Profit after tax
+€ millions
+Consolidated Statements of Comprehensive Income of SAP Group for the Years Ended December 31
+Additional
+Information
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Combined Group
+Management Report
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+(C.4)
+Other comprehensive income for items that will not be reclassified to profit or loss, net of tax
+Items that will be reclassified subsequently to profit or loss
+-589
+-949
+-3,662
+-3,178
+-2,916
+-4,692
+-4,707
+-5,030
+-2,159
+-2,008
+-1,925
+-2,534
+-2,699
+-3,105
+Attributable to non-controlling interests
+-7,946
+Attributable to owners of parent
+Income tax expense
+Profit before tax
+Financial income, net
+Finance costs
+Finance income
+Other non-operating income/expense, net
+Operating profit
+Total operating expenses
+(B.6)
+Other operating income/expense, net
+Restructuring
+General and administration
+Sales and marketing
+Profit after tax
+-7,886
+-8,355
+19,897
+787
+1,473
+3,123
+-74
+-179
+17
+(C.3)
+4,473
+6,623
+-23,081
+-20,715
+-23,186
+4,656
+18
+84
+43
+-1,130
+(D.2)
+-157
+-1,629
+-1,356
+-2,431
+-7,693
+-7,106
+-7,505
+-4,292
+-4,454
+-5,190
+19,199
+19,453
+-697
+31,090
+(D.3)
+Intangible assets
+778
+-2,986
+-7,021
+Dividends paid
+(E.2)
+-2,182
+-1,864
+-1,790
+Dividends paid on non-controlling interests
+-54
+-2
+-17
+Purchase of treasury shares
+(E.2)
+0
+735
+-1,492
+3,229
+-3,063
+Proceeds from sales of equity or debt instruments of other entities
+-72
+203
+61
+Purchase of intangible assets and property, plant, and equipment
+-800
+-816
+-817
+Proceeds from sales of intangible assets or property, plant, and equipment
+91
+88
+71
+Purchase of equity or debt instruments of other entities
+-4,368
+-2,535
+-900
+Net cash flows from investing activities
+Cash flows from sale of subsidiaries or businesses
+0
+2,828
+-59
+0
+Net cash flows from financing activities
+-56
+-3,997
+102
+Effect of foreign currency rates on cash and cash equivalents
+484
+-214
+110
+Net decrease/increase in cash and cash equivalents
+3,587
+-4
+-3,313
+Cash and cash equivalents at the beginning of the period
+-2
+Proceeds from changes in ownership interests in subsidiaries that do not result in the loss of control
+(E.2)
+-403
+95
+0
+Proceeds from borrowings
+(E.3)
+1,680
+2,132
+3,622
+Repayments of borrowings
+(E.3)
+-1,952
+-2,430
+-1,309
+Payments of lease liabilities
+-374
+-378
+Transactions with non-controlling interests
+(E.3)
+-6,215
+-1,142
+1,835
+(C.5)
+1,471
+1,938
+1,226
+(C.4)
+-2,174
+-776
+-198
+-11
+68
+14
+27,538
+-198
+-54
+1,084
+Decrease/increase in trade and other receivables
+2,794
+1,872
+2019
+Il Profit after tax
+5,376
+5,283
+3,370
+Adjustments to reconcile profit after tax to net cash flow from operating activities:
+Depreciation and amortization
+Share-based payment expenses
+Il Income tax expense
+Il Financial income, net
+Decrease/increase in allowances on trade receivables
+Other adjustments for non-cash items
+(D.2)-(D.4)
+1,775
+1,831
+(B.3)
+-662
+Decrease/increase in other assets
+Increase/decrease in contract liabilities
+-244
+-341
+56
+122
+97
+Income taxes paid, net of refunds
+-2,063
+-1,194
+-2,329
+Net cash flows from operating activities
+6,223
+7,194
+3,496
+Cash flows for business combinations, net of cash and cash equivalents acquired
+(D.1)
+-202
+Increase/decrease in trade payables, provisions, and other liabilities
+-1,257
+-1,120
+414
+821
+-1,469
+-706
+-651
+-583
+475
+293
+328
+100
+128
+984
+Share-based payments
+Interest paid
+Interest received
+-1,310
+5,311
+5,314
+8,627
+Additional
+Information
+Consolidated Statements of Comprehensive Income of SAP Group
+Consolidated Statements of Financial Position of SAP Group..
+Consolidated Statements of Changes in Equity of SAP Group
+Consolidated Statements of Cash Flows of SAP Group...
+Consolidated Income Statements of SAP Group
+Consolidated Financial Statements IFRS
+Consolidated Financial
+Statements IFRS
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Stakeholders
+Combined Group
+To Our
+SAP Integrated Report 2021
+SAP
+For more information about future opportunities relating to our employees, see the Employees and
+Social Investments section.
+Our outlook and medium-term prospects are based on certain assumptions regarding employee
+retention and our Business Health Culture Index. Should these develop at a rate that is better than
+expected, employee productivity and engagement may increase. A stronger-than-expected increase in
+the Employee Engagement Index can therefore be an opportunity that could positively impact our
+revenue, profit, and cash flows, enabling SAP to exceed our stated medium-term prospects.
+Our employees drive innovation, provide value to our customers, and consistently enable our growth
+and profitability. We continuously invest in our people with the aim of retaining their high level of
+engagement, further strengthening their skills, fostering an agile and innovative organization, and
+ensuring a healthy, diverse, and inclusive workforce. By doing so, we anticipate improvements in our
+employee productivity and innovation capabilities.
+163
+Opportunities from Our Employees
+165
+167
+175
+Revenue
+(A.1)
+175
+Customers
+-
+Section A
+174
+170
+170
+(IN.2) Implications of the COVID-19 Pandemic...
+(IN.1) Basis for Preparation
+Notes
+169
+168
+166
+(A.2)
+Partners contribute to SAP's growth by expanding our market reach in sales and services, specifically
+by retaining and increasing sales to existing customers, attracting new customers, and satisfying our
+joint customers' requirements through (co-)innovation. Together with all of the aforementioned
+measures, this may positively impact our revenue, profit, and cash flows, and enable SAP to exceed
+our stated medium-term prospects.
+SAP and our partner ecosystem offer solutions to help customers grow their businesses and
+accelerate their move to the cloud. SAP partners build innovative extensions for SAP applications
+based on SAP BTP, and in doing so, enhance the customer value with SAP. By providing innovations
+that extend SAP applications, partners can influence the adoption of SAP technologies to support
+customers' unique business needs. Thus, customers maximize their SAP investment through partner
+offerings such as solution extensions, industry-specific solutions, line-of-business (LOB) solutions, and
+mobile solutions.
+Based on our innovation capability, we see opportunities in growing product and market areas, such
+as in the further enhancement of business processes with intelligent technologies. In addition to the
+increased focus on innovation, we also focus on ease of adoption and consumption, so our customers
+can receive the benefits from our software applications, technologies, and platforms at reduced time
+to value. For example, the accelerated adoption of technology that helps companies transform into
+more sustainable businesses could result in additional upsell opportunities for customers migrating to
+SAP S/4HANA Cloud.
+In addition, we continue to expand innovation initiatives to support long-term projects in strategic
+opportunity areas, supporting talented entrepreneurs within SAP, as well as, for example, external
+startups.
+Our continued growth through innovation is based on our ability to leverage research and
+development (R&D) resources effectively. We continue to improve our products through design
+thinking and lean methodologies. We are accelerating innovation cycles, especially in our cloud
+solutions, and engaging even more closely with our customers to enable success.
+Opportunities Through Innovation
+For more information about future trends in the global economy and the IT market outlook, as well as
+their potential influence on SAP, see the beginning of the Expected Developments and Opportunities
+section.
+to be mindful of the negative aspects of this global situation, we do see a trend developing to
+prioritize investments in digital transformation. This could result in an acceleration of the digitalization
+of business processes that exceeds what we had originally planned.
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP
+SAP Integrated Report 2021
+In particular, we see three innovation areas that have the potential to grow beyond our
+expectations.
+Partners constantly respond to the market needs while raising awareness around strategic offerings,
+such as RISE with SAP, SAP BTP, and our industry cloud solutions, which drive the cloud
+transformation of our customers. Partners offer customers a vast array of SAP technologies and
+services specific to their LoB or industry, making it easy for customers to purchase the right
+combination of products and services (such as consulting, implementation, and development) to meet
+their business needs.
+First, with its open APIs and value services, SAP Business Technology Platform (SAP BTP) may be
+adopted faster than internally planned. Second, business process intelligence (BPI) may see
+increased demand for intelligent automation realized through services such as application lifecycle
+management (ALM) and robotic process automation (RPA), for example. Third, we see high growth
+potential in the area of sustainability management. Our vision to enable customers to transform into
+intelligent, sustainable enterprises is based on our commitment to "chasing zero" - - zero emissions,
+zero waste, zero inequality. If this conviction is shared by increasing numbers of customers, this may
+lead to an increased demand for our business process logics.
+Opportunities from Our Strategy for Profitable Growth
+SAP's partner ecosystem is defined by the interdependent relationships of our customers, our
+employees, our suppliers, our partners, and our competition. Our ecosystem, which includes more
+than 22,500 partners with different areas of expertise, carries the SAP brand into global markets and
+expands our portfolio with their expertise, services, and products. Our ecosystem includes partners in
+four different tracks: partners in the “Build” track develop solutions on top of, or integrate with, SAP
+technology and platforms; partners in the “Sell” track resell, implement, and support customers in the
+cloud and on premise; partners in the “Service” track (systems integrators) provide strategic business
+consulting, system design, solution integration, and project implementation of SAP solutions; partners
+in the "Run" track are outsourcing or hosting companies that offer SAP solutions to customers through
+a private or public cloud.
+Opportunities from Our Partner Ecosystem
+The stronger focus on customer success enabled through our shift to a new operating model that
+aligns sales, services, and customer engagement activities may positively impact our revenue, profit,
+and cash flows. This potential may result in our stated medium-term prospects being exceeded.
+Our extensive experience in applications and analytics, as well as database and technology, continue
+to offer solid multiyear growth opportunities as we bring innovative technologies with simplified
+consumption to our installed base and continue to acquire new customers.
+Additional
+Information
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+162/338
+161/338
+SAP seeks to establish new business models and leverage our expanding ecosystem of partners to
+achieve scale and maximize opportunities. We see additional opportunities in potential future strategic
+partnerships, such as those for the migration of critical business systems to the cloud linked to the
+RISE with SAP offering. In addition, a promising joint venture in the financial services industry called
+SAP Fioneer was founded in 2021, enabling a better coverage of the rapidly changing banking and
+insurance industry.
+SAP strives to generate profitable growth across our portfolio of products, solutions, and services to
+keep or improve our market position. Our aim is to continue to expand our addressable market
+through the adjustment of our portfolio and our new technologies and innovations. The COVID-19
+pandemic has strengthened the readiness in the market to consume software in the cloud, including
+core business process platforms. This could result in an even faster adoption of our core ERP offering
+in the cloud than anticipated, translating into higher cloud and total revenue growth from 2023
+onwards than currently provided for in our midterm ambition. Greater efficiency in our cloud
+operations may also positively affect the profitability of our cloud business.
+For more information about future opportunities in research and development for SAP, see the
+Products, Research & Development, and Services section.
+Trade and Other Receivables
+180
+(A.3)
+The registered domicile of SAP SE is in Walldorf, Germany (Commercial Register of the Lower Court of
+Mannheim HRB 719915). The Consolidated Financial Statements for 2021 of SAP SE and its
+subsidiaries (collectively, “we,” “us,” “our,” “SAP,” “Group," and "Company") have been prepared in
+accordance with International Financial Reporting Standards (IFRS).
+We have applied all IFRS standards and interpretations that were effective on and endorsed by the
+European Union (EU) as at December 31, 2021. There were no standards or interpretations as at
+December 31, 2021, impacting our Consolidated Financial Statements for the years ended
+December 31, 2021, 2020, and 2019, that were effective but not yet endorsed. Therefore, our
+Consolidated Financial Statements comply with both, IFRS as issued by the International Accounting
+Standards Board (IASB) and IFRS as endorsed by the EU.
+Our Executive Board approved the Consolidated Financial Statements on February 23, 2022, for
+submission to our Supervisory Board which approved the Consolidated Financial Statements on the
+same day.
+All amounts included in the Consolidated Financial Statements are reported in millions of euros
+(€ millions) except where otherwise stated. As figures are rounded, numbers presented throughout
+this document may not add up precisely to the totals we provide and percentages may not precisely
+reflect the absolute figures.
+Amounts disclosed in the Notes that are taken directly from our
+and 44,
+Consolidated Income Statements
+or our Consolidated Statements of Financial Position are marked with the symbols
+respectively.
+Accounting Policies, Management Judgments, and Sources of Estimation
+Uncertainty
+How We Present Our Accounting Policies, Judgments, and Estimates
+To ease the understanding of our financial statements, we present the accounting policies,
+management judgments, and sources of estimation uncertainty (hereafter: accounting policies,
+judgments, and estimates) on a given subject together with other disclosures related to the same
+subject in the Note that deals with this subject. Accounting policies, judgments, and estimates that do
+not relate to a specific subject are presented in the following section.
+For easier identification of our accounting policies, judgments, and estimates, the respective
+disclosures are marked with the symbol and highlighted with a light gray box. They focus on the
+accounting choices made within the framework of the prevailing IFRS and refrain from repeating the
+underlying promulgated IFRS guidance, unless we consider it particularly important to the
+understanding of a Note's content.
+208
+(C.6) Earnings per Share
+.203
+General Information
+(C.5) Income Taxes
+(IN.1) Basis for Preparation
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Cash and cash equivalents at the end of the period
+(E.3)
+8,898
+5,311
+5,314
+The accompanying Notes are an integral part of these Consolidated Financial Statements.
+169/338
+170/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Notes
+Management Report
+Additional
+Information
+203
+Financial Income, Net.
+(C.4)
+185
+Share-Based Payments.
+(B.3)
+184
+(B.2) Employee Benefits Expenses.
+184
+Employee Headcount......
+(B.1)
+184
+Section B - Employees
+182
+Customer-Related Provisions........
+(A.4)
+181
+Capitalized Cost from Contracts with Customers.....
+(B.4)
+Pension Plans and Similar Obligations..........
+193
+(B.5)
+.202
+Other Non-Operating Income/Expense, Net
+(C.3)
+202
+Reconciliation of Segment Measures to the Consolidated Income Statements.
+(C.2)
+198
+2020
+Results of Segments.
+198
+Section C - Financial Results
+196
+Restructuring
+(B.6)
+196
+Other Employee-Related Obligations..
+(C.1)
+2021
+39
+€ millions
+28,537
+1,229
+1,229
+1,918
+545
+37,022
+32,026
+1,757
+-1,012
+-3,072
+-3,072
+38,853
+29,716
+(E.2)
+2,670
+29,646
+211
+15,696
+36
+667
+(E.3), (D.5)
+11,042
+13,605
+(B.3), (B.5), (G.2)
+860
+770
+(A.4), (B.4), (B.5), (B.6)
+355
+362
+(C.5)
+291
+158
+(A.1)
+13
+13,510
+827
+(E.2)
+29,927
+Hyperinflation
+Other changes
+12/31/2019
+Il Profit after tax
+Other comprehensive income
+Comprehensive income
+Share-based payments
+Dividends
+Purchase of treasury shares
+Changes in non-controlling
+interests
+Other changes
+12/31/2020
+Il Profit after tax
+Other comprehensive income
+Dividends
+41,523
+Share-based payments
+Other comprehensive income
+71,169
+58,464
+Notes
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Consolidated Statements of Changes in Equity of SAP Group for the Years Ended December 31
+Equity Attributable to Owners of Parent
+€ millions
+Notes
+1/1/2019
+Il Profit after tax
+Comprehensive income
+98
+122
+12,842
+(A.3), (G.1)
+2,628
+1,926
+263
+271
+(C.5)
+1,779
+1,188
+51,125
+43,395
+71,169
+58,464
+Trade and other payables
+Tax liabilities
+Financial liabilities
+137
+Other non-financial liabilities
+147
+Total assets
+3,966
+3,784
+Property, plant, and equipment
+(D.4), (D.8)
+4,977
+5,041
+Other financial assets
+(D.6), (E.3)
+6,275
+3,512
+Trade and other receivables
+Other non-financial assets
+Tax assets
+Deferred tax assets
+Total non-current assets
+(A.2)
+Provisions
+Contract liabilities
+Total current liabilities
+1,367
+304
+414
+(E.3), (D.5)
+4,528
+2,348
+(B.3), (B.5), (G.2)
+5,203
+4,643
+(A.4), (B.4), (B.5), (B.6)
+(A.1)
+89
+73
+4,431
+3,996
+16,136
+1,580
+The accompanying Notes are an integral part of these Consolidated Financial Statements.
+Total equity and liabilities
+Total equity
+Trade and other payables
+Tax liabilities
+Financial liabilities
+Other non-financial liabilities
+Provisions
+Deferred tax liabilities
+Contract liabilities
+Comprehensive income
+Total non-current liabilities
+Issued capital
+Share premium
+Retained earnings
+Other components of equity
+Treasury shares
+Equity attributable to owners of parent
+Non-controlling interests
+Total liabilities
+Share-based payments
+167/338
+Transactions with non-controlling
+-1,012
+-3,072
+29,716
+211
+29,927
+5,256
+5,256
+121
+5,376
+34
+2,768
+2,802
+Dividends
+2,853
+5,290
+32,026
+2,768
+545
+-5
+1
+1
+-1,864
+-1,864
+-2
+-1,866
+-1,492
+-1,492
+-1,492
+-64
+-64
+-64
+-4
+-4
+0
+1,229
+1
+8,058
+8,230
+1,757
+-3,072
+38,853
+2,670
+41,523
+The accompanying Notes are an integral part of these Consolidated Financial Statements.
+168/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+Consolidated Statements of Cash Flows of SAP Group for the Years Ended December 31
+37,022
+172
+1,918
+-30
+1,373
+1,373
+311
+1,684
+-2,182
+-2,182
+-88
+-2,271
+1,933
+1,933
+2,050
+3,983
+-44
+-44
+14
+1,229
+2,531
+51
+2,393
+(E.2)
+1,229
+543
+27,336
+1,234
+-1,580
+28,761
+45
+28,807
+3,321
+3,321
+50
+3,370
+-52
+536
+(E.2)
+483
+(E.2)
+Shares
+interests
+Other changes
+138
+Additional
+Information
+Issued
+Share
+Retained
+Capital
+Premium
+Earnings
+Other
+Components
+of Equity
+Treasury
+Total
+Non-
+Controlling
+Interests
+Total Equity
+(E.2)
+483
+12/31/2021
+536
+1,770
+-1,580
+30,746
+76
+30,822
+5,145
+5,145
+138
+5,283
+30
+-2,782
+-2,752
+-2,752
+-2,782
+3,268
+28,783
+545
+5,175
+-2
+1,229
+3,854
+2
+2
+2
+-1,790
+-1,790
+50
+-1,810
+0
+-19
+-2
+3,804
+-29
+-29
+-29
+-2
+2021
+44 12/31/2021
+Other²
+Decreases resulting from satisfaction of performance obligations
+Increases resulting from billing and invoices becoming due
+1/1/20211
+€ billions
+Additional
+Information
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+4.0
+Stakeholders
+Contract Liabilities
+Further Information on
+Sustainability
+(A.2)
+-9.0
+To Our
+For information about how the default risk for trade receivables is analyzed and managed, how the
+loss rates for the provision matrix are determined, how credit impairment is determined and what our
+criteria for write-offs are, see the section on credit risk in Note (F.1).
+In our Consolidated Income Statements, net gains/losses from expected credit loss allowances are
+included in Other operating income/expense, net. Gains/losses from foreign currency exchange rate
+fluctuations are included in Other non-operating income/expense, net.
+Determining our expected credit loss allowance involves significant judgment. In this judgment, we
+primarily consider our historical experience with credit losses in the respective provision matrix risk
+class and current data on overdue receivables. We expect that our historical default rates represent a
+reasonable approximation for future expected customer defaults. Besides historical data, our
+judgment used in developing the provision matrix considers reasonable and supportable forward-
+looking information (for example, changes in country risk ratings, and fluctuations in credit default
+swaps of the countries in which our customers are located).
+The assessment of whether a receivable is collectible involves the use of judgment and requires us to
+make assumptions about customer defaults that could change significantly.
+By applying this judgment, we record an allowance for a specific customer when it is probable that a
+credit loss has occurred and the amount of the loss is reasonably estimable. Basing the expected
+credit loss allowance for the remaining receivables primarily on our historical loss experience likewise
+requires judgment, as history may not be indicative of future development. Also, including reasonable
+and supportable forward-looking information in the loss rates of the expected credit loss allowance
+requires judgment, as they may not provide a reliable prediction for future development.
+8.8
+We measure trade receivables and contract assets from contracts with customers at amortized cost
+less expected credit losses. We account for expected credit losses by recording an allowance on a
+portfolio basis. We apply the simplified impairment approach. On initial measurement of the
+receivables, we consider all credit losses that are expected to occur during the lifetime of the
+receivables. We use a provision matrix to estimate these losses.
+Trade and Other Receivables
+The amount of revenue recognized in the reporting period that was included in the contract liability
+balance at the beginning of the reporting period was €3.6 billion (December 31, 2020: €3.5 billion).
+2 Other includes, for example, the impact of foreign currency translation and business acquisition.
+1 The prior year number was reduced by €0.2 billion to conform to the presentation requirement regarding payments received in
+advance for cancelable contracts. The corresponding balance is presented in the line "Trade and other payables."
+4.4
+0.6
+Accounting for Trade and Other Receivables
+SAP Integrated Report 2021
+3,798
+180/338
+2020
+2019
+3,308
+2,608
+2,115
+10,931 10,364
+10,211
+4,894
+4,439
+3,945
+9,348
+9,239
+9,172
+1,217
+1,033
+872
+3,625
+179/338
+The following table presents the activities impacting contract liabilities balances during the year ended
+December 31, 2021:
+Contract Balances
+The contract period of our cloud and software support contracts remaining at the balance sheet
+date and thus by the timing of contract renewals
+Currency fluctuations
+The majority of this amount is expected to be recognized as revenue over the next 12 months
+following the respective balance sheet date. This estimate is based on our best judgment, as it needs
+to consider estimates of possible future contract modifications. The amount of transaction price
+allocated to the remaining performance obligations, and changes in this amount over time, are
+impacted by, among others:
+SAP
+The transaction price allocated to performance obligations that were unsatisfied or partially
+unsatisfied as at December 31, 2021, was €39.9 billion (December 31, 2020: €33.4 billion). This
+amount mostly comprises obligations to provide software support or cloud subscriptions services, as
+the respective contracts typically have durations of one or multiple years. The portion of remaining
+performance obligations related to services consists of non-cancelable revenue from contracts for
+projects with a predefined output.
+Remaining Performance Obligations
+For information about the breakdown of revenue by segment and segment revenue by region, see
+Note (C.1).
+6,933 24,078 23,228 23,012
+8,080
+9,418
+3,629
+Amounts of a customer contract's transaction price that are allocated to the remaining performance
+obligations represent contracted revenue that has not yet been recognized. They include amounts
+recognized as contract liabilities and amounts that are contracted but not yet due.
+SAP
+AUD
+Additional
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+For agreements that combine the delivery of software and the obligation to deliver, in the future,
+unspecific software products, we recognize revenue at a point in time for licenses that are made
+immediately accessible to the customer. We recognize revenue ratably over the term of the
+software subscription contract for the unspecified software products, as our performance obligation
+is to stand ready to deliver such products on a when-and-if-available basis.
+Software support revenue is typically recognized based on time elapsed and thus ratably over the
+term of the support arrangement. Under our standardized support services, our performance
+obligation is to stand ready to provide technical product support and unspecified updates, upgrades,
+and enhancements on a when-and-if-available basis. Our customers simultaneously receive and
+consume the benefits of these support services as we perform.
+Service revenue is typically recognized over time. Where we stand ready to provide the service (such
+as access to learning content), we recognize revenue based on time elapsed and thus ratably over the
+service period. Consumption-based services (such as separately identifiable consulting services and
+premium support services and classroom training services) are recognized over time as the services
+are utilized, typically following the percentage-of-completion method or ratably. When using the
+percentage-of-completion method, we typically measure the progress toward complete satisfaction of
+the performance obligation in the same way and with the same reasoning and judgment as we do for
+customer-specific on-premise software development agreements. We apply judgment in determining
+whether a service qualifies as a stand-ready service or as a consumption-based service.
+Revenue for combined performance obligations is recognized over the longest period of all promises
+in the combined performance obligation.
+Judgment is also required to determine whether revenue is to be recognized at a point in time or over
+time. For performance obligations satisfied over time, we need to measure progress using the method
+that best reflects SAP's performance. When using cost incurred as a measure of progress for
+recognizing revenue over time, we apply judgment in estimating the total cost to satisfy the
+performance obligation.
+All of the judgments and estimates mentioned above can significantly impact the timing and amount
+of revenue to be recognized.
+Contract Balances
+We recognize trade receivables for performance obligations satisfied over time gradually as the
+performance obligation is satisfied and in full once the invoice is due. Judgment is required in
+determining whether a right to consideration is unconditional and thus qualifies as a receivable.
+Contract liabilities primarily reflect invoices due or payments received in advance of revenue
+recognition.
+Typically, we invoice fees for on-premise standard software on contract closure and software delivery.
+Periodic fixed fees for cloud subscription services, software support services, and other multi-period
+agreements are typically invoiced yearly or quarterly in advance. Such fee prepayments account for
+the majority of our contract liability balance. Fees based on actual transaction volumes for cloud
+subscriptions and fees charged for non-periodical services are invoiced as the services are delivered.
+While payment terms and conditions vary by contract type and region, our terms typically require
+payment within 30 to 60 days.
+Geographic Information
+The amounts for revenue by region in the following tables are based on the location of customers.
+The regions in the following table are EMEA (Europe, Middle East, and Africa), Americas (North
+America and Latin America), and APJ (Asia Pacific Japan).
+SAP
+SAP Integrated Report 2021
+SAP Integrated Report 2021
+SAP
+177/338
+Additional
+Information
+history. Typically, our standardized support offerings and our professional service offerings follow
+this approach.
+Where sales prices for an offering are not directly observable or highly variable across customers,
+we use estimation techniques. For renewable offerings with highly variable pricing across
+customers, these techniques consider the individual contract's expected renewal price as far as this
+price is substantive. Typically, our cloud offerings follow this approach. For non-renewable
+offerings, these estimations follow a cost-plus-margin approach.
+For offerings that lack renewals, have highly variable pricing, and lack substantial direct costs to
+estimate based on a cost-plus-margin approach, we allocate the transaction price by applying a
+residual approach. We use this technique in particular for our standard on-premise software
+offerings.
+Judgment is required when estimating SSPs. To judge whether the historical pricing of our goods and
+services is highly variable, we have established thresholds of pricing variability. For judging whether
+contractual renewal prices are substantive, we have established floor prices that we use as SSPS
+whenever the contractual renewal prices are below these floor prices. In judging whether contracts
+are expected to renew at their contractual renewal prices, we rely on our respective renewal history.
+The SSPS of material right options depend on the probability of option exercise. In estimating these
+probabilities, we apply judgment considering historical exercise patterns.
+We review the SSPs periodically or whenever facts and circumstances change to ensure the most
+objective input parameters available are used.
+Recognition of Revenue
+Cloud revenue is recognized over time as the services are performed. Where our performance
+obligation is the grant of a right to continuously access and use a cloud offering for a certain term,
+revenue is recognized based on time elapsed and thus ratably over this term. In limited scenarios
+where the transaction price is entirely variable and determined by the customer's usage, we recognize
+revenue based on usage in the period in which it was earned.
+Software revenue is recognized at a point in time or over time depending on whether we deliver
+standard software, customer-specific software, or software subscription contracts that combine the
+delivery of software and the obligation to deliver, in the future, unspecified software products:
+Licenses for our standard on-premise software products are typically delivered by providing the
+customer with access to download the software. We recognize revenue for these on-premise
+licenses at the point in time when we grant the license rights to the customer and the customer has
+access to and thus control over the software. In judging whether our on-premise software offerings
+grant customers a right to use, rather than a right to access, our intellectual property, we have
+considered the usefulness of our software without subsequent updates to it.
+· Typically, our customer-specific on-premise software development agreements:
+"
+Are for software developed for specific needs of individual customers and therefore it does not
+I have any alternative use for us
+■
+Provide us with an enforceable right to payment for performance completed to date
+For such development agreements, we recognize revenue over time as the software development
+progresses. Judgment is required in identifying an appropriate method to measure the progress
+toward complete satisfaction of such performance obligations. We typically measure progress of
+our development agreements based on the direct costs incurred to date in developing the software
+as a percentage of the total reasonably estimated direct costs to fully complete the development
+work (percentage-of-completion method). This method of measuring progress faithfully depicts the
+transfer of the development services to the customer, as substantially all of these costs are cost of
+the staff or third parties performing the development work. In estimating the total cost to fully
+complete the development work, we consider our history with similar projects.
+178/338
+To Our
+Stakeholders
+Combined Group
+8,870
+9,110
+9,085
+Rest of Americas
+2,099
+1,996
+2,109
+Americas
+10,969
+11,106
+11,194
+Japan
+1,301
+1,305
+1,180
+Rest of APJ
+2,984
+United States
+12,105
+12,067
+12,589
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+Total Revenue by Region
+€ millions
+Germany
+Rest of EMEA
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+2021
+2019
+4,343
+4,015
+3,948
+8,246
+8,052
+8,158
+EMEA
+2020
+Management Report
+Combined Group
+To Our
+Stakeholders
+Section A - Customers
+This section discusses disclosures related to contracts with our customers. These include but are not
+limited to explanations of how we recognize revenue, revenue disaggregation, and information about
+our trade receivables and customer-related obligations.
+(A.1) Revenue
+Accounting for Revenue from Contracts with Customers
+Classes of Revenue
+We derive our revenue from fees charged to our customers for the use of our cloud offerings, for
+licenses to our on-premise software products, and for standardized and premium support services,
+consulting, customer-specific software developments, training, and other services.
+Cloud and software revenue, as presented in our Consolidated Income Statements, is the sum of
+our cloud revenue, our software license revenue, and our software support revenue.
+Cloud revenue represents fees earned from providing customers with any of the following:
+Software as a service (SaaS), that is, a right to use software functionality (including standard
+functionalities and custom cloud applications and extensions) in a cloud-based infrastructure hosted
+by SAP or third parties engaged by SAP, where the customer does not have the right to terminate the
+hosting contract and take possession of the software to either run it on its own IT infrastructure or to
+engage a third-party provider unrelated to SAP to host and manage the software; SaaS also includes
+transaction and agent fees for transactions that customers of our network business execute on our
+cloud-based transaction platforms.
+Platform as a service (PaaS), that is, access to a cloud-based platform to develop, deploy, integrate,
+and manage applications.
+Infrastructure as a service (laaS), that is, hosting and related application management services for
+software hosted by SAP or third parties engaged by SAP.
+Premium cloud support, that is, support beyond the regular support embedded in the underlying
+cloud subscription services.
+Software license revenue represents fees earned from the sale or license of software to customers
+for use on the customer's premises, in other words, where the customer has the right to take
+possession of the software for installation on the customer's premises or on hardware of third-party
+hosting providers unrelated to SAP (on-premise software). Software license revenue includes revenue
+from both the sale of our standard software products and customer-specific on-premise-software
+development agreements.
+Software support revenue represents fees earned from providing customers with standardized
+support services that comprise unspecified future software updates, upgrades, and enhancements as
+well as technical product support services for on-premise software products.
+Services revenue primarily represents fees earned from professional consulting services, premium
+support services, and training services.
+Identification of Contract
+We frequently enter into multiple contracts with the same customer. For accounting purposes, we
+treat these contracts as a single contract if they are entered into at or near the same time and are
+economically interrelated. We do not combine contracts with closing days more than three months
+apart because we do not consider them being entered into near the same time. Judgment is required
+175/338
+176/338
+Additional
+Information
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Stakeholders
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+(IN.2) Implications of the COVID-19 Pandemic
+SAP
+Management Judgments and Estimates Due to the COVID-19 Pandemic
+As the pandemic continues, it remains difficult to predict its duration and the magnitude of its impact
+on assets, liabilities, results of operations, and cash flows. We based our financial-statement-related
+estimates and assumptions on existing knowledge and best information available at the time, and
+applied a scenario that assumes the COVID-19 situation will continue to improve as vaccine programs
+continue to take effect globally, leading to a growing demand environment in 2022.
+We will continue to analyze possible future effects of the COVID-19 pandemic on the measurement of
+individual assets and liabilities.
+The impact of global travel restrictions on SAP's Concur business continues, leading to an overall
+further decline in pay-as-you-go transactional revenues as part of software as a service revenue
+(defined in Note (A.1)) compared to 2020. Over the course of the second half of 2021, such revenues
+I have started to increase again.
+The overall impact of the COVID-19 pandemic on SAP's consolidated financial statements has not
+been significant.
+SAP
+SAP Integrated Report 2021
+To Our
+Combined Group
+Management judgments and estimates can affect the amounts and reporting of assets and liabilities
+as at the reporting date, and the amounts of income and expense reported for the period. Due to the
+global consequences of the ongoing COVID-19 pandemic, these management judgments and
+estimates continue to be subject to uncertainty. Actual amounts may differ from the management
+judgments and estimates; changes could have a material impact on the Consolidated Financial
+Statements. All available information on the expected economic developments and country-specific
+governmental mitigation measures was included when updating the management judgments and
+estimates. This information was also included in the analysis of the recoverability and collectability of
+assets and receivables.
+2,859
+SAP Integrated Report 2021
+Combined Group
+Accounting for business combinations
+(D.1)
+Accounting for income taxes
+(C.5)
+Accounting for share-based payments
+(B.3)
+Accounting for legal contingencies
+(A.4), (G.3)
+(A.2)
+Valuation of trade receivables
+Revenue recognition
+> Significant Accounting Policies
+(A.1)
+Note
+The accounting policies that most frequently or significantly require us to make judgments, estimates,
+and assumptions, and therefore are critical to understanding our results of operations, include the
+following:
+SAP
+SAP Integrated Report 2021
+(D.2)
+Accounting for goodwill
+(D.3)
+Accounting for intangible assets (including recognition of internally generated intangible assets from
+development)
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+in evaluating whether various contracts are interrelated, which includes considerations as to whether
+they were negotiated as a package with a single commercial objective, whether the amount of
+consideration on one contract is dependent on the performance of the other contract, or if some or all
+goods in the contracts are a single performance obligation.
+New arrangements with existing customers can be either a new contract or the modification of prior
+contracts with the customer. Our judgment in making this determination considers whether there is a
+connection between the new arrangement and the pre-existing contracts, whether the goods and
+services under the new arrangement are highly interrelated with the goods and services sold under
+prior contracts, and how the goods and services under the new arrangement are priced. In
+determining whether a change in transaction price represents a contract modification or a change in
+variable consideration, we examine whether the change in price results from changing the contract or
+from applying unchanged existing contract provisions.
+Identification of Performance Obligations
+Our customer contracts often include various products and services. Typically, the products and
+services outlined in the Classes of Revenue section qualify as separate performance obligations and
+the portion of the contractual fee allocated to them is recognized separately. Judgment is required,
+however, in determining whether a good or service is considered a separate performance obligation.
+In particular for our professional services and implementation activities, judgment is required to
+evaluate whether such services significantly integrate, customize, or modify the on-premise software
+or cloud service to which they relate. In this context, we consider the nature of the services and their
+volume relative to the volume of the on-premise software or cloud service to which they relate. In
+general, the implementation services for our cloud services go beyond pure setup activities and
+qualify as separate performance obligations. Similarly, our on-premise implementation services and
+our custom development services typically qualify as separate performance obligations. Non-distinct
+goods and services are combined into one distinct bundle of goods and services (combined
+performance obligation).
+When selling goods or services, we frequently grant customers options to acquire additional goods or
+services (for example, renewals of renewable offerings, or additional volumes of purchased software).
+We apply judgment in determining whether such options provide a material right to the customer that
+the customer would not receive without entering into that contract (material right options). In this
+judgment, we consider, for example, whether the options entitle the customer to a discount that
+exceeds the discount granted for the respective goods or services sold together with the option.
+Determination of Transaction Price
+To Our
+Stakeholders
+We apply judgment in determining the amount to which we expect to be entitled in exchange for
+transferring promised goods or services to a customer. This includes estimates as to whether and to
+what extent subsequent concessions may be granted to customers and whether the customer is
+expected to pay the contractual fees. In this judgment, we consider our history with the respective
+customer or on a portfolio basis.
+Only very rarely do our contracts include significant financing components. We do not account for
+financing components if the period between when SAP transfers the promised goods or services to
+the customer and when the customer pays for those goods or services is one year or less.
+Allocation of Transaction Price
+We have established a hierarchy to identify the standalone selling prices (SSPs) that we use to
+allocate the transaction price of a customer contract to the performance obligations in the contract.
+Where standalone selling prices for an offering are observable and reasonably consistent across
+customers (that is, not highly variable), our SSP estimates are derived from our respective pricing
+173/338
+The IASB has issued various amendments to IFRS standards (such as IAS 1 (Classification of
+Liabilities as Current or Non-current), IAS 37 (Provisions, Contingent Liabilities and Contingent
+Assets)) that are relevant for SAP but not yet effective. We are currently in the process of finalizing the
+assessment of the impact on SAP, but do not expect material effects on our financial position or
+results of operations.
+New Accounting Standards Not Yet Adopted
+Our management periodically discusses these significant accounting policies with the Audit and
+Compliance Committee of our Supervisory Board.
+Accounting for equity investments
+(D.6)
+Our typical cloud services do not provide the customer with a software license because the customer
+does not have the right to terminate the hosting contract and take possession of the software.
+Consequently, cloud fees that are based on transaction volumes are considered in the transaction
+price based on estimates rather than being accounted for as sales-based license royalties.
+3,074
+APJ
+4,285
+USD
+1.1326
+1.2271
+1.1835
+1.1413
+1.1196
+Japanese yen
+JPY
+130.38
+126.49
+129.86
+121.78
+122.06
+Pound sterling
+GBP
+0.8403
+0.8990
+U.S. dollar
+2019
+2020
+2021
+171/338
+172/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+0.8600
+Additional
+Information
+The exchange rates of key currencies affecting the Company were as follows:
+Exchange Rates
+Middle Rate
+Annual Average Exchange Rate
+Equivalent to €1
+as at 12/31
+2021
+2020
+monthly basis. Exchange differences resulting from foreign currency transactions are recognized in
+other non-operating income/expense, net.
+Income and expenses and operating cash flows of our foreign subsidiaries that use a functional
+currency other than the Euro are translated at average rates of foreign exchange (FX) computed on a
+0.8892
+Swiss franc
+Cost of cloud and software includes the costs incurred in producing the goods and providing the
+services that generate cloud and software revenue. Consequently, this line item primarily includes
+employee expenses relating to these services, amortization of acquired intangibles, fees for third-party
+licenses, depreciation of our property, plant, and equipment (for example, of our data centers in which
+we host our cloud solutions), and costs for third-party hosting services. For more information about
+the capitalization of costs from contracts with customers, see Note (A.3).
+Cost of Services
+Cost of services includes the costs incurred in providing the services that generate service revenue.
+Consequently, this line item primarily includes employee expenses and related training, system and
+system administration costs, and costs for third-party resources.
+Research and Development
+Research and development includes the costs incurred by activities related to the development of
+software solutions (new products, updates, and enhancements) including resource and hardware
+costs for the development systems. For more information about the recognition of internally generated
+intangible assets from development, see Note (D.3).
+Sales and Marketing
+Sales and marketing includes the costs incurred for the selling activities (such as sales commissions
+and amortization of capitalized sales commissions) and marketing activities related to our software
+and cloud solutions and our service portfolio. For more information about the capitalization of costs
+from contracts with customers, see Note (A.3).
+General and Administration
+General and administration includes the costs related to finance and administrative functions, human
+resources, and general management as long as they are not directly attributable to one of the other
+operating expense line items.
+Management Judgments and Sources of Estimation Uncertainty
+The preparation of the Consolidated Financial Statements requires our management to make
+judgments, estimates, and assumptions that affect the application of accounting policies and the
+reported amounts of assets, liabilities, revenues, and expenses, as well as disclosure of contingent
+liabilities.
+SAP Integrated Report 2021
+SAP
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Cost of Cloud and Software
+Cost Classification
+1.6106
+1.6554
+CHF
+1.0331
+1.0802
+1.0814
+1.0703
+1.1127
+Canadian dollar
+CAD
+0.8773
+1.4393
+1.4835
+1.5294
+1.4857
+Australian dollar
+174/338
+1.5615
+1.5896
+1.5747
+1.5633
+Additionally, we recognize allowances for individual receivables if there is objective evidence of credit
+impairment.
+Foreign Currencies
+Monetary assets and liabilities denominated in foreign currencies are translated at period-end
+exchange rates.
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+The following table provides an overview of where our accounting policies, management judgments,
+and estimates are disclosed:
+Note
+Accounting Policies, Judgments, and Estimates
+(IN.1)
+Basis for Preparation
+(IN.2)
+Implications of the COVID-19 Pandemic
+(A.1)
+Revenue
+(A.2)
+(A.3)
+(A.4)
+(B.3)
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+4,165
+4,254
+lil SAP Group
+27,842
+27,338
+27,553
+Major Revenue Classes by Region
+€ millions
+Trade and Other Receivables
+EMEA
+APJ
+Jil SAP Group
+Cloud Revenue
+Cloud and Software Revenue
+2021
+2020
+2019
+2021
+Americas
+The financial statements of our subsidiaries to which hyperinflation accounting applies are restated.
+Capitalized Cost from Contracts with Customers
+Share-Based Payments
+(E.2)
+Total Equity
+(E.3)
+Liquidity
+(F.1)
+Financial Risk Factors and Risk Management
+(F.2)
+Fair Value Disclosures on Financial Instruments
+(G.3)
+Other Litigation, Claims, and Legal Contingencies
+(G.5)
+Executive and Supervisory Board Compensation
+General Accounting Policies
+Bases of Measurement
+The Consolidated Financial Statements have been prepared on the historical cost basis except for the
+following:
+Derivative financial instruments, liabilities for cash-settled share-based payments, and financial
+assets with cash flows that are not solely payments of principal or interest are measured at fair
+value.
+Post-employment benefits are measured at the present value of the defined benefit obligations
+less the fair value of the plan assets.
+Equity Investments
+(D.6)
+Leases
+(D.5)
+(B.4)
+Pension Plans and Similar Obligations
+(B.5)
+Other Employee-Related Obligations
+(B.6)
+Restructuring
+(C.1)
+Results of Segments
+Customer-Related Provisions
+(C.5)
+(D.1)
+Business Combinations and Divestitures
+(D.2)
+Goodwill
+(D.3)
+Intangible Assets
+(D.4)
+Property, Plant, and Equipment
+Income Taxes
+Account balances are written off either partially or in full if we judge that the likelihood of recovery is
+remote.
+Information
+We base our judgments, estimates, and assumptions on historical and forecast information, and on
+regional and industry economic conditions in which we or our customers operate. Changes to these
+conditions could adversely affect our estimates. Although we believe we have made reasonable
+estimates about the ultimate resolution of the underlying uncertainties, no assurance can be given
+that the final outcome of these matters will be consistent with what is reflected in our recognized
+assets, liabilities, revenues, and expenses and disclosed contingent liabilities. Actual results could
+differ significantly from original estimates.
+0%
+1,230
+157
+461
+Share-based payment expenses
+2,794
+1,084
+1,835
+Thereof cash-settled share-based payments
+1,147
+893
+1,664
+Thereof equity-settled share-based payments
+1,647
+General and administration
+562
+360
+655
+429
+296
+513
+246
+175
+266
+82
+55
+70
+56
+40
+59
+2019
+191
+171
+Our major share-based payment plans are described below.
+a) Cash-Settled Share-Based Payments
+The number of MSUS initially awarded is likewise multiplied by a performance factor. The
+performance factor depends on the amount of the TSR on the SAP share, measured for an entire
+performance period of approximately three years, compared to the TSR for NASDAQ-100 companies.
+If the TSR on the SAP share equals the median, the performance factor will be 100%. If the TSR on
+the SAP share over the performance period is negative, the maximum performance factor will,
+however, in deviation from the summary above, be 100%.
+Target achievement
+130%
+120%
+110%
+100%
+90%
+80%
+0%
+70%
+Operating income
+50%
+100%
+Total revenue
+150%
+2020
+Cloud revenue
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+200%
+Performance factor
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+The number of FSUs initially awarded is multiplied by a performance factor. The performance factor
+consists of three equally weighted individual performance indicators relating to the three non-IFRS
+KPIs at constant currencies, derived from SAP's long-term strategy: total revenue, cloud revenue, and
+operating income. The performance period throughout which the target achievement for these three
+KPIs is measured starts at the beginning of the financial year in which the FSUs are awarded and
+concludes upon the end of the second year following the year in which the share units were awarded.
+A numerical target value equaling 100% target achievement is set for each KPI. This constitutes, in
+each case, a cumulative value for the three years of the performance period.
+The LTI 2020 is a long-term, multi-year performance-based compensation element that is granted in
+annual tranches. The LTI 2020 reflects SAP's long-term strategy and thus sets uniform incentives for
+the Executive Board members to achieve key targets from the long-term strategic plans. The LTI 2020
+also serves to reward the Executive Board members for long-term SAP share price performance as
+compared to the market, thus ensuring that shareholders' interests are also honored. In addition, the
+LTI 2020 includes a component to ensure long-term retention of our Executive Board members.
+The LTI 2020 is a virtual share program under which annual tranches with a term of approximately four
+years each are granted. When the individual tranches are granted, a certain grant amount specified in
+the Executive Board member's service contract is converted into virtual shares (Share units). For this
+purpose, the grant amount is divided by the price of the SAP share which corresponds to the
+arithmetic mean of the SAP share price on the 20 trading days after scheduled publication of the
+preliminary results for the fourth quarter and the year as a whole (grant price). The share units
+allocated are composed of 1/3 Financial Performance Share Units (FSUS), 1/3 Market Performance
+Share Units (MSUs), and 1/3 Retention Share Units (RSUs). All three types of share units have a
+vesting period of approximately four years. In contrast to RSUs, FSUS and MSUS are subject to
+changes in quantity. In this context, the following applies:
+SAP Long-Term Incentive Program 2020 (LTI 2020)
+Information
+2021
+Sales and marketing
+Research and development
+SAP
+14,870
+13,420
+15,552
+Employee benefits expenses
+47
+72
+101
+Termination benefits outside of restructuring plans
+1,111
+-7
+25
+Employee-related restructuring expenses
+369
+SAP Integrated Report 2021
+419
+Pension expenses
+1,835
+1,084
+2,794
+Share-based payment expenses
+1,477
+1,439
+1,589
+Social security expenses
+10,031
+10,413
+10,635
+Salaries
+2019
+408
+Performance factor
+To Our
+Combined Group
+Cost of services
+Cost of cloud
+€ millions
+Share-Based Payment Expenses by Functional Area
+The operating expense line items in our income statement include the following share-based payment
+expenses:
+Additional
+Information
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+186/338
+185/338
+Stakeholders
+We present the payments of our share-based payment plans separately in our Statements of Cash
+Flows under cash flows from operating activities. As a result, the changes in other assets and in other
+liabilities presented in the reconciliation of operating cash flow do not consider share-based payment-
+related assets or liabilities.
+Under certain programs, we grant our employees discounts on purchases of SAP shares. Since those
+discounts are not dependent on future services to be provided by our employees, the discount is
+recognized as an expense when the discounts are granted.
+The fair values of our equity-settled Qualtrics Plan equal the Qualtrics share price at grant date, as the
+expected dividend yield is 0%. The future settlement of Performance Share Units (PSUs) under this
+plan will also be dependent on meeting non-market-based Qualtrics performance conditions.
+We believe that the expected volatility is the most sensitive assumption we use in estimating the fair
+values of our share options. Regarding future payout under our cash-settled plans, the SAP share
+price is the most relevant factor. With respect to our LTI 2016 Plan, we believe that future payout will
+be significantly impacted not only by our share price but also by the relative performance against the
+Peer Group Index. With respect to our LTI 2020, we believe that future payout will be significantly
+impacted not only by our share price but also by the relative performance against the NASDAQ-100
+companies. Future payouts under our LTI 2020 will also be dependent on meeting non-market-based
+performance conditions based on SAP's long-term strategy. The latter, however, is not incorporated
+into our fair value calculation but leads to adjustments of the quantity of awards granted. Changes in
+these factors could significantly affect the estimated fair values as calculated by the valuation model,
+and the future payout.
+We use certain assumptions in estimating the fair values for our share-based payments, including
+expected share price volatility and expected award life (which represents our estimate of the average
+remaining life until the awards are exercised or expire unexercised). In addition, the final payout for
+plans also depends on the achievement of performance indicators and on our share price on the
+respective exercise dates. Changes to these assumptions and outcomes that differ from these
+assumptions could require material adjustments to the carrying amount of the liabilities we have
+recognized for these share-based payments. The fair value of the share units granted under the
+LTI 2016 Plan are dependent on our performance against a group of peer companies (Peer Group
+Index), the volatility, and the expected correlation between the price of the index and our share price.
+The fair value of the share units granted under the LTI 2020 are dependent on our performance
+against the total shareholder return (TSR) for NASDAQ-100 companies, the volatility, and the
+expected correlation between the TSR of the NASDAQ-100 companies and our TSR.
+Valuation, Judgment, and Sources of Estimation Uncertainty
+Share-based payments cover cash-settled and equity-settled awards issued to our employees. The
+respective expenses are recognized as employee benefits and classified in our Consolidated Income
+Statements according to the activities that the receiving employees perform.
+Classification in the Income Statement
+Accounting for Share-Based Payments
+Share-Based Payments
+(B.3)
+Information
+Additional
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Presentation in the Statements of Cash Flows
+200%
+150%
+100%
+Information how fair value was measured at measurement date
+Weighted average fair value as at 12/31/2020
+33.66
+105.52
+94.75
+72.94
+Qualtrics
+Rights
+RSU Plan
+(2017-2020
+Tranches)
+Tranches)
+LTI 2020
+(2020 Tranche)
+Additional
+Information
+LTI 2016 Plan
+(2017-2019
+€, unless otherwise stated
+Fair Value and Parameters Used at Year End 2020 for Cash-Settled Plans
+Option pricing model used
+Sustainability
+Combined Group
+Management Report
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+189/338
+1 For these awards, the fair value is calculated by subtracting the net present value of expected future dividend payments, if any, until
+maturity of the respective award from the prevailing share price as at the valuation date.
+1.1
+2.8
+0.7
+Weighted average remaining life of awards outstanding as at 12/31/2021 (in years)
+1.52
+NA
+1.52
+Expected dividend yield (in %)
+Consolidated Financial Further Information on
+Statements IFRS
+ΝΑ
+Monte Carlo
+Other¹
+The risk-free interest rate is derived from German government bonds with a similar duration. The SAP
+dividend yield is based on expected future dividends.
+For the LTI 2020 valuation, the NASDAQ-100 Total Return Index on December 31, 2021, was
+US$19,217.94 (2020: US$15,072.29). The expected volatility of the NASDAQ-100 companies of 36%
+to 38% (2020: 36%), and the expected correlation of SAP and the NASDAQ-100 companies of 31% to
+34% (2020: 31%) are based on historical TSR data for SAP and the NASDAQ-100 companies.
+For the LTI 2016 Plan valuation, the Peer Group Index price on December 31, 2021, was US$593.37
+(2020: US$481.65); the expected dividend yield of the index of 1.00% (2020: 1.14%), the expected
+volatility of the index of 17% to 18% (2020: 26% to 31%), and the expected correlation of the SAP
+share price and the index price of 35% to 36% (2020: 27% to 30%) are based on historical data for
+the SAP share price and index price.
+1.5
+1 For these awards, the fair value is calculated by subtracting the net present value of expected future dividend payments, if any, until
+maturity of the respective award from the prevailing share price as at the valuation date.
+1.0
+3.2
+1.2
+190/338
+Weighted average remaining life of awards outstanding as at 12/31/2020
+(in years)
+1.54
+1.54
+ΝΑ
+1.54
+Monte Carlo
+NA
+30
+Expected dividend yield (in %)
+Expected volatility (in %)
+-0.77 to -0.37
+-0.77 to -0.32
+ΝΑ
+-0.75 to -0.11
+Risk-free interest rate, depending on maturity (in %)
+107.22
+107.22
+107.22
+107.22
+Share price
+Other¹
+NA
+2020
+30 to 32
+Expected volatility (in %)
+Over a three-year service period and upon achieving certain key performance indicators (KPIs)
+From 2021 onwards, the number of PSUs that will vest under the different tranches is mainly
+contingent upon achievement of two equally weighted KPIs in the year of grant: operating profit (non-
+Over a one-to-three-year service period only, or
+Over a half-year service period only
+Granted share units will vest in different tranches, either:
+To retain and engage executives and certain employees, we grant virtual shares representing a
+contingent right to receive a cash payment determined by the SAP share price and the number of
+share units that ultimately vest. In June 2020 and 2021, we granted share units under the new
+Grow SAP Plan. This fixed term plan has broadly the same terms and conditions as the
+Move SAP Plan, recognizes all employees' commitment to SAP's success, and deepens their
+participation in our future company performance. In March 2021, we granted share units under the
+COVID-19 Recognition Plan to thank all employees for their commitment, dedication, and resilience.
+Except for a six-month vesting period, this non-recurring plan has broadly the same terms and
+conditions as the Move SAP Plan.
+Restricted Stock Unit Plan Including Move SAP Plan, Grow SAP Plan, and COVID-
+19 Recognition Plan (RSU Plan)
+If an Executive Board member's service contract is terminated before the end of the third year
+following the year in which the share units were granted, both the RSUs and PSUs are forfeited in
+whole or in part, depending on the circumstances of the relevant resignation from office or termination
+of the service contract.
+The number of PSUs ultimately paid out depends on the performance of the SAP share - absolute
+and relative to the Peer Group Index. In contrast, the final number of RSUs is fixed. SAP's absolute
+share price performance is measured by comparing the grant price against the payout price. If the
+SAP share price performance equals the Peer Group Index performance over the same period, the
+performance factor is set at 100%. If the SAP share price performs better than the Peer Group Index
+(measured as difference between SAP share price performance and Peer Group Index performance),
+the performance factor is increased by the percentage point of the outperformance of the SAP share
+price. The percentage point is doubled if, additionally, the payout price is higher than the grant price.
+The performance factor is capped at 150%. If the Peer Group Index performs better than the SAP
+share price, the performance factor is decreased by the percentage point of the outperformance of
+the Peer Group Index. All PSUs lapse if the performance factor is below 50%.
+All share units granted in this way, comprising 60% PSUs and 40% RSUs, have a vesting period of
+approximately four years. At the end of the vesting period, the corresponding share units are non-
+forfeitable. The payout price used for the settlement is the arithmetic mean of the XETRA closing
+prices of the SAP share on the 20 trading days following the publication of SAP's fourth-quarter results
+subsequent to the end of the vesting period. The payout price is capped at 300% of the grant price.
+The LTI tranche is cash-settled and paid in euros after the Annual General Shareholders' Meeting of
+the corresponding year.
+An LTI tranche was granted annually and has a term of four years (2016-2019 tranches). Each grant
+started with determining a grant amount in euros. The grant amount was based on the Executive
+Board members' contractual LTI target amount and the operating profit target achievement for the
+previous year. The Supervisory Board set the grant amount at a level between 80% and 120% of the
+contractual LTI target amount, taking into account the operating profit target achievement. This grant
+amount was converted into virtual shares, referred to as share units, by dividing the grant amount by
+the grant price. The grant price was the arithmetic mean of the XETRA closing prices of the SAP share
+on the 20 trading days following the publication of SAP's fourth-quarter results.
+retention of our Executive Board members, and to reward them for the long-term SAP share price
+performance as compared to its main peer group (Peer Group).
+Information
+Additional
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+€, unless otherwise stated
+Management Report
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+188/338
+187/338
+The purpose of the LTI 2016 Plan was to reward our Executive Board members for the annual
+achievement of SAP's operating profit (non-IFRS at constant currencies) targets, to ensure long-term
+Long-Term Incentive 2016 Plan (LTI 2016 Plan)
+The performance of the share units is linked to the performance of the SAP share price, including
+dividend payments. Accordingly, an amount is paid out for each share unit which equals the SAP
+share price plus those dividends disbursed in respect of an SAP share in the period from the
+beginning of the year in which the share units were awarded until the end of the third year following
+the year in which the share units were awarded. The arithmetic mean of the SAP share price on the
+20 trading days after scheduled publication of the preliminary results for the fourth quarter and the
+year as a whole will be used as the SAP share price. The payout amount per share unit, including the
+dividend amounts due on the share units, is capped at 200% of the grant price. The tranche is cash-
+settled and paid in euros after the Annual General Meeting of Shareholders of the corresponding year.
+If an Executive Board member's service contract is terminated before the end of the third year
+following the year in which the share units were granted, the RSUs and PSUs are forfeited in whole or
+in part, depending on the circumstances of the relevant resignation from office or termination of the
+service contract.
+Ranking
+75th percentile
+Median
+25th percentile
+34 to 42
+50%
+Combined Group
+21
+SAP Integrated Report 2021
+To Our
+Stakeholders
+-0.72 to -0.32
+ΝΑ
+-0.72 to -0.12
+Risk-free interest rate, depending on maturity (in %)
+124.90
+Other¹
+Monte Carlo
+124.90
+124.90
+Share price
+Monte Carlo
+Option pricing model used
+Information how fair value was measured at measurement date
+Weighted average fair value as at 12/31/2021
+122.88
+SAP
+(2018-2021
+Tranches)
+118.73
+LTI 2020
+(2020-2021
+Tranches)
+64.16
+LTI 2016 Plan
+(2018-2019
+Tranches)
+Fair Value and Parameters Used at Year End 2021 for Cash-Settled Plans
+The valuation of our outstanding cash-settled plans was based on the following parameters and
+assumptions:
+In conjunction with the acquisition of Qualtrics in 2019, under the terms of the acquisition agreement,
+SAP exchanged unvested Restricted Share Awards (RSAs), Restricted Share Units (RSUs), and
+Performance Share Units (PSUs), and options held by employees of Qualtrics into cash-settled share-
+based payment awards of SAP (Qualtrics Rights). After completion of a voluntary exchange offer in
+conjunction with the Qualtrics IPO in 2021, most of the Qualtrics Rights were exchanged into equity-
+settled Qualtrics RSU awards. For more information about this voluntary exchange offer, see the
+section Qualtrics Equity Awards - Exchange Offer in this Note (B.3).
+Qualtrics Cash-Settled Awards Replacing Pre-Acquisition Qualtrics Awards
+(Qualtrics Rights)
+IFRS at constant currencies) and cloud revenue (non-IFRS at constant currencies). Until 2021,
+operating profit (non-IFRS at constant currencies) was the only KPI. Depending on the weighted
+average performance, the number of PSUs vesting ranges between 0% and 200% of the number
+initially granted. Performance against the KPI target was 130.9% in 2021 (2020: 100.4%,
+2019: 118.7%). All share units are paid out in cash upon vesting.
+Information
+Additional
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Combined Group
+RSU Plan
+2021
+Cost of software
+(B.2) Employee Benefits Expenses
+49
+as % of Other non-financial
+assets
+Capitalized contract cost
+3,247
+1,926
+1,321
+4,261
+2,628
+1,633
+Other non-financial assets
+2,270
+1,687
+583
+3,127
+89
+2,333
+Capitalized contract cost
+customer contracts
+242
+151
+91
+301
+175
+126
+Capitalized cost to fulfill
+customer contracts
+2,028
+1,536
+€ millions
+2,826
+793
+2,158
+73
+88
+Contingent liabilities exist in respect of customer-related litigation and claims for which no provision
+has been recognized. It is not practicable to estimate the financial impact of these contingent liabilities
+due to the uncertainties around these lawsuits and claims as outlined above.
+At the end of each reporting period, we reassess the potential obligations related to our pending
+claims and litigation and adjust our respective provisions to reflect the current best estimate. In
+addition, we monitor and evaluate new information that we receive after the end of the respective
+reporting period, but before the Consolidated Financial Statements are authorized for issue, to
+determine whether this provides additional information regarding conditions that existed at the end of
+the reporting period. Changes to the estimates and assumptions underlying our accounting for legal
+contingencies, and outcomes that differ from these estimates and assumptions, could require material
+adjustments to the carrying amounts of the respective provisions recorded and additional provisions.
+The expected timing or amounts of any outflows of economic benefits resulting from these lawsuits
+and claims are uncertain and not estimable, as they generally depend on the duration of the legal
+proceedings and settlement negotiations required to resolve the litigation and claims and the
+unpredictability of the outcomes of legal disputes in several jurisdictions.
+- Estimating the amount of the expenditure required to settle the present obligation
+- Determining whether the amount of an obligation is reliably estimable
+Determining the probability of outflow of economic benefits
+Additional
+Information
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP
+SAP Integrated Report 2021
+Determining whether an obligation exists
+Due to uncertainties relating to these matters, provisions are based on the best information available.
+Significant judgment is required in the determination of whether and when a provision is to be
+recorded and what the appropriate amount for such provision should be. Notably, judgment is
+required in the following areas:
+44
+Customer-related provisions also include obligations resulting from customer-related litigation and
+claims. We are currently confronted with various claims and legal proceedings, including claims that
+relate to customers demanding indemnification for proceedings initiated against them based on their
+use of SAP software, and occasionally claims that relate to customers being dissatisfied with the
+products and services that we have delivered to them. The obligations arising from customer-related
+litigation and claims comprise cases in which we indemnify our customers against liabilities arising
+from a claim that our products infringe a third party's patent, copyright, trade secret, or other
+proprietary rights.
+Customer-related provisions mainly include expected contract losses. We adjust these provisions as
+further information becomes available and as circumstances change. Non-current provisions are
+measured at the present value of their expected settlement amounts as at the reporting date.
+The unit of account for the identification of potential onerous customer contracts is based on the
+contract definition of IFRS 15 including the contract combination guidance. The economic benefits
+considered in the assessment comprise the future benefits we are directly entitled to under the
+contract as well as the anticipated future benefits that are the economic consequence of the contract
+if these benefits can be reliably determined.
+129
+171
+450
+523
+2020
+2021
+Expected Contract Losses
+(A.4) Customer-Related Provisions
+Capitalized cost to fulfill customer contracts
+Capitalized cost of obtaining customer contracts
+€ millions
+Amortization Expense
+70
+Customer-Related Litigation and Claims
+667
+Capitalized cost of obtaining
+Non-Current
+103
+395
+611
+146
+465
+Other receivables
+6,232
+33
+6,199
+5,888
+1
+5,887
+Trade receivables, net
+Total
+498
+Current Non-Current
+Non-Current
+Current
+€ millions
+2020
+2021
+Trade and Other Receivables
+Additional
+Information
+Sustainability
+Consolidated Financial Further Information on
+Statements IFRS
+Combined Group
+Management Report
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+Total
+AA Total
+6,352
+147
+Current
+Total
+Current Non-Current
+Total
+2020
+2021
+€ millions
+Capitalized Cost from Contracts with Customers
+Amortization of capitalized costs to fulfill contracts for custom cloud applications and extensions is
+included in the cost of cloud.
+Additional
+Information
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+182/338
+6,499
+6,593
+137
+6,730
+Contract assets as at December 31, 2021, were €360 million (December 31, 2020: €295 million).
+For more information about financial risk, how we manage credit risk, and details of our trade
+receivables and contract assets allowances, see Note (F.1).
+(A.3)
+183/338
+Capitalized Cost from Contracts with Customers
+Capitalized costs from customer contracts are classified as Other non-financial assets in our
+statement of financial position.
+The capitalized assets for the incremental costs of obtaining a customer contract primarily consist of
+sales commissions earned by our sales force and partners. Judgment is required in determining the
+amounts to be capitalized, particularly where the commissions are based on cumulative targets and
+where commissions relate to multiple performance obligations in one customer contract. We
+capitalize such cumulative target commissions for all customer contracts that count towards the
+cumulative target but only if nothing other than obtaining customer contracts can contribute to
+achieving the cumulative target. Commissions for contracts with multiple performance obligations or
+for probable renewals thereof are allocated to these performance obligations and probable renewals
+relative to the respective standalone selling price.
+Our sales commission payments for customer contract renewals are typically not commensurate with
+the commissions paid for new contracts. Thus, the commissions paid for renewable new contracts
+also relate to expected renewals of these contracts. Consequently, we amortize sales commissions
+paid for new customer contracts on a straight-line basis over the expected contract life including
+probable contract renewals. Judgment is required in estimating these contract lives. In exercising this
+judgment, we consider our expectation about future contract renewals which we evaluate periodically
+to confirm that the resulting amortization period properly reflects the expected contract life.
+Commensurate payments are amortized over the contract term to which they relate. The amortization
+periods range from 18 months to eight years depending on the type of offering. Amortization of the
+capitalized costs of obtaining customer contracts is classified mainly as sales and marketing expense.
+We expense incremental costs of obtaining a customer contract as incurred if we expect an
+amortization period of one year or less.
+> Costs to Fulfill Customer Contracts
+Capitalized costs incurred to fulfill customer contracts mainly consist of direct costs for set-up and
+implementation of cloud products and custom cloud development contracts as far as these costs are
+not in scope of other accounting standards than IFRS 15. These costs are amortized after completion
+of the setup and implementation or the development, respectively, on a straight-line basis over the
+expected life of the cloud subscription contract including expected renewals. For the life of the
+contract, we consider our expectation about future contract renewals which we evaluate periodically
+to confirm that the resulting amortization period properly reflects the expected contract life. The
+amortization periods range from six to eight years depending on the type of offering. In addition, the
+capitalized costs include third-party license fees which are amortized over the term of the third-party
+license contract. Judgment is required in evaluating whether costs are directly related to customer
+contracts and in estimating contract lives.
+181/338
+> Costs of Obtaining Customer Contracts
+SAP
+491
+To Our
+654
+984
+2,220
+4,094
+696
+1,107
+2,291
+4,786
+824
+1,353
+2,609
+Infrastructure
+administration
+6,530
+3,859
+1,246
+3,161
+6,689
+1,243
+2,161
+3,285
+6,879
+1,199
+2,306
+3,374
+General and
+5,209 25,781
+10,368
+25,834 10,205
+5,000
+2,123
+10,485
+SAP Group
+31,660 29,113 107,415
+184/338
+SAP Integrated Report 2021
+29,368 27,092 99,157
+42,697
+101,476
+30,306 27,830
+28,354 104,364 43,340
+30,651
+45,359
+SAP Group (months'
+acquisitions
+2,113
+137
+1,638
+46,641
+338
+75
+97
+609
+914
+45
+407
+462
+Thereof
+(December 31)
+100,330
+29,712 27,571
+27,979 102,430 43,048
+30,369
+44,082
+781
+10,348
+end average)
+5,481
+15,646
+5,113
+4,586
+5,947
+Cloud and software
+Total
+APJ
+EMEA Americas
+Total
+APJ
+EMEA Americas
+Total
+APJ
+EMEA Americas
+6,278
+Full-time equivalents
+12/31/2020
+12/31/2021
+Employee Headcount by Region and Function
+The following table provides an overview of employee headcount, broken down by function and by
+the regions EMEA (Europe, Middle East, and Africa), Americas (North America and Latin America), and
+APJ (Asia Pacific Japan).
+Employee Headcount
+(B.1)
+This section provides financial insights into our employee benefit arrangements. It should be read in
+conjunction with the compensation disclosures for key management personnel in Note (G.5).
+Section B - Employees
+Information
+Additional
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Stakeholders
+28,215
+12/31/2019
+4,589
+Combined Group
+16,392
+5,525
+11,598
+11,136
+Sales and marketing
+development
+27,634
+9,131
+5,793
+29,580 12,710
+6,094
+13,705
+32,244
+6,326 10,571
+15,347
+Research and
+9,781
+5,971
+6,501
+20,239
+5,361 16,288
+Services
+8,229
+5,491
+5,924 19,644
+4,426
+5,934
+6,018
+5,733
+19,842
+8,250
+8,175
+5
+Gerhard Oswald
+92%
+12
+13
+8
+5
+5
+Dr. Qi Lu
+100%
+5
+7
+23
+5
+28
+28
+100%
+Christine Regitz
+5
+5
+12
+12
+17
+17
+100%
+Dr. Friederike Rotsch
+5
+16
+23
+16
+Peter Lengler (since 10.08.2021)
+11
+100%
+Monika Kovachka-Dimitrova
+5
+5
+10
+10
+15
+15
+100%
+Lars Lamadé
+5
+5
+13
+13
+16
+18
+100%
+29
+1
+1
+5
+5
+6
+6
+100%
+Bernard Liautaud
+5
+5
+तु
+11
+18
+29
+$ ཟླ -
+34
+15
+100%
+Gunnar Wiedenfels
+5
+5
+22
+22
+27
+27
+100%
+James Wright
+5
+5
+26
+26
+31
+31
+100%
+Ralf Zeiger (until 28.10.2021)
+3
+3
+7
+7
+10
+10
+100%
+20/338
+1 Helmut Stengele joined the Supervisory Board as an employee representative on October 29, 2021. As at December 31, 2021, he has
+not served on any committee, nor have there been any Supervisory Board meetings since his appointment. However, he did participate in
+four circular resolutions during this period.
+25
+15
+13
+13
+2
+Heike Steck
+5
+5
+16
+16
+21
+21
+Helmut Stengele (since 29.10.2021)¹
+ΝΑ
+ΝΑ
+NA
+NA
+ΝΑ
+34
++4
+100%
+100%
+NA
+NA
+Christa Vergien-Knopf
+5
+5
+9
+9
+14
+14
+100%
+(until 09.08.2021)
+Dr. Rouven Westphal (ab 12.05.2021)
+2
+21
+25
+20
+20
+Report by the Supervisory
+Board
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+Dear Shareholders,
+Stakeholders
+SAP Integrated Report 2021
+SAP
+18/338
+17/338
+*40% of institutional investors are classified as ESG investors.
+4%
+To Our
+In the following, we would like to inform you about the work of the Supervisory Board in the fiscal year
+2021.
+Collaboration Between the Supervisory Board and the Executive Board
+In the past fiscal year, the Supervisory Board of SAP SE advised the Executive Board on an ongoing
+basis with regard to the management of the Company and kept the Executive Board's management of
+the Company under observation for legal compliance, adherence to proper accounting principles,
+business focus, and expediency. We were involved whenever decisions of fundamental importance to
+SAP were made.
+The Supervisory Board and its committees also convened wholly or partly without the Executive
+Board as necessary in the reporting year to deliberate on items that pertained to the Executive Board
+or required internal discussion among Supervisory Board members alone. This was the case in three
+of the plenary sessions, and in five committee meetings. In addition, the shareholder representatives
+and the employee representatives independently discussed individual agenda items as required prior
+to the adoption of resolutions in plenary sessions. The Supervisory Board addressed the following key
+topics during the year:
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP
+SAP Integrated Report 2021
+In the past fiscal year, the Supervisory Board of SAP SE held four ordinary meetings and one
+extraordinary meeting at which we deliberated and resolved on all matters of relevance to the
+Company. Due to the ongoing travel and contact restrictions imposed on us as a result of the COVID-
+19 pandemic, we also conducted the majority of our plenary meetings and Committee meetings,
+which are normally held as physical meetings, in 2021 as video conferences or as hybrid sessions,
+where some members attended physically and the remainder online. We also adopted eleven
+resolutions by correspondence vote. The following table provides an overview of the individual
+members' attendance at the Supervisory Board's plenary sessions and committee meetings in the
+year under review.
+Supervisory Board Meetings and Resolutions
+The Supervisory Board chairperson and the CEO were in continuous contact, which meant the
+Supervisory Board chairperson was always informed without delay of all important events that were
+significant for assessing SAP's situation and progress or for the management and governance of the
+Company. Moreover, the chairperson of the Supervisory Board discussed SAP's strategy, business
+performance, risks, risk management, compliance, and other key topics and decisions regularly with
+the CEO. This enabled the Supervisory Board chairperson to update the members of the Supervisory
+Board between meetings.
+The content and scope of the Executive Board's reports to us fully met our requirements for them: The
+Executive Board came to Supervisory Board meetings for discussion of the agenda items. We
+questioned and probed the Executive Board to satisfy ourselves that the information it gave us was
+plausible. All transactions requiring approval by the Supervisory Board whether by law, the Articles of
+Incorporation, or the Supervisory Board's list of transactions requiring its consent were carefully
+examined and discussed with the Executive Board prior to approval.
+The Supervisory Board received regular, full, and timely reports from the Executive Board, both from
+members in person and in written documents. The Supervisory Board was also in regular exchange
+with senior internal officers through its various committees. This ensured that we were always up to
+date, even between meetings, on the Company's strategy, planning, business performance, risks, risk
+management, compliance (in other words, adherence to laws, to the Company's Articles of
+Incorporation, and to internal policies), and on transactions of special significance for SAP. In its
+reports, the Executive Board also informed us in particular where business deviated from plan or
+target, and why. In addition, the Supervisory Board members can turn to SAP Digital Boardroom at
+any time to call up comprehensive metrics for all business areas in real time and generate evaluations
+and analyses as required. The solution affords us an up-to-date view of SAP's business performance
+whenever we need it - with maximum transparency.
+Founders 11 %
+4 %
+Germany 7%
+North America 21 %
+Capital Stock Unchanged
+2021
+2020
+2019
+2018
+2017
+12%
+5%
+7%
+17%
+1.40
+1.50
+1.58
+32%
+1.85
+SAP's capital stock as at December 31, 2021, was €1,228,504,232 (2020: €1,228,504,232). It is issued
+as 1,228,504,232 no-par shares, each with an attribute value of €1 in relation to capital stock.
+Strategy and RISE with SAP
+SAP
+To Our
+Treasury
+Rest of World
+Retail / Not identified 24 %
+United Kingdom/
+Ireland
+14%
+Europe (ex Germany)
+16%
+Institutional
+Investors
+Applying the definition accepted on the Frankfurt Stock Exchange, which excludes treasury stock from
+the free float, as at December 31, 2021, the free float stood at 85% (December 31, 2020: 86%).
+Shareholder Structure
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined Group
+SAP Integrated Report 2021
+In October 2020, SAP announced a revised corporate strategy in the form of an accelerated transition
+to the cloud, which resulted in a series of measures and investments in line with customer
+requirements. We continued to monitor and discuss with the Executive Board the implementation of
+this revised company strategy in 2021. We satisfied ourselves that the activities introduced by the
+Executive Board created room for organic innovation, expedited the harmonization of SAP's cloud
+business, and, last but not least, contributed to the good results for fiscal 2021. In this regard, the
+Executive Board reported, inter alia, on the progress made with respect to SAP Business Technology
+Platform (which companies can use to run own developments or existing SAP or third-party services),
+and on its measures to implement SAP's People Strategy. A further significant step was the acquisition
+of Signavio, a provider of cloud solutions for business process management. We approved this
+acquisition during our extraordinary meeting on January 25, 2021, on recommendation of the Finance
+and Investment Committee because we, like the Executive Board, consider investment in business
+process intelligence (BPI, or applications and tools for capturing and analyzing process data) to be
+strategically worthwhile. BPI enables SAP to leverage the experiences of its customers to identify and
+eliminate inefficiencies and vulnerabilities of their business operations. Prior to this, in its meetings on
+January 15 and 25, 2021, the Finance and Investment Committee had thoroughly discussed the
+opportunities and risks associated with this acquisition as well as the two fairness opinions (external
+assessments of the purchase price determination and company valuation of the planned acquisition).
+At our meeting on February 24, 2021, the Executive Board presented the RISE with SAP offering to us.
+Introduced at the end of January 2021, this flexible cloud service package provides customers with a
+holistic approach for accelerating their transition to the cloud and transforming into an intelligent
+enterprise. As part of its ongoing reports to the full Supervisory Board, the Executive Board kept us
+apprised of the package's success among SAP customers. When we met in April and July 2021, we
+deliberated with the Executive Board on the Company's China strategy, the future direction of the
+marketing strategy, and HR measures to attract new cloud development talent.
+19/338
+SAP
+Aicha Evans
+(until 07.07.2021)
+100%
+16
+16
+13
+13
+3
+3
+Panagiotis Bissiritsas
+(since 08.07.2021)
+67%
+2
+3
+1
+5
+1
+5
+14
+20
+5
+5
+Margret Klein-Magar
+100%
+13
+13
+8
+8
+5
+5
+Prof. Dr. Gesche Joost
+95%
+19
+20
+15
+Dividend per Share
+1
+Manuela Asche-Holstein
+Participation
+Meetings
+Participation
+Meetings
+Supervisory Board Members
+All Meetings
+Committees
+Plenum
+Meeting Participation of SAP SE Supervisory Board Members During Fiscal Year 2021
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+To Our
+Stakeholders
+SAP Integrated Report 2021
+Meetings
+2
+Participation
+Prof. Dr. h.c. Hasso Plattner
+100%
+9
+9
+6
+6
+3
+3
+Pekka Ala-Pietilä (until 12.05.2021)
+90%
+18
+20
+13
+15
+5
+5
+Participation
+in %
+Reorganization of Supervisory Board Responsibilities in Committees
+Luka Mucic
+At the Annual General Meeting of Shareholders, the Executive Board and the Supervisory Board of
+SAP SE will recommend increasing the total dividend for fiscal year 2021 by approximately 32% to
+€2.45 per share (2020: €1.85). This includes a special dividend of €0.50 to celebrate SAP's 50th
+anniversary. The payout ratio would be 54% (2020: 41%). Excluding the special dividend, the ratio
+would be 43%.
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+14/338
+13/338
+October then saw SAP stock benefit from stronger than expected preliminary results for the third
+quarter and a renewed guidance increase for the full year (8). Analysts were impressed above all with
+the strength of SAP's cloud business, and the share price jumped 3.9% to €121.50, but subsequent
+publication of our final third-quarter results (9), together with a reiteration of expected margin
+development in fiscal 2022, had a dampening impact on the share price. The share price nevertheless
+climbed to its high for the year of €128.98 by early November. The subsequent market downturn,
+triggered by new COVID-19 concerns, was almost made up for by the end of the year, with the share
+benefitting in December from positive industry news as well as a buy recommendation from another
+major financial institution, which had forecast accelerated cloud growth in 2022. SAP stock ultimately
+ended the fourth quarter at €124.90, or 16.5% above its opening price for the year.
+Increasing demand for technology shares in August, however, ultimately lifted SAP stock slightly
+above its previous high for the year, before mounting concerns about interest rates and the Chinese
+economy melted away gains in September.
+announcement.
+Thanks also to good results in the first quarter of 2021 (4), (5), SAP stock was able to rally back in
+April, rising to an interim high of €120.70 before broad market rotation out of technology stocks and
+into value names triggered by interest rate concerns pushed it back down again. By contrast, the ex-
+dividend markdown of €1.85 (6) in May had no appreciable effect on the share price. SAP stock
+ultimately recovered in June and, continuing its upward trajectory, reached a new interim high of
+€125.78 in July following a clear buy recommendation from a major financial institution.
+SAP's strategic focus on cloud business resonated with the market: analysts particularly praised the
+benefits of cloud migration, the switch to a long-term, more profitable subscription model, and the
+'RISE with SAP' offering. Despite strong first-half results (7) attesting to the successful implementation
+of the cloud strategy, SAP shares declined 2.5% to €118.46 amidst a positive overall market. Market
+analysts pointed out that even more optimistic expectations had emerged prior to the earnings
+December 31, 2020. Though buoyed temporarily at the end of January by the Qualtrics IPO, the share
+price reached its lowest level for the year of €101.78 just a few weeks later.
+SAP stock started the year at €107.22 (1, see graphic below), the Xetra closing price on
+Cloud Strategy Resonates -SAP Stock Gains Ground
+Investment appetite remained high during 2021, enabling the markets to develop favorably overall
+and even break new records in the final months of the year. Macroeconomic issues were the main
+driver of market movements, including the ongoing COVID-19 pandemic and its effects on global
+supply chains. Further, persistent supply bottlenecks for key products, such as semiconductors, and a
+jump in energy, and commodity prices slowed down economic growth significantly. Rising inflation,
+and interest rate concerns also contributed to volatility in the marketplace. SAP stock largely followed
+general market trends in this environment, gaining 16.5% on the year to finish higher than the DAX
+(+15.8%) but below the NASDAQ-100 (+26.6%). With a market capitalization of €153.4 billion at year
+end, SAP was the second most valuable company on the DAX.
+Current Executive Board term expires: 2024
+Nationality: U.S. citizen
+Year of Birth: 1973
+SAP
+SAP Integrated Report 2021
+To Our
+SAP Stock Versus Major Indices (December 30, 2020 to December 30, 2021)
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+Investor Relations
+New Highs Despite Challenging Environment
+Stakeholders
+Appointed to the Executive Board: 2021
+percent
+SAP Stock (Xetra)
+May 13, 2021 Ex dividend, €1.85 per share
+6.
+1. December 30, 2020 Closing Price €107.22
+Dec.
+Nov.
+Oct.
+Sept.
+Aug.
+July
+June
+May
+Apr.
+Mar.
+Feb.
+Jan.
+95
+11
+DAX 40 Performanceindex (Xetra)
+NASDAQ 100 Index
+125
+5
+120
+115
+130
+110
+3
+68
+105
+100
+4
+6
+1
+Joined SAP: 2021
+Chief Marketing & Solutions Officer
+Julia White
+Joined SAP: 1996
+Chief Financial Officer
+2.45
+Germany; Supervisory Board, Schaeffler AG, Herzogenaurach, Germany
+Other board memberships: Executive Board, Bitkom e.V., Berlin,
+Year of Birth: 1966
+Nationality: German
+Current Executive Board term expires: 2023
+Appointed to the Executive Board: 2021
+Joined SAP: 2021
+Chief People & Operating Officer, Labor Relations Director
+Sabine Bendiek
+Supervisory Board, adidas AG, Herzogenaurach, Germany
+Other board memberships:
+Year of Birth: 1980
+Nationality: German
+Current Executive Board term expires: 2025
+SAP
+SAP Integrated Report 2021
+To Our
+Combined Group
+Stakeholders
+Management Report
+Appointed to the Executive Board: 2014
+Consolidated Financial
+Statements IFRS
+Additional
+Information
+SAP Executive Board
+Christian Klein
+Chief Executive Officer (CEO)
+Joined SAP: 1999
+Appointed to the Executive Board: 2018
+Further Information on
+Sustainability
+Current Executive Board term expires: 2026
+Nationality: German
+Year of Birth: 1971
+Nationality: German
+Year of Birth: 1982
+Scott Russell
+Customer Success
+Joined SAP: 2010
+Appointed to the Executive Board: 2021
+Current Executive Board term expires: 2024
+Current Executive Board term expires: 2024
+Nationality: Australian
+Thomas Saueressig
+SAP Product Engineering
+Joined SAP: 2004
+Appointed to the Executive Board: 2019
+Current Executive Board term expires: 2025
+Nationality: German
+Year of Birth: 1985
+Year of Birth: 1973
+2.
+Appointed to the Executive Board: 2019
+Chief Technology Officer
+Other board memberships:
+Supervisory Board, HeidelbergCement AG, Heidelberg, Germany
+11/338
+12/338
+SAP
+SAP Integrated Report 2021
+Joined SAP: 2013
+To Our
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+Juergen Mueller
+Stakeholders
+January 14, 2021 Preliminary results Q4 2020
+7.
+July 21, 2021 Financial results Q2 2021
+16/338
+15/338
+1 Assuming all dividends were reinvested.
+Technology Software Index
+35.0
+26.8
+23.8
+S&P North American
+total return index
+36.3
+14.5
+15.8
+S&P 500 Composite ―
+-1.3
+0.2
+0.9
+15.8
+15,083
+8.6
+9.29
+7.54
+8.75
+8.06
+SAP
+2.87
+12/31/2020
+1 year
+11,649
+16.5
+10.4
+6.7
+4.21
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+10.1
+12/31/2020
+1 year
+10,745
+7.5
+Performance comparators
+16,211
+S&P 500 Composite —
+16.3
+26.9
+total return index
+1 Assuming all dividends were reinvested. Source: Bloomberg
+Dividend Increased to €2.45
+It is our policy to pay a dividend totaling 40% or more of IFRS profit after tax.
+14.3
+5 years
+5 years
+10.2
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+Return on SAP ADRs
+-
+- 803054204 (CUSIP)
+12/31/2016
+Percent, unless otherwise stated
+Initial investment US$10,000
+12/31/2011
+Period of investment
+10 years
+Value at 12/31/2021¹ (in US$)
+Average annual return
+26,461
+Date of investment
+In the past fiscal year, the Supervisory Board took the key results from a Spring 2021 questionnaire
+reviewing the efficiency of the Supervisory Board's work as an opportunity to change the structure,
+size, and duties of its committees so as to further optimize their work and decision-making processes
+in the interest of good corporate governance. At its meeting on April 15, 2021, for example, it
+deliberated on proposals for reorganizing the Supervisory Board committees, as drawn up by the
+Personnel and Governance Committee based on the aforementioned efficiency review of the plenary
+and committee work. The Supervisory Board subsequently resolved on the new composition and
+structure of the committees by circular correspondence vote in May 2021. Some of the tasks of the
+committees were rearranged and some of the committees were renamed to better reflect their roles.
+In addition, the number of committees was partially reduced, or their memberships filled anew, as
+described in the section on the work of the committees below. Notably, the General and
+Compensation Committee was renamed to Personnel and Governance Committee, the Audit
+Committee was renamed to Audit and Compliance Committee, and the People and Organization
+Committee was renamed to People and Culture Committee. The Personnel and Governance
+Committee was downsized from 10 to eight members, and the number of seats on the Technology
+12/31/2016
+SAPG.F or .DE
+Germany
+Listings
+Key Facts About SAP Stock/SAP ADRS
+In addition, we provide a Webcast for all key investor events at which members of our Executive
+Board speak, and we post all relevant presentations on the Investor Relations Web site.
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP
+SAP Integrated Report 2021
+We provide a wide range of information online about SAP and its shares. Our communications
+channels include our Twitter feed @sapinvestor and the quarterly SAP INVESTOR magazine.
+Shareholders can reach the IR team directly by telephone hotline and by e-mail at investor@sap.com.
+We also publish an overview of the latest analyst consensus in collaboration with Vara Research.
+SAP representatives engaged with retail shareholders at virtual events. The IR team and the Treasury
+team also maintained regular communication with the debt investor community.
+We continued our dialogue with socially responsible investors (SRI), providing them with insights into
+our environmental, social, and corporate governance policies. SAP's leadership in this area is being
+recognized by leading organizations. SAP was one of only three enterprise software companies to
+make the Carbon Disclosure Project's (CDP) A List 2021. And SAP remains the software industry
+leader in the Dow Jones Sustainability Indices for the 15th year in a row.
+The IR team, together with senior management, held more than 100 meetings in 2021 to maintain the
+dialogue with investors and analysts, including one-on-one phone calls, video conferences, and virtual
+road shows as well as a limited number of in-person meetings under strict hygiene standards.
+Members of the Executive Board and the IR team participated in more than 20 conferences
+worldwide. In June, we hosted the virtual Financial Analyst Conference as a part of our SAPPHIRE
+NOW event for investors and financial analysts. Once again, SAP held the 2021 Annual General
+Meeting of Shareholders (AGM) virtually without physical presence.
+3.
+January 29, 2021 Final results Q4/ Full year 2020
+8.
+October 12, 2021 Preliminary results Q3 2021
+4.
+April 13, 2021 Preliminary results Q1 2021
+United States (ADRs)
+9.
+5.
+April 22, 2021 Final results Q1 2021
+10.
+December 30, 2021 Closing price €124.90
+Continuous Engagement with the Investment Community
+SAP continuously engaged with the investment community in 2021. Throughout the year, members of
+the Executive Board of SAP SE and the Investor Relations (IR) team discussed our latest strategy, its
+execution and business development, and how SAP was helping customers in the new virtual world,
+with institutional investors, analysts, and private investors worldwide. Given the ongoing pandemic,
+most events were held virtually.
+October 21, 2021 Final results Q3 2021
+IDS and symbols
+WKN/ISIN
+NYSE (ADRs)
+Average annual return
+Performance comparators
+DAX 40 Performance
+total return index
+REX General Bond -
+total return index
+Value as at 12/31/2021¹ (in €)
+12/31/2011
+30,575
+11.8
+Berlin, Frankfurt, Stuttgart
+New York Stock Exchange
+716460/DE0007164600
+803054204 (CUSIP)
+10 years
+SAP GR
+Period of investment
+WKN 716460/ISIN DE007164600
+Reuters
+Bloomberg
+Weight (%) in indexes as at 12/31/2021¹
+DAX 40
+Prime All Share
+CDAX
+Date of investment
+HDAX
+Dow Jones EURO STOXX 50
+1 Source: Qontigo
+Return on SAP Common Stock -
+-
+Percent, unless otherwise stated
+Initial investment €10,000
+Dow Jones STOXX 50
+€ | change since previous year
+1 The 2021 constant currency amounts are only comparable to 2020 actual currency amounts; 2020 constant currency amounts are only comparable to 2019 actual currency
+amounts.
+SAP
+lil Restructuring expenses
+-157
+3
+-1,130
+If not presented separately in our income statement, restructuring expenses would have been
+classified in the different expense items in our income statement as follows:
+Restructuring Expenses by Functional Area
+€ millions
+Cost of cloud
+2021
+2020
+2019
+-127
+0
+-20
+Cost of software licenses and support
+-5
+1
+-118
+Cost of services
+Research and development
+-13
+restructuring-related impairment losses
+-3
+-19
+-132
+We consider whether a change in business is material based on the business affected rather than for
+SAP as a whole. In judging whether a unit qualifies as a business for restructuring purposes, we
+consider if the unit has its own management team, has access to all inputs and processes necessary
+to provide outputs, and generates or could generate revenues. The materiality of a change to a
+business is assessed based on both the size and the nature of the change and therefore does not
+necessarily involve a material quantitative impact on our financial statements.
+To accelerate the modernization of our cloud infrastructure and to harmonize our platform structure,
+we initiated a restructuring program in the Global Cloud Services area. The implementation started in
+the first quarter of 2021 and is expected to conclude in the first half of 2023. The majority of the
+expenses recognized as a result of this program are impairments of data centers and related assets.
+Restructuring expenses presented in SAP's income statement primarily include the following
+components:
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+Restructuring Expenses
+€ millions
+2021
+2020
+2019
+Employee-related restructuring expenses
+-25
+7
+-1,111
+Onerous contract-related restructuring expenses and
+-4
+-154
+-12
+1
+(C.1) Results of Segments
+General Information
+At year end 2021, SAP had five operating segments that are regularly reviewed by the Executive
+Board, which is responsible for assessing the performance of the Company and for making resource
+allocation decisions as our chief operating decision-maker (CODM). The operating segments are
+largely organized and managed separately according to their product and service offerings, notably
+whether the products and services relate to our services activities, experience management solutions,
+business process transformation offerings, or our customer experience portfolio of Emarsys, or cover
+other activities of our business.
+Following organizational changes, and to further strengthen our cloud offerings and support the new
+cloud strategy, functions related to SAP's travel management solutions in the Concur segment were
+mainly integrated into the Applications, Technology & Support segment and the Services segment.
+Hence, the Concur segment was dissolved.
+The Applications, Technology & Support segment derives its revenues primarily from the sale of
+software licenses, support offerings, and cloud subscriptions (as far as not included in one of the
+other segments).
+The Services segment covers most of SAP's services activities. Revenues are mainly generated from
+the sale of various professional services, premium support services, implementation services for our
+software products, and education services on the use of our products. However, the services segment
+does not reflect the full services business, as other segments provide services as well.
+In 2021, the finance and legal functions of Qualtrics were reintegrated into the Qualtrics segment.
+Additionally, the Clarabridge business, acquired by Qualtrics International Inc. in October 2021, was
+added to the Qualtrics segment accordingly (for more information, see Note (D.1)). The Qualtrics
+segment derives its revenues mainly from the sale of experience management cloud solutions that
+run front-office functions across experience data, and from the sale of related services. The figures of
+the Qualtrics segment of SAP and the financial results of Qualtrics International Inc. cannot be
+compared, notably due to different accounting standards.
+The finance and information technology functions of the Emarsys segment have already been
+integrated into SAP's corporate functions and therefore their expenses are not included in the Emarsys
+segment anymore. All other functions are still included in the Emarsys segment, which derives its
+revenues mainly from the sale of cloud-based customer experience offerings and from the sale of
+related services. Due to its size, Emarsys is not a reportable segment.
+The acquisition of Signavio GmbH, combined with our business process intelligence unit, led to a new
+operating segment called Business Process Intelligence. The segment derives its revenues from the
+sale of business process transformation offerings from SAP and Signavio. Due to its size, Business
+Process Intelligence is not a reportable segment. For more information about the acquisition of
+Signavio GmbH, see Note (D.1).
+The segment information for 2021 and the comparative prior periods were restated to conform with
+the new segment composition.
+SAP
+SAP Integrated Report 2021
+To Our
+Combined Group
+Stakeholders
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+Segment Reporting Policies
+Our management reporting system, and hence our segment reporting system, reports our
+intersegment services as cost reductions and does not track them as internal revenue. Intersegment
+services mainly represent utilization of human resources of one segment by another segment on a
+project basis. Intersegment services are charged based on internal cost rates including certain indirect
+overhead costs but excluding a profit margin.
+Most of our depreciation and amortization expense affecting segment profits is allocated to the
+segments as part of broader infrastructure allocations and is thus not tracked separately on the
+operating segment level. Depreciation and amortization expense that is directly allocated to the
+operating segments is immaterial in all segments presented.
+This section provides insight into the financial results of SAP's reportable segments and of SAP overall
+as far as not already covered by previous sections. This includes but is not limited to segment results,
+income taxes, and earnings per share.
+Section C - Financial Results
+Additional
+Information
+Further Information on
+Sustainability
+-467
+Sales and marketing
+3
+3
+-299
+General and administration
+-2
+2
+-71
+lil Restructuring expenses
+The program established is planned to start shortly after the program plan is approved and is
+expected to be completed in a timeframe that makes significant changes to the plan unlikely, and
+The program has been announced to the parties affected or has commenced.
+-157
+-1,130
+197/338
+198/338
+SAP
+SAP Integrated Report 2021
+To Our
+Combined Group
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+3
+Our management reporting system produces a variety of reports that differ by the currency exchange
+rates used in the accounting for foreign-currency transactions and operations, where both actual and
+constant currency numbers are reported to and used by our CODM. Reports based on actual
+currencies use the same currency rates as are used in our financial statements. Reports based on
+constant currencies report revenues and expenses using the average exchange rates from the
+previous year's corresponding period.
+A detailed and documented restructuring plan has been approved by our Executive Board, a
+member thereof, or a direct report of an Executive Board member, and
+We only recognize provisions for restructuring if and when the following occurs:
+Quoted in an
+Active Market
+Not Quoted in an
+Active Market
+Quoted in an
+Active Market
+Not Quoted in an
+Active Market
+597
+1,254
+485
+1,207
+182
+0
+149
+0
+202
+0
+151
+0
+39
+1,254
+7
+1,207
+2020
+Our expected contribution in 2022 to our domestic and foreign defined benefit pension plans is
+immaterial. The weighted duration of our defined benefit plans amounted to 11 years as at
+December 31, 2021, and 12 years as at December 31, 2020.
+2021
+Corporate bonds
+159
+2,196
+2,062
+1,825
+194/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+Investments in Plan Assets
+Our investment strategy on domestic benefit plans is to invest all contributions in stable insurance
+policies.
+Our investment strategies for foreign benefit plans vary according to the conditions in the country in
+which the respective benefit plans are situated. We have adopted a long-term investment horizon for
+all major foreign benefit plans. Although our policy is to invest in a risk-diversified portfolio consisting
+of a mix of assets, both the defined benefit obligation and plan assets can fluctuate over time, which
+exposes the Group to actuarial and market (investment) risks. Depending on the statutory
+requirements in each country, it might be necessary to reduce any underfunding by addition of liquid
+assets.
+Plan Asset Allocation
+€ millions
+Total plan assets
+Thereof: Asset category
+Equity investments
+Insurance policies
+Total future benefit payments from our defined benefit plans as at December 31, 2021, are expected
+to be €2,289 million (2020: €1,969 million). Of this amount, 77% (2020: 77%) has maturities of over
+five years, and 62% (2020: 64%) relates to domestic plans.
+195/338
+196/338
+3,464
+liabilities
+Other non-financial liabilities
+5,203
+860
+6,063
+4,643
+770
+5,413
+Other employee-related
+liabilities as % of
+71
+46
+68
+68
+41
+64
+Other non-financial liabilities
+Other employee-related liabilities mainly relate to obligations from bonuses and sales commissions,
+outstanding vacation, time credits accumulated in the working time account, employee-related social
+security expenses, severance payments outside restructuring programs, and jubilee expenses.
+(B.6) Restructuring
+Recognition of Restructuring Provisions
+316
+3,147
+4,115
+398
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+(B.5)
+Other Employee-Related Obligations
+SAP has designed a program that materially changes the scope of one of our businesses or the
+manner in which the business is conducted, and
+Accounting Policy
+Other Employee-Related Liabilities
+€ millions
+Current Non-Current
+2021
+2020
+Total
+Current Non-Current
+Total
+Other employee-related
+3,717
+As far as the obligation for long-term employee benefits is secured by pledged reinsurance coverage,
+it is offset with the relating plan asset.
+204
+We use an operating profit indicator to measure the performance of our operating segments. The
+measurement of operating segment revenues and results includes recurring revenue that is not
+recognized under IFRS due to fair value accounting for the contracts in effect at the time of the
+respective acquisitions. Starting in 2021, we no longer adjust our IFRS revenues. Due to immateriality,
+prior year revenue numbers continue to be based on our previous accounting policies. The accounting
+policies applied in the measurement of operating segment expenses and profit continue to differ as
+follows from the IFRS accounting principles used to determine the operating profit measure in our
+income statement:
+■
+Cloud
+Cloud and software
+757
+780
+518
+529
+371
+757
+780
+518
+529
+371
+Services
+172
+177
+162
+166
+137
+Total segment revenue
+929
+957
+Actual
+Currency
+681
+Constant
+Currency¹
+Constant
+Currency¹
+18,934
+18,500
+18,887
+18,573
+-9,127
+-9,216
+-8,779
+-8,953
+-8,800
+9,567
+9,718
+9,722
+9,934
+9,773
+1 The 2021 constant currency amounts are only comparable to 2020 actual currency amounts; 2020 constant currency amounts are only comparable to 2019 actual currency
+amounts.
+Qualtrics
+2021
+2020
+2019
+€ millions
+Actual
+Currency
+Actual
+Currency
+696
+508
+Cost of cloud
+-152
+-155
+-110
+Segment gross profit
+739
+763
+528
+541
+398
+Other segment expenses
+-696
+-719
+-533
+-545
+-407
+Segment profit
+44
+44
+-4
+-5
+_9
+-194
+-190
+Total cost of revenue
+-78
+-65
+-66
+-43
+-43
+-33
+Cost of software licenses and support
+0
+0
+0
+0
+18,694
+0
+-65
+-66
+-43
+-43
+-33
+Cost of services
+-125
+-128
+-110
+-112
+Cost of cloud and software
+The expense measures exclude:
+Segment profit
+Segment gross profit
+Cloud
+8,509
+8,661
+7,541
+7,685
+6,632
+Software licenses
+3,244
+3,236
+3,637
+3,765
+4,523
+Software support
+11,410
+11,576
+11,502
+11,707
+11,542
+Software licenses and support
+14,654
+14,812
+Actual
+Currency
+15,139
+Constant
+Currency¹
+Constant
+Currency¹
+Acquisition-related charges such as amortization expense and impairment charges for
+intangibles acquired in business combinations and certain stand-alone acquisitions of
+intellectual property (including purchased in-process research and development) as well as
+sale/disposal gains and losses for these intangibles, settlements of pre-existing business
+relationships in connection with a business combination, and acquisition-related third-party
+expenses
+■ Share-based payment expenses
+■ Restructuring expenses
+SAP headquarter functions which are exclusively managed on corporate level, such as finance,
+accounting, legal, human resources, global business operations, and corporate marketing, are not
+included in the results of our reportable segments.
+Revenues and expenses of our operating but non-reportable segments, and the certain activities
+managed on corporate level, as outlined above, are presented under the Other revenue and Other
+expenses items in the reconciliation in Note (C.2).
+Information about assets and liabilities and additions to non-current assets by segment are not
+regularly provided to our Executive Board. Goodwill by segment is disclosed in Note (D.2).
+199/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Applications, Technology & Support
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+2021
+2020
+2019
+€ millions
+Actual
+Currency
+Actual
+Currency
+15,473
+16,065
+Cloud and software
+-1,757
+-1,790
+-1,910
+Cost of cloud and software
+-4,401
+-4,470
+-4,071
+-4,161
+-4,057
+Cost of services
+-406
+-412
+-393
+-399
+-421
+Total cost of revenue
+-4,808
+-4,882
+-4,464
+-4,560
+-4,478
+-1,733
+-1,716
+Cost of software licenses and support
+-2,147
+23,163
+23,473
+22,680
+23,157
+22,696
+Services
+339
+343
+285
+289
+Other segment expenses
+355
+23,502
+23,816
+22,965
+23,446
+23,051
+Cost of cloud
+-2,685
+-2,737
+-2,315
+-2,371
+Total segment revenue
+200/338
+223
+663
+Share-based payment liabilities as % of
+Other non-financial liabilities
+2020
+Total
+454
+1,317
+770
+5,413
+2021
+Current
+Non-Current
+Total
+Current
+Non-Current
+839
+462
+1,302
+863
+5,203
+860
+6,063
+Other non-financial liabilities
+4,643
+Share-based payment liabilities
+Share-Based Payment Balances
+113.34
+106.68
+NA
+107.69
+105.10
+Total expense (in € millions) recognized in
+2019
+44
+NA
+1,087
+461
+2020
+-9
+6
+760
+132
+2021
+-11
+9
+1,139
+11
+€ millions
+16
+54
+21
+171
+1,426
+0
+0
+21
+0
+0
+1,647
+191
+171
+Own SAP Plan (Own)
+Under Own, employees have the opportunity to purchase, on a monthly basis, SAP shares without
+any required holding period. The investment per each eligible employee is limited to a percentage of
+the respective employee's monthly base salary. SAP matches the employee investment by 40% and
+adds a subsidy of €20 per month for non-executives. This plan is not open to members of the
+Executive Board.
+Numbers of Shares Purchased
+Millions
+Own
+2021
+2020
+2019
+5.7
+5.5
+5.2
+191
+200
+2019
+2020
+19
+59
+24
+191/338
+192/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+109.75
+Management Report
+Sustainability
+Additional
+Information
+b) Equity-Settled Share-Based Payments
+Recognized Expense for Equity-Settled Plans
+€ millions
+Own
+Qualtrics Plan
+Others
+Total
+2021
+Consolidated Financial Further Information on
+Statements IFRS
+As a result of our Own SAP Plan, we have commitments to grant SAP shares to employees. We intend
+to meet these commitments by reissuing treasury shares or through an agent who administers the
+equity-settled programs and purchases shares on the open market. We have fulfilled the obligations
+of Own through an agent.
+ΝΑ
+2021
+ΝΑ
+-5
+ΝΑ
+Exercised
+-129
+0
+-7,204
+-7,791
+Forfeited
+-3
+-30
+-1,164
+-699
+12/31/2020
+767
+172
+16,993
+7,518
+Granted
+0
+238
+-211
+12,204
+Adjustment based upon KPI target achievement
+9,238
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+Changes in Outstanding Awards Under Our Cash-Settled Plans
+LTI 2016 Plan
+Thousands, unless otherwise stated
+(2017-2019
+Tranches)
+LTI 2020
+(2020-2021
+Tranches)
+RSU Plan
+(2017-2021
+Tranches)
+Qualtrics
+Rights
+12/31/2019
+1,110
+0
+16,128
+16,007
+Granted
+0
+202
+0
+0
+Adjustment based upon KPI target achievement
+-150
+49
+6
+1,027
+193
+28
+15
+1,260
+1
+Total intrinsic value of vested awards (in € millions) as at
+12/31/2020
+32
+3
+0
+0
+12/31/2021
+38
+4
+0
+0
+Weighted average share price (in €) for awards exercised in
+2020
+12/31/2021
+12/31/2020
+Total carrying amount (in € millions) of liabilities as at
+44
+ΝΑ
+153
+ΝΑ
+Exercised
+-92
+0
+-8,092
+-1,780
+Exchanged
+ΝΑ
+124.03
+NA
+-5,451
+Forfeited
+-57
+-70
+-1,165
+-243
+12/31/2021
+469
+340
+18,783
+-1,309
+576
+Qualtrics Equity Awards
+Qualtrics grants equity awards settled with Qualtrics shares to eligible employees and the executive
+officers of Qualtrics. Qualtrics intends to meet these commitments by issuing shares. Granted units
+are either RSU awards subject to a time-based vesting, or PSUs subject to the achievement of certain
+performance conditions, as established by Qualtrics' board of directors and measured annually
+(Qualtrics RSUs). Additionally, there are Qualtrics equity-settled options resulting from acquisitions as
+described below. The RSUs mainly vest with 25% one year after grant and ratably thereafter for 12
+quarters. The PSUs vest in four equal annual installments and are measured annually, with vesting of
+100% of each installment in the event that the performance targets are achieved, and ratable
+downward adjustments in the event that the performance targets are partially achieved.
+4
+27
+31
+35
+32
+65
+66
+Of the present value of the DBO of our domestic plans, €1,125 million (2020: €1,054 million) relate to
+plans that provide for lump-sum payments not based on final salary; of the present value of the DBO
+of our foreign plans, €524 million (2020: €479 million) relate to plans that provide for annuity
+payments not based on final salary.
+The following significant weighted average assumptions were used for the actuarial valuation of our
+domestic and foreign pension liabilities as well as other post-employment benefit obligations as at the
+respective measurement date:
+Significant Actuarial Assumptions
+Domestic Plans
+Foreign Plans
+Other Foreign Post-Employment
+Plans
+Percent
+2021
+2020
+2019
+2021
+2020
+2019
+3
+2021
+0
+0
+1,183
+1,112
+578
+506
+91
+73
+1,852
+1,691
+11
+15
+89
+110
+125
+116
+225
+241
+0
+0
+0
+0
+0
+0
+2020
+2019
+Discount
+2019
+benefit obligations if:
+Discount rate was 50 basis
+1,134
+1,066
+968
+626
+573
+495
+203
+185
+154
+1,964
+1,824
+1,617
+points higher
+Discount rate was 50 basis
+points lower
+1,260
+1,195
+1,090
+714
+2020
+2021
+2019
+2020
+1.2
+0.9
+0.8
+0.5
+0.4
+0.3
+3.1
+3.0
+3.7
+rate
+1,932
+The sensitivity analysis table below shows how the present value of all defined benefit obligations
+would have been influenced by reasonably possible changes to significant actuarial assumptions. The
+sensitivity analysis considers change in discount rate assumptions, holding all other actuarial
+assumptions constant.
+Foreign Plans
+Other Foreign Post-
+Employment Plans
+Total
+2021
+2020
+2019
+2021
+2020
+2019
+2021
+Domestic Plans
+Qualtrics Omnibus Plan (Qualtrics Plan)
+2,077
+216
+12,872
+US$30.04
+US$44.27
+-7,467
+US$33.43
+-2,241
+US$41.29
+84,018
+US$43.13
+1 The number of awards and their weighted average grant date fair values in this table include Qualtrics RSUs and Qualtrics equity-settled
+options replacing Clarabridge options.
+The weighted average remaining life of Qualtrics Plan awards outstanding as at December 31, 2021
+(in years) was 3.0 years.
+Under Qualtrics' equity-settled plans, we expect to transfer US$300 million to the tax authority to
+settle the employees' tax obligation in 2022.
+(B.4)
+Pension Plans and Similar Obligations
+Defined Contribution Plans
+Amounts for domestic and foreign defined contribution plans are based on a percentage of the
+employees' salaries or on the amount of contributions made by employees. In Germany and some
+other countries, we make contributions to public pension schemes that are operated by national or
+local government or similar institutions. Expenses for such local state pension plans are recognized as
+short-term employee benefits, that is, social security expenses.
+Defined Benefit Pension Plans
+The discount rates used in measuring our post-employment benefit assets and liabilities are derived
+from rates available on high-quality corporate bonds and government bonds for which the timing and
+amounts of payments match the timing and the amounts of our projected pension payments. Net
+interest expense and other expenses related to defined benefit plans are recognized as employee
+benefits expenses and classified in our Consolidated Income Statements according to the activities
+that the employees owning the awards perform. Since our domestic defined benefit pension plans
+primarily consist of an employee-financed post-retirement plan that is fully financed with qualifying
+insurance policies, current service cost may become a credit as a result of adjusting the defined
+benefit liability's carrying amount to the fair value of the qualifying plan assets. Such adjustments are
+recorded in service cost. Total expenses on defined benefit pension plans comprise related current
+and past service costs as well as interest income and expense.
+193/338
+SAP
+SAP Integrated Report 2021
+NA
+To Our
+0
+Awards
+Exchange Offer
+After completion of a voluntary exchange offer for eligible Qualtrics employees in conjunction with the
+IPO on January 28, 2021, 5.4 million cash-settled Qualtrics Rights and 1.3 million SAP RSU awards
+were exchanged into 12.8 million equity-settled Qualtrics RSU awards. The terms and conditions of
+the voluntary exchange offer, including the exchange ratio, were designed to preserve the intrinsic
+value of the Qualtrics Rights and SAP RSUs that were tendered. The modification date fair value of
+the Qualtrics RSU awards was US$30.00, which is equivalent to the Qualtrics IPO price.
+Furthermore, a subsequent exchange offer for certain Qualtrics employees in Australia took place in
+September 2021.
+SAP Integrated Report 2021
+SAP
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+Qualtrics Equity-Settled Options Replacing Clarabridge Options
+In conjunction with the acquisition of Clarabridge in 2021, Qualtrics assumed outstanding Clarabridge
+stock options, which were converted into Qualtrics options. The conversion factor was set to preserve
+the intrinsic value of the outstanding Clarabridge options. The replacement awards mirror the terms of
+the replaced awards except that the awards are settled by issuing Qualtrics shares while retaining
+their initial vesting schedules. For some Qualtrics options, additional vesting terms were agreed. The
+majority of the assumed options were either fully vested or partially vested as at the acquisition date
+and had a strike price well below the fair value of the awards at the conversion date. The modification
+date fair value of the stock options was determined to approximate the intrinsic value of the options
+with an underlying Qualtrics share price of US$43.88.
+Changes in Outstanding Awards Under Our Equity-Settled Plans
+Qualtrics Plan¹
+Thousands, unless otherwise stated
+12/31/2020
+Exchanged
+Granted
+Exercised
+Forfeited
+12/31/2021
+Weighted Average Grant
+Date Fair Value
+Stakeholders
+Combined Group
+Management Report
+Net defined benefit liability (asset) as % of:
+Non-current other financial assets
+Non-current provisions
+Sensitivity Analysis
+€ millions
+Present value of all defined
+Domestic Plans
+Foreign Plans
+Other Foreign Post-
+Employment Plans
+Total
+2021
+2020
+2021
+2020
+2021
+2020
+2021
+2020
+1,194
+1,127
+667
+616
+Net defined benefit liability (asset)
+Fair value of the plan assets
+Present value of the DBO
+€ millions
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+Total Expense of Pension Plans
+€ millions
+Defined contribution plans
+Defined benefit pension plans
+Pension expenses
+2021
+2020
+189
+2019
+326
+314
+62
+93
+55
+408
+419
+369
+Defined Benefit Plans
+Present Value of the Defined Benefit Obligations (DBO) and the Fair Value of the Plan Assets
+346
+80,856
+681
+€ millions
+2020
+2019
+6,847
+7,220
+4,596
+1,808
+1,901
+1,212
+(2020: 26.3%; 2019: 26.4%)
+Tax effect of:
+Foreign tax rates
+2021
+Non-deductible expenses
+-126
+-166
+-171
+420
+254
+116
+-630
+-282
+-131
+Withholding taxes
+204
+Tax-exempt income
+105
+Il Profit before tax
+Relationship Between Tax Expense and Profit Before Tax
+2021
+2020
+2019
+Germany
+2,040
+2,481
+2,012
+Foreign
+4,807
+4,739
+2,584
+€ millions, unless otherwise stated
+.lil Total
+7,220
+4,596
+The following table reconciles the expected income tax expense, computed by applying our
+combined German tax rate of 26.4% (2020: 26.3%; 2019: 26.4%), to the actual income tax expense.
+Our 2021 combined German tax rate includes a corporate income tax rate of 15.0% (2020: 15.0%;
+2019: 15.0%), plus a solidarity surcharge of 5.5% (2020: 5.5%; 2019: 5.5%) thereon, and trade taxes of
+10.6% (2020: 10.5%; 2019: 10.6%).
+SAP
+SAP Integrated Report 2021
+To Our
+Combined Group
+Stakeholders
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+6,847
+€ millions
+138
+-75
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+Components of Recognized Deferred Tax Assets and Liabilities
+€ millions
+Deferred tax assets
+Intangible assets
+2021
+2020
+SAP Integrated Report 2021
+759
+Property, plant, and equipment
+19
+19
+Other financial assets
+14
+11
+Trade and other receivables
+Pension provisions
+Share-based payments
+58
+115
+455
+Research and development and foreign tax credits
+SAP
+205/338
+-100
+-89
+Prior-year taxes
+9
+128
+80
+Reassessment of deferred tax assets, research and
+-34
+41
+48
+development tax credits, and foreign tax credits
+206/338
+48
+il Total income tax expense
+Effective tax rate (in %)
+-105
+57
+23
+1,471
+1,938
+1,226
+21.5
+26.8
+26.7
+Other
+Profit Before Tax by Geographic Location
+1,226
+1,938
+Judgments and Estimates
+We are subject to changing tax laws in multiple jurisdictions within the countries in which we operate.
+Our ordinary business activities also include transactions where the ultimate tax outcome is uncertain
+due to different interpretations of tax laws, such as those involving transfer pricing and intercompany
+transactions between SAP Group entities. In addition, the amount of income taxes we pay is generally
+subject to ongoing audits by domestic and foreign tax authorities. In determining our worldwide
+income tax provisions, judgment is involved in assessing whether to consider each uncertain tax
+treatment separately or together with one or more other uncertain tax treatments and whether to
+reflect the respective effect of uncertainty based on the most likely amount or the expected value. In
+applying these judgments, we consider the nature and the individual facts and circumstances of each
+uncertain tax treatment as well as the specifics of the respective jurisdiction, including applicable tax
+laws and our interpretation thereof.
+The assessment whether a deferred tax asset is impaired requires judgment, as we need to estimate
+future taxable profits to determine whether the utilization of the deferred tax asset is probable. In
+evaluating our ability to utilize our deferred tax assets, we consider all available positive and negative
+evidence, including the level of historical taxable income and projections for future taxable income
+over the periods in which the deferred tax assets are recoverable. Our judgment regarding future
+taxable income is based on assumptions about future market conditions and future profits of SAP.
+Judgment is also required in evaluating whether interest or penalties related to income taxes meet the
+definition of income taxes, and, if not, whether it is of financial nature. In this judgment, we particularly
+consider applicable local tax laws and interpretations on IFRS by national standard setters in the area
+of group financial reporting.
+203/338
+204/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Income Taxes
+Sustainability
+Tax Expense by Geographic Location
+€ millions
+Current tax expense
+Germany
+Foreign
+Total current tax expense
+Deferred tax expense/income
+Germany
+Foreign
+Total deferred tax expense/income
+Total income tax expense
+Additional
+Information
+Major Components of Tax Expense
+(C.5)
+776
+Finance income
+3,123
+1,473
+787
+Thereof gains from financial assets at fair value through profit or loss
+Finance costs
+3,067
+1,360
+596
+-949
+-697
+-589
+198
+Thereof losses from financial assets at fair value through profit or loss
+-342
+-151
+Thereof interest expense from financial liabilities at amortized cost
+Thereof interest expense from financial liabilities at fair value through
+profit or loss
+-160
+-179
+-207
+-50
+-76
+-155
+Jil Financial income, net
+2,174
+-654
+€ millions
+Current tax expense/income
+Tax expense for current year
+1,653
+1,818
+261
+243
+-40
+1,968
+1,896
+1,778
+Total current tax expense
+Deferred tax expense/income
+Origination and reversal of temporary differences
+1,707
+-526
+-710
+Unused tax losses, research and development tax credits, and
+foreign tax credits
+29
+-5
+158
+Total deferred tax expense/income
+Total income tax expense
+-497
+42
+-552
+1,471
+47
+2019
+2020
+2021
+Taxes for prior years
+2021
+2020
+2019
+608
+895
+625
+1,360
+1,001
+1,153
+1,968
+1,896
+1,778
+109
+-38
+-3
+-606
+80
+-549
+-497
+42
+-552
+1,471
+1,938
+1,226
+196
+194
+278
+197
+1,194
+Weighted average shares outstanding, diluted¹
+1,180
+1,182
+1,194
+Earnings per share, basic, attributable to equity
+4.46
+4.35
+2.78
+holders of SAP SE (in €)
+Earnings per share, diluted, attributable to equity
+1,182
+4.46
+2.78
+holders of SAP SE (in €)
+1 Number of shares in millions
+SAP
+SAP Integrated Report 2021
+To Our
+Combined Group
+Stakeholders
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+4.35
+Information
+1,180
+-35
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+(C.6)
+Earnings per Share
+€ millions, unless otherwise stated
+2021
+Weighted average shares outstanding, basic¹
+2020
+Profit attributable to equity holders of SAP SE
+5,256
+5,145
+3,321
+Issued ordinary shares¹
+1,229
+1,229
+1,229
+Effect of treasury shares¹
+-49
+-46
+2019
+Section D - Invested Capital
+This section highlights our non-current assets including investments that form the basis of our
+operating activities. Additions to invested capital include separate asset acquisitions or business
+combinations. Further, we disclose information about purchase obligations and capital contributions.
+(D.1) Business Combinations and Divestitures
+Measuring Non-Controlling Interests and Allocation of Consideration Transferred
+We decide for each business combination whether to measure the non-controlling interest in the
+acquiree at fair value or at the proportionate share of the acquiree's identifiable net assets.
+Goodwill
+Total consideration transferred
+255
+73
+328
+108
+108
+220
+729
+949
+The initial accounting for the Signavio business combination is incomplete because we are still
+obtaining the information necessary to identify and measure items such as tax-related assets and
+liabilities of Signavio. Accordingly, the amounts recognized in our financial statements for these items
+are regarded provisional as at December 31, 2021.
+Total identifiable net assets
+In general, the goodwill arising from our acquisitions consists largely of the synergies and the know-
+how and skills of the acquired businesses' workforces.
+-
+Cross-selling opportunities to existing SAP customers across all regions, using SAP's sales
+organization
+The acquisition of Signavio complements SAP's business process intelligence offerings and will
+help create new offerings by combining Signavio products and SAP products, but is also expected
+to result, for example, in increased SAP S/4HANA and RISE with SAP sales.
+Improved profitability in Signavio sales and operations
+The allocation of the goodwill resulting from the Signavio acquisition to our operating segments
+depends on how our operating segments actually benefit from the synergies of the Signavio business
+combination. For more information, see Note (D.2).
+Clarabridge Acquisition
+On October 1, 2021 (after receipt of required regulatory approvals and satisfaction or waiver of other
+customary closing conditions), Qualtrics completed its previously announced acquisition of
+Clarabridge, a customer experience management software company headquartered in Reston,
+Virginia, United States, pursuant to an Agreement and Plan of Reorganization and Merger. The
+number of Qualtrics class A common stock issued to the sellers was fixed based on a valuation of
+US$1,125 million (subject to certain adjustments) – the assumed Qualtrics share price was US$37.33.
+The actual consideration transferred (mainly in shares valued at the acquisition date fair value of the
+common stock) amounted to US$1,298 million (€1,116 million). This includes €910 million of issued
+shares, €115 million of assumed awards as well as €91 million of cash paid.
+-
+Qualtrics has (1) assumed, amended, and restated Clarabridge stock plans, and (2) converted the
+assumed options to purchase shares of Clarabridge stock outstanding into corresponding Qualtrics
+options. Qualtrics has granted equity incentive awards to certain continuing employees of Clarabridge
+and its subsidiaries under their own Qualtrics equity plan at Qualtrics' sole discretion. For more
+information see Note (B.3).
+The following table summarizes the values of identifiable assets acquired and liabilities assumed in
+connection with the acquisition of Clarabridge, as at the acquisition date:
+Services
+Signavio goodwill was attributed to expected synergies from the acquisition, particularly in the
+following areas:
+Total identifiable liabilities
+Other identifiable liabilities
+Total identifiable assets
+We classify costs related to executing business combinations as general and administration expense.
+In our accounting for business combinations, judgment is required in determining whether an
+intangible asset is identifiable, and should be recorded separately from goodwill. Additionally,
+estimating the acquisition-date fair values of the identifiable assets acquired and liabilities assumed
+involves considerable judgment. The necessary measurements are based on information available on
+the acquisition date and are based on expectations and assumptions that have been deemed
+reasonable by management. These judgments, estimates, and assumptions can materially affect our
+financial position and profit for several reasons, including the following:
+Fair values assigned to assets subject to depreciation and amortization affect the amounts of
+depreciation and amortization to be recorded in operating profit in the periods following the
+acquisition.
+Subsequent negative changes in the estimated fair values of assets may result in additional
+expense from impairment charges.
+Subsequent changes in the estimated fair values of liabilities and provisions may result in
+additional expense (if increasing the estimated fair value) or additional income (if decreasing the
+estimated fair value).
+We acquire businesses in specific areas of strategic interest to us, particularly to broaden our product
+and service portfolio.
+2021 Acquisitions
+In 2021, we closed the acquisition of Signavio GmbH, Berlin, Germany, ("Signavio") and of
+Clarabridge, Inc., Reston, Virginia, United States, ("Clarabridge”).
+Signavio Acquisition
+In January 2021, SAP announced it had entered into an agreement to acquire Signavio, a leader in
+the enterprise business process intelligence and process management space that enables companies
+to understand, improve, transform, and manage all their business processes quickly and at scale.
+The purchase price was €949 million. The transaction closed on March 5, 2021, following satisfaction
+of regulatory and other approvals. The Signavio operating results and assets and liabilities are
+reflected in our consolidated financial statements starting on that date.
+The following table summarizes the values of identifiable assets acquired and liabilities assumed in
+connection with the acquisition of Signavio, as at the acquisition date:
+209/338
+210/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+Signavio Acquisition: Recognized Assets and Liabilities
+€ millions
+Intangible assets
+Other identifiable assets
+SAP Integrated Report 2021
+2019
+SAP
+207/338
+Total deferred tax liabilities
+Total deferred tax assets, net
+903
+854
+525
+529
+169
+239
+206
+178
+29
+Other
+21
+0
+50
+87
+7
+4
+181
+123
+2,071
+2,035
+1,488
+1,030
+1
+The increase in deferred tax assets for intangible assets mainly results from the capitalization of
+research and development expenses for tax purposes. Furthermore, the deferred tax assets for
+contract liabilities increased mainly because of deferred revenue.
+Contract liabilities
+Share-based payments
+Other provisions and obligations
+1,097
+1,155
+Contract liabilities
+781
+631
+Carryforwards of unused tax losses
+146
+123
+Research and development and foreign tax credits
+77
+Other provisions and obligations
+57
+134
+108
+Total deferred tax assets
+3,559
+3,065
+Deferred tax liabilities
+Intangible assets
+Property, plant, and equipment
+Other financial assets
+Trade and other receivables
+Pension provisions
+Other
+Deferred tax assets for other provisions and obligations in the amount of €472 million
+(2020: €452 million) and deferred tax liabilities for property, plant, and equipment in the amount of
+€405 million (2020: €400 million) result from the accounting of liabilities and right-of-use assets from
+leases.
+SAP
+1,124
+Deductible temporary differences
+602
+587
+538
+Unused research and development and foreign tax credits
+Not expiring
+28
+26
+28
+Expiring after the following year
+933
+20
+17
+Total unused tax credits
+48
+43
+45
+Of the unused tax losses, €183 million (2020: €179 million; 2019: €187 million) relate to U.S. state tax
+loss carryforwards.
+We have not recognized a deferred tax liability on approximately €24.04 billion (2020: €18.37 billion)
+for undistributed profits of our subsidiaries, because we are in a position to control the timing of the
+reversal of the temporary difference and it is probable that such differences will not reverse in the
+foreseeable future.
+Income Tax-Related Litigation
+We are subject to ongoing tax audits by domestic and foreign tax authorities. Currently, we are in
+dispute mainly with the German and only a few foreign tax authorities. The German dispute is in
+respect of certain secured capital investments, while the few foreign disputes are in respect of the
+deductibility of intercompany royalty payments and intercompany services. In all cases, we expect
+that a favorable outcome can only be achieved through litigation. For all of these matters, we have not
+recorded a provision as we believe that the tax authorities' claims have no merit and that no
+adjustment is warranted. If, contrary to our view, the tax authorities were to prevail in their arguments
+before the court, we would expect to have an additional expense of approximately €1,283 million
+(2020: €1,221 million) in total (including related interest expenses and penalties of €677 million
+(2020: €648 million)).
+Reform of International Taxation Rules
+In October 2021, over 135 jurisdictions agreed on a new framework for the international tax system
+covering the re-allocation of taxing rights and the introduction of a global minimum corporate tax rate.
+On December 20, 2021, the Organization for Economic Co-operation and Development (OECD)
+released model rules, which shall ensure that multinational enterprises with revenue above
+€750 million will be subject to a 15% minimum corporate tax rate. Based on this release, on
+December 22, 2021, the European Commission (EC) proposed a directive for implementation within
+the EU. We expect to be subject to such rules. However, since they still need to be implemented into
+national law and are expected to only apply starting 2023, we cannot yet assess possible impacts for
+SAP.
+17
+765
+Total unused tax losses
+373
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+Items Not Resulting in a Deferred Tax Asset
+€ millions
+Unused tax losses
+Not expiring
+Expiring in the following year
+2021
+2020
+2019
+430
+570
+688
+26
+25
+63
+Expiring after the following year
+309
+338
+208/338
+2020
+Tax expense at applicable tax rate of 26.4%
+€ millions
+153
+157
+97
+690
+711
+528
+86
+89
+55
+Services
+1,458
+Qualtrics
+1,455
+1,370
+1,414
+1,491
+406
+414
+408
+929
+3,234
+957
+3,283
+681
+3,379
+Total
+reportable
+segments
+1,479
+12,513
+& Support
+3,621
+2021
+2020
+2021
+2020
+2021
+2020
+2021
+2020
+€ millions
+Actual
+Currency
+Constant Actual
+Currency Currency
+23,502 23,816 22,965
+Actual
+Currency
+Actual Constant
+Currency
+Actual
+Currency Currency
+Actual Constant Actual
+Currency Currency Currency
+Applications,
+Technology
+10,902
+10,900 10,437
+8,862
+9,116
+8,907
+3,737
+3,799
+Constant Actual
+Currency Currency
+12,512 12,013
+10,922
+11,242
+9,200
+9,066
+3,621
+3,698
+3,679 22,965 23,446 23,051
+& Support
+Qualtrics
+97
+99
+68
+528
+8,907
+540
+55
+56
+37
+681
+Services
+1,479
+1,491
+1,568
+1,491
+1,527
+1,621
+403
+10,306
+10,549
+10,437
+10,927
+4,230
+4,302
+4,084
+27,665
+28,055 27,024
+€ millions
+EMEA
+2020
+2019
+Actual
+Americas
+APJ
+2020
+2019
+2020
+2019
+Total Segment Revenue
+2020
+2019
+Actual Constant
+Actual Constant
+Currency Currency Currency Currency Currency
+Actual Actual
+Currency Currency
+Constant
+Currency
+Actual Actual Constant Actual
+Currency Currency Currency Currency
+Applications,
+Technology
+Total Segment Revenue
+408
+APJ
+EMEA
+Constant
+Currency¹
+Actual
+Currency
+Constant
+Currency¹
+Actual
+Currency
+0
+0
+0
+1
+0
+0
+0
+Currency
+0
+0
+0
+0
+4
+4
+5
+0
+0
+4
+4
+5
+0
+0
+Actual
+2020
+SAP Integrated Report 2021
+SAP
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Cloud
+Software licenses
+Software support
+Software licenses and support
+Cloud and software
+2019
+Services
+Cost of cloud
+Cost of software licenses and support
+Cost of cloud and software.
+Cost of services
+Total cost of revenue
+Segment gross profit
+Other segment expenses
+Segment profit
+Further Information on
+Sustainability
+Additional
+Information
+2021
+Total segment revenue
+0
+5
+5
+-2,254
+-2,579
+-2,131
+-2,161
+-2,315
+-2,363
+-2,695
+1,102
+1,122
+1,063
+1,070
+-2,209
+983
+-379
+-418
+-427
+-466
+728
+743
+645
+642
+517
+1 The 2021 constant currency amounts are only comparable to 2020 actual currency amounts; 2020 constant currency amounts are only comparable to 2019 actual currency
+amounts.
+Segment Revenue by Region
+-375
+-2,062
+2021
+-116
+5
+3,234
+3,282
+3,374
+3,428
+3,674
+3,234
+3,283
+3,379
+3,432
+3,679
+-78
+-80
+-74
+-76
+-62
+-18
+-19
+-32
+-33
+-54
+-97
+-99
+-106
+-109
+Americas
+415
+-2,035
+3,379
+-623
+-623
+-577
+-577
+-689
+-2,794
+-2,794
+-1,084
+-1,084
+-1,835
+-157
+-81
+-157
+3
+-1,130
+4,656
+4,656
+6,623
+6,623
+4,473
+17
+17
+-179
+-179
+3
+-74
+-5
+0
+322
+396
+Other expenses
+-2,286
+-2,274
+-2,395
+-2,390
+-2,469
+Adjustment for currency impact
+0
+-178
+-5
+0
+0
+Adjustment for
+Revenue under fair value accounting
+Acquisition-related charges
+Share-based payment expenses
+Il Restructuring
+Il Operating profit
+■ Other non-operating income/expense, net
+Il Financial income, net
+Il Profit before tax
+0
+-216
+2,174
+2,174
+776
+-396
+Thereof from financial liabilities at amortized cost
+-70
+-34
+-176
+Miscellaneous income/expense, net
+-33
+-25
+-23
+Other non-operating income/expense, net
+17
+-487
+-179
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+490
+(C.4) Financial Income, Net
+-74
+-382
+Thereof from financial liabilities at fair value through profit or loss
+194
+776
+198
+6,847
+6,847
+7,220
+7,220
+4,596
+1 The 2021 constant currency amounts are only comparable to 2020 actual currency amounts; 2020 constant currency amounts are only comparable to 2019 actual currency
+amounts.
+202/338
+(C.3)
+Other Non-Operating Income/Expense, Net
+2021
+2020
+2019
+Foreign currency exchange gain/loss, net
+49
+-154
+-51
+Thereof from financial assets at fair value through profit or loss
+316
+601
+358
+Thereof from financial assets at amortized cost
+111
+-134
+319
+177
+€ millions
+Other revenue
+2020
+2021
+2019
+€ millions
+Actual
+Currency
+Constant
+Currency¹
+Actual
+Currency
+Constant
+Currency¹
+Actual
+Currency
+Applications, Technology & Support
+23,502
+(C.2) Reconciliation of Segment Measures to the Consolidated Income Statements
+23,816
+23,446
+23,051
+Services
+3,234
+3,283
+3,379
+3,432
+3,679
+Qualtrics
+929
+957
+22,965
+696
+Additional
+Information
+Combined Group
+Management Report
+696
+3,432
+508
+177
+3,679
+Total
+reportable
+12,013
+12,139
+11,942
+10,927
+11,267
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+11,089
+4,169
+4,207
+27,024
+27,574
+27,238
+segments
+For a breakdown of revenue by region for the SAP Group, see Note (A.1).
+201/338
+SAP
+To Our
+Stakeholders
+4,084
+508
+SAP Integrated Report 2021
+27,665
+27,553
+Applications, Technology & Support
+9,567
+9,718
+9,722
+9,934
+9,773
+Services
+728
+743
+645
+642
+Qualtrics
+44
+44
+-4
+-5
+-9
+Total segment profit for reportable segments
+10,339
+10,505
+Total segment revenue for reportable segments
+10,281
+10,363
+10,571
+27,338
+27,338
+517
+27,842
+27,238
+Other revenue
+177
+177
+319
+27,024
+396
+Adjustment for currency impact
+0
+-390
+0
+322
+0
+27,842
+-554
+Total revenue
+-81
+28,055
+-5
+27,574
+0
+0
+Adjustment of revenue under fair value accounting
+-5
+27,842
+5,376
+Contribution of 2021 Acquisitions
+70
+-89
+Had the acquired entities been consolidated as at January 1, 2021, our 2021 revenue and profit after
+tax would not have been materially different.
+Combined Group
+2021 Divestitures
+SAP and SAP Fioneer have executed transition service and go-to-market agreements, among others.
+The disposal gain relating to the transfer of the business (predominantly IP and employees) is
+included in Other operating income/expense, net (€77 million for both IFRS and non-IFRS).
+211/338
+212/338
+SAP
+To Our
+Stakeholders
+On April 13, 2021, SAP and investment company Dediq GmbH, Munich, Germany, ("Dediq”)
+announced that they had agreed to enter into a partnership in the area of financial services. Following
+the close of the transaction in September 2021 (after satisfaction of all closing conditions including
+regulatory approvals), SAP and Dediq jointly own the new “SAP Fioneer” entity (with SAP owning a
+minority share).
+SAP Integrated Report 2021
+In general, the goodwill arising from our acquisitions consists largely of the synergies and the know-
+how and skills of the acquired businesses' workforces.
+2021
+103
+Management Report
+297
+194
+922
+1,116
+The initial accounting for the business combination is preliminary as at December 31, 2021 (as we are
+still in the process of collecting the information necessary to determine the fair value of, for example,
+intangible assets as well as tax assets and liabilities).
+103
+The Clarabridge goodwill consists largely of the synergies that SAP expects to achieve from
+combining the acquired assets and operations with its existing operations, especially in its Qualtrics
+subsidiary.
+For more information about the allocation of goodwill to our segments (benefitting from the
+acquisition), see Note (D.2).
+Impact of Business Combinations on Our Financial Statements
+The amounts of revenue and profit or loss of the Signavio and Clarabridge businesses acquired in
+2021 since the acquisition date are included in the 2021 consolidated income statements as follows:
+2021 Acquisitions: Impact on SAP's Financials (Signavio and Clarabridge)
+€ millions
+lil Revenue
+Il Profit after tax
+as Reported
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Total consideration transferred
+2020 Acquisitions
+€ millions
+Cash paid
+Liabilities incurred
+6,212
+237
+6,449
+Qualtrics Acquisition: Consideration Transferred
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+79
+Additional
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+SAP
+Additional
+Information
+The operating results and assets and liabilities of Qualtrics are reflected in our consolidated financial
+statements from January 23, 2019, onward.
+Qualtrics is a leading provider of experience management solutions. By combining Qualtrics products
+and SAP products, we aim to deliver an end-to-end experience and operational management system
+to our customers.
+On November 4, 2020, we concluded the acquisition of 100% of the shares of Emarsys eMarketing
+Systems AG, Vienna, Austria, (“Emarsys") following satisfaction of applicable regulatory and other
+approvals.
+The operating results and assets and liabilities of Emarsys are reflected in our consolidated financial
+statements from November 4, 2020, onwards.
+Measurement period adjustments recorded in both 2021 and 2020 were not material (the
+measurement period adjustments have resulted in an adjustment of our 2020 numbers - reducing
+goodwill along with non-current provisions by €6 million; a further reduction of goodwill by €16 million
+was caused by adjustments of tax items).
+In general, the goodwill arising from our acquisitions consists largely of the synergies and the know-
+how and skills of the acquired businesses' workforces.
+Emarsys goodwill is attributed to expected synergies from the acquisition, particularly in the following
+areas:
+We acquired 100% of the Qualtrics shares for approx. US$35 per share, representing consideration
+transferred in cash of approximately US$7.1 billion. In addition to the cash payments, SAP also
+incurred liabilities and post-closing expenses relating to assumed share-based payment awards
+amounting to approximately US$0.9 billion.
+Cross-selling opportunities to existing SAP customers across all regions, using SAP's sales
+organization
+- Improved profitability in Emarsys sales and operations
+2020 Divestitures
+On May 5, 2020, SAP and Sinch AB, Stockholm, Sweden, ("Sinch”) announced that they had entered
+into a definitive agreement for Sinch to acquire the SAP Digital Interconnect group. The business sold
+(which was a non-reportable segment to SAP) consists of several SAP subsidiaries as well as assets
+transferred from certain SAP entities. The initial cash purchase price was €225 million (on a cash-free,
+debt-free basis). The disposal gain of €194 million (IFRS) and €128 million (non-IFRS) is included in
+Other operating income/expense, net.
+The transaction closed on November 1, 2020, following satisfaction of applicable regulatory and other
+approvals.
+Due to immateriality, we have not separately presented the business as a discontinued operation.
+2019 Acquisitions
+On January 23, 2019, we concluded the acquisition of Qualtrics International Inc. ("Qualtrics"),
+following satisfaction of applicable regulatory and other approvals.
+Emarsys offerings complementing the existing SAP Customer Experience solutions
+218
+Operating margin budgeted for a given budget period equals the operating margin achieved in the current year, increased by
+expected efficiency gains. Values assigned reflect past experience, except for efficiency gains.
+Goodwill
+Revenue growth rate achieved in the current year, adjusted for an expected increase in SAP's addressable cloud and database
+markets; expected growth in the established software applications and analytics markets. Values assigned reflect our past
+experience and our expectations regarding an increase in the addressable markets.
+Basis for Determining Values Assigned to Key Assumption
+The key assumptions on which management based its cash flow projections for the period covered by
+the underlying business plans are as follows:
+Goodwill Impairment Test
+Note (D.1)), we disposed €20 million of goodwill (thereof €9 million from the Applications, Technology
+& Support segment and €11 million from the Services segment).
+In conjunction with the creation of the SAP Fioneer joint venture (for more information, see
+Our estimated cash flow projections are discounted to present value using discount rates (after-tax rates). Discount rates are
+based on the weighted average cost of capital (WACC) approach.
+Due to the dissolution of the Concur segment in 2021 (for more information, see Note (C.1)), the
+Concur goodwill (€3,307 million) was moved to the Applications, Technology & Support segment.
+Given the close proximity to the 2020 annual goodwill impairment test and the significant headroom,
+no formal impairment test was performed on the reallocation date of the Concur segment.
+Terminal growth rate
+Discount rates
+Budgeted operating margin
+Budgeted revenue growth
+Key Assumption
+Additional
+Information
+goodwill resulting from the Clarabridge acquisition (by Qualtrics) to our operating segments depends
+on how our operating segments actually benefit from the synergies of the Clarabridge business
+combination. As we have not yet completed the identification of those benefits and the initial
+accounting for the business combination is preliminary (for more information, see Note (D.1)), the
+entire goodwill (€924 million) was provisionally allocated to the Qualtrics segment.
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Our estimated cash flow projections for periods beyond the business plan were extrapolated using segment-specific terminal
+growth rates. These growth rates do not exceed the long-term average growth rates for the markets in which our segments
+operate.
+Percent, unless
+2021¹
+Information
+2020
+2021
+2020
+2021
+Key Assumptions and Detailed Planning Period
+Emarsys
+Qualtrics
+Services
+Applications, Technology
+2020
+Business Process
+Intelligence
+otherwise stated
+& Support
+Total consideration transferred
+Management Report
+To Our
+Stakeholders
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+To Our
+Clarabridge Acquisition: Recognized Assets and Liabilities
+Intangible assets
+Other identifiable assets
+Total identifiable assets
+Other identifiable liabilities
+Total identifiable liabilities
+Total identifiable net assets
+€ millions
+Combined Group
+SAP Integrated Report 2021
+12/31/2020
+12/31/2021
+SAP Integrated Report 2021
+SAP
+215/338
+A portion (€43 million) of the goodwill in the Applications, Technology & Support segment was moved
+to the newly formed Business Process Intelligence segment. Based on the expected synergies, the
+goodwill added through the acquisition of Signavio (€766 million) was provisionally allocated to the
+Applications, Technology & Support segment (€383 million) and the Business Process Intelligence
+segment (€383 million). As the initial accounting for the Signavio business combination is incomplete
+(for more information, see Note (D.1)), the allocation of goodwill is provisional. The allocation of the
+31,090
+408
+SAP
+27,538
+395
+395
+2,637
+3,846
+3,307
+ΝΑ
+355
+367
+26,074
+20,844
+NA
+The liabilities incurred related to the earned portion of unvested share-based payment awards. These
+liabilities were incurred by replacing, upon acquisition, equity-settled share-based payment awards
+held by employees of Qualtrics with cash-settled share-based payment awards, which are subject to
+forfeiture. The respective liabilities represent the portion of the replacement awards that relates to pre-
+acquisition services provided by the acquiree's employees and were measured at the fair value
+determined under IFRS 2.
+Estimation of weighted average cost of capital
+The following table summarizes the values of identifiable assets acquired and liabilities assumed in
+connection with the acquisition of Qualtrics, as at the acquisition date.
+Additions from business combinations
+Foreign currency exchange differences
+1/1/2020
+Historical cost
+€ millions
+Goodwill
+Retirements/disposals
+Statements IFRS
+Further Information on
+Sustainability
+Consolidated Financial
+Combined Group
+Stakeholders
+To Our
+SAP Integrated Report 2021
+Management Report
+SAP
+12/31/2020
+Additions from business combinations
+-2,010
+29,260
+Additional
+Information
+12/31/2021
+12/31/2020
+Carrying amount
+Foreign currency exchange differences
+12/31/2021
+12/31/2020
+Foreign currency exchange differences
+1/1/2020
+Accumulated amortization
+12/31/2021
+Retirements/disposals
+Foreign currency exchange differences
+395
+Changes in our segment structure result in the reallocation of goodwill with the reallocated goodwill
+being calculated based on relative values (if a direct allocation is not possible).
+Changes to the assumptions underlying our goodwill and intangible assets impairment assessments
+could require material adjustments to the carrying amount of our recognized goodwill and intangible
+assets as well as the amounts of impairment charges recognized in profit or loss.
+€ millions
+Qualtrics Acquisition: Impact on SAP's Financials
+The amounts of revenue and profit or loss of the Qualtrics business acquired in 2019 since the
+acquisition date were included in our 2019 consolidated income statements as follows:
+Impact of the Business Combination on Our Financial Statements
+Information
+Additional
+lil Revenue
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+214/338
+2020
+Management Report
+The outcome of goodwill impairment tests may also depend on the allocation of goodwill to our
+operating segments. This allocation involves judgment as it is based on our estimates regarding which
+operating segments are expected to benefit from the synergies of business combinations.
+Il Profit after tax
+as Reported
+Internal forecasts
+Changes in business strategy
+In making impairment assessments for our goodwill and intangible assets, the outcome of these tests
+is highly dependent on management's assumptions regarding future cash flow projections and
+economic risks, which require significant judgment and assumptions about future developments. They
+can be affected by a variety of factors, including:
+In general, the test is performed at the same time (at the beginning of the fourth quarter) for all
+operating segments.
+are no lower levels in SAP at which goodwill is monitored for internal management purposes.
+The annual goodwill impairment test is performed at the level of our operating segments, since there
+2019
+Goodwill and Intangible Asset Impairment Testing
+Had Qualtrics been consolidated as at January 1, 2019, our 2019 revenue and profit after tax would
+not have been materially different.
+-526
+3,370
+429
+27,553
+Contribution of
+Qualtrics
+(D.2) Goodwill
+Measurement period adjustments recorded in both 2020 and 2019 were not material.
+-9
+1,838
+Thereof software and database licenses
+2
+Total identifiable assets
+2,074
+Trade and other payables
+Financial liabilities
+1,226
+Current and deferred tax liabilities
+Contract liabilities
+Total identifiable liabilities
+Total identifiable net assets
+97
+53
+317
+Provisions and other non-financial liabilities
+41
+Thereof customer relationship and other intangibles
+Thereof acquired technology
+Qualtrics Acquisition: Recognized Assets and Liabilities
+€ millions
+Cash and cash equivalents
+Other financial assets
+Trade and other receivables
+Other non-financial assets
+575
+Property, plant, and equipment
+138
+1
+37
+20
+75
+1,803
+Intangible assets
+27,636
+129
+1,437
+Goodwill by Operating Segment
+For impairment testing purposes, the carrying amount of goodwill is allocated to the operating
+segments expected to benefit from goodwill as follows:
+Based on our analysis, which we updated in the fourth quarter and which served as the basis for our
+regular goodwill impairment test, we assume that the COVID-19 situation will continue to improve as
+vaccine programs continue to take effect globally, leading to a growing demand environment in 2022.
+For more information, see Note (IN.2).
+For more information about our segments and the changes in 2021, see Note (C.1).
+Throughout 2021 (particularly in light of the COVID-19 pandemic and its development), we have -
+through a qualitative and quantitative analysis - been continuously monitoring whether triggering
+events exist.
+31,090
+27,538
+€ millions
+101
+98
+-3
+101
+31,191
+-20
+1,737
+3
+637
+Applications,
+Technology &
+Concur
+Goodwill
+Total consideration transferred
+5,012
+6,449
+In general, the goodwill arising from our acquisitions consists largely of the synergies and the know-
+how and skills of the acquired businesses' workforces.
+Qualtrics goodwill was attributed to expected synergies from the acquisition, particularly in the
+following areas:
+Services
+Cross-selling opportunities to existing SAP customers across all regions, using SAP's sales
+organization
+- Improved profitability in Qualtrics sales and operations
+Total
+Business
+Process
+Intelligence
+Support
+Emarsys
+Qualtrics
+Creation of new offerings by combining Qualtrics products and SAP products to deliver an end-to-
+end experience and operational management system to the customers
+2021
+1 No formal test was performed in 2020 as the acquisition was after the annual testing date.
+However, we performed a quantitative and qualitative analysis to monitor whether triggering
+events exist.
+2021
+All our purchased intangible assets other than goodwill have finite useful lives. They are initially
+measured at acquisition cost and subsequently amortized based on the expected consumption of
+economic benefits over their estimated useful lives ranging from two to 20 years.
+Measurement of Intangibles
+These judgments impact the total amount of intangible assets that we present in our balance sheet as
+well as the timing of recognizing development expenses in profit or loss.
+· Determining whether a cost is directly or indirectly attributable to an intangible asset and whether a
+cost is necessary for completing a development
+The term "technical feasibility" is not defined in IFRS, and therefore determining whether the
+completion of an asset is technically feasible requires judgment and a company-specific approach.
+Determining the future ability to use or sell the intangible asset arising from the development and
+the determination of the probability of future benefits from sale or use
+Determining whether activities should be considered research activities or development activities
+Determining whether the conditions for recognizing an intangible asset are met requires
+assumptions about future market conditions, customer demand, and other developments.
+Determining whether internally generated intangible assets from development qualify for recognition
+requires significant judgment, particularly in the following areas:
+Whereas in general, expenses for internally generated intangibles are expensed as incurred,
+development expenses incurred on standard-related customer development projects (for which the
+IAS 38 criteria are met cumulatively) are capitalized on a limited scale with those amounts being
+amortized over the estimated useful life for the majority of the projects of eight years.
+Recognition of Intangibles
+(D.3) Intangible Assets
+Information
+Additional
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Stakeholders
+Combined Group
+To Our
+SAP Integrated Report 2021
+SAP
+-20
+-2.5
+2021
+Business Process Intelligence
+Target operating margin at the end of the budgeted period
+(change in pp)
+(change in pp)
+Judgment is required in determining the following:
+Budgeted revenue growth
+The useful life of an intangible asset, as this is based on our estimates regarding the period over
+which the intangible asset is expected to generate economic benefits to us
+Both the amortization period and the amortization method have an impact on the amortization
+expense that is recorded in each period.
+10,096
+6,415
+2,752
+929
+1/1/2020
+Total
+Customer
+Relationships and
+Other Intangibles
+Acquired
+Technology
+Database Licenses
+Software and
+Additional
+Information
+Sustainability
+Consolidated Financial Further Information on
+Statements IFRS
+Combined Group
+Management Report
+Stakeholders
+To Our
+SAP Integrated Report 2021
+Historical cost
+€ millions
+Intangible Assets
+SAP
+219/338
+Amortization expenses of intangible assets are classified as cost of cloud, cost of services, research
+and development, sales and marketing, and general and administration, depending on the use of the
+respective intangible assets.
+We classify intangible assets according to their nature and use in our operations. Software and
+database licenses consist primarily of technology for internal use, whereas acquired technology
+consists primarily of purchased software to be incorporated into our product offerings. Customer
+relationship and other intangibles consist primarily of customer relationships and acquired trademark
+licenses.
+Classification of Intangibles
+The amortization method, as IFRS requires the straight-line method to be used unless we can
+reliably determine the pattern in which the asset's future economic benefits are expected to be
+consumed by us
+Sensitivity to Change in Assumptions
+The following table shows the amounts by which the key assumptions would need to change
+individually (that is, without changing the other key assumptions) for the recoverable amount to be
+equal to the carrying amount. For budgeted revenue growth sensitivity, the cost structure was not
+adjusted, hence leading to a modified terminal operating margin:
+The recoverable amount exceeded the carrying amount by €1,225 million.
+Emarsys Segment
+Qualtrics International Inc. completed its initial public offering ("IPO”) on January 28, 2021. The
+recoverable amount was determined based on fair value less costs of disposal calculation. The fair
+value measurement was categorized as a Level 1 fair value based on the market capitalization
+derived from publicly listed shares of Qualtrics. We believe that no reasonably foreseeable change in
+the share price of Qualtrics would cause the carrying amount of our Qualtrics segment to exceed its
+recoverable amount.
+Qualtrics Segment
+-2
+-4
+Target operating margin at the end of the budgeted period
+(change in pp)
+(change in pp)
+-0.6
+-0.8
+Budgeted revenue growth
+2020
+2021
+Services
+Sensitivity to Change in Assumptions
+The following table shows the amounts by which the key assumptions would need to change
+individually (that is, without changing the other key assumptions) for the recoverable amount to be
+equal to the carrying amount. For budgeted revenue growth sensitivity, the cost structure was not
+adjusted, hence leading to a modified terminal operating margin:
+For our Services segment, the recoverable amount exceeded the carrying amount by €1,377 million
+(2020: €1,416 million).
+We believe that no reasonably possible change in any of the above key assumptions would cause the
+carrying amount of our Applications, Technology & Support segment to exceed the recoverable
+amount.
+used in the valuation. The cash flow projections were based on actual operating results and specific
+estimates covering a detailed planning period and the terminal growth rate thereafter. The projected
+results were determined based on management's estimates and are consistent with the assumptions
+a market participant would make (target operating margins of 33.1% (Applications, Technology &
+Support) (2020: 32.4%) and 5.1% (Services) (2020: 2.4%) were used in the valuation).
+Information
+Additional
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+The recoverable amount was determined based on fair value less costs of disposal calculation. The
+fair value measurement was categorized as a Level 3 fair value based on the inputs used in the
+valuation. The cash flow projections were based on actual operating results and specific estimates
+covering a detailed planning period and the terminal growth rate thereafter. The projected results were
+determined based on management's estimates and are consistent with the assumptions a market
+participant would make (a target operating margin of 24.6% was used in the valuation).
+Given the fact that the Emarsys segment is expected to show disproportionate growth in the coming
+years and has not yet reached a steady state, we have used a longer and more detailed planning
+period than one would apply in a more mature segment.
+The recoverable amount exceeded the carrying amount by €547 million.
+The following table shows the amounts by which the key assumptions would need to change
+individually (that is, without changing the other key assumptions) for the recoverable amount to be
+equal to the carrying amount. For budgeted revenue growth sensitivity, the cost structure was not
+adjusted, hence leading to a modified terminal operating margin:
+Given the fact that the Business Process Intelligence segment is expected to show disproportionate
+growth in the coming years and has not yet reached a steady state, we have used a longer and more
+detailed planning period than one would apply in a more mature segment.
+The recoverable amount was determined based on fair value less costs of disposal calculation. The
+fair value measurement was categorized as a Level 3 fair value based on the inputs used in the
+valuation. The cash flow projections were based on actual operating results and specific estimates
+covering a detailed planning period and the terminal growth rate thereafter. The projected results were
+determined based on management's estimates and are consistent with the assumptions a market
+participant would make (a target operating margin of 24.8% was used in the valuation).
+Business Process Intelligence Segment
+ΝΑ
+213/338
+-14
+NA
+-1.7
+2020¹
+2021
+Emarsys
+Target operating margin at the end of the budgeted period
+(change in pp)
+Foreign currency exchange differences
+(change in pp)
+Sensitivity to Change in Assumptions
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+218/338
+217/338
+Budgeted revenue growth
+-14
+-224
+-467
+11
+Foreign currency exchange differences
+5,612
+3,046
+2,043
+523
+12/31/2020
+-300
+-131
+-22
+-147
+Retirements/disposals
+719
+420
+214
+85
+Additions amortization
+-412
+-219
+-180
+-13
+Foreign currency exchange differences
+5,605
+2,976
+2,031
+171
+211
+393
+Additions amortization
+3,966
+3,076
+604
+286
+3,784
+2,992
+522
+270
+220/338
+12/31/2021
+12/31/2020
+Carrying amount
+598
+6,598
+2,392
+547
+12/31/2021
+-85
+-10
+-11
+-64
+Retirements/disposals
+678
+412
+189
+77
+3,659
+SAP
+1/1/2020
+10,564
+6,038
+2,565
+793
+12/31/2020
+3
+-12
+0
+15
+-312
+-142
+-22
+-148
+70
+60
+0
+10
+Transfers
+Retirements/disposals
+Other additions
+244
+184
+59
+1
+Additions from business combinations
+-705
+9,396
+Foreign currency exchange differences
+12
+205
+6,735
+2,996
+833
+4
+-89
+0
+93
+-102
+-11
+-7
+-84
+12/31/2021
+Accumulated amortization
+Transfers
+85
+66
+0
+19
+Other additions
+537
+304
+233
+0
+Additions from business combinations
+644
+427
+Retirements/disposals
+20202
+The allocation of the goodwill resulting from the Qualtrics acquisition to our operating segments was
+depending on how our operating segments actually benefit from the synergies of the Qualtrics
+business combination.
+ΝΑ
+0.0
+3.0
+NA
+3.0
+3.0
+NA
+ΝΑ
+Detailed planning
+5
+5
+5
+5
+NA
+13
+12
+14
+NA
+period (in years)
+216/338
+1 As we are using Level 1 inputs for Qualtrics in 2021, no information on assumptions and the detailed planning period is presented.
+2 No formal test was performed in 2020 as the acquisition was after the annual testing date. However, we performed a quantitative and
+qualitative analysis to monitor whether triggering events exist.
+On October 1, 2021, we performed a goodwill impairment test for the segments mentioned above.
+Applications, Technology & Support Segment and Services Segment
+For more information about our 2021 segment changes, see Note (C.1).
+The recoverable amount of these segments was determined based on fair value less costs of disposal
+calculation. The fair value measurement was categorized as a Level 3 fair value based on the inputs
+3.0
+3.0
+3.0
+NA
+Budgeted revenue
+growth (average of the
+8.4
+5.4
+0.4
+Terminal growth rate
+NA
+20.6
+15.3
+ΝΑ
+31.7
+NA
+3.4
+After-tax discount rate
+budgeted period)
+ΝΑ
+10.0
+ΝΑ
+7.2
+9.7
+7.9
+8.8
+8.8
+11.5
+-3
+83
+190
+Expected credit loss allowance
+-3
+0
+107
+2,711
+0
+-3
+Non-derivative financial debt investments
+308
+3,019
+186
+1,552
+-3
+107
+Gains/losses on equity securities at FVTPL include gains/losses from fair value fluctuations, from
+disposals as well as dividends, while gains/losses on equity securities at FVOCI only include
+dividends, all of which are shown in Financial income, net. Regular way purchases and sales are
+recorded as at the trade date.
+Loans and other financial receivables
+269
+0
+1,448
+Debt securities
+30
+0
+30
+24
+0
+24
+Financial instruments related to employee benefit plans
+0
+201
+201
+0
+162
+162
+79
+1,822
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+2,758
+(D.6)
+Information
+Additional
+1,448
+Management Report
+Combined Group
+Stakeholders
+Equity Investments
+To Our
+SAP
+For more information about right-of-use asset additions, see Note (D.4), and for a maturity analysis of
+lease liabilities, see Note (F.1). For more information about the cash flow related to lease liabilities,
+see the "Reconciliation of Liabilities Arising from Financing Activities" table within Note (E.3).
+396
+398
+2020
+2021
+Depreciation of right-of-use assets
+SAP Integrated Report 2021
+Other financial assets
+Accounting Policies, Judgments, and Estimates
+For equity securities, as the cash flow characteristics are typically other than solely principal and
+interest, we take an investment-by-investment decision whether to classify as FVTPL or FVOCI.
+6,275
+9,033
+1,635
+3,512
+5,147
+Non-derivative financial debt investments
+as % of Other financial assets
+98
+As we do not designate financial assets as “at fair value through profit or loss," we generally classify
+financial assets into the following categories: at amortized cost (AC), at fair value through other
+comprehensive income (FVOCI), and at fair value through profit or loss (FVTPL), depending on the
+contractual cash flows of and our business model for holding the respective asset.
+5
+95
+8
+35
+230/338
+Time deposits with original maturity of three months or less are presented as cash and cash
+equivalents, and those with original maturities of greater than three months (investments considered
+in group liquidity) are presented as other financial assets. Debt securities consist of acquired CP and
+acquired bonds of mainly financial and non-financial corporations and municipalities.
+For more information about financial risk and the nature of risk, see Note (F.1).
+The valuation of equity securities of private companies requires judgment, since it is typically based
+on significant unobservable inputs as no market prices are available and there is an inherent lack of
+liquidity.
+33
+2,605
+-3
+2,605
+Total
+Current
+Non-Current
+Total
+Cash at banks
+3,149
+0
+Non-Current
+3,149
+0
+2,732
+Time deposits
+1,420
+0
+1,420
+927
+2,732
+0
+Current
+2020
+-2,273
+Non-current financial debt
+-9,338
+-11,801
+2,463
+Financial debt
+-13,094
+€ millions
+-13,283
+Net debt (-)
+-1,563
+-6,503
+4,939
+While we continuously monitor the ratios presented in the capital structure table, we actively manage
+our liquidity and structure of our financial indebtedness based on the ratios group liquidity and net
+debt.
+Cash and Cash Equivalents
+2021
+189
+0
+927
+4,281
+0
+8,898
+5,311
+0
+5,311
+Non-Derivative Financial Debt Investments
+2021
+8,898
+2020
+Current
+Non-Current
+Total
+Current
+Non-Current
+Total
+Time deposits
+€ millions
+Money market and other funds
+44 Cash and cash equivalents
+0
+0
+4,281
+1,655
+1,655
+Debt securities
+50
+0
+-3
+50
+0
+0
+Expected credit loss allowance
+Lease expenses within operating profit
+0
+-3
+-3
+0
+€ millions
+4,977
+SAP is committed to future minimum lease payments in the amount of €172 million for facility leases
+that had not yet commenced as at December 31, 2021. For data centers, we have future
+commitments to spend €226 million on services and IFRS 16-related assets. Because this agreement
+does not specify the required split, the entire amount has been included in the purchase obligations
+reported in Note (D.8).
+Property, Plant, and Equipment
+Automobiles
+Office furniture
+Information technology equipment
+Leased assets and leasehold improvements
+Buildings
+Useful Lives of Property, Plant, and Equipment
+Property, plant, and equipment are typically depreciated using the straight-line method. Judgment is
+required in estimating the useful life of the assets. In this assessment we consider, among others, our
+history with similar assets and current and future changes in technology.
+Depreciation of Property, Plant and Equipment
+(D.4) Property, Plant, and Equipment
+2,776
+2,786
+Total significant intangible assets
+15
+ΝΑ
+€ millions
+12/31/2020
+12/31/2021
+Predominantly 25 to 50 years
+1,816
+1,457
+Progress
+Total
+and Construction in
+Plant, and
+Equipment Leased
+Plant, and
+Equipment
+184
+Leased
+Advance Payments
+Other Property,
+Other Property,
+Land and Buildings
+2 to 5 years
+4 to 20 years
+Based on the term of the lease contract
+2 to 6 years
+Land and Buildings
+Signavio Customer relationships
+6 to 13
+174
+203
+174
+Ariba - Customer relationships
+Remaining
+Useful Life
+(in years)
+2020
+2021
+€ millions, unless otherwise stated
+4 to 6
+Carrying Amount
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+Stakeholders
+To Our
+Significant Intangible Assets
+1,628
+Concur Customer relationships
+786
+163
+Emarsys - Customer relationships
+11 to 16
+991
+983
+Customer relationships
+Qualtrics
+755
+4
+286
+Qualtrics Acquired technologies
+7 to 11
+262
+241
+Callidus Customer relationships
+9 to 13
+360
+41
+99
+5,041
+37
+Right-of-use assets as % of Property, plant, and equipment
+5,041
+-1,482
+Property, plant, and equipment
+1,857
+1,840
+37
+Total right-of-use assets
+40
+Right-of-use assets - other property, plant, and equipment
+1,816
+1,800
+Right-of-use assets - land and buildings
+12/31/2020
+12/31/2021
+41
+Right-of-use assets
+Lease liabilities
+407
+13
+16
+13,605
+11,042
+1,740
+1,736
+Non-current lease liabilities as % of Non-current financial liabilities
+Current lease liabilities
+Non-current financial liabilities
+16
+9
+Current lease liabilities as % of Current financial liabilities
+2,348
+4,528
+Current financial liabilities
+380
+Non-current lease liabilities
+Leases in the Income Statement
+€ millions
+Under IFRS 16, a contract is or contains a lease if the contract conveys the right to control the use of
+an identified asset for a period of time in exchange for consideration. As a lessee, SAP recognizes a
+right-of-use asset representing its right to use the underlying asset and a lease liability representing its
+obligation to make lease payments. The right-of-use assets are depreciated on a straight-line basis
+and interest expense is recognized on the lease liabilities. The vast majority of our leases consist of
+facility and data center leases. Payments for short-term and low-value leases are expensed over the
+lease term. Extension options are included in the lease term if their exercise is reasonably certain.
+144
+2021
+1,006
+87
+25
+424
+404
+313
+66
+Additions
+4,977
+77
+40
+1,450
+1,801
+1,609
+2020
+Leases in the Balance Sheet
+518
+69
+Accounting Policies, Judgments, and Estimates
+Leases
+(D.5)
+Information
+Additional
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+23
+Combined Group
+To Our
+SAP Integrated Report 2021
+SAP
+222/338
+221/338
+The additions (other than from business combinations) relate primarily to the replacement and
+purchase of information technology equipment and the construction and leasing of buildings and data
+centers. For more information about the impairment of data centers, see Note (B.6). For more
+information about leases, see Note (D.5).
+1,067
+Stakeholders
+Considerable judgment and assumptions are involved with regard to the selection of appropriate
+comparable company data, the assessment of cash requirements of the business, the acceptance of
+the technology or products in the addressable markets, the actual and forecasted performance, the
+milestone achievements, the adequacy of price points from financing rounds, the transaction of similar
+securities of the same company, the rights and preferences of the underlying securities, the selection
+of adequate equity allocation parameters, and the possible exit scenarios and associated weightings.
+Because all of these assumptions could change significantly and because of the inherent uncertainty
+of valuation, our estimated fair values may differ significantly from the values that would have been
+used had market prices for the investments existed and that will ultimately be realized, and those
+differences could be material.
+-3,755
+4,750
+30,143
+26,829
+441
+379
+30,584
+27,208
+1,263
+1,216
+43,079
+38,572
+For a breakdown of our employee headcount by region, see Note (B.1), and for a breakdown of
+revenue by region, see Note (A.1).
+(D.8)
+Purchase Obligations
+2021
+2020
+€ millions
+Contractual obligations for acquisition of property, plant, and equipment and
+intangible assets
+Other purchase obligations
+Purchase obligations
+10,149
+99
+11,232
+5,927
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+(D.7)
+Non-Current Assets by Region
+The table below shows non-current assets excluding financial instruments, deferred tax assets, post-
+employment benefit assets, and rights arising under insurance contracts.
+Non-Current Assets by Region
+€ millions
+Germany
+Rest of EMEA
+EMEA
+United States
+Rest of Americas
+Americas
+APJ
+SAP Group
+2021
+2020
+5,305
+4,350
+5,798
+Management Report
+106
+3,685
+Additional
+Information
+-
+Section E – Capital Structure,
+Financing, and Liquidity
+This section describes how SAP manages its capital structure. Our capital management is based on a
+high equity ratio, modest financial leverage, a well-balanced maturity profile, and deep debt capacity.
+(E.1)
+Capital Structure Management
+The primary objective of our capital structure management is to maintain a strong financial profile for
+investor, creditor, and customer confidence, and to support the growth of our business. We seek to
+maintain a capital structure that will allow us to continuously cover our funding requirements through
+the capital markets on reasonable terms and, in so doing, ensure a high level of independence,
+confidence, and financial flexibility.
+SAP SE's long-term credit rating is "A2" by Moody's and "A" by Standard & Poor's, both with stable
+outlook.
+12/31/2021
+12/31/2020
+€ millions
+% of
+Total Equity
+and Liabilities
+€ millions
+% of
+Total Equity
+and Liabilities
+A in %
+Equity
+41,523
+58
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+4,680
+Management Report
+Combined Group
+4,779
+3,791
+The contractual obligations for acquisition of property, plant, and equipment and intangible assets
+relate primarily to the purchase of hardware, software, patents, office equipment, and vehicles. The
+remaining obligations relate mainly to marketing, consulting, maintenance, license agreements, cloud
+services, and other third-party agreements. The increase is mainly due to new purchase obligations
+related to cloud services. Historically, the majority of such purchase obligations have been realized.
+Maturities
+€ millions
+Due 2022
+Due 2023 to 2026
+Due thereafter
+Total
+12/31/2021
+Purchase Obligations
+1,199
+2,946
+634
+4,779
+225/338
+226/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+To Our
+Stakeholders
+SAP
+14
+Equity investments
+0
+5,954
+5,954
+0
+3,127
+3,127
+Other financial assets
+2,758
+6,275
+9,033
+1,635
+3,512
+5,147
+Equity investments as % of
+0
+95
+66
+14
+0
+0
+155
+Equity Investments
+2021
+2020
+€ millions
+Current
+Non-
+Current
+Total
+Current
+Non-
+Current
+Total
+Equity securities
+0
+5,799
+5,799
+0
+3,113
+3,113
+Investments in associates
+0
+155
+89
+61
+Other financial assets
+For a list of the names of other equity investments, see Note (G.9).
+Financial Commitments in Venture Capital Funds
+€ millions
+Investments in venture capital funds
+2021
+2020
+255
+237
+SAP invests and holds interests in unrelated parties that manage investments in venture capital. On
+December 31, 2021, total commitments to make such investments amounted to €757 million
+(2020: €607 million), of which €502 million had been drawn (2020: €370 million). By investing in such
+venture capital funds, we are exposed to the risks inherent in the business areas in which the entities
+operate. Our maximum exposure to loss is the amount invested plus contractually committed future
+capital contributions.
+Maturities
+€ millions
+Due 2022
+Total
+12/31/2021
+Investments in
+Venture Capital Funds
+255
+255
+SAP Integrated Report 2021
+The proportionate share of earnings of SAP Fioneer is included in SAP's Consolidated Financial
+Statements with a time lag of one month. The figures for the equity result relate to the period from
+September 1, 2021, to November 30, 2021.
+SAP contributed certain software solutions specific to the financial services industry to SAP Fioneer
+(with SAP employees also transferring over on a voluntary basis) in exchange for a minority share in
+the new entity. The transaction closed on September 1, 2021. The associated accounting for this
+transaction is preliminary and the accounting alignment is ongoing. As such, the proportionate share
+of earnings is provisional.
+-1
+-9
+223/338
+224/338
+SAP
+SAP Integrated Report 2021
+To Our
+Combined Group
+Stakeholders
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+29,927
+Additional
+Information
+SAP also has interests in a number of individually immaterial associates. We own more than 20% of
+the equity interests or have at least 20% of the voting rights. Based on these facts and the nature of
+the relationships, SAP has determined that it has significant influence.
+The following table shows, in aggregate, the carrying amount and share of profit of these associates.
+€ millions
+Carrying amount of interest in associates
+Share of profit and losses from continuing operations
+2021
+2020
+155
+14
+Investments in Associates
+Current financial debt
+51
+Current liabilities
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+more than 10% of SAP SE's issued share capital. Although treasury shares are legally considered
+outstanding, there are no dividend or voting rights associated with them. We may redeem or resell
+shares held in treasury, or we may use treasury shares for the purpose of servicing option or
+conversion rights under the Company's share-based payment plans. Also, we may use shares held in
+treasury as consideration in connection with mergers with, or acquisitions of, other companies.
+Distribution Policy and Dividends
+Our general intention is to remain in a position to return liquidity to our shareholders by distributing
+annual dividends totaling 40% or more of our profit after tax and by potentially repurchasing treasury
+shares in future.
+In 2021, we distributed €2,182 million (€1.85 per share) in dividends for 2020 compared to
+€1,864 million (€1.58 per share) paid in 2020 for 2019 and €1,790 million (€1.50 per share) paid in
+2019 for 2018.
+The total dividend available for distribution to SAP SE shareholders is based on the profits of SAP SE
+as reported in its statutory financial statements prepared under the accounting rules in the German
+Commercial Code (Handelsgesetzbuch). For the year ended December 31, 2021, the Executive
+Board intends to propose that a dividend of €2.45 per share (that is, an estimated total dividend of
+€2,890 million), be paid from the profits of SAP SE, which includes an extraordinary dividend
+component of €0.50 per share to celebrate SAP's 50th anniversary in 2022.
+Non-Controlling Interests
+On January 28, 2021, Qualtrics successfully issued 12% of its shares on the Nasdaq Stock Market
+(NASDAQ). The IPO-related cash inflow amounted to €1,847 million and the initial value of non-
+controlling interests in net assets was €909 million.
+On October 1, 2021, Qualtrics completed its acquisition of Clarabridge in the form of Qualtrics shares
+and cash. Following the issuance of new Qualtrics shares, SAP's ownership further decreased to 78%,
+resulting in an additional value of non-controlling interests of €261 million in net assets to be
+recognized.
+On November 11, 2021, Qualtrics announced the closing of its public offering and issued an
+additional 4% of its shares, which reduced SAP's ownership in Qualtrics to 74%. The offering-related
+cash inflow amounted to €981 million and the corresponding value of non-controlling interests in net
+assets was €250 million.
+(E.3) Liquidity
+Accounting for Non-Derivative Financial Instruments
+Classification and Measurement of Non-Derivative Financial Debt Investments
+Our non-derivative financial debt investments comprise cash at banks and cash equivalents (highly
+liquid investments with original maturities of three months or less, such as time deposits and money-
+market funds), loans and other financial receivables, and acquired debt securities.
+As we do not designate financial assets as “at fair value through profit or loss," we generally classify
+financial assets as: at amortized cost (AC), at fair value through other comprehensive income (FVOCI),
+or at fair value through profit or loss (FVTPL), depending on the contractual cash flows of, and our
+business model for, holding the respective asset. Financial assets having cash flow characteristics
+other than solely principal and interest such as money market and similar funds are generally
+classified as FVTPL. Generally, all other financial assets with cash flows consisting solely of principal
+and interest are classified as AC because we follow a conservative investment approach, safeguarding
+our liquidity by ensuring the safety of principal investment amounts.
+To Our
+Stakeholders
+Gains/losses on non-derivative financial debt investments at FVTPL are reported in Financial income,
+net and show interest income/expenses separately from other gains/losses which include gains/losses
+from fair value fluctuations and disposals. Gains/losses on non-derivative financial debt investments
+SAP Integrated Report 2021
+228/338
+Other comprehensive income for items that will be reclassified to profit or loss, net of tax
+-2,792
+10
+-2,782
+12/31/2020
+-1,016
+4
+-1,012
+Other comprehensive income for items that will be reclassified to profit or loss, net of tax
+2,846
+-26
+2,819
+12/31/2021
+1,830
+-22
+1,808
+Treasury Shares
+By resolution of SAP SE's Annual General Meeting of Shareholders held on May 17, 2018, the
+authorization granted by the Annual General Meeting of Shareholders on June 4, 2013, regarding the
+acquisition of treasury shares was revoked to the extent it had not been exercised at that time, and
+replaced by a new authorization of the Executive Board of SAP SE to acquire, on or before
+May 16, 2023, shares of SAP SE representing a pro rata amount of capital stock of up to €120 million
+in aggregate, provided that the shares purchased under the authorization, together with any other
+shares in the Company previously acquired and held by, or attributable to, SAP SE do not account for
+227/338
+SAP
+1,770
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Group Liquidity and Net Debt
+€ millions
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+2021
+2020
+Δ
+Cash and cash equivalents
+8,898
+5,311
+3,587
+Current time deposits and debt securities
+2,632
+1,470
+1,162
+Group liquidity
+11,530
+6,781
+Management Report
+SAP
+Combined Group
+To Our
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+at AC are reported in Financial income, net and show interest income/expenses separately from other
+gains/losses which include gains/losses disposals and changes in expected and incurred credit
+losses. Gains/losses from foreign currency exchange rate fluctuations are included in Other non-
+operating income/expense, net. Regular way purchases and sales are recorded as at the trade date.
+Impairment of Non-Derivative Financial Debt Investments
+For these financial assets, we apply considerable judgment by employing the general impairment
+approach as follows:
+For cash at banks, time deposits, and debt securities such as acquired bonds and acquired
+commercial paper, we apply the low credit risk exception, as it is our policy to invest only in high-
+quality assets of issuers with a minimum rating of at least investment grade to minimize the risk of
+credit losses. Thus, these assets are always allocated to stage 1 of the three-stage credit loss
+model, and we record a loss allowance at an amount equal to 12-month expected credit losses.
+This loss allowance is calculated based on our exposure at the respective reporting date, the loss
+given default for this exposure, and the credit default swap spread as a measure for the probability
+of default. Even though we invest only in assets of at least investment-grade, we also closely
+observe the development of credit default swap spreads as a measure of market participants'
+assessments of the creditworthiness of a debtor to evaluate probable significant increases in credit
+risk to timely react to changes should these manifest. Among others, we consider cash at banks,
+time deposits, and debt securities to be in default when the counterparty is unlikely to pay its
+obligations in full, when there is information about a counterparty's financial difficulties or if there is
+a drastic increase in a counterparty's credit default swap spread for a prolonged time period while
+the overall market environment remains generally stable. Such financial assets are written off either
+partially or in full if the likelihood of recovery is considered remote, which might be evidenced, for
+example, by the bankruptcy of a counterparty of such financial assets.
+Loans and other financial receivables are monitored based on borrower-specific internal and
+external information to determine whether there has been a significant increase in credit risk since
+initial recognition. We consider such assets to be in default if they are significantly beyond their due
+date or if the borrower is unlikely to pay its obligation. A write-off occurs when the likelihood of
+recovery is considered remote, for example when bankruptcy proceedings have been finalized or
+when all enforcement efforts have been exhausted.
+Non-Derivative Financial Liabilities
+Non-derivative financial liabilities include bank loans, issued bonds, private placements, and other
+financial liabilities. Included in other financial liabilities are customer funding liabilities which are funds
+we draw from and make payments on behalf of our customers for customers' employee expense
+reimbursements, related credit card payments, and vendor payments. We present these funds in cash
+and cash equivalents and record our obligation to make these expense reimbursements and
+payments on behalf of our customers as customer funding liabilities.
+As we do not designate financial liabilities as FVTPL, we generally classify non-derivative financial
+liabilities as AC.
+Expenses and gains or losses on financial liabilities at AC mainly consist of interest expense, which is
+shown in Financial income, net. Gains/losses from foreign currency exchange rate fluctuations are
+included in Other non-operating income/expense, net.
+Group Liquidity, Financial Debt, and Net Debt
+Group liquidity consists of cash at banks, money market and other funds, as well as time deposits and
+debt securities (both with remaining maturities of less than one year). Financial debt is defined as the
+nominal volume of bank loans, issued commercial paper, private placements, and bonds. Net debt is
+group liquidity less financial debt.
+229/338
+SAP
+SAP Integrated Report 2021
+Stakeholders
+-6
+1,776
+536
+Thereof lease liabilities
+2,143
+3
+2,120
+4
+1
+Total equity and liabilities
+71,169
+100
+58,464
+100
+22
+In 2021, we drew two short-term loans of €950 million and €500 million with the tenor of one year and
+a flexible repayment schedule, as well as €150 million in issued commercial paper (CP). At maturity,
+we repaid €500 million in Eurobonds, as well as €150 million in CP. Making use of the flexible
+structure, we further repaid €1,250 million in acquisition loan for Qualtrics prior to its final maturity
+date in 2022. The ratio of total nominal volume of financial debt to total equity and liabilities
+decreased 4 pp.
+(E.2) Total Equity
+Accounting for Interests in Subsidiaries
+Changes in SAP's interest in a subsidiary that do not result in a loss of control are accounted for as
+equity transactions. When SAP loses control over the subsidiary, it derecognizes the assets and
+liabilities of the subsidiary and any related non-controlling interests (NCI) and other components of
+equity. Any resulting gain or loss is recognized in profit or loss.
+Issued Capital
+SAP SE has issued no-par value bearer shares with a calculated nominal value of €1 per share. All of
+the shares issued are fully paid.
+SAP
+-1
+SAP Integrated Report 2021
+23
+18
+16,136
+23
+12,842
+22
+26
+Non-current liabilities
+13,510
+19
+15,696
+27
+-14
+Liabilities
+29,646
+42
+28,537
+49
+4
+Thereof financial debt
+13,094
+13,283
+To Our
+Stakeholders
+Combined Group
+Management Report
+The Articles of Incorporation authorize the Executive Board to increase the issued capital as follows:
+-
+By up to a total amount of €250 million by issuing new no-par value bearer shares against
+contributions in cash until May 19, 2025 (Authorized Capital I). The issuance is subject to the
+statutory subscription rights of existing shareholders.
+By up to a total amount of €250 million by issuing new no-par value bearer shares against
+contributions in cash or in kind until May 19, 2025 (Authorized Capital II). Subject to the consent of
+the Supervisory Board, the Executive Board is authorized to exclude the shareholders' statutory
+subscription rights in certain cases.
+Contingent Shares
+SAP SE's share capital is subject to a contingent capital increase, which may be effected only to the
+extent that the holders or creditors of convertible bonds or stock options issued or guaranteed by
+SAP SE or any of its directly or indirectly controlled subsidiaries under certain share-based payments
+exercise their conversion or subscription rights, and no other methods for servicing these rights are
+used. As at December 31, 2021, €100 million, representing 100 million shares, was still available for
+issuance (2020: €100 million).
+Other Components of Equity
+€ millions
+Exchange
+Differences
+Cash Flow
+Hedges/Cost of
+Hedging
+Total
+1/1/2019
+Other comprehensive income for items that will be reclassified to profit or loss, net of tax
+12/31/2019
+1,239
+-5
+1,234
+537
+-1
+Authorized Shares
+On January 13, 2022, SAP announced a new share repurchase program to service future share-based
+compensation awards. The program, with a volume of up to €1 billion, is planned to be executed in
+the period between February 1, 2022, and December 31, 2022.
+-48.9
+1,228.5
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Number of Shares
+Millions
+1/1/2019
+12/31/2019
+Purchase of treasury shares
+12/31/2020
+12/31/2021
+39
+Additional
+Information
+Treasury Shares
+1,228.5
+-34.9
+1,228.5
+-34.9
+0
+-14.1
+1,228.5
+We take the most recent qualitative and quantitative information aspects into consideration to
+determine the fair value estimates of these equity securities.
+Issued Capital
+-48.9
+SAP
+SAP Integrated Report 2021
+Change in value used for calculating hedge ineffectiveness
+Cash flow hedge
+2021
+-28
+-28
+Cost of hedging
+-2
+Balances remaining in cash flow hedge reserve for which hedge accounting is no longer
+applied
+0
+SAP Integrated Report 2021
+€ millions
+SAP
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+The amounts as at December 31, 2021, designated as hedging instruments were as follows:
+Designated Hedging Instruments in Foreign Currency Exchange Rate Hedges
+€ millions
+Nominal amount
+Carrying amount
+To Our
+Stakeholders
+SAP
+Forecasted License Payments
+For all years presented, no previously highly probable transaction designated as a hedged item in a
+foreign currency cash flow hedge relationship ceased to be probable. Therefore, we did not
+discontinue any of our cash flow hedge relationships. Also, ineffectiveness was either not material or
+non-existent in all years reported. Generally, the cash flows of the hedged forecasted transactions are
+expected to occur and to be recognized in profit or loss monthly within a time frame of 12 months
+from the date of the statement of financial position.
+We manage market risks, credit risk, and liquidity risk on a Group-wide basis through our global
+treasury department, global risk management, and global credit management. Risk management
+policies are established to identify risks, to set appropriate risk limits, and to monitor risks. Risk
+management policies and hedging strategies are laid out in our internal guidelines (for example,
+treasury guideline and other internal guidelines), and are subject to continuous internal review,
+analysis, and update to reflect changes in market conditions and our business.
+We only purchase derivative financial instruments to reduce risks and not for speculation, which is
+defined as entering into derivative instruments without a corresponding underlying transaction.
+Foreign Currency Exchange Rate Risk
+Foreign Currency Exchange Rate Risk Factors
+As we are active worldwide, our ordinary operations are subject to risks associated with fluctuations in
+foreign currencies. Since the Group's entities mainly conduct their operating business in their own
+235/338
+236/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+The amounts as at December 31, 2021, relating to items designated as hedged items were as follows:
+Designated Hedged Items in Foreign Currency Exchange Rate Hedges
+Combined Group
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+functional currencies, our risk of exchange rate fluctuations from ongoing ordinary operations is not
+considered significant. However, SAP occasionally generates foreign currency-denominated
+receivables, payables, and other monetary items by transacting in a currency other than the functional
+currency. To mitigate the extent of the associated foreign currency exchange rate risk, the majority of
+these transactions are hedged as described below.
+In rare circumstances, transacting in a currency other than the functional currency also leads to
+embedded foreign currency derivatives being separated and measured at fair value through profit or
+loss.
+In addition, the intellectual property (IP) holders in the SAP Group are exposed to risks associated
+with forecasted intercompany cash flows in foreign currencies. These cash flows arise out of royalty
+payments from subsidiaries to the respective IP holder. The royalties are linked to the subsidiaries'
+external revenue. This arrangement leads to a concentration of the foreign currency exchange rate risk
+with the IP holders, as the royalties are mostly denominated in the subsidiaries' local currencies, while
+the functional currency of the IP holders with the highest royalty volume is the euro. The highest
+foreign currency exchange rate exposure of this kind relates to the currencies of subsidiaries with
+significant operations, for example the U.S. dollar, the pound sterling, the Japanese yen, the Swiss
+franc, and the Australian dollar.
+Generally, we are not exposed to any significant foreign currency exchange rate risk with regard to our
+investing and financing activities, as such activities are normally conducted in the functional currency
+of the investing or borrowing entity.
+Foreign Currency Exchange Rate Risk Management
+We continuously monitor our exposure to currency fluctuation risks based on monetary items and
+forecasted transactions and pursue a Group-wide strategy to manage foreign currency exchange rate
+risk, using derivative financial instruments, primarily foreign exchange forward contracts, as
+appropriate, with the primary aim of reducing profit or loss volatility. Most of the hedging instruments
+are not designated as being in a hedge accounting relationship.
+Currency Hedges Designated as Hedging Instruments (Cash Flow Hedges)
+We enter into derivative financial instruments, primarily foreign exchange forward contracts, to hedge
+significant forecasted cash flows (royalties) from foreign subsidiaries denominated in foreign
+currencies with a hedge ratio of 1:1 and a hedge horizon of up to 12 months, which is also the
+maximum maturity of the foreign exchange derivatives we use.
+Management Report
+Other financial assets
+Other financial liabilities
+Hedge ineffectiveness recognized in Finance income, net
+770
+253
+0.87
+0.86
+130.52
+130.32
+1.08
+1.07
+1.58
+1.61
+1.19
+1.16
+Foreign Currency Exchange Rate Exposure
+Our risk exposure is based on the following assumptions:
+The SAP Group's entities generally operate in their functional currencies. In exceptional cases and
+limited economic environments, operating transactions are denominated in currencies other than
+the functional currency, leading to a foreign currency exchange rate risk for the related monetary
+instruments. Where material, this foreign currency exchange rate risk is hedged. Therefore,
+fluctuations in foreign currency exchange rates do not have a significant impact on either profit or
+other comprehensive income with regard to our non-derivative monetary financial instruments and
+related income or expenses.
+Our free-standing derivatives designed for hedging foreign currency exchange rate risks almost
+completely balance the changes in the fair values of the hedged item attributable to exchange rate
+movements in the Consolidated Income Statements in the same period. As a consequence, the
+hedged items and the hedging instruments are not exposed to foreign currency exchange rate
+risks, and thereby have no effect on profit.
+Consequently, we are only exposed to significant foreign currency exchange rate fluctuations with
+regard to the following:
+237/338
+SAP
+SAP Integrated Report 2021
+To Our
+Average EUR:USD forward rate
+Average EUR:AUD forward rate
+Average EUR:CHF forward rate
+Average EUR:JPY forward rate
+Cost of hedging recognized in OCI
+Amount reclassified from cash flow hedge in OCI to Other non-operating income, net
+Amount reclassified from cost of hedging in OCI to Finance income, net
+Forecasted License Payments
+2021
+1,023
+1
+-31
+-28
+0
+We are exposed to various financial risks, such as market risks (that is, foreign currency exchange rate
+risk, interest rate risk, and equity price risk), credit risk, and liquidity risk.
+2
+-3
+On December 31, 2021, we held the following instruments to hedge exposures to changes in foreign
+currency:
+Details on Hedging Instruments in Foreign Currency Exchange Rate Hedges
+Maturity
+2021
+1-6 Months
+7-12 Months
+Forward exchange contracts
+Net exposure in € millions
+Average EUR:GBP forward rate
+-4
+Stakeholders
+We continue to monitor the IBOR reform project, assess any impact, manage our transition to
+alternative benchmark rates, and provide respective disclosures. Apart from that, the IBOR reform had
+no impact on our risk management strategy.
+Derivatives held in a hedging relationship: We have already replaced the old interest rate
+benchmark with the new risk-free rate for our EUR interest rate swaps designated in hedging
+relationships for which we transitioned from EONIA to Euro Short-Term Rate (€STR) + 8.5bps in the
+first quarter of 2021, or
+Accrued interest
+67
+0
+0
+0
+0
+-6
+61
+Interest rate swaps
+7
+0
+0
+2
+-123
+-114
+Lease¹
+2,204
+-378
+15
+-125
+0
+13,344
+14
+117
+-109
+0
+13,283
+Basis adjustment
+13
+0
+0
+-4
+117
+0
+126
+404
+Transaction costs
+-16
+0
+0
+0
+14
+-66
+Financial debt (carrying amount)
+13,616
+-298
+2
+-64
+2,120
+Total liabilities from financing activities
+15,895
+Fair value fluctuations in the spot component of such derivatives at FVTPL are included in Other non-
+operating income/expense, net while the forward element is shown in Financial income, net.
+Derivatives Designated as Hedging Instruments
+a) Cash Flow Hedge
+In general, we apply cash flow hedge accounting to the foreign currency risk of highly probable
+forecasted transactions. With regard to foreign currency risk, hedge accounting relates to the spot
+price and the intrinsic values of the derivatives designated and qualifying as cash flow hedges.
+Accordingly, the effective portion of these components determined on a present value basis is
+recorded in other comprehensive income. The forward element and time value as well as foreign
+currency basis spreads excluded from the hedging relationship are recorded as cost of hedging in a
+separate position in other comprehensive income. As the amounts are not material, they are
+presented together with the effective portion of the cash flow hedges in our consolidated statements
+of comprehensive income and consolidated statements of changes in equity. All other components
+including counterparty credit risk adjustments of the derivative and the ineffective portion are
+immediately recognized in Financial Income, net profit or loss. Amounts accumulated in other
+comprehensive income are reclassified to profit or loss to Other non-operating income/expense, net
+and Financial income, net in the same period when the hedged item affects profit or loss.
+b) Fair Value Hedge
+We apply fair value hedge accounting for certain of our fixed-rate financial liabilities and show the fair
+value fluctuations in Financial income, net.
+c) Valuation and Testing of Effectiveness
+At inception of a designated hedging relationship, we document our risk management strategy and
+the economic relationship between hedged item and hedging instrument. The existence of an
+economic relationship is demonstrated as well as the effectiveness of the hedging relationship tested
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+In addition, we occasionally have contracts that contain foreign currency embedded derivatives that
+are required to be accounted for separately.
+Combined Group
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+prospectively by applying the critical terms match for our foreign currency hedges, since currencies,
+maturities, and the amounts are closely aligned for the forecasted transactions and for the spot
+element of the forward exchange rate contract or intrinsic value of the currency options, respectively.
+For interest rate swaps, effectiveness is tested prospectively using statistical methods in the form of a
+regression analysis, by which the validity and extent of the relationship between the change in value
+of the hedged items as the independent variable and the fair value change of the derivatives as the
+dependent variable is determined. The main sources of ineffectiveness are:
+The effect of the counterparty and our own credit risk on the fair value of the forward exchange
+contracts and interest rate swaps, which is not reflected in the respective hedged item, and
+- Differences in the timing of hedged item and hedged transaction in our cash flow hedges.
+Amendments to IFRS 9, IAS 39, IFRS 16, IFRS 4, and IFRS 7 - Interest Rate Benchmark
+Reform
+The IASB issued amendments to IFRS 9, IAS 39, IFRS 16, IFRS 4, and IFRS 7 on August 26, 2020,
+completing Phase 2 of the Interest Rate Benchmark Reform (IBOR reform) project. This was
+necessary because major interest rate benchmarks were reformed or even replaced.
+We are exposed to interest rate benchmarks due to our investing, financing, and hedging activities.
+The impact of the interest rate benchmark reform, however, is very limited either because the interest
+rate benchmarks we are mainly using will stay in place (that is, Euribor, USD Fed Funds Rate), the
+instruments will mature well before the respective benchmark rate is discontinued, or because the
+instruments have fixed interest rates.
+We are impacted by the IBOR reform with regard to:
+Management Report
+Non-derivative financial instruments: We are in the process of reviewing and amending the
+respective contracts well before the respective IBOR will no longer be quoted, which is the case for
+our USD bond of US$300 million referencing to three-month USD LIBOR.
+Many transactions constitute economic hedges, and therefore contribute effectively to the securing of
+financial risks but do not qualify for hedge accounting under IFRS 9. To hedge currency risks inherent
+in foreign-currency denominated and recognized monetary assets and liabilities, we do not designate
+our held-for-trading derivative financial instruments as accounting hedges, because the profits and
+losses from the underlying transactions are recognized in profit or loss in the same periods as the
+profits or losses from the derivatives.
+Accounting for Derivative Financial Instruments
+-675
+17
+-233
+-5
+413
+15,411
+1 Other includes new lease liabilities.
+233/338
+234/338
+SAP
+We use derivatives to hedge foreign currency risk or interest rate risk and designate them as cash flow
+or fair value hedges if they qualify for hedge accounting under IFRS 9, which involves judgment.
+Derivatives Not Designated as Hedging Instruments
+SAP Integrated Report 2021
+Combined Group
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+Section F - Management of
+Financial Risk Factors
+This section discusses financial risk factors and risk management regarding foreign currency exchange
+rate risk, interest rate risk, equity price risk, credit risk, and liquidity risk. Further, it contains information
+about financial instruments.
+(F.1)
+Financial Risk Factors and Risk Management
+To Our
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+1,250
+0.893%
+0.233%
+0.868%
+1.031%
+None of the fair value adjustment from the receiver swaps, the basis adjustment on the underlying
+hedged items held in fair value hedge relationships, and the difference between the two recognized in
+Financial income, net, is material in any of the years presented.
+239/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+Interest Rate Exposure
+Our interest rate exposure (and our average/high/low exposure) as at December 31 was as follows:
+Interest Rate Risk Exposure
+€ billions
+Fair value interest rate risk
+2021
+2020
+500
+800
+1,000
+1,000
+1.469%
+€ millions
+EUR interest rate swaps
+Nominal amounts
+Average variable interest rate
+USD interest rate swaps
+7
+0
+7
+2021
+Maturity
+2022
+Year-End
+2024
+2028
+2029
+2030
+2031
+Nominal amounts
+196
+88
+Average variable interest rate
+1.011%
+0.890%
+2027
+Average
+High
+Low
+1.70
+1.99
+3.18
+3.93
+1.99
+From interest rate swaps
+4.83
+4.82
+4.83
+4.81
+2.95
+4.81
+5.10
+4.30
+240/338
+Interest Rate Sensitivity
+A sensitivity analysis is provided to show the impact of our interest rate risk exposure on profit or loss
+and equity in accordance with IFRS 7, considering the following:
+Changes in interest rates only affect the accounting for non-derivative fixed-rate financial
+instruments if they are recognized at fair value. Therefore, such interest rate changes do not
+change the carrying amounts of our non-derivative fixed-rate financial liabilities, as we account for
+them at amortized cost. Investments in fixed-rate financial assets classified as fair value through
+profit or loss were not material at each year end reported. Thus, we do not consider any fixed-rate
+instruments in the equity-related sensitivity calculation.
+Income or expenses recorded in connection with non-derivative financial instruments with variable
+interest rates are subject to interest rate risk if they are not hedged items in an effective hedge
+relationship. Thus, we take into consideration interest rate changes relating to our variable-rate
+financing and our investments in money market instruments in the profit-related sensitivity
+calculation.
+The designation of interest rate receiver swaps in a fair value hedge relationship leads to interest
+rate changes affecting Financial income, net. The fair value movements related to the interest rate
+swaps are not reflected in the sensitivity calculation, as they offset the fixed interest rate payments
+for the bonds and private placements as hedged items. However, changes in market interest rates
+affect the amount of interest payments from the interest rate swap. As a consequence, we include
+those effects of market interest rates on interest payments in the profit-related sensitivity
+calculation.
+Due to the different interest rate expectations for the U.S. dollar and the euro area, we base our
+sensitivity analyses on a yield curve upward shift of +75/+20 basis points (bps) for the U.S. dollar/euro
+area (2020: +50/+10bps for the U.S. dollar/euro area; 2019: +50/+10bps for the U.S. dollar/euro area),
+and a yield curve downward shift of -25/-20bps for the U.S. dollar/euro area (2020: -50/-20bps for
+the U.S. dollar/euro area; 2019: -50/- 20bps for the U.S. dollar/euro area).
+If, on December 31, 2021, 2020, and 2019, interest rates had been higher/lower than as described
+above, this would not have had a material effect on Financial income, net, for our variable interest rate
+investments and would have had the following effects on Financial income, net.
+4.78
+Details on Hedging Instruments in Interest Rate Hedges
+2.07
+4.58
+Year-End
+Average
+High
+Low
+From investments
+0.03
+0.03
+0.03
+0.02
+0.02
+1.71
+0.02
+0.02
+Cash flow interest rate risk
+From investments (including cash)
+From financing
+7.72
+6.25
+7.72
+4.67
+4.58
+5.14
+5.77
+0.02
+As at December 31, 2021, we held the following instruments to hedge exposures to changes in
+interest rates:
+-49
+-49
+2021
+2020
+2019
+2021
+2020
+2019
+Derivatives held within a designated cash flow hedge relationship
+All major currencies -10% (2020: all major currencies -10%;
+2019: all major currencies -10%)
+All major currencies +10% (2020: all major currencies +10%;
+2019: all major currencies +10%)
+Embedded derivatives
+Effects on Other Comprehensive Income
+All currencies -10%
+238/338
+Interest Rate Risk
+40
+40
+53
+-49
+-49
+-53
+106
+43
+All currencies +10%
+53
+Effects on Other Non-Operating Expense, Net
+Foreign Currency Sensitivity
+Additional
+Information
+The spot component of derivatives held within a designated cash flow hedge relationship affecting
+other comprehensive income
+Foreign currency embedded derivatives affecting other non-operating expense, net
+Thus, our foreign currency exposure (and our average/high/low exposure) as at December 31, 2021,
+was as follows:
+Foreign Currency Exposure
+€ billions
+Year-end exposure toward all our major currencies
+Average exposure
+Highest exposure
+Lowest exposure
+€ millions
+2021
+1.4
+0.9
+1.3
+0.9
+1.6
+1.0
+1.0
+0.9
+Foreign Currency Exchange Rate Sensitivity
+We calculate our sensitivity on an upward/downward shift of +/-10% of the foreign currency exchange
+rate between the euro and all major currencies (2020: +/-10% of the foreign currency exchange rate
+between the euro and all other major currencies; 2019: +/-10% of the foreign currency exchange rate
+between the euro and all other major currencies). If, on December 31, 2021, 2020, and 2019, the
+foreign currency exchange rates had been higher/lower as described above, this would have had the
+following effects on other non-operating expense, net and other comprehensive income:
+2020
+0
+-106
+-53
+285
+4,508
+284
+59
+-24
+59
+-9
+0
+The amounts as at December 31, 2021, designated as hedging instruments were as follows:
+Designated Hedging Instruments in Interest Rate Hedges
+€ millions
+4,550
+Notional amount
+Other financial assets
+Other financial liabilities
+Change in fair value used for measuring ineffectiveness
+-16
+2021
+Interest Rate Swaps for
+EUR Borrowing
+Interest Rate Swaps for
+USD Borrowing
+4,550
+285
+0
+Carrying amount
+-43
+in USD
+Fixed-Rate Borrowing
+in EUR
+Interest Rate Risk Factors
+We are exposed to interest rate risk as a result of our investing and financing activities mainly in euros
+and U.S. dollars, since a large part of our investments are based on variable rates and/or short
+maturities (2021: 67%; 2020: 67%) and most of our financing transactions are based on fixed rates
+and long maturities (2021: 87%; 2020: 85%).
+Interest Rate Risk Management
+The aim of our interest rate risk management is to reduce profit or loss volatility and optimize our
+interest result by creating a balanced structure of fixed and variable cash flows. We therefore manage
+interest rate risks by adding interest-rate-related derivative instruments to a given portfolio of
+investments and debt financing. The desired fixed-floating mix of our net debt is set by the Treasury
+Committee.
+SAP Integrated Report 2021
+SAP
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Fixed-Rate Borrowing
+Additional
+Derivatives Designated as Hedging Instruments (Fair Value Hedges)
+To match the interest rate risk from our financing transactions to our investments, we use receiver
+interest rate swaps to convert certain fixed-rate financial liabilities to floating, and by this means
+secure the fair value of the swapped financing transactions on a 1:1 ratio. Including interest rate
+swaps, 50% (2020: 48%) of our total interest-bearing financial liabilities outstanding as at
+December 31, 2021, had a fixed interest rate.
+The amounts as at December 31, 2021, relating to items designated as hedged items were as follows:
+Designated Hedged Items in Interest Rate Hedges
+€ millions
+Notional amount
+Carrying amount
+Accumulated fair value adjustments in Other financial liabilities
+Change in fair value used for measuring ineffectiveness
+Accumulated amount of fair value hedge adjustments for
+hedged items ceased to be adjusted for hedging gains/losses
+2021
+Information
+-105
+2
+-282
+597
+Eurobond 14 - 2018
+2021
+100.519%
+0.000% (var.)
+-0.15%
+€500
+0
+500
+Eurobond 15 - 2018
+2026
+99.576%
+1.000% (fix)
+1.06%
+€500
+499
+498
+Eurobond 16 - 2018
+2030
+98.687%
+1.375% (fix)
+597
+€600
+1.13%
+1.000% (fix)
+Carrying
+Amount
+Carrying Amount
+(in € millions)
+(in € millions)
+millions)
+Eurobond 8 - 2014
+2023
+Eurobond 9 - 2014
+2027
+99.478%
+99.284%
+1.50%
+1.125% (fix)
+1.750% (fix)
+€1,000
+999
+998
+1.87%
+€1,000
+985
+1,006
+Eurobond 12 - 2015
+2025
+99.264%
+1.24%
+€500
+491
+510
+98.382%
+1.625% (fix)
+1.78%
+€1,250
+1,223
+1,279
+Eurobond 22 - 2020
+2023
+99.794%
+0.000% (fix)
+2031
+0.07%
+599
+599
+Eurobond 23 - 2020
+2026
+99.200%
+0.125% (fix)
+0.26%
+€600
+596
+596
+€600
+respective
+currency in
+Eurobond 21 - 2018
+982
+Eurobond 18 - 2018
+2022
+99.654%
+0.250% (fix)
+0.36%
+€900
+900
+899
+Eurobond 19 - 2018
+2024
+1,009
+99.227%
+0.89%
+€850
+847
+845
+Eurobond 20 - 2018
+2028
+98.871%
+1.250% (fix)
+1.38%
+€1,000
+0.750% (fix)
+Effective
+Interest Rate
+Coupon Rate
+Issue Price
+8,965
+900
+8,851
+9,751
+500
+9,844
+500
+9,868
+10,369
+Private placement
+900
+393
+396
+393
+790
+0
+707
+0
+742
+742
+transactions
+Commercial paper
+373
+930
+Bonds
+Non-
+Current
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+2021
+2020
+Total
+Nominal Volume
+Carrying Amount
+Nominal Volume
+Carrying Amount
+Current
+Non-
+Current
+Current Non-Current
+Total
+Current
+Non-
+Current
+Current
+€ millions
+Eurobond 24 - 2020
+0
+0
+1,482
+11,801
+1,484
+11,860
+13,344
+2,348
+13,605
+15,953
+Financial debt as % of
+Financial liabilities
+83
+13,005
+15,570
+84
+63
+87
+84
+Bonds
+Financial liabilities are unsecured, except for the retention of title and similar rights customary in our
+industry. Effective interest rates on our financial debt (including the effects from interest rate swaps)
+were 0.83% in 2021, 0.87% in 2020, and 1.09% in 2019.
+For more information about the risk associated with our financial liabilities, see Note (F.1). For more
+information about fair values, see Note (F.2).
+2021
+2020
+Nominal
+Volume (in
+Maturity
+84
+931
+11,042
+Financial liabilities
+931
+930
+0
+931
+0
+931
+Bank loans
+1,533
+0
+1,533
+4,528
+0
+52
+1,250
+52
+1,250
+1,302
+Financial debt
+3,756
+9,338
+3,760
+9,245
+1,533
+Financial Debt
+2029
+0.375% (fix)
+Accrued interest
+61
+0
+0
+0
+0
+-1
+60
+Interest rate swaps
+-114
+0
+0
+-1
+157
+0
+42
+Lease¹
+2,120
+-374
+4
+106
+13,005
+11
+-163
+82
+0
+13,094
+Basis adjustment
+126
+0
+0
+3
+-163
+0
+-34
+0
+Transaction costs
+0
+0
+0
+0
+11
+-55
+Financial debt (carrying amount)
+13,344
+-272
+3
+-66
+287
+2,143
+Total liabilities from financing activities
+12/31/2020
+Combinations
+Currency
+Changes
+Current financial debt
+2,529
+-2,282
+2
+-17
+0
+Other
+1,251
+Non-current financial debt
+11,139
+2,000
+1
+-88
+0
+-1,251
+11,801
+Financial debt (nominal volume)
+13,668
+1,482
+0
+Cash Flows
+€ millions
+15,411
+-646
+7
+187
+-6
+297
+15,250
+1 Other includes new lease liabilities.
+232/338
+SAP Integrated Report 2021
+1/1/2020
+SAP
+Stakeholders
+Consolidated Financial Further Information on
+Combined Group
+Management Report
+Statements IFRS
+Sustainability
+Additional
+Information
+Business
+Foreign
+Fair Value
+To Our
+79
+3
+-272
+Tranche 9 2012
+Private placements
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+Nominal Volume
+Tranche 8-2012
+Maturity
+Effective Interest
+Rate
+(in respective
+currency in
+millions)
+2021
+2020
+Carrying
+Amount
+Carrying Amount
+(in € millions)
+(in € millions)
+2022
+Coupon Rate
+3.18% (fix)
+Tranche 7-2012
+Private Placements
+0.51%
+€800
+769
+789
+Eurobonds
+9,487
+10,125
+USD bond 2018
+2025
+100.000%
+U.S. private placements
+0.721% (var.)
+US$300
+264
+243
+Bonds
+9,751
+10,369
+All of our Eurobonds are listed for trading on the Luxembourg Stock Exchange.
+231/338
+SAP
+SAP Integrated Report 2021
+0.80%
+98.787%
+3.22%
+396
+Foreign
+Currency
+Fair Value
+Changes
+Other
+12/31/2021
+Current financial debt
+1,482
+980
+1
+1
+0
+Business
+Combinations
+1,291
+Non-current financial debt
+11,801
+-1,252
+2
+78
+0
+-1,291
+9,338
+Financial debt (nominal volume)
+13,283
+3,755
+US$444.5
+Cash Flows
+€ millions
+373
+2024
+3.33% (fix)
+3.37%
+US$323
+300
+281
+2027
+3.53% (fix)
+3.57%
+1/1/2021
+US$100
+88
+790
+742
+The U.S. private placement notes were issued by one of our subsidiaries that has the U.S. dollar as its
+functional currency.
+Commercial Paper
+The net proceeds from our commercial paper program (Commercial Paper, or CP) are being used for
+general corporate purposes, including dividends and share repurchases. As at December 31, 2021, we
+had €930 million of issued commercial paper outstanding with maturities generally less than six
+months and the carrying amount was €931 million (December 31, 2020: €931 million). The weighted
+average interest rate of our CP was -0.48% as at December 31, 2021 (December 31, 2020: -0.40%).
+Loans
+In 2021, prior to its original maturity date, SAP repaid the remaining €1,250 million from the term loan
+drawn in 2019 for the acquisition of Qualtrics.
+In March 2021, SAP drew two short-term bank loans of €950 million and €500 million with tenors of
+one year. In November 2021, the tenors were extended to September 30, 2022. The loans can be
+repaid flexibly over time, and currently bear interest at 0.55% and 0.52%, respectively.
+Reconciliation of Liabilities Arising from Financing Activities
+The changes in our financial debts are reconciled to the cash flows from borrowings included in the cash flow from financing
+activities.
+94
+Change in value recognized in OCI
+1,445
+Interest rate swaps
+-62
+7,158
+-3,194
+9,997
+-5,164
+-695
+4,881
+-978
+247/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Fair Values of Financial Instruments and Classification Within the Fair Value Hierarchy
+€ millions
+Assets
+Additional
+Information
+12/31/2020
+Measurement Categories
+Fair Value
+Category
+Carrying
+At
+-62
+-62
+-62
+FVTPL
+Private placements
+AC
+-790
+-790
+-801
+-801
+Other non-derivative financial liabilities³
+AC
+-2,424
+-2,424
+-281
+-281
+Amount
+Derivatives
+FX forward contracts
+Not designated as hedging instrument
+-31
+-31
+-31
+-31
+-49
+-49
+-49
+-49
+FX forward contracts
+Total financial instruments, net
+Designated as hedging instrument
+Amortized
+Cost
+At Fair
+Value
+Level 1
+AC
+24
+24
+24
+24
+Equity securities
+FVTPL
+3,113
+3,113
+72
+536
+2,505
+5,147
+3,113
+14
+Time deposits
+AC
+1,445
+1,445
+1,445
+Financial instruments related to employee benefit
+plans²
+-
+162
+Loans and other financial receivables
+AC
+190
+Investments in associates²
+-11,179
+498
+Other financial assets
+Level 2
+Level 3
+Total
+Cash and cash equivalents
+5,311
+Cash at banks¹
+AC
+2,732
+2,732
+Time deposits¹
+AC
+924
+Debt securities
+924
+FVTPL
+1,655
+1,655
+1,655
+1,655
+Trade and other receivables
+6,730
+Trade receivables¹
+AC
+6,232
+6,232
+Other receivables²
+Money market and similar funds
+-931
+-10,248
+-1,533
+Other receivables²
+Other financial assets
+Debt securities
+611
+9,033
+AC
+30
+30
+30
+30
+Equity securities
+FVTPL
+5,888
+5,799
+772
+155
+4,871
+5,799
+Investments in associates²
+155
+Time deposits
+AC
+2,602
+2,602
+2,602
+2,602
+5,799
+Financial instruments related to employee benefit plans²
+5,888
+Trade receivables¹
+Amount
+Amortized
+At Fair
+Value
+Level 1
+Level 2
+Level 3
+Total
+Cost
+Cash and cash equivalents
+8,898
+Cash at banks¹
+AC
+AC
+3,149
+Time deposits¹
+AC
+1,467
+1,467
+Money market and similar funds
+FVTPL
+4,281
+4,281
+4,281
+4,281
+Trade and other receivables
+6,499
+3,149
+190
+-
+Loans and other financial receivables
+10
+10
+10
+Liabilities
+Trade and other payables
+41
+0
+10
+Trade payables¹
+Other payables²
+Financial liabilities
+-1,702
+10
+AC
+-1,089
+-613
+-15,571
+Non-derivative financial liabilities
+Loans
+AC
+-1,533
+Bonds
+AC
+-10,682
+-1,533
+-10,682
+-1,533
+-1,089
+201
+FVTPL
+0
+AC
+186
+186
+186
+186
+Derivative assets
+FX forward contracts
+1
+1
+1
+1
+7
+Call option on equity shares
+7
+7
+Interest rate swaps
+Not designated as hedging instrument
+FX forward contracts
+FVTPL
+41
+41
+41
+Call options for share-based payments
+FVTPL
+0
+0
+7
+190
+190
+Derivative assets
+-16,904
+-16,904
+Determination of Fair Values
+A description of the valuation techniques and the inputs used in the fair value measurement is given
+below:
+249/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Financial Instruments Measured at Fair Value on a Recurring Basis
+AC
+Туре
+Fair Value
+Hierarchy
+Determination of Fair Value/Valuation
+Technique
+Significant Unobservable
+Inputs
+Additional
+Information
+Interrelationship Between
+Significant Unobservable Inputs
+and Fair Value Measurement
+Money-market and
+similar funds
+Level 1
+Quoted prices in an active market
+ΝΑ
+ΝΑ
+Debt securities
+Other financial assets
+Level 1
+-61
+FVTPL
+13,323
+FVTPL
+-62
+-62
+AC
+-16,517
+-16,517
+Fair Values of Financial Instruments by Instrument Classification
+€ millions
+Financial assets
+At fair value through profit or loss
+At amortized cost
+-61
+Financial liabilities
+At amortized cost
+12/31/2020
+Category
+Carrying Amount
+At Amortized Cost
+At Fair Value
+FVTPL
+AC
+4,846
+11,547
+11,547
+4,846
+At fair value through profit or loss
+10,131
+Quoted prices in an active market
+ΝΑ
+- The liquidity discounts were
+lower (higher)
+The estimated fair value would
+increase (decrease) if:
+- Different financing rounds are
+selected
+- Weighting of financing rounds
+changes
+-Weighting of the applied equity
+allocation methods changes
+- Volatility assumptions were
+higher (lower)
+- Estimated time to exit increases
+(decreases)
+- The imminent exit value
+increases (decreases)
+The estimated fair value would
+increase (decrease) if:
+- Price of latest financing round
+increases (decreases)
+- The overall company value were
+higher (lower)
+-The respective analyzed share
+class would be affected by this
+change due to its rights and
+preferences
+- The investees' revenues were
+higher (lower)
+The estimated fair value would
+increase (decrease) if:
+Call option on equity
+shares
+Level 3
+Market approach. Venture capital
+method evaluating a variety of
+quantitative and qualitative factors
+such as actual and forecasted results,
+cash position, recent or planned
+transactions, and market comparable
+companies.
+NA
+ΝΑ
+Other financial assets/ Financial liabilities
+FX forward contracts
+Level 2
+Discounted cash flow using par
+method. Expected future cash flows
+based on forward exchange rates are
+discounted over the respective
+remaining term of the contracts using
+the respective deposit interest rates
+and spot rates.
+NA
+ΝΑ
+250/338
+- Reported net asset value of
+respective fund were higher
+(lower)
+ΝΑ
+- The revenue multiples were
+higher (lower)
+Net asset value
+calculations of the
+respective funds
+Listed equity
+Level 1
+Quoted prices in an active market
+ΝΑ
+ΝΑ
+securities
+Level 2
+Quoted prices in an active market
+deducting a discount for the disposal
+restriction derived from the premium
+for a respective put option.
+ΝΑ
+ΝΑ
+Unlisted equity
+securities
+Level 3
+The estimated fair value would
+increase (decrease) if:
+Market approach. Comparable
+company valuation using revenue
+multiples derived from companies
+comparable to the investee.
+Last financing round valuations
+Net asset value/fair market value as
+reported by the respective funds
+- Peer companies used
+(revenue multiples range
+from 3.5 to 11.5)
+- Revenues of investees
+- Discounts for lack of
+marketability (10% to
+32.3%)
+- Nature and selection of
+financing rounds
+- Weighting of financing
+rounds
+- Discounts for lack of
+marketability
+- Weighting of equity
+allocation method such
+as option pricing model
+and common stock
+equivalent model
+- Volatility assumptions
+- Estimated time to exit
+- Imminent exit value
+Nature and pricing
+indication of latest
+financing round
+Market approach. Venture capital
+method evaluating a variety of
+quantitative and qualitative factors
+such as actual and forecasted results,
+cash position, recent or planned
+transactions, and market comparable
+companies.
+At
+10,131
+13,323
+FVTPL
+Liabilities
+Trade and other payables
+Trade payables¹
+Other payables²
+Financial liabilities
+-1,312
+AC
+-1,014
+-1,014
+-298
+-15,953
+Non-derivative financial liabilities
+4
+Loans
+-1,301
+Bonds
+AC
+-11,300
+-1,301
+-11,300
+-1,301
+-1,301
+-10,966
+-931
+-11,897
+Private placements
+AC
+AC
+Other non-derivative financial liabilities³
+4
+4
+Designated as hedging instrument
+FX forward contracts
+7
+7
+7
+7
+114
+114
+114
+114
+Interest rate swaps
+Not designated as hedging instrument
+4
+FX forward contracts
+38
+38
+38
+38
+Call options for share-based payments
+FVTPL
+36
+36
+36
+36
+Call option on equity shares
+FVTPL
+FVTPL
+AC
+AC
+-742
+-2,547
+-7,833
+1 We do not separately disclose the fair value for cash and cash equivalents, trade receivables, and accounts payable as their carrying amounts are a reasonable approximation
+of their fair values.
+2 Since the line items Trade receivables, Trade payables, and Other financial assets contain both financial and non-financial assets or liabilities (such as other taxes or advance
+payments), the carrying amounts of non-financial assets or liabilities are shown to allow a reconciliation to the corresponding line items in the Consolidated Statements of
+Financial Position.
+3 For lease liabilities, included in the line item Other non-derivative financial liabilities, separate disclosure of fair value is not required.
+248/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+-61
+Fair Values of Financial Instruments by Instrument Classification
+Financial assets
+At fair value through profit or loss
+At amortized cost
+Financial liabilities
+At fair value through profit or loss
+At amortized cost
+Additional
+Information
+12/31/2021
+Category
+Carrying Amount
+At Amortized Cost
+At Fair Value
+€ millions
+-742
+-2,547
+2,509
+-61
+-771
+-771
+-427
+-427
+Derivatives
+Designated as hedging instrument
+FX forward contracts
+Interest rate swaps
+-1
+-1
+-1
+-1
+-1,128
+0
+0
+0
+Not designated as hedging instrument
+FX forward contracts
+Total financial instruments, net
+FVTPL
+-61
+-77
+-5,357
+-61
+4,904
+-9,214
+0
+Carrying
+Designated as hedging instrument
+Fair Value
+0
+-6
+243/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+As at December 31, 2021, the major part of our other loans and other financial receivables was
+concentrated in Germany. There were no loans, or other financial receivables past due but not
+impaired and we had no indications of impairments of such assets that were not past due and not
+impaired as at that date.
+Trade Receivables and Contract Assets
+4,898
+As at December 31, 2021, our exposure to credit risk from trade receivables was as follows:
+€ millions, unless otherwise stated
+Weighted Average Loss
+Rate
+Gross Carrying Amount
+Not Credit-Impaired
+Gross Carrying Amount
+Credit-Impaired
+2021
+Category
+AR not due and due
+-0.5%
+4,106
+6
+-19
+Credit Risk Exposure from Trade Receivables and Contract Assets
+AR overdue 1 to 30 days
+-0.1%
+-3
+6,930
+0
+-6
+2020
+€ millions, unless otherwise stated
+Equivalent to External Weighted Average Loss
+Rating
+Rate
+Gross Carrying Amount Gross Carrying Amount
+Not Credit-Impaired
+Credit-Impaired
+ECL Allowance
+Risk class 1 - low risk
+Risk class 2 high risk
+AAA to BBB-
+Total
+-0.1%
+0
+-3
+BB to D
+0.0%
+29
+0
+0
+Risk class 3 - unrated
+NA
+-11.3%
+23
+0
+4,846
+-0.1%
+-1.0%
+57
+-10
+-0.9%
+511
+71
+-5
+-1.8%
+380
+61
+-8
+-16.8%
+695
+273
+0
+-163
+6,012
+405
+-186
+244/338
+For 2021, the movement in the ECL allowance for trade receivables and contract assets is as follows:
+Movement in ECL Allowance for Trade Receivables and Contract Assets
+€ millions
+Balance as at 1/1
+Net credit losses recognized
+Amounts written off
+Balance as at 12/31
+Liquidity Risk
+-2.9%
+611
+4,426
+TOTAL
+-7
+AR overdue 30 to 90 days
+-1.8%
+514
+48
+-10
+AR overdue more than 90 days
+-19.3%
+482
+240
+-139
+TOTAL
+-0.2%
+-2.9%
+351
+-175
+2020
+€ millions, unless otherwise stated
+Weighted Average Loss Rate
+Gross Carrying Amount
+Not Credit-Impaired
+Gross Carrying Amount
+Credit-Impaired
+ECL Allowance
+AR not due and due
+AR overdue 1 to 30 days
+AR overdue 30 to 90 days
+AR overdue more than 90 days
+5,713
+-3
+0
+29
+8
+Equity Price Risk
+Equity Price Risk Factors
+We are exposed to equity price risk with regard to our investments in equity securities and our share-
+based payments plans.
+Equity Price Risk Management
+Our listed equity investments are monitored based on the current market value that is affected by the
+fluctuations in the volatile stock markets worldwide. Unlisted equity investments are monitored based
+on detailed financial information provided by the investees. The fair value of our listed equity
+investments depends on the equity prices, while the fair value of the unlisted equity investments is
+influenced by various unobservable input factors.
+We also monitor the exposure with regard to our share-based payment plans. To reduce resulting
+profit or loss volatility, we historically hedged certain cash flow exposures associated with these plans
+by purchasing derivative instruments, but we did not apply hedge accounting. This practice ceased in
+June 2021.
+Equity Price Exposure
+On December 31, 2021, our exposure from our investments in equity securities was €5,799 million
+(2020: €3,113 million; 2019: €1,996 million).
+For information about the exposure from our share-based payments plans, see Note (B.3).
+Equity Price Sensitivity
+Our sensitivity towards a fluctuation in equity prices is as follows:
+Equity Price Sensitivity
+6
+€ millions
+2020
+2019
+Investments in equity securities
+Increase in equity prices and respective
+unobservable inputs of 10% - increase of
+515
+259
+156
+financial income, net
+Decrease in equity prices and respective
+unobservable inputs of 10% decrease of
+financial income, net
+-515
+2021
+-259
+5
+-8
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Interest Rate Sensitivity
+€ millions
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+Effects on Financial Income, Net
+2021
+Interest rates-25bps for U.S. dollar area/-20bps for euro area (2020: -50/-20bps for
+U.S. dollar/euro area; 2019: -50/-20bps for U.S. dollar/euro area)
+2020
+Derivatives held within a designated fair value hedge relationship
+Interest rates +75bps for U.S. dollar area/+20bps for euro area (2020: +50/+10bps for
+U.S. dollar/euro area; 2019: +50/+10bps for U.S. dollar/euro area)
+-70
+-41
+-41
+Interest rates -25bps for U.S. dollar area/-20bps for euro area (2020: -50/-20bps for
+U.S. dollar/euro area; 2019: -50 /-20bps for U.S. dollar/euro area)
+Variable-rate financing
+68
+79
+76
+Interest rates +75bps for U.S. dollar area/+20bps for euro area (2020: +50/+10bps for
+U.S. dollar/euro area; 2019: +50/+10bps for U.S. dollar/euro area)
+-10
+-6
+2019
+-156
+241/338
+242/338
+Credit Risk Exposure from Cash, Time Deposits, and Debt Securities
+2021
+€ millions, unless otherwise stated
+Equivalent to External
+Weighted Average
+Rating
+Loss Rate
+Gross Carrying
+Amount Not Credit-
+Impaired
+Gross Carrying
+Amount Credit-
+Impaired
+ECL Allowance
+Risk class 1 - low risk
+Risk class 2 high risk
+As at December 31, 2021, our exposure to credit risk from cash, time deposits, and debt securities
+I was as follows:
+Risk class 3 - unrated
+AAA to BBB-
+-0.0%
+6,864
+0
+-3
+BB to D
+0.0%
+37
+0
+0
+NA
+-10.3%
+Total
+Cash, Time Deposits, and Debt Securities
+Credit Risk Exposure
+The impact of default on our trade receivables from individual customers is mitigated by our large
+customer base and its distribution across many different industries, company sizes, and countries
+worldwide. For more information about our trade receivables, see Note (A.2).
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Credit Risk
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+Credit Risk Factors
+To reduce the credit risk in investments, we arrange to receive rights to collateral for certain investing
+activities in the full amount of the investment volume, which we would be allowed to make use of only
+in the case of default of the counterparty to the investment. In the absence of other significant
+agreements to reduce our credit risk exposure, the total amounts recognized as cash and cash
+equivalents, current investments, loans, and other financial receivables, trade receivables, and
+derivative financial assets represent our maximum exposure to credit risks, except for the agreements
+mentioned above.
+Credit Risk Management
+Cash at Banks, Time Deposits, and Debt Securities
+To mitigate the credit risk from our investing activities and derivative financial assets, we conduct all
+our activities only with approved major financial institutions and issuers that carry high external
+ratings, as required by our internal treasury guideline. Among its stipulations, the guideline requires
+that we invest only in assets from issuers with a minimum rating of at least “BBB flat." We only invest
+in issuers with a lower rating in exceptional cases. Such investments were not material in 2021 and
+2020. The weighted average rating of our financial assets is A. We pursue a policy of cautious
+investments characterized by predominantly current investments, standard investment instruments, as
+well as a wide portfolio diversification by doing business with a variety of counterparties.
+To further reduce our credit risk, we require collateral for certain investments in the full amount of the
+investment volume, which we would be allowed to make use of in the case of default of the
+counterparty to the investment. As such collateral, we only accept bonds with at least investment-
+grade rating level.
+In addition, the concentration of credit risk that exists when counterparties are involved in similar
+activities by instrument, sector, or geographic area is further mitigated by diversification of
+counterparties throughout the world and adherence to an internal limit system for each counterparty.
+This internal limit system stipulates that the business volume with individual counterparties is
+restricted to a defined limit that depends on the lowest official long-term credit rating available by at
+least one of the major rating agencies, the Tier 1 capital of the respective financial institution, or
+participation in the German Depositors' Guarantee Fund or similar protection schemes. We
+continuously monitor strict compliance with these counterparty limits. As the premium for credit
+default swaps mainly depends on market participants' assessments of the creditworthiness of a
+debtor, we also closely observe the development of credit default swap spreads in the market to
+evaluate probable risk developments and react in a timely manner to changes should these manifest.
+For cash at banks, time deposits, and debt securities such as acquired bonds or commercial paper,
+we apply the general impairment approach. As it is our policy to only invest in high-quality assets of
+issuers with a minimum rating of at least investment grade so as to minimize the risk of credit losses,
+we use the low credit risk exception. Thus, these assets are always allocated to stage 1 of the three-
+stage credit loss model and we record a loss allowance for an amount equal to 12-month expected
+credit losses. This loss allowance is calculated based on our exposure as at the respective reporting
+date, the loss given default for this exposure, and the credit default swap spread as a measure for the
+probability of default. To ensure that during their lifetime our investments always fulfill the requirement
+of being investment-grade, we monitor changes in credit risk by tracking published external credit
+ratings. Among other things, we consider cash at banks, time deposits, and debt securities to be in
+default when the counterparty is unlikely to pay its obligations in full, when there is information about
+a counterparty's financial difficulties, or in case of a drastic increase in the credit default swap spread
+of a counterparty for a prolonged time period while the overall market environment remains rather
+stable. Such financial assets are written off either partially or in full if the likelihood of recovery is
+considered remote, which might be evidenced, for example, by the bankruptcy of a counterparty of
+such financial assets.
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Trade Receivables
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+The default risk of our trade receivables is managed separately, mainly based on assessing the
+creditworthiness of customers through external ratings and on our past experience with the customers
+concerned. Based on this assessment, individual credit limits are established for each customer and
+deviations from such credit limits need to be approved by management.
+We apply the simplified impairment approach using a provision matrix for all trade receivables and
+contract assets to take into account any lifetime expected credit losses already at initial recognition.
+For the purpose of the provision matrix, customers are clustered into different risk classes, mainly
+based on market information such as the country risk assessment of their country of origin. Loss rates
+used to reflect lifetime expected credit losses are determined using a roll-rate method based on the
+probability of a receivable progressing through different stages of being overdue and on our actual
+credit loss experience over the past years. These loss rates are enhanced by forward-looking
+information to reflect differences between economic conditions during the period over which the
+historical data has been collected, current conditions, and the expected changes in the economic
+conditions over the expected life of the receivables. Forward-looking information is based on changes
+in country risk ratings, or fluctuations in credit default swaps of countries of the customers we do
+business with. We continuously monitor outstanding receivables locally to assess whether there is
+objective evidence that our trade receivables and contract assets are credit-impaired. Evidence that
+trade receivables and contract assets are credit-impaired include, among the trade receivables being
+past due, information about significant financial difficulty of the customer or non-adherence to a
+payment plan. We consider receivables to be in default when the counterparty is unlikely to pay its
+obligations in full, However, a delay of payments (for example, more than 90 days past due) in the
+normal course of business alone does not necessarily indicate a customer default. We write off
+account balances either partially or in full if we judge that the likelihood of recovery is remote, which
+might be evidenced, for example, when bankruptcy proceedings for a customer are finalized or when
+all enforcement efforts have been exhausted.
+2021
+2020
+ECL Allowance
+-131
+-919
+-141
+Cash inflows
+885
+139
+Interest rate derivatives designated as hedging instruments
+-49
+0
+Cash outflows
+-48
+-476
+Cash inflows
+Cash outflows
+60
+Total of derivative financial liabilities
+-142
+-76
+-67
+-63
+-62
+-7
+Derivative financial assets
+Currency derivatives not designated as hedging instruments
+45
+38
+Cash outflows
+421
+-2,878
+-1
+Currency derivatives designated as hedging instruments
+Contractual Maturities of Derivative Financial Liabilities and Financial Assets
+€ millions
+Carrying
+Amount
+Contractual Cash Flows
+Carrying
+Amount
+Contractual Cash Flows
+12/31/2021
+2022
+Thereafter
+12/31/2020
+2021 Thereafter
+Derivative financial liabilities and assets
+-31
+Derivative financial liabilities
+-62
+-61
+Cash outflows
+-2,381
+-12
+-2,902
+-7
+Cash inflows
+2,327
+0
+2,842
+0
+Currency derivatives not designated as hedging instruments
+Additional
+Information
+-2,452
+2,923
+Total of derivative financial liabilities and assets
+-89
+-25
+-65
+95
+6
+90
+246/338
+(F.2)
+Fair Value Disclosures on Financial Instruments
+Level Transfers
+It is our policy that transfers between the different levels of the fair value hierarchy are deemed to
+have occurred at the beginning of the period of the event or change in circumstances that caused the
+transfer.
+97
+Fair Value of Financial Instruments
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+Fair Values of Financial Instruments and Classification Within the Fair Value Hierarchy
+€ millions
+Assets
+12/31/2021
+Measurement Categories
+We use various types of financial instruments in the ordinary course of business, which are classified
+as either amortized cost (AC) or fair value through profit or loss (FVTPL). For those financial
+instruments measured at fair value or for which fair value must be disclosed, we have categorized the
+financial instruments into a three-level fair value hierarchy depending on the inputs used to determine
+fair value and their significance for the valuation techniques.
+Cash inflows
+68
+2
+2,493
+Currency derivatives designated as hedging instruments
+1
+7
+Cash outflows
+-186
+-291
+Cash inflows
+137
+297
+Interest rate derivatives designated as hedging instruments
+7
+158
+114
+-4
+-4
+-48
+-398
+Cash inflows
+9
+6
+69
+495
+Total of derivative financial assets
+53
+51
+Cash outflows
+Sustainability
+-136
+Combined Group
+Management Report
+2022
+2023
+2024
+2025
+2026
+Thereafter
+Non-derivative financial liabilities
+Trade payables
+-1,089
+-1,089
+0
+0
+12/31/2021
+0
+0
+Lease liabilities
+-2,143
+-448
+-338
+-263
+-208
+-184
+-934
+Other financial liabilities
+-13,285
+-4,084
+0
+-1,695
+Contractual Cash Flows
+€ millions
+Consolidated Financial Further Information on
+Statements IFRS
+-87
+-97
+98
+42
+-175
+-186
+Liquidity Risk Factors
+We are exposed to liquidity risk from our obligations towards suppliers, employees, and financial
+institutions.
+Liquidity Risk Management
+Our liquidity is managed by our global treasury department with the primary aim of maintaining
+liquidity at a level that is adequate to meet our financial obligations.
+Generally, our primary source of liquidity is funds generated from our business operations. Our global
+treasury department manages liquidity centrally for all subsidiaries. Where possible, we pool their
+Carrying
+Amount
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+cash surplus so that we can use liquidity centrally for our business operations, for subsidiaries' funding
+requirements, or to invest any net surplus in the market. With this strategy, we seek to optimize yields,
+while ensuring liquidity, by investing only with counterparties and issuers of high credit quality, as
+explained before. Hence, high levels of liquid assets and marketable securities provide a strategic
+reserve, helping keep SAP flexible, sound, and independent.
+Apart from effective working capital and cash management, we have reduced the liquidity risk
+inherent in managing our day-to-day operations and meeting our financing responsibilities by
+arranging an adequate volume of available credit facilities with various financial institutions on which
+we can draw if necessary.
+In order to retain high financial flexibility, in 2017, SAP SE entered into a €2.5 billion syndicated credit
+facility agreement with a term until 2024. The use of the facility is not restricted by any financial
+covenants. Borrowings under the facility bear interest of EURIBOR or LIBOR for the respective
+currency plus a margin of 17bps. We are also required to pay a commitment fee of 5.95bps per
+annum on the unused available credit. We have not drawn on the facility.
+In September 2019, we initiated a commercial paper program (Commercial Paper, or CP). As at
+December 31, 2021, we had €930 million of CP outstanding with maturities generally less than six
+months (2020: €930 million).
+Additionally, as at December 31, 2021 and 2020, the Group had available lines of credit totaling
+€346 million and €372 million, respectively. There were immaterial borrowings outstanding under
+these lines of credit in all years presented.
+Liquidity Risk Exposure
+The table below is an analysis of the remaining contractual maturities of all our financial liabilities held
+as at December 31, 2021. Financial liabilities for which repayment can be requested by the contract
+partner at any time are assigned to the earliest possible period. Variable interest payments were
+calculated using the latest relevant interest rate fixed as at December 31, 2021. As we generally settle
+our derivative contracts gross, we show the pay and receive legs separately for all our currency and
+interest rate derivatives, whether or not the fair value of the derivative is negative. The cash outflows
+for the currency derivatives are translated using the applicable spot rate.
+SAP
+-1,228
+Contractual Maturities of Non-Derivative Financial Liabilities
+Total of non-derivative financial liabilities
+-426
+-359
+-262
+-218
+-165
+-931
+Other financial liabilities
+-13,770
+-1,982
+-2,640
+-1,700
+-918
+-2,120
+Total of non-derivative financial liabilities
+-3,422
+-2,999
+-1,962
+-1,429
+-1,083
+-5,933
+-6,864
+245/338
+SAP
+SAP Integrated Report 2021
+To Our
+-936
+Stakeholders
+-16,904
+Lease liabilities
+-1,211
+0
+-16,517
+-5,621
+0
+-2,033
+-1,491
+-1,144
+-1,165
+-1,349
+-4,773
+-5,707
+Carrying
+Amount
+€ millions
+12/31/2020
+2021
+2022
+Contractual Cash Flows
+2023
+0
+0
+-1,014
+-1,014
+Non-derivative financial liabilities
+Trade payables
+Thereafter
+2025
+2024
+0
+Among the claims and lawsuits disclosed in this Note are the following classes:
+Individual cases of intellectual property-related litigation and claims include the following:
+Intellectual property-related litigation and claims are cases in which third parties have threatened or
+initiated litigation claiming that SAP violates one or more intellectual property rights that they possess.
+Such intellectual property rights may include patents, copyrights, and other similar rights.
+Contingent liabilities exist from intellectual property-related litigation and claims for which no provision
+has been recognized. Generally, it is not practicable to estimate the financial impact of these
+contingent liabilities due to the uncertainties around the litigation and claims, as outlined above. The
+total amounts claimed by plaintiffs in those intellectual property-related lawsuits or claims in which a
+claim has been quantified were not material to us as at December 31, 2021 and 2020. Based on our
+past experience, most of the intellectual property-related litigation and claims tend to be either
+dismissed in court or settled out of court for amounts significantly below the originally claimed
+amounts. We currently believe that resolving the intellectual property-related claims and lawsuits
+pending as at December 31, 2021, will neither individually nor in the aggregate have a material
+adverse effect on our business, financial position, profit, or cash flows.
+In June 2018, Teradata Corporation, Teradata US, Inc. and Teradata Operations, Inc. (collectively
+“Teradata”) filed a civil lawsuit against SAP SE, SAP America, Inc., and SAP Labs, LLC in U.S. federal
+court in California. Teradata alleged that SAP misappropriated trade secrets of Teradata, infringed
+Teradata's copyrights (this claim was subsequently withdrawn by Teradata), and violated U.S. antitrust
+laws. Teradata sought unspecified monetary damages and injunctive relief. In 2019, SAP asserted
+patent infringement counterclaims against Teradata seeking monetary damages and injunctive relief.
+In 2020, Teradata initiated a second civil lawsuit against SAP asserting patent infringement, seeking
+monetary damages and injunctive relief; in February 2021, SAP filed patent infringement
+counterclaims against Teradata in this second U.S. lawsuit as well as a civil lawsuit against Teradata in
+Germany asserting patent infringement, seeking monetary damages and injunctive relief. Currently, all
+claims between the parties have been dismissed. Teradata has appealed the dismissal of its trade
+secret and antitrust claims; this appeal is expected to be completed by late 2023.
+Intellectual Property-Related Litigation and Claims
+We are subject to a variety of claims and lawsuits that arise from time to time in the ordinary course of
+our business, including proceedings and claims that relate to companies we have acquired. We will
+continue to vigorously defend against all claims and lawsuits against us. The provisions recorded for
+these claims and lawsuits as at December 31, 2021, are neither individually nor in the aggregate
+material to SAP.
+Information
+Further, the expected timing of any resulting outflows of economic benefits from these lawsuits and
+claims is typically uncertain and not estimable, as it depends generally on the duration of the legal
+proceedings and settlement negotiations required to resolve them.
+claims are of a very individual nature and claims are either not quantified by the claimants or the
+claim amounts quantified are, based on historical evidence, not expected to be a good proxy for the
+expenditure that would be required to resolve the case concerned. The specifics of the jurisdictions
+where most of the claims are located further impair the predictability of the outcome of the cases.
+Therefore, it is typically not practicable to reliably estimate the financial effect that these lawsuits and
+claims would have if SAP were to incur expenditure for these cases.
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Tax-Related Litigation
+Management Report
+Combined Group
+We are subject to ongoing audits by domestic and foreign tax authorities. In respect of non-income
+taxes, we are involved in various proceedings with only a few foreign tax authorities regarding
+assessments and litigation matters on intercompany royalty payments and intercompany services. The
+total potential amount in dispute related to these matters for all applicable years is approximately
+For more information about our income tax-related litigation, see Note (C.5).
+254/338
+The alleged conduct may result in monetary penalties or other sanctions under the FCPA and/or other
+anti-bribery laws. In addition, SAP's ability to conduct business in certain jurisdictions could be
+negatively impacted. The comprehensive and exhaustive investigations and the corresponding
+remediation activities are still ongoing. In South Africa, SAP is seeking resolution of pending civil
+claims relating to ongoing investigations. Considering the complexity of individual factors and the large
+number of open questions, it is not entirely possible at this point in time to assess the risk of a
+financial impact.
+SAP has received communications and whistleblower information alleging conduct that may violate
+anti-bribery laws in the United States (including the U.S. Foreign Corrupt Practices Act (FCPA)), and
+other countries. The Office of Ethics and Compliance (OEC) of SAP is conducting investigations with
+the assistance of an external law firm and voluntarily advised the U.S. Securities and Exchange
+Commission (U.S. SEC) and the U.S. Department of Justice (U.S. DOJ), as well as local authorities
+where potential violations are being investigated. The investigations and dialogue between SAP and
+the local authorities and the U.S. SEC and U.S. DOJ are ongoing.
+To Our
+Stakeholders
+For the reasons outlined above, it is impossible at this point in time to determine whether the potential
+anti-bribery law violations represent present obligations of SAP and, if so, to reliably estimate the
+amount of these obligations. We recognized no material provisions for these potential violations in our
+consolidated financial statements 2021. It is also not practicable to estimate the financial effect of any
+contingent liabilities that may result from these potential violations.
+Anti-Bribery and Export Control Matters
+€195 million (2020: €154 million). We have not recorded a provision for these matters, as we believe
+that we will prevail.
+253/338
+Information
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Combined Group
+To Our
+SAP Integrated Report 2021
+SAP
+Additional
+SAP Integrated Report 2021
+646
+The outcome of litigation and claims is intrinsically subject to considerable uncertainty. Management's
+view of these matters may also change in the future. Actual outcomes of litigation and claims may
+differ from the assessments made by management in prior periods, which could result in a material
+impact on our business, financial position, profit, cash flows, or reputation. Most of the lawsuits and
+Non-Current
+Furthermore, SAP voluntarily self-disclosed potential export control and economic sanctions violations
+to the U.S. DOJ and the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) in
+September 2017. At the same time, SAP provided notification to the U.S. SEC and responded to a
+U.S. SEC comment letter on export restriction matters in October 2017. SAP also provided disclosure
+to the U.S. Department of Commerce's Bureau of Industry and Security (BIS) based on the same
+alleged facts.
+Current
+Total
+Current
+Non-Current
+Total
+0
+646
+632
+0
+632
+5,203
+860
+6,063
+4,643
+770
+The policies outlined in Note (A.4) for customer-related provisions, which include provisions for
+customer-related litigation cases and claims, equally apply to our other litigation, claims, and legal
+contingencies disclosed in this Note.
+Uncertainty in Context of Legal Matters
+matters.
+This Note discloses information about intellectual property-related litigation and claims, tax-related
+litigation other than income tax-related litigation (see Note (C.5)), and anti-bribery and export control
+Other Litigation, Claims, and Legal Contingencies
+(G.3)
+SAP
+Other tax liabilities primarily consist of VAT, payroll tax, sales tax, and withholding tax.
+0
+14
+11
+0
+12
+5,413
+12
+Following comprehensive investigations, SAP entered into a non-prosecution agreement with the
+U.S. DOJ and mutual settlement agreements with the BIS and OFAC in April 2021. Among other
+things, the settlement agreements require SAP to conduct internal audits of its compliance with
+U.S. export control laws and regulations and produce audit reports for a period of three years. In
+addition, SAP paid non-material monetary penalties in May 2021.
+Head of Global Sponsorships
+SAP Integrated Report 2021
+Chief Marketing and Solutions Officer
+Global Marketing, Corporate Communications, Government Affairs
+255/338
+256/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+Executive Board Members Who Left During 2021
+Adaire Fox-Martin (until June 30, 2021, member of the Executive Board until January 31, 2021)
+Supervisory Board
+Memberships on supervisory boards and other comparable governing bodies of enterprises, other
+than subsidiaries of SAP, on December 31, 2021
+Prof. Dr. h.c. mult. Hasso Plattner 2, 4, 6, 8
+Supervisory Board, Ottobock SE & Co. KGaA, Duderstadt, Germany
+2020
+Professor for Design Research and Head of the Design Research Lab, Berlin University of the Arts,
+Berlin, Germany
+Prof. Dr. Gesche Joost4, 7
+Board of Directors, Joby Aviation LLC, Santa Cruz, CA, United States
+Chief Executive Officer and Member of the Board of Directors, Zoox, Inc., Foster City, CA, United
+States
+Julia White (from March 1, 2021)
+Aicha Evans², 4, 6, 7
+Industry Advisor Expert
+Manuela Asche-Holstein (from July 8, 2021)
+Supervisory Board, Rhein-Neckar Loewen GmbH, Kronau, Germany
+Deputy Chairperson (from January 1, 2022)
+Lars Lamadé1, 2, 4, 8
+Chairperson
+Member of the SAP Germany SE & Co. KG Works Council
+SAP
+Global Responsibility for all SAP Business Software Applications, Cloud Operations and Support,
+Cross-Development Functions, SAP Enterprise Adoption Organization
+Thomas Saueressig
+To Our
+Combined Group
+Stakeholders
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+(G.4) Board of Directors
+Executive Board
+Memberships on supervisory boards and other comparable governing bodies of enterprises, other
+than subsidiaries of SAP, on December 31, 2021
+Christian Klein
+Chief Executive Officer
+Corporate Development and Strategy, Security and Secrecy, Compliance
+Supervisory Board, adidas AG, Herzogenaurach, Germany
+Sabine Bendiek (from January 1, 2021)
+Chief People & Operating Officer, Labor Relations Director
+Global Field Organization including Sales, Services, Partner Ecosystem, and Customer Engagement
+Customer Success
+Scott Russell (from February 1, 2021)
+Supervisory Board, DFKI GmbH, Kaiserslautern, Germany
+Technology and Innovation Strategy, SAP HANA Database, SAP Business Technology Platform,
+Analytics, Cloud Infrastructure
+Technology & Innovation
+SAP Product Engineering
+Chief Technology Officer
+Supervisory Board, HeidelbergCement AG, Heidelberg, Germany
+Global Finance and Administration including Investor Relations, Internal Audit, Data Protection &
+Privacy, Business Process Intelligence, Sustainability
+Chief Financial Officer
+Luka Mucic
+Supervisory Board, Schaeffler AG, Herzogenaurach, Germany
+HR Strategy, Business Transformation, Leadership Development, Talent Development
+Juergen Mueller
+2021
+Board of Directors, Traefik Labs SAS, Lyon, France
+Prepaid expenses primarily consist of prepayments for hyperscalers, support services, and software
+royalties. Other tax assets primarily consist of value-added tax (VAT).
+Transfers of equity securities from Level 2 to Level 1, which occurred because disposal restrictions
+lapsed and deducting a discount for such restriction was no longer necessary, were €1,030 million in
+2021 (2020: €91 million), while transfers from Level 1 to Level 2 did not occur at all.
+Level 3 Fair Value Disclosures
+The following table shows the reconciliation of fair values from the opening to the closing balances for
+our unlisted equity securities and call options on equity shares classified as Level 3 fair values:
+Reconciliation of Level 3 Fair Values
+€ millions
+1/1
+Transfers
+Into Level 3
+Out of Level 3
+Purchases
+Sales
+Gains/losses
+Included in financial income, net
+2021
+2020
+2,508
+1,896
+12/31
+-183
+256
+Included in exchange differences in other comprehensive income
+501
+2,348
+Transfers Between Levels 1 and 2
+-233
+728
+1,076
+-201
+-455
+0
+0
+-852
+4,881
+For other non-derivative financial assets/liabilities and variable rate financial debt, it is assumed that
+their carrying value reasonably approximates their fair values.
+Level 2
+Supervisory Board, ING-DiBa AG, Frankfurt, Germany
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+Interrelationship Between
+Significant Unobservable Inputs
+and Fair Value Measurement
+Туре
+Fair Value
+Hierarchy
+Determination of Fair Value/Valuation
+Technique
+Significant Unobservable
+Inputs
+Interest rate swaps
+Fixed-rate private placements/ loans (financial
+liabilities)
+Discounted cash flows
+Quoted prices in an active market
+Level 1
+Fixed-rate bonds (financial liabilities)
+Financial liabilities
+Future cash outflows for fixed interest and principal are
+discounted over the term of the respective contracts using
+the market interest rates as at the reporting date.
+Determination of Fair Value/Valuation Technique
+Туре
+Financial Instruments Not Measured at Fair Value
+ΝΑ
+ΝΑ
+Discounted cash flow. Expected future
+cash flows are estimated based on
+forward interest rates from observable
+yield curves and contract interest rates,
+discounted at a rate that reflects the
+credit risk of the counterparty.
+Level 2
+Fair Value Hierarchy
+(G.2) Other Tax Liabilities
+2,508
+1,789
+Total
+588
+242
+830
+495
+187
+682
+219
+53
+272
+209
+52
+261
+807
+295
+1,102
+704
+29
+12
+53
+26
+Board of Directors, Toucan Toco SAS, Paris, France
+49
+Non-Current
+3,247
+1,321
+4,261
+2,628
+1,633
+943
+239
+1,926
+Change in unrealized gains/losses in profit or loss for equity investments held at the
+end of the reporting period
+Current
+Non-Current
+376
+Transfers out of Level 3 are due to initial public offerings of the respective investees. Changing the
+unobservable inputs to reflect reasonably possible alternative assumptions would not have a material
+impact on the fair values of our unlisted equity securities held as FVTPL as at the reporting date.
+251/338
+€ millions
+Prepaid expenses
+Other tax assets
+Total
+SAP
+Other non-financial assets
+Prepaid expenses and other tax
+assets as % of 44 Other non-
+financial assets
+€ millions
+Other tax liabilities
+Other non-financial liabilities
+Other tax liabilities as % of 4 Other
+non-financial liabilities
+252/338
+Current
+2020
+2021
+(G.1) Prepaid Expenses and Other Tax Assets
+This section provides additional disclosures on miscellaneous topics, including information pertaining
+to the Executive Board, the Supervisory Board, related party transactions, and other corporate
+governance topics.
+Section G - Other Disclosures
+Total
+Information
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Stakeholders
+Combined Group
+To Our
+SAP Integrated Report 2021
+Additional
+Margret Klein-Magar 1, 2, 3, 8
+11
+Vice President, Head of SAP Alumni Relations
+Retirement Pension Plan for Executive Board Members
+€ thousands
+DBO 12/31
+Annual pension entitlement
+2021
+2020
+2019
+3,435
+The defined benefit obligation (DBO) for pensions to Executive Board members and the annual
+pension entitlement of the members of the Executive Board on reaching age 62 based on
+entitlements from performance-based and salary-linked plans were as follows:
+3,520
+108
+98
+215
+The total annual compensation of the Supervisory Board members is as follows:
+Supervisory Board Compensation
+€ thousands
+Total compensation
+Thereof fixed compensation
+5,497
+44,447
+11,173
+6,356
+2,825
+461
+487
+2,056
+3
+1
+769
+50,574
+28,677
+52,596
+Share-Based Payment for Executive Board Members
+Number of share units granted
+Total expense in € thousands
+2021
+2020
+2019
+238,428
+201,690
+344,047
+Thereof committee remuneration
+488
+2021
+2019
+2021
+2020
+2019
+Payments
+2,159
+3,010
+2,081
+DBO 12/31
+€ thousands
+42,313
+44,306
+SAP did not grant any compensation advance or credit to, or enter into any commitment for the
+benefit of, any member of the Executive Board or Supervisory Board in 2021, 2020, or 2019.
+Detailed information about the different elements of the compensation is disclosed in the
+Compensation Report and in the Annual Report on Form 20-F, both of which are available on SAP's
+Web site.
+(G.6)
+Related Party Transactions Other Than Board
+Compensation
+Certain Supervisory Board members of SAP SE currently hold, or held within the last year, positions of
+significant responsibility with other entities. We have relationships with certain of these entities in the
+ordinary course of business, whereby we buy and sell products, assets, and services at prices
+believed to be consistent with those negotiated at arm's length between unrelated parties.
+Companies controlled by Hasso Plattner, Chairperson of the Supervisory Board of SAP SE and Chief
+Software Advisor of SAP, engaged in the following transactions with SAP: providing consulting services
+to SAP, receiving sport sponsoring from SAP, and making purchases of SAP products and services.
+Occasionally, members of the Executive Board of SAP SE obtain services from SAP for which they pay
+a consideration consistent with those negotiated at arm's length between unrelated parties.
+All amounts related to the abovementioned transactions were immaterial to SAP in all periods
+presented.
+In total, we sold products and services to companies controlled by members of the Supervisory Board
+in the amount of €2 million (2020: €3 million), we bought products and services from such companies
+in the amount of €4 million (2020: €2 million), and we provided sponsoring and other financial support
+to such companies in the amount of €3 million (2020: €4 million). Outstanding balances at year end
+from transactions with such companies were €0 million (2020: €0 million) for amounts owed to such
+companies and €0 million (2020: €0 million) for amounts owed by such companies. All of these
+balances are unsecured and interest-free and settlement is expected to occur in cash. Commitments
+(the longest of which is for 2 years) made by us to purchase further goods or services from these
+companies and to provide further sponsoring and other financial support amount to €6 million as at
+December 31, 2021 (2020: €10 million).
+In total, we sold services to members of the Executive Board and the Supervisory Board in the
+amount of €0 million (2020: €0 million), and we received services from members of the Supervisory
+Board (including services from employee representatives on the Supervisory Board in their capacity
+as employees of SAP) in the amount of €2 million (2020: €2 million). Amounts owed, but not yet paid,
+to Supervisory Board members from these transactions were €0 million as at December 31, 2021
+(2020: €0 million). All of these balances are unsecured and interest-free and settlement is expected to
+occur in cash.
+For information about the compensation of our Executive Board and Supervisory Board members, see
+Note (G.5).
+44,043
+Payments to/DBO for Former Executive Board Members
+such compensation is for their services as employees only and is unrelated to their status as
+members of the Supervisory Board.
+Information
+3,856
+3,755
+3,770
+3,176
+3,149
+3,218
+680
+606
+553
+The Supervisory Board members do not receive any share-based payment for their services. As far as
+members who are employee representatives on the Supervisory Board receive share-based payment,
+259/338
+260/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+2020
+Further, we have relationships to associated entities. In total, we sold products and services to these
+entities in the amount of €6 million (2020: €2 million), we bought products and services from such
+464
+28,189
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+Senior Operations Manager
+Member of the SAP SE Works Council and Member of the SAP SE Works Council (Europe)
+Helmut Stengele (from October 29, 2021)
+On Early Retirement
+Heike Steck¹, 4, 5, 7, 8
+Dr. Rouven Westphal (from May 12, 2021)³, 5,
+Member of the Executive Board of the Hasso Plattner Foundation, Potsdam, Germany, and Managing
+Director of the General Partner of HPC Germany GmbH & Co. KG, Potsdam, Germany
+Advisory Board, Sharks Sports & Entertainment LLC, San José, CA, United States
+Dr. Gunnar Wiedenfels³,5
+Chief Financial Officer, Discovery, Inc., New York, NY, United States
+Board of Directors, Motor Trend Group, LLC, El Segundo, CA, United States (until July 1, 2021)
+Board of Directors, OWN LLC, West Hollywood, CA, United States
+James Wright¹, 3, 4, 5
+Chairperson of the SAP SE Works Council (Europe)
+5,6
+Combined Group
+Stakeholders
+To Our
+Board of Directors, Kili Technology SAS, Paris, France (from July 26, 2021)
+Board of Directors, 2121 Atelier, Inc., Brooklyn, NY, United States (from November 18, 2021)
+Board of Directors, Sweep SAS, Paris, France (from December 14, 2021)
+Dr. Qi Lu4, 7, 8
+CEO, MiraclePlus Ltd., Beijing, China
+Board of Directors, Pinduoduo Inc., Shanghai, China
+Chairperson of the Board of Directors, Pine Field Holding Limited, Cayman Islands
+Chairperson of the Board of Directors, Pine Field Holding Limited, Hong Kong, China
+Chairperson of the Board of Directors, Pine Field Ltd., Beijing, China
+Gerhard Oswald 5,8
+Managing Director of Oswald Consulting GmbH, Walldorf, Germany
+Advisory Board, TSG 1899 Hoffenheim Fußball-Spielbetriebs GmbH, Sinsheim, Germany
+Christine Regitz 1, 2, 4, 5, 8
+Vice President, User Experience
+Vice President, Head of Women in Tech@SAP
+Dr. Friederike Rotsch 2, 3, 6, 7, 8
+Group General Counsel and Head of Group Legal & Compliance, Merck KGaA, Darmstadt, Germany
+257/338
+258/338
+SAP
+SAP Integrated Report 2021
+Supervisory Board Members Who Left During 2021
+49,771
+Pekka Ala-Pietilä (until May 12, 2021)
+Christa Vergien-Knopf (until August 9, 2021)
+€ thousands
+Short-term employee benefits
+Share-based payment
+Subtotal
+Post-employment benefits
+Thereof defined-benefit
+Thereof defined-contribution
+Total
+Executive Board Compensation
+2021
+2019
+25,015
+5,094
+17,378
+25,095
+23,095
+32,393
+50,110
+2020
+In the table "Share-Based Payment for Executive Board Members," the share-based payment expense
+is the amount recorded in profit or loss under IFRS 2 (Share-Based Payment) in the respective period.
+The total compensation of the Executive Board members for each of the years 2021, 2020, and 2019
+was as follows:
+The share-based payment amounts disclosed below in the table “Executive Board Compensation" are
+based on the grant date fair value of the share units in the respective year. In 2021 and 2020, share
+units were issued to the Executive Board members under the LTI 2020 and in 2019 under the
+LTI 2016 Plan.
+Accounting Policy
+Ralf Zeiger (until October 28, 2021)
+Appointed by the SAP SE Works Council (Europe)
+2 Member of the Company's Personnel and Governance Committee
+3 Member of the Company's Audit and Compliance Committee
+4 Member of the Company's Technology and Strategy Committee
+5 Member of the Company's Finance and Investment Committee
+6 Member of the Company's Nomination Committee
+7 Member of the Company's People and Culture Committee
+8 Member of the Company's China Strategy Committee
+SAP
+SAP Integrated Report 2021
+To Our
+Combined Group
+Stakeholders
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+(G.5) Executive and Supervisory Board Compensation
+Panagiotis Bissiritsas (until July 7, 2021)
+Deputy Chairperson (until December 31, 2021)
+Stakeholders
+Board of Directors, nlyte Software Ltd., London, United Kingdom (until October 5, 2021)
+Board of Directors, Citymapper Ltd., London, United Kingdom
+Board of Directors, Tim Talent SAS, Paris, France
+Board of Directors, Peakon Aps, Copenhagen, Denmark (until March 9, 2021)
+Board of Directors, Virtuo Technologies, Paris, France
+Board of Directors, Qubit Digital Ltd., London, United Kingdom (until October 10, 2021)
+Board of Directors, Aircall.io, New York City, NY, United States
+Board of Directors, Dashlane, Inc., New York, NY, United States
+Board of Directors, Vestiaire Collective SA, Levallois-Perret, France (until April 2, 2021)
+Managing Partner Balderton Capital, London, United Kingdom
+Bernard Liautaud², 4
+Member of the SAP Germany SE & Co. KG Works Council and Member of the SAP SE Works
+Council (Europe)
+3,7
+Peter Lengler (from August 10, 2021)¹, ³,
+Value Advisor Expert
+Additional
+Chairperson of the Spokespersons' Committee of Senior Managers of SAP SE
+Monika Kovachka-Dimitrova 1, 2, 4, 7
+Chief Operations Expert
+Member of the SAP SE Works Council (Europe)
+Information
+SAP Integrated Report 2021
+SAP
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+To Our
+45,239
+6,215,786
+1,697
+SAP America, Inc., Newtown Square, PA, United States
+100
+-309,232
+Management Report
+8,731
+SAP Argentina S.A., Buenos Aires, Argentina
+100
+162,335
+60,404
+19,337,747
+1,235,416
+100
+SAP (UK) Limited, Feltham, United Kingdom
+810
+264,263
+127,116
+1,092,657
+100
+SAP (Schweiz) AG, Biel, Switzerland
+16
+6,147
+-213,060
+-1,577
+1,106,711
+3,129
+100
+67,259
+740,871
+16
+100
+SAP Deutschland SE & Co. KG, Walldorf, Germany
+3,012
+700,086
+139,927
+1,036,257
+100
+SAP Canada Inc., Toronto, Canada
+2,379 16
+44,060
+-22,415
+467,512
+100
+1,205
+67,725
+44,741
+SAP (China) Co., Ltd., Shanghai, China
+100
+Consolidated Financial
+Statements IFRS
+SAP Australia Pty Ltd, Sydney, Australia
+16
+1,110
+-6,721
+7,457
+550,036
+100
+SAP Asia Pte. Ltd., Singapore, Singapore
+1,132
+3,380
+499,785
+-1,440,737
+Total Revenue
+Owner-
+ship
+Name and Location of Company
+Major Subsidiaries
+Subsidiaries
+Additional
+Information
+Sustainability
+Consolidated Financial Further Information on
+Statements IFRS
+Management Report
+Combined Group
+Stakeholders
+To Our
+SAP
+SAP Integrated Report 2021
+290
+-18
+39
+269
+-12
+17
+264
+Total
+The additions relate to legal entities added in connection with acquisitions and foundations. The
+disposals are mainly due to mergers, and liquidations of legal entities.
+12/31/2021
+Disposals
+Additions
+12/31/2020
+in 2021¹
+Profit/Loss
+(-) After Tax
+Total Equity
+for 2021¹
+898,901
+100
+Qualtrics, LLC, Wilmington, DE, United States
+3,485
+7,878,818
+188,665
+1,621,912
+100
+Concur Technologies, Inc., Bellevue, WA, United States
+1,772
+5,276,448
+4,921,867
+1,318,872
+8,228,091
+100
+1,281
+34,185
+9,481
+80,790
+100
+Ariba Technologies India Private Limited, Bangalore, India
+€ thousands
+€ thousands
+€ thousands
+%
+Foot-
+note
+Number of
+Employees as at
+12/31/20212
+as at
+12/31/20211
+Ariba, Inc., Palo Alto, CA, United States
+946,574
+1,794,013
+4,463
+83,428
+100
+SAP Services s.r.o., Prague, Czech Republic
+1,705
+50,793
+14,186
+209,533
+100
+SAP Service and Support Centre (Ireland) Limited, Dublin, Ireland
+11
+=1
+610
+443,701
+208,699
+708,927
+100
+SAP Nederland B.V., 's-Hertogenbosch, the Netherlands
+636
+651,935
+127,178
+858,772
+100
+Further Information on
+Sustainability
+16
+964
+111,265
+26,097
+2,074
+15,285
+1,191
+263/338
+100
+100
+AppGyver Inc., Indianapolis, IN, United States
+Apex Expert Solutions LLC, Chantilly, VA, United States
+16
+100
+100
+Ambin Properties Proprietary Limited, Johannesburg, South Africa
+Abakus Ukraine Limited Liability Company, Kiev, Ukraine
+100
+110405, Inc., Newtown Square, PA, United States
+100
+"SAP Kazakhstan" LLP, Almaty, Kazakhstan
+415,025
+%
+Ownership
+Name and Location of Company
+Other Subsidiaries³
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+264/338
+Footnote
+1,912,583
+100
+1,893
+359,149
+103,453
+105,770
+588,508
+100
+SAP Industries, Inc., Newtown Square, PA, United States
+633,680
+100
+SAP India Private Limited, Bangalore, India
+1,163
+23,817
+4,563
+133,643
+100
+SAP Hungary Rendszerek, Alkalmazások és Termékek az
+Adatfeldolgozásban Informatikai Kft., Budapest, Hungary
+1,506
+Disposals
+198,617
+1,099,071
+100
+SAP France S.A., Levallois-Perret, France
+791
+341,508
+29,557
+510,602
+100
+SAP España - Sistemas, Aplicaciones y Productos en la Informática,
+S.A., Madrid, Spain
+7,9
+2,125
+1,122,929
+276
+SAP Italia Sistemi Applicazioni Prodotti in Data Processing S.p.A.,
+Vimercate, Italy
+608,787
+159,933
+575,665
+100
+SAP Labs, LLC, Palo Alto, CA, United States
+9,882
+205,586
+60,855
+628,073
+100
+SAP Labs India Private Limited, Bangalore, India
+1,125
+21,544
+SAP México S.A. de C.V., Mexico City, Mexico
+3,321
+100
+SAP Labs Bulgaria EOOD, Sofia, Bulgaria
+1,318
+458,761
+138,785
+1,251,106
+100
+SAP Japan Co., Ltd., Tokyo, Japan
+750
+265,312
+37,154
+615,004
+100
+78,971
+Additions
+SAP
+Entities Consolidated in the Financial Statements
+100
+Systems Applications Products (Africa Region) Proprietary Limited, Johannesburg, South Africa
+Systems Applications Products (Africa) Proprietary Limited, Johannesburg, South Africa
+Systems Applications Products (South Africa) Proprietary Limited, Johannesburg, South Africa
+Systems Applications Products Nigeria Limited, Victoria Island, Nigeria
+Technology Management Associates Inc., Chantilly, VA, United States
+100
+100
+70
+16
+100
+16
+100
+Temkin Group, LLC, Wilmington, DE, United States
+TM Property Holdings, LLC, Wilmington, DE, United States
+TomorrowNow, Inc., Bryan, TX, United States
+100
+100
+100
+TRX Europe Limited, Feltham, United Kingdom
+100
+TRX Technologies India Private Limited, Bangalore, India
+100
+TRX UK Limited, Feltham, United Kingdom
+TRX, Inc., Bellevue, WA, United States
+Usermind d.o.o Beograd, Belgrade, Serbia
+Usermind International, Inc., Seattle, WA, United States
+100
+10
+100
+100
+4
+Sybase, Inc., San Ramon, CA, United States
+100
+100
+100
+Statwing, LLC, Wilmington, DE, United States
+Success Factors (Philippines), Inc., Pasig City, Philippines
+SuccessFactors Cayman, Ltd., Grand Cayman, Cayman Islands
+SuccessFactors, Inc., Newtown Square, PA, United States
+SurveyVitals A Qualtrics Company, LLC, Wilmington, DE, United States
+Sybase Angola, LDA, Luanda, Angola
+100
+4
+100
+4
+100
+4
+100
+4
+100
+4
+100
+100
+16
+100
+100
+100
+4
+100
+45
+15
+Sybase Iberia, S.L., Madrid, Spain
+Sybase International Holdings Corporation, LLC, San Ramon, CA, United States
+4
+Usermind International, LTD, Bristol, United Kingdom
+Usermind, Inc., Seattle, WA, United States
+Volume Integration, Inc., Reston, VA, United States
+Name and Location of Company
+Joint Arrangements and Investments in Associates
+China DataCom Corporation Limited, Guangzhou, China
+Procurement Negócios Eletrônicos S/A, Rio de Janeiro, Brazil
+SAP Fioneer GmbH, Walldorf, Germany
+Name and Location of Company
+Equity Investments with Ownership of at Least 5%
+83North IV, L.P., Hertzalia, Israel
+Adverity GmbH, Vienna, Austria
+Alation, Inc., Redwood City, CA, United States
+Alchemist Accelerator Fund I LLC, San Francisco, CA, United States
+Aleph-Bigg SPV, L.P., Grand Cayman, Cayman Islands
+All Tax Platform Solucoes Tributarias S.A., São Paulo, Brazil
+Amplify Partners II L.P., Menlo Park, CA, United States
+Amplify Partners III, L.P., Menlo Park, CA, United States
+Amplify Partners IV, L.P., Menlo Park, CA, United States
+Amplify Partners Select Fund IV, L.P., Menlo Park, CA, United States
+Amplify Partners, L.P., Menlo Park, CA, United States
+BGS Holdings, Inc., Austin, TX, United States
+Bitonic Technology Labs, Inc., Karnataka, India
+Blue Yard Capital 1 Alternative GmbH & Co. KG, Berlin, Germany
+Blue Yard Capital | GmbH & Co. KG, Berlin, Germany
+Blue Yard Crytpo 1, L.P., Hot Springs Village, AR, United States
+Boldstart Ventures V, L.P., New York, NY, United States
+Boldstart Ventures VI, L.P., New York, NY, United States
+Brightfield Holdings, Inc., New York, NY, United States
+Ownership
+%
+28
+17
+20
+Other Equity Investments
+17 Dissolved on January 7, 2022, by merger into SAP SE.
+15 Pursuant to Angola Tax Law and Presidential Decree no. 147/13 of October 1, 2013, the entity does not qualify as being a Large
+Taxpayer and therefore is exempt from having its financial statements audited in respect of its financial year ended December 31, 2021.
+16 Entity with support letter issued by SAP SE.
+14 Pursuant to section 211 (3) of the New Zealand Companies Act 1993 and section 45 (2) of the Financial Reporting Act 2013, the entity
+had approved exclusions and is not required to lodge audited financial statements in respect of its financial year ended
+September 30, 2021.
+100
+4
+100
+4
+100
+1 These figures are based on our local IFRS financial statements prior to eliminations resulting from consolidation and therefore do not
+reflect the contribution of these companies included in the Consolidated Financial Statements. The translation of the equity into Group
+currency is based on period-end closing exchange rates, and on average exchange rates for revenue and net income/loss.
+2 As at December 31, 2021, including managing directors, in FTE.
+3 Figures for profit/loss after tax and total equity pursuant to HGB, section 285 and section 313 are not disclosed if they are of minor
+significance for a fair presentation of the profitability, liquidity, capital resources, and financial position of SAP SE, pursuant to HGB,
+section 313 (2) sentence 3 no. 4 and section 286 (3) sentence 1 no. 1.
+4 Consolidated for the first time in 2021.
+5 Agreements with the other shareholders provide that SAP SE fully controls the entity.
+6 SAP SE has the following structured entities: SAP.io Fund, L.P., Sapphire Fund Investments II Holdings, LLC, Sapphire Fund Investments
+II, L.P., Sapphire Fund Investments III, L.P., Sapphire SAP HANA Fund of Funds, L.P., Sapphire Ventures Fund I, L.P., Sapphire Ventures
+Fund II, L.P., Sapphire Ventures Fund III, L.P., Sapphire Ventures Fund IV, L.P., Sapphire Ventures Fund V, L.P., Sapphire Ventures Fund
+269/338
+270/338
+SAP
+Signavio, Inc., Burlington, VT, United States
+SAP Integrated Report 2021
+Combined Group
+Stakeholders
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+VI, L.P., SAPV (Mauritius). The results of operations of these entities are included in SAP's consolidated financial statements in accordance
+with IFRS 10 (Consolidated Financial Statements).
+7 Entity whose personally liable partner is SAP SE.
+8 Entity with (profit and) loss transfer agreement.
+9 Pursuant to HGB, section 264 (3) or section 264b, the subsidiary is exempt from applying certain legal requirements to their statutory
+stand-alone financial statements including the requirement to prepare notes to the financial statements and a review of operations, the
+requirement of independent audit, and the requirement of public disclosure.
+10 Pursuant to section 480 of the UK Companies Act 2006, the entity is exempt from having its financial statements audited on the grounds
+that the entity is entitled to the benefits from a dormant entity exemption in respect of its financial year ended December 31, 2021.
+11 Pursuant to article 2:403 of the Dutch Civil Code, the entity is exempt from applying certain legal requirements to their statutory stand-
+alone financial statements including the requirement to prepare the financial statements, the requirement of independent audit, and the
+requirement of public disclosure, on the basis that SAP SE has provided a guarantee of the entity's liabilities in respect of its financial year
+ended December 31, 2021, or in respect of its financial year ended September 30, 2021, respectively.
+12 Pursuant to Irish Companies Act 2014, chapter 16 of Part 6, section 365, the entity is exempt from having its financial statements
+audited on the grounds that the entity is entitled to the benefits from a dormant entity exemption in respect of its financial year ended
+December 31, 2021.
+13 Pursuant to article 727a, paragraph 2 of the Swiss Code of Obligations, the entity is exempt from having its financial statements audited
+in respect of its financial year ended December 31, 2021, or in respect of its financial year ended September 30, 2021, respectively.
+To Our
+Signavio UK Ltd, Birmingham, United Kingdom
+Signavio Sweden AB, Stockholm, Sweden
+Signavio Schweiz GmbH, Zug, Switzerland
+0
+0
+0
+0
+0
+0
+0
+0
+0
+0
+0
+0
+0
+1
+1
+0
+2
+1
+0
+7
+5
+2
+10
+7
+3
+12
+9
+0
+0
+0
+0
+Investments
+Scope of Consolidation, Subsidiaries and Other Equity
+(G.9)
+Additional
+Information
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Stakeholders
+Combined Group
+To Our
+SAP Integrated Report 2021
+4
+262/338
+261/338
+3
+Other than that, no events have occurred since December 31, 2021, that have a material impact on
+the Company's Consolidated Financial Statements.
+Events After the Reporting Period
+(G.8)
+Audit fees are the aggregate fees charged by KPMG for auditing our consolidated financial statements
+and the statutory financial statements of SAP SE and its subsidiaries. Audit-related fees are fees
+charged by KPMG for assurance and related services that are reasonably related to the performance
+of the audit, for service organization attestation procedures, and fees charged by KPMG for services
+regarding the initial public offering of Qualtrics.
+10
+8
+3
+14
+10
+3
+19
+13
+6
+0
+On January 27, 2022, SAP announced its intent to acquire a majority stake of Taulia, a leading
+provider of working capital management solutions. The acquisition is expected to further expand
+SAP's Business Network capabilities and strengthen SAP's solutions for the CFO office. The
+acquisition is expected to close in March 2022, following completion of customary closing conditions
+and regulatory approvals.
+12/31/2019
+12
+3
+€ millions
+Additional
+Information
+Name and Location of Company
+Signavio ANZ Pty Ltd, Melbourne, Australia
+Signavio Benelux B.V., Amsterdam, the Netherlands
+Ownership
+Footnote
+100
+4
+100
+4
+Signavio France S.A.S., Paris, France
+100
+4
+Signavio GmbH, Berlin, Germany
+100
+4, 17
+Signavio India Private Limited, Gurugram, India
+100
+4
+Signavio Italia S.r.l., Milan, Italy
+100
+4
+Signavio Japan KK, Tokyo, Japan
+100
+4
+Signavio Pte. Ltd., Singapore, Singapore
+Audit fees
+Audit-related fees
+Tax fees
+All other fees
+KPMG Firms
+Total
+Foreign
+KPMG AG
+(Germany)
+Total
+Foreign
+KPMG Firms
+KPMG AG
+(Germany)
+(Germany) KPMG Firms
+Total
+Foreign
+KPMG AG
+2019
+2020
+8
+2021
+Principal Accountant Fees and Services
+(G.7)
+For more information about the SAP Fioneer divestment (SAP Fioneer is an associated entity of SAP
+and thus treated as a related party), see Note (D.1) and Note (D.6).
+companies in the amount of €37 million (2020: €0 million). Outstanding balances at year end from
+transactions with such companies were €15 million (2020: €0 million) for amounts owed to such
+companies and €4 million (2020: €0 million) for amounts owed by such companies. All of these
+balances are unsecured and interest-free, and settlement is expected to occur in cash.
+Information
+Additional
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+Total
+At the Annual General Meeting of Shareholders held on May 12, 2021, our shareholders elected
+KPMG AG Wirtschaftsprüfungsgesellschaft (KPMG) as SAP's independent auditor for 2021. KPMG has
+been the Company's principal auditor since the fiscal year 2002. Bodo Rackwitz has signed as auditor
+responsible for audit of the financial reporting and the group reporting of SAP SE since the fiscal year
+2018. KPMG and other firms in the global KPMG network charged the following fees to SAP for audit
+and other professional services related to 2021 and the previous years:
+AppGyver Oy., Helsinky, Finland
+SAP Brasil Ltda, São Paulo, Brazil
+4
+100
+SAP France Holding S.A., Levallois-Perret, France
+100
+SAP Foreign Holdings GmbH, Walldorf, Germany
+100
+SAP Finland Oy, Espoo, Finland
+100
+SAP Financial, Inc., Toronto, Canada
+100
+SAP Estonia OÜ, Tallinn, Estonia
+8,9
+100
+SAP Erste Beteiligungs- und Vermögensverwaltungs GmbH, Walldorf, Germany
+100
+SAP EMEA Inside Sales S.L., Madrid, Spain
+16
+100
+SAP Egypt LLC, Cairo, Egypt
+16
+100
+SAP East Africa Limited, Nairobi, Kenya
+100
+SAP Dritte Beteiligungs- und Vermögensverwaltungs GmbH, Walldorf, Germany
+100
+SAP Danmark A/S, Copenhagen, Denmark
+16
+100
+100
+100
+SAP Global Marketing, Inc., New York, NY, United States
+16
+100
+SAP Hosting Beteiligungs GmbH, St. Leon-Rot, Germany
+100
+SAP Latvia SIA, Riga, Latvia
+100
+SAP Labs Korea, Inc., Seoul, South Korea
+100
+SAP Labs Israel Ltd., Ra'anana, Israel
+100
+SAP Labs France S.A.S., Mougins, France
+100
+SAP Korea Ltd., Seoul, South Korea
+16
+100
+SAP Israel Ltd., Ra'anana, Israel
+100
+SAP Ireland US - Financial Services Designated Activity Company, Dublin, Ireland
+12
+100
+SAP Ireland Limited, Dublin, Ireland
+100
+SAP Investments, Inc., Wilmington, DE, United States
+100
+100
+100
+8,9
+100
+16
+100
+100
+SAP India (Holding) Pte. Ltd., Singapore, Singapore
+SAP International Panama, S.A., Panama City, Panama
+SAP International, Inc., Miami, FL, United States
+SAP Hellas Single Member S.A., Athens, Greece
+SAP Hong Kong Co., Ltd., Hong Kong, China
+SAP Malaysia Sdn. Bhd., Kuala Lumpur, Malaysia
+100
+100
+SAP Andina y del Caribe C.A., Caracas, Venezuela
+SAP AZ LLC, Baku, Azerbaijan
+100
+100
+100
+100
+4
+100
+4
+100
+100
+4
+100
+4
+100
+Qualtrics Netherlands B.V., Amsterdam, the Netherlands
+Qualtrics Provo HQ, LLC, Wilmington, DE, United States
+Qualtrics Sweden AB, Stockholm, Sweden
+Qualtrics Switzerland AG, Zurich, Switzerland
+Qualtrics Technologies Brasil Ltda., São Paulo, Brazil
+Qualtrics Technologies Spain, S.L.U., Madrid, Spain
+QUL Technologies Limited, London, United Kingdom
+SAP (Beijing) Software System Co., Ltd., Beijing, China
+SAP (China) Holding Co., Ltd., Beijing, China
+4
+100
+Qualtrics Mexico, S. DE R.L. DE C.V., Mexico City, Mexico
+4
+100
+Qualtrics Korea, LLC, Seoul, South Korea
+100
+Qualtrics Japan LLC, Tokyo, Japan
+4
+100
+Qualtrics Ireland Limited, Dublin, Ireland
+74
+Qualtrics International Inc., Wilmington, DE, United States
+4
+100
+16
+16
+SAP
+SAP d.o.o., Zagreb, Croatia
+SAP Cyprus Limited, Nicosia, Cyprus
+SAP ČR, spol. s r.o., Prague, Czech Republic
+SAP Costa Rica, S.A., San José, Costa Rica
+SAP Colombia S.A.S., Bogotá, Colombia
+100
+100
+SAP CIS, LLC, Moscow, Russia
+SAP Chile Limitada, Santiago de Chile, Chile
+11
+100
+SAP Business Services Center Nederland B.V., 's-Hertogenbosch, the Netherlands
+100
+SAP Bulgaria EOOD, Sofia, Bulgaria
+100
+100
+Footnote
+Ownership
+SAP Beteiligungs GmbH, Walldorf, Germany
+SAP Belgium – Systems, Applications and Products S.A., Brussels, Belgium
+Name and Location of Company
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+Stakeholders
+To Our
+SAP Integrated Report 2021
+100
+100
+100
+100
+SAP Zweite Beteiligungs- und Vermögensverwaltungs GmbH, Walldorf, Germany
+SAP.io Fund, L.P., Austin, TX, United States
+100
+SAP West Balkans d.o.o., Belgrade, Serbia
+100
+SAP Vietnam Company Limited, Ho Chi Minh City, Vietnam
+100
+SAP Vierte Beteiligungs- und Vermögensverwaltungs GmbH, Walldorf, Germany
+8,9
+100
+SAP Ventures Investment GmbH, Walldorf, Germany
+100
+SAP UAB, Vilnius, Lithuania
+100
+SAP Türkiye Yazilim Üretim ve Ticaret A.Ş., Istanbul, Turkey
+100
+SAP Training and Development Institute FZCO, Dubai, United Arab Emirates
+100
+SAP Technologies Inc., Palo Alto, CA, United States
+100
+SAP Taiwan Co., Ltd., Taipei, Taiwan
+100
+SAP Systems, Applications and Products in Data Processing (Thailand) Ltd., Bangkok, Thailand
+100
+SAP System Application and Products Asia Myanmar Limited, Yangon, Myanmar
+100
+SAP Svenska Aktiebolag, Stockholm, Sweden
+5,16
+49
+SAP Software and Services LLC, Doha, Qatar
+100
+100
+8,9
+6
+Combined Group
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+6
+100
+4,6
+0
+6
+0
+6
+0
+6
+0
+6
+0
+6
+0
+6
+0
+6
+0
+6
+0
+Sapphire Fund Investments II, L.P., Austin, TX, United States
+Sapphire Fund Investments III, L.P., Austin, TX, United States
+Sapphire SAP HANA Fund of Funds, L.P., Austin, TX, United States
+Sapphire Ventures Fund I, L.P., Austin, TX, United States
+Sapphire Ventures Fund II, L.P., Austin, TX, United States
+Sapphire Ventures Fund III, L.P., Austin, TX, United States
+Sapphire Ventures Fund IV, L.P., Austin, TX, United States
+Sapphire Ventures Fund V L.P., Austin, TX, United States
+Sapphire Ventures Fund VI, L.P., Austin, TX, United States
+SAPV (Mauritius), Ebene, Mauritius
+6
+100
+Sapphire Fund Investments II Holdings, LLC, Austin, TX, United States
+0
+SAP MENA FZ L.L.C., Dubai, United Arab Emirates
+100
+100
+SAP Philippines, Inc., Taguig City, Philippines
+SAP Perú S.A.C., Lima, Peru
+SAP Österreich GmbH, Vienna, Austria
+Name and Location of Company
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+268/338
+267/338
+16
+100
+100
+SAP North West Africa Ltd, Casablanca, Morocco
+SAP Norge AS, Oslo, Norway
+100
+SAP New Zealand Limited, Auckland, New Zealand
+11
+100
+SAP Nederland Holding B.V., 's-Hertogenbosch, the Netherlands
+5, 16
+49
+SAP Middle East and North Africa L.L.C., Dubai, United Arab Emirates
+16
+SAP Polska Sp. z o.o., Warsaw, Poland
+8,9
+Ownership
+100
+8,9
+100
+16
+75
+100
+100
+100
+8,9,16
+100
+100
+SAP Saudi Arabia Software Services Ltd, Riyadh, Kingdom of Saudi Arabia
+SAP Saudi Arabia Software Trading Ltd, Riyadh, Kingdom of Saudi Arabia
+SAP Sechste Beteiligungs- und Vermögensverwaltungs GmbH, Walldorf, Germany
+SAP Siebte Beteiligungs- und Vermögensverwaltungs GmbH, Walldorf, Germany
+SAP sistemi, aplikacije in produkti za obdelavo podatkov d.o.o., Ljubljana, Slovenia
+SAP Slovensko s.r.o., Bratislava, Slovakia
+SAP Retail Solutions Beteiligungsgesellschaft GmbH, Walldorf, Germany
+SAP Romania SRL, Bucharest, Romania
+SAP Puerto Rico GmbH, Walldorf, Germany
+SAP Public Services, Inc., Washington, DC, United States
+100
+SAP Projektverwaltungs- und Beteiligungs GmbH, Walldorf, Germany
+100
+SAP Portugal - Sistemas, Aplicações e Produtos Informáticos, Sociedade Unipessoal, Lda.,
+Porto Salvo, Portugal
+100
+SAP Portals Israel Ltd., Ra'anana, Israel
+100
+SAP Portals Holding Beteiligungs GmbH, Walldorf, Germany
+100
+SAP Portals Europe GmbH, Walldorf, Germany
+100
+16
+100
+16
+100
+Footnote
+Qualtrics India Private Limited, Mumbai, India
+100
+100
+100
+Footnote
+Ownership
+Concur Holdings (Netherlands) B.V., 's-Hertogenbosch, the Netherlands
+Name and Location of Company
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+100
+13
+100
+100
+Concur (Philippines) Inc., Makati City, Philippines
+Concur (Switzerland) GmbH, Zurich, Switzerland
+Concur Holdings (France) S.A.S., Levallois-Perret, France
+14
+100
+Concur (New Zealand) Limited, Wellington, New Zealand
+97
+Concur (Japan) Ltd., Tokyo, Japan
+8,9
+100
+Concur (Germany) GmbH, Frankfurt am Main, Germany
+100
+11
+Concur (France) S.A.S., Levallois-Perret, France
+Concur Technologies (Australia) Pty. Limited, Sydney, Australia
+Concur Technologies (Hong Kong) Limited, Hong Kong, China
+Concur Technologies (India) Private Limited, Bangalore, India
+Concur Technologies (Singapore) Pte. Ltd., Singapore, Singapore
+Concur Technologies (UK) Limited, Feltham, United Kingdom
+ConTgo Consulting Limited, Feltham, United Kingdom
+100
+Emarsys North America, Inc., Indianapolis, IN, United States
+100
+Emarsys Limited, Hong Kong, China
+100
+Emarsys Interactive Services GmbH, Berlin, Germany
+100
+100
+100
+100
+12
+100
+10
+100
+10
+100
+Emarsys İletişim Sistemleri Tic. Ltd Şti., Istanbul, Turkey
+Emarsys eMarketing Systems GmbH, Vienna, Austria
+Emarsys Beijing Limited, Beijing, China
+Delighted, LLC, Wilmington, DE, United States
+Datahug Limited, Dublin, Ireland
+Crystal Decisions (UK) Limited, Feltham, United Kingdom
+ConTgo Limited, Feltham, United Kingdom
+100
+100
+16
+100
+100
+100
+100
+100
+Concur (Czech) s.r.o., Prague, Czech Republic
+100
+100
+Callidus Software Ltd., Feltham, United Kingdom
+100
+Callidus Software Inc., San Ramon, CA, United States
+100
+Business Objects Software Limited (Trading as SAP Solutions), Dublin, Ireland
+100
+Business Objects Option, LLC, Wilmington, DE, United States
+11
+100
+11
+100
+Ariba Technologies Netherlands B.V., 's-Hertogenbosch, the Netherlands
+Business Objects Holding B.V., 's-Hertogenbosch, the Netherlands
+100
+Ariba Software Technology Services (Shanghai) Co., Ltd., Shanghai, China
+100
+Ariba Slovak Republic, s.r.o., Košice, Slovakia
+100
+Ariba International, Inc., Wilmington, DE, United States
+100
+Ariba International Singapore Pte. Ltd., Singapore, Singapore
+100
+Ariba International Holdings, Inc., Wilmington, DE, United States
+100
+Ariba India Private Limited, Gurugram, India
+16
+100
+Ariba Czech s.r.o., Prague, Czech Republic
+4
+10
+Callidus Software Pty. Ltd., Sydney, Australia
+100
+CallidusCloud (India) Private Limited, Hyderabad, India
+Concur (Canada), Inc., Toronto, Canada
+100
+CNQR Operations Mexico S. de. R.L. de. C.V., Mexico City, Mexico
+10
+100
+Clicktools Limited, Feltham, United Kingdom
+57
+ClearTrip Inc., George Town, Cayman Islands
+100
+ClearTrip Inc. (Mauritius), Ebene, Mauritius
+100
+C-Learning Pty. Ltd., Sydney, Australia
+4
+100
+Emarsys Pte. Ltd., Singapore, Singapore
+Clarabridge, Inc., Reston, VA, United States
+100
+Clarabridge UK Ltd, London, United Kingdom
+4
+100
+Clarabridge Netherlands B.V., Amsterdam, the Netherlands
+100
+Christie Partners Holding C.V., 's-Hertogenbosch, the Netherlands
+100
+CallidusCloud Pty. Ltd., Sydney, Australia
+100
+CallidusCloud Holdings Pty. Ltd., Sydney, Australia
+100
+CallidusCloud (Malaysia) Sdn. Bhd., Kuala Lumpur, Malaysia
+100
+4
+100
+SAP National Security Services, Inc., Newtown Square, PA, United
+States
+100
+100
+4
+100
+4
+100
+4
+100
+Footnote
+Ownership
+Quadrem Brazil Ltda., Rio de Janeiro, Brazil
+Quadrem Africa Pty. Ltd., Johannesburg, South Africa
+QSL Technologies Pte. Ltd., Singapore, Singapore
+QPL Technologies sp. z o.o., Kraków, Poland
+QIL Technologies Limited, Dublin, Ireland
+QAL Technologies Pty Ltd, Sydney, Australia
+QCL Techonologies Ltd., Toronto, Canada
+QDL Technologies GmbH, Munich, Germany
+QFL Technologies S.A.R.L., Paris, France
+Q (AGF2) Inc., Wilmington, DE, United States
+PT SAP Indonesia, Jakarta, Indonesia
+Plat.One Lab S.r.l., Genoa, Italy
+Plat.One Inc., Newtown Square, PA, United States
+OutlookSoft Deutschland GmbH, Walldorf, Germany
+Outerjoin, Inc., San Ramon, CA, United States
+OrientDB Limited, Feltham, United Kingdom
+Nihon Ariba K.K., Tokyo, Japan
+New Debden Merger Sub II LLC, Wilmington, DE, United States
+Market Metrix, A Clarabridge Company, LLC, Wilmington, DE, United States
+Market Metrix Singapore Pte. Ltd., Singapore, Singapore
+Market Metrix Iberia S.L., Barcelona, Spain
+Name and Location of Company
+Additional
+Information
+100
+Further Information on
+Sustainability
+100
+100
+Emarsys Pty Ltd, Sydney, Australia
+Qualtrics Hong Kong Limited, Hong Kong, China
+100
+Qualtrics Holdings Inc., Wilmington, DE, United States
+100
+Quadrem Peru S.A.C., Lima, Peru
+100
+Quadrem Overseas Cooperatief U.A., 's-Hertogenbosch, the Netherlands
+11
+100
+Quadrem Netherlands B.V., 's-Hertogenbosch, the Netherlands
+100
+Quadrem International Ltd., Hamilton, Bermuda
+100
+Quadrem Chile Ltda., Santiago de Chile, Chile
+100
+100
+100
+100
+100
+100
+100
+100
+100
+100
+99
+100
+100
+8,9
+10
+Consolidated Financial
+Statements IFRS
+100
+Combined Group
+8,9
+100
+hybris GmbH, Munich, Germany
+100
+hybris (U.S.) Corporation, Wilmington, DE, United States
+100
+Hipmunk, Inc., San Francisco, CA, United States
+100
+FreeMarkets Ltda., São Paulo, Brazil
+100
+Financial Fusion, Inc., San Ramon, CA, United States
+100
+Extended Systems, Inc., San Ramon, CA, United States
+ESS Cubed Procurement Proprietary Limited, Johannesburg, South Africa
+4
+100
+4
+100
+Engagor, Inc., Wilmington, DE, United States
+Engagor N.V., Ghent, Belgium
+100
+EMARSYS-Technologies Informatikai Szolgáltató Kft., Budapest, Hungary
+100
+Emarsys UK Ltd, London, United Kingdom
+100
+Emarsys Schweiz GmbH, Zurich, Switzerland
+Management Report
+Emarsys S.A.S., Levallois-Perret, France
+100
+Inxight Federal Systems Group, Inc., Wilmington, DE, United States
+100
+100
+100
+100
+100
+100
+16
+Stakeholders
+100
+100
+Loyalsys Technologies Israel Ltd., Tel Aviv, Israel
+265/338
+266/338
+SAP
+IP Asset Holdings, LLC, Provo, UT, United States
+SAP Integrated Report 2021
+To Our
+100
+100
+Loyalsys GmbH, Vienna, Austria
+100
+Lead Formix, Inc., Dublin, CA, United States
+Learning Heroes Ltd., Feltham, United Kingdom
+100
+10
+Learning Seat Borrowings Pty. Ltd., Sydney, Australia
+Learning Seat Group Pty. Ltd., Sydney, Australia
+100
+Learning Seat Pty. Ltd., Sydney, Australia
+LLC "Emarsys", Moscow, Russia
+LLC "SAP Labs", Moscow, Russia
+LLC "SAP Ukraine", Kiev, Ukraine
+100
+Learning Seat Holdings Pty. Ltd., Sydney, Australia
+Stakeholder Capitalism Metrics
+313
+GRI Content Index and UN Global Compact Communication on Progress
+304
+Non-Financial Notes: Environmental Performance
+302
+Non-Financial Notes: Social Performance
+Memberships, Partnerships, and Commitments
+Sustainable Procurement
+299
+Public Policy
+293
+296
+Waste and Water
+300
+325
+Information
+327
+The social and environmental data and information included in the SAP Integrated Report has been
+prepared in accordance with the GRI Standards: Core option. This option indicates that a report
+contains the minimum information needed to understand the nature of the organization, its material
+topics and related impacts, and how these are managed.
+289
+Information on Economic,
+Environmental, and Social
+Performance
+About This Further
+Additional
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+SASB Index
+Management Report
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+328
+Task Force on Climate-Related Financial Disclosure (TCFD)
+Combined Group
+Our Contribution to the UN Sustainable Development Goals
+Information
+Sustainability Management
+275/338
+Based on the assessment under these criteria, SAP management has concluded that, as at
+December 31, 2021, the Company's internal control over financial reporting was effective.
+SAP's management assessed the effectiveness of the Company's internal control over financial
+reporting as at December 31, 2021. In making this assessment, it used the criteria set forth by the
+Committee of Sponsoring Organizations of the Treadway Commission in Internal Control - Integrated
+Framework (2013).
+The management of SAP is responsible for establishing and maintaining adequate internal control
+over financial reporting as such term is defined in Rules 13a-15(f) and 15d-15(f) under the
+U.S. Securities Exchange Act of 1934. SAP's internal control over financial reporting is a process
+designed under the supervision of SAP's CEO and CFO to provide reasonable assurance regarding
+the reliability of financial reporting and the preparation of financial statements for external reporting
+purposes in accordance with International Financial Reporting Standards as issued by the
+International Accounting Standards Board.
+U.S. law requires that management submit a report on the effectiveness of internal control over
+financial reporting in the consolidated financial statements. For 2021, that report is as follows:
+Financial Statements
+276/338
+Consolidated
+Management's Annual Report
+Additional
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Stakeholders
+The Further Information on Economic, Environmental, and Social Performance includes information
+that is required to comply with the GRI Standards. In addition, we present our Connectivity model that
+shows the interrelations between social, environmental, and financial performance. We also report on
+our contribution towards the United Nations Sustainable Development Goals (SDGs) and respond to
+the recommendations of the Task Force on Climate-Related Financial Disclosure (TCFD).
+Starting in 2021, we map our reporting to two additional frameworks:
+on Internal Control over
+Financial Reporting in the
+SAP
+SAP Integrated Report 2021
+To Our
+286
+Stakeholder Engagement
+282
+Materiality
+278
+Connectivity of Financial and Non-Financial Indicators
+277
+About This Further Information on Economic, Environmental,
+and Social Performance
+Further Information about
+Economic, Environmental,
+and Social Performance
+Information
+Additional
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Stakeholders
+Combined Group
+288
+-
+Increasing regulatory pressure has also resulted in an urgent requirement for a reporting standard for
+environmental, social, and governance criteria. In response, organizations such as the Sustainability
+Accounting Standards Board (now part of the Value Reporting Foundation) and the Global Reporting
+Initiative are adapting and aligning their efforts to develop reporting systems that help investors make
+more sustainable decisions.
+The core "Stakeholder Capitalism Metrics" as proposed by the World Economic Forum's
+International Business Council (WEF IBC).
+SAP Integrated Report 2021
+SAP
+280/338
+279/338
+The VBA was founded by eight companies: BASF SE, Robert Bosch GmbH, Deutsche Bank AG,
+LafargeHolcim Ltd, Novartis International AG, Philip Morris International Inc, SAP SE, and SK Group.
+The organization is supported by the world's four largest accounting companies: Deloitte Touche
+Tohmatsu Limited, Ernst and Young Global Ltd, KPMG International Ltd, and PricewaterhouseCoopers
+International Limited. It is also supported by leading universities such as Harvard Business School,
+together with stakeholders from governments, civil societies, and standard-setting organizations. As at
+the end of 2021, the alliance consisted of 19 companies. By participating in the VBA's methodology
+Building on our many years of experience in connecting financial and non-financial measures, we
+cofounded the Value Balancing Alliance (VBA) in 2019. This alliance looks at ways in which
+businesses can better understand their societal and environmental impacts and formulate corporate
+strategies to address these areas.
+To Our
+Stakeholders
+In line with our purpose to help the world run better and improve people's lives, we have moved
+beyond financial measures to evaluate the consequences of our actions on society and the
+environment as well as the wider economy. As well as exploring cause-and-effect chains within SAP's
+own operations, we also measure positive and negative societal impacts across our complete value
+chain.
+Using the connectivity model as outlined above, we have been able to embed non-financial KPIs into
+our software solutions. This integrated approach to financial and non-financial performance is
+reflected in the solutions developed for climate action, circular economy, social responsibility and
+holistic steering and reporting.
+We will continue to share our approach and methodology with our customers to help them win in the
+marketplace. We believe that companies achieve higher profits – resulting from both greater cost
+efficiency as well as revenue growth - by addressing economic, social, and environmental
+considerations in a holistic and integrated manner. More importantly, these companies are better
+equipped to lead in the future, as they navigate the world's most pressing challenges and help bring
+about long-term sustainable change.
+By embedding this approach into our decision-making and quarterly business reviews, our
+sustainability performance steers our business alongside factors such as revenue and profit. Our goal
+is for all senior managers and experts at SAP to recognize - and be held accountable for – the fact
+that improving such measures as employee engagement also boosts financial performance.
+Embedding Non-Financial Performance Indicators into Our Solutions
+Our findings have helped us shift the conversation for managers, investors, employees, and other key
+stakeholders, and firmly establish non-financial indicators as playing a crucial role in our financial
+success. As a result, engaging employees or reducing our emissions is no longer seen as a nice-to-
+have, but rather as essential to carrying out a successful business strategy.
+Documenting the financial impact of non-financial indicators has helped us move closer to achieving
+our sustainability goals. Rather than simply stating the business case for social or environmental
+change, we also have the numbers to back it up.
+Promoting Sustainability Measures to Boost Financial
+Performance
+A New and Broader Focus
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Training: Money spent on offering training to employees positively impacts their employability,
+earnings, skills, and knowledge. However, it also results in “softer” impacts such as enhanced
+GHG: Our analysis enabled us to identify the GHG impact of each subsidiary and location, and we
+now have insights into which SAP locations have the highest CO2 footprints and which locations
+have the lowest. Negative impacts of GHG were monetized at €136 million and this has helped
+inform decision-making regarding our CO2-reduction strategy. It has also helped us quantify the
+investment required for offsetting emissions by funding alternative energy resources to achieve
+carbon neutrality in our operations by 2023.
+Analysis took place across multiple impact categories, and resulted, for example, in the following
+findings from the GHG and training categories:
+Wherever possible, we used primary data for the calculations. Where primary data was not available,
+we used proxies, modeling techniques, and assumptions that were well-defined and documented in
+the VBA method papers. Key stakeholders across all relevant lines of business were engaged in the
+pilot, which was sponsored by our CFO.
+Ending in November 2021, our second VBA pilot analyzed categories including GDP contribution,
+health and safety, training, consumptive water use, water pollution, greenhouse gas (GHG), air
+emissions, land use and biodiversity, and waste. We used data from our Integrated Report 2020, from
+our internal controlling and HR systems, and from our environmental management system. The
+analysis focused on our complete operations and our supply chain. An analysis of the "downstream"
+impacts resulting from customers' use of our software solutions and services will be piloted in the next
+phase.
+Piloting the Measurement of Non-Financial Impacts
+To help the European Union (EU) achieve its commitment to making Europe the first climate-neutral
+continent by 2050 as part of the European Green Deal, the VBA is acting as an advisor on EU
+regulatory activities. Furthermore, the VBA is working to help drive the establishment of a globally
+accepted system of standards for non-financial disclosure.
+We co-founded the VBA to support the development of a standardized methodology that helps
+companies, investors, and other stakeholders compare non-financial performance. These insights
+enable companies to create business value beyond revenue or profit growth while taking into
+consideration the long-term impacts of their business operations on the environment and society as a
+whole.
+Combined Group
+Accounting systems often ignore the value of environmental and societal impacts, leading to
+misallocation of resources. However, as is increasingly recognized by institutions such as Harvard
+Business School, monetary evaluation of these impacts has the potential to change accounting
+systems and transform capital markets. The development of impact-weighted accounting metrics is a
+necessary precondition for this.
+Meeting the Challenges of Non-Financial Value Measurement
+Environmental degradation, rising societal inequalities, and the COVID-19 pandemic have highlighted
+the need for corporate accountability and value creation beyond financial markets. However, most
+corporations are failing to tackle climate change, biodiversity loss, and inequality, because - as one of
+multiple reasons - decisions are based on insufficient information.
+development and piloting phases, SAP is playing an active part in shaping the future of impact
+measurement and valuation.
+Information
+Additional
+Further Information on
+Sustainability
+Having illustrated this impact with concrete numbers, we are now turning our focus to a broader
+perspective of impact (for example, see Our Contribution to the UN Sustainable Development Goals
+and A New and Broader Focus). We still strongly believe in the fundamental conclusions of the
+analysis, but do not see a need to continuously update specific monetary values on the well-
+established connections. This is because the values have not been subject to any large fluctuations
+over the years. Instead, they have increased steadily, as expected.
+The Software & IT Services Sustainability Accounting Standards prepared by the Sustainability
+Accounting Standards Board (SASB), now part of the Value Reporting Foundation.
+Information
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+At SAP, we have put a monetary value on how selected non-financial indicators impact our operating
+profit. For example, how well we engage with our employees and inspire them to commit to our
+purpose and strategy, support a healthy business culture, and succeed in reducing our carbon
+emissions.
+Where We Come From: Putting a Value on Non-Financial
+Performance Indicators
+Connectivity of Financial and
+Non-Financial Indicators
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+BHCI
+Management Report
+Combined Group
+To Our
+SAP Integrated Report 2021
+SAP
+278/338
+277/338
+Stakeholders
+Employee
+Engagement
+Employee
+Retention
+Women in
+Management
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP
+SAP Integrated Report 2021
+From 2014 to 2018, SAP used techniques such as linear regression analysis to document the financial
+impact of four non-financial indicators: the Business Health Culture Index, the Employee Engagement
+Index, employee retention, and carbon emissions. In the past, we assessed each indicator to see what
+a change of one percentage point (pp) (or 1% for carbon emissions) would mean for our operating
+profit. The results for 2018, for example, showed that a 1pp change in the Business Health Culture
+Index affected our operating profit by €90 million to €100 million (non-IFRS).
+To achieve this, we created cause-and-effect chains that show how specific actions we take at SAP
+lead to shifts in behavior. This behavior impacts our business and has a financial consequence.
+By doing so, we established more than just a correlation between non-financial and financial
+indicators. The cause-and-effect chains also reveal why and how something such as employee
+engagement ultimately leads to gains or losses in business performance. We believe that such
+insights are a prerequisite for fully modeling the financial impact of non-financial performance.
+Magnitude of Financial Impact
+Figure 1: Connectivity Between Social, Environmental, and Economic Performance. SAP's main KPIs
+are marked in orange.
+Total Energy
+Consumed
+Carbon
+Emissions
+Capability
+Building
+Customer
+Loyalty
+Profitability
+Social
+Investment
+Growth
+Additional
+To Our
+Reltio, Inc., Redwood Shores, CA, United States
+SAP
+Additional
+Information
+Local Globe VIII, L.P., St. Peter Port, Guernsey, Channel Islands
+Local Globe VII, L.P., St. Peter Port, Guernsey, Channel Islands
+Local Globe Opportunity Fund, L.P., St. Peter Port, Guernsey, Channel Islands
+LGVP F I LLC, Dover, DE, United States
+LeanData, Inc., Sunnyvale, CA, United States
+271/338
+Kaltura, Inc., New York, NY, United States
+JFrog, Ltd., Netanya, Israel
+Involve.ai, Inc., Santa Monica, CA, United States
+Integral Ad Science Holiding Corp., New York, NY, United States
+innoWerft Technologie- und Gründerzentrum Walldorf Stiftung GmbH, Walldorf, Germany
+Innovation Lab GmbH, Heidelberg, Germany
+Initialized CBH SPV LLC, Walnut, CA, United States
+JupiterOne, Inc., Morrisville, NC, United States
+272/338
+SAP
+SAP Integrated Report 2021
+Medable Inc., Palo Alto, CA, United States
+Matillion Ltd., Altrincham, United Kingdom
+Mango Capital 2020, L.P., Los Altos, CA, United States
+Mango Capital 2018, L.P., Los Altos, CA, United States
+Local Globe XI, L.P., St. Peter Port, Guernsey, Channel Islands
+Local Globe X, L.P., St. Peter Port, Guernsey, Channel Islands
+Name and Location of Company
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+Stakeholders
+To Our
+InfluxData, Inc., San Francisco, CA, United States
+Mosaic Partners II, L.P., London, United Kingdom
+IEX Group, Inc., New York, NY, United States
+Haystack Ventures V, L.P., Mill Valley, CA, United States
+Chalfen Ventures Fund IL.P., St Heiler, Jersey, Channel Islands
+CDQ AG, St. Gallen, Switzerland
+Catchpoint Systems, Inc., New York, NY, United States
+Canvas Ventures 3, L.P., Portola Valley, CA, United States
+BY Capital 2 GmbH & Co. KG, Berlin, Germany
+Name and Location of Company
+Chalfen Ventures Fund II L.P., St Helier, Jersey, Channel Islands
+Further Information on
+Sustainability
+Management Report
+Combined Group
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+Consolidated Financial
+Statements IFRS
+CircleCI, Inc., San Francisco, CA, United States
+ComponentLab Inc., Seattle, WA, United States
+Contentful GmbH, Berlin, Germany
+Greater Pacific Capital (Cayman) L.P., Grand Cayman, Cayman Islands
+GitGuardian SAS, Paris, France
+Follow Analytics, Inc., San Francisco, CA, United States
+Finco Services, Inc. (dba Current), New York, NY, United States
+Felix Ventures II, L.P., London, United Kingdom
+Felix Capital Fund III, London, United Kingdom
+FeedZai S.A., Lisbon, Portugal
+Dremio Corporation, Santa Clara, CA, United States
+Digital Hub Rhein-Neckar GmbH, Ludwigshafen, Germany
+Data Collective IV, L.P., Palo Alto, CA, United States
+DataRobot, Inc., Boston, MA, United States
+Data Collective III L.P., Palo Alto, CA, United States
+Data Collective II L.P., Palo Alto, CA, United States
+Culture Amp, Inc., San Francisco, CA, United States
+Costanoa Venture Capital III L.P., Palo Alto, CA, United States
+Costanoa Venture Capital QZ, LLC, Palo Alto, CA, United States
+Creandum SPV TR (D) AB, Stockholm, Sweden
+Costanoa Venture Capital II L.P., Palo Alto, CA, United States
+IDG Ventures USA III, L.P., San Francisco, CA, United States
+SAP Integrated Report 2021
+Notation Capital II CIRC, LLC, Brooklyn, NY, United States
+Notation Capital III, L.P., Brooklyn, NY, United States
+274/338
+273/338
+www.sap.com/investors/en/governance.
+In 2021 and 2020, the Executive Board and Supervisory Board of SAP SE issued the required
+declarations of implementation. The declaration for 2021 was issued at the end of October 2021.
+These statements are available on our Web site:
+The German federal government published the German Corporate Governance Code (the "Code") in
+February 2002 and introduced a commission that amends the Code from time to time. The Code
+contains statutory requirements and a number of recommendations and suggestions. Only the legal
+requirements are binding for German companies. With regard to the recommendations, the German
+Stock Corporation Act, section 161, requires that every year, listed companies publicly state the extent
+to which they have implemented them. Companies can deviate from the suggestions without having
+to make any public statements.
+(G.10) German Code of Corporate Governance
+SAP
+Zesty Tech Ltd., Ramat Gan, Israel
+Walkabout Ventures Fund II L.P., Los Angeles, CA, United States
+Vistex, Inc., Hoffman Estates, IL, United States
+VerbIT, Inc., New York, NY, United States
+Uptycs, Inc., Waltham, MA, United States
+Upfront V, L.P., Santa Monica, CA, United States
+Unmind Ltd., London, United Kingdom
+Yapily Ltd., London, United Kingdom
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Thomas Saueressig
+Juergen Mueller
+Julia White
+Scott Russell
+Luka Mucic
+Sabine Bendiek
+Christian Klein
+The Executive Board
+Walldorf, Baden
+SAP SE
+Walldorf, February 23, 2022
+Information
+Additional
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Combined Group
+Management Report
+UJET, Inc., San Francisco, CA, United States
+Notation Capital II, L.P., Brooklyn, NY, United States
+Tribe Capital LLC Series 3, Redwood City, CA, United States
+Additional
+Information
+Splashtop, Inc., San Jose, CA, United States
+Smart City Planning, Inc., Tokyo, Japan
+Side, Inc., San Francisco, CA, United States
+SafeGraph, Inc., Denver, CO, United States
+Ridge Ventures IV, L.P., San Francisco, CA, United States
+Ridge Software Investments I, LLC, San Francisco, CA, United States
+SportsTech Fund, L.P., Palo Alto, CA, United States
+Restream, Inc., Austin, TX, United States
+Pivot North Early Fund I, L.P., Atherton, CA, United States
+Point Nine Annex GmbH & Co. KG, Berlin, Germany
+Point Nine Capital Fund II GmbH & Co. KG, Berlin, Germany
+Point Nine Capital Fund III GmbH & Co. KG, Berlin, Germany
+Point Nine Capital Fund IV GmbH & Co. KG, Berlin, Germany
+Point Nine Capital Fund V GmbH & Co. KG, Berlin, Germany
+Project 44, Inc., Chicago, IL, United States
+Pendo.io, Inc., Raleigh, NC, United States
+OpsRamp, Inc., San Jose, CA, United States.
+OpenX Software Limited, Pasadena, CA, United States
+NOTATION I SPV SV OCT 2020, LLC, Brooklyn, NY, United States
+Notation Capital, L.P., Brooklyn, NY, United States
+PubNub, Inc., San Francisco, CA, United States
+SportsTech Parallel Fund, L.P., Palo Alto, CA, United States
+Spring Mobile Solutions, Inc., Salt Lake City, UT, United States
+StackHawk, Inc., Denver, CO, United States
+Sustainability
+Further Information on
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+Third Kind Venture Capital II, L.P., New York, NY, United States
+Third Kind Venture Capital III, L.P., New York, NY, United States
+Tribe Capital LLC Series 3, Redwood City, CA, United States
+The SaaStr Fund II, L.P., Palo Alto, CA, United States
+The SaaStr Fund, L.P., Palo Alto, CA, United States
+SV Angel IV, L.P., San Francisco, CA, United States
+Tetrate.io, Inc., Milpitas, CA, United States
+Sun Basket, Inc., San Francisco, CA, United States
+SumoLogic, Inc., Redwood City, CA, United States
+Storm Ventures V, L.P., Menlo Park, CA, United States
+Name and Location of Company
+Clari, Inc., Sunnyvale, CA, United States
+SAP
+SAP University Alliances introduces students and faculty to SAP software by providing networking and
+educational activities and partnering to build technology skills. For more information about how we
+engage with NPOs, see the Employees and Social Investments and Our Contribution to the UN SDGS
+sections.
+Additional
+Information
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP
+SAP Integrated Report 2021
+Our dialog with NPOs and academic institutions helps us understand how we can address today's
+most pressing issues with our solutions and what is expected from us as a corporation. For example,
+Non-Profit Organizations (NPOs) and Academia
+With more than 22,500 partners around the world, the SAP ecosystem is vital to our success. We take
+a multifaceted approach to engagement that begins with the dedicated, interactive SAP Partner
+Portal. Partners receive regular communications including customized newsletters, training offers, and
+Web seminars, with the latest announcements and thought leadership relevant to their specific
+partnership type. Additionally, virtual events are held throughout the year, around the globe, to further
+gauge partners' feedback on how SAP can continuously improve. For more information about our
+ecosystem, see the section Products, Research & Development, and Services.
+Sustainability Advisory Panel
+Partners
+Industry Analysts
+For more information about our dialog with governments, see the Public Policy section.
+Governments
+For more information about our dialog with the financial community (that is, financial analysts,
+institutional investors, and retail shareholders), see the Investor Relations section.
+Financial Analysts and Investors
+In addition, the Executive Board answers employees' questions in quarterly all-hands meetings. In
+regular coffee corner sessions, senior executives explain our strategy to employees and answer their
+questions directly.
+We strive for constructive labor relations across the world, working within each country's requirements.
+We currently have social partners in 37 countries in Europe, Asia, and the Americas. These employee
+representative bodies consist of elected union members and/or non-union members, and are
+consulted by SAP management mainly on topics that define the work environment and work
+processes. Collective bargaining agreements with unions are only made in countries where legally
+required. Overall, about 49% of our employees are represented by works councils or an independent
+trade union, or are covered by collective bargaining agreements.
+We survey our employees regularly throughout the year. For the results of our latest employee survey
+and action items resulting from it, see the Employees and Social Investments section.
+Employees
+For more information about our customer engagement programs, see the Customers section.
+Our Analyst Relations team, the Executive Board, and executives have strong relations with IT analysts
+and engage with them on strategic SAP solutions and services on a frequent basis.
+Customers
+Our sustainability advisory panel consists of expert representatives from our customers, investors,
+partners, NPOs, and academia. In 2021, the panel discussed key initiatives related to corporate social
+responsibility, environmental performance, and our sustainability management solutions.
+Our Al ethics advisory panel consists of academic, policy, and industry experts who advise us on the
+development and operationalization of the guiding principles for artificial intelligence. In 2021, the
+panel discussed, for example, the importance of harmonizing Al ethics with SAP's overall human
+rights agenda and operationalizing these topics.
+We measure the success of our initiatives through our employee engagement surveys. The latest
+results from 2021 showed that 79% of our employees stated “I actively contribute to SAP's
+sustainability goals.” This is down from 87% in 2019 but up from 47% in 2009 when we introduced the
+question.
+To help drive progress in our sustainability initiatives, we need the support of employees in every part
+of SAP. We have a global internal network of more than 300 sustainability champions who represent
+different regions and areas of the business at SAP. Not only do they act as role models and
+multipliers, these champions also tailor sustainability engagement activities to local and lines-of-
+business needs and interests and share best practices.
+Employee engagement is essential for driving change throughout SAP. We set up a number of
+programs to help employees understand how sustainability is engrained in our purpose and strategy,
+and how they can contribute. For example, SAP continues to include sustainability in its onboarding
+training for new hires and various line-of-business-specific learning offerings. Furthermore, employees
+can take open SAP online courses on sustainability, which are also available to the general public for
+free. Due to the COVID-19 pandemic, onsite offerings have been on hold, but in many cases have
+shifted to new virtual alternatives.
+Changing Our Behavior and Culture
+In addition to the Sustainability Council, we have governance and project structures in place to
+address specific topics such as solution development, environmental management, and human rights.
+2) Leading by example in our own sustainable business operations and practices (exemplar)
+Our chief sustainability officer (CSO) reports directly to the chief financial officer (CFO), who is the
+sponsor for sustainability on the Executive Board. The CSO chairs the Sustainability Council which
+consists of dedicated senior executives in charge of sustainability in each Board area. Together with
+the CSO's team, the Council is accountable for driving SAP's holistic, cross-company sustainability
+agenda and setting annual objectives and priorities.
+1) Providing products and services that meet the sustainability challenges and opportunities of our
+customers (enabler)
+We aim to create positive economic, environmental, and social impact within the planetary
+boundaries using two key levers:
+With SAP's purpose to help the world run better and improve people's lives, sustainability is firmly
+anchored in our business strategy, governance, and executive compensation system. For more
+information about our renewed corporate strategy, see the Strategy section.
+Putting Sustainability at the Heart of Our Strategy
+Al Ethics Advisory Panel
+Sustainability Management
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined Group
+To Our
+SAP Integrated Report 2021
+SAP
+288/338
+287/338
+Additional
+Information
+SAP
+For SAP, stakeholder engagement and collaboration are deeply embedded into our process of
+innovation and the development of our products and services. Before we can design a new solution,
+we must first understand the issue we are addressing. This is why we regularly liaise with the
+stakeholder groups described below, including our sustainability and Al ethics advisory panels.
+Additional
+Information
+According to the HGB, the following topics are material:
+Product responsibility
+20*
+Solutions for an inclusive and circular economy
+19**
+Responsible supply chain
+17**
+Resource efficiency and waste
+14*
+Transparency
+Index Topic
+13**
+12*
+Customer responsibility
+11*
+Energy
+10*
+Talent and development
+9*
+Governance
+8**
+Climate change and air quality
+Employee engagement
+Stakeholder Engagement
+1*
+2*
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined Group
+To Our
+SAP Integrated Report 2021
+SAP
+286/338
+285/338
+Security, privacy, and data protection
+Employee engagement
+11*
+Talent and development
+9*
+Governance
+8**
+Climate change and air quality
+7*
+Fair and inclusive workplace
+4*
+Ethics and compliance
+12*
+SAP Integrated Report 2021
+To Our
+Combined Group
+Our Policies and Selected
+Activities and Programs to
+Enhance Positive Impacts
+and Mitigate Negative
+Impacts
+Our KPIs and Targets
+digitalization and automation; potentially increase
+precarious jobs
+Fuel negative effects on employment through
+Combat forced and child labor throughout supply chains
++
+Respect human rights across value chains
++
+Enable an inclusive economy
++
+Number of employees
+Create three million jobs in our ecosystem (based on a
+2017 study by SAP and PwC)
++ Create decent jobs at SAP through our growth plans,
+specifically in developing markets
+Indirect:
+Direct:
+Our Potential Direct and
+Indirect Impact
+SDG 8 Decent Work and Economic Growth
+SAP and SDG 4, SAP Learning for Life, Powering Opportunity Through Digital Inclusion, SAP Digital Learning Initiative
+Employees and Social Investments
+Where You Can Find More
+Information in the SAP
+Integrated Report and Other
+Sources
+openSAP; CSR digital literacy programs;
+SAP digital learning initiative
+Cloud-based learning management system for employees
++
+Indirect:
+Direct:
+Indirect:
+290/338
+SAP support for startups through various programs
+Indirect:
+SAP Labs Network; One Billion Lives initiative fostering
+purpose-driven innovation
+Direct:
+ΝΑ
+Our Policies and Selected
+Activities and Programs to
+Enhance Positive Impacts and
+Mitigate Negative Impacts
+Our KPIs and Targets
++ Integrate small and medium-sized enterprises into
+global value chains and markets
++ Provide “Best Practice” business processes through
+standard software solutions
+SAP recruiting programs
++ Support providers of infrastructure, financial services
+and clean technologies
++ Increase inclusive and sustainable industrialization
+through SAP's investments in research and
+development (including in developing countries)
+Direct:
+SDG 9 Industry, Innovation, and Infrastructure
+Our Potential Direct and
+Indirect Impact
+SAP and SDG 8, Skilled and Inclusive Workforce, Pledge to Flex, Supporting Social Entrepreneurship, Powering Opportunity
+Through Digital Inclusion, SAP Solutions for Social Responsibility, SAP Rural Sourcing Management
+Employees and Social Investments
+Where You Can Find More
+Information in the SAP
+Integrated Report and Other
+Sources
+Partnership with Social Enterprise UK
+SAP Ariba Supplier Risk;
+SAP Rural Sourcing Management;
+Indirect:
+Direct:
+Engaging two million children, youth, and young adults in digital skills and coding programs by 2022
+customers
+healthcare, and personalized medicine on a global scale
+Enhance safe and healthy working conditions,
+-
++
+Indirect:
+Business Health Culture Index
+Our KPIs and Targets
++ Provide access to a healthy lifestyle and a safe and
+healthy working environment for our employees
+Direct:
+SDG 3 Good Health and Well-Being
+Increase transparency of physical, medical, and health
+conditions of individuals, which might be abused
+Our Potential Direct and
+Indirect Impact
+QAudit Scope
+The following table describes the potential positive (+) and negative (-) direct or indirect impacts of
+our company and of our products and services related to the selected SDGs. We use "direct" when we
+refer to impacts through our own operations; "indirect" describes impacts through the use of our
+solutions and technology or in our ecosystem.
+In discussions with our Sustainability Council and external sustainability advisory panel, we defined
+the SDGs for which there is a tangible and material link between our own operational activities or the
+use of our software by customers.
+The 17 United Nations Sustainable Development Goals (SDGs) provide a globally accepted
+framework anchored in human rights, which we use for communicating our purpose to "help the world
+run better and improve people's lives." We strive to execute on this purpose by being a role model for
+sustainable, purpose-led operations and by enabling our customers to operate in a sustainable way.
+Following the adoption of the SDGs by world leaders in September 2015, we identified and aligned
+existing initiatives with all 17 SDGs. For example, we looked at the environmental and social impacts
+of customers using SAP technology and applications, linking these impacts to the SDGs. The resulting
+Web book (www.sap.com/unglobalgoals) was published in early 2016 and has been updated
+regularly.
+Our Contribution to the UN
+Sustainable Development
+Goals
+Information
+Additional
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Stakeholders
+The content of this section was not subject to the independent limited assurance engagement of our
+external auditor.
+Our Policies and Selected
+Activities and Programs to
+Enhance Positive Impacts
+and Mitigate Negative
+Impacts
+Where You Can Find More
+Information in the SAP
+Integrated Report and Other
+Sources
+Direct:
+Build capability in our ecosystem and among our
++
+Indirect:
+Our Policies and Selected
+Activities and Programs to
+Enhance Positive Impacts
+and Mitigate Negative
+Impacts
+Our KPIs and Targets
++ Train and educate SAP employees
+Direct:
+SDG 4 Quality Education
+Our Potential Direct and
+Indirect Impact
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+289/338
+SAP and SDG 3, Healthcare, SAP Environment, Health, and Safety Management, SAP Mental Health Initiative, SAP'S COVID-
+19 Response, Corona-Warn-App, SAP Vaccine Collaboration Hub
+SAP solutions for healthcare; SAP Environment, Health, and
+Safety Management; SAP Success Factors Well-Being
+Management by Virgin Pulse; Corona-Warn-App
+Indirect:
+Employees and Social Investments
+Global Health and Safety Management Policy; Employee
+Assistance Program; Corporate Oncology Program for
+Employees; Mental Health Initiative
+7*
+Well-being, health, and safety
+Customer responsibility
+Human rights
+13
+9
+2
+1
+8
+6
+10
+5
+6*
+3
+11
+14
+21
+2
+< Low
+High >
+Importance of topic for stakeholders
+Our materiality matrix for prioritizing our reporting topics is shown in the following graphic. We have
+categorized topics according to whether they are sustainability challenges or sustainability
+management practices. The former affect SAP and are also impacted by us, whereas the latter offer
+guidance on how to deal with these challenges.
+Results
+Feedback on and analysis of our integrated report will be taken into account during future materiality
+assessments.
+Review
+We have applied the definition of materiality according to the GRI Standards more strictly. We now
+identify material topics by considering their importance for stakeholders or SAP's impact on the
+topic. Previously, we combined both dimensions.
+15
+We have extended the thresholds for defining topics as material, to better align our reporting with
+our strategic priorities.
+12
+18
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+284/338
+17
+283/338
+High
+Medium
+Low
+SAP's impact on topic:
+High >
+Impact of topic on SAP
+< Low
+20
+16
+19
+Materiality Matrix for Prioritizing Our Reporting Topics (numbers in the matrix are explained in the
+table below)
+To achieve greater consistency with definitions in reporting standards, we deleted the topics
+"Business resilience" and "Innovation and digitalization" from the matrix. “Business resilience" is
+redundant to the y-axis of our matrix; “Innovation and digitalization” is at the heart of our business
+model and described as such.
+The changes in 2021 compared to 2020 include:
+Additional
+Information
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+282/338
+281/338
+The content of this section was not subject to the independent limited assurance engagement of our
+external auditor.
+QAudit Scope
+Our impact measurement experiences form a foundation for software innovations in the fields of
+climate action, circular economy, social responsibility, and holistic steering and reporting, helping
+customers on their environmental, social, and governance journey. We see the monetary evaluation of
+environmental and societal impacts as crucial in achieving a sustainable economy, and by simplifying,
+aligning, and optimizing enterprise sustainability reporting, we help customers address global
+sustainability challenges.
+We are using insights gained during our impact valuation journey in the development of our
+sustainability management initiative. We strive to embed impact measurement into our corporate and
+relevant business unit decision-making and target-setting. Holistic steering and reporting are being
+developed across the value chain, incorporating our response to legal requirements and using
+capabilities embedded in our software solutions.
+Combined Group
+Since the outbreak of COVID-19, impact measurement and valuation as a science is evolving globally.
+The connection between economic, social, and environmental impacts will become a guiding
+principle for the way businesses are evaluated and steered.
+We aim to add further indicators and share best practices and lessons learned with external
+stakeholders and other VBA member companies to help improve the methodology and input process.
+In addition, we will make results available to the public.
+confidence, self-awareness, and active listening. This can result in improved mental well-being,
+with benefits for our employees' immediate social environment, as well as social and civic
+engagement. The analysis identified that our global employee training programs have a material
+positive impact and thus valuation of training is being prioritized in our future journey in shaping
+impact measurement and valuation.
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+Shaping the Environment of Impact Measurement
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP
+SAP Integrated Report 2021
+In 2020, the results of the materiality analysis were reviewed and confirmed by our steering committee
+for integrated reporting, our sustainability council, and our sustainability advisory panel. Our chief
+financial officer, who is also our Board sponsor for sustainability and integrated reporting, was also
+informed about the results. In 2021, our materiality assessment was reviewed, updated, and
+confirmed by our Integrated Report Steering Committee.
+Validation
+Finally, based on survey responses gathered from SAP sustainability experts, we considered the
+potential impacts on society, the environment, and the economy, ranking topics as either low,
+medium, or high. We have estimated our impact on today's society, environment, and economy and
+we expect the impact level to change as we continue to design solutions to manage areas such as
+climate change.
+Next, we evaluated the financial, operational, and strategic relevance of each topic to SAP's business
+success and resilience, drawing on an analysis by SAP sustainability experts from various units and
+regions.
+We ranked topics by their importance to stakeholders by analyzing six external sources. These
+sources included corporate peer reports; mandatory and voluntary regulations for the software sector;
+online news related to the technology equipment and services industry; tweets; and questionnaires
+gathering non-financial information from socially responsible investors and clients.
+Prioritization
+We compiled a list of approximately 100 potentially relevant topics based on guidance from standards
+of the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB), as
+well as our existing materiality topics. We also considered a materiality assessment for the information
+and communications technology industry by the Global Enabling Sustainability Initiative (GeSI) as well
+as the United Nations' Sustainable Development Goals (SDGs). When identifying key topics and their
+boundaries, we looked at areas related to our operations and supply chain as well as at topics related
+to our solutions. Since we oriented ourselves on the topics provided in the Datamaran matrix, the
+selected topics are more detailed than in our last materiality assessment.
+Identification
+3) Magnitude of SAP's impact on the topic (differently colored circles)
+Below, we have detailed the key stages of the process.
+2) Relevance to SAP's business success (X-axis: Impact of topic on SAP)
+1) Importance of topic for stakeholders (Y-axis)
+To select the topics to be included in our integrated reporting, we conducted a comprehensive
+materiality assessment in 2020 using an artificial intelligence (AI) and Big Data solution from
+Datamaran Limited that helped us build an evidence-based materiality matrix. We assessed
+economic, social, and environmental topics according to three criteria:
+Defining Key Priorities for Our Non-Financial Reporting
+Materiality
+Information
+Additional
+Sustainability challenges* and management practices** included in our materiality assessment are as
+follows:
+Index Topics
+7
+Security, privacy, and data
+protection
+Environmental
+matters
+Variety of flora and fauna on earth, and the foundation
+for ecosystem services that are essential for nature and
+human well-being
+Product and service quality, as well as the information
+shared with customers so that they can make informed
+decisions
+Products and services that create positive environmental
+and social impact during their whole lifecycle
+Programs and projects to help ensure the well-being and
+positive development of communities with which a
+company interacts, including employee volunteering
+Procurement practices to help ensure respect of the
+environment and human rights throughout the entire
+supply chain
+Political conditions, demographic changes, and
+catastrophic or other events with an influence on
+business
+Use, management, conservation, reduction, and
+contamination of water
+Transparency through non-financial reporting on public
+policy practices and executive compensation
+(Non-)hazardous waste as well as resource usage,
+reduction, reuse, or recycling
+Biodiversity
+Environmental
+21*
+20*
+Solutions for an inclusive and
+circular economy
+19**
+Local community support
+18**
+Responsible supply chain
+17**
+Geopolitical events
+16*
+Water
+Product responsibility
+15*
+matters
+Environmental
+5*
+Fair and inclusive workplace
+4*
+Employee rights
+3*
+Ethics and compliance
+2*
+Security, privacy, and data protection
+1*
+Index Topic
+Customer matters
+According to the GRI Standards, the following topics are material:
+Sustainability management practices offer guidance on how to deal with these challenges.
+1*
+* Sustainability challenges affect SAP and are also impacted by us.
+Information
+Consolidated Financial Further Information on Additional
+Statements IFRS
+Sustainability
+Combined Group
+Management Report
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+matters
+In our reporting, we seek to meet the materiality requirements of both the GRI Standards and
+section 289c (3) of the German Commercial Code (Handelsgesetzbuch, HGB). Because of the
+diverging definitions of materiality, we see the following difference in material topics:
+Resource efficiency and waste
+**
+Transparency
+Employee matters
+Employee matters
+Labor rights, including unionization, as well as
+compensation and benefits offered to employees by their
+employer
+Active integration, equal opportunity, as well as fair
+treatment and remuneration of all employees
+Governance
+8**
+Climate change and air quality
+7*
+Well-being, health, and safety
+6*
+Human rights
+5*
+Fair and inclusive workplace
+4*
+Employee rights
+Anti-corruption and
+bribery matters
+Responsible business conduct, including anti-corruption,
+anti-bribery, fair competition, respect for intellectual
+property, and responsible tax principles
+Protection of private, confidential, or sensitive information
+and data, as well as the vulnerability of critical
+information systems
+Related Non-
+Financial Matters
+Definitions
+Ethics and compliance
+2*
+14*
+Respect for human
+rights
+Employee matters
+3*
+12*
+Employee matters
+Corporate culture, employee engagement and
+motivation, and strategic decisions involving workforce
+changes
+Employee engagement
+13**
+Customer matters
+Environmental
+matters
+Employee matters
+Responsibility to help ensure customer satisfaction and
+customer rights, including responsible marketing and
+selling practices
+Customer responsibility
+11*
+Energy consumption by operations and products, and the
+transition to renewable energy
+Environmental
+Social, economic, psychological, and physical conditions
+of employees in their workplace, as well as employees'
+occupational health and safety
+(Non-)greenhouse gas emissions from operations and
+products, as well as present or potential disruptive
+impacts of climate change
+Procedures and rules concerning a company's control
+and decision-making system, as well as relationship
+management with investors and stakeholders
+Energy
+matters
+Fundamental rights of all individuals to live in dignity
+Talent and development
+Talent attraction, retention, and development
+10*
+9*
+Further Information on
+Sustainability
+SAP Integrated Report 2021
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+Stakeholders
+To Our
+Additional
+Information
+In December 2021, we gave our approval, as recommended by the Personnel and Governance
+Committee, for compensation-related changes to be made to the Executive Board contracts of Scott
+Russell effective January 1, 2022, and Thomas Saueressig effective November 1, 2022.
+24/338
+23/338
+In May 2021, we adopted, besides the above resolution, two further resolutions by correspondence,
+namely: one resolution appointing a SAP regional president for the Greater China region (China,
+Taiwan, Hong Kong), and one resolution approving an additional venture capital fund (Sapphire
+Ventures Fund VI).
+Resolutions Adopted by Correspondence in May
+On April 15, 2021, the Supervisory Board reviewed the first quarter results for 2021 and SAP's
+competitive situation. A senior analyst from global asset management company AllianceBerstein
+joined this session to share an outside view of SAP from the investors' standpoint. With this expert, we
+also examined the most important metrics in SAP's financial reports and the capital markets'
+expectations of SAP. We also assessed the effectiveness of the work of the full Supervisory Board and
+its committees (the so-called the efficiency review), as is regularly required pursuant to the
+recommendations of the German Corporate Governance Code (GCGC, herein: Code). For more
+information relating to this assessment, see the Corporate Governance Statement for 2022. In this
+regard, an electronic survey was sent to all the Supervisory Board members ahead of the meeting,
+with questions addressing all aspects of the Supervisory Board's work. We evaluated the
+questionnaire and discussed the consolidated survey responses and comments in the plenum. In
+closing, we dealt with the question of waiving a former Executive Board member's contractually
+agreed non-compete provisions.
+Meeting in July
+Meeting in April
+In February 2021, the Supervisory Board approved by way of correspondence vote the corporate
+governance statement for 2021 as well as the appointment of new regional presidents for the APJ
+(Asia Pacific Japan) and EMEA North (Europe, Middle East, and North Africa) regions.
+SAP
+-
+Combined Group
+Resolutions Adopted by Correspondence in August
+The Work of the Supervisory Board Committees
+Resolutions Adopted by Correspondence in February
+Resolution Adopted by Correspondence in December
+Information
+Additional
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+To Our
+Stakeholders
+SAP
+SAP Integrated Report 2021
+We adopted two resolutions by correspondence in November 2021. In the first correspondence vote,
+the Supervisory Board extended Thomas Saueressig's Executive Board contract by a further three
+years to October 2025, and in that regard defined a new total compensation for this Executive Board
+member effective November 1, 2022. We had deliberated on this resolution in advance in our October
+session. In the second correspondence vote, we consented, on recommendation of the Finance and
+Investment Committee, to the execution of a share repurchase program in the amount of €1 billion.
+The program is to be executed between February 2022 and December 2022, and is intended to
+enable SAP to service future awards under the global share-based employee compensation program
+predominantly through SAP shares. This resolution was based on the authorization granted by the
+Annual General Meeting of Shareholders on May 17, 2018, under agenda item 8.
+Resolution Adopted by Correspondence in November
+At our meeting on October 28, 2021, the Executive Board first reported on business performance in
+the third quarter. As is regularly the case, we also dealt with the topic of independence. Based on the
+findings from our own examination, we determined that all shareholder representatives were
+independent in the meaning of the Code and were therefore to be named as such in the Corporate
+Governance Statement. We also resolved on what we believe to be the appropriate number of
+independent shareholder representative members, and determined that the Supervisory Board has an
+appropriate number of independent members in the meaning of the Code, also when the shareholder
+structure is taken into account. In agreement with the Executive Board, we also adopted, for regular
+publication in October 2021, the annual Declaration of Implementation of the Code, and approved an
+amendment to the objectives for the composition of the Supervisory Board. On recommendation of
+the Finance and Investment Committee, we consented to a follow-on share offering by Qualtrics,
+under which the subsidiary offered additional Qualtrics shares through the stock market in
+November 2021. Prior to this decision, the Executive Board explained to the meeting members the
+planned use of the funds collected in this way and how the move would affect SAP SE's stake in
+Qualtrics. The Executive Board also reported on the efficiency review we had requested in the
+Research & Development area.
+Meeting in October
+In August 2021, the Supervisory Board resolved by way of correspondence the appointment of a new
+chief strategy officer for SAP.
+When we met on July 29, 2021, we resolved to file a petition to the court for the removal of an
+employee representative from the Supervisory Board. The Supervisory Board was advised in this
+regard by a law firm it had commissioned to examine the underlying facts. The Supervisory Board
+member in question was first given the opportunity to comment on matter, and then left the meeting
+to allow the other members of the Supervisory Board to discuss and vote on the agenda item. The
+member rejoined the meeting once the item had been dealt with. After that, we discussed the effects
+of an adjustment in the non-IFRS definition – which from a Group point of view was not material - on
+the Group budget. In addition, we updated the list of transactions that go beyond the scope of the
+Company's articles of incorporation and for which the Executive Board must obtain the Supervisory
+Board's prior consent. On recommendation of the Finance and Investment Committee, we also
+agreed to the planned acquisition of the U.S.-based company Clarabridge by Qualtrics, a listed SAP
+subsidiary in which SAP holds a majority interest, based on the details of the acquisition contract
+explained to us previously. Fairness opinions of two independent consulting firms confirmed that the
+purchase price was fair. With the combination of both companies' products, now made possible by
+the acquisition, SAP aims to reinforce Qualtrics' leading position in the Experience Management (XM)
+space.
+Information
+As already announced publicly in a May 4, 2020, mandatory disclosure, the Company has also
+stepped up its cybersecurity efforts in the wake of internal investigations. The Audit and Compliance
+Committee monitored, from the outset and continuously in the year under review, the progress of
+cybersecurity measures introduced by the Executive Board in relation to SAP cloud products, as well
+as the other steps taken to continuously improve security standards.
+Further Information on
+Sustainability
+21/338
+Further, the Supervisory Board was informed that, following comprehensive investigations into
+potential export controls and economic sanctions violations, SAP had entered into a non-prosecution
+agreement with the U.S. DOJ and mutual settlement agreements with the U.S. Bureau of Industry and
+The Audit and Compliance Committee continued to seek assistance from its own external consultants
+to help address the complex technical and legal nature of the compliance and cybersecurity matters
+being investigated, and reported on their opinions to the Supervisory Board, which – where required -
+resolved on the next steps. In particular, representatives of the external legal consultant referred to
+above attended the Supervisory Board's July 2021 meeting as experts and explained to the plenum
+the results of their legal audits and the status of the internal investigations. At present, SAP is still in
+discussions with the U.S. DOJ and the U.S. Securities and Exchange Commission (U.S. SEC) with a
+view to reaching a global resolution with regard to the compliance matters. The Supervisory Board
+and notably the Audit and Compliance Committee are regularly updated on these matters. The
+negotiations are expected to close in 2022.
+SAP's Office of Ethics & Compliance (OEC) kept the Audit and Compliance Committee continually
+informed about the ongoing investigations being conducted with the assistance of external counsel
+into potential violations of anticorruption laws (including the U.S. Foreign Corrupt Practices Act
+(FCPA)). Said updates included reports on the implementation of further significant improvements to
+compliance processes and controls at the Company, which had been introduced in response to the
+relevant investigations and as part of the general evolution of the compliance management program.
+The Audit and Compliance Committee reported in turn on the status of these compliance matters and
+on the discussions with the U.S. Department of Justice (U.S. DOJ), which intensified significantly in
+the third quarter, to the full Supervisory Board at our extraordinary meeting held on January 25, 2021,
+and at our ordinary plenary meetings held in February, April, July, and October 2021.
+The Supervisory Board and the Audit and Compliance Committee dealt at length with the ongoing
+compliance and cybersecurity matters and immediately addressed all governance issues that arose
+during the reporting year.
+Compliance, Cybersecurity, and Governance Matters
+and Strategy Committee was reduced from 12 to 10 members. We subsequently adopted the rules of
+procedure of the committees – except for the China Strategy Committee and the Nomination
+Committee - in updated form at our meeting on July 29, 2021. As part of a circular correspondence
+vote at the beginning of October 2021, a new employee representative was appointed to each of the
+Personnel and Governance Committee and the People and Culture Committee as successor to an
+employee representative who had left both committees. When we convened on October 28, 2021, we
+updated the rules of procedure of the full Supervisory Board and of the Audit and Compliance
+Committee, primarily to take account of the new regulations, insofar as they pertained to the work of
+the Supervisory Board, in the German Act to Strengthen Financial Market Integrity, which for the most
+part entered into force on July 1, 2021. The rules of procedure were also updated to reflect the
+increased requirements of investors regarding the handling of ESG (environmental, social and
+governance) issues in the supervisory bodies. For more information about the Supervisory Board
+committees, particularly their respective tasks and responsibilities, see Corporate Governance
+Statement for 2022 and the Corporate Governance section of SAP's Web site. We also resolved, by
+way of correspondence vote in December 2021, on the creation of an eight-member Go-to-Market
+and Operations Committee effective January 1, 2022, comprising an equal number of employer and
+employee representatives. Our objective with this new Committee is to provide more space for
+deliberating the sales and marketing strategy and discussing same with the relevant Executive Board
+members, and thereby ease the burden on the Strategy and Technology Committee. We believe that
+the work in the committees is now structured even better than before.
+22/338
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP
+The committees made a key contribution to the work of the Supervisory Board in 2020, and reported
+on their work to us, including their preparatory work for and decisions made on the relevant agenda
+items of the subsequent Supervisory Board meetings. The following committees were in place in the
+year under review:
+Additional
+Additional
+SAP
+To Our
+Stakeholders
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP
+SAP Integrated Report 2021
+In the plenary session on February 24, 2021, we approved a change to the Executive Board's
+schedule of portfolios. This was followed by a report on business in 2020, and the adoption of the
+budget for 2021 after discussing same extensively with the Executive Board. Next, we turned to the
+matter of Executive Board compensation. We first determined the total target achievement under the
+Short-Term Incentive (STI) 2020 Plan, which, due to the COVID-19 pandemic, had not resulted in any
+payouts. After that, we deliberated on Executive Board compensation for 2021. We set the specific
+target numbers for, and relative weighting of, each key performance indicator (KPI) of the STI 2021. In
+addition, we set the specific target numbers for each KPI of the Long-Term Incentive Program 2020
+(LTI 2020), tranche 2021. The Supervisory Board, as required, evaluated the appropriateness of the
+individual Executive Board members' total compensation for fiscal 2021, and in each case found it to
+be appropriate in terms of amount, structure, objective criteria, and for each member's responsibilities
+and tasks. We referred in this regard to an appropriateness certificate obtained beforehand from an
+external consulting firm for compensation matters. In addition, the Supervisory Board approved, on
+recommendation of the Personnel and Governance Committee, the payment of supplementary
+compensation to the Executive Board members as permitted by the compensation system in the
+event of extraordinary situations. In doing so, the Supervisory Board honored the fact that, despite
+unprecedented challenges posed by the COVID-19 pandemic, the related restrictions, and the
+ensuing economic crisis, the Executive Board members exhibited extraordinary performance, ensuring
+the company remained profitable and positioned for long-term, sustainable success. In accordance
+with the agreement, the Executive Board members invested the net payout amount of this
+supplementary compensation in the purchase of SAP shares with a holding period of three years. The
+Supervisory Board referred prior to this decision to a corresponding analysis from an independent
+consulting firm for compensation matters as well as a legal opinion from an external law firm. For
+more information about the STI 2021, the LTI 2020, tranche 2021, the supplementary compensation,
+and the other compensation elements for Executive Board members, see the Compensation Report.
+In addition, the Supervisory Board turned its attention to the SAP SE financial statements and the
+SAP Integrated Report 2021
+Other key topics addressed at our meetings in 2021 notably included the following:
+Meeting in February (Meeting to Discuss the Financial Statements)
+Security (BIS) and U.S. Department of Treasury's Office of Foreign Assets Control (OFAC) in
+April 2021. SAP had voluntarily self-disclosed potential violations to the U.S. DOJ and OFAC in
+September 2017 and had notified the U.S. SEC at the same time. Since then, the Audit and
+Compliance Committee and the full Supervisory Board have been kept continually apprised of the
+status of the investigations.
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+Another topic of interest, initially dealt with at length by the responsible Finance and Investment
+Committee at a March 2021 meeting, was SAP Fioneer, SAP's joint venture with Dediq. At said
+meeting, the Committee and the Executive Board examined all the details of the joint venture
+agreement, the ownership structure, and the underlying strategic and economic considerations. After
+comprehensive analysis, the Committee members approved the joint venture by correspondence
+vote. When later media reports criticized the shareholder structure of the joint venture, the Audit and
+Compliance Committee probed the governance aspects of the transaction to follow up on the
+concerns expressed. To this end, the Committee commissioned two independent external opinions to
+assess the valuation of SAP's and participating partners' stake in SAP Fioneer and to report on
+whether the decision process regarding the joint venture complied with applicable law. The opinions
+confirmed that the valuation was in line with the market and the decision process compliant.
+In an extraordinary meeting in December 2021, the Audit and Compliance Committee dealt with
+allegations in media reports about inadequate corporate governance measures in connection with a
+past legal dispute that SAP had already settled many years earlier in 2014. A representative of the law
+firm commissioned by the Supervisory Board at the time informed the Committee about the checks
+and deliberations actually carried out by the Supervisory Board during the period in question. The
+external counsel and the Committee jointly concluded that the modus operandi chosen by the
+Supervisory Board at the time was appropriate and that the Supervisory Board had no reason to
+question it after the fact.
+-
+consolidated financial statements for 2020, the audits conducted by KPMG AG
+Wirtschaftsprüfungsgesellschaft (KPMG), and the Executive Board's proposed resolution on the
+appropriation of retained earnings for 2020. The auditor attended the meeting and reported in detail
+on the audit and its findings for each of the focus areas that had been agreed between the auditor
+and the Audit and Compliance Committee. The auditor also related the discussions on those matters
+at the preceding meetings of the Audit and Compliance Committee. The auditor then discussed the
+results of the audit with the Supervisory Board and answered our questions. The Audit and
+Compliance Committee had comprehensively prepared all topics in connection with the financial
+statements and the consolidated financial statements for 2020, and in particular reported on the form
+and scope of its examination of the documents relating to the financial statements, which it
+recommended we approve. The Supervisory Board approved the audit. There were no findings from
+our own examination, so we gave our consent to the SAP SE and consolidated financial statements
+for 2020. We endorsed the Executive Board's proposal concerning the appropriation of retained
+earnings for 2020, in accordance with the Audit and Compliance Committee's recommendation to us,
+and subsequently passed the proposed resolutions for the SAP SE Annual General Meeting of
+Shareholders on May 12, 2021. In particular, this included our proposal to the Annual General Meeting
+concerning the election of an auditor for fiscal 2021. Next, we extended the appointment of Juergen
+Mueller as member of the Executive Board for a further three years. In compliance with auditor
+rotation legislation, we resolved, on recommendation of the Audit and Compliance Committee, to
+propose to the 2022 Annual General Meeting that BDO AG Wirtschaftsprüfungsgesellschaft be
+appointed as SAP SE's auditor for fiscal 2023, so as to facilitate optimal familiarization with and
+preparation for the new auditor. Prior to this, the Audit and Compliance Committee had conducted a
+tender and selection process to identify a suitable new auditor and, following its own in-depth analysis
+of the candidates, proposed two of them to the Supervisory Board while citing a clear preference. In
+addition, the Executive Board gave us an overview of the Company's equity investments in 2020 and
+SAP's donation activities.
+Audit and Compliance Committee (formerly Audit Committee): Gunnar Wiedenfels
+(chairperson), Panagiotis Bissiritsas (until May 31, 2021), Margret Klein-Magar, Peter Lengler (since
+August 10, 2021), Gerhard Oswald (until May 31, 2021), Friederike Rotsch, Christa Vergien-Knopf
+(June 1 until August 9, 2021), Rouven Westphal (since June 1, 2021), James Wright
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP
+SAP Integrated Report 2021
+SAP's corporate governance and insider trading compliance officer monitored our compliance with
+those recommendations in the Code with which we claim to comply in SAP SE's declaration, and
+reported in full to the Personnel and Governance Committee in this regard at the latter's meeting on
+February 10, 2021. Detailed information about compliance with the Code is available in the Executive
+and Supervisory Boards' Corporate Governance Statement. Members of the Supervisory Board and of
+the Executive Board had no conflicts of interest that recommendations E.1 and E.2 of the Code
+require to be disclosed to the Supervisory Board. Insofar as Supervisory Board members hold
+executive positions in companies or have material equity in companies that currently have business
+dealings with SAP, we do not see any impairment of their independence. The scope of these
+transactions is relatively small and, moreover, takes place at arm's length. During the year under
+review, the Personnel and Governance Committee approved transactions involving a member of the
+Executive Board in 2020 which were all consistent with industry standards and immaterial. Other than
+those contracts mentioned in this report, the Company made no other contracts with members of the
+Executive Board or Supervisory Board that would have required a resolution of the Supervisory Board.
+Corporate Governance
+The work of the committees and their regular reports to the full Supervisory Board ensured that we
+were kept fully informed of all matters covered by the committees and were able to discuss them
+thoroughly.
+The Nomination Committee met twice in the reporting year. In January 2021, the Committee
+resolved the nomination of Qi Lu and Rouven Westphal as candidates for election to the
+Supervisory Board by the Annual General Meeting on May 12, 2021. The Committee met again on
+December 10, 2021, to deliberate on the candidates for election to the Supervisory Board at the
+Annual General Meeting in May 2022. It resolved to nominate Hasso Plattner, Rouven Westphal,
+and Gunnar Wiedenfels as candidates for reelection at the Annual General Meeting on
+May 18, 2022. Further, the Committee discussed the subject of succession planning for the
+Supervisory Board. It decided to solicit the help of an international personnel consulting firm, so as
+to obtain an overview of available top managers who might be potential candidates to succeed
+departing shareholder representatives in future.
+The People and Culture Committee held four meetings in fiscal year 2021. The focus of the
+meeting in February 2021 was SAP's People Strategy. In this connection, the Committee was given
+an overview of the implementation status, the future concept for performance management, and
+the attraction, hiring, and onboarding of top talents. Also at this meeting, and again in August and
+October 2021, the Committee was updated on the impact of the coronavirus pandemic and the
+global measures introduced both within and outside the Company as a result. At its April meeting,
+the Committee turned its attention to the early talent process and looked back at the SAP People
+Day, reviewing both the successes and insights for potential improvement. In addition, the
+Executive Board updated the Committee on the measures taken in the various Board areas to
+harness and integrate the diverse socio-cultural backgrounds of the workforce into SAP's corporate
+culture, and explained the key metrics in that regard. The August meeting focused on the new
+Future of Work organization at SAP, which deals with the changing world of work and its impact on
+society, the process of attracting leaders, the leadership culture at SAP, and the new onboarding
+experience, that is, the process of familiarizing new leaders with their roles. In October 2021, after
+receiving an update on the diversity strategy focused on the topics "women in management" and
+"promoting ethnic diversity at SAP," the Committee discussed SAP's revised employee
+compensation strategy planned for the next two years, the management culture, and the talent
+development process.
+China. In December 2021, the Committee received a written final report from the Executive Board
+summarizing their jointly-developed China strategy and the planned measures for implementing it.
+The task of the Committee was thus fulfilled, and it concluded its activities at the end of the fiscal
+year 2021.
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+Training and Professional Development
+The members of the Supervisory Board once again took advantage of various training and
+professional development opportunities throughout the year, with appropriate support from the
+Company. At the start of their term of office, new Supervisory Board members were made familiar
+with their tasks and responsibilities through on-boarding sessions and leaflets. In addition, the
+members of the Audit and Compliance Committee were invited to a presentation in April 2021 on
+"New regulatory reporting requirements," and a short seminar in July 2021 on the impact of the
+"OECD/G20 New World Tax Order for Digital Business" (a new basic approach adopted by OECD/G20
+to reform international business taxation) on SAP. In January 2021, the Supervisory Board members
+were invited to the professional development events “Resilient and Sustainable Supply Chain with
+SAP Digital Supply Chain," and "RISE with SAP." In March 2021, the Supervisory Board members were
+invited to a seminar on "Professional Negotiation Management" and a training course focusing on
+pending business models in Retail Solutions (digital solutions for the retail industry). Where it made
+sense, the training offerings were recorded and placed on a specially configured training platform to
+enable the remaining Supervisory Board members to take part in them as well.
+SAP Integrated Report 2021
+After the Executive Board had explained them, the Audit and Compliance Committee and the
+Supervisory Board reviewed the financial statement documents (based on drafts identical to the final
+documents), taking KPMG's audit reports (or the drafts identical to the final documents) into account.
+The Audit and Compliance Committee then passed the compensation report on to the Supervisory
+Board for release. The representative of the auditor who attended presented full reports on the audit
+and the results of the audit to the Audit and Compliance Committee and Supervisory Board meetings
+and explained its audit reports (or final drafts thereof). The auditor also reported that it had not
+identified any material weaknesses in SAP's internal control and risk-management systems for
+financial reporting. Both the Audit and Compliance Committee and the Supervisory Board asked
+detailed questions about the form, scope, and results of the audit. The Audit and Compliance
+Committee reported to the Supervisory Board on its own review of the financial statements of SAP SE
+and the SAP Group, its discussions with the Executive Board and with the auditor, and its supervision
+of the financial reporting process. It confirmed that as part of its supervisory work, it had addressed
+the SAP Group's internal control, risk management, and internal auditing systems, and found the
+systems to be effective.
+The Executive Board explained the financial statements of SAP SE and the SAP Group and its
+proposal concerning the appropriation of retained earnings at the meeting of the Audit and
+Compliance Committee on February 22, 2022 (based on the drafts identical to the final documents)
+and at the meeting of the Supervisory Board on February 23, 2022. Members of the Executive Board
+answered questions from the Committee and Supervisory Board members. At the Audit and
+Compliance Committee meeting, they also explained the compensation report and the Annual Report
+on Form 20-F prepared in accordance with the applicable U.S. standards.
+audit reports prepared by KPMG, and the Executive Board's proposal concerning the appropriation of
+retained earnings in good time. On February 23, 2022, the Executive Board prepared the financial
+accounts of SAP SE and the Group for 2021, comprising the SAP SE financial statements, the
+consolidated financial statements, and the combined management report, and submitted them
+without delay to the Supervisory Board.
+Information
+Additional
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Management Report
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+30/338
+29/338
+KPMG audited the SAP SE and consolidated financial reports for 2021. The Annual General Meeting
+of Shareholders elected KPMG as the SAP SE and SAP Group auditor on May 12, 2021. The
+Supervisory Board proposed the appointment of KPMG on the recommendation of the Audit and
+Compliance Committee. Prior to the proposed resolution being put to the Annual General Meeting of
+Shareholders, KPMG had confirmed to the chairperson of the Supervisory Board and the Audit and
+Compliance Committee that circumstances did not exist that might prejudice or raise any doubt
+concerning its independence as the Company's auditor. In that connection, KPMG also informed us of
+the volume of the services that were not part of the audit which it had either provided to the Group in
+the past year or was engaged to provide in the year to come. The Supervisory Board has agreed with
+KPMG that the auditor should report to the Supervisory Board and record in the auditor's report any
+fact found during the audit that is inconsistent with the declaration given by the Executive Board and
+the Supervisory Board concerning implementation of the German Corporate Governance Code.
+KPMG examined the SAP SE financial statements prepared in accordance with the German
+Commercial Code, the consolidated financial statements prepared in accordance with International
+Financial Reporting Standards (IFRSS) as required by the German Commercial Code, section 315e,
+and the combined SAP Group and SAP SE management report prepared in accordance with the
+German Commercial Code, and certified them without qualification. The auditor thus confirmed that,
+in its opinion and based on its audit in accordance with the applicable accounting principles, the
+SAP SE and consolidated financial statements give a true and fair view of the net assets, financial
+position, and results of operations of SAP SE and the SAP Group. The auditor also confirmed that the
+combined SAP SE and SAP Group management report is consistent with the corresponding financial
+statements and as a whole gives a suitable view of the position of SAP SE and the SAP Group and of
+foreseeable opportunities and risks. In accordance with section 317 (3a) of the German Commercial
+Code, the auditor also examined and confirmed that the renderings of the financial statements, the
+management report, the consolidated financial statements, and the combined management report
+contained in the files submitted on an electronic data carrier, which can be accessed by the issuer on
+the secure client portal, and prepared for the purposes of disclosure comply in all material respects
+with the requirements of section 328 (1) of the German Commercial Code regarding the electronic
+reporting format (“ESEF format”). KPMG had completed its audit of SAP's internal control over
+financial reporting and certified without qualification that it complies with the applicable U.S.
+standards. The auditor stated in its opinion that it considers SAP's internal controls with respect to the
+consolidated financial statements to be effective in all material respects. Additionally, it provided
+assurance on the non-financial declaration in the combined management report, and on the separate
+review of the compensation report and selected qualitative and quantitative sustainability disclosures
+outside of the financial statements and management report. All Audit and Compliance Committee
+members and Supervisory Board members received - initially in the form of drafts that were identical
+to the final documents – the documents concerning the financial statements mentioned above, the
+SAP SE and Consolidated Financial Reports for 2021
+Combined Group
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+26/338
+25/338
+Consolidated Financial
+Statements IFRS
+The Personnel and Governance Committee held four regular meetings in the reporting year. In
+particular, the Committee, in fulfillment of the tasks assigned to it, extensively prepared and
+discussed in advance the deliberations of the Supervisory Board and its resolutions on the self-
+assessment and reorganization of the Supervisory Board committees, on a termination agreement
+for a departing Executive Board member, and on Executive Board compensation, or it adopted its
+Besides the matters described above, the committees focused primarily on the following topics in
+2021:
+site.
+Nomination Committee: Hasso Plattner (chairperson), Pekka Ala-Pietilä (until May 12, 2021),
+Aicha Evans (since June 1, 2021), Bernard Liautaud (until May 31, 2021), Gerhard Oswald (until
+May 31, 2021), Friederike Rotsch (since June 1, 2021), Rouven Westphal (since June 1, 2021)
+Each of the aforementioned committees was active in 2021. For more information about the
+Supervisory Board committees and their duties, see the Corporate Governance section of SAP's Web
+China Strategy Committee: Gerhard Oswald (chairperson), Margret Klein-Magar, Lars Lamadé,
+Qi Lu (since February 24, 2021), Hasso Plattner, Christine Regitz (since February 24, 2021),
+Friederike Rotsch, Heike Steck
+People and Culture Committee (formerly People and Organization Committee): Aicha Evans
+(chairperson since June 1, 2021), Pekka Ala-Pietilä (until May 12, 2021), Manuela Asche-Holstein
+(since October 8, 2021), Gesche Joost, Monika Kovachka-Dimitrova, Peter Lengler (since
+August 10, 2021), Gerhard Oswald (until May 31, 2021, as chairperson and member), Friederike
+Rotsch (since June 1, 2021), Heike Steck, Christa Vergien-Knopf (until August 9, 2021), Ralf Zeiger
+(until October 7, 2021)
+· Technology and Strategy Committee: Hasso Plattner (chairperson), Christine Regitz (deputy
+chairperson), Aicha Evans, Gesche Joost, Monika Kovachka-Dimitrova, Lars Lamadé, Bernard
+Liautaud, Qi Lu (since February 24, 2021), Gerhard Oswald (until May 31, 2021), Heike Steck,
+Christa Vergien-Knopf (until May 31, 2021), James Wright
+Finance and Investment Committee: Rouven Westphal (since June 1, 2021, as chairperson and
+member), Panagiotis Bissiritsas (until May 31, 2021), Christine Regitz, Friederike Rotsch (until
+May 31, 2021, as chairperson and member), Heike Steck (since June 1, 2021), Gunnar Wiedenfels,
+James Wright
+-
+Personnel and Governance Committee (formerly General and Compensation Committee):
+Friederike Rotsch (chairperson since June 1, 2021), Pekka Ala-Pietilä (until May 12, 2021),
+Panagiotis Bissiritsas (until May 31, 2021), Aicha Evans, Margret Klein-Magar, Monika Kovachka-
+Dimitrova (since October 8, 2021), Lars Lamadé, Bernard Liautaud, Hasso Plattner (chairperson
+until May 31, 2021), Christine Regitz, Ralf Zeiger (until October 7, 2021)
+Further Information on
+Sustainability
+own resolutions in these matters. At its first meeting in February 2021, the Committee reviewed the
+annual report from SAP's corporate governance and insider trading compliance officer, as
+presented to it. In its second meeting in February, the Committee dealt with the extension of
+Juergen Mueller's appointment to the Executive Board. When it met in July 2021, the Committee
+approved the acceptance of an outside supervisory board seat by an Executive Board member and
+the conclusion of a consulting contract with a former Executive Board member. It also discussed
+the lessons learned from the voting results at the Annual General Meeting in May 2021 and the
+feedback from institutional investors. In October 2021, the Committee prepared the Supervisory
+Board's resolutions regarding an update to the objectives for the composition of the Supervisory
+Board, submission of the implementation declaration, and determination of the independence of
+Supervisory Board members. The Committee also discussed the succession planning process for
+the Executive Board and the development of top talent as potential successors for departing
+members. At its ordinary meeting on December 16, 2021, the Committee approved its resolution
+proposal to the Supervisory Board regarding the Executive Board compensation for Scott Russell
+effective January 1, 2022, and for Thomas Saueressig effective November 1, 2022.
+SAP
+28/338
+27/338
+The China Strategy Committee met three times in the reporting year. At its meeting in February, the
+Committee discussed SAP's business performance in China in the past years, the current situation
+in China, and the software market there. It also analyzed SAP's future strategy, particularly the
+areas in which SAP sought to make adjustments to cater to the growing importance of the Chinese
+market. When it met in April, the Committee examined SAP's product, sales, and partner strategies
+and the associated risks. To this end, it received reports in particular on the temporary tensions
+between the United States and China. The July meeting focused on the current geopolitical
+situation and SAP's half-year 2021 results. In addition, the Committee discussed the appointment
+of a new SAP regional president for Greater China and plans to increase SAP's market share in
+The Technology and Strategy Committee met four times in 2021. It discussed key technology
+trends in the software industry in the years to come and SAP's corporate and product strategies.
+The Executive Board explained SAP's technology strategy to the Committee members at its
+February meeting, where the two bodies also discussed the improved competitive situation in
+marketing as a result of the 2020 acquisition of Emarsys. At the meeting in April, the Committee
+turned its attention to how SAP's partner network and SAP itself used SAP technologies to develop
+cloud applications for organizations. In July 2021, the Executive Board updated the Committee on
+the strategy plans for small and medium-sized enterprises. The Executive Board also reported on
+how SAP planned to leverage machine learning and direct integration in business processes to set
+itself above the competition in the workflow management domain, that is, in the collaborative
+processes or business processes used by companies and authorities. When it met in
+October 2021, the Committee examined SAP's long-term innovation strategy and the changes in
+company culture that had been triggered to support this. To this end, the Executive Board
+explained that the lever for these changes was the REINVENT strategy, which, through the
+integration of SAP's product portfolio, the use of artificial intelligence, and a wide range of new
+functions and applications, was intended to support customers on their journey to an intelligent
+enterprise and greater sustainability.
+February 2021, the Executive Board updated the Committee on the status of both projects as well
+as on the closing of the sale of SAP Digital Interconnect (SDI). The Executive Board also reported
+on the acquisition of Finnish company AppGyver, provider of a no-code platform enabling app
+development without prior coding experience. Further, the Committee received its regular written
+update on SAP's equity investments during the preceding fiscal year. In the joint meeting with the
+Audit and Compliance Committee that followed, the members of both Committees discussed the
+annual budget for 2021 and voted in favor of recommending its approval to the Supervisory Board.
+On March 15, 2021, the Committee convened to deliberate on a small acquisition by an SAP
+subsidiary. At the meeting in April, the Executive Board reported to the Committee on selected
+Investor Relations activities. In addition, representatives from Sapphire Ventures gave the
+Committee an overview of the European and U.S. market for venture capital in technology and a
+status report on the active SAP venture capital funds, and presented the details of the planned
+additional venture capital fund, Sapphire Venture Fund VI. A resolution to recommend the
+Supervisory Board's approval of this new fund was subsequently adopted by the Committee by
+correspondence in May 2021. At our extraordinary meeting on July 23, 2021, we deliberated on
+Qualtrics' planned acquisition of Clarabridge. At our ordinary meeting on July 29, 2021, the
+Executive Board presented an analysis of the acquisitions and shareholding transactions of the
+past three years, updated us on the SAP's liquidity situation, and compared the current business
+performance with the budget presented for fiscal 2021. At the Committee's regular meeting in
+October, the Executive Board took the Committee through SAP's current product portfolio. In
+addition, the Committee deliberated on the Executive Board's proposed restructuring of current
+financing activities and recommended the Supervisory Board approve it as well. The Committee
+was also given a funding and strategy update on the Sapphire Ventures funds manager, and
+provided with a written report on SAP's business performance up to the third quarter. In
+December 2021, the Committee held a second joint meeting with the Audit and Compliance
+Committee, at which the Executive Board presented the preliminary Group annual plan for 2022.
+This meeting was held in preparation for the Supervisory Board meeting in February 2022, at which
+the full Supervisory Board resolved to approve the Group annual plan for 2022.
+Information
+Additional
+Information
+Additional
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+The Audit and Compliance Committee held ten regular meetings – two of which jointly with the
+Finance and Investment Committee - and three extraordinary meetings in 2021. It also adopted
+one resolution by way of correspondence. The Committee comprehensively prepared the
+resolutions of the Supervisory Board for all topics assigned to it, as described above, and dealt at
+its meetings with the course of business in the respective quarter, the accounting processes, the
+preparation of end-of-quarter closings, and the quarterly reports due for publication. In addition, the
+Committee chairperson was in regular contact with the auditor. Other recurring meeting topics
+included SAP's risk management system, its internal control system, its compliance system
+(including specific compliance issues, the status of corresponding SAP-internal investigations, and
+case-related collaboration with authorities), and cybersecurity. During its meeting in February 2021,
+the Committee focused on the financial accounts of SAP SE and the SAP Group for 2020 and
+prepared the Supervisory Board's proposed resolutions to the Annual General Meeting of
+Shareholders concerning the election of an auditor and the appropriation of retained earnings. The
+decision on the recommendation regarding the election of the auditor was preceded by a review of
+the auditor's independence, qualifications, and quality of work. To monitor the latter, the Audit and
+Compliance Committee obtained regular reports from the auditor on its internal quality assurance
+standards and on any material findings from internal quality audits, from external quality controls
+via peer review, and from any inspections conducted by the government or regulators into the
+auditor's audits. Other material topics deliberated on by the Committee beyond the regular meeting
+topics in its ordinary and extraordinary meetings included quarter-specific matters and the
+compensation system for SAP's Sales organization. Further, the Committee discussed the progress
+of selected lawsuits involving SAP. The Audit and Compliance Committee also received regular
+updates on the activities relating to the change in auditor for SAP's financial statements and
+consolidated financial statements. The Committee discussed the audit focus with the auditor at its
+meeting in July. At its meeting in April, and again at its meeting in July, the Committee resolved to
+commission non-audit services from the auditor in relation to the compensation report (April
+meeting) and in relation to the non-financial report (July meeting). Specifically, this included a
+limited assurance review of the documents and a report to the Committee on the results of the
+review. As reported in more detail below, the Committee also held two joint meetings with the
+Finance and Investment Committee in February and December 2021 to discuss the Group annual
+plan for 2021 and the preliminary Group annual plan for 2022. The auditor attended all Audit and
+Compliance Committee meetings except for the extraordinary meetings in June, July, and
+December, as well as the joint meetings with the Finance and Investment Committee, and reported
+in depth on its audit work and on its quarterly reviews of selected software agreements.
+The Finance and Investment Committee held six regular meetings and six extraordinary meetings
+in 2021, and outside these meetings it passed two resolutions by correspondence. Two of its
+meetings, one in February and one in December 2021, were joint meetings with the Audit and
+Compliance Committee. In two extraordinary meetings in January 2021, the Committee was given
+detailed status reports on the Qualtrics IPO and the planned acquisition of Signavio. In
+Further Information on
+Sustainability
+The Committee also reported that KPMG had told it that no circumstances had arisen that might give
+cause for concern about KPMG's impartiality, and informed us about the services KPMG had provided
+that were not part of the audit. The Committee reported that it had examined the auditor's
+independence, taking the non-audit services it had rendered into consideration, and stated that, in the
+Committee's opinion, the auditor possessed the required degree of independence and professional
+qualification.
+The Audit and Compliance Committee and the Supervisory Board satisfied themselves that KPMG
+had conducted the audit properly. In particular, they concluded that both the audit reports and the
+audit itself fulfilled the legal requirements. On the basis of the report and the Audit and Compliance
+Committee's recommendation, the Supervisory Board approved the results of the audit and, since
+there were no findings from our own examination, we gave our consent to the SAP SE financial
+statements, the consolidated financial statements, the combined Group management report, and
+adopted the compensation report pursuant to the German Stock Corporation Act, section 162. The
+financial statements and combined management report were thus formally adopted upon approval by
+the Supervisory Board. The Supervisory Board's opinion of the Company and the Group coincided
+with that of the Executive Board as set out in the combined management report. The Supervisory
+Board considered the proposal presented by the Executive Board concerning the appropriation of
+retained earnings. We had regard to the requirements of dividends policy, the effects on the liquidity of
+SAP SE and the SAP Group, and the interests of the shareholders. We also discussed these matters
+with the auditor. We then endorsed the Executive Board's proposal concerning the appropriation of
+retained earnings, in accordance with the Audit and Compliance Committee's recommendation. The
+corporate governance statement pursuant to the German Commercial Code, sections 315d and 289f
+was approved for publication by the Supervisory Board by way of correspondence vote prior to the
+meeting to discuss the financial statements on February 22, 2022. Finally, we adopted this present
+Report.
+Consolidated Financial
+Statements IFRS
+Our CPO and chief sustainability officer meet each quarter to discuss the progress and challenges
+related to embedding sustainability in our procurement practices.
+Upholding High Standards Across Our Supply Chain
+SAP's supplier code of conduct (SCOC) is included in our standard supplier contracts and is an
+essential part of our supplier registration. This supplier registration ensures that potential suppliers of
+SAP are aware of SAP's SCoC. We review and update our SCoC regularly to maintain high standards
+within our supplier network. This strengthens the code's enforceability and sends a clear message
+about its importance for SAP.
+In addition to requirements for sustainable packaging (such as plastic-free, appropriately sized boxes),
+our SCoC contains provisions on the Modern Slavery Act and diversity and inclusion, as well as a
+labor standards chapter that expressly refers to human rights. Furthermore, we recommend to SAP
+suppliers that they deliver goods and services that are accessible to everyone, including people with
+disabilities.
+In early 2022, the GPO will implement the Procurement with Purpose supplier qualification process.
+This process will capture information pertaining to the performance of our suppliers in three focus
+areas: Social & Inclusive Supply Chain, Environmental Supply Chain, and Human Rights in Value
+Chain. This data will enable the GPO to make an informed supplier selection based on environmental
+and social performance.
+What We Buy and Where We Buy It From
+We consider our suppliers to be key partners in our business success. In 2021, we spent
+approximately €5.3 billion in purchases from more than 15,000 suppliers worldwide
+(2020: approximately €5.1 billion from more than 14,700 suppliers worldwide). Within our five
+categories and our Sourcing Excellence Champions unit, we approach sustainability from different
+28 Car Fleet includes procurement relating to the global Company car fleet. IT Infrastructure procures products and services for SAP's
+cloud business such as network services and data center and co-location goods and services. Marketing & Travel supports topics related
+to SAP's marketing, events, merchandise, and business travel areas. Professional Services includes application and development services
+as well as financial and legal services. Workplace Infrastructure includes procurement for areas such as facility services, client services,
+and equipment, communication, and collaboration services. Sourcing Excellence Champions are responsible for the seamless execution of
+procurement and sourcing activities and are drivers for customer satisfaction and end user success.
+293/338
+294/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Also reporting to the CPO, the chief operating officer (COO) is responsible for enabling processes and
+governance within the GPO.
+SAP's GPO is led by our chief procurement officer (CPO). Reporting to our CPO are the heads of our
+procurement categories (1) Car Fleet, (2) IT Infrastructure, (3) Marketing & Travel, (4) Professional
+Services, and (5) Workplace Infrastructure and their teams. 28
+Governance
+A significant part of our social and environmental impact is delivered through our supply chain.
+Eliminating single-use plastics, decreasing carbon emissions, reducing oversized packages, and close
+collaboration with our supplier network are factors that contribute to a sustainable supply chain.
+Our Global Procurement Organization (GPO) aims to transform into an even more purpose-driven
+organization consistent with diversity and social enterprises. That is why we established the
+overarching Procurement with Purpose strategy, which promotes purpose-driven programs such as
+diversity and social inclusion and responsible resource usage.
+Enhance Positive Impacts and
+Mitigate Negative Impacts
+Where You Can Find More
+Information in the SAP
+Integrated Report and Other
+Sources
+For more information, see the section
+Memberships, Partnerships, and Commitments
+Employees and Social Investment, Memberships, Partnerships, and Commitments
+SAP and SDG 17, SAP and UNICEF, SAP Founding Member of Value Balancing Alliance, SDG Ambition, SAP joins the Ellen
+MacArthur Foundation, WEF Global Plastic Action Partnership, SAP Is Innovation Partner in WBSCD's Value Chain Carbon
+Transparency Pathfinder, SAP joins the Global Alliance for YOUth
+292/338
+SAP
+Information
+SAP Integrated Report 2021
+Combined Group
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+Sustainable Procurement
+Making Our Supply Chain More Sustainable
+To Our
+angles: Workplace Infrastructure (example: reduce single-use plastics packaging and packaging
+material), Professional Services (example: CO2-reduced mobility concepts, electronic contracts),
+Marketing & Travel (example: sustainable merchandise and events), IT Infrastructure (example:
+sustainable cooling of data centers), and Car Fleet (example: sustainable mobility concepts).
+Suppliers by Category (Tier 1)
+Percent of total spend
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+diverse suppliers and social enterprises, engaging with their regional procurement teams on current
+and upcoming activities, supporting Environmental Management System (EMS) audits for ISO 14001
+certification, and acting as a multiplier for passing on Procurement with Purpose knowledge, learning,
+and training opportunities to the GPO.
+As part of its Procurement with Purpose program, SAP was a corporate member of the following
+supplier and social enterprise certification organizations in 2021:
+To support these programs, the GPO established the Procurement with Purpose Ambassador
+Network. This network consists of volunteers within the GPO across the various procurement spend
+categories and regions; its functions include identifying new opportunities to engage with certified
+Supplier Diversity:
+WEConnect International
+Disability:IN
+Social Enterprise:
+-
+Social Enterprise UK
+Buy Social Canada
+Social Traders (Australia)
+Social Enterprise NL
+National Minority Supplier Development Council (NMSDC)
+Activities and Programs to
+Driven by our GPO, SAP's supplier diversity and social enterprise programs are an integral part of our
+transformation into a purpose-driven organization. These programs aim to build the capacity of
+diverse and social businesses to provide a fair chance at competing for contracts and are treated
+equally with other SAP suppliers. Utilizing the procurement skills and expertise within the organization,
+our GPO engages in skills-based volunteering to build the capacity of social enterprises in the
+Sustainable Growth of Revenues for International Development (S-GRID) program by the social
+purpose organization MovingWorlds.
+Social Procurement
+Car Fleet
+4%
+IT Infrastructure
+Marketing & Travel
+Professional Services
+Workplace Infrastructure
+APJ
+Americas
+We believe that diverse and sustainable businesses bring significant added value to SAP.
+Establishing an inclusive supplier network – that is, minority enterprises defined by gender, ethnicity,
+disability, sexual orientation, and other characteristics, as well as certified social enterprises that focus
+their company's mission on making social impact - have become a key priority for SAP. We believe
+that our commitment to an inclusive, bias-free culture in our workplace must be mirrored in our
+approach to our supplier base.
+EMEA
+Percent of Suppliers per Region
+Percent of total spend
+20%
+26%
+26%
+27%
+32%
+54%
+11%
+NA
+Build capacity throughout our broader ecosystem
++
+Combined Group
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+291/338
+Environmental Policy, SAP and SDG 12, Circular Economy, SAP Solutions for Circular Economy, Circular Design Project, SAP
+and Topolytics Launch COP26 Waste Insights Project, Phase out single-use plastics, Buy social: 5 & 5 by '25, SHIFT: Digital
+tools to fight ocean plastics, Material traceability, Green Token by SAP
+Energy and Emissions, Waste and Water, Sustainable Procurement
+Management Report
+SAP Responsible Design and Production; 5 & 5 by '25
+initiative; SAP Ariba Supplier Risk Management; SAP Digital
+Supply Chain; SAP Rural Sourcing Management;
+SAP Logistics Business Network and Material Traceability
+Beyond Single-Use Plastics initiative; Supplier Code of
+Conduct; Sustainable Procurement; e-waste recycling
+Direct:
+We drive resource productivity with an aspiration to a world with zero waste.
++ Decouple economic prosperity from resource
+consumption by enabling transparency and optimizing
+resource productivity in linear or circular economies
+Increase absolute resource and energy consumption
+because efficiency gains through automation may be
+counteracted (rebound effect)
+Indirect:
+Environmental Policy, SAP and SDG 13, Climate Action, Climate Change: What SAP Is Doing, SAP sets 1.5°C science-based
+emissions reduction targets aligned with a net-zero future, SAP's investment in Livelihoods Carbon Funds, SAP joins 1t.org
+with a pledge to plant 21 million trees, Climate 21, SAP Product Carbon Footprint Management, SAP Concur Sustainable
+Travel
+Use energy, water, and resources; produce waste
++ Drive sustainable business practices and integrated
+reporting
+Indirect:
+Direct:
+Green Cloud; Business ambition for 1.5°C; Climate 21
+program; SAP Product Carbon Footprint Management;
+SAP Landscape Management Cloud; SAP Transportation
+Management; Concur Travel, and TripIT
+Additional
+Information
+Global Environmental Policy; Report and reduce CO2
+emissions and energy consumption; Procure 100%
+renewable electricity; Carbon impact relevance for
+Executive Board compensation
+Direct:
+Become carbon neutral by 2023
+Where You Can Find More
+Information in the SAP
+Integrated Report and Other
+Sources
+Our Policies and Selected
+Activities and Programs to
+Enhance Positive Impacts and
+Mitigate Negative Impacts
+Our KPIs and Targets
+Increase customers' energy consumption through use of
+software
+climate-change relevant parameters and help
+understand and minimize the climate footprint of a
+company's products, operations, and services
+Further Information on
+Sustainability
+-
++ Contribute to climate change mitigation and strengthen
+resilience and adaptive capacity to climate-related
+hazards and natural disasters of our customers
+Indirect:
+Emit greenhouse gases
+Assume responsibility for products in use-related
+emissions by running customer applications in the SAP
+green cloud
++
+Direct:
+SDG 13 Climate Action
+Our Potential Direct and
+Indirect Impact
++ Enable holistic operational steering by integrating
+-
+SDG 12 Responsible Consumption and Production
+Our Policies and Selected
+Activities and Programs to
+Enhance Positive Impacts and
+Mitigate Negative Impacts
+Our Potential Direct and
+Indirect Impact
+SAP and SDG 9, SAP Innovation, One Billion Lives Initiative, SAP.io
+Products, Research & Development, and Services, Employees and Social Investments
+Integrated Report and Other
+Sources
+Where You Can Find More
+Information in the SAP
+Additional
+Information
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
++
+Combined Group
+SAP Integrated Report 2021
+SAP
+Our Potential Direct and
+Indirect Impact
+Our KPIs and Targets
+Our Policies and Selected
+SDG 17 Partnerships for the Goals
+Direct:
+To Our
+Stakeholders
+Where You Can Find More
+Information in the SAP
+Integrated Report and Other
+Sources
+SDG 10 Reduced Inequalities
+Ensure equal opportunity and inclusion of all
+employees, irrespective of age, sex, disability, race,
+ethnicity, origin, religion, or economic or other status
+Our KPIs and Targets
+Our Potential Direct and
+Indirect Impact
+SAP and SDG 10, Human Rights Commitment Statement, Equality for All, Diversity and Inclusion, Social Justice, Spotlight
+Black Businesses, Equal Pay for Equal Work, Fostering Corporate Spend with Diverse Suppliers, Powering Opportunity
+Through Digital Inclusion, SAP Product Accessibility, SAP Solutions for Social Responsibility, SAP Rural Sourcing
+Management
+Where You Can Find More
+Information in the SAP
+Integrated Report and Other
+Sources
+SAP solutions for social responsibility; SAP Ariba Supplier
+Risk Management
+Indirect:
+Human Rights Commitment Statement; Diversity & Inclusion
+programs including EDGE certification; SAP Global Anti-
+Discrimination Policy; 5 & 5 by '25 initiative
+Direct:
+Direct
+Reach 5% of annual addressable procurement spend with social enterprises and with diverse businesses by 2025
+•
+Our Policies and Selected
+Activities and Programs to
+Enhance Positive Impacts and
+Mitigate Negative Impacts
+30% women in management by year end 2022
+"
+Our KPIs and Targets
+Decouple societal groups from entire areas of
+employment through an accelerated digital divide and
+lack of digital skills
++ Enable an inclusive economy by providing tools and
+systems to foster inclusion of all in workforce and
+supply chains
+Indirect
+Double the representation of African-American talent in the U.S. over the next three years
+Energy and Emissions, Compensation Report
+Akina Foundation
+These organizations enable the GPO to identify opportunities to engage with diverse suppliers and
+social enterprises, to support the 5 & 5 by '25 social procurement spend targets. This target is defined
+as 5% addressable spend with diverse suppliers and 5% addressable spend with Social Enterprises
+by year end 2025. As at the end of 2021, we had achieved €200.9 million (3.9%) diverse spend with
+958 diverse suppliers in the United States.
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+Memberships, Partnerships,
+and Commitments
+To better understand and evolve sustainable performance, dialogue, and exchange of knowledge and
+different perspectives on a national, regional, and global level, is vital for SAP, both for our company
+and customers. Hence, SAP subscribes to, commits to, and routinely engages in a range of third-party
+organizations, including:
+Organization
+Accounting Standards Committee of Germany (ASCG)
+Alliance for Development and Climate
+ASEAN Foundation
+Bitkom e.V.
+Business Call to Action
+CEO letter on EU 2030 emissions targets
+Deloitte Digital
+DIGITALEUROPE
+econsense e.V.
+EMF ERP Pledge
+Management Report
+Stakeholders
+Combined Group
+To Our
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+EU Green Deal CEO Pledge
+Public Policy
+SAP engages with governments around the globe on various policy issues as well as on creating
+reasonable framework conditions for the adoption of new beneficial technologies or business models
+such as cloud computing, the Internet of Things, and Big Data.
+SAP believes in transparency in the political process. Accordingly, we are registered in the European
+Transparency Register for interest representatives. In the United States, SAP is registered, and reports
+in compliance with, the federal Lobbying Disclosure Act. We are also registered in other countries,
+where this is required by local law.
+Political Contributions
+In accordance with the SAP Code of Business Conduct (CoBC), SAP does not support any political
+parties. By the laws of the United States, SAP employees exercise their right to operate a political
+action committee (PAC). The SAP America PAC is an independent, registered, and strictly regulated
+organization that allows eligible SAP employees to voluntarily contribute to the SAP America PAC in
+the United States to financially support candidates seeking public office at the state and federal levels.
+Consistent with U.S. laws, SAP exercises no control over or influence on the SAP America PAC.
+SAP America PAC expenditure figures are transparent and accessible through the U.S. Federal
+Election Commission Web site.
+299/338
+300/338
+SAP
+SAP Integrated Report 2021
+SAP has developed trusting and transparent relationships with governments worldwide by
+cooperatively exploring the potential for information and communications technologies to spur
+economic growth, create jobs, and address societal challenges. This includes consideration of the role
+governments play as consumers as well as policy makers, and by supporting the digital
+transformation of the public sector to become more efficient, effective, and citizen oriented.
+European Climate Pact Pledge
+European Roundtable for Industry (ERT)
+Federation of German Industries
+National Chambers of Commerce
+Network for Teaching Entrepreneurship (NFTE)
+Ocean Plastics Leadership Network
+Race to Zero
+Schmalenbach-Gesellschaft für Betriebswirtschaft e.V.
+Social Enterprise UK
+Social Traders
+Sustainable Markets Initiative
+Livelihood Funds
+Terra Carta of the Sustainable Markets Initiative by Prince
+Charles
+The Green Web Foundation
+RE100
+Science Based Targets initiative
+Social Enterprise World Forum
+Society of Corporate Compliance & Ethics
+The Climate Pledge
+The Female Quotient
+Thrive Global
+The Conference Board, Inc.
+SAP
+Industrial Internet Consortium
+Global Business Alliance
+Global Alliance for YOUth
+GlobalGiving
+Gucci CEO Carbon Neutral Challenge
+Impact 2030 (founding member)
+Information Technology Industry Council
+JA Worldwide (JA Americas and INJAZ Al-Arab)
+Klimabündnis Baden-Württemberg
+LEAF Coalition
+Global Partnership for Sustainable Development Data
+Metropolregion Rhein-Neckar
+Breakthrough Energy Ventures
+Business for Social Responsibility
+Climate Neutral Now
+Deutschland sicher im Netz e.V.
+Ellen MacArthur Foundation (EMF)
+ESMIG
+European CEO Alliance
+European Green Digital Coalition (EGDC)
+Advancing Women Executives
+Alliance for Integrity
+Social Entrepreneurship Network Germany
+2021
+2019
+Remarketing
+WEEE
+■Mechanical Recycling
+101
+Tons
+■Thermal Recycling
+13
+3 117
+■Disposal
+151
+Building Regenerative Business in a Circular Economy
+In 2020, we made a commitment with our customers to strive for a significantly cleaner ocean by 2030
+at the World Economic Forum in Davos, alongside the Ellen MacArthur Foundation, World Wildlife
+Fund, and the Global Plastic Action Partnership. To make the circular economy the de facto approach
+to material use and waste management, we are working with our customers and partners on solutions
+that address full-circle transparency across all material flows to enable three priorities: eliminate,
+circulate, and regenerate.
+Eliminate: Manage packaging and regulatory risks including extended producer responsibility
+obligations and plastic taxes holistically across global markets, and embed circularity principles into
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+End-of-Life Treatment of Electrical and Electronic Equipment
+In multiple SAP locations, we cooperate with international and/or local IT asset lifecycle partners to
+refurbish, recycle, and dispose our EEE. In late 2020, we started to transform our e-waste reporting.
+Instead of reporting only scrapped e-waste, we began collaborating with our major IT asset lifecycle
+partners to establish a more distinguished (W)EEE reporting that enables us to see more precisely
+what type of end-of-life treatment was applied to our disposed IT assets and devices.
+Waste of electrical and electronic equipment (WEEE, or e-waste) is one of the world's fastest-growing
+waste streams. As a global cloud company running data centers and office buildings across the world
+with a large amount of IT devices in place for our more than 100,000 employees, the ecological
+footprint of our electrical and electronic equipment (EEE) and their end-of-life treatment is a growing
+area of focus for SAP. Thus, the ultimate goal is to give our discarded electronic devices and assets a
+second life through refurbishment and remarketing. If the device is non-repairable or unmarketable,
+the subsequent priority is to recover valuable materials through mechanical recycling.
+Managing Our Discarded Electrical and Electronic Devices
+To ensure that all diverse and social spend is captured, our GPO evaluates its supplier network to
+identify and register all existing certified diverse suppliers and social enterprises. Activities such as this
+and expanding our efforts with the Buy Social Corporate Challenge aim to enable SAP to fulfill our
+pledge and shift our addressable spend to diverse suppliers and social enterprises. With Ariba
+Network, we invite existing suppliers, as well as potential suppliers, to engage more in the area of
+diversity and social enterprises.
+Improving Sustainability Through Practice
+As part of our Third Party Risk Management (TPRM) program, we have created a Responsible
+Sourcing questionnaire to identify, manage, mitigate, and avoid sustainability risks within our supply
+chain. The risk domains evaluated include: Environmental, Human Rights, Diversity, Equity & Inclusion,
+Social Enterprise, and Health & Safety.
+As outlined in the Waste and Water section, the GPO is one of the focus areas of the interdisciplinary
+Beyond Single-Use Plastics initiative. From addressing plastic packaging materials, to the items in our
+SAP Ariba catalog, our GPO is engaging with all relevant suppliers to remove single-use plastics from
+their packaging material and their offered product portfolio.
+295/338
+296/338
+SAP
+SAP Integrated Report 2021
+Consolidated Financial
+Statements IFRS
+To Our
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+Waste and Water
+Aspiring to a World of Zero Waste
+We believe in SAP's capabilities to help transform the economy into a low-carbon, circular system to
+reach a restorative and regenerative world of zero waste and significantly cleaner oceans by 2030. In
+alignment with SAP's Global Environmental Policy, our waste and water strategy and corresponding
+Company-wide initiatives aim to continuously reduce SAP's impact on the environment by generating
+less waste, reducing water consumption, and enabling our customer to do the same.
+Stakeholders
+2020
+Further Information on
+Sustainability
+Information
+Using Water Efficiently
+Climate change affects – and is affected by - global water resources and management. This is why
+we continue to use water as efficiently as possible in our data centers and offices even though our
+operations are not water-intensive. For example, in the data centers of our headquarters, we use
+adiabatic cooling (evaporative cooling) as well as a closed water circuit to minimize water
+consumption for cooling our server racks. In 2021, we set the target to reduce water consumption for
+cooling purposes in our headquarters data centers by at least 1,200 m³ per year (achievement rate
+2021: 100%). At our headquarters and other office locations, we use rain and run-off water for
+irrigation and toilets.
+Based on the Aqueduct Water Risk Atlas of the World Resource Institute, we conducted a water risk
+assessment for our ISO 14001-certified sites. Twenty percent of these sites are located in high to
+extremely high water-risk regions. We address this issue with dedicated water management efforts.
+For instance, in Bangalore, India, we will install a rainwater harvesting system at the beginning of 2022
+to improve water conservation. In Johannesburg, South Africa, smart water meters and a water
+catchment solution were installed to decrease municipal water consumption. In Ra'anana, Israel, we
+implemented a building management system (BMS) to monitor and track consumption, and various
+detectors were installed to limit irrigation on rainy days and to detect water leakages early on.
+In 2021, our global water usage further decreased due to the prevailing COVID-19 pandemic and the
+strong reduction in the usage of our offices coupled with our implemented water-reduction measures.
+Global Water Usage
+Thousand cubic meters
+1,332
+1,376
+Furthermore, we reduced our paper usage by 88% (over 73 million pages) since 2009, despite a
+125.7% increase in employee full-time equivalents over the same period. Initiatives such as the
+continuous global rollout of a secure pull-printing system (about 82,000 registered employees) or the
+implementation of double-sided, black-and-white printouts by default supported this decrease. In
+2021, we also continued our approach of paperless contracting. By using the SAP Signature
+Management application by DocuSign, which enables electronic signatures, we were able to further
+cut down on the printing of paper-based contracts by about 185,600 pages in 2021 (2020: over
+224,000 pages) - considering the same procurement contract types as in 2020. As most employees
+continued to work from home in 2021 due to the pandemic, the printing volume further decreased
+42% (6.9 million pages) compared to 2020.
+1,185
+13%
+-3%
+988
+765
+-23%
+-26%
+2017
+2018
+16%
+Information
+Additional
+Further Information on
+Sustainability
+core busines processes to eliminate waste through the SAP Responsible Design and Production
+solution
+Circulate: Establish responsible sourcing and secondary marketplaces to stimulate an increase in
+value of materials for re-use as well as gain transparency into material flows across global supply
+networks. For instance, the SAP Rural Sourcing Management solution was used to engage waste
+collector communities ethically and responsibly in the first-mile acquisition of waste materials,
+while the GreenToken by SAP solution provides full multitier transparency of raw material flows,
+including co-mingled commodities.
+Regenerate: Leverage new regenerative business models to accelerate the shift from consumption
+to re-use models, by way of industry cloud innovations from SAP.
+SAP also advocates global systems change at scale to accelerate the transition to a circular economy:
+in addition to endorsing meaningful proposals such as calling for the implementation of extended
+producer responsibility schemes for packaging, it enables citizens to find their role and best-fit
+solutions to help solve ocean plastic pollution, through the SHIFT platform developed in close
+collaboration with Emily Penn, ocean advocate and co-founder of the non-profit organization
+eXxpedition.
+Finding Alternatives to Single-Use Plastics
+To lead by example, SAP continued to execute on its original commitment to phase out single-use
+plastics by the end of 2020 as part of its global environmental policy's goals. The interdisciplinary
+'Beyond Single-Use Plastics' initiative is based on identifying and eliminating single-use plastics and
+introducing more sustainable alternatives based on three principles: reduce waste, reuse items, and
+recycle materials.
+Worldwide, SAP locations continued to collaborate with their suppliers and service providers to
+eliminate single-use plastic products such as bottles, cups, stirrers, straws, cutlery, and food
+packaging. For example, we rolled-out a digital reusable food packaging system for takeout, delivery,
+and convenience in all SAP locations with a canteen in Germany, and piloted the first two single-use
+plastic-free cafeteria kiosks at SAP's headquarters in Walldorf. At SAP locations in the United States
+and Canada, meanwhile, "Sustainability on the Go" kits with reusable utensils were distributed among
+the employees. The lessons learned and experiences of such practices will be used to refine the
+concepts and make them suitable for a global rollout.
+We also continue to exclude single-use plastics in our internal procurement processes (such as for
+office supply packaging) as outlined in the Sustainable Procurement section. The established "Choose
+to Reuse" campaign aims to increase visibility and usage of reusable products by encouraging
+employees to take photos of reusable items of their everyday work and share them on social media.
+Thanks to the continuous efforts of our global network of sustainability champions, our Environmental
+Management System (EMS) colleagues, and other internal stakeholders, and their persistent
+engagement of and communication with external suppliers and partners, we overcame our setbacks
+from 2020 caused by the COVID-19 pandemic and, by midyear 2021, had successfully phased out
+nearly all single-use plastics at the Company. The project was operationalized at the end of the
+second quarter 2021 and handed over to the three core lines-of-business in the area of facilities,
+procurement, and events to ensure SAP remains free of single-use plastics going forward.
+Cutting Down on Further Residual Waste
+In 2021, our continuous effort to improve waste segregation and evolve our processes at offices
+across the globe failed to pick up its original speed due to the persisting COVID-19 pandemic, as
+many sites remained closed or opened with major restrictions. Nonetheless, as part of our ISO 14001
+program, SAP introduced the 'Too Good to Go' app in Germany. For a small fee, employees can pick
+up leftover lunches from the cafeterias to fight food waste. At SAP Mexico, the amount of waste
+segregation stations was further expanded, while SAP Philippines implemented systematic
+hazardous-waste management practices.
+297/338
+298/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Additional
+Indirect:
+Combined Group
+Management Report
+To Our
+Stakeholders
+Waste Generated and Water Consumed in Operations 30
+Capital Goods 30
+Purchased Goods and Services 30
+Logistics
+Electricity in external data centers and hyperscalers
+Employee commuting
+Business travel (train, plane, rental car, private car)
+Upstream Emission Categories
+Scope 3
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+310/338
+309/338
+Indirect energy in buildings (chilled / hot water, steam)
+Electricity in own buildings and data centers
+Emission Categories
+Scope 2
+Mobile combustion in corporate jets
+Mobile combustion and refrigerants in corporate cars
+Stationary combustion and refrigerants in buildings
+Emission Categories
+Other Fuel- and Energy-Related Activities²
+Downstream Emission Categories
+Use of sold products 30
+(Data Download - incorporated in "Logistics")
+WEF 1t.org
+WEF Global Battery Alliance
+WEF CEO Climate Leaders
+We Are Family Foundation
+Value Balancing Alliance e.V. (founding member)
+UNICEF
+United Nations Global Compact (since 2000)
+TRACE International
+Together with Nature Principles for Nature-Based Solutions
+Organization
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Scope 1
+Stakeholders
+SAP Integrated Report 2021
+SAP
+31 In 2021, we achieved an EAC market boundary alignment of 87% based on the criteria of RE100 and GHG Protocol Scope 2 Guidance.
+30 Not included in SAP's carbon neutral target but in SAP's science-based target.
+In addition, all of our purchased renewable electricity is EKO energy-certified, a high-quality,
+internationally recognized not-for-profit ecolabel for renewable energy installations that fulfill
+additional sustainability criteria. Through the purchase of EKOenergy-certified electricity, we also
+contribute to EKOenergy's Climate Fund, which finances solar projects tackling energy poverty.
+To calculate the carbon reductions of the EACS, the amount of purchased electricity is multiplied by
+the country-specific carbon factor derived from the location where the renewable electricity was
+Accounting: SAP uses the country-specific emissions factor to calculate the carbon reduction
+achieved by the EACs. EACS are considered independently to the electricity achieved through their
+procurement. SAP aims to consider the latest guidelines on EAC market boundaries.31
+Vintage: The renewable electricity must be produced in the same year or the year preceding the
+reporting period to which it will be applied.
+Installation: The power plant producing the renewable electricity shall not be older than 10 years.
+In case of a renovation of an old power plant, the 10-year rule applies only to the additional
+electricity output due to efficiency increase. Furthermore, SAP does not consider EACs from
+government supported power plants.
+Type of Renewable Electricity: SAP only considers solar and wind for renewable electricity
+sourcing.
+As recommended by the Greenhouse Gas Protocol and CDP, we actively look for the best available
+quality and standards, which support renewable electricity projects that meet robust criteria in terms
+of environmental integrity, stakeholder inclusivity, and reporting and verification. We have developed a
+quality standard that defines key criteria for the procurement of EACs to drive change in the electricity
+market and to avoid the risk caused by low-quality products. The key characteristics of our renewable
+electricity purchasing guidelines are as follows:
+We define renewable electricity as electricity coming from renewable electricity sources such as wind,
+solar, hydro, and geothermal. The amount of renewable electricity used by SAP is calculated by
+adding the amounts of renewable electricity produced onsite by our own solar cells and covered by
+EACs.
+Renewable Electricity
+SAP uses external reductions, such as purchases of EACS and certified voluntary "offsets," to achieve
+its carbon neutral target. Emission reductions are subtracted from gross Scope 1 to Scope 3 emissions
+to achieve a net carbon inventory.
+External Reductions
+To Our
+10,269 kilotons (kt) CO₂e
+Relevant for SAP's Science-Based Target
+8,586 kt CO₂e
+Relevant for SAP's Carbon Neutral Target
+to determine an average emission factor per euro spent based on short, medium, and long-haul
+flight emission factors. For CO2 calculation, this factor is applied to actual controlling costs for
+business flights. Emission factors for business flights do not consider the radiative forcing factors.
+Rental Cars: Emissions caused by business trips by rental car. An average emission factor from
+rental cars is calculated based on actual distance traveled and actual costs spent (90% data
+coverage). This average emission factor is used for extrapolation based on the controlling costs.
+Train Travel: Emissions from business trips by train. An average emission factor from train travel is
+calculated based on actual distance traveled and actual costs spent (24% data coverage). This
+average factor is used for extrapolation based on the controlling costs. In Germany, business trips
+by train are considered carbon neutral as they are compensated with 100% green electricity by
+Deutsche Bahn.
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+308/338
+307/338
+Business Flights: Emissions caused by business trips by airplane. Calculation of emissions is
+based on actual distance travelled and actual costs spent (79% data coverage). This data is used
+Only selected upstream emissions are measured directly and hence included in our corporate carbon
+target. The following upstream Scope 3 carbon emissions are included in our target:
+Upstream
+Business Trips with Private Cars: Emissions from business trips with employee-owned cars and
+company cars without fuel card. Carbon calculation is based on distance traveled with car (100%
+data coverage). Company car trips with fuel cards are excluded from this activity type.
+Employee Commuting: Emissions caused by commuting between home and work at an SAP
+office location. Considered are all modes of transport, excluding commuters with corporate cars.
+An SAP-global, system-integrated commuting survey about the distance to work and the mode of
+transport is conducted to collect relevant data. However, due to the COVID-19 pandemic, no new
+commuting survey has been conducted since 2018. Approximately 28,000 employees responded
+to the 2018 survey. These responses are the basis for carbon calculation of employee commuting
+in 2021. Commuting data for non-responding employees and quarterly updates are extrapolated
+based on the number of FTEs excluding those employees who own a company car (24% data
+coverage).
+Refers to other indirect carbon emissions and is defined as emissions that are a consequence of
+operations of an organization, but are not directly owned or controlled by the organization. Scope 3
+emissions are divided into upstream and downstream emissions.
+Purchased Chilled and Hot Water and Steam: Emissions caused by the consumption of
+purchased heat or steam in office buildings (district heating). Calculation of emissions is based on
+consumption of district heating. Emission factors are updated annually. Where no measured data is
+available, stable values (kWh/m²) based on the previous year's energy consumption data are used
+for extrapolation (38% data coverage).
+Electricity in Data Centers: Emissions caused by the consumption of purchased electricity in
+SAP-owned and operated data centers. The calculation of emissions is based on data center
+electricity consumption (100% data coverage). CO2e conversion factors are updated annually
+based on country-specific grid factors.
+Electricity in Office Buildings: Emissions caused by the consumption of purchased electricity in
+office buildings. Calculation of emissions is based on building electricity consumption. Country-
+specific emission factors are updated annually. Where no measured data is available, stable values
+(kWh/m²) based on the previous year's energy consumption data are used for extrapolation (75%
+data coverage).
+Refers to indirect carbon emissions and is defined as emissions from the consumption of purchased
+electricity, steam, or other sources of energy generated upstream from the organization. To determine
+SAP's global net emissions, we use the location-based method to calculate the Scope 2 emissions.
+Additionally, we disclose our market-based Scope 2 emissions in the interactive chart generator. At
+SAP, the following emission categories are covered by Scope 2:
+Scope 2
+Mobile Combustion in Corporate Jets: Emissions caused by business trips with SAP-owned or
+chartered jets. Emission calculation for SAP's own jets is based on actual fuel consumption (100%
+data coverage).
+Refrigerants in Corporate Cars: HFC emissions caused by air conditioning devices in company
+cars. Refrigerant emissions are based on an estimate of HFC1234yf emissions per car (in Europe)
+and HFC134a emissions per car (for the rest of the world) and are extrapolated based on the
+number of corporate cars reported (100% data coverage).
+Mobile Combustion in Corporate Cars: Emissions from fuel combustion of company cars. In the
+context of carbon reporting, the term company car refers to all cars for which SAP permanently
+covers the fuel costs. Emission calculation is based on fuel consumption. In 2021, 29 countries
+reported actual fuel data (93% data coverage); for other countries, stable values (liters/car) are
+used for extrapolation based on the number of corporate cars reported. The stable values for
+extrapolation are based on the previous year's carbon emissions data.
+Refrigerants in Facilities: HFC emissions caused by the use of refrigeration and air conditioning
+equipment. The emissions are extrapolated based on the number of server units in data centers
+and office space with an air conditioning (A/C) system (100% data coverage). All refrigerants are
+assumed to be HFC134a.
+impact of burning wood pellets as 'outside of scopes' carbon emissions. In 2021, these emissions
+accounted for 0.375 kilotons of carbon emissions.
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Scope 3
+"We Mean Business" coalition
+Electricity in External Data Centers: Emissions caused by the consumption of purchased
+electricity in data centers not operated by SAP. An external data center (co-location) is a local
+computing center with server units running SAP software that is operated by an external partner.
+CO2e conversion factors are updated annually based on country-specific grid factors. Electricity
+consumption for external data centers is extrapolated based on the consumed data center
+capacity and a power usage effectiveness (PUE) factor. Where no data is available, average factors
+are applied (78% data coverage).
+- Logistics: Newly established category which consists of the following three emission sources: 1)
+Emissions caused by mail and parcel, 2) Emissions caused by the consumption of paper, and 3)
+Emissions caused by our customers downloading software data from our servers (originally a
+downstream emissions category). Due to their insignificant emissions impact, calculation is done
+based on an average factor 'carbon emissions per FTE.' This factor has been determined based on
+the emissions data of each category of the previous three years (0% data coverage).
+Each year, we measure the following additional upstream Scope 3 carbon emissions based on the
+GHG Protocol's Corporate Value Chain (Scope 3) Accounting and Reporting Standard: Purchased
+Goods and Services, Capital Goods, Waste Generated and Water Consumed in Operations, Other
+Fuel- and Energy-Related Activities. These emission categories are not included in our carbon neutral
+target but our science-based target. The emissions calculation is based on an estimate. Due to the
+link of our upstream emissions to operating expenses, we extrapolated these upstream figures for
+345 kt CO₂e
+96 kt CO₂e 112 kt CO₂e
+84%
+Downstream
+Scope 3
+1%
+1%
+L
+1,475 kt CO₂e
+14%
+Upstream
+Scope 2
+Scope 1
+Scope 3
+Electricity Consumed by Hyperscale Services: Emissions caused by the consumption of
+purchased electricity resulting from the usage of hyperscale services in providers' hyperscale data
+centers. Hyperscale data centers enable massive, efficient, and robust scalability of computing,
+system, and server architecture in order to respond to the increasing demand for cloud computing
+and Big Data solutions. Electricity consumption is calculated based on the total allocated server
+memory size (RAM) of all hyperscale services. A power conversion factor is used to convert the
+allocated RAM value into a server power value, and an average PUE factor is used to extrapolate
+the total hyperscale service electricity (100% data coverage).
+SAP's 2021 Gross Carbon Emissions Along the Value Chain
+Excluded Scope 3 Emissions
+The annual energy need per year is determined using a landscape simulation. It is extrapolated
+globally based on the number of productive installations and PUE. We use a PUE factor of 1.55, which
+is the average PUE of our external data centers. Emissions are calculated using a global electricity
+emission factor. Due to the special characteristics of software products, we chose an assessment of
+resource need per year. This deviates from the minimum boundaries as defined by the GHG Protocol's
+Corporate Value Chain (Scope 3) Accounting and Reporting Standard, which requires assessment
+and disclosure of "direct use-phase emissions of sold products over their expected lifetime." The
+calculation covers all of our major solutions, including on-premise software. Cloud solutions are not
+included, as they are part of internal, external, and hyperscale data center electricity emissions.
+Mobile solutions (for example, SAP apps running on customer IT equipment) are also not included.
+Calculation parameters will be adapted when significant technology changes occur.
+Use of Sold Products: The vast majority of our overall emissions stem from the use of our software
+(customers running SAP solutions on their hardware and premises). Due to our lack of control over
+our customers' IT landscapes, these emissions are not included in our carbon neutral target.
+Nonetheless, we have been calculating the emissions for indicative purposes for many years and take
+them into account for our science-based target.
+In previous years, the only downstream emission category included in SAP's carbon neutral target was
+"Data Download.” In 2021, this KPI was incorporated into the newly created upstream Scope 3
+category "Logistics" as described above.
+Downstream
+2021 by multiplying the four key contributors to our previous year's upstream emissions with the year-
+over-year change of operating expenses between 2020 and 2021.
+Additional
+Information
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Combined Group
+Stakeholders
+To Our
+SAP
+SAP Integrated Report 2021
+The following Scope 3 emissions sources are not applicable to SAP's business operations: Upstream
+Leased Assets, Processing of Sold Products, End-of-Life Treatment of Sold Products, Downstream
+Leased Assets, Franchises, and Investments.
+Wirtschaft macht Klimaschutz
+Combined Group
+World Economic Forum (WEF)
+SAP defines its organizational boundaries by applying the operational control approach as set out in
+the GHG Protocol.
+Organizational Boundaries
+In alignment with the GHG Protocol Scope 2 Guidance, we report our net carbon emissions based on
+the two different calculation approaches: the classic location-based method and the market-based
+method.
+SAP's preparation of the carbon emissions is based on the Corporate Accounting and Reporting
+Standard, the GHG (Greenhouse Gas) Protocol Scope 2 Guidance, and the Corporate Value Chain
+(Scope 3) Accounting and Reporting Standard of the World Resources Institute/World Business
+Council for Sustainable Development. This approach conforms to the requirements of GRI Standard
+indicators 305-1, 305-2, and 305-3.
+Reporting Principles
+We define the gross carbon emissions as the sum of all greenhouse gas emissions, measured and
+reported as CO₂e, while net carbon emissions include the compensation with renewable electricity
+and carbon offsets (see External Reductions).
+Definition
+Carbon Emissions
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Operational control is established when SAP has the full authority to introduce and implement its
+operating policies. The emissions of all operations over which the company has operational control
+and all owned, leased facilities, co-location data centers, and vehicles that the company occupies or
+operates are accounted for in the carbon emissions. They are based either on measurements or,
+where no measured data is available, on estimations and extrapolations.
+Combined Group
+SAP Integrated Report 2021
+SAP
+Reporting on total energy consumed and data center electricity is based on the data collected for the
+calculation of our carbon emissions. All numbers are based on the metric system. Whenever we state
+"tons," we mean metric tons.
+Data for our environmental indicators is collected and reported on a quarterly basis and is subject to
+external assurance for annual reporting.
+Reporting Approach
+Our reporting takes two different perspectives into account: SAP as a company, which includes all our
+legal entities and operations and supply chain, and SAP as a solution provider enabling our
+customers. These boundaries are listed in the Content Index of the Global Reporting Initiative (GRI).
+Boundaries
+We consider the principle of Sustainability Context (the performance of the organization in the context
+of the limits and demands placed on environmental or social resources at the sectoral, local, regional,
+or global level) in a number of ways, such as by looking at global issues or trends including climate
+change and demographic shifts. For example, we assess our carbon emissions in the context of the
+emissions of the entire information and communications technology landscape, with particular focus
+on the abatement potential of the industry. When it comes to completeness, we recognize that while
+we comply with this principle in reporting on our own operations, we are still developing
+methodologies to reliably quantify our impact through our solutions.
+General Information
+By looking at the energy usage and emissions throughout our entire value chain, we gain insights to
+help us manage our environmental performance and, in turn, help our customers to do the same.
+Our gross carbon emissions for 2021 were 345 kilotons of CO2 equivalents (CO2e) (2020: 410 kilotons
+CO2e), including all carbon emission categories of Scope 1 and 2, as well as selected categories of
+Scope 3 relevant for our carbon neutral target as described in Methodology and Further Details
+below. Our net carbon emissions (110 kilotons in 2021) are calculated by deducting purchased EACS,
+self-generated renewable electricity, and carbon offsets from our gross carbon emissions in the
+respective reporting period.
+We understand environmental performance as the measurable outcome of SAP's ability to meet
+environmental objectives and targets set forth in our environmental policy. In this context, we
+determine SAP's greenhouse gas footprint (in the following called carbon emissions), total energy
+consumed, and data center electricity as the three key environmental performance indicators.
+Furthermore, we realize external reductions through self-generated renewable electricity and by
+purchasing offsets and Energy Attribute Certificates (EACs). Plus, we identify water consumption and
+the end-of-life treatment of SAP's electrical and electronic equipment as additional environmental
+aspects.
+Non-Financial Notes:
+Environmental Performance
+Additional
+Information
+Further Information on
+Sustainability
+World Bank: "Put a Price on Carbon" statement
+Consolidated Financial
+Statements IFRS
+A portion of SAP's leased facilities operates under full-service or multitenant leases, where SAP does
+not have access to actual energy consumption information. SAP includes these facilities in our
+definition of operational control and accounts for them by estimating related energy consumption.
+To support the growing demand for SAP's cloud offerings, we subcontract computation power in local
+third-party data centers. Carbon emissions are approximated and included based on the consumed or
+extrapolated computation power.
+Data Consistency
+SAP
+SAP Integrated Report 2021
+Stationary Combustion in Facilities: Emissions caused by oil or gas combustion of heating
+systems and generators in SAP office buildings and data centers. Emission calculation is based on
+gas and oil consumption in kWh. Where no measured data is available, stable values (kWh/m²)
+based on the previous year's stationary combustion consumption data are used for extrapolation
+(78% data coverage). In cases where no specific information is available, natural gas reported by
+local sites is assumed to be reported in Lower Heating Value. Besides gas and oil, we also began
+using wood pellets to produce thermal heat for our buildings. The Scope 1 emissions of wood
+pellets can be set to net '0', since the wood itself absorbs an equivalent amount of carbon
+emissions during the growth phase as the amount of emissions released through combustion. Still,
+to ensure complete accounting for all emissions caused, we document the direct carbon dioxide
+Refers to direct carbon emissions and is defined as emissions from sources that are owned or
+controlled by the organization. At SAP, the following areas are covered by Scope 1:
+Scope 1
+Below you will find the different parameters contributing to our carbon emissions. We use "carbon
+emissions" as the common term for greenhouse gas emissions or CO2e. Data coverage refers to the
+share of measured data (compared to extrapolated data) that is the basis for emissions calculation,
+such as kWh for electricity emissions or liters of fuel for corporate car emissions.
+Methodology and Further Details
+Due to office closures and travel restrictions during the COVID-19 pandemic, the 2021 extrapolation
+factors for the following emission categories were reduced by a factor considering the ratio between
+limited and business-as-usual operations: stationary combustion in facilities, refrigerants in facilities
+and corporate cars, mobile combustion in corporate cars, electricity in office buildings, purchased
+chilled and hot water, steam, and employee commuting.
+Where relevant, our conversion factors consider CO2e for greenhouse gases. Global Warming
+Potential factors are based on the Fifth Assessment Report of the Intergovernmental Panel on Climate
+Change (IPCC). We report all our carbon emissions in CO2 equivalents including the impact from CH4
+and N2O in our target-relevant Scope 1, Scope 2, and Scope 3. The emission impact of refrigerants
+includes hydrofluorocarbons (HFCs) only. As SF6 and PFCs mainly occur in chemical processes, they
+are not relevant for us. Since 2016, we annually review all our emissions and extrapolation factors and
+update them if required.
+The calculation of the carbon emissions is based on factors for conversion and extrapolation,
+provided by IEA, US EPA, UK DEFRA, Environment Canada, and GHG Protocol. SAP also uses
+extrapolation factors based on own reported data (of previous quarters) to determine an average
+consumption value per base unit (such as corporate cars: liters of fuel per car; facility: electricity
+consumption per m²).
+We annually measure the cumulative cost avoidance of our carbon emissions, compared to a
+business-as-usual scenario. Since 2015, our calculation approach uses a triennial rolling method.
+Conversion Factors
+Financial Impact of Sustainability Measures
+For other types of structural or organizational changes, we use a significance threshold of 5% of total
+current-year emissions. A structural or organizational change that increases or decreases the total
+carbon inventory by 5% or more will trigger an adjustment of past years. A structural or organizational
+change that increases or decreases the total inventory by less than 5% will be considered insignificant
+and thus no adjustment will be made.
+A structural change due to company acquisitions will be considered in our emission calculations by
+extrapolating the company's emissions based on FTEs for relevant emission categories.
+In most instances, however, SAP has 100% ownership of its subsidiaries. Accordingly, the difference
+between applying the control versus the equity approach is about 0.8% based on SAP revenue. If
+investments in associates were included, the difference would be even smaller, about 0.6%.
+Structural Changes
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined Group
+To Our
+SAP Integrated Report 2021
+SAP
+306/338
+305/338
+If a significant error is found in the current year that has an impact on the preceding year's emissions,
+it will be corrected not only in the current year but also retrospectively. An error is significant if it
+affects SAP's gross carbon footprint by more than 5%. No restatement due to an error correction of
+historical data was necessary in 2021.
+Error Correction
+We aim to continuously refine SAP's emissions calculation methodology and to increase the usage of
+measured instead of extrapolated input data. Methodology changes include changes in the source of
+activity data, additional new activity types, changes in emission factors, and changes in the
+methodology used to calculate carbon emissions. As we implemented our methodology approaches
+to the best of our current knowledge and ability, and consider such changes to be continuous desired
+progress, methodology changes will not lead to retrospective data adjustments. Hence, changes will
+be applied from the current year onward. The current year's methodology changes are made
+transparent in this chapter, particularly under Methodology and Further Details.
+Methodology Change
+Additional
+Information
+Management Report
+To Our
+Combined Group
+Boundaries
+General Information About Social Indicators
+Social Performance
+Non-Financial Notes:
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined Group
+To Our
+SAP Integrated Report 2021
+SAP
+Our reporting takes two different perspectives into account: SAP as a company, which includes all our
+legal entities and operations and supply chain, and SAP as a solution provider enabling our
+customers. These boundaries are listed in detail in the GRI Standard Content Index.
+Stakeholders
+The content of this section was not subject to the independent limited assurance engagement of our
+external auditor.
+QAudit Scope
+WWF OneSource Coalition
+World Business Council for Sustainable Development
+(WBCSD)
+"We Mean Business" Letter to G20 Leaders
+Women in Data Science (WDS)
+WEF Stakeholder Capitalism Coalition
+WEF Global Plastic Action Partnership
+WEF Commitment to Stakeholder Capitalism Metrics
+WEConnect International
+Verband Deutscher Maschinen- und Anlagenbau e. V.
+(VDMA)
+Unternehmen für ein leistungsfähiges Klimapaket
+UN Global Compact SDG Ambition
+Transparency International Germany
+Topolytics
+301/338
+Social Indicators
+302/338
+Employee Retention
+Data for our social indicators is collected and reported on a quarterly or annual basis and is audited at
+a reasonable assurance level.
+To Our
+SAP Integrated Report 2021
+SAP
+304/338
+303/338
+29 Eligible are all headcount-relevant employees (permanent contracts) and employees from acquired companies if their acquisition status
+allows for it. In Germany, additional non-headcount-relevant employees are eligible (temporary staff with tenure of more than six months,
+employees on long-term leave or parental leave, PhD students, and vocational trainees).
+The BHCI is calculated based on the results of our "#Unfiltered" program (April 2021 survey).
+The Business Health Culture Index (BHCI) is an indicator of the extent to which SAP successfully
+offers employees a working environment that promotes health supporting their long-term
+employability and their active engagement in reaching our corporate goals. The index covers
+questions concerning how employees rate their personal well-being and the working conditions at
+SAP, including our leadership culture.
+October, 70,386 participated (response rate: 68%). All employees were invited to take part in the 2021
+#Unfiltered survey cycle.29
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Business Health Culture Index
+Stakeholders
+We define employee retention as the ratio of the average number of employees minus the employees
+who voluntarily departed, to the average number of employees, taking into account the past 12
+months (in full-time equivalents, or FTEs). This ratio puts emphasis on employee-initiated turnover - in
+other words, we seek to measure how many employees choose to stay with SAP. As opposed to
+keeping a low turnover rate, we aim to keep our retention rate high. The number of voluntarily
+departed employees excludes the voluntary part of restructuring-related departures for more
+transparency and precise headcount management purposes.
+We define "women in management" as the share of women in management positions as compared to
+the total number of managers, expressed by the number of individuals and not FTEs.
+Managers managing teams: Refers to managing teams of at least one employee or vacant
+positions.
+Managers managing managers: Refers to managing managers who manage teams.
+Board members
+Employee Engagement
+Women in Management
+It is calculated based on the average of the scores retrieved in each of the surveys we run for our
+engagement survey program “#Unfiltered.” Adopting the Experience Management (XM) philosophy of
+Qualtrics, we changed our engagement survey concept to a continuous listening approach that
+includes multiple data collections throughout the year. The overall program focuses on measuring the
+key people outcome indices Employee Engagement and Leadership Trust, as well as the
+organizational and team factors derived from the strategy that impact engagement. In the #Unfiltered
+survey in April, 73,598 employees participated (response rate: 72%), and in the #Unfiltered survey in
+SAP Integrated Report 2021
+SAP
+To Our
+Combined Group
+We define employee engagement as an index score of five items measuring the satisfaction and
+commitment of our employees, how proud they are of our company, and how strongly they identify
+with SAP.
+3
+SAP + external
+Employees and Social Investments: How We Measure and Manage
+Our Performance
+parties
+3
+SAP + external
+UN GC
+Principles
+Additional
+Information
+External
+Assurance
+Boundaries
+Safety Instructions for Contractors
+SAP Supplier Code of Conduct
+SAP has developed an internal health management system called
+"RUN HEALTHY" which is built on International Labour Organization
+Occupational Health and Safety (ILO-OSH) standards. "RUN
+HEALTHY" enables SAP organizations to assess their maturity state
+on health, well-being, and safety, to develop and drive targeted
+initiatives across their organizations, and to boost their local Business
+Health Culture Index, employee engagement, and employer
+attractivity. The implementation is voluntary and driven by the
+managing director according to country/line-of-business needs. We
+give all workers access to global offerings which are complemented
+according to local business needs. Local RUN HEALTHY councils are
+key in the process to self-assess maturity levels in the light of
+covering local requirements and global standards. RUN HEALTHY is
+expanded on a continuous basis. In addition, SAP engages with its
+suppliers, partners, and customers to promote the topics of people
+health and occupational safety beyond the boundaries of our
+company.
+Links, Content, and Omissions
+UN SDGS
+1,2
+3
+403-3
+102-45
+403-2
+SAP
+320/338
+SAP's Health and Well-Being team provides global frameworks and a
+comprehensive health and well-being portfolio to enable SAP's
+business with its organizations at all levels to run healthy.
+Please also refer to GRI 403-6.
+By regularly conducting surveys, we continuously receive insights
+which enable SAP and particularly its Health and Well-Being
+organization, together with its strong partners in Human Resources,
+Real Estate and Facilities, Occupational Safety and Personal Security
+to enforce and adjust its initiatives and counteract adverse
+developments in time.
+Employees and Social Investments: Health and Well-Being
+Employees and Social Investments: How We Measure and Manage
+Our Performance
+Our workers can use various tools to report concerns as outlined in
+the Human Rights Commitment Statement, and are protected against
+retaliation. This document is core to our people-related policies, such
+as the Global Health and Safety Policy. SAP's Pledge to Flex
+empowers employees to choose when and where to work best while
+balancing business requirements and personal needs. This approach
+enables employees to avoid and circumvent hazardous workplace
+situations.
+SAP relies on the enablement of internal multiplier networks such as
+the Health Ambassador Network, and external trainings and
+certifications to ensure health & safety competence across the
+organization.
+SAP regularly conducts health risk assessments on global level with
+reporting on all manager levels. Mental health is key to SAP's ability
+to provide innovative solutions for our customers. SAP has a long
+tradition in taking action against stigmatization and in taking care of
+prevention and case management. With the Stress-Satisfaction Score
+SAP is monitoring an early-watch KPI to measure resilience on
+people level and to detect fields of action on individual and
+organizational level. In 2020, we established a COVID-19-related risk
+assessment to identify stress factors while working remote. An
+SAP Analytics Cloud-based "Country Health Dashboard" supports the
+identification of health risks on country level.
+Pledge to Flex
+Human Rights Commitment Statement
+Sustainable Procurement: Improving Sustainability Through Practice
+Global Health and Safety Policy
+Employees and Social Investments: Health and Well-Being
+Non-Financial Notes: Social Performance
+parties
+403-1
+SAP
+Consolidated Financial
+Statements IFRS
+✓
+102-48
+SAP
+Links and Content
+Materiality
+Non-Financial Notes
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+102-49
+Non-Financial Notes
+Materiality
+102-50
+About This Report
+102-51
+March 4, 2021
+102-52
+Annual Reporting Cycle
+102-53
+Financial Calendar and Addresses
+102-54
+About This Report
+102-55
+GRI Content Index
+About This Report
+Independent Assurance Report
+Topic-Specific Disclosures
+✓
+✓
+10
+✓
+By charging an internal carbon price for business flights and investing in the forest project, we were
+able to offset 85% (10.7 kt) of our business flights emissions in 2021.
+In 2021, we did not require our financial contribution to the LCF to offset our emissions. Instead, we
+used an investment in a nature-based forest project to compensate for a portion of our business
+flights as well as 100% of the following emissions categories: corporate cars using Novofleet's
+climate fuel cards, corporate jets, business trips with private cars, and logistics.
+Carbon offsets represent a unit of CO2e that is reduced, avoided, and removed to compensate for
+emissions occurring elsewhere. We continuously refine our internal carbon emissions calculation
+methodology and uphold high requirements for dealing with carbon offsets:
+Carbon Offsets
+In the net carbon emissions, the purchased as well as the produced renewable electricity is already
+deducted from our Scope 2 and Scope 3 electricity emissions.
+produced. The renewable electricity is only considered if confirmed by an official certificate or written
+confirmation of our respective EAC suppliers (100% data coverage).
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+Ethics and Compliance
+SAP
+Report by the Supervisory Board
+Note (G.9) Scope of Consolidation, Subsidiaries and Other Equity Investments
+All entities are covered by the report.
+102-46
+About This Report
+102-47
+314/338
+Materiality
+Non-Financial Notes
+Materiality
+External
+Assurance
+UN GC
+Principles
+6
+1
+7
+Products, Research & Development, and Services
+Further Information on
+Sustainability
+Additional
+Information
+External
+Assurance
+SAP
+16, 17
+SAP
+9, 11, 16
+SAP
+9, 11, 16
+SAP
+9, 11, 16
+315/338
+207-4
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+10
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+Links, Content, and Omissions
+As a German company, we report our tax expense separately for
+Germany and the rest of the world. We are confident that this
+information meets our stakeholders' demands.
+419-1
+Note (G.3) Other Litigation, Claims, and Legal Contingencies
+Environmental Matters
+Energy
+Boundaries
+External
+Assurance
+UN SDGS
+UN GC
+Principles
+SAP
+Combined Group
+Management Report
+A requirement for carbon offsets is the application of the Verified Carbon Standard (VCS) and equally-
+high quality standards. SAP ensures that the quantified carbon emission reductions from offsets are
+credible and that they meet four key principles:
+16
+10
+UN GC
+Principles
+✓
+✓
+✓
+Links, Content, and Omissions
+Boundaries
+External
+Assurance
+UN SDGS
+UN GC
+Principles
+Business Conduct
+103-1
+GRI Content Index
+103-2
+103-3
+SAP
+Business Conduct
+Business Conduct
+SAP's Global Tax Principles
+205-1
+Business Conduct
+Risk Management and Risks
+In alignment with the different legal requirements in various countries,
+and as per SAP Global Risk Management Policy and supporting
+processes, SAP, together with legal advisory services as deemed
+appropriate, perform risk assessments globally. These include cross-
+business topics and the evaluation of risks related to compliance,
+bribery, and corruption. Overall, our corporate risk assessments focus
+on compliance topics. In addition, 45% of all audits concluded in
+2021 under the risk-based audit plan are compliance-relevant audits.
+As part of this process, a regular and dedicated focus is also placed
+on identifying high-risk countries to identify deep dive reviews and
+necessary mitigations accompanied by regular monitoring.
+Furthermore, ad hoc audits are performed if there are grounds of
+suspicion. This regular auditing is a vital component of ensuring
+compliance worldwide in our business processes and identifying
+weaknesses or non-compliance to derive adequate measures.
+Given the holistic approach of our compliance risk assessment, SAP
+does not report on the number of audits solely related to corruption.
+206-1
+Note (G.3) Other Litigation, Claims, and Legal Contingencies
+207-1
+SAP's Global Tax Principles
+207-2
+SAP's Global Tax Principles
+207-3
+SAP's Global Tax Principles
+SAP's Global Tax Principles
+✓
+Real: The carbon reductions represent actual emission reductions that have already occurred.
+Additional: The carbon reductions are surplus to regulation and would not have happened without
+the offset.
+Verifiable: The performance of the carbon reduction projects can be readily and accurately
+quantified, monitored, and verified.
+Financial Performance: Review and Analysis
+Note (IN.2) Implications of the COVID-19 Pandemic
+Sustainable Procurement
+Strategy
+At SAP, we consider the portion of contingent workers as not significant.
+About This Report
+Employees and Social Investments
+Chart Generator
+Note (B.1) Employee Headcount
+Links and Content
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+102-11
+102-10
+102-9
+102-8
+313/338
+✓
+✓
+✓
+✓
+UN GC
+Principles
+Strategy
+Sustainable Procurement
+We support a precautionary approach towards environmental management, which is why we have
+implemented an environmental management system across various SAP locations worldwide according to
+ISO 14001. While we see little apparent risk for our own operations, we do see an opportunity to help our
+customers anticipate and manage this risk in a more agile and responsive fashion through effective product
+lifecycle management and sustainable design.
+Sustainability Management
+Employees and Social Investments
+Stakeholder Engagement
+102-44
+Human Rights and Labor Standards
+Business Conduct
+Stakeholder Engagement
+102-43
+Human Rights and Labor Standards
+Business Conduct
+Stakeholder Engagement
+102-42
+Stakeholder Engagement
+102-41
+Stakeholder Engagement
+External
+Assurance
+102-40
+Corporate Governance Report
+102-18
+Employees and Social Investments
+Business Conduct
+102-16
+Letter from the CEO
+102-14
+Memberships
+102-13
+Memberships
+102-12
+Sustainability Management
+Products, Research & Development, and Services
+Strategy
+Sustainability Management
+Note (B.1) Employee Headcount
+Note (G.9) Scope of Consolidation, Subsidiaries and Other Equity Investments
+Financial Performance: Review and Analysis
+SAP Integrated Report 2021
+SAP
+Some of our SAP locations collaborate with local providers in addition to our large IT remarketing and
+recycling partners – or even exclusively. To supplement our EEE / WEEE reporting in the Waste and
+Water section, we collect local providers' e-waste data from all locations that are in scope of our
+environmental management system. The remaining data of locations not covered is extrapolated
+based on full-time equivalents. Consequently, 16 tons of WEEE was collected in 2021 on top of our
+WEEE reported in the Waste and Water section. In total, 133 tons of WEEE was collected in 2021
+(98% data coverage).
+Data is based on the weight of the devices. As remarketed EEE is reported in items (and not in
+weight), the IT asset lifecycle partners use average item weights to determine the remarketing weight.
+To determine the share of end-of-life treatment practices (remarketing vs. mechanical vs. thermal
+recycling vs. landfill), our key IT asset lifecycle partners aim to use the specific quotas of the recycling
+sites. If this data is not available, regional quotas or other available country quotas are used for
+approximation.
+Landfill: Disposing waste on a landfill site; this treatment option has to be avoided under all
+circumstances.
+Thermal recycling: Generating energy through the incineration of waste
+Mechanical recycling (secondary priority): Extracting raw materials to preserve and reuse them
+(such as plastics, metals, and rare earths)
+Within the WEEE stream, we distinguish between the following processing treatments:
+2. Waste: By waste of electrical and electronic equipment (WEEE) or e-waste, we mean any electric
+devices and assets discarded in our offices and data centers that cannot be refurbished or
+remarketed due to outdatedness or unrepairable dysfunctions.
+1. Remarketing (top priority): Refurbishing and reselling functioning EEE to give it a second life
+The discarded electrical and electronic equipment (EEE) ranges from laptops, peripherals, and mobile
+devices to servers. Our international and local IT asset lifecycle partners test the collected EEE to
+determine its end-of-life treatment. In doing so, EEE is channeled either into the remarketing or waste
+stream. We define these streams as follows:
+End-of-Life Treatment of SAP's Electrical and Electronic Equipment
+Information
+Additional
+To Our
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+312/338
+311/338
+By water, we mean the total amount of freshwater withdrawn for our office buildings and data centers.
+Data is based on measurements and estimations from sites. Data was provided for 65% of the total
+water consumption; remaining data is extrapolated based on square meter footage.
+Water
+Additional Environmental Aspects
+We define data center electricity as the sum of electricity consumed to provide internal and external
+computation power in SAP data centers, contracted third-party data centers, and hyperscale data
+centers. A data center is any global, regional, or local computing center (location with any number of
+server units) that is part of our global IT infrastructure strategy.
+Data Center Electricity
+We define total energy consumed as the sum of all energy consumed in SAP's own operations and
+value chain (Scope 1, 2, and 3), including energy from renewable sources. It is calculated based on
+the consumption data obtained through our measurements for the carbon emissions and is the sum
+of energy consumption from stationary combustion in facilities, mobile combustion in corporate cars,
+mobile combustion in corporate jets, electricity in offices, electricity in data centers, purchased chilled
+water, purchased hot water, and purchased steam, and electricity in external data centers (co-
+locations and hyperscalers).
+Total Energy Consumed
+In the net carbon emissions, purchased offsets are already deducted from our gross emissions.
+Management Report
+Permanent: The carbon reductions are permanent or have guarantees to ensure that any losses
+are replaced in the future.
+Combined Group
+Management Report
+Consolidated Financial Statements IFRS
+http://www.sap.com/industries.html
+Strategy
+Note (C.1) Results of Segments
+Financial Performance: Review and Analysis
+102-7
+102-6
+Strategy
+102-5
+Note (G.9) Scope of Consolidation, Subsidiaries and Other Equity Investments
+Strategy
+102-4
+Strategy
+102-3
+Stakeholders
+Strategy
+Strategy
+102-1
+Links and Content
+General Standard Disclosures
+The content of the column UN SDGs was not subject to the independent limited assurance
+engagement of our external auditor.
+QAudit Scope
+To meet our commitment to the UN Global Compact (UN GC) initiative, this chapter serves as an
+annual Communication on Progress (COP) outlining how SAP supports and upholds the Ten
+Principles of the UN GC. We also present the interconnection between the GRI topic-specific
+disclosures that are material to SAP and the 17 United Nations Sustainable Development Goals
+(UN SDGs).
+The 15 material topics in this GRI Content Index were selected based on the comprehensive
+materiality assessment conducted in 2020 and reviewed in 2021, and reflect topics that have been
+identified as sustainability challenges and material topics by the GRI Standards. We have clustered
+these topics according to the relevant non-financial matters set out in the German Commercial Code
+(Handelsgesetzbuch, HGB) (exception: the material topic “ethics and compliance" is not clustered
+under "Anti-corruption and bribery matters" as the corresponding GRI standards are defined more
+broadly). The two material management practices 'Governance' and 'Transparency' are not listed as
+individual disclosures below as they have already been fulfilled through the universal GRI
+standards 102: General Disclosures and/or GRI 103: Management Approach.
+The social and environmental data and information included in the SAP Integrated Report 2021 has
+been prepared in accordance with the GRI Standards: Core option.
+GRI Content Index and
+UN Global Compact
+Communication on Progress
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+102-2
+Further Information on
+Sustainability
+16, 17
+Boundaries
+Employees and Social Investments
+Sustainability Management
+Boundaries
+External
+Assurance
+UN GC
+UN SDGS
+Principles
+1,2,6
+Employees and Social Investments
+Women in
+Management
+Employees and Social Investments
+Chart Generator
+SAP
+5
+6
+Employee
+Engagement
+Employees and Social Investments
+SAP
+6
+401-1
+Employees and Social Investments
+SAP
+8
+Note (B.1) Employee Headcount
+Chart Generator
+404-1
+Employees and Social Investments
+SAP
+4, 5, 8, 9, 10
+SAP offers a wide portfolio of learning and development offerings to
+help all of our employees to upskill and accelerate their career. Every
+individual employee is encouraged to learn and expand their skills –
+independent of employee level/category or gender. We align training
+activities according to the needs of each employee and they can
+freely choose what makes sense for them.
+404-2
+Sustainability Management
+GRI Content Index
+Employees and Social Investments
+Nothing has a greater impact on our long-term success than the
+creativity, talent, commitment, health, and well-being of our people.
+Their ability to innovate and understand the needs of our customers
+has the potential to deliver sustainable value to our Company and
+our society.
+7,8
+Boundaries
+External
+Assurance
+UN SDGS
+UN GC
+Principles
+SAP + external
+parties
+12, 13, 14
+7,8
+SAP + external
+parties
+12, 13, 14
+7,8
+SAP + external
+parties
+12, 13, 14
+7,8
+Employees and Social Investments
+317/338
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+Employee Matters
+The management approaches for the material topics 'employee rights,' 'fair and inclusive workplace,' 'talent development,' and
+'employee engagement' strongly overlap. This is why we decided to combine them in one joint table, including their corresponding
+topic-specific disclosures:
+103-1
+103-2
+103-3
+Links, Content, and Omissions
+SAP
+SAP has dedicated as well as volunteer staff that supports
+generational intelligence on matters of continued employability,
+managing career endings, and cross-generational integration and
+collaboration. These experts work to continuously improve processes
+and design programs that sustain employability for as long as
+possible. They provide training for cross-generation collaboration,
+facilitate flexible career endings for employees (such as part-time
+options), and keep employees connected with the Company after
+retirement (the “HR Lounge - Mature Talents" consultation session,
+for example, provides a platform for our experienced, long-term
+employees in Germany to gain insight on sharing experiences across
+generations, career development, transitioning to retirement, and so
+on).
+404-3
+Employees and Social Investments
+Boundaries
+External
+Assurance
+UN SDGS
+Well-Being, Health, and Safety
+103-1
+103-2
+103-3
+Links, Content, and Omissions
+Nothing has a greater impact on our long-term success than the
+creativity, talent, commitment, health, safety, and well-being of our
+people. Their ability to collaborate, innovate, and understand the
+needs of our customers has the potential to deliver sustainable value
+to our company, customers, and society.
+As an enterprise software company, SAP does not have the
+occupational health and safety issues associated with manufacturing
+or heavy-industry jobs. Most of our people have sedentary,
+intellectually demanding jobs in a constantly changing business
+environment that requires considerable flexibility and agility.
+Therefore, typical health and safety management issues at SAP
+include ergonomic and safe workplaces, stress management, self-
+management, work-life balance, travel medicine, and general medical
+prevention.
+Employees and Social Investments
+GRI Content Index
+Sustainability Management
+Employees and Social Investments
+1, 2, 3
+Global Health and Safety Policy
+Sustainability Management
+Employees and Social Investments
+Non-Financial Notes: Social Performance
+SAP provides manifold feedback opportunities and encourages its
+people to get involved and shape SAP's caring culture and working
+conditions to "tell it like it is," and in so doing, help us improve where
+needed. Our success is tracked through the Business Health Culture
+Index (BHCI) and the Stress-Satisfaction Score (measured by regular
+employee surveys, which revealed that job satisfaction was equal or
+higher than the perceived stress for about 70% of SAP participants in
+2021).
+> > > >
+1,3,6
+UN GC
+Principles
+319/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Conditions in which people live up to their full potential - now and in
+the future of work - are mainly defined by the organization's
+leadership style and working culture. We believe that there can be no
+organizational health without "individual health." SAP and its leaders
+take ownership for workplaces and a caring culture that foster
+physical health, safety, and mental well-being, while every employee
+is enabled and encouraged to take care of their individual health.
+SAP Health and Well-Being team (led by SAP's chief medical officer),
+together with their partners in Human Resources, Real Estate and
+Facilities, Occupational Safety and Personal Security, provide the
+information, education, and support to foster a healthy working
+culture and a supporting environment for all people. In doing so, we
+enable the organization to be a role model in safe, healthy, and
+sustainable people management.
+3, 12, 13, 15
+8
+UN GC
+Principles
+With our performance appraisal approach called SAP Talk, our
+employees receive regular performance and development reviews -
+independent of gender and employee category.
+405-1
+Corporate Governance Statement
+https://www.sap.com/investors/en/governance/supervisory-board.html
+318/338
+Chart Generator
+SAP
+4, 5, 8, 9, 10
+6
+5,8,10
+6
+SAP
+5,8,10
+1,2,6
+SAP + external
+parties
+407-1
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Links, Content, and Omissions
+Human Rights and Labor Standards
+We are not aware of any operations or suppliers in which the right to
+exercise freedom of association and collective bargaining may be at
+significant risk.
+Sustainable Procurement
+Boundaries
+External
+Assurance
+UN SDGS
+SAP
+Links, Content, and Omissions
+✓
+3, 12, 13, 14, 15
+Allocation of energy consumption reductions to conservation and
+efficiency initiatives cannot be presented precisely due to overlapping
+effects (such as reductions caused by the COVID-19 pandemic).
+Climate Change and Air Quality
+Links, Content, and Omissions
+Energy and Emissions
+SAP
+7, 8, 12, 13
+8
+SAP
+7,8,13
+8
+Boundaries
+External
+Assurance
+UN SDGS
+UN GC
+Principles
+103-1
+GRI Content Index
+103-2
+Energy and Emissions
+Sustainability Management
+103-3
+Energy and Emissions
+Sustainability Management
+305-1
+Energy and Emissions
+SAP
+3, 12, 13, 14, 15
+7,8
+Non-Financial Notes
+316/338
+Non-Financial Notes
+Energy and Emissions
+302-4
+The ratio uses only energy consumption within the organization.
+External
+Assurance
+UN SDGS
+UN GC
+Principles
+103-1
+Energy and Emissions
+GRI Content Index
+103-2
+Energy and Emissions
+Sustainability Management
+103-3
+Energy and Emissions
+Sustainability Management
+302-1
+Energy and Emissions
+SAP
+Chart Generator
+7, 8, 12, 13
+Non-Financial Notes
+Chart Generator
+302-2
+Energy and Emissions
+Non-Financial Notes
+SAP + external
+parties
+7, 8, 12, 13
+7,8
+✓
+302-3
+Energy and Emissions
+Non-Financial Notes
+Chart Generator
+Five-Year Summary
+7,8
+SAP
+SAP Integrated Report 2021
+To Our
+Sustainability Management
+103-3
+Waste and Water
+Sustainability Management
+306-1
+Waste and Water
+306-2
+Waste and Water
+Non-Financial Notes
+306-3
+Suppliers must acknowledge and adhere to the SAP Supplier Code of
+Conduct, which expects compliance with legal obligations. In
+addition, our ISO 14001-certified locations monitor regulatory
+requirements through a legal register. We also work on integrating
+specific waste-related legal demands into supplier contracts of our IT
+asset lifecycle partners.
+As a software company with no production sites, the generated total
+weight of waste is considered non-material. Considering our business
+model, we only perceive electrical and electronic waste as relevant.
+Waste and Water
+Non-Financial Notes
+Additional
+Information
+Waste and Water
+Boundaries
+UN SDGS
+UN GC
+Principles
+SAP
+3, 12, 13, 14, 15
+7,8
+External parties
+3, 12, 13, 14, 15
+7,8
+SAP + external
+parties
+13, 14, 15
+8
+SAP + external
+parties
+13, 14, 15
+8,9
+External
+Assurance
+7,8
+Energy and Emissions
+GRI Content Index
+Stakeholders
+Links, Content, and Omissions
+305-2
+Energy and Emissions
+Non-Financial Notes
+Chart Generator
+305-3
+Energy and Emissions
+Non-Financial Notes
+Chart Generator
+305-4
+Chart Generator
+Non-Financial Notes
+305-5
+103-2
+Energy and Emissions
+Chart Generator
+305-6
+305-7
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Allocation of carbon emission reductions to avoidance and efficiency
+initiatives cannot be connected precisely due to overlapping effects
+(such as reductions caused by the COVID-19 pandemic).
+As a software company with no production sites, emissions of ozone-
+depleting substances (ODS) are not material to SAP.
+We report all our carbon emissions in CO2 equivalents (CO₂e)
+including the impact from CH4, N₂O, and HFCS in our Scope 1 and 2
+emissions. We do not provide a breakdown. As a software company
+with no production sites, sulfur oxides (SOX) and other significant air
+emissions are not material to SAP.
+Ressource Efficiency and Waste
+103-1
+Links, Content, and Omissions
+Energy and Emissions
+Waste and Water
+Non-Financial Notes
+102-56
+Customers
+343
+General and administration (IFRS)
+-2,431
+-1,356
+-1,629
+-1,098
+-1,075
+Depreciation and amortization (IFRS)
+-1,775
+-1,831
+-1,872
+-1,362
+-1,272
+330/338
+Risk Management and Risks
+Technology Disruptions
+QAudit Scope
+The content of this section was not subject to the independent limited assurance engagement of our
+external auditor.
+-6,924
+-6,781
+-7,693
+-7,106
+SAP
+-4,292
+-3,624
+-3,352
+Research and development (in % of total revenue, IFRS)
+18.6
+16.3
+15.6
+327/338
+14.7
+Research and development (in % of total operating expenses, IFRS)
+22.4
+21.5
+18.6
+19.1
+18.0
+Sales and marketing (IFRS)
+-7,505
+14.3
+SAP Integrated Report 2021
+328/338
+SAP Integrated Report 2021
+Energy and Emissions
+Energy and Emissions
+Risk Management and Risks
+Non-Financial Notes:
+Environmental Performance
+Chart Generator
+QAudit Scope
+The content of this section was not subject to the independent limited assurance engagement of our
+external auditor.
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+Additional Information
+Five-Year Summary
+Energy and Emissions
+Risk Management and Risks
+Strategy
+Energy and Emissions
+Chapter
+Metrics and targets that SAP uses to assess and manage relevant
+climate-related risks and opportunities where such information is
+material.
+To Our
+Combined Group
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+Task Force on Climate-Related
+Financial Disclosure (TCFD)
+SAP
+The TCFD recommends companies to disclose their climate-related financial risks to investors,
+lenders, insurers, and other stakeholders. SAP started to report in alignment with the TCFD
+recommendations in 2018. For more information, see the table below.
+Governance
+Strategy
+Risk Management
+Metrics and Targets
+Content
+SAP's governance of climate-related risks and opportunities.
+Actual and potential impacts of climate-related risks and opportunities
+on SAP's businesses, strategy, and financial planning where such
+information is material.
+How does SAP identify, assess, and manage climate-related risks?
+Area
+Financial Calendar and Addresses
+To Our
+Combined Group
+103-3
+Human Rights and Labor Standards
+103-2
+UN GC
+Principles
+UN SDGS
+External
+Assurance
+Boundaries
+3
+SAP
+UN GC
+Principles
+UN SDGS
+External
+Assurance
+Boundaries
+Additional
+Information
+Human Rights and Labor Standards
+GRI Content Index
+Links, Content, and Omissions
+103-1
+Human Rights and Labor Standards
+407-1
+Human Rights and Labor Standards
+We are not aware of any operations or suppliers in which the right to
+exercise freedom of association and collective bargaining may be at
+significant risk.
+We are not aware of any operations or suppliers being at significant
+risk for incidents of forced or compulsory labor.
+Sustainable Procurement
+1,2,4
+3,8,10
+SAP + external
+parties
+Human Rights and Labor Standards
+409-1
+1,2,5
+3,8
+Respect for Human Rights
+✓
+8
+Sustainable Procurement
+SAP + external
+parties
+We are not aware of any operations or suppliers being at significant
+risk for incidents of child labor.
+408-1
+Human Rights and Labor Standards
+Sustainable Procurement
+SAP + external
+parties
+1, 2, 3
+Stakeholders
+For non-employee workers, we require our suppliers and sub-
+suppliers to uphold health and safety standards via our Global
+Supplier Code of Conduct. In addition, in Germany we have safety
+Instructions for contractors in place.
+Internally, we track and monitor an SAP illness rate (in %) which is
+defined as the total number of days absent (including absences
+shorter than 3 days) / scheduled workdays per year (250 days) x 100.
+In 2021, SAP had a global illness rate of 1.7%. 32
+A RUN HEALTHY council is the execution entity for the RUN
+HEALTHY program (see GRI 403-1 for its purpose and target). It
+meets regularly (usually quarterly) and contains the RUN HEALTHY
+lead, different line-of-business representatives, such as from the
+Human Resources, Facility, and Health departments, as well as an
+employee representative. The program is being expanded step by
+step; not all SAP employees are represented by the RUN HEALTHY
+program.
+SAP'S RUN HEALTHY management system includes a self-
+assessment conducted by a cross-functional staffed council in order
+to drive tailor-made and effective local programs and initiatives.
+Digital solutions are leveraged to guide SAP's people to their relevant
+health content by considering individual needs and location, and to
+gather their feedback to drive highest standards of quality, as we do
+with the permanent Qualtrics-based Health Feedback Survey across
+all health and well-being offerings.
+Links, Content, and Omissions
+403-7
+403-6
+403-5
+403-4
+3
+SAP
+UN GC
+Principles
+UN SDGS
+External
+Assurance
+Boundaries
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+At SAP, we offer a flexible training and enablement portfolio (such as
+SAP's learning platform Success Map) to enable our people to thrive
+in the future of work, foster healthy working habits, and become
+multipliers. In addition to flagship sessions on how to manage stress
+and foster a healthy work lifestyle, new classes and Web seminars
+were introduced with special focus on the pandemic situation to help
+our people adapt to the sudden change in working conditions.
+Specific offerings for leaders support caring for people's health,
+safety, and well-being.
+Employees and Social Investments: Health and Well-Being
+SAP Health and Well-Being: Fostering a Healthy Culture
+At SAP, we offer a wide range of health and well-being services to
+our employees, ranging from general guidance on how to be more
+active and to deal with stress and challenging situations in- and
+outside SAP, conducting health and people days, consultation on
+ergonomic workplace set-up to prevent back pain, to local
+vaccination initiatives. Employees have access to these services and
+are informed about them in SAP's internal employee portal, monthly
+newsletters, live sessions, and campaigns, or by contacting the
+SAP Health team directly. In addition, we have Web-based tools such
+as the Qualtrics-based SAP Health Navigator which guides SAP
+people toward health offerings and tips according to their individual
+needs. The Run Your Way program on our Fit@SAP activity
+challenge platform encourages people to integrate more physical
+activity into their daily life.
+As outlined in GRI 403-2, we have various approaches to identify
+negative occupational health and safety impacts such as the BHCI
+and Country Health Dashboard as well as various channels to report
+concerns and incidents. In addition, to ensure the health, safety, and
+well-being of our employees worldwide, SAP runs dedicated crises
+management and business continuity frameworks. To safeguard our
+people on business travels, SAP ensures medical and security
+assistance through a Travel Emergency Assistance Program.
+Sustainable Procurement: Improving Sustainability Through Practice
+The identification of work-related hazards that pose a risk of ill health
+(such as via the BHCI or the RUN HEALTHY program), as well the
+actions taken to eliminate/ minimize these hazards and risks, are
+outlined in GRI 403-1 to GRI 403-7.
+Fatalities and injuries are not a material issue for SAP, as employees
+work in an office environment. Please refer to GRI 103-1 for the main
+types of work-related ill health.
+Links, Content, and Omissions
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+To Our
+Stakeholders
+In 2021, our Stress Satisfaction Score evaluation (see GRI 403-2)
+confirmed lower stress levels on average compared to satisfaction.
+Furthermore, we leverage the company reports from our external
+Employee Assistance Program (EAP) providers to recognize health
+trends and to derivate appropriate actions.
+To Our
+SAP
+403-10
+321/338
+3
+3
+SAP + external
+parties
+SAP + external
+parties
+SAP + external
+parties
+SAP Integrated Report 2021
+330
+334
+Financial and Sustainability Publications
+0
+0
+0
+Non-IFRS adjustments
+10,908
+10,981
+11,547
+11,506
+11,412
+Software support (IFRS)
+4,872
+4,647
+4,533
+3,642
+3,248
+Software licenses (non-IFRS)
+0
+0
+0
+Software support (non-IFRS)
+11,412
+Services (IFRS = non-IFRS)
+Cloud and software (non-IFRS)
+3
+33
+81
+5
+0
+Non-IFRS adjustments
+0
+19,549
+23,012
+23,228
+24,078
+Cloud and software (IFRS)
+10,908
+10,982
+11,548
+11,506
+20,622
+Total revenue (IFRS)
+0
+0
+8,080
+9,418
+2017
+2018
+2019
+2020
+2021
+Non-IFRS adjustments
+Cloud (IFRS)
+Revenues
+€ millions, unless otherwise stated
+Additional
+Information
+Sustainability
+Consolidated Financial Further Information on
+Statements IFRS
+Five-Year Summary¹
+Combined Group
+Management Report
+Stakeholders
+6,933
+4,993
+3,769
+0
+Non-IFRS adjustments
+4,872
+4,647
+4,533
+3,642
+3,248
+423
+Software licenses (IFRS)
+0
+3,771
+7,013
+8,085
+9,418
+Cloud (non-IFRS)
+2
+33
+81
+5
+5,027
+24,078
+3,764
+23,233
+23,093
+97
+103
+Non-IFRS adjustments
+-2,234
+-2,092
+-2,159
+-2,008
+-1,925
+Cost of software licenses and support (IFRS)
+-1,427
+-1,855
+-2,228
+-2,451
+-2,876
+Cost of cloud (non-IFRS)
+233
+213
+141
+130
+190
+Cost of software licenses and support (non-IFRS)
+335
+Publication Details
+337
+329/338
+SAP
+446
+345
+332
+305
+Non-IFRS adjustments
+-1,962
+-4,160
+-4,692
+-4,707
+-5,030
+Cost of cloud and software (IFRS)
+-2,018
+-1,911
+-1,822
+-2,044
+-3,893
+248
+229
+Non-IFRS adjustments
+24,741
+27,634
+27,343
+27,842
+3
+33
+81
+5
+23,464
+0
+3,912
+4,086
+24,708
+27,553
+4,541
+4,110
+27,338
+27,842
+19,552
+20,655
+23,461
+✓
+75
+67
+-1,660
+-2,068
+-2,534
+-2,699
+-3,105
+Cost of cloud (IFRS)
+Operating Expenses
+Share of more predictable revenue (non-IFRS, in %)
+72
+Share of more predictable revenue (IFRS, in %)
+Non-IFRS adjustments
+63
+65
+67
+72
+75
+63
+65
+Total revenue (non-IFRS)
+Security, Privacy, and Data Protection
+Combined Group
+103-2
+SAP Speak Out
+Business Conduct
+Integrating risk and opportunity into
+business process
+Protected ethics advice and reporting
+mechanisms
+Risk and Opportunity Oversight
+Partners are also requested to complete
+any compliance training available based
+on their partner type. For more
+information, see SAP's Partner Code of
+Conduct.
+Provisions for material corruption cases
+would be reported together with further
+details in Note (G.3).
+SAP Partner Code of Conduct
+Note (G.3) Other Litigation, Claims, and
+Legal Contingencies
+Business Conduct
+Stakeholder Engagement
+Materiality
+Note (G.4)
+Form 20-F Item 6
+https://www.sap.com/investors/en/gover
+nance/supervisory-board.html
+Corporate Governance Statement
+Strategy
+Anti-corruption
+Material issues impacting stakeholders
+Governance body composition
+Setting purpose
+Comments
+Links
+Risk Management and Risks
+Expected Developments and
+Opportunities
+Planet
+Theme
+Links
+Core Metrics and Disclosures
+Theme
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+People
+Combined Group
+Stakeholders
+To Our
+Core Metrics and Disclosures
+SAP Integrated Report 2021
+325/338
+Comments
+Energy and Emissions
+Task Force on Climate-Related Financial
+Disclosure
+Chart Generator
+Energy and Emissions
+TCFD implementation
+Greenhouse gas (GHG) emissions
+Climate Change
+Links
+Core Metrics and Disclosures
+SAP
+Principles of Governance
+The table refers to the chapters of our Management Report, Notes, Form 20-F, and other sources that
+contain the respective disclosures. Core metrics that have not been identified as material for SAP
+during our latest materiality analysis have been omitted.
+The following table provides information about the core metrics proposed by the WEF White Paper
+titled "Measuring Stakeholder Capitalism: Towards Common Metrics and Consistent Reporting of
+Sustainable Value Creation", published in September 2020.
+7,8
+12, 13
+✓
+1, 2, 7, 8
+10, 12, 13, 17
+✓
+SAP + external
+parties
+For this material topic, we could not identify a topic-specific GRI
+standard. In addition, we are still working on meaningful key
+performance indicators for measuring the impact of our solutions for
+an inclusive and circular economy, for example through our
+membership in the Value Balancing Alliance. For more information,
+see the Connectivity section.
+324/338
+Waste and Water
+103-3
+SAP + external
+parties
+Waste and Water
+GRI Content Index
+Waste and Water
+103-1
+Links, Content, and Omissions
+Solutions for an Inclusive and Circular Economy
+SAP set a social procurement spend target aiming for 5%
+addressable spend with diverse suppliers and 5% addressable spend
+with social enterprises by year end 2025.
+Sustainable Procurement
+All our suppliers have to acknowledge the SAP Supplier Code of
+Conduct, containing environmental expectations of them and their
+sub-suppliers. In addition, we are in the process of setting up a
+holistic third-party risk assessment for SAP suppliers, including
+screening for environmental criteria. Once the process has been
+rolled out, we can report a percentage.
+enterprises
+suppliers and
+social
+diverse
+103-2
+Dignity and Equality
+10, 12
+Boundaries
+To support long-term value creation, SAP has committed to applying the World Economic Forum
+(WEF) Stakeholder Capitalism Metrics and encourages further global standardization and
+convergence in the ESG reporting landscape. We include the standards in our own reporting and also
+offer the framework in our core sustainability software solutions.
+Metrics
+Stakeholder Capitalism
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined Group
+To Our
+SAP Integrated Report 2021
+1
+Ethical Behavior
+Quality of Governing Body
+Governing Purpose
+Theme
+SAP
+14, 15
+7,8,9
+3, 6, 9, 12, 13,
+UN GC
+Principles
+✓
+UN SDGS
+External
+Assurance
+Stakeholder Engagement
+Diversity and inclusion (%)
+Pay equality (%)
+Employees and Social Investment
+Chart Generator
+-2,991
+-7,051
+617
+523
+700
+494
+589
+Total cost of revenue (non-IFRS)
+-7,328
+-7,362
+-7,655
+-6,969
+-7,462
+-6,462
+-5,190
+-4,454
+TC-SI-550a.2
+Managing Systemic Risks from
+As a global organization with employees
+from over 150 nationalities, our aspiration
+is that SAP's workforce mirrors the
+diversity in society that includes gender
+parity and demographics of all of the
+regions where we have employees.
+Employees and Social Investments
+Employees and Social Investments
+Non-Financial Notes: Social Performance
+Key Facts
+Key Facts
+SAP is a multinational company with
+locations all over the world. At each
+location, we hire people based on their
+qualifications and our business needs.
+For an overview of our headcount per
+geographical area, see Note (B.1).
+For more information about data protection
+and privacy, see the SAP Trust Center
+Security, Data Protection, and Privacy
+Risk Management and Risks
+Employees and Social Investments
+Note (B.1) Employee Headcount
+Research and development (IFRS)
+Energy and Emissions
+Security, Data Protection, and Privacy
+-8,355
+-7,946
+Cost of cloud and software (non-IFRS)
+-4,698
+-4,362
+-4,247
+Cost of services (IFRS)
+Non-IFRS adjustments
+Cost of services (non-IFRS)
+Total cost of revenue (IFRS)
+Non-IFRS adjustments
+-2,916
+-3,178
+-7,886
+-3,662
+-3,471
+-3,158
+286
+178
+254
+151
+166
+-2,630
+-3,000
+-3,408
+-3,151
+-3,817
+-3,302
+spend with
+Comments
+TC-SI-330a.2
+SAP
+The content of this section was not subject to the independent limited assurance engagement of our
+external auditor.
+QAudit Scope
+326/338
+Analysis of Consolidated Statements of
+Cash Flow
+Total tax paid
+Community and Social Vitality
+Comments
+Links
+Core Metrics and Disclosures
+Theme
+SAP Integrated Report 2021
+Prosperity
+In our Compensation Report, we
+disclose the vertical pay ratio. This ratio
+compares the total compensation
+granted to the CEO with that of all
+employees who were employed at year
+end.
+Creating an inclusive workplace that
+benefits employees, customers, and
+partners is a strategic commitment for
+SAP. We are the first EDGE-certified
+global technology company and have
+received numerous recognitions for our
+advances in creating an inclusive and
+more equal workplace, such as
+Bloomberg Equality Index, Best Place to
+Work, Forbes' America's Best Employers
+For Women ranking, and many others.
+No disclosure of other indicators of
+diversity due to legal requirements in
+Germany.
+Comments
+Employees and Social Investment
+Training provided (#, $)
+Skills for the Future
+Compensation Report
+Wage level (%)
+SAP among Forbes' America's Best
+Employers For Women 2021
+SAP Recertifies with EDGE
+Bloomberg Gender-Equality Index 2021
+SAP Named Among Best Companies to
+Work for in 2021
+Training hours split by gender and
+employee category are not a material
+issue for SAP, as we align our training
+activities according to the needs of each
+employee and do not tolerate
+discrimination.
+TC-SI-330a.3
+To Our
+Combined Group
+Diverse and Skilled Workforce
+TC-SI-330a.1
+Recruiting & Managing a Global,
+TC-SI-230a.2
+Data Security
+TC-SI-220a.1
+Data Privacy & Freedom of
+Expression
+TC-SI-130a.3
+Waste and Water
+TC-SI-130a.2
+Hardware Infrastructure
+Stakeholders
+Energy and Emissions
+TC-SI-130a.1
+Environmental Footprint of
+Code
+Topic
+Starting in 2021, SAP maps existing sustainability disclosures to the standards of the Sustainability
+Accounting Standards Board (SASB). The table below presents a set of sustainable indicators based
+on the SASB standards for Software and IT Services (Version 2018-10).
+SASB Index
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Links
+103-1
+SAP Integrated Report 2021
+UN GC
+Principles
+To Our
+SAP Integrated Report 2021
+SAP
+323/338
+UN GC
+Principles
+> > >
+UN SDGS
+External
+Assurance
+Boundaries
+Products, Research & Development, and Services
+Strategy
+Sustainability Management
+Stakeholders
+Products, Research & Development, and Services
+Sustainability Management
+GRI Content Index
+Strategy
+At SAP, we are committed to our purpose of helping the world run
+better and improving people's lives. To this end, we aim to create
+innovations that help accelerate economic prosperity, drive positive
+social impact, and safeguard the planet.
+103-3
+103-2
+103-1
+Links, Content, and Omissions
+Product Responsibility
+Performance Management System
+4,5,8,10
+SAP
+Strategy
+Consolidated Financial Further Information on
+Combined Group
+Management Report
+Statements IFRS
+UN SDGS
+SAP
+UN GC
+Principles
+Links, Content, and Omissions
+Boundaries
+External
+Assurance
+UN SDGS
+Responsible Supply Chain
+103-1
+Sustainable Procurement
+GRI Content Index
+103-2
+Sustainable Procurement
+103-3
+Sustainable Procurement
+308-1
+Sustainable Procurement
+Percentage of
+addressable
+Performance Management System
+Customers
+score.
+Customers express their satisfaction with the quality of our products
+and services via the regularly conducted customer net promoter
+Links, Content, and Omissions
+Customer
+Loyalty
+Additional
+Information
+Sustainability
+Customers
+External
+Assurance
+Customer
+Loyalty
+3
+We have not received any substantiated complaints concerning
+breaches of customer privacy, neither from outside parties nor
+regulatory bodies. As a result, we have no identified leaks, thefts, or
+losses of customer data.
+Security, Data Protection, and Privacy
+SAP Trust Center: Data Protection and Privacy
+Security, Data Protection, and Privacy
+Links, Content, and Omissions
+418-1
+103-3
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+Stakeholders
+Customer Matters
+To Our
+SAP
+32 Employees of recently acquired companies and SAP Israel as well as workers who are not SAP employees are excluded.
+✓
+UN GC
+Principles
+UN SDGS
+External
+Assurance
+Boundaries
+322/338
+SAP Trust Center: Data Protection and Privacy
+SAP Privacy Statement
+Security, Data Protection, and Privacy
+Security, Data Protection, and Privacy
+GRI Content Index
+Links, Content, and Omissions
+SAP Integrated Report 2021
+Customer Responsibility
+Links, Content, and Omissions
+103-1
+SAP + external
+parties
+As a software company without any physical products or production
+sites, customer health and safety is mainly related to the responsible
+usage of technology, especially artificial intelligence.
+Human Rights and Labor Standards
+416-1
+UN GC
+Principles
+UN SDGS
+External
+Assurance
+Boundaries
+1
+12, 16
+UN GC
+Principles
+Additional
+Information
+SAP + external
+parties
+UN SDGS
+External
+Assurance
+Boundaries
+Performance Management System
+Customers
+Sustainability Management
+Performance Management System
+Customers
+Sustainability Management
+GRI Content Index
+Strategy
+At SAP, we are committed to our purpose of helping the world run
+better and improving people's lives. To this end, we aim to create
+innovations that help accelerate economic prosperity, drive positive
+social impact, and safeguard the planet.
+103-3
+103-2
+Guiding Principles for Artificial Intelligence
+Boundaries
+-7.0
+85
+96,498
+88,543
+Number of employees, annual average5
+104,364
+101,476
+99,157
+93,709
+86,999
+Number of employees in research and development5,
+7
+32,244
+29,580
+27,634
+27,060
+24,872
+Personnel expenses
+15,552
+13,420
+14,870
+11,595
+11,643
+100,330
+102,430
+107,415
+Number of employees'
+8.6
+7.9
+15.6
+6.9
+9.0
+Return on SAP shares4, 10-year investment period (in %)
+11.8
+11.0
+13.9
+13.2
+Personnel expenses - excluding share-based payments
+10.2
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+Employees and Personnel Expenses
+332/338
+Return on SAP shares, 5-year investment period (in %)
+12,758
+13,035
+Women managing managers6. 7 (in %)
+24.1
+23.5
+22.5
+21.1
+21.7
+Women managing teams 6.7 (in %)
+29.7
+29.0
+27.8
+27.5
+26.8
+Employee Engagement Index (in %)
+Business Health Culture Index (BHCI, in %)
+Leadership Trust Index (LTI, as NPS)
+Employee retention (in %)
+Total turnover rate (in %)
+83
+86
+83
+84
+25.4
+25.7
+26.4
+27.5
+10,765
+10,523
+Personnel expenses per employee - excluding share-based payments (in € thousands)
+122
+122
+131
+115
+121
+Operating profit per employee (in € thousands)
+45
+12,336
+65
+61
+56
+Women working at SAP (in %)
+34.3
+33.6
+33.5
+33.0
+32.8
+Women in management (total, in % of total number of employees)
+28.3
+45
+12.8
+131.7
+Financial debts
+5.11
+4.35
+4.43
+Earnings per share, diluted (in €)
+4.46
+4.35
+2.78
+5.41
+3.42
+Dividend per share³ (in €)
+2.45
+1.85
+1.58
+1.50
+1.40
+Total dividend distributed³
+3.35
+2,890
+6.73
+3.35
+1,780
+8,090
+3,715
+1,630
+Key SAP Stock Facts
+Issued shares (in millions)
+1,229
+Earnings per share, basic (non-IFRS, in €)
+1,229
+1,229
+1,229
+Earnings per share, basic (in €)
+4.46
+4.35
+2.78
+3.42
+1,229
+3,522
+2,182
+1,790
+101.78
+87.63
+84.31
+82.47
+82.43
+Market capitalization' (in € billions)
+153.4
+SAP share price - low (in €)
+81
+106.8
+114.8
+Return on SAP shares4, 1-year investment period (in %)
+16.5
+-10.9
+38.4
+Additional SAP policies are made public at www.sap.com/sustainability.
+147.8
+1,886
+100.35
+124.72
+1,671
+Total dividend distributed³ (in % of profit after tax)
+54
+41
+56
+44
+41
+108.02
+SAP share price? (in €)
+107.22
+120.32
+86.93
+93.45
+SAP share price - peak (in €)
+128.98
+142.26
+129.40
+(cash and cash equivalents/short-term investments/restricted cash)
+Investments in goodwill, intangible assets, or property, plant, and equipment (including
+capitalizations due to acquisitions)
+44
+20,044
+15,069
+15,213
+16,620
+11,930
+31,090
+27,538
+Goodwill
+29,159
+21,271
+Total non-current assets
+51,125
+43,395
+44,999
+34,881
+30,554
+23,736
+Total current liabilities (including contract liabilities/deferred income)
+Total current assets
+6,480
+-13,094
+-13,283
+-13,668
+-11,331
+-6,264
+Net liquidity (net debt)
+-1,563
+6,017
+-6,503
+-2,493
+-1,479
+Assets, Equity and Liabilities
+Trade and other receivables
+6,499
+6,730
+8,037
+-8,286
+40
+16,136
+14,462
+Contract liabilities/Deferred income - current (IFRS)
+4,431
+3,996
+4,266
+3,028
+2,771
+Equity ratio (total equity in % of total assets)
+42,484
+58
+51
+56
+60
+Debt ratio (total liabilities² in % of total assets)
+42
+49
+49
+51
+12,842
+51,502
+58,464
+10,486
+10,210
+Total non-current liabilities (including contract liabilities/deferred income)
+13,510
+15,696
+14,929
+12,138
+60,215
+6,759
+41,523
+29,927
+30,822
+28,877
+25,515
+Total assets
+71,169
+Total equity (including contract liabilities/deferred income)
+80
+―
+78
+879
+941
+Total energy consumption ¹² (in GWh)
+13.9
+12.6
+10.9
+4.9
+3.9
+Net carbon emissions ¹¹ per € revenue (in grams)
+3.7
+3.3
+3.0
+1.3
+1.0
+Net carbon emissions ¹¹ per employee5 (in tons)
+325
+310
+Cloud gross margin (in % of corresponding revenue, IFRS)
+Profits and Margins
+€ millions, unless otherwise stated
+Stakeholders
+To Our
+SAP Integrated Report 2021
+1,115
+SAP
+17.8
+Environment
+Net carbon emissions ¹¹ (in kilotons)
+110
+135
+300
+-5.0
+Combined Group
+1,055
+Energy consumed per employee (in kWh)
+8 Data center electricity consumption normalized against € revenue represents the required energy to develop and operate solutions in internal and external data centers.
+9 Due to changes in sampling in 2018, Customer NPS is not fully comparable to the prior years' scores.
+7 Numbers at year end.
+100
+100
+100
+100
+100
+11
+12
+12
+13
+15
+265
+318
+338
+361
+429
+Total data center electricity consumption (in GWh)
+Data center electricity consumption per € revenue³ (in Wh)
+Renewable energy sourced (in %)
+1 SAP Group. Amounts according to IFRS, unless otherwise stated.
+2 As sum of current and non-current liability
+4 Average annual return assuming all dividends are reinvested.
+1,005
+3 Numbers are based on the proposed dividend and on level of treasury stock at year end.
+6 Relates to different levels of management position.
+8,980
+8,650
+11,230
+10,630
+11,510
+5 Full-time equivalents
+10 As at January 1, 2019, we changed our free cash flow definition to avoid effects resulting from the adoption of IFRS 16.
+Management Report
+Sustainability
+Services gross margin (in % of corresponding revenue, non-IFRS)
+30.1
+27.0
+25.0
+22.9
+23.5
+Software and support gross margin (IFRS, in %)
+Software and support gross margin (non-IFRS, in %)
+Gross margin (in % of total revenue, IFRS)
+86.9
+86.7
+86.6
+86.6
+85.8
+87.6
+87.4
+87.4
+Operating profit (IFRS)
+72.5
+71.8
+72.3
+73.1
+73.7
+19.3
+Gross margin (in % of total revenue, non-IFRS)
+69.8
+69.7
+71.2
+71.5
+87.0
+87.4
+69.9
+Consolidated Financial Further Information on
+Statements IFRS
+19.2
+22.7
+Additional
+Information
+2021
+2020
+2019
+2018
+2017
+67.0
+66.6
+63.5
+58.6
+56.0
+Cloud gross margin (in % of corresponding revenue, non-IFRS)
+69.5
+69.7
+68.2
+63.1
+62.2
+22.5
+Services gross margin (in % of corresponding revenue, IFRS)
+82.2
+81.5
+81.6
+81.2
+19.4
+80.5
+80.1
+79.8
+79.6
+79.7
+79.1
+Cloud and software gross margin (in % of corresponding revenue, IFRS)
+Cloud and software gross margin (in % of corresponding revenue, non-IFRS)
+11 In CO2 equivalents
+12 Before 2021, our total energy consumption covered direct energy consumption (Scope 1) and selected indirect energy consumption (Scope 2). In 2021, we added indirect
+energy consumption of our value chain (Scope 3) to all years shown.
+333/338
+Group Headquarters
+SAP SE
+Dietmar-Hopp-Allee 16
+69190 Walldorf
+Germany
+www.sap.com
+www.sap.com/investor
+SAP
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+Stakeholders
+To Our
+SAP Integrated Report 2021
+-
+Agreement on the Involvement of Employees in SAP SE
+German Code of Corporate Governance
+―
+Declaration of Implementation pursuant to the German Stock Corporation Act, Section 161
+Global Code of Ethics and Business Conduct for Employees Corporate Governance Statement
+337/338
+pursuant to the German Commercial Code, Sections 315d and 289f
+Rules of Procedure for the SAP SE Executive Board
+Profile of Skills and Expertise for the SAP SE Supervisory Board
+Overview of the participation of Supervisory Board members in meetings of the Supervisory Board
+and its committees
+335/338
+336/338
+SAP
+Rules of Procedure for the SAP SE Supervisory Board
+Documents relating to SAP SE's Annual General Meetings of Shareholder, including voting results
+SAP SE's Articles of Incorporation
+SAP and other SAP products and services mentioned herein as well as their respective logos are
+trademarks or registered trademarks of SAP SE (or an SAP affiliate company) in Germany and other
+countries. All other product and service names mentioned are the trademarks of their respective
+companies. Please see www.sap.com/about/legal/copyright.html for additional trademark information
+and notices.
+Germany
+SAP Human Rights Commitment Statement
+SAP Global Health and Safety Management Policy
+SAP Environmental Policy
+SAP Global Anti-Discrimination Statement
+SAP's Guiding Principles for Artificial Intelligence and SAP Global Artificial Intelligence Ethics Policy
+SAP Supplier Code of Conduct
+SAP Partner Code of Conduct
+SAP's Global Tax Principles
+Further, the SAP Glossary is available at www.sap.com/glossary
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+69190 Walldorf
+Dietmar-Hopp-Allee 16
+SAP SE
+Copyright
+of the audited consolidated financial statements can also be requested free of charge by sending an
+email to investor@sap.com or via phone +49 6227 7-67336.
+SAP has decided to publish the SAP Integrated Report solely as an electronic document. A hard copy
+© 2022 SAP SE or an SAP affiliate company. All rights reserved. No part of this publication may be
+reproduced or transmitted in any form or for any purpose without the express permission of SAP SE
+or an SAP affiliate company.
+Printing
+SAP Integrated Report project team
+Concept and Realization
+Investor Relations
+SAP SE
+Publisher
+Publication Details
+with the support of SAP solutions
+Details of managers' (the Executive and Supervisory Board members') transactions in SAP
+securities
+Information about the management of SAP SE, including the current members of the Executive
+Board and the Supervisory Board, their CVs and memberships in boards of other companies
+Information about the Supervisory Boards' committees, including their tasks and current
+composition
+Complete information on the governance of SAP SE is available at www.sap.com/corpgovernance.
+Materials include:
+Germany
+69190 Walldorf
+Dietmar-Hopp-Allee 16
+SAP SE
+Group Headquarters
+Addresses
+Information
+Additional
+Results for the fourth quarter and full year 2022
+January 26
+2023
+Results for the second quarter and half-year 2022
+Results for the third quarter 2022
+Annual General Meeting of Shareholders, virtual event
+Dividend payment
+Results for the first quarter 2022
+October 25
+July 21
+May 23
+334/338
+SAP
+SAP Integrated Report 2021
+To Our
+Combined Group
+Stakeholders
+Tel. +49 6227 74 74 74
+Management Report
+Financial Calendar and
+Addresses
+Financial Calendar
+2022
+April 22
+May 18
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Fax +49 6227 75 75 75
+E-mail info@sap.com
+Web site www.sap.com
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+Financial and Sustainability
+Publications
+We present our financial, social, and environmental performance in the SAP Integrated Report 2021,
+which is available at www.sapintegrated report.com. This SAP Integrated Report 2021 comprises all of
+the information required by accounting and disclosure standards applicable to us.
+The following publications are available in English at www.sap.com/investor, or in German at
+www.sap.de/investor.
+Management Report
+-
+Annual Report on Form 20-F (IFRS, available in English only)
+SAP Integrated Report (PDF)
+SAP SE Statutory Financial Statements and Review of Operations (HGB, available in German only)
+Half-Year Reports
+SAP Compensation Report
+SAP Quarterly Statements
+SAP INVESTOR, SAP's quarterly shareholder magazine
+(in German)
+-
+4,656
+Stakeholders
+To Our
+The addresses of all our international subsidiaries and sales partners are available on our public Web
+site at www.sap.com/directory/main.html.
+For more information about the matters discussed in the report, contact:
+Investor Relations
+Tel. +49 6227 76 73 36
+Fax +49 6227 74 08 05
+Combined Group
+E-mail investor@sap.com
+Press
+Tel. +49 6227 74 63 15
+E-mail press@sap.com
+Web site www.sap.com/press
+SAP
+SAP Integrated Report 2021
+Web site www.sap.com/investor
+80
+6,623
+5,703
+€ millions, unless otherwise stated
+2021
+2020
+2019
+2018
+2017
+Segment profit
+728
+645
+517
+403
+315
+Segment margin (Segment profit in % of Segment revenue)
+22.5
+19.1
+14.1
+11.9
+-3,066
+-7,021
+-2,986
+-3,063
+5,045
+4,303
+Additional
+Information
+3,496
+6,223
+Net cash flows from financing activities
+Net cash flows from investing activities
+Net cash flows from operating activities
+Liquidity and Cash Flow
+9.7
+7,194
+-1,112
+Sustainability
+Combined Group
+Management Report
+ΝΑ
+ΝΑ
+Segment profit
+44
+-4
+-9
+NA
+ΝΑ
+Segment margin (Segment profit in % of Segment revenue)
+4.7
+-0.6
+-1.7
+ΝΑ
+ΝΑ
+Services
+Segment revenue
+Segment gross margin (in % of corresponding revenue)
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+331/338
+23.7
+23.9
+Consolidated Financial Further Information on
+Statements IFRS
+26.7
+34.1
+3,240
+3,390
+3,678
+3,379
+3,234
+31.5
+78.3
+-56
+102
+1,470
+67
+211
+774
+Group liquidity
+11,530
+6,781
+5,382
+8,838
+4,785
+-6.0
+4.0
+10.0
+Customer Net Promoter Score⁹
+Customer
+7.9
+7.6
+79
+67
+62
+59
+60
+61
+2,632
+92.8
+93.3
+93.9
+94.6
+9.0
+7.0
+10.7
+95.3
+-3,997
+Short-term investments
+8,627
+3,283
+-3,406
+Capital expenditure
+Free cash flow 10
+-800
+-816
+-817
+-1,458
+-1,275
+5,049
+6,000
+2,276
+2,844
+3,770
+Free cash flow in % of total revenue
+18
+22
+5,314
+5,311
+8,898
+Cash and cash equivalents
+(net cash flows from operating activities in % of profit after tax)
+125
+4,011
+105
+136
+116
+Cash conversion rate
+16
+12
+8
+104
+77.6
+79.6
+Segment gross margin (in % of corresponding revenue)
+5,600
+5,029
+PBT margin (in % of revenues)
+24.6
+26.4
+16.7
+22.7
+21.4
+Income tax expense
+-1,471
+-1,938
+-1,226
+-1,511
+-983
+Profit after tax
+5,376
+5,283
+26.3
+26.2
+26.5
+20.0
+Effective tax rate (non-IFRS, in %)
+19.5
+4,596
+27.0
+26.8
+21.5
+Effective tax rate (IFRS, in %)
+4,046
+4,088
+3,370
+26.7
+22.8
+7,220
+Profit before tax (PBT)
+4,877
+Non-IFRS adjustments
+3,573
+1,664
+3,735
+1,459
+1,892
+Operating profit (non-IFRS)
+8,230
+8,287
+8,208
+7,163
+6,769
+Operating margin (in % of total revenue, IFRS)
+16.7
+24.2
+16.2
+188
+-47
+198
+776
+2,174
+Financial income, net
+6,847
+28.9
+29.7
+30.3
+29.6
+Operating margin (in % of total revenue, non-IFRS)
+20.8
+23.1
+29.0
+Return on equity (profit after tax in percentage of average equity)
+15
+17
+Segment revenue
+23,502
+22,965
+23,051
+20,997
+19,881
+Segment gross margin (in % of corresponding revenue)
+79.5
+80.6
+80.6
+80.8
+81.7
+Segment profit
+9,567
+9,722
+9,773
+8,764
+NA
+ΝΑ
+508
+681
+929
+Segment revenue
+Applications, Technology & Support
+Qualtrics
+41.7
+42.4
+42.3
+40.7
+Segment margin (Segment profit in % of Segment revenue)
+8,375
+42.1
+Segment Results
+182
+19
+5
+0
+Revenue adjustments
+Non-IFRS Adjustments
+NA
+NA
+81
+6,681
+9,447
+Current cloud backlog
+Current cloud backlog
+16
+15
+11
+7,155
+4,473
+3
+623
+1,130
+-3
+157
+Adjustment for restructuring
+1,120
+830
+Adjustment for acquisition-related charges
+1,835
+2,794
+Adjustment for share-based payment expenses
+587
+577
+689
+577
+1,084
+33
+The Supervisory Board is responsible for overseeing the Group's financial reporting process for the
+preparation of the consolidated financial statements and of the Group Management Report.
+Auditor's Responsibilities for the Audit of the Consolidated Financial Statements
+and of the Group Management Report
+Julia White
+We evaluated the design and tested the operating effectiveness of certain internal controls over the
+tax process including controls over the Group's assessment of tax law and the process to estimate the
+related exposures. We assessed the competency, skills and objectivity of the external experts and
+evaluated the related expert opinions. We inquired of the Group's tax department and inspected
+correspondence with the relevant tax authorities. We involved tax professionals with specialized skills
+and knowledge, who assisted in evaluating SAP's conclusions over the estimate of tax uncertainties
+based on their knowledge and experience regarding the application of relevant legislation by tax
+authorities and courts.
+OUR AUDIT APPROACH
+SAP operates in multiple tax jurisdictions with complexities and uncertainties due to different
+interpretations of tax laws, such as those involving transfer pricing and intercompany transactions
+between SAP Group entities. The determination of provisions for tax uncertainties requires SAP to
+make judgments on tax issues and develop estimates regarding SAP's exposure to tax risks. SAP
+regularly engages external experts to provide tax opinions to support their own risk assessment. The
+risk for the consolidated financial statements relates to the completeness, measurement and
+disclosure of the provision for uncertain tax treatments. As of December 31, 2021 SAP disclosed
+contingent liabilities relating to tax uncertainties of EUR 1,283 million.
+THE FINANCIAL STATEMENT RISK
+Refer to note (C.5) - Income Taxes, and Group Management Report section Risk Management and
+Risks.
+Assessment of the Group's uncertain tax treatments
+SAP has developed an adequate framework for determining the accounting treatment for its revenue.
+For the vast majority of the software arrangements entered into during 2021, it was clear which of
+SAP's revenue recognition policies should be applied. Where there was room for interpretation, SAP's
+judgment was balanced and appropriate.
+For the majority of software support revenue, we compared the actual support revenue with the
+support revenue that is expected based on last year's support revenue, the loss rate of last year's
+support contracts and the current year software sales that trigger additional support revenue.
+OUR OBSERVATIONS
+Finally, we assessed whether the disclosures in the notes with respect to uncertain tax treatments are
+complete and appropriate.
+evaluated the allocation of the transaction price for each of the deliverables that qualified as a
+separate performance obligation by assessing the methodology applied and testing mathematical
+accuracy of the underlying calculations.
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP
+SAP Integrated Report 2021
+Information
+obtained and inspected external confirmations of the key terms and conditions from the respective
+customers to test whether contracts were economically interrelated, as well as to evaluate the
+identified performance obligations,
+OUR OBSERVATIONS
+35/338
+We evaluated the design and implementation and tested the operating effectiveness of certain
+internal controls over the Company's investments process. This included controls related to selection
+of the valuation model and the relevance and reliability of the significant unobservable inputs. We also
+involved financial instrument valuation professionals with specialized skills and knowledge, who
+assisted in testing management's ability to produce a fair value estimate compliant with IFRS 13 Fair
+Value Measurements for a selection of investments by (1) testing the appropriateness of the valuation
+method selected by comparing it to our expectation based on industry experience and knowledge of
+the investment, and (2) assessing the reliability and relevance of the significant unobservable inputs
+by comparing them to historical and market information.
+OUR AUDIT APPROACH
+There is the risk for the consolidated financial statements that the valuations are not appropriate.
+There is also the risk that the related disclosures in the notes are not appropriate.
+The measurement of fair value of such investments is complex and, with regard to the assumptions
+made, highly dependent on management's estimates and judgments. This applies particularly to
+selection of the appropriate valuation method and the determination of the significant unobservable
+inputs.
+As of December 31, 2021, the Company holds unlisted equity securities with a carrying amount of
+EUR 4,871 million. These financial instruments are classified as equity securities at fair value through
+profit and loss and their valuations are based on significant unobservable inputs (Level 3 of the fair
+value hierarchy).
+THE FINANCIAL STATEMENT RISK
+Refer to note (D.6) - Equity Investments and note (F.2) - Fair Value Disclosures on Financial
+Instruments
+Valuation of unlisted equity securities
+SAP's judgments as to the amounts recognized as tax provisions for tax uncertainties as of December
+31, 2021 are appropriate. The disclosures in the notes to the consolidated financial statements are
+complete and appropriate.
+Additional
+Information
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined Group
+To Our
+SAP Integrated Report 2021
+SAP
+36/338
+Further Information on
+Sustainability
+For a sample of customer contracts, which were selected using a statistical approach, we:
+inspected the underlying contractual agreements and other related documents as well as inquired
+with SAP's accounting and/or sales representatives to evaluate SAP's assessment of whether
+contracts were economically interrelated as well as to evaluate the identified performance
+obligations and allocation of transaction price,
+We evaluated the design and tested the operating effectiveness of certain internal controls related to
+the revenue process including controls related to the identification of economically interrelated
+contracts, separate performance obligations and allocation of the transaction price to the performance
+obligations in the contract.
+On software revenue recognition, we evaluated the compliance of SAP's accounting policies with the
+IFRS Framework and IFRS 15.
+Basis for the Opinions
+Pursuant to Section 322 (3) sentence 1 HGB, we declare that our audit has not led to any reservations
+relating to the legal compliance of the consolidated financial statements and of the Group
+Management Report.
+the accompanying Group Management Report as a whole provides an appropriate view of the
+Group's position. In all material respects, this Group Management Report is consistent with the
+consolidated financial statements, complies with German legal requirements and appropriately
+presents the opportunities and risks of future development. Our opinion on the Group
+Management Report does not cover the content of those components of the Group Management
+Report specified in the "Other Information" section of the auditor's report.
+the accompanying consolidated financial statements comply, in all material respects, with the
+IFRSS as adopted by the EU and the additional requirements of German commercial law pursuant
+to Section 315e (1) HGB [Handelsgesetzbuch: German Commercial Code], as well as the IFRSS as
+adopted by the International Accounting Standards Board and, in compliance with these
+requirements, give a true and fair view of the assets, liabilities and financial position of the Group
+as at December 31, 2021, and of its financial performance for the financial year from January 1 to
+December 31, 2021 and
+In our opinion, on the basis of the knowledge obtained in the audit,
+In addition, we have audited the combined Group Management Report by the SAP Group and the
+Management Report of SAP SE, Walldorf ("Group Management Report") for the financial year from
+January 1 to December 31, 2021. In accordance with German legal requirements, we have not
+audited the content of those components of the Group Management Report specified in the "Other
+Information" section of our auditor's report.
+We have audited the consolidated financial statements of SAP SE, Walldorf, and its subsidiaries (the
+Group), which comprise the consolidated statements of financial position as at December 31, 2021,
+consolidated income statements, consolidated statements of comprehensive income, consolidated
+statements of changes in equity and consolidated statements of cash flows for the financial year from
+January 1 to December 31, 2021 and notes to the consolidated financial statements, including a
+summary of significant accounting policies.
+Opinions
+We conducted our audit of the consolidated financial statements and of the Group Management
+Report in accordance with Section 317 HGB and the EU Audit Regulation No. 537/2014 (referred to
+subsequently as “EU Audit Regulation") and in compliance with German Generally Accepted
+Standards for Financial Statement Audits promulgated by the Institut der Wirtschaftsprüfer [Institute of
+Public Auditors in Germany] (IDW) as well as in supplementary compliance with the International
+Standards on Auditing (ISAs) and guidelines of the Public Company Accounting Oversight Board
+(United States).
+Report on the Audit of the Consolidated Financial Statements and
+of the Group Management Report
+For the consolidated financial statements and Group Management Report we have issued an unqualified auditor's report. The English
+language text below is a translation of the independent auditor's report.
+Independent Auditor's Report
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined Group
+TO SAP SE, Walldorf
+33/338
+34/338
+SAP
+OUR AUDIT APPROACH
+There is the financial statement risk that the recognition cut-off of software license revenue as at the
+balance sheet date is incorrect and that revenues are allocated incorrectly.
+3. the allocation of the transaction price of a customer contract to the performance obligations in the
+contract based on standalone-selling prices.
+2. whether products and services qualify as separate performance obligations, and
+1. whether various contracts are economically interrelated,
+The evaluation of software licenses revenue recognition bears an inherent risk of errors as SAP's
+software customer contracts are complex. SAP defined detailed policies, procedures and processes to
+manage the accounting for its customer contracts, which are also described in the notes. Applying
+them often requires significant judgments, in particular in the assessment of the following:
+In the financial year 2021 SAP generated revenue of EUR 27,842 million, of which EUR 14,660 million
+relate to revenues from sales of software licenses and support.
+Refer to note (A.1) - Revenue and Group Management Report, section Risk Management and Risks.
+THE FINANCIAL STATEMENT RISK
+Software license revenue recognition
+Key audit matters are those matters that, in our professional judgment, were of most significance in
+our audit of the consolidated financial statements for the financial year from January 1 to December
+31, 2021. These matters were addressed in the context of our audit of the consolidated financial
+statements as a whole, and in forming our opinion thereon, we do not provide a separate opinion on
+these matters.
+Key Audit Matters in the Audit of Consolidated Financial Statements
+Our responsibilities under those requirements, principles and standards are further described in the
+"Auditor's Responsibilities for the Audit of the Consolidated Financial Statements and of the Group
+Management Report" section of our auditor's report. We are independent of the group entities in
+accordance with the requirements of European law and German commercial and professional law,
+and we have fulfilled our other German professional responsibilities in accordance with these
+requirements. In addition, in accordance with Article 10 (2) point (f) of the EU Audit Regulation, we
+declare that we have not provided non-audit services prohibited under Article 5 (1) of the EU Audit
+Regulation. We believe that the evidence we have obtained is sufficient and appropriate to provide a
+basis for our opinions on the consolidated financial statements and on the Group Management
+Report.
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+Finally, we assessed whether the related disclosures in the notes regarding the determination of fair
+value are appropriate.
+To Our
+OUR OBSERVATIONS
+Other Information
+A company's internal control over financial reporting in the consolidated financial statements is a
+process designed to provide reasonable assurance regarding the reliability of financial reporting in the
+consolidated financial statements and the preparation of financial statements for external purposes in
+accordance with generally accepted accounting principles. A company's internal control over financial
+reporting in the consolidated financial statements includes policies and procedures to (1) ensure an
+accounting system that in reasonable detail accurately and fairly reflects the transactions and
+dispositions of the company's assets, (2) provide reasonable assurance that transactions are recorded
+as necessary to permit preparation of financial statements in accordance with generally accepted
+accounting principles, and (3) provide reasonable assurance regarding prevention or timely detection
+of unauthorized acquisition, use or disposition of the company's assets that could have a material
+effect on the financial statements.
+SAP SE's Executive Board is responsible for maintaining effective internal control over financial
+reporting in the consolidated financial statements and assessing its effectiveness, which is included in
+the Executive Board's report on the internal control over consolidated financial reporting.
+Executive Board's and Supervisory Board's Responsibility for the Internal Control
+over Financial Reporting in the Consolidated Financial Statements
+In our opinion, SAP maintained, in all material respects, effective internal control over financial
+reporting in the consolidated financial statements as at December 31, 2021 based on the criteria set
+out in the Internal Control - Integrated Framework (2013) issued by the COSO.
+We have audited the internal control over financial reporting in the consolidated financial statements
+of SAP SE, Walldorf, and its subsidiaries in place as at December 31, 2021. This control system is
+based on criteria set out in the Internal Control - Integrated Framework (2013) issued by the
+Committee of Sponsoring Organizations of the Treadway Commission (COSO).
+Opinion on Internal Control over Financial Reporting in the Consolidated Financial
+Statements
+Report on Internal Control over Financial Reporting in the Consolidated Financial
+Statements pursuant to PCAOB
+Other Legal and Regulatory Requirements
+Because of its inherent limitations, internal control over financial reporting may not prevent or detect
+material misstatements. Also, projections of any evaluation of effectiveness to future periods are
+subject to the risk that controls may become inadequate because of changes in conditions, or that the
+degree of compliance with the policies or procedures may deteriorate.
+We also provide the Supervisory Board with a statement that we have complied with relevant
+independence requirements and communicate with them all relationships and other matters that may
+reasonably be thought to bear on our independence, and where applicable the related safeguards.
+From the matters communicated with the Supervisory Board, we determine those matters that were of
+most significance in the audit of the consolidated financial statements of the current period and are
+therefore the key audit matters. We describe these matters in our auditor's report, unless law or
+regulation precludes public disclosure about the matter.
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+Stakeholders
+To Our
+We communicate with the Supervisory Board regarding, among other matters, the planned scope and
+timing of the audit and significant audit findings, including any significant deficiencies in internal
+control that we identify during our audit.
+SAP
+The Supervisory Board is responsible for overseeing the Group's internal control over financial
+reporting in the consolidated financial statements.
+40/338
+In addition, the company's management is responsible for such internal control that they have
+considered necessary to enable the preparation of ESEF documents that are free from material
+The company's management is responsible for the preparation of the ESEF documents including the
+electronic rendering of the consolidated financial statements and the group management report in
+accordance with Section 328 (1) sentence 4 item 1 HGB and for the tagging of the consolidated
+financial statements in accordance with Section 328 (1) sentence 4 item 2 HGB.
+We conducted our assurance work on the rendering of the consolidated financial statements and the
+group management report contained in the file made available and identified above in accordance
+with Section 317 (3a) HGB and the IDW Assurance Standard: Assurance Work on the Electronic
+Rendering of Financial Statements and Management Reports Prepared for Publication Purposes in
+Accordance with Section 317 (3a) HGB (IDW ASS 410 (10.2021)). Our responsibility in accordance
+therewith is further described below. Our audit firm applies the IDW Standard on Quality
+Management 1: Requirements for Quality Management in Audit Firms (IDW QS 1).
+In our opinion, the rendering of the consolidated financial statements and the group management
+report contained in the electronic file made available, identified above and prepared for publication
+purposes complies in all material respects with the requirements of Section 328 (1) HGB for the
+electronic reporting format. Beyond this assurance opinion and our audit opinion on the
+accompanying consolidated financial statements and the accompanying group management report
+for the financial year from January 1, 2021 to December 31, 2021 contained in the "Report on the
+Audit of the Consolidated Financial Statements and the Group Management Report” above, we do not
+express any assurance opinion on the information contained within these renderings or on the other
+information contained in the file identified above.
+19f70e106b19b514fedebc79853c98601bd2) made available and prepared for publication purposes
+complies in all material respects with the requirements of Section 328 (1) HGB for the electronic
+reporting format ("ESEF format"). In accordance with German legal requirements, this assurance work
+extends only to the conversion of the information contained in the consolidated financial statements
+and the group management report into the ESEF format and therefore relates neither to the
+information contained in these renderings nor to any other information contained in the file identified
+above.
+We have performed assurance work in accordance with Section 317 (3a) HGB to obtain reasonable
+assurance about whether the rendering of the consolidated financial statements and the group
+management report (hereinafter the “ESEF documents") contained in the electronic file „sap-2021-12-
+31AR.zip" (SHA256 hash value: 3121b1e38e2abffbffc947b3749e
+Report on the Assurance on the Electronic Rendering of the Consolidated Financial
+Statements and the Group Management Report Prepared for Publication Purposes
+in Accordance with Section 317 (3a) HGB
+We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
+for our opinion.
+39/338
+Our responsibility is to express an opinion on the internal control over financial reporting in the
+consolidated financial statements based on our audit. We conducted our audit in accordance with the
+standards of the Public Company Accounting Oversight Board (United States). Those standards
+require that we plan and perform the audits to obtain reasonable assurance about whether effective
+internal control over financial reporting in the consolidated financial statements was maintained in all
+material respects. Our audit of internal control over financial reporting in the consolidated financial
+statements included obtaining an understanding of internal control over financial reporting, assessing
+the risk of material deficiencies in internal control, testing and evaluating the design and operating
+effectiveness of internal control based on this assessment, and performing such other procedures as
+we considered necessary in the circumstances.
+Information
+Additional
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+Auditor's Responsibility for the Internal Control over Financial Reporting in the
+Consolidated Financial Statements
+SAP Integrated Report 2021
+Evaluate the consistency of the Group Management Report with the consolidated financial
+statements, its conformity with German law, and the view of the Group's position it provides.
+Perform audit procedures on the prospective information presented by the Executive Board in the
+Group Management Report. On the basis of sufficient appropriate audit evidence we evaluate, in
+particular, the significant assumptions used by the Executive Board as a basis for the prospective
+information, and evaluate the proper derivation of the prospective information from these
+assumptions. We do not express a separate opinion on the prospective information and on the
+assumptions used as a basis. There is a substantial unavoidable risk that future events will differ
+materially from the prospective information.
+Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
+business activities within the Group to express opinions on the consolidated financial statements
+and on the Group Management Report. We are responsible for the direction, supervision and
+performance of the group audit. We remain solely responsible for our opinions.
+In connection with our audit, our responsibility is to read the other information and, in so doing, to
+consider whether the other information
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+is materially inconsistent with the consolidated financial statements, with the Group Management
+Report information audited for content or our knowledge obtained in the audit, or
+SAP
+Our opinions on the consolidated financial statements and on the Group Management Report do not
+cover the other information and consequently we do not express an opinion or any other form of
+assurance conclusion thereon.
+The other information does not include the consolidated financial statements, group management
+report information and our auditor's report thereon.
+The other information also includes the annual report on Form 20-F and remaining parts of the annual
+report.
+Information extraneous to the Group Management Report and marked as unaudited.
+the corporate governance statement, included in section “Corporate Governance Fundamentals" of
+the Group Management Report, and
+the combined non-financial statement, included in section "Non-Financial Statement Including
+Information on Sustainable Activities" of the Group Management Report,
+-
+The Executive Board and the Supervisory Board, respectively, of SAP SE is responsible for the other
+information. The other information comprises the following components of the Management Report,
+whose content was not audited:
+SAP Integrated Report 2021
+otherwise appears to be materially misstated.
+If, based on the work we have performed, we conclude that there is a material misstatement of this
+other information, we are required to report that fact. We have nothing to report in this regard.
+In addition, we were engaged to perform an independent assurance engagement on selected
+qualitative and quantitative sustainability disclosures of the integrated report 2021. In regard to the
+nature, extent and conclusions of this independent assurance engagement we refer to our
+Independence Assurance Report dated on February 23, 2022.
+Evaluate the overall presentation, structure and content of the consolidated financial statements,
+including the disclosures, and whether the consolidated financial statements present the
+underlying transactions and events in a manner that the consolidated financial statements give a
+true and fair view of the assets, liabilities, financial position and financial performance of the Group
+in compliance with IFRSS as adopted by the EU as well as with IFRSS as adopted by the
+International Accounting Standards Board and the additional requirements of German commercial
+law pursuant to Section 315e (1) HGB.
+Obtain an understanding of internal control relevant to the audit of the consolidated financial
+statements and of arrangements and measures (systems) relevant to the audit of the Group
+Management Report in order to design audit procedures that are appropriate in the circumstances.
+Evaluate the appropriateness of accounting policies used by the Executive Board and the
+reasonableness of accounting estimates made by the Executive Board and related disclosures.
+Conclude on the appropriateness of the Executive Board's use of the going concern basis of
+accounting and, based on the audit evidence obtained, whether a material uncertainty exists
+related to events or conditions that may cast significant doubt on the Group's ability to continue as
+a going concern. If we conclude that a material uncertainty exists, we are required to draw
+attention in the auditor's report to the related disclosures in the consolidated financial statements
+and in the Group Management Report or, if such disclosures are inadequate, to modify our
+respective opinions. Our conclusions are based on the audit evidence obtained up to the date of
+our auditor's report. However, future events or conditions may cause the Group to cease to be able
+to continue as a going concern.
+Identify and assess the risks of material misstatement of the consolidated financial statements and
+of the Group Management Report, whether due to fraud or error, design and perform audit
+procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to
+provide a basis for our opinions. The risk of not detecting a material misstatement resulting from
+fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional
+omissions, misrepresentations, or the override of internal control.
+Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
+accordance with Section 317 HGB and the EU Audit Regulation and in compliance with German
+Generally Accepted Standards for Financial Statement Audits promulgated by the Institut der
+Wirtschaftsprüfer (IDW) as well as in supplementary compliance with ISAs and guidelines of the
+Public Company Accounting Oversight Board (United States) will always detect a material
+misstatement. Misstatements can arise from fraud or error and are considered material if, individually
+or in the aggregate, they could reasonably be expected to influence the economic decisions of users
+taken on the basis of these consolidated financial statements and this Group Management Report.
+We exercise professional judgment and maintain professional scepticism throughout the audit. We
+also:
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+38/338
+37/338
+Our objectives are to obtain reasonable assurance about whether the consolidated financial
+statements as a whole are free from material misstatement, whether due to fraud or error, and
+whether the Group Management Report as a whole provides an appropriate view of the Group's
+position and, in all material respects, is consistent with the consolidated financial statements and the
+knowledge obtained in the audit, complies with the German legal requirements and appropriately
+presents the opportunities and risks of future development, as well as to issue an auditor's report that
+includes our opinions on the consolidated financial statements and on the Group Management
+Report.
+In preparing the consolidated financial statements, the Executive Board is responsible for assessing
+the Group's ability to continue as a going concern. The Executive Board also has the responsibility for
+disclosing, as applicable, matters related to going concern. In addition, the Executive Board is
+responsible for financial reporting based on the going concern basis of accounting unless there is an
+intention to liquidate the Group or to cease operations, or there is no realistic alternative but to do so.
+Furthermore, the Executive Board is responsible for the preparation of the Group Management Report
+that, as a whole, provides an appropriate view of the Group's position and is, in all material respects,
+consistent with the consolidated financial statements, complies with the German legal requirements
+and appropriately presents the opportunities and risks of future development. In addition, the
+Executive Board is responsible for such arrangements and measures (systems) as the Executive
+Board has considered necessary to enable the preparation of the Group Management Report that is
+in accordance with the applicable German legal requirements, the German Accounting Standards
+number 17 and 20 (GAS 17, GAS 20) and the IFRS Practice Statement Management Commentary
+and to be able to provide sufficient appropriate evidence for the assertions in the Group Management
+Report.
+The Executive Board of SAP SE is responsible for the preparation of the consolidated financial
+statements that comply, in all material respects, with IFRSS as adopted by the EU and the additional
+requirements of German commercial law pursuant to Section 315e (1) HGB as well as IFRSS as
+adopted by the International Accounting Standards Board and that the consolidated financial
+statements, in compliance with these requirements, give a true and fair view of the assets, liabilities,
+financial position, and financial performance of the Group. In addition, the Executive Board is
+responsible for such internal control as the Executive Board has determined necessary to enable the
+preparation of consolidated financial statements that are free from material misstatement, whether
+due to fraud or error.
+Responsibilities of the Executive Board and the Supervisory Board for the
+Consolidated Financial Statements and the Group Management Report
+The valuation method used for the valuation of unlisted equity securities is appropriate and in line
+with the accounting policies. The Company's underlying assumptions and data are appropriate. The
+related disclosures in the notes are appropriate.
+SAP Integrated Report 2021
+SAP Integrated Report 2021
+Pekka Ala-Pietilä stepped down from the Supervisory Board at the end of the Annual General Meeting
+of Shareholders on May 12, 2021. The Supervisory Board would like to sincerely thank him for his
+invaluable contribution for the benefit of the Company. On May 12, 2021, the Annual General Meeting
+of Shareholders elected Rouven Westphal to the Supervisory Board as a successor for Pekka Ala-
+Pietilä. Qi Lu, who was initially appointed by the court as member of the Supervisory Board on
+December 21, 2021, was likewise elected to the Supervisory Board by the Annual General Meeting of
+Shareholders. Christa Vergien-Knopf left the Supervisory Board as employee representative on
+August 10, 2021, and was succeeded by Peter Lengler effective the same day. The Supervisory Board
+also thanks Christa Vergien-Knopf for her work on the Supervisory Board. With effect from
+July 8, 2021, Panagiotis Bissiritsas resigned from his seat as employee representative on the
+Supervisory Board. He was succeeded by Manuela Asche-Holstein. Lastly, Ralf Zeiger was removed
+from the SAP SE Supervisory Board by order of the Mannheim Municipal Court dated
+32/338
+31/338
+(Chairperson)
+Professor Hasso Plattner
+For the Supervisory Board
+The ongoing COVID-19 pandemic continued to challenge us all in 2021. The Supervisory Board
+thanks the current members of the Executive Board and all SAP employees for their tireless
+commitment to SAP under these extraordinary circumstances.
+October 20, 2021, which came into effect on October 28, 2021. Helmut Stengele replaced Ralf Zeiger
+as employee representative on October 29, 2021.
+SAP
+After 13 years at SAP, most recently as Executive Board member responsible for Customer Success,
+Adaire Fox-Martin retired from the Executive Board on January 31, 2021. We thank Adaire Fox-Martin
+for her valuable contribution to the success of the Company over these many years. Her successor,
+Scott Russell, took over said Board area as a new member of the Executive Board effective
+February 1, 2021. In addition, Julia White joined the Executive Board on March 1, 2021, becoming
+SAP's chief marketing officer.
+Information
+Additional
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Combined Group
+Management Report
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+Changes on the Executive Board and Supervisory Board in 2021
+SAP
+SAP Integrated Report 2021
+Combined Group
+Luka Mucic
+Sabine Bendiek
+Christian Klein
+Executive Board of SAP SE
+Walldorf, Germany
+SAP SE
+To Our
+Jürgen Müller
+Walldorf, February 23, 2022
+Additional
+Information
+Responsibility Statement
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Thomas Saueressig
+Management Report
+Stakeholders
+To the best of our knowledge, and in accordance with the applicable reporting principles, the
+Consolidated Financial Statements give a true and fair view of the assets, finances, and operating
+results of the SAP Group, and the management report of the Group and SAP SE includes a fair review
+of the development and performance of the business and the position of the Group and SAP SE,
+together with a description of the principal opportunities and risks associated with the expected
+development of the Group and SAP SE.
+Scott Russell
+For the selected quantitative sustainability indicators Business Health Culture Index; Employee
+Engagement Index; Employee Retention Rate; Ratio of Women in Management; Total Gross and Net
+Greenhouse Gas Emissions (Scope 1, Scope 2 and selected Scope 3 emissions including, for
+instance, business flights and employee commuting); Renewable Energy Certificates (Energy Attribute
+Certificates); Total Energy Consumption; and Customer Net Promoter Score, including the explanatory
+notes supplementing these indicators (further "sustainability indicators"), a reasonable assurance
+engagement was performed.
+We have performed an independent assurance engagement on selected qualitative and quantitative
+sustainability disclosures as well as on selected quantitative sustainability indicators included in the
+Integrated Report 2021 (further “Report”) for the business year from January 1 to December 31, 2021
+of SAP SE, Walldorf (further "Company" or "SAP").
+For selected qualitative and quantitative sustainability disclosures included in the "Combined Group
+Management Report" (sections: General Information About This Management Report; Human Rights
+and Labor Standards; Social Investments), as well as included in "Further Information on Economic,
+Environmental, and Social Performance" (sections: Materiality; Stakeholder Engagement;
+Sustainability Management; Sustainable Procurement; Waste and Water; Public Policy; Non-Financial
+Notes: Social Performance, and Non-Financial Notes: Environmental Performance; GRI Content Index
+and UN Global Compact Communication on Progress) (further "sustainability disclosures") a limited
+assurance engagement was performed.
+The responsibility includes the selection and application of appropriate methods to prepare the
+Report and the use of assumptions and estimates for individual qualitative and quantitative
+sustainability disclosures, which are reasonable under the circumstances. Furthermore, this
+responsibility includes designing, implementing and maintaining systems and processes relevant for
+the preparation of the Report in a way that is free of - intended or unintended – material
+misstatements.
+Management's Responsibility
+The legal representatives of SAP are responsible for the preparation of the Report in accordance with
+the Reporting Criteria. SAP's Report applies the principles and standard disclosures of the Global
+Reporting Initiative (GRI) Sustainability Reporting Standards, the Corporate Accounting and Reporting
+Standard, the Greenhouse Gas Protocol Scope 2 Guidance, and the Corporate Value Chain (Scope 3)
+Accounting and Reporting Standard of the Greenhouse Gas Protocol Initiative by the World Resources
+Institute and the World Business Council for Sustainable Development, in combination with internal
+guidelines, as described in the "Non-Financial Notes: Social Performance" and the "Non-Financial
+Notes: Environmental Performance" as Reporting Criteria (further: “Reporting Criteria”).
+To the Executive Board of SAP SE, Walldorf
+Selected sustainability disclosures included in the scope of our assurance engagement are marked in
+the GRI Content Index with the following symbol: „✔“.
+Assurance Report of the
+Independent Auditor
+regarding Sustainability
+Information
+Wiegand
+Wirtschaftsprüfer
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined Group
+To Our
+SAP Integrated Report 2021
+SAP
+SAP
+46/338
+Additional
+Information
+SAP Integrated Report 2021
+Evaluation of the process for determining material aspects and respective boundaries, including
+results of SAP's stakeholder engagement.
+Combined Group
+- Interviewing management at corporate level responsible for sustainability performance goal setting
+and monitoring process.
+Risk analysis, including a media search, to identify relevant sustainability aspects for SAP in the
+reporting period.
+[German Public Auditor]
+-
+Within the scope of our engagement, we performed amongst others the following procedures when
+conducting the limited assurance:
+This standard requires that we plan and perform the assurance engagement to obtain limited
+assurance whether any matters have come to our attention that cause us to believe that the above-
+mentioned sustainability disclosures of the entity for the business year January 1 to December 31,
+2021 have not been prepared, in all material respects, in accordance with the Reporting Criteria. We
+do not, however, issue a separate conclusion for each disclosure. As the assurance procedures
+performed in a limited assurance engagement are less comprehensive than in a reasonable
+assurance engagement, the level of assurance obtained is substantially lower. The choice of
+assurance procedures is subject to the auditor's own judgement.
+Accordingly, we have to comply with our professional duties and to plan and perform the assurance
+engagement in such a way that we, respecting the principle of materiality, reach our conclusion with a
+reasonable level of assurance on the above-mentioned sustainability indicators. The assurance of the
+sustainability indicators encompasses the performance of assurance procedures to obtain evidence
+for the information included in the Report. The choice of assurance procedures is subject to the
+auditor's own judgement.
+We conducted our work in accordance with the International Standard on Assurance Engagements
+(ISAE) 3000 (Revised): "Assurance Engagements other than Audits or Reviews of Historical Financial
+Information", published by IAASB.
+Our responsibility is to express a conclusion based on our work performed within the assurance
+engagement on the sustainability indicators and the sustainability disclosures described above.
+Practitioner's Responsibility
+In performing this engagement, we applied the legal provisions and professional pronouncements
+regarding independence and quality assurance, in particular the Professional Code for German Public
+Auditors and Chartered Accountants (in Germany) and the quality assurance standard of the German
+Institute of Public Auditors (Institut der Wirtschaftsprüfer, IDW) regarding quality assurance
+requirements in audit practice (IDW QS 1).
+Firm
+Independence and Quality Assurance on the Part of the Auditing
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+To Our
+Wirtschaftsprüfer
+Firm
+Wirtschaftsprüfungsgesellschaft
+Evaluation of the process for the identification of taxonomy-eligible economic activities and the
+corresponding disclosures in the combined non-financial statement by
+Assessment of the overall presentation of the disclosures.
+Evaluation of local data collection, validation and reporting processes as well as the reliability of
+reported data based on a sample of three sites.
+Analytical procedures for the evaluation of data and of the trends of quantitative information as
+reported at group level by all sites.
+Inspecting selected internal and external documents.
+Inquiries of group level personnel, who are responsible for the disclosures on concepts, due
+diligence processes, results and risks, the performance of internal control activities and the
+consolidation of the disclosures.
+- Assessing the design and implementation of systems and processes for identifying, handling and
+monitoring information on environmental, employee and social matters, respect for human rights
+and combatting corruption and bribery, including the consolidation of data.
+Carry out a risk assessment, including media analysis, to identify relevant information on SAP's
+sustainability performance in the reporting period.
+-
+▪ Inquiries of responsible employees at Group level to obtain an understanding of the approach to
+identify relevant economic activities in accordance with EU taxonomy.
+Within the scope of our engagement we performed, amongst others, the following procedures:
+Interviewing employees responsible for the materiality analysis at group level in order to obtain an
+understanding on the approach for identifying key issues and related reporting limits of SAP.
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+conjunction with 289b to 289e HGB and with the EU Taxonomy Regulation and the supplementing
+Delegated Acts as well as the interpretation of the wordings and terms contained in the EU Taxonomy
+Regulation and in the supplementing Delegated Acts by the legal representatives as disclosed in
+Section "Sustainable Finance: EU Taxonomy Disclosures" of the combined non-financial statement.
+We do not, however, issue a separate conclusion for each disclosure. As the assurance procedures
+performed in a limited assurance engagement are less comprehensive than in a reasonable
+assurance engagement, the level of assurance obtained is substantially lower. The choice of
+assurance procedures is subject to the auditor's own judgement.
+Beyer
+Assessing the design and implementation of systems and procedures for identifying, processing
+and monitoring information of revenue, capital expenditures and operating expenditures for the
+taxonomy-relevant economic activities.
+The legal representatives have to interpret vague legal concepts in order to be able to compile the
+relevant disclosures according to Article 8 of the EU Taxonomy Regulation. Due to the innate risk of
+diverging interpretations of vague legal concepts, the legal conformity of these interpretations and,
+correspondingly, our assurance thereof are subject to uncertainty.
+KPMG AG
+Mannheim, February 23, 2022
+(https://www.kpmg.de/bescheinigungen/lib/aab_english.pdf). By reading and using the information
+contained in this assurance report, each recipient confirms notice of the provisions contained therein
+including the limitation of our liability as stipulated in No. 9 and accepts the validity of the General
+Engagement Terms with respect to us.
+Our assignment for the Supervisory Board of SAP SE, Walldorf, and professional liability as described
+above was governed by the General Engagement Terms for Wirtschaftsprüfer and
+Wirtschaftsprüfungsgesellschaften (Allgemeine Auftragsbedingungen für Wirtschaftsprüfer und
+Wirtschaftsprüfungsgesellschaften) in the version dated January 1, 2017
+This assurance report is issued for purposes of the Supervisory Board of SAP SE, Walldorf only. We
+assume no responsibility with regard to any third parties.
+Restriction of Use/General Engagement Terms
+Based on the procedures performed and the evidence obtained, nothing has come to our attention
+that causes us to believe that the combined non-financial statement of SAP SE for the period from
+January 1 to December 31, 2021 has not been prepared, in all material respects, in accordance with
+§§ 315b and 315c in conjunction with 289b to 289e HGB and with the EU Taxonomy Regulation and
+the supplementing Delegated Acts as well as the interpretation disclosed in Section "Sustainable
+Finance: EU Taxonomy Disclosures" of the combined separate non-financial statement.
+Conclusion
+Additional
+Information
+Assessment of the overall presentation of the information.
+Further Information on
+Sustainability
+Combined Group
+Management Report
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+In performing this engagement, we applied the legal provisions and professional pronouncements
+regarding independence and quality assurance, in particular the Professional Code for German Public
+Auditors and Chartered Accountants (in Germany) and the quality assurance standard of the German
+Institute of Public Auditors (Institut der Wirtschaftsprüfer, IDW) regarding quality assurance
+requirements in audit practice (IDW QS 1).
+Reviewing the suitability of the internally developed reporting criteria.
+Independence and Quality Assurance on the Part of the Auditing
+In our opinion, we obtained sufficient and appropriate evidence for reaching a conclusion for the
+assurance engagement.
+Consolidated Financial
+Statements IFRS
+Evaluation of the design and implementation of the systems and processes for the collection,
+processing and control of the data on sustainability performance indicators, including the
+consolidation of the data.
+Restriction of Use/Clause on General Engagement Terms
+In addition, we conducted the following procedures to obtain reasonable assurance:
+126
+123
+116
+Expected Developments and Opportunities
+Risk Management and Risks
+Human Rights and Labor Standards
+Business Conduct
+Corporate Governance Fundamentals
+Energy and Emissions
+108
+Employees and Social Investments
+107
+Customers
+103
+Security, Data Protection, and Privacy
+99
+Non-Financial Statement Including Information on Sustainable Activities
+74
+Financial Performance: Review and Analysis
+129
+131
+155
+49/338
+44/338
+This management report contains forward-looking statements and information based on the beliefs of,
+and assumptions made by, SAP management using information currently available to them. Any
+statements contained in this report that are not historical facts are forward-looking statements as
+defined in the U.S. Private Securities Litigation Reform Act of 1995. We have based these forward-
+looking statements on our current expectations, assumptions, and projections about future conditions
+and events. As a result, our forward-looking statements and information are subject to uncertainties
+and risks, many of which are beyond our control. If one or more of these uncertainties or risks
+materializes, or if management's underlying assumptions prove incorrect, our actual results could
+differ materially from those described in or inferred from our forward-looking statements and
+information. We describe these risks and uncertainties in the Risk Management and Risks section.
+The words "aim,” “anticipate,” “assume,” “believe,” “continue,” “could,” “counting on," "is confident,”
+"development," "estimate,” “expect,” “forecast,” “future trends," "guidance,” “intend,” “may,” “might,"
+"outlook,” “plan,” “predict,” “project,” “seek,” “should,” “strategy,” “want,” “will,” “would,” and similar
+expressions as they relate to us are intended to identify such forward-looking statements. Such
+statements include, for example, those made in the Operating Results section, our quantitative and
+qualitative disclosures about market risk pursuant to the International Financial Reporting Standards
+(IFRS), namely IFRS 7 and related statements in our Notes to the Consolidated Financial Statements;
+Forward-Looking Statements
+All of the information in this report relates to the situation as at December 31, 2021, or the fiscal year
+ended on that date, unless otherwise stated. As figures are rounded, numbers presented throughout
+this document may not add up precisely to the totals we provide and percentages may not precisely
+reflect the absolute figures.
+For more information about the scope of the assurance and the underlying reporting criteria, see
+KPMG's Independent Auditor's Report, the Limited Assurance Report of the Independent Auditor
+Regarding the Combined Non-Financial Statement, and the Assurance Report of the Independent
+Auditor Regarding Sustainability Information.
+Our auditor, KPMG AG Wirtschaftsprüfungsgesellschaft (KPMG), audited SAP's combined group
+management report, except for some information that relates to the Non-Financial Statement
+Including Information on Sustainable Activities that was not subject to the statutory audit of our
+combined group management report, but on which a limited assurance engagement was performed.
+The Security, Data Protection, and Privacy; Employees and Social Investments; Energy and Emissions;
+Business Conduct; and Human Rights and Labor Standards sections include such information that
+was not subject to the statutory audit of our combined group management report, but on which a
+limited assurance engagement was performed. These sections contain further explanations about the
+audit scope in an info box at the end of the respective section marked by the symbol .
+This combined group management report by the SAP Group (collectively, “we,” “us,” “our," "SAP,"
+"Group," or "Company") and the management report of SAP SE have been prepared in accordance
+with sections 289, 289a, 289b, 289f, 315, 315a, 315b, and 315d of the German Commercial Code and
+German Accounting Standards (GAS) No. 17 and 20. The combined group management report is also
+a management commentary complying with the International Financial Reporting Standards (IFRS)
+Practice Statement "Management Commentary."
+Basis of Presentation
+General Information About
+This Management Report
+28
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+50/338
+Additional
+Interviews with relevant staff at corporate level responsible for providing the data, carrying out
+internal control procedures and consolidating the data, including the “Non-Financial Notes".
+Evaluating internal and external documentation to determine whether selected qualitative claims
+and quantitative indicators on sustainability performance are supported by sufficient evidence.
+Reviewing the consistency of GRI Standards in accordance with “Core Option” as declared by SAP
+with sustainability performance information presented in the Integrated Report.
+52
+Products, Research & Development, and Services
+Our assignment for the Executive Board of SAP SE, Walldorf, and professional liability as described
+above was governed by the General Engagement Terms for Wirtschaftsprüfer and
+Wirtschaftsprüfungsgesellschaften (Allgemeine Auftragsbedingungen für Wirtschaftsprüfer und
+Wirtschaftsprüfungsgesellschaften) in the version dated January 1, 2017
+This assurance report is issued for purposes of the Executive Board of SAP SE, Walldorf, only. We
+assume no responsibility with regard to any third parties.
+Based on the procedures performed and the evidence obtained for the limited assurance, nothing has
+come to our attention that causes us to believe that the above-mentioned sustainability disclosures of
+SAP SE for the business year from January 1 to December 31, 2021, published in the Report, are not
+prepared, in all material respects, in accordance with the Reporting Criteria.
+In our opinion the above-mentioned sustainability indicators in the Report, including the Non-Financial
+Notes supplementing these indicators, of SAP SE for the business year from January 1 to December
+31, 2021 are presented, in all material respects, in accordance with the Reporting Criteria.
+Conclusions
+In our opinion, we obtained sufficient and appropriate evidence for reaching a conclusion for the
+assurance engagement.
+- Conducting (remote) site visits to Walldorf, St. Leon Rot (both Germany), Newtown Square (USA)
+und Vancouver (Canada) to assess the quality of information, management systems and the
+reliability of the data as reported to corporate level.
+Auditing the 2021 data using internal and external documentation in order to determine in detail
+whether the data correspond to the information in the relevant underlying sources, and whether all
+the relevant information contained in such underlying sources has been included in SAP's
+Integrated Report.
+An evaluation of the design, existence, and testing of the operation of the systems and methods
+used to collect and process data reported for Business Health Culture Index; Employee
+Engagement Index; Employee Retention Rate; Ratio of Women in Management; Total Gross and
+Net Greenhouse Gas Emissions (Scope 1, Scope 2 and selected Scope 3 emissions including, for
+instance, business flights and employee commuting); Renewable Energy Certificates (Energy
+Attribute Certificates); Total Energy Consumption; and Customer Net Promoter Score, including the
+aggregation of the data into the information as presented in the Integrated Report.
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+48/338
+47/338
+(https://www.kpmg.de/bescheinigungen/lib/aab_english.pdf). By reading and using the information
+contained in this assurance report, each recipient confirms notice of the provisions contained therein
+(including the limitation of our liability as stipulated in No. 9) and accepts the validity of the General
+Engagement Terms with respect to us.
+Mannheim, February 23, 2022
+KPMG AG
+Wirtschaftsprüfungsgesellschaft
+59
+Performance Management System
+50
+Strategy
+General Information About This Management Report
+Combined Group
+Management Report
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+68
+Management Report
+Combined Group
+To Our
+SAP Integrated Report 2021
+SAP
+[German Public Auditor]
+Wiegand
+Wirtschaftsprüfer
+[German Public Auditor]
+Wirtschaftsprüfer
+Beyer
+Stakeholders
+45/338
+[German Public Auditor]
+We conducted our work in the form of a limited assurance engagement in accordance with the
+International Standard on Assurance Engagements (ISAE) 3000 (Revised): "Assurance Engagements
+other than Audits or Reviews of Historical Financial Information", published by IAASB.
+Accordingly, we have to plan and perform the assurance engagement in such a way that we obtain
+limited assurance as to whether any matters have come to our attention that cause us to believe that
+the combined non-financial statement of the Company for the period from January 1 to December 31,
+2021 has not been prepared, in all material respects, in accordance with §§ 315b and 315c in
+The German Public Auditor responsible for the engagement is Bodo Rackwitz.
+Mannheim, February 23, 2022
+KPMG AG
+Wirtschaftsprüfungsgesellschaft
+[signature] Rackwitz
+Wirtschaftsprüfer
+[German Public Auditor]
+[signature] Conrad
+Wirtschaftsprüfer
+[German Public Auditor]
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+German Public Auditor Responsible for the Engagement
+Management Report
+Further Information on
+Sustainability
+Additional
+Information
+Limited Assurance Report of
+the Independent Auditor
+regarding the combined non-
+financial statement
+To the Supervisory Board of SAP SE, Walldorf
+We have performed an independent limited assurance engagement on the non-financial statement of
+SAP SE (further "Company" or "SAP") and on the non-financial statement of the parent company that
+is combined with it, which are published in the Management Report, (further "combined non-financial
+statement") for the period from January 1 to December 31, 2021.
+Management's Responsibility
+The legal representatives of the Company are responsible for the preparation of the combined non-
+financial statement in accordance with §§ 315b, 315c in conjunction with 289b to 289e HGB and with
+Article 8 of REGULATION (EU) 2020/852 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL
+of June 18, 2020 on the establishment of a framework to facilitate sustainable investment, and
+amending Regulation (EU) 2019/2088 (further „EU Taxonomy Regulation “) and the supplementing
+Delegated Acts as well as the interpretation of the wordings and terms contained in the EU Taxonomy
+Regulation and in the supplementing Delegated Acts by the Company as disclosed in Section
+"Sustainable Finance: EU Taxonomy Disclosures” of the combined non-financial statement.
+This responsibility of the legal representatives includes the selection and application of appropriate
+methods to prepare the combined non-financial statement and the use of assumptions and estimates
+for individual disclosures which are reasonable under the given circumstances. Furthermore, the legal
+representatives are responsible for the internal controls they deem necessary for the preparation of
+the combined non-financial statement that is free of - intended or unintended - material
+misstatements.
+The EU Taxonomy Regulation and the supplementing Delegated Acts contain wordings and terms that
+are still subject to substantial uncertainties regarding their interpretation and for which not all
+clarifications have been published yet. Therefore, the legal representatives have included a
+description of their interpretation in Section “Sustainable Finance: EU Taxonomy Disclosures" of the
+combined non-financial statement. They are responsible for its tenability. Due to the innate risk of
+diverging interpretations of vague legal concepts, the legal conformity of these interpretations is
+subject to uncertainty.
+Practitioner's Responsibility
+It is our responsibility to express a conclusion on the combined non-financial statement based on our
+work performed within a limited assurance engagement.
+43/338
+Consolidated Financial
+Statements IFRS
+Additional
+Information
+Combined Group
+Consolidated Financial
+Statements IFRS
+SAP
+Further Information on
+Sustainability
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+intentional or unintentional non-compliance with the requirements of Section 328 (1) HGB for the
+electronic reporting format.
+The Supervisory Board is responsible for overseeing the process of preparing the ESEF documents as
+part of the financial reporting process.
+Our objective is to obtain reasonable assurance about whether the ESEF documents are free from
+material intentional or unintentional non-compliance with the requirements of Section 328 (1) HGB.
+We exercise professional judgement and maintain professional scepticism throughout the assurance
+work. We also:
+Identify and assess the risks of material intentional or unintentional non-compliance with the
+requirements of Section 328 (1) HGB, design and perform assurance procedures responsive to
+those risks, and obtain assurance evidence that is sufficient and appropriate to provide a basis for
+our assurance opinion.
+Obtain an understanding of internal control relevant to the assurance on the ESEF documents in
+order to design assurance procedures that are appropriate in the circumstances, but not for the
+purpose of expressing an assurance opinion on the effectiveness of these controls.
+Evaluate the technical validity of the ESEF documents, i.e. whether the file made available
+containing the ESEF documents meets the requirements of the Delegated Regulation (EU)
+2019/815, as amended as at the reporting date, on the technical specification for this electronic file.
+Evaluate whether the ESEF documents provide an XHTML rendering with content equivalent to the
+audited consolidated financial statements and the audited group management report.
+Evaluate whether the tagging of the ESEF documents with Inline XBRL technology (iXBRL) in
+accordance with the requirements of Articles 4 and 6 of the Delegated Regulation (EU) 2019/815,
+as amended as at the reporting date, enables an appropriate and complete machine-readable
+XBRL copy of the XHTML rendering.
+Information
+Combined Group
+Management Report
+Further Information pursuant to Article 10 of the EU Audit Regulation
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+41/338
+42/338
+Other matter - Use of the Auditor's Report
+In addition to the financial statement audit, we have provided to group entities the following services
+that are not disclosed in the consolidated financial statements or in the Group Management Report:
+We audited the financial statements of SAP SE and performed various financial statement audits at
+subsidiaries. Furthermore, other assurance services required by law or on a contractual basis were
+performed, including an assurance engagement on selected qualitative and quantitative sustainability
+disclosures of the Integrated Report 2021 and an EMIR assurance service pursuant to section 20 of
+German Securities Trading Act [WpHG] and service organization attestation procedures.
+We declare that the opinions expressed in this auditor's report are consistent with the additional report
+to the audit committee pursuant to Article 11 of the EU Audit Regulation (long-form audit report).
+We were elected as group auditor at the annual general meeting on May 12, 2021. We were engaged
+by the Chairman of the Audit and Compliance Committee of the Supervisory Board of SAP SE on May
+20, 2021, and this engagement was confirmed on October 6, 2021. We have been the group auditor
+of SAP SE without interruption since the financial year 2002.
+Our auditor's report must always be read together with the audited consolidated financial statements
+and the audited group management report as well as the examined ESEF documents. The
+consolidated financial statements and group management report converted to the ESEF format –
+including the versions to be published in the German Federal Gazette [Bundesanzeiger] – are merely
+electronic renderings of the audited consolidated financial statements and the audited group
+management report and do not take their place. In particular, the ESEF report and our assurance
+opinion contained therein are to be used solely together with the examined ESEF documents made
+available in electronic form.
+More than €22 billion
+Employee
+Engagement
+Customer Loyalty
+Profitability
+2025 Ambition
+Note: A reconciliation of non-IFRS results to IFRS equivalent is available in the Performance Management System section.
+Growth
+KPI
+Strategic Objective
+Ambitions for 2025
+Total revenue
+Cloud revenue
+Operating profit¹
+57/338
+Customer Net Promoter Score
+Employee Engagement Index
+Carbon Impact
+Net carbon emissions
+More than €36 billion
+More than €11.5 billion
+Approximately €8 billion
+Steady increase
+84% to 86%
+O kt (from 2023 onward; net
+zero along our value chain
+by 2030)
+¹Non-IFRS
+2 at constant currencies
+Our Vision
+1 Non-IFRS
+Information
+84% to 86%
+58/338
+2022 Outlook
+Cloud revenue
+€9.42 billion
+€11.55 billion to €11.85
+billion²
+Growth
+Cloud and software revenue
+€24.08 billion
+€25.0 billion to €25.5 billion²
+Profitability
+Operating profit
+€8.23 billion¹
+€7.8 billion to €8.25 billion 1,2
+Free cash flow
+€5.05 billion
+More than €4.5 billion
+Customer Loyalty
+Customer Net Promoter Score
+10
+11 to 15
+Employee
+Engagement
+Employee Engagement Index
+83%
+Carbon Impact
+Net carbon emissions
+110 kt
+70 kt
+SAP
+We use the cloud revenue measure at both actual currencies and constant currencies.
+To Our
+Stakeholders
+success.
+Current cloud backlog (CCB): We use CCB both in actual and at constant currencies, to manage
+our operating financial performance. The CCB measures our overall go-to-market success in
+committed cloud business. The CCB is the contractually committed cloud revenue we expect to
+recognize over the upcoming 12 months as of a specific key date. Thus, it is a subcomponent of our
+overall remaining performance obligations following IFRS 15.120. For our committed cloud business,
+we believe the CCB is a valuable indicator of our go-to-market success, as it reflects both new
+contracts closed as well as existing contracts renewed.
+Operating profit (non-IFRS): We use operating profit (non-IFRS) expressed in both actual currencies
+and constant currencies to measure our overall operational process efficiency and overall business
+performance.
+59/338
+60/338
+SAP Integrated Report 2021
+SAP
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Total revenue: We use total revenue to measure our growth at both actual currencies and constant
+currencies. The total of cloud revenue and support revenue divided by total revenue is the share of
+more predictable revenue. This measure provides additional insight into our sustained business
+Information
+Operating margin (non-IFRS): We use operating margin to measure our overall operational
+efficiency. Operating margin (non-IFRS) is the ratio of our operating profit (non-IFRS) to total revenue
+(non-IFRS), expressed as a percentage.
+Measures to Manage Our Non-Operating Financial Performance
+We use the following measures to manage our non-operating financial performance:
+Financial income, net: This measure provides insight into the return on liquid assets and capital
+investments and the cost of borrowed funds. To manage our financial income, net, we focus on cash
+flow, the composition of our liquid assets and capital investment portfolio, and the average rate of
+interest at which assets are invested. We also monitor average outstanding borrowings and associated
+finance costs.
+Measures to Manage Overall Financial Performance
+We use the following measures to manage our overall financial performance:
+Earnings per share (EPS) (IFRS and non-IFRS): EPS (basic and diluted) measures our overall
+performance because it captures all operating and non-operating elements of profit as well as income
+tax expense. It represents the portion of profit after tax attributable to equity holders of SAP SE
+allocable to each SAP share outstanding. EPS is influenced not only by our operating and non-
+operating business and income taxes but also by the number of shares outstanding.
+Effective tax rate (IFRS and non-IFRS): We define our effective tax rate as the ratio of income tax
+expense to profit before tax, expressed as a percentage.
+Operating, investing, and financing cash flows and free cash flow: Our consolidated statement
+of cash flows provides insight into how we generate and use cash and cash equivalents. When
+applied in conjunction with the other primary financial statements, it provides information that helps
+us evaluate the changes in our net assets, our financial structure (including our liquidity and solvency),
+and our ability to affect the amounts and timing of cash flows to adapt to changing circumstances and
+opportunities. We use our free cash flow measure to determine the cash flow remaining after all
+expenditures required to maintain or expand our organic business have been paid off. This measure
+provides management with supplemental information to assess our liquidity needs. We calculate free
+cash flow as net cash from operating activities minus purchases (other than purchases made in
+connection with business combinations) of intangible assets and property, plant, and equipment, as
+well as payments for lease liabilities.
+Measures to Manage Our Non-Financial Performance
+In 2021, we used the following key measures to manage our non-financial performance in the areas of
+customer loyalty, employee engagement, leadership trust, and carbon emissions:
+Customer Net Promoter Score (Customer NPS): In 2021, we continued to harmonize the
+Customer Loyalty Survey program where Customer NPS is measured. Specifically, to enable better
+standardization and comparability, we now ask about SAP across all entities and product lines. The
+annual assessment of customer loyalty is based on a survey that includes the Net Promoter Score
+(NPS) metric. The Customer NPS score is calculated based on the NPS Likelihood to Recommend
+question with its proprietary scoring, identified on a scale of 0–10. We introduced this measure in
+2012 as we are convinced that we can achieve our financial goals only when our customers are loyal
+to, and satisfied with, SAP and our solutions. To derive the Customer NPS, we start with the
+percentage of "promoters" of SAP, that is, those giving us a score of 9 or 10 on a scale of 0-10. We
+then subtract the percentage of “detractors,” that is, those giving us a score of 0-6. The method
+ignores "passives," that is, those giving us a score of 7 or 8. Consequently, the range of achievable
+Cloud gross margin (non-IFRS): We use our cloud gross margin (non-IFRS) to measure our process
+efficiency in our cloud business. Cloud gross margin (non-IFRS) is the ratio of our cloud gross profit
+(non-IFRS) to cloud revenue (non-IFRS), expressed as a percentage.
+SAP Integrated Report 2021
+Cloud and software revenue: We use cloud and software revenue expressed in both actual
+currencies and constant currencies to measure our revenue growth. Our cloud and software revenue
+includes cloud revenue plus software licenses and support revenue. Cloud revenue and software
+revenue are our key revenue drivers because they tend to affect our other revenue streams. Generally,
+customers that buy software licenses also enter into related support contracts, and these generate
+recurring support revenue after the software sale. Support contracts cover standardized support
+services and unspecified future software updates and enhancements. Cloud and software revenue
+also tends to stimulate services revenue, which is earned by providing customers with professional
+services, premium engagement services, training services, and payment services.
+see the Notes to the Consolidated Financial Statements, Note (A.1).
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+Note: A reconciliation of non-IFRS results to IFRS equivalents is available in the Performance Management System section.
+SAP
+SAP Integrated Report 2021
+To Our
+Combined Group
+Stakeholders
+Management Report
+Consolidated Financial
+Statements IFRS
+2021 Results
+Further Information on
+Sustainability
+Performance Management
+System
+We use various performance measures to manage our performance with regard to our primary
+financial objectives, which are growth and profitability, and our primary non-financial objectives, which
+are customer loyalty, employee engagement, and carbon impact. We view growth and profitability as
+indicators of our current performance, while we see customer loyalty, employee engagement, and
+carbon impact as indicators of our future performance.
+Measures to Manage Our Financial Performance
+Measures to Manage Our Operating Financial Performance
+In 2021, we used the following key measures to manage our operating financial performance:
+Cloud revenue: This revenue driver comprises the main revenues of our fast-growing cloud business.
+Revenue from cloud is derived from fees earned from providing customers with any of the following:
+-
+Software as a service (SaaS)
+Platform as a service (PaaS)
+Infrastructure as a service (laaS)
+Premium cloud support beyond regular support embedded in cloud offerings
+For more information regarding the composition of cloud revenue and a description of these services,
+Additional
+Information
+ΚΡΙ
+Free cash flow
+Outlook for 2022
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+54/338
+53/338
+10 An "intelligent enterprise" is an event-driven, real-time business powered by technology that includes machine learning, robotic process
+automation, Internet of Things, and analytics capabilities to help scale innovation.
+Consolidated Financial
+Statements IFRS
+Our intelligent spend management applications aim to provide a more unified view of a customer's
+spending to reduce costs, mitigate risks, improve collaboration, and make sure every spend decision
+is aligned with the business strategy.
+SAP S/4HANA Cloud provides modular cloud ERP in the areas of finance, supply chain, and
+sustainability among others - and can enable customers to adjust and adopt business process and
+business models.
+The most prominent building blocks of our product portfolio are:
+While each of our line-of-business (LoB) solutions must be competitive in its own right, we believe the
+true value comes through the strength of our collective offerings, with SAP S/4HANA Cloud at the
+core. SAP has the technologies, products, footprint, and experience to combine four essential end-to-
+end business processes to create not just one intelligent enterprise, but a global ecosystem of
+intelligent enterprises. Those processes - Recruit to Retire, Source to Pay, Design to Operate, and
+Lead to Cash are supported by our products.
+Our Product Strategy
+The traditional focus of businesses on productivity and profitability is expanding to include a new
+measurement for business success - how operations impact the environment, or the "green line." With
+the overview and transparency of business processes and ability to connect value chains end to end
+provided by SAP software, we help companies to measure and improve sustainability across entire
+networks, allowing them to effectively "chase zero" - zero emissions, zero waste, and zero inequality.
+Our REINVENT strategy is firmly rooted in our goal to be an innovative and trusted partner for our
+ecosystem, supporting them on their journey to reinvent how their businesses run. To achieve our
+overarching objectives of creating resilient, profitable, and sustainable business outcomes for our
+customers, we have honed our strategic priorities mentioned above, in which our product strategy
+plays a central role.
+Enabling a Sustainable World
+We believe that businesses are playing an even greater role in their communities - forming a network
+that expands far beyond the walls of any one company. We deliver innovation and intelligent
+technologies across procurement, logistics, asset management, and industry-specific offerings to
+enable a global business network spanning entire industries and value chains. As companies face
+supply chain disruptions, this becomes even more important, as our software aims to enable
+stakeholders in the network to react to disruption in real time.
+Creating a Network of Intelligent, Sustainable Enterprises
+SAP SuccessFactors Human Experience Management (HXM) Suite provides cloud-based
+solutions, such as a human resources management system (HRMS) for core HR and payroll, talent
+management, employee experience management, and people analytics, by aiming to create
+differentiated employee experiences across the employee lifecycle.
+Intelligent enterprises use data with embedded artificial intelligence (AI) and experience management
+to remove friction across business processes and drive innovation, enabling people to work more
+flexibly.
+Further Information on
+Sustainability
+Information
+Combined Group
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+For more information, see the Employees and Social Investments section.
+We are working to ensure our people have the skills and resources they need to deliver on our
+strategy and overall ambitions. SAP's global workforce of over 100,000 employees is key to the
+successful execution of our strategy.
+Our People
+Additional
+Customer Centricity: Achieving our growth ambitions requires us to put an unwavering focus on our
+customers. Therefore, we aim to provide the maximum Customer Lifetime Value, that is, the
+cumulative value that SAP provides to customers over the course of our relationship. To do so, SAP
+aims to deliver differentiated value across the customer relationship, from the first interaction to
+deployment and beyond.
+Compelling Value Propositions and Customer Centricity
+For more information about the products and solutions offered as part of our strategy framework, see
+the Products, Research & Development, and Services section.
+Our sustainability management solutions empower customers to integrate sustainability into their
+business processes. ― from ethical sourcing and inclusive hiring to visibility into and management of a
+company's overall ecological footprint. The solutions aim to help our customers minimize carbon
+emissions, reduce waste through responsible supply chain management, and enable diversity across
+all business practices.
+Our business process intelligence (BPI) application portfolio, which has been significantly
+expanded with the integration of Signavio solutions, helps our customers enable their business
+transformations. We support analysis of current processes, benchmarking against best practices, and
+reconfiguring current processes towards future processes.
+SAP Business Network is a network of enterprises. The interactive community helps enable
+companies to extend their ecosystem, react to supply chain disruptions, discover new trading
+partners, and find new opportunities, all through a unified, role-based experience.
+SAP's Industry Cloud provides the opportunity for SAP and our partners to extend our core with
+modular solutions addressing industry-specific functions, built on SAP BTP.
+SAP Business Technology Platform (SAP BTP) is a business-centric and open platform that
+enables customers and partners to extend and customize SAP applications in a cloud-native way. It
+allows shared data and insights, Al-powered experiences, as well as partner solutions and customer-
+led customizations. Specifically, it provides capabilities in four key areas: database and data
+management; analytics and planning; application development and integration; and intelligent
+technologies such as Al, all bundled into one platform offering.
+Our SAP Customer Experience solutions deliver a personalized view across customers and
+business partners, connecting the front- and back office with solutions spanning from the point of
+sale, to manufacturing, to logistics, customer experience, and returns management.
+Business Transformation: To achieve our strategy and deliver the best value to our stakeholders, we
+must execute against our goals with strong alignment across the company. To that end, we have
+established a Corporate Transformation Office to drive the end-to-end execution of our REINVENT
+strategy. This office unites experts with strong program management skills, deep content knowledge
+around major areas of SAP's transformation, as well as change and communications management.
+Value Proposition: As we implement our strategy, we have introduced new initiatives and offerings
+including, for example, RISE with SAP. Launched in early 2021, RISE with SAP is our business
+transformation-as-a-service offering. We have also redesigned our ecosystem engagement model to
+create an attractive proposition for our partners in the cloud. A dedicated operating model
+demonstrates the integrated value of our solution areas across development, marketing and solution
+management, and go-to-market functions.
+Helping Our Customers Become Intelligent and Sustainable Enterprises
+SAP Integrated Report 2021
+Strategic Objective
+Our ordinary shares are listed on the Frankfurt Stock Exchange. American Depositary Receipts (ADRs)
+representing SAP SE ordinary shares are listed on the New York Stock Exchange (NYSE). SAP is a
+member of Germany's DAX and TecDAX as well as the Dow Jones EURO STOXX 50, the Dow Jones
+Sustainability Index World, and the Dow Jones Sustainability Index Europe. As at December 31, 2021,
+SAP was the second most valuable company in the DAX based on market capitalization. SAP was
+ranked as the most sustainable software company in the Dow Jones Sustainability Indices for the
+fifteenth consecutive year.
+Our Purpose
+Our purpose at SAP is to "help the world run better and improve people's lives." We strive to achieve
+this as both an enabler and an exemplar of sustainable business. Our products and services aim to
+help our customers both meet the challenges and take advantage of the opportunities presented by
+today's rapidly changing world.
+In addition, we want our own business operations and practices to be intelligent, sustainable, and
+inclusive. SAP is committed to the goal set by the Paris Agreement of limiting global warming to
+1.5 degrees Celsius in comparison to pre-industrial levels. In March 2021, SAP announced the
+intention to become carbon neutral in our own operations by the end of 2023 – two years earlier than
+previously stated. Further, in January 2022, SAP announced its commitment to achieve net-zero along
+their value chain in 2030; 20 years earlier than originally targeted. SAP also supports the United
+Nations Sustainable Development Goals (UN SDGs). Together with our customers and partners, we
+are engaged in initiatives across the UN SDGs.
+4 IDC, Worldwide Enterprise Applications Market Shares, 2020: Next-Generation Applications Shaping the Market, Doc #US47983821,
+Sept. 2021
+5 IDC, Worldwide Enterprise Resource Management Applications Market Shares, 2020: Digital Makes Strides, Doc #US47984121, Sept.
+2021
+6 IDC, Worldwide Supply Chain Management Applications Market Shares, 2020: Disruption Managed, Doc #US46435921, Dec. 2021
+7 IDC, Worldwide Procurement Applications Software Market Shares, 2020: Digital Became New Normal, Doc #US47984421, Aug. 2021
+Founded in 1972, SAP is a global company headquartered in Walldorf, Germany. Our legal corporate
+name is SAP SE. SAP has been named a market share leader in the following areas worldwide:
+enterprise applications software, 4 enterprise resource management applications, 5 supply chain
+management applications, 6 procurement applications software, travel and expense management
+software, and enterprise resource planning software, 9 among others. The SAP Group has a global
+presence and employs more than 100,000 people.
+8 IDC, Worldwide Travel and Expense Management Software Market Shares, 2020: Travel Down But New Opportunities Emerge, Doc
+#US47980421, July 2021
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+9 IDC, Worldwide Enterprise Resource Planning Software Market Shares, 2020: The Advance of Modular and Intelligent ERP Systems, Doc
+#US46441121, June 2021
+Overview of SAP
+In 2020, SAP introduced our REINVENT strategy. The underlying vision of this strategy was extended
+in 2021 to "REINVENT how the world runs as a network of intelligent, 10 sustainable enterprises." In our
+pursuit of this vision, we focus on three areas:
+Additional
+Information
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+Expected Developments and Opportunities and Risk Management and Risks sections; and other
+forward-looking information appearing in other parts of this report.
+To fully consider the factors that could affect our future financial results, both this report and our
+Annual Report on Form 20-F should be considered, as well as all of our other filings with the U.S.
+Securities and Exchange Commission (SEC). Readers are cautioned not to place undue reliance on
+these forward-looking statements, which speak only as of the date specified or the date of this report.
+We undertake no obligation to publicly update or revise any forward-looking statements as a result of
+new information that we receive about conditions that existed upon issuance of this report, future
+events, or otherwise unless we are required to do so by law.
+This report includes statistical data about the IT industry and global economic trends that comes from
+information published by sources including International Data Corporation (IDC), Gartner, the
+European Central Bank (ECB), and the International Monetary Fund (IMF). This type of data
+represents only the estimates of IDC, Gartner, the ECB, the IMF, and other sources of industry data.
+SAP does not adopt or endorse any of the statistical information provided by sources such as IDC,
+Gartner, the ECB, the IMF, or other similar sources that is contained in this report. The data from these
+sources is subject to risks and uncertainties, and subject to change based on various factors, including
+those described above, in the Risk Management and Risks section, and elsewhere in this report.
+These and other factors could cause our results to differ materially from those expressed in the
+estimates made by third parties and SAP. We caution readers not to place undue reliance on this data.
+51/338
+52/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Management Report
+Consolidated Financial
+Statements IFRS
+SAP
+Additional
+Profitability
+Growth
+€9.59 billion
+€9.4 billion to €9.6 billion
+Cloud revenue**
+2021 Results
+2021 Outlook*
+ΚΡΙ
+Cloud and software revenue**
+Strategic Objective
+The table below provides an overview of the specific key performance indicators (KPIs) used to
+measure performance within these objectives and compares this performance with our goals.
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+Outlook and Results for 2021
+Operating profit**
+€23.8 billion to €24.2 billion
+€24.41 billion
+Further Information on
+Sustainability
+Note: A reconciliation of non-IFRS results to IFRS equivalents is available in the Performance Management System section.
+** Non-IFRS, at constant currencies
+* The 2021 outlook was communicated in January 2021 and was updated in April, July, and October 2021. The 2021 outlook numbers
+above reflect the updated outlook from October 2021.
+110 kt
+90 kt to 110 kt
+83%
+Net carbon emissions
+84% to 86%
+Employee Engagement Index
+Carbon Impact
+Engagement
+Employee
+10
+5 to 10
+Customer Net Promoter Score
+Customer Loyalty
+€8.41 billion
+€8.1 billion to €8.3 billion
+SAP
+SAP Integrated Report 2021
+Strategy
+Customer loyalty
+Employee engagement
+On October 1, 2021 (after receipt of required regulatory approvals and satisfaction or waiver of other
+customary closing conditions), Qualtrics completed its previously announced acquisition of
+Clarabridge, Inc., a customer experience management software company headquartered in Reston,
+Virginia, in the United States.
+For more information about Signavio, see Note (D.1), Business Combinations and Divestitures.
+The acquisition of Signavio GmbH ("Signavio"), closed on March 5, 2021, and deepens SAP's
+business process intelligence capabilities, which represent the process layer within the SAP portfolio.
+Solutions from Signavio augment the spectrum of business process management solutions offered by
+SAP by adding process modeling, process mining, and process management capabilities.
+We continue to focus on organic investments in technology and innovations that ensure sustainable
+growth of our solution portfolio to drive our short-term, mid-term, and long-term ambitions.
+Additionally, we may make targeted acquisitions to complement our solution offerings and improve
+coverage in key strategic markets.
+Acquisitions
+For more information about the Qualtrics acquisition and Qualtrics IPO, see Note (D.1), Business
+Combinations and Divestitures and Note (E.2) Total Equity.
+On November 11, 2021, Qualtrics announced the closing of its public offering and issued an
+additional 4% of its shares, which reduced SAP's ownership in Qualtrics to 74%. The offering-related
+cash inflow amounted to €1.0 billion and the corresponding value of non-controlling interests in net
+assets was €0.3 billion.
+Qualtrics IPO
+For a list of our subsidiaries, associates, and other equity investments, see the Notes to the
+Consolidated Financial Statements, Note (G.9), Scope of Consolidation, Subsidiaries and Other Equity
+Investments.
+SAP SE is the parent company of the SAP Group. As at December 31, 2021, the SAP Group
+comprised 290 companies.
+Subsidiaries
+Subsidiaries, Acquisitions, and Joint Ventures
+For an overview of our product portfolio, see the Products, Research and Development, and Solutions
+section.
+We derive revenue from fees charged to our customers for use of our cloud subscription solutions as
+well as licensing software. Support, consulting, development, training, and other services also
+contribute significant revenue.
+We create value by identifying the business needs of our customers, then developing and delivering
+cloud solutions, services, and support addressing these needs. By proactively obtaining customer
+feedback on a quarterly basis, we strive to continuously improve our solutions, identify further
+business needs, and deliver enhanced value to our customers across the whole lifecycle thus
+increasing customer loyalty.
+Our business model, through which we implement our vision and strategy, can be summarized as
+follows:
+Our Business Model
+Information
+Carbon impact
+For more information about Clarabridge, see Note (D.1), Business Combinations and Divestitures.
+55/338
+On January 28, 2021, Qualtrics International Inc. issued 12% of its shares on the Nasdaq Stock
+Market (NASDAQ). The IPO-related cash inflow amounted to €1,847 million and the initial value of
+non-controlling interests in net assets was €909 million.
+SAP
+-
+56/338
+- Profitability
+Growth
+-
+We use the following financial and non-financial objectives to steer our company:
+In addition to our investments in organic growth and acquisitions, SAP also supports entrepreneurs
+that aspire to build industry-leading businesses through venture capital funds managed by Sapphire
+Ventures. Sapphire Ventures manages over US$8.8 billion (€7.8 billion) and has invested in more
+than 200 companies. Sapphire Ventures pursues opportunities in which it can help fuel enterprise
+growth by adding expertise, relationships, geographic reach, and capital. It places a particular focus
+on companies in Europe, Israel, and the United States. In the second quarter of 2021, the Executive
+Board proposed, and the Supervisory Board consented to, the financing of a new Sapphire Ventures
+fund ("SAPPHIRE Ventures Fund VI"). SAP's total volume committed for SAPPHIRE Ventures Fund VI
+is US$1.75 billion (€1.5 billion).
+For more information, see Note (D.1), Business Combinations and Divestitures.
+Sapphire Ventures
+To better support our customers in the financial services industry (FSI), SAP created a joint venture
+called SAP Fioneer, with German investment company Dediq GmbH. The aim of this joint venture is
+to build agile solutions for FSI using SAP technologies as a basis. SAP has contributed certain FSI-
+centric software solutions to SAP Fioneer in exchange for a minority share in the new entity. Some
+SAP employees transferred to the new entity. The transaction closed in September 2021.
+Measuring Our Success
+On January 27, 2022, SAP announced its intent to acquire a majority stake of Taulia, a leading
+provider of working capital management solutions. The acquisition is expected to close in
+March 2022, following completion of customary closing conditions and regulatory approvals.
+For more information about Taulia, see Note (G.8), Events After the Reporting Period.
+-
+Information
+Additional
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Combined Group
+Joint Ventures
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP Business Technology Platform
+SAP Business Technology Platform (SAP BTP) spans a comprehensive set of on-premise and
+cloud-native technologies and services that support SAP applications across four areas: database and
+data management; analytics; application development and integration; and Al and robotic process
+automation.
+This platform aims to help our customers, partners, and internal development teams to store and
+manage data, derive insights, build, extend, and integrate applications, as well as optimize and
+automate business processes in and beyond SAP landscapes. Across technologies, SAP provides
+customers actionable use cases with prebuilt support and executable code that is ready to deploy.
+As part of our multi-cloud strategy, we increased our global footprint of SAP BTP by adding to our
+regional presence in APJ and Europe. New points of presence include Microsoft Azure in Sydney as
+well as Amazon Web Services (EU Access) and Google Cloud Platform (GCP) in Frankfurt.
+SAP Business Network
+As part of our strategy to make SAP Business Network more open, SAP announced a partnership with
+Amazon Business in Q3/2021. This partnership aims to enable users to tap into millions of items listed
+on Amazon Business directly from within SAP Ariba solutions, as well as assist with compliance with
+corporate purchasing policies. With this partnership and technology integration, Amazon Business
+becomes a source of supply for Spot Buy, a capability within SAP Ariba solutions for users to
+purchase items from trusted suppliers.
+SAP officially launched SAP Business Network in June 2021, bringing together Ariba Network,
+SAP Logistics Network, and SAP Asset Intelligence Network with the aim to unify the points of
+interaction and integration across trading partners – from supplier collaboration to logistics
+coordination and traceability, to equipment usage and maintenance. The trading partner directory in
+SAP Business Network aims to provide trading partners with a view of their customer relationships
+and transactions on the network.
+Our SAP Customer Experience solutions bring together customer data, machine learning
+technology, and microservices to support customer engagements across end-to-end processes in the
+areas of marketing, commerce, sales, and service. The focus for 2021 was maintaining leadership
+positions in various "magic quadrants" such as Gartner's Magic Quadrant for Sales Force Automation
+with SAP Sales Cloud; Forrester Wave for Customer Identity and Access Management (CIAM) with
+SAP Customer Data Cloud (formerly Gigya); and Gartner Magic Quadrant for Personalization Engines
+for SAP Emarsys Customer Data platform.
+-
+Customer Experience
+Management Report
+SAP provides a comprehensive set of solutions for customers to better navigate spend management
+decisions aligned with corporate strategies. It brings together SAP's intelligent spend management
+solutions including products branded under SAP Ariba, SAP Concur, and SAP Fieldglass as well
+as SAP Business Network. Our intelligent spend management solutions aim to address our
+customers' end-to-end procurement, travel and expense, and external workforce needs with visibility
+across the entire supply chain.
+Intelligent Spend Management
+In 2021, we maintained a leadership position in the Gartner Magic Quadrant for Cloud HCM Suites for
+1,000+ Employee Enterprises that we have been awarded for six consecutive years; the 2021 IDC
+MarketScape Reports for Talent Management for nine consecutive years; and the inaugural The
+Forrester Wave: Learning Management Systems and Experience Platforms report.
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Group
+69/338
+At SAPPHIRE NOW, we introduced Verify, a new SAP Concur service that uses Al and machine
+learning to evaluate companies' expense reports and identify anomalies.
+70/338
+SAP's industry cloud is an open innovation space for SAP and our partners to build solutions that
+make a difference to the core business of our customers. Industry cloud solutions extend the end-to-
+end processes of SAP S/4HANA, LoB cloud solutions, and SAP Business Network to enable our
+customers optimize and transform their core business.
+SAP Integrated Report 2021
+Industry cloud solutions are built by SAP and partners in the cloud, giving our customers access to the
+innovation power of an entire ecosystem. The solutions are built on SAP BTP and can use its full
+spectrum of intelligent technologies and business services. We have an expanding portfolio and a
+growing ecosystem across all industries.
+To Our
+Stakeholders
+Industry Cloud
+Experience Management (XM) refers to both Qualtrics technology as well as the discipline of seeking
+out and closing the experience gaps across the four core areas of businesses - customer, product,
+employee, and brand. In 2021, Qualtrics acquired Clarabridge, adding omnichannel conversational
+analytics to Qualtrics XM Platform. The combination of SAP and Qualtrics' respective offerings, as
+well as integration into our suite solutions aim to help organizations and governments bring real-time
+customer and employee sentiment to their travel and expense programs, vaccination efforts, and
+business and office reopening.
+Experience Management
+For more information, see Sustainable Solutions and Products in Use in the Energy and Emissions
+section.
+As a key strategic pillar, sustainability is a topic that is covered across the various SAP product areas
+along emerging and maturing environmental, social, and governance (ESG) standards from
+organizations such as the World Economic Forum (WEF), the International Sustainability Standards
+Board (ISSB), the European Union (EU), and others. The goal of our sustainability management
+solutions is to enable customers to include sustainability as a new dimension into their business
+processes and operations. SAP offers solutions focusing on ESG reporting, climate change, circular
+economy, and social responsibility.
+Sustainable Business Solutions, Services, and Partnerships
+With the SAP-wide initiative One Process Acceleration Layer (OPAL), we aim to create a primary
+resource for process repository, process simulation, process mining and analytics, process
+collaboration, and enterprise-wide dissemination.
+SAP
+Released in September 2021, SAP Process Insights aims to help companies foster continuous
+improvements with performance views and process drilldowns, as well as recommendations and
+improvement actions.
+Business process intelligence (BPI) solutions aim to help our customers analyze their operations,
+understand their process bottlenecks, and improve their business process landscape.
+Business Process Intelligence
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+Stakeholders
+To Our
+Our goal is to offer one integrated BPI portfolio, the SAP Signavio Business Process Management
+(BPM) Suite. The suite consists of branded SAP Signavio solutions and the SAP Process Insights
+solution with integration into application lifecycle management solutions SAP Solution Manager and
+SAP Cloud ALM. The suite aims to deliver business transformation capabilities for our customers and
+partners with quick time to insights and time to deploy. This portfolio is powered by SAP BTP
+capabilities such as workflow management, citizen automation, low-code/no-code, and intelligent
+robotic process automation. Acquisitions such as Signavio and the no-code platform SAP AppGyver
+contributed to this comprehensive business process transformation solution.
+SAP
+To Our
+SAP solutions for human experience management (HXM) under the SAP SuccessFactors brand aim
+to increase the value of a workforce by developing, managing, engaging, and empowering people.
+SAP SuccessFactors HXM Suite was designed to provide decision-makers with tools to identify and
+reduce unconscious bias from key people decisions such as hiring, calibration, and compensation.
+With embedded analytics throughout the suite, SAP SuccessFactors HXM solutions aim to enable
+organizations to visualize and forecast diversity trends, as well as track and measure progress against
+diversity, equity, and inclusion goals through custom reports, dashboards, and scorecards.
+-19,056
+-3
+1,084
+577
+-20,715
+-19,613
+157
+2,794
+623
+-23,186
+Total operating expenses
+net
+18
+0
+0
+-66
+84
+0
+0
+1 Share-based payments
+67/338
+68/338
+SAP
+Human Experience Management
+At SAPPHIRE NOW in 2021, we announced the availability of RISE with SAP transformation
+packages for specific industries that provide business transformation-as-a-service with five
+industry-tailored cloud solutions for retail, consumer products, automotive, utilities, and industrial
+machinery and components. RISE with SAP for Modular Cloud ERP, which includes ERP
+capabilities in different domains and lines of business (LoBs), namely procurement, human
+experience management (HXM), analytics, and governance, was also announced at our annual event.
+Around 2,800 SAP S/4HANA customers were added in 2021, bringing the number of customers to
+approximately 18,800, up 18% year over year.
+SAP offers a choice of SAP S/4HANA deployments - in the public cloud via software as a service
+(SaaS), in a private cloud or on premise as well as a combination in a hybrid deployment.
+Launched in January 2021, RISE with SAP is our business-transformation-as-a-service offering that
+aims to support and accelerate customers in their transformation to an intelligent enterprise. It is a
+package of products and tools and includes SAP S/4HANA Cloud - either public or private
+deployment options; business process intelligence (BPI) solutions; migration tools and services
+including the SAP Readiness Check tool and the Custom Code Migration app; infrastructure
+provided by any hyperscaler or SAP data center; SAP Business Technology Platform (SAP BTP);
+and an SAP Business Network Starter Pack.
+SAP S/4HANA is our ERP suite with intelligent technologies such as artificial intelligence (AI),
+machine learning, and advanced analytics. Running on SAP HANA, the suite combines automation
+and integrated business processes analytics and a role-based user experience. The suite provides
+software capabilities for finance, sales, service, procurement, manufacturing, and asset management,
+as well as research and development (R&D).
+SAP S/4HANA Cloud
+For an overview of our strategy, see the Strategy section.
+The goal of our product and services portfolio is to deliver on this expanded vision.
+Enabling a sustainable world
+Creating a network of intelligent, sustainable enterprises
+SAP Integrated Report 2021
+Helping customers become intelligent and sustainable enterprises
+In 2021, we expanded on 2020's REINVENT strategy to “REINVENT how the world runs as a network
+Products, Research &
+Development, and Services
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Stakeholders
+Combined Group
+SAP Integrated Report 2021
+of intelligent, sustainable enterprises." Our strategy was built on the following focus areas:
+43
+0
+0
+1,473
+0
+1,473
+3,123
+0
+3,123
+Finance income
+-179
+0
+-179
+17
+0
+17
+Other non-operating income/expense, net
+8,287
+1,664
+6,623
+8,408
+178
+8,230
+3,573
+4,656
+Operating profit
+Profit numbers
+-19,056
+1,659
+-20,715
+Finance costs
+-19,824
+-949
+-949
+2,960
+5,376
+Profit after tax
+-2,350
+-413
+-1,938
+-2,084
+-613
+-1,471
+Income tax expense
+8,884
+1,664
+7,220
+10,421
+3,573
+6,847
+Profit before tax
+776
+0
+776
+2,174
+0
+2,174
+Financial income, net
+-697
+0
+-697
+0
+-212
+-19,613
+3,573
+-4,454
+-4,667
+524
+-5,190
+Research and development
+19,981
+528
+19,453
+20,514
+617
+19,897
+Gross profit
+-7,362
+523
+-7,886
+-7,328
+617
+-7,946
+Total cost of revenue
+-3,000
+178
+-3,178
+-2,630
+286
+-2,916
+Cost of services
+-4,362
+303
+-4,151
+Sales and marketing
+-7,505
+-23,186
+Total operating expenses
+18
+-66
+84
+43
+0
+43
+Other operating income/expense, net
+0
+-3
+3
+0
+8,337
+157
+Restructuring
+-1,190
+166
+-1,356
+-1,181
+1,250
+-2,431
+General and administration
+-6,371
+735
+-7,106
+-6,479
+1,025
+-157
+345
+5,283
+6,534
+-2,630
+0
+266
+20
+-2,916
+Cost of services
+support
+-1,911
+0
+55
+42
+-2,008
+-1,822
+0
+70
+33
+-1,925
+Cost of software licenses and
+-2,451
+0
+40
+208
+-2,699
+-2,876
+0
+59
+169
+-3,178
+-3,105
+3
+0
+1,230
+20
+-2,431
+General and administration
+-6,371
+0
+360
+375
+-7,106
+-6,479
+0
+655
+370
+-7,505
+Sales and marketing
+-4,151
+0
+296
+7
+-4,454
+-4,667
+0
+513
+10
+-5,190
+Research and development
+-3,000
+175
+Cost of cloud
+Related
+Related
+29.8
+66/338
+Due to rounding, the sum of the numbers presented in the table above might not precisely equal the totals we provide.
+6.73
+20.0
+29.6
+4.46
+21.5
+16.7
+Earnings per share, basic (in €)
+Effective tax rate (in %)
+Operating margin (in %)
+Key ratios
+138
+0
+138
+394
+273
+121
+Attributable to non-controlling interests
+6,396
+1,251
+5,145
+7,943
+2,687
+5,256
+Attributable to owners of parent
+24.2
+30.3
+26.8
+26.5
+Non-IFRS
+Restruc-
+turing
+SBP1
+sition-
+IFRS
+Non-IFRS
+Restruc-
+turing
+SBP1
+sition-
+IFRS
+Acqui-
+Acqui-
+€ millions
+1,251
+2020
+Additional
+2021
+Non-IFRS Adjustments by Functional Areas
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+5.41
+4.35
+Information
+-1,181
+-4,707
+332
+A in %
+2020
+2021
+€ millions
+Among other measures, we use free cash flow to manage our overall financial performance.
+We believe it is important for investors to have information that provides insight into the development
+of our sales. Revenue measures determined under IFRS provide information that is useful in this
+regard. However, both sales volume and currency effects impact period-over-period changes in sales
+revenue. We do not sell standardized units of products and services, so we cannot provide relevant
+information on sales volume by providing data on the changes in product and service units sold. To
+provide additional information that may be useful to investors in breaking down and evaluating
+changes in sales volume, we present information about our revenue and various values and
+components relating to operating profit that are adjusted for foreign currency effects. We calculate
+constant currencies measures by translating foreign currencies using the average exchange rates from
+the comparative period instead of the current period. Constant currency measures on current cloud
+backlog use the closing exchange rate from the previous year's corresponding key date instead of the
+average exchange rate.
+Constant Currencies Information
+Operating Profit (Non-IFRS), Cloud Gross Margin (Non-IFRS), Operating Margin
+(Non-IFRS), Effective Tax Rate (Non-IFRS), and Earnings per Share (Non-IFRS)
+Operating profit, cloud gross margin, operating margin, effective tax rate, and earnings per share
+denominated as operating profit (non-IFRS), cloud gross margin (non-IFRS), operating margin (non-
+IFRS), effective tax rate (non-IFRS), and earnings per share (non-IFRS) have been adjusted from the
+respective IFRS measures by adjusting for the aforementioned operating expenses (non-IFRS) and
+the income tax effects thereon.
+We exclude certain acquisition-related expenses for the purpose of calculating operating profit (non-
+IFRS), operating margin (non-IFRS), and earnings per share (non-IFRS) when evaluating SAP's
+continuing operational performance because these expenses generally cannot be changed or
+influenced by management after the relevant acquisition other than by disposing of the acquired
+assets. Since management at levels below the Executive Board does not influence these expenses,
+we generally do not consider these expenses for the purpose of evaluating the performance of
+management units. For similar reasons, we eliminate share-based payment expenses as these costs
+are impacted by share price developments and other factors outside our control. We also eliminate
+restructuring expenses because they are volatile and mostly cannot be influenced by management at
+levels below the Executive Board.
+· Restructuring expenses, that is, expenses resulting from measures which comply with the definition
+of restructuring according to IFRS
+Share-based payment expenses
+Acquisition-related third-party expenses
+■
+■ Settlements of preexisting business relationships in connection with a business combination
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+Amortization expense/impairment charges for intangibles acquired in business combinations
+and certain stand-alone acquisitions of intellectual property (including purchased in-process
+research and development) as well as sale/disposal gains and losses for these intangibles
+■
+Acquisition-related charges
+Operating expense numbers that are identified as operating expenses (non-IFRS) have been adjusted
+by excluding the following expenses:
+Net cash flows from operating activities
+Operating Expense (Non-IFRS)
+6,223
+-13
+The non-IFRS measures provide investors with additional information that enables a comparison of
+year-over-year operating performance by eliminating certain direct effects of acquisitions, share-
+based compensation plans, and restructuring plans.
+We believe that our non-IFRS measures are useful to investors for the following reasons:
+Our expense (non-IFRS), and profit (non-IFRS) measures, along with the current cloud backlog
+(CCB) measure (see above), provide investors with insight into management's decision-making
+because management uses these measures to run our business and make financial, strategic, and
+operating decisions. We exclude the expense adjustments outlined above when making decisions
+to allocate resources. In addition, we use these non-IFRS measures to facilitate comparisons of
+SAP's operating performance from period to period.
+-
+Usefulness of Non-IFRS Measures
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+64/338
+63/338
+-16
+6,000
+5,049
+Free cash flow
+-1
+-378
+-374
+Payments of lease liabilities
+equipment (without acquisitions)
+-2
+-816
+-800
+Purchase of intangible assets and property, plant, and
+7,194
+Thus, SAP's IFRS revenue equals the non-IFRS revenue at actual currencies starting with the annual
+reporting period 2021. Due to immateriality, prior-year numbers are further based on our previous
+non-IFRS definition as described in our SAP Integrated Report 2020.
+Starting in 2021, we no longer adjust our IFRS revenue measures by including the full amount of
+recurring revenue that is not recognized under IFRS due to fair value accounting for the contracts in
+effect at the time of the respective acquisitions.
+Revenue (Non-IFRS)
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP
+SAP Integrated Report 2021
+-1,356
+9
+157
+0
+-1,190
+Restructuring
+-157
+0
+0
+157
+0
+3
+0
+0
+-3
+0
+Other operating income/expense,
+43
+scores is -100 to +100, with the latter being the best achievable score for customer loyalty as
+measured by the Customer NPS methodology.
+Since this year, we determine the Employee Engagement Index and the Leadership Trust Score
+as the average of the scores retrieved in each of the surveys we run within a fiscal year. Adopting the
+Experience Management (XM) philosophy of Qualtrics, we changed our engagement survey concept
+to a continuous listening approach that includes multiple data collections throughout the year. This
+new average score provides a more valid evaluation of the full-year engagement and trust level of our
+employees.
+We measure both the Employee Engagement Index as well as Leadership Trust Score to get insights
+on the following:
+Employee Engagement Index: We use this index to measure the satisfaction and commitment of
+our employees, how proud they are of our company, and how strongly they identify with SAP.
+Applying this measure is recognition that our growth strategy depends on engaged employees.
+Leadership Trust Score: We use this score to further enhance accountability and to measure our
+collective effort to foster a work environment based on trust. It is derived from a question in our
+surveys that gauges employees' trust in our leaders. We measure leadership trust by using the
+same NPS methodology that we use to compute the Customer NPS.
+Our non-IFRS financial measures reflect adjustments based on the items below, as well as
+adjustments for the related income tax effects.
+measures.
+Both our internal performance targets and the guidance we provide to the capital markets are
+based on revenue and profit (non-IFRS) measures rather than the respective IFRS financial
+All forecast and performance reviews with all senior managers globally are based on these non-
+IFRS measures, rather than the respective IFRS financial measures.
+The annual budgeting process for all management units is based on operating profit (non-IFRS)
+numbers rather than the respective IFRS financial measures.
+The variable components of our Executive Board members' and employees' remuneration are
+based on non-IFRS numbers such as operating profit (non-IFRS), operating margin (non-IFRS), as
+well as current cloud backlog (CCB) measures rather than the respective IFRS measures.
+Our management primarily uses these non-IFRS measures rather than IFRS measures as the basis
+for making financial, strategic, and operating decisions.
+-
+We use these non-IFRS measures consistently in our internal planning and forecasting, reporting, and
+compensation, as well as in our external communications, as follows:
+We believe that the disclosed supplemental historical and prospective non-IFRS financial information
+provides useful information to investors because management uses this information, in addition to
+financial data prepared in accordance with IFRS, to attain a more transparent understanding of our
+past performance and our anticipated future results.
+We disclose certain financial measures that are not prepared in accordance with IFRS and are
+therefore considered non-IFRS financial measures. Our non-IFRS financial measures may not
+correspond to non-IFRS financial measures that other companies report. The non-IFRS financial
+measures that we report should only be considered in addition to, and not as substitutes for, or
+superior to, our IFRS financial measures.
+Explanation of Non-IFRS Measures
+Non-IFRS Financial Measures Cited in This Report
+Non-IFRS and non-GAAP (Generally Accepted Accounting Principles) measures are widely used in
+the software industry. In many cases, inclusion of our non-IFRS measures may facilitate
+comparison with our competitors' corresponding non-IFRS and non-GAAP measures.
+and define any appropriate actions. Our entire network of planning, control, and reporting processes is
+implemented in integrated planning and information systems, based on SAP software, across all
+organizational units so that we can conduct the evaluations and analyses needed to make informed
+decisions.
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+62/338
+61/338
+Based on our detailed annual plans, we determine the budget for the respective fiscal year. We also
+have processes in place to forecast revenue and profit on a quarterly basis, to quantify whether we
+expect to realize our financial goals, and to identify any deviations from plan. We continuously monitor
+the affected operating segments and Board areas in the SAP Group to analyze their developments
+SAP's long-term strategic plans are the point of reference for our short-term and mid-term planning
+and controlling processes. We initially identify future growth and profitability drivers at a highly
+aggregated level for the entire SAP Group. In a first step, the resulting financial plan is broken down
+into (i) product portfolio grouped into solution areas and deployment models “On Premise," "Software
+as a Service/Platform as a Service," "Infrastructure as a Service," and "Intelligent Spend Management";
+and (ii) functions such as development, delivery, sales, and administration. In a second step, the
+planned total revenues and total expenses are generally allocated to the operating segments and the
+areas of functional responsibility of the individual members of the Executive Board ("Board area”). If a
+Board area represents not only a functional department but also has a responsibility for operating
+segments within this Board area, the allocation is done at the lower segment level. Budget
+adjustments may be applied during the year to reflect changes in priorities, to achieve efficiency
+targets, and to reflect endogenous and exogenous factors. Such budget adjustments, as well as the
+assessment of the performance, are handled at the Board area level if the Board area is part of a
+segment, or at the segment level if the Board area comprises several segments. It is then the
+individual Executive Board member's responsibility to break down the allocated budget adjustments
+within the segment budget boundary. Based on an integrated portfolio process running in parallel to
+the budgeting process, we ensure aligned investment behavior across Board areas with regards to
+specific solution and/or subsolution areas. In a final step, customer-facing revenue targets and cost-
+of-sales and marketing targets are broken down into sales regions and market units.
+Our holistic view of the performance measures described above, together with our associated
+analyses, comprises the information we use for value-based management. We use planning and
+control processes to manage the compilation of these key measures and their availability to our
+decision-makers across various management levels.
+Value-Based Management
+Carbon emissions: We use carbon emissions to manage our non-financial performance. It is used as
+a metric to strengthen our ambitious short-term and long-term carbon reduction targets. We measure
+our net carbon emissions according to the Greenhouse Gas (GHG) Protocol. The net carbon
+emissions are calculated by deducting emission savings such as self-produced renewable energy,
+renewable energy certificates, and carbon offsets from our gross carbon emissions.
+Additional
+Information
+-4,698
+Limitations of Non-IFRS Measures
+-
+3,764
+0
+3,764
+Services
+23,233
+5
+23,228
+24,410
+332
+24,078
+0
+24,078
+Cloud and software
+15,148
+0
+15,148
+14,818
+158
+14,660
+0
+14,660
+Software licenses and support
+11,506
+0
+11,506
+11,577
+166
+58
+11,412
+3,823
+0
+-5,030
+Cost of cloud and software
+-1,911
+97
+-2,008
+-1,822
+103
+-1,925
+Cost of software licenses and support
+-2,451
+248
+-2,699
+-2,876
+229
+-3,105
+Cost of cloud
+Operating expense measures
+27,343
+5
+27,338
+28,232
+390
+27,842
+0
+27,842
+Total revenue
+4,110
+4,110
+0
+11,412
+Software support
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+65/338
+Despite these limitations, we believe that the presentation of our non-IFRS measures and the
+corresponding IFRS measures, together with the relevant reconciliations, provide useful information to
+management and investors regarding present and future business trends relating to our financial
+condition and results of operations.
+revenue, operating expenses, operating profit, or other measures of financial performance prepared in
+accordance with IFRS on the other. We caution the readers of our financial reports to follow a similar
+approach by considering nominal and constant currencies non-IFRS measures only in addition to, and
+not as a substitute for or superior to, changes in revenue, operating expenses, operating profit, or
+other measures of financial performance prepared in accordance with IFRS.
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+We believe that constant currencies measures have limitations, particularly as the currency effects that
+are eliminated constitute a significant element of our revenue and expenses and could materially
+impact our performance. Therefore, we limit our use of constant currencies measures to the analysis
+of changes in volume as one element of the full change in a financial measure. We do not evaluate
+our results and performance without considering both constant currencies and nominal measures of
+revenue (non-IFRS) and operating profit (non-IFRS) measures on the one hand, and changes in
+In the past, we have issued share-based payment awards to our employees every year and we
+intend to continue doing so in the future. Thus, our share-based payment expenses are recurring,
+although the amounts usually change from period to period.
+The valuation of our cash-settled share-based payments could vary significantly from period to
+period due to the fluctuation of our share price and other parameters used in the valuation of these
+plans. In the future, we plan to move more of our awards to equity settlement.
+Our restructuring charges resulted in significant cash outflows in the past and could do so in the
+future. The same applies to our share-based payment expense because most of our share-based
+payments are settled in cash rather than shares.
+The expense adjustment for acquisition-related charges does not arise from a common conceptual
+basis. This is because the expense adjustment aims to improve the comparability between post-
+acquisition periods and pre-acquisition periods. This should particularly be considered when
+evaluating our operating profit (non-IFRS) and operating margin (non-IFRS) numbers, as these
+combine our revenue and expenses (non-IFRS) despite the absence of a common conceptual
+basis.
+The acquisition-related amortization expense that we eliminate in deriving our profit (non-IFRS)
+numbers is a recurring expense that will impact our financial performance in future years.
+The remaining acquisition-related charges that we eliminate in deriving our profit (non-IFRS)
+numbers are likely to recur should SAP enter into material business combinations in the future.
+Similarly, the restructuring expenses that we eliminate in deriving our profit (non-IFRS) numbers are
+likely to recur should SAP perform restructurings in the future.
+While our profit (non-IFRS) numbers reflect the elimination of certain acquisition-related expenses,
+no eliminations are made for the additional revenue or other income that results from the
+acquisitions.
+Reconciliations of IFRS to Non-IFRS Financial Measures for the Years 2021 and 2020
+€ millions, unless otherwise stated
+Revenue measures
+2021
+3,642
+0
+3,642
+3,240
+-8
+3,248
+0
+3,248
+Software licenses
+8,085
+5
+8,080
+9,592
+Without being analyzed in conjunction with the corresponding IFRS measures, the non-IFRS
+measures are not indicative of our present and future performance, foremost, but not limited, for the
+following reasons:
+174
+0
+9,418
+Cloud
+Non-IFRS
+Adj.
+IFRS
+Constant
+Currency
+Impact
+Adj. Non-IFRS
+IFRS
+Currency
+Non-IFRS
+2020
+9,418
+Free Cash Flow
+20,622
+(2020: €702 million), which was mainly caused by the divestiture of the SAP Digital Interconnect
+business.
+Our current cloud backlog (contractually committed cloud revenue that we expect to recognize over
+the upcoming 12 months) reached €9.01 billion at constant currencies (€9.45 billion at actual
+currencies; 2020: €7.15 billion). This was an increase of 26% (2020: 14%) on a constant currency
+basis.
+In a global economic situation that keeps being shaken by the COVID-19 pandemic, the demand for
+our solutions and services was higher than assumed in 2021, reflecting the strong business
+performance which is expected to continue to accelerate cloud revenue growth.
+20.0%
+21.5%
+21.0% to 22.0%
+20.0% to 21.0%
+20.0% to 21.5%
+22.5% to 23.5%
+24.5% to 25.5%
+26.5%
+26.0% to 27.0%
+27.5% to 28.5%
+26.8%
+Effective tax rate (non-IFRS)
+Effective tax rate (IFRS)
+75%
+€8.41 billion
+€8.1 billion
+to €8.3 billion
+75%
+75%
+€23.6 billion
+to €24.0 billion
+€7.95 billion
+to €8.25 billion
+At constant currencies, the resulting non-IFRS cloud revenue grew from €8.09 billion in 2020 to
+€9.59 billion in 2021, hitting the high end of our guidance range of €9.4 billion to €9.6 billion. That
+represented an increase of 19% at constant currencies.
+Revised Outlook
+for 2021
+(Half-Year Report)
+Cloud and software revenue (non-IFRS) grew 5% at constant currencies to €24.41 billion
+(2020: €23.23 billion), and thus ended above our range forecasted for 2021 of €23.8 billion to
+€24.2 billion.
+Total revenue (non-IFRS) on a constant currency basis grew 3% in 2021 to €28.23 billion
+(2020: €27.34 billion).
+Revenue
+We break our operations down into three regions: the Europe, Middle East, and Africa (EMEA) region,
+the Americas region, and the Asia Pacific Japan (APJ) region. We allocate revenue amounts to each
+region based on where the customer is located. For more information about revenue by geographic
+region, see the Notes to the Consolidated Financial Statements, Note (A.1).
+This section on operating results (IFRS) discusses results only in terms of IFRS measures, so the IFRS
+numbers are not expressly identified as such.
+Operating Results (IFRS)
+We achieved an effective tax rate (IFRS) of 21.5% and an effective tax rate (non-IFRS) of 20.0%, which
+is in the middle of the adjusted outlook of 21.0% to 22.0% (IFRS) and at the lower end of the range of
+20.0% to 21.0% (non-IFRS) we announced in October 2021.
+Non-IFRS operating profit in 2021 was €8.41 billion on a constant currency basis (2020: €8.29 billion),
+reflecting an increase of 1%. As a result, we were able to surpass our excellent results from 2019 and
+2020, despite our continued investment in our business transformation during the reporting year. The
+development of our operating profit was largely influenced by investment decisions in our innovation
+areas and growth markets. This, among other things, resulted in an increase of our overall headcount
+by 4,984 full-time equivalents or FTEs (4,071 thereof organically), primarily in research and
+development as well as in sales and marketing. Thus, non-IFRS operating profit on a constant
+currency basis amounting to €8.41 billion exceeded the top end of the target range (€8.1 billion to
+€8.3 billion).
+Profitability in our software as a service/platform as a service (SaaS/PaaS) excluding intelligent spend
+cloud offerings was 70% at constant currencies (non-IFRS) for 2021. Due to ongoing investments in
+the further development and harmonization in the operation of our various SaaS/PaaS offerings on a
+single platform, the gross margin declined 0.5pp.
+Additional
+Information
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Combined Group
+Management Report
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+78/338
+77/338
+The cloud gross margin (non-IFRS) on our infrastructure as a service (laaS) cloud offerings saw a
+decline of 0.8pp for 2021 on a constant currency basis to achieve a cloud gross margin (non-IFRS) of
+34% for the full year.
+The cloud gross margin (non-IFRS) on our intelligent spend management offerings improved 0.6pp on
+a constant currency basis, resulting in 80% for 2021 (2020: 79%).
+Our expense base in 2021 was impacted by our transformation to a fast-growing cloud business. The
+cloud gross margin (non-IFRS) for 2021 was 69%, declining slightly in comparison with the previous
+year, despite the increase in cloud revenue. This decline was predominantly due to investments into
+our cloud delivery program.
+Operating expenses (non-IFRS) in 2021 on a constant currency basis increased 4% to €19.82 billion
+(2020: €19.06 billion).
+Thanks to the strong increase in cloud business described above, we were able to increase the share
+of more predictable revenue 3.3pp to 75% (2020: 72%). As such, our total revenue (non-IFRS)
+increased slightly despite a decline in the software license business, which is in line with our cloud
+transformation.
+24,708
+for 2021
+(Q1 Quarterly
+Statement)
+€9.2 billion
+to €9.5 billion
+€23.4 billion
+to €23.8 billion
+€7.8 billion
+to €8.2 billion
+75%
+72%
+2021 Actual Revenue and Profit Performance Compared to Outlook (Non-IFRS)
+On the cloud revenue side, we reached the upper end of the guidance, while our cloud and software
+revenue and our operating profit both exceeded the outlook adjusted in October 2021.
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP
+SAP Integrated Report 2021
+We adjusted our projection for cloud revenue upward to range between €9.4 billion and €9.6 billion,
+which represented a growth rate of 16% to 19% at constant currencies. In addition, the Company then
+anticipated cloud and software revenue of between €23.8 billion and €24.2 billion. This range
+represented a growth rate of 2% to 4% at constant currencies. Furthermore, we projected the share of
+more predictable revenue to reach approximately 75%. We also set a target range of €8.1 billion to
+€8.3 billion for our operating profit, which represented a decrease of 2% to flat at constant currencies.
+We expected a full-year 2021 effective tax rate (IFRS) of 21.0% to 22.0% and an effective tax rate
+(non-IFRS) of 20.0% to 21.0%. The decrease in comparison to the previous outlook mainly resulted
+from changes in tax-exempt income.
+In our quarterly statement published on October 21, 2021, we raised our outlook again to further
+reflect the strong business performance. This outlook likewise continued to assume that the COVID-19
+pandemic would continue to recede as vaccine programs rolled out globally.
+In July 2021, we adjusted our outlook for cloud revenue at constant currencies to range between
+€9.3 billion and €9.5 billion and for cloud and software revenue to range between €23.6 billion and
+€24.0 billion, resulting in a new projected non-IFRS operating profit of between €7.95 billion and
+€8.25 billion. We adjusted our outlook for the effective tax rate (IFRS) to between 21.5% and 23.0%
+and for the effective tax rate (non-IFRS) to between 20.0% and 21.5%. The decrease in comparison to
+the previous outlook mainly resulted from changes in tax-exempt income.
+The initial outlook for 2021, updated on April 13, 2021 (for more information, see the table
+"Comparison of Outlook and Results for 2021"), reflected the strong new cloud business performance,
+which was expected to reaccelerate cloud revenue growth, while software licenses revenue was
+expected to decline for the full year as more customers turned to the RISE with SAP subscription
+offering. This outlook also continued to assume that the COVID-19 pandemic would begin to recede
+as vaccine programs rolled out globally, leading to a gradually improving global demand environment
+in the second half of 2021. In this context, we predicted cloud revenue to range between €9.2 billion
+and €9.5 billion, and cloud and software revenue to range between €23.4 billion and €23.8 billion, with
+more predictable revenue anticipated to make up 75% of this result. Furthermore, we expected
+operating profit (non-IFRS) to range between €7.8 billion and €8.2 billion. We expected a full-year
+2021 effective tax rate (IFRS) of 27.5% to 28.5% (2020: 26.8%) and an effective tax rate (non-IFRS) of
+24.5% to 25.5% (2020: 26.5%). In April 2021, we adjusted our outlook for the effective tax rate (IFRS)
+to between 26.0% and 27.0% and for the effective tax rate (non-IFRS) to between 22.5% and 23.5%.
+The decrease in comparison to the previous outlook mainly resulted from changes in taxes for prior
+years and tax-exempt income. Under IFRS, these positive tax effects were partly compensated by
+changes in non-deductible expenses.
+Outlook for 2021 (Non-IFRS)
+As in previous years, our 2021 operating profit-related goals and published outlook were based on our
+non-IFRS financial measures at constant currencies. For this reason, in the following section we
+discuss performance against our outlook only in terms of non-IFRS numbers (at constant currencies)
+derived from IFRS measures. The subsequent section about IFRS operating results discusses
+numbers only in terms of the International Financial Reporting Standards (IFRS), so the numbers in
+that section are not expressly identified as IFRS numbers.
+Performance Against Our Outlook for 2021 (Non-IFRS)
+commitment to sustainability is also reflected in our target to reach CO2-neutrality in our own
+operations by 2023 and our announcement to achieve net-zero along our value chain in 2030.
+We are confident that we will continue our growth path in 2022 and will deliver on both our financial
+and non-financial outlook for 2022 and on our 2025 mid-term ambition.
+Information
+Comparison of Outlook and Results for 2021
+75%
+Results
+for 2020
+Results
+for 2021
+Share of predictable revenue
+€7.8 billion
+to €8.2 billion
+(non-IFRS, at constant currencies)
+€8.29 billion
+Operating profit
+€9.1 billion
+to €9.5 billion
+€23.3 billion
+to €23.8 billion
+€23.23 billion
+Cloud and software revenue
+(non-IFRS, at constant currencies)
+€8.09 billion
+(non-IFRS, at constant currencies)
+Cloud revenue
+Revised Outlook
+€24.41 billion
+€9.59 billion
+€23.8 billion
+to €24.2 billion
+€9.4 billion
+to €9.6 billion
+for 2021
+(Q3 Quarterly
+Statement)
+Revised Outlook
+€9.3 billion
+to €9.5 billion
+Outlook for 2021
+(Integrated Report
+2020)
+23,461
+Total Revenue
+€ millions | change since previous year
+2018
+2017
+17%
+17%
+8,080
+9,418
+26%
+32%
+39%
+3,769
+4,993
+6,933
+€ millions | change since previous year
+Cloud Revenue
+Cloud and software revenue grew from €23,228 million in 2020 to €24,078 million in 2021, an increase
+of 4%.
+2021
+2020
+1%
+4%
+2019
+24,078
+2020
+79/338
+For more information about the development of our Services segment, see the Segment Information
+section.
+18,480
+Software Support Cloud
+€ millions
+More Predictable Revenue
+Software licenses and software support revenue decreased €488 million, or 3%, from €15,148 million
+in 2020 to €14,660 million in 2021.
+(2020: €11,506 million), the slight decline being driven by an accelerated transition to the cloud and
+unfavorable currency exchange rates. SAP Enterprise Support was the largest contributor to our
+software support revenue.
+The continued demand for SAP software helped us maintain a stable maintenance customer base for
+software support, resulting in software support revenue of €11,412 million in 2021
+Our software licenses revenue declined €393 million from €3,642 million in 2020 to €3,248 million in
+2021.
+Cloud revenue increased €1,337 million, or 17%, from €8,080 million in 2020 to €9,418 million in 2021.
+With continued lower transactional revenue, SAP Concur and SAP Fieldglass supplier business grew
+moderately, having an unfavorable impact on the cloud revenue growth. The current cloud backlog
+increased 32% to €9,447 million in 2021 (2020: €7,155 million).
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+80/338
+2021
+23,228
+2019
+12%
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+Cloud and software revenue represented 86% of total revenue in 2021 (2020: 85%). Service revenue
+decreased 8% from €4,110 million in 2020 to €3,764 million in 2021, which was 14% of total revenue
+(2020: 15%).
+Total revenue increased from €27,338 million in 2020 to €27,842 million in 2021, representing an
+increase of €504 million, or 2%.
+2021
+2020
+-1%
+2%
+27,842
+27,338
+2019
+2018
+2017
+12%
+5%
+6%
+27,553
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+23,012
+2018
+2017
+5%
+6%
+19,549
+€ millions | change since previous year
+Cloud and Software Revenue
+For more information about our regional performance, see the Revenue by Region section.
+Cloud revenue refers to the income earned from contracts that permit the customer to access specific
+software solutions hosted by SAP or third parties engaged by SAP during the term of its contract with
+SAP. Software licenses revenue results from the fees earned from selling or licensing software to
+customers. Support revenue represents fees earned from providing customers with technical support
+services and unspecified software upgrades, updates, and enhancements. For more information
+about our revenue types, see the Notes to the Consolidated Financial Statements, Note (A.1).
+Additional
+11,412
+3,764
+Services
+Software Support
+3,248
+Software Licenses
+€ millions
+Revenue by Revenue Type
+Cloud
+Additional
+Information
+9,418
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+21.5% to 23.0%
+Combined Group
+Management Report
+Combined Group
+To Our
+Stakeholders
+SAP Integrated Report 2021
+SAP
+72/338
+71/338
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Industry cloud-based services are now available. These services include industry-specific advisory
+services that aim to help discover and prioritize innovation opportunities and reimagine business
+To scale the delivery of the value of SAP BTP to our customers, all relevant service offerings and
+methods were adjusted to ensure the ability to use the platform in all service-related projects. To
+ensure easy integration across different solutions, a program was initiated to make integration-related
+content available to all customers and the developer community on SAP API Business Hub, the
+central catalog for integrations and extensions.
+Enabling Use of SAP BTP
+design the business transformation based on our BPI portfolio.
+Supporting Business Transformation
+To scale the RISE with SAP offering, the SAP Services and Support organization focused on the
+development of a comprehensive, full-lifecycle adoption methodology. The methodology goal is to
+drive successful customer adoption and provide clearly outlined deliverables throughout the
+engagement of each RISE journey in 30/60/90/120-day sprints. The activities during these sprints are
+closely aligned with the SAP Integrated Delivery Framework, which allows for seamless partner
+collaboration.
+Scaling RISE with SAP
+The standardization and automation of our remote service delivery on the Intelligent Service
+Delivery Hub aims to assist customers with their adoption and improve delivery efficiency and
+quality. This is a new cloud-based service delivery and collaboration platform for customers, partners,
+and SAP to use throughout the customer engagement lifecycle. Embedded automation capabilities
+aim to enable automated quality checks, performance issue detection, and customer notification to
+mitigate potential issues that may arise.
+Starting Fast with Industry Cloud Solutions
+Speeding Up the Adoption of SAP Solutions
+Additional
+Information
+Expanding Our Support Offerings
+3,352
+3,624
+4,292
+€ millions | change since previous year
+Research & Development (IFRS)
+SAP's strong commitment to R&D is reflected in our expenditures (see graphic below).
+Investment in R&D
+processes with pre-defined templates and accelerators. These industry cloud-based services also
+include quick-start services to speed functional implementation and technical readiness.
+The SAP MaxAttention program was expanded to enhance collaboration with customers. This
+includes continuing the launch of the Intelligent Enterprise institute to help customers explore the
+full potential of SAP products and solutions through thought leadership, think tanks, and unique
+events. Chapters have now been established in Berlin, London, and New York.
+To accelerate the implementation of specific business scenarios, premium engagement services
+have been bundled into out-of-the box service plans, providing a prescribed implementation approach
+and road map broken down into phases with individual steps and timelines. Over 25 business
+scenarios are available.
+Simplifying Business Journeys
+SAP Learning System Access (previously called SAP Live Access) is now available as an
+integrated platform within SAP Learning Hub, edition for Preferred Success, providing access to
+live, preconfigured instances of SAP software to carry out class exercises, cross-train, and gain
+hands-on experience.
+SAP Preferred Success now covers SAP S/4HANA Cloud, private edition and is available through
+the RISE with SAP offering.
+An engagement model was established where customers, through their Customer Success team at
+SAP, now have access to domain experts through newly formed Success Centers.
+A new version of Built-In Support, a product-embedded digital support assistant, was released.
+SAP Cloud ALM has provided implementation and operation capabilities for cloud solutions
+which now includes solution monitoring, partner delivery content, and APIs, for a number of SAP
+solutions.
+SAP continued to expand and scale the capabilities of our customers' support experience, including
+the following ways:
+Enhancing the SAP MaxAttention Program
+18%
+Complementing our software and technology offerings, SAP provides services and support to help
+customers continually realize business value from their SAP investment. Throughout the customer
+lifetime partnership, we aim to help customers as they implement and adopt new solutions in the
+cloud, move legacy solutions to the cloud, or transform their business.
+From a services perspective, the RISE with SAP offering simplifies the engagement between SAP,
+ecosystem partners, and our customers. Aiming to support small and midsize business (SMB)
+partners, partner services for RISE with SAP are available for the enablement of their teams and
+offered in partner-led customer engagements. In line with this, SAP Learning Hub aims to support
+enabling and certificating SMB partners.
+10,908
+10,981
+11,547
+11,506
+11,412
+2017
+2018
+4,993
+2019
+2021
+We define more predictable revenue as the sum of our cloud revenue and our software support
+revenue. Our more predictable revenue increased from €19,586 million in 2020 to €20,829 million in
+2021. This reflects a rise of 6%. More predictable revenue accounted for 75% of our total revenue in
+2021 (2020: 72%), following the upward trend from prior years.
+Services revenue combines revenue from consulting services, premium support services, and other
+services such as training services. Consulting services primarily relate to the implementation of our
+cloud and on-premise software products. Our premium support offering consists of high-end support
+services tailored to customer requirements.
+Services revenue decreased €345 million, or 8%, from €4,110 million in 2020 to €3,764 million in 2021.
+The services revenue decline was predominantly caused by the divestiture of the SAP Digital
+Interconnect business in 2020. For more information, see Note (D.1). At the same time, the year-over-
+year revenue development continued to be negatively impacted by the lower consulting order entry
+generated in 2020 in the wake of COVID-19 pandemic uncertainties.
+Consulting revenue and premium support revenue decreased €114 million, or 3%, from €3,408 million
+in 2020 to €3,294 million in 2021. In 2021, consulting and premium support revenue contributed 87%
+of the total services revenue (2020: 83%) and 12% of total revenue (2020: 12%).
+Revenue from other services decreased €231 million, or 33%, to €471 million in 2021
+2020
+Services and Support
+3,769
+8,080
+SAP's ecosystem consists of more than 22,500 partners worldwide in over 140 countries that build,
+sell, service, and run SAP solutions and technology. The introduction of SAP PartnerEdge Cloud
+Choice, flex model in 2021 offers greater flexibility for customers, partners, and SAP to support cloud
+adoption. Through emphasis on landing customers as well as fostering engagement, SAP and our
+partners have new opportunities in the midmarket and large enterprise segments. Our 2025 ambition
+is to develop a radically partner-centric approach in line with the wider SAP strategy.
+Simplifying Partner and Customer Engagement Through RISE with SAP
+Ecosystem
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+Stakeholders
+9,418
+To Our
+SAP
+Management Report
+20,829
+19,586
+15,975
+14,677
+6,933
+SAP Integrated Report 2021
+10%
+To support our customers in getting started quickly and realizing their desired business transformation,
+a series of low-touch, fixed scope services were introduced to help customers detail, model, and
+2017
+Consolidated Financial
+Statements IFRS
+Management Report
+Combined Group
+8%
+To Our
+Stakeholders
+SAP
+SAP Integrated Report 2021
+Further Information on
+Sustainability
+According to IDC, “adaptations and lessons learned from the COVID-19 pandemic are becoming
+permanent, requiring revised global business and operating models. Digital resilience approaches
+The IT Market
+In the EMEA region, after a technical recession at the start of the year, the euro area economy
+recovered moderately in 2021 thanks to robust domestic demand, and nearly reached its pre-
+pandemic level of output in the third quarter. However, economic activity in the euro area waned
+again over the final quarter of the year as some countries reintroduced tighter containment measures
+to cope with new pandemic waves. In central and eastern Europe, economic activity stabilized until
+the third quarter but slackened in the fourth, reflecting a significant deterioration of the
+epidemiological situation, persistent supply bottlenecks, and high energy prices. In Russia, rising
+global demand for oil and gas supported economic activity throughout 2021, while sharply increasing
+numbers of pandemic infections led to tighter containment measures toward the end of the year.
+As for the Americas region, economic activity recovered in the United States, with subdued growth in
+the third quarter caused by a resurgence of pandemic infections. Over the year, consumer demand in
+the United States rotated toward services, which were not subject to supply bottlenecks. In Brazil, a
+tighter policy stance and limited fiscal space constrained economic activity in 2021, reports the ECB.
+Concerning the APJ region, the ECB finds that the Japanese economy slowed until the third quarter in
+the face of supply bottlenecks and the pandemic resurgence. However, it rebounded in the fourth
+quarter when containment measures were eased, vaccinations progressed, and policy support
+continued. In China, on the other hand, economic activity decelerated in the second half of the year
+because of energy shortages, turmoil in the residential property sector, and renewed pandemic
+outbreaks.
+Throughout 2021, rising commodity prices led to a buildup of inflationary pressures across the globe,
+reports the ECB. While the services sector benefitted from large economies reopening, supply
+bottlenecks interfered with the manufacturing sector in particular. In addition to pandemic
+uncertainties, these factors weighed on global economic activity, with the recovery lagging behind
+especially in emerging market economies.
+According to the European Central Bank (ECB), (A) the global economy was on the road to recovery in
+2021, with some advanced economies even returning to their pre-pandemic trajectories by year end.
+Overall, however, the recovery turned out to be less smooth than expected. Toward the end of the
+year, the ECB even revised its previous projections downward when the emergence of the Omicron
+variant of the coronavirus threatened to intensify the pandemic on a global scale.
+Economy and the Market
+Financial Performance:
+Review and Analysis
+Additional
+Information
+"2021 represented times of uncertainty due to the global health crisis and the upending of traditional
+business practices, but it also fueled further growth in digital technology pivots and digital
+transformation." This is how International Data Corporation (IDC), a U.S.-based market research firm,
+summarizes the reporting year. (B) "One notable impact of the COVID-19 pandemic is that many
+enterprises now recognize that their ability to build innovative digital products and services will
+determine whether they succeed or fail in the market. The imperative to develop innovative digital
+offerings is influencing an array of strategic decision making in the enterprise, including significant
+changes to business models, organizational models, distribution models, and revenue streams, says
+IDC. (C)
+Additional
+Information
+counter supply chain disruptions. Organizations are preparing for the return to office, the return to
+travel, new consumer spending patterns, the challenges of finding (higher-cost) talent, and the
+possible return of inflation in an environment of continued economic uncertainty. Innovation and
+digital resiliency become key to navigating ongoing disruption. During the pandemic, changes in
+behavior, consumption, and supply forced companies to adopt digital-led business and operating
+models that endure lockdowns, movement restrictions, social distancing, and more. Work from
+anywhere, connectivity, scalability, security, throughput, resiliency, and redefining internal processes
+for remote access will define the next normal."(C)
+SAP Integrated Report 2021
+SAP
+76/338
+75/338
+SAP's non-financial performance developed as follows: the Customer Net Promoter Score was 10,
+hitting the upper end of our 2021 guidance (5 to 10). Employee Engagement decreased slightly to
+83% (-3pp compared to 2020 and remaining below our outlook for 2021 (84% to 86%)). Our net
+carbon emissions continued to decrease by 18.5% to 110 kt (outlook for 2021: 90 kt to 110 kt). SAP's
+Full-year cloud revenue was up 17% to €9.42 billion and up 19% to €9.59 billion at constant
+currencies, hitting the high end of the revised full year outlook (€9.4 billion to €9.6 billion at constant
+currencies). Cloud and software revenue was up 4% year over year to €24.08 billion and up 5% to
+€24.41 billion at constant currencies, exceeding the high end of the revised full-year outlook
+(€23.8 billion to €24.2 billion at constant currencies). IFRS operating profit decreased 30% year over
+year to €4.66 billion. Non-IFRS operating profit was down 1% to €8.23 billion and up 1% to
+€8.41 billion at constant currencies, exceeding the high end of the revised full-year outlook
+(€8.1 billion to €8.3 billion non-IFRS at constant currencies).
+Looking at most of our financial and non-financial KPIs, the course of business was favorable for SAP
+in 2021:
+Executive Board's Assessment
+Overall Financial Position
+Businesses around the world increasingly used digital technologies and the cloud to transform the
+way they do business. Companies expressed the need for flexibility and adaptability as a response to
+supply chain disruptions and new regulatory restrictions. The strength and the execution of our
+strategy showed up on multiple fronts, for instance with strong growth in current cloud backlog and
+cloud revenues in particular that exceeded our expectations. High customer adoption was
+underpinned by strong demand for our cloud offerings. Furthermore, Customer NPS continued to
+increase, echoing our efforts toward stronger customer focus.
+Impact on SAP
+(c) IDC FutureScape: Worldwide Future of Digital Innovation 2022 Predictions, Doc #US47148621, October 2021
+(B) IDC FutureScape: Worldwide Digital Transformation 2022 Predictions, Doc #US47115521, October 2021
+(A) European Central Bank, Economic Bulletin, Issue 8/2021, Publication Date: January 13, 2022
+(https://www.ecb.europa.eu/pub/pdf/ecbu/eb202108.en.pdf)
+Sources:
+Monitoring decarbonization initiatives turned out to be a key component of digital transformation in
+the reporting year. "Beyond just cost take out, organizations will increasingly be disrupting themselves
+by using lower carbon power sources and creating more sustainable operations to adhere to the
+numerous sustainability standards that fall under the environmental, social, and governance (ESG)
+umbrella. More than 40% of organizations surveyed by IDC worldwide have declared an intent to
+reduce CO2 in their products/services, while about 30% have implemented a CO2 monitoring solution
+and another 20% are currently developing a CO2 monitoring solution," observed IDC. (B)
+IDC observed in addition that “companies that traditionally weren't technology centric are now digitally
+transforming and adopting technology to run and support their businesses. As part of that
+transformation, many are rethinking their business models so they can offer differentiated and
+recurring services, which are harder to commoditize. Where companies once sold physical items, they
+are now reimaging their businesses to provide outcome-based recurring services."(C)
+Sustainability
+Further Information on
+To Our
+Stakeholders
+Management Report
+17%
+2021
+In 2021, our IFRS R&D ratio, reflecting R&D expenses as a portion of total operating expenses,
+increased by 0.9 percentage points (pp) to 22.4% (2020: 21.5%). Our non-IFRS R&D ratio increased
+SAP Integrated Report 2021
+SAP
+To Our
+Stakeholders
+Combined Group
+Professional development of our R&D workforce.
+2020
+Management Report
+Consulting related to our product strategy
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Additional
+Information
+by 2.0pp to 23.8% year over year (2020: 21.8%). At the end of 2021, our total full-time equivalent
+(FTE) headcount in development work was 32,244 (2020: 29,580). Measured in FTEs, our R&D
+headcount was 30% of total headcount (2020: 29%).
+Patent attorney services and fees
+Obtaining certification for products in different markets
+Consolidated Financial
+Statements IFRS
+Translating, localizing, and testing products
+4%
+5,190
+Combined Group
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+74/338
+73/338
+4,454
+While our intellectual property is important to our success, we believe our business as a whole is not
+dependent on any particular patent or a combination of patents.
+Patents
+2018
+2019
+SAP actively seeks intellectual property protection for innovations and proprietary information. Our
+software innovations continue to strengthen our market position as a leader in business solutions and
+services. Our investment in R&D has resulted in numerous patents. As at December 31, 2021, SAP
+held a total of more than 11,605 (2020: 10,931) validated patents worldwide. Of these, 793
+(2020: 897) were granted and validated in 2021.
+Total R&D expense not only includes our own personnel costs but also the external costs of work and
+services from the providers and cooperation partners we work with to deliver and enhance our
+products. We also incur external costs for the following:
+3.42
+2.78
+10%
+2%
+3.35
+26
+56%
+-19%
+Dividend per Share
+If the shareholders approve this recommendation, and based on the number of treasury shares as at
+December 31, 2021, the total amount distributed in dividends will be €2,890 million. The actual
+amount distributed can be different from this total amount, because the number of shares held as
+treasury stock will change before the Annual General Meeting of Shareholders due to the share
+buyback SAP will execute in 2022. In 2021, we distributed €2,182 million in dividends.
+The Executive Board and the Supervisory Board of SAP SE will recommend to the Annual General
+Meeting of Shareholders in May 2022 that the total dividend for 2021 be increased 32% to €2.45 per
+share (2020: €1.85). This payment includes a special dividend of €0.50 to celebrate SAP's 50th
+anniversary. Based on this recommendation, the overall dividend payout ratio (which means the total
+distributed dividend as a percentage of profit after tax) would be 54% (2020: 41%). Excluding the
+special dividend, the ratio would be 43%.
+€ | change since previous year
+Dividend
+Information
+Additional
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+Stakeholders
+€ | change since previous year
+To Our
+SAP
+88/338
+87/338
+2021
+2020
+2019
+2018
+2017
+2%
+4.35
+4.46
+SAP Integrated Report 2021
+We believe our shareholders should benefit appropriately from the profit the Company made in 2021.
+Our dividend policy is to pay a dividend totaling 40% or more of profit after tax.
+12%
+Basic earnings per share increased to €4.46 (2020: to €4.35). The number of shares outstanding
+decreased slightly to 1,180 million in 2021 (2020: 1,182 million).
+Income Taxes
+Finance costs mainly consist of interest expense on financial liabilities amounting to €160 million
+(2020: €179 million), and IFRS 9-related fair value adjustments or losses from disposal of Sapphire
+Ventures investments totaling €654 million (2020: €345 million). For more information about financing
+instruments, see the Notes to the Consolidated Financial Statements, Note (E.3).
+Financial income, net, changed to €2,174 million (2020: €776 million). Our finance income was
+€3,123 million (2020: €1,473 million) and our finance costs were €949 million (2020: €697 million).
+Finance income mainly consists of gains from IFRS 9-related fair value adjustments, mainly of
+Sapphire Ventures investments, and the disposal of equity securities totaling €3,067 million
+(2020: €1,360 million).
+Financial Income, Net
+Information
+Additional
+The effective tax rate in 2021 was 21.5% (2020: 26.8%). The year-over-year decrease mainly resulted
+from changes in tax-exempt income and a one-time change of taxable temporary differences
+associated with investments in subsidiaries, which were partly compensated by changes in non-
+deductible expenses. For more information about income taxes, see the Notes to the Consolidated
+Financial Statements, Note (C.5).
+Further Information on
+Sustainability
+Combined Group
+Management Report
+Stakeholders
+To Our
+SAP Integrated Report 2021
+1.85
+SAP
+Consolidated Financial
+Statements IFRS
+Profit After Tax and Earnings per Share
+Profit after tax increased to €5,376 million in 2021 (2020: €5,283 million).
+Profit After Tax
+2021
+2%
+2020
+57%
+5,376
+5,283
+2019
+2018
+2017
+-18%
+1%
+3,370
+4,088
+4,046
+€ millions | change since previous year
+Earnings per Share
+1.58
+865
+1.40
+88
+800
+1,730
+1,600
+1,047
+500
+1,000
+1,250
+Combined Group
+Stakeholders
+To Our
+SAP Integrated Report 2021
+SAP
+90/338
+600
+1,088
+1,100
+1,135
+Overall, the segment profit and the segment margin benefitted from this development and ended the
+year with a segment profit of €728 million and a segment margin of 22.5%, which indicates a growth
+of 3.4pp (3.5pp at constant currencies).
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+On December 31, 2021, two bilateral term loans with a total amount of €1.45 billion were outstanding.
+The amount can be flexibly repaid until maturity of the loan on September 30, 2022.
+Financial Debts
+Financial debt is defined as the nominal volume of bank loans, commercial papers, private
+placements, and bonds.
+3,756
+2,026
+Maturity Profile of Financial Debts
+€ millions
+■ Variable Fixed
+1,600
+1,250
+89/338
+1.50
+As at December 31, 2021, SAP SE had additional available credit facilities totaling €335 million.
+Several other SAP entities have credit facilities available that allow them to borrow funds at prevailing
+interest rates.
+Other sources of liquidity are available to us through various credit facilities, if required.
+Global Financial Management
+2021
+2020
+2019
+2018
+2.45
+We use global centralized financial management to control liquid assets and monitor exposure to
+interest rates and currencies. The primary aim of our financial management is to maintain liquidity in
+the Group at a level that is adequate to meet our financial obligations at all times. Most SAP entities
+have their liquidity managed centrally by the Group, so that liquid assets across the Group can be
+consolidated, monitored, and invested in accordance with Group policy. High levels of liquid assets
+help keep SAP flexible, sound, and independent. In addition, various credit facilities are currently
+available for additional liquidity, if required. For more information about these facilities, see the Credit
+Facilities section.
+32%
+Finances (IFRS)
+2017
+5%
+12%
+7%
+17%
+Overview
+We manage credit, liquidity, interest rate, equity price, and foreign exchange rate risks on a Group-
+wide basis. We use selected derivatives exclusively for this purpose and not for speculation, which is
+defined as entering into a derivative instrument for which we do not have corresponding underlying
+transactions. The rules for the use of derivatives and other rules and processes concerning the
+management of financial risks are documented in our Treasury Guideline, which applies globally to all
+companies in the Group. For more information about the management of each financial risk and
+about our risk exposure, see the Notes to the Consolidated Financial Statements, Notes (F.1)
+and (F.2).
+SAP
+SAP Integrated Report 2021
+Credit Facilities
+Therefore, we continuously monitor funding options available in the capital markets and trends in the
+availability of funds, as well as the cost of such funding. In recent years, we were able to repay
+additional debt within a short period of time due to our persistently strong free cash flow. For more
+information about the financial debt, see the Cash Flows and Liquidity section.
+We believe that our liquid assets combined with our undrawn credit facilities are sufficient to meet our
+operating financing needs in 2022 and, together with expected cash flows from operations, will
+support debt repayments, currently planned capital expenditure requirements, and capital returns to
+our shareholders over the near term and medium term. It may also be necessary to enter into
+financing transactions when additional funds are required that cannot be wholly sourced from free
+cash flow, to maintain flexibility, and/or limit repayment risk.
+Our primary source of cash, cash equivalents, and current investments is funds generated from our
+business operations. Over the past several years, our principal use of cash has been to support
+operations and our capital expenditure requirements resulting from our growth, to quickly repay
+financial debt, to acquire businesses, to pay dividends on our shares, and to buy back SAP shares on
+the open market. On December 31, 2021, our cash, cash equivalents, and current investments were
+primarily held in euros and U.S. dollars. We generally invest only in the financial assets of issuers or
+funds with a minimum credit rating of BBB, and pursue a policy of cautious investment characterized
+by wide portfolio diversification with a variety of counterparties, predominantly short-term investments,
+and standard investment instruments. Our investments in financial assets of issuers with a credit
+rating lower than BBB were not material in 2021.
+Liquidity Management
+The Company plans to repurchase shares with a volume of up to €1.0 billion in the period between
+February 1, 2022, and December 31, 2022. Repurchased shares will primarily be used to service
+future awards granted under the 'Move SAP' share-based compensation plan which will start to be
+predominantly equity-settled in 2022. The share buyback will be in addition to SAP's regular dividend
+policy. Further capital returns in subsequent years will be decided on an annual basis in line with
+SAP's capital allocation priorities.
+The long-term credit rating for SAP SE is "A2" by Moody's and "A" by Standard & Poor's, both with a
+stable outlook.
+The primary objective of our capital structure management is to maintain a strong financial profile for
+investor, creditor, and customer confidence, and to support the growth of our business. We seek to
+maintain a capital structure that will allow us to cover our funding requirements through the capital
+markets at reasonable conditions, and in so doing, ensure a high level of independence, confidence,
+and financial flexibility. For more information about the capital structure and its analysis, see the
+Analysis of Consolidated Statement of Financial Position section and the Notes to the Consolidated
+Financial Statements, Note (E.1).
+Capital Structure Management
+Additional
+Information
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Group
+Management Report
+Stakeholders
+To Our
+To retain high financial flexibility, we have available a €2.5 billion syndicated revolving credit facility
+with an end date in November 2024. A possible future utilization is not subject to any financial
+covenants. Borrowings under the facility bear interest of EURIBOR or LIBOR for the respective
+currency plus a margin of 0.17%. We are also required to pay a commitment fee of 0.0595% per
+annum on the unused available credit. So far, we have not used, and do not currently foresee any
+need to use this credit facility.
+The Services segment, comprising major parts of SAP's services business, recorded revenue of
+€3,234 million, which represents a decline of 4.2% (2.7% at constant currencies). Cost of services
+decreased 7.9% (6.7% at constant currencies) to €2,035 million. As a result, the services gross margin
+increased 2.6pp (2.7pp at constant currencies) to 34.1% in 2021. This gross margin improvement was
+primarily attributable to the positive development of SAP's consulting and premium engagement
+business, and a higher remote delivery share of the consulting services.
+2.7pp
+3.4pp
+2018
+Operating Margin
+Percent | change since previous year
+24.2
+8.pp
+16.7
+16.2
+-6.9pp
+2019
+-7.5pp
+2020
+2.3pp
+2021
+Cost of Cloud and Software
+Cost of cloud and software consists primarily of costs for deploying and operating cloud solutions, the
+cost of developing custom solutions that address customers' specific business requirements, and
+customer support costs.
+In 2021, the cost of cloud and software increased to €5,030 million (2020: €4,707 million) and our
+cloud margin widened 0.4pp from 66.6% in 2020 to 67.0% in 2021.
+Our software licenses and software support margin was 86.9%, slightly above the prior year level
+(2020: 86.7%). Software licenses and software support revenue decreased 3% to €14,660 million
+(2020: €15,148 million), primarily arising from an 11% decline in software revenue. Software licenses
+and software support costs decreased correspondingly by 4% to €1,925 million (2020: €2,008 million).
+83/338
+84/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Changes to the individual elements in our cost of revenue were as follows:
+2017
+-2.5pp
+20.8
+Information
+Operating Profit and Operating Margin
+SAP continued to increase its cloud revenue in 2021. Total revenue increased significantly by 2% to
+€27,842 million (2020: €27,338 million), representing an increase of €504 million.
+In 2021, our operating expenses increased €2,471 million, or 12%, to €23,186 million
+(2020: €20,715 million). The main contributor to the increase were share-based payments, mainly
+caused by newly granted equity-settled Qualtrics RSUs. Our employee headcount (measured in full-
+time equivalents, or FTEs) grew 4,984 FTEs year over year to 107,415.
+As a result of these effects, our operating profit decreased 30% to €4,656 million
+(2020: €6,623 million) and our operating margin decreased 7.5pp to 16.7% (2020: 24.2%).
+Operating Profit
+€ millions | change since previous year
+4,877
+5,703
+17%
+-5%
+6,623
+4,656
+4,473
+48%
+-30%
+-22%
+2017
+2018
+2019
+2020
+2021
+23.1
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Non-IFRS
+€ millions, unless otherwise stated
+Non-
+Currency
+Non-
+Non-
+IFRS
+IFRS
+Impact
+Constant IFRS
+Currency
+Adj.
+IFRS
+Constant
+IFRS
+IFRS
+Currency³
+Cloud revenue - SaaS/PaaS¹
+Intelligent Spend
+Other
+2,831
+2,831
+67
+2,899 2,722
+0 2,722
+4
+4
+Non-IFRS
+Additional
+A in %
+Q1-Q4 2021
+Information
+Cost of Services
+Cost of services consists primarily of the cost of consulting, premium services and training courses,
+and the cost of bought-in consulting and training resources.
+The services revenue decreased by 8% year over year to €3,764 million in 2021
+(2020: €4,110 million). The cost of services declined 8% to €2,916 million (2020: €3,178 million). Our
+gross margin on services, defined as services profit as a percentage of services revenue, decreased
+slightly to 22.5% (2020: 22.7%). As our services business trends away from traditional software
+licensing and consulting revenue toward more subscription revenue from cloud solutions, we adjusted
+our service delivery resources correspondingly. The expenses are impacted by COVID-19-related
+limitations in personal customer contacts and a correspondingly high remote delivery share of the
+consulting services.
+Research and Development
+Our research and development (R&D) expense consists primarily of the personnel cost of our R&D
+employees, costs incurred for independent contractors whom we retain to assist in our R&D activities,
+and amortization of the computer hardware and software we use for our R&D activities.
+Due to growing personnel costs driven by a 9% year-over-year increase in our R&D headcount, and
+due to continued strategic investments, our R&D expense rose 17% to €5,190 million in 2021 from
+€4,454 million in 2020. R&D expense as a percentage of total revenue thus increased to 18.6% in
+2021 (2020: 16.3%). For more information, see the Products, Research & Development, and Services
+section.
+Sales and Marketing Expense
+Sales and marketing expense consists mainly of personnel costs, direct sales costs, and the cost of
+marketing our products and services.
+Our sales and marketing expense grew 6% from €7,106 million in 2020 to €7,505 million in 2021. This
+increase is mainly attributable to the expansion of the global sales force and to greater expenditure
+on bonus payments prompted by strong revenue growth and share-based payments.
+Accordingly, the ratio of sales and marketing expense to total revenue, expressed as a percentage,
+increased 1.0pp in 2021 to 27.0% (2020: 26.0%).
+General and Administration Expense
+Our general and administration expense consists mainly of personnel costs to support our finance
+and administration, human resource, and corporate functions.
+General and administration expense increased 79% from €1,356 million in 2020 to €2,431 million in
+2021. This increase is primarily due to expenses from share-based payments, with a major effect
+coming from Qualtrics equity-settled plans. The ratio of general and administration expense to total
+revenue grew 3.8pp year over year to 8.7% (2020: 5.0%).
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+Reconciliation of Cloud Revenues and Margins
+Q1-Q4 2020
+Further Information on
+Sustainability
+Consolidated Financial
+Statements IFRS
+Management Report
+1,029
+10,931
+10,364
+2,608
+3,308
+7,730
+7,898
+8,096
+7,756
+7,624
+2017
+2018
+2019
+2020
+2021
+Cloud and software revenue generated in the EMEA region totaled €10,931 million
+(2020: €10,364 million). That was 87% of all revenue from the region (2020: 86%). Cloud revenue in
+the EMEA region rose 27% to €3,308 million in 2021 (2020: €2,608 million). Software licenses and
+software support revenue decreased 2% to €7,624 million in 2021 (2020: €7,756 million).
+Americas Region
+In 2021, 39% of our total revenue was generated in the Americas region (2020: 41%). Total revenue in
+the Americas region decreased 1% to €10,969 million (2020: €11,106 million). Revenue in the United
+States decreased to €8,870 million (2020: €9,110 million), primarily driven by unfavorable changes in
+currency exchange rates. The United States contributed 81% (2020: 82%) of all revenue generated in
+the Americas region. In the remaining countries of the Americas region, revenue increased 5% to
+€2,099 million. Revenue in the remaining countries of the Americas region was generated primarily in
+Brazil, Canada, and Mexico.
+81/338
+82/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+1,441
+Combined Group
+Management Report
+2,115
+9,339
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial
+Statements IFRS
+Further Information on
+Sustainability
+Additional
+Information
+Revenue by Region
+Revenue by Region (Based on Customer Location)
+€ millions
+APJ
+Americas
+EMEA
+4,285
+10,969
+12,589
+EMEA Region
+In 2021, the EMEA region generated €12,589 million in revenue (2020: €12,067 million), which was
+45% of total revenue (2020: 44%). Revenue in Germany increased 8% to €4,343 million
+(2020: €4,015 million). Germany contributed 34% (2020: 33%) of all EMEA region revenue. The
+remaining revenue in the EMEA region was primarily generated in France, Italy, the Netherlands,
+Switzerland, and the United Kingdom.
+Cloud and Software Revenue (EMEA)
+€ millions
+Software & Support ■ Cloud
+10,211
+8,759
+6
+Consolidated Financial
+Statements IFRS
+Additional
+Information
+3,798
+3,629
+3,625
+3,310
+3,124
+419
+872
+611
+1,033
+1,217
+2,705
+2,699
+2,757
+2,592
+2,582
+2017
+2018
+2019
+2020
+2021
+Cloud and software revenue in the APJ region totaled €3,798 million (2020: €3,625 million). That was
+89% of all revenue from the region (2020: 87%). Cloud revenue in the APJ region rose 18% to
+€1,217 million in 2021 (2020: €1,033 million). Software licenses and software support revenue
+decreased from €2,592 million in 2020 to €2,582 million in 2021.
+SAP Integrated Report 2021
+SAP
+To Our
+Stakeholders
+Combined Group
+Software & Support ■Cloud
+Further Information on
+Sustainability
+€ millions
+In 2021, 15% of our total revenue was generated in the APJ region (2020: 15%). Total revenue in the
+APJ region increased 3% to €4,285 million (2020: €4,165 million). Despite the unfavorable currency
+development in Japan, revenue reached €1,301 million, nearly matching the previous year's level of
+€1,305 million. Revenue from Japan accounted for 30% of all revenue generated in the APJ region
+(2020: 31%). In the remaining countries of the APJ region, revenue increased 4%. Revenue in the
+remaining countries of the APJ region was generated primarily in Australia, China, and India.
+Cloud and Software Revene (Americas)
+€ millions
+Software & Support Cloud
+9,172
+9,239
+9,348
+7,666
+7,973
+3,945
+4,439
+2,321
+4,894
+2,941
+5,345
+5,032
+5,227
+4,800
+4,455
+2017
+2018
+2019
+2020
+2021
+Cloud and software revenue generated in the Americas region totaled €9,348 million
+(2020: €9,239 million). That was 85% of all revenue from the region (2020: 83%). Cloud revenue in the
+Americas region rose 10% to €4,894 million in 2021 (2020: €4,439 million). The United States, SAP's
+largest market, contributed 83% of cloud revenue generated in the Americas region. Software licenses
+and software support revenue amounted to €4,455 million in 2021 (2020: €4,800 million).
+APJ Region
+Cloud and Software Revenue (APJ)
+5,669 5,669
+86
+5,755 4,517
+Constant
+Currency
+Cloud revenue
+757
+780
+518
+46
+50
+Cloud gross margin (in %)
+91.5
+91.5
+91.8
+-0.3pp
+-0.2pp
+Segment revenue
+929
+957
+681
+37
+41
+Segment gross margin (in %)
+79.6
+79.7
+77.6
+1.9pp
+2.1pp
+Actual
+Currency
+Segment profit
+Actual
+Currency
+Currency
+Segment margin (in %)
+40.7
+40.8
+-1.6pp
+-1.5pp
+The Applications, Technology & Support segment recorded a strong increase in cloud revenue of
+12.8% in 2021 (14.8% at constant currencies). At the same time, cost of cloud increased 16.0%
+(18.3% at constant currencies), which led to a reduction in the cloud gross margin of 0.9pp (0.9pp at
+constant currencies) to 68.4%. Software support revenue remained flat compared to the prior year
+and ended 2021 at €11,410 million, which indicated a growth of 0.6% at constant currencies. Together
+with software licenses revenue, which decreased 10.8% (11.0% at constant currencies) mainly due to
+the shift toward cloud revenue, the segment achieved a total software licenses and support revenue
+of €14,654 million. However, total segment revenue rose slightly, by 2.3% (3.7% at constant
+currencies), and ended 2021 at €23,502 million.
+Overall, the share of more predictable revenue increased 1.8pp from 82.9% in 2020 to 84.8% in 2021.
+Cost of revenue increased 7.7% (9.3% at constant currencies) compared to the prior year, ending
+2021 at €4,808 million. This development was mainly driven by a strong increase in cost of cloud.
+85/338
+86/338
+SAP
+SAP Integrated Report 2021
+To Our
+Stakeholders
+Combined Group
+Management Report
+Consolidated Financial Further Information on
+Statements IFRS
+Sustainability
+Additional
+Information
+Segment profit remained at prior year level and ended 2021 at €9,567 million. This is mainly explained
+by an increase of total segment cost of 6.5% at constant currencies. Consequently, both the segment
+gross margin and the segment margin decreased slightly by 1.1pp and 1.5pp at constant currencies.
+Qualtrics
+2021
+2020
+A in %
+A in %
+€ millions, unless otherwise stated
+(non-IFRS)
+Actual
+Constant
+Currency
+0
+44
+-4
+34.5
+2.6pp
+2.7pp
+Segment revenue
+3,234
+3,283
+3,379
+-4
+-3
+Segment gross margin (in %)
+34.1
+34.2
+31.5
+2.6pp
+1,100
+Segment profit
+728
+743
+645
+13
+15
+Segment margin (in %)
+22.5
+22.6
+19.1
+37.2
+44
+37.1
+-3
+<-100
+<-100
+Segment margin (in %)
+4.7
+4.6
+-0.6
+5.4pp
+5.2pp
+The Qualtrics segment, which comprises SAP's experience management solutions, closed 2021 with a
+strong cloud revenue growth of 46.2% (50.4% at constant currencies). The associated cost of cloud
+rose 54.5% at constant currencies, which led to a slight drop in the segment's cloud gross margin of
+0.3pp (0.2pp at constant currencies). Including services revenue, the total segment revenue increased
+36.6% (40.6% at constant currencies) to €929 million. Overall, the Qualtrics segment profit increased
+to €44 million in 2021. The corresponding segment margin rose 5.4pp (5.2pp at constant currencies)
+to 4.7%.
+Services
+2021
+2020
+A in %
+A in %
+€ millions, unless otherwise stated
+(non-IFRS)
+Actual
+Currency
+Constant
+Currency
+Services revenue
+3,234
+3,282
+Actual
+Currency
+3,374
+Actual
+Currency
+Constant
+Currency
+-4
+Services gross margin (in %)
+3.5pp
+-2
+9,718
+8,085
+17
+16
+19
+Intelligent Spend
+78.9
+79.5
+79.5 78.6
+78.9
+0.3pp 0.6pp
+0.6pp
+Cloud gross margin-
+SaaS/PaaS¹ (in %)
+Cloud gross margin -
+laas² (in %)
+Cloud gross margin (in %)
+Other
+66.7 70.3
+70.2
+65.5
+70.7
+1.2pp -0.4pp
+-0.5pp
+Total
+70.8
+5
+73.3
+9,592 8,080
+9,418 9,418
+5
+4,522
+25
+25
+27
+Total
+8,500 8,500
+154
+8,653 7,239
+5
+7,244
+17
+17
+19
+Cloud revenue - laaS²
+Cloud revenue
+918
+918
+21
+939 841
+0
+841
+9
+9
+12
+174
+9,722
+73.3 70.4
+0.3pp -0.5pp
+8,661
+Cloud gross margin (in %)
+68.4
+68.4
+Actual
+Currency
+7,541
+69.3
+Actual
+Currency
+Constant
+Currency
+13
+15
+-0.9pp
+-0.9pp
+Segment revenue
+23,502
+23,816
+22,965
+2
+4
+Segment gross margin (in %)
+79.5
+79.5
+80.6
+-1.0pp
+-1.1pp
+Segment profit
+9,567
+8,509
+73.8
+Cloud revenue
+Actual
+Currency
+-0.5pp
+32.5
+33.6
+33.5 33.6
+34.3
+-1.1pp -0.7pp
+-0.8pp
+67.0
+69.5
+69.4
+66.6
+69.7
+0.4pp -0.2pp
+-0.3pp
+1 Software as a service/platform as a service
+2 Infrastructure as a service
+3 Constant currency period-over-period changes are calculated by comparing the current year's non-IFRS constant currency numbers with the non-IFRS numbers of the previous
+year's respective period.
+Segment Information
+At the end of 2021, SAP had three reportable segments: Applications, Technology & Support;
+Qualtrics; and Services. For more information about our segment reporting and the changes in the
+composition of our reportable segments in 2021, see the Notes to the Consolidated Financial
+Statements, Notes (C.1) and (C.2), and the Performance Management System section.
+Applications, Technology & Support
+2021
+2020
+A in %
+A in %
+€ millions, unless otherwise stated
+(non-IFRS)
+Constant
+Currency
+1,000
+42.3
+800
+1,000
+For more information about our financial debt, see the Notes to the Consolidated Financial
+Statements, Note (E.3).
+€ millions
+Financial Debt
+1,533
+Bank Loan
+930
+Commercial Paper
+766
+Private Placement
+Bonds
+Financial Debt by Instrument
+Nominal volume of financial debt on December 31, 2021, included amounts in euros (€12,058 million)
+and U.S. dollars (€1,036 million). On December 31, 2021, approximately 50% of the financial debt was
+held at variable interest rates, partially swapped from fixed into variable using interest rate swaps.
+For information about the intended repayments, see the goals for liquidity and finance in the Financial
+Targets and Prospects section.
+9,865
+2030
+2031
+500
+265
+2022
+2023
+88
+2025
+2026
+2027
+2029
+2028
+2024
+Chief Technology Officer
+Dr.-Ing. Juergen Mueller
+Other board memberships: Supervisory Board, Bertelsmann Management SE and
+Bertelsmann SE & Co. KGaA, Gütersloh, Germany (not publicly listed)
+Nationality: German
+Current Executive Board term expires: 2026
+Appointed to the Executive Board: 2023
+Joined SAP: 2023
+Joined SAP: 2013
+Chief Financial Officer
+Year of Birth: 1969
+Appointed to the Executive Board: 2019
+To Our
+Year of Birth: 1982
+8/324
+SAP
+SAP Integrated Report 2023
+Combined Management
+Stakeholders
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Dominik Asam
+Current Executive Board term expires: 2024
+Nationality: German
+Information
+Report
+Supervisory Board, adidas AG, Herzogenaurach, Germany
+I would like to thank you, dear fellow shareholders, for your trust in SAP in 2023 – and I am excited
+about the great opportunities and promising future that lie ahead.
+Sincerely,
+Christian Klein
+CEO, SAP SE
+7/324
+SAP
+SAP Integrated Report 2023
+To Our
+Combined Management
+Stakeholders
+Additional
+Additional
+Further Information about
+Sustainability
+SAP Executive Board
+Christian Klein
+Chief Executive Officer (CEO)
+Joined SAP: 1999
+Appointed to the Executive Board: 2018
+Current Executive Board term expires: 2025
+Nationality: German
+Year of Birth: 1980
+Other board memberships:
+Consolidated Financial
+Statements IFRS
+Information
+Nationality: German
+Customer Success
+Current Executive Board term expires: 2027
+Nationality: U.S. citizen
+Year of Birth: 1973
+9/324
+SAP
+SAP Integrated Report 2023
+To Our
+Combined Management
+Stakeholders
+Report
+Appointed to the Executive Board: 2021
+Consolidated Financial
+Statements IFRS
+Additional
+Information
+Investor Relations
+Global Economy Without Momentum but Inflationary Pressure
+Easing Slowly
+According to a statement by the German Federal Ministry of Economics and Climate Protection
+(BMWK), there are increasing signs that the global economy is facing a prolonged phase of below-
+average growth. The medium-term prospects for economic growth are lower than they have been for
+decades. After a strong start to 2023, the global economy showed a significant slowdown over the
+summer. This was mainly due to weak industrial production and the sharp rise in interest rates in most
+regions of the world. Another dampening factor was the subdued development in China. The
+economic situation is assessed very similarly by international organizations such as the International
+Monetary Fund (IMF) and the Organisation for Economic Co-operation and Development (OECD).
+Inflation, however, has fallen from last year's multiyear high. The IMF expects inflation rates to fall from
+6.9% in 2023 to 5.8% in 2024, with most countries not coming close to their central banks' targets
+before 2025. The OECD expects an average inflation rate of at least 2% in 2024 for both the United
+States and the euro area and is even forecasting 2.1% for Japan.
+Stock Markets Stimulated by Falling Interest Rates
+The stock market year 2023 was nevertheless more successful than many had expected in advance:
+The German blue-chip index DAX ended the year with a rise of over 19% and most stock markets
+worldwide were also up. The recent slowdown in inflation raised hopes of a looser monetary policy,
+which had a price-driving effect. The S&P500 index rose 22.8% and the Nasdaq-100 technology index
+exceeded all expectations with a gain of 53.8%.
+SAP Stock Reaches New All-Time High
+The SAP share price continued to improve throughout 2023. Shortly after SAP announced its good
+results for financial year 2022 at the end of January, the SAP share price rose more than 7% in a single
+week to €112.58. The successful execution of SAP's cloud transformation and the resulting
+improvement in profitability sent clear signals to the market. The positive sentiment solidified over the
+course of the following months, lifting SAP stock to €115.60 by the time the results for the first quarter
+were announced. The Q1 numbers and outlook for the full year were once again convincing and
+pushed the share a further 7% higher to €123.62 within a week. The market already had high
+expectations for the half-year results at the end of July due to SAP's performance in the previous
+quarters, and these expectations were met with the announcement, albeit without providing any
+further strong stimulus.
+With the results for the crucial third quarter, which once again confirmed the successful execution of
+SAP's strategy in terms of order entry, sales revenue, and operating profit, SAP stock began a
+remarkable upward trend. Within six weeks, the share price climbed to a new all-time high of €148.18
+on December 8, 2023, in a supportive market environment. The share ended the trading year on
+December 29 at a closing price of €139.48, representing an increase of 43.1% compared to the
+previous year's closing price. SAP's market capitalization at the end of December was €171.3 billion,
+making it once again the most valuable company in the German share index. With our intensified
+Investor Relations activities in North America, we could drive a strong increase in trading volume of the
+SAP ADR at the New York Stock Exchange. Additionally, SAP was ranked 61st among the 100 most
+valuable companies in the world according to a study by the management consulting firm EY.
+Further Information about
+Sustainability
+Scott Russell
+Joined SAP: 2021
+Julia White
+Joined SAP: 2010
+Appointed to the Executive Board: 2021
+Current Executive Board term expires: 2027
+Nationality: Australian
+Year of Birth: 1973
+Other board memberships: Board of Directors, Qualtrics International Inc, Provo, UT, USA
+Thomas Saueressig
+SAP Product Engineering
+Joined SAP: 2004
+Appointed to the Executive Board: 2019
+Chief Marketing & Solutions Officer
+Current Executive Board term expires: 2025
+Year of Birth: 1985
+Other board memberships:
+Board of Directors, Nokia Corporation, Espoo, Finland
+Gina Vargiu-Breuer
+Chief People Officer, Labor Relations Director
+Joined SAP: 2024
+Appointed to the Executive Board: 2024
+Current Executive Board term expired: 2027
+Nationality: German
+Year of Birth: 1975
+invest almost €1 billion to develop powerful Al use cases for our customers. And, with a dedicated
+transformation program, we intend to further intensify the shift of resources to business Al, in line with
+the significant growth potential we see for SAP. The planned program will also include a restructuring
+component focusing on reskilling and voluntary exits. A decision affecting colleagues this way is never
+easy - but we truly believe it is the right next step for the company. We're setting up SAP for a strong,
+competitive future that all stakeholders will benefit from.
+Information
+Driven by the Company's excellent results and an overall positive market mood, particularly for tech
+companies, SAP's stock soared in 2023. Towards the end of the year that also marked the 25th
+anniversary of our U.S. stock market listing, SAP stock reached a new all-time high at €148.18 per share.
+The share price increased 43.2% in total over the course of 2023 - more than double the
+development of the DAX, which gained 19.1%. The Nasdaq-100 appreciated by 54.9% in the same
+time frame. SAP also regained its position as the most valuable company among the DAX 40 in
+February 2023, and ended the year with a market capitalization of €171 billion on December 31, 2023.
+Shareholders will additionally profit from SAP's strong performance by means of an attractive dividend.
+Based on the Company's strong performance in 2023, SAP intends to propose a dividend of €2.20² per
+share at the annual general meeting in May - up approximately 7% compared to the preceding year.
+What is more, we announced a €5 billion share repurchase program to be conducted through the end
+of 2025. In addition to returning capital to shareholders, the program will help to balance out dilution
+related to employee share programs.
+Further Information about
+Sustainability
+Consolidated Financial Statements IFRS
+151
+Further Information about Sustainability
+259
+Additional Information
+315
+3/324
+SAP
+SAP Integrated Report 2023
+To Our
+45
+Stakeholders
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+To Our Stakeholders
+Letter from the CEO
+SAP Executive Board
+Investor Relations
+Report by the Supervisory Board
+LQ
+5
+Combined Management
+Report
+8
+Combined Management Report
+Contents
+SAP
+SAP
+2023
+Integrated Report
+SAP
+The SAP Integrated Report 2023 presents our annual financial, social, and environmental performance
+in a single integrated report ("SAP Integrated Report") available at www.sapintegratedreport.com.
+We report on our contribution to the UN Sustainable Development Goals (SDGs) and have embedded
+the recommended disclosures of the Task Force on Climate-Related Financial Disclosures (TCFD), of
+the Sustainability Accounting Standards Board (SASB) standards, and of the World Economic Forum
+(WEF) stakeholder capitalism metrics.
+Basis of Presentation
+Our combined management report is prepared in accordance with the German Commercial Code and
+the relevant German Accounting Standards.
+The report encompasses SAP SE and all subsidiaries which we control and, hence, include in our
+consolidated financial statement according to IFRS. Joint arrangements and associates are not
+included in the sustainability reporting. Any further deviations for the sustainability reporting are
+specifically mentioned in the respective chapters. Our executive management has confirmed the
+effectiveness of our internal controls over financial reporting.
+To Our Stakeholders
+The social and environmental data and information included in the SAP Integrated Report is prepared
+in accordance with the Global Reporting Initiative (GRI) Standards, which require a report to provide a
+comprehensive picture of its material topics and related impacts and how these are managed. We
+apply the GRI principles (sustainability context, stakeholder inclusiveness, materiality, and
+completeness) for defining report content. We also report on SDGs identified as material to our
+strategy.
+Data
+All financial and non-financial data and information for the reporting period is reported utilizing SAP
+software solutions and sourced from the responsible business units.
+The reporting period is fiscal year 2023. The report encompasses SAP SE and all subsidiaries of the
+SAP Group. To make this report as current as possible, we have included relevant information available
+up to the auditor's opinion dated February 21, 2024. The report is available in English and German.
+Independent Audit and Assurance
+BDO AG Wirtschaftsprüfungsgesellschaft (BDO) has audited our consolidated financial statements and
+our combined management report. Information relating to the non-financial statement included in
+SAP's management report has been audited with limited assurance by BDO. Additionally, BDO has
+provided assurance on selected sustainability information in accordance with the International
+Standard on Assurance Engagements (ISAE) 3000, a pertinent standard for the assurance of
+sustainability reporting. The Independent Auditor's Report and the Assurance Reports of BDO for the
+non-financial statement and selected sustainability information are available in the Independent
+Auditor's Report section, in the Independent Auditor's Report on a Limited Assurance Engagement of
+the Combined Non-Financial Statement, and in the Independent Auditor's Report on a Limited
+Assurance Engagement on Sustainability Information section.
+Concept and Realization
+This report was designed by SAP and created with SAP S/4HANA software and the SAP Disclosure
+Management application.
+2/324
+SAP
+SAP Integrated Report 2023
+Greenhouse gas data is prepared based on the Greenhouse Gas Protocol.
+00
+10
+15
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+€13.7 billion, growing 27%¹, while Cloud Revenue went up 23%¹ to €13.7 billion. Non-IFRS operating
+profit expanded by 13%¹, exceeding our guidance range. What is more, Total Cloud Backlog increased
+39%¹ to €44 billion, fostering the Company's resilience for the years to come.
+Our strong portfolio, tightly integrated in both technological and commercial terms, is at the heart of
+our Company's growth formula. Hundreds of leading global companies choose "RISE with SAP" every
+year to move their business processes to the cloud. In March 2023, we introduced "GROW with SAP,"
+an offering to support the cloud conversion of medium-sized companies. GROW with SAP, too, is
+proving to be a major success, with over 700 customers signing up in just nine months. In September,
+then, we launched Joule, SAP's generative Al co-pilot, to the public. Joule will be infused throughout
+our cloud portfolio. It will deliver insights from across SAP solutions and beyond, and it will enable
+users and companies to quickly reach relevant, reliable outcomes in a fast and responsible manner.
+Strong partnerships and collaborations with leading Al companies - including Nvidia, Microsoft, and
+OpenAl, as well as Google - will help SAP to further expand the capabilities of our business Al
+solutions and to maximize their benefit for our customers.
+With portfolio transactions, we additionally rounded out our offering. In June, we closed the sale of
+Qualtrics, aiming to focus our portfolio and to direct investments where they have the biggest impact.
+And in November, SAP finalized the acquisition of LeanIX, whose enterprise architecture management
+(EAM) solutions will help ensure that processes, systems, and data yield the right outcome for every
+SAP customer. In their combination, SAP LeanIX solutions, the SAP Signavio portfolio, and the
+SAP Cloud ALM solution for application life cycle management form a unique business transformation
+suite.
+SAP
+10/324
+Our Customer Net Promoter Score (NPS) improved 2 points year over year to 9 in 2023, reflecting that
+customers are increasingly satisfied with our solutions. Meanwhile, our Employee Engagement Index
+remained stable at 80% and came in at the upper end of our target range, indicating high levels of
+employee motivation, affinity towards SAP, and excitement about the Company's future. The proportion
+of women in management roles increased to 29.7% (2022: 29.4%) and reached 35.2% in the workforce
+overall.
+On behalf of the entire Executive Board, I would like to thank all SAP colleagues for these excellent
+achievements in a challenging environment. We had promised to quickly turn SAP into a cloud
+company - a company with double-digit profit growth - and we can comfortably say: we delivered.
+As we move into the future, we're determined to keep leading the way as a top Enterprise Application
+company and we're determined to become the #1 Business Al company as well. This is why, out of a
+very strong position, we are accelerating SAP's development. Over the next two years, we're going to
+1 At constant currencies
+2 Pending approval of Annual General Meeting of Shareholders
+6/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Beyond the convincing financial performance, SAP also met its non-financial goals. In 2023, SAP
+achieved carbon neutrality in its own operations and continues to focus on achieving net zero by 2030
+along our value chain. Further, we intend to make an even bigger contribution to sustainability by
+helping our customers accelerate their respective journeys. Roughly 1,000 new customers chose SAP's
+sustainability solutions in 2023 alone.
+5/324
+Today, SAP is stronger and more relevant than ever. And this is also visible in our business results: In
+2023, we met or exceeded our outlook in all key metrics. Current Cloud Backlog surpassed
+All these global developments have a direct relevance for SAP. Our solutions touch 87% of global
+commerce and help keep companies, economies, and global business resilient in volatile times. Our
+sustainability offering enables customers to systematically track key metrics, including carbon
+emissions, and to take effective action. Meanwhile, SAP is increasingly embedding business Al in all our
+solutions. We're doing our part to make the technology a powerful, readily accessible tool for
+organizations to become more efficient, more sustainable, and more innovative.
+Responsibility Statement
+28
+Independent Auditor's Report
+29
+Independent Auditor's Report on a Limited Assurance Engagement of the
+Combined Non-Financial Statement
+29
+29
+Independent Auditor's Report on a Limited Assurance Engagement on
+Sustainability Information
+42
+42
+4/324
+SAP
+SAP Integrated Report 2023
+To Our
+Combined Management
+Stakeholders
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+Letter from the CEO
+Dear Fellow Shareholders,
+2023 was another year of exponential developments around the globe. Looking at the geopolitical
+landscape, new crises surfaced as old ones had not yet settled, and conflicts in multiple regions kept
+the world on edge. Looking at the climate, record global temperatures and extreme weather events
+underlined the urgency to accelerate climate action. At the same time, change continued to be the only
+constant in the tech industry. The year saw incredible leaps especially in generative artificial
+intelligence (GenAI), and consumer applications rapidly captured the imagination of the global public.
+It also became clear, though, that the true value of this seminal technology lies in its application to the
+business world. GenAl will be a powerful tool to transform companies and to make the world economy
+more sustainable, resilient, and fair overall. At a time when humanity's challenges become ever more
+complex, GenAl promises to drastically expand our capacity to find solutions - and to do more with
+less.
+Additional
+SAP Integrated Report 2023
+About This Report
+Content
+Infrastructure as a service (laaS)
+Energy and Emissions:
+Due Diligence; Policies and
+Guidelines (Concepts)
+The individual non-financial aspects to be covered by the non-financial statement are addressed in the
+following sections of our combined management report if material. No material risks according to
+section 289c (3) sentence numbers 3 and 4 HGB have been identified.
+We determine which non-financial information has to be disclosed based on a materiality analysis we
+perform using internal and external input. For more information, see Materiality in the About This
+Further Information on Economic, Environmental, and Social Performance section in our
+SAP Integrated Report.
+Non-Financial Disclosures in SAP's Combined Management Report
+Vision and Strategy; Due Diligence
+Human Rights
+Environmental Matters
+gory
+Tran-
+Aligned (A.1) or
+Enab-
+sitio-
+Employee Matters
+Employees:
+Vision and Strategy; Due Diligence
+Expected Developments and
+Opportunities:
+Opportunities from Our Employees
+Human Rights:
+Vision and Strategy; Due Diligence
+Measures and Results, Including KPIs
+Relevant for Steering and Compensation
+KPI: Net carbon emissions
+Energy and Emissions:
+How We Measure and Manage Our Performance
+Performance Management System
+Strategy and Business Model: Measuring Our
+Success
+Expected Developments and Opportunities
+KPI: Employee Engagement Index
+Employees:
+How We Measure and Manage Our Performance
+Performance Management System
+Strategy and Business Model:
+Measuring Our Success
+Financial Performance:
+Review and Analysis
+Eligible (A.2)
+ling
+nal
+CapEx 2022
+A. Taxonomy-eligible activities
+N/EL²
+N/EL²
+N/EL²
+N/EL²
+N/EL²
+N/EL²
+T
+E
+%
+Y/N
+Y/N
+Y/N
+Y/N
+Expected Developments and Opportunities
+Y/N
+Y/N
+%
+Text
+Y;N;
+Y;N;
+Y;N;
+Y;N;
+Y;N;
+Y;N;
+ty (20)
+(19)
+(18)
+activi-
+activity
+Y/N
+Human Rights:
+How We Measure and Manage Our Performance
+References to Consolidated Financial
+Statements
+In this area of activity, we looked at our data centers and our relevant cloud solutions. The criteria for the Taxonomy alignment of activity 8.1 were not met in financial year 2023. We expect to make
+progress on the transition from Taxonomy-eligible to Taxonomy-aligned over the next few years as we work toward meeting the technical screening criteria. For instance, under the EU Taxonomy
+regulation, refrigerants used in data centers must not exceed a certain level of global warming potential. The refrigerants SAP uses do not meet these thresholds yet. Replacing them right away
+would create toxic waste and generate additional costs. Therefore, we intend to replace the refrigerants according to our regular maintenance schedule over the course of the next few years. Also,
+SAP's data center colocations and hyperscalers do not yet fully meet the criteria set out in the Taxonomy regulation. We are working with our providers to evaluate options to reach Taxonomy
+alignment over the next few years.
+Activity 3.3 "Manufacture of low carbon technologies for transport" (substantial contribution to climate change mitigation)
+This economic activity includes the vehicles purchased for the SAP car fleet. In 2023, SAP capitalized an amount of €210 million. For most of our electric vehicles, we were able to obtain the proof
+required for Taxonomy alignment from our suppliers, allowing us to report €51 million as Taxonomy-aligned.
+Other activity
+In single locations, SAP operates combined heat/cool and power generation facilities using fossil gaseous fuels. However, the associated Taxonomy-eligible and aligned revenues, capital
+expenditures, and operational expenditures are negligible. No further activities for nuclear or gas are applicable.
+Minimum safeguards
+SAP has conducted a review of all core topics of the minimum safeguards to ensure compliance. Our global due diligence processes ensure that SAP upholds and meets the requirements under
+the minimum safeguards.
+92/324
+SAP
+SAP Integrated Report 2023
+To Our Stakeholders
+Combined Management Report
+Consolidated Financial Statements IFRS
+Further Information about Sustainability
+Activity 8.1 "Data processing, hosting, and related activities” (substantial contribution to climate change mitigation)
+Additional Information
+€ millions, unless otherwise stated
+Financial Year
+2023
+Substantial Contribution Criteria
+DNSH Criteria ("Does Not Significantly Harm")
+Mini-
+Propor-
+tion of
+Climate Climate
+Climate Climate
+Proportion of
+Taxonomy-
+Cate-
+Category
+gory
+Circular Biodi-
+Revenue
+Taxonomy-Eligible Economic Activities of SAP
+The EU Taxonomy distinguishes between "Taxonomy-eligible" and "Taxonomy-aligned" economic activities. The eligibility assessment for 2023 is in accordance with the current EU Taxonomy
+regulation and reflects the changes published in the Environmental Delegated Act as well as the amendments to the Climate Delegated Act. As a result, SAP has identified two activities as relevant
+for disclosure, and examined whether they qualify as Taxonomy-aligned.
+Assessment of Taxonomy Eligibility and Alignment
+Notes to the Consolidated Financial
+Statements, Section B - Employees
+Anti-Corruption and
+Bribery Matters
+Business Conduct:
+Vision and Strategy; Due Diligence
+Business Conduct:
+How We Measure and Manage Our Performance
+Notes to the Consolidated Financial
+Statements, Note (G.3)
+Customer Matters
+Our Customers:
+Vision and Strategy: Due Diligence
+KPI: Customer Net Promoter Score; Revenues
+Customers: How We Measure and Manage Our
+Performance
+Performance Management System
+Strategy and Business Model: Measuring Our
+Success
+Financial Performance:
+Notes to the Consolidated Financial
+Statements, Section A - Customers
+Consolidated Income Statements -
+Revenue
+Review and Analysis
+Security, Data
+Protection, and Privacy
+Sustainable Finance: EU Taxonomy Disclosures
+Additional Information
+Further Information about Sustainability
+Consolidated Financial Statements IFRS
+Combined Management Report
+To Our Stakeholders
+A.1. Environmentally sustainable activities (Taxonomy-aligned)
+CapEx related to purchase of
+output of "3.3 Manufacture of
+SAP Integrated Report 2023
+91/324
+How We Measure and Manage Our Performance
+Security, Cloud Compliance, Data Protection, and
+Privacy:
+Expected Developments and Opportunities
+Vision and Strategy; Due Diligence
+for Security Topics; Due Diligence for
+Data Protection Topics
+Security, Cloud Compliance, Data
+Protection, and Privacy:
+SAP
+Code¹
+low carbon technologies for
+51
+Every day, organizations around the world trust SAP with their data - either on premise at their
+physical locations, in the cloud, or when using mobile devices while on the move. Which is why
+security, cloud compliance, and data protection and privacy are of paramount importance to us.
+Therefore, the principles set out in the SAP Global Security Policy govern how we keep our data and
+our customers' data safe, how we process it in compliance with local legislation, and how we protect it
+from malicious use. SAP uses the National Standards and Technology's Cybersecurity Framework
+(NIST CSF) to assess how well we manage cybersecurity risk in the Company. The cybersecurity
+governance framework incorporates industry standards and best practices that help guide our
+understanding of cybersecurity threats, vulnerabilities, and impacts, and how to mitigate these risks
+using proactive measures.
+Vision and Strategy
+Security, Cloud Compliance,
+Data Protection and Privacy
+Additional
+Information
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+Stakeholders
+To Our
+SAP Integrated Report 2023
+SAP
+98/324
+The content of the non-financial statement was not subject to the statutory audit of the combined management report. However, our external auditor carried out an independent limited assurance
+engagement on the non-financial statement including the EU Taxonomy disclosures. In addition, all non-financial aspects referenced to in the table Non-Financial Disclosures in SAP's Combined
+Management Report are assured by our external auditor, however on different audit assurance levels (reasonable or limited). The sections containing information audited with limited assurance
+include an Audit Scope box at the end explaining the audit scope of the disclosures in the respective section.
+QAudit Scope
+SAP Global Security and Cloud Compliance
+Since all activities at SAP contribute only to environmental objective I "Climate protection,” there is no risk of double counting.
+Information
+Taxonomy-eligible capital expenditures relate to assets and processes that are associated with the economic activity "8.1 Data processing, hosting, and related activities." These expenses comprise
+mostly investments in SAP's cloud infrastructure (IT hardware and software).
+In line with the EU Taxonomy regulation, total capital expenditures presented in this section include additions to tangible and intangible assets accounted for based on IAS 16, IAS 38, and IFRS 16,
+and additions to tangible and intangible assets (excluding additions to goodwill) resulting from business combinations.
+Additional Information
+Further Information about Sustainability
+Consolidated Financial Statements IFRS
+Combined Management Report
+To Our Stakeholders
+SAP Integrated Report 2023
+SAP
+97/324
+1 The code is the abbreviation of the relevant objective to which the economic activity is eligible to make a substantial contribution (for example: CCM - Climate Change Mitigation) plus the section number of the activity in the EU's annex to the Taxonomy Regulation.
+2 Y- Yes, Taxonomy-aligned with the relevant environmental objective; N - No, Taxonomy-eligible but not Taxonomy-aligned with the relevant environmental objective; N/EL - not eligible, Taxonomy-non-eligible activity for the relevant environmental objective
+3 EL - Taxonomy-eligible activity; N/EL - Taxonomy-non-eligible activity
+1,378
+23%
+Additionally, Taxonomy-eligible capital expenditures include capitalized costs relating to the purchases of vehicles.
+Cloud solutions and services are increasingly important to many companies' daily operations.
+Organizations today are facing many risk factors and disruptions, such as war, political unrest, severe
+weather, pandemics, cyberattacks, and supply chain disruption, making digital solutions critical to
+organizational resilience. As a result, digital transformation is accelerating and cybersecurity is now
+even more crucial to IT security professionals, and to leaders in business and government, particularly
+in those organizations that have moved their core processes to the cloud.
+The SAP strategy is focused on helping our customers in their digital transformation. Our SAP Global
+Security and Cloud Compliance (SGSC) unit supports this journey with the goals of reducing risk and
+promoting regulatory compliance, and by aligning people, procedures, and technology to protect
+business processes and data. The organization embraces a security-minded culture that embeds
+security and compliance in our development and deployment processes and helps secure digital
+transformation.
+SGSC supports key stakeholders across SAP in our lines of business (LoBs), IT, and the presales
+organization in securing solutions, and drives operational excellence for security and cloud
+compliance across the enterprise. To protect our organization's data and assets, and support high-
+quality risk management and reporting, SGSC regularly reviews and adapts our security policies,
+standards, and frameworks.
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+100/324
+SAP has established a global network of data protection and privacy coordinators (DPPCs) across all
+SAP Group entities that process personal data. This DPPC network consists of regional and local
+DPPCs to ensure data protection and privacy compliance on a local level. The DPPC network
+sensitizes our employees by conducting local training and monitoring the legal landscape. Where new
+data protection laws evolve, the DPPC network also helps the Data Protection and Privacy (DPP)
+team, which acts on behalf of the DPO, identify and analyze them. If this requires compliance activities,
+they align with the affected LoBs and help drive the relevant implementation. Supported by the DPPC
+network, the DPP team regularly engages with SAP Government Relations to represent SAP's interests
+To meet and ensure consistent security and data protection compliance, SAP has implemented a
+formal governance model that assigns clear responsibilities across the SAP Group. Upon request, the
+DPO attends steering committee meetings and reports on matters relevant to data protection to the
+Audit and Compliance Committee of the SAP Supervisory Board.
+Within the scope of their responsibilities, our global data protection officer (DPO) monitors the
+compliance of activities involving the processing of personal data. The DPO reports to our CFO. Within
+the Executive Board, the SAP CFO is responsible for compliance and enforcement of data protection
+and privacy. The DPO is responsible for the SAP Global Data Protection and Privacy Policy that
+addresses SAP's data protection governance, and regularly informs the CFO about the status of data
+protection compliance in the SAP Group.
+Governance
+Due Diligence for Data Protection Topics
+This policy provides high-level requirements for numerous security domains. These include, but are not
+limited to, access control, physical security, network security management, incident response, and
+acceptable use. These requirements apply to all SAP employees, contractors, and consultants, and to
+external parties that are granted access to SAP information and information assets. SAP reviews the
+policy annually and enacts modifications as deemed appropriate and necessary to protect SAP and
+our own and our customers' data and assets where new threats or vulnerabilities are identified. All SAP
+employees are required to read and adhere to this internal policy. The SAP Security Policy
+Framework consists of several levels of security documents that support the requirements described
+in the policy. In addition, the various LoBs at SAP may have supporting policies, standards, procedures,
+and practices.
+The purpose of the SAP Global Security Policy is to provide governance and structure for an
+appropriate and effective level of information security at SAP and our affiliated businesses. Aligned
+with the overall SAP corporate strategy and vision, it details management expectations and the
+strategic goals and objectives for SAP security.
+Guidelines and Policies
+Our commitment to customers is to be open and transparent about security vulnerabilities. To ensure
+this, we work with several external stakeholder groups, including the SAP user groups for the Americas
+and for the German-speaking countries.
+The SAP Security and Cloud Compliance Governance Model is designed to ensure executive
+engagement and facilitates shared responsibility in quarterly SAP Security Advisory Board and
+Security Council meetings and in periodic updates to the Executive Board.
+SGSC is led by a chief security compliance and risk officer and a chief security officer who report
+directly to the SAP chief technology officer (CTO). SGSC divisions are responsible for areas such as
+product and application security, cyberdefense, operational security risk management, security
+compliance, executive protection, physical security, and a Trust Office that supports customers and
+partners on matters relating to security and compliance.
+Data Protection
+With our product and services portfolio, we aim to protect the rights of individuals involved and to
+meet relevant local requirements when processing personal data. In addition, we strive to strengthen
+SAP's reputation in the long term as a sustainable and trustworthy partner in the market. We have
+implemented safeguards intended to help protect the fundamental rights of everyone whose data is
+processed by SAP, whether they are customers, suppliers, partners, prospects, employees, or
+applicants.
+We develop and pursue our global data protection and privacy strategy in accordance with our
+business strategy. Our global data protection and privacy strategy is to constantly monitor the global
+regulatory data protection compliance landscape, identify relevant stakeholders, and enable them to
+take necessary measures. It is also designed to safeguard the processing of personal data. The
+strategy consists of four pillars to help ensure we comply with applicable data protection laws and
+regulations. These pillars are our global data protection and privacy policy, mandatory global data
+protection and privacy trainings for employees, our global data protection and privacy network and
+global data protection management system and its data protection control framework.
+99/324
+SAP
+SAP Integrated Report 2023
+23%
+To Our
+Stakeholders
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+Due Diligence for Security and Cloud Compliance Topics
+Governance
+Combined Management
+Report
+CCM
+9%
+T
+CapEx of Taxonomy-eligible
+3.3
+EL
+11%
+159
+CCM
+EL
+12%
+160
+CCM
+8.1
+8.1 Data processing, hosting,
+and related activities
+CapEx related to purchase of
+output of "3.3 Manufacture of
+low carbon technologies for
+transport"
+EL; N/EL³ EL; N/EL³ EL; N/EL³ EL; N/EL³ EL; N/EL³ EL; N/EL³
+A.2 Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities)
+0%
+but not environmentally
+sustainable activities (not
+Taxonomy-aligned activities)
+100%
+0
+51
+100%
+4%
+51
+Of which Transitional
+Of which enabling
+(Taxonomy-aligned) (A.1)
+sustainable activities
+CapEx of environmentally
+transport"
+3.3
+Y
+4%
+4%
+0%
+(A.2)
+A. CapEx of Taxonomy-
+eligible activities (A.1+A.2)
+0%
+E
+0%
+Y
+Y
+Y
+Y
+Y
+Y
+Y
+0%
+E
+0%
+Y
+Y
+Y
+Y
+B. Taxonomy-non-eligible activities
+CapEx of Taxonomy-non-
+eligible activities (B)
+Total (A+B)
+319
+23%
+14%
+370
+1,008
+73%
+100%
+Y
+Y
+Y
+27%
+Economic Activities (1)
+(2)
+Turn-
+over (3)
+19%
+1,545
+A. OpEx of Taxonomy-eligible
+activities (A.1+A.2)
+Taxonomy-aligned activities)
+19%
+1,545
+(A.2)
+but not environmentally
+sustainable activities (not
+EL
+19%
+1,545
+CCM
+8.1
+OpEx of Taxonomy-eligible
+and related activities
+B. Taxonomy-non-eligible activities
+8.1 Data processing, hosting,
+A.2 Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities)
+Of which Transitional
+Of which Enabling
+(Taxonomy-aligned) (A.1)
+sustainable activities
+OpEx of environmentally
+A.1. Environmentally sustainable activities (Taxonomy-aligned)
+A. Taxonomy-eligible activities
+Y/N
+Y/N
+Y/N
+Y/N
+Y/N
+Y/N
+EL; N/EL EL; N/EL EL; N/EL4 EL; N/EL EL; N/EL EL; N/EL4
+OpEx of Taxonomy-non-eligible
+6,660
+81%
+Combined Management Report
+To Our Stakeholders
+SAP Integrated Report 2023
+SAP
+96/324
+For a detailed description of the development and key drivers of all operating expenses, see the Performance Against Our Outlook for 2023 (Non-IFRS) and the Operating Profit and Operating
+Margin sections in our combined management report.
+Total operating expenses according to the EU Taxonomy mainly include the following non-capitalized cost elements: research and development, short-term lease, and maintenance and repairs
+relating to property, plant, and equipment. Other major expense components in SAP's Consolidated Income Statement, such as depreciation, utilities (for example, costs for heating and electricity
+consumption), and most general and administrative cost, restructuring, and sales and marketing cost do not meet the definition of operating expenses in the EU Taxonomy and are therefore
+excluded.
+We have designated those costs as Taxonomy-eligible that relate to assets and processes associated with the Taxonomy-eligible activity "8.1 Data processing, hosting, and related activities." We
+considered materiality aspects when identifying relevant costs and activities. Most of the costs connected to this activity are leasing expenses for hosting services provided by third parties. To a
+smaller extent, these costs also include expenses for the maintenance and repair of SAP's cloud infrastructure.
+Additional Information
+Further Information about Sustainability
+Consolidated Financial Statements IFRS
+Combined Management Report
+To Our Stakeholders
+SAP Integrated Report 2023
+SAP
+95/324
+3Y - Yes, Taxonomy-aligned with the relevant environmental objective; N - No, Taxonomy-eligible but not Taxonomy-aligned with the relevant environmental objective; N/EL - not eligible, Taxonomy-non-eligible activity for the relevant environmental objective
+4EL - Taxonomy-eligible activity; N/EL - Taxonomy-non-eligible activity
+activities (B)
+Total (A+B)
+8,205
+100%
+19%
+19%
+Y/N
+19%
+E
+T
+ய
+E
+T
+1 The code is the abbreviation of the relevant objective to which the economic activity is eligible to make a substantial contribution (for example: CCM - Climate Change Mitigation) plus the section number of the activity in the EU's annex to the Taxonomy Regulation.
+2 Results for 2022 have been adjusted for continuing operations to reflect the divestiture of Qualtrics.
+%
+Consolidated Financial Statements IFRS
+Y;N;
+N/EL3
+Y;N;
+N/EL³
+(2)
+Economic Activities (1)
+Pollu-
+Change Change Water
+gory
+Category
+Cate-
+Proportion of
+Taxonomy-
+Climate Climate
+Climate Climate
+Propor-
+tion of
+OpEx
+Code¹
+Mini-
+(3)
+DNSH Criteria ("Does Not Significantly Harm")
+2023
+Financial Year
+€ millions, unless otherwise stated
+Operational Expenditures
+Additional Information
+Further Information about Sustainability
+Consolidated Financial Statements IFRS
+Combined Management Report
+To Our Stakeholders
+SAP Integrated Report 2023
+SAP
+94/324
+For a detailed description of the development and key drivers of SAP's revenue, see the Performance Against Our Outlook for 2023 (Non-IFRS) and the Operating Results (IFRS) sections of the
+combined management report.
+SAP's cloud revenue results from these services. Revenues that qualify as cloud revenue but cannot be classified as Taxonomy-eligible have been excluded. Total revenue is determined according
+to IFRS, specifically IFRS 15, and matches total revenue presented in SAP's Consolidated Income Statements. For more information about how we recognize revenue, and about the components of
+revenue, see the Notes to the Consolidated Financial Statements, Note A.1.
+Substantial Contribution Criteria
+OpEx
+2023 (4)
+Mitiga-
+Adapta-
+Y;N;
+N/EL³
+Y;N;
+N/EL3
+Y;N;
+N/EL3
+%
+€
+Text
+(19)
+(20)
+activity
+(A.2) OpEx
+20222 (18)
+activity
+guards
+(17)
+tion (12)
+tion (11)
+(16)
+ling
+or Eligible
+(7)
+tion (8)
+tion (5)
+tion (6)
+Circular Biodi-
+Econo-
+my (9)
+versity
+Y;N;
+N/EL³
+Change Change Water Pollu-
+Mitiga- Adapta- (13)
+tion (14)
+Circular Biodi-
+Econo- versity
+my (15)
+mum
+Safe-
+Tran-
+Aligned (A.1)
+Enab-
+sitional
+(10)
+Platform as a service (PaaS)
+Further Information about Sustainability
+Capital Expenditures
+Y;N;
+Y;N;
+Y/N
+Y/N
+Y/N
+Y/N
+Y/N
+Y/N
+Y/N
+%
+E
+T
+N/EL³
+N/EL³
+Y;N;
+N/EL³
+N/EL³
+A. Taxonomy-eligible activities
+A.1. Environmentally sustainable activities (Taxonomy-aligned)
+Turnover of environmentally
+sustainable activities
+(Taxonomy-aligned) (A.1)
+Of which Enabling
+Of which Transitional
+A.2 Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities)
+8.1 Data processing, hosting,
+and related activities
+Turnover of Taxonomy-
+eligible but not
+environmentally sustainable
+N/EL³
+Y;N;
+Y;N;
+Y;N;
+N/EL³
+Change Change Water
+Turn-
+Mitiga-
+Adapta-
+(7)
+Pollu-
+tion (8)
+Change Change Water Pollu-
+over
+tion (5)
+Econo- versity
+my (9)
+(10)
+tion (6)
+Mitiga- Adapta-
+tion (11) tion (12)
+(13)
+tion (14)
+Circular
+Econo-
+my (15)
+2023 (4)
+Biodi-
+versity Safe-
+(16) guards
+(17)
+%
+€
+Text
+ty (19)
+(18)
+(20)
+activities (not Taxonomy-
+activi-
+ling
+sitional
+Enab-
+Aligned (A.1) or
+Eligible (A.2)
+Turnover 20222
+Tran-
+mum
+activity
+Additional Information
+EL; N/EL4 EL; N/EL EL; N/EL4 EL; N/EL EL; N/EL4 EL; N/EL4
+13,361
+Mini-
+mum
+Safe-
+guards
+(17)
+(16)
+Circular Biodi-
+Econo- versity
+my (15)
+Pollu-
+tion (14)
+Water
+(13)
+Climate Climate
+Change Change
+Mitiga- Adapta-
+tion (11) tion (12)
+tion (6)
+tion (5)
+Circular Biodi-
+Econo- versity
+(10)
+my (9)
+Pollu-
+tion (8)
+Software as a service (SaaS)
+Adapta-
+Mitiga-
+gory
+CapEx
+2023 (4)
+Change
+Climate Climate
+Propor-
+tion of
+CapEx
+(3)
+Code¹
+(2)
+Economic Activities (1)
+Cate-
+Proportion of
+Cate-
+DNSH Criteria (“Does Not Significantly Harm")
+Substantial Contribution Criteria
+2023
+Financial Year
+€ millions, unless otherwise stated
+Change Water
+Taxonomy-
+As outlined above, we have identified only one activity as a relevant Taxonomy-eligible economic activity to which revenues can be attributed. We considered materiality aspects in this process.
+Eligible turnover consists of revenue earned from providing the following services, which comply with the description of activity 8.1:
+Additional Information
+43%
+EL
+8.1
+13,361
+43%
+aligned activities) (A.2)
+A. Turnover of Taxonomy-
+13,361
+43%
+eligible activities (A.1+A.2)
+B. Taxonomy-non-eligible activities
+Turnover of Taxonomy-non-
+eligible activities (B)
+17,846
+57%
+Total (A+B)
+31,207
+100%
+Further Information about Sustainability
+Consolidated Financial Statements IFRS
+Combined Management Report
+To Our Stakeholders
+SAP Integrated Report 2023
+SAP
+CCM
+93/324
+1 The code is the abbreviation of the relevant objective to which the economic activity is eligible to make a substantial contribution (for example: CCM - Climate Change Mitigation) plus the section number of the activity in the EU's annex to the Taxonomy Regulation.
+2 Results for 2022 have been adjusted for continuing operations to reflect the divestiture of Qualtrics.
+T
+E
+38%
+38%
+38%
+3Y - Yes, Taxonomy-aligned with the relevant environmental objective; N - No, Taxonomy-eligible but not Taxonomy-aligned with the relevant environmental objective; N/EL - not eligible, Taxonomy-non-eligible activity for the relevant environmental objective
+4EL - Taxonomy-eligible activity; N/EL - Taxonomy-non-eligible activity
+(7)
+SAP
+SAP Integrated Report 2023
+SAP Integrated Report 2023
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+External hires
+Early Talent 23 hires and pipeline
+programs
+Global onboarding
+Continuous learning, upskilling,
+and engagement
+Succession management process
+SAP Alumni Network
+Candidate and hiring manager
+experience
+Average tenure
+As part of our strategic pillar "Build SAP's Skills for the Future," we focus on the skills transformation of
+our workforce. We have established one unified skills library, and are working to unify existing skills
+management tools to implement one single platform, SAP SuccessFactors, for all employees. This will
+enable greater skills transparency, data-driven workforce planning, and intentional upskilling, as well as
+enhance our processes from hire to retire.
+Our learning strategy is closely aligned with our product and customer strategies to drive cohesive,
+skill-based development for both our ecosystem and our workforce.
+Talent Attraction, Development, and Retention
+104/324
+Women in Management: We define "women in management" as the share of women in management positions as compared to the total
+number of managers, expressed by the number of individuals and not FTEs. It includes three categories: 1) Managers managing teams: Refers
+to managing teams of at least one employee or vacant position; 2) Managers managing managers: Refers to managing managers who manage
+teams; and 3) Executive Board members. For 2023, we kept our ambition to increase the rate of women in management to 30%. Our
+aspiration is to reach gender parity in our workforce at all levels and to retain women leaders.
+Employee Retention: Ratio of the average number of employees minus the employees who left voluntarily, to the average number of
+employees, taking into account the past 12 months (in full-time equivalents, or FTEs). This ratio puts emphasis on employee-initiated turnover.
+In other words, we seek to measure how many employees choose to stay with SAP. As opposed to keeping a low turnover rate, we aim to
+keep our retention rate high. The number of employees who left voluntarily excludes those who left voluntarily as part of restructuring-related
+departures, for more transparency and precise headcount management purposes.
+Simplification of Processes: Shows the impact of our continued efforts to simplify our processes. The index is measured by nine questions in
+our #Unfiltered program (October 2023 survey).
+percent
+Simplification of
+Processes
+Employee
+Retention
+percent
+percent
+Women in
+Management
+percent
+87.
++-Opp
+- 7,187 (FTE) (2022: 12,564) employees, of which 41.5% were women (2022: 38.1%)
+62-2pp
+Below is an overview of how we put the three themes of our People Strategy and the KPIs into
+practice.
+Build SAP's Skills for the Future
+SAP is committed to accelerating cloud growth. This requires workforce upskilling and expansion.
+Attracting, hiring, onboarding, developing, and retaining top talent is vital for our future success. In 2023,
+we focused on internal roles and strategic investment areas to support our transformation and long-
+term growth. The competitive talent market underscores the need to further communicate our
+Employer Value Proposition, encourage employee ambassadorship, and promote referrals. We
+remain committed to fostering inclusivity across generations, genders, nationalities, and more, to
+ensure a rich and diverse workforce.
+For 2023, it remained our ambition to have 30% of management roles held by women. Our aspiration is
+to reach gender parity in our workforce at all levels and to retain women leaders.
+21 Information was not part of the statutory audit or the independent limited assurance engagement performed by our external auditor.
+22 Employee Engagement Index: For more information, see the Performance Management System section. The Employee Engagement Index
+target range for 2023 was 76% to 80%; this range will also be the target for 2024.
+Leadership Trust Net Promoter Score: for more information, see the Performance Management System section.
+Business Health Culture Index (BHCI): Indicates the extent to which SAP successfully offers employees a working environment that promotes
+health, and supports their long-term employability and their active engagement in reaching our corporate goals. The index covers questions
+concerning how employees rate their personal well-being, the working conditions at SAP, and our leadership culture. The BHCI is calculated
+based on the results of our #Unfiltered program (April 2023 survey). For 2024 through 2025, our ambition remains to keep the BHCI between
+78% and 80%.
+Innovation Index: Indicates to what extent we foster an innovation culture. The index is measured by three questions in our #Unfiltered
+program (April 2023 survey).
+96.4++3.6pp 29.7++0.4pp
+- Attracting diverse talent is supported by initiatives such as the SAP Returnship program for professionals who have taken a
+career break for caregiving, relocation, or military service.
+- Early Talent hires: out of 7,187 hired employees, 37.8% (FTE) (2022: 27.9%) are Early Talents.
+- Vocational Training / SAP Student Training and Rotation (VT/STAR) program: average of 1,454 students and apprentices
+(from Australia, Brazil, China, Germany, Hungary, India, Ireland, Japan, New Zealand, South-East Asia, South Korea, Switzerland,
+and the United States); conversion rate 24 of 82% (2022: 78%)
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+Earned employer, learning, and
+development recognitions
+- 170 (2022: 154); List of Workplace Culture Awards³¹
+- Our approach to upskilling has been recognized by:
+- The Chief Learning Officer 2023 Learning Elite Awards - Gold Status
+- SAP being named a leader in three IDC MarketScape reports, the European and U.S. IT Training Services 2021 Vendor
+Assessment, and APeJ IT Training Services 2022 Vendor Assessment, and issued again in 2023.
+Smart and transparent
+goal-setting approaches
+and continuous dialogue
+Holistic Total Rewards
+value proposition
+Drive SAP's Winning and Inclusive Culture
+With our performance management approach, we aim to establish a high-performance focus by linking
+business goals to the impact of individuals and teams. Development opportunities, meaningful reward
+packages, and a culture of inclusion foster an environment where the full potential of every individual
+is realized. It is critical that our employees see the link between their individual contribution and SAP's
+future success.
+Goal Setting and Reward Structure
+- SAP's top leadership sets goals for their organization based on SAP's and their respective Board area's strategy and focus
+areas and make them visible to all employees, kicking off a goal cascade through all required leadership levels, down to team
+and employee goal setting. In the time from January to April, up to 93% of our workforce documented their performance goals
+in 2023 (2022: 88%).32
+- SAP Talk conversation and check-ins throughout the year are designed to ensure manager and employee dialogue, discuss
+goals defined according to the SMART 33 methodology, agree upon and document these goals, and share feedback.
+Our rewards experiences bring value to our people and SAP. For example, we:
+105/324
+30 Score 1 is based on the question: "Would you hire this employee again?"; Score 2 is based on the question: "Has this employee 'raised the
+bar' for your team?"
+29 This is a weighted average of the candidate touchpoint survey: Career Site, Post-Application, Post-Interview, and Post-Decision.
+28 The score is based on three questions (scale: 1 being the lowest, 5 the highest rating) about their experience with the recruiter, their ability
+to represent the Company, and the opportunities there, and their ability to serve as strategic advisor to find the best fit within the Company for
+the candidate.
+-Cooperation with more than 2,700 academic institutions (events, executive lectures, office visits, competitions)
+- SAP Internship Experience Program: 1,568 (2022: 1,662) global participants in 22 countries
+- New employees must attend virtual corporate onboarding sessions (a total of 12 hours) that ensure they understand SAP's
+strategy, culture, structure, operations, and success metrics.
+-Around 4,500 new hires completed these sessions in 2023, with a customer satisfaction rate of 4.5.25
+- For new hires in customer-facing sales roles, corporate onboarding is complemented by role-based onboarding. In 2023,
+1,212 new hires in customer-facing sales roles completed our role-based onboarding program. With each new hire completing
+at least 80 to 90 hours of learning, total trackable learning was more than 97,000 hours.
+- Self-paced online and live interactive training, and a peer-to-peer learning portfolio for all employees
+- Role-based solution upskilling program for customer-facing functions26 (completion rate: 53%) 27
+- Cloud upskilling program that reached 39,618 employees (2022: 34,233)
+- High employee-learning participation rate: in 2023, the participation rate was 99%, resulting in more than 2.3 million learning
+hours (2021: more than 3 million hours; 2022: more than 3.1 million hours with a 98% participation rate)., and 12,057 individuals
+spent more than 50 hours learning.
++-Opp
+- More than 1.8 million external learners upskilled on SAP solutions and technologies in 2023 as part of our ambition to upskill
+2 million learners annually by 2025, including programs for underrepresented groups to build digital skills.
+- 25,559 former employees (2022: 20,054); 5,903 current employees (2022: 5,444)
+- It is our goal to differentiate SAP by creating a great experience in every interaction. Qualtrics feedback surveys of candidates
+and hiring managers help provide the necessary insight to continuously improve our hiring practices.
+- Candidate Experience: 28 4.22; Hiring Manager Experience: 29 4.68; Quality of Hire: Score 1: 96%; Score 2: 67%30
+- 8.7 years (2022: 8.3 years)
+23 "Early Talents" are defined as having 0 to 3 years of experience in a professional setting when hired into a professional role.
+24 Percentage who received permanent contracts after completing the VT/STAR program
+25 Score based on the question: "Overall, how satisfied are you with the Experience SAP session?" (scale: 1 being the lowest, 5 the highest
+rating).
+26 The role-based skill program is mandatory for all SAP employees in Customer Success (CS) - excluding contract employees in CS roles in
+Germany, where the program is considered "highly recommended."
+27 The role-based skill program consists of the following levels: L100 completion rate: 50%, L200 completion rate: 45%, L300 completion rate:
+121%, and Essential Learning completion rate: 53%.
+- Succession pipeline defined by supporting targeted development and facilitating Executive Board exposure in roundtables
+for incumbents and identified successors of executive roles
+81
+71 -1pts
+Innovation Index
+Change the Way We Lead - Do What's Right by driving accountability and empowerment in an
+agile, healthy, and inclusive environment
+Drive SAP's Winning and Inclusive Culture by fostering a culture that enables and rewards impact
+and business outcomes and nurtures inclusion and belonging
+Build SAP's Skills for the Future by attracting the best and most diverse talent and continuously
+up-/reskilling our people
+As part of People & Operations, our People Strategy connects with our go-to-market and product
+strategies, bringing together the essential fabric of SAP's transformation: our people, processes, and
+technology. Since 2020, we have been evolving our annual execution of our People Strategy, which
+contributes to our business strategy and value generation. It can be summarized across three strategic
+priorities powered by operational excellence, and showcasing SAP SuccessFactors solutions for
+human experience management (HXM):
+People are at the heart of our organization. Aiming for a highly engaged, diverse, future-fit workforce
+equipped with the right skills helps SAP attract and retain the best talent.
+Vision and Strategy
+Employees
+Additional
+Information
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+Stakeholders
+To Our
+Leadership Trust
+SAP
+102/324
+The content of the Security, Cloud Compliance, Data Protection and Privacy section was not subject to
+the statutory audit of our combined management report. However, our external auditor performed an
+independent limited assurance engagement for the content of this section.
+QAudit Scope
+For related financial risks, see the Risk Management and Risks section, specifically the Cybersecurity
+and Security and Data Protection and Privacy subsections.
+Due Diligence
+Governance
+Sabine Bendiek served as Chief People and Operating Officer and Labor Relations Director from
+January 1, 2021, until her departure from the Company on December 31, 2023. She is succeeded by
+Gina Vargiu-Breuer, who joined the SAP Executive Board in February 202417. The following functional
+areas help implement our People Strategy: Future of Work (including Global Health, Safety & Well-
+Being), Global Diversity & Inclusion, SAP Learning, Talent Attraction, Total Rewards, and our Global
+People Success Services team, which includes the HR Business Partner organization, People
+Experience, and Global HR Service Delivery.
+Guidelines and Policies
+83
+percent
+Employee Engagement Index
+Our Key People-Related KPIs at a Glance²²
+engagement (which includes excitement for the future of SAP), leadership trust, and health and well-
+being along with other topics twice in 2023. The average scores from both data collections were used
+as the full-year Employee Engagement Index and Leadership Trust Net Promoter Score.
+Additional people-related KPIs can be found in the Report data Hub.21
+Information
+Additional
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Related Risks for SAP
+Combined Management
+Report
+SAP Integrated Report 2023
+SAP
+103/324
+20 82,651 employees participated in the #Unfiltered survey in April (response rate: 76%), and 78,041 employees participated in the
+#Unfiltered survey in October (response rate: 71%). All headcount (HC)-relevant employees and, in addition, in Germany, the non-HC relevant
+employees on parental leave, on long-term sick leave, with a tenure of more than six months, PhD students, and vocational trainees were
+invited to take part in the 2023 #Unfiltered survey cycle.
+18 The Commitment Statement, first published in February 2023, is the public version of our internal SAP Global Health & Safety Policy.
+19 Both links lead to information that was not part of the statutory audit or the independent limited assurance engagement performed by our
+external auditor.
+17 As a result of the departure of Sabine Bendiek, as of January 1, 2024, SAP's HR function has been re-established as an independent Board
+area named People & Culture.
+The impact of our People Strategy is measured by seven KPIs (see table "Our Key People-Related KPIs
+at a Glance"). Five out of the seven KPIs are based on the results of our engagement survey program
+#Unfiltered.20 With #Unfiltered, we strengthen our commitment to listen regularly to our employees
+and act together on their feedback. Our focus in 2023 was on continuing our efforts to further
+strengthen the excitement about the future of SAP. We gauged the sentiment on employee
+How We Measure and Manage Our Performance
+SAP is committed to ensuring the fair and equal treatment of all employees in a sustainable manner.
+For that reason, we established comprehensive policies that guide us in our daily business. Examples
+include our SAP Global Antidiscrimination Statement and SAP Health & Safety Commitment
+Statement.18,19
+To Our
+Stakeholders
+In 2023, there were two notifiable data protection incidents in accordance with the GDPR for data that
+SAP processes for its own purposes and were reported to the supervisory authorities.
+SAP respects the rights of the data subjects to obtain information as to whether personal data
+concerning them is being processed. All necessary information is made available to the data subjects
+within the framework of the privacy statements on the respective SAP Web sites.
+SAP's own quality standards and international regulations require careful selection and monitoring of
+subprocessors processing personal data on behalf of SAP and SAP customers. With the goal that all
+subprocessors meet data protection and security requirements for the processing of personal data,
+SAP has implemented a subprocessor verification process that is part of the overall SAP Third-Party
+Risk Management framework.
+in the legislative process. In this regard, SAP participates in external working groups aiming at
+communicating industry-specific interests with respective governments.
+Additional
+Information
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+To Our
+Stakeholders
+SAP Integrated Report 2023
+SAP
+Net Promoter Score
+SAP has implemented a data protection management system (DPMS) for our organization. The DPMS
+adheres to the generally recognized standard for data protection management systems as defined in
+the British Standard BS 10012, which comprises the data protection requirements of the European
+Union (EU) General Data Protection Regulation (GDPR) since version 10012:2017. Our DPMS covers
+almost all LoBs and is planned to be implemented in all acquired companies as well. It is designed as
+a framework covering all aspects of data protection compliance of SAP organizations and employees.
+The system is used as SAP's standard methodology to ensure compliance with data protection
+legislation. The maintenance of the framework is subject to certification by the British Standards
+Institution (BSI) that confirms data protection compliance annually.
+Business Health
+Culture Index
+percent
+80
+80
+2019
+2020
+2021
+2022
+2023
+80
++-Opp
+60
+- Ensure fair pay through annual, global reviews of our pay ranges and pay equity, and centrally-funded pay adjustments, so
+that all employees are within their pay range and acceptable spread of pay differences with peers. Our approach is agnostic
+of personal characteristics and recognized as market-leading by The Josh Bersin Company.34
+Guidelines and Policies
+How We Measure and Manage Our Performance
+We also track the quality of our data protection compliance level based on the annual recertification of
+our DPMS by the BSI. SAP has been audited by the BSI annually and awarded certifications according
+to BS 10012 since 2011. The most recent certification is valid until end of 2025.
+To help ensure necessary knowledge about data protection, global data protection and privacy
+training is mandatory for SAP employees. The training is conducted every two years, with the latest
+rolled out in 2023. This training helps our workforce handle personal data with due care and in
+accordance with the law and to maintain compliance with data protection requirements in their work.
+We monitor compliance of data protection-relevant procedures across SAP. We maintain a record of
+processing activities ("procedure enrollment tool"), in which all procedures that process personal data
+must be documented. These records contain general information about the procedure according to
+clearly defined criteria that are necessary to meet proper documentation. The records are reportable
+and regularly reviewed.
+Data Protection
+Further Information about Additional
+Sustainability
+Information
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+Stakeholders
+To Our
+SAP Integrated Report 2023
+The SAP Global Data Protection and Privacy Policy sets a Group-wide governance standard and
+structure for the handling of personal data in accordance with data protection and privacy
+requirements. It also defines requirements for business processes that involve personal data and
+assigns clear responsibilities. The data protection principles set out in this policy are generally
+accepted and enshrined in most data protection laws around the world, including the EU GDPR. These
+principles provide the general framework in the SAP Group for the processing of personal data. We
+actively monitor changes to applicable laws and regulations so that we can update our standards on
+an ongoing basis as necessary to meet data protection compliance. The policy was last updated in
+2023.
+SAP
+Have external internationally accredited auditors assess and certify our cloud services according to
+various reporting standards and ISO certifications, such as ISO 9001, ISO 27001, ISO 27017,
+ISO 27018, ISO 22301, and BS 10012
+Offer service organization control (SOC) reports – such as SOC 1 Type II/ISAE 3402 and SOC 2
+Type II/ISAE 3000 - to provide insights into the design and operational effectiveness of internal
+control systems implemented within cloud delivery units
+-
+Monitor and support our cloud and IT units with more than 2,800 controls that are audited and
+tested for design and operational effectiveness
+Engage in internal and external audits across SAP globally
+We strive to reduce risk by continuously improving our processes for detecting and remediating
+attacks and vulnerabilities. To that end, we:
+SAP discloses vulnerabilities to customers and provides accompanying patches or instructions when
+the customer needs to take action. This procedure also applies to the rarer cases where SAP patches
+to cloud services require customer action. We disclose these instructions using SAP Security Notes
+published every second Tuesday of the month (Patch Day). By the time any vulnerabilities are
+disclosed to customers, the patches are already applied on cloud landscapes as a rule. This process is
+further supported by the publication of Common Vulnerabilities and Exposures (CVE documents)
+through MITRE that enable integration with the customer's existing vulnerability and risk management
+tools. MITRE is a disclosure mechanism that provides customers with authoritative, public information
+from SAP about SAP software vulnerabilities that can be integrated with their existing risk management
+processes and tools.
+Compliance processes at SAP adhere to trust-service criteria established by the American Institute of
+Certified Public Accountants (AICPA). Our security, privacy, confidentiality, and processing integrity
+controls are designed to achieve the appropriate control objectives. In addition, independent, external
+auditing partners regularly conduct security compliance audits.
+Security and Cloud Compliance
+101/324
+- Follow a "pay-for-performance" approach with broad-based and targeted investments to reward individuals' unique
+contribution and impact
+- Empower managers with a real-time analytics dashboard, powered by SAP, to make impactful rewards decisions
+- Motivate employees to drive our cloud transformation with short-term incentives using a unified KPI of growth in current
+cloud backlog (CCB) 35
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+- SAP puts processes and tools in place that enable employees to work flexibly from different
+locations (including working from home or abroad for personal reasons), in line with local flexible work
+policies.
+- The SAP Signavio Process Intelligence solution provides our HR organization with insights on how
+HR support tickets flow between the various HR support teams. In addition, we are currently leveraging
+the SAP Build Process Automation solution to further automate processes such as bonus plans and
+variable pay.
+Related Risks for SAP
+"Human rights and employee matters" is a risk factor that is assessed as part of SAP's corporate
+financial risk management system. No material financial risks were identified through our risk
+framework as described in the Risk Management and Risks section.
+Headcount and Personnel Expense
+Numbers disclosed in the Employees section 38 are based on headcount (exceptions in FTE are
+indicated). We define headcount in FTE39 as the number of people on permanent employment
+contracts, taking into account their staffing percentage. Students, individuals employed by SAP but
+currently not working for reasons such as maternity/parental leave, and temporary employees on
+limited contracts of less than six months are excluded from our figures. The number of temporary
+employees is not material.
+Full-time
+equivalents
+FTE year end
+107,602
++1,291 2022: 106,312
+Average number of
+employees
+SAP
+108/324
+37 The term "leaders" is inclusive of all SAP colleagues who are in a formal executive or people manager role - either managing a team or
+managing managers.
+- SAP runs SAP SuccessFactors solutions to manage global SAP people data, and the SAP Analytics
+Cloud solution to provide analytics and insights.
+Health, safety, and well-being
+Innovation
+In addition to our leadership culture, one further strategic pillar is that of pursuing an agile,
+entrepreneurial, healthy, and innovative organization, which is essential in today's rapidly changing
+environment.
+A Future-Ready, Agile, Healthy, and Innovative Organization
+- SAP's holistic approach to the future of work actively addresses trends and developments - including the Al revolution and
+skills shortage - to reimagine work at its core. We drive this transformation with state-of-the-art people practices and
+innovative workplace approaches to future-proof our organization in times of unprecedented change.
+86
+- Leveraging advanced technology and new office design concepts in frontrunner locations (London, Montréal, and Zurich)
+further supports SAP in attracting and retaining top talent in the tech industry.
+- The health, safety, and well-being of our people is a cornerstone of a sustainable Future of Work. To deliver on the promises
+outlined in SAP's business strategy, our people need to run at their best and realize their full potential, while caring for their
+own health, their colleagues' and team's well-being, and their customers' needs.
+FTE months' end
+average
+- A caring culture and compliance with international and local health and safety regulations are integral parts of our business
+conduct, our duty of care, and our commitment to ethical leadership, as outlined in SAP's Health & Safety Commitment
+Statement.
+- Rolled out the revised internal SAP Global Health & Safety Policy with the SAP Global Health Summit and an
+employee enablement training
+- Updated SAP's global health and safety management system in line with the SAP Global Health & Safety Policy
+- Continued the "Are you OK?" mental well-being initiative for leaders and employees as part of our commitment to a no-
+stigma working culture
+- Continued the SAP Global Mindfulness Practice program, supporting employees and customers in bringing mindfulness
+into daily personal and professional lives to increase their overall well-being and productivity
+- The SAP.IO programs curate a relevant and diverse startup ecosystem that extends the value of SAP solutions and meets
+the continuously evolving needs of our customers. The programs provide dedicated support to promising startups as they
+launch and scale relationships with SAP and our global network of customers, partners, and employees. In 2023, SAP.IO
+helped 120 startups scale their solutions and expand the SAP ecosystem.
+-Hasso Plattner Founders' Award: the highest internal employee recognition at SAP
+Deliver Operational Excellence and Showcase Human Experience
+Management
+Delivering engaging experiences for SAP's customers starts with our own workforce. A continued
+emphasis on operational excellence and experience management is key to delivering our human
+experience management (HXM) solutions and services efficiently, with both empathy and compliance.
+Examples include:
+- In 2023, for example, we:
+106,043
++173 2022: 105,582
+Average personnel
+expense/employee
+Further Information about Additional
+Sustainability
+Information
+Energy and Emissions
+Vision and Strategy
+For over a decade now, climate action has been at the top of SAP's corporate sustainability agenda in
+light of the increasing impacts of climate change and escalating global challenges such as ecosystem
+degradation and biodiversity loss. As outlined in the Sustainability Management 40 section, we aim to
+take climate action through our dual approach as enabler and exemplar to help pave the way toward
+a low-carbon future for our customers, partners, and SAP, and create impact within planetary
+boundaries.
+Due Diligence
+Governance
+As outlined in the Sustainability Management-section, the Executive Board sponsorship for
+sustainability lies with the CEO, and for climate action with the CEO and CFO. The ESG Steering Board
+(formerly Sustainability Council) serves as a governance body to steer SAP's corporate sustainability
+performance. The organizational unit and operating segment responsible for sustainability drives SAP's
+holistic, cross-company sustainability agenda. The Office of the Chief Sustainability Officer (OCSO) is
+part of this unit and continues to shape SAP's response to climate change in close cooperation with
+other departments. Among other things, the OCSO is responsible for:
+Defining the Environmental Policy and determining a global environmental project portfolio to help
+steer SAP's impact
+Consolidated Financial
+Statements IFRS
+Setting reduction and impact targets and embedding sustainability-related initiatives across SAP
+(for example, running the cross-board Environmental Management System and net-zero program)
+- Evaluating our carbon inventory and monitoring carbon emissions on a quarterly basis
+Assessing and managing climate-related risks through a quarterly risk review
+Serving as advisor to our development units to develop solutions
+Sustainability is a company-wide effort, and initiatives are also driven outside this dedicated unit. For
+example, the global procurement organization aims to ensure that SAP purchases energy-efficient,
+sustainable products and services. The global real estate and facilities management team designs and
+operates many SAP facilities based on robust environmental standards such as ISO 14001:2015 and
+the Leadership in Energy and Environmental Design (LEED) certification program. Our global cloud
+services organization attends to the optimization of the energy consumption in our data centers, while
+our SAP IT department encourages employees to use IT equipment and business software
+responsibly. In addition, to be able to innovate and evolve sustainability further, we regularly engage
+externally with various stakeholder groups, such as non-governmental organizations (NGOs), investors,
+customers, and academia. For more information, see the Stakeholder Engagementª¹ section.
+Guidelines and Policies
+Our Global Environmental Policy 42 provides the core framework for how we manage our environmental
+impact in our own operations and with our customers. Updated in August 2023 and approved by the
+40 Link leads to information that was neither part of the statutory audit nor included in the independent limited assurance engagement
+performed by our external auditor.
+41 Link leads to information that was neither part of the statutory audit nor included in the independent limited assurance engagement
+performed by our external auditor.
+42 Link leads to information that was neither part of the statutory audit nor included in the independent limited assurance engagement
+performed by our external auditor.
+110/324
+Managing nature-based investment decisions
+Future of Work
+Report
+Combined Management
+in Euro
+Restructuring-
+related
+terminations
+in FTE
+1,857
+160,000
++16,000 2022: 144,000
++1,318 2022: 539
+The personnel expense for each employee is defined as the overall personnel expense divided by the
+average number of employees.
+Stakeholders
+For 2024, we plan a targeted restructuring program in close alignment with social partners, which is
+expected to affect about 8,000 employees from SAP's global workforce. For more information, see the
+Notes to the Consolidated Financial Statements, Note (G.8).
+QAudit Scope
+Except for the quantitative indicators Headcount and Personnel Expense, the content of the
+Employees section was not subject to the statutory audit of our combined management report.
+However, our external auditor performed an independent limited assurance engagement for the
+content of this section. Under this engagement, the quantitative indicators Business Health Culture
+Index, Employee Engagement Index, Employee Retention, Women in Management, and Women in
+Executive Roles were audited at a reasonable assurance level.
+38 All financial and non-financial numbers in this chapter are based on continuing operations excluding Qualtrics.
+39 Thereof acquisitions: 558.
+109/324
+SAP
+SAP Integrated Report 2023
+To Our
+For more information about employee compensation and a breakdown of personnel expense, see the
+Notes to the Consolidated Financial Statements, Note (B.1) and Note (B.2).
+- Percentage of global senior executives who have completed relevant development offerings: 62.2%
+- With our Pledge to Flex initiative, SAP established a new standard for flexible work as the foundation for successful hybrid
+work - also for the post-pandemic era. Our global "I'm In” campaign, launched in May, reaffirmed our commitment to flex work
+and recommended working in the office two to three days per week as a good practice for many employees in 2023. We see
+value in coming together in the office on a regular basis, as it supports camaraderie, team collaboration, productivity, and
+innovation.
+- Holding the SAP Leadership Summit
+Marketplace Leadership: We are aware of the potential impact we can have as one of the largest
+tech companies in the world, and therefore extend our diversity and inclusion focus to our entire
+ecosystem.
+Gender inclusion, advancement,
+and equality
+Autism inclusion
+Race and ethnicity
+LGBTQ+ inclusion
+Workplace accessibility
+Global Employee Network
+Groups (ENGs)
+Equality and Inclusion in the Workplace
+Information
+- Women in the overall workforce: 35.2% (2022: 34.9%); women in management roles: 29.7% (2022: 29.3%); women in
+executive roles:36 22.2%
+- SAP Business Women's Network impact: 3,300 participants at International Women's Day and 150 chapter global events
+- We launched the Global Women's Development Program for women below managerial levels, which has 263 participants
+across all Board areas.
+- Percentage of leaders 37 who have completed at least one relevant learning asset: 44.4%
+- Celebrating 10 years of success in 2023, our Autism at Work program supported 244 (2022: 215) colleagues on the autism
+spectrum across 16 (2022: 15) countries. The program was also expanded to the Philippines.
+-SAP Autism Inclusion Pledge: we continued to support 126 companies with best-practice sharing.
+- We sponsored the first-ever Autism Inclusion Company of the Year Award in partnership with Disability:IN.
+- SAP received the HollyRod Foundation's Corporate Compassion Award.
+-We created the Sensory Relaxation Room in Prague and the Tranquility Lounge at the SuccessConnect event in Las Vegas as
+neurodivergent-inclusive spaces.
+- SAP ranked #3 on Forbes' list of the World's Top Companies for Women in 2023, rising from #18 in 2022.
+- SAP continued to be a member of the Equal@Work platform of ENAR, the European Network Against Racism.
+Additional
+Consolidated Financial
+Statements IFRS
+- Drive ownership through our share-based compensation program, Move SAP, which vests quarterly and is share-settled in
+most countries (2023: 97% of employees eligible)
+- Ensure ownership is accessible for all employees through our global share purchase plan, Own SAP. Overall participation
+was 75% in 2023 (2022: 79%) with a collective investment of 6,710,033 shares (2022: 9,183,599).
+-Increase transparency for employees on their holistic rewards offerings - from pay to benefits and equity. Employees now
+have transparency into their own pay ranges (99.8% of all employees) and the value of top benefits offerings (66% of all
+employees).
+For more information, see the Notes to the Consolidated Financial Statements, Note (B.3).
+At SAP, we strive to be the world's most inclusive workplace, aiming to create a unique culture where
+everyone feels a sense of belonging, and human differences are celebrated and valued.
+As a global organization with employees from 160 nationalities, we strive to consider the full spectrum
+of human differences and promote inclusion for each one of them (for example, inclusion of gender,
+race, LGBTQ+, generations, disability, and many other diversities). Our Diversity & Inclusion Strategy is
+built on three pillars:
+Workforce Diversity: We believe in leveraging the widest spectrum of human differences that
+represent a diversity of identities, thoughts, and perspectives to create business outcomes that help
+the world run better every day.
+Workplace Inclusion: We foster a work environment where colleagues can thrive and engage to
+their fullest potential in driving SAP's purpose. Inclusion involves active co-creation of the culture
+where all experiences lead to a feeling of acceptance and belonging.
+Further Information about
+Sustainability
+31 Link leads to information that was not part of the statutory audit or the independent limited assurance engagement performed by our
+external auditor.
+33 SMART is an acronym that stands for Specific, Measurable, Achievable, Realistic, and Timely.
+34 The Josh Bersin Company, SAP Transforms Total Rewards to Accomplish Pay Equity, 2023
+35 Used in our sales leadership plans as a primary KPI, in non-quota carrying sales plans as a secondary KPI, and in our revenue-enabling
+plans as the core basis of evaluating our company success. For a definition of CCB, see the Performance Management System section.
+106/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+32 M&A teams that are not yet using our Success Map tool are excluded.
+- We launched a global development program focused on levelling the playing field for underrepresented groups. The
+program was extended beyond North America to Africa and Brazil.
+- The SAP Returnship program, a 20-week internship for mid-career professionals, converted 66% of the returnees into full-
+time employees and doubled in size.
+- SAP received the following recognitions: Top rating in the Corporate Equality Index of the Human Rights Campaign in five
+countries; a gold seal in Uhlala Group's PRIDE Champion Audit in Germany; gold certification in Japan in the PRIDE Index from
+Work With Pride for the fourth consecutive year.
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+- SAP joined the Partnership for Global LGBTIQA+ Equality's "Pride on the Promenade" initiative at the World
+Economic Forum.
+Further Information about
+Sustainability
+Additional
+Information
+107/324
+leaders
+Consistent enablement of
+leaders
+engagement across all levels, including:
+- Executive strategy forums and clinics
+- Enabling executives to build high-performing organizations
+- Traditional, peer, and experiential learning journeys focus on purpose-driven leadership and on driving high-performing
+teams and organizations.
+-We built accountability into critical processes and provided data transparency on leadership KPIs for organizational steering.
+Targeted development offerings for each leadership tier, developing the skills to lead SAP into the future:
+- Enabling courageous conversations, providing feedback, intentional inclusion, and psychological safety
+- Scaling delivery of our modularized learning and flagship programs
+Reinforcing leadership culture
+36 We define "women in executive roles" as the percentage of women on the three management levels below the Executive Board out of the
+combined total of men, women, and other genders at those three levels.
+Consolidated Financial
+Statements IFRS
+SAP's leadership culture is built on our leadership credo: "Do what's right, make SAP better for
+generations to come," which focuses on empowerment of our leaders to make critical decisions and
+drive change, and on stewardship to bring along the next generation of leaders and employees.
+Leadership Culture
+- SAP sponsored the Out & Equal 2023 Workplace Summit.
+-We strengthened SAP's leadership culture, based on the credo, through the creation of a consistent approach to leadership
+- SAP supports 13 global Employee Network Groups (ENGS), which foster a culture of inclusion and psychological safety in
+the workplace.
+- Executive Board members continue to be executive sponsors for ENGS.
+- Allyship for Inclusion initiative launched globally in 2023 in partnership with ENGs to build a culture of inclusion.
+Workplace inclusion
+- SAP launched the first global diversity survey to assess workforce representation.
+Marketplace leadership
+Empowering and guiding our
+- We received a 100% score on the Disability Equality Index for the fifth consecutive year.
+- We launched Intentional Inclusion workshops globally to raise awareness about overcoming unconscious bias.
+- We achieved a 92% workplace equality rating (compared to 91% in 2022) in the #Unfiltered survey.
+Change the Way We Lead - Do What's Right
+-The SAP Design team released accessibility design tools and the inaugural research handbook to enhance product
+accessibility.
+- To foster the inclusion of transgender and non-binary people, SAP implemented the pronouns and preferred name
+functionalities available in the SAP SuccessFactors solutions it deploys internally.
+83
+- We activated the SAP EMEA South partner ecosystem on diversity and inclusion through active engagement with leadership.
+- We partnered with the World Economic Forum in best-practice sharing.
+- SAP won 56 diversity and inclusion awards in 2023, more than in any previous year.
+- In 2023, SAP was recognized as a Top Faith-Friendly Company by the Religious Freedom and Business Foundation.
+-We enhanced our engagement with customers to advance diversity and inclusion (for example, Tech Day of Pink).
+Base Year
+Our Carbon Reduction Targets
+How We Measure and Manage Our Performance
+CEO, this policy guides our efforts to improve our ecological footprint, provide environmental
+performance transparency, and demonstrate sustainable leadership through transformational
+strategies. In addition, it helps us comply with internationally recognized sustainability standards as
+well as stakeholder expectations, primarily those of customers, investors, and employees.
+1.5°C-aligned Science-Based
+Target (SBT)
+Carbon neutrality in our own
+operations by 2023
+Information
+Additional
+Further Information about
+Sustainability
+Combined Management
+Report
+To Our
+Stakeholders
+SAP Integrated Report 2023
+SAP
+Target
+Consolidated Financial
+Statements IFRS
+For more information, see the Sustainable Procurement section.
+120/324
+50 In the Report Data Hub, we provide more details about our environmental data (selected data presented in the linked environmental
+section was part of the statutory audit or independent limited assurance engagement performed by our external auditor. For more
+information, see the auditor's assurance report).
+49 Link leads to information that was neither part of the statutory audit nor included in the independent limited assurance engagement
+performed by our external auditor.
+48 Confirmed by the SBTI in a 2019 reassessment, our original 1.5°C-aligned SBT (first defined in 2017) aimed for a reduction of 85% by 2050
+compared to the base-year level 2016 (near-term target: reduction by 40% by 2025).
+47 Acceleration decision made in 2022 to prevent and mitigate the intensifying adverse effects of climate change.
+46 In the Report Data Hub, we provide a carbon emissions breakdown and more details on progress (selected data presented in the linked
+environmental section were part of the statutory audit or independent limited assurance engagement performed by our external auditor. For
+more information, see the auditor's assurance report).
+45 Link leads to information that was part of the compensation report audit of our external auditor (reasonable assurance level).
+111/324
+44 To see which emission categories are considered in our carbon neutral target, see section Non-Financial Information: Environmental
+Performance (link leads to information that was neither part of the statutory audit nor included in the independent limited assurance
+engagement performed by our external auditor).
+With our net carbon emissions dropping to 0 kilotons (kt) in 2023 (2022: 85 kt), we have achieved our
+carbon neutrality commitment within the targeted timeframe. To achieve our target, we continued and
+expanded existing initiatives and programs to drive efficiency and innovation, following our strategic
+approach to first avoid, secondly reduce, and thirdly - if no other option is feasible - compensate for
+residual emissions by investing in high-quality offset projects certified by international standards (for
+more information, see the section Investing in Carbon Offsets to Compensate for Our Remaining
+Emissions). Starting in 2024, we will shift toward reporting on our new leading environmental target of
+'net zero across our entire value chain by 2030.'
+Performance and Measures to Progress50
+Next steps: submission to the SBTI in 2024 and publication of target
+pathway 2024-2030 in the SAP Integrated Report 2024.
+In line with the Greenhouse Gas (GHG) Protocol, we revised the baseline,
+which includes scope 1, scope 2 market-based, and all business-relevant
+scope 3 value chain emissions. For more information, see the Non-
+Financial Notes49 section.
+In 2023, our original SBT48 was replaced by our commitment to reach net
+zero by 2030 in line with the SBTI Corporate Net-Zero Standard.
+о
+43 We account and report all our carbon emissions in CO2 equivalents (CO₂e).
+SAP
+SAP Integrated Report 2023
+To Our
+0
+-23%
+-19%
+110
+135
+Additional
+Information
+Total Net Carbon Emissions
+Kilotons CO2e
+2019
+-3%
+300
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Report
+Stakeholders
+Combined Management
+о
+○
+Status and next steps:
+• Acceleration of SAP's science-based target 47 (to reach net zero across our
+value chain in line with a 1.5°C future by 2030, 20 years earlier than originally
+planned) required a reassessment of the baseline, underlying scopes,
+calculation methodologies, and the target pathway.
+This approach allows us to reduce our entire electricity-consumption-related emissions (2023: 256 kt in total; 161 kt by SAP
+and 95 kt by suppliers; 2022: 257 kt). Going forward, we aim to expand the usage of Power Purchase Agreements for sourcing
+renewable electricity.
+• SAP's environmental management system (EMS) is implemented in over 45 sites in 26 countries worldwide and certified
+by the internationally recognized ISO 14001:2015 standard. In 2023, we successfully maintained this certification.
+• Target: Increase EMS scope to 100% of SAP's major company-owned sites by 2025 (2023: 86%).
+• SAP's headquarters in Germany and North America and 100% of SAP's own major data centers (St. Leon-Rot and
+Walldorf in Germany, and Colorado Springs and Newtown Square in the United States) operate an ISO 50001:2018-
+certified energy management system.
+53 For more insight into our sustainability software portfolio, see SAP's Website (link leads to information that was neither part of the statutory
+audit nor the independent limited assurance engagement performed by our external auditor).
+54 We achieve this by leveraging 1) investments in high-quality, EKOenergy-certified EACs, and 2) renewables produced on-site. The term "data
+center" refers to both SAP-owned and external data centers (co-location data centers and hyperscalers).
+55 Relating to the electricity consumed by cloud solutions from SAP only.
+56 The term "data center" refers to both SAP-owned and external data centers (co-location data centers and hyperscalers).
+57 For more information, see section Non-Financial Notes: Environmental Performance.
+113/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+• As a potential third lever, we are running a green tariff pilot in Australia to power our local facilities with renewable
+electricity (bundled EACs).
+-55%
+• We produce renewable electricity in selected SAP locations worldwide through solar panels (such as in Palo Alto, CA, in the
+United States, Bangalore, India, and Mougins, France). At SAP's headquarters, we are in the process of implementing an on-
+site Power Purchase Agreement (PPA) solar project with the aim of increasing the share of renewable electricity self-
+produced on-site and achieving price stability.
+Since 2014, SAP has been running all its offices and data centers 56 with 100% renewable electricity in alignment with our
+commitment toward the RE100 initiative. For this, we use two strategic levers:
+⚫ Status: Achieved 46
+⚫ To track progress on our target, we derived annual targets for our internal
+operational steering. Since the beginning of 2020, these annual targets have
+been integrated in the Executive Board's short-term performance-based
+compensation45.
+• Net carbon emissions = gross carbon emissions (scope 1, 2, and selected
+scope 3)44 minus purchased renewable energy certificates (EACS), self-
+generated renewable energy, and carbon offsets.
+Target Description, Status, and Next Steps
+2030: reduction by
+90% (near-term
+and long-term
+target)
+2023: 0 kilotons
+(kt) net carbon
+emissions
+Target Year
+• Since 2012, SAP has helped to plant over 16.3 million trees to support ecosystem restoration and sustainable
+development. SAP will continue to finance nature-based solutions and is committed to planting 21 million trees by the
+end of 2025.
+• By applying strict quality criteria, SAP aims to support initiatives which restore and protect the right trees in the right places
+and have a positive impact on the local community, biodiversity, and climate.
+• Since 2021, SAP has been part of the 1t.org Corporate Alliance, which mobilizes business leaders to responsibly conserve,
+restore, and grow trees worldwide while pursuing the 1.5 degrees Celsius science-based target.
+Operations
+Running SAP facilities with 100%
+renewable electricity
+ISO 14001
+ISO 50001
+• We invest in high-quality, EKOenergy-certified EACS 57 to foster renewable energy generation.
+Further Information about
+Sustainability
+2020
+2022
+Combined Management
+Report
+To Our
+Stakeholders
+SAP Integrated Report 2023
+SAP
+Cloud Transformation
+112/324
+Consolidated Financial
+Statements IFRS
+52 For more information, see section Non-Financial Notes: Environmental Performance.
+2023
+2022
+2021
+2020
+2019
+108
+51 In 2023, hyperscaler electricity consumption was more than two times that of our co-locations. For more information about our energy
+consumption, see section Non-Financial Notes: Environmental Performance.
+Further Information about
+Sustainability
+Additional
+Information
+Key Initiatives to Avoid and Reduce Emissions
+• We consider environmental requirements in procurement processes and decisions.
+Multi-phased supply chain engagement program: We partner with (top) suppliers to procure low carbon and energy-
+efficient products and services to reduce their environmental footprint throughout the supply chain.
+•
+nature-based solutions to
+climate change
+Fostering biodiversity and
+Environmentally conscious
+procurement
+Supply Chain
+• We collaborate with customers to optimize their on-premise landscapes so that they consume less energy (for example,
+we decommission legacy systems, archive unused data, consolidate business applications, and virtualize their system
+landscapes).
+• We started to develop a carbon footprint sizing approach with the aim of enabling our customers to gain transparency on
+the carbon impact of their SAP applications that run in SAP's internal and external data centers, answering the question of
+how much our customers can reduce their environmental footprint while running SAP solutions on SAP's self-operated or
+on SAP sourced infrastructure.
+• By powering all data centers with 100% renewable electricity, 54 we offer our customers carbon-neutral 55 cloud software
+solutions and help them reduce their overall carbon emissions (upstream scope 3).
+The vast majority of our overall carbon emissions result from the use of our software. To address this, we aim to help our
+customers, hardware providers, and others to run more energy-efficient operations.
+• As co-innovation customers for the Sustainability Control Tower, Sustainability Footprint Management, Sustainability Data
+Exchange, and Green Ledger, various teams such as the Corporate Sustainability team and Sustainability Controlling team
+provide input and feedback to the development teams with the aim of leveraging a solution that enables companies to
+record, report, and act on their sustainability goals.
+• SAP delivers sustainability management solutions for sustainability reporting, climate action, circular economy, and social
+responsibility to enable our customers to run sustainable and resilient operations as described in the Product Strategy
+section.53
+Carbon-neutral cloud solutions
+and product-in-use emissions
+SAP's sustainability software
+portfolio
+138
+157
+176
+177
+7%
+805
+845
+906
+Gigawatt hours (GWh)
+2020
+2019
+-22%
+871
+5%
+1,110
+(Scope 1 and Scope 2, excluding hyperscale data centers)
+Total Energy Consumption
+After post-COVID-19 catch-up effects and a corresponding increase in 2022, total energy consumption
+in our own operations decreased slightly in 2023. Looking at the data center electricity consumption,
+we continue to see a decrease attributable to a shift toward hyperscale services and the implemented
+energy efficiency measures taking effect. 51 We have continued to reduce all electricity-related emission
+categories with electricity from renewable energy sources 52 (for more information, see the Key
+Initiatives to Avoid and Reduce Emissions table below).
+2023
+-3%
+2021
+2021
+2022
+105
+168
+175
+213
+177
+156
+306
+■Co-locations
+332
+333
+353
+SAP-own
+Gigawatt hours (GWh)
+Total Data Center Electricity Consumption
+(Scope 2, excluding hyperscale data centers)
+2023
+-11%
+• Intact forests help to slow climate change, safeguard biodiversity, and provide critical ecosystem services to people. Thus,
+reforestation projects are one part of SAP's climate action plan.
+Additional
+Information
+Alternative commuting
+Additional
+Information
+Under the terms of our U.S. private placements totaling approximately US$0.42 billion as at
+December 31, 2023, we are required to offer lenders repayment of outstanding debt if there is a
+change of control and SAP is consequently assigned a lower credit rating within a defined period. For
+more information about these private placements, see the Notes to the Consolidated Financial
+Statements, Note (E.3). Lenders would have up to 30 days to accept the offer.
+We have entered into relationships with other companies to jointly develop and market new software
+products and cloud solutions. These relationships are governed by development and marketing
+agreements with the respective companies. Some of the agreements include provisions that, in the
+event of a change of control over one of the parties, give the other party a right to consent to the
+assignment of the agreement or to terminate it.
+Change-of-control provisions in Executive Board compensation agreements: Agreements have
+been concluded with the members of the Executive Board of SAP SE concerning compensation in the
+event of a change of control. These agreements, which are customary internationally, are described in
+the Compensation Report. We have no analogous compensation agreements with our other
+employees.
+Further Information about
+Sustainability
+118/324
+SAP Integrated Report 2023
+To Our
+Combined Management
+Stakeholders
+Report
+Consolidated Financial
+Statements IFRS
+SAP
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+To Our
+Stakeholders
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+Executive Board. Executive Board members may be reappointed for, or their term of office extended
+by, a maximum of five years. A simple majority of the Supervisory Board members is required for
+Executive Board appointments. In the event of a tie, the chairperson of the Supervisory Board has the
+deciding vote. The Supervisory Board can appoint a chairperson of the Executive Board and one or
+more deputy chairpersons from among the members of the Executive Board. The Supervisory Board
+can revoke appointments to the Executive Board in accordance with the SE Regulation, article 9, and
+the German Stock Corporation Act, section 84, if compelling reasons exist, such as gross negligence on
+the part of the Executive Board member. If the Executive Board is short of a required member, one may
+be appointed in urgent cases by a court in accordance with the SE Regulation, article 9, and the
+German Stock Corporation Act, section 85. In accordance with the SE Regulation, article 59, and the
+German Stock Corporation Act, section 179, an amendment of the Articles of Incorporation requires a
+resolution of the General Meeting of Shareholders with a majority of at least three-quarters of the valid
+votes cast. For any amendments of the Articles of Incorporation that require a simple majority for stock
+corporations established under German law, however, the simple majority of the valid votes cast is
+sufficient if at least half of the subscribed capital is represented or, in the absence of such quorum, the
+majority prescribed by law (that is, two-thirds of the votes cast, pursuant to article 59 of the
+SE Regulation) is sufficient. Section 11 (2) of the Articles of Incorporation authorizes the Supervisory
+Board to amend the Articles of Incorporation where such amendments only concern the wording.
+Power to issue and repurchase shares: The Annual General Meeting of Shareholders on
+May 12, 2021, granted powers to the Executive Board, subject to the consent of the Supervisory Board,
+to issue convertible and/or warrant-linked bonds, profit-sharing rights and/or income bonds (or
+combinations of these instruments), and to grant conversion or option rights in respect of SAP SE
+shares representing a total attributable portion of the share capital of not more than €100 million
+secured by a corresponding amount of contingent capital. These powers will expire on May 11, 2026.
+The Executive Board is also authorized until May 19, 2025, to increase the share capital by not more
+than €250 million by issuing new shares against contributions in cash and to increase the share capital
+by not more than €250 million by issuing new shares against contributions in cash or in kind. For more
+information about the different tranches of authorized capital and the aforementioned contingent
+capital, see the Articles of Incorporation, section 4.
+The Annual General Meeting of Shareholders on May 11, 2023, granted a power to the Executive Board
+in accordance with the German Stock Corporation Act, section 71 (1)(8), to buy back for treasury on or
+before May 10, 2028, SAP SE shares attributable in total to not more than €120 million of the share
+capital. This power is subject to the proviso that the shares repurchased, together with any shares that
+were previously acquired and are still held by SAP in treasury and any other shares controlled by SAP,
+must not in total exceed 10% of SAP's share capital. Executive Board powers, such as those described
+to issue and repurchase stock and to grant rights of conversion and subscription to shares of SAP, are
+widely followed common practice among German companies such as SAP. These powers give the
+Executive Board the flexibility it needs, in particular, the option to use SAP shares as consideration in
+equity investments, raise funds on the financial markets at short notice on favorable terms, or return
+value to shareholders during the course of the year.
+Material agreements with change-of control provisions: SAP SE has concluded the following
+material agreements with provisions that take effect in the event of a change of control, whether
+following a takeover bid or otherwise:
+The terms of SAP's syndicated €3 billion revolving credit facility include a change-of-control clause. For
+more information about this syndicated credit facility, see the Notes to the Consolidated Financial
+Statements, Note (F.1). This clause obliges SAP SE to notify the banks in case of a change of control. If,
+on receiving the notification, banks that represent at least two-thirds of the credit volume so require,
+the banks have the right to cancel the credit facility and demand complete repayment of the
+outstanding debt. If no continuation agreement is reached, the credit facility would end and the
+obligation to repay would become effective at an ascertainable time.
+SAP had bonds totaling €7.1 billion and US$0.3 billion outstanding as at December 31, 2023. For more
+information about SAP's bonds, see the Notes to the Consolidated Financial Statements, Note (E.3).
+Under the terms agreed with the buyers, we are required to notify the buyers, without delay, of any
+change of control. If there is a change of control and SAP is consequently assigned a lower credit rating
+within a defined period, buyers are entitled to demand repayment.
+117/324
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+SAP Integrated Report 2023
+Further Information about
+Sustainability
+Additional
+Information
+Business Conduct
+Vision and Strategy
+Guidelines and Policies
+SAP's Global Code of Ethics and Business Conduct (COEBC) is the primary ethical and legal framework
+within which SAP conducts business and remains on course for success. It is available in 22 languages
+and is just one of many global policies that provide clear guidance to employees.
+SAP also expects all partners and suppliers to commit to meeting our high standards of integrity. For
+this reason, we have the SAP Partner Code of Conduct and the SAP Supplier Code of Conduct in place
+so that partners and suppliers understand what is expected of them.
+How We Measure and Manage Our Performance
+Enforcing Policies and Guidelines
+All employees are bound by the COEBC; they are required to acknowledge its contents and confirm
+their commitment to it on an annual basis. In 2023, we continued to monitor employee certification of
+the COEBC for employees worldwide, recording a 99.9% certification rate for permanent SAP
+employees (excluding those from acquired companies).
+Communication
+The OEC's dedicated communications team consistently distributes integrity-related communications
+at all levels of the Company - including to senior leaders, managers, and employees, as well as topic-
+related content for SAP partners. Executive Board members and senior leaders regularly host global
+employee meetings as well as leadership team meetings and smaller gatherings, which include
+integrity-focused topics, demonstrating their dedication to ethical business.
+Quarterly OEC newsletters provide all SAP employees with information on a range of compliance-
+related topics. Additionally, a quarterly newsletter with a focus on leadership and management topics
+is sent specifically to executive and senior management. Quarterly toolkits provide topic-focused
+resources to communicators across the Company to further amplify compliance messages in
+business-owned channels.
+Employees can use the SAP One employee portal at any time to access all global policies, guidelines,
+and additional information. Externally, our Web site sap.com features information and guidance for our
+external stakeholders.
+All Board areas have re-committed their support for the OEC's Compliance Ambassador Program and
+have nominated employees to participate in it. In 2023, a sixth cohort was introduced, bringing the
+number of nominees from over 1,200 in 2022 to over 1,500 in 2023. The program is designed to give
+employees a further point of contact in the business when compliance matters arise. Ambassadors
+participate in an extensive curriculum of monthly on-boarding sessions over a 15-month period. They
+are invited to cascade and transfer information on the importance of compliance and ethics
+throughout their teams and lines of business. In 2023, the Extended Compliance Ambassador Network
+was launched, giving compliance ambassadors who have completed the ambassador curriculum an
+opportunity to meet on a quarterly basis.
+Training Offerings
+Our training programs cover topics such as anticorruption and antibribery, conflicts of interest,
+governance for customer commitments, working with public sector customers, and compliant partner
+engagement.
+In addition to our biannual Ethical Fundamentals online training course for all SAP employees, a new
+Ethical Success workshop was delivered live for all Sales and Presales employees in the Customer
+Success Board area. We continue to train new hires globally and we continue to hold Ethical
+Leadership workshops for new people managers.
+Additionally, our field compliance officers hold live trainings, in person and virtually, according to a risk-
+based approach for the specific teams and countries they support. These trainings target employees
+Information
+SAP
+Additional
+Consolidated Financial
+Statements IFRS
+In an increasingly complex business environment, making the right decisions and abiding by ethical
+choices has never been more important. As a company operating in numerous countries across the
+globe, SAP is required to adhere to strict international legislation that defines acceptable business
+conduct and practices.
+At SAP, we also expect our business practices to not only meet international rules and legal
+requirements, but to adhere to our internal high standards of ethics and integrity. We understand that
+our customers expect this as well. SAP's reputation for doing business the right way is one of our most
+important assets. By striving to make ethical choices and acting with integrity, we aim to continue to
+grow SAP in a way that meets both our own and our customers' high ethical expectations.
+Due Diligence
+Governance
+The Office of Ethics & Compliance (OEC) contributes to SAP's success by providing trusted advice to
+SAP managers, leaders, and employees across the entire business. The OEC strives to advance SAP's
+business goals by promoting a strong culture of integrity and helping SAP to "Win the Right Way."
+In 2023, our aim to maintain a robust compliance program, based on our corporate values and
+voluntary commitments, as well as international standards, continued. The OEC team grew for the sixth
+consecutive year, from 154 employees in 2022 to 157 employees in 2023. The group chief compliance
+officer (GCCO) continues to report directly to the group CEO.
+At SAP, ethical behavior is an integral part of our cultural values that can influence our daily decision-
+making at every level of the business and in every market. To help nurture this environment, the OEC's
+various teams continually provide guidance to SAP colleagues, address compliance challenges, and
+improve policies, guidelines, systems, and measures related to their implementation.
+The OEC has field compliance officers across the globe, in both high- and low-risk jurisdictions. Field
+compliance officers are often the first point of contact for the business when compliance matters arise.
+In those high-risk countries in which the OEC is not physically represented and where there might be
+local language needs, the OEC operates a network of compliance stewards drawn largely from either
+our legal, finance, or human resources (HR) departments. Compliance stewards support the OEC's
+field compliance officers by offering advice on specific and straightforward compliance questions; they
+work alongside our global network of compliance ambassadors (drawn from all areas of the Company)
+to amplify compliance messages and provide a further link for local employees to the relevant field
+compliance officer.
+Compliance matters are regularly discussed with Executive and Supervisory Board members at
+quarterly Audit and Compliance Committee meetings as well as during regular touchpoints with
+Executive Board and Supervisory Board members. Compliance matters are also discussed by the
+GCCO in quarterly Global Compliance Governance Committee meetings. Participants at these
+meetings include members of Global Finance, Customer Success, Global Communications, Global
+Security, and Global Risks & Assurance Services (GR&AS).
+Outside SAP, the OEC regularly exchanges ideas and best practices for compliance processes with
+relevant peers in the software industry and beyond. SAP is a Corporate Member of the Association of
+Certified Fraud Examiners (ACFE), and the GCCO is also a member of the European Chief Compliance
+Officers Forum (ECCIOF) and the UN Global Compact's Think Lab focused on transformational
+governance.
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+Stakeholders
+Combined Management
+Report
+Further Information about
+Sustainability
+Global car fleet: Transition to
+electric or zero-emission vehicles
+116/324
+Type of control over voting rights applying to employee shareholders who do not directly
+exercise their control rights: As with other shareholders, employee holders of SAP shares exercise
+their control rights in accordance with the law and the Articles of Incorporation. In votes on the formal
+approval of their acts at the Annual General Meeting of Shareholders, employee representatives on
+the Supervisory Board, as all other members of the Supervisory Board, are prohibited from exercising
+the voting rights associated with their shares.
+To Our
+Stakeholders
+Combined Management
+Report
+Further Information about
+Sustainability
+Additional
+Information
+SAP Integrated Report 2023
+Offset Provider
+Carbon Retailers
+Carbon Project Portfolio and Long-Term Commitments
+Description and Details
+• SAP committed to invest approx. €10 million (accumulated) in the Livelihoods Carbon Funds 1-3 between the years
+2013 and 2045. By year end 2023, SAP had invested approximately 42% of the total commitment.
+• The funds prefinance community-based ecosystem restoration, agroforestry, biodiversity preservation, and clean
+energy projects in developing countries.
+• Due diligence is ensured by applying strict, recognized (for example, Gold Standard), project management by trusted
+partners in collaboration with the local non-profit organizations, and joint overseeing of the strategy, project portfolio,
+and impact by the corporate co-investors and their individual company criteria.
+Livelihoods Carbon Funds
+(LCF)
+SAP
+114/324
+61 To finance our investments in high-quality carbon offset projects (for example, certified by the Gold Standard) and EACS, we leverage the
+collected internal air travel fees charged on business flights.
+Business flights
+• Efficient power usage effectiveness (PUE) 58 at SAP headquarters in Germany and North America: 1.50
+• Core refurbishment of buildings: starting with building WDF01 at SAP's headquarters in Germany, which aims to save 42% in
+final energy used annually compared to the previous construction method.
+• Centralization of the cooling distribution system at SAP's headquarters in Germany will allow the usage of environmentally
+friendly operating fluids and sector coupling (conversion of surplus energy into cooling energy by absorption chillers and
+use of heat pumps for room cooling). Electricity for the cooling system will be derived primarily from renewable sources
+(such as solar).
+From 2025 onwards, all new company cars for employees are planned to be emission-free.59 At the end of 2023, about
+14% of our global car fleet comprised emission-free vehicles. SAP also promotes various incentives to accelerate this change,
+for example:
+• We power all SAP-owned charging stations at SAP locations with 100% renewable electricity.
+• For larger vehicle fleets such as in Germany, the Netherlands, and others, we offer employees a subsidy to install a charging
+point at home, and reimburse them for the electricity consumed. As far as legally possible and factually reasonable, we will
+offer similar subsidies in all countries.
+• In some countries, we offer our employees a discount or a higher budget if they choose an all-electric vehicle.
+• We continually expand SAP's global charging infrastructure (2023: 1,650+ charging stations; 2022: 1,100+ charging stations).
+To generate a shift in commuting habits and foster inter-/multimodal mobility, we continue to offer various programs, such as:
+• Company bicycle leasing programs: Employees can lease bicycles with the option of purchasing them after contract end.
+Such programs have already been established in Belgium, Germany, and Luxembourg.
+• Successful role out of a flexible mobility budget in spring 2023 as a regular mobility alternative in Germany (2023: about
+1,950 participants). Participants receive a fixed monthly mobility budget to use any mode of transport to commute to work
+or in their leisure time (bicycle, e-scooter, rental car, train, bus, and so on).
+• We avoid business flights by investing in virtual collaboration and communication technologies.
+• In 2016, we began charging an internal carbon price for business flights, which we invest in high-quality carbon offset
+projects to counterbalance the carbon emissions these flights cause. By annually increasing the carbon price per flight
+ticket that is charged to the organizational cost center, we seek to incentivize the organizational units and employees to fly
+less or to choose an alternative, sustainable mode of travel.
+Investing in Carbon Offsets to Compensate for Our Remaining Emissions
+SAP financed a diverse portfolio of carbon projects 60 with a strategic focus on natural carbon sinks to
+help avoid and remove from the atmosphere the equivalent of the remaining emissions from its own
+operations (2023: 215 kt, 2022: 97 kt; scope 1, 2, and selected scope 3 emissions).61 All offsets were
+generated by reforestation, forest protection, rural energy, and agroforestry projects implemented in
+collaboration with local communities. This voluntary investment in certified carbon offsets helped SAP
+reach its carbon-neutrality goal in 2023.
+58 The PUE is a ratio that describes the efficiency of a data center, with 1.0 being the ideal ratio.
+59 "Emission-free" refers to vehicles that do not emit exhaust gas or other pollutants from the onboard source of power. These vehicles will
+gradually replace out of plug-in hybrid electric vehicles (PHEV) and vehicles with internal combustion engines (ICEV) as company cars.
+60 Investments in projects and the corresponding carbon offsets represent a unit of reduced, avoided, or removed GHG emissions.
+• Offset volume in 2023: 114 kt
+•
+SAP collaborates with an independent third-party carbon rating agency to systematically procure offsets from carbon
+retailers which are exclusively generated by the highest-rated carbon projects on the market based on the projects'
+carbon score, additionality, durability, and co-benefits such as the impact on people and biodiversity. This diligent
+procurement approach helps SAP mitigate the risk of procuring non-genuine carbon emission reductions while
+reinforcing our own quality expectations (for more information, see the Non-Financial Notes: Environmental
+Performance section).
+• Offset volume in 2023: 101 kt
+Stakeholders
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about Additional
+Sustainability
+Information
+Corporate Governance
+Fundamentals
+Corporate Governance Statement
+The German Commercial Code, section 315d in connection with section 289f, requires that, as a listed
+company, SAP SE publish a corporate governance statement either as part of our management report
+or on our Web site. The Executive Board and the Supervisory Board of SAP SE issued the Corporate
+Governance Statement on February 20, 2024, and published it on our Web site at
+www.sap.com/investors/en/governance.html.
+Changes in Management
+On August 29, 2023, SAP announced that Gina Vargiu-Breuer had been appointed to the SAP Executive
+Board as Chief People Officer and labor director, effective February 1, 2024. She succeeded Sabine
+Bendiek, who left the Company at her own request upon the end of her term on December 31, 2023.
+Information Concerning Takeovers
+Information required under the German Commercial Code, sections 289a and 315a, with an
+explanatory report:
+Composition of share capital: For information about the composition of SAP SE's share capital as at
+December 31, 2023, see the Notes to the Consolidated Financial Statements, Note (E.2). Each share
+entitles the bearer to one vote. American depositary receipts (ADRs) representing our shares are listed
+on the New York Stock Exchange (NYSE) in the United States. ADRs are certificates representing non-
+U.S. shares and are traded on U.S. stock exchanges instead of the underlying shares. One SAP ADR
+corresponds to one SAP share.
+Restrictions applying to share voting rights or transfers: SAP shares are not subject to transfer
+restrictions. SAP held 61,275,176 treasury shares on December 31, 2023 (see the Notes to the
+Consolidated Financial Statements, Note (E.2)). Treasury shares do not carry voting rights or dividend
+rights or other rights. We are not aware of any other restrictions applying to share voting rights or to
+share transfers.
+Shareholdings that exceed 10% of the voting rights: We are not aware of any direct or indirect
+SAP SE shareholdings that exceed 10% of the voting rights.
+Shares with special rights conferring powers of control: No SAP shareholder has special rights
+conferring powers of control.
+Combined Management
+Requirements concerning appointments and dismissals of members of the Executive Board and
+amendments to the Articles of Incorporation: Conditions for the appointment and dismissal of
+members of the Executive Board and amendments to the Articles of Incorporation reflect the relevant
+provisions of applicable European and German law, including Council Regulation (EC) No. 2157/2001
+on the Statute for a European Company ("SE Regulation") and the German Stock Corporation Act.
+Under the Articles of Incorporation, the Executive Board consists of at least two members, who are
+appointed for a period of not more than five years by the Supervisory Board in accordance with the
+SE Regulation, articles 39 and 46. The Supervisory Board decides on the number of members of the
+To Our
+SAP
+In 2023, we invested for the first time as a pilot in Sustainable Aviation Fuel (SAF), to reduce our
+business-flight-related emissions compared to emissions generated by using conventional (fossil)
+aviation fuel.62
+Related Risks for SAP
+In 2022, we performed a climate risk and vulnerability assessment to identify physical climate risks
+(acute and chronic) that are material to the SAP-relevant activity 'data processing and hosting,' as
+follows:
+Risk screening for all our own and co-location data centers based on a multitude of climate hazards
+(acute and chronic), 63 using global climate models (representative concentration paths
+(RCPS) 2.6, 4.5, and 8.5).
+Deep-dive exposure analysis for a selected range of climate hazards based on 2°C and 4°C
+scenarios: heatwaves and extreme precipitation (time horizon: 2021-2050) 64 as well as river
+flooding and water stress (time horizon: 2030 and 2050).65 The hazards were selected based on the
+risk screening outcome and impact on data centers combined with expert discussions.
+· Vulnerability analysis of our own data centers with high exposures helped us identify the impact
+and risk of a hazard by considering current and past hazard experiences and implemented
+mitigation actions.
+In 2023, we rolled out a vulnerability and adaptation questionnaire to our own data centers to
+ensure (on-site) measures are planned and/or in place to address the identified applicable main
+climate change risk(s).
+'Climate change and air quality' is a risk factor that is assessed as part of SAP's Corporate Financial Risk
+Management System. No material financial risks were identified through our risk framework as
+described in the Risk Management and Risks section.
+Audit Scope
+The content of the Energy and Emissions section was not subject to the statutory audit of our
+combined management report. However, our external auditor performed an independent limited
+assurance engagement for the content of this section. Under this engagement, the quantitative
+indicators carbon emissions (scope 1, scope 2, and scope 3 relevant for SAP's business model), total
+energy consumption, and renewable energy certificates were audited at a reasonable assurance level.
+62 We have not (yet) counted the emission reductions received towards our carbon targets.
+63 Examples of chronic hazards: changing temperature, heat stress, changing wind patterns, rise in sea level, and soil erosion. Examples of
+acute hazards: wildfires, water stress, droughts, floods, avalanches, and landslides.
+64 Usage of Intergovernmental Panel on Climate Change (IPCC) RCP 2.6 and RCP 8.5.
+65 Usage of IPCC RCP 4.5 and RCP 8.5.
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+Consolidated Financial
+Statements IFRS
+85
+2017: 327 kilotons
+(kt) net carbon
+emissions43
+2023: 6.9 million
+tons gross carbon
+emissions
+(market-based)
+Low
+Our Risk Management
+Internal Control and Risk Management Systems
+As a global company, SAP is exposed to a broad range of risks across our business operations.
+Consequently, our Executive Board has established comprehensive internal control and risk
+management structures that enable us to identify and analyze risks early and take appropriate action.
+Our internal control and risk management systems are designed to identify potential events that could
+negatively impact the Company and to provide reasonable assurance regarding the operating
+effectiveness of our internal controls over our financial reporting.
+These systems comprise numerous control mechanisms and are an essential element of our
+corporate decision-making process; they are therefore implemented across the entire Group as an
+integral part of SAP's business processes. We have adopted an integrated internal control and risk
+management approach to help maintain appropriate and effective global risk management while also
+enabling us to aggregate risks and report on them transparently.
+Appropriateness and Effectiveness of SAP's Entire Internal Control and Risk
+Management System68
+We have a governance model in place across the internal control and risk management systems, as
+well as a central software solution to store, maintain, and report all risk-relevant information. In the
+Business Conduct section of our combined management report, we describe in more detail the
+governance structure as well as the measures and guidelines SAP has implemented to ensure
+compliance not only with international rules and legal requirements but also with our internal
+standards of ethics and integrity. Furthermore, SAP monitors risks relating to material sustainability
+matters. Material non-financial topics are listed in the section Non-Financial Statement Including
+Information on Sustainable Activities. The governance model, policies, and guidelines as well as the
+control measures we have implemented relative to these topics are described in the respective
+chapters in this combined management report. SAP continuously reviews and adjusts its entire internal
+control and risk management system as well as the policies and guidelines we have implemented
+regarding the material sustainability topics. We considered the results from external audits, such as the
+audit of our internal control system for financial reporting and early risk detection system conducted
+by our auditor BDO, as well as internal sources, such as audit reports from our Global Risk & Assurance
+Services (GR&AS) team, to evaluate the effectiveness of our internal control and risk management
+systems. If issues are identified, SAP takes remedial action. While the non-financial internal control
+system has not yet reached the same maturity level as the financial internal control system, no material
+indication has come to our attention that SAP's entire internal control and risk management system is
+not appropriate or effective.
+Legal and Regulatory Requirements
+Risk Management and Risks
+Due to our public listings in both Germany and the United States, we are subject to both German and
+U.S. regulatory requirements that relate to internal controls and risk management over financial
+reporting, such as provisions in the German Stock Corporation Act, section 91 (2), the U.S. Sarbanes-
+Oxley Act (SOX) of 2002, specifically sections 302 and 404, and the German Corporate Governance
+Code. Hence, our Executive Board has established an early warning system (risk management system)
+to enable transparent risk disclosures and compliance with applicable regulations.
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+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+68 The appropriateness and effectiveness of SAP's entire internal control and risk management system, except for the internal control system
+for financial reporting and early risk detection system, was neither part of the statutory audit nor the independent limited assurance
+engagement performed by our external auditor.
+Information
+Additional
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+have conducted since 2012 to help us verify that subsidiaries adhere to human rights standards and
+check whether employees feel empowered to raise concerns.
+Receiving Complaints or Concerns
+Through the globally available Speak Out at SAP tool, we encourage all employees and external
+groups to report conduct that violates our policies. External groups include groups at heightened risk
+of becoming disadvantaged or marginalized (also called “vulnerable groups") such as temporary staff.
+Employees can also reach out to their managers, to HR or compliance officers, and to our Global
+Ombuds Office which offers confidential, independent, neutral, and informal conflict clarification
+services and mediation for all employees worldwide.
+Related Risks for SAP
+"Human rights and employee matters" is a risk factor that is assessed as part of SAP's corporate risk
+management system. No financial material risks were identified through our risk framework, which is
+detailed in the Risk Management and Risks section.
+QAudit Scope
+The content of the Human Rights section was not subject to the statutory audit of the combined
+management report. However, our external auditor performed an independent limited assurance
+engagement for the content of this section.
+124/324
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+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Additional
+Combined Management
+Report
+Information
+The risk management policy issued by our Executive Board governs how we manage risk in line with
+the Company's risk appetite and defines a methodology that is applied uniformly across all parts of
+the SAP Group.
+All GR&AS risk managers, working with assigned risk contacts in the relevant business units, identify
+and assess risks associated with material business operations and monitor the implementation and
+effectiveness of the measures chosen to mitigate risks.
+Further financial risk management activities are performed for example by our Global Treasury and
+Global Tax departments. General legal risks are managed by the Global Legal department. Sanction
+and embargo-related risks are managed by the Export Control department, harassment and other HR-
+related issues by our Global Labor & Employee Relations Office, security-related risks by our SAP
+Global Security Office, and IP risks by our Global IP Office. Non-financial risks are reported jointly by
+GR&AS and SAP's Sustainability and other involved organizations. All risks are tracked, maintained, and
+reported within SAP's risk management system.
+During the merger and acquisition and post-merger integration phase, newly acquired companies are
+subject to risk management performed by our Corporate Development Mergers and Acquisitions
+(M&A) function. Furthermore, for as long as the newly acquired companies are not integrated, existing
+risk management structures are maintained or enhanced within the acquired companies for the
+purposes of compliance with legal requirements.
+SAP reviews the exposure of its business units to potential compliance risks on a regular basis.
+Quantitative and qualitative internal data as well as external information, such as Transparency
+International's Corruption Perceptions Index, are considered in our wider compliance risk analysis.
+Based on this information, we perform a detailed assessment for all SAP-relevant high-risk countries
+and derive local and global mitigations.
+The GR&AS unit, led by the Chief Risk Officer (who also acts as Chief Audit Executive), combines
+internal audit, SOX, internal controls, and global governance, risk, and compliance activities. The Chief
+Risk Officer reports to our Group CFO and is responsible for SAP's internal control and risk
+management programs. Additionally, the Office of Ethics & Compliance (OEC) continuously addresses
+compliance challenges and improves policies, guidelines, systems, and measures related to their
+implementation. For more information about SAP's governance structure in the area of compliance, see
+section Business Conduct.
+Internal Control and Risk Management System for Financial Reporting
+The purpose of our system of internal control over financial reporting is to provide reasonable
+assurance that our financial reporting is reliable and compliant with generally accepted accounting
+principles. Because of the inherent limitations of internal controls over financial reporting, this system
+might not prevent or bring to light all potential misstatements in our financial statements.
+Our internal control system consists of the internal control and risk management system for financial
+reporting (ICRMSFR), which also covers the broader business environment and is part of the overall
+risk management system of SAP. Using the current COSO Internal Control - Integrated Framework of
+2013, we have defined and implemented internal controls along the value chain on a process and
+subprocess level to ensure that sound business objectives are set in line with SAP's strategic,
+operational, financial, and compliance goals.
+and implementation of our risk management policy, as well as the standardized internal and external
+risk reporting.
+SAP's ICRMSFR is based on our Group-wide risk management methodology. It includes organizational,
+control, and monitoring structures designed to ensure that data and information concerning our
+business is collected, compiled, and analyzed in accordance with applicable laws and properly
+reflected in our IFRS Consolidated Financial Statements.
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+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Our ICRMSFR also includes policies, procedures, and measures designed to ensure compliance of
+SAP's financial reports with applicable laws and regulations. We analyze new statutes, standards, and
+other pronouncements concerning IFRS accounting and its impact on our financial statements and the
+ICRMSFR. Failure to adhere to these would present a substantial risk to the compliance of our financial
+reporting. In addition, the ICRMSFR has both preventive and detective controls, including, for example,
+automated and non-automated reconciliations, segregated duties with two-person responsibility,
+authorization concepts in our software systems, and corresponding monitoring measures.
+Information
+Additional
+Further Information about
+Sustainability
+We have developed and implemented a cybersecurity risk management program intended to protect
+the confidentiality, integrity, and availability of our critical systems, information, and our customers'
+data. Our cybersecurity risk management program and processes are part of our Executive Board-
+issued risk management policy that governs how we manage risk, and is aligned with the
+methodologies, reporting channels, and governance processes that apply across our enterprise risk
+management program to other legal, compliance, strategic, operational, and financial risk areas of the
+SAP Group.
+Risk Management Pillars
+Our risk management system is based on the framework published by the Committee of Sponsoring
+Organizations of the Treadway Commission (COSO) entitled "Enterprise Risk Management -
+Integrating with Strategy and Performance." Updated in 2017, this framework is built on four pillars,
+namely: a global risk management governance framework, a dedicated risk management policy, a
+global risk management organization, and a standardized risk management methodology.
+In accordance with the COSO framework, SAP's enterprise risk management covers risks in the areas
+of strategy, operations, finance, and compliance (the latter also covering ethical behavior, corporate
+governance, and sustainability).
+Our Global Risk Management Governance Framework
+The risk management governance framework at SAP represents a comprehensive system of
+approaches and processes to ensure control through a clearly structured risk management system
+and a supporting risk culture. The risk culture is considered the basis of SAP's risk management
+system. Risk culture at SAP comprises a system of values, beliefs, knowledge, attitudes, and
+understanding concerning risks and risk management as part of our corporate culture. To support and
+continuously foster SAP's risk culture, we conduct risk activities for the entire SAP organization such as
+mandatory training in ethical behavior, code of conduct, and risk management.
+Our Executive Board is responsible for ensuring the effectiveness of the internal control system and
+our risk management system. The effectiveness of both systems and their implementation in the
+different Board areas is monitored by each Executive Board member. The Audit and Compliance
+Committee of the Supervisory Board regularly monitors the effectiveness of SAP's internal control and
+risk management systems. Our GR&AS organization regularly provides a status update on the internal
+control and the risk management systems to the Audit and Compliance Committee of the Supervisory
+Board. Every year, SAP's external auditors assess whether the SAP Group early-warning system for risk
+detection is adequate to identify risks that might endanger our ability to continue as a going concern.
+Additional assurance is obtained through the external audit of the effectiveness of our system of
+internal controls over financial reporting.
+Our Global Risk Management Policy
+The risk management policy is reviewed annually and stipulates responsibilities for conducting risk
+management activities and defines reporting and monitoring structures. Our global SAP risk
+management policy clearly states that each employee is responsible for active engagement in the risk
+management process as well as for the continuous identification of risks, based upon clear rules of
+engagement in adherence to the policy. The risk management system primarily analyzes risks.
+Opportunities are assessed or analyzed where it is deemed appropriate.
+Our Global Risk Management Organization
+Our global risk management organization is responsible for the implementation of a Group-wide
+effective risk management system. Furthermore, GR&AS is responsible for the regular maintenance
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+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Risk Management Policy and Framework
+To Our
+Stakeholders
+SAP Integrated Report 2023
+SAP
+QAudit Scope
+The content of the Business Conduct section was not subject to the statutory audit of the combined
+management report. However, our external auditor performed an independent limited assurance
+engagement for the content of this section.
+121/324
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+SAP Integrated Report 2023
+To Our
+Combined Management
+The actions and processes to address risks in business conduct are described above. For more
+information about financial risks, see also Ethical Behavior in the Risk Management and Risks section.
+Stakeholders
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+Human Rights
+Vision and Strategy
+SAP is committed to respecting and advancing human rights across our operations, extended supply
+chain, and product lifecycle, and we are guided by the United Nations (UN) Guiding Principles on
+Business and Human Rights in doing so. We also expect our employees and business partners to
+respect human rights and avoid complicity in any abuse.
+Due Diligence
+Report
+Related Risks for SAP
+For more information about the material allegations currently being investigated by the OEC, see the
+Notes to the Consolidated Financial Statements, Note (G.3).
+The OEC's investigation team is comprised of dedicated investigators who probe allegations of
+misconduct within the OEC's area of responsibility. In recent years, the team has engaged the
+assistance of an external law firm to examine whistleblower complaints alleging that the business
+conduct of some former SAP employees within subsidiary SAP companies did not comply with SAP's
+policies and procedures or applicable laws. These investigations culminated in January 2024 in a
+settlement agreement with the U.S. Securities and Exchange Commission (U.S. SEC) and the U.S.
+Department of Justice (U.S. DOJ), as well as with local authorities in South Africa. SAP fully cooperated
+with law enforcement authorities, and took immediate steps to discipline the employees involved,
+including terminating all those implicated in potential law violations. Since these allegations were
+made, SAP has also significantly strengthened its compliance program and related internal controls in
+accordance with DOJ and regulatory expectations and requirements.
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+across the organization, from customer-facing staff to individuals in supporting roles, such as finance,
+marketing, and legal.
+Compliance Processes
+The OEC also evaluates SAP's third-party providers to assess whether SAP's compliance standards are
+met. New suppliers and third parties seeking a partnership with SAP are scrutinized according to a risk-
+based compliance due diligence process, which is repeated every two to five years thereafter. Supplier
+and partner relationships are formally defined in contracts that outline their obligation to abide by
+SAP's compliance requirements. In almost all cases, these include a "right to audit” clause. The OEC
+also has a team dedicated to conducting compliance audits of partners and suppliers to assess
+adherence to SAP's requirements and to identify and address compliance risks.
+The OEC's Compliance Monitoring & Analysis (CMA) team monitors the effectiveness of SAP's
+compliance processes and controls through regular testing of high-risk transactions, identified using a
+data analytics tool developed with PricewaterhouseCoopers GmbH (PwC) and through manual
+sampling. The CMA team also analyzes findings from investigations and partner audit reports to
+identify potential enterprise-wide process deficiencies and patterns that indicate a compliance risk.
+The team then conducts root cause analyses on the highest-risk topics and recommends remediation
+actions to mitigate the risks.
+Speak Out at SAP
+Speak Out at SAP is SAP's independently managed whistleblower reporting tool, through which any
+matters or concerns can be reported easily, and, if desired, anonymously. The tool is available 24 hours
+a day, seven days a week, both internally to SAP employees and externally to concerned parties,
+including customers, suppliers, and partners.
+Reports may be submitted either directly by the reporter through the Internet-based portal, or by
+phone, with local language support across the globe in order to maximize accessibility for reporters. In
+all cases, SAP continues to maintain a strict non-retaliation policy.
+Beyond Speak Out at SAP, we provide further reporting channels, including an internal ticketing system,
+a postal address for written submissions, and local contact persons worldwide.
+Investigating Misconduct
+Governance
+Our cross-company agenda on human rights is driven by SAP's Human Rights Office that is part of the
+chief sustainability officer's organization. At least once a year, the Human Rights Officer reports to the
+Executive Board on such matters as the status of compliance with the German Supply Chain Act
+(Lieferkettensorgfaltspflichtengesetz, LKSG). The Human Rights Office works together with a Human
+Rights Steering Committee comprised of executives from various Board areas who embed human
+rights due diligence in their areas of responsibility, such as enterprise risk management, people
+management, or procurement.
+Grounded in our commitment to respecting human rights, the Artificial Intelligence (AI) Ethics
+Steering Committee guides our internal efforts to implement and enforce Al ethics in our operations,
+solutions, and policies. It comprises SAP executives from relevant Board areas with supervision of
+topics relevant to guiding and implementing Al ethics. Made up of experts from academia, industry,
+and public policy, our external Al Ethics Advisory Panel advises us on how to further develop and
+operationalize SAP's Guiding Principles for Artificial Intelligence.
+Policy Commitment
+In our direct and indirect supply chain: assessment still ongoing
+Related to products, services, and customers: non-discrimination and privacy
+Moreover, we have started to explore the human rights implications of our net-zero efforts.
+Human Rights of Our Employees
+The salient issues related to health and safety and non-discrimination in our own operations are
+mitigated through extensive programs for employees as described in the Employees section.
+In addition, our employees receive voluntary and mandatory training on human rights issues most
+relevant to SAP. For example, they are trained on our policies on non-discrimination, health and safety,
+and data protection and privacy. In 2023, we introduced new training modules for all employees, for
+example to increase the awareness of our grievance mechanism, and for specific roles in procurement
+and risk management.
+We regularly consulted employee representatives in 2023 to specifically understand their concerns
+and interests related to the rights protected by the LkSG. The discussions focused on gaining a better
+understanding of how we identify salient human rights risks and supply chain risks.
+Human Rights in Our Extended Supply Chain
+We expect suppliers and partners to respect human rights, and our codes of conduct require them to
+uphold international labor rights and provide a safe and healthy work environment for all employees.
+We also expect our suppliers to promote these standards across their supply chain.
+For more information, see the Sustainable Procurement section.
+Human Rights Related to SAP Products, Services, and Customers
+We seek to respect human rights throughout the product lifecycle – from design through to
+development and use. Protection of personal information and non-discrimination are key areas of
+focus.
+For more information about the protection of personal information, see the Security and Privacy
+section.
+Preventing discrimination is currently based on two pillars: First, making our software more accessible
+is ensured through our own accessibility standards and guidelines that support the possibility for
+everyone, including people who are differently-abled, to access and use technology and information
+products. Second, identifying and avoiding bias is a key principle of our Global Al Ethics program.
+Consequently, we review Al use cases to ensure that bias and discrimination and other ethical risks
+specified in the Global Al Ethics Policy are mitigated. High-risk Al use cases are approved or rejected
+by the Global Al Ethics Steering Committee as applicable.
+Assessing Human Rights Measures
+SAP reviews the effectiveness of its risk management and due diligence processes annually as well as
+on an ad hoc basis. In 2023, we revised our approach to assess effectiveness so as to better align with
+the UN Guiding Principles and legal requirements. For example, we piloted 1001 (input-output -
+outcome-impact) models to get a better understanding of whether our measures have a positive
+impact on people. This new approach complements existing measures such as the internal audits we
+123/324
+In our own operations: occupational health and safety and non-discrimination
+Additional
+and customers and with a concept to identify human rights impacts among indirect suppliers (that is,
+tier 2 to n suppliers). Taking into consideration our business activities as described in the Strategy and
+Business Model section, we assessed potential impacts based on their severity (scale, scope,
+remediability) and probability of occurrence as well as our ability to trigger change. While our
+assessment of salient issues is an ongoing process and not yet finalized for all stages of our entire
+value chain, we have prioritized the following salient issues:
+Additional
+We support the International Bill of Human Rights; the Organization for Economic Co-operation and
+Development (OECD) Guidelines for Multinational Enterprises; and the International Labour
+Organization (ILO) Core Labour Rights Conventions. The SAP Global Code of Ethics and Business
+Conduct for Employees, and – in a more detailed way – the SAP Global Human Rights
+-
+-
+Commitment Statement, are our public commitment to respecting and advancing human rights
+across our value chain. The current version of the Human Rights Commitment Statement is available
+on our public Web site at www.sap.com/human-rights66, has been updated to meet LKSG
+requirements, and is approved by our Executive Board.
+In addition, our Global Al Ethics Policy helps ensure that our artificial intelligence (AI) software is
+developed, deployed, and sold in line with the ethical standards laid out in our guiding principles. This
+policy and guiding principles are available at Al Ethics and Society | SAP.67
+How We Measure and Manage Our Performance
+Identifying Salient Human Rights Issues
+In 2023, we introduced new concepts for identifying human rights impacts across our own operations
+and our direct supply chain globally to be compliant with increasing legal requirements such as the
+LKSG. We have complemented this exercise with an analysis of salient issues related to our solutions
+66 Information that was neither part of the statutory audit nor the independent limited assurance engagement performed by our external
+auditor.
+67 Information that was neither part of the statutory audit nor the independent limited assurance engagement performed by our external
+auditor.
+122/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Information
+130/324
+Information
+We have outsourced some tasks, such as the valuation of projected benefit obligations and share-
+based payouts, quarterly tax calculations for most entities, purchase price allocations in the context of
+asset acquisitions and business combinations, and the local statutory financial statements for a few of
+our subsidiaries. These outsourced tasks are subject to the same stringent requirements that are
+mandated for all our internally generated financially relevant information.
+Probability
+Impact
+Risk Level
+Global Economic and Political Environment
+International Laws and Regulations
+Likely
+Major
+Economic, Political, Social, and Regulatory Risks
+Medium
+Business-Critical
+Medium
+Legal and IP
+Likely
+Major
+Medium
+Data Protection and Privacy
+Remote
+Overview of Risk Factors (Aggregated Statement for 2023)
+The following table provides an overview of major and business-critical risk categories (together with
+the respective risk factors). Therein, risk factors are categorized with their net value (after the
+implementation of mitigations).
+Information
+L
+L
+L
+Impact
+L
+L = Low Risk
+M = Medium Risk
+H = High Risk
+To further streamline our integrated report, we disclose material and relevant risk factors and focus on
+"major" and "business-critical” risk factors as per our assessment. Thus, the following risk factors are
+not included in the Integrated Report 2023 as they do not currently fall into either the "major" or
+"business-critical" category: Corporate Governance; Environment and Sustainability; Sales and
+Revenue Conditions; Liquidity; Use of Accounting Policies and Judgment; Currency, Interest Rate, and
+Share Price Fluctuation; Insurance and Venture Capital; Unauthorized Disclosure of Information;
+Investor Relations; Corporate Affairs; Marketing; Portfolio; SAP Strategy; Human Workforce.
+129/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Likely
+1% to 19%
+Major
+Corporate Governance and Compliance Risks
+Technology and Products
+Unlikely
+Business-Critical
+Medium
+Strategic Risks
+Market Share and Profit
+Unlikely
+High
+Business-Critical
+Mergers and Acquisitions
+Unlikely
+Moderate
+Low
+Innovation
+Remote
+Major
+Medium
+Business-Critical
+Likely
+Cybersecurity and Security
+Ethical Behavior
+Likely
+Major
+Medium
+Operational Business Risks
+Sales and Services
+Unlikely
+Major
+Medium
+Partner Ecosystem
+Unlikely
+Major
+Medium
+Cloud Operations
+Unlikely
+Major
+Medium
+Medium
+M
+M
+L
+Remote
+Impact
+Level
+Impact Definition
+Insignificant
+20% to 39%
+Unlikely
+Minor
+1% to 19%
+40% to 59%
+Moderate
+60% to 79%
+Highly Likely
+Major
+80% to 99%
+Near Certainty
+Business-
+Critical
+Likely
+of Occurrence
+Description
+Probability/Likelihood
+Based on an analysis of the design and operating effectiveness of our respective internal controls over
+financial reporting, a committee with leadership representation from Finance, Compliance, Legal, and
+IT presents the results of the assessment of the ICRMSFR effectiveness with respect to our IFRS
+consolidated financial statements as at December 31 each year to our Group CFO. The committee
+meets regularly to set the annual scope for the test of effectiveness, to assess and evaluate any
+weaknesses in the controls, and to determine measures to address them in time and adequately. The
+Audit and Compliance Committee of the Supervisory Board regularly scrutinizes the resulting
+assessments of the effectiveness of the internal controls over financial reporting with respect to the
+IFRS consolidated financial statements and corresponding disclosure notes.
+The assessment, conducted by SAP and external audit, of the effectiveness of the ICRMSFR related to
+our IFRS consolidated financial statements concluded that, on December 31, 2023, the Group had an
+effective internal control system over financial reporting in place.
+Additionally, and in compliance with German commercial law requirements, SAP maintains an internal
+control system beyond financial reporting. This is supported through automated controls (continuous
+control monitoring) as part of our business processes.
+Supporting Software Solution
+We use our own risk management software, namely SAP governance, risk, and compliance (GRC)
+solutions powered by SAP HANA, to support the governance process. GR&AS risk managers record
+and track identified risks using our risk management software online and in real time to help create
+transparency across all known risks that exist in the Group, as well as to facilitate risk management and
+the associated risk reporting. These GRC solutions also support the risk-based approach of the
+ICRMSFR. Our continuous control monitoring activities are performed utilizing our GRC software as
+well. This information is available to managers through direct access to our SAP Fiori application for
+enterprise risk reporting, and in regularly issued reports, and is consolidated and aggregated for the
+quarterly risk reports to the Executive Board.
+128/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+Risk Factors
+The following sections outline our risk categories and risk factors that we have identified and
+continuously track. To determine which risk factors pose the greatest threat to the viability of the
+SAP Group, we classify them as high, medium, or low based on 1) the likelihood that a risk factor will
+occur within the assessment horizon, and 2) the impact the risk factor would likely have on SAP's
+business objectives were it to occur.
+The scales for measuring these indicators are given in the following tables.
+Impact
+Negligible negative impact on
+business, financial position,
+profit, and/or cash flows
+Limited negative impact on
+business, financial position,
+profit, and/or cash flows
+Some potential negative
+impact on business, financial
+position, profit, and/or cash
+flows
+Considerable negative
+impact on business, financial
+position, profit, and/or cash
+flows
+Detrimental negative impact
+on business, financial
+position, profit, and/or cash
+flows
+H
+60% to
+L
+M
+M
+H
+H
+79%
+40% to
+L
+M
+M
+H
+59%
+20% to
+39%
+L
+L
+H
+SAP
+H
+L
+From €0 to
+€25 million
+From
+€25 million
+to €50 million
+From
+€50 million
+to €100 million
+From
+€100 million to
+€500 million
+From
+€500 million
+The combination of the likelihood of a risk factor and its impact on SAP's reputation, business, financial
+position, profit, and/or cash flows leads to a subsequent classification as either "high," "medium," or
+"low."
+Probability
+Insignificant
+(€0 to
+€25 million)
+Minor
+(€25 million to
+€50 million)
+Moderate
+(€50 million to
+€100 million)
+Major
+(€100 million to
+€500 million)
+Business-Critical
+(from
+€500 million)
+80% to
+99%
+M
+Our Corporate Financial Reporting (CFR) department codifies all accounting and reporting policies in
+SAP Group Accounting and SAP Global Revenue Recognition guidelines. These policies and
+corresponding corporate timelines define the closing process. Under this closing process, we prepare,
+predominately through centralized or external services, the financial statements of all SAP entities for
+consolidation by CFR. CFR and other corporate departments are responsible for ensuring compliance
+with Group accounting policies and monitor the accounting work. CFR reviews accounting standards
+and processes to ensure applicable updates are made to SAP's financial reporting.
+M
+We are subject to risks and associated consequences in the following areas, among others: non-
+compliance with our policies and violation of compliance related rules, regulations, and legal
+requirements including, but not limited to, antitrust, anticorruption, and antibribery legislation in
+Germany, the U.S. Foreign Corrupt Practices Act, the UK Bribery Act, and other local laws prohibiting
+corrupt conduct; unethical and fraudulent behavior leading to criminal charges, fines, and claims by
+affected parties; collusion with external third parties; fraud and corruption; public sector transactions in
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+To Our
+Stakeholders
+SAP Integrated Report 2023
+SAP
+133/324
+SAP's leadership position in the global market is founded on the long-term and sustainable trust of our
+stakeholders worldwide. Our overarching approach is one of corporate transparency, open
+communication with financial markets, regulators, and authorities, and adherence to recognized
+standards of business integrity. This commitment to recognized standards of business integrity is
+formalized in SAP's COEBC and supporting guidelines.
+Ethical Behavior: Our global business exposes us to risks related to unethical behavior and non-
+compliance with policies by employees, other individuals, partners, third parties, or entities
+associated with SAP.
+Corporate Governance and Compliance Risks
+We cannot exclude the possibility that if any one or more of the risks associated with this risk factor
+were to occur, the impact could be major. We estimate the probability of occurrence to be likely, and
+classify this risk factor as medium.
+SAP has established measures intended to address and mitigate the described risks and adverse
+effects. For example, we: have implemented internal processes and measures to enable SAP to
+comply successfully and sufficiently with applicable data protection requirements; anchor data
+protection requirements in the mandatory product standards of SAP's product development lifecycle;
+continuously review SAP's existing standards and policies to address changes to applicable laws and
+regulations; continuously enhance our data center operations worldwide; actively monitor legal
+developments; engage with political stakeholders and government authorities; and provide clear
+governance and guidance on data handling, processing standards, and external communication as
+part of our data management framework, specifically incorporating aspects of new technologies such
+as those represented in embedded intelligence applications.
+Any of these events could have a material adverse effect on our reputation, business, financial
+performance, competitive or financial position, profit, and cash flows.
+In addition, the German Federal Office for the Protection of the Constitution and security industry
+experts continue to warn of risks related to a globally growing number of cybersecurity attacks aimed
+at obtaining or violating company data including personal data.
+Non-compliance with applicable data protection and privacy laws by SAP or any of the subprocessors
+engaged by SAP within the processing of personal data could lead to risks. These include, among
+others: mandatory disclosure of breaches to affected individuals, customers, and data protection
+supervisory authorities; investigations and administrative measures by data protection supervisory
+authorities, such as the instruction to alter or stop non-compliant data processing activities, including
+the instruction to stop using non-compliant subprocessors; or the possibility of damage claims by
+customers and individuals, contract terminations, and potential fines.
+Furthermore, evolving data protection and privacy laws, regulations, and other standards around the
+world (such as the California Consumer Privacy Act, the Chinese Personal Information Protection Law
+including data localization requirements, the EU Digital Services Act, and the EU's proposed e-Privacy
+Regulation) are increasingly aimed at protecting individuals' personal information when it comes to
+marketing and tracking their online activities. This may impose additional burdens for SAP due to
+increasing compliance standards that could restrict the use and adoption of SAP's products and
+services (in particular cloud services) and make it more challenging and complex to meet customer
+expectations. These changing criteria also impact the compliant use of new technology, such as
+machine learning and Artificial Intelligence for product development and deployment of intelligent
+applications.
+protection require additional safeguards, including transfer risk assessments, to justify a transfer from
+the EU to a third country under the new EU standard contractual clauses.
+Information
+Further Information about
+Sustainability
+Additional
+Information
+territories exposed to a high risk of corruption; or increased exposure and impact on business activities
+in highly regulated industries.
+solution developments that might be misperceived by customers as commitments on future software
+functionalities.
+Information
+Additional
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+To Our
+Stakeholders
+SAP Integrated Report 2023
+Additional
+SAP
+We are subject to risks and associated consequences in the following areas, among others:
+implementation risks caused by insufficient or incorrect information provided by customers, insufficient
+customer expectation management, including scope, integration capabilities and aspects, and a lack of
+purposeful selection, implementation, or utilization of SAP solutions; a lack of customer commitments
+and respective engagements; challenges to achieve a seamlessly integrated, sufficiently automated
+and aligned service delivery; unrenderable services committed during the sales stage; inadequate
+contracting and consumption models based on subscription models for services, support, and
+application management; deviations from standard terms and conditions; or statements concerning
+A core element of our business is the successful implementation of software and service solutions.
+The implementation of SAP software and cloud-based service deliveries is led by SAP, by partners, by
+customers, or by a combination thereof.
+Sales and Services: Sales and implementation of SAP software and services, including cloud, are
+subject to several significant risks sometimes beyond our direct control.
+We cannot exclude the possibility that if any one or more of the risks associated with this risk factor
+were to occur, the impact could be major. We estimate the probability of occurrence to be likely, and
+classify this risk factor as medium.
+Despite our comprehensive and continuously evolving compliance programs and internal controls,
+intentional efforts of individuals to circumvent controls or engage in corruption, especially by way of
+collusion with other involved parties, cannot always be prevented.
+SAP has established measures intended to address and mitigate the described risks and adverse
+effects. For example, we: continuously evolve our comprehensive compliance program based on the
+three pillars of prevention, detection, and response; improve associated business processes, to
+prevent further and future violations; review partner business models, to mitigate risks of corruption
+while meeting agility requirements; conduct internal audits of our compliance programs related to
+bribery, corruption, and substantial fraud; annually reconfirm commitment to the COEBC by SAP's
+workforce (except where disallowed by local legal regulations); implement compliance policies and
+processes aimed at managing third parties and preventing misuse of third-party payments for illegal
+purposes, including the performance of compliance due diligence activities prior to the engagement of
+third parties; and launched a Partner Integrity Initiative aimed at examining the compliance programs of
+partners in SAP's ecosystem and reviewing the SAP-related deals closed by them. We also introduced
+a platform called "Speak Out at SAP" for anyone within and outside of SAP to raise confidentially and, if
+desired, anonymously their concerns on ethics and compliance related to our COEBC and any law or
+regulation.
+SAP has encountered situations in the past that required clear messaging and strong action on non-
+compliance in the context of corrupt behavior that has the potential to harm our business and
+reputation. SAP is continuing to investigate its dealings with the public sector.
+Any of these events could have a material adverse effect on our reputation, business, competitive or
+financial position, profit, and cash flows. In recent years, the investigation team within SAP's Office of
+Ethics & Compliance (OEC), together with the assistance of an external law firm, investigated
+whistleblower complaints alleging that the business conduct of some former SAP employees within
+subsidiary SAP companies did not comply with SAP's policies and procedures or applicable laws.
+These investigations culminated in January 2024 in a settlement agreement with the U.S. Securities
+and Exchange Commission (U.S. SEC) and the U.S. Department of Justice (U.S. DOJ), as well as with
+local authorities in South Africa. SAP fully cooperated with law enforcement authorities, and took
+immediate steps to discipline the employees involved, including terminating all those implicated in
+potential law violations. Since these allegations were made, SAP has also significantly strengthened its
+compliance program and related internal controls in accordance with DOJ and regulatory expectations
+and requirements.
+134/324
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+SAP
+131/324
+As we expand into new countries and markets or extend our business activities in these markets,
+including emerging and high-risk markets, these risks could intensify. The application of the respective
+local laws and regulations to our business is sometimes unclear, subject to change over time, and
+often conflicting among jurisdictions. Additionally, these laws and government approaches to
+enforcement continue to change and evolve, just as our products and services continually evolve.
+Compliance with these varying laws and regulations, including antitrust regulations, could involve
+significant costs or require changes in our products or business practices. Non-compliance could
+result in the imposition of penalties or cessation of orders due to alleged non-compliant activity.
+Governmental authorities could use considerable discretion in applying these statutes and any
+imposition of sanctions against us could be material.
+Our business is subject to numerous risks inherent to international business operations and associated
+consequences, such as changes in tax laws, changes in external reporting standards, and the
+interpretation of the complex tax rules in certain countries, including but not limited to conflict and
+overlap among tax regimes as well as the introduction of new tax concepts that harm digitalized
+business models; discriminatory, protectionist, or conflicting fiscal policies and tax laws; import and
+export regulations and trade sanctions; counter or even conflicting sanctions; embargoes, including but
+not limited to country-specific software certification requirements; and newly emerging cybersecurity
+and environmental, social, and governance (ESG) compliance and disclosure laws.
+The SAP Group has a global presence and operates in most countries of the world. As a European
+company domiciled in Germany with securities listed in Germany and the United States, we are
+subject to European, German, U.S., and other governance-related regulatory requirements of the
+countries we operate in.
+International Laws and Regulations: Laws, regulatory requirements and standards in Germany,
+the United States, and elsewhere continue to be very stringent. Our international business
+activities and processes expose us to numerous and often conflicting laws and regulations,
+policies, standards, or other requirements, and sometimes even conflicting regulatory
+requirements.
+We cannot exclude the possibility that if any one or more of the risks associated with this risk factor
+were to occur, the impact could be major. We estimate the probability of occurrence to be likely, and
+classify this risk factor as medium.
+SAP has established measures intended to address and mitigate the described risks and adverse
+effects. For example, we increase our share of more predictable revenue streams from cloud
+subscriptions and software support revenue streams, providing increased stability against financial
+volatility; and, supported by our global government affairs unit, we continuously monitor and evaluate
+global and political developments, to share insights and provide guidance to allow for proactive
+preparation and timely mitigation.
+SAP Integrated Report 2023
+As a global company, we are influenced by multiple external factors that are difficult to predict, may
+develop quickly, and are beyond our influence and control. These include, among others: crises
+affecting credit or liquidity markets; regional or global recessions; sharp fluctuations in commodity
+prices, currency exchange rates or interest rates; inflation or deflation; sovereign debt and bank debt
+rating downgrades; restructurings or defaults; adverse geopolitical events (such as Russia's invasion of
+Ukraine and the Israel-Hamas conflict); rising military tensions around the world (such as the China-
+Taiwan tensions) and in particular within Europe's borders; global policy including in the United States,
+the European Union (EU), Russia, and China; and global pandemic diseases such as COVID-19.
+Any of these events could have an adverse effect on our reputation, business, competitive or financial
+position, profit, and cash flows.
+Economic, Political, Social, and Regulatory Risks
+Additional
+Information
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+To Our
+Stakeholders
+SAP Integrated Report 2023
+SAP
+Global Economic and Political Environment: Uncertainty in the global economy and/or financial
+markets, and social and political instability caused by state-based conflicts, terrorist attacks,
+civil unrest, war, or international hostilities could lead to disruptions in our business.
+Any of these events could have an adverse effect on our reputation, business, competitive or financial
+position, profit, and cash flows.
+To Our
+Stakeholders
+Consolidated Financial
+Statements IFRS
+To Our
+Stakeholders
+SAP Integrated Report 2023
+SAP
+132/324
+As a global software and service provider, SAP is required to comply with local laws wherever it does
+business. One of the relevant European data protection laws is the General Data Protection Regulation.
+International data transfers to third countries that do not provide for an adequate level of data
+Data Protection and Privacy: Non-compliance with increasingly complex and stringent,
+sometimes even conflicting, applicable data protection and privacy laws, or failure to meet the
+contractual requirements of SAP's customers with respect to our products and services, could
+lead to civil liabilities and fines, as well as loss of customers.
+We cannot exclude the possibility that if any one or more of the risks associated with this risk factor
+were to occur, the impact could be major. We estimate the probability of occurrence to be likely, and
+classify this risk factor as medium.
+SAP has established measures intended to address and mitigate the described risks and adverse
+effects. For example, we: have various internal programs, such as internal policies, processes, and
+monitoring in place to assess and manage the risks associated with open source and third-party
+intellectual property; endeavor to protect ourselves in the respective third-party software agreements
+by obtaining certain rights in case such agreements are terminated; and are a party to certain patent
+cross-license agreements with third parties.
+Combined Management
+Report
+We are subject to risks and associated consequences in the following areas, among others:
+dependency in the aggregate on third-party technology, including cloud and Web services, that we
+embed in our products or that we resell to our customers; integration of open source software
+components from third parties into our software and the implications derived from it; inability to
+prevent third parties from obtaining, using, or selling without authorization what we regard as our
+proprietary technology and information; and the possibility that third parties might reverse-engineer or
+otherwise obtain and use technology and information that we regard as proprietary. Moreover, the
+laws and courts of certain countries might not offer effective means to enforce our legal or intellectual
+property rights. Finally, SAP may not be able to collect or otherwise enforce all judgments awarded to
+it in legal proceedings. The outcome of litigation and other claims or lawsuits is intrinsically uncertain.
+Management's view of the litigation might also change in the future. Actual outcomes of litigation and
+other claims or lawsuits could differ from the assessments made by management in prior periods,
+which are the basis for our accounting for these litigations and claims under IFRS.
+We have in the past, and believe that we will continue to be subject to, claims and lawsuits, including
+intellectual property infringement claims, as our solution portfolio grows; as we acquire companies
+with increased use of third-party code including open source code; as we expand into new industries
+with our offerings, resulting in greater overlap in the functional scope of offerings; and as non-practicing
+entities that do not design, manufacture, or distribute products assert intellectual property
+infringement claims.
+Legal and IP: Claims and lawsuits against us, such as for IP infringements, or our inability to
+obtain or maintain adequate licenses for third-party technology, or if we are unable to protect or
+enforce our own intellectual property, may result in adverse outcomes.
+We cannot exclude the possibility that if any one or more of the risks associated with this risk factor
+were to occur, the impact could be business-critical. We estimate the probability of occurrence to be
+remote, and classify this risk factor as medium.
+SAP has established measures intended to address and mitigate the described risks and adverse
+effects. For example, we: monitor new and increased regulatory requirements; continuously invest in,
+improve, and standardize our global processes, procedures, and solutions; proactively assess newly
+emerging regulatory initiatives; consult external economic and tax advisors, law firms, and authorities in
+the concerned countries; and take legal action when necessary.
+Any of these events could have a material adverse effect on our operations globally or in one or more
+countries or regions, which could have a material adverse effect on our business, financial position,
+profit, and cash flows.
+Information
+Additional
+Further Information about
+Sustainability
+Moreover, protecting and defending our intellectual property is crucial to our success. The outcome of
+litigation and other claims or lawsuits is intrinsically uncertain.
+SAP has established measures intended to address and mitigate the described risks and adverse
+effects. For example, we: integrate risk management processes into SAP's project management
+methods that are intended to safeguard implementations through coordinated risk and quality
+management programs; conduct ethical scope reviews and monitoring that are adapted as required as
+part of a clearly defined change request process together with respective project governance, steering,
+monitoring and controlling activities; and put in place a policy that clearly outlines communication
+rules on future functionalities as well as legal requirements for commitments to customers.
+Operational Business Risks
+Partner Ecosystem: If we are unable to scale, maintain, and enhance an effective partner
+ecosystem, revenue might not increase as expected.
+We are subject to risks and associated consequences in the following areas, among others: inability to
+deliver fully suitable solution and transformation services to our customers on the cloud
+transformation journey, both in cloud-only and hybrid scenarios; inability to successfully execute on
+our hyperscaler strategy; adverse, near-term revenue effects due to increasing cloud business and
+conversions from on-premise licenses to cloud subscriptions from existing SAP customers, which
+could have an adverse effect on related maintenance and services revenue; insufficient solution and
+service adoption together with increased complexity, as well as failures during the execution of our
+corporate strategy in the context of our portfolio for solutions and services, which could lead to a loss
+of SAP's position as a leading cloud company and subsequently to reduced customer adoption;
+customers and partners being reluctant or unwilling to migrate and adapt to the cloud; customers
+considering cloud offerings from our competitors; strategic alliances among competitors; price
+pressure, cost increases, and loss of market share through traditional, new, and cooperating
+competitors and hyperscalers; and the inability to achieve the planned margin increase in time as
+planned.
+The market for cloud computing is increasingly competitive and is exhibiting strong growth relative to
+the market for on-premise solutions. To maintain or improve our operating results in the cloud
+business, it is important that we not only attract new customers but also that our existing customers
+renew their agreements with us when the initial contract term expires and purchase additional
+modules or additional capacity. Additionally, we need to bring innovations to the market in line with the
+demands of our ecosystem and ahead of our competitors, such as solutions to support new data-
+driven applications and the extension of our suite of intelligent technologies based on SAP Business
+Technology Platform (SAP BTP).
+Market Share and Profit: Our market share and profit could decline due to increased
+competition, market consolidation, technological innovation, and new business models in the
+software industry.
+Strategic Risks
+We cannot exclude the possibility that if any one or more of the risks associated with this risk factor
+were to occur, the impact could be business-critical. We estimate the probability of occurrence to be
+unlikely, and classify this risk factor as medium.
+introduction; the consideration of regular and direct customer feedback; and a comprehensive
+certification program designed to ensure that relevant third-party solutions are of consistently high
+quality.
+We cannot exclude the possibility that if any one or more of the risks associated with this risk factor
+were to occur, the impact could be major. We estimate the probability of occurrence to be unlikely, and
+classify this risk factor as medium.
+Additional
+Any of these events could have a material adverse effect on our reputation, business, competitive or
+financial position, profit, and cash flows.
+Further Information about
+Sustainability
+Combined Management
+Report
+To Our
+Stakeholders
+SAP Integrated Report 2023
+SAP
+138/324
+SAP has established measures to address and mitigate the described risks and adverse effects, such
+as: a broad range of techniques, including project management, project monitoring, product standards
+and governance, and rigid and regular quality assurance measures certified to ISO 9001:2015; a holistic
+testing strategy to validate the state of quality and security for every product before market
+Any of these events could have a material adverse effect on our reputation, business, competitive or
+financial position, profit, and cash flows.
+We are subject to risks and associated consequences in the following areas, among others: failure of
+software products and services to fully meet market needs or customer expectations; failure of
+software products and services from acquired companies to fully comply with SAP quality standards;
+failure of new products, services, and cloud offerings, including third-party technologies, to comply with
+local standards and requirements; the possibility that new products, services, and cloud offerings or
+subsequent versions and updates to existing products, services, and cloud offerings might contain
+defects or security vulnerabilities, or might not be mature enough from the customer's point of view for
+business-critical solutions, or might not be sufficiently secure after release or shipment despite all the
+due diligence SAP puts into quality; inability of algorithms to correctly adapt to evolving circumstances,
+which may lead to adverse decision-making processes in the context of Al-related technologies; and
+the inability to fulfil expectations of customers regarding time and quality in the defect resolution
+process.
+Consolidated Financial
+Statements IFRS
+Technology and Products: Our technology and products may experience undetected defects,
+coding or configuration errors, may not integrate as expected, or may not meet customer
+expectations.
+SAP has established measures intended to address and mitigate the described risks and adverse
+effects. For example, we: share our overall long-term cloud strategy and our integration road map with
+our customers; continuously implement improvements to enhance our cloud solutions through our
+corporate strategy; demonstrate the benefits of our solution and services portfolio; enable and
+support our customers as they transition from on-premise to the cloud; balance the allocation of our
+strategic investments by evolving and protecting our core businesses and simultaneously developing
+new solutions, technologies, and business models; offer broader range of services to support and
+drive the digital transformation for our customers; continuously drive the solution integration and
+harmonization of data models to support integrated business processes, applications, and technology
+while focusing on resilience, profitability, and sustainability; enable our portfolio for hyperscalers to
+extend customer reach and further meet customer expectations; continue to move SAP HANA
+Enterprise Cloud towards a full-stack offering; and increase the share of high-value cloud application
+services to further improve the margin.
+139/324
+140/324
+We are subject to risks and associated consequences in the following areas, among others: inability to
+develop and sell new cloud products spanning various organizations on time and in line with market
+demands due to complexity in heterogeneous technical environments; inability to anticipate and develop
+Our future success depends on our ability to keep pace with technological and process innovations and
+new business models, as well as on our ability to develop new products and services, enhance and
+expand our existing products and services portfolio, and integrate products and services we obtain
+through acquisitions. To be successful, we are required to adapt our products and our go-to-market
+approach to a cloud-based delivery and consumption model so as to satisfy increasing customer
+demand and to ensure an appropriate level of adoption, customer satisfaction, and retention.
+Innovation: We might not be able to compete effectively if we strategize our solution portfolio
+ineffectively or if we are unable to keep up with rapid technological and product innovations,
+enhancements, new business models, and changing market expectations.
+SAP has established measures intended to address and mitigate risks and adverse effects. For
+example, we: perform technical, operational, financial, and legal due diligence on the company or
+assets to be acquired or divested; identify, implement, and track risk mitigation measures for material
+transactions or integration risks; and conduct process, risk, and control analyses that are subsequently
+integrated into SAP's processes and control framework and supported by mitigations as required by
+any specific circumstances to subsequently increase adherence to SAP's standards and policies.
+We cannot exclude the possibility that if any one or more of the risks associated with this risk factor
+were to occur, the impact could be moderate. We estimate the probability of occurrence to be unlikely,
+and classify this risk factor as low.
+Any of these events could have a material adverse effect on our reputation, business, competitive or
+financial position, profit, and cash flows.
+We have in the past, and may in the future, choose to divest certain entities, businesses, or product
+lines. We may have difficulty obtaining terms acceptable to us. Additionally, we may experience
+difficulty carving out portions of or entire businesses, we may incur a loss of revenue or experience a
+negative impact on margins, or we may not achieve the desired strategic and financial benefits. Such
+potential transactions may also delay achievement of our strategic objectives, cause us to incur
+additional expenses, disrupt customer, partner, and employee relationships, and may expose us to
+unanticipated or ongoing obligations and liabilities, including as a result of indemnification obligations.
+Further, during the pendency of a divestiture, we may be subject to risks such as a decline in the
+business to be divested, a loss of employees, customers, or suppliers, and the risk that the transaction
+may not close, any of which could have a material adverse effect on the business to be divested as
+well as our retained business. If a divestiture is not completed for any reason, we may not be able to
+find another buyer on the same terms, and we may have incurred significant costs without the
+corresponding benefit.
+We are subject to risks and associated consequences in the following areas, among others: incorrect
+information or assumptions during the due diligence process for acquisitions, divestitures, and other
+transactions; failure to integrate acquired technologies or solutions successfully and profitably into
+SAP's solution portfolio and strategy; failure to successfully integrate acquired entities and their
+operations; failure to fulfill the needs of the acquired company's customers or partners; failure to
+implement, restore, or maintain internal controls, disclosure controls, and procedures and policies
+within acquired companies; debt incurrence or significant unexpected cash expenditures; impairment
+of goodwill and other intangible assets acquired in business combinations; and failure of acquired
+companies to comply with regulatory requirements..
+We cannot exclude the possibility that if any one or more of the risks associated with this risk factor
+were to occur, the impact could be business-critical. We estimate the probability of occurrence to be
+unlikely, and classify this risk factor as medium.
+To expand and consolidate our business, we acquire and divest businesses, products, and
+technologies, and we expect to continue doing so in the future. Over time, some of these acquisitions
+have increased in size and in strategic importance for SAP. Management negotiation of potential
+acquisitions and divestures and the integration and carve-out of acquired businesses, products, or
+technologies demands time, focus, and resources of both management and the workforce, and
+exposes us to unpredictable operational difficulties.
+Information
+Additional
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+To Our
+Stakeholders
+SAP Integrated Report 2023
+SAP
+Mergers and Acquisitions: We might not acquire, integrate, or divest companies or their
+components effectively or successfully.
+cybersecurity program, for example by implementing the National Institute of Standards and
+Technology Cybersecurity Framework (NIST CSF) and establishing a Cyber Fusion Center (CFC). In
+addition, the Executive Board and Supervisory Board continue to increase their governance of and
+involvement in cybersecurity matters, for example by focusing on cybersecurity audit and risk
+management topics. SAP has established measures intended to address the described risks and
+adverse effects, such as the continuous adaptation, standardization, and modification of our security
+procedures. This includes, among others: security risk identification, threat modeling, advanced threat
+defense, application patches and container security enhancements, and security validation of our
+critical components and services before shipment. We increased our investments and resources,
+including various internal initiatives to achieve SAP's objective of ensuring over time that our
+cybersecurity infrastructure meets or exceeds evolving industry standards. In addition, we enhanced
+the security capabilities in our hosting environment, cloud platforms, and cloud deployment tools,
+including improved monitoring to our infrastructure. Disaster recovery and business continuity plans
+are in place to protect our key IT infrastructure including implementation of data redundancies and
+backup strategies. In addition, we have set up local and regional crisis management teams to respond
+and minimize losses in case of crisis situations. Furthermore, we conduct security certifications and
+attestations (such as ISO/IEC 27001, ISO/IEC 22301, SOC, and PCI) and provide our customers with
+security white papers, product documentation, and reports from independent auditors and
+certification bodies. All employees are required to follow the SAP Global Security Policy, security
+standards, procedures, and good practices reinforced by completion of mandatory security and
+compliance training. SAP's third-party risk management process aims to control and achieve
+governance in SAP's third-party ecosystem. Besides conducting risk assessments to gauge a third
+party's risk level, we increase employee and contractor awareness through cybersecurity campaigns
+and awareness training. Formalized third-party and partner data privacy and security agreements
+require adherence to SAP standards. We also engage experts to advise on appropriate cybersecurity
+protocols to further increase attention and understanding of cybersecurity procedures and protection
+options. SAP also established the CFC to bring functional teams together and strengthen detection
+capability. Additionally, the software security development lifecycle with integrated security features
+and functionalities has been applied to increase coordination across our various lines of business,
+which in turn improves our ability to detect, identify, and respond to threats in a timely manner.
+Despite the foregoing measures, we cannot exclude the possibility that if any one or more of the risks
+associated with this risk factor were to occur, the impact could be business-critical and materially
+impact our business and results. We estimate the probability of occurrence to be likely, and classify
+this risk factor as high.
+Information
+Additional
+136/324
+SAP has established measures intended to address and mitigate the described risks and adverse
+effects. For example, we: consolidated and harmonized our data centers and our data protection
+measures, which included implementing security information and event management solutions as well
+as enforcing network access control; invest significantly in infrastructure and processes to ensure
+consistently secure operations of our cloud solutions while continuously improving resistance,
+resilience, reusability, and scalability towards a standardized and harmonized portfolio; continuously
+enhance our infrastructure landscape capabilities and deployment options, including harmonized,
+efficient, and highly repetitive migration services; adhere to stringent SLAs with hyperscalers to ensure
+a high-quality customer experience; increase transparency through our continuously enhanced and
+expanded SAP Trust Center, in an effort to provide an appropriate level of information, for example,
+regarding planned patching activities and associated downtimes; monitor and invest in the continuous
+enhancement of our disaster recovery and business continuity capabilities; continuously aim for a
+homogeneous landscape that supports the complex infrastructure, application, and security
+requirements so that we can deliver the required service level for cloud services in a cost-effective
+manner; set up physical access control systems at facilities, multilevel access controls, closed-circuit
+television surveillance, security personnel in all critical areas, and recurring social engineering tests for
+SAP premises and data centers; control the access to information and information systems using
+authorization concepts that include managers and employees being regularly sensitized to the issues
+and given mandatory security and compliance trainings; adapt our cloud service delivery to local or
+specific market requirements (such as local or regional data centers) and comply with all local legal
+regulations regarding data protection and privacy as well as data security; establish contracts and
+SLAs with our public cloud partners to ensure that data security and privacy measures meet local
+regulatory and compliance standards and SAP's own standards for data security and privacy; maintain
+strict internal policies and controls concerning utilization of our partner's cloud infrastructure, including
+people, process, and technology standards required to enhance compliance and cyber resilience;
+closely monitor data center utilization, capacity, and pipeline for subsequent investment planning;
+regularly conduct risks reviews, disclosure requests, and audits to ensure public cloud providers meet
+SAP's data privacy and security standards; ensure PCI-validated compliance through successful
+PCI DSS audits; invest in training and certifications concerning hyperscaler and related next-generation
+technologies; and implement best-of-breed tools for IT operations management and automation.
+We are subject to risks and associated consequences in the following areas, among others: the cloud
+portfolio or strategic direction of cloud operations may not fully meet customer demands; customers'
+cloud service demands may not match our data center capacity or control investments; capacity
+shortages could affect SAP's ability to deliver and operate cloud services as expected by or
+committed to our customers; scalability demands on infrastructure and operation could lead to cost
+increases and margin impacts; hyperscaler or infrastructure instabilities and the lack of availability or
+comprehensive contractual agreements could lead to challenges in meeting service level agreement
+(SLA) commitments; we might lack sufficient “future skills" for delivering and operating hybrid
+environments; we might lack the automation, standardization, and tools to manage and optimize
+operations and infrastructure; local legal requirements or changes to data sovereignty may lead to
+customers relocating their landscapes to a different data center; the loss of the right to use hardware
+purchased or leased from third parties could affect our ability to provide our cloud applications;
+disruptions to SAP's cloud applications portfolio (such as system outages or downtimes, SAP network
+failure due to human or other errors, security breaches, or variability in user traffic for cloud
+applications) could affect customer SLAs; hardware failures or system errors might result in data loss
+or corruption; exploitation by threat actors of known and previously unknown ("zero day") security
+vulnerabilities in our or our customers' systems and software, including as a result of our or our
+customers' failure to patch such vulnerabilities in a timely or effective manner; partner co-location of
+data centers might not adhere to our quality standards; or we might not comply with applicable
+certification requirements, such as the Payment Card Industry Data Security Standard (PCI DSS).
+Any of these events could have a material adverse effect on our reputation, business, competitive or
+financial position, profit, and cash flows.
+are focused on attacking third-party product and service providers, such as SAP, as a means of
+compromising our and our downstream customers' systems and data.
+Further Information about Additional
+Sustainability
+Information
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+To Our
+Stakeholders
+SAP
+SAP Integrated Report 2023
+135/324
+Information
+Cloud Operations: We may not be able to properly protect and safeguard our critical
+information and assets, business operations, cloud offerings and portfolio presentation, and
+related infrastructure against cyberattacks, insufficient infrastructure, disruption, or deficient
+performance.
+We cannot exclude the possibility that if any one or more of the risks associated with this risk factor
+were to occur, the impact could be major. We estimate the probability of occurrence to be unlikely, and
+classify this risk factor as medium.
+SAP has established measures intended to address and mitigate the described risks and adverse
+effects. For example, we: develop and enhance a wide range of partner programs to retain existing and
+attract new partners; offer training opportunities for our partners; provide safeguarding services to
+customers and partners; introduced a partner delivery quality framework; and implemented a
+certification process for third-party solutions to ensure consistent high-quality and seamless
+integration.
+If any of these risks materialize, this might have an adverse effect on the demand for our products and
+services as well as the partner's loyalty and ability to deliver. As a result, we might not be able to scale
+our business to compete successfully with other vendors, which could have an adverse effect on our
+reputation, business, competitive or financial position, profit, and cash flows.
+We are subject to risks and associated consequences in the following areas, among others: failure to
+establish and enable a network of qualified and fully committed partners; failure of partners to
+develop sufficient innovative solutions and content on our platforms or to provide high-quality
+products or services to meet customer expectations; failure of partners to embed our solutions
+sufficiently enough to profitably drive product adoption; failure of partners to adhere to applicable
+legal and compliance regulations; failure of partners to transform their business model in accordance
+with the transformation of SAP's business model in a timely manner; and failure of partners to comply
+with contract terms in embargoed or high-risk countries.
+An open and vibrant partner ecosystem is a fundamental pillar of our success and growth strategy. We
+have entered into partnership agreements that drive co-innovation on our platforms, profitably expand
+our routes to market to optimize market coverage, optimize cloud delivery, and provide high-quality
+services capacity in all market segments. Partners play a key role in driving market adoption of our
+entire solutions portfolio, by co-innovating on our platforms, embedding our technology, and reselling
+or implementing our software.
+SAP
+SAP Integrated Report 2023
+SAP is highly dependent on the availability, integrity, and reliability of our infrastructure, including
+infrastructure provided by third-party business partners, and the software used in our cloud portfolio is
+inherently complex. Customers using our cloud services rely on the security of our infrastructure to
+protect the availability of our services and the data that they store on our infrastructure. Threat actors
+Combined Management
+Report
+To Our
+Stakeholders
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+SAP Integrated Report 2023
+SAP
+137/324
+The foregoing types of events could result in a loss of customers or customer opportunities, a
+diminished reputation in the marketplace, government investigations or enforcement actions, internal
+investigations, litigation including class actions, fines, or penalties, increased costs associated with
+remediation or compliance requirements, required changes to our business model or operations, and
+a host of other costs and losses, any or all of which could have a material adverse effect on our
+reputation, business, financial performance, competitive or financial position, profit, and cash flows. In
+response to the cybersecurity risk environment it is experiencing, SAP is continuously enhancing its
+We could also experience material exposure to our business operations and service delivery due to
+disruptions to backups, disaster recovery or business-continuity management processes, or as the
+result of malicious or inadvertent actions by threat actors, employees, contractors, or a host of other
+parties. Security threats may also exist due to delayed or insufficient responses to identified issues or
+other interdependencies such as cloud service providers and those beyond SAP's cybersecurity
+infrastructure and protocols. SAP's and/or its partners' lack of sufficient security controls or compliance
+with existing controls could impact SAP's and/or its partners' ability to comply with applicable
+regulations and customer requirements. SAP and/or its partners could unknowingly introduce security
+threats and vulnerabilities without established security evaluation processes. Additionally, failure to
+integrate or maintain SAP's cybersecurity infrastructure and protocols with network systems obtained
+through acquisitions could result in cyberbreaches, a loss of data confidentiality and integrity, and/or a
+loss of system availability.
+To Our
+Stakeholders
+SAP delivers a full portfolio of solutions, hosts or manages elements of our customers' businesses in
+the cloud, processes large amounts of data, and provides mobile solutions to users. While SAP
+executes each of these areas either directly or through partners and other third parties, our industry
+continues to experience a complex and threatening cybersecurity landscape. The severity of these
+cybersecurity threats is amplified due to the increasingly sophisticated and malicious global
+landscape in which we operate. This includes third-party data, products, and services that we
+incorporate into SAP products and services, and the increasingly advanced obfuscation, control-
+circumvention, and related techniques and tools - such as artificial intelligence - employed by threat
+actors targeting IT products, businesses, and the supply chain. When we become aware of
+unauthorized access to our systems or those of our third-party partners, we have action plans in place
+intended to identify and remediate the source and impact of such events. Like many companies, we
+and certain of our third-party partners have experienced and expect to continue to experience
+cyberattacks and other security incidents that affect our business. While we experience cybersecurity
+incidents of various kinds in the ordinary course of our business, we are not aware of any such
+incidents that have had a material impact on our business.
+Cybersecurity and Security: Cybersecurity attacks or breaches, and security vulnerabilities in
+our infrastructure or services or those of our third-party partners could materially impact our
+business operations, products, and service delivery.
+We cannot exclude the possibility that if any one or more of the risks associated with this risk factor
+were to occur, the impact could be major. We estimate the probability of occurrence to be unlikely, and
+classify this risk factor as medium.
+Information
+Additional
+Further Information about
+Sustainability
+We are subject to risks and associated consequences in many areas including, but not limited to, an
+increasing number of global threat actor attacks using ransomware as their preferred method of attack
+as well as exploiting known and unknown bugs, errors and vulnerabilities in our software and systems
+or those of business partners, customers or other third parties. Given the nature of complex systems,
+software and services like ours, and the scanning tools that we deploy across our networks and
+products, we regularly identify and track security vulnerabilities. Security vulnerabilities are prioritized
+based on known and anticipated risks, and remediation activities aim to patch within the designated
+timeframes. Although we have standard routine patch management processes, we are unable to
+comprehensively apply patches or to confirm that mitigating measures are in place to mitigate all such
+vulnerabilities, or that any patches will be applied before exploitation by a threat actor. In other
+situations, vulnerabilities persist even after we have issued security patches, because our customers
+may fail to either apply the patches, update their systems, or authorize service downtime sufficient to
+allow for patching by SAP. If attackers are able to exploit vulnerabilities before patches are installed or
+mitigating measures are implemented, significant compromises could impact our and our customers'
+systems and data.
+Consolidated Financial
+Statements IFRS
+Japan
+Latin America and the Caribbean
+Canada
+United States
+Sub-Saharan Africa
+Middle East and Central Asia
+Euro Area
+Germany
+Regions (according to IMF taxonomy)
+China
+Advanced Economies
+Emerging Markets and Developing Economies
+Emerging and Developing Europe
+p = projection
+4.1
+2024p
+2025p
+3.1
+3.1
+3.2
+1.6
+1.5
+1.8
+4.1
+4.2
+0.5
+0.9
+1.7
+World
+2023
+Percent
+Expected Developments and
+Opportunities
+For the APJ region, the ECB's growth outlook remains broadly unrevised with respect to emerging Asia
+and China. In China, the ECB projects economic growth to gradually decrease over the coming years
+owing to structural factors such as population ageing. In Japan, economic growth might remain positive
+but modest in 2024, amid signs of a slight rebound in real consumption levels.
+-0.3
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+technological improvements or succeed in adapting SAP products, services, processes, and business
+models to technological change, changing regulatory requirements, or emerging industry standards; a
+change in requirements of our customers and partners to strengthen the Intelligent Enterprise strategy;
+the possibility that our product and technology strategy might not be successful, or that our customers
+and partners might not adopt our technology platforms, applications, or cloud services quickly enough, or
+that they might consider other competing solutions in the market, or that our strategy might not match
+customers' expectations and needs, specifically in the context of expanding the product portfolio into
+additional markets.
+We are integrating Al into a number of our products, including our suite of enterprise applications and
+SAP BTP, and we expect our use of Al across our portfolio to continue to grow. As with many innovations,
+Al presents risks and challenges that could affect its adoption and therefore our business. Al algorithms
+or training methodologies may be flawed. Data sets may be overbroad, insufficient, or contain biased
+information. Content generated by Al systems may be offensive, illegal, or otherwise harmful. Ineffective or
+inadequate Al development or deployment practices by SAP or our partners could result in incidents that
+impair the acceptance of Al solutions or cause harm to individuals, customers, or society, or result in our
+products and services not working as intended. Human review of certain outputs may be required, which
+could introduce error or inefficiencies to the intended use of our Al-enabled offerings. As a result of these
+and other challenges associated with innovative technologies, our implementation of Al systems could
+subject us to competitive harm, regulatory action, legal liability, and brand or reputational harm.
+In particular, there is significant uncertainty surrounding the applications of intellectual property and
+privacy laws to Al technology. Intellectual property ownership and license rights, including copyright,
+surrounding Al technology have not been fully addressed by courts or other laws or regulations of the
+jurisdictions in which we operate, and our use of Al technology or integration of Al technology into our
+products and services may result in disputes with respect to ownership or intellectual property, or
+exposure to claims of copyright or other intellectual property misappropriation. In addition, our Al
+technology may involve the processing of personal and other sensitive data and may be subject to laws,
+policies, legal obligations, and contractual requirements related to privacy, data protection, and
+information security. Various privacy laws extend rights to consumers (such as the right to obtain consent
+or delete certain personal data) and regulate automated decision making. An alleged or actual failure to
+meet these obligations may lead to regulatory investigations and fines or penalties; may require us to
+change our business practices or retrain our algorithms; or may prevent or limit our use of Al technology. It
+is also possible that we are held liable for intellectual property, privacy, or other legal violations of third-
+party Al technology that we use, and that we may not have full recourse for any damages that we suffer
+(for example, our use of third-party Al technology may be subject to limitations of liability or provide no
+liability coverage).
+In addition, some Al scenarios present ethical issues or may have broad impacts on society, and there
+can be no assurance that our Global Al Ethics Policy or similar policies and procedures will be sufficient
+to address such issues. If we enable or offer Al solutions that have unintended consequences,
+unintended usage or customization by our customers and partners, or are controversial because of their
+impact on human rights, privacy, employment, or other social, economic, or political issues, we may
+experience reputational harm, adversely affecting our business and consolidated financial statements.
+Any of these events could have a material adverse effect on our reputation, business, competitive or
+financial position, profit, and cash flows.
+SAP has established measures intended to address and mitigate the described risks and adverse effects.
+For example, we: continuously align our organization, processes, products, delivery, commercial and
+consumption models, and services to changing markets and customer and partner demands;
+continuously benchmark, match, and challenge the entire portfolio; focus all investment decisions related
+to innovative technologies and solutions on portfolio compatibility and readiness as well as high
+customer value; explore future trends as well as the latest technologies; conduct wide-ranging market
+and technology analyses and research or co-innovation projects; and make strategic acquisitions in white
+spots of our portfolio.
+We cannot exclude the possibility that if any one or more of the risks associated with this risk factor were
+to occur, the impact could be major. We estimate the probability of occurrence to be remote, and classify
+this risk factor as low.
+141/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+Future Trends in the Global Economy
+Global economic growth will decrease slightly in 2024, mainly reflecting the impact of monetary policy
+tightening across advanced economies, projects the European Central Bank (ECB) in its most recent
+Economic Bulletin.¹ This means that the global economy will expand but still at a rate below the
+historical average over the ECB's projection horizon. With post-COVID-19 growth momentum waning,
+the services sector, which had previously proven resilient, might also show a greater deceleration in
+2024.
+Concerning the EMEA region, economic growth in the euro area might remain subdued in the near
+term, as interest rate increases could tighten financing conditions and dampen demand, but at the
+same time help push down inflation. However, these effects are likely to fade later on in the projection
+period because of rising real incomes and improving foreign demand, suggests the ECB. It also expects
+services activity in the EMEA region to soften in the coming months due to spillovers from weaker
+industrial activity, fading effects from the reopening of the economy, and the broadening impact of
+tighter financing conditions.
+As for the Americas region, the ECB predicts that while economic growth in the United States could
+moderate in the near term as tighter monetary policy might restrain spending, the U.S. economy should
+recover again from the second half of 2024 onward.
+Economic Trends - GDP Growth Year Over Year
+0.5
+Emerging and Developing Asia
+2.7
+The outlook for the SAP Group in respect to liquidity, finance, investment, and dividend is equally
+applicable to SAP SE.
+Among the assumptions underlying this outlook are those presented above concerning the economy
+and our expectations for the performance of the SAP Group.
+Opportunities
+Our customers choose SAP as a trusted partner for their digital business transformation. We have
+established a framework for opportunity management by evaluating and analyzing key areas such as
+current markets, external scenarios, economic conditions, and technological trends. We have also
+researched customer and product segmentation, growth drivers, and industry-specific factors for
+success. These combined insights play a key role for the Executive Board in the development of our
+market strategies. Our shareholder value relies heavily upon a fine balance of risk mitigation and value-
+driven opportunities. Therefore, our governance model helps ensure that decisions are based on
+return, investment required, and risk mitigation.
+As far as opportunities are likely to occur, we have incorporated them into our business plans, our
+outlook for 2024, and our medium-term prospects outlined in this report. Therefore, the following
+section focuses on future trends or events that might result in an uplift of our outlook and medium-
+term prospects should they develop more positively than anticipated in our forecasts.
+SAP SE is the parent company of the SAP Group and earns most of our revenue from subscription
+fees, software license fees, and dividends paid by affiliates. Consequently, the opportunities described
+below also apply - directly or indirectly - to SAP SE.
+Opportunities from Economic Conditions
+Economic conditions clearly influence our business, financial position, profit, and cash flows. Should
+the global economy recover faster than is reflected in our plans today, our revenue and profit may
+surpass our current outlook and medium-term prospects. Our medium-term planning considers
+146/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+We expect that this growth will also result in further revenue and profit growth for SAP SE to the same
+degree. We expect that SAP SE will continue to receive investment income in the form of profit
+transfers and dividends from its subsidiaries. The growth we expect for the SAP Group should have a
+positive effect on this investment income.
+Combined Management
+Report
+Further Information about
+Sustainability
+Additional
+Information
+changes in market conditions as a result of the ongoing geopolitical and macroeconomic
+environments. Although we continue to be mindful of the negative aspects of this global situation, we
+take opportunities to further invest into our strategic growth areas.
+For more information about future trends in the global economy and the IT market outlook, as well as
+their potential influence on SAP, see the beginning of this Expected Developments and Opportunities
+section.
+Opportunities Through Innovation
+Our continued growth through innovation is based on our ability to leverage research and
+development (R&D) resources effectively. We are accelerating innovation cycles, especially in our
+cloud solutions, and engaging even more closely with our customers to enable success. Specifically,
+we focus on ease of adoption and consumption so customers can receive the benefits from our
+software solutions, technologies, and platforms at reduced time to value.
+Our aim is to bring our customers into a clean core in the cloud based on SAP S/4HANA Cloud and
+enabled by our SAP Business Technology Platform (SAP BTP), which provides the required
+extensibilities and thereby creates connectivity between our solutions. This clean core is intended to
+enable multicloud adoption from our customers and partners.
+To address new and critical environmental, economic, and social challenges, SAP embeds
+SAP Business Al capabilities across our entire portfolio, a step we believe will increase customer
+demand. In addition, SAP Business Al has the potential to simplify how people interact with SAP
+solutions, and to increase the addressable user base.
+Based on our innovation capabilities, we see opportunities to drive customer value by shaping the
+future of business processes with next-generation, modular, industry-specific solutions that enhance
+companies' existing systems. Designed to drive unprecedented business agility, forge the future of
+business collaboration, and enable companies to manage operations seamlessly within and beyond
+organizational boundaries, said solutions are pioneering the future of data-driven decision-making,
+empowering businesses to act boldly and with greater confidence. These enhancements could also
+lead to increased demand across our cloud portfolio. For example, the accelerated adoption of
+technology that helps companies take more sustainable decisions and that we natively build in our
+SAP S/4HANA Cloud could result in additional upsell opportunities for customers migrating to cloud
+ERP.
+We also see high growth potential in four adjacent innovation areas: sustainability management,
+working capital management (accelerated through the Taulia portfolio), business networks,
+business transformation solutions (accelerated through the SAP Signavio portfolio and LeanIX
+solutions) that help us deliver on our vision and commitments to help customers reach agility at scale,
+achieve more across the value chain, and become sustainable at their core.
+In addition, we continue to expand startup engagement in strategic opportunity areas, focusing on
+startups as customers and partners.
+Consolidated Financial
+Statements IFRS
+For more information about future opportunities in research and development for SAP, see the
+Strategy and Business Model section.
+Given the Company-wide restructuring program we announced and the projected restructuring
+expenses at SAP SE level, and assuming that there are no one-time effects relating to acquisitions or to
+other non-recurring events, we expect SAP SE's operating profit to decrease significantly.
+The primary source of revenue for SAP SE is the license fees it charges subsidiaries for the right to
+market and maintain SAP software solutions. Consequently, the performance of SAP SE in operating
+terms is closely tied to the cloud and the software revenue of the SAP Group.
+The share of more predictable revenue to be approximately 86%
+Further, SAP strives for an acceleration of total revenue growth and an expansion of operating margin
+beyond 2025.
+1 Non-IFRS. Our Ambition for 2025 has been adjusted in accordance with our updated non-IFRS definition applicable from 2024. For more
+information, see the Performance Management System section.
+Note: For a reconciliation of non-IFRS results to IFRS equivalents, see the Performance Management System section.
+Investment Goals
+Our planned investment expenditures for 2024 and 2025, other than for business combinations,
+consist primarily of the purchase of IT infrastructure and the construction activities described in the
+Assets (IFRS) section. We expect investments in IT infrastructure to be approximately €400 million and
+in construction activities to be approximately €350 million in 2024. In 2024, we expect total capital
+expenditures of approximately €950 million. In 2025, capital expenditures are expected to decrease to
+approximately €700 million.
+Goals for Liquidity and Finance
+As of December 31, 2023, our net liquidity was €3.5 billion. We believe that our liquid assets combined
+with our undrawn credit facilities are sufficient to meet our operating financing needs in 2024 as well,
+and, together with expected cash flows from operations, will support debt repayments and our
+currently planned capital expenditure requirements over the near and medium term.
+In 2024, we expect a free cash flow of approximately €3.5 billion (compared to €5.1 billion in 2023) and
+of around €8.0 billion in 2025. The decline in free cash flow in 2024 will be driven predominantly by our
+preliminary €2.0 billion estimated outflow for restructuring, a €200 million outflow for compliance
+matters, and a €200 million adverse impact due to the discontinuation of the SAP-triggered financing
+program.
+In 2024, we intend to repay €850 million in Eurobonds and US$323 million in U.S. private placements.
+The ratio of net debt as of December 31, 2023, divided by the total of operating profit (IFRS) plus
+depreciation and amortization was -0.49x and therefore below our 2023 target of 0.5x.
+Non-Financial Goals for 2024 and Ambition for 2025
+In addition to our financial goals, we also focus on four non-financial targets: customer loyalty,
+employee engagement, carbon impact, and women in executive roles.
+Due to the rise, at constant currencies, in non-IFRS cloud and software revenue anticipated for the
+SAP Group in 2024, we expect a moderate increase in product revenue for SAP SE.
+For 2024, SAP expects employee engagement, measured by the Employee Engagement Index, to be
+between 76% and 80% (2023: 80%). Through 2025, we aim to achieve a steady increase in our
+Employee Engagement Index score.
+145/324
+1.6
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about Additional
+Sustainability
+Information
+In 2024, we expect to steadily decrease carbon emissions across the relevant value chain. Further, SAP
+has also committed to achieving net-zero along our value chain in line with a 1.5 degrees Celsius future
+in 2030.
+From 2024, SAP will track a new KPI: Women in Executive Roles (WIER). For 2024 and beyond, we are
+expecting to steadily increase the percentage of women on Global Executive Team, Senior Executive
+Team, and Executive Team level as we strive to achieve our target of 25% by the end of 2027.
+Premises on Which Our Outlook and Prospects Are Based
+In preparing our outlook and prospects, we have taken into account all events known to us at the time
+we prepared this report that could influence SAP's business going forward.
+Outlook for SAP SE
+SAP measures customer loyalty using the Customer Net Promoter Score (Customer NPS). We expect
+the score to be between 9 and 13 for Customer NPS in 2024. SAP expects to steadily increase the
+Customer NPS through 2025.
+Total revenue of more than €37.5 billion
+Opportunities from Our Strategy for Profitable Growth
+To positively affect the profitability of our cloud business, we set clear priorities to optimize efficiency
+in our cloud operations. Our operational excellence priorities include a focus on adoption and
+consumption of our product portfolio, leading to more efficient sales and marketing invest; a focused
+product portfolio leading to more effective R&D investment; more centralized business operations
+Our employees drive innovation, provide value to our customers, and consistently enable our growth
+and profitability. We continuously invest in our people with the aim of retaining their high level of
+engagement, further strengthening their skills, fostering an agile and innovative organization, and
+ensuring a healthy, diverse, and inclusive workforce. By doing so, we anticipate improvements in our
+employee productivity and innovation capabilities.
+Our outlook and medium-term prospects are based on certain assumptions regarding employee
+retention and our Business Health Culture Index. Should these develop at a rate that is better than
+expected, employee productivity and engagement may increase. A stronger-than-expected increase in
+the Employee Engagement Index can therefore be an opportunity that could positively impact our
+revenue, profit, and cash flows, enabling SAP to exceed our stated medium-term prospects.
+For more information about future opportunities relating to our employees, see the Employees section.
+Executive Board's Overall Assessment of Opportunities and Risks
+In our view, considering their impact level and likelihood of occurrence, the risks described in our
+aggregated risk report do not individually or cumulatively threaten our ability to continue as a going
+concern. While individual risks, individual opportunities, and assessments may have changed during
+2023, our overall risk profile and overall opportunities profile did not change materially compared to
+the prior year. Management remains confident that the Group's earnings strength forms a solid basis
+for our future business development and provides the necessary resources to pursue the
+opportunities available to the Group. Based on our structured processes for early risk identification, we
+are confident that, in 2024, we can continue to counter the challenges arising from the risks in our
+current risk profile.
+149/324
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+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Responsibility Statement
+Opportunities from Our Employees
+Additional
+Information
+Walldorf, February 21, 2024
+SAP SE
+Walldorf, Germany
+Executive Board of SAP SE
+Christian Klein
+Dominik Asam
+Dr. Jürgen Müller
+Scott Russell
+Thomas Saueressig
+Gina Vargiu-Breuer
+Julia White
+150/324
+To the best of our knowledge, and in accordance with the applicable reporting principles, the
+Consolidated Financial Statements give a true and fair view of the assets, finances, and operating
+results of the SAP Group, and the management report of the Group and SAP SE includes a fair review
+of the development and performance of the business and the position of the Group and SAP SE,
+together with a description of the principal opportunities and risks associated with the expected
+development of the Group and SAP SE.
+SAP strives to generate profitable growth across our portfolio of products, solutions, and services to
+keep and improve our market position. Our aim is to continue to expand our addressable market by
+enhancing our portfolio and our new technologies and innovations. As an industry, we are benefiting
+from a secular trend toward digitalization, cloud, and the rise of Al, and are strengthening the market's
+readiness to consume software in the cloud, including core business process platforms.
+Information
+Further Information about
+Sustainability
+147/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+leading to end-to-end-optimization; and an accelerated workforce transformation leading to a future-
+ready workforce.
+SAP seeks to establish new business models and leverage its expanding ecosystem of partners to
+achieve scale and maximize opportunities. Building on our success with RISE with SAP, we are moving
+toward expansion and have launched Grow with SAP, a dedicated offering for midmarket companies
+that is helping us win net-new customers.
+New commercial models such as RISE Premium Plus increase the focus on packaged suite sales and
+flexible consumption, making sure we capture the significant cross-sell potential of our suite while
+decreasing cost of sales for the acquisition of net-new customers and increasing customer lifetime
+value with existing customers.
+Additional
+Our strong focus on technical integration between our line-of-business (LoB) solutions and
+SAP S/4HANA, to provide a seamless and delightful experience for our customers, may uplift the
+cross-sell potential of our suite portfolio and create operational synergies.
+Opportunities from Our Ecosystem
+SAP's ecosystem is defined by the interdependent relationships of our customers, our employees, our
+suppliers, our partners, and our complementary technology partners. Our ecosystem, which includes
+more than 25,000 partners with different areas of expertise, carries the SAP brand into global markets
+and expands our portfolio with their expertise, services, and solutions. Our ecosystem includes
+partners in four different tracks: partners in the "Build" track develop solutions on top of, or integrate
+with, SAP technology and platforms; extending the scope and functionality of SAP solutions to address
+customer requirements; partners in the "Sell" track advise, resell, implement, and support customers of
+all types and sizes; partners in the “Service” track (systems integrators) provide strategic business
+consulting, system design, solution integration, and project implementation of SAP solutions; partners
+in the "Run" track are outsourcing or hosting companies that offer SAP solutions to customers through
+a private or public cloud.
+SAP and our partner ecosystem offer solutions to help customers grow their businesses and
+accelerate their move to the cloud. SAP partners build innovative extensions for SAP applications
+based on SAP BTP, and in doing so, enhance the customer value offered by SAP. We continue to focus
+on developing new talent and capacity in the partner ecosystem to support the increased demand for
+customer cloud transformations. By providing innovations that extend SAP applications, partners can
+influence the adoption of SAP technologies to support customers' unique business needs. Thus,
+customers maximize their SAP investment through partner offerings such as industry-specific solutions,
+LoB solutions, added functionality, and sustainability offerings.
+Partners constantly respond to market needs while raising awareness around strategic offerings, such
+as RISE with SAP, SAP BTP, and our industry cloud solutions, which drive the transformation in the
+cloud for our customers. Partners offer customers a vast array of SAP technologies and services
+specific to their LoB or industry, making it easy for customers to purchase the right combination of
+products, solutions, and services (such as consulting, implementation, and development) to meet their
+business needs.
+Partners contribute to SAP's growth by expanding market reach in sales and services, specifically by
+retaining and increasing sales to existing customers, attracting new customers, accessing new markets,
+and addressing our joint customers' requirements with their expertise and solution innovations.
+Together with all the aforementioned measures, this may positively impact our revenue, profit, cash
+flows, customer satisfaction and retention, and enable SAP to exceed our stated medium-term
+prospects.
+148/324
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+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+To further drive the aforementioned opportunities, SAP announced a transformation program for 2024
+to focus on key strategic growth areas, in particular business Al. Through this program, SAP intends to
+transform its operational setup to capture organizational synergies and Al-driven efficiencies, and to
+prepare the Company for highly scalable future revenue growth.
+Cloud revenue of more than €21.5 billion
+SAP
+Free cash flow of approximately €8.0 billion
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about Additional
+Sustainability
+Information
+The IT Market: Outlook for 2024 and Beyond
+"Organizations that can make smarter investments and better execute on their strategies because of
+their digital business platforms will find themselves with a major competitive advantage over the next
+five years, leading them to capture significant portions of the digital market share.”² That is the
+assessment of International Data Corporation (IDC), a U.S.-based market research firm. It projects that
+"spending on digital technology by organizations will grow at 7x the economy in 2024, as companies
+are compelled by market demands to grow digital business models and strengthen digital
+capabilities," and finds that “in a scenario where agility is paramount, a continued reliance on legacy
+systems can be detrimental. As we move closer to 2025, organizations must prioritize this transition not
+just to be at the forefront of their market but simply to survive."³
+According to IDC, "by early 2025, organizations still on legacy systems will need to modernize their
+applications immediately to survive and adapt to the digital world already surpassing them."³ In
+addition, by 2028, “organizations with established digital business platforms will have 50% higher
+digital market share with greater abilities to track ROI and execute digital revenue initiatives," and "85%
+of CIOs will leverage organizational changes to harness Al, automation, and analytics, driving agile,
+insight-driven digital businesses."
+"4
+SAP continues to expect:
+In particular, IDC reports that "tools and technologies that facilitate real-time monitoring and reporting
+of ESG metrics will be essential" to "mitigate legal risks and enhance their brand and competitive
+advantage." It predicts, for example, that "applications that enable real-time carbon footprint tracking
+and integrate seamlessly with green supply chain mechanisms will transition from a nice-to-have to a
+must-have" and that, therefore, "the automation of regulatory compliance will be essential for
+monitoring, analyzing, and reporting accurate ESG metrics to meet regulatory standards.”"4
+1 European Central Bank, Economic Bulletin, Issue 8/2023, Publication Date: January 11, 2024.
+2 IDC FutureScape: Worldwide Digital Business Strategies 2024 Predictions, Doc #US50120323, October 2023.
+3 IDC FutureScape: Worldwide Intelligent ERP 2024 Predictions, Doc #US51300923, October 2023.
+4 IDC FutureScape: Worldwide CIO Agenda 2024 Predictions, Doc #US51294523, October 2023.
+Impact on SAP
+The global economy is currently impacted by multiple crises, such as political tensions, wars in Ukraine
+and the Middle East, disruptions of supply chains, and increasing natural disasters due to climate
+change. Nevertheless, SAP's resilience is remarkable and with 83% of our revenue recurring, the
+Company is able to withstand economic pressure to a large degree. Even so, SAP must continue to
+evolve and remain agile while continuously adapting to a fast-changing landscape.
+In 2024 and beyond, SAP plans to execute along the refined corporate strategy, with increasing focus
+on key strategic growth areas, such as cloud adoption, SAP Business Al, and value for customers. This
+makes us confident in our ability to expand our addressable market and deliver sustained topline
+growth. In addition, given our increased focus on operational efficiency, we are very confident we will
+be able to achieve our midterm ambition.
+Financial Targets and Prospects
+Revenue and Operating Profit Targets and Prospects (Non-IFRS)
+Outlook 2024
+The outlook for 2024 has been prepared in accordance with our updated non-IFRS definition from
+2024. For more information, see the Performance Management System section.
+For the full year 2024, SAP expects:
+143/324
+SAP
+SAP Integrated Report 2023
+SAP Integrated Report 2023
+SAP
+142/324
+Source: International Monetary Fund (IMF), World Economic Outlook Update January 2024, Moderating Inflation and Steady Growth Open
+Path to Soft Landing (https://www.imf.org/-/media/Files/Publications/WEO/2024/Update/January/English/text.ashx), p. 6.
+2.8
+2.5
+2.0
+2.9
+4.2
+3.3
+3.8
+4.1
+2.5
+2.1
+1.7
+1.1
+To Our
+Stakeholders
+1.4
+2.5
+1.9
+2.5
+1.9
+0.9
+0.8
+5.4
+5.2
+4.8
+5.2
+4.6
+4.1
+2.3
+Combined Management
+Report
+Concerning sustainability, IDC expects that "by 2027, G2000 organizations' business and IT leaders will
+dedicate at least 20% of their digital tech spending toward sustainability initiatives”, “meeting their
+digital goals while taking sustainability into account. These types of sustainability initiatives will increase
+in the next five years as significant parts of digital technology investment strategies."2
+Further Information about
+Sustainability
+305-385
+about 2,000
+0
+345
+214
+155
+Furthermore, the differences between free cash flow as our non-IFRS financial measure and operating
+cash flow as our IFRS financial measure include estimated cash flows in 2024 for leasing and capital
+expenditures of €1.2 billion (2023: €1.1 billion).
+We do not provide an outlook for the effective tax rate (IFRS) due to the uncertainty and potential
+variability of gains and losses associated with equity investments, which are reconciling items between
+non-IFRS and IFRS.
+Proposed Dividend
+In 2024, we intend to pay a dividend of €2.20 per share (subject to shareholder approval at the Annual
+General Shareholders Meeting in May 2024). For more information, see the Financial Performance:
+Review and Analysis section.
+Ambition 2025
+In this section, all numbers (except cloud revenue and total revenue) are based exclusively on non-
+IFRS measures.
+for 2023
+144/324
+SAP Integrated Report 2023
+Consolidated Financial
+Statements IFRS
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+By 2025, SAP now expects:
+-
+Non-IFRS cloud gross profit of approximately €16.2 billion, which now includes share-based
+compensation expenses of approximately €0.1 billion¹
+Non-IFRS operating profit of approximately €10.0 billion, which now includes share-based
+compensation expenses of approximately €2 billion¹
+SAP
+for 2024
+To Our
+Estimated Amounts
+Actual Amounts
+Additional
+Information
+€17.0 billion to €17.3 billion in cloud revenue at constant currencies (2023: €13.66 billion), up 24%
+to 27% at constant currencies
+€29.0 billion to €29.5 billion in cloud and software revenue at constant currencies
+(2023: €26.92 billion), up 8% to 10% at constant currencies
+Free cash flow of approximately €3.5 billion (2023: €5.09 billion). This includes a preliminary
+€2 billion estimate for payouts associated with the program, a €0.2 billion impact from a settlement
+earlier this year
+of pre-existing regulatory compliance matters accrued in 2023, and a €0.2 billion
+adverse impact due to the discontinuation of the SAP-triggered financing program.
+An effective tax rate (non-IFRS) of around 32.0% (2023: 30.3%, based on the updated non-IFRS
+definition)
+Furthermore, SAP provides the following additional forward-looking information for selected metrics:
+CCB: we expect a year-end growth rate similar that of 2023, while at a larger scale.
+Cloud ERP Suite revenue: we expect to sustain the high growth rate in 2024.
+While SAP's full-year 2024 business outlook is at constant currencies, numbers reported in actual
+currencies are likely to be impacted by exchange rate fluctuations as the year progresses. See the
+table below for the expected currency impacts for the full-year 2024. These expectations are based on
+the December 2023 level.
+In percentage points (pp)
+Cloud revenue growth
+€7.6 billion to €7.9 billion non-IFRS operating profit at constant currencies (2023: €6.51 billion,
+based on the updated non-IFRS operating profit definition and excluding gains and losses from less
+material divestitures), up 17% to 22% at constant currencies.
+FY/2024
+Cloud and software revenue growth
+Restructuring
+Acquisition-related charges
+Regulatory compliance matters
+The following table shows the estimates of the items that represent the differences between our non-
+IFRS financial measures and our IFRS financial measures for operating profit.
+Operating profit growth (non-IFRS)
+€ millions
+-2.0pp to 0.0pp
+-1.5pp to 0.5pp
+-2.0pp to 0.0pp
+633
+429
+-645
+443
+643
+-59
+154
+Share-based payments
+Net cash flows from operating activities - continuing operations
+Interest received
+Income taxes paid, net of refunds²
+(B.3)
+-1,091
+-1,213
+-1,056
+-1,180
+Interest paid
+-700
+-10
+196
+1,446
+-393
+1,682
+(C.4)
+456
+1,389
+-2,178
+77
+-9
+23
+-175
+15
+Decrease/increase in trade and other receivables
+Decrease/increase in other assets
+Increase/decrease in trade payables, provisions, and other liabilities
+Increase/decrease in contract liabilities
+-393
+497
+-244
+89
+469
+6,332
+5,647
+6,223
+-1,168
+-679
+-1,032
+0
+289
+-72
+-91
+0
+0
+-785
+-877
+-701
+99
+1,741
+41
+-198
+-29
+(D.1)
+156
+56
+-2,161
+-1,642
+-2,047
+6,210
+5,675
+6,182
+Net cash flows from operating activities - discontinued operations
+Net cash flows from operating activities¹
+Cash flows for business combinations, net of cash and cash equivalents acquired
+Proceeds from sales of subsidiaries or other businesses
+Cash flows from derivative financial instruments related to the sale of subsidiaries or businesses
+Purchase of intangible assets and property, plant, and equipment
+Proceeds from sales of intangible assets or property, plant, and equipment
+Purchase of equity or debt instruments of other entities
+Proceeds from sales of equity or debt instruments of other entities
+122
+(C.5)
+1,684
+1,431
+2,768
+34
+5,376
+121
+5,256
+5,256
+29,927
+211
+29,716
+-3,072
+-1,012
+32,026
+545
+1,229
+Total equity and liabilities
+(E.2)
+(E.2)
+(E.2)
+(E.2)
+Total Equity
+Non-
+Controlling
+Interests
+Total
+Treasury
+Shares
+Other
+Components
+of Equity
+Earnings
+Premium
+Issued Capital
+2,802
+51
+2,853
+5,290
+41,523
+2,670
+38,853
+-3,072
+1,757
+37,022
+1,918
+1,229
+-30
+14
+-44
+-44
+3,983
+Retained
+2,050
+1,933
+-2,271
+-88
+-2,182
+-2,182
+SAP
+311
+1,373
+1,373
+8,230
+172
+8,058
+2,768
+1,933
+Share
+12/31/2023
+Other changes
+Equity Attributable to Owners of Parent
+Consolidated Statements of Changes in Equity of SAP Group for the Years Ended December 31
+Additional
+Information
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+Stakeholders
+To Our
+SAP Integrated Report 2023
+SAP
+155/324
+72,159
+68,335
+€ millions
+42,848
+(E.2)
+2,662
+249
+(E.2)
+40,186
+43,157
+-4,341
+-4,741
+3,801
+2,368
+36,418
+42,457
+95
+43,406
+2,284
+Notes
+Il Profit after tax¹
+Changes in non-controlling interests
+share-based payments
+Reissuance of treasury shares under
+Purchase of treasury shares
+Dividends
+Share-based payments
+Comprehensive income
+Other comprehensive income
+Il Profit after tax¹
+12/31/2022
+Other changes
+Changes in non-controlling interests
+share-based payments
+1/1/2021
+Reissuance of treasury shares under
+Dividends
+Share-based payments
+Comprehensive income
+Other comprehensive income
+Il Profit after tax¹
+12/31/2021
+Other changes
+interests
+Transactions with non-controlling
+Dividends
+Share-based payments
+Comprehensive income
+Other comprehensive income
+Purchase of treasury shares
+1,335
+2,284
+1,708
+To Our
+SAP Integrated Report 2023
+SAP
+156/324
+1 From continuing and discontinued operations
+The accompanying Notes are an integral part of these Consolidated Financial Statements.
+43,406
+249
+43,157
+-4,741
+2,368
+42,457
+1,845
+134
+-1
+135
+135
+-2,235
+-2,164
+-71
+2,197
+-2,268
+568
+568
+568
+1,229
+-968
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+2,220
+(B.3)
+1,537
+1,569
+1,373
+(D.2)-(D.4)
+1,447
+1,359
+-2,363
+Other adjustments for non-cash items
+Decrease/increase in allowances on trade receivables
+■ Financial income, net
+Il Income tax expense
+-968
+Share-based payment expenses
+■ll (Profit) loss after tax from discontinued operations
+Adjustments to reconcile profit after tax to net cash flow from operating activities:
+5,376
+1,708
+5,964
+.lil Profit after tax¹
+2021
+2022
+2023
+Notes
+€ millions
+Consolidated Statements of Cash Flows of SAP Group for the Years Ended December 31
+Additional
+Information
+Depreciation and amortization
+-968
+-2,417
+-21
+-3
+90
+-92
+-92
+230
+230
+230
+-1,500
+-1,500
+-1,500
+-2,895
+-29
+-2,865
+13
+-2,865
+325
+1,163
+1,163
+3,988
+-396
+4,385
+2,044
+2,340
+2,280
+180
+2,100
+2,044
+56
+1,488
+-576
+13
+15
+-2,395
+-2,395
+1,153
+121
+1,032
+1,032
+4,323
+-347
+4,670
+-1,433
+6,103
+-1,641
+-172
+2
+-1,469
+-36
+5,964
+-175
+6,139
+6,139
+42,848
+2,662
+40,186
+-4,341
+3,801
+36,418
+3,081
+1,229
+-1,433
+SAP Integrated Report 2023
+The accompanying Notes are an integral part of these Consolidated Financial Statements.
+Stakeholders
+906
+667
+-3,063
+(E.2)
+-2,395
+-13
+-2,865
+-2,182
+-12
+-54
+Purchase of treasury shares
+-208
+(E.2)
+-1,500
+0
+Proceeds from borrowings
+(E.3)
+13
+158
+1,680
+Repayments of borrowings
+(E.3)
+-4,081
+-949
+-1,445
+-32
+(D.1)
+4,808
+Other non-financial liabilities
+(B.3), (B.5), (G.2)
+5,648
+4,818
+Provisions
+(A.4), (B.6), (G.3)
+235
+90
+-3,566
+5,510
+-2,320
+907
+4,190
+3,229
+Net cash flows from investing activities - continuing operations
+Net cash flows from investing activities – discontinued operations
+Net cash flows from investing activities¹
+Dividends paid
+Dividends paid on non-controlling interests
+-4,603
+699
+-2,856
+-4,368
+1,735
+-1,952
+-332
+3,587
+Cash and cash equivalents at the beginning of the period
+(E.3)
+9,008
+8,898
+5,311
+Cash and cash equivalents at the end of the period
+(E.3)
+8,124
+9,008
+109
+8,898
+1 From continuing and discontinued operations
+2 Total income taxes paid, net of refunds 2023: -€2,973 million thereof contained in the line item "Net cash flows from investing activities - discontinued operations": -€815 million.
+157/324
+SAP
+SAP Integrated Report 2023
+To Our
+Combined Management
+Stakeholders
+Report
+Contract liabilities
+The accompanying Notes are an integral part of these Consolidated Financial Statements.
+Payments of lease liabilities
+-883
+484
+-410
+-375
+Transactions with non-controlling interests
+(E.2)
+0
+0
+-2
+Net cash flows from financing activities - continuing operations
+-7,758
+-6,074
+Net decrease/increase in cash and cash equivalents
+-2,885
+(D.1)
+24
+-263
+2,828
+-7,734
+-6,337
+-56
+Effect of foreign currency rates on cash and cash equivalents
+-388
+134
+Net cash flows from financing activities - discontinued operations
+Net cash flows from financing activities¹
+(E.3), (D.5)
+Financial liabilities
+283
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+Consolidated Statements of Financial Position of SAP Group as at December 31
+€ millions
+Notes
+2023
+SAP
+2022
+(E.3)
+8,124
+9,008
+Other financial assets
+(D.6), (E.3)
+3,344
+853
+Trade and other receivables
+Other non-financial assets
+Tax assets
+Cash and cash equivalents
+Total current assets
+154/324
+-396
+39
+-26
+Other comprehensive income for items that will be reclassified to profit or loss, net of tax
+-1,605
+2,224
+2,819
+Other comprehensive income, net of tax
+-1,641
+2,280
+2,853
+172
+Total comprehensive income
+Attributable to non-controlling interests
+The accompanying Notes are an integral part of these Consolidated Financial Statements.
+1 From continuing and discontinued operations
+4,323
+3,988
+8,230
+4,670
+4,385
+8,058
+-347
+Attributable to owners of parent
+Goodwill
+(A.2)
+6,322
+5,626
+(A.2)
+203
+169
+(A.3), (G.1)
+3,573
+3,580
+382
+323
+(C.5)
+5,543
+2,193
+47,764
+53,638
+Total assets
+Trade and other payables
+68,335
+72,159
+1,783
+2,146
+Tax liabilities
+266
+2,095
+(D.6), (E.3)
+Total non-current assets
+Deferred tax assets
+6,236
+(A.3), (G.1)
+2,374
+2,139
+407
+287
+20,571
+18,522
+(D.2)
+29,088
+33,077
+Intangible assets
+(D.3)
+2,505
+3,835
+Property, plant, and equipment
+(D.4), (D.5), (D.8)
+4,276
+4,934
+Other financial assets
+Trade and other receivables
+Other non-financial assets
+Tax assets
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+Notes
+156.33
+140.66
+151.94
+138.01
+129.86
+U.S. dollar
+USD
+1.1050
+1.0666
+1.0816
+JPY
+1.0539
+Cost Classification
+Cost of Cloud and Software
+Cost of cloud and software includes the costs incurred in providing the services and producing the
+goods that generate cloud and software revenue. Consequently, this line item primarily includes
+employee expenses relating to these services, amortization of acquired intangibles, fees for third-party
+licenses, depreciation of our property, plant, and equipment (for example, of our data centers in which
+we host our cloud solutions), and costs for third-party hosting services. For more information about the
+capitalization of costs from contracts with customers, see Note (A.3).
+Updated Cost Allocation Policy
+Starting January 1, 2023, all activities related to changes in the code of SAP's cloud and on-premise
+solutions are treated as development-related activities. Some of those activities, specifically code
+corrections, were previously considered as support-related activities. SAP believes that this update
+aligns SAP's accounting policy with market standards and increases comparability to its peers.
+For the full year 2023, the update of our cost allocation policy led to an increase in the cloud gross
+profit of approximately €95 million (2022: €88 million, 2021: €61 million), an increase in the software
+license and support gross profit of approximately €275 million (2022: €310 million, 2021: €326 million),
+and an increase in our research & development (R&D) expenses of approximately €370 million
+(2022: €398 million, 2021: €388 million).
+Prior periods have been adjusted to reflect the updated cost allocation policy.
+Cost of Services
+Cost of services includes the costs incurred in providing the services that generate service revenue.
+Consequently, this line item primarily includes employee expenses and related training, system and
+system administration costs, and costs for third-party resources.
+Research and Development
+Research and development includes the costs incurred by activities related to the development of
+cloud and software solutions including resource and hardware costs for the development systems.
+The same applies for all activities related to changes in the code of SAP's cloud and software
+solutions. For more information about the recognition of internally generated intangible assets from
+development, see Note (D.3).
+1.1835
+Please also note the Updated Cost Allocation Policy above.
+Japanese yen
+0.8526
+1.6285
+1.5174
+1.5747
+Canadian dollar
+CAD
+1.4642
+1.4440
+1.4596
+1.3703
+1.4835
+0.8600
+Swiss franc
+0.9260
+0,9847
+0.9717
+1.0052
+1.0814
+Pound sterling
+GBP
+0.8691
+0.8869
+0.8699
+CHF
+160/324
+Total equity
+Non-controlling interests
+Provisions
+705
+698
+(B.3), (B.5), (G.2)
+Other non-financial liabilities
+9,547
+7,941
+(E.3), (D.5)
+Financial liabilities
+893
+(A.4), (B.4), (B.6)
+877
+39
+17,453
+14,642
+Tax liabilities
+Trade and other payables
+Total current liabilities
+5,309
+4,975
+(A.1)
+To Our
+79
+433
+359
+Deferred tax liabilities
+Equity attributable to owners of parent
+Treasury shares
+Other components of equity
+Retained earnings
+3,081
+1,845
+1,229
+1,229
+29,311
+24,928
+11,858
+10,287
+33
+33
+(A.1)
+241
+265
+(C.5)
+Share premium
+Issued capital
+Total liabilities
+Total non-current liabilities
+Contract liabilities
+1.5693
+-8
+1.6263
+Australian dollar
+Accounting Policies, Judgments, and Estimates
+(IN.1)
+Basis for Preparation
+(A.1)
+Revenue
+(A.2)
+(A.3)
+(A.4)
+(B.3)
+(B.4)
+Note
+(B.5)
+(C.1)
+Trade and Other Receivables
+Capitalized Cost from Contracts with Customers
+Customer-Related Provisions
+Share-Based Payments
+Pension Plans and Similar Obligations
+Other Employee-Related Obligations
+Restructuring
+Results of Segments
+(C.5)
+(B.6)
+Income Taxes
+The following table provides an overview of where our accounting policies, management judgments,
+and estimates are disclosed:
+Additional
+(IN.1) Basis for Preparation
+General Information
+The registered domicile of SAP SE is in Walldorf, Germany (Commercial Register of the Lower Court of
+Mannheim HRB 719915). The Consolidated Financial Statements for 2023 of SAP SE and its
+subsidiaries (collectively, “we,” “us,” “our,” “SAP,” “Group," and "Company") have been prepared in
+accordance with International Financial Reporting Standards (IFRS) and the additional requirements
+set forth in section 315e (1) of the German Commercial Code (HGB).
+We have applied all IFRS standards and interpretations that were effective on and endorsed by the
+European Union (EU) as at December 31, 2023. There were no standards or interpretations as at
+December 31, 2023, impacting our Consolidated Financial Statements for the years ended
+December 31, 2023, 2022, and 2021, that were effective but not yet endorsed. Therefore, our
+Consolidated Financial Statements comply with both, IFRS as issued by the International Accounting
+Standards Board (IASB) and IFRS as endorsed by the EU.
+Our Executive Board approved the Consolidated Financial Statements on February 21, 2024, for
+submission to our Supervisory Board which approved the Consolidated Financial Statements on the
+same day.
+All amounts included in the Consolidated Financial Statements are reported in millions of euros
+(€ millions) except where otherwise stated. As figures are rounded, numbers presented throughout this
+document may not add up precisely to the totals we provide and percentages may not precisely
+reflect the absolute figures.
+Amounts disclosed in the Notes that are taken directly from our
+and 44,
+Consolidated Income Statements
+or our Consolidated Statements of Financial Position are marked with the symbols
+respectively.
+Information
+Furthermore, all financial numbers in the Consolidated Financial Statements are based on continuing
+operations (unless otherwise noted).
+How We Present Our Accounting Policies, Judgments, and Estimates
+To ease the understanding of our financial statements, we present the accounting policies,
+management judgments, and sources of estimation uncertainty (hereafter: accounting policies,
+judgments, and estimates) on a given subject together with other disclosures related to the same
+subject in the Note that deals with this subject. Accounting policies, judgments, and estimates that do
+not relate to a specific subject are presented in the following section.
+For easier identification of our accounting policies, judgments, and estimates, the respective
+disclosures are marked with the symbol and highlighted with a light gray box. They focus on the
+accounting choices made within the framework of the prevailing IFRS and refrain from repeating the
+underlying promulgated IFRS guidance, unless we consider it particularly important to the
+understanding of a Note's content.
+158/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Accounting Policies, Management Judgments, and Sources of Estimation
+Uncertainty
+(D.1)
+(D.2)
+(D.3)
+Provisions are recognized at the best estimate of their fulfillment amount when they occur.
+Foreign Currencies
+Income and expenses and operating cash flows of our foreign subsidiaries that use a functional
+currency other than the Euro are translated at average rates of foreign exchange (FX) computed on a
+monthly basis. Exchange differences resulting from foreign currency transactions are recognized in
+other non-operating income/expense, net.
+159/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Monetary assets and liabilities denominated in foreign currencies are translated at period-end
+exchange rates.
+Additional
+Information
+Exchange Rates
+Middle Rate
+Annual Average Exchange Rate
+Equivalent to €1
+as at 12/31
+2023
+2022
+2023
+2022
+2021
+The exchange rates of key currencies affecting the Company were as follows:
+· Post-employment benefits are measured at the present value of the defined benefit obligations
+less the fair value of the plan assets.
+Derivative financial instruments, liabilities for cash-settled share-based payments, and financial
+assets with cash flows that are not solely payments of principal or interest are measured at fair
+value.
+The Consolidated Financial Statements have been prepared on the historical cost basis except for the
+following:
+Business Combinations and Divestitures
+Goodwill
+Intangible Assets
+(D.4)
+Property, Plant, and Equipment
+(D.5)
+Leases
+(D.6)
+Equity Investments
+(D.9)
+(E.2)
+(E.3)
+(F.1)
+(F.2)
+(G.3)
+(G.5)
+Income-Related Government Grants
+Total Equity
+Liquidity
+Financial Risk Factors and Risk Management
+Fair Value Disclosures on Financial Instruments
+Other Litigation, Claims, and Legal Contingencies
+Executive and Supervisory Board Compensation
+General Accounting Policies
+Bases of Measurement
+AUD
+(E.2)
+Combined Management
+9
+.237
+..237
+237
+.239
+.243
+.244
+.245
+.245
+(G.9) Scope of Consolidation; Subsidiaries and Other Equity Investments..
+.231
+.246
+.256
+Management's Annual Report on Internal Control over Financial Reporting in
+the Consolidated Financial Statements
+258
+152/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+(G.10) German Code of Corporate Governance.
+Consolidated Financial
+Statements IFRS
+.217
+(G.8) Events After the Reporting Period.
+(E.2) Total Equity..
+209
+.209
+.210
+(E.3)
+Liquidity.
+.212
+(F.1)
+Section F - Management of Financial Risk Factors
+217
+Financial Risk Factors and Risk Management...
+Section G - Other Disclosures
+(G.1) Prepaid Expenses and Other Tax Assets...
+(G.2) Other Tax Liabilities..
+(G.3) Other Litigation, Claims, and Legal Contingencies.
+(G.4) Board of Directors....
+(G.5)
+Executive and Supervisory Board Compensation.
+(G.6) Related Party Transactions Other Than Board Compensation.
+(G.7) Principal Accountant Fees and Services.
+(F.2) Fair Value Disclosures on Financial Instruments.
+Further Information about
+Sustainability
+Additional
+Information
+lil Consolidated Income Statements of SAP Group for the Years Ended December 31
+25,391
+23,361
+4,283
+4,128
+3,592
+(A.1), (C.2)
+31,207
+29,520
+26,953
+26,924
+Cost of cloud
+-3,499
+-2,881
+Cost of software licenses and support
+-1,383
+-1,384
+-1,598
+Cost of cloud and software
+-5,267
+-4,883
+-3,884
+14,660
+13,965
+13,261
+€ millions, unless otherwise stated
+Notes
+2023
+2022
+2021
+Cloud
+13,664
+11,426
+8,701
+Software licenses
+1,764
+2,056
+3,248
+Software support
+Software licenses and support
+Cloud and software
+Services
+Total revenue
+11,496
+11,909
+11,412
+(E.1) Capital Structure Management..
+Section E- Capital Structure, Financing, and Liquidity
+Additional
+Information
+Further Information about
+Sustainability
+Capitalized Cost from Contracts with Customers.
+.168
+(A.4)
+Customer-Related Provisions..
+.169
+Section B - Employees
+171
+(B.1)
+Employee Headcount..
+(A.3)
+.171
+(B.2) Employee Benefits Expenses.
+(B.3)
+Share-Based Payments...
+(B.4) Pension Plans and Similar Obligations.
+(B.5) Other Employee-Related Obligations.
+Restructuring..
+.171
+.172
+..179
+(B.6)
+.167
+Trade and Other Receivables..
+(A.2)
+Combined Management
+Report
+Cash flow hedges/cost of hedging, net of tax
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+Consolidated Financial
+Statements IFRS
+Consolidated Income Statements of SAP Group for the Years Ended December 31.
+Consolidated Statements of Comprehensive Income of SAP Group for the Years Ended
+December 31...
+..153
+.154
+155
+Consolidated Statements of Financial Position of SAP Group as at December 31.
+Consolidated Statements of Changes in Equity of SAP Group for the Years Ended December 31.......156
+Consolidated Statements of Cash Flows of SAP Group for the Years Ended December 31.
+157
+Notes
+158
+(IN.1) Basis for Preparation..
+.158
+Section A - Customers
+162
+(A.1)
+Revenue
+.162
+..181
+-4,479
+.181
+183
+.202
+.204
+.205
+.206
+(D.7)
+Non-Current Assets by Region.
+.207
+(D.8)
+Purchase Obligations..
+.198
+.208
+Income-Related Government Grants..
+.208
+151/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+(D.9)
+.192
+192
+.191
+(C.1) Results of Segments..
+.183
+(C.2)
+Reconciliation of Segment Measures to the Consolidated Income Statements.
+.186
+(C.3)
+Other Non-Operating Income/Expense, Net.
+.187
+(C.4)
+Financial Income, Net.
+.187
+(C.5) Income Taxes.
+.187
+(C.6) Earnings per Share.
+Section D - Invested Capital
+(D.1) Business Combinations and Divestitures.
+(D.2) Goodwill.
+(D.3) Intangible Assets...
+(D.4) Property, Plant, and Equipment.
+(D.5) Leases.
+(D.6) Equity Investments.
+Section C - Financial Results
+Cost of services
+237
+-3,155
+5.45
+Earnings per share, diluted (in €)¹
+(C.6)
+5.20
+1.94
+4.46
+The accompanying Notes are an integral part of these Consolidated Financial Statements.
+1 From continuing and discontinued operations
+153/324
+SAP
+SAP Integrated Report 2023
+To Our
+2.79
+Stakeholders
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+Consolidated Statements of Comprehensive Income of SAP Group for the Years Ended December 31
+€ millions
+.lil Profit after tax¹
+Notes
+2023
+2022
+2021
+Combined Management
+Report
+5,964
+3.08
+Earnings per share, diluted (in €) from continuing operations
+395
+(D.1)
+2,363
+-1,359
+-1,447
+5,964
+1,708
+5,376
+6,139
+2,284
+5,256
+(C.6)
+-175
+121
+Earnings per share, basic (in €) from continuing operations
+(C.6)
+3.11
+2.80
+5.45
+Earnings per share, basic (in €)¹
+(C.6)
+5.26
+1.95
+4.46
+-576
+1,708
+5,376
+Items that will not be reclassified to profit or loss
+Exchange differences, net of tax
+21
+-10
+-9
+(E.2)
+-1,597
+2,186
+2,846
+Gains (losses) on cash flow hedges/cost of hedging, before tax
+-11
+53
+Income taxes relating to exchange differences on translation
+-39
+0
+0
+4
+Cash flow hedges/cost of hedging, before tax
+(F.1)
+-11
+53
+-35
+Income taxes relating to cash flow hedges/cost of hedging
+3
+-14
+Reclassification adjustments on cash flow hedges/cost of hedging, before tax
+-3,407
+2,195
+-1,618
+Remeasurements on defined benefit pension plans, before tax
+-45
+71
+43
+Income taxes relating to remeasurements on defined benefit pension plans
+10
+-15
+-9
+Remeasurements on defined benefit pension plans, net of tax
+-36
+56
+34
+Other comprehensive income for items that will not be reclassified to profit or loss, net of tax
+Items that will be reclassified subsequently to profit or loss
+-36
+56
+34
+Gains (losses) on exchange differences on translation, before tax
+Reclassification adjustments on exchange differences on translation, before tax
+Exchange differences, before tax
+-1,631
+2,190
+2,825
+12
+6
+30
+-210
+-33
+2,855
+3,277
+Restructuring
+(B.6)
+-215
+-138
+-157
+Other operating income/expense, net
+-16
+-1,187
+60
+Sales and marketing
+-25,420
+-23,429
+-20,645
+Operating profit
+5,787
+6,090
+44
+-1,289
+-1,364
+General and administration
+-8,828
+-7,946
+-6,080
+-6,324
+(D.9)
+Research and development
+19,734
+21,482
+22,534
+-7,219
+-8,038
+-8,674
+Gross profit
+-2,740
+6,429
+Total cost of revenue
+-6,856
+6,308
+Other non-operating income/expense, net
+Total operating expenses
+9
+(C.5)
+(C.3)
+-1,741
+-1,446
+-1,682
+Profit after tax from continuing operations
+3,600
+Income tax expense
+3,068
+Attributable to owners of parent
+Attributable to non-controlling interests
+Profit (loss) after tax from discontinued operations
+Profit after tax¹
+Attributable to owners of parent¹
+Attributable to non-controlling interests¹
+3,634
+6,824
+8,505
+-5,270
+5,341
+-187
+19
+Finance income
+857
+811
+3,123
+Finance costs
+-1,313
+-2,200
+-945
+Financial income, net
+(C.4)
+4,513
+-456
+(C.2)
+-1,389
+Profit before tax from continuing operations
+2,178
+1,218
+31,207
+.lil SAP Group
+4,204
+4,384
+APJ
+2,917
+29,520
+3,166
+3,199
+Rest of APJ
+12,227
+10,292
+Japan
+1,243
+1,286
+4,441
+Further Information about
+Sustainability
+Americas
+Consolidated Financial
+Statements IFRS
+Additional
+Information
+Total Revenue by Region
+€ millions
+Germany
+Rest of EMEA
+2023
+2022
+2021
+4,921
+4,469
+4,324
+9,083
+8,440
+8,135
+EMEA
+14,004
+12,909
+12,458
+United States
+10,204
+9,799
+8,235
+Rest of Americas
+2,558
+2,427
+2,056
+12,762
+26,953
+10,959
+€ millions
+1,151
+3,937
+3,855
+3,732
+13,664
+11,426
+8,701
+26,924
+25,391
+23,361
+1,478
+For information about the breakdown of revenue by segment and segment revenue by region, see
+Note (C.1).
+Amounts of a customer contract's transaction price that are allocated to the remaining performance
+obligations represent contracted revenue that has not yet been recognized. They include amounts
+recognized as contract liabilities and amounts that are contracted but not yet due.
+The transaction price allocated to performance obligations that were unsatisfied or partially
+unsatisfied as at December 31, 2023, was €58.0 billion (December 31, 2022: €46.9 billion). The
+transaction price thereof allocated to cloud performance obligations that were unsatisfied or partially
+unsatisfied (total cloud backlog) as at December 31, 2023, was €44.3 billion
+(December 31, 2022: €32.4 billion). The remaining amount mostly comprises obligations to provide
+software support services. The vast majority of software support contracts are contracts in the renewal
+phase that typically have a one-year contract term, while cloud subscription contracts typically are
+multiple-year contracts. The portion of remaining performance obligations related to services consists
+of non-cancelable revenue from contracts for projects with a predefined output.
+Overall, almost half of the total remaining performance obligations is expected to be recognized over
+the next 12 months following the respective balance sheet date. This estimate is based on several
+factors. For example, for certain cloud business models with a contractually agreed spend volume
+(consumption-based models), judgment is applied on customers' deployment of the purchased
+solutions. The amount of the transaction price allocated to the remaining performance obligations, and
+changes in this amount over time, are impacted by, among others:
+Currency fluctuations
+The contract period of our cloud and software support contracts remaining at the balance sheet
+date, and thus the timing of contract renewals
+166/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Remaining Performance Obligations
+Major Revenue Classes by Region
+1,781
+10,456
+EMEA
+Americas
+APJ
+.Iil SAP Group
+Cloud Revenue
+Cloud and Software Revenue
+2023
+2022
+2021
+2023
+8,808
+2022
+5,241
+4,137
+3,196
+12,028
+11,081
+10,820
+6,642
+5,810
+4,354
+Combined Management
+Report
+2021
+Stakeholders
+Where standalone selling prices for an offering are observable and reasonably consistent across
+customers (that is, not highly variable), our SSP estimates are derived from our respective pricing
+history. Typically, our standardized support offerings and our professional service offerings follow
+this approach.
+SAP Integrated Report 2023
+Accounting for goodwill
+(D.2)
+Accounting for business combinations
+(D.1)
+Accounting for income taxes
+Software license revenue represents fees earned from the sale or license of software to customers
+for use on the premises owned or fully controlled by the customer, in other words, where the customer
+has the right to take possession of the software for installation on the customer's premises or on
+hardware of third-party hosting providers unrelated to SAP (on-premise software). Software license
+revenue includes revenue from both the sale of our standard software products and customer-specific
+on-premise-software development agreements.
+Software support revenue represents fees earned from providing customers with standardized
+support services that comprise unspecified future software updates, upgrades, and enhancements as
+well as technical product support services for on-premise software products.
+Services revenue primarily represents fees earned from professional consulting services, premium
+support services, and training services.
+Identification of Contract
+We frequently enter into multiple contracts with the same customer. For accounting purposes, we treat
+these contracts as a single contract if they are entered into at or near the same time and are
+economically interrelated. We do not combine contracts with closing days more than three months
+apart because we do not consider them being entered into near the same time. Judgment is required
+in evaluating whether various contracts are interrelated, which includes considerations as to whether
+they were negotiated as a package with a single commercial objective, whether the amount of
+162/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+consideration on one contract is dependent on the performance of the other contract, or if some or all
+goods in the contracts are a single performance obligation.
+New arrangements with existing customers can be either a new contract or the modification of prior
+contracts with the customer. Our judgment in making this determination considers whether there is a
+connection between the new arrangement and the pre-existing contracts, whether the goods and
+services under the new arrangement are highly interrelated with the goods and services sold under
+prior contracts, and how the goods and services under the new arrangement are priced. In determining
+whether a change in transaction price represents a contract modification or a change in variable
+consideration, we examine whether the change in price results from changing the contract or from
+applying unchanged existing contract provisions.
+(D.3)
+Accounting for intangible assets (including recognition of internally generated intangible assets from
+development)
+(D.6)
+Accounting for equity investments
+Combined Management
+Report
+Premium cloud support, that is, support beyond the regular support embedded in the underlying
+cloud subscription services.
+Infrastructure as a service (laaS), that is, hosting and related application management services for
+software hosted by SAP or third parties engaged by SAP.
+Platform as a service (PaaS), that is, access to a cloud-based platform to develop, deploy, integrate,
+and manage applications.
+Cloud revenue represents fees earned from providing customers with any of the following:
+Software as a service (SaaS), that is, a right to use software functionality (including standard
+functionalities and custom cloud applications and extensions) in a cloud-based infrastructure hosted
+by SAP or third parties engaged by SAP, where the customer does not have the right to terminate the
+hosting contract and take possession of the software to either run it on its own IT infrastructure or to
+engage a third-party provider unrelated to SAP to host and manage the software; SaaS also includes
+transaction and agent fees for transactions that customers execute on our cloud-based transaction
+platforms.
+Cloud and software revenue, as presented in our Consolidated Income Statements, is the sum of our
+cloud revenue, our software license revenue, and our software support revenue.
+We derive our revenue from fees charged to our customers for the use of our cloud offerings, for
+licenses to our on-premise software products, and for standardized and premium support services,
+consulting, customer-specific software developments, training, and other services.
+Classes of Revenue
+Accounting for Revenue from Contracts with Customers
+(A.1) Revenue
+Identification of Performance Obligations
+This section discusses disclosures related to contracts with our customers. These include but are not
+limited to explanations of how we recognize revenue, revenue disaggregation, and information about
+our trade receivables and customer-related obligations.
+Further Information about Additional
+Sustainability
+Information
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+To Our
+Stakeholders
+SAP Integrated Report 2023
+SAP
+161/324
+The IASB has issued various amendments to the IFRS standards (such as IAS 1 (Presentation of
+Financial Statements), IAS 7 (Statement of Cash Flows), IFRS 7 (Financial Instruments Disclosure), and
+IFRS 16 (Lease Liability in a Sale and Leaseback Transaction)) that are relevant for SAP but not yet
+effective. We are currently assessing the impact on SAP, but do not expect material effects on our
+financial position or profit after tax.
+New Accounting Standards Not Yet Adopted
+Our management periodically discusses these material accounting policies with the Audit and
+Compliance Committee of our Supervisory Board.
+Section A - Customers
+Our customer contracts often include various products and services. Typically, the products and
+services outlined in the Classes of Revenue section qualify as separate performance obligations and
+the portion of the contractual fee allocated to them is recognized separately. Judgment is required,
+however, in determining whether a good or service is considered a separate performance obligation.
+For our professional services and implementation activities, judgment is required to evaluate whether
+such services significantly integrate, customize, or modify the on-premise software or cloud service to
+which they relate. In this context, we consider the nature of the services and their volume relative to
+the volume of the on-premise software or cloud service to which they relate. In general, the
+implementation services for our cloud services go beyond pure setup activities and qualify as
+separate performance obligations. Similarly, our on-premise implementation services and our custom
+development services typically qualify as separate performance obligations. Non-distinct goods and
+services are combined into one distinct bundle of goods and services (combined performance
+obligation).
+When selling goods or services, we frequently grant customers options to acquire additional goods or
+services (for example, renewals of cloud or support arrangements, or additional volumes of purchased
+cloud solutions or software). We apply judgment in determining whether such options provide a
+material right to the customer that the customer would not receive without entering into that contract.
+In this judgment, we consider, for example, whether the options entitle the customer to a discount that
+exceeds the discount granted for the respective goods or services sold together with the option.
+Determination of Transaction Price
+We apply judgment in determining the amount to which we expect to be entitled in exchange for
+transferring promised goods or services to a customer. Generally, variable consideration is estimated
+based on the most likely amount and is included in the transaction price to the extent that the
+constraint does not apply. This includes estimates as to whether and to what extent subsequent
+concessions may be granted to customers and whether the customer is expected to pay the
+contractual fees. In this judgment, we consider our history with the respective customer or on a
+portfolio basis.
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+work (input-based percentage-of-completion method). This method of measuring progress faithfully
+depicts the transfer of the development services to the customer, as substantially all of these costs
+are cost of the staff or third parties performing the development work. In estimating the total cost to
+fully complete the development work, we consider our history with similar projects.
+For agreements that combine the delivery of software and the obligation to deliver, in the future,
+unspecific software products, we recognize revenue at a point in time for licenses that are made
+immediately accessible to the customer. We recognize revenue ratably over the term of the
+software subscription contract for the unspecified software products, as our performance obligation
+is to stand ready to deliver such products on a when-and-if-available basis.
+Software support revenue is typically recognized based on time elapsed and thus ratably over the
+term of the support arrangement. Under our standardized support services, our performance
+obligation is to stand ready to provide technical product support and unspecified updates, upgrades,
+and enhancements on a when-and-if-available basis. Our customers simultaneously receive and
+consume the benefits of these support services as we perform.
+SAP
+Service revenue is typically recognized over time. Where we stand ready to provide the service (such
+as access to learning content), we recognize revenue based on time elapsed and thus ratably over the
+service period. Consumption-based services (such as separately identifiable consulting services and
+premium support services and classroom training services) are recognized over time as the services
+are utilized, typically following the percentage-of-completion method or ratably. When using the
+percentage-of-completion method, we typically measure the progress toward complete satisfaction of
+the performance obligation in the same way and with the same reasoning and judgment as we do for
+customer-specific on-premise software development agreements. We apply judgment in determining
+whether a service qualifies as a stand-ready service or as a consumption-based service.
+Judgment is also required in determining whether revenue is to be recognized at a point in time or
+over time. For performance obligations satisfied over time, we need to measure progress using the
+method that best reflects SAP's performance. When using cost incurred as a measure of progress for
+recognizing revenue over time, we apply judgment in estimating the total cost to satisfy the
+performance obligation.
+All of the judgments and estimates mentioned above can significantly impact the timing and amount of
+revenue to be recognized.
+Contract Balances
+We recognize trade receivables for performance obligations satisfied over time gradually as the
+performance obligation is satisfied and in full once the invoice is due. Judgment is required in
+determining whether a right to consideration is unconditional and thus qualifies as a receivable.
+Contract liabilities primarily reflect invoices due or payments received in advance of revenue
+recognition.
+Typically, we invoice fees for on-premise standard software on contract closure and software delivery.
+Periodic fixed fees for cloud subscription services, software support services, and other multi-period
+agreements are typically invoiced yearly or quarterly in advance. Such fee prepayments account for
+the majority of our contract liability balance. Fees based on actual transaction volumes for cloud
+subscriptions and fees charged for non-periodical services are invoiced as the services are delivered.
+While payment terms and conditions vary by contract type and region, our terms typically require
+payment within 30 to 60 days.
+Geographic Information
+The amounts for revenue by region in the following tables are based on the location of customers. The
+regions in the following table are EMEA (Europe, Middle East, and Africa), Americas (North America and
+Latin America), and APJ (Asia Pacific Japan).
+165/324
+SAP
+Revenue for combined performance obligations is recognized over the longest period of all promises
+in the combined performance obligation.
+To Our
+164/324
+Provide us with an enforceable right to payment for performance completed to date
+The recognition constraint is applied to on-premise software transactions that include usage-based or
+sales-based contingent fees. In contrast, our typical cloud services do not provide the customer with a
+software license because the customer does not have the right to terminate the hosting contract and
+take possession of the software. Consequently, variable cloud fees are considered in the transaction
+price based on estimates, rather than being accounted for as usage-based or sales-based license
+royalties. If SAP pays consideration to a customer in exchange for a distinct good or service, and such
+purchase is linked to a customer contract, an estimate of fair value of such goods and services is
+required to conclude whether or not to account for a reduction in the transaction price of the linked
+customer contract.
+Only very rarely do our contracts include significant financing components. We do not account for
+financing components if the period between when SAP transfers the promised goods or services to
+the customer and when the customer pays for those goods or services is one year or less.
+Allocation of Transaction Price
+We have established a hierarchy to identify the standalone selling prices (SSPs) that we use to allocate
+the transaction price of a customer contract to the performance obligations in the contract.
+163/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+For such development agreements, we recognize revenue over time as the software development
+progresses. Judgment is required in identifying an appropriate method to measure the progress
+toward complete satisfaction of such performance obligations. We typically measure progress of
+our development agreements based on the direct costs incurred to date in developing the software
+as a percentage of the total reasonably estimated direct costs to fully complete the development
+Additional
+Where sales prices for an offering are not directly observable or highly variable across customers,
+we use estimation techniques. For renewable offerings with highly variable pricing across
+customers, these techniques consider the individual contract's expected renewal price as far as this
+price is substantive. Typically, our cloud offerings follow this approach. For non-renewable offerings,
+these estimations follow a cost-plus-margin approach.
+For offerings that lack renewals, have highly variable pricing, and lack substantial direct costs to
+estimate based on a cost-plus-margin approach, we allocate the transaction price by applying a
+residual approach. We use this technique in particular for our standard on-premise software
+offerings.
+Judgment is required when estimating SSPs. To judge whether the historical pricing of our goods and
+services is highly variable, we have established thresholds of pricing variability. For judging whether
+individually negotiated contractual renewal prices are substantive, we have established floor prices
+based on internal calculation which include a minimum margin that we use as SSPS whenever the
+contractual renewal prices are below these floor prices. In judging whether contracts are expected to
+renew at their contractual renewal prices, we rely on our respective renewal history. The SSPs of
+material right options depend on the probability of option exercise. In estimating these probabilities,
+we apply judgment considering historical exercise patterns.
+We review the SSPs periodically or whenever facts and circumstances change to ensure the most
+objective input parameters available are used.
+Recognition of Revenue
+Cloud revenue is recognized over time as the services are performed. For cloud business models
+where we grant rights to continuously access and use one or more cloud offerings for a certain term,
+revenue is recognized based on time elapsed and thus ratably over this term. For cloud business
+models provisioned on a consumption basis where a customer commits to a fixed value of spend on
+cloud services throughout the contract term, but with the discretion to call off cloud services during
+the contract term, we recognize revenue based on consumption as it best reflects our measure
+towards satisfaction of that performance obligation. In limited scenarios where the transaction price is
+entirely variable and determined by the customer's consumption, we recognize revenue based on
+usage in the period in which it was earned.
+Software license revenue is recognized at a point in time or over time depending on whether we
+deliver standard software, customer-specific software, or software subscription contracts that combine
+the delivery of software and the obligation to deliver, in the future, unspecified software products:
+Licenses for our standard on-premise software products are typically delivered by providing the
+customer with access to download the software. We recognize revenue for these on-premise
+licenses at the point in time when we grant the license rights to the customer and the customer has
+access to and thus control over the software. In judging whether our on-premise software offerings
+grant customers a right to use, rather than a right to access, our intellectual property, we have
+considered the usefulness of our software without subsequent updates to it.
+- Typically, our customer-specific on-premise software development agreements:
+■
+Represent software developed for specific needs of individual customers and therefore do not
+have any use for us
+Information
+Consolidated Financial
+Statements IFRS
+Expected Contract Losses
+Additional
+3,580
+5,719
+Capitalized contract cost
+as % of Other non-financial
+assets
+52
+88
+74
+48
+84
+71
+Amortization Expense
+Further Information about
+Sustainability
+Capitalized cost of obtaining customer contracts
+Capitalized cost to fulfill customer contracts
+2023
+2022
+1,000
+725
+327
+243
+(A.4)
+2,139
+5,947
+3,573
+2,374
+2,918
+3,964
+871
+2,812
+3,684
+customer contracts
+Capitalized cost to fulfill
+199
+236
+436
+Customer-Related Provisions
+164
+370
+customer contracts
+Capitalized contract cost
+1,246
+3,154
+4,400
+1,036
+3,019
+4,054
+Other non-financial assets
+206
+1,046
+Customer-related provisions mainly include expected contract losses. We adjust these provisions as
+further information becomes available and as circumstances change. Non-current provisions are
+measured at the present value of their expected settlement amounts as at the reporting date.
+The unit of account for the identification of potential onerous customer contracts is based on the
+contract definition of IFRS 15 including the contract combination guidance. The economic benefits
+considered in the assessment comprise the future benefits we are directly entitled to under the
+contract as well as the anticipated future benefits that are the economic consequence of the contract
+if these benefits can be reliably determined.
+Customer-related provisions also include obligations resulting from customer-related litigation and
+claims. We are currently confronted with various claims and legal proceedings, including claims that
+relate to customers demanding indemnification for proceedings initiated against them based on their
+use of SAP software, and occasionally claims that relate to customers being dissatisfied with the
+Additional
+Information
+Sales and Marketing
+Sales and marketing includes the costs incurred for the selling activities (such as sales commissions
+and amortization of capitalized sales commissions) and marketing activities related to our software
+and cloud solutions and our service portfolio. For more information about the capitalization of costs
+from contracts with customers, see Note (A.3).
+General and Administration
+General and administration includes the costs related to finance and administrative functions, human
+resources, and general management as long as they are not directly attributable to one of the other
+operating expense line items.
+Management Judgments and Sources of Estimation Uncertainty
+The preparation of the Consolidated Financial Statements requires our management to make
+judgments, estimates, and assumptions that affect the application of accounting policies and the
+reported amounts of assets, liabilities, revenues, and expenses, as well as disclosure of contingent
+liabilities.
+We base our judgments, estimates, and assumptions on historical and forecast information, and on
+regional and industry economic conditions in which we or our customers operate. Changes to these
+conditions could adversely affect our estimates. Although we believe we have made reasonable
+estimates about the ultimate resolution of the underlying uncertainties, no assurance can be given that
+the final outcome of these matters will be consistent with what is reflected in our recognized assets,
+liabilities, revenues, and expenses and disclosed contingent liabilities. Actual results could differ
+significantly from original estimates.
+The accounting policies that most frequently or significantly require us to make judgments, estimates,
+and assumptions, and therefore are critical to understanding our results of operations, include the
+following:
+Note
+Material Accounting Policies
+(A.1)
+Revenue recognition
+(A.2)
+Valuation of trade receivables
+(A.4), (G.3)
+Accounting for legal contingencies
+(B.3)
+Accounting for share-based payments
+(C.5)
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Report
+Stakeholders
+169/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+products and services that we have delivered to them. The obligations arising from customer-related
+litigation and claims comprise cases in which we indemnify our customers against liabilities arising
+from a claim that our products infringe a third party's patent, copyright, trade secret, or other
+proprietary rights.
+Customer-Related Litigation and Claims
+Due to uncertainties relating to these matters, provisions are based on the best information available.
+Significant judgment is required in the determination of whether and when a provision is to be
+recorded and what the appropriate amount for such provision should be. Notably, judgment is
+required in the following areas:
+Determining the probability of outflow of economic benefits
+- Determining whether the amount of an obligation is reliably estimable
+Estimating the amount of the expenditure required to settle the present obligation
+At the end of each reporting period, we reassess the potential obligations related to our pending
+claims and litigation and adjust our respective provisions to reflect the current best estimate. In
+addition, we monitor and evaluate new information that we receive after the end of the respective
+reporting period, but before the Consolidated Financial Statements are authorized for issue, to
+determine whether this provides additional information regarding conditions that existed at the end of
+the reporting period. Changes to the estimates and assumptions underlying our accounting for legal
+contingencies, and outcomes that differ from these estimates and assumptions, could require material
+adjustments to the carrying amounts of the respective provisions recorded and additional provisions.
+The expected timing or amounts of any outflows of economic benefits resulting from these lawsuits
+and claims are uncertain and not estimable, as they generally depend on the duration of the legal
+proceedings and settlement negotiations required to resolve the litigation and claims and the
+unpredictability of the outcomes of legal disputes in several jurisdictions.
+Contingent liabilities exist in respect of customer-related litigation and claims for which no provision
+has been recognized. It is not practicable to estimate the financial impact of these contingent liabilities
+due to the uncertainties around these lawsuits and claims as outlined above.
+170/324
+SAP
+SAP Integrated Report 2023
+To Our
+Combined Management
+Determining whether an obligation exists
+Capitalized cost of obtaining
+€ millions
+Non-Current
+In our Consolidated Income Statements, net gains/losses from expected credit loss allowances are
+included in Other operating income/expense, net. Gains/losses from foreign currency exchange rate
+fluctuations are included in Other non-operating income/expense, net.
+Determining our expected credit loss allowance involves significant judgment. In this judgment, we
+primarily consider our historical experience with credit losses in the respective provision matrix risk
+class and current data on overdue receivables. We expect that our historical default rates represent a
+reasonable approximation for future expected customer defaults. Besides historical data, our
+judgment used in developing the provision matrix considers reasonable and supportable forward-
+looking information (for example, changes in country risk ratings, and fluctuations in credit default
+swaps of the countries in which our customers are located).
+The assessment of whether a receivable is collectible involves the use of judgment and requires us to
+make assumptions about customer defaults that could change significantly.
+167/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+By applying this judgment, we record an allowance for a specific customer when it is probable that a
+credit loss has occurred and the amount of the loss is reasonably estimable. Basing the expected
+credit loss allowance for the remaining receivables primarily on our historical loss experience likewise
+requires judgment, as history may not be indicative of future development. Also, including reasonable
+and supportable forward-looking information in the loss rates of the expected credit loss allowance
+requires judgment, as they may not provide a reliable prediction for future development.
+Trade and Other Receivables
+€ millions
+Trade receivables, net
+Other receivables
+44 Total
+2023
+2022
+Current
+For information about how the default risk for trade receivables is analyzed and managed, how the
+loss rates for the provision matrix are determined, how credit impairment is determined and what our
+criteria for write-offs are, see the section on credit risk in Note (F.1).
+Account balances are written off either partially or in full if we judge that the likelihood of recovery is
+remote.
+Additionally, we recognize allowances for individual receivables if there is objective evidence of credit
+impairment.
+Depending on the business model, we measure trade receivables and contract assets from contracts
+with customers either at amortized cost, or at fair value through other comprehensive income (OCI)
+less expected credit losses. We account for expected credit losses by recording an allowance on a
+portfolio basis. We apply the simplified impairment approach. On initial measurement of the
+receivables, we consider all credit losses that are expected to occur during the lifetime of the
+receivables. We use a provision matrix to estimate these losses.
+Information
+Performance Obligations Satisfied in Previous Years
+Revenue recognized in the reporting period for performance obligations satisfied in earlier periods
+was €78 million (December 31, 2022: €81 million), mainly resulting from changes in estimates of
+variable considerations and changes in estimates related to percentage-of-completion-based
+contracts.
+Contract Balances
+The following table presents the activities impacting contract liabilities balances during the year ended
+December 31, 2023:
+Contract Liabilities
+€ billions
+1/1/2023
+Increases resulting from billing and invoices becoming due
+Decreases resulting from satisfaction of performance obligations
+Non-
+Current
+Total
+2023
+5.3
+11.4
+-11.0
+-0.7
+1 Other includes, for example, the impact of foreign currency translation and business combinations and divestitures.
+The amount of revenue recognized in the reporting period that was included in the contract liability
+balance at the beginning of the reporting period was €4.5 billion (December 31, 2022: €4.1 billion).
+5.0
+(A.2)
+Trade and Other Receivables
+Accounting for Trade and Other Receivables
+12/31/2023
+Total
+Other¹
+Non-
+Current
+The amortization periods range from 18 months to seven years depending on the type of offering.
+Amortization of the capitalized costs of obtaining customer contracts is classified mainly as sales and
+marketing expense. We expense the incremental costs of obtaining a customer contract as incurred if
+we expect an amortization period of one year or less.
+The regular review of the amortization periods resulted in a shorter contract life for on-premise
+support contracts and consequently in an accelerated amortization of costs related to these contracts.
+This results, for capitalized cost of obtaining customer contracts as of December 31, 2023, in higher
+amortization expenses amounting to €121 million for 2023 and approximately €80 million for 2024.
+168/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Our sales commission payments for customer contract renewals are typically not commensurate with
+the commissions paid for new contracts. Thus, the commissions paid for renewable new contracts also
+relate to expected renewals of these contracts. Consequently, we amortize sales commissions paid for
+new customer contracts on a straight-line basis over the expected contract life including probable
+contract renewals. Judgment is required in estimating these contract lives. In exercising this judgment,
+we consider our expectation about future contract renewals which we evaluate periodically to confirm
+that the resulting amortization period properly reflects the expected contract life or if there are
+potential indicators of impairment. Commensurate payments are amortized over the contract term to
+which they relate.
+Information
+Capitalized costs incurred to fulfill customer contracts mainly consist of direct costs for set-up and
+implementation of cloud products and custom cloud development contracts as far as these costs are
+not in scope of other accounting standards than IFRS 15. These costs are amortized after completion
+of the setup and implementation or the development, respectively, on a straight-line basis over the
+expected life of the cloud subscription contract including expected renewals. For the life of the
+contract, we consider our expectation about future contract renewals which we evaluate periodically
+to confirm that the resulting amortization period properly reflects the expected contract life. The
+amortization periods range from five to eight years depending on the type of offering. In addition, the
+capitalized costs include third-party license fees which are amortized over the term of the third-party
+license contract. Judgment is required in evaluating whether costs are directly related to customer
+contracts and in estimating contract lives.
+Amortization of capitalized costs to fulfill contracts for custom cloud applications and extensions is
+included in the cost of cloud.
+Capitalized Cost from Contracts with Customers
+2023
+€ millions
+Current
+Non-Current
+Total
+Current
+Current
+Costs to Fulfill Customer Contracts
+The capitalized assets for the incremental costs of obtaining a customer contract consist of sales
+commissions earned by our sales force and partners as well as amounts paid to employees with non-
+sales roles when the payments meet the definition of being an incremental cost to obtain a contract
+with a customer. Judgment is required in determining the amounts to be capitalized, particularly where
+the commissions are based on cumulative targets and where commissions relate to multiple
+performance obligations in one customer contract. We capitalize such cumulative target commissions
+for all customer contracts that count towards the cumulative target but only if nothing other than
+obtaining customer contracts can contribute to achieving the cumulative target. Commissions for
+contracts with multiple performance obligations or for probable renewals thereof are allocated to
+these performance obligations and probable renewals relative to the respective standalone selling
+price.
+2022
+Capitalized Cost from Contracts with Customers
+Costs of Obtaining Customer Contracts
+Total
+Capitalized costs from customer contracts are classified as Other non-financial assets in our Statement
+of Financial Position.
+5,892
+5
+5,897
+0
+5,782
+429
+198
+627
+454
+5,782
+623
+169
+Contract assets are included in Other receivables in our Statement of Financial Position. Contract
+assets as at December 31, 2023, were €307 million (December 31, 2022: €343 million).
+6,405
+6,236
+169
+6,524
+(A.3)
+203
+6,321
+For more information about financial risk, how we manage credit risk, and details of our trade
+receivables and contract assets allowances, see Note (F.1).
+649
+203
+505
+626
+247
+203
+1,134
+points higher
+1,616
+1,964
+Discount rate was 50 basis
+1,108
+993
+908
+1,260
+727
+1,911
+1,015
+2023
+benefit obligations if:
+The sensitivity analysis table below shows how the present value of all defined benefit obligations
+would have been influenced by reasonably possible changes to significant actuarial assumptions. The
+sensitivity analysis considers change in discount rate assumptions, holding all other actuarial
+assumptions constant.
+562
+Domestic Plans
+Foreign Plans
+Other Foreign Post-
+Employment Plans
+Total
+2023
+2022
+2021
+2022
+2021
+2023
+2022
+2021
+2023
+2022
+2021
+Discount rate was 50 basis
+714
+190
+points lower
+Equity investments
+0
+170
+0
+Corporate bonds
+233
+0
+190
+0
+Insurance policies
+59
+59
+1,120
+41
+1,012
+180/324
+3.1
+Thereof: Asset category
+266
+Not Quoted in an
+Active Market
+1,012
+Quoted in an
+Active Market
+219
+223
+2,101
+1,774
+2,196
+Investments in Plan Assets
+Our investment strategy on domestic benefit plans is to invest all contributions in stable insurance
+policies.
+Our investment strategies for foreign benefit plans vary according to the conditions in the country in
+which the respective benefit plans are situated. We have adopted a long-term investment horizon for
+all major foreign benefit plans. Although our policy is to invest in a risk-diversified portfolio consisting of
+a mix of assets, both the defined benefit obligation and plan assets can fluctuate over time, which
+exposes the Group to actuarial and market (investment) risks. Depending on the statutory
+requirements in each country, it might be necessary to reduce any underfunding by addition of liquid
+assets.
+Plan Asset Allocation
+€ millions
+Total plan assets
+2023
+2022
+Quoted in an
+Active Market
+714
+Not Quoted in an
+Active Market
+1,120
+611
+5.5
+Expected volatility (in %)
+0.5
+Restricted Stock Units (RSUs) with service condition only
+Different vesting schedules apply to specific share units. Granted share units will vest in different
+tranches mainly as follows:
+see section b) Cash-Settled Share-Based Payments in this Note (B.3).
+Starting in 2022, we decided to grant share units under Move that we intend to predominantly settle in
+shares instead of cash. For more information about the terms and conditions of the cash-settled Move,
+Equity-Settled Move SAP Plan (Move)
+a) Equity-Settled Share-Based Payments
+Our major share-based payment plans are described below.
+Additional
+Information
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+Stakeholders
+To Our
+SAP Integrated Report 2023
+SAP
+172/324
+Share-based payment expenses related to the Qualtrics plan are included in the results from
+discontinued operations (for more information, see Note (D.1)).
+199
+1,075
+Over a half-year period,
+Over a three-year period on a quarterly basis after a waiting period of six months, or
+Performance Share Units (PSUs) with service condition and upon achieving certain key
+performance indicators (KPIs)
+Over a one-year period,
+Over a three-year period on a quarterly basis after a waiting period of 12 months.
+The number of PSUs that will vest under the different tranches is mainly contingent upon achievement
+of two equally weighted KPIs in the year of grant: Operating profit (non-IFRS at constant currencies)
+and Cloud revenue (at constant currencies). Depending on the weighted average performance, the
+number of PSUs vesting ranges between 0% and 200% of the number initially granted. Performance
+against the KPI target was 112.4% in 2023 (2022: 84.3%).
+1 For these awards, the fair value is calculated by subtracting expected future dividends, if any, until maturity of the respective award from the
+prevailing share price as at the measurement date.
+Weighted average remaining life of awards outstanding as at 12/31/2023 (in years)
+1.1
+1.7
+1.79
+114.25
+Other¹
+111.23
+(2022-2023 Tranches)
+1,414
+Move
+Weighted average expected dividend yield (in %)
+Weighted average share price
+Valuation model used
+Information how fair value was measured at grant date
+Weighted average fair value as at grant date
+€, unless otherwise stated
+Fair Value and Parameters Used at Grant Date in 2023
+The valuation was based on the following parameters and assumptions:
+We intend to settle the share units classified as equity-settled by reissuing treasury shares upon
+vesting (for more information, see Note (E.2)).
+Weighted average initial life at grant date (in years)
+1,136
+356
+806
+Thereof equity-settled share-based payments
+Thereof cash-settled share-based payments
+Share-based payment expenses
+General and administration
+Sales and marketing
+Research and development
+Cost of services
+Cost of software licenses and support
+Cost of cloud
+2023
+€ millions
+The operating expense line items in our income statement include the following share-based payment
+expenses:
+We present the payments of our cash-settled share-based payment plans separately in our
+Statements of Cash Flows under Cash flows from operating activities. As a result, the changes in other
+assets and in other liabilities presented in the reconciliation of operating cash flow do not consider
+share-based payment-related assets or liabilities.
+Presentation in the Statements of Cash Flows
+Under the OWN SAP share purchase plan, we grant our employees discounts on share purchases. As
+those discounts are not dependent on future services to be provided by our employees, the discount
+is recognized as an expense when the discounts are granted.
+Regarding future payout under our cash-settled plans, the SAP share price is the most relevant factor.
+With respect to our LTI 2020, we believe that future payout will be significantly impacted not only by
+our share price but also by the relative TSR performance against the NASDAQ-100 companies. Future
+payouts under our LTI 2020 will also be dependent on meeting non-market-based performance
+conditions based on SAP's long-term strategy. The latter, however, is not incorporated into our fair
+value calculation but leads to adjustments of the quantity of awards granted. Changes in these factors
+could significantly affect the estimated fair values as calculated by the valuation model, and the future
+payout.
+We use certain assumptions in estimating the fair values for our share-based payments, including
+expected share price volatility and expected dividend yields. In addition, the final number of
+Performance Share Units (PSUs) vesting also depends on the achievement of performance indicators.
+Furthermore, the payout for cash-settled share units depends on our share price on the respective
+vesting dates. Changes to these assumptions and outcomes that differ from these assumptions could
+require material adjustments to the carrying amount of the liabilities we have recognized for these
+share-based I payments. The fair value of the share units granted under the SAP Long-Term Incentive
+Program 2020 (LTI 2020) is dependent on our performance against the total shareholder return (TSR)
+for NASDAQ-100 companies, the volatility, and the expected correlation between the TSR of the
+NASDAQ-100 companies and our TSR.
+Valuation, Judgment, and Sources of Estimation Uncertainty
+Share-based payments cover equity-settled and cash-settled awards issued to our employees. The
+respective expenses are recognized as employee benefits and classified in our Consolidated Income
+Statements according to the activities that the receiving employees perform.
+Classification in the Income Statement
+Share-Based Payment Expenses by Functional Area
+173/324
+2022
+94
+1,334
+1,431
+2,220
+87
+137
+175
+513
+503
+834
+2021
+402
+703
+233
+250
+375
+49
+48
+38
+51
+53
+440
+Accounting for Share-Based Payments
+SAP
+To Our
+174/324
+As a result of Own, we have commitments to grant SAP shares to employees. We have fulfilled and
+intend to continue to meet these commitments through an agent who administers the equity-settled
+programs and purchases shares on the open market.
+5.7
+9.2
+6.5
+2021
+2022
+2023
+Own
+Millions
+Numbers of Shares Purchased
+Under the share purchase plan Own, employees have the opportunity to purchase, on a monthly basis,
+SAP shares without any required holding period. The investment per each eligible employee is limited
+to a percentage of the respective employee's monthly base salary. SAP matches the employee
+investment by 40% and adds a subsidy of €20 per month for non-executives. As part of SAP's
+50th anniversary celebration, SAP's contribution was temporarily doubled from 40% to 80% from
+January to March 2022, contributing to the peak in 2022. This plan is not open to members of the
+Executive Board.
+Own SAP Plan (Own)
+The weighted average share price for awards exercised in 2023 was €130.59 (2022: €92.00).
+2 We have changed the classification of some share units granted under the Move plan with the initial intention to settle in shares from equity-
+settled to cash-settled because a cash outflow became probable. Share units with switched classification are considered in the number of
+granted share units.
+12/31/2023
+16,830
+-471
+-403
+SAP
+SAP Integrated Report 2023
+To Our
+Combined Management
+1,414
+ΝΑ
+768
+1,175
+200
+307
+239
+2021
+2022
+-7,675
+2023
+Total
+Move (2022-2023 Tranches)
+Own
+€ millions
+Recognized Expense
+Further Information about Additional
+Sustainability
+Information
+Consolidated Financial
+Statements IFRS
+Report
+Stakeholders
+b) Cash-Settled Share-Based Payments
+115
+13,760
+11,504
+2.43
+97.61
+Other¹
+93.80
+(2022 Tranches)
+Move
+Additional
+Information
+Weighted average initial life at grant date (in years)
+Weighted average expected dividend yield (in %)
+1.6
+Weighted average share price
+Information how fair value was measured at grant date
+Weighted average fair value as at grant date
+€, unless otherwise stated
+Fair Value and Parameters Used at Grant Date in 2022
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Report
+Stakeholders
+Combined Management
+Valuation model used
+SAP Integrated Report 2023
+1.2
+1 For these awards, the fair value is calculated by subtracting expected future dividends, if any, until maturity of the respective award from the
+prevailing share price as at the measurement date.
+-470
+-3,258
+-139
+15,371
+NA
+(2022-2023 Tranches)
+Move
+Change in settlement²
+Forfeited
+Weighted average remaining life of awards outstanding as at 12/31/2022 (in years)
+Exercised
+Granted²
+12/31/2022
+Forfeited
+Exercised
+Adjustment based upon KPI target achievement
+Granted²
+12/31/2021
+Thousands, unless otherwise stated
+Changes in Outstanding Awards
+Adjustment based upon KPI target achievement
+Share-Based Payments
+(B.3)
+Information
+development¹
+33,377
+11,248
+5,641
+16,487
+35,280
+11,764
+5,752
+17,764
+36,444
+12,474
+5,884
+18,086
+Research and
+19,012
+5,864
+5,053
+8,095
+19,005
+Sales and
+12,086
+10,300
+5,342
+1,866
+6,431
+1,240
+1,804
+3,387
+6,704
+1,307
+1,777
+3,619
+5,769
+General and
+26,090
+5,183
+10,186
+10,721
+27,766
+5,463
+10,633
+11,671
+27,728
+marketing
+5,106
+8,129
+18,672
+APJ
+Americas
+EMEA
+Full-time equivalents
+12/31/2021
+12/31/2022
+12/31/2023
+Employee Headcount by Region and Function
+The following table provides an overview of employee headcount, broken down by function and by
+the regions EMEA (Europe, Middle East, and Africa), Americas (North America and Latin America), and
+APJ (Asia Pacific Japan).
+Total
+(B.1) Employee Headcount
+Section B - Employees
+Further Information about Additional
+Sustainability
+Information
+Consolidated Financial
+Statements IFRS
+Report
+Stakeholders
+Combined Management
+To Our
+SAP Integrated Report 2023
+SAP
+This section provides financial insights into our employee benefit arrangements. It should be read in
+conjunction with the compensation disclosures for key management personnel in Note (G.5).
+1,164
+EMEA Americas
+Total
+5,481
+5,013
+8,178
+Services
+13,148
+4,406
+4,191
+4,551
+12,740
+APJ
+4,538
+4,178
+13,080
+4,426
+4,266
+4,389
+Cloud and software¹
+Total
+APJ
+EMEA Americas
+4,025
+6,308
+administration
+Infrastructure
+438
+Pension expenses
+1,334
+1,431
+2,220
+Share-based payment expenses
+1,516
+1,779
+1,919
+447
+10,120
+12,128
+2021
+2022
+2023
+Social security expenses
+Salaries
+€ millions
+(B.2) Employee Benefits Expenses
+1 Due to the updated cost allocation policy described in Note (IN.1), headcount numbers for the comparative period were adjusted accordingly.
+11,369
+average)
+390
+222
+Additional
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Report
+Combined Management
+Stakeholders
+To Our
+SAP Integrated Report 2023
+SAP
+Employee-related restructuring expenses
+171/324
+15,157
+16,992
+Employee benefits expenses
+101
+44
+64
+Termination benefits outside of restructuring plans
+25
+85
+13,487
+1,075
+100,453
+27,822
+45,734
+106,312
+28,702 29,686
+47,924
+29,897 107,602
+28,515
+49,191
+SAP Group
+4,722
+28,236 28,687
+821
+2,602
+5,089
+912
+1,382
+2,795
+4,975
+867
+1,274
+2,834
+1,299
+28,009
+102,658
+Thereof
+105,582 44,622
+28,785 29,438
+47,359
+28,239 29,582 106,043
+48,222
+(months' end
+SAP Group
+acquisitions
+465
+(December 31)
+44
+377
+385
+8
+189
+188
+558
+0
+138
+421
+44
+5.3
+200
+To retain and engage executives and certain employees, we grant share units under Move representing
+a contingent right to receive a cash payment determined by the SAP share price and the number of
+share units that ultimately vest. Since 2022, we intend to settle share units granted from then on
+predominantly in shares. For more information about the terms and conditions of the equity-settled
+Move, see section a) Equity-Settled Share-Based Payments in this Note (B.3). Obligations from
+outstanding share units granted before 2022 will continue to be settled in cash.
+425
+381
+2021
+2022
+2023
+Pension expenses
+Defined benefit pension plans
+Defined contribution plans
+€ millions
+Total Expense of Pension Plans
+The discount rates used in measuring our post-employment benefit assets and liabilities are derived
+from rates available on high-quality corporate bonds and government bonds for which the timing and
+amounts of payments match the timing and the amounts of our projected pension payments. Net
+interest expense and other expenses related to defined benefit plans are recognized as employee
+benefits expenses and classified in our Consolidated Income Statements according to the activities
+that the employees owning the awards perform. Since our domestic defined benefit pension plans
+primarily consist of an employee-financed post-retirement plan that is fully financed with qualifying
+insurance policies, current service cost may become a credit as a result of adjusting the defined
+benefit liability's carrying amount to the fair value of the qualifying plan assets. Such adjustments are
+recorded in service cost. Total expenses on defined benefit pension plans comprise related current
+and past service costs as well as interest income and expense.
+Defined Benefit Pension Plans
+Amounts for domestic and foreign defined contribution plans are based on a percentage of the
+employees' salaries or on the amount of contributions made by employees. In Germany and some
+other countries, we make contributions to public pension schemes that are operated by national or
+local government or similar institutions. Expenses for such local state pension plans are recognized as
+short-term employee benefits, that is, social security expenses.
+Defined Contribution Plans
+(B.4) Pension Plans and Similar Obligations
+Further Information about Additional
+Sustainability
+Information
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+To Our
+Stakeholders
+328
+57
+22
+62
+1,060
+Present value of the DBO
+2022
+2023
+2022
+2023
+2022
+2023
+2022
+SAP Integrated Report 2023
+2023
+Other Foreign Post-
+Employment Plans
+Foreign Plans
+Domestic Plans
+€ millions
+Present Value of the Defined Benefit Obligations (DBO) and the Fair Value of the Plan Assets
+Defined Benefit Plans
+390
+447
+438
+Total
+SAP
+178/324
+of Other non-financial liabilities
+Total
+Non-Current
+Current
+2022
+2023
+Share-Based Payment Balances
+4 We have changed the classification of some share units granted under the Move plan with the initial intention to settle in shares from equity-
+settled to cash-settled because a cash outflow became probable. Share units with switched classification are considered in the number of
+granted share units.
+764
+36
+Current
+346
+1,139
+9
+2023
+2022
+2021
+Total expense (in € millions) recognized in
+117.86
+ΝΑ
+2023
+8
+949
+Non-Current
+Share-based payment liabilities
+15
+40
+11
+11
+22
+10
+Share-based payment liabilities as %
+5,523
+705
+Total
+4,818
+698
+5,648
+Other non-financial liabilities
+803
+279
+524
+707
+152
+555
+6,346
+97.35
+686
+256
+To Our
+Stakeholders
+SAP Integrated Report 2023
+Present value of all defined
+€ millions
+Sensitivity Analysis
+SAP
+179/324
+of our foreign plans, €535 million (2022: €448 million) relate to plans that provide for annuity payments
+not based on final salary.
+Of the present value of the DBO of our domestic plans, €1,006 million (2022: €899 million) relate to
+plans that provide for lump-sum payments not based on final salary; of the present value of the DBO
+1 After the effects of the asset ceiling
+54
+69
+33
+51
+20
+19
+0
+0
+Net defined benefit liability as % of 44 Non-current
+provisions
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+2.6
+2.0
+1.2
+4.2
+3.5
+2021
+Other Foreign Post-
+Employment Plans
+2022
+2023
+2022 2021
+0
+2023
+2022
+2023
+Foreign Plans
+Domestic Plans
+Discount rate
+Percent
+Significant Actuarial Assumptions
+The following significant weighted average assumptions were used for the actuarial valuation of our
+domestic and foreign pension liabilities as well as other post-employment benefit obligations as at the
+respective measurement date:
+Information
+2021
+1
+0
+1
+222
+120
+158
+57
+64
+0
+0
+Net defined benefit liability (asset)¹
+1,623
+177
+1,833
+98
+579
+672
+953
+1,063
+Fair value of the plan assets
+1,737
+2,002
+211
+91
+577
+Thereof: Net defined benefit asset
+0
+0
+0
+0
+0
+Net defined benefit asset as % of Non-current
+other financial assets
+193
+301
+120
+221
+0
+73
+0
+0
+Net defined benefit liability
+-16
+-79
+0
+-63
+-16
+-17
+80
+NA
+2022
+Weighted average share price (in €) for awards exercised in
+If an Executive Board member's service contract is terminated before the end of the third year
+following the year in which the share units were granted, the Retention Share Units and PSUs are
+forfeited in whole or in part, depending on the circumstances of the relevant resignation from office or
+termination of the service contract.
+whole will be used as the SAP share price. The payout amount per share unit, including the dividend
+amounts due on the share units, is capped at 200% of the grant price. The tranche is cash-settled and
+paid in euros after the Annual General Meeting of Shareholders of the corresponding year.
+Information
+Additional
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+To Our
+Stakeholders
+SAP Integrated Report 2023
+SAP
+176/324
+The performance of the share units is linked to the performance of the SAP share price, including
+dividend payments. Accordingly, an amount is paid out for each share unit which equals the SAP share
+price plus those dividends disbursed in respect of an SAP share in the period from the beginning of
+the year in which the share units were awarded until the end of the third year following the year in
+which the share units were awarded. The arithmetic mean of the SAP share price on the 20 trading
+days after scheduled publication of the preliminary results for the fourth quarter and the year as a
+Ranking
+75th percentile
+Median
+25th percentile
+0%
+50%
+100%
+Long-Term Incentive 2016 Plan (LTI 2016 Plan)
+The purpose of the LTI 2016 Plan was to reward our Executive Board members for the annual
+achievement of SAP's Operating profit (non-IFRS at constant currencies) targets, to ensure long-term
+retention of our Executive Board members, and to reward them for the long-term SAP share price
+performance as compared to its main peer group (Peer Group). An LTI tranche was granted annually
+and had a term of four years (2016-2019 tranches).
+All share units granted in this way, comprising 60% PSUs and 40% Retention Share Units, had a vesting
+period of approximately four years. At the end of the vesting period, the corresponding share units
+were non-forfeitable. The payout price used for the settlement was the arithmetic mean of the XETRA
+closing prices of the SAP share on the 20 trading days following the publication of SAP's fourth-quarter
+results subsequent to the end of the vesting period. The payout price was capped at 300% of the
+grant price. The number of PSUs ultimately paid out was dependent on the performance of the SAP
+share absolute and relative to the Peer Group Index. The LTI tranche was cash-settled and paid in
+euros after the Annual General Shareholders' Meeting of the corresponding year. The last LTI tranche
+2019 was paid out in 2023.
+-
+Expected dividend yield (in %)
+NA
+15 to 23
+Expected volatility (in %)
+139.48
+139.48
+Share price
+Other³
+Monte Carlo
+150%
+Valuation model used
+Tranches)
+137.98
+154.24
+Move
+(2020-2023
+Tranches)
+LTI 2020
+(2020-2023
+Weighted average fair value as at 12/31/2023
+€, unless otherwise stated
+Fair Value and Parameters Used at Year End 2023
+The valuation was based on the following parameters and assumptions:
+Information how fair value was measured at measurement date
+200%
+Performance factor
+The number of MSUs initially awarded is likewise multiplied by a performance factor. The performance
+factor depends on the amount of the TSR on the SAP share, measured for an entire performance
+period of approximately three years, compared to the TSR for NASDAQ-100 companies. If the TSR on
+the SAP share equals the median, the performance factor will be 100%. If the TSR on the SAP share
+over the performance period is negative, the maximum performance factor will, however, in deviation
+from the summary above, be 100%.
+To Our
+Stakeholders
+SAP Integrated Report 2023
+SAP
+175/324
+The LTI 2020 is a long-term, multiyear performance-based element of our Executive Board
+compensation that is granted in annual tranches. The LTI 2020 reflects SAP's long-term strategy and
+thus sets uniform incentives to achieve key targets from the long-term strategic plans. The LTI 2020 also
+serves to reward the Executive Board members for long-term SAP share price performance as
+compared to the market, thus ensuring that shareholders' interests are also honored. In addition, the
+LTI 2020 includes a component to ensure long-term retention of our Executive Board members.
+The LTI 2020 is a virtual share program under which annual tranches with a term of approximately four
+years each are granted. When the individual tranches are granted, a certain grant amount specified in
+the Executive Board member's service contract is converted into virtual shares (share units). For this
+purpose, the grant amount is divided by the price of the SAP share which corresponds to the
+arithmetic mean of the SAP share price on the 20 trading days after scheduled publication of the
+preliminary results for the fourth quarter and the year as a whole (grant price). The share units
+SAP Long-Term Incentive Program 2020 (LTI 2020)
+The share units classified as cash-settled are paid out in cash upon vesting.
+The number of PSUs that will vest under the different tranches is mainly contingent upon achievement
+of two equally weighted KPIs in the year of grant: operating profit (non-IFRS at constant currencies) and
+cloud revenue (at constant currencies). Depending on the weighted average performance, the number
+of PSUs vesting ranges between 0% and 200% of the number initially granted. Performance against the
+KPI target was 112.4% in 2023 (2022: 84.3%, 2021: 130.9%).
+Over a three-year period on a quarterly basis after a waiting period of 12 months.
+Combined Management
+Report
+■
+■
+Over a three-year period on a quarterly basis after a waiting period of six months, or
+Performance Share Units (PSUs) with service condition and upon achieving certain key
+performance indicators (KPIs)
+■
+■ Over a three-year period on annual basis,
+Over a half-year period,
+■
+Restricted Stock Units (RSUs) with service condition only
+Different vesting schedules apply to specific share units. Granted share units under the respective
+plans will vest in different tranches, mainly as follows:
+From 2020 to 2023, we granted share units under the Grow SAP Plan that we intend to settle in cash.
+This fixed term plan has broadly the same terms and conditions as Move and recognizes all
+employees' commitment to SAP's success, and deepens their participation in our future company
+performance.
+Over a three-year period, or
+ΝΑ
+Consolidated Financial
+Statements IFRS
+Additional
+Target achievement
+130%
+120%
+110%
+100%
+90%
+80%
+70%
+0%
+Further Information about
+Sustainability
+Operating income
+100%
+Total revenue
+150%
+Cloud revenue
+200%
+Performance factor
+The number of FSUS initially awarded is multiplied by a performance factor. The performance factor
+consists of three equally weighted individual performance indicators relating to the three non-IFRS
+KPIs at constant currencies, derived from SAP's long-term strategy: total revenue, cloud revenue, and
+operating income. The performance period throughout which the target achievement for these three
+KPIs is measured starts at the beginning of the financial year in which the FSUs are awarded and
+concludes upon the end of the second year following the year in which the share units were awarded.
+A numerical target value equaling 100% target achievement is set for each KPI. This constitutes, in each
+case, a cumulative value for the three years of the performance period.
+allocated are composed of 1/3 Financial Performance Share Units (FSUS), 1/3 Market Performance
+Share Units (MSUs), and 1/3 Retention Share Units. All three types of share units have a vesting period
+of approximately four years. In contrast to Retention Share Units, FSUs and MSUs are subject to
+changes in quantity. In this context, the following applies:
+Information
+50%
+1.52
+Weighted average remaining life of awards outstanding as at 12/31/2023 (in
+years)
+1.9
+-7,234
+0
+Exercised
+-57
+-64
+Adjustment based upon KPI target achievement
+1,900
+215
+Granted4
+Forfeited
+11,859
+12/31/2022
+-1,016
+0
+-8,869
+0
+-36
+NA
+2,997
+206
+546
+Forfeited
+-91
+Change in settlement
+0
+15
+0
+3
+12/31/2023
+12/31/2022
+Total intrinsic value of vested awards (in € millions) as at
+644
+59
+-266
+12/31/2023
+23
+12/31/2022
+Total carrying amount (in € millions) of liabilities as at
+6,672
+605
+12/31/2023
+470
+NA
+ཎྜ
+752
+Cash-Settled Move SAP Plan (Move) Including Grow SAP Plan
+Exercised
+Granted4
+Expected dividend yield (in %)
+NA
+24 to 31
+96.39
+96.39
+Share price
+Other³
+Monte Carlo
+Valuation model used
+ΝΑ
+Information how fair value was measured at measurement date
+Move
+(2019-2022
+Tranches)
+94.83
+Tranches)
+LTI 2020
+(2020-2022
+Weighted average fair value as at 12/31/2022
+€, unless otherwise stated
+Fair Value and Parameters Used at Year End 2022
+3 For these awards, the fair value is calculated by subtracting expected future dividends, if any, until maturity of the respective award from the
+prevailing share price as at the measurement date.
+0.7
+94.78
+Adjustment based upon KPI target achievement
+2.03
+2.3
+18,783
+340
+12/31/2021
+Move
+(2019-2023
+Tranches)
+Tranches)
+LTI 2020
+(2020-2023
+Thousands, unless otherwise stated
+Changes in Outstanding Awards
+The risk-free interest rate is derived from German government bonds with a similar duration. The SAP
+dividend yield is based on expected future dividends.
+Weighted average remaining life of awards outstanding as at 12/31/2022 (in
+For the LTI 2020 valuation, the NASDAQ-100 Total Return Index on December 31, 2023, was
+US$20,158.42 (2022: US$12,994.57). The expected volatility of the NASDAQ-100 companies of 34% to
+36% (2022: 36% to 41%), and the expected correlation of SAP and the NASDAQ-100 companies of
+24% to 27% (2022: 26% to 32%) are based on historical TSR data for SAP and the NASDAQ-100
+companies.
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+To Our
+Stakeholders
+SAP Integrated Report 2023
+SAP
+177/324
+3 For these awards, the fair value is calculated by subtracting expected future dividends, if any, until maturity of the respective award from the
+prevailing share price as at the measurement date.
+years)
+0.8
+Further Information about Additional
+Sustainability
+Information
+3,278
+€ millions
+1,814
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+The assessment whether a deferred tax asset is impaired requires judgment, as we need to estimate
+future taxable profits to determine whether the utilization of the deferred tax asset is probable. In
+evaluating our ability to utilize our deferred tax assets, we consider all available positive and negative
+evidence, including the level of historical taxable income and projections for future taxable income
+over the periods in which the deferred tax assets are recoverable. Our judgment regarding future
+taxable income is based on assumptions about future market conditions and future profits of SAP.
+Judgment is also required in evaluating whether interest or penalties related to income taxes meet the
+definition of income taxes, and, if not, whether it is of financial nature. In this judgment, we particularly
+consider applicable local tax laws and interpretations on IFRS by national standard setters in the area
+of group financial reporting.
+Tax Expense by Geographic Location
+€ millions
+Current tax expense
+Germany
+Foreign
+Total current tax expense
+Deferred tax expense/income
+Germany
+Foreign
+Total deferred tax income
+SAP Integrated Report 2023
+SAP
+187/324
+We are subject to changing tax laws in multiple jurisdictions within the countries in which we operate.
+Our ordinary business activities also include transactions where the ultimate tax outcome is uncertain
+due to different interpretations of tax laws, such as those involving transfer pricing and intercompany
+transactions between SAP Group entities. In addition, the amount of income taxes we pay is generally
+subject to ongoing audits by domestic and foreign tax authorities. In determining our worldwide
+income tax provisions, judgment is involved in assessing whether to consider each uncertain tax
+treatment separately or together with one or more other uncertain tax treatments and whether to
+reflect the respective effect of uncertainty based on the most likely amount or the expected value. In
+applying these judgments, we consider the nature and the individual facts and circumstances of each
+uncertain tax treatment as well as the specifics of the respective jurisdiction, including applicable tax
+laws and our interpretation thereof.
+-203
+-156
+Thereof interest expense from financial liabilities at
+-239
+-69
+-50
+fair value through profit or loss
+lil Financial income, net
+lil Total income tax expense
+-456
+2,178
+Financial income, net, increased €934 million in 2023, in comparison to 2022, mainly due to:
+Lower net losses from the fair valuation of our equity investments (€1,049 million),
+An increase in interest income due to a higher market interest rate level applied to a higher volume
+of interest-generating investments (€276 million) which is partially offset by an increase in interest
+expenses on our financial debt (€–197 million) (for more information, see Note (E.3)), and
+An increase in interest expenses from derivatives (€-170 million), mainly from the deal contingent
+forward held in connection with the Qualtrics disposal (for more information, see Note (F.1)).
+(C.5)
+Income Taxes
+Judgments and Estimates
+-1,389
+-400
+Major Components of Tax Expense
+2022
+€ millions
+2023
+2022
+2021
+Current tax expense/income
+Tax expense for current year
+Taxes for prior years
+Total current tax expense
+1,935
+1,717
+1,702
+17
+-13
+267
+1,952
+SAP
+SAP Integrated Report 2023
+1,682
+1,446
+1,741
+-287
+2021
+596
+539
+603
+1,356
+1,165
+1,366
+1,952
+2023
+1,704
+74
+86
+108
+-285
+-344
+-395
+-211
+-258
+1,969
+To Our
+Stakeholders
+Thereof interest expense from financial liabilities at
+amortized cost
+-654
+€ millions
+2023
+2022
+2021
+Foreign currency exchange gain/loss, net
+46
+-144
+51
+Thereof from financial assets at fair value through
+profit or loss
+571
+515
+316
+Thereof from financial assets at amortized cost
+56
+218
+111
+Thereof from financial liabilities at fair value through
+(C.3) Other Non-Operating Income/Expense, Net
+Additional
+Information
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Section C - Financial Results
+-456
+-456
+-1,389
+-1,389
+2,178
+.lil Profit before tax from continuing operations
+5,341
+-514
+5,341
+4,513
+8,505
+1 The 2023 constant currency amounts are only comparable to 2022 actual currency amounts; 2022 constant currency amounts are only comparable to 2021 actual currency
+amounts.
+186/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+4,513
+through profit or loss
+-766
+profit or loss
+376
+100
+29
+amortized cost
+Thereof gains from financial assets at fair value
+380
+2,057
+608
+3,067
+through profit or loss
+Finance costs
+-1,313
+-2,200
+-945
+Thereof losses from financial assets at fair value
+-525
+-1,802
+Thereof interest income from financial assets at
+3,123
+811
+857
+Thereof from financial liabilities at amortized cost
+-30
+-88
+-68
+Miscellaneous income/expense, net
+-36
+-44
+-32
+-382
+lil Other non-operating income/expense, net
+-187
+19
+(C.4) Financial Income, Net
+€ millions
+2023
+2022
+2021
+Finance income
+9
+This section provides insight into the financial results of SAP's reportable segments and of SAP overall
+as far as not already covered by previous sections. This includes but is not limited to segment results,
+income taxes, and earnings per share.
+Combined Management
+Report
+Further Information about
+Sustainability
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+1,704
+Information
+1,969
+Deferred tax expense/income
+Origination and reversal of temporary differences
+-222
+-216
+-311
+Unused tax losses, research and development tax credits, and
+11
+-42
+24
+SAP Integrated Report 2023
+SAP
+182/324
+-157
+-31
+-70
+-13
+Research and development
+-42
+-16
+-12
+Sales and marketing
+foreign tax credits
+-121
+3
+General and administration
+-19
+-4
+-2
+.lil Restructuring expenses
+-215
+-138
+-58
+-6
+Total deferred tax income
+-258
+20
+20
+5
+Expiring after the following year
+28
+9
+59
+Not expiring
+Unused research and development and foreign tax credits
+602
+378
+325
+Deductible temporary differences
+765
+19
+395
+Total unused tax losses
+Total unused tax credits
+64
+29
+48
+-287
+lil Total income tax expense
+1,741
+1,446
+1,682
+Profit Before Tax by Geographic Location
+€ millions
+2023
+-211
+2022
+Germany
+1,201
+In October 2021, over 135 jurisdictions agreed on a new framework for the international tax system
+covering the re-allocation of taxing rights and the introduction of a global minimum corporate tax rate.
+In December 2021, the Organization for Economic Co-operation and Development (OECD) released
+model rules, which shall ensure that multinational enterprises with revenue above €750 million will be
+subject to a 15% minimum corporate tax rate. In December 2022, the Member States of the European
+Union (EU) adopted a directive on a global minimum level of taxation for multinational enterprise
+groups and large-scale domestic groups in the EU. By the end of 2023, Germany transposed the EU
+Reform of International Taxation Rules
+We are subject to ongoing tax audits by domestic and foreign tax authorities. Currently, we are in
+dispute mainly with the German and only a few foreign tax authorities. The German dispute is in
+respect of certain secured capital investments, while the few foreign disputes are mainly in respect of
+the deductibility of intercompany royalty payments and intercompany services. In all cases, we expect
+that a favorable outcome can only be achieved through litigation. For all of these matters, we have not
+recorded a provision as we believe that the tax authorities' claims have no merit and that no
+adjustment is warranted. If, contrary to our view, the tax authorities were to prevail in their arguments
+before the court, we would expect to have an additional expense of approximately €1,815 million
+(2022: €1,607 million) in total (including related interest expenses and penalties of €1,003 million
+(2022: €881 million)).
+Income Tax-Related Litigation
+We have not recognized a deferred tax liability on approximately €22.15 billion (2022: €28.91 billion)
+for undistributed profits of our subsidiaries, because we are in a position to control the timing of the
+reversal of the temporary difference and it is probable that such differences will not reverse in the
+foreseeable future.
+Of the unused tax losses, €181 million (2022: €276 million; 2021: €183 million) relate to U.S. state tax
+loss carryforwards.
+2021
+Consolidated Financial
+Statements IFRS
+-9
+-127
+426
+4,058
+5,648
+698
+6,346
+4,818
+705
+5,523
+74
+78
+75
+75
+60
+73
+Other employee-related liabilities mainly relate to obligations from bonuses and sales commissions,
+outstanding vacation, time credits accumulated in the working time account, employee-related social
+security expenses, severance payments outside restructuring programs, and jubilee expenses.
+(B.6) Restructuring
+Recognition of Restructuring Provisions
+3,632
+4,751
+546
+4,205
+Additional
+Information
+Our expected contribution in 2024 to our domestic and foreign defined benefit pension plans is
+immaterial. The weighted duration of our defined benefit plans amounted to 10 years as at
+December 31, 2023 and 2022.
+Total future benefit payments from our defined benefit plans as at December 31, 2023, are expected
+to be €2,707 million (2022: €2,404 million). Of this amount, 76% (2022: 76%) have maturities of over five
+years, and 55% (2022: 61%) relate to domestic plans.
+(B.5)
+Other Employee-Related Obligations
+Accounting Policy
+As far as the obligation for long-term employee benefits is secured by pledged reinsurance coverage, it
+is offset with the relating plan asset.
+We only recognize provisions for restructuring if and when the following occurs:
+Other Employee-Related Liabilities
+2022
+€ millions
+Current
+Non-Current
+Total
+Current Non-Current
+Total
+Other employee-related liabilities
+Other non-financial liabilities
+Other employee-related liabilities as
+% of Other non-financial liabilities
+2023
+-8
+SAP has designed a program that materially changes the scope of one of our businesses or the
+manner in which the business is conducted, and
+The program established is planned to start shortly after the program plan is approved and is
+expected to be completed in a timeframe that makes significant changes to the plan unlikely, and
+The program has been announced to the parties affected or has commenced.
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+Most of the restructuring expenses recognized in 2023 relate to the targeted restructuring program in
+selected areas of the company that SAP announced and launched in the first quarter of 2023 to further
+focus on its strategic growth areas and accelerated cloud transformation. Restructuring expenses
+primarily include employee-related benefits such as severance payments. The restructuring costs
+presented in 2022 mainly include expenses related to the wind-down of business in Russia and
+Belarus.
+If not presented separately in our income statement, restructuring expenses would have been
+classified in the different expense items in our income statement as follows:
+Restructuring Expenses by Functional Area
+€ millions
+Cost of cloud
+Cost of software licenses and support
+Cost of services
+2023
+2022
+2021
+7
+20
+To Our
+Stakeholders
+SAP Integrated Report 2023
+SAP
+181/324
+We consider whether a change in business is material based on the business affected rather than for
+SAP as a whole. In judging whether a unit qualifies as a business for restructuring purposes, we
+consider if the unit has its own management team, has access to all inputs and processes necessary to
+provide outputs, and generates or could generate revenues. The materiality of a change to a business
+is assessed based on both the size and the nature of the change and therefore does not necessarily
+involve a material quantitative impact on our financial statements.
+Restructuring Expenses
+€ millions
+2023
+2022
+2021
+Employee-related restructuring expenses
+-222
+A detailed and documented restructuring plan has been approved by our Executive Board, a
+member thereof, or a direct report of an Executive Board member, and
+-85
+Onerous contract-related restructuring expenses and
+restructuring-related impairment losses
+8
+-52
+-132
+.lil Restructuring expenses
+-215
+-138
+-157
+-25
+(C.1) Results of Segments
+General Information
+At year end 2023, SAP had five operating segments that are regularly reviewed by the Executive Board,
+which is responsible for assessing the performance of the Company and for making resource
+allocation decisions as our chief operating decision-maker (CODM). The operating segments are
+largely organized and managed separately according to their product and service offerings. The
+Applications, Technology & Services (ATS) segment is SAP's only reportable segment.
+26,961
+28,496
+4,077
+4,193
+4,280
+9,826
+10,386
+11,606
+12,267
+12,382
+12,610
+Applications,
+Technology
+Actual
+Currency
+Constant Actual Actual Constant
+Currency Currency Currency Currency
+Actual
+Currency
+Actual Constant Actual
+Currency Currency Currency
+Constant Actual
+Currency Currency
+26,170
+& Services
+Total
+reportable
+segments
+12,610
+Constant
+Currency¹
+Actual
+Currency
+€ millions
+2023
+2021
+2022
+(C.2) Reconciliation of Segment Measures to the Consolidated Income Statements
+For a breakdown of revenue by region for the SAP Group, see Note (A.1).
+Currency
+26,170
+28,496
+4,077
+4,193
+4,280
+9,826
+10,386
+11,606
+12,382 12,267
+26,961
+Actual
+Currency
+Actual
+2022
+Total
+& Services
+30,853 28,496
+30,057
+4,280
+4,624
+4,320
+11,606
+12,493
+12,091
+12,610
+13,736
+13,645
+Technology
+Applications,
+Constant
+Actual Actual Constant Actual
+Currency Currency Currency Currency Currency Currency Currency Currency
+2022
+reportable
+segments
+13,645
+13,736
+12,610
+2021
+2022
+2021
+2022
+2021
+2022
+€ millions
+Total Segment Revenue
+2021
+APJ
+EMEA
+30,057 30,853 28,496
+4,280
+4,624
+4,320
+11,606
+12,493
+12,091
+Americas
+2023
+Constant
+Currency¹
+Total segment revenue for reportable segments
+Il Restructuring
+-1,334
+-1,431
+-1,431
+-2,220
+-2,220
+Share-based payment expenses
+-405
+-329
+-329
+-345
+-345
+Acquisition-related charges
+Adjustment for
+0
+320
+0
+-215
+-215
+-138
+-138
+-187
+-187
+9
+9
+Other non-operating income/expense, net
+6,308
+6,090
+6,090
+-322
+5,787
+.lil Operating profit
+0
+0
+0
+-155
+-155
+Adjustment for regulatory compliance matter expenses
+-157
+5,787
+Actual
+Currency
+0
+-1,887
+.lil Total revenue
+0
+1,620
+0
+-826
+0
+Adjustment for currency impact
+26,170
+783
+938
+1,024
+1,180
+1,150
+Other revenue
+26,961
+28,496
+30,853
+30,057
+31,207
+31,207
+29,520
+29,520
+-1,741
+-1,858
+-2,265
+-2,239
+Other expenses
+783
+938
+1,024
+Adjustment for currency impact
+1,180
+Other revenue
+9,308
+8,472
+8,824
+10,129
+9,811
+Total segment profit for reportable segments
+26,953
+1,150
+Total Segment Revenue
+APJ
+Actual Actual Constant
+Software licenses and support
+11,411
+11,363
+11,908
+11,781
+11,495
+Software support
+3,248
+1,972
+2,056
+1,801
+1,764
+Software licenses
+7,941
+9,754
+10,428
+12,903
+13,259
+13,582
+13,964
+13,335
+26,961
+28,496
+30,853
+30,057
+Total segment revenue
+3,570
+3,872
+4,104
+12,538
+4,369
+Services
+22,600
+23,089
+24,392
+26,485
+25,797
+Cloud and software
+14,659
+4,260
+26,170
+Cloud
+Constant
+Currency¹
+Combined Management
+Report
+To Our
+Stakeholders
+SAP Integrated Report 2023
+SAP
+183/324
+Our management reporting system produces a variety of reports that differ by the currency exchange
+rates used in the accounting for foreign-currency transactions and operations, where both actual and
+constant currency numbers are reported to and used by our CODM. Reports based on actual
+currencies use the same currency rates as are used in our financial statements. Reports based on
+Most of our depreciation and amortization expense affecting segment profits is allocated to the
+segments as part of broader infrastructure allocations and is thus not tracked separately on the
+operating segment level. Other depreciation and amortization expense is directly allocated to the
+operating segments.
+Our management reporting system, and hence our segment reporting system, reports our
+intersegment services as cost reductions and does not track them as internal revenue. Intersegment
+services mainly represent utilization of human resources of one segment by another segment on a
+project basis. Intersegment services are charged based on internal cost rates including certain indirect
+overhead costs but excluding a profit margin.
+Segment Reporting Policies
+The Sustainability segment bundles a portfolio of sustainability-related solutions that enables SAP's
+customers to record and report financial and non-financial metrics and act on improving their
+sustainability footprint across all ESG (Environmental, Social, and Governance) dimensions.
+The segment information for 2023 and the comparative prior periods were restated to conform with
+the new segment composition.
+The Business Network segment combines SAP's network offerings, covering procurement, logistics,
+asset management, and industry-specific solutions spanning end-to-end value chains. The segment
+generates revenues from cloud application subscriptions, transactional fees, and services.
+The Taulia segment derives its revenues mainly from the sale of working capital solutions.
+The Emarsys segment derives its revenues mainly from the sale of cloud-based customer
+experience offerings and from the sale of related services.
+-
+Due to their size, the following segments are non-reportable:
+At the end of the second quarter of 2023, we sold our stake in Qualtrics, a formerly reportable
+segment. For more information about the sale of Qualtrics, see Note (D.1).
+In the first quarter of 2023, the non-reportable SAP Signavio segment was dissolved and integrated
+into the Applications, Technology & Services segment.
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+Actual
+Currency
+Constant
+Currency¹
+Actual
+Currency
+€ millions
+2021
+2022
+2023
+Applications, Technology & Services
+Actual
+Currency
+Information about assets and liabilities and additions to non-current assets by segment is not regularly
+provided to our Executive Board. Goodwill by segment is disclosed in Note (D.2).
+SAP headquarter functions which are exclusively managed on corporate level, such as finance,
+accounting, legal, human resources, global business operations, and corporate marketing, are not
+included in the results of our reportable segments.
+Regulatory compliance matter expenses
+Restructuring expenses
+Share-based payment expenses
+Acquisition-related charges such as amortization expense and impairment charges for intangibles
+acquired in business combinations, including goodwill impairment charges, and certain stand-alone
+acquisitions of intellectual property (including purchased in-process research and development) as
+well as sale/disposal gains and losses for these intangibles, settlements of pre-existing business
+relationships in connection with a business combination, and acquisition-related third-party
+expenses
+The expense measures exclude:
+We use an operating profit indicator to measure the performance of our operating segments. The
+accounting policies applied in the measurement of operating segment expenses and profit differ as
+follows from the IFRS accounting principles used to determine the operating profit measure in our
+income statement:
+constant currencies report revenues and expenses using the average exchange rates from the previous
+year's corresponding period.
+Revenues and expenses of our operating but non-reportable segments, and the certain activities
+managed on corporate level, as outlined above, are presented under the Other revenue and Other
+expenses items in the reconciliation in Note (C.2).
+Cost of cloud
+-3,693
+-3,779
+SAP
+185/324
+Information
+Additional
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Report
+Stakeholders
+Combined Management
+To Our
+SAP Integrated Report 2023
+SAP
+184/324
+Directly allocated depreciation and amortization expense in the ATS segment decreased compared to
+2022 by 23% (22% at constant currency) from €639 million to €491 million.
+1 The 2023 constant currency amounts are only comparable to 2022 actual currency amounts; 2022 constant currency amounts are only
+comparable to 2021 actual currency amounts.
+9,308
+8,472
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+2022
+2023
+2022
+2023
+Actual
+Currency
+Currency Currency
+Actual
+Constant
+8,824
+Actual
+Currency
+2023
+€ millions
+Americas
+EMEA
+Segment Revenue by Region
+Additional
+Information
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+2022
+10,129
+9,811
+-10,282
+-2,981
+Cost of services
+-4,127
+-4,322
+-4,686
+-5,078
+-4,971
+Cost of cloud and software
+-3,044
+-1,431
+-1,331
+-1,299
+-1,277
+Cost of software licenses and
+support
+-2,696
+190/324
+-3,073
+-3,355
+-1,248
+309
+-2,856
+-2,453
+-11,459
+-12,130
+-12,602
+-12,294
+19,590
+19,931
+20,954
+22,731
+-2,708
+22,105
+Other segment expenses
+Segment gross profit
+-6,580
+-7,030
+-7,542
+-8,122
+-7,951
+Total cost of revenue
+Segment profit
+344
+673
+Expiring after the following year
+1,682
+1,446
+1,741
+lil Total income tax expense
+-39
+-20
+31
+Other
+-36
+Effective tax rate (in %)
+-124
+Assessment of deferred tax assets, research and development
+tax credits, and foreign tax credits
+18
+4
+-8
+Prior-year taxes
+-73
+-84
+-89
+Research and development and foreign tax credits
+138
+32.6
+32.0
+19.8
+81
+Share-based payments
+Pension provisions
+Trade and other receivables
+23
+77
+503
+379
+27
+37
+1,069
+1,074
+Other financial assets
+Leases
+Property, plant, and equipment
+Intangible assets
+Deferred tax assets
+2022
+2023
+€ millions
+Components of Recognized Deferred Tax Assets and Liabilities
+199
+81
+176
+Withholding taxes
+€ millions, unless otherwise stated
+Relationship Between Tax Expense and Profit Before Tax
+Additional
+Information
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+216
+To Our
+Stakeholders
+SAP Integrated Report 2023
+.lil Profit before tax from continuing operations
+SAP
+The following table reconciles the expected income tax expense, computed by applying our
+combined German tax rate of 26.5% (2022: 26.4%; 2021: 26.4%), to the actual income tax expense. Our
+2023 combined German tax rate includes a corporate income tax rate of 15.0% (2022: 15.0%;
+2021: 15.0%), plus a solidarity surcharge of 5.5% (2022: 5.5%; 2021: 5.5%) thereon, and trade taxes of
+10.7% (2022: 10.6%; 2021: 10.6%).
+8,505
+4,513
+5,341
+.lil Total
+6,448
+2,699
+4,140
+Foreign
+188/324
+Tax expense at applicable tax rate of 26.5%
+(2022: 26.4%; 2021: 26.4%)
+Tax effect of:
+-630
+297
+-77
+141
+138
+241
+-143
+-134
+-210
+2,245
+1,193
+1,418
+8,505
+4,513
+5,341
+2021
+2022
+2023
+Tax-exempt income
+Non-deductible expenses
+Foreign tax rates
+297
+211
+■ Financial income, net
+267
+2,449
+2,269
+Total deferred tax liabilities (gross)
+326
+34
+269
+245
+35
+Netting
+33
+761
+170
+185
+437
+341
+108
+89
+835
+269
+581
+-2,004
+Total deferred tax liabilities (net)
+Items Not Resulting in a Deferred Tax Asset
+203
+€ millions
+2023
+2022
+(2022: €288 million), as well as the decrease in deferred tax liabilities for other in the amount of
+€292 million (2022: €140 million), mainly result from reclassifications, leading to a more consistent
+presentation of the components of recognized deferred tax assets and liabilities. The presentation for
+2022 remains unchanged in this respect.
+The increase in deferred tax assets for other in the amount of €236 million (2022: €169 million) and in
+deferred tax liabilities for trade and other receivables in the amount of €492 million
+The decrease in deferred tax assets for contract liabilities and the decrease in deferred tax liabilities
+for intangible assets mainly result from the divestiture of Qualtrics.
+-2,208
+Information
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+To Our
+Stakeholders
+SAP
+189/324
+241
+265
+Additional
+Other
+SAP Integrated Report 2023
+Pension provisions
+4,197
+Total deferred tax assets (gross)
+134
+370
+Other
+110
+44
+Research and development and foreign tax credits
+4,303
+180
+994
+818
+Contract liabilities
+753
+692
+Other provisions and obligations
+226
+Other provisions and obligations
+Carryforwards of unused tax losses
+Netting
+147
+-2,208
+2021
+Other financial assets
+-2,004
+Unused tax losses
+Not expiring
+Expiring in the following year
+315
+430
+Trade and other receivables
+28
+151
+26
+Leases
+Property, plant, and equipment
+Total deferred tax assets (net)
+Intangible assets
+Deferred tax liabilities
+2,193
+14
+2,095
+30
+100%
+7
+22
+24
+31
+29
+94%
+30
+7
+23
+6
+7
+7
+87%
+20
+23
+14
+16
+7
+Dr. Qi Lu
+Jennifer Xin-Zhe Li
+Peter Lengler
+7
+Lars Lamadé
+23
+7
+100%
+12
+100%
+21
+23
+7
+7
+Dr. Friederike Rotsch
+21
+7
+7
+Christine Regitz
+11
+11
+7
+14
+7
+4
+Dr. h. c. Punit Renjen (from 5/11/2023)
+100%
+33
+33
+26
+26
+7
+7
+Gerhard Oswald
+90%
+19
+21
+4
+23
+18
+16
+19
+6
+7
+Manuela Asche-Holstein
+89%
+25
+28
+21
+21
+7
+7
+Prof. Dr. h. c. Hasso Plattner
+Participation
+in %
+Participation
+Participation Meetings Participation Meetings
+Meetings
+Supervisory Board Members
+All Meetings
+Committees
+Plenum
+Additional
+Information
+Meeting Participation of SAP Supervisory Board Members During Fiscal Year 2023
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+To Our
+Stakeholders
+SAP Integrated Report 2023
+18
+26
+Aicha Evans
+7
+16
+7
+7
+Monika Kovachka-Dimitrova
+97%
+37
+38
+30
+31
+7
+7
+Margret Klein-Magar
+88%
+23
+89%
+92%
+24
+227
+8
+4
+5
+3
+3
+Prof. Dr. Gesche Joost (until 5/11/2023)
+27
+18
+20
+6
+24
+21
+7
+28
+Stakeholders
+Combined Management
+To Our
+SAP Integrated Report 2023
+SAP
+18/324
+On April 13, 2023, we discussed the aforementioned key topics as well as business in the first quarter,
+the Executive Board reporting particularly on SAP's competitive position and on the current tasks in the
+individual Executive Board portfolios.
+Meeting in April
+We held an extraordinary meeting on March 12, 2023, to discuss the sale already underway of SAP's
+interest in Qualtrics International Inc. ("Qualtrics”), a U.S.-listed company. The Executive Board and the
+Finance and Investment Committee explained the economic background of this move to us. In
+preparation for this meeting, we obtained written answers to questions the Supervisory Board
+members had submitted in advance regarding the sale of Qualtrics. We ultimately approved the
+divestiture on recommendation of the Finance and Investment Committee.
+Extraordinary Meeting in March
+Next, we passed the proposed resolutions for the SAP SE Annual General Meeting of Shareholders on
+May 11, 2023. In particular, these proposals included the proposed election of Punit Renjen as a new
+Supervisory Board member with the intention of establishing him as a successor to the Supervisory
+Board chair, and the re-election of Jennifer Li and Qi Lu. The auditor for the 2023 financial year had
+already been elected by the Annual General Meeting of Shareholders on May 18, 2022, in view of the
+upcoming change of auditor, which is why there was no proposal for a resolution in this regard. Further,
+we received an Executive Board report on business in 2022 and adopted the budget for 2023 after
+discussing same extensively with the Executive Board. In addition, the Supervisory Board turned its
+attention to the SAP SE financial statements and the consolidated financial statements for 2022. On
+recommendation of the Audit and Compliance Committee, we approved the audit and gave our
+consent to the financial statements and the consolidated financial statements for 2022., In addition, we
+endorsed the Executive Board's proposal concerning the appropriation of retained earnings for 2022,
+and approved the compensation report for fiscal 2022. Beyond this, the Executive Board gave us an
+overview of SAP's equity investments and donation activities in 2022.
+We also discussed the upcoming reappointments of, and thus renewals of the contracts with, Julia
+White, Sabine Bendiek, and Scott Russell at this meeting. In this connection, the Supervisory Board
+chairperson reported that Sabine Bendiek would not be standing for a further term of office. We
+thereafter resolved to offer both Scott Russell and Julia White reappointment and renewal of their
+Executive Board contracts by a further three years until 2027, and to negotiate new contracts with
+them. We also concerned ourselves with succession planning for Sabine Bendiek.
+At our ordinary Supervisory Board meeting on February 22, 2023, we adopted the resolutions required
+under the current Executive Board compensation package for fiscal 2022 and 2023. To this end, we first
+determined performance against the defined target for the short-term incentive (STI) 2022, and then
+set the performance targets for the STI 2023. In addition, we resolved the individual allocation amount
+for the 2023 tranche of the long-term incentive (LTI) 2020. Finally, we evaluated the appropriateness of
+the Executive Board members' compensation for 2022, and in each case found it to be appropriate in
+terms of amount, structure, objective criteria, and reasonable and appropriate in relation to the
+Company's circumstances, also in regard to its profit and outlook. We referred in this regard to a
+certificate obtained beforehand from an independent compensation consultant. For more information
+about the STI 2022 and 2023, the LTI 2020, and the other compensation elements for Executive Board
+members, see the Compensation Report.
+Meeting in February (Meeting to Discuss the Financial Statements)
+Other key topics addressed at our meetings in 2023 notably included the following:
+sustainability as it relates to social issues. On top of this, the full Supervisory Board was updated on
+SAP's current sustainability portfolio and the planned expansion of this product range at its meeting in
+April. As part of the October meeting, the Supervisory Board had the opportunity to examine the topic
+of sustainability at SAP based on a detailed meeting document that highlighted, in particular, SAP's
+goal to emit zero greenhouse gas emissions from 2030 onwards, general human rights topics, the
+German Supply Chain Due Diligence Act, and best practices for responsible Al.
+Information
+Additional
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+To Our
+Stakeholders
+SAP Integrated Report 2023
+SAP
+17/324
+Due to the comprehensive strategic importance that sustainability has for SAP and its customers, the
+Supervisory Board addressed the sustainability aspects that are relevant to SAP numerous times
+throughout the fiscal year 2023. It is important to note here that SAP promotes sustainability in two
+different ways: by offering solutions that empower SAP customers to become more sustainable
+enterprises, and by aligning its own business activities with ESG (environmental, social, and
+governance) goals and targets. The entire spectrum of SAP's sustainability efforts and sustainability
+solutions is a cross topic that is monitored and covered by several committees. That is why the
+Supervisory Board has not formed a pure ESG or sustainability committee. By continuously addressing
+sustainability issues both in plenary sessions and in the committees, we have been able to build
+extensive expertise in this area: specifically, the Audit and Compliance Committee monitored the
+sustainability reporting and the way the reports are created and managed, and the Personnel and
+Governance Committee dealt with sustainability targets relevant to Executive Board compensation.
+The Technology and Strategy Committee, meanwhile, concerned itself with sustainability-related
+products and software as well as IT security, whereas the People and Culture Committee addressed
+Sustainability
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+20/324
+December: Resolution to eliminate the impact of the LeanIX acquisition on the KPIs for the
+STI 2023 and for the tranches 2021, 2022, and 2023 of the LTI 2020
+October: Approval of a long-term collaboration contract as part of SAP's sponsoring activities
+November: Resolution on applying a new non-IFRS definition to Executive Board compensation
+as of January 1, 2024, whereby the still-pending LTI tranches 2022 and 2023 remain unaffected
+and are to be calculated according to the previous non-IFRS definition.
+August: a) Resolution on the new conditions of the Directors and Officers Insurance (DSO);
+b) Resolution on the appointment of Gina Vargiu-Breuer to the Executive Board and as new head
+of HR as of February 2, 2024; c) Consent to changes to the SAP Executive Board portfolios
+September: a) Consent to the planned acquisition of LeanIX; b) Resolution on how to handle the
+effect of potential fines on Executive Board members' compensation; c) Resolution on the
+associated declaration of compliance for 2022; d) Resolutions on changes to the composition of
+the Nomination Committee and the Go-To-Market and Operations Committee
+July: Resolution to increase the volume of a Group-internal financing measure adopted by the
+Supervisory Board at its meeting in May 2023
+May: a) Resolution on the appropriation of retained earnings as amended for fiscal year 2022;
+b) Approval of a lump-sum payment into Julia White's U.S. pension plan, on recommendation of
+the Personnel and Governance Committee
+March: Reappointment of Scott Russell and Julia White for a further three years until the end of
+January 2027 and February 2027, respectively, and agreement to the terms and conditions of their
+new Executive Board appointment contracts
+February: Approval of the Corporate Governance Statement for 2022
+We adopted, besides the above resolutions, several resolutions by correspondence which the
+relevant Committees had deliberated on in advance and recommended to us, as follows:
+Resolutions by Correspondence Vote
+An extraordinary Supervisory Board meeting was held on December 10, 2023, during which the
+Supervisory Board focused on the forthcoming settlement agreements with the U.S. Department of
+Justice (U.S. DOJ), the SEC, and the South Africa National Prosecution Authority in relation to the
+compliance violations in South Africa and other countries. The Supervisory Board gave its consent to
+the detailed content of the settlement agreements negotiated with the said authorities at the meeting.
+Extraordinary Meeting in December
+Board has an appropriate number of independent members in the meaning of the GCGC, also when
+the shareholder structure is taken into account. Lastly, the Supervisory Board adopted the regular
+declaration of compliance and approved an amendment to the non-IFRS definition for the financial
+year 2024.
+The rise in legal requirements in the context of national security and geopolitical developments are
+becoming increasingly important for SAP as a software provider for the public sector and as an
+operator of critical infrastructures. The Supervisory Board discussed, on several occasions in 2023,
+matters relating to the national security of states in which SAP is subject to corresponding regulations.
+From the Supervisory Board's perspective, it was essential that a committee on government security
+be set up to reflect SAP's business activities in these security-sensitive areas. The Supervisory Board
+will therefore, in accordance with the legal framework, accompany and monitor these specific
+Company activities by means of a dedicated committee going forward. The Personnel and Governance
+Committee discussed the formation of and rules of procedure for this committee at its April 12 and
+July 26, 2023, meetings and thereafter reported on its deliberations to the full Supervisory Board. The
+new six-member Government Security Committee was subsequently established, its rules of
+procedure adopted, and its members elected during the October meeting of the Supervisory Board.
+The Committee began its work in January 2024.
+Information
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+To Our
+Stakeholders
+SAP Integrated Report 2023
+SAP
+19/324
+At our meeting on October 26, 2023, the individual Executive Board members first reported on
+business performance in the third quarter for their respective Board area. Next, we took an in-depth
+look at SAP's transformation, focusing on the goals, the measures planned by the Executive Board to
+improve the process, and the new structure of responsibilities at Executive Board level. The
+Supervisory Board thereafter discussed various HR and compensation matters without the Executive
+Board being present. Topics notably included the adjustment of Executive Board service contracts to
+the new compensation system, and the adoption of a clawback policy, which standardizes the cases in
+which the Company can reclaim variable compensation already paid out to certain top executives,
+including members of the Executive Board. SAP was required to adopt and implement this directive by
+December 31, 2023, due to new regulations of the SEC and the New York Stock Exchange (NYSE).
+Going forward, the new clawback policy will complement the clawback provisions that already exist in
+the Executive Board contracts. We then dealt with the regular review of the independence of the
+shareholder representatives on the Supervisory Board. Based on the findings from our own
+examination, we determined that all shareholder representatives were independent in the meaning of
+the German Corporate Governance Code (GCGC) and were therefore to be named as such in the
+Corporate Governance Statement. We also ascertained-in accordance with the recommendations in
+the GCGC - that more than half of the shareholder representatives are independent from the
+Company and the Executive Board. Thereafter, we resolved on what we believe to be the appropriate
+number of independent shareholder representative members, and determined that the Supervisory
+Meeting in October
+As previously mentioned above, Al was a key topic in our July meeting. The Executive Board also
+reported on business in the second quarter, and we discussed with management potential markets to
+focus on in future and various marketing-related matters. Next, an analyst from a U.S. investment
+management company explained the difference between SAP and other major software companies
+from his perspective as an analyst and the main criteria he used to arrive at this opinion. Based on this
+information, the Supervisory Board and the Executive Board then discussed the strategic direction of
+the Company with the goal of better meeting the capital markets' expectations. In addition, the Audit
+and Compliance Committee and the law firm tasked by the Supervisory Board updated us on the
+ongoing compliance matters, particularly the negotiations with the U.S. Department of Justice and the
+U.S. Securities and Exchange Commission (SEC), and informed us on how to proceed. We also
+approved an amendment of the Rules of Procedure of the Supervisory Board to include rules on
+dealing with conflicts of interests, and passed two resolutions on Executive Board compensation
+serving to neutralize the impact of the Qualtrics sale on the key performance indicators (KPIs) for the
+STI 2023 and for the 2021, 2022, and 2023 tranches of the LTI 2020.
+Meeting in July
+The Supervisory Board held an extraordinary meeting following the Annual General Meeting of
+Shareholders on May 11, 2023. After welcoming the newly-elected member Punit Renjen, we
+appointed him as second deputy chairperson of the Supervisory Board and, due to the new election
+or re-election of the Supervisory Board members concerned, approved the proposed changes to the
+composition of the committees. The Executive Board then explained to us the planned adjustments to
+the Company's 2025 financial ambition, which was announced at the SAP Sapphire customer event in
+Orlando, and the expectations of investors in this regard. Next, the Executive Board presented its
+proposal to establish a €5 billion share buyback program that would run until the end of 2025.
+According to the proposal, the program would be carried out on the basis of the appropriate
+authorization by the Annual General Meeting, and various intra-group financing measures would be
+undertaken to implement it. After joint deliberation, we approved the Executive Board's proposal. As
+the last item on the agenda, we discussed how to deal with potential fines against SAP in connection
+with ongoing compliance investigations, when it came to the compensation of the Executive Board
+members currently in office. We particularly took into account that the compliance incidents in
+question had occurred before the current members of the Executive Board were appointed. The
+Supervisory Board's investigations into these compliance incidents therefore do not pertain to current
+Executive Board members.
+Extraordinary Meeting in May
+Additional
+New Government Security Committee
+SAP's transformation to a cloud company continued to be the subject of ongoing dialog between the
+Executive Board and Supervisory Board in 2023. We consulted in-depth with the Executive Board on
+the key initiatives and measures in the Company's cloud transformation strategy and monitored its
+implementation. In our April meeting, we examined the challenges in public cloud. When it met in
+October, the Finance and Investment Committee reviewed SAP's strategy to realign the product and
+service portfolio and discussed the cloud gross margin with the Executive Board. The Go-To-Market
+and Operations Committee likewise dealt with the cloud transformation in the reporting year,
+specifically the go-to-market strategy and related sales model. In our plenary session on
+October 26, 2023, the full Supervisory Board and the Executive Board reviewed in-depth the planned
+second phase of the cloud transformation, including the related goals and implementation measures.
+In this connection, we also discussed with the Executive Board its proposals for a new Executive Board
+structure, which it deemed necessary to ensure the successful implementation of the next phase of
+the transformation and the proposed efficiency measures. The Supervisory Board places great
+importance on being fully informed about the further cloud transformation, so that it can constructively
+support its implementation.
+Cloud Transformation
+32
+25
+25
+7
+7
+57%
+4
+7
+0
+0
+4
+7
+Gunnar Wiedenfels
+32
+Dr. Rouven Westphal
+97%
+28
+29
+21
+22
+7
+7
+Heike Steck
+93%
+28
+30
+21
+100%
+Helmut Stengele¹
+28
+32
+7
+implementation of SAP's enterprise Al strategy and examined the framework conditions for data
+consumption by Al applications. SAP's Al strategy was also the subject of intense debate at the plenary
+meeting in July 2023. Among other things, our discussions focused on the go-to-market strategy and
+SAP's current and future investments to expand its Al portfolio. In addition, management explained to
+us its plans for building up additional Al expertise among SAP's workforce. The Go-to-Market and
+Operations Committee analyzed the success of the go-to-market measures for Al at its October
+meeting.
+Information
+Additional
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+To Our
+Stakeholders
+SAP Integrated Report 2023
+SAP
+16/324
+One of the main focuses of our discussions with the Executive Board was the topic of artificial
+intelligence ("AI"). SAP is working intensively to integrate Al in its software solutions to allow customers
+to reap the enormous potential of using Al. The Supervisory Board supports and continually monitors
+this process and the measures associated with it. At our meeting on February 22, 2023, for example,
+the Technology and Strategy Committee reported on how the Executive Board had explained SAP's Al
+strategy and its bearing on SAP's product portfolio to it. When the Supervisory Board met on
+April 13, 2023, the Executive Board presented the Company's innovation plans in the field of Al and
+outlined how SAP would integrate certain Al applications into its products. Our plenary session and
+committee meetings in July 2023 were held in San Martin, California, USA. These sessions and the
+supporting program likewise dealt with Al, and included expert presentations covering various aspects
+of this technology. When the Technology and Strategy Committee met in July 2023, it reviewed the
+Artificial intelligence
+The Supervisory Board and its committees also regularly convened wholly or partly without the
+Executive Board as necessary to deliberate on matters that pertained to the Executive Board, required
+internal discussion among Supervisory Board members alone or did not require the Executive Board's
+presence, or to facilitate discussion between the Supervisory Board or its respective committee and
+the auditor without the Executive Board present. This was the case in three of the plenary sessions and
+in eight committee meetings in 2023. In addition, the shareholder representatives and the employee
+representatives independently discussed, at times with the CEO, the topics on the respective agenda
+before each ordinary meeting. Said deliberations similarly took place as required prior to the
+extraordinary meetings or prior to circular correspondence votes. The Supervisory Board addressed
+the following key topics during the year:
+100%
+1 Currently not a member of any Supervisory Board committee
+35
+35
+28
+28
+SAP
+7
+James Wright
+77%
+24
+31
+18
+24
+6
+100%
+15/324
+Combined Management
+Report
+Supervisory Board Meetings and Resolutions
+716460/DE0007164600
+New York Stock Exchange
+Berlin, Frankfurt, Stuttgart
+1 Source: STOXX
+Dow Jones EURO STOXX 50
+Dow Jones STOXX 50
+TecDax
+HDAX
+CDAX
+Prime All Share
+DAX 40
+Weight (%) in indexes as at 12/29/2022¹
+Bloomberg
+Reuters
+NYSE (ADRS)
+WKN/ISIN
+IDS and symbols
+United States (ADRs)
+Germany
+Listings
+Key Facts About SAP Stock/SAP ADRS
+In addition, we provide a Webcast for all key investor events at which members of our Executive Board
+speak, and we post all relevant presentations on the Investor Relations Web site.
+can reach the IR team directly by telephone hotline and by e-mail at investor@sap.com. We also
+publish an overview of the latest analyst consensus on the Investor Relations Web site.
+Information
+Additional
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+803054204 (CUSIP)
+SAPG.F or .DE
+SAP GR
+Return on SAP Common Stock - WKN 716460/ISIN DE007164600
+5.8%
+DAX 40 Performance -
+In the past fiscal year, the Supervisory Board of SAP SE held four ordinary meetings and three
+extraordinary meetings at which we deliberated and resolved on all matters of relevance to the
+Company. Our plenary meetings and committee meetings were held as physical meetings, as video or
+telephone conferences, or as hybrid sessions, where some members attended physically and the
+remainder online. We also adopted 15resolutions by correspondence vote. The following table
+provides an overview of the individual members' attendance at the Supervisory Board's plenary
+sessions and committee meetings in the year under review. This report also contains a table that
+shows which meetings of the Supervisory Board and its committees were held as a physical meeting,
+as a video or telephone conference, or as a hybrid session.
+44.7%
+9.9%
+8.4%
+Average annual return
+14,470
+16,045
+22,385
+Value as at 12/31/2023¹ (in €)
+1 year
+5 years
+Combined Management
+Report
+10 years
+12/31/2022
+12/31/2018
+12/31/2013
+Date of investment
+4.44
+2.90
+9.13
+9.40
+10.50
+9.85
+9.41
+Initial investment €10,000
+Percent, unless otherwise stated
+Period of investment
+To Our
+Stakeholders
+SAP Integrated Report 2023
+SAP
+Mar Apr
+Feb
+Jan
+90%
+8
+7
+6
+Nasdaq-100 Index
+5
+2
+100%
+110%
+120%
+May
+130%
+150%
+160%
+DAX40 Performanceindex (Xetra)
+SAP Stock (Xetra)
+SAP Stock Versus Major Indices (January 2, 2023, to December 29, 2023)
+Information
+Additional
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+To Our
+Stakeholders
+SAP Integrated Report 2023
+SAP
+140%
+9.7%
+Jun
+Jul
+11/324
+We provide a wide range of information online about SAP and its stock. Our communications channels
+include the LinkedIn channel SAP Investor Relations and the SAP INVESTOR magazine. Shareholders
+SAP representatives engaged with retail shareholders at virtual and physical events. The IR team and
+the Treasury team also maintained regular communication with the debt investor community.
+We continued our dialogue with investors, focusing on environmental, social, and governance (ESG)
+topics and providing them with insights into our sustainability policies and products. SAP's leadership
+in this area has been recognized by leading sustainability rating organizations.
+In summary, the IR team, together with senior management, held more than 300 meetings in 2023 to
+maintain the dialogue with investors and analysts, including one-on-one phone calls, video
+conferences, and road shows. Members of the Executive Board and the IR team attended more than
+20 conferences across an expanded geographical mix. In May, we hosted the Financial Analyst
+Conference as a part of our SAP® SapphireⓇ event in Orlando, Florida, United States. In 2023, for the
+first time since 2020, SAP held the Annual General Meeting of Shareholders (AGM) with physical
+presence again in Mannheim, Germany.
+Our event analysis showed that most of the conferences attended consisted of participants with
+longer investment time horizon and high purchase potential. 85% of the SAP engagements were with
+asset managers with an investment horizon of 1+ years. The number of days SAP engaged with the
+buy-side exceeded the industry benchmark and SAP IR interacted with 75% of the Top 100
+shareholders throughout the year.
+SAP continued its strong engagement with the investment community in 2023. Throughout the year,
+members of the Executive Board of SAP SE and the Investor Relations (IR) team discussed our latest
+strategy, its execution and business development, and how SAP was helping customers meet the many
+challenges faced by companies today, with institutional investors, analysts, and private investors
+worldwide.
+Continuous Engagement with the Investment Community
+December 29 - Closing price - €139.48
+8.
+May 16 - Dividend payment - €2.05
+4.
+December 18 - Annual High 2023 - €148.18
+Jul
+7.
+3.
+October 18 - Financial results Q3 2023
+6.
+January 26 - Financial results Q4 and Full year 2022
+2.
+July 20 - Financial results Q2 and Half-Year 2023
+5.
+January 2 Opening price - €97.42
+1.
+Dec
+Nov
+Oct
+Aug Sep
+April 21 - Financial results Q1 2023
+20.3%
+Performance comparators
+Nasdaq-100 index
+Further Information about Additional
+Sustainability
+Information
+Consolidated Financial
+Statements IFRS
+Stakeholders
+To Our
+SAP Integrated Report 2023
+SAP
+13/324
+SAP's capital stock as at December 31, 2023, was €1,228,504,232 (2022: €1,228,504,232). It is issued as
+1,228,504,232 no-par shares, each with an attribute value of €1 in relation to capital stock.
+Capital Stock Unchanged
+2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
+0.20***▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬
+2.20
+0.28
+Shareholder Structure
+0.36
+0.60
+0.40
+0.85
+1.00
+1.10
+1.10
+1.15
+1.25
+1.40
+total return index
+1.58
+1.85
+0.50 2.05
+0.46 0.50 0.50 0.50
+2.45
+Applying the definition accepted on the Frankfurt Stock Exchange, which excludes treasury stock from
+the free float, as at December 31, 2023, the free float stood at 83.6% (December 31, 2022: 83.3%).
+SAP Free float at 83.6%
+Transactions that were submitted to us because they required the approval of the Supervisory Board
+whether by law, the Articles of Incorporation, or the Supervisory Board's list of transactions requiring its
+consent, were approved by us after detailed examination and discussion with the Executive Board.
+In addition, the Supervisory Board chairperson and the CEO were in continuous contact, which meant
+the Supervisory Board chairperson was always apprised without delay of all important events that
+were significant for assessing SAP's situation and progress or for the management and governance of
+the Company. Moreover, the chairperson of the Supervisory Board and the CEO regularly discussed
+matters related to SAP's strategy, business performance, risk position, risk management, and
+compliance. In preparation for the upcoming handover of the Supervisory Board chair position, the
+deputy chairperson representing the shareholder representatives was increasingly included in these
+discussions.
+In the past fiscal year, the Supervisory Board of SAP SE discharged the duties imposed on it by the law
+and by the Company's Articles of Incorporation. It advised the Executive Board on an ongoing basis
+with regard to the running of the Company and it scrutinized and monitored the work of management.
+The Supervisory Board received regular, full, and timely reports from the Executive Board, both from
+members in person and in written documents. The Supervisory Board was also in regular exchange
+with senior internal officers through its various committees. This ensured that we were always up to
+date, even between meetings, on the Company's strategy, planning, business performance, risks, risk
+management, compliance (in other words, adherence to laws, to the Company's Articles of
+Incorporation, and to internal policies), and on transactions of special significance for SAP. In its reports,
+the Executive Board also informed us in particular where business deviated from plan or target, and
+why. We questioned and probed the Executive Board's reports to satisfy ourselves that the information
+it gave us was plausible. The Executive Board fully met our requirements when it came to providing
+information.
+Collaboration Between the Supervisory Board and the Executive Board
+In the following, we would like to inform you about the work of the Supervisory Board in the fiscal year
+2023.
+Dear Shareholders,
+Report by the Supervisory
+Board
+Information
+Additional
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Report
+Stakeholders
+Institutional
+Investors
+Combined Management
+SAP Integrated Report 2023
+SAP
+14/324
+41% of institutional investors are classified as ESG investors.
+Treasury 5%
+Retail / Not identified
+21%
+3%
+Germany 6%
+North America 26%
+Rest of World
+Founders
+11 %
+United Kingdom /
+Ireland
+13%
+Europe (ex Germany)
+15%
+To Our
+At the 2024 Annual General Meeting of Shareholders, the Executive Board and the Supervisory Board
+of SAP SE will recommend a total dividend for fiscal year 2023 of €2.20 (2022: €2.05) representing an
+increase of €0.15, or 7.3% compared to the dividend paid for fiscal year 2022. The payout ratio would
+be 43.1%.
+1.50
+Dividend of €2.20 Proposed
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Report
+It is our policy to pay a dividend totaling 40% or more of IFRS profit after tax.
+Combined Management
+To Our
+SAP Integrated Report 2023
+SAP
+12/324
+1 Source: Bloomberg, Dividends reinvested
+Technology Software Index
+55.1%
+22.2%
+Additional
+Information
+20.2%
+total return index
+20.5%
+14.6%
+12.4%
+S&P 500 Composite ―
+1.3%
+-2.1%
+-0.4%
+total return index
+REX General Bond -
+53.8%
+21.6%
+16.7%
+S&P North American
+Return on SAP ADRs
+Stakeholders
+803054204 (CUSIP)
+53.8%
+21.6%
+16.7%
+24.2%
+13.7%
+9.9%
+49.8%
+9.2%
+-
+14,981
+15,529
+17,740
+1 year
+5 years
+5.9%
+12/31/2022
+10 years
+Initial investment US$10,000
+Date of investment
+Period of investment
+Value at 12/31/2023¹ (in US$)
+Average annual return
+Percent, unless otherwise stated
+S&P 500 Composite —
+Performance comparators
+12/31/2018
+1 Source: Bloomberg, Dividends reinvested
+NASDAQ100 index
+total return index
+12/31/2013
+12
+12
+1 The 2022 figures relate to the Applications, Technology & Support segment without the reallocation of the SAP Signavio segment.
+Applications, Technology & Services Segment
+For more information about our 2023 segment changes, see Note (C.1).
+The recoverable amount was determined based on a fair value less costs of disposal calculation. The
+fair value measurement was categorized as a Level 3 fair value based on the inputs used in the
+valuation. The cash flow projections were based on actual operating results and specific estimates
+covering a detailed planning period and the terminal growth rate thereafter. The projected results were
+determined based on management's estimates and are consistent with the assumptions a market
+participant would make (a target operating margin of 34.5% (2022: 27.8%) was used in the valuation).
+We believe that no reasonably possible change in any of the above key assumptions would cause the
+carrying amount of our Applications, Technology & Services segment to exceed the recoverable
+amount.
+Emarsys Segment
+The recoverable amount was determined based on a fair value less costs of disposal calculation. The
+fair value measurement was categorized as a Level 3 fair value based on the inputs used in the
+valuation. The cash flow projections were based on actual operating results and specific estimates
+covering a detailed planning period and the terminal growth rate thereafter. The projected results were
+200/324
+On October 1, 2023, we performed a goodwill impairment test for the operating segments.
+549
+10
+Total operating expenses (including total cost of revenue)
+-1,155
+-2,771
+Disposal gain before tax
+3,562
+0
+Operating profit
+3,152
+-1,420
+Profit (loss) before tax
+3,162
+-1,423
+Income tax expense¹
+Profit (loss) after tax
+Attributable to owners of parent
+Earnings per share, basic (IFRS, in €) 2
+Earnings per share, diluted (IFRS, in €)²
+-799
+64
+2,363
+-1,359
+2,505
+-993
+2.15
+-0.85
+2.12
+-0.85
+Consolidated Statements of Cash Flow
+Net operating cash flow
+-499
+Net investing cash flow
+-196
+-265
+On March 13, 2023, resulting from a process that was initiated on January 26, 2023, SAP announced it
+had agreed to sell all of its 423 million shares of Qualtrics International Inc. as part of the acquisition of
+Qualtrics by funds affiliated with Silver Lake as well as the Canada Pension Plan Investment Board. The
+sale closed on June 28, 2023, following satisfaction of customary closing conditions and regulatory
+approvals. At a purchase price of US$18.15 in cash per share, SAP's stake was acquired for
+193/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+approximately US$7.7 billion. To secure the euro countervalue of the US$7.7 billion purchase price, we
+hedged an amount of US$7.1 billion by entering into a deal contingent forward applying net
+investment hedge accounting. For more information, see Note (F.1). At the time that Qualtrics was
+classified as a discontinued operation (following IFRS 5), there was no indication of an impairment (as
+the fair value less cost of disposal (calculated based on share prices) significantly exceeded the
+carrying amount).
+SAP is a close go-to-market and technology partner for Qualtrics.
+SAP's financial results present Qualtrics as a discontinued operation as required under IFRS 5. The
+Qualtrics disposal group was previously included in the Qualtrics reportable segment.
+The pre-tax disposal gain included in discontinued operations (€3,562 million) was calculated by
+adjusting the purchase price less the cost of disposal (€7,003 million) for net assets leaving the
+SAP Group (€5,800 million, consisting mostly of goodwill (€4,007 million) and other intangible assets
+(€1,294 million)), the corresponding non-controlling interests (€2,337 million), and amounts of other
+comprehensive income (€22 million). SAP incurred taxes amounting to €799 million in connection with
+the transaction.
+The cash inflow resulting from the purchase price (€7,068 million) was offset by cash and cash
+equivalents of €713 million leaving the SAP Group.
+SAP continues to provide rental guarantees for certain offices used by Qualtrics. Qualtrics is obligated
+to indemnify SAP with respect to the guarantees.
+Additional financial information relating to Qualtrics is presented in the following tables (revenues and
+expenses are presented after consolidation of transactions between Qualtrics and SAP's continuing
+operations):
+€ millions, unless otherwise stated
+2023
+2022
+Consolidated Income Statements
+Cloud revenue
+Total revenue
+621
+1,129
+745
+1,351
+Cost of cloud
+-88
+Total cost of revenue
+Net financing cash flow
+122
+-29
+87
+244
+88
+88
+156
+705
+Prior to December 31, 2022, we completed our accounting assessment relating to the supply chain
+financing (SCF) transactions offered by Taulia. Based on the setup of the compartments and series
+within which the SCF receivables and liabilities are siloed, and on the related contractual and founding
+agreements, we concluded that we do not control the receivables and liabilities resulting from the SCF
+activities under IFRS 10. Thus, we do not include the respective items in our balance sheet and do not
+show cash flows linked to the SCF transactions in investing/financing cash flow.
+In Q1 2023, measurement of tax-related assets and liabilities for the Taulia business combination
+accounting was completed and resulted in €28 million adjusted to the Other identifiable assets'
+opening balance and Goodwill.
+In general, the goodwill arising from our acquisitions consists largely of the synergies and the know-
+how and skills of the acquired businesses' workforces.
+Taulia goodwill was attributed to expected synergies from the acquisition, particularly in the following
+areas:
+Cross-selling to existing SAP customers across all regions, using SAP's sales organization
+Further expanding the SAP Business Network capabilities and strengthening SAP's solutions for the
+CFO office
+Creating new offerings by combining Taulia products and SAP products
+Improving profitability in Taulia sales and operations
+The allocation of the goodwill resulting from the Taulia acquisition to our operating segments depends
+on how our operating segments actually benefit from the synergies of the Taulia business combination.
+195/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+10
+Additional
+Information
+Impact of the Business Combination on Our Financial Statements
+The amounts of revenue and profit or loss of the Taulia business acquired in 2022 since the acquisition
+date were included in our Consolidated Income Statement for 2022 as follows:
+Taulia Acquisition: Impact on SAP's Financials
+€ millions
+lil Revenue
+157
+Total consideration transferred
+Goodwill
+Total identifiable net assets
+5,510
+-32
+24
+-263
+¹ For 2023, €799 million relates to the gain on sale of discontinued operations.
+2 For 2023 and 2022, the weighted average number of shares was 1,167 million (diluted: 1.180 million) and 1,170 million (diluted: 1,175 million),
+respectively (treasury stock excluded).
+Total operating expenses includes share-based payment expenses related to Qualtrics' equity-settled
+plan of €403 million in 2023 (€1,182 million in 2022).
+194/324
+SAP
+SAP Integrated Report 2023
+To Our
+Combined Management
+Stakeholders
+Report
+Qualtrics Disposal
+Consolidated Financial
+Statements IFRS
+Additional
+Information
+2022 Acquisitions
+In 2022, we closed the acquisition of Taulia Inc., San Francisco, California (USA) ("Taulia") and of
+INNAAS srl, Rome (Italy).
+Taulia Acquisition
+On January 27, 2022, SAP announced its intent to acquire a majority stake of Taulia (for information
+about SAP's current shareholding percentage, see Note (G.9)), a leading provider of cloud-based
+working capital management solutions. The acquisition closed on March 9, 2022, following satisfaction
+of customary closing conditions and regulatory approvals; the operating results and the assets and
+liabilities are reflected in our consolidated financial statements starting on that date.
+Consideration transferred amounted to €705 million.
+The following table summarizes the values of identifiable assets acquired and liabilities assumed in
+connection with the acquisition of Taulia, as at the acquisition date:
+Taulia Acquisition: Recognized Assets and Liabilities
+€ millions
+Intangible assets
+Other identifiable assets
+Total identifiable assets
+Other identifiable liabilities
+Total identifiable liabilities
+Further Information about
+Sustainability
+2023 Divestitures
+Had LeanlX been consolidated as at January 1, 2023, our revenue and profit after tax for 2023 would
+not have been materially different.
+-8
+12
+5
+0
+Weighted average shares outstanding, diluted²
+1,180
+1,175
+1,180
+Earnings per share, basic, attributable to equity holders of SAP SE (in €)
+from continuing operations
+3.11
+2.80
+5.45
+Earnings per share, basic, attributable to equity holders of SAP SE (in €)¹
+Earnings per share, diluted, attributable to equity holders of SAP SE (in €)
+from continuing operations
+5.26
+1.95
+4.46
+3.08
+2.79
+5.45
+Earnings per share, diluted, attributable to equity holders of SAP SE (in €)¹
+5.20
+1.94
+4.46
+1 From continuing and discontinued operations
+2 Number of shares in millions
+191/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Dilutive effect of share-based payments²
+1,180
+1,170
+1,167
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about Additional
+Sustainability
+Information
+directive into national law, applicable for fiscal years beginning after December 30, 2023. SAP has
+performed an assessment of its potential exposure to the global minimum tax legislation. This
+assessment is based on our current understanding of the global minimum taxation rules and on the
+most recent information available regarding the financial performance of the constituent entities within
+SAP. Our simulation reveals that SAP should not be materially affected. SAP has applied the temporary
+mandatory exception to recognizing and disclosing information about deferred tax assets and
+liabilities related to the global minimum tax.
+(C.6)
+Earnings per Share
+€ millions, unless otherwise stated
+2023
+2022
+2021
+Profit attributable to equity holders of SAP SE
+Combined Management
+Report
+3,634
+6,429
+Profit attributable to equity holders of SAP SE¹
+6,139
+2,284
+5,256
+Issued ordinary shares²
+1,229
+1,229
+1,229
+Effect of treasury shares²
+-61
+-58
+-49
+Weighted average shares outstanding, basic²
+3,277
+.Iil Profit after tax
+Consolidated Financial
+Statements IFRS
+Additional
+Information
+Goodwill
+Total consideration transferred
+476
+102
+578
+214
+214
+364
+867
+1,231
+As we are still obtaining the information necessary to identify and measure certain assets and
+liabilities, mainly tax-related items, the initial accounting for the LeanIX business combination is still
+incomplete.
+In general, the goodwill arising from our acquisitions consists largely of the synergies and the know-
+how and skills of the acquired businesses' workforces.
+LeanIX goodwill was attributed to expected synergies from the acquisition, particularly in the following
+areas:
+- Cross-selling to existing SAP customers across all regions, using SAP's sales organization
+- Creating new offerings by combining LeanIX products and SAP products
+- LeanIX complements the transformation capabilities of SAP Signavio solutions and will give SAP
+customers unique clarity on the IT landscapes they need to reap the full benefit of business
+transformation
+The allocation of the goodwill resulting from the LeanIX acquisition to our operating segments
+depends on how our operating segments actually benefit from the synergies of the LeanlX business
+combination. For more information, see Note (D.2).
+Impact of the Business Combination on Our Financial Statements
+The amounts of revenue and profit or loss of the LeanIX business acquired in 2023 since the
+acquisition date were included in our Consolidated Income Statement for 2023 as follows:
+€ millions
+lil Revenue
+.lil Profit after tax
+2023
+as Reported
+31,207
+5,964
+Contribution of
+LeanIX
+10
+Total identifiable net assets
+Total identifiable liabilities
+Other identifiable liabilities
+Total identifiable assets
+Section D - Invested Capital
+This section highlights our non-current assets including investments that form the basis of our
+operating activities. Additions to invested capital include separate asset acquisitions or business
+combinations. Further, we disclose information about purchase obligations and capital contributions.
+(D.1) Business Combinations and Divestitures
+Measuring Non-Controlling Interests and Allocation of Consideration
+Transferred
+We decide for each business combination whether to measure the non-controlling interest in the
+acquiree at fair value or at the proportionate share of the acquiree's identifiable net assets.
+We classify costs related to executing business combinations as general and administration expense.
+In our accounting for business combinations, judgment is required in determining whether an
+intangible asset is identifiable and whether it should be recorded separately from goodwill.
+Additionally, estimating the acquisition-date fair values of the identifiable assets acquired and liabilities
+assumed involves considerable judgment. The necessary measurements are based on information
+available on the acquisition date and are based on expectations and assumptions that have been
+deemed reasonable by management. These judgments, estimates, and assumptions can materially
+affect our financial position and profit for several reasons, including the following:
+Fair values assigned to assets subject to depreciation and amortization affect the amounts of
+depreciation and amortization to be recorded in operating profit in the periods following the
+acquisition.
+Subsequent negative changes in the estimated fair values of assets may result in additional
+expense from impairment charges.
+Subsequent changes in the estimated fair values of liabilities and provisions may result in additional
+expense (if increasing the estimated fair value) or additional income (if decreasing the estimated fair
+value).
+We acquire businesses in specific areas of strategic interest to us, particularly to broaden our product
+and service portfolio.
+2023 Acquisitions
+LeanIX Acquisition
+On September 7, 2023, SAP announced its intent to acquire 100% of the shares of LeanlX GmbH
+("LeanIX"), a leader in enterprise architecture management (EAM) software.
+The acquisition closed on November 7, 2023, following satisfaction of customary closing conditions
+and regulatory approvals; the operating results and the assets and liabilities are reflected in our
+Consolidated Financial Statements starting on that date.
+Further Information about
+Sustainability
+The acquisition is expected to further expand SAP's business transformation portfolio, giving
+customers access to the full suite of tools required for continuous business transformation and
+facilitating Al-enabled process optimization.
+192/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+The following table summarizes the values of identifiable assets acquired and liabilities assumed in
+connection with the acquisition of LeanIX, as at the acquisition date:
+LeanIX Acquisition: Recognized Assets and Liabilities
+€ millions
+Intangible assets
+Other identifiable assets
+Consideration transferred amounted to €1,231 million paid in cash.
+1 From continuing and discontinued operations
+Further Information about
+Sustainability
+Contribution of
+12/31/2023
+Applications,
+Technology & Qualtrics¹ Emarsys
+Services
+Taulia²
+Business
+Network
+Sustainability
+Total
+27,221
+27,392
+4,083
+395
+294
+1,052
+32
+33,077
+0
+395
+296
+Additional
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+To Our
+Stakeholders
+SAP Integrated Report 2023
+12/31/2022
+SAP
+Based on the expected synergies, the goodwill added through the acquisition of LeanIX (€867 million)
+was provisionally allocated to the Applications, Technology & Services segment on December 31. As
+the initial accounting for the LeanIX business combination is incomplete (for more information, see
+Note (D.1)), the allocation is provisional. The goodwill impairment test for the Applications, Technology
+& Services segment on October 1 resulted in a headroom that is significantly higher than the portion of
+Due to the dissolution of the SAP Signavio segment at the beginning of 2023 (for more information, see
+Note (C.1)), the SAP Signavio goodwill (€410 million) was moved to the Applications, Technology &
+Services segment. Given the close proximity to the 2022 annual goodwill impairment test and the
+significant headroom, no formal impairment test was performed on the reallocation date of the
+SAP Signavio segment.
+1 The Qualtrics segment was dissolved after the divestiture of SAP's share in Qualtrics International Inc.
+2 Taulia goodwill opening balance was adjusted by €28 million in 2023.
+29,088
+29
+976
+199/324
+€ millions
+Goodwill by Operating Segment
+For impairment testing purposes, the carrying amount of goodwill is allocated to the operating
+segments expected to benefit from goodwill as follows:
+Accumulated amortization
+29,191
+-4,008
+12/31/2023
+Retirements/disposals
+867
+1/1/2022
+Additions from business combinations
+Foreign currency exchange differences
+33,181
+12/31/2022
+-95
+560
+1,526
+-849
+Information
+Foreign currency exchange differences
+Foreign currency exchange differences
+or cause the carrying amount of goodwill to exceed the recoverable amount.
+Throughout 2023, we have – through a qualitative and quantitative analysis – been continuously
+monitoring whether triggering events exist. We did not identify any triggering events that would indicate
+29,088
+33,077
+103
+-1
+12/31/2022
+104
+102
+For more information about our segments and the changes in 2023, see Note (C.1).
+12/31/2023
+12/31/2022
+Carrying amount
+12/31/2023
+2
+31,190
+the goodwill that – at the end of December - was allocated to the segment. Thus, there is no
+impairment risk resulting from the allocation of the LeanIX goodwill.
+Budgeted operating margin
+34.6
+of the budgeted period)
+After-tax discount rate
+11.9
+11.1
+12.3
+11.7
+11.0
+11.3
+12.5
+11.9
+11.7
+10.9
+Terminal growth rate
+3.0
+3.0
+3.0
+13
+13
+12
+12
+5
+5
+31.5
+Detailed planning period (in years)
+3.0
+3.0
+3.0
+3.0
+3.0
+3.0
+3.0
+14.0
+12.7
+24.8
+Taulia
+Emarsys
+Applications,
+Technology & Services¹
+Percent, unless otherwise stated
+Key Assumptions and Detailed Planning Period
+Our estimated cash flow projections for periods beyond the business plan were extrapolated using segment-specific terminal
+growth rates. These growth rates do not exceed the long-term average growth rates for the markets in which our segments
+operate.
+Business Network
+Our estimated cash flow projections are discounted to present value using discount rates (after-tax rates). Discount rates are
+based on the weighted average cost of capital (WACC) approach.
+Revenue growth rate achieved in the current year, adjusted for an expected increase in SAP's addressable cloud and database
+markets; expected growth in the established software applications and analytics markets. Values assigned reflect our past
+experience and our expectations regarding an increase in the addressable markets.
+Basis for Determining Values Assigned to Key Assumption
+The key assumptions on which management based its cash flow projections for the period covered by
+the underlying business plans are as follows:
+Goodwill Impairment Test
+Terminal growth rate
+Discount rates
+Operating margin budgeted for a given budget period equals the operating margin achieved in the current year, increased by
+expected efficiency gains. Values assigned reflect past experience, except for efficiency gains.
+Key Assumption
+Sustainability
+2022
+22.3
+13.9
+13.3
+11.4
+12.8
+Budgeted revenue growth (average
+2023
+2022
+2022
+2023
+2022
+2023
+2022
+2023
+2023
+Retirements/disposals
+Additions from business combinations
+Foreign currency exchange differences
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+In general, the goodwill arising from our acquisitions consists largely of the synergies and the know-
+how and skills of the acquired businesses' workforces.
+Signavio goodwill was attributed to expected synergies from the acquisition, particularly in the
+following areas:
+-
+Cross-selling opportunities to existing SAP customers across all regions, using SAP's sales
+organization
+The acquisition of Signavio complements SAP's business process intelligence offerings and will
+help create new offerings by combining Signavio products and SAP products, but is also expected
+to result, for example, in increased SAP S/4HANA and RISE with SAP sales.
+Improved profitability in Signavio sales and operations
+The allocation of the goodwill resulting from the Signavio acquisition to our operating segments
+depends on how our operating segments actually benefit from the synergies of the Signavio business
+combination.
+Clarabridge Acquisition
+On October 1, 2021 (after receipt of required regulatory approvals and satisfaction or waiver of other
+customary closing conditions), Qualtrics completed its previously announced acquisition of
+Clarabridge, a customer experience management software company headquartered in Reston, Virginia,
+USA, pursuant to an Agreement and Plan of Reorganization and Merger. The number of Qualtrics class
+A common stock issued to the sellers was fixed based on a valuation of US$1,125 million (subject to
+certain adjustments) – the assumed Qualtrics share price was US$37.33. The actual consideration
+transferred (mainly in shares valued at the acquisition date fair value of the common stock) amounted
+to US$1,298 million (€1,116 million). This includes €910 million of issued shares, €115 million of
+assumed awards, and €91 million of cash paid.
+Qualtrics has (1) assumed, amended, and restated Clarabridge stock plans, and (2) converted the
+assumed options to purchase shares of Clarabridge stock outstanding into corresponding Qualtrics
+options. Qualtrics has granted equity incentive awards to certain continuing employees of Clarabridge
+and its subsidiaries under its own Qualtrics equity plan at Qualtrics' sole discretion.
+The following table summarizes the values of identifiable assets acquired and liabilities assumed in
+connection with the acquisition of Clarabridge, as at the acquisition date:
+Clarabridge Acquisition: Recognized Assets and Liabilities
+2022¹
+as Reported
+30,871
+Intangible assets
+Other identifiable assets
+Total identifiable assets
+Other identifiable liabilities
+Total identifiable liabilities
+Total identifiable net assets
+196/324
+949
+729
+220
+Taulia
+59
+1,708
+-38
+Had Taulia been consolidated as at January 1, 2022, our revenue and profit after tax for 2022 would
+not have been materially different.
+2022 Divestitures
+On August 17, 2022, SAP and Francisco Partners (FP) announced that FP had signed a definitive
+agreement with SAP America, Inc. under which FP would acquire SAP Litmos from SAP. The transaction
+closed on December 1, 2022, following satisfaction of applicable regulatory and other approvals.
+The disposal gain of €175 million is included in Other operating income/expense, net.
+2021 Acquisitions
+In 2021, we closed the acquisition of Signavio GmbH, Berlin (Germany) ("Signavio") and of
+Clarabridge, Inc., Reston, Virginia (USA) ("Clarabridge").
+Signavio Acquisition
+In January 2021, SAP announced it had entered into an agreement to acquire the shares of Signavio, a
+leader in the enterprise business process intelligence and process management space that enables
+companies to understand, improve, transform, and manage all their business processes quickly and at
+scale.
+The purchase price was €949 million. The transaction closed on March 5, 2021, following satisfaction of
+regulatory and other approvals. The Signavio operating results and assets and liabilities are reflected in
+our consolidated financial statements starting on that date.
+The following table summarizes the values of identifiable assets acquired and liabilities assumed in
+connection with the acquisition of Signavio, as at the acquisition date:
+Goodwill
+Signavio Acquisition: Recognized Assets and Liabilities
+Intangible assets
+Other identifiable assets
+Total identifiable assets
+Other identifiable liabilities
+Total identifiable liabilities
+Total identifiable net assets
+Goodwill
+Total consideration transferred
+255
+73
+328
+108
+108
+€ millions
+Total consideration transferred
+€ millions
+84
+(D.2)
+Goodwill
+Goodwill and Intangible Asset Impairment Testing
+218
+The annual goodwill impairment test is performed at the level of our operating segments, since there
+are no lower levels in SAP at which goodwill is monitored for internal management purposes.
+In general, the test is performed at the same time (at the beginning of the fourth quarter) for all
+operating segments.
+In making impairment assessments for our goodwill and intangible assets, the outcome of these tests
+is highly dependent on management's assumptions regarding future cash flow projections and
+economic risks, which require significant judgment and assumptions about future developments. They
+can be affected by a variety of factors, including:
+- Changes in business strategy
+Internal forecasts
+Estimation of weighted-average cost of capital
+Changes to the assumptions underlying our goodwill and intangible assets impairment assessments
+could require material adjustments to the carrying amount of our recognized goodwill and intangible
+assets as well as the amounts of impairment charges recognized in profit or loss.
+The outcome of goodwill impairment tests may also depend on the allocation of goodwill to our
+operating segments. This allocation involves judgment as it is based on our estimates regarding which
+operating segments are expected to benefit from the synergies of business combinations.
+SAP and SAP Fioneer have executed transition service and go-to-market agreements, among others.
+The disposal gain relating to the transfer of the business (predominantly IP and employees) was
+included in Other operating income/expense, net (€77 million).
+Changes in our segment structure result in the reallocation of goodwill with the reallocated goodwill
+being calculated based on relative values (if a direct allocation is not possible).
+SAP
+SAP Integrated Report 2023
+To Our
+Combined Management
+Stakeholders
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+Goodwill
+€ millions
+Historical cost
+1/1/2022
+198/324
+On April 13, 2021, SAP and investment company Dediq GmbH, Munich (Germany) ("Dediq")
+announced that they had agreed to enter into a partnership in the area of financial services. Following
+the close of the transaction in September 2021 (after satisfaction of all closing conditions including
+regulatory approvals), SAP and Dediq jointly own the new SAP Fioneer entity (with SAP owning a
+minority share).
+Budgeted revenue growth
+Had the acquired entities been consolidated as at January 1, 2021, our 2021 revenue and profit after
+tax would not have been materially different.
+€ millions
+The amounts of revenue and profit or loss of the Signavio and Clarabridge businesses acquired in
+2021 since the acquisition date are included in the 2021 consolidated income statements as follows:
+2021 Acquisitions: Impact on SAP's Financials (Signavio and Clarabridge)
+Impact of Business Combinations on Our Consolidated Financial Statements
+Information
+Additional
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+To Our
+Stakeholders
+.Iil Revenue
+SAP Integrated Report 2023
+197/324
+The Clarabridge goodwill consists largely of the synergies that SAP expects to achieve from combining
+the acquired assets and operations with its existing operations, especially in its Qualtrics subsidiary.
+In general, the goodwill arising from our acquisitions consists largely of the synergies and the know-
+how and skills of the acquired businesses' workforces.
+1,116
+921
+195
+107
+107
+302
+SAP
+2021 Divestitures
+.lil Profit after tax
+2021¹
+as Reported
+27,842
+-89
+5,376
+70
+Contribution of
+2021 Acquisitions
+1 From continuing and discontinued operations
+0
+-7.6
+0
+1,228.5
+-61.3
+On August 14, 2023, SAP launched a new share repurchase program designed primarily to service
+future share-based compensation awards. With a total volume of up to €1,250 million, the program will
+run until February 19, 2024. By December 31, 2023, we had repurchased shares with a total volume of
+€949 million. In addition, we reissued 7.7 million treasury shares to service share-based payment
+awards under our Move SAP Plan in 2023.
+The Articles of Incorporation authorize the Executive Board to increase the issued capital as follows:
+-
+By up to a total amount of €250 million by issuing new no-par value bearer shares against
+contributions in cash until May 19, 2025 (Authorized Capital I). The issuance is subject to the
+statutory subscription rights of existing shareholders.
+By up to a total amount of €250 million by issuing new no-par value bearer shares against
+contributions in cash or in kind until May 19, 2025 (Authorized Capital II). Subject to the consent of
+the Supervisory Board, the Executive Board is authorized to exclude the shareholders' statutory
+subscription rights in certain cases.
+Contingent Shares
+SAP SE's share capital is subject to a contingent capital increase, which will be implemented only
+insofar as the holders or creditors of convertible bonds or stock options issued or guaranteed by
+SAP SE or any of its directly or indirectly controlled subsidiaries under certain share-based payments
+exercise their conversion or subscription rights, and no other methods for servicing these rights are
+used. As at December 31, 2023, €100 million, representing 100 million shares, was still available for
+issuance (2022: €100 million).
+Retained Earnings
+Retained earnings mainly comprise profit after tax and dividend payments as well as transactions with
+non-controlling interests.
+210/324
+Authorized Shares
+7.7
+The valuation of equity securities of private companies requires judgment because it is typically based
+on significant unobservable inputs, as no market prices are available and there is inherent lack of
+liquidity.
+1,228.5
+Other Property,
+Land and
+Property, Plant, and Equipment
+Information
+Further Information about Additional
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+Stakeholders
+To Our
+SAP Integrated Report 2023
+SAP
+204/324
+4 to 5 years
+4 to 20 years
+2 to 6 years
+Based on the term of the lease contract
+Predominantly 25 to 50 years
+Automobiles
+Office furniture
+Information technology equipment
+Leased assets and leasehold improvements
+Buildings
+Useful Lives of Property, Plant, and Equipment
+Other Property,
+Property, plant, and equipment are typically depreciated using the straight-line method. Judgment is
+required in estimating the useful life of the assets. In this assessment we consider, among others, our
+history with similar assets and current and future changes in technology.
+Land and
+Advance
+Payments and
+55
+1,309
+1,320
+1,430
+12/31/2023
+4,934
+142
+43
+1,406
+1,758
+1,585
+12/31/2022
+Progress
+Leased
+Equipment
+Leased
+Construction in
+Equipment
+Buildings
+Total
+Plant, and
+Buildings
+€ millions
+Plant, and
+162
+Depreciation of Property, Plant and Equipment
+1,068
+Signavio - Customer relationships
+Callidus Customer relationships
+LeanIX - Customer relationships
+Concur Customer relationships
+€ millions, unless otherwise stated
+Significant Intangible Assets
+12/31/2023
+12/31/2022
+Carrying amount
+5,279
+3,101
+1,584
+594
+12/31/2023
+-1,879
+-1,307
+-477
+-95
+Retirements/disposals
+528
+305
+77
+146
+Total significant intangible assets
+(D.4) Property, Plant, and Equipment
+513
+2,836
+1,258
+13
+183
+178
+9
+181
+147
+13
+0
+345
+7 to 11
+704
+588
+(in years)
+2022
+2023
+Remaining
+Useful Life
+Carrying Amount
+2,505
+1,791
+235
+479
+3,835
+486
+4,276
+Additions
+12/31/2022
+Equity Investments
+(D.6)
+For more information about right-of-use asset additions, see Note (D.4), and for a maturity analysis of
+lease liabilities, see Note (F.1). For more information about the cash flow related to lease liabilities, see
+the "Reconciliation of Liabilities Arising from Financing Activities" table within Note (E.3).
+397
+325
+2022
+2023
+Lease expenses within operating profit
+Depreciation of right-of-use assets
+€ millions
+Leases in the Income Statement
+Additional
+Information
+Further Information about
+Sustainability
+-61.4
+Report
+Stakeholders
+Combined Management
+To Our
+SAP Integrated Report 2023
+SAP
+205/324
+SAP is committed to future minimum lease payments in the amount of €37 million (2022: €49 million)
+for facility leases that had not yet commenced as at December 31, 2023.
+19
+17
+Accounting Policies, Judgments, and Estimates
+9,547
+As we do not designate financial assets as “at fair value through profit or loss," we generally classify
+financial assets into the following categories: at amortized cost (AC), at fair value through other
+comprehensive income (FVOCI), and at fair value through profit or loss (FVTPL), depending on the
+contractual cash flows of and our business model for holding the respective asset.
+We take the most recent qualitative and quantitative information aspects into consideration to
+determine the fair value estimates of these equity securities.
+5,138
+5,138
+0
+4,967
+4,967
+0
+Total
+Non-
+Current
+Current
+Total
+Non-
+Current
+Current
+2022
+2023
+Equity investments as % of Other financial assets
+Other financial assets
+Equity investments
+Investments in associates
+Equity securities
+€ millions
+Equity Investments
+Gains/losses on equity securities at FVTPL include gains/losses from fair value fluctuations, from
+disposals as well as dividends, while gains/losses on equity securities at FVOCI only include dividends,
+all of which are shown in Financial income, net. Regular way purchases and sales are recorded as at
+the trade date.
+Considerable judgment and assumptions are involved with regard to the selection of appropriate
+comparable company data, the assessment of cash requirements of the business, the acceptance of
+the technology or products in the addressable markets, the actual and forecasted performance, the
+milestone achievements, the adequacy of price points from financing rounds, the transaction of similar
+securities of the same company, the rights and preferences of the underlying securities, the selection
+of adequate equity allocation parameters, the possible exit scenarios and associated weightings.
+Because all of these assumptions could change significantly, and because valuation is inherently
+uncertain, our estimated fair values may differ significantly from the values that would have been used
+had market prices for the investments existed and that will ultimately be realized, and those
+differences could be material.
+For equity securities, as the cash flow characteristics are other than solely principal and interest, we
+take an investment-by-investment decision whether to classify as FVTPL or FVOCI.
+7,941
+1,791
+1,327
+12/31/2022
+12/31/2023
+Right-of-use assets
+€ millions
+Leases in the Balance Sheet
+Under IFRS 16, a contract is or contains a lease if the contract conveys the right to control the use of an
+identified asset for a period of time in exchange for consideration. As a lessee, SAP recognizes a right-
+of-use asset representing its right to use the underlying asset and a lease liability representing its
+obligation to make lease payments. The right-of-use assets are depreciated on a straight-line basis and
+interest expense is recognized on the lease liabilities. The vast majority of our leases consist of facility
+and data center leases. Payments for short-term and low-value leases are expensed over the lease
+term. Extension options are included in the lease term if their exercise is reasonably certain.
+Accounting Policies, Judgments, and Estimates
+Leases
+(D.5)
+The additions (other than from business combinations) relate primarily to the replacement and
+purchase of information technology equipment and the construction and leasing of buildings and data
+centers. For more information about leases, see Note (D.5).
+810
+98
+82
+470
+102
+58
+12/31/2023
+1,129
+87
+30
+567
+399
+46
+Right-of-use assets - land and buildings
+1,320
+1,758
+Right-of-use assets - other property, plant, and equipment
+Non-current lease liabilities as % of 4 Non-current financial liabilities
+Non-current financial liabilities
+Non-current lease liabilities
+7
+17
+Current lease liabilities as % of 44 Current financial liabilities
+4,808
+1,735
+Current financial liabilities
+349
+294
+Additions amortization
+Current lease liabilities
+37
+32
+Right-of-use assets as % of 44 Property, plant, and equipment
+4,934
+4,276
+Property, plant, and equipment
+1,801
+1,375
+Total right-of-use assets
+43
+55
+Lease liabilities
+0
+-176
+-57
+Intangible Assets
+(D.3)
+3.9
+8.3
+After-tax discount rate
+-13
+-19
+Target operating margin at the end of the budgeted period (change in pp)
+-1.4
+-2.1
+Budgeted revenue growth (change in pp)
+2022
+2023
+Sustainability
+Sensitivity to Change in Assumptions
+The recoverable amount exceeded the carrying amount by €246 million (2022: €112 million).
+The following table shows the amounts by which the key assumptions would need to change
+individually (that is, without changing the other key assumptions) for the recoverable amount to be
+equal to the carrying amount. For budgeted revenue growth sensitivity, the cost structure was not
+adjusted, hence leading to a modified terminal operating margin:
+The recoverable amount was determined based on a fair value less costs of disposal calculation. The
+fair value measurement was categorized as a Level 3 fair value based on the inputs used in the
+valuation. The cash flow projections were based on actual operating results and specific estimates
+covering a detailed planning period and the terminal growth rate thereafter. The projected results were
+determined based on management's estimates and are consistent with the assumptions a market
+participant would make (a target operating margin of 26.9% (2022: 26.2%) was used in the valuation).
+Given the fact that the Sustainability segment is expected to show disproportionate growth in the
+coming years and has not yet reached a steady state, we have used a longer detailed planning period
+than one would apply in a more mature segment.
+Sustainability Segment
+-19
+-19
+Target operating margin at the end of the budgeted period (change in pp)
+-2.8
+-3.0
+Recognition of Intangibles
+Budgeted revenue growth (change in pp)
+Whereas in general, expenses for internally generated intangibles are expensed as incurred,
+development expenses incurred on standard-related customer development projects (for which the
+IAS 38 criteria are met cumulatively) are capitalized on a limited scale with those amounts being
+amortized over the estimated useful life for the majority of the projects of five to seven years.
+Determining whether internally generated intangible assets from development qualify for recognition
+requires significant judgment, particularly in the following areas:
+The term "technical feasibility" is not defined in IFRS, and therefore determining whether the
+completion of an asset is technically feasible requires judgment and a company-specific approach.
+€ millions
+Intangible Assets
+Amortization expenses of intangible assets are classified as Cost of cloud, Cost of services, Research
+and development, Sales and marketing, and General and administration, depending on the use of the
+respective intangible assets.
+We classify intangible assets according to their nature and use in our operations. Software and
+database licenses consist primarily of technology for internal use, whereas acquired technology
+consists primarily of purchased software to be incorporated into our product offerings. Customer
+relationships and other intangibles consist primarily of customer relationships and acquired trademark
+licenses.
+Classification of Intangibles
+Both the amortization period and the amortization method have an impact on the amortization
+expense that is recorded in each period.
+The amortization method, as IFRS requires the straight-line method to be used unless we can
+reliably determine the pattern in which the asset's future economic benefits are expected to be
+consumed by us
+The useful life of an intangible asset, as this is based on our estimates regarding the period over
+which the intangible asset is expected to generate economic benefits to us
+Judgment is required in determining the following:
+All our purchased intangible assets other than goodwill have finite useful lives. They are initially
+measured at acquisition cost and subsequently amortized based on the expected consumption of
+economic benefits over their estimated useful lives ranging from two to 20 years.
+Measurement of Intangibles
+These judgments impact the total amount of intangible assets that we present in our balance sheet as
+well as the timing of recognizing development expenses in profit or loss.
+Determining whether a cost is directly or indirectly attributable to an intangible asset and whether a
+cost is necessary for completing a development
+Determining the future ability to use or sell the intangible asset arising from the development and
+the determination of the probability of future benefits from sale or use
+Information
+Additional
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+To Our
+Stakeholders
+SAP Integrated Report 2023
+SAP
+202/324
+- Determining whether activities should be considered research activities or development activities
+Determining whether the conditions for recognizing an intangible asset are met requires
+assumptions about future market conditions, customer demand, and other developments.
+Software and
+2022
+Business Network
+The recoverable amount was determined based on a fair value less costs of disposal calculation. The
+fair value measurement was categorized as a Level 3 fair value based on the inputs used in the
+valuation. The cash flow projections were based on actual operating results and specific estimates
+covering a detailed planning period and the terminal growth rate thereafter. The projected results were
+determined based on management's estimates and are consistent with the assumptions a market
+participant would make (a target operating margin of 26.5% (2022: 24.9%) was used in the valuation).
+Given the fact that the Taulia segment is expected to show disproportionate growth in the coming
+years and has not yet reached a steady state, we have used a longer detailed planning period than
+one would apply in a more mature segment.
+Taulia Segment
+-16
+-21
+Target operating margin at the end of the budgeted period (change in pp)
+-2.0
+-2.5
+Budgeted revenue growth (change in pp)
+2022
+2023
+Emarsys
+Sensitivity to Change in Assumptions
+The following table shows the amounts by which the key assumptions would need to change
+individually (that is, without changing the other key assumptions) for the recoverable amount to be
+equal to the carrying amount. For budgeted revenue growth sensitivity, the cost structure was not
+adjusted, hence leading to a modified terminal operating margin:
+The recoverable amount exceeded the carrying amount by €618 million (2022: €513 million).
+determined based on management's estimates and are consistent with the assumptions a market
+participant would make (a target operating margin of 33.2% (2022: 29.4%) was used in the valuation).
+Given the fact that the Emarsys segment is expected to show disproportionate growth in the coming
+years and has not yet reached a steady state, we have used a longer detailed planning period than
+one would apply in a more mature segment.
+Information
+Additional
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+To Our
+Stakeholders
+SAP Integrated Report 2023
+SAP
+The recoverable amount exceeded the carrying amount by €567 million (2022: €366 million).
+2023
+The following table shows the amounts by which the key assumptions would need to change
+individually (that is, without changing the other key assumptions) for the recoverable amount to be
+equal to the carrying amount. For budgeted revenue growth sensitivity, the cost structure was not
+adjusted, hence leading to a modified terminal operating margin:
+Taulia
+Sensitivity to Change in Assumptions
+The recoverable amount exceeded the carrying amount by €2,719 million (2022: €2,821 million).
+The following table shows the amounts by which the key assumptions would need to change
+individually (that is, without changing the other key assumptions) for the recoverable amount to be
+equal to the carrying amount. For budgeted revenue growth sensitivity, the cost structure was not
+adjusted, hence leading to a modified terminal operating margin:
+Information
+Additional
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+To Our
+Stakeholders
+SAP Integrated Report 2023
+SAP
+201/324
+The recoverable amount was determined based on a fair value less costs of disposal calculation. The
+fair value measurement was categorized as a Level 3 fair value based on the inputs used in the
+valuation. The cash flow projections were based on actual operating results and specific estimates
+covering a detailed planning period and the terminal growth rate thereafter. The projected results were
+determined based on management's estimates and are consistent with the assumptions a market
+participant would make (a target operating margin of 25.2% (2022: 24.2%) was used in the valuation).
+Given the fact that the Business Network segment is expected to show disproportionate growth in the
+coming years and has not yet reached a steady state, we have used a longer detailed planning period
+than one would apply in a more mature segment.
+Business Network Segment
+3.4
+5.8
+-11
+-15
+Target operating margin at the end of the budgeted period (change in pp)
+After-tax discount rate
+−1.1
+-1.6
+Budgeted revenue growth (change in pp)
+2022
+2023
+Sensitivity to Change in Assumptions
+Database
+Acquired
+Technology
+Licenses
+Accumulated amortization
+Additional
+Information
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+Stakeholders
+To Our
+SAP Integrated Report 2023
+SAP
+203/324
+7,784
+4,892
+1,819
+1,073
+12/31/2023
+0
+-87
+0
+87
+Transfers
+-3,166
+-2,307
+-767
+1/1/2022
+-92
+547
+3,653
+-1
+Foreign currency exchange differences
+6,806
+4,221
+2,041
+544
+12/31/2022
+-873
+-61
+-703
+-109
+Retirements/disposals
+766
+458
+209
+99
+Additions amortization
+315
+171
+137
+7
+Foreign currency exchange differences
+6,598
+2,398
+Retirements/disposals
+84
+59
+309
+65
+0
+244
+Other additions
+163
+98
+65
+0
+Additions from business combinations
+515
+337
+170
+8
+Foreign currency exchange differences
+10,563
+6,734
+2,996
+833
+1/1/2022
+Historical cost
+Total
+Customer
+Relationships and
+Other Intangibles
+Retirements/disposals
+-115
+-703
+-92
+3
+22
+Other additions
+476
+355
+121
+0
+Additions from business combinations
+-251
+-185
+-65
+-118
+-1
+10,641
+7,057
+2,527
+1,057
+12/31/2022
+1
+-85
+-1
+87
+Transfers
+-910
+Foreign currency exchange differences
+135
+Consolidated Financial
+Statements IFRS
+0
+44 Non-current liabilities
+10,287
+15
+11,858
+16
+-13
+Liabilities
+-16
+24,928
+29,311
+41
+-15
+Thereof financial debt
+7,755
+11
+11,764
+36
+24
+17,453
+21
+12/31/2023
+12/31/2022
+% of
+% of
+A in %
+€ millions
+Total Equity
+and Liabilities
+€ millions
+Total Equity
+and Liabilities
+Equity
+43,406
+64
+42,848
+59
+1
+Current liabilities
+14,642
+16
+-34
+Thereof lease liabilities
+1,621
+Total Equity
+Accounting for Interests in Subsidiaries
+Changes in SAP's interest in a subsidiary that do not result in a loss of control are accounted for as
+equity transactions. When SAP loses control over the subsidiary, it derecognizes the assets and
+liabilities of the subsidiary, and any related non-controlling interests (NCI) and other components of
+equity. Any resulting gain or loss is recognized in profit or loss.
+Issued Capital
+SAP SE has issued no-par value bearer shares with a calculated nominal value of €1 per share. All of
+the shares issued are fully paid.
+Number of Shares
+Millions
+1/1/2021
+12/31/2021
+Purchase of treasury shares
+Reissuance of treasury shares under share-based payments
+12/31/2022
+Purchase of treasury shares
+Reissuance of treasury shares under share-based payments
+12/31/2023
+Issued Capital
+Treasury Shares
+1,228.5
+(E.2)
+SAP SE's long-term credit rating is "A2" by Moody's (positive outlook) and "A+" by S&P Global Ratings
+(stable outlook).
+Further Information about Additional
+Sustainability
+Information
+Report
+2
+2,140
+3
+-25
+Total equity and liabilities
+68,335
+100
+72,159
+100
+-5
+At maturity, we repaid €1,600 million in Eurobonds, €1,450 million in term loans, and €930 million in
+Commercial Paper in 2023. The ratio of total nominal volume of financial debt to total equity and
+liabilities decreased 5 pp. Applying IFRS 5, prior-year numbers include amounts attributable to
+Qualtrics.
+209/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Consolidated Financial
+Statements IFRS
+Share buy-backs to return excess cash to shareholders
+-
+Payment of dividends
+Due thereafter
+Due 2025 to 2028
+Due 2024
+€ millions
+Maturities
+The contractual obligations for acquisition of property, plant, and equipment and intangible assets
+relate primarily to the purchase of hardware, software, patents, office equipment, and vehicles. The
+remaining obligations relate mainly to cloud services, marketing, consulting, maintenance, license
+agreements, and other third-party agreements. The increase is mainly due to new purchase obligations
+related to cloud infrastructure services. Historically, the majority of such purchase obligations have
+been realized.
+7,635
+10,541
+7,491
+10,377
+Other purchase obligations
+Purchase obligations
+144
+164
+Contractual obligations for acquisition of property, plant, and equipment and
+intangible assets
+2022
+2023
+€ millions
+Total
+Purchase Obligations
+12/31/2023
+2,286
+Additional
+Information
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+Stakeholders
+To Our
+SAP Integrated Report 2023
+SAP
+208/324
+At the end of 2023, we received a grant from the German government to fund research and
+development expenditures related to cloud infrastructure. The grant will provide reimbursements of up
+to €329 million for qualifying expenditures through 2026. No material amounts were recognized or
+reimbursed in 2023.
+We recognize Income-Related Government Grants as a reduction of the related expense in the period
+in which the expense is incurred.
+Recognition of Income-Related Government Grants
+Income-Related Government Grants
+(D.9)
+10,541
+503
+7,752
+Purchase Obligations
+-48.9
+(D.8)
+The decrease in non-current assets in the United States is primarily due to the divestiture of Qualtrics.
+For more information, see Note (D.1).
+526
+32,385
+25,236
+11,794
+13,027
+5,897
+5,902
+(E.1)
+Capital Structure Management
+135
+The primary objective of our capital structure management is to maintain a strong financial profile for
+investor, creditor, and customer confidence, and to support the growth of our business. We seek to
+maintain a capital structure that will allow us to continuously cover our funding requirements through
+the capital markets on reasonable terms and, in so doing, ensure a high level of independence,
+confidence, and financial flexibility.
+SAP's prime principle of financial risk management is to safeguard liquidity at a level to be able to
+meet all our financial obligations. In order to support this goal, SAP's principal use of cash is focused
+on:
+Capital expenditure
+Quick repayment of financial debt
+-
+Acquisitions and venture activities
+510
+For a breakdown of our employee headcount by region, see Note (B.1), and for a breakdown of
+revenue by region, see Note (A.1).
+25,762
+361
+Additional
+Information
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Report
+Stakeholders
+Combined Management
+To Our
+SAP Integrated Report 2023
+SAP
+207/324
+45,899
+39,959
+1,210
+1,170
+877
+809
+333
+32,894
+1,228.5
+-48.9
+0
+12/31/2023
+Due 2024
+Total
+€ millions
+Maturities
+SAP invests and holds interests in unrelated parties that manage investments in venture capital. On
+December 31, 2023, total commitments to make such investments amounted to €977 million
+(2022: €957 million), of which €708 million had been drawn (2022: €654 million). By investing in such
+venture capital funds, we are exposed to the risks inherent in the business areas in which the entities
+operate. Our maximum exposure to loss is the amount invested plus contractually committed future
+capital contributions.
+303
+269
+Committed investments in venture capital funds
+2022
+2023
+€ millions
+Financial Commitments in Venture Capital Funds
+The vast majority of the carrying amount of interest in associates relates to SAP Fioneer GmbH.
+For a list of the names of other equity investments, see Note (G.9).
+-4
+-16
+Investments in Venture Capital Funds
+269
+269
+(D.7)
+Non-Current Assets by Region
+7,125
+2022
+2023
+SAP Group
+APJ
+Rest of APJ
+India
+Share of profit and losses from continuing operations
+Americas
+United States
+EMEA
+Rest of EMEA
+Germany
+€ millions
+Non-Current Assets by Region
+The table below shows non-current assets excluding financial instruments, deferred tax assets, post-
+employment benefit assets, and rights arising under insurance contracts.
+Rest of Americas
+151
+135
+Carrying amount of interest in associates
+92
+0
+6,479
+5,626
+853
+8,887
+5,543
+57
+3,344
+5,289
+0
+5,102
+5,102
+0
+151
+151
+5,289
+5,897
+0
+82
+2022
+2023
+€ millions
+The following table shows, in aggregate, the carrying amount and share of profit of these associates.
+SAP has interests in a number of individually immaterial associates. We own more than 20% of the
+equity interests or have at least 20% of the voting rights in these entities. Based on these facts and the
+nature of the relationships, SAP has determined that it has significant influence.
+Investments in Associates
+Additional
+Information
+94
+Further Information about
+Sustainability
+Report
+Stakeholders
+Combined Management
+To Our
+SAP Integrated Report 2023
+SAP
+206/324
+Consolidated Financial
+Statements IFRS
+Section E - Capital Structure,
+Financing, and Liquidity
+This section describes how SAP manages its capital structure. Our capital management is based on a
+high equity ratio, modest financial leverage, a well-balanced maturity profile, and deep debt capacity.
+-15.7
+0
+3.3
+1,122
+397
+-3
+0
+388
+95
+294
+90
+292
+8,155
+0
+6,556
+1,600
+7,381
+1,600
+6,780
+5,932
+Private placement transactions
+405
+Commercial paper
+849
+The U.S. private placement notes were issued by one of our subsidiaries that has the U.S. dollar as its
+functional currency.
+0
+0
+0
+0
+0
+Bank loans
+928
+0
+928
+0
+930
+0
+0
+0
+0
+0
+405
+6,521
+850
+Bonds
+93
+42
+8
+97
+6,479
+5,626
+853
+8,887
+6
+5,543
+0
+-3
+Non-derivative financial debt
+3,259
+Other financial assets
+Non-derivative financial debt
+investments
+3,695
+790
+332
+3,344
+17
+Financial Debt
+Time deposits with original maturity of three months or less are presented as cash and cash
+equivalents, and those with original maturities of greater than three months (investments considered in
+group liquidity) are presented as other financial assets. Debt securities consist of acquired commercial
+papers and acquired bonds of mainly financial and non-financial corporations and municipalities.
+Total
+Non-
+Current
+Current
+Non-
+Current
+Current
+Total
+Non-
+Current
+Current
+Non-
+Current
+Current
+Carrying Amount
+Nominal Volume
+Carrying Amount
+Nominal Volume
+€ millions
+2022
+2023
+For more information about financial risk and the nature of risk, see Note (F.1).
+The increase in time deposits presented as cash equivalents and current investments and the increase
+in money market funds in 2023 are due to the proceeds from the Qualtrics divestiture.
+investments
+436
+Private placements
+388
+2027
+Eurobond 9 - 2014
+1,000
+0
+€1,000
+1.24%
+1.125% (fix)
+99.478%
+2023
+Eurobond 8 - 2014
+Carrying Amount
+(in € millions)
+Carrying Amount
+(in € millions)
+Nominal Volume
+(in respective
+currency in millions)
+Effective
+Interest Rate
+Coupon Rate
+Issue Price
+Maturity
+2022
+2023
+99.284%
+Additional
+Information
+1.750% (fix)
+€1,000
+Eurobond 16 - 2018
+499
+499
+€500
+1.06%
+1.000% (fix)
+99.576%
+2026
+Eurobond 15 - 2018
+598
+599
+€600
+1.13%
+1.000% (fix)
+99.264%
+2025
+Eurobond 12 - 2015
+869
+914
+1.87%
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Report
+1,735
+Financial liabilities¹
+10,943
+6,960
+3,983
+7,778
+3,986
+7,169
+6,026
+1,143
+6,612
+1,143
+Financial debt
+1,456
+0
+1,456
+0
+1,456
+-7
+7,941
+9,676
+4,808
+9,547
+Stakeholders
+Combined Management
+To Our
+SAP Integrated Report 2023
+SAP
+Bonds
+214/324
+For more information about the risk associated with our financial liabilities, see Note (F.1). For more
+information about fair values, see Note (F.2).
+Financial liabilities are unsecured, except for the retention of title and similar rights customary in our
+industry. Effective interest rates on our financial debt (including the effects from interest rate swaps)
+were 3.49% in 2023, 1.23% in 2022, and 0.83% in 2021.
+2030
+1 In 2023, SAP changed the presentation of trade-debtors with a credit balance from Financial liabilities to Trade and other payables. Trade-debtors with credit balances for 2023 are
+€186 million (2022: €286 million). The presentation for 2022 remains unchanged.
+as % of
+76
+73
+83
+74
+76
+66
+Financial debt
+14,354
+Financial liabilities
+405
+98.687%
+1.50%
+Private Placements
+8,155
+6,780
+Bonds
+281
+271
+US$300
+4.74%
+4.69% (fix)
+100.000%
+2025
+USD bond - 2018
+7,874
+6,509
+Eurobonds
+643
+686
+€800
+0.51%
+All of our Eurobonds are listed for trading on the Luxembourg Stock Exchange.
+0.375% (fix)
+2023
+Maturity
+99
+95
+US$100
+3.57%
+306
+294
+US$323
+3.37%
+3.33% (fix)
+3.53% (fix)
+2027
+Tranche 9-2012
+2024
+Tranche 8-2012
+U.S. private placements
+Carrying Amount
+(in € millions)
+Carrying Amount
+(in € millions)
+Nominal Volume
+(in respective
+currency in millions)
+Effective
+Interest Rate
+Coupon Rate
+2022
+98.787%
+2029
+Eurobond 24 - 2020
+843
+891
+€1,000
+1.38%
+1.250% (fix)
+98.871%
+2028
+Eurobond 20 - 2018
+848
+849
+€850
+0.89%
+0.750% (fix)
+99.227%
+2024
+Eurobond 19 - 2018
+401
+428
+€500
+Eurobond 21 - 2018
+2031
+98.382%
+1.625% (fix)
+597
+598
+€600
+0.26%
+0.125% (fix)
+99.200%
+2026
+Eurobond 23 - 2020
+600
+1.375% (fix)
+0
+0.07%
+0.000% (fix)
+99.794%
+2023
+Eurobond 22 - 2020
+976
+1,045
+€1,250
+1.78%
+€600
+0
+Treasury Shares
+Expected credit loss allowance
+License Payments
+Net Investment
+Forecasted
+Cost of hedging
+Cash flow hedge
+Change in value used for calculating hedge
+ineffectiveness
+€ millions
+Designated Hedged Items in Foreign Currency Exchange Rate Hedges
+The amounts as at December 31, 2023, relating to items designated as hedged items were as follows:
+Forecasted
+License Payments
+To assess hedge effectiveness, we have determined the economic relationship between the hedging
+instrument and the hedged item, by comparing changes in the carrying amount of the deal contingent
+forward that is attributable to a change in the spot rate with changes in the investment in the U.S.
+subsidiaries due to movements in the spot rate.
+Currency Hedges Designated as Hedging Instruments (Net Investment Hedges)
+For all years presented, no previously highly probable transaction designated as a hedged item in a
+foreign currency cash flow hedge relationship ceased to be probable. Therefore, we did not
+discontinue any of our cash flow hedge relationships. Also, ineffectiveness was either not material or
+non-existent in all years reported. Generally, the cash flows of the hedged forecasted transactions are
+expected to occur and to be recognized in profit or loss monthly within a time frame of 12 months from
+the date of the Statement of Financial Position.
+We enter into derivative financial instruments, primarily foreign exchange forward contracts, to hedge
+significant forecasted cash flows (royalties) from foreign subsidiaries denominated in foreign currencies
+with a hedge ratio of 1:1 and a hedge horizon of up to 12 months, which is also the maximum maturity
+of the foreign exchange derivatives we use.
+Currency Hedges Designated as Hedging Instruments (Cash Flow Hedges)
+We continuously monitor our exposure to currency fluctuation risks based on monetary items and
+forecasted transactions and pursue a Group-wide strategy to manage foreign currency exchange rate
+risk, using derivative financial instruments, primarily foreign exchange forward contracts, as appropriate,
+with the primary aim of reducing profit or loss volatility. Most of the hedging instruments are not
+designated as being in a hedge accounting relationship.
+Foreign Currency Exchange Rate Risk Management
+Generally, we are not exposed to any significant foreign currency exchange rate risk with regard to our
+investing and financing activities, as such activities are normally conducted in the functional currency of
+the investing or borrowing entity.
+operations, for example the U.S. dollar, the pound sterling, the Japanese yen, the Swiss franc, and the
+Australian dollar.
+Information
+We have hedged part of our net investment in our U.S. subsidiaries which have the U.S. dollar as their
+functional currency, by entering into a deal contingent forward. The hedged risk is the weakening of the
+U.S. dollar against the euro. The deal contingent forward is designated as a hedging instrument for the
+changes in the value of the net investment that is attributable to changes in the U.S. dollar/euro spot
+rate.
+Net Investment
+2023
+2022
+SAP
+219/324
+The amounts as at December 31, 2023, designated as hedging instruments were as follows:
+0
+0
+-15
+0
+reserve for which hedge accounting is no
+longer applied
+Balances remaining in cash flow hedge
+0
+-9
+0
+-7
+0
+32
+0
+19
+0
+32
+-15
+19
+Additional
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+SAP Integrated Report 2023
+SAP
+217/324
+The designated component in hedge accounting is the spot price of the derivatives designated and
+qualifying as net investment hedges. Accordingly, the effective portion of this component determined
+on a present value basis is recorded in Other comprehensive income. All other not-designated
+components or ineffective portions are immediately recognized in Financial Income, net in profit or
+loss. Amounts accumulated in Other comprehensive income are reclassified to profit or loss to Other
+In general, we do not hedge the foreign currency exposure from the net assets of subsidiaries with a
+functional currency different from the euro, and we do not apply net investment hedge accounting.
+However, in selected cases we might do so, and we applied net investment hedge accounting in 2023.
+For more information, see Note (D.1).
+In general, we apply cash flow hedge accounting to the foreign currency risk of highly probable
+forecasted transactions. With regard to foreign currency risk, hedge accounting relates to the spot price
+and to the intrinsic values of the derivatives designated and qualifying as cash flow hedges.
+Accordingly, the effective portion of these components determined on a present value basis is
+recorded in other comprehensive income. The forward element and time value as well as foreign
+currency basis spreads excluded from the hedging relationship are recorded as cost of hedging in a
+separate position in other comprehensive income. As the amounts are not material, they are presented
+together with the effective portion of the cash flow hedges in our consolidated statements of
+comprehensive income and consolidated statements of changes in equity. All other components
+including counterparty credit risk adjustments of the derivative and the ineffective portion are
+immediately recognized in Financial Income, net in profit or loss. Amounts accumulated in other
+comprehensive income are reclassified to profit or loss to Other non-operating income/expense, net
+and Financial income, net in the same period when the hedged item affects profit or loss.
+b) Net Investment Hedge
+a) Cash Flow Hedge
+Derivatives Designated as Hedging Instruments
+Fair value fluctuations in the spot component of such derivatives at FVTPL are included in Other non-
+operating income/expense, net while the forward element is shown in Financial income, net.
+In addition, we occasionally have contracts that contain foreign currency embedded derivatives that
+are required to be accounted for separately.
+We use derivatives to hedge foreign currency risk or interest rate risk and designate them as cash flow
+or fair value hedges if they qualify for hedge accounting under IFRS 9, which involves judgment.
+Derivatives Not Designated as Hedging Instruments in Hedge Accounting Relationships
+Many transactions constitute economic hedges, and therefore contribute effectively to the securing of
+financial risks but do not qualify for hedge accounting under IFRS 9. To hedge currency risks inherent in
+foreign-currency denominated and recognized monetary assets and liabilities, we do not designate our
+held-for-trading derivative financial instruments in hedge accounting, because the profits and losses
+from the underlying transactions are recognized in profit or loss in the same periods as the profits or
+losses from the derivatives.
+Accounting for Derivative Financial Instruments
+Financial Risk Factors and Risk Management
+(F.1)
+This section discusses financial risk factors and risk management regarding foreign currency exchange
+rate risk, interest rate risk, equity price risk, credit risk, and liquidity risk. Further, it contains information
+about financial instruments.
+Section F - Management of
+Financial Risk Factors
+Information
+Further Information about Additional
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+Stakeholders
+To Our
+SAP Integrated Report 2023
+Stakeholders
+Consolidated Financial
+Statements IFRS
+To Our
+Stakeholders
+SAP Integrated Report 2023
+SAP
+218/324
+In addition, the intellectual property (IP) holders in the SAP Group are exposed to risks associated with
+forecasted intercompany cash flows in foreign currencies. These cash flows arise out of royalty
+payments from subsidiaries to the respective IP holder. The royalties are linked to the subsidiaries'
+external revenue. This arrangement leads to a concentration of the foreign currency exchange rate risk
+with the IP holders, as the royalties are mostly denominated in the subsidiaries' local currencies, while
+the functional currency of the IP holders with the highest royalty volume is the euro. The highest foreign
+currency exchange rate exposure of this kind relates to the currencies of subsidiaries with significant
+In rare circumstances, transacting in a currency other than the functional currency also leads to
+embedded foreign currency derivatives being separated and measured at fair value through profit or
+loss.
+As we are active worldwide, our ordinary operations are subject to risks associated with fluctuations in
+foreign currencies. Since the Group's entities mainly conduct their operating business in their own
+functional currencies, our risk of exchange rate fluctuations from ongoing ordinary operations is not
+considered significant. However, the Group's entities occasionally generate foreign currency-
+denominated receivables, payables, and other monetary items by transacting in a currency other than
+the respective functional currency. To mitigate the extent of the associated foreign currency exchange
+rate risk, a significant portion of these transactions is hedged as described below.
+Foreign Currency Exchange Rate Risk Factors
+Foreign Currency Exchange Rate Risk
+We only purchase derivative financial instruments to reduce risks and not for speculation, which is
+defined as entering into derivative instruments without a corresponding underlying transaction.
+We manage market risks, credit risk, and liquidity risk on a Group-wide basis through our global
+treasury department, global risk management, and global credit management. Risk management
+policies are established to identify risks, to set appropriate risk limits, and to monitor risks. Risk
+management policies and hedging strategies are laid out in our internal guidelines (for example,
+treasury guideline and other internal guidelines), and are subject to continuous internal review,
+analysis, and update to reflect changes in market conditions and our business.
+We are exposed to various financial risks, such as market risks (that is, foreign currency exchange rate
+risk, interest rate risk, and equity price risk), credit risk, and liquidity risk.
+The effect of the counterparty and our own credit risk on the fair value of the forward exchange
+contracts and interest rate swaps, which is not reflected in the respective hedged item, and
+Differences in the timing of hedged item and hedged transaction in our cash flow hedges.
+At inception of a designated hedging relationship, we document our risk management strategy and the
+economic relationship between hedged item and hedging instrument. The existence of an economic
+relationship is demonstrated as well as the effectiveness of the hedging relationship tested
+prospectively by applying the critical terms match for our foreign currency hedges, since currencies,
+maturities, and the amounts are closely aligned for the forecasted transactions and for the spot
+element of the forward exchange rate contract or intrinsic value of the currency options, respectively.
+For interest rate swaps, effectiveness is tested prospectively using statistical methods in the form of a
+regression analysis, by which the validity and extent of the relationship between the change in value of
+the hedged items as the independent variable and the fair value change of the derivatives as the
+dependent variable is determined. The main sources of ineffectiveness are:
+d) Valuation and Testing of Effectiveness
+We apply fair value hedge accounting for certain of our fixed-rate financial liabilities and show the fair
+value fluctuations in Financial income, net.
+c) Fair Value Hedge
+non-operating income/expense, net in the same period when the foreign operation is partially
+disposed of or sold.
+Information
+Additional
+Further Information about
+Sustainability
+Combined Management
+Report
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+0.88
+550
+822
+1,025
+Net exposure in € millions
+Average EUR:GBP forward rate
+Average EUR:JPY forward rate
+7-12 Months
+1-6 Months
+7-12 Months
+1-6 Months
+Forward exchange contracts
+2022
+2023
+Maturity
+Details on Hedging Instruments in Foreign Currency Exchange Rate Hedges
+On December 31, 2023, we held the following instruments to hedge exposures to changes in foreign
+currency:
+hedging in OCI to Finance income, net
+0
+-7
+о
+-9
+Amount reclassified from cost of
+0.88
+0
+0.86
+148.12
+The SAP Group's entities generally operate in their functional currencies. In exceptional cases and
+limited economic environments, operating transactions are denominated in currencies other than
+the functional currency, leading to a foreign currency exchange rate risk for the related monetary
+instruments. Where material, this foreign currency exchange rate risk is hedged. Therefore,
+fluctuations in foreign currency exchange rates only have an impact on profit with regard to our
+unhedged non-derivative monetary financial instruments and related income or expenses.
+Our free-standing derivatives designed for hedging foreign currency exchange rate risks almost
+completely balance the changes in the fair values of the hedged item attributable to exchange rate
+movements in the Consolidated Income Statements in the same period. As a consequence, the
+hedged items and the hedging instruments are not exposed to foreign currency exchange rate risks,
+and thereby have no effect on profit.
+Our risk exposure is based on the following assumptions:
+Foreign Currency Exchange Rate Exposure
+1.03
+1.05
+1.09
+1.10
+Average EUR:USD forward rate
+1.54
+1.53
+1.67
+1.64
+Average EUR:AUD forward rate
+0.97
+1.00
+0.94
+0.96
+Average EUR:CHF forward rate
+138.23
+136.83
+152.10
+0.88
+To Our
+-42
+62
+33
+Other financial assets
+Carrying amount
+Nominal amount
+0
+1,371
+0
+2,390
+2022
+2023
+€ millions
+Net Investment
+in USD
+Payments in EUR
+in USD
+Forecasted License
+Net Investment
+Forecasted License
+Payments in EUR
+Designated Hedging Instruments in Foreign Currency Exchange Rate Hedges
+Information
+Additional
+Further Information about
+Sustainability
+0
+0
+-9
+Other financial liabilities
+Amount reclassified from cash flow
+hedge in OCI to Other non-operating
+income, net
+0
+-9
+0
+-7
+Cost of hedging recognized in OCI
+Finance income, net
+0
+0
+-106
+0
+Hedge ineffectiveness recognized in
+0
+32
+15
+19
+Change in value recognized in OCI
+0
+-9
+0
+-20
+0
+SAP Integrated Report 2023
+SAP
+216/324
+-22
+0
+-3,986
+10,943
+Financial debt (carrying amount)
+-35
+12
+0
+0
+0
+0
+-47
+Transaction costs
+-550
+0
+221
+2
+0
+0
+-773
+Basis adjustment
+221
+7,755
+12
+Accrued interest and payment to banks
+0
+55
+0
+-332
+2,140
+Lease¹
+537
+0
+-215
+-1
+0
+0
+753
+Interest rate swaps
+94
+-27
+0
+0
+0
+-83
+203
+7,169
+-241
+0
+-24
+Combinations
+Cash Flows
+1/1/2023
+€ millions
+Business
+The changes in our financial debts are reconciled to the cash flows from borrowings included in the cash flow from financing
+activities.
+Reconciliation of Liabilities Arising from Financing Activities
+Additional
+Information
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Report
+Stakeholders
+Combined Management
+To Our
+SAP Integrated Report 2023
+SAP
+215/324
+In March 2021, SAP drew two short-term bank loans of €950 million and €500 million with original
+tenors of one year that could be flexibly repaid until September 30, 2023. We repaid both loans in
+August 2023.
+Loans
+The net proceeds from our commercial paper (Commercial Paper, or CP) program are being used for
+general corporate purposes, including dividends and share repurchases. On December 31, 2023, we
+had no commercial papers outstanding. (December 31, 2022: €928 million carrying amount generally
+with a maturity of less than six months). The weighted average interest rate of the CP outstanding as of
+December 31, 2022, was 1.96%.
+Commercial Paper Program
+Foreign
+Currency
+0
+Fair Value
+Changes
+12/31/2023
+0
+-7
+-3,986
+11,764
+Financial debt (nominal volume)
+6,612
+-1,142
+0
+-24
+0
+0
+7,778
+Non-current financial debt
+1,143
+1,142
+0
+0
+0
+-3,986
+3,986
+Current financial debt
+Other
+Consequently, we are only exposed to significant foreign currency exchange rate fluctuations with
+regard to the following:
+1,621
+14,039
+203
+24
+0
+0
+0
+119
+60
+Accrued interest
+10,943
+8
+-741
+77
+0
+-1,406
+13,005
+Financial debt (carrying amount)
+-47
+8
+0
+0
+0
+Interest rate swaps
+0
+42
+0
+1 Other includes new lease liabilities.
+14,039
+398
+-29
+131
+0
+-1,711
+15,250
+Total liabilities from financing activities
+2,140
+366
+0
+55
+0
+-424
+2,143
+Lease¹
+753
+0
+711
+-1
+0
+Total liabilities from financing activities
+-55
+-773
+0
+36
+0
+-1,406
+3,755
+Current financial debt
+Changes
+12/31/2022
+Other
+Fair Value
+Foreign
+Currency
+Business
+Combinations
+1/1/2022 Cash Flows
+€ millions
+1 Other includes new lease liabilities.
+9,421
+-256
+7
+32
+0
+-4,400
+1,600
+Transaction costs
+3,986
+9,338
+0
+-741
+2
+0
+0
+-34
+Basis adjustment
+11,764
+0
+0
+76
+0
+-1,406
+13,094
+Financial debt (nominal volume)
+7,778
+-1,600
+0
+40
+0
+0
+Non-current financial debt
+220/324
+1,364
+Stakeholders
+4
+-1,016
+1/1/2021
+of Hedging
+Differences
+Total
+-1,012
+Cash Flow
+Hedges/Cost
+Exchange
+Other Components of Equity
+Information
+Additional
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+€ millions
+Report
+Other comprehensive income for items that will be reclassified to profit or
+loss, net of tax
+-26
+Other comprehensive income for items that will be reclassified to profit or
+loss, net of tax
+4,031
+16
+4,015
+12/31/2022
+2,224
+2,846
+39
+Other comprehensive income for items that will be reclassified to profit or
+loss, net of tax
+1,808
+-22
+1,830
+12/31/2021
+2,819
+2,186
+-1,597
+Stakeholders
+To Our
+Current
+Non-Current
+Total
+Cash at banks
+3,369
+0
+Total
+3,369
+0
+3,176
+Time deposits
+2,130
+0
+2,130
+3,176
+Combined Management
+Non-Current
+€ millions
+SAP Integrated Report 2023
+SAP
+-7,778
+1,166
+-7,755
+-11,764
+Current
+4,009
+-2,070
+5,590
+While we continuously monitor the ratios presented in the capital structure table, we actively manage
+our liquidity and structure of our financial indebtedness based on the ratios group liquidity and net
+debt.
+Cash and Cash Equivalents
+2023
+2022
+3,521
+2,932
+-8
+12/31/2023
+Cash and cash equivalents
+€ millions
+Group Liquidity and Net Debt
+Group liquidity consists of cash at banks, money market and other funds, as well as time deposits and
+debt securities (both with remaining maturities of less than one year). Financial debt is defined as the
+nominal volume of bank loans, issued commercial papers, private placements, and bonds. Net debt is
+group liquidity less financial debt.
+Group Liquidity, Financial Debt, and Net Debt
+Expenses and gains or losses on financial liabilities at AC mainly consist of interest expense which is
+shown in Financial income, net. Gains/losses from foreign currency exchange rate fluctuations are
+included in Other non-operating income/expense, net.
+Current time deposits and debt securities
+As we do not designate financial liabilities as FVTPL, we generally classify non-derivative financial
+liabilities as AC.
+Information
+Additional
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+Stakeholders
+reimbursements, related credit card payments, and vendor payments. We present these funds in cash
+and cash equivalents and record our obligation to make these expense reimbursements and
+payments on behalf of our customers as customer funding liabilities.
+To Our
+Group liquidity
+Non-current financial debt
+1,581
+9,694
+11,275
+2,464
+686
+3,151
+Current financial debt
+-883
+8,124
+Δ
+2022
+2023
+Net debt (-)
+Financial debt
+9,008
+-1,605
+SAP Integrated Report 2023
+212/324
+SAP Integrated Report 2023
+SAP
+211/324
+Note (D.1). In 2023, a loss of €33 million (2022: €210 million) was attributed to non-controlling interests
+of other SAP entities.
+Until divestiture in June 2023, Qualtrics issued new shares to serve share-based payment awards
+under the Qualtrics Omnibus plan, which further reduced SAP's ownership in Qualtrics to 69%
+(2022: 71%). In the first half of 2023, a loss of €141 million (2022: €366 million) was attributed to non-
+controlling interests of Qualtrics. For more information about the divestiture of Qualtrics, see
+Non-Controlling Interests
+To Our
+In 2023, we distributed €2,395 million (€2.05 per share) in dividends for 2022, compared to
+€2,865 million (€2.45 per share, including a special dividend of €0.50 to celebrate SAP's 50th
+anniversary) paid in 2022 for 2021 and €2,182 million (€1.85 per share) paid in 2021 for 2020.
+The total dividend available for distribution to SAP SE shareholders is based on the profits of SAP SE
+as reported in its statutory financial statements prepared under the accounting rules in the German
+Commercial Code (Handelsgesetzbuch). For the year ended December 31, 2023, the Executive
+Board intends to propose that a dividend of €2.20 per share (that is, an estimated total dividend of
+€2,568 million), be paid from the profits of SAP SE.
+Distribution Policy and Dividends
+By resolution of SAP SE's Annual General Meeting of Shareholders held on May 11, 2023, the
+authorization granted by the Annual General Meeting of Shareholders on May 17, 2018, regarding the
+acquisition of treasury shares was revoked to the extent it had not been exercised at that time, and
+replaced by a new authorization of the Executive Board of SAP SE to acquire, on or before
+May 10, 2028, shares of SAP SE representing a pro rata amount of capital stock of up to €120 million in
+aggregate, provided that the shares purchased under the authorization, together with any other shares
+in the Company previously acquired and held by, or attributable to, SAP SE do not account for more
+than 10% of SAP SE's issued share capital. Although treasury shares are legally considered
+outstanding, there are no dividend or voting rights associated with them. We may redeem or resell
+shares held in treasury, or we may use treasury shares for the purpose of servicing option or
+conversion rights under the Company's share-based payment plans. Also, we may use shares held in
+treasury as consideration in connection with mergers with, or acquisitions of, other companies.
+Following the above authorization, in May 2023 we announced a new share buyback program with an
+aggregate volume of up to €5 billion and a term until December 31, 2025. As part of the first tranche of
+this program, we acquired shares with a volume of €949 million (without incidental acquisition costs)
+between August 14, 2023, and December 31, 2023.
+-6,612
+2,426
+9
+2,418
+Our general intention is to remain in a position to return liquidity to our shareholders by distributing
+annual dividends totaling 40% or more of our profit after tax and by potentially repurchasing treasury
+shares in future.
+SAP
+2,843
+Consolidated Financial
+Statements IFRS
+Non-derivative financial liabilities include bank loans, issued bonds, private placements, and other
+financial liabilities. Other financial liabilities also include customer funding liabilities which are funds we
+draw from and make payments on behalf of our customers for customers' employee expense
+Non-Derivative Financial Liabilities
+Loans and other financial receivables are monitored based on borrower-specific internal and
+external information to determine whether there has been a significant increase in credit risk since
+initial recognition. We consider such assets to be in default if they are significantly beyond their due
+date or if the borrower is unlikely to pay its obligation. A write-off occurs when the likelihood of
+recovery is considered remote, for example when bankruptcy proceedings have been finalized or
+when all enforcement efforts have been exhausted.
+For cash at banks, time deposits, and debt securities such as acquired bonds and acquired
+commercial papers, we apply the low credit risk exception, as it is our policy to invest only in high-
+quality assets of issuers with a minimum rating of at least investment grade to minimize the risk of
+credit losses. Thus, these assets are always allocated to stage 1 of the three-stage credit loss model,
+and we record a loss allowance at an amount equal to 12-month expected credit losses. This loss
+allowance is calculated based on our exposure at the respective reporting date, the loss given
+default for this exposure, and the credit default swap spread as a measure for the probability of
+default. Even though we invest only in assets of at least investment-grade, we also closely observe
+the development of credit default swap spreads as a measure of market participants' assessments
+of the creditworthiness of a debtor to evaluate probable significant increases in credit risk to timely
+react to changes should these manifest. Among others, we consider cash at banks, time deposits,
+and debt securities to be in default when the counterparty is unlikely to pay its obligations in full,
+when there is information about a counterparty's financial difficulties or if there is a drastic increase
+in a counterparty's credit default swap spread for a prolonged time period while the overall market
+environment remains generally stable. Such financial assets are written off either partially or in full if
+the likelihood of recovery is considered remote, which might be evidenced, for example, by the
+bankruptcy of a counterparty of such financial assets.
+For these financial assets, we apply considerable judgment by employing the general impairment
+approach as follows:
+Gains/losses on non-derivative financial debt investments at FVTPL are reported in Financial income,
+net and show interest income/expenses separately from other gains/losses which include gains/losses
+from fair value fluctuations and disposals. Gains/losses on non-derivative financial debt investments at
+AC are reported in Financial income, net and show interest income/expenses separately from other
+gains/losses which include gains/losses on disposals and changes in expected and incurred credit
+losses. Gains/losses from foreign currency exchange rate fluctuations are included in Other non-
+operating income/expense, net. Regular way purchases and sales are recorded as at the trade date.
+Impairment of Non-Derivative Financial Debt Investments
+Combined Management
+Report
+We generally classify financial assets as: at amortized cost (AC), at fair value through other
+comprehensive income (FVOCI), or at fair value through profit or loss (FVTPL), depending on the
+contractual cash flows of, and our business model for, holding the respective asset. Financial assets
+having cash flow characteristics other than solely principal and interest such as money market and
+similar funds are classified as FVTPL. Generally, other financial assets with cash flows consisting solely
+of principal and interest are held within a business model whose objective is "hold to collect" and are
+thus classified as AC. Occasionally, such other financial assets are held within a business model whose
+objective is "hold to collect and sell" in which case they are classified as FVOCI.
+Classification and Measurement of Non-Derivative Financial Debt Investments
+Accounting for Non-Derivative Financial Instruments
+(E.3) Liquidity
+Information
+Additional
+Further Information about
+Sustainability
+Our non-derivative financial debt investments comprise cash at banks and cash equivalents (highly
+liquid investments with original maturities of three months or less, such as time deposits and money-
+market funds), loans and other financial receivables, and acquired debt securities.
+0
+2,932
+Money market and other funds
+129
+0
+129
+Debt securities
+657
+0
+657
+32
+3,028
+3,028
+Time deposits
+Total
+Non-Current
+Current
+Total
+Non-Current
+0
+Current
+0
+Financial instruments related to
+|
+receivables
+233
+129
+104
+-1,143
+192
+32
+108
+employee benefit plans
+203
+203
+0
+244
+244
+0
+Loans and other financial
+€ millions
+300
+2023
+-3
+Expected credit loss allowance
+47
+0
+47
+150
+0
+0
+150
+2,855
+0
+2,855
+2,478
+0
+2,478
+2022
+Debt securities
+-3
+-3,986
+0
+-3
+Non-Derivative Financial Debt Investments
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+Stakeholders
+To Our
+SAP Integrated Report 2023
+SAP
+Further Information about Additional
+Sustainability
+Information
+9,008
+0
+9,008
+8,124
+0
+8,124
+Cash and cash equivalents
+213/324
+-3
+2
+44
+46
+46
+Thereof: USD +10% (2022: +10%; 2021: +10%) against the respective
+functional currency
+-2
+Thereof: USD -10% (2022: -10%; 2021: -10%) against the respective
+functional currency
+-46
+15
+63
+112
+All currencies +10% against the respective functional currency
+-44
+238
+36
+106
+-238
+-135
+-106
+131
+29
+-15
+-131
+-29
+-36
+221/324
+SAP
+SAP Integrated Report 2023
+To Our
+135
+-63
+-48
+All currencies -10% against the respective functional currency
+Information
+-1,496
+-8,155
+Carrying
+Contractual Cash Flows
+Amount
+€ millions
+12/31/2022
+2023
+2024
+Net
+2023
+2022
+2021
+-112
+2022
+-63
+-38
+-49
+64
+31
+40
+Thereof: EUR -10% (2022: -10%; 2021: -10%) against the respective
+functional currency
+-20
+-32
+Thereof: EUR +10% (2022: +10%; 2021: +10%) against the respective
+functional currency
+48
+20
+32
+Unhedged monetary assets and liabilities
+2021
+2023
+Consolidated Financial
+Statements IFRS
+To Our
+Stakeholders
+€ millions
+The movement in the ECL allowance for trade receivables and contract assets is as follows:
+Movement in ECL Allowance for Trade Receivables and Contract Assets
+-261
+390
+5,647
+-4.3%
+-200
+236
+Balance as at 1/1
+0
+0
+0
+0
+0
+0
+Commercial paper
+0
+0
+0
+0
+Net credit losses recognized
+Balance as at 12/31
+Generally, our primary source of liquidity is funds generated from our business operations. Our global
+treasury department manages liquidity centrally for all subsidiaries. Where possible, we pool their cash
+surplus so that we can use liquidity centrally for our business operations, for subsidiaries' funding
+requirements, or to invest any net surplus in the market. With this strategy, we seek to optimize yields,
+while ensuring liquidity, by investing only with counterparties and issuers of high credit quality, as
+explained before. Hence, high levels of liquid assets and marketable securities provide a strategic
+reserve, helping keep SAP flexible, sound, and independent.
+Our liquidity is managed by our global treasury department with the primary aim of maintaining
+liquidity at a level that is adequate to meet our financial obligations.
+Liquidity Risk Management
+We are exposed to liquidity risk from our obligations towards suppliers, employees, and financial
+institutions.
+Liquidity Risk Factors
+-261
+-203
+101
+Amounts written off
+90
+-32
+-175
+-261
+ECL Allowance
+ECL Allowance
+2022
+2023
+Liquidity Risk
+-187
+0
+0
+0
+-1,298
+-1,160
+-3,408
+Financial guarantees
+0
+-19
+-19
+-19
+-1,368
+-19
+-309
+229/324
+SAP
+SAP Integrated Report 2023
+To Our
+Combined Management
+Stakeholders
+Further Information about Additional
+Sustainability
+-19
+-1,245
+-2,652
+-10,075
+0
+Lease liabilities
+-1,621
+-350
+-260
+-204
+-159
+-127
+Combined Management
+-804
+Other financial liabilities¹
+-263
+-34
+-30
+0
+0
+0
+0
+Total of non-derivative financial liabilities
+228/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+3.3
+1.6
+4.2
+1.7
+2.5
+1.3
+Foreign Currency Exchange Rate Sensitivity
+If, on December 31, 2023, 2022, and 2021, the foreign currency exchange rates had been higher/lower
+as described below, this would have had the following effects on other non-operating expense, net
+and other comprehensive income:
+1.7
+Derivatives held within a designated cash flow hedge relationship
+All major currencies +10% (2022: all major currencies +10%;
+2021: all major currencies +10%) against the euro
+Thereof: USD -10% (2022: –10%; 2021: -10%) against the euro
+Thereof: USD +10% (2022: +10%; 2021: +10%) against the euro
+Embedded derivatives
+All currencies -10% against the respective functional currency
+All currencies +10% against the respective functional currency
+Effects on Other Non-Operating Expense,
+Effects on Other Comprehensive Income
+-94
+-3
+-3
+All major currencies -10% (2022: all major currencies -10%;
+2021: all major currencies -10%) against the euro
+4.2
+2022
+2023
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+-
+The spot component of derivatives held within a designated cash flow hedge relationship affecting
+other comprehensive income
+· Foreign currency embedded derivatives affecting other non-operating expense, net
+Unhedged foreign-currency monetary assets and liabilities affecting other non-operating expense,
+net
+Thus, our foreign currency exposure (and our average/high/low exposure) as at December 31 was as
+follows:
+Foreign Currency Exposure
+€ billions
+Year-end exposure toward all our major currencies
+Average exposure
+Highest exposure
+Lowest exposure
+Foreign Currency Sensitivity
+€ millions
+-305
+Report
+-388
+-1,033
+Contractual Cash Flows
+12/31/2023
+Carrying
+Amount
+€ millions
+Contractual Maturities of Non-Derivative Financial Liabilities
+We continue to provide rental guarantees for certain offices used by Qualtrics. The amounts shown for
+the financial guarantees are the gross amounts we guarantee, however, we are entitled to
+indemnification payments by Qualtrics which will reduce the guarantee amounts disclosed.
+Financial liabilities for which repayment can be requested by the contract partner at any time are
+assigned to the earliest possible period. Variable interest payments were calculated using the latest
+relevant interest rate fixed as at December 31, 2023. As we generally settle our derivative contracts
+gross, we show the pay and receive legs separately for all our currency and interest rate derivatives,
+whether or not the fair value of the derivative is negative. The cash outflows for the currency derivatives
+are translated using the applicable spot rate.
+The table below is an analysis of the remaining contractual maturities of all our financial liabilities and
+guarantees held as at December 31, 2023.
+2024
+Liquidity Risk Exposure
+Additionally, as at December 31, 2023 and 2022, the Group had available lines of credit totaling
+In September 2019, we initiated a commercial paper (Commercial Paper, or CP) program. As at
+December 31, 2023, we had €0 million of CP outstanding with maturities generally less than six months
+(2022: €930 million).
+In order to retain high financial flexibility, in 2023, SAP SE entered into a sustainability-linked revolving
+credit facility with a volume of €3.0 billion with an initial term until 2028 plus two one-year extension
+options, replacing its previous credit facility of €2.5 billion from 2017. The use of the facility is not
+restricted by any financial covenants. Borrowings under the facility bear interest of EURIBOR or the
+agreed benchmark rate for the respective currency plus a base margin which might be adjusted
+depending on the fulfillment of agreed sustainability performance targets. We are also required to pay
+a commitment fee of 7bps per annum on the unused available credit. We have not drawn on the
+facility.
+Apart from effective working capital and cash management, we have reduced the liquidity risk inherent
+in managing our day-to-day operations and meeting our financing responsibilities by arranging an
+adequate volume of available credit facilities with various financial institutions on which we can draw if
+necessary.
+Additional
+Information
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+€555 million and €555 million, respectively. There were immaterial borrowings outstanding under these
+lines of credit in all years presented.
+2025
+2026
+2027
+-1,045
+-1,161
+-952
+-941
+-6,780
+Loans
+Private placements
+Bonds
+0
+0
+0
+0
+0
+-1,022
+-1,022
+Trade payables
+Non-derivative financial liabilities
+Thereafter
+2028
+-2,604
+Stakeholders
+Nominal amounts
+Consolidated Financial
+Statements IFRS
+Gross Carrying Amount
+Not Credit-Impaired
+Gross Carrying Amount
+Credit-Impaired
+ECL Allowance
+AR not due and due
+-0.3%
+4,036
+2
+Weighted Average Loss Rate
+-13
+-0.6%
+770
+51
+-5
+AR overdue 30 to 90 days
+-1.5%
+564
+AR overdue 1 to 30 days
+32
+€ millions, unless otherwise stated
+Credit Risk Exposure from Trade Receivables and Contract Assets
+Net Amount
+33
+35
+-33
+-816
+227/324
+SAP
+2023
+SAP Integrated Report 2023
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+Trade Receivables and Contract Assets
+As at December 31, 2023, our exposure to credit risk from trade receivables was as follows:
+To Our
+2022
+-9
+-27.3%
+-1.0%
+1,420
+80
+-15
+AR overdue 30 to 90 days
+-2.3%
+582
+-31
+64
+AR overdue more than 90 days
+Total
+-27.2%
+499
+2025
+2026
+2027
+-15
+AR overdue more than 90 days
+10
+-1.0%
+432
+213
+-176
+Total
+-3.3%
+5,802
+298
+3,146
+-203
+€ millions, unless otherwise stated
+Weighted Average Loss Rate
+Gross Carrying Amount Gross Carrying Amount Credit-
+Not Credit-Impaired
+ECL Allowance
+Impaired
+AR not due and due
+AR overdue 1 to 30 days
+P2022
+-849
+-568
+-55
+-3.9%
+77
+0
+-3
+-0.1%
+8,807
+0
+ΝΑ
+-10
+€ millions, unless otherwise stated
+Equivalent to External Weighted Average Loss
+Rating
+Rate
+Gross Carrying Amount Gross Carrying Amount
+Not Credit-Impaired
+Credit-Impaired
+ECL Allowance
+Risk class 1- low risk
+Risk class 2 high risk
+2022
+Risk class 3 - unrated
+0
+66
+Risk class 1 - low risk
+Risk class 2-high risk
+Risk class 3 - unrated
+Total
+2023
+Equivalent to External
+Rating
+Weighted Average
+Loss Rate
+Gross Carrying
+Amount Not Credit-
+Impaired
+0
+Gross Carrying
+Amount Credit-
+Impaired
+AAA to BBB-
+-0.1%
+8,664
+0
+-7
+BB+ to D
+0.0%
+ECL Allowance
+AAA to BBB-
+-0.0%
+6,554
+Master Netting and Similar Arrangements
+2023
+€ millions
+Carrying
+Amounts
+Nettable
+Amounts in Case
+of Insolvency
+Net Amount
+Carrying Amounts
+The following table shows the derivative instruments that are subject to such netting arrangements:
+Nettable Amounts
+Financial assets
+90
+55
+35
+68
+Financial liabilities
+-623
+in Case of
+Insolvency
+We enter into derivatives on the basis of the German Master Agreement on Financial Derivatives
+Transactions ("Deutscher Rahmenvertrag für Finanztermingeschäfte") and similar agreements. The
+regulations of these agreements apply particularly in the case of insolvency and not during the normal
+course of business.
+Master Netting and Similar Arrangements
+As at December 31, 2023, the majority of our other loans and other financial receivables was
+concentrated in Germany. There were no loans, or other financial receivables past due but not
+impaired and we had no indications of impairments of such assets that were not past due and not
+impaired as at that date.
+0
+-3
+BB+ to D
+0.0%
+33
+0
+0
+ΝΑ
+-6.5%
+46
+0
+-3
+Total
+-0.1%
+6,633
+0
+-6
+Thereafter
+€ millions, unless otherwise stated
+Non-derivative financial liabilities
+Bonds
+-309
+Cash inflows
+948
+302
+Interest rate derivatives designated as hedging instruments
+-537
+-753
+-958
+Cash outflows
+-848
+-102
+-1,201
+Cash inflows
+63
+301
+63
+-242
+364
+Cash outflows
+-20
+Thereafter
+Derivative financial liabilities and assets
+Derivative financial liabilities
+Currency derivatives not designated as hedging instruments
+-66
+-88
+Cash outflows
+-9
+-2,048
+Cash inflows
+2,017
+0
+-3,185
+3,113
+-13
+0
+Currency derivatives designated as hedging instruments
+0
+2023
+Total of derivative financial liabilities
+-220
+Total of derivative financial assets
+85
+73
+0
+63
+57
+0
+1,069
+Total of derivative financial liabilities and assets
+-147
+-547
+-787
+-61
+-850
+230/324
+SAP Integrated Report 2023
+-538
+-623
+-1,039
+Cash inflows
+-547
+-849
+-118
+-850
+Derivative financial assets
+Currency derivatives not designated as hedging instruments
+52
+-1,418
+1,441
+30
+Cash inflows
+-2,992
+3,042
+-1,713
+1,740
+Currency derivatives designated as hedging instruments
+33
+33
+Cash outflows
+Cash outflows
+12/31/2022
+Thereafter
+2024
+-97
+0
+-1,456
+-1,479
+0
+0
+0
+-3
+0
+-928
+-932
+0
+0
+0
+0
+0
+0
+Lease liabilities
+-3
+-14
+-1,496
+0
+0
+0
+0
+0
+-1,690
+-316
+-941
+-1,162
+-1,045
+-3,636
+Private placements
+Loans
+Commercial paper
+-405
+-962
+-2,140
+-398
+-317
+0
+0
+0
+0
+0
+0
+1 The carrying amount of Other financial liabilities includes accrued interest for our non-derivative financial debt as well as for derivatives, while the cash outflow of this accrued
+interest is presented together with the underlying liability in the maturity analysis.
+Financial guarantees
+0
+Carrying
+Contractual Cash Flows
+Amount
+Carrying
+Amount
+Contractual Cash Flows
+€ millions
+12/31/2023
+Contractual Maturities of Derivative Financial Liabilities and Financial Assets
+-4,707
+-1,330
+-1,393
+-257
+-228
+-188
+-1,071
+Other financial liabilities¹
+-422
+-307
+-31
+0
+0
+0
+0
+Total of non-derivative financial liabilities
+-15,002
+-6,316
+-1,605
+-1,222
+Trade payables
+Report
+Credit Risk Exposure from Cash, Time Deposits, and Debt Securities
+Cash, Time Deposits, and Debt Securities
+2029
+2030
+2031
+Nominal amounts
+90
+Average variable interest rate
+6.150%
+2028
+€ millions
+Average variable interest rate
+USD interest rate swaps
+1,000
+1,000
+800
+500
+5.941%
+EUR interest rate swaps
+5.365%
+2027
+Maturity
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+2024
+Information
+Details on Hedging Instruments in Interest Rate Hedges
+€ millions
+EUR interest rate swaps
+Nominal amounts
+Average variable interest rate
+USD interest rate swaps
+2023
+As at December 31, 2023, we held the following instruments to hedge exposures to changes in interest
+rates:
+222/324
+4.705%
+1,250
+5.503%
+3.348%
+3.511%
+Interest Rate Exposure
+Our interest rate exposure (and our average/high/low exposure) as at December 31 was as follows:
+Interest Rate Risk Exposure
+2023
+2022
+2.713%
+€ billions
+Average
+High
+Low
+Year-End
+Average
+High
+Low
+Year-End
+5.340%
+3.373%
+1,250
+2022
+Maturity
+2024
+2027
+2028
+2029
+2030
+3.949%
+2031
+94
+Average variable interest rate
+5.150%
+1,000
+1,000
+800
+500
+Nominal amounts
+10
+700
+-2
+in USD
+Notional amount
+4,550
+90
+4,550
+94
+Carrying amount
+in EUR
+3,964
+3,732
+95
+Accumulated fair value adjustments in
+Other financial liabilities
+556
+-6
+782
+-9
+89
+Change in fair value used for measuring
+Fixed-Rate
+Borrowing
+Fixed-Rate
+Borrowing
+in USD
+Further Information about
+Sustainability
+Additional
+Information
+Interest Rate Risk
+Interest Rate Risk Factors
+We are exposed to interest rate risk as a result of our investing and financing activities mainly in euros
+and U.S. dollars, since a large part of our investments are based on variable rates and/or short
+maturities (2023: 53%; 2022: 64%) and most of our financing transactions are based on fixed rates and
+long maturities (2023: 100%; 2022: 87%).
+Interest Rate Risk Management
+The aim of our interest rate risk management is to reduce profit or loss volatility and optimize our
+interest result by creating a balanced structure of fixed and variable cash flows. We therefore manage
+interest rate risks by adding interest-rate-related derivative instruments to a given portfolio of
+investments and debt financing. The desired fixed-floating mix of our net debt is set by the Treasury
+Committee.
+Fixed-Rate
+Borrowing
+Derivatives Designated as Hedging Instruments (Fair Value Hedges)
+The amounts as at December 31, 2023, relating to items designated as hedged items were as follows:
+Designated Hedged Items in Interest Rate Hedges
+2023
+2022
+€ millions
+Fixed-Rate
+Borrowing
+in EUR
+To match the interest rate risk from our financing transactions to our investments, we use receiver
+interest rate swaps to alter the interest cash flows of certain fixed-rate financial liabilities to floating,
+and by this means secure the fair value of the swapped financing transactions on a 1:1 ratio. Including
+interest rate swaps, 43% (2022: 52%) of our total interest-bearing financial liabilities outstanding as at
+December 31, 2023, had a fixed interest rate.
+226
+1
+-723
+90
+4,550
+94
+Carrying amount
+Other financial assets
+0
+0
+4,550
+0
+Other financial liabilities
+-535
+-1
+-749
+-3
+Change in fair value used for measuring
+ineffectiveness for the reporting period
+-214
+0
+USD Borrowing
+EUR Borrowing
+Interest Rate
+Swaps for
+-11
+ineffectiveness for the reporting period
+Accumulated amount of fair value hedge
+adjustments for hedged items ceased to
+be adjusted for hedging gains/losses
+0
+-7
+0
+-11
+The amounts as at December 31, 2023, designated as hedging instruments were as follows:
+Designated Hedging Instruments in Interest Rate Hedges
+2023
+€ millions
+Notional amount
+2022
+Interest Rate
+Swaps for
+EUR Borrowing
+Interest Rate
+Swaps for
+USD Borrowing
+Interest Rate
+Swaps for
+Fair value interest rate risk
+As at December 31, 2023, our exposure to credit risk from cash, time deposits, and debt securities was
+as follows:
+From investments
+0.00
+On December 31, 2023, our exposure from our investments in equity securities was €4,967 million
+(2022: €5,137 million; 2021: €5,799 million).
+Equity Price Sensitivity
+Our sensitivity towards a fluctuation in equity prices is as follows:
+Equity Price Sensitivity
+€ millions
+2023
+2022¹
+Equity Price Exposure
+20211
+Increase in equity prices and respective
+unobservable inputs of 22% - increase of financial
+1,093
+503
+515
+income, net
+Decrease in equity prices and respective
+Investments in equity securities
+unobservable inputs of 22% - decrease of
+Information
+Further Information about
+Sustainability
+-32
+-5
+-9
+Equity Price Risk
+Equity Price Risk Factors
+We are exposed to equity price risk with regard to our investments in equity securities.
+Equity Price Risk Management
+Additional
+Our listed equity investments are monitored based on the current market value that is affected by the
+fluctuations in the volatile stock markets worldwide. Unlisted equity investments are monitored based
+on detailed financial information provided by the investees. The fair value of our listed equity
+investments depends on the equity prices, while the fair value of the unlisted equity investments is
+influenced by various unobservable input factors.
+SAP
+SAP Integrated Report 2023
+To Our
+Combined Management
+Stakeholders
+Report
+Consolidated Financial
+Statements IFRS
+224/324
+Interest rates -100bps for U.S. dollar area/-100bps for euro area (2022: -25/-10bps for
+U.S. dollar/euro area; 2021: -25/-20bps for U.S. dollar/euro area)
+-1,093
+-515
+restricted to a defined limit that depends on the lowest official long-term credit rating available by at
+least one of the major rating agencies, the Tier 1 capital of the respective financial institution, or
+participation in the German Depositors' Guarantee Fund or similar protection schemes. We
+continuously monitor strict compliance with these counterparty limits. As the premium for credit
+default swaps mainly depends on market participants' assessments of the creditworthiness of a
+debtor, we also closely observe the development of credit default swap spreads in the market to
+evaluate probable risk developments and react in a timely manner to changes should these manifest.
+For cash at banks, time deposits, and debt securities such as acquired bonds or commercial papers,
+we apply the general impairment approach. As it is our policy to only invest in high-quality assets of
+issuers with a minimum rating of at least investment grade so as to minimize the risk of credit losses,
+we use the low credit risk exception. Thus, these assets are always allocated to stage 1 of the three-
+stage credit loss model and we record a loss allowance for an amount equal to 12-month expected
+credit losses. This loss allowance is calculated based on our exposure as at the respective reporting
+date, the loss given default for this exposure, and the credit default swap spread as a measure for the
+probability of default. To ensure that during their lifetime our investments always fulfill the requirement
+of being investment-grade, we monitor changes in credit risk by tracking published external credit
+ratings. Among other things, we consider cash at banks, time deposits, and debt securities to be in
+default when the counterparty is unlikely to pay its obligations in full, when there is information about a
+counterparty's financial difficulties, or in case of a drastic increase in the credit default swap spread of
+a counterparty for a prolonged time period while the overall market environment remains rather stable.
+Such financial assets are written off either partially or in full if the likelihood of recovery is considered
+remote, which might be evidenced, for example, by the bankruptcy of a counterparty of such financial
+assets.
+Trade Receivables
+The default risk of our trade receivables is managed separately, mainly based on assessing the
+creditworthiness of customers through external ratings and on our past experience with the customers
+concerned. Based on this assessment, individual credit limits are established for each customer and
+deviations from such credit limits need to be approved by management.
+We apply the simplified impairment approach using a provision matrix for all trade receivables and
+contract assets to take into account any lifetime expected credit losses already at initial recognition.
+For the purpose of the provision matrix, customers are clustered into different risk classes, mainly
+based on market information such as the country risk assessment of their country of origin. Loss rates
+used to reflect lifetime expected credit losses are determined using a roll-rate method based on the
+probability of a receivable progressing through different stages of being overdue and on our actual
+credit loss experience over the past years. These loss rates are enhanced by forward-looking
+information to reflect differences between economic conditions during the period over which the
+historical data has been collected, current conditions, and the expected changes in the economic
+conditions over the expected life of the receivables. Forward-looking information is based on changes
+in country risk ratings, or fluctuations in credit default swaps of countries of the customers we do
+business with. We continuously monitor outstanding receivables locally to assess whether there is
+objective evidence that our trade receivables and contract assets are credit-impaired. Evidence that
+trade receivables and contract assets are credit-impaired include, among the trade receivables being
+past due, information about significant financial difficulty of the customer or non-adherence to a
+payment plan. Under extreme situations such as the current war situation in Ukraine, related account
+receivables and contract assets are critically assessed to determine whether they are credit-impaired.
+We consider receivables to be in default when the counterparty is unlikely to pay its obligations in full,
+However, a delay of payments (for example, more than 90 days past due) in the normal course of
+business alone does not necessarily indicate a customer default. We write off account balances either
+partially or in full if we judge that the likelihood of recovery is remote, which might be evidenced, for
+example, when bankruptcy proceedings for a customer are finalized or when all enforcement efforts
+have been exhausted.
+The impact of default on our trade receivables from individual customers is mitigated by our large
+customer base and its distribution across many different industries, company sizes, and countries
+worldwide. For more information about our trade receivables, see Note (A.2).
+226/324
+SAP
+Information
+SAP Integrated Report 2023
+Combined Management
+Stakeholders
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+Credit Risk Exposure
+To Our
+-503
+Additional
+Consolidated Financial
+Statements IFRS
+financial income, net
+1 For 2022 and 2021, a +/-10% increase and decrease was assumed.
+Most of our equity securities are within the venture-capital-related investment activities. For purposes
+of our equity price sensitivity disclosure, we benchmarked the historical average of public market
+returns of the NASDAQ and S&P 500 to the average annual venture capital benchmark returns over a
+12-year period, which is the assumed average holding period of venture capital funds. Overall, our
+analysis indicated a blended return range of +/- 22% in 2023.
+Credit Risk
+Credit Risk Factors
+To reduce the credit risk in investments, we arrange to receive rights to collateral for certain investing
+activities in the full amount of the investment volume, which we would be allowed to make use of only
+in the case of default of the counterparty to the investment. In the absence of other significant
+agreements to reduce our credit risk exposure, the total amounts recognized as cash and cash
+equivalents, current investments, loans, and other financial receivables, trade receivables, and
+derivative financial assets represent our maximum exposure to credit risks, except for the agreements
+mentioned above.
+Credit Risk Management
+Further Information about
+Sustainability
+Cash at Banks, Time Deposits, and Debt Securities
+To further reduce our credit risk, we require collateral for certain investments in the full amount of the
+investment volume, which we would be allowed to make use of in the case of default of the
+counterparty to the investment. As such collateral, we only accept bonds with at least investment-
+grade rating level.
+In addition, the concentration of credit risk that exists when counterparties are involved in similar
+activities by instrument, sector, or geographic area is further mitigated by diversification of
+counterparties throughout the world and adherence to an internal limit system for each counterparty.
+This internal limit system stipulates that the business volume with individual counterparties is
+225/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+To mitigate the credit risk from our investing activities and derivative financial assets, we conduct all our
+activities only with approved major financial institutions and issuers that carry high external ratings, as
+required by our internal treasury guideline. Among its stipulations, the guideline requires that we invest
+only in assets from issuers with a minimum rating of at least "BBB flat." We only invest in issuers with a
+lower rating in exceptional cases. Such investments were not material in 2023 and 2022. The weighted
+average rating of our financial assets is A. We pursue a policy of cautious investments characterized by
+predominantly current investments, standard investment instruments, as well as a wide portfolio
+diversification by doing business with a variety of counterparties.
+24
+26
+32
+1.73
+0
+1.45
+1.71
+1.76
+1.45
+From interest rate swaps
+1.10
+4.64
+4.64
+4.64
+4.64
+4.84
+4.88
+4.64
+Interest Rate Sensitivity
+4.64
+A sensitivity analysis is provided to show the impact of our interest rate risk exposure on profit or loss
+and equity in accordance with IFRS 7, considering the following:
+0
+interest-bearing cash)
+0.00
+0.00
+0.03
+0.04
+0.04
+0.03
+Cash flow interest rate risk
+From financing
+From investments (including
+4.70
+7.45
+3.26
+6.19
+5.83
+7.21
+4.87
+3.26
+Changes in interest rates only affect the accounting for non-derivative fixed-rate financial
+instruments if they are recognized at fair value. Therefore, such interest rate changes do not change
+the carrying amounts of our non-derivative fixed-rate financial liabilities, as we account for them at
+amortized cost. Investments in fixed-rate financial assets classified as fair value through profit or
+223/324
+SAP
+-58
+-11
+Interest rates -100bps for U.S. dollar area/-100bps for euro area (2022: -25/-10bps for
+U.S. dollar/euro area; 2021: -25/-20bps for U.S. dollar/euro area)
+Variable-rate financing
+40
+46
+5
+10
+-46
+Interest rates +100bps for U.S. dollar area/+100bps for euro area (2022: +75/+125bps for
+U.S. dollar/euro area; 2021: +75/+20bps for U.S. dollar/euro area)
+-14
++
+Interest rates -100bps for U.S. dollar area/-100bps for euro area (2022: -25/-10bps for
+U.S. dollar/euro area; 2021: -25/-20bps for U.S. dollar/euro area)
+Variable-rate investments
+0
+1
+3
+Interest rates +100bps for U.S. dollar area/+100bps for euro area (2022: +75/+125bps for
+U.S. dollar/euro area; 2021: +75/+20bps for U.S. dollar/euro area)
+0
+Interest rates +100bps for U.S. dollar area/+100bps for euro area (2022: +75/+125bps for
+U.S. dollar/euro area; 2021: +75/+20bps for U.S. dollar/euro area)
+Derivatives held within a designated fair value hedge relationship
+2021
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+-
+loss were not material at each year end reported. Thus, we do not consider any fixed-rate
+instruments in the equity-related sensitivity calculation.
+Income or expenses recorded in connection with non-derivative financial instruments with variable
+interest rates are subject to interest rate risk if they are not hedged items in an effective hedge
+relationship. Thus, we take into consideration interest rate changes relating to our variable-rate
+financing and our investments in money market instruments in the profit-related sensitivity
+calculation.
+The designation of interest rate receiver swaps in a fair value hedge relationship leads to interest
+rate changes affecting Financial income, net. The fair value movements related to the interest rate
+swaps are not reflected in the sensitivity calculation, as they offset the fixed interest rate payments
+for the bonds and private placements as hedged items. However, changes in market interest rates
+affect the amount of interest payments from the interest rate swap. As a consequence, we include
+those effects of market interest rates on interest payments in the profit-related sensitivity
+calculation.
+If, on December 31, 2023, 2022, and 2021, interest rates had been higher/lower this would have had
+the following effects on Financial income, net.
+Interest Rate Sensitivity
+€ millions
+Effects on Financial Income, Net
+2023
+2022
+0.00
+SAP
+0
+0
+0
+-3,087
+-88
+-88
+-5,156
+7,212
+-88
+-2,154
+5,311
+Total financial instruments, net
+-88
+FVTPL
+FX forward contracts
+Not designated as hedging instrument
+-753
+-753
+-753
+AC
+-422
+-422
+-422
+-422
+Derivatives
+4,886 -3,357
+Designated as hedging instrument
+Interest rate swaps
+-9
+-753
+-9
+-9
+-9
+FX forward contracts
+1 We do not separately disclose the fair value for cash and cash equivalents, trade receivables, and accounts payable as their carrying amounts are a reasonable approximation of
+their fair values.
+2 Since the line items Trade receivables, Trade payables, and Other financial assets contain both financial and non-financial assets or liabilities (such as other taxes or advance
+payments), the carrying amounts of non-financial assets or liabilities are shown to allow a reconciliation to the corresponding line items in the Consolidated Statements of Financial
+Position.
+3 For lease liabilities, separate disclosure of fair value is not required.
+Fair Values of Financial Instruments by Instrument Classification
+-8,454
+-8,454
+AC
+-66
+-66
+FVTPL
+At amortized cost
+At fair value through profit or loss
+Financial liabilities
+14,873
+14,873
+AC
+At amortized cost
+7,502
+122
+122
+FVOCI
+Fair Values of Financial Instruments by Instrument Classification
+€ millions
+Financial assets
+12/31/2023
+Category
+At
+Other non-derivative financial liabilities
+At
+Amortized Cost
+Fair Value
+At fair value through profit or loss
+FVTPL
+7,502
+At fair value through other comprehensive income
+Carrying Amount
+€ millions
+-2,140
+Lease liabilities³
+Stakeholders
+To Our
+SAP Integrated Report 2023
+SAP
+232/324
+5
+5
+5
+5
+FVTPL
+Call option on equity shares
+payments
+0
+0
+0
+0
+FVTPL
+33
+33
+0
+0
+0
+Interest rate swaps
+Combined Management
+Report
+Not designated as hedging instrument
+FVTPL
+30
+30
+30
+30
+Call options for share-based
+FX forward contracts
+-2,140
+Consolidated Financial
+Statements IFRS
+Additional
+Information
+-383
+-383
+-405
+-405
+AC
+Private placements
+-9,229
+-928
+-8,301
+-9,083
+-9,083
+AC
+Bonds
+-1,456
+-1,456
+-1,456
+-1,456
+Liabilities
+Trade and other payables
+Trade payables¹
+Other payables²
+Financial liabilities
+-2,226
+Further Information about
+Sustainability
+AC
+-1,496
+-730
+-14,355
+Non-derivative financial liabilities
+Loans
+AC
+-1,496
+Financial assets
+12/31/2022
+Category
+To Our
+Stakeholders
+SAP Integrated Report 2023
+SAP
+234/324
+ΝΑ
+ΝΑ
+Market approach. Venture capital
+method evaluating a variety of
+quantitative and qualitative factors
+such as actual and forecasted
+results, cash position, recent or
+planned transactions, and market
+comparable companies.
+The estimated fair value
+would increase (decrease) if:
+Reported net asset value of
+respective fund would be
+higher (lower)
+-the overall company value
+would be higher (lower)
+-the respective analyzed
+share class would be
+affected by this change due
+to its rights and preferences
+round would increase
+(decrease)
+- Price of latest financing
+The estimated fair value
+would increase (decrease) if:
+- The imminent exit value
+increases (decreases)
+- Estimated time to exit
+increases (decreases)
+- Volatility assumptions were
+higher(lower)
+- Weighting of financing
+rounds changes
+- Different financing rounds
+are selected
+Last financing round valuations
+Net asset value/fair market value as
+reported by the respective funds
+Peer companies used
+(revenue multiples range
+from 1.0 to 17.5)
+Revenues of investees
+Discounts for lack of
+marketability (10% to
+30%)
+- Nature and selection of
+financing rounds
+- Weighting of financings
+rounds
+- Discounts for lack of
+marketability
+Combined Management
+Report
+- Weighting of equity
+allocation method such as
+option pricing model and
+common stock equivalent
+model
+- Imminent exit value
+Nature and pricing
+indication of latest
+financing round
+Net asset value
+calculations of the
+respective funds
+The estimated fair value
+would increase (decrease) if:
+-The revenue multiples
+were higher (lower)
+- The investees' revenues
+were higher (lower)
+- The liquidity discounts
+were lower (higher)
+The estimated fair value
+would increase (decrease) if:
+- Volatility assumptions
+- Estimated time to exit
+Market approach. Venture capital
+method evaluating a variety of
+quantitative and qualitative factors
+such as actual and forecasted
+results, cash position, recent or
+planned transactions, and market
+comparable companies.
+Consolidated Financial
+Statements IFRS
+Other financial assets/ Financial liabilities
+The following table shows the reconciliation of fair values from the opening to the closing balances for
+our unlisted equity securities and call options on equity shares, as well as the deal contingent forward
+from our net investment hedge classified as Level 3 fair values:
+Level 3 Fair Value Disclosures
+Transfers of equity securities from Level 2 to Level 1, which occurred because disposal restrictions
+lapsed and deducting a discount for such restriction was no longer necessary, did not take place in
+2023 (2022: €93 million), while transfers from Level 1 to Level 2 did not occur at all.
+Transfers Between Levels 1 and 2
+For other non-derivative financial assets/liabilities and variable rate financial debt, it is assumed that
+their carrying value reasonably approximates their fair values.
+Future cash outflows for fixed interest and principal are
+discounted over the term of the respective contracts using
+the market interest rates as at the reporting date.
+Level 2
+Fixed-rate private placements/loans
+(financial liabilities)
+Discounted cash flows
+Quoted prices in an active market
+Level 1
+Fixed-rate bonds (financial liabilities)
+Determination of Fair Value/Valuation Technique
+Fair Value Hierarchy
+Туре
+Financial liabilities
+Financial Instruments Not Measured at Fair Value
+FX forward contracts Level 2
+Deal contingent
+forward
+Level 3
+Interest rate swaps
+Level 2
+Discounted cash flow using par
+method. Expected future cash
+flows based on forward exchange
+rates are discounted over the
+respective remaining term of the
+contracts using the respective
+deposit interest rates and spot
+rates.
+Further Information about Additional
+Sustainability
+Information
+Discounted cash flow. Expected
+future cash flows are estimated
+based on forward interest rates
+from observable yield curves and
+contract interest rates, discounted
+at a rate that reflects the credit risk
+of the counterparty.
+NA
+NA
+Deal contingent premium
+as percentage of the
+equivalent at-the-money-
+forward option
+The estimated fair value
+would increase (decrease) if:
+-the uncertainty of the deal
+and thus the deal
+contingency premium would
+decrease (increase)
+ΝΑ
+ΝΑ
+Discounted cash flow. Expected
+future cash flows are estimated
+based on forward interest rates
+from observable yield curves and
+contract interest rates, discounted
+at a rate that reflects the credit risk
+of the counterparty.
+33
+Market approach. Comparable
+company valuation using revenue
+multiples derived from companies
+comparable to the investee.
+Call option on equity
+shares
+Stakeholders
+Combined Management
+To Our
+SAP Integrated Report 2023
+SAP
+233/324
+-12,862
+-12,862
+AC
+-88
+-88
+FVTPL
+At amortized cost
+At fair value through profit or loss
+Financial liabilities
+12,847
+12,847
+At
+Carrying Amount
+Amortized Cost
+At
+Fair Value
+At fair value through profit or loss
+FVTPL
+Report
+8,028
+FVOCI
+0
+8,028
+0
+At amortized cost
+AC
+At fair value through other comprehensive income
+Level 3
+Consolidated Financial
+Statements IFRS
+Additional
+Level 3
+Unlisted equity
+securities
+NA
+NA
+NA
+NA
+ΝΑ
+ΝΑ
+Quoted prices in an active market
+Quoted prices in an active market
+Quoted prices in an active market
+deducting a discount for the
+disposal restriction derived from
+the premium for a respective put
+option.
+Level 2
+Listed equity
+securities
+Level 1
+Level 1
+Debt securities
+similar funds
+NA
+ΝΑ
+Information
+Determination of Fair Values
+A description of the valuation techniques and the inputs used in the fair value measurement is given
+below:
+Financial Instruments Measured at Fair Value on a Recurring Basis
+Other financial assets
+Type
+Further Information about
+Sustainability
+Fair Value
+Hierarchy
+Significant Unobservable
+Inputs
+Interrelationship Between
+Significant Unobservable
+Inputs and Fair Value
+Measurement
+Money-market and
+Level 1
+Quoted prices in an active market
+Determination of Fair
+Value/Valuation Technique
+0
+33
+FX forward contracts
+33
+Not designated as hedging instrument
+Interest rate swaps
+FX forward contracts
+Designated as hedging instrument
+Derivative assets
+300
+300
+300
+300
+AC
+Loans and other financial receivables
+benefit plans²
+244
+0
+Financial instruments related to employee
+3,021
+3,021
+3,021
+AC
+Time deposits
+135
+-
+Investments in associates²
+4,967
+4,811
+0
+156
+4,967
+4,967
+3,021
+33
+33
+33
+Stakeholders
+To Our
+SAP Integrated Report 2023
+SAP
+Other payables²
+Trade payables¹
+231/324
+-1,822
+Trade and other payables
+Liabilities
+5
+5
+5
+5
+FVTPL
+Call option on equity shares
+payments
+0
+0
+0
+FX forward contracts
+FVTPL
+52
+FVTPL
+52
+52
+Call options for share-based
+FVTPL
+0
+0
+0
+52
+Equity securities
+129
+129
+Assets
+Fair Value
+Amortized Cost
+Total
+Level 3
+Level 2
+Level 1
+At
+At
+Carrying
+Amount
+Measurement Categories
+Category
+Fair Value
+12/31/2023
+€ millions
+Fair Values of Financial Instruments and Classification Within the Fair Value Hierarchy
+We use various types of financial instruments in the ordinary course of business, which are classified as
+either amortized cost (AC), fair value through other comprehensive income (FVOCI), or fair value
+through profit or loss (FVTPL). For those financial instruments measured at fair value or for which fair
+value must be disclosed, we have categorized the financial instruments into a three-level fair value
+hierarchy depending on the inputs used to determine fair value and their significance for the valuation
+techniques.
+SAP
+SAP Integrated Report 2023
+To Our
+Combined Management
+Stakeholders
+Report
+Cash and cash equivalents
+Consolidated Financial
+Statements IFRS
+Additional
+Information
+(F.2) Fair Value Disclosures on Financial Instruments
+Level Transfers
+It is our policy that transfers between the different levels of the fair value hierarchy are deemed to have
+occurred at the beginning of the period of the event or change in circumstances that caused the
+transfer.
+Fair Value of Financial Instruments
+Further Information about
+Sustainability
+Combined Management
+Report
+8,124
+AC
+129
+129
+AC
+Debt securities
+8,887
+Other financial assets
+628
+Other receivables²
+122
+122
+122
+FVOCI
+Trade receivables¹
+5,775
+5,775
+AC
+Trade receivables¹
+3,369
+3,369
+Time deposits¹
+AC
+2,277
+2,277
+Cash at banks¹
+Money market and similar funds
+2,478
+2,478
+2,478
+2,478
+Trade and other receivables
+6,525
+FVTPL
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+629
+Other receivables²
+FVOCI
+Trade receivables¹
+5,776
+5,776
+AC
+Trade receivables¹
+6,405
+Trade and other receivables
+2,855
+2,855
+2,855
+2,855
+FVTPL
+Money market and similar funds
+2,976
+Level 1
+Level 2
+Level 3
+Total
+Assets
+Cash and cash equivalents
+Other financial assets
+9,008
+AC
+3,176
+3,176
+Time deposits¹
+AC
+2,976
+Cash at banks¹
+At
+Fair Value
+6,479
+AC
+Designated as hedging instrument
+Derivative assets
+233
+233
+233
+233
+AC
+Loans and other financial receivables
+employee benefit plans²
+203
+Financial instruments related to
+654
+654
+654
+654
+AC
+Time deposits
+32
+32
+32
+32
+Equity securities
+FVTPL
+Debt securities
+5,138
+258
+0
+4,880
+5,138
+Investments in associates²
+151
+5,138
+235/324
+Amount Amortized Cost
+Carrying
+AC
+Other non-derivative financial liabilities
+-1,621
+-1,621
+Lease liabilities³
+-374
+-374
+-388
+-388
+AC
+Private placements
+-7,005
+0
+-7,005
+-6,780
+-6,780
+AC
+AC
+-1,022
+-1,022
+-800
+-9,676
+Financial liabilities
+-263
+Non-derivative financial liabilities
+AC
+0
+0
+0
+0
+Bonds
+Loans
+At
+-263
+-263
+Fair Value
+Measurement Categories
+Category
+12/31/2022
+Fair Values of Financial Instruments and Classification Within the Fair Value Hierarchy
+2,720
+4,816
+2,268
+-4,242
+7,034
+4,798
+12,038
+-66
+-66
+-66
+-66
+FVTPL
+Derivative liabilities
+Designated as hedging instrument
+FX forward contracts
+Interest rate swaps
+-20
+-537
+-20
+-263
+-20
+-537
+-537
+-537
+Not designated as hedging instrument
+FX forward contracts
+Total financial instruments, net
+-20
+SAP
+-Weighting of the applied
+equity allocation methods
+changes
+To Our
+The outcome of litigation and claims is intrinsically subject to considerable uncertainty. Management's
+view of these matters may also change in the future. Actual outcomes of litigation and claims may differ
+from the assessments made by management in prior periods, which could result in a material impact
+on our business, financial position, profit, cash flows, or reputation. Most of the lawsuits and claims are
+of a very individual nature and claims are either not quantified by the claimants or the claim amounts
+237/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+quantified are, based on historical evidence, not expected to be a good proxy for the expenditure that
+would be required to resolve the case concerned. The specifics of the jurisdictions where most of the
+claims are located further impair the predictability of the outcome of the cases. Therefore, it is typically
+not practicable to reliably estimate the financial effect that these lawsuits and claims would have if
+SAP were to incur expenditure for these cases.
+Further, the expected timing of any resulting outflows of economic benefits from these lawsuits and
+claims is typically uncertain and not estimable, as it depends generally on the duration of the legal
+proceedings and settlement negotiations required to resolve them.
+The policies outlined in Note (A.4) for customer-related provisions, which include provisions for
+customer-related litigation cases and claims, equally apply to our other litigation, claims, and legal
+contingencies disclosed in this Note.
+We are subject to a variety of claims and lawsuits that arise from time to time in the ordinary course of
+our business, including proceedings and claims that relate to companies we have acquired. We will
+continue to vigorously defend against all claims and lawsuits against us. The provisions recorded for
+these claims and lawsuits as at December 31, 2023, are neither individually nor in the aggregate
+material to SAP.
+Intellectual Property-Related Litigation and Claims
+Intellectual property-related litigation and claims are cases in which third parties have threatened or
+initiated litigation claiming that SAP violates one or more intellectual property rights that they possess.
+Such intellectual property rights may include patents, copyrights, and other similar rights.
+Contingent liabilities exist from intellectual property-related litigation and claims for which no provision
+has been recognized. Generally, it is not practicable to estimate the financial impact of these
+contingent liabilities due to the uncertainties around the litigation and claims, as outlined above. Based
+on our past experience, most of the intellectual property-related litigation and claims tend to be either
+dismissed in court or settled out of court for amounts significantly below the originally claimed
+amounts. We currently believe that resolving the intellectual property-related claims and lawsuits
+pending as at December 31, 2023, will neither individually nor in the aggregate have a material adverse
+effect on our business, financial position, profit, or cash flows.
+Individual cases of intellectual property-related litigation and claims include the following:
+In June 2018, Teradata Corporation, Teradata US, Inc. and Teradata Operations, Inc. (collectively
+"Teradata") filed a civil lawsuit against SAP SE, SAP America, Inc., and SAP Labs, LLC in U.S. federal court
+in California. Teradata alleged that SAP had misappropriated trade secrets of Teradata, had infringed
+Teradata's copyrights (this claim was subsequently withdrawn by Teradata), and had violated U.S.
+antitrust laws. Teradata sought unspecified monetary damages and injunctive relief. In 2019, SAP
+asserted patent infringement counterclaims against Teradata seeking monetary damages and
+injunctive relief. In 2020, Teradata initiated a second civil lawsuit against SAP asserting patent
+infringement, seeking monetary damages and injunctive relief; in February 2021, SAP filed patent
+infringement counterclaims against Teradata in this second U.S. lawsuit as well as a civil lawsuit against
+Teradata in Germany asserting patent infringement, seeking monetary damages and injunctive relief.
+Currently, all claims between the parties have been dismissed. Teradata has appealed the dismissal of
+its trade secret and antitrust claims; this appeal is expected to be completed by late 2024.
+Tax-Related Litigation
+We are subject to ongoing audits by domestic and foreign tax authorities. In respect of non-income
+taxes, we are involved in various proceedings with only a few foreign tax authorities regarding
+assessments and litigation matters on intercompany royalty payments and intercompany services. The
+total potential amount in dispute related to these matters for all applicable years is approximately
+€416 million (2022: €344 million). We have not recorded a provision for these matters, as we believe
+that we will prevail.
+For more information about our income tax-related litigation, see Note (C.5).
+238/324
+SAP
+SAP Integrated Report 2023
+To Our
+Among the claims and lawsuits disclosed in this Note are the following classes:
+Uncertainty in Context of Legal Matters
+This Note discloses information about intellectual property-related litigation and claims, tax-related
+litigation other than income tax-related litigation (see Note (C.5)), and anti-bribery matters.
+Other Litigation, Claims, and Legal Contingencies
+Non-
+Current
+Total
+Current Non-Current
+Total
+Other tax liabilities
+871
+0
+871
+662
+0
+662
+Other non-financial liabilities
+5,648
+698
+6,346
+4,818
+705
+5,523
+Other tax liabilities as % of 44 Other non-
+financial liabilities
+15
+0
+14
+14
+0
+12
+Other tax liabilities primarily consist of VAT, payroll tax, sales tax, and withholding tax.
+(G.3)
+Combined Management
+Stakeholders
+Report
+Consolidated Financial
+Statements IFRS
+Juergen Mueller
+Chief Technology Officer
+Technology & Innovation
+Technology and Innovation Strategy, SAP Business Technology Platform including Data Management,
+Analytics and Planning, Integration, Application Development Capabilities, Global Security
+Scott Russell
+Customer Success
+Global Field Organization including Sales, Services, Partner Ecosystem, Customer Engagement,
+Working Capital Management
+Thomas Saueressig
+Global Responsibility for all SAP Business Software Applications, Cloud Operations and Support,
+Cross-Development Functions, SAP Enterprise Adoption Organization, Emarsys
+Board of Directors, Nokia Corporation, Espoo, Finland
+Gina Vargiu-Breuer (from February 1, 2024)
+People & Culture, Labor Relations Director
+Julia White
+Chief Marketing and Solutions Officer
+Global Marketing, Corporate Communications, Government Affairs
+Executive Board Members Who Left During 2023
+Luka Mucic (until March 31, 2023)
+Supervisory Board
+Memberships on supervisory boards and other comparable governing bodies of enterprises, other
+than subsidiaries of SAP, on December 31, 2023
+Prof. Dr. h. c. mult. Hasso Plattner 2, 4, 6, 8
+Chairperson
+Lars Lamadé¹, 2, 4, 8
+Deputy Chairperson
+Head of Global Sponsorships
+Supervisory Board, Rhein-Neckar Loewen GmbH, Kronau, Germany
+240/324
+SAP Integrated Report 2023
+Information
+Current
+Additional
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+Anti-Bribery Matters
+SAP has received communications and whistleblower information alleging conduct that may violate
+anti-bribery laws in the United States (including the U.S. Foreign Corrupt Practices Act (FCPA)) and in
+other countries. SAP's Office of Ethics & Compliance (OEC) conducted investigations with the
+assistance of an external law firm and voluntarily advised the U.S. Securities and Exchange
+Commission (U.S. SEC), the U.S. Department of Justice (U.S. DOJ), and local authorities where potential
+violations were investigated. In early January 2024, following comprehensive and exhaustive
+investigations, dialogue, and corresponding remediation activities, SAP entered into final settlement
+agreements with U.S. SEC and U.S. DOJ, as well as with local authorities and parties in South Africa, to
+resolve criminal and civil claims fully and finally against SAP. Under these agreements, SAP is required
+to make payments amounting to €207 million. As a consequence, as at December 31, 2023, provisions
+for fines in regulatory compliance matters totaling €155 million (December 31, 2022: €0 million,
+June 30, 2023: €170 million) were recognized in our Consolidated Financial Statements as well as
+repayments to customers, for which revenue recognized from contracts with customers have been
+reversed. A considerable portion of these repayments to customers was eligible to be credited against
+the fines incurred in the regulatory compliance matters. Immaterial amounts were already paid in 2022.
+The remaining payments will be made to a large extent within the first half of 2024.
+(G.4) Board of Directors
+Executive Board
+Memberships on supervisory boards and other comparable governing bodies of enterprises, other
+than subsidiaries of SAP, on December 31, 2023
+Christian Klein
+Chief Executive Officer
+Strategy & Operations, Corporate Development, Sustainability, Business Al, and Compliance
+Supervisory Board, adidas AG, Herzogenaurach, Germany
+Dominik Asam (from March 7, 2023)
+Chief Financial Officer
+Global Finance and Administration including Legal, Investor Relations, Internal Audit, Data Protection &
+Export Control
+Supervisory Board, Bertelsmann Management SE and Bertelsmann SE & Co. KGaA, Guetersloh,
+Germany
+Sabine Bendiek (until December 31, 2023)
+Chief People & Operating Officer, Labor Relations Director
+HR Strategy, Business Transformation, Leadership Development, Talent Development
+Supervisory Board, Schaeffler AG, Herzogenaurach, Germany
+239/324
+SAP
+SAP Integrated Report 2023
+To Our
+Combined Management
+Stakeholders
+Report
+Further Information about
+Sustainability
+€ millions
+SAP Product Engineering
+2023
+0
+417
+-43
+0
+-101
+0
+91
+Settlements
+Gains/losses
+Included in financial income, net
+-219
+-106
+522
+-789
+Included in exchange differences in other comprehensive
+income
+-164
+15
+337
+0
+12/31
+Change in unrealized gains/losses in profit or loss for equity
+investments held at the end of the reporting period
+4,817
+0
+4,883
+0
+532
+0
+-8
+0
+-25
+Stakeholders
+2022
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+Reconciliation of Level 3 Fair Values
+€ millions
+1/1
+Transfers
+Into Level 3
+Purchases
+Sales
+2023
+2022
+Unlisted Equity
+Securities and Call
+Options on Equity
+Deal Contingent
+Forward
+Shares
+4,883
+Unlisted Equity
+Securities and Call
+Options on Equity
+Shares
+Deal Contingent Forward
+0
+4,881
+0
+0
+0
+9
+0
+-788
+Out of Level 3
+Transfers out of Level 3 are due to initial public offerings of the respective investees or distributions in
+kind in the form of listed investees. Changing the unobservable inputs to reflect reasonably possible
+alternative assumptions would not have a material impact on the fair values of our unlisted equity
+securities held as FVTPL as at the reporting date.
+33
+274
+244
+49
+293
+1,085
+419
+1,504
+1,072
+561
+1,633
+Other non-financial assets
+2,374
+3,573
+5,947
+2,139
+3,580
+5,719
+Prepaid expenses and other tax assets
+as % of Other non-financial assets
+12
+25
+50
+16
+29
+(G.2) Other Tax Liabilities
+0
+Prepaid expenses primarily consist of prepayments for hyperscalers, support services, and software
+royalties. Other tax assets primarily consist of value-added tax (VAT).
+241
+Total
+46
+1,340
+SAP Integrated Report 2023
+Other tax assets
+236/324
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+SAP
+Additional
+Information
+Section G - Other Disclosures
+This section provides additional disclosures on miscellaneous topics, including information pertaining
+to the Executive Board, the Supervisory Board, related party transactions, and other corporate
+governance topics.
+(G.1) Prepaid Expenses and Other Tax Assets
+2023
+2022
+Further Information about
+Sustainability
+Current
+€ millions
+1,230
+386
+844
+512
+Total
+Non-
+Current
+Prepaid expenses
+Current
+Total
+Non-
+Current
+828
+CEO, MiraclePlus Ltd., Beijing, China
+Dr. Qi Lu4,7,8
+Board of Directors, Full Truck Alliance Co. Ltd., Nanjing, Jiangsu, China, and Cayman Islands
+Chairperson of the Board of Directors, Pine Field Holding Limited, Cayman Islands
+Chairperson of the Board of Directors, Pine Field Holding Limited, Hong Kong, China
+Chairperson of the Board of Directors, Pine Field Ltd., Beijing, China
+Gerhard Oswald 3, 4, 7
+Managing Director of Oswald Consulting GmbH, Walldorf, Germany
+Advisory Board, TSG 1899 Hoffenheim Fußball-Spielbetriebs GmbH, Sinsheim, Germany
+Advisory Board, appliedAI Initiative GmbH, Munich, Germany (from January 1, 2024)
+Board of Directors, Pinduoduo Inc., Shanghai, China
+Stakeholders
+SAP
+SAP Integrated Report 2023
+To Our
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+Vice President, Global Head of SAP Women in Tech
+Christine Regitz¹, 2, 4, 5
+241/324
+Board of Directors, Kone Oy, Espoo, Finland (until February 28, 2023)
+Margret Klein-Magar 1, 2, 3, 4
+General Partner of Changcheng Investment Partners, Beijing, China
+Combined Management
+Stakeholders
+To Our
+Supervisory Board, Schloss Dagstuhl - Leibniz Center for Informatics, Wadern, Germany
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+Manuela Asche-Holstein³, 7, 8
+Industry Advisor Expert, SAP Germany SE & Co. KG, Walldorf, Germany
+Aicha Evans², 4, 6, 7
+Chief Executive Officer and Member of the Board of Directors, Zoox, Inc., Foster City, CA, United States
+Board of Directors, Joby Aviation LLC, Santa Cruz, CA, United States
+Vice President, Head of SAP Alumni Relations
+Chairperson of the Spokespersons' Committee of Senior Managers of SAP SE
+Monika Kovachka-Dimitrova 1, 2, 4, 7
+Chief Operations Expert
+Member of the SAP SE Works Council (Europe)
+Peter Lengler 1, 3, 7, 8
+Value Advisor Expert
+Member of the SAP Germany SE & Co. KG Works Council
+Jennifer Xin-Zhe Li³,5
+Board of Directors, ABB Ltd., Zurich, Switzerland
+Supervisory Board, HV Capital Manager GmbH, Munich, Germany
+To Our
+Independent Management Consultant
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+4 Member of the Company's Technology and Strategy Committee
+5 Member of the Company's Finance and Investment Committee
+6 Member of the Company's Nomination Committee
+7 Member of the Company's People and Culture Committee
+8 Member of the Company's Go-To-Market and Operations Committee
+Stakeholders
+(G.5) Executive and Supervisory Board Compensation
+The share-based payment amounts disclosed below in the table "Executive Board Compensation" are
+based on the grant date fair value of the share units in the respective year. In 2023, 2022, and 2021,
+share units were issued to the Executive Board members under the LTI 2020. For more information
+about the terms and details of this plan, see Note (B.3).
+In the table "Share-Based Payment for Executive Board Members,” the share-based payment expense
+is the amount recorded in profit or loss under IFRS 2 (Share-Based Payment) in the respective period.
+The total compensation of the Executive Board members for each of the years 2023, 2022, and 2021
+was as follows:
+Executive Board Compensation
+€ thousands
+Short-term employee benefits
+Share-based payment
+Subtotal
+SAP Integrated Report 2023
+Post-employment benefits
+Thereof defined-benefit
+Accounting Policy
+Combined Management
+SAP Integrated Report 2023
+SAP
+Dr. Friederike Rotsch 2, 3, 6, 7
+General Counsel, Deutsche Bank AG, Frankfurt am Main, Germany
+Heike Steck¹, 2, 4, 5, 7
+Senior Operations Manager
+Member of the SAP SE Works Council and Member of the SAP SE Works Council (Europe)
+Helmut Stengele
+On Early Retirement, SAP Germany SE & Co. KG, Walldorf, Germany
+Dr. Rouven Westphal², 4, 5, 6,8
+Member of the Executive Board of the Hasso Plattner Foundation, Potsdam, Germany, and Managing
+Director of the General Partner of HPC Germany GmbH & Co. KG, Potsdam, Germany
+Advisory Board, Sharks Sports & Entertainment LLC, San José, CA, United States
+Dr. Gunnar Wiedenfels 2, 3, 5, 6
+Chief Financial Officer, Warner Bros. Discovery, Inc., New York, NY, United States
+Board of Directors, OWN LLC, West Hollywood, CA, United States
+Board of Directors, Speechagain, Inc., New York, NY, United States
+James Wright 1, 3, 5, 8
+Member of the SAP SE Works Council (Europe)
+Supervisory Board Members Who Left During 2023
+Prof. Dr. Gesche Joost (until May 11, 2023)
+Professor for Design Research and Head of the Design Research Lab, Berlin University of the Arts
+1 Appointed by the SAP SE Works Council (Europe)
+2 Member of the Company's Personnel and Governance Committee
+3 Member of the Company's Audit and Compliance Committee
+242/324
+Dr. h. c. Punit Renjen (from May 11, 2023)
+SAP
+In 2024, SAP will further increase its focus on key strategic growth areas, in particular business Al. It also
+intends to transform its operational setup to capture organizational synergies, and Al-driven
+efficiencies and prepare the Company for highly scalable future revenue growth.
+10
+290
+Total
+The additions relate to legal entities added in connection with acquisitions and foundations. The
+disposals are mainly due to mergers, liquidations, and divestitures of legal entities.
+12/31/2023
+Disposals
+Additions
+12/31/2022
+Disposals
+Additions
+12/31/2021
+26
+Entities Consolidated in the Financial Statements
+(G.9) Scope of Consolidation; Subsidiaries and Other Equity
+On February 14, 2024, the first tranche of the share repurchase program launched in 2023 was
+completed with a total volume of €1,011 million. For the volume processed until December 31, 2023,
+and for more information, see Note (E.2).
+SAP Completes First Tranche of Share Repurchase Program
+On February 11, 2024, the Supervisory Board of SAP SE nominated Pekka Ala-Pietilä as a new member
+of the Supervisory Board and proposes Pekka Ala-Pietilä as the designated successor to Chairman
+Hasso Plattner. Pekka Ala-Pietilä will stand for election for a two-year term at the next Annual General
+Meeting and, if elected, will assume the role of chair. Punit Renjen has chosen to resign his mandate on
+the SAP Supervisory Board with effect from the end of SAP's Annual General Meeting on May 15, 2024.
+The Supervisory Board of SAP SE nominates Pekka Ala-Pietilä as new member
+of the Supervisory Board
+Restructuring expenses are preliminarily projected at around €2 billion, the vast majority of which is
+expected to be recognized in the first half of 2024, impacting IFRS operating profit. Excluding
+restructuring expenses, the program is expected to provide only a minor cost benefit in 2024.
+Expected cost savings and re-investments are fully reflected in SAP's 2024 outlook and the updated
+2025 non-IFRS operating profit- and free cash flow ambition.
+To this end, and to ensure that SAP's skill set and resources continue to meet future business needs,
+SAP will execute a Company-wide restructuring program in 2024. The majority of the approximately
+8,000 affected positions is expected to be covered by voluntary leave programs and internal re-skilling
+measures. Reflecting re-investments into strategic growth areas, SAP expects to exit 2024 at a
+headcount similar to current levels.
+Transformation Program 2024: Focus on Scalability of Operations and Key
+Strategic Growth Areas
+Information
+Additional
+Investments
+Further Information about
+Sustainability
+-28
+12
+Footnote
+Thereof defined-contribution
+Number of
+Employees as at
+12/31/20233
+Total Equity as
+at 12/31/20232
+Profit/Loss
+(-) After Tax
+for 2023²
+in 2023²
+Total Revenue
+Owner-
+ship
+Name and Location of Company
+Additional
+Information
+288
+Further Information about
+Sustainability
+Combined Management
+Report
+Stakeholders
+To Our
+SAP Integrated Report 2023
+SAP
+Major Subsidiaries
+Subsidiaries¹
+246/324
+235
+-65
+Consolidated Financial
+Statements IFRS
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+To Our
+Stakeholders
+0
+0
+0
+0
+0
+0
+0
+0
+0
+7
+0
+5
+10
+7
+3
+1
+1
+0
+12
+8
+3
+14
+2
+0
+0
+0
+SAP Integrated Report 2023
+SAP
+245/324
+In early January 2024, following exhaustive investigations, dialogue, and corresponding remediation
+activities, SAP entered into final settlement agreements with the U.S. SEC and U.S. DOJ, as well with as
+local authorities and parties in South Africa, to resolve criminal and civil claims fully and finally against
+SAP. For more information, see Note (G.3).
+Settlement to Resolve Criminal and Civil Claims in United States and
+South Africa Fully and Finally Against SAP
+On January 9, 2024, SAP announced several organizational changes. Muhammad Alam was appointed
+a member of the Executive Board effective April 1, 2024, and a new Board area called Customer
+Services & Delivery will be formed under the leadership of Thomas Saueressig. The announced
+organizational changes might result in a change in SAP's operating segments.
+Organizational Changes
+(G.8) Events After the Reporting Period
+Audit fees are the aggregate fees charged by BDO for auditing our consolidated financial statements
+and the statutory financial statements of SAP SE and its subsidiaries. The increase in audit fees for
+BDO AG is due to a centralized audit approach. Further, BDO Germany has engaged local BDO
+network firms to audit financial information of subsidiaries as part of the audit of our consolidated
+financial statements. Audit-related fees are fees charged by BDO for assurance and related services
+that are reasonably related to the performance of the audit and for service organization attestation
+procedures.
+19
+13
+6
+24
+17
+7
+864,453
+6
+8
+0
+0
+0
+0
+0
+4
+Termination Benefits
+ΝΑ
+2023
+5
+NA
+NA
+financial support provided
+Outstanding balances at year end
+ΝΑ
+ΝΑ
+0
+0
+0
+7
+0
+-18
+(Vendors)
+Outstanding balances at year end
+ΝΑ
+NA
+0
+0
+0
+0
+0
+-6
+4
+ΝΑ
+ΝΑ
+2022
+2023
+2022
+Products and services provided
+NA
+ΝΑ
+0
+0
+0
+1
+ΝΑ
+13
+Products and services received
+ΝΑ
+21
+21
+3
+4
+110
+113
+Sponsoring and other
+ΝΑ
+11
+(Customers)
+Commitments at year end
+ΝΑ
+At the Annual General Meeting of Shareholders held on May 18, 2022, our shareholders elected
+BDO AG Wirtschaftsprüfungsgesellschaft (BDO) as SAP's independent auditor for 2023. BDO has been
+the Company's principal auditor since the fiscal year 2023. Dr. Jens Freiberg has signed as auditor
+responsible for the audit of the financial reporting and the group reporting of SAP SE since the fiscal
+year 2023.
+For prior fiscal years since 2002, KPMG AG Wirtschaftsprüfungsgesellschaft was the Company's
+principal auditor and Bodo Rackwitz signed as auditor responsible for the audit of the financial
+reporting and the group reporting of SAP SE for the years 2018 to 2022.
+BDO and other firms in the global BDO network charged the following fees to SAP for audit and other
+professional services related to 2023 (KPMG for previous years):
+2023
+2022
+2021
+BDO AG
+Foreign
+Total
+(Germany)
+Principal Accountant Fees and Services
+BDO Firms
+Foreign
+KPMG AG
+Foreign
+Total
+Total
+(Germany) KPMG Firms
+8
+5
+13
+%
+KPMG AG
+(Germany) KPMG Firms
+(G.7)
+All of these balances are unsecured and interest-free and settlement is expected to occur in cash.
+For information about the compensation of our Executive Board and Supervisory Board members, see
+Note (G.5).
+Information
+ΝΑ
+0
+0
+422
+51
+ΝΑ
+ΝΑ
+1 Including services from employee representatives on the Supervisory Board in their capacity as employees of SAP
+2 The longest of these commitments is five years.
+244/324
+€ millions
+Audit fees
+Audit-related fees
+Tax fees
+All other fees
+Total
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+2023
+Total
+2022
+2022
+Share-Based Payment for Executive Board Members
+2023
+2022
+2021
+Number of share units granted
+Total expense in € thousands
+214,530
+36,127
+205,965
+9,986
+238,428
+6,356
+50,574
+The defined benefit obligation (DBO) for pensions to Executive Board members and the annual
+pension entitlement of the members of the Executive Board on reaching age 62 based on entitlements
+from performance-based and salary-linked plans were as follows:
+€ thousands
+2023
+2022
+2021
+DBO 12/31
+2,192
+1,462
+3,435
+Annual pension entitlement
+137
+Retirement Pension Plan for Executive Board Members
+114
+41,453
+NA
+2022
+2021
+19,632
+12,556
+25,015
+24,469
+20,726
+25,095
+44,101
+33,282
+45,134
+50,110
+-1,429
+464
+673
+-1,433
+461
+360
+4
+3
+NA
+9,600
+1,033
+108
+243/324
+SAP
+2023
+2022
+2021
+Payments
+2,329
+2,217
+2,159
+DBO 12/31
+33,251
+31,217
+€ thousands
+42,313
+(G.6) Related Party Transactions Other Than Board
+Compensation
+Certain Supervisory Board members of SAP SE currently hold, or held within the last year, positions of
+significant responsibility with other entities. We have relationships with certain of these entities in the
+ordinary course of business, whereby we buy and sell products, assets, and services at prices believed
+to be consistent with those negotiated at arm's length between unrelated parties.
+Companies controlled by Hasso Plattner, Chairperson of the Supervisory Board of SAP SE and Chief
+Software Advisor of SAP, engaged in the following transactions with SAP: providing consulting services
+to SAP, receiving sport sponsoring from SAP, and making purchases of SAP products and services.
+Occasionally, members of the Executive Board of SAP SE obtain services from SAP for which they pay
+a consideration consistent with those negotiated at arm's length between unrelated parties.
+All amounts related to the abovementioned transactions were immaterial to SAP in all periods
+presented.
+Related Party Transactions
+Executive Board Members
+Supervisory Board Members
+Companies Controlled by
+Supervisory Board Members
+Associated Entities
+€ millions
+2023
+SAP did not grant any compensation advance or credit to, or enter into any commitment for the benefit
+of, any member of the Executive Board or Supervisory Board in 2023, 2022, or 2021.
+Payments to/DBO for Former Executive Board Members
+The Supervisory Board compensation is a short-term benefit. The Supervisory Board members do not
+receive any share-based payment for their services. As far as members who are employee
+representatives on the Supervisory Board receive share-based payment, such compensation is for
+their services as employees only and is unrelated to their status as members of the Supervisory Board.
+680
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+The total annual compensation of the Supervisory Board members is as follows:
+Supervisory Board Compensation
+€ thousands
+Total compensation
+Thereof fixed compensation
+Thereof committee remuneration
+2023
+2022
+2021
+5,427
+5,206
+3,856
+3,185
+3,149
+3,176
+2,242
+2,058
+2023
+€ thousands
+1,733
+€ thousands
+100
+SAP AZ LLC, Baku, Azerbaijan
+17
+100
+100
+100
+100
+SAP Andina y del Caribe C.A., Caracas, Venezuela
+SAP (China) Holding Co., Ltd., Beijing, China
+SAP Belgium – Systems, Applications and Products S.A., Brussels, Belgium
+SAP (Beijing) Software System Co., Ltd., Beijing, China
+100
+Quadrem Overseas Cooperatief U.A., 's-Hertogenbosch, the Netherlands
+14
+100
+100
+100
+Quadrem Netherlands B.V., 's-Hertogenbosch, the Netherlands
+Quadrem International Ltd., Hamilton, Bermuda
+Quadrem Chile Ltda., Santiago de Chile, Chile
+Quadrem Peru S.A.C., Lima, Peru
+100
+SAP Beteiligungs GmbH, Walldorf, Germany
+100
+SAP CIS, LLC, Moscow, Russia
+17
+100
+14
+100
+Footnote
+Ownership
+(%)
+SAP Chile Limitada, Santiago de Chile, Chile
+SAP Business Services Center Nederland B.V., 's-Hertogenbosch, the Netherlands
+Name and Location of Company
+Additional
+Information
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+Stakeholders
+To Our
+SAP Integrated Report 2023
+SAP
+249/324
+100
+SAP Bulgaria EOOD, Sofia, Bulgaria
+100
+100
+100
+Quadrem Africa Pty. Ltd., Johannesburg, South Africa
+100
+LeanIX, B.V., Amsterdam, the Netherlands
+5
+100
+LeanIX US Holdings, Inc., Watertown, MA, United States
+5
+100
+LeanIX UK Limited, London, United Kingdom
+5
+5
+100
+5
+100
+LeanIX GmbH, Bonn, Germany
+5
+100
+LeanIX France S.A.R.L., Courbevoie, France
+100
+LeadFormix, Inc., San Ramon, CA, United States
+100
+LeanIX SI d.o.o., Ljubljana, Slovenia
+LeanIX, Inc., Houston, TX, United States
+100
+5
+99
+10, 11
+100
+PT SAP Indonesia, Jakarta, Indonesia
+OutlookSoft Deutschland GmbH, Walldorf, Germany
+100
+100
+5
+100
+100
+Outerjoin, Inc., San Ramon, CA, United States
+Nihon Ariba K.K., Tokyo, Japan
+LXTECH India Private Limited, Hyderabad, India
+Loyalsys Technologies Israel Ltd., Tel Aviv, Israel
+17
+100
+100
+LLC "SAP Ukraine", Kyiv, Ukraine
+LLC "SAP Labs", Moscow, Russia
+100
+LLC "Emarsys", Moscow, Russia
+Quadrem Brazil Ltda., Rio de Janeiro, Brazil
+10, 11
+SAP Colombia S.A.S., Bogotá, D.C., Colombia
+SAP ČR, spol. s r.o., Prague, Czech Republic
+SAP Malaysia Sdn. Bhd., Kuala Lumpur, Malaysia
+100
+SAP Latvia SIA, Riga, Latvia
+100
+100
+SAP Labs Korea, Inc., Seoul, South Korea
+SAP Labs Israel Ltd., Ra'anana, Israel
+100
+SAP Labs France S.A.S., Mougins, France
+100
+100
+17
+100
+SAP Israel Ltd., Ra'anana, Israel
+100
+SAP Ireland US - Financial Services Designated Activity Company, Dublin, Ireland
+17
+100
+SAP Ireland Limited, Dublin, Ireland
+100
+SAP Korea Ltd., Seoul, South Korea
+SAP Middle East and North Africa L.L.C., Dubai, United Arab Emirates
+49
+6, 17
+100
+100
+17
+100
+100
+100
+100
+SAP Portals Holding Beteiligungs GmbH, Walldorf, Germany
+SAP Polska Sp. z o.o., Warsaw, Poland
+SAP Perú S.A.C., Lima, Peru
+SAP Österreich GmbH, Vienna, Austria
+SAP North West Africa Ltd, Casablanca, Morocco
+SAP Norge AS, Oslo, Norway
+100
+14
+100
+SAP New Zealand Limited, Auckland, New Zealand
+SAP Nederland Holding B.V., 's-Hertogenbosch, the Netherlands
+17
+100
+SAP Middle East FZ-LLC, Dubai, United Arab Emirates
+SAP Investments, Inc., Wilmington, DE, United States
+SAP Costa Rica, S.A., Escazú, Costa Rica
+100
+SAP International Panama, S.A., Panama City, Panama
+SAP International, Inc., Miami, FL, United States
+17
+100
+SAP Egypt LLC, Cairo, Egypt
+17
+100
+SAP East Africa Limited, Nairobi, Kenya
+Croatia
+100
+SAP društvo s ograničenom odgovornošću za digitalnu ekonomiju novog tisućljeća, Zagreb,
+SAP EMEA Inside Sales S.L., Madrid, Spain
+100
+100
+100
+100
+17
+100
+17
+100
+SAP Danmark A/S, Copenhagen, Denmark
+SAP Cyprus Limited, Nicosia, Cyprus
+SAP Dritte Beteiligungs- und Vermögensverwaltungs GmbH, Walldorf, Germany
+100
+SAP Erste Beteiligungs- und Vermögensverwaltungs GmbH, Walldorf, Germany
+100
+100
+10, 11
+100
+SAP Hosting Beteiligungs GmbH, St. Leon-Rot, Germany
+SAP India (Holding) Pte. Ltd., Singapore, Singapore
+17
+100
+100
+SAP Hellas Single Member S.A., Athens, Greece
+SAP Hong Kong Co., Ltd., Hong Kong, China
+100
+SAP Global Marketing, Inc., New York, NY, United States
+100
+SAP France Holding S.A., Levallois-Perret, France
+100
+SAP Foreign Holdings GmbH, Walldorf, Germany
+100
+SAP Finland Oy, Espoo, Finland
+100
+SAP Financial, Inc., Toronto, Canada
+100
+SAP Estonia OÜ, Tallinn, Estonia
+10, 11
+100
+100
+100
+100
+Ariba Czech s.r.o., Prague, Czech Republic
+100
+100
+AppGyver Oy., Espoo, Finland
+AppGyver Inc., Indianapolis, IN, United States
+100
+Apex Expert Solutions LLC, Chantilly, VA, United States
+17
+100
+100
+Ambin Properties Proprietary Limited, Johannesburg, South Africa
+Abakus Ukraine Limited Liability Company, Kyiv, Ukraine
+100
+110405, Inc., Newtown Square, PA, United States
+100
+Footnote
+Ownership
+(%)
+"SAP Kazakhstan" LLP, Almaty, Kazakhstan
+Name and Location of Company
+Other Subsidiaries4
+100
+Ariba India Private Limited, Gurugram, India
+100
+Ariba International Holdings, Inc., Wilmington, DE, United States
+8
+0
+Baiza Capital LLC, Newark, NJ, United States
+5,8
+0
+Baiza Capital Italia s.r.l., Milan, Italy
+5,8
+0
+Baiza Capital Designated Activity Company, Dublin, Ireland
+14
+100
+Ariba Technologies Netherlands B.V., 's-Hertogenbosch, the Netherlands
+100
+Ariba Software Technology Services (Shanghai) Co., Ltd., Shanghai, China
+100
+Ariba Slovak Republic, s.r.o., Košice, Slovakia
+100
+Ariba International, Inc., Wilmington, DE, United States
+100
+Ariba International Singapore Pte. Ltd., Singapore, Singapore
+100
+Additional
+Information
+Baiza Capital S.A., Luxembourg, Luxembourg
+Further Information about
+Sustainability
+Report
+14
+687
+967,086
+281,244
+828,363
+100
+SAP Nederland B.V., 's-Hertogenbosch, the Netherlands
+638
+567,360
+SAP Philippines, Inc., Taguig City, Philippines
+215,069
+100
+SAP National Security Services, Inc., Newtown Square, PA, United
+States
+17
+1,118
+131,233
+-6,246
+531,654
+100
+SAP México S.A. de C.V., Mexico City, Mexico
+1,152,270
+100
+117,602
+285
+Stakeholders
+Combined Management
+To Our
+SAP Integrated Report 2023
+SAP
+247/324
+1,436
+23,055
+4,705
+122,548
+100
+SAP Services s.r.o., Prague, Czech Republic
+1,757
+125,741
+85,456
+336,355
+100
+SAP Service and Support Centre (Ireland) Limited, Dublin, Ireland
+17
+997
+8,975
+Consolidated Financial
+Statements IFRS
+0
+8
+Business Objects Holding B.V., 's-Hertogenbosch, the Netherlands
+Emarsys İletişim Sistemleri Tic. Ltd Şti., Istanbul, Turkey
+Emarsys eMarketing Systems GmbH, Vienna, Austria
+Name and Location of Company
+Additional
+Information
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Report
+Stakeholders
+Combined Management
+Emarsys Interactive Services GmbH, Berlin, Germany
+To Our
+SAP
+248/324
+100
+Delos Cloud GmbH, Schönefeld, Germany
+13
+100
+Crystal Decisions (UK) Limited, Feltham, United Kingdom
+13
+100
+SAP Integrated Report 2023
+100
+Ownership
+(%)
+Footnote
+100
+INNAAS s.r.l., Rome, Italy
+hybris GmbH, Munich, Germany
+ESS Cubed Procurement Proprietary Limited, Johannesburg, South Africa
+FreeMarkets Ltda., São Paulo, Brazil
+EMARSYS-Technologies Informatikai Szolgáltató Kft., Budapest, Hungary
+100
+Emarsys UK Ltd, London, United Kingdom
+100
+Emarsys Schweiz GmbH, Zurich, Switzerland
+100
+Emarsys S.A.S., Levallois-Perret, France
+100
+Emarsys Pty Ltd, Sydney, Australia
+100
+Emarsys Pte. Ltd., Singapore, Singapore
+100
+Emarsys North America, Inc., Indianapolis, IN, United States
+100
+Emarsys Limited, Hong Kong, China
+100
+100
+ConTgo Limited, Feltham, United Kingdom
+13, 17
+100
+17
+100
+Concur (Czech) s.r.o., Prague, Czech Republic
+100
+Concur (Canada), Inc., Toronto, Canada
+100
+CNQR Operations Mexico S. de. R.L. de. C.V., Mexico City, Mexico
+5
+100
+Cleanshelf, Inc., San Francisco, CA, United States
+100
+Christie Partners Holding C.V., 's-Hertogenbosch, the Netherlands
+100
+CallidusCloud (India) Private Limited, Hyderabad, India
+100
+Callidus Software Inc., San Ramon, CA, United States
+100
+Business Objects Software Limited (Trading as SAP Solutions), Dublin, Ireland
+100
+Business Objects Option, LLC, Wilmington, DE, United States
+14
+100
+Concur (France) S.A.S., Levallois-Perret, France
+250/324
+100
+100
+100
+17
+100
+100
+100
+Concur Technologies (Hong Kong) Limited, Hong Kong, China
+Concur Technologies (India) Private Limited, Bengaluru, India
+Concur Technologies (Singapore) Pte. Ltd., Singapore, Singapore
+Concur Technologies (UK) Limited, Feltham, United Kingdom
+ConTgo Consulting Limited, Feltham, United Kingdom
+100
+Concur Technologies (Australia) Pty. Limited, Sydney, Australia
+14
+100
+Concur Holdings (Netherlands) B.V., 's-Hertogenbosch, the Netherlands
+100
+Concur Holdings (France) S.A.S., Levallois-Perret, France
+15
+100
+Concur (Switzerland) GmbH, Zurich, Switzerland
+100
+Concur (Philippines) Inc., Makati City, Philippines
+97
+Concur (Japan) Ltd., Tokyo, Japan
+10, 11
+Concur (Germany) GmbH, Frankfurt am Main, Germany
+€ thousands
+14
+100
+100
+1,217,078
+146,869
+1,924,300
+1,575
+SAP Hungary Rendszerek, Alkalmazások és Termékek az
+SAP France S.A., Levallois-Perret, France
+100
+6,545
+35,395
+1,452
+Adatfeldolgozásban Informatikai Kft., Budapest, Hungary
+SAP India Private Limited, Bengaluru, India
+100
+169,259
+792,589
+S.A., Madrid, Spain
+29,122
+1,187,938
+103,844
+768,751
+3,104
+SAP Deutschland SE & Co. KG, Walldorf, Germany
+100
+959
+5,724,456
+1,796,440
+5,048
+9
+SAP España - Sistemas, Aplicaciones y Productos en la Informática,
+100
+640,969
+819,333
+100
+SAP Industries, Inc., Newtown Square, PA, United States
+94,539
+158,746
+121,838
+5,945
+32,905
+1,330
+SAP Labs India Private Limited, Bengaluru, India
+100
+100
+890,380
+281,808
+10,672
+SAP Labs, LLC, Palo Alto, CA, United States
+100
+668,207
+118,097
+99,539
+603,743
+SAP Labs Bulgaria EOOD, Sofia, Bulgaria
+303,285
+310,957
+2,379
+1,427,522
+239
+SAP Italia Sistemi Applicazioni Prodotti in Data Processing S.p.A.,
+Vimercate, Italy
+100
+1,416
+743,718
+92,681
+826
+SAP Japan Co., Ltd., Tokyo, Japan
+100
+1,164,259
+77,354
+20,902
+SAP Canada Inc., Toronto, Canada
+120,151
+2,839
+100
+1,313,574
+21,903
+-75,918
+6,528
+17
+17
+SAP (Schweiz) AG, Biel, Switzerland
+1,392,865
+124,568
+310,761
+873
+SAP (UK) Limited, Feltham, United Kingdom
+100
+100
+3,217
+8,828,126
+408,667
+Ariba Technologies India Private Limited, Bengaluru, India
+100
+107,665
+14,181
+41,767
+1,360
+Ariba, Inc., Palo Alto, CA, United States
+100
+1,426,356
+689,432
+6,618,961
+1,589
+Concur Technologies, Inc., Bellevue, WA, United States
+100
+2,169,139
+1,431,680
+66,373
+SAP (China) Co., Ltd., Shanghai, China
+SAP Brasil Ltda., São Paulo, Brazil
+11,302
+1,085
+17
+SAP Australia Pty Ltd, Sydney, Australia
+100
+808,936
+713,377
+-17,934
+1,302
+100
+810,113
+37,881
+112,716
+204,673
+96,836
+100
+8,864
+11,879,728
+17
+SAP America, Inc., Newtown Square, PA, United States
+100
+8,476,670
+-112,108
+SAP Asia Pte. Ltd., Singapore, Singapore
+9,225
+1,658
+SAP Argentina S.A., Buenos Aires, Argentina
+237,309
+-19,467
+-7,742
+1,134
+17
+100
+0
+7
+7
+0
+7
+0
+0
+7
+10, 11
+100
+7
+SC SAP Romania SRL, Bucharest, Romania
+100
+Shanghai SAP Cloud Technology Company, Ltd., Shanghai, China
+7
+70
+SAPV (Mauritius), Ebene, Mauritius
+0
+0
+0
+Signavio UK Ltd, Birmingham, United Kingdom
+7
+Sapphire Fund Investments II Holdings, LLC, Austin, TX, United States
+Sapphire Fund Investments II, L.P., Austin, TX, United States
+Sapphire Fund Investments III Holdings, LLC, Austin, TX, United States
+Sapphire Fund Investments III, L.P., Austin, TX, United States
+Sapphire SAP HANA Fund of Funds, L.P., Austin, TX, United States
+Sapphire Ventures Fund I, L.P., Austin, TX, United States
+Sapphire Ventures Fund II, L.P., Austin, TX, United States
+Sapphire Ventures Fund III, L.P., Austin, TX, United States
+Sapphire Ventures Fund IV, L.P., Austin, TX, United States
+Sapphire Ventures Fund V, L.P., Austin, TX, United States
+Sapphire Ventures Fund VI, L.P., Austin, TX, United States
+Sapphire Ventures Fund VII-A, L.P., Austin, TX, United States
+100
+7
+0
+7
+100
+7
+0
+7
+0
+7
+0
+7
+7
+100
+Stakeholders
+Signavio, Inc., Newtown Square, PA, United States
+100
+16
+Sybase Iberia, S.L., Madrid, Spain
+Sybase International Holdings Corporation, LLC, San Ramon, CA, United States
+Sybase, Inc., San Ramon, CA, United States
+Systems Applications Products (Africa Region) Proprietary Limited, Johannesburg, South Africa
+Systems Applications Products (Africa) Proprietary Limited, Johannesburg, South Africa
+100
+100
+100
+100
+100
+Systems Applications Products (South Africa) Proprietary Limited, Johannesburg, South Africa
+Systems Applications Products Nigeria Limited, Victoria Island, Nigeria
+81
+17
+100
+Footnote
+Ownership
+(%)
+Sybase Angola, LDA, Luanda, Angola
+Name and Location of Company
+100
+SuccessFactors (Philippines), Inc., Pasig City, Philippines
+100
+17
+12
+SuccessFactors, Inc., Newtown Square, PA, United States
+100
+13
+251/324
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+SAP
+SAP Zweite Beteiligungs- und Vermögensverwaltungs GmbH, Walldorf, Germany
+SAP.io Fund, L.P., Austin, TX, United States
+The Software & IT Services Sustainability Accounting Standards prepared by the Sustainability
+Accounting Standards Board (SASB), now part of the Value Reporting Foundation.
+SAP West Balkans d.o.o., Belgrade, Serbia
+Further Information about
+Sustainability
+Additional
+Information
+Name and Location of Company
+SAP Portals Israel Ltd., Ra'anana, Israel
+Ownership
+(%)
+Footnote
+100
+SAP Portugal - Sistemas, Aplicações e Produtos Informáticos, Sociedade Unipessoal, Lda.,
+Porto Salvo, Portugal
+100
+SAP Projektverwaltungs- und Beteiligungs GmbH, Walldorf, Germany
+SAP Public Services, Inc., Washington, DC, United States
+SAP Puerto Rico GmbH, Walldorf, Germany
+SAP Retail Solutions Beteiligungsgesellschaft GmbH, Walldorf, Germany
+SAP Saudi Arabia Software Services Ltd, Riyadh, Kingdom of Saudi Arabia
+SAP Saudi Arabia Software Trading Ltd, Riyadh, Kingdom of Saudi Arabia
+SAP Sechste Beteiligungs- und Vermögensverwaltungs GmbH, Walldorf, Germany
+SAP Siebte Beteiligungs- und Vermögensverwaltungs GmbH, Walldorf, Germany
+SAP sistemi, aplikacije in produkti za obdelavo podatkov d.o.o., Ljubljana, Slovenia
+SAP Slovensko s.r.o., Bratislava, Slovakia
+100
+100
+Consolidated Financial
+Statements IFRS
+100
+Report
+Combined Management
+Report
+260/324
+The core "Stakeholder Capitalism Metrics" as proposed by the World Economic Forum's
+International Business Council (WEF IBC).
+100
+Furthermore, we map our reporting to two additional frameworks:
+We also report on our contribution towards the United Nations Sustainable Development Goals
+(SDGs) and respond to the recommendations of the Task Force on Climate-Related Financial
+Disclosure (TCFD).
+Unless otherwise stated, all of the information in this Report relates to the situation as at
+December 31, 2023, or the fiscal year ended on that date. Furthermore, all financial numbers in this
+Report are based on continuing operations (unless otherwise noted). Non-financial information has not
+been adjusted (unless otherwise noted). For more information, see the Notes to the Consolidated
+Financial Statements, Note (D.1).
+The social and environmental data and information included in the SAP Integrated Report has been
+prepared in accordance with the GRI Standards and were subject to an independent assurance
+engagement of our external auditor with different levels of assurance. At the end of each chapter, you
+will find a grey info box marked by the symbol Q that contains further explanation about the audit
+scope.
+About This Further
+Information on Economic,
+Environmental, and Social
+Performance
+Information
+Additional
+Further Information
+about Sustainability
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+10, 11, 17
+100
+100
+100
+SAP Training and Development Institute FZCO, Dubai, United Arab Emirates
+100
+17
+SAP Türkiye Yazilim Üretim ve Ticaret A.Ş., Istanbul, Turkey
+100
+SAP UAB, Vilnius, Lithuania
+100
+SAP Ventures Investment GmbH, Walldorf, Germany
+100
+10, 11
+SAP Vierte Beteiligungs- und Vermögensverwaltungs GmbH, Walldorf, Germany
+100
+SAP Vietnam Company Limited, Ho Chi Minh City, Vietnam
+100
+SAP Technologies Inc., Palo Alto, CA, United States
+100
+SAP Taiwan Co., Ltd., Taipei, Taiwan
+100
+75
+17
+100
+10, 11
+100
+10, 11
+100
+100
+100
+49
+6, 17
+SAP Svenska Aktiebolag, Stockholm, Sweden
+100
+SAP System Application and Products Asia Myanmar Limited, Yangon, Myanmar
+100
+SAP Systems, Applications and Products in Data Processing (Thailand) Ltd., Bangkok, Thailand
+SAP Software and Services WLL, Doha, Qatar
+17
+100
+Taulia Arabia LLC, Riyadh, Kingdom of Saudi Arabia
+SAP's management assessed the effectiveness of the Company's internal control over financial
+reporting as at December 31, 2023. In making this assessment, it used the criteria set forth by the
+Committee of Sponsoring Organizations of the Treadway Commission in Internal Control - Integrated
+Framework (2013).
+Based on the assessment under these criteria, SAP management has concluded that, as at
+December 31, 2023, the Company's internal control over financial reporting was effective.
+258/324
+SAP
+SAP Integrated Report 2023
+To Our
+The management of SAP is responsible for establishing and maintaining adequate internal control over
+financial reporting as such term is defined in Rules 13a-15(f) and 15d-15(f) under the U.S. Securities
+Exchange Act of 1934. SAP's internal control over financial reporting is a process designed under the
+supervision of SAP's CEO and CFO to provide reasonable assurance regarding the reliability of
+financial reporting and the preparation of financial statements for external reporting purposes in
+accordance with International Financial Reporting Standards as issued by the International Accounting
+Standards Board.
+Stakeholders
+Consolidated Financial
+Statements IFRS
+Further Information
+about Sustainability
+Additional
+Information
+Further Information about
+Sustainability
+About This Further Information on Economic, Environmental, and Social
+Combined Management
+Report
+U.S. law requires that management submit a report on the effectiveness of internal control over
+financial reporting in the consolidated financial statements. For 2023, that report is as follows:
+Financial Statements
+Consolidated
+Thomas Saueressig
+Julia White
+Gina Vargiu-Breuer
+257/324
+SAP
+SAP Integrated Report 2023
+To Our
+Combined Management
+Stakeholders
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+Management's Annual Report
+on Internal Control over
+Financial Reporting in the
+Performance
+Scott Russell
+260
+Sustainability Management
+292
+GRI Content Index
+296
+Stakeholder Capitalism Metrics
+311
+SASB Index
+Our Contribution to the UN Sustainable Development Goals
+313
+314
+259/324
+SAP
+SAP Integrated Report 2023
+To Our
+Combined Management
+Task Force on Climate-Related Financial Disclosure (TCFD)
+282
+Non-Financial Notes: Environmental Performance
+280
+261
+Stakeholder Engagement
+263
+Materiality
+265
+Why Holistic Steering and Reporting Matters
+268
+Social Investments
+271
+Sustainable Procurement
+273
+Waste and Water
+276
+Public Policy
+Memberships, Partnerships, and Commitments
+Medable Inc., Palo Alto, CA, United States
+Matillion Ltd., Altrincham, United Kingdom
+Dr. Juergen Mueller
+Christian Klein
+Qualified.com, Inc., San Francisco, CA, United States
+Reltio, Inc., Redwood Shores, CA, United States
+Restream, Inc., Austin, TX, United States
+Ridge Ventures IV, L.P., San Francisco, CA, United States
+Ridge Ventures V, L.P., San Francisco, CA, United States
+SafeGraph, Inc., Denver, CO, United States
+Sapphire Sport Parallel Fund, L.P., Austin, TX, United States
+Sapphire Sport Parallel Fund II, L.P., Austin, TX, United States
+PubNub, Inc., San Francisco, CA, United States
+Sapphire Sport, L.P., Austin, TX, United States
+Simpplr Inc., Redwood City, CA, United States
+Smart City Planning, Inc., Tokyo, Japan
+Splashtop, Inc., San Jose, CA, United States
+Spring Mobile Solutions, Inc., Salt Lake City, UT, United States
+StackHawk, Inc., Denver, CO, United States
+Storm Ventures V, L.P., Menlo Park, CA, United States
+Side, Inc., San Francisco, CA, United States
+Point Nine Capital Fund II GmbH & Co. KG, Berlin, Germany
+Point Nine Capital Fund III GmbH & Co. KG, Berlin, Germany
+Point Nine Capital Fund IV GmbH & Co. KG, Berlin, Germany
+Point Nine Capital Fund V GmbH & Co. KG, Berlin, Germany
+Project 44, Inc., Chicago, IL, United States
+PivotNorth Early Fund I, L.P., Atherton, CA, United States
+Point Nine Annex GmbH & Co. KG, Berlin, Germany
+Notation Capital III, L.P., Brooklyn, NY, United States
+OpenX Software Limited, Pasadena, CA, United States
+Paper Education Company Inc., Quebec, Canada
+Pendo.io, Inc., Raleigh, NC, United States
+Taulia (Shanghai) Smart Technology Co. Ltd., Shanghai, China
+Mosaic Ventures Investors Fund I, L.P., London, United Kingdom
+Notation Capital, L.P., Brooklyn, NY, United States
+Notation Capital II CIRC, LLC, Brooklyn, NY, United States
+254/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+Name and Location of Company
+Notation Capital II, L.P., Brooklyn, NY, United States
+SV Angel IV, L.P., San Francisco, CA, United States
+Dominik Asam
+Tetrate.io, Inc., Milpitas, CA, United States
+The SaaStr Fund II, L.P., Palo Alto, CA, United States
+In 2023 and 2022, the Executive Board and Supervisory Board of SAP SE issued the required
+declarations of compliance. The declaration for 2023 was issued at the end of October 2023. These
+statements are available on our Web site: www.sap.com/investors/en/governance.
+256/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+The German federal government published the German Corporate Governance Code (the "Code") in
+February 2002 and introduced a commission that amends the Code from time to time. The Code
+contains statutory requirements and a number of recommendations and suggestions. Only the legal
+requirements are binding for German companies. With regard to the recommendations, the German
+Stock Corporation Act, section 161, requires that every year, listed companies publicly state the extent
+to which they have implemented them. Companies can deviate from the suggestions without having to
+make any public statements.
+Combined Management
+Report
+Further Information about
+Sustainability
+Additional
+Information
+Walldorf, February 21, 2024
+SAP SE
+Walldorf, Baden
+The Executive Board
+Consolidated Financial
+Statements IFRS
+(G.10) German Code of Corporate Governance
+Additional
+Information
+Further Information about
+Sustainability
+Third Kind Venture Capital II, L.P., New York, NY, United States
+Third Kind Venture Capital III, L.P., New York, NY, United States
+Tribe Capital LLC Series 3, Redwood City, CA, United States
+Tribe Capital LLC Series 8, Redwood City, CA, United States
+UJET, Inc., San Francisco, CA, United States
+Unmind Ltd., London, United Kingdom
+Upfront V, L.P., Santa Monica, CA, United States
+Uptycs, Inc., Waltham, MA, United States
+VerbIT, Inc., New York, NY, United States
+Vistex, Inc., Hoffman Estates, IL, United States
+Walkabout Ventures Fund II L.P., Los Angeles, CA, United States
+Yapily Ltd., London, United Kingdom
+Zesty Tech Ltd., Ramat Gan, Israel
+255/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+The SaaStr Fund, L.P., Palo Alto, CA, United States
+Mango Capital 2022, L.P., Los Altos, CA, United States
+279
+Local Globe VIII, L.P., St. Peter Port, Guernsey, Channel Islands
+Local Globe X, L.P., St. Peter Port, Guernsey, Channel Islands
+LocalGlobe XI, L.P., St. Peter Port, Guernsey, Channel Islands
+Mango Capital 2018, L.P., Los Altos, CA, United States
+Mango Capital 2020, L.P., Los Altos, CA, United States
+252/324
+16 Pursuant to Angola Tax Law and Presidential Decree no. 147/13 of October 1, 2013, the entity does not qualify as being a Large Taxpayer
+and therefore is exempt from having its financial statements audited in respect of its financial year ended December 31, 2023.
+17 Entity with support letter issued by SAP SE.
+15 Pursuant to article 727a, paragraph 2 of the Swiss Code of Obligations, the entity is exempt from having its financial statements audited in
+respect of its financial year ended December 31, 2023, or in respect of its financial year ended September 30, 2023, respectively.
+14 Pursuant to article 2:403 of the Dutch Civil Code, the entity is exempt from applying certain legal requirements to their statutory stand-alone
+financial statements including the requirement to prepare the financial statements, the requirement of independent audit, and the
+requirement of public disclosure in respect of its financial year ended December 31, 2023, or in respect of its financial year ended
+September 30, 2023, respectively.
+13 Pursuant to section 480 of the UK Companies Act 2006, the entity is exempt from having its financial statements audited on the grounds that
+the entity is entitled to the benefits from a dormant entity exemption in respect of its financial year ended December 31, 2023.
+SAP Integrated Report 2023
+12 Pursuant to HGB, section 316 (1), the subsidiary is exempt from having its financial statements audited in respect of its financial year ended
+December 31, 2023.
+10 Entity with (profit and) loss transfer agreement.
+9 Entity whose personally liable partner is SAP SE.
+8 In accordance with IFRS 10 the structured entity does not include the receivables and liabilities resulting from the supply chain financing
+(SCF) activities.
+7 Structured entity belonging to SAP SE. The results of operations of these entities are included in SAP's Consolidated Financial Statements in
+accordance with IFRS 10 (Consolidated Financial Statements).
+Agreements with the other shareholders provide that SAP SE fully controls the entity.
+5 Consolidated for the first time in 2023.
+11 Pursuant to HGB, section 264 (3) or section 264b, the subsidiary is exempt from applying certain legal requirements to their statutory stand-
+alone financial statements including the requirement to prepare notes to the financial statements and a review of operations, the requirement
+of independent audit, and the requirement of public disclosure.
+To Our
+Combined Management
+Stakeholders
+Alchemist Accelerator Fund I LLC, San Francisco, CA, United States
+Alation, Inc., Redwood City, CA, United States
+Adverity GmbH, Vienna, Austria
+83North IV, L.P., Hertzalia, Israel
+47th Street Partners I, L.P., Menlo Park, CA, United States
+Equity Investments with Ownership of at Least 5%
+Name and Location of Company
+SAP Fioneer GmbH, Walldorf, Germany
+Procurement Negócios Eletrônicos S/A, Rio de Janeiro, Brazil
+China DataCom Corporation Limited, Guangzhou, China
+Name and Location of Company
+Joint Arrangements and Investments in Associates
+Other Equity Investments
+Consolidated Financial
+Statements IFRS
+Report
+4 Figures for profit/loss after tax and total equity pursuant to HGB, section 285 and section 313 are not disclosed if they are of minor
+significance for a fair presentation of the profitability, liquidity, capital resources, and financial position of SAP SE, pursuant to HGB,
+section 313 (2) sentence 3 no. 4 and section 286 (3) sentence 1 no. 1.
+3 As at December 31, 2023, including managing directors, in FTE.
+2 These figures are based on our local IFRS financial statements prior to eliminations resulting from consolidation and therefore do not reflect
+the contribution of these companies included in the Consolidated Financial Statements. The translation of the equity into Group currency is
+based on period-end closing exchange rates, and on average exchange rates for revenue and net income/loss.
+1 For the classification of the subsidiaries, the following figures are considered: revenues, profit/loss after tax, total equity, and number of
+employees.
+100
+Taulia Singapore Pte. Ltd., Singapore, Singapore
+96
+Taulia LLC, San Francisco, CA, United States
+12
+12
+100
+Consolidated Financial
+Statements IFRS
+100
+5
+100
+100
+Taulia GmbH, Düsseldorf, Germany
+Taulia Bulgaria EOOD, Sofia, Bulgaria
+Taulia Australia Pty. Ltd., Sydney, Australia
+Taulia Trade Technology GmbH, Düsseldorf, Germany
+Aleph-Bigg SPV, L.P., Grand Cayman, Cayman Islands
+100
+Taulia UK Ltd., London, United Kingdom
+100
+Volume Integration, Inc., Chantilly, VA, United States
+100
+TRX, Inc., Bellevue, WA, United States
+13
+100
+TRX UK Limited, Feltham, United Kingdom
+100
+TRX Technologies India Private Limited, Bengaluru, India
+13, 17
+100
+TRX Europe Limited, Feltham, United Kingdom
+100
+Technology Management Associates Inc., Chantilly, VA, United States
+100
+12
+All Tax Platform - Solucoes Tributarias S.A., São Paulo, Brazil
+SAP
+Amplify Partners III, L.P., Menlo Park, CA, United States
+Amplify Partners IV, L.P., Menlo Park, CA, United States
+Amplify Partners, L.P., Menlo Park, CA, United States
+Filament 2024, L.P., Brooklyn, NY, United States
+Felix Ventures II, L.P., London, United Kingdom
+Felix Capital Fund III, London, United Kingdom
+Dremio Corporation, Santa Clara, CA, United States
+Essence VC III, L.P., Seattle, WA, United States
+FeedZai S.A., Lisbon, Portugal
+Data Collective IV, L.P., Palo Alto, CA, United States
+Digital Hub Rhein-Neckar GmbH, Ludwigshafen, Germany
+Data Collective III L.P., Palo Alto, CA, United States
+Finco Services, Inc. (dba Current), New York, NY, United States
+Data Collective II L.P., Palo Alto, CA, United States
+Cultivate Rollco LLC (fka Cultivate Technology, Inc.), San Francisco, CA, United States
+Creandum SPV TR (D) AB, Stockholm, Sweden
+Name and Location of Company
+Additional
+Information
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Culture Amp, Inc., San Francisco, CA, United States
+Cypress.io, Inc., Atlanta, GA, United States
+FloQast, Inc., Los Angeles, CA, United States
+GitGuardian SAS, Paris, France
+Gorgias Inc., San Francisco, CA, United States
+Local Globe VII, L.P., St. Peter Port, Guernsey, Channel Islands
+Local Globe Opportunity Fund, L.P., St. Peter Port, Guernsey, Channel Islands
+LGVP F I LLC, Dover, DE, United States
+LeanData, Inc., Sunnyvale, CA, United States
+Kaltura, Inc., New York, NY, United States
+JupiterOne, Inc., Morrisville, NC, United States
+JetLenses Inc. (dba Verse Medical), New York, NY, United States
+Involve.ai, Inc., Santa Monica, CA, United States
+innoWerft Technologie- und Gründerzentrum Walldorf Stiftung GmbH, Walldorf, Germany
+InnovationLab GmbH, Heidelberg, Germany
+Initialized CBH SPV LLC, Walnut, CA, United States
+InfluxData, Inc., San Francisco, CA, United States
+IEX Group, Inc., New York, NY, United States
+Amplify Partners II L.P., Menlo Park, CA, United States
+Haystack Ventures V, L.P., Mill Valley, CA, United States
+Report
+Stakeholders
+Haystack Ventures VI, L.P., Mill Valley, CA, United States
+Haystack Ventures VII, L.P., San Francisco, CA, United States
+Huntress Labs Incorporated, Ellicott City, MD, United States
+IDG Ventures USA III, L.P., San Francisco, CA, United States
+To Our
+Chalfen Ventures Fund II L.P., St Helier, Jersey, Channel Islands
+Chalfen Ventures Fund III L.P., St Helier, Jersey, Channel Islands
+Chalfen Ventures Fund I L.P., St Heiler, Jersey, Channel Islands
+CDQ AG, St. Gallen, Switzerland
+Catchpoint Systems, Inc., New York, NY, United States
+BY Capital 2 GmbH & Co. KG, Berlin, Germany
+Bryj Technologies, Inc. (fka Follow Analytics, Inc.), San Francisco, CA, United States
+Brightfield Holdings, Inc., New York, NY, United States
+Boldstart Ventures V, L.P., Miami, FL, United States
+Blue Yard Crytpo 1, L.P., Hot Springs Village, AR, United States
+Blue Yard Capital I GmbH & Co. KG, Berlin, Germany
+Blue Yard Capital 1 Alternative GmbH & Co. KG, Berlin, Germany
+Bitonic Technology Labs, Inc., Karnataka, India
+BioCatch Ltd., Tel Aviv, Israel
+BGS Holdings, Inc., Austin, TX, United States
+Combined Management
+CircleCl, Inc., San Francisco, CA, United States
+Clari, Inc., Sunnyvale, CA, United States
+Boldstart Ventures VI, L.P., Miami, FL, United States
+Collectly, Inc., Pasadena, CA, United States
+SAP Integrated Report 2023
+Cofinity-X GmbH, Cologne, Germany
+SAP
+253/324
+20
+28
+Ownership (%)
+Additional
+Information
+17
+Further Information about
+Sustainability
+Costanoa Venture Capital III L.P., Palo Alto, CA, United States
+Costanoa Venture Capital QZ, LLC, Palo Alto, CA, United States
+Costanoa Venture Capital II L.P., Palo Alto, CA, United States
+Contentful Global, Inc., Berlin, Germany
+ComponentLab, Inc., Seattle, WA, United States
+Additional
+We disclosed a selection of the results of the VBA's third methodology piloting exercise, which ended
+in November 2022, in our Integrated Report published in March 2023. In 2023, we leveraged these
+results and learnings to steer a number of our internal sustainability programs, which are mentioned
+below.
+Examples of Business Steering Based on VBA Methodologies
+Compensation cycle adjustment: In 2023, we integrated the concept of "living wages" into our
+annual compensation review process.
+The methodologies in that context continue to mature year over year, and still have several challenges
+to solve. Fundamentals such as global standardization, non-netting of positive and negative impacts,
+regulatory uptake, and ensuring a reasonable range of valuation coefficients should be integrated in
+the ongoing global efforts. We overcome the maturity challenge through peer learning and exchange
+sessions at the VBA and by taking a sensitivity analysis approach where we determine the impacts
+across a broad range of valuation co-efficients.
+These insights enable companies to create business value beyond revenue or profit growth while
+taking into consideration the long-term impacts of their business operations on the environment and
+society as a whole.
+Information
+Materiality analysis: In 2023, we revisited our materiality analysis to identify and prioritize key
+material topics. The VBA pilot analysis, which shows prioritized issues based on our procurement
+spend, was used as one of the sources to identify material issues for SAP. This data-driven,
+quantitative result complemented the qualitative approach generally used for materiality analyses,
+further improving quality and completeness.
+Further Information
+about Sustainability
+Several institutions are working on developing and maturing impact measurement and valuation
+methodologies, most notably the International Foundation for Valuing Impacts (IFVI) and the VBA.
+Combined Management
+Report
+To Our
+Stakeholders
+SAP Integrated Report 2023
+SAP
+268/324
+We derive the definition of impact from the Organisation for Economic Co-operation and Development
+(OECD), which states that the impact of an organization is the effect it has on the condition of the
+natural environment and the well-being of people. This impact can either be positive or negative and
+can be intended or unintended. Impact measurement and valuation is the process of first identifying
+and quantifying the positive and negative impacts that SAP has on people and the planet in monetary
+terms, and then intentionally reducing the negative impacts and increasing the positive impacts.
+Monetary valuation of sustainability aspects is increasingly used by corporations and investors to
+integrate sustainability aspects in decision-making processes. It is the language that business
+understands, it enables comparability, it incorporates the local context and the complexity of how
+impacts arise, and in the future, it could be integrated in traditional accounting systems.
+Impact Measurement and Valuation
+Human rights due diligence: The upstream hotspot analysis using monetized values for social
+indicators was an integral part of our annual risk assessment in the context of the German Supply
+Chain Due Diligence Act. The monetary valuation allowed us to set thresholds universally across
+different metrics to identify low, medium, or high risks.
+We strive to embed impact measurement in our corporate and relevant business unit decision-making
+and target-setting. Holistic steering and reporting is being developed across the value chain. Our
+impact measurement experiences also form a foundation for our software innovations in the fields of
+climate action, circular economy, social responsibility, and holistic steering and reporting, helping
+customers on their ESG journeys.
+Consolidated Financial
+Statements IFRS
+Net zero 2030 and internal carbon pricing: We used the pilot results to update the emission
+baseline figures for our net zero 2030 target. In addition, the current social cost of carbon value set
+by the VBA, which is US$223 per ton of greenhouse gas (GHG), was used as the reference to
+update our internal carbon pricing. This brought the internal carbon price closer to the social cost of
+carbon than in previous years.
+The real value of monetization of impacts is observable when all our procurement categories and all
+the KPIs are represented on X and Y axes and the main risk areas are visualized.
+Ending in December 2023, our fourth VBA pilot analyzed metrics including GHG emissions, water
+consumption, GDP contribution, and training. We used data from our Integrated Report 2022, internal
+controlling and HR systems, and our environmental management system. The analysis primarily
+focused on our own operations and our supply chain. In addition, we piloted a limited scope of our
+downstream impacts looking at GHG impacts from our on-premise software installations. Wherever
+possible, we used primary data for calculations. Where primary data was not available, we used
+proxies, modeling techniques, and assumptions that were well-defined and documented in the VBA
+method papers. Key stakeholders across all relevant lines of business were engaged in the pilot.
+The most relevant findings from the GHG emissions, GDP contribution, living wages, and upstream
+hotspot analyses comprise:
+At SAP, we have been measuring our progress holistically and connecting financial and non-financial
+data since 2012, when we merged our sustainability and annual reports into an integrated report.
+In 2019, SAP became a founding member of the Value Balancing Alliance (VBA) to contribute our
+experience to support the development of a standardized methodology along with 27 other like-
+minded, multinational companies. The VBA helps companies, investors, and other stakeholders
+integrate and compare non-financial performance based on the concept of impact.
+270/324
+The content of the Why Holistic Steering and Reporting Matters section was not subject to an
+independent limited assurance of our external auditor.
+QAudit Scope
+As the impact measurement and valuation ecosystem matures, we will continue to play an active role
+in its co-development and application and to enable our customers and partners. While we maintain
+existing partnerships with the VBA and WifOR Institute, we will actively seek other institutional and
+academic partnerships as well as explore Al capabilities in this topic. We plan to use materiality
+analyses and material topics as the foundation for developing and applying methodologies to
+understand, steer, and improve our overall impact. We will increase the frequency of impact valuations
+to quarterly for selected KPIs. Through our SAP Cloud for Sustainable Enterprises solution and other
+product lines, we support our customers in their own impact management journeys. As we look ahead,
+we see the potential for us to place impact management at the center of everything we do and strive
+to become an impact positive company.
+Outlook
+Our induced impact calculation showed that we created a total of 110,000 jobs in the supply chain due
+to our procurement spend and patterns.
+Upstream risk analysis: We conducted a complete upstream risk analysis using our procurement
+spend of 2022. The analysis showed that one of the highest negative monetized impacts was
+valued at more than US$584 million for the KPI Occupational Health & Safety, and the highest
+positive monetized impact was valued at US$8.4 billion for the KPI GDP Contribution.
+GDP contribution: Our overall GDP contribution from our operations and supply chain stands at
+more than US$8.4 billion (CapEx and OpEx). We have the breakdown of the GDP contribution by all
+our operating countries. This insight enables us to sharpen our messaging toward public sector
+companies and governments.
+2023 VBA Piloting and Results
+GHG, we realize that there is a wide range of values in the market, and the effort to standardize
+them further is ongoing.
+Additional
+Further Information
+about Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+To Our
+Stakeholders
+SAP Integrated Report 2023
+SAP
+269/324
+GHG emissions: Our analysis enabled us to identify the GHG impact of each subsidiary and
+location, and we now have insights into which SAP locations have the highest CO2 impacts and
+which locations have the lowest. Negative impacts of GHG on own operations and supply chain
+were monetized at more than US$163 million, and this has helped inform decision-making
+regarding our CO2 reduction strategy. While we are still developing a full downstream impact
+methodology, we calculated the negative impact of GHG emissions from our existing on-premise
+installations of our customer base at more than US$1.9 billion. While these impacts were calculated
+using the VBA's recommended social cost of carbon valuation co-efficient of US$223 per ton of
+Information
+Our Journey Toward Sustainable Impact
+Additional
+Connecting financial and non-financial ESG metrics is key to comprehensively analyzing all dimensions
+of a company's performance and working toward their integration and harmonization. On this journey,
+digital technologies play a fundamental role in delivering embedded, validated, and real-time data.
+In addition to the perspective of connecting financial and non-financial ESG metrics, holistic steering
+and reporting integrates the dimensions of positive and negative impacts that businesses create along
+their complete value chain.
+To Our
+Stakeholders
+SAP Integrated Report 2023
+SAP
+263/324
+With more than 25,500 partners around the world, the SAP ecosystem is vital to our success. We take a
+multifaceted approach to engagement that begins with the dedicated, interactive SAP Partner Portal.
+Partners receive regular communications including customized newsletters, training offers, and Web
+seminars, with the latest announcements and thought leadership relevant to their specific partnership
+type. Additionally, virtual events are held throughout the year, around the globe, to further gauge
+partners' feedback on how SAP can continuously improve.
+Partners
+Our Analyst Relations team, the Executive Board, and executives have strong relations with industry
+analysts and engage with them frequently on strategic SAP solutions and services.
+Industry Analysts
+For more information about our dialog with governments, see the Public Policy section.
+Governments
+For more information about our dialog with the financial community (that is, financial analysts,
+institutional investors, and retail shareholders), see the Investor Relations section.
+Financial Analysts and Investors
+In addition, the Executive Board answers employees' questions in quarterly employee meetings. In
+regular coffee corner sessions, senior executives explain our strategy to employees and answer their
+questions directly.
+We strive for constructive labor relations across the world, working within each country's requirements.
+We currently have social partners in 37 countries in Africa, the Americas, Asia, and Europe. These
+employee representative bodies consist of elected union members and/or non-union members and
+are consulted by SAP management mainly on topics that define the work environment and work
+processes. Collective bargaining agreements with unions are only made in countries where legally
+required. Overall, about 52% of our employees are represented by works councils or an independent
+trade union, or are covered by collective bargaining agreements. The working conditions and terms of
+employment of the remaining employees are not influenced or determined based on other collective
+bargaining agreements. To foster the goal that every SAP employee worldwide can be heard and
+speak out without fear of retaliation, we have established a Global Ombuds Office which operates as
+an informal, independent, and confidential channel on top of the formal complaint mechanisms in
+place, including our Speak Out whistleblower reporting tool. For more information, see the Business
+Conduct section.
+We survey our employees regularly throughout the year. For the results of our latest employee survey,
+see the Employees section.
+Employees
+For more information about our customer engagement programs, see the Customers section.
+Customers
+For SAP, stakeholder engagement and collaboration are deeply embedded into our process of
+innovation and the development of our products and services. Before we can design a new solution,
+we must first understand the issue we are addressing. This is why we regularly liaise with the
+stakeholder groups described below, including our sustainability and Al ethics advisory panels.
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information
+about Sustainability
+Additional
+Information
+Additional
+Further Information
+about Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+Stakeholders
+To Our
+SAP Integrated Report 2023
+SAP
+Additional
+Information
+264/324
+QAudit Scope
+Our Al ethics advisory panel consists of academic, policy, and industry experts who advise us on the
+development and operationalization of the guiding principles for artificial intelligence. In 2023, we held
+an in-person, 1.5-day workshop with the panel where topics such as ethical implications of generative
+Al, human rights and Al, and high-risk use cases, were discussed. For more information about Al ethics,
+see the Human Rights section.
+Al Ethics Advisory Panel
+In 2023, the panel discussed key initiatives related to our sustainability management solutions,
+environmental performance, and human rights. For more information about our Sustainability Advisory
+Panel, see the Sustainability Management section of this report.
+Sustainability Advisory Panel
+To learn more about our engagement with NPOs, see the Social Investments and Our Contribution to
+the UN SDGs sections of this report. Alternatively, you can visit the SAP University Alliances Web page
+for more information.
+Our ongoing dialog with non-profit organizations (NPOs) and academic institutions plays a crucial role
+in our understanding of the current challenges we face as a society and how our solutions can address
+them. Through the SAP University Alliances program, we actively engage with students and faculty
+members, introducing them to SAP software through various networking and educational activities. By
+partnering with over 2,800 educational institutions worldwide, we aim to integrate SAP's cutting-edge
+technology into curricula, enabling students to gain hands-on experience in using software that powers
+some of the world's largest organizations. This collaboration between SAP and our academic partners
+puts us in a unique position to equip the next generation with the skills they need to tackle the
+questions of the future. By providing students with practical experience and exposure to our software,
+we are nurturing a pool of talent for SAP and our ecosystem that can contribute to solving the
+challenges that lie ahead.
+Non-Profit Organizations (NPOs) and Academia
+Information
+The content of the Stakeholder Engagement section was subject to an independent limited assurance
+engagement by our external auditor.
+Stakeholder Engagement
+Further Information
+about Sustainability
+Consolidated Financial
+Statements IFRS
+Placing dedicated focus on SAP's own operations, the ESG Steering Board (formerly Sustainability
+Council) serves as a governance body to steer SAP's corporate sustainability performance. Convened
+by the CSO and consisting of senior executives from across the Company, it provides strategic
+guidance and cross-Company engagement for SAP's holistic sustainability agenda.
+The Supervisory Board and its committees also deliberate on environmental, social, and governance
+(ESG) and related reporting matters. To this end, the Supervisory Board is regularly (at least once a
+year) briefed about the SAP Group's sustainability approach and the state of its implementation. The
+entire Supervisory Board oversees the sustainability performance and advises the Executive Board in
+this regard.
+To better seize the strategic opportunities of sustainability, in 2022 SAP brought together the key
+functional sustainability entities across SAP - corporate sustainability and the office of the chief
+sustainability officer, product development, marketing and solutions, and go-to-market teams – into a
+single end-to-end organizational unit and operating segment. This unit is led by two co-general
+managers reporting to the chief strategy officer who in turn reports to the CEO. Since January 2024, the
+co-general managers report directly to the CEO. The chief sustainability officer (CSO) leads SAP's
+global corporate sustainability efforts. In addition to reporting to the co-general managers, the CSO
+reports to the Chief Financial Officer (CFO) with a dotted line. The CEO is the Executive Board sponsor
+for sustainability overall. Additionally, SAP's CFO is co-sponsoring our environmental agenda
+(Environmental Management System (EMS) and Net Zero Program), while the Executive Board
+member responsible for Product Engineering is sponsoring SAP's efforts on Al Ethics.
+Sustainability Governance
+We leverage our dual approach in pursuit of a world with zero emissions, zero waste, and zero
+inequality.69
+SAP as exemplar: To live up to our corporate responsibility and to build resilience, we strive
+toward leading by example in SAP's business operations and practices by running our own
+operations more sustainably.
+SAP as enabler: We strive to provide products and services that support our customers in
+meeting their sustainability challenges and in capitalizing on the related opportunities.
+2)
+1)
+SAP also regularly engages with external stakeholder groups such as non-governmental organizations
+(NGOs), non-profit organizations (NPOs), and academia. This notably includes an external
+sustainability advisory panel comprised of expert representatives from our customers, investors,
+partners, NGOs, and academia, who provide us with valuable outside-in feedback and advice.
+For more information, see the Stakeholder Engagement section.
+We aim to create positive economic, environmental, and social impact within the planetary boundaries
+by using two key levers:
+Sustainability Management
+Information
+Additional
+Further Information
+about Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+To Our
+Stakeholders
+SAP Integrated Report 2023
+SAP
+At the heart of our strategy to bring SAP's purpose of “helping the world run better and improving
+people's lives" to life, sustainability is firmly anchored in our business strategy, governance, and
+executive compensation system. For more information about our corporate strategy, see the Strategy
+section.
+Materiality
+69 SAP's sustainability performance has been recognized by sustainability ratings and ranking and independent analysts. Recognitions are
+listed on SAP's Web site (link leads to information that was neither part of the statutory audit nor the independent limited assurance
+engagement performed by our external auditor).
+SAP
+Report
+Combined Management
+To Our
+Stakeholders
+SAP Integrated Report 2023
+SAP
+262/324
+The content of the Sustainability Management section was subject to an independent limited
+assurance engagement by our external auditor.
+QAudit Scope
+We measure the success of our initiatives through our employee engagement surveys. The latest
+results from 2023 showed that 81% of our employees stated, "I actively contribute to SAP's
+sustainability goals." This is down from 82% in 2022 and up from 47% in 2009 when we introduced the
+question.
+261/324
+Employee engagement is essential for driving change throughout SAP. We have set up several
+programs to help employees understand how sustainability is engrained in our purpose and strategy,
+and how they can contribute. For example, SAP continues to include sustainability in its onboarding
+training for new hires, global and local employee engagement sessions, and various line-of-business-
+specific learning offerings. Furthermore, employees can take openSAP online courses on sustainability,
+which are also available to the general public for free.
+Information
+Additional
+Further Information
+about Sustainability
+Consolidated Financial
+Statements IFRS
+Report
+Stakeholders
+Combined Management
+To Our
+Our corporate sustainability approach is to create positive economic, social, and environmental impact
+within planetary boundaries.
+Changing Our Behavior and Culture
+Defining Key Priorities for Our Non-Financial Reporting
+SAP Integrated Report 2023
+In 2023, we re-visited the results of the materiality analysis conducted in 2022 to evaluate if there had
+been changes in SAPS operations or operational environment that might trigger adjustments of the
+materiality analysis. As described below, no material changes occurred.
+Combined Management
+To Our
+SAP Integrated Report 2023
+SAP
+266/324
+rights
+Respect for human
+Energy consumption by operations and products, and the
+transition to renewable energy
+Talent attraction, retention, and development
+Stakeholders
+Active integration, equal opportunity, and fair treatment
+and remuneration of all employees
+Talent and development
+Energy
+Fair and inclusive workplace
+Human rights
+Employee matters
+Social, economic, psychological, and physical conditions
+of employees in their workplace, as well as employees'
+occupational health and safety
+Employee matters
+Employee matters
+Corporate culture, employee engagement and motivation,
+and strategic decisions involving workforce changes
+Labor rights, including unionization, as well as
+compensation and benefits offered to employees by their
+employer
+Environmental
+matters
+Fundamental rights of all individuals to live in dignity
+Anti-corruption and
+bribery matters
+Report
+Further Information
+about Sustainability
+To select the topics to be included in our integrated reporting, we conducted a comprehensive
+materiality assessment in 2022, applying the requirements of the German Commercial Code as well as
+the materiality definition of the Universal Standards of the Global Reporting Initiative (GRI): “Material
+topics are topics that represent an organization's most significant impacts on the economy,
+environment, and people, including impacts on their human rights."
+Expectations of our stakeholders are still rising in this context: Customers ask us to help them in their
+sustainability transformation; employees expect SAP to be a truly purpose-driven company; investors
+demand disclosure of not only financial performance but also environmental, social, and governance
+(ESG) performance for their investment decisions; and governments around the globe increasingly
+implement ESG-related regulations, taxes, and policies.
+Global crises and challenges such as climate change, environmental degradation, rising societal
+inequalities, ongoing wars, and the COVID-19 pandemic have highlighted the urgent need for corporate
+accountability and value creation beyond financial performance.
+Why Holistic Steering and
+Reporting Matters
+Information
+Further Information
+about Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+Stakeholders
+Consolidated Financial
+Statements IFRS
+To Our
+SAP
+267/324
+The content of the Materiality section was subject to an independent limited assurance engagement
+by our external auditor.
+Audit Scope
+While the likelihood and severity of impact scenarios and the financial, strategic, and regulatory
+relevance of a topic to SAP's business success and resilience had changed in a few instances, the
+overall list of material topics according to HGB and GRI had not.
+To re-evaluate the results, we looked at all topics that had been considered in 2022, and pre-assessed
+whether (1) a positive or negative impact scenario and (2) financial, strategic, and regulatory relevance
+could have changed. To validate this pre-assessment, we additionally consulted internal experts and
+collected their views.
+Re-Visiting the Results
+Information
+Additional
+SAP Integrated Report 2023
+Financial Matters
+To help drive progress in our sustainability initiatives, we need the support of employees throughout
+the organization. We currently have a global internal network of nearly 400 sustainability champions
+who represent different regions and areas of the business at SAP. Not only do they act as role models
+and multipliers, these champions tailor sustainability engagement activities to local and lines-of-
+business needs and interests and share best practices.
+GRI
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+To Our
+Stakeholders
+SAP Integrated Report 2023
+SAP
+Topic
+265/324
+70 Represented stakeholder groups are further explained in section Stakeholder Engagement.
+According to section 289c (3) of the German Commercial Code (Handelsgesetzbuch, HGB), the
+material topics are identified by considering both the inside-out and outside-in perspectives. In
+Further Information
+about Sustainability
+Next, we prioritized the assessed impacts by translating the result of each evaluation category into
+numeric values, ranking the topics, and applying thresholds to derive the material topics for SAP from
+the inside-out perspective.
+Next, we assessed the inside-out perspective. In a first step, we qualitatively described positive and
+negative impact scenarios for each topic on the list based on the results of the impact assessment,
+using the Value Balancing Alliance (VBA) methodology, through which we aim to monetarily measure
+SAP's impact on society and environment across the value chain, see the Why Holistic Steering and
+Reporting Matters section.
+To assess the outside-in perspective, we evaluated the financial, strategic, and regulatory relevance of
+each topic to SAP's business success and resilience. To this end, we ranked the topics and applied
+thresholds.
+1) Outside-in perspective (impact of the topic on SAP)
+To assess the significance of each topic on the updated long list, we considered the following two
+perspectives:
+Prioritization
+We compiled a list of relevant topics that builds on the long list of 2020, using the artificial intelligence
+(Al) and Big Data solution from Datamaran Limited. To ensure timeliness and completeness, we
+enriched the list with an analysis of further external sources covering, among others, corporate peer
+reports as well as mandatory and voluntary regulations for the software sector. To identify key topics
+and their boundaries, we looked at areas related to our operations and supply chain and at topics
+related to our solutions. Additional topics identified were added and mapped to the long list.
+Identification
+Related Non-
+Below, we have detailed the key stages of the process we followed to assess the significance of each
+economic, social, and environmental impact.
+Following this, we assessed each negative impact scenario according to its likelihood and severity
+(scale, scope, remediability), and each positive impact scenario according to its likelihood, scale, and
+scope. We considered mitigation measures in place in the course of this process, and hence the net
+risks. During the assessment, we considered the input of several SAP sustainability experts from
+various units and regions, taking different stakeholders' perspectives 70 into account.
+Additional
+2) Inside-out perspective (SAP's impact on the topic)
+contrast, the material topics according to GRI 3 only take into account the inside-out perspective
+including the impact on human rights, in the context of their activities and business relationships.
+Topic Material
+According to
+HGB
+Topic Material
+According to
+Information
+Well-being, health, and safety
+Employee rights
+Responsibility to help ensure customer satisfaction and
+customer rights, including responsible marketing and
+selling practices
+(Non-)greenhouse gas emissions from operations and
+products, as well as present or potential disruptive
+impacts of climate change
+Responsible business conduct, including anti-corruption,
+anti-bribery, fair competition, respect for intellectual
+property, and responsible tax principles
+Protection of private, confidential, or sensitive information
+and data, as well as the vulnerability of critical information
+systems
+Customer responsibility
+Employee engagement
+Ethics and compliance
+Cybersecurity, privacy, and data
+protection
+Definitions
+The following topics are material according to the HGB and/or GRI:
+In our reporting, we seek to meet the materiality requirements of both the GRI Standards and
+section 289c (3) of the HGB despite diverging definitions.
+Results
+Feedback on and analysis of our integrated report will be taken into account during future materiality
+assessments.
+Validation
+Climate change and
+air quality
+The results of the 2022 materiality assessment were reviewed and confirmed by our executive owners
+for integrated reporting. Our CFO thereafter approved the materiality assessment.
+Review
+Stakeholders
+To Our
+SAP Integrated Report 2023
+SAP
+272/324
+Audit Scope
+The content of the Social Investments section was subject to an independent limited assurance
+engagement by our external auditor.
+This strategy also covers SAP's humanitarian aid efforts extending to natural disasters and beyond.
+Where applicable, we mobilize a swift and effective response, providing immediate aid while focusing
+on long-term, sustainable rebuilding efforts.
+Additionally, through a long-standing partnership with We Are Family Foundation, SAP champions
+youth inclusion in global dialogues through the Youth to the Table and Youth to the Front Fund
+programs. This collaboration increases youth representation in critical forums such as the World
+Economic Forum (WEF), UN General Assembly (UNGA), and Conference of the Parties (COP),
+showcasing SAP's dedication to intertwining social responsibility with tangible sustainability efforts and
+inclusivity. In 2023, SAP's sponsorship enabled over 35 youth social entrepreneurs and climate leaders
+to engage in a diverse array of forums, resulting in hundreds of meaningful exchanges.
+SAP fosters employee engagement, aligning employee contributions with its holistic sustainability
+framework. In 2023, SAP employees dedicated over 137,000 volunteer hours, of which 74% were skills-
+based. Our internal SAP Together volunteering and donation platform counts 47,300 registered
+employees and 459 volunteering opportunities.
+Combined Management
+Report
+Equitable Access to a Green Economy - Collaborate for Sustainability
+74 Exchange rate date: December 31, 2023.
+Consolidated Financial
+Statements IFRS
+What We Buy and Where We Buy It From
+Additional
+In 2023, in total, digital skill-building and coding programs trained 41,806 teachers and engaged
+2.8 million youth, of which 46% were girls.
+SAP Integrated Report 2023
+SAP
+273/324
+76 (1) Car Fleet: Includes procurement relating to the global company car fleet and additional mobility options. (2) Cloud Infrastructure:
+Procures products and services for SAP's cloud operations such as network services, data center, co-location, hyperscaler, middleware, and
+related goods and services. (3) Marketing: Supports topics related to SAP's marketing, events, and merchandise. (4) Professional Services:
+Includes financial and legal services, temporary staff, and business travel areas. (5) Technical Services: Includes application and development
+services. (6) IT Solutions: Includes procurement for areas such as client services, equipment, communication, and software. (7) Real Estate and
+Facilities: Manages building related capital projects and operations, including catering and facility management.
+75 Link leads to information that was neither part of the statutory audit nor the independent limited assurance engagement performed by our
+external auditor.
+Further Information
+about Sustainability
+In 2023, we spent approximately €6.4 billion in purchases from around 13,000 suppliers worldwide
+(2022: approximately €7.2 billion from more than 13,000 suppliers worldwide). Within our seven
+procurement categories, 76 we approach sustainable procurement from different angles: IT Solutions
+(example: reduce single-use plastics packaging and packaging material), Professional Services
+(example: CO2-reduced mobility concepts, electronic contracts), Marketing (example: sustainable
+merchandise and events), Cloud Infrastructure (example: sustainable cooling of data centers),
+Technical Services (example: managed services with remote delivery), Real Estate & Facilities
+(example: increase of self-produced solar energy and avoidance of single use tableware), and Car
+Fleet (example: sustainable mobility concepts with a commitment to emissions-free vehicle-only car
+fleet from the year 2025).
+The SAP Supplier Code of Conduct 75 (SCOC) is required in our standard supplier contracts and is an
+essential part of our supplier registration. This supplier registration ensures that potential suppliers of
+SAP are aware of SAP's SCoC. We review and update our SCoC regularly to maintain high standards
+within our supplier network – the latest update being a new and improved version that was published
+at the end of 2023. This strengthens the SCOC's enforceability and sends a clear message to our
+suppliers about its importance for SAP.
+Upholding High Standards Across Our Supply Chain
+A significant part of our social and environmental impact is delivered through our supply chain.
+Eliminating single-use plastics, decreasing carbon emissions, respecting human rights, and closely
+collaborating with a diverse supplier network are factors that contribute to a sustainable supply chain.
+Our Global Procurement Organization (GPO), led by our chief procurement officer (CPO), aims to
+transform into a purpose-driven program. That is why we established the overarching Procurement
+with Purpose (PwP) initiative, which promotes purpose-driven initiatives such as diversity and social
+inclusion and environmental improvement from vendors.
+Making Our Supply Chain More Sustainable
+Sustainable Procurement
+Information
+Our SCoC contains provisions on labor standards, human rights, environmental standards, and
+diversity and inclusion. Furthermore, we recommend to SAP suppliers that they deliver goods and
+services that are accessible to everyone, including people with disabilities.
+In 2023, SAP continued collaborating with UNICEF's Generation Unlimited and the digital
+marketplace Yoma to advance SAP Educate to Employ, a pilot program educating youth in need on
+soft skills, foundational knowledge, and SAP skills to enable a pathway to a successful career in the
+SAP ecosystem. The program started in Kenya, Nigeria, the Philippines, and South Africa with the goal
+of transitioning 25 youth per country to SAP-related roles. It has since engaged over 224,000 youth in
+digital skills training.
+Governance, Guidelines, and Policies
+As a result, in 2023, SAP made direct capacity for non-profit organizations and social enterprises
+through in-kind contributions of US$3.7 million (€3.3 million) 74 through 140 consulting projects. The
+number of employees engaged as pro-bono consultants increased 45% year over year to 518.
+The head of CSR globally leads the SAP CSR team, reporting to our Global Government Affairs unit. C-
+level executives from different Board areas form the Global CSR Governance Committee, tasked
+with guiding, overseeing, and approving SAP's CSR strategy. Additionally, regional CSR governance
+committees vet and approve significant CSR alliances and initiatives in collaboration with regional SAP
+CSR leaders. Our internal SAP CSR policy outlines our focus areas, ensuring our social investments
+uphold integrity and responsibility. It also delineates the operational standards, clarifying the distinct
+roles and accountabilities across global CSR, regional CSR, and line-of-business activities.
+To Our
+The vast majority of our social investments (2023: €25.2 million 7¹) are aligned with the United Nations
+(UN) Sustainable Development Goals (SDGs), primarily focusing on quality education (SDG 4), gender
+equality (SDG 5), decent work and economic growth (SDG 8), reduced inequalities (SDG 10), climate
+action (SDG 13), and partnership for sustainable development (SDG 17).
+SAP recognizes the interdependencies between today's environmental and social issues, approaching
+them with a sustainable corporate strategy. Corporate social responsibility (CSR) is part of that
+strategy, embodying SAP's purpose to help the world run better and improve people's lives. CSR at
+SAP focuses on driving long-term social and environmental impact and business value with three focus
+areas that power equitable access to economic opportunity, education and employment, and the
+green economy. These focus areas are Accelerate Social Business, Build Future Skills, and Collaborate
+for Sustainability.
+Strategy
+Social Investments
+Impact Measurement and Management
+Information
+Further Information
+about Sustainability
+Consolidated Financial
+Statements IFRS
+Report
+Stakeholders
+Combined Management
+To Our
+Additional
+Equitable Access to Education and Employment - Build Future Skills
+SAP invests in innovative education models and fosters engagement with multistakeholder
+partnerships to enable pathways to employment and entrepreneurship in the sustainable and digital
+economy for youth in need (underrepresented, underserved, and underprivileged youth between the
+ages of 16 and 24).
+We regularly assess the impact of our social investments, reporting specified output metrics for all
+initiatives across regions: employee engagement, volunteer hours, beneficiaries reached, youth trained,
+and social enterprises enabled. Moreover, each signature initiative adheres to a tailored impact
+measurement framework and logic model.72
+By empowering a new generation of youth with the education, knowledge, and ICT skills needed to
+participate in the digital future, SAP's program increases the likelihood that ACW beneficiaries will
+realize higher earnings during their working lives. Based on future increased income, Common Good
+Marketplace estimates that ACW catalyzed up to $1 billion 73 in social value for program participants.
+Equitable Access to Economic Opportunity - Accelerate Social Business
+Social enterprises aim to generate profit while solving social or environmental problems. Unlike
+traditional businesses, they reinvest most of their earnings into their mission. SAP supports social
+enterprises through a three-pronged approach. Firstly, SAP enhances their organizational capacity
+In 2023, SAP significantly increased its virtual pro-bono consulting offering through the TRANSFORM
+Support Hub jointly powered by MovingWorlds, Unilever, and TRANSFORM. The global platform
+connects SAP employees with social enterprises worldwide. It serves as an international one-stop
+shop for non-financial support to social entrepreneurs, harmonizing resources and offerings from
+public, private, and social sectors. Pro-bono consulting offers our employees opportunities for
+personal and professional growth as it does for social entrepreneurs and their businesses.
+while developing SAP employees by means of on-site and virtual pro bono consulting. Secondly, by
+promoting social procurement, SAP facilitates social enterprises to enter new B2B markets such as
+SAP Business Network. Thirdly, we advocate supportive policies and dedicate (non-)financial
+resources towards fostering a sustainable and inclusive economy, investing in essential network-
+building and stakeholder capacity enhancement.
+Information
+Additional
+Further Information
+about Sustainability
+Consolidated Financial
+Statements IFRS
+We work with third-party evaluators to assess the impact of our initiatives. Specifically, in 2023, an
+extensive evaluation was conducted on SAP's Africa Code Week (ACW). From 2015 to 2022, the ACW
+initiative engaged 14.6 million participants, introducing students to key digital skills essential for
+tomorrow's tech workplace. In partnership with UNESCO, SAP's gender-sensitive program reached
+primary and secondary school students, 46% of which were girls, across 48 African countries and
+promoted the integration of coding and computational thinking into seven national curricula, advancing
+the SDGS 4, 5, and 17.
+Combined Management
+Report
+SAP Integrated Report 2023
+SAP
+271/324
+73 Assuming 50% of program participants achieved moderate learning outcomes in ICT skill improvement (.125 net standard deviation learning
+gain in ICT skills).
+72 See SAP CSR in Review 2023 (link leads to information that was neither part of the statutory audit nor the independent limited assurance
+engagement performed by our external auditor).
+71 The topic of SDGs was neither part of the statutory audit nor the independent limited assurance engagement performed by our external
+auditor.
+To Our
+Stakeholders
+Combined Management
+4%
+Report
+274/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information
+about Sustainability
+Additional
+engagement, and make an informed supplier selection based on environmental and social
+performance. This process captures information pertaining to the performance of our suppliers in three
+focus areas: Social, diverse, and inclusive supply chain; environmental supply chain; and human rights
+in the value chain. As a next step, the GPO plans to set up a Supplier Enablement Team as a dedicated
+team responsible for the supplier qualification process.
+Addressing Supply Chain Legislation Across the World
+In light of the uptake in legislative action around the world, such as the UK and Australian Modern
+Slavery Act and the German Supply Chain Due Diligence Act (LKSG), SAP respects the human rights in
+its own operations but equally in its supply chain. This includes, for instance, introducing new concepts
+for identifying human rights risks across our supply chain (for more information, see the Human Rights
+section).
+QAudit Scope
+The content of the Sustainable Procurement section was subject to an independent limited assurance
+engagement by our external auditor.
+275/324
+SAP
+SAP Integrated Report 2023
+To Our
+Managing Our Discarded Electrical and Electronic Devices
+Being an Exemplar: Cutting Down Waste in Our Own Operations
+SAP advocates global systems change at scale to accelerate the transition to a circular economy. To
+make the circular economy the de facto approach to material use and waste management, we are
+working with our customers and partners on solutions that address full-circle transparency across a
+wide range of material flows. For more details about our circular economy solutions, see the Product
+Strategy section and our Circular Economy Solutions Web site 79.
+Being an Enabler: Leveraging Software Solutions
+We believe in SAP's capabilities to help transform the economy into a low-carbon, circular system to
+reach a restorative and regenerative world of zero waste and significantly cleaner oceans. In alignment
+with SAP's Global Environmental Policy 78, our waste and water strategy and corresponding company-
+wide initiatives aim to continuously reduce SAP's impact on the environment by generating less waste,
+reducing water consumption, and enabling our customer to do the same.
+Aspiring to a World of Zero Waste
+77 Top 100 suppliers by emissions are part of the pilot for the improved qualification process.
+Waste and Water
+Additional
+Further Information
+about Sustainability
+Consolidated Financial
+Statements IFRS
+Report
+Stakeholders
+Combined Management
+Information
+Stakeholders
+In addition, our GPO has started to implement a supplier qualification process based on sustainability
+indicators." This will enable the organization to increase visibility over our vendors, improve our
+As part of its PwP program, SAP was a corporate member of supplier and social enterprise certification
+organizations such as WEConnect International, Disability:IN, and Social Enterprise UK.
+Consolidated Financial
+Statements IFRS
+Further Information
+about Sustainability
+Cloud Infrastructure
+Technical Services
+IT Solutions
+Marketing
+Professional Services
+Real Estate and Facilities
+Car Fleet
+Percent of Suppliers per Region
+Percent of total spend
+APJ
+10%
+■ APJ
+Americas
+27%
+■ America
+EMEA
+EMEA
+63%
+Driven by our GPO, SAP's supplier diversity and social enterprise initiatives aim to build the capacity of
+diverse and social businesses to provide a fair chance at competing for contracts and are treated
+equally to other SAP suppliers.
+We believe that diverse and sustainable businesses bring significant added value to SAP. Establishing
+an inclusive supplier network – that is, minority enterprises defined by gender, ethnicity, disability,
+sexual orientation, and other characteristics, as well as certified social enterprises that focus their
+company's mission on making social impact – remains a priority for SAP. We believe that our
+commitment to an inclusive, bias-free culture in our workplace must be mirrored in our approach to
+our supplier base.
+Environmental and Social Procurement
+Additional
+Information
+26%
+17%
+These organizations enable the GPO to identify opportunities to engage with diverse suppliers and
+social enterprises, supporting our social procurement spend targets.
+14%
+10%
+11%
+6%
+Other
+Percent of total spend
+Suppliers by Category (Tier 1)
+12%
+Information
+SAP
+Thousand cubic meters
+2019
+-19%
+-26%
+-23%
+15%
+710
+765
+878
+Global Water Usage
+988
+-3%
+1,332
+Additional
+Information
+Further Information
+about Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+Stakeholders
+To Our
+SAP Integrated Report 2023
+2020
+SAP
+2021
+2023
+Report
+Stakeholders
+Combined Management
+To Our
+SAP Integrated Report 2023
+SAP
+278/324
+80 Based on the Aqueduct Water Risk Atlas of the World Resource Institute.
+The content of the Waste and Water section was subject to an independent limited assurance
+engagement by our external auditor.
+QAudit Scope
+⚫ In Budapest (Hungary) and Bangalore (India), we installed water aerators that reduce the water usage by 40%.
+• In Bangalore (India), a rainwater harvesting system was installed to improve water conservation and a system to capture
+atmospheric particles was implemented to produce water for the cafeteria.
+• At our headquarters and other locations, we use rain and run-off water for irrigation and toilets.
+• Based on our water risk-assessment for our ISO 14001-certified sites 80: twenty percent of these sites are located in high to
+extremely high water-risk regions. In 2023, we enabled access to real consumption data in these sites by installing water
+(sub)meters and/or sensors to measure and improve our consumption.
+• In our headquarters, we use adiabatic cooling (evaporative cooling) and closed water circuits to minimize water
+consumption for cooling our server racks. In 2023, we installed an adiabatic cooling system in Bangalore (India).
+• We completed a robust and comprehensive climate risk and vulnerability assessment to identify physical climate risks that
+are material to SAP's owned data centers. The results were discussed with relevant stakeholders from SAP and four climate
+hazards were selected for in-depth analysis, including "water stress." The vulnerability of data centers to any of the priority
+hazards has been assessed.
+Water management
+efforts in our offices
+Water management
+efforts in SAP-owned data
+centers
+Implemented Measures and Initiatives
+2022
+277/324
+In 2023, the water usage decreased compared to 2022 and remains at a lower level compared to the
+pre-pandemic situation due to the introduced flexible working mode and our implemented water-
+reduction measures.
+Climate change affects - and is affected by - global water resources and management. This is why we
+continue to aim to use water as efficiently as possible in our data centers and offices even though our
+operations are not water-intensive.
+Waste directed
+to disposal
+from disposal
+840
+Waste diverted
+Tons
+E-Waste Treatment
+Information
+Additional
+Further Information
+about Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+Stakeholders
+To Our
+SAP Integrated Report 2023
+SAP
+276/324
+79 The link leads to information that was neither part of the statutory audit nor included in the independent limited assurance engagement
+performed by our external auditor.
+78 The link leads to information that was neither part of the statutory audit nor included in the independent limited assurance engagement
+performed by our external auditor.
+Waste of electrical and electronic equipment (WEEE, or e-waste) is one of the world's fastest-growing
+waste streams. As a global cloud company running data centers for our customers and office buildings
+across the world with a large amount of IT devices in place for our more than 107,000 employees, the
+ecological footprint of our electrical and electronic equipment (EEE) and their end-of-life treatment is
+a growing area of focus for SAP. In our Global Environmental Policy, we made the commitment to strive
+towards zero e-waste in our own operations by diverting close to 100% from incineration, landfill, and
+nature by 2030. As such, we cooperate with international and local IT asset lifecycle partners to reuse
+and recycle our e-waste. We also engaged with them to improve their sustainability roadmap - helping
+to reach our own sustainability target for 2030 – as well as with the Climate Neutral Data Centre Pact
+(CNDCP) Circularity working group to define sustainability measures and find new levers to drive
+positive change forward. By the end of 2023, we had reused 56% and recycled 37% (total: 93%) of our
+total WEEE. For more information about the accounting of our WEEE, see the Non-Financial Notes:
+Environmental Performance section.
+78 25 103
+558
+1398
+■Reusage
+Using Water Efficiently
+With the results of our yearly assessments for our Taxonomy-related disclosures, we would also like to sensitize those
+suppliers who are not yet compliant to further develop their products and services in accordance with the requirements of the
+EU Taxonomy.
+• Downstream: 94% of servers and data storage products undergo preparation for re-use, recovery, or recycling operations,
+or for proper treatment, including removal of all fluids and selective treatment.
+Upstream: 56% of servers and data storage products already comply with eco-design and hazardous waste requirements.
+•
+In 2023, we conducted a WEEE treatment compliant assessment of a selected range of key upstream suppliers and
+downstream asset lifecycle partners:
+• An Indoor Smart Composting System was installed in Budapest (Hungary) and an Organic Waste Converter was installed in
+Bangalore (India) to process the organic waste generated in the office.
+• There is a Waste-to-Energy (WtE) process in our headquarters in which organic waste is used to generate biogas.
+• 'Too Good to Go' app installed in selected German cafeterias enabled employees to pick up leftover lunches for a small
+fee to combat food waste. In 2023, more than 3,000 meals were saved.
+Consolidated Financial
+Statements IFRS
+• The global printing volume remained at a low level: 12.5 million pages (increase of 18% versus 2022; decrease of 74%
+versus 2019)
+• We continued our waste separation initiative by installing 55 further waste separation systems in the flexible workspaces in
+Walldorf and St. Leon-Rot.
+Based on three principles 'reduce waste, reuse items, and recycle materials', we continued to collaborate with suppliers,
+service providers, partners, the internal global network of sustainability champions, and other stakeholders to eliminate
+single-use plastic products such as bottles, cups, stirrers, straws, cutlery, and food packaging. For example, in Barcelona we
+reduced plastic bottles in the employees' daily lives by providing water filters for their own homes.
+Assessment of our suppliers and
+partners
+Improve waste segregation and
+reduce residual waste
+Implemented Measures and Initiatives
+Elimination of single-use plastics
+Cutting Down Residual Waste Within Own Operations
+■Landfill
+■Incineration with/without energy recovery
+Recycling
+• The office furniture and equipment from vacated seats and floors was reused in several sites.
+Further Information
+about Sustainability
+• In Colorado Springs (USA), we use free air cooling in the colder winter season and leverage a non-potable water system in
+the warmer months. By increasing the programmed outside temperature set point that determines when the sumps are
+filled with water, we were able to improve our water usage efficiency (WUE).
+Information
+Global Partnership for Sustainable Development Data
+Global Business Coalition for Education
+Get Nature Positive
+Fundação Amazonas Sustentável
+European Roundtable for Industry (ERT)
+Additional
+Euclid Network
+EMF London Design Festival Circular Design Project
+Ellen MacArthur Foundation (EMF)
+econsense e.V.
+Disability:IN
+Deutschland sicher im Netz e.V.
+Deloitte Digital
+Code Unnati (India)
+Climate Neutral Now
+ChangemakerXchange
+CIPL
+CDP
+Buy Social USA
+Gucci CEO Carbon Neutral Challenge
+Haus des Stiftens
+IMPACT2030 (founding member)
+INJAZ Al-Arab (former Junior Achievement MENA)
+SAP Integrated Report 2023
+280/324
+LEAF Coalition
+International Investors Association of Turkey (YASED)
+Information Technology Industry Council
+Goodwall
+GlobalGiving
+Global Business Alliance
+The Future of Privacy
+Business Coalition for a Global Plastics Treaty
+European Venture Philanthropy Association (EVPA)
+EU Code Week
+ESMIG
+EMF ERP Pledge
+EcoVadis
+DIGITALEUROPE
+Deutsches Rechnungslegungs Standards Committee e.V.
+Latin Code Week
+Klimabündnis Baden-Württemberg
+Junior Achievement
+European Green Digital Coalition (EGDC)
+Business for Nature's Call to Action
+European Climate Pact Pledge
+Bitkom e.V.
+and Commitments
+Memberships, Partnerships,
+Additional
+Information
+Further Information
+about Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+Stakeholders
+To Our
+SAP Integrated Report 2023
+SAP
+279/324
+The content of the Public Policy section was subject to an independent limited assurance engagement
+by our external auditor.
+QAudit Scope
+Business Avengers
+Political Contributions
+SAP believes in transparency in the political process. Accordingly, we are registered in the Lobby
+Registry of the German Federal Parliament and selected state parliaments and in the European
+Transparency Register for interest representatives. In the United States, SAP is registered, and reports
+in compliance with, the federal Lobbying Disclosure Act. We are also registered in other countries,
+wherever required by local law.
+SAP engages with governments around the globe on various policy issues and on creating reasonable
+framework conditions for the adoption of new beneficial technologies or business models such as
+cloud computing, the Internet of Things, and Big Data.
+SAP has developed trusting and transparent relationships with governments worldwide by
+cooperatively exploring the potential for information and communications technologies to spur
+economic growth, create jobs, and address societal challenges. This includes consideration of the role
+governments play as users as well as policy makers, and by supporting the digital transformation of the
+public sector to become more efficient, effective, and citizen-oriented.
+Public Policy
+To better understand and evolve sustainable performance, dialog, and exchange of knowledge and
+different perspectives on a national, regional, and global level, are vital for SAP, both for our company
+and customers. Hence, SAP subscribes to, commits to, and routinely engages in a range of third-party
+organizations, including:
+Organization
+In accordance with the SAP Global Code of Ethics and Business Conduct, SAP does not make direct
+contributions for political purposes, to political parties, politicians, or political organizations other than
+through event sponsorships and related marketing as allowed by law and specifically approved by
+SAP Global Government Affairs and the Office of Ethics & Compliance (OEC). By the laws of the United
+States, SAP employees exercise their right to operate a political action committee (PAC). The
+SAP America PAC is an independent, registered, and strictly regulated organization that allows eligible
+SAP employees to voluntarily contribute to the SAP America PAC in the United States to financially
+support candidates seeking public office at the state and federal levels. Consistent with U.S. laws, SAP
+exercises no control over or influence on the SAP America PAC. SAP America PAC expenditure figures
+are transparent and accessible through the U.S. Federal Election Commission Web site.
+Africa Code Week
+Acumen
+ASSOCHAM
+Australian Indigenous Education Foundation
+ASEAN Foundation
+Advancing Women Executives
+Climate Neutral Data Centers Pact
+CII-ITC Center of Excellence for Sustainable Development
+CEO 2030 EU Climate Letters
+Capital Equipment Coalition
+BSA The Software Alliance
+Alliance for Development and Climate
+Buy Social Canada
+Business for Social Responsibility
+Business Call to Action (UNDP)
+Breakthrough Energy Ventures
+Beyond Sport
+Australian Climate Leaders Coalition
+Ashoka Young Changemakers
+Alliance for Integrity
+Covers electricity consumed by hyperscale services.
+Market-based reporting: To a large proportion, most of SAP's hyperscaler providers operate their data centers with
+renewable electricity sources. To ensure that SAP's cloud infrastructure runs with 100% renewable electricity, we procure
+EACs for the remaining electricity consumption not already covered by renewable electricity from our providers. For this
+purpose, we use the latest available and assured renewable electricity information of our suppliers: For fiscal year 2023,
+we relied on supplier data from 2022, as externally assured data for 2023 was not yet available at the point of
+publication of this Integrated Report.
+In the location-based net carbon emissions, the renewable electricity by our hyperscalers as well as the SAP-procured
+EACs for any remaining non-renewable electricity consumption is deducted from our Scope 3 hyperscaler emissions.
+For SAP-procured EACs, we also ensure that it is confirmed by an official certificate or written confirmation of our
+respective EAC suppliers (100% data coverage).
+For our science-based target (net zero by 2030) baseline, we account Scope 2 market-based
+emissions in line with the GHG Protocol Scope 2 Guidance.
+Carbon Offsets
+As outlined in the Energy and Emissions section, SAP invests the equivalent of remaining emissions
+from our own operations (Scope 1, 2 and selected 3 emissions) in carbon projects to help reach its
+carbon neutrality target.
+Projects and benefits shall be additional. Assumptions regarding the baseline shall reflect reality as closely as possible and
+avoid overstatements. Deforestation shall not have occurred to implement planting projects. The risk of leakage site shall be
+identified, addressed, and reduced.
+To support credible, genuine projects, SAP's due diligence approach for its offset providers and nature-
+based projects are outlined in the Energy and Emissions section. Further details on SAP's own,
+annually-reviewed quality expectations can be found below:
+Partners shall have a history of successfully implemented projects and expertise to implement the right projects in the right
+places. Scientific partnerships and project designs are strongly preferred.
+Local biodiversity shall be protected or enhanced. Implementors shall ensure native ecosystems are not deteriorated. All
+planting projects shall grow a selection of genetically diverse, at best native and climate-resilient trees in mixed stands.
+Projects shall be designed to protect or promote human rights. Organizations must identify and consult impacted
+stakeholders and ensure that projects are implemented in collaboration or with support of local stakeholders.
+•
+Partners must pass SAP's standard compliance checks. Projects generating carbon offsets must be independently certified
+and validated.
+Quality Criteria
+Transparency
+Further Information
+about Sustainability
+Compliance
+Partners must implement measures to address causes of nature destruction, and protect the project site during the
+committed time, ideally permanently. The political environment shall not actively undermine project activities. If the (limited)
+extraction of timber is required to safeguard project durability, trees shall be responsibly harvested (for example, no large-
+scale clear-cuts), allowing for regrowth.
+SAP
+288/324
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Durability
+Consolidated Financial
+Statements IFRS
+Information
+Carbon Neutrality
+Scope 3
+Additionality / Carbon
+Biodiversity
+Community
+Competence
+Additional
+Organizations must initially and regularly disclose selected data to provide transparency. Organizations leveraging technology,
+satellite imagery, or other tools to increase transparency, protection and/or understanding of the restored area are preferred.
+SAP Integrated Report 2023
+In the net carbon emissions relevant for our carbon neutrality target, purchased offsets are already
+deducted from our gross emissions. When our net carbon emission became a short-term Incentive KPI
+of the Executive Board compensation, we defined and documented a multi-year carbon offsetting plan
+(which is part of the annual independent audit procedures) to prevent misusage.
+Water Usage
+By water usage, we mean the total amount of freshwater withdrawn for our office buildings and data
+centers. Data is based on measurements and estimations from sites. Data was provided for 84.7% of
+the total water consumption; the remaining data is extrapolated based on square meter footage.
+E-Waste Management
+Waste of Electrical and electronic equipment (WEEE / e-waste) 85 means all the discarded electrical
+and electronic devices. These ranges from end-user IT equipment such as laptops, peripherals, and
+mobile devices to compute, to networking and storage devices of our data centers. Our international
+and local IT asset lifecycle partners test the collected WEEE to determine the correct treatment. We
+define the possible streams as follows:
+Waste diverted from disposal:
+1. Reusage (top priority): Refurbishing and reselling functioning devices to give it a second life
+Additional Environmental Aspects
+2. Recycling (second priority – previously called "mechanical recycling"): Extracting raw materials to
+preserve and reuse them (such as plastics, metals, and rare earths)
+1. Incineration with and without energy recovery (previously called “thermal recycling"), whereby the
+former refers to the generation of energy through the incineration of waste
+2. Landfill: Disposing of waste on a landfill site (we strive to avoid this treatment as much as possible)
+85 The former categorization (Reusage vs. WEEE) has been replaced by a new structure aligned with the European Sustainability Reporting
+Standards (ESRS) E5 and still aligns with EU Directive 2008/98/EC & EU Directive 2012/19/EU. "Reusage" is included in WEEE and there are
+two sub-categories: "Waste diverted from disposal" and "Waste directed to disposal". New terminology has also been implemented in
+alignment with ESRS E5 (specified in the text).
+290/324
+84 SAP aims to consider the latest guidelines on EAC market boundaries. In the 2023 RE100 disclosure report, we achieved an EAC market
+boundary alignment of 83% based on the criteria of RE100.
+SAP
+Waste directed to disposal:
+Calculation
+We define data center electricity as the sum of electricity consumed to provide internal and external
+computation power in SAP-owned data centers and contracted third-party data centers (co-locations).
+A data center is any global, regional, or local computing center (location with any number of server
+units) that is part of our global IT infrastructure strategy. Hyperscale data centers are not part of our
+own operations and are therefore not reflected in this disclosure. Internally, we calculate the electricity
+consumption of hyperscale services as basis to determine the required procurement of EACs to
+ensure that SAP software solutions running on hyperscale data centers are powered with 100%
+renewable electricity.
+Total Energy Consumed
+In 2023, the voluntary investments in our carbon project portfolio (see the Energy and Emissions
+section) were used to compensate for the remaining emissions of the following emission categories
+which could not be avoided nor reduced:
+-
+Scope 1: Stationary combustion in facilities, refrigerants in facilities, mobile combustion and
+refrigerants in corporate cars, mobile combustion in corporate jets
+Scope 2: Purchased chilled and hot water and steam
+289/324
+SAP
+SAP Integrated Report 2023
+Data Center Electricity
+To Our
+Stakeholders
+Consolidated Financial
+Statements IFRS
+Further Information
+about Sustainability
+Additional
+Information
+Scope 3: Business flights, rental cars, train travel, business trips with private cars, employee
+commuting, and logistics
+For our science-based target (net zero by 2030), we do not consider carbon offsets (beyond value
+chain mitigation) in line with the Science-Based Target initiative's Corporate Net-Zero Standard.
+Combined Management
+Report
+For market-based reporting, we apply a region-based market-boundary approach to account for our procured EACS for
+the market-based emissions. With 'region-based market-boundary approach', we refer to mapping the electricity
+consumption of our SAP sites to defined regions to ensure regional purchasing 84.
+We define total energy consumed as the sum of all energy consumed in SAP's own operations
+(Scope 1 and 2), including energy from renewable sources. It is calculated based on the consumption
+data obtained through our measurements for the carbon emissions and is the sum of energy
+consumption from stationary combustion in facilities, mobile combustion in company cars, mobile
+combustion in corporate jets, electricity in offices, electricity in own data centers, purchased chilled
+water, purchased hot water, and purchased steam, and electricity in co-location data centers (see Data
+Center Electricity).
+For location-based reporting, we consider EACS regardless of the site where the electricity is generated (unbundled
+EACS). SAP uses the regional- or country-specific emissions factors to calculate the emission reductions achieved by the
+EACs.
+Definition
+Carbon Emissions
+Data for our environmental indicators is collected and reported on a quarterly basis and is subject to
+external assurance for annual reporting (limited or reasonable assurance). Reporting on total energy
+consumed and data center electricity is based on the data collected for the calculation of our carbon
+emissions. All numbers are based on the metric system. Whenever we state "tons," we mean metric
+tons.
+Reporting Approach
+Our gross carbon emissions for 2023 were 472 kilotons of CO2 equivalents (CO2e) (2022: 441 kilotons
+CO2e), including all carbon emission categories of Scope 1 and 2, as well as selected categories of
+Scope 3 relevant for our carbon neutrality target as described in Methodology and Further Details
+below. Our net carbon emissions (0 kilotons in 2023) are calculated by deducting purchased EACs,
+self-generated renewable electricity, and carbon offsets from our gross emissions in the reporting
+period. We disclose various environmental performance indicators, including carbon neutral-relevant
+Scope 1, 2, and 3 emissions in the Report Data Hub82.
+We understand environmental performance as the measurable outcome of SAP's ability to meet
+environmental objectives and targets set forth in our Global Environmental Policy81. In this context, we
+determine SAP's greenhouse gas footprint (in the following called carbon emissions) as well as total
+energy consumed and data center electricity as the three key environmental performance indicators.
+Furthermore, we realize external compensations through self-generated renewable electricity and by
+purchasing offsets and Energy Attribute Certificates (EACS). Plus, we identify water consumption and
+the end-of-life treatment of SAP's electrical and electronic equipment as additional environmental
+topics relevant for our reporting.
+General Information
+Non-Financial Notes:
+Environmental Performance
+Additional
+Information
+Further Information
+about Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+Stakeholders
+To Our
+SAP Integrated Report 2023
+SAP
+281/324
+The content of the Memberships, Partnerships, and Commitments section was not subject to the
+independent limited assurance engagement of our external auditor.
+In the location-based net carbon emissions, the purchased as well as the self-produced renewable electricity is already
+deducted from our Scope 2 emissions.
+Yunus Social Business
+Young ICT Explorers
+World Business Council for Sustainable Development (WBCSD)
+World Economic Forum (WEF)
+"We Mean Business" coalition
+WEF Global Alliance for Social Entrepreneurship
+WEF 1t.org
+WEConnect International
+US-EU Trade and Technology Council
+We define the gross carbon emissions as the sum of all greenhouse gas emissions, measured and
+reported as CO2e, while net carbon emissions include the compensation with renewable electricity
+and carbon offsets (for more information, see External Reductions below).
+Reporting Principles
+SAP's preparation of the carbon emissions is based on the Corporate Accounting and Reporting
+Standard, the GHG (Greenhouse Gas) Protocol Scope 2 Guidance, and the Corporate Value Chain
+(Scope 3) Accounting and Reporting Standard of the World Resources Institute/World Business
+Council for Sustainable Development. This approach conforms to the requirements of GRI Standard
+indicators 305-1, 305-2, and 305-3.
+In alignment with the GHG Protocol Scope 2 Guidance, we report our net carbon emissions based on
+the two different calculation approaches: location-based and market-based.
+Carbon Neutrality 2023
+you I will find the different parameters contributing to our carbon emissions. Data coverage refers
+to the share of measured data (compared to extrapolated data) that is the basis for emissions
+calculation, such as kWh for electricity emissions or liters of fuel for corporate car emissions.
+Below
+Methodology and Further Details
+Where relevant, our conversion factors consider CO2e for greenhouse gases. Global Warming Potential
+factors are based on the Sixth Assessment Report of the Intergovernmental Panel on Climate Change
+(IPCC). We report all our carbon emissions in CO2 equivalents including the impact from CH4 and N2O
+in our target-relevant Scope 1, Scope 2, and Scope 3. The emission impact of refrigerants includes
+hydrofluorocarbons (HFCS) only. We review all our emissions and extrapolation factors annually and
+update them if required.
+The calculation of the carbon emissions is based on factors for conversion and extrapolation, provided
+by IEA, US EPA, UK DEFRA, Environment Canada, and GHG Protocol. SAP also uses extrapolation
+factors based on own reported data (of previous quarters) to determine an average consumption
+value per base unit (such as corporate cars: liters of fuel per car; facility: electricity consumption per
+m²).
+Conversion Factors
+We aim to continuously refine SAP's emissions calculation methodology and to increase the usage of
+measured instead of extrapolated input data. Methodology changes include changes in the source of
+activity data, additional new activity types, changes in emission factors, and changes in the
+methodology used to calculate carbon emissions. As we implemented our methodology approaches
+to the best of our current knowledge and ability, and consider such changes to be continuous desired
+progress, methodology changes will not lead to retrospective data adjustments. Hence, changes will
+be applied from the current year onward. The current year's methodology changes are made
+transparent in this section, particularly under Methodology and Further Details.
+Methodology Change
+Data Consistency
+To support the growing demand for SAP's cloud offerings, we subcontract computation power in local
+third-party data centers. Carbon emissions are approximated and included based on the consumed or
+extrapolated computation power.
+A portion of SAP's leased facilities operates under full-service or multitenant leases, where SAP does
+not have access to actual energy consumption information. SAP includes these facilities in our
+definition of operational control and accounts for them by estimating related energy consumption.
+Operational control is established when SAP has the full authority to introduce and implement its
+operating policies. The emissions of all operations over which the company has operational control
+and all owned, leased facilities, co-location data centers, and vehicles that the company occupies or
+operates are accounted for in the carbon emissions. They are based either on measurements or, where
+no measured data is available, on estimations and extrapolations.
+UNGC Sustainable Ocean Principles & Sustainable Oceans
+Coalition
+SAP defines its organizational boundaries by applying the operational control approach as set out in
+the GHG Protocol.
+Information
+Additional
+Further Information
+about Sustainability
+Consolidated Financial
+Statements IFRS
+Report
+Stakeholders
+Combined Management
+To Our
+SAP Integrated Report 2023
+SAP
+282/324
+82 Selected data presented in the linked environmental section were part of the statutory audit or independent limited assurance
+engagement performed by our external auditor. For details, see the auditor's assurance report.
+81 Link leads to information that was neither part of the statutory audit nor the independent limited assurance engagement performed by our
+external auditor.
+Organizational Boundaries
+UNICEF (Generation Unlimited)
+United Nations Development Programme (UNDP)
+Turkish Industry & Business Association (TÜSİAD)
+Science Based Targets initiative
+RE100
+Platform for Accelerating the Circular Economy
+Pyxera Global
+National Minority Supplier Development Council
+Metropolregion Rhein-Neckar
+Mechanical Engineering Industry Association
+Social Enterprise UK
+Singapore International Foundation
+SEND e.V.
+Schmalenbach-Gesellschaft für Betriebswirtschaft e.V.
+RebootKamp (RBK)
+Race to Zero
+Pratham Infotech Foundation
+Singapore Institute of International Affairs
+Pathway Japan
+Network for Teaching Entrepreneurship (NFTE)
+National Chambers of Commerce
+meQuilibrium
+Meet and Code
+make.sense
+Livelihood Funds
+Organization
+Additional
+Information
+Further Information
+about Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+Stakeholders
+To Our
+Ocean Plastics Leadership Network
+SAP reached its target of carbon neutrality in its own operations in 2023. Carbon neutrality 2023
+includes the following emission categories:
+Social Enterprise NL
+Social Traders
+Topolytics
+The Green Web Foundation
+The Climate Pledge
+TERI Innovative Solutions for Sustainable Development
+The Public Affairs Council
+techUK
+WWF OneSource Coalition
+"We Mean Business" Letter to G20 Leaders
+WEF Stakeholder Capitalism Coalition
+WEF Global Plastic Action Partnership
+WEF Alliance of CEO Climate Leaders
+We Are Family Foundation
+Value Balancing Alliance e.V. (founding member)
+Social Enterprise World Forum
+UN Energy Compact called 24/7 Carbon Free Energy
+United Nations Global Compact (since 2000)
+UMUZI
+UK Plastics Pact
+The Women's Industry Network
+Transparency International Germany
+Together with Nature Principles for Nature-Based Solutions
+The Conference Board, Inc.
+The Climate Solutions Foundation
+The Benefits Council
+Tech Saksham
+Teach For All
+SRIW
+Social Impact Award
+University of the People
+283/324
+QAudit Scope
+SAP Integrated Report 2023
+Use of Sold Products
+81%
+6.9 M tons CO2е
+and services
+Purchased goods Capital goods
+3%
+13%
+Travel and
+commute
+1%
+2%
+17%
+5.6 M tons CO2е
+Scope 3
+Downstream
+Scope 1 & 2
+0.1 M tons CO2e
+1.2 M tons CO2е
+Scope 3
+Upstream
+SAP's 2023 Gross Carbon Emissions Along the Value Chain (Market-Based)
+Baseline for Net Zero
+The following Scope 3 emissions sources are not applicable or insignificant to SAP's business
+operations: Downstream transportation and distribution, processing of sold products, end-of-life
+treatment of sold products, downstream leased assets, franchises, and investments. Additionally, the
+category upstream leased assets are not relevant for SAP since we have classified emissions resulting
+from leased assets as Scope 1 and 2 emissions following the operational control approach of the GHG
+Protocol.
+Excluded Scope 3 Emissions
+SAP aims to constantly improve the calculation methodology. Calculation parameters will be adapted
+when significant technology changes occur or more accurate data sources are available.
+Emissions are calculated using a global electricity emission factor. The calculation covers all of our
+major solutions, including on-premise software. Cloud solutions are not included, as they are part of
+internal, co-location, and hyperscale datacenter electricity emissions. Mobile solutions (for example,
+SAP apps running on customer IT equipment) are also not included.
+Use of Sold Products: A big part of our overall emissions stems from the use of our software
+(customers running SAP solutions on their hardware and premises). Due to our lack of control over our
+customers' IT landscapes, these emissions are not included in our carbon neutrality 2023 target.
+Nonetheless, we have been calculating the emissions for indicative purposes for many years. We are
+also taking them into account for our net zero 2030 target. Because of this, and to enhance the
+accuracy of the calculation, we refined the calculation methodology in 2023. The estimated energy
+consumption is extrapolated globally based on an average number of productive installations and
+average PUE, derived from SAP's external data centers. Previously, we relied only on planning data to
+estimate the average system size. Now, we also use real data from our customers to calculate the
+weighted average system size. In addition, we revisited the underlying data base. The data base we
+used in the past for indicative purposes included systems with active and non-active maintenance
+contracts. Because of this, carbon emissions from products in use had been significantly overstated.
+For systems without maintenance contracts, SAP has no transparency on whether the solutions are still
+in use. Therefore, from 2023 onwards, we only consider on-premise solutions with active maintenance
+contracts. This way, we ensure that only active, still functional software products are used in the
+calculation.
+Downstream Scope 3
+Employee Commuting: Includes Scope 1 and 2 emissions of employees for transportation of
+employees between their homes and their worksites during the reporting year in vehicles not
+owned or operated by SAP. The calculation approach is the same as outlined above in the Carbon
+Neutrality 2023 section for the category employee commuting.
+Information
+Additional
+287/324
+SAP
+SAP Integrated Report 2023
+To Our
+The renewable electricity for EACs is only considered if confirmed by an official certificate or written confirmation of our
+respective EAC suppliers (100% data coverage).
+The total of purchased EACS equals the total electricity consumption as well as the caused emissions of all electricity-
+related Scope 2 categories: electricity in office buildings, electricity in own data centers, electricity in co-location data
+centers, home office electricity, and e-mobility.
+The amount of renewable electricity used by SAP is calculated by adding the amounts of renewable electricity a)
+produced onsite, b) covered by EACs, and c) sourced through local green tariff agreements.
+Scope 2
+Carbon Neutrality
+For our carbon neutrality target we implement the following calculation approach for renewable
+electricity:
+Calculation
+All of our purchased renewable electricity is EKOenergy-certified, a high-quality, internationally recognized not-for-profit
+ecolabel for renewable energy installations that fulfill additional sustainability criteria. Through the purchase of EKOenergy-
+certified electricity, we also contribute to EKOenergy's Climate Fund, which finances solar projects tackling energy poverty.
+SAP
+The power plant producing the renewable electricity shall not be older than 10 years. In case of renovation of an old power
+plant, the 10-year rule applies only to the additional electricity output due to efficiency increase. SAP strives to not consider
+EACs from government-supported power plants.
+Currently, SAP only considers solar photovoltaics (PV) and wind for its own renewable electricity sourcing.
+EKOenergy
+Vintage
+Further Information
+about Sustainability
+Installation
+Quality Criteria for SAP's Procurement of EACS
+We define renewable electricity as electricity coming from renewable electricity sources such as wind,
+solar, geothermal, sustainably sourced biomass (including biogas), and sustainable hydropower. As
+recommended by the Greenhouse Gas Protocol and CDP/RE100, we actively look for the best
+available quality and standards, which support renewable electricity projects that meet robust criteria
+in terms of environmental integrity, reporting and verification. We have defined quality criteria for the
+procurement of Energy Attribute Certificates (EACS) by SAP to drive change in the electricity market
+and to avoid the risk caused by low-quality products. The key characteristics of our renewable
+electricity purchasing guidelines are as follows:
+Quality Criteria
+to abate electricity-related emissions. This is a strategic lever to achieve our carbon neutrality target
+and net zero target.
+As outlined in the Energy and Emissions section, SAP uses electricity from renewable energy sources
+Renewable Electricity
+Information
+Additional
+Further Information
+about Sustainability
+Consolidated Financial
+Statements IFRS
+Report
+Stakeholders
+Combined Management
+Type of Renewable Electricity
+Consolidated Financial
+Statements IFRS
+The renewable electricity must be produced in the same year or the year preceding the reporting period to which it will be
+applied.
+To Our
+Stakeholders
+Electricity in Co-Location Data Centers: Emissions caused by the consumption of purchased
+electricity in co-location data centers. A co-location is a local computing center where the building
+infrastructure is controlled and managed by an external provider but where SAP has control over
+the operations of the network and server infrastructure on which SAP software is running. CO₂e
+conversion factors are updated annually based on country-specific grid factors. Electricity
+consumption for co-location data centers is calculated based on the consumed server power and a
+power usage effectiveness (PUE) factor. Where no data is available, average factors are applied.
+E-Mobility: Emissions from company cars with electric drive. Electricity consumption is calculated
+based on the number of e-cars per country, an average energy consumption value for e-cars, and
+an average mileage per year. Emissions calculation is based on country-specific emission factors
+(100% data coverage).
+Information
+Additional
+Further Information
+about Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+To Our
+Stakeholders
+SAP Integrated Report 2023
+SAP
+284/324
+83 Since 2022, we also consider the server units located in our co-location data centers.
+Electricity in SAP-Owned Data Centers: Emissions caused by the consumption of purchased
+electricity in SAP-owned and -operated data centers. The calculation of emissions is based on data
+center electricity consumption (100% data coverage). CO2e conversion factors are updated
+annually based on country-specific grid factors.
+Electricity in Office Buildings: Emissions caused by the consumption of purchased electricity in
+office buildings. Calculation of emissions is based on building electricity consumption. CO₂e
+conversion factors are updated annually based on country-specific grid factors. Where no
+measured data is available, stable values (kWh/m²) based on the previous year's energy
+consumption data are used for extrapolation.
+Home Office Electricity: Emissions caused by end-user IT equipment used by SAP employees
+working from home. Due to the high number of employees working from home (flexible hybrid
+working model, Pledge to Flex) we started to report the electricity emissions of IT equipment usage
+outside of the office in 2022. Per employee, an average equipment usage consisting of a notebook,
+monitor, and mobile phone is considered. For each of these hardware device types, the model that
+is primarily used by SAP employees is taken into account to determine the average electricity
+consumption per hour. Average daily usage, charging hours, and stand-by hours are additionally
+considered when calculating the electricity consumption of an employee in home office. The
+information about the share of home office per location is determined based on the latest
+commuting survey conducted in 2022 (see Employee Commuting). Emission calculation is based on
+country-specific emission factors.
+Refers to indirect carbon emissions and is defined as emissions from the consumption of purchased
+electricity, purchased steam, or other sources of energy generated upstream from the organization. To
+determine SAP's global net emissions, we use the location-based method to calculate the Scope 2
+emissions. To calculate the market-based Scope 2 emissions, we have applied a regional EAC portfolio
+approach (see Renewable Electricity below). At SAP, the following emission categories are covered by
+Scope 2:
+Mobile Combustion in Corporate Jets: Emissions caused by business trips with SAP-owned or
+chartered jets. Emission calculation for SAP's jets is based on actual fuel consumption (100% data
+coverage).
+Refrigerants in Corporate Cars: HFC emissions caused by air conditioning devices in company
+cars (fuel and electric cars). Refrigerant emissions are based on an estimate of HFC1234yf
+emissions per car (in Europe) and HFC134a emissions per car (for the rest of the world) and are
+extrapolated based on the number of corporate cars reported (100% data coverage).
+Mobile Combustion in Corporate Cars: Emissions from fuel combustion of company cars. In the
+context of carbon reporting, the term 'company car' refers to all cars for which SAP permanently
+covers the fuel costs. Emission calculation is based on fuel consumption. If detailed fuel data is not
+available in specific countries, stable values (liters/car) are used for extrapolation based on the
+number of company cars reported. The stable values for extrapolation are based on the previous
+year's carbon emissions data.
+Refrigerants in Facilities: HFC emissions caused by the loss of refrigerants used in cooling systems
+and air conditioning equipment. The emissions are extrapolated based on the number of server
+units in data centers 83 and office space with an air conditioning (A/C) system (100% data coverage).
+All refrigerants are assumed to be HFC134a.
+Stationary Combustion in Facilities: Emissions caused by oil or gas combustion of heating
+systems and generators in SAP office buildings and data centers. Emission calculation is based on
+gas and oil consumption in kWh. Where no measured data is available, stable values (kWh/m²)
+based on the previous year's stationary combustion consumption data are used for extrapolation.
+In cases where no specific information is available, natural gas reported by local sites is assumed to
+be reported as a lower heating value. Besides gas and oil, we also use wood pellets to produce
+thermal heat for our buildings in our headquarters in Walldorf. The Scope 1 emissions of wood
+pellets can be set to net '0', since the wood itself absorbs an equivalent amount of carbon
+emissions during the growth phase as the amount of emissions released through combustion. Still,
+to ensure complete accounting for all emissions caused, we document the direct carbon dioxide
+impact of burning wood pellets as ‘outside of scopes' carbon emissions. In 2023, these emissions
+accounted for 0.461 kilotons of carbon emissions (2022: 0.686 kilotons).
+Refers to direct carbon emissions and is defined as emissions from sources that are owned or
+controlled by the organization. At SAP, the following areas are covered by Scope 1:
+Scope 1
+Additional
+Further Information
+about Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+To Our
+Stakeholders
+Combined Management
+Report
+Scope 2
+Purchased Chilled and Hot Water and Steam: Emissions caused by the consumption of
+purchased heat or steam in office buildings (district heating). Calculation of emissions is based on
+consumption of district heating. Emission factors are updated annually. Where no measured data is
+available, stable values (kWh/m²) based on the previous year's energy consumption data are used
+for extrapolation.
+Information
+Refers to other indirect carbon emissions, and is defined as emissions that are a consequence of
+operations of an organization but are not directly owned or controlled by the organization. Scope 3
+emissions are divided into upstream and downstream emissions.
+SAP Integrated Report 2023
+SAP
+Scope 3
+286/324
+Capital Goods: Includes all cradle-to-gate upstream emissions of purchased capital goods, such as
+buildings, data center and IT equipment, cars, and so on. SAP applies the same calculation logic as
+described above in the section Purchased Goods and Services.
+Purchased Goods and Services: Includes all significant cradle-to-gate upstream emissions of
+goods and services that SAP purchased during the reporting period. We also include services from
+waste and water disposal in this category. Furthermore, the Purchased Goods and Services
+category includes the services from our hyperscaler providers, fuel- and energy-related activities,
+and upstream transportation and distribution. In contrast to the carbon neutrality 2023 target, we
+consider all significant cradle-to-gate emissions for the net zero 2030 target. Therefore, we apply a
+different calculation approach for all purchased goods and services. To derive the CO2e, SAP
+closely collaborates with a third-party provider that utilizes a spend-based method. We use
+coefficients that translate each US$ of spend into kilogram of CO2e. The coefficients are available
+for each country-sector combination and by supply chain tier (direct suppliers, suppliers of
+suppliers, and so on).
+Upstream Scope 3
+We measure the Scope 3 carbon emissions based on the GHG Protocol's Corporate Value Chain
+(Scope 3) Accounting and Reporting Standard.
+We aim to reach net zero across our value chain in line with a 1.5°C future by 2030. The net zero 2030
+target is planned for submission to the SBTI in 2024. The baseline for the net zero target consists of
+SAP's Scope 1 and 2 emissions as explained above except for the emissions from air conditioning
+devices in corporate cars as these emissions are very insignificant compared to SAP's total footprint.
+The Scope 3 emissions taken into account for net zero are described below.
+Net Zero 2030
+Logistics: This category consists of the following three emission sources: 1) Emissions caused by
+mail and parcel delivery; 2) Emissions caused by the consumption of paper; and 3) Emissions
+caused by our customers downloading software data from our servers (prior to 2021, this was a
+downstream emissions category). Due to the insignificant emissions impact of these sources,
+calculation is done based on an average factor 'carbon emissions per FTE. This factor has been
+determined based on historical emissions data of each category.
+Electricity Consumed by Hyperscale Services: Emissions caused by the consumption of
+purchased electricity resulting from the usage of hyperscale services in providers' hyperscale data
+centers. Hyperscale data centers enable massive, efficient, and robust scalability of computing,
+system, and server architecture in order to respond to the increasing demand for cloud computing
+and Big Data solutions. Electricity consumption is calculated based on the total allocated server
+memory (RAM) and the operating processor hours (CPU) of all hyperscale services. Conversion
+factors are used to convert the allocated RAM and CPU values into a power value, and an average
+PUE factor is used to extrapolate the total hyperscale service electricity. For more information about
+the consideration of renewable energy sources in the calculation, see the External Reductions
+section.
+Employee Commuting: Emissions caused by commuting between home and work at an SAP office
+location. Considered are all modes of transport, excluding commuters with company cars. An SAP-
+global, Qualtrics-based commuting survey about the distance to work and the mode of transport is
+conducted to collect relevant data. The latest commuting survey was conducted in 2022 for which
+we received approximately 30,000 valid responses. These responses are the basis for our carbon
+calculation of employee commuting and home office electricity in 2023. Commuting data for non-
+responding employees and quarterly updates are extrapolated based on the number of FTEs,
+excluding those employees who have a company car.
+Information
+Business Travel: Includes Scope 1 and 2 emissions of transportation of employees for business-
+related activities during the reporting year not owned or operated by SAP. The main components
+are emissions from business flights, rental cars, train travel, and business trips with private cars. The
+calculation approach is the same as outlined above in the Carbon Neutrality 2023 section.
+Further Information
+about Sustainability
+Only selected upstream emissions are included in our target to be carbon neutral in our own
+operations in 2023. The following upstream Scope 3 carbon emissions are included in our carbon
+neutrality 2023 target:
+Additional
+Rental Cars: Emissions caused by business trips by rental car. An average emission factor from
+rental cars is calculated based on actual distance traveled and actual costs spent. This average
+emission factor is used for extrapolation based on the costs.
+Train Travel: Emissions from business trips by train. An average emission factor from train travel is
+calculated based on actual distance traveled and actual costs spent. This average factor is used for
+extrapolation based on costs. In Germany, business trips by train are considered carbon neutral as
+they are compensated with 100% green electricity by Deutsche Bahn.
+Business Trips with Private Cars: Emissions from business trips with employee-owned cars and
+company cars without fuel card. Carbon calculation is based on distance traveled with the car.
+Company car trips with fuel cards are excluded from this activity type.
+285/324
+Business Flights: Emissions caused by business trips by airplane. Calculation of emissions is based
+on actual distance traveled and actual costs spent. This data is used to determine an average
+emission factor per euro spent based on short, medium, and long-haul flight emission factors. For
+CO2e calculation, this factor is applied to actual costs for business flights. Emission factors for
+business flights do not consider the radiative forcing factors.
+SAP Integrated Report 2023
+Upstream
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+SAP
+Information
+SAP Integrated Report 2023
+The Supervisory Board bade farewell in 2023 to Gesche Joost, whose term of office on the
+Supervisory Board ended at the close of the Annual General Meeting of Shareholders on
+May 11, 2023. We thank Gesche Joost for her commitment to SAP. On May 11, 2023, the Annual
+General Meeting of Shareholders elected Punit Renjen to the Supervisory Board as her successor. In
+addition, the Annual General Meeting of Shareholders elected to extend the Supervisory Board
+mandates of Jennifer Li and Qi Lu for a further four years.
+The Supervisory Board thanks the members of the Executive Board and all SAP employees for their
+great commitment and dedication to SAP.
+For the Supervisory Board
+Professor Hasso Plattner
+(Chairperson)
+27/324
+SAP
+Changes on the Executive Board and Supervisory Board in 2023
+Dominik Asam took office as SAP's new CFO on March 7, 2023, succeeding Luka Mucic who retired
+from the SAP Executive Board at the end of March 2023. The Supervisory Board would like to thank
+Luka Mucic for his invaluable contribution for the benefit of the Company. Sabine Bendiek's Executive
+Board post was not renewed at her own request and ended on December 31, 2023. The Supervisory
+Board thanks Sabine Bendiek for her outstanding work and her remarkable contribution to the
+transformation of SAP.
+Further Information about
+Sustainability
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Responsibility Statement
+Additional
+Information
+To the best of our knowledge, and in accordance with the applicable reporting principles, the
+Consolidated Financial Statements give a true and fair view of the assets, finances, and operating
+results of the SAP Group, and the management report of the Group and SAP SE includes a fair review
+of the development and performance of the business and the position of the Group and SAP SE,
+together with a description of the principal opportunities and risks associated with the expected
+development of the Group and SAP SE.
+Walldorf, February 21, 2024
+SAP SE
+Walldorf, Germany
+Additional
+Executive Board of SAP SE
+Christian Klein
+To Our
+Stakeholders
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Dominik Asam
+Further Information about
+Sustainability
+Additional
+Information
+members of the Audit and Compliance Committee were invited to a short seminar in April 2023 on
+"Current aspects of non-financial reporting." In May 2023, a course on "Innovation at SAP" was offered
+that focused on Al, large language models (models that are trained on huge data volumes), and on the
+metaverse, a digital space that is created by interacting with virtual, augmented, and physical reality. In
+November, several Supervisory Board members took part in a virtual deep dive on Customer
+Experience at SAP. On-boarding courses and leaflets are available for new Supervisory Board
+members to familiarize themselves with their tasks and responsibilities when they assume office. New
+members also have the opportunity to meet individually with members of the Executive Board to
+discuss the topics relevant to their new portfolio.
+SAP SE and Consolidated Financial Reports for 2023
+BDO audited the SAP SE and consolidated financial reports for 2023. The Annual General Meeting of
+Shareholders on May 18, 2022, elected BDO as the SAP SE and SAP Group auditor for fiscal year 2023.
+The Supervisory Board had proposed the appointment of BDO on the recommendation of the Audit
+and Compliance Committee. Prior to the proposed resolution being put to the Annual General Meeting
+of Shareholders, BDO had confirmed to the chairperson of the Supervisory Board and the Audit and
+Compliance Committee that circumstances did not exist that might prejudice or raise any doubt
+concerning its independence as the Company's auditor. In that connection, BDO informed us of the
+volume of the services that were not part of the audit which it had either provided to the Group in the
+past year or was engaged to provide in the year to come. The Supervisory Board has agreed with BDO
+that the auditor should report to the Supervisory Board and record in the auditor's report any fact
+found during the audit that is inconsistent with the declaration given by the Executive Board and the
+Supervisory Board concerning implementation of the German Corporate Governance Code. BDO
+examined the SAP SE financial statements prepared in accordance with the German Commercial
+Code, the consolidated financial statements prepared in accordance with International Financial
+Reporting Standards (IFRSS) as required by the German Commercial Code, section 315e, and the
+combined SAP Group and SAP SE management report prepared in accordance with the German
+Commercial Code, and certified them without qualification. The auditor thus confirmed that, in its
+opinion and based on its audit in accordance with the applicable accounting principles, the SAP SE
+and consolidated financial statements give a true and fair view of the net assets, financial position, and
+results of operations of SAP SE and the SAP Group. The auditor also confirmed that the combined
+SAP SE and SAP Group management report is consistent with the corresponding financial statements
+and as a whole gives a suitable view of the position of SAP SE and the SAP Group and of foreseeable
+opportunities and risks. In accordance with section 317 (3a) of the German Commercial Code, the
+auditor also examined and confirmed that the renderings of the financial statements, the management
+report, the consolidated financial statements, and the combined management report contained in the
+files submitted on an electronic data carrier, which can be accessed by the issuer on the secure client
+portal, and prepared for the purposes of disclosure comply in all material respects with the
+requirements of section 328 (1) of the German Commercial Code regarding the electronic reporting
+format ("ESEF format”). BDO had completed its audit of SAP's internal control over financial reporting
+and certified without qualification that it complies with the applicable U.S. standards. The auditor
+stated in its opinion that it considers SAP's internal controls with respect to the consolidated financial
+statements to be effective in all material respects. Additionally, it provided assurance on the non-
+financial declaration and the disclosures contained therein on the topics identified as material -
+namely, the environment, employees, human rights, corruption and bribery, customer loyalty, and data
+privacy and data security – in the combined management report, and on the separate examination of
+the compensation report and review of selected qualitative and quantitative sustainability disclosures
+outside of the financial statements and management report. All Audit and Compliance Committee
+members and Supervisory Board members received - initially in the form of drafts that were identical
+to the final documents - the documents concerning the financial statements mentioned above, the
+audit reports prepared by BDO, and the Executive Board's proposal concerning the appropriation of
+retained earnings in good time. On February 21, 2024, the Executive Board prepared the financial
+accounts of SAP SE and the SAP Group for 2023, comprising the SAP SE financial statements, the
+consolidated financial statements, and the combined management report, and submitted them
+without delay to the Supervisory Board.
+25/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Further Information about
+Sustainability
+Information
+The Executive Board explained the financial statements of SAP SE and the SAP Group and its proposal
+concerning the appropriation of retained earnings at the meeting of the Audit and Compliance
+Committee on February 21, 2024 (based on the drafts identical to the final documents) and at the
+meeting of the Supervisory Board on February 21, 2024. Members of the Executive Board answered
+questions from the Committee and the Supervisory Board. At the Audit and Compliance Committee
+meeting, they also explained the compensation report and the Annual Report on Form 20-F prepared
+in accordance with the applicable U.S. standards.
+After the Executive Board had explained them, the Audit and Compliance Committee and the
+Supervisory Board reviewed the financial statement documents (based on drafts identical to the final
+documents), taking BDO's audit reports (or the drafts identical to the final documents) into account.
+The Audit and Compliance Committee then passed the compensation report on to the Supervisory
+Board for release. The representative of the auditor who attended presented full reports on the audit
+and the results of the audit to the Audit and Compliance Committee and Supervisory Board meetings
+and explained its audit reports (or final drafts thereof). The auditor also reported that it had not
+identified any material weaknesses in SAP's internal control and risk-management systems for financial
+reporting. Both the Audit and Compliance Committee and the Supervisory Board asked detailed
+questions about the form, scope, and results of the audit. The Audit and Compliance Committee
+reported to the Supervisory Board on its own review of the financial statements of SAP SE and the
+SAP Group, its discussions with the Executive Board and with the auditor, and its supervision of the
+financial reporting process. It confirmed that, as part of its supervisory work, it had addressed the
+SAP Group's internal control, risk management, and internal auditing systems, and found the systems
+to be effective.
+The Committee also reported that BDO had told it that no circumstances had arisen that might give
+cause for concern about BDO's impartiality, and informed us about the services BDO had provided
+that were not part of the audit. The Committee reported that it had examined the auditor's
+independence, taking the non-audit services it had rendered into consideration, and stated that, in the
+Committee's opinion, the auditor possessed the required degree of independence and professional
+qualification.
+The Audit and Compliance Committee and the Supervisory Board satisfied themselves that BDO had
+conducted the audit properly. In particular, they concluded that both the audit reports and the audit
+itself fulfilled the legal requirements. Based on the report and the Audit and Compliance Committee's
+recommendation, the Supervisory Board approved the results of the audit and, since there were no
+findings from our own examination, we gave our consent to the SAP SE financial statements, the
+consolidated financial statements, the combined Group management report, and adopted the
+compensation report pursuant to the German Stock Corporation Act, section 162. The financial
+statements and combined management report were thus formally adopted upon approval by the
+Supervisory Board. The Supervisory Board's opinion of the Company and the Group coincided with
+that of the Executive Board as set out in the combined management report. The Supervisory Board
+considered the proposal presented by the Executive Board concerning the appropriation of retained
+earnings. We had regard to the requirements of dividends policy, the effects on the liquidity of SAP SE
+and the SAP Group, and the interests of the shareholders. We also discussed these matters with the
+auditor. We then endorsed the Executive Board's proposal concerning the appropriation of retained
+earnings, in accordance with the Audit and Compliance Committee's recommendation. The corporate
+governance statement pursuant to the German Commercial Code, sections 315d and 289f was
+approved for publication by the Supervisory Board by way of correspondence vote prior to the
+meeting to discuss the financial statements. Finally, we approved this present Report.
+26/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Consolidated Financial
+Statements IFRS
+Dr. Jürgen Müller
+To Our
+Stakeholders
+Thomas Saueressig
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+commercial and professional law, and we have fulfilled our other German professional responsibilities
+in accordance with these requirements.
+In addition, in accordance with Article 10 (2) letter (f) of the EU Audit Regulation, we declare that we
+have not provided non-audit services prohibited under Article 5 (1) of the EU Audit Regulation.
+We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
+for our audit opinions on the consolidated financial statements and on the combined group
+management report.
+KEY AUDIT MATTERS IN THE AUDIT OF THE CONSOLIDATED FINANCIAL
+STATEMENTS
+Key audit matters are those matters that, in our professional judgment, were of most significance in our
+audit of the consolidated financial statements for the financial year from January 1, 2023 to
+December 31, 2023. These matters were addressed in the context of our audit of the consolidated
+financial statements as a whole, and in forming our audit opinion thereon; we do not provide a
+separate audit opinion on these matters.
+SAP Integrated Report 2023
+We have identified the following matters as key audit matters to be disclosed in our auditor's report:
+1. Cloud revenue recognition
+3. Measurement of unlisted equity securities
+CLOUD REVENUE RECOGNITION
+Matter
+The Group generated revenue in 2023 of EUR 31,207 million, of which EUR 13,664 million relate to
+cloud revenues from fees earned from providing customers a cloud offering with software as a service,
+platform as a service, infrastructure as a service and/or premium cloud support through subscriptions
+for use of the Group's cloud solutions. For most of the Group's cloud offerings, measured both in
+volume and number, the customer is entitled to continuously access and use one or more cloud
+solutions for a specified term, therefore cloud revenue is recognized based on time elapsed and thus
+ratably over the term of access. However, some cloud business models are provisioned on a
+consumption basis where a customer commits to a fixed value of spend on cloud services throughout
+the contract term, but with the discretion to call off cloud services on an as needed basis. For those
+arrangements cloud revenue is recognized based on consumption as it best reflects the measure
+towards satisfaction of the performance obligation(s).
+The evaluation of cloud revenue contracts bears an inherent risk of errors due to the complex nature
+of certain contracts. SAP defined detailed accounting policy guidelines in line with the applicable
+accounting standards and has established uniform processes throughout the group to manage the
+accounting for its cloud contracts. Applying them often requires significant management judgement, in
+particular with respect to whether certain agreements with the same customer are economically linked
+and need to be combined, whether the various services that are owed by the Group according to the
+contract qualify as separate performance obligations, the allocation of the transaction price of a
+customer contract to the performance obligations in the contract based on standalone-selling prices
+and the point in time at which the provision of services by the Group for the specific performance
+obligation commences.
+Cloud revenue recognition is a key audit matter due to the significance of the cloud revenue and the
+high degree of complex judgement required.
+The respective cloud revenue disclosures of the Group are contained in section "A.1 Revenue” of the
+notes to the consolidated financial statements.
+Auditor's Response and Observations
+We evaluated the design and we tested the operating effectiveness of certain internal controls related
+to the revenue process, including controls related to the identification of certain economically linked
+agreements and separate performance obligations, the allocation of the transaction price to the
+30/324
+Combined Management
+Report
+2. Assessment of the Group's uncertain tax treatments
+Scott Russell
+SAP
+We conducted our audit of the consolidated financial statements and of the combined group
+management report in accordance with § 317 HGB and the EU Audit Regulation (No. 537/2014,
+referred to subsequently as "EU Audit Regulation") and in compliance with German Generally
+Accepted Standards for Financial Statement Audits promulgated by the Institut der Wirtschaftsprüfer
+[Institute of Public Auditors in Germany] (IDW). We conducted our audit of the consolidated financial
+statements in supplementary compliance with the International Standards on Auditing (ISAs). Our
+responsibilities under those requirements, principles and standards are further described in the
+"AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS
+AND OF THE COMBINED GROUP MANAGEMENT REPORT" section of our auditor's report. We are
+independent of the group entities in accordance with the requirements of European law and German
+Gina Vargiu-Breuer
+Julia White
+28/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+29/324
+Information
+To SAP SE, Walldorf
+REPORT ON THE AUDIT OF THE CONSOLIDATED FINANCIAL
+STATEMENTS AND OF THE COMBINED GROUP MANAGEMENT
+REPORT
+AUDIT OPINIONS
+We have audited the consolidated financial statements of SAP SE, Walldorf, and its subsidiaries (the
+Group), which comprise the consolidated statements of financial position as at December 31, 2023,
+and the consolidated income statements, consolidated statements of comprehensive income,
+consolidated statements of changes in equity and consolidated statements of cash flows for the
+financial year from January 1, 2023 to December 31, 2023, and notes to the consolidated financial
+statements, including a summary of significant accounting policies.
+In addition, we have audited the combined group management report (report on the position of the
+company and of the group) of SAP SE for the financial year January 1, 2023 to December 31, 2023. In
+accordance with the German legal requirements, we have not audited the content of those parts of the
+combined group management report listed in section "OTHER INFORMATION".
+In our opinion, on the basis of the knowledge obtained in the audit,
+the accompanying consolidated financial statements comply, in all material respects, with the IFRSS
+as issued by the International Accounting Standards Board as well as adopted by the EU, and the
+additional requirements of German commercial law pursuant to § 315e (1) HGB
+[Handelsgesetzbuch: German Commercial Code] and, in compliance with these requirements, give
+a true and fair view of the assets, liabilities and financial position of the group as at December 31,
+2023 and of its financial performance for the financial year from January 1, 2023 to
+December 31, 2023 and
+the accompanying combined group management report as a whole provides an appropriate view
+of the group's position. In all material respects, this combined group management report is
+consistent with the consolidated financial statements, complies with German legal requirements
+and appropriately presents the opportunities and risks of future development. Our opinion on the
+combined group management report does not cover the content of those parts of the combined
+group management report listed in section "OTHER INFORMATION".
+Pursuant to § 322 (3) sentence 1 HGB (German Commercial Code), we declare that our audit has not
+led to any reservations relating to the legal compliance of the consolidated financial statements and of
+the combined group management report.
+BASIS FOR THE AUDIT OPINIONS
+Independent Auditor's Report
+To Our
+Stakeholders
+Additional
+SAP
+Thereof physical
+1
+0
+1
+0
+0
+0
+3
+0
+meetings
+Thereof hybrid sessions
+4
+5
+71,2
+61
+0
+0
+4²
+4
+Thereof
+telephone/video
+1
+1
+6
+0
+5
+4
+10
+4
+SAP Integrated Report 2023
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+Format of Meetings in Fiscal 2023
+Committees
+4
+Plenum
+Audit and
+Compliance
+Technology
+and Strategy
+Nomination
+People and
+Culture
+Finance and
+Investment
+Go-To-
+Market and
+Operations
+Total number of
+meetings
+7
+6
+6
+Personnel
+and
+Governance
+4
+14
+о
+-
+-
+The Technology and Strategy Committee held six meetings in 2023, which included two joint
+meetings with the Audit and Compliance Committee as described above. The Committee
+discussed the outlook for key technology trends in the software industry in the years to come and
+SAP's corporate and product strategies. At the February meeting, the Executive Board presented
+management's strategy for the Customer Experience product segment – which encompasses
+everything an organization does to deliver superior customer outcomes – placing particular focus
+on customer relationship management (CRM) and SAP's various analytics applications in this
+domain. In April, the Committee turned its attention to SAP's solutions for business network growth
+areas, business process optimization, and sustainability. In October 2023, the Committee dealt
+with matters related to data integration and data management, and reviewed the Company's
+innovation strategy for SAP Datasphere and the product's generative Al capabilities. At their joint
+meeting in October 2023, the Finance and Investment Committee and the Technology and
+Strategy Committee deliberated on cybersecurity and the priorities to be set for it.
+The People and Culture Committee met four times in the reporting year. At its February meeting,
+the Committee deliberated at length on the results of the employee survey that had been
+conducted in the fall of 2022, notably those relating to employee engagement, as well as
+feedback about management, and discussed the measures to be derived from this insight as a
+result. Beyond this, it focused on SAP's training business, which had undergone a radical
+transformation since 2021 aimed at reaching one million active users by the end of 2023. In March,
+the Committee looked at the progress made in the initiative to promote a standardized
+performance management concept that supports the envisioned performance-based
+compensation and incentive system and integrated planning of annual targets for employees. In
+July 2023, the managers responsible for the People Compliance process at SAP introduced
+themselves to the Committee and, after explaining that the focus of their efforts was on preventing
+employee misconduct vis-à-vis others, gave an in-depth overview of the underlying compliance
+processes and related information. Another topic of interest at this meeting was the progress
+being made in strategic personnel planning. The Committee was presented in this regard with a
+detailed overview of the past and expected demographic development of the SAP SE workforce,
+23/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+The Finance and Investment Committee held four regular meetings and four extraordinary
+meetings in 2023. In addition, it held a joint meeting with the Audit and Compliance Committee in
+February 2023 and again in December 2023. The Committee devoted considerable time at
+several meetings to discussing business development and investor relations, and to discussing an
+analysis of management efficiency. At an extraordinary meeting in January 2023, the Committee
+and the Executive Board examined the different options for selling SAP's interest in Qualtrics. In
+the joint meeting with the Audit and Compliance Committee in February 2023, the members of
+both Committees discussed the annual budget for 2023 and recommended its approval to the
+Supervisory Board. In the Finance and Investment Committee meeting that followed, the
+members were updated on the Group's liquidity situation and on productivity in the development
+organization. The Committee held an extraordinary meeting in March where, after careful
+consideration, it resolved to recommend the divestiture of Qualtrics to the Supervisory Board. At
+its meeting in April, the Committee and the Executive Board discussed selected capital market
+topics. In addition, the Committee was updated on the investments in the venture capital area,
+which were being carried out in cooperation with the fund manager Sapphire Ventures, and the
+strategic aspects of these activities. It also reviewed SAP's product strategy and the management
+of SAP's product portfolio. In July, the Committee discussed SAP's global strategy for the use and
+expansion of its data centers, as well as SAP's sovereign cloud offerings and share-based
+compensation plans. Beyond this, the Executive Board reported on selected RISE with SAP
+contracts as well as the strategy to extend existing customer contracts, and gave the Committee
+members advance notice of the Company's plans to acquire LeanIX, a provider of cloud-based IT
+management software. The Committee deliberated on this acquisition at length at its meeting in
+September, where it subsequently resolved its recommendation to the Supervisory Board. At its
+October meeting, the Committee discussed key treasury topics. In December 2023, the
+Committee held a second joint meeting with the Audit and Compliance Committee, at which the
+Executive Board presented the preliminary Group annual plan for 2024. This meeting was held in
+preparation for the Supervisory Board meeting in February 2024, at which the full Supervisory
+Board resolved to approve the Group annual plan for 2024.
+Additional
+and discussed the skills and expertise the Company would require of employees in the future.
+When it met in October, the Committee revisited the topic of performance management,
+particularly in view of the upcoming global rollout of the new concept. Moreover, the Committee
+discussed SAP's plans to require more in-office presence of its staff.
+The Nomination Committee met five times in 2023. On January 15, 2023, for example, the
+Committee discussed potential candidates for election to the Supervisory Board by the Annual
+General Meeting of Shareholders in May 2023. In particular, the Committee members discussed
+the potential successor to Hasso Plattner as Supervisory Board chairperson, ultimately deciding
+that Punit Renjen was their preferred candidate. When it met again on January 25, the Committee
+resolved its final recommendation to the Supervisory Board to elect Jennifer Li, Qi Lu, and Punit
+Renjen to the Supervisory Board. Since four Supervisory Board members will reach the end of
+their term of office in 2024, the Committee spent its August 2023 meeting deliberating on
+candidates for re-election or election as new members. It also discussed the skills that Hasso
+Plattner's successor should possess, and agreed that the person should have extensive
+technology knowledge. Based on the process it had agreed upon in August for nominating
+candidates, the Committee met again in October 2023 to agree on how to approach the ones they
+had shortlisted. On December 6, 2023, the Committee agreed on the candidates to be proposed
+to the Annual General Meeting of Shareholders in May 2024 for the Supervisory Board seat being
+vacated by the departing Hasso Plattner.
+The Go-To-Market and Operations Committee likewise met four times in the reporting year. At the
+Committee's meeting in February, the Executive Board presented its marketing plans for
+SAP S/4HANA Cloud, public edition as well as its planned changes to the internal go-to-market
+concept for 2023 target achievement, particularly with regard to roles and incentives. In April 2023,
+the Executive Board presented a plan designed to further improve the measurable usage of our
+software by customers and simultaneously increase demand, especially in the cloud environment.
+In addition, the largest planned events for the remainder of the year were presented. When the
+Committee met in July 2023, the Executive Advisory Board, an advisory body comprised of
+managers from more than 20 SAP customers from various regions and industries, presented
+feedback on the customer journey – that is, on the individual phases that a customer goes
+through before the purchase and until after the delivery of a product. In addition, the Executive
+Board presented a growth plan aimed at boosting growth and ensuring constant pipeline
+population — that is, the number of software sales that are lined up. The last item discussed at this
+meeting was a status report presented on new customer acquisition, also in comparison to SAP's
+peers. The Committee's meeting in October reviewed an update on the growth plan presented to
+it in July and discussed the further expansion of SAP's partner network.
+-
+The work of the committees and their regular reports in the plenary sessions ensured that we were
+kept fully informed of all matters covered by the committees and were able to discuss them
+thoroughly.
+Conflicts of Interest
+Members of the Supervisory Board and of the Executive Board had no conflicts of interest that
+recommendations E.1 and E.2 of the CGCG require to be disclosed to the Supervisory Board. Rather,
+they were avoided by the Supervisory Board member concerned not taking part in the relevant
+discussions or voting on the matter in question in the event of a possible, selective conflict of interest.
+Insofar as Supervisory Board members hold executive positions in companies or have material equity
+in companies that currently have business dealings with SAP, we do not see any impairment of their
+independence. The scope of the business relationships in question is relatively small and, moreover,
+the transactions take place at arm's length.
+Training and Professional Development
+The members of the Supervisory Board were once again offered various training and professional
+development opportunities throughout the year, with appropriate support from the Company. Where it
+made sense, presentations and training offerings were recorded and placed on a specially configured
+training platform to enable the remaining Supervisory Board members to take part in them as well. The
+3
+24/324
+Information
+Information
+Further Information about
+Sustainability
+Additional
+conferences
+1 Thereof two joint meetings between the Technology and Strategy Committee and the Audit and Compliance Committee
+2 Thereof two joint meetings between the Finance and Investment Committee and the Audit and Compliance Committee
+The Work of the Supervisory Board Committees
+The committees made a key contribution to the work of the Supervisory Board in 2023, notably by
+preparing relevant agenda items and resolutions for Supervisory Board meetings, by approving
+resolution proposals, and by regularly reporting on their deliberations and on their decisions taken.
+The following committees were in place in the year under review:
+Personnel and Governance Committee, Audit and Compliance Committee, Finance and Investment
+Committee, Technology and Strategy Committee, People and Culture Committee, Nomination
+Committee, Go-To-Market and Operations Committee
+Each of the aforementioned committees was active in 2023. For more information about the
+Supervisory Board committees, particularly their respective composition, tasks, and responsibilities,
+see the Corporate Governance Statement and the Corporate Governance section of SAP's Web site.
+Besides the matters described above, the committees focused primarily on the following topics in
+2023:
+The Personnel and Governance Committee held six meetings in the reporting year. In particular,
+the Committee, in fulfillment of the tasks assigned to it, extensively prepared the Supervisory
+Board's deliberations and resolutions described above on Executive Board compensation and on
+the new Government Security Committee, and approved resolution proposals. The Committee
+adopted a total of three resolutions by correspondence vote. In two sessions in January 2023, the
+Committee dealt with the renewal of Scott Russell and Julia White's Executive Board contracts,
+and with the introduction of compensation for the Lead Independent Director after it had become
+apparent that this role involves considerable additional time and effort. In addition, the Committee
+consented to the secondary employment of an Executive Board member and examined the
+German Federal Labor Court's ruling on SAP's Employee Involvement Agreement. The Committee
+approved, by way of correspondence vote, the conclusion of a consulting contract by Luka Mucic.
+Following his departure from the SAP Supervisory Board at the end of March 2023, Luka Mucic
+was to remain a member of the Qualtrics Executive Board until SAP had fully divested Qualtrics.
+The consulting contract was to serve as the legal basis for this membership. When it met in April,
+the Committee resolved an update to the contractual non-compete clause in Executive Board
+contracts that was to be introduced in connection with the conversion of those contracts to the
+new compensation system. In addition, the Committee dealt with the search for candidates to
+replace Sabine Bendiek as head of the Executive Board's HR portfolio. The Committee
+subsequently agreed on the candidate proposed by the Supervisory Board for this portfolio when
+it met in July. As well as discussing various compensation matters, the Committee's
+October 25, 2023, meeting focused particularly on a change in the non-IFRS definition for fiscal
+2024 and on the creation of a new Supervisory Board office. The Committee also held an
+21/324
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+SAP
+SAP Integrated Report 2023
+Further Information about
+Sustainability
+Combined Management
+Report
+To Our
+Stakeholders
+SAP
+22/324
+Consolidated Financial
+Statements IFRS
+The Audit and Compliance Committee held 12 meetings in 2023 - two of which jointly with the
+Finance and Investment Committee and two jointly with the Technology and Strategy Committee.
+Said schedule included one telephone conference per quarter to vote on the quarterly reporting,
+and one session per quarter to address regular and topical agenda items. In addition, in
+November and December 2023, the Committee resolved both times internally on the System and
+Organization Controls (SOC). The SOC involves software-related certifications and risk analyses
+that enable companies to conduct an impartial investigation in accordance with a framework
+established by the American Institute of Certified Public Accountants (AICPA), which the
+companies and their customers both require in the context of their financial reporting. In its
+ordinary meetings, the Committee also had the opportunity to engage with the auditor without the
+Executive Board present, which was an integral part of the meeting agenda. The Committee
+comprehensively prepared the resolutions of the Supervisory Board for all topics assigned to it,
+as described above. Regular agenda items included the course of business in the respective
+quarter, the accounting processes, the preparation of end-of-quarter closings, and the quarterly
+reports due for publication. In addition, the Committee chairperson was in regular contact with the
+auditor. Other recurring meeting topics included the monitoring of SAP's risk management system,
+internal control system, non-financial reporting, and compliance system (including specific
+compliance issues, the status of corresponding SAP-internal investigations, and case-related
+collaboration with authorities). The Committee also dealt regularly with the monitoring of SAP's
+cybersecurity processes that the Executive Board had established and continually optimizes to
+ensure compliance of all activities in this area. At its February 2023 meeting, the Committee
+prepared the Supervisory Board's resolutions on the financial statements of SAP SE and the
+SAP Group for 2022 in the run-up to the Annual General Meeting of Shareholders, which were
+adopted by the Supervisory Board at the audit meeting. Other material topics dealt with by the
+Committee beyond the regular meeting topics in its ordinary meetings and those described in the
+"Sustainability" section of this report included quarter-specific matters and the amendments to
+the non-IFRS definition for fiscal 2024. Further, the Committee monitored the progress of selected
+lawsuits involving SAP. The Audit and Compliance Committee also received regular updates on
+how BDO AG Wirtschaftsprüfungsgesellschaft (BDO) was performing its tasks as the new auditor
+for SAP's financial statements and consolidated financial statements. In addition, the Committee
+continually monitored the quality of the auditor and the management report. To this end - in
+addition to evaluating satisfaction surveys for the prior year's audit by the previous auditor - the
+Committee obtained and referred to the report from the current auditor on its internal quality
+assurance standards and to any material findings from internal quality audits, external quality
+controls, and peer reviews, and from any investigations conducted by the government or
+regulators into the auditor's audits. At its meeting in July, the Committee discussed the audit focus
+for 2023 with the auditor. As reported in more detail below, the Committee also held two joint
+meetings with the Finance and Investment Committee in February and December 2023 to discuss
+the Group annual plan for 2023 and the preliminary Group annual plan for 2024. The joint
+meetings with the Technology and Strategy Committee in April and October focused on SAP's
+cybersecurity framework, which had been enhanced based on the results of the assessment by
+NIST (National Institute of Standards and Technology, a department of the U.S. Department of
+Commerce). Beyond this, the Committees reviewed the status of the SOC certifications for fiscal
+2023, and the Audit and Compliance Committee approved the certification services to be
+provided by BDO. The auditor attended the Audit and Compliance Committee meetings except
+for the joint meetings with the Finance and Investment Committee and the Technology and
+Strategy Committee, and reported in depth on its audit work and on its quarterly reviews of
+selected cloud and software agreements.
+extraordinary meeting on December 6, 2023, to deliberate on the candidate to be proposed to
+the Supervisory Board as a new Executive Board member for the Product & Engineering area. It
+came to the conclusion that Muhammad Alam was its favorite candidate. In January 2024, the
+Committee prepared the Supervisory Board's resolution to elect Muhammad Alam to the
+Executive Board effective April 1, 2024, once the details of his Executive Board contract had been
+negotiated. The proposed resolution took into account the new SAP Executive Board structure
+that was announced on January 9, 2024.
+Information
+Additional
+Further Information about
+Sustainability
+SAP Integrated Report 2023
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+Stakeholders
+To Our
+Where You Can Find More
+Information in the
+SAP Integrated Report
+Energy and Emissions
+294/324
+Sustainable Procurement
+Waste and Water
+SAP's solutions for the circular economy: SAP Responsible
+Design and Production; SAP Ariba Supplier Risk; product
+lifecycle management solutions; SAP S/4HANA for waste and
+recycling; SAP Returnable Packaging Management; SAP Rural
+Sourcing Management; SAP Green Token, and more
+Further Information
+about Sustainability
+SAP
+Additional
+Information
+Become carbon neutral by 2023 in our own operations; net zero along our value chain by 2030
+Our Potential Direct and Indirect
+Impact
+Direct:
++
+Assume responsibility for products in use-related
+emissions by running customer applications in the SAP
+cloud powered with 100% renewable electricity
+Emit greenhouse gases
+Indirect:
++ Contribute to climate change mitigation and strengthen
+resilience and adaptive capacity to climate-related
+hazards and natural disasters of our customers
++ Enable holistic operational steering by integrating
+climate-change relevant parameters and help
+understand and minimize the climate footprint of a
+company's products, operations, and services
+Increase customers' energy consumption through use
+of software
+Our KPIs and Targets
+Our Policies and Selected
+Activities and Programs to
+Enhance Positive Impacts and
+Mitigate Negative Impacts
+Cloud powered by 100% renewable electricity; Business
+ambition for 1.5°C; SAP Cloud for Sustainable Enterprises;
+SAP's solutions for climate action: SAP Sustainability
+Footprint Management; SAP Sustainability Data Exchange;
+SAP E-Mobility; SAP Landscape Management Cloud;
+SAP Transportation Management; SAP Environment, Health
+and Safety Management; SAP Cloud for Energy; SAP Concur;
+SAP Digital Vehicle Hub
+Direct:
+Global Environmental Policy; cross-company net-zero
+program; Cloud transformation; emissions reduction in
+installed base and on-premise solution portfolio; continuous
+avoidance and reduction of emissions in operations
+including transformation of company car-fleet; top supplier
+engagement program; procure 100% renewable electricity;
+carbon impact part of Executive Board compensation
+Indirect:
+Indirect:
+SDG 13 Climate Action
+Supplier Code of Conduct; Sustainable Procurement; e-
+waste recycling
+Direct
+We drive resource productivity with an aspiration to a world with zero waste.
+Further Information
+about Sustainability
+Where You Can Find More
+Information in the
+Additional
+Information
+SDG 10 Reduced Inequalities
+Our Potential Direct and Indirect
+Impact
+Our KPIs and Targets
+Our Policies and Selected
+Activities and Programs to
+Enhance Positive Impacts and
+Mitigate Negative Impacts
++ Ensure equal opportunity and inclusion of all
+employees, irrespective of age, sex, disability, race,
+ethnicity, origin, religion, or economic or other status
+Indirect
++ Enable an inclusive economy by providing tools and
+systems to foster inclusion of all in workforce and
+supply chains
+Decouple societal groups from entire areas of
+employment through an accelerated digital divide and
+lack of digital skills
+25% women on the three management levels below the Executive Board by 2027
+Double the representation of African-American talent in the United States over the next three years (2022-2025)
+Reach 5% of annual addressable procurement spend with social enterprises and with diverse businesses by 2025
+Direct:
+Direct:
+Human Rights Commitment Statement; Diversity & Inclusion
+programs including EDGE certification; Global
+Antidiscrimination Statement; social procurement initiative
+SAP's solutions for social responsibility: SAP SuccessFactors
+HXM Suite; SAP Ariba Supplier Risk; SAP's internal standard
+for product accessibility
+Where You Can Find More
+Information in the
+SAP Integrated Report
+Employees
+Sustainable Procurement
+Our Potential Direct and Indirect
+Impact
+Our KPIs and Targets
+Our Policies and Selected
+Activities and Programs to
+Enhance Positive Impacts and
+Mitigate Negative Impacts
+SDG 12 Responsible Consumption and Production
+Direct:
++ Drive sustainable business practices and integrated
+reporting
+Use energy, water, and resources; produce waste
+Indirect:
++ Decouple economic prosperity from resource
+consumption by enabling transparency and optimizing
+resource productivity in linear or circular economies
+Increase absolute resource and energy consumption
+because efficiency gains through automation may be
+counteracted (rebound effect)
+Indirect:
+SAP Integrated Report
+Independent assurance practitioner's report
+Our Potential Direct and Indirect
+Impact
+GRI 2: General
+Disclosures 2021
+2-1
+Organizational Details
+Strategy and Business Model
+2-2
+Entities included in the
+organization's sustainability
+reporting
+Strategy and Business Model
+About This Report
+Worldwide Office Locations
+Reporting period, frequency
+About This Report
+2-3
+and contact point
+2-4
+Restatements of information
+External assurance
+2-5
+Consolidated Financial
+Statements IFRS
+Financial Calendar and Addresses
+Non-Financial Notes: Environmental Performance
+In 2023, we did not have any material restatements of information of
+previous reporting periods.
+Independent assurance practitioner's report
+Supervisory Board
+Activities, value chain, and
+Strategy and Business Model
+2-6
+other business relationships
+Sustainable Procurement
+2-7
+Links and Content
+Disclosure Title
+GRI Standards
+General Disclosures
+SDG 17 Partnerships for the Goals
+Direct:
++
+Build capacity throughout our broader ecosystem
+Our KPIs and Targets
+ΝΑ
+Our Policies and Selected
+Activities and Programs to
+Enhance Positive Impacts and
+Mitigate Negative Impacts
+For more information, see the section
+Memberships, Partnerships, and Commitments
+Where You Can Find More
+Information in the
+SAP Integrated Report
+Social Investments
+Memberships, Partnerships, and Commitments
+Energy and Emissions
+Compensation Report 2023
+QAudit Scope
+295/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information
+about Sustainability
+Additional
+Information
+GRI Content Index
+SAP SE has reported in accordance with the GRI Standards for the period from January 1, 2023, to
+December 31, 2023. The GRI 1 used was GRI 1: Foundation 2021.
+The 11 material topics in this GRI Content Index were selected based on the comprehensive
+materiality assessment conducted in 2022 and reflect the requirements of GRI 3: Material Topics. We
+have clustered these topics according to the relevant non-financial matters set out in the German
+Commercial Code (Handelsgesetzbuch, HGB) (exception: the material topic "ethics and compliance" is
+not clustered under “Anti-corruption and bribery matters" as the corresponding GRI standards are
+defined more broadly).
+We present the interconnection between the GRI topic-specific disclosures that are material to SAP
+and the 17 United Nations Sustainable Development Goals (UN SDGs).
+The content of the Our Contribution to the UN Sustainable Development Goals section was not
+subject to the independent limited assurance engagement of our external auditor.
+Combined Management
+Report
+SAP solutions: SAP SuccessFactors Learning
+To Our
+Business Health Culture Index
+Indirect:
++
+-
+Enhance safe and healthy working conditions,
+healthcare, and personalized medicine on a global
+scale
+Increase transparency of physical, medical, and health
+conditions of individuals, which might be abused
+Our Policies and Selected
+Activities and Programs to
+Enhance Positive Impacts and
+Mitigate Negative Impacts
+Where You Can Find More
+Information in the
+SAP Integrated Report
+Direct:
+Global Health and Safety Policy; Employee Assistance
+Program; Healthy Leadership enablement, Employee Care
+Cycle for Mental Health, Global Mindfulness Practice, and
+programs for an active workplace and physical activity
+Employees
+Indirect:
+SAP's solutions for healthcare: SAP Environment, Health, and
+Safety Management; SAP S/4HANA for product compliance;
+SAP Concur duty of care functionality
+SDG 4 Quality Education
+Our Potential Direct and Indirect
+Impact
+Direct:
++
+Train and educate SAP employees
+Our KPIs and Targets
+Our Policies and Selected
+Activities and Programs to
+Upskill two million people worldwide by 2025
+Direct:
+Indirect:
++ Build capability in our ecosystem and among our
+customers
+Indirect:
+Free learning on SAP Learning site; SAP CSR education and
+292/324
+SAP
++ Provide access to a healthy lifestyle and a safe and
+healthy working environment for our employees
+Direct:
+SDG 3 Good Health and Well-Being
+The following table describes the potential positive (+) and negative (-) direct or indirect impacts of
+our company and of our products and services related to the selected SDGs. We use "direct" when we
+refer to impacts through our own operations; "indirect" describes impacts through the use of our
+solutions and technology or in our ecosystem.
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information
+about Sustainability
+Additional
+Information
+Calculation of E-Waste with Treatment Insights
+The e-waste data we receive from our large IT asset lifecycle partners is based on weight or the
+number of devices which is converted into weight based on an average weight of the devices. To
+determine the share of end-of-life treatment practices (recycling versus incineration with/without
+energy recovery versus landfill), our partners aim to use the specific quotas of the recycling sites. If this
+data is not available, regional quotas or other available country quotas are used for approximation. We
+also collect reusage data from ISO 14001-certified SAP locations that are not (fully) covered by our
+large IT asset lifecycle partners. This amount is included in the reusage data visualized in the Waste
+and Water section.
+In 2023, an analytical reporting sourcing system was developed and implemented to improve
+assessment and management, gain clear insights in sustainability performance in data centers (for
+example, waste diverted from disposal versus waste directed to disposal). We roll out monthly
+Sustainability & Commercial reports with complete insights in all process steps from handover to final
+processing for our data centers' e-waste. This report includes information about raw and extracted
+hazardous materials.
+Calculation of E-Waste Without Treatment Insights
+To supplement our e-waste data from our large IT asset lifecycle partners, we also collect data from all
+locations that are a) in scope of our ISO 14001-certified environmental management system (EMS),
+and b) not (fully) covered by our large partners.
+For SAP sites that are neither covered by our partners nor are part of SAP's EMS, we extrapolate e-
+waste shares for end-user IT equipment based on full-time equivalents. The end-of-life treatment split
+into recycling and incineration with energy recovery and landfill is calculated based on the country-
+specific or region-specific factors of the Global E-waste Monitor 2020.
+For co-location data centers not covered by our global IT asset lifecycle partners, we extrapolate the
+data based on the electricity consumption share. The e-waste treatment split into recycling and
+incineration with energy recovery and landfill is calculated based on the country-specific or region-
+specific factors of the Global E-waste Monitor 2020.
+Overall, we achieved a data coverage for our WEEE reporting of 94%.
+SAP Integrated Report 2023
+QAudit Scope
+291/324
+SAP
+Our Potential Direct and Indirect
+Impact
+Our KPIs and Targets
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information
+about Sustainability
+Additional
+Information
+Our Contribution to the UN
+Sustainable Development
+Goals
+The 17 United Nations Sustainable Development Goals (SDGs) provide a globally accepted
+framework anchored in human rights, which we use for communicating our purpose to "help the world
+run better and improve people's lives." We strive to execute on this purpose by being a role model for
+sustainable, purpose-led operations and by enabling our customers to operate in a sustainable way.
+Following the adoption of the SDGs by world leaders in September 2015, we identified and aligned
+existing initiatives with all 17 SDGs. For example, we looked at the environmental and social impacts of
+customers using SAP technology and applications, linking these impacts to the SDGs. The resulting
+Web book "SAP and the UN Global Goals" was published in early 2016 and has been updated
+regularly.
+In discussions with our ESG Steering Board and external sustainability advisory panel, we defined the
+SDGs for which there is a tangible and material link between our own operational activities or the use
+of our software by customers.
+The content of the Non-Financial Notes: Environmental Performance section was subject to an
+independent limited assurance engagement by our external auditor. Under this engagement, the
+quantitative indicators carbon emissions (scope 1, scope 2, and scope 3 emissions relevant for SAP's
+business model), total energy consumption and renewable energy certificates were audited at a
+reasonable assurance level.
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+SAP's solutions for social responsibility: SAP Environment,
+Health and Safety Management; SAP Rural Sourcing
+Management
+SAP Ariba Supplier Risk; SAP Fieldglass Contingent
+Workforce Management
+SAP CSR programs to foster social entrepreneurship
+Where You Can Find More
+Information in the
+SAP Integrated Report
+Our Potential Direct and Indirect
+Impact
+Employees
+SDG 9 Industry, Innovation, and Infrastructure
+Direct:
++ Increase inclusive and sustainable industrialization
+through SAP's investments in research and
+development (including in developing countries)
+Indirect:
++ Support providers of infrastructure, financial services,
+and clean technologies
++ Provide “Best Practice" business processes through
+standard software solutions
++ Integrate small and medium-sized enterprises into
+global value chains and markets
+Indirect:
+Unconscious bias and discrimination in Al (Artificial
+Intelligence) technology
+Our Policies and Selected
+Activities and Programs to
+Enhance Positive Impacts and
+Mitigate Negative Impacts
+Where You Can Find More
+Information in the
+SAP Integrated Report
+NA
+Direct:
+SAP Labs Network
+Strategy and Business Model
+Indirect:
+SAP support for startups through various programs, such as
+SAP.io Foundries, Sustainable Accelerator;
+SAP (Co-)Innovation Labs; SAP participation in Industry
+Consortia; SAP Next-Gen program, and academic
+partnership programs
+SAP Al Ethics Guiding Principles, Policy and Governance
+293/324
+SAP
+SAP Integrated Report 2023
+Our KPIs and Targets
+Stakeholders
+Recruiting programs; Human Rights Commitment Statement;
+Human Rights Due Diligence Program
+Number of employees
+Further Information
+about Sustainability
+Additional
+Information
+Enhance Positive Impacts and
+Mitigate Negative Impacts
+Cloud-based learning management system for employees
+digital skills program
+Where You Can Find More
+Information in the
+SAP Integrated Report
+Employees
+Social Investments
+SAP Educate to Employ initiative in partnership with UNICEF
+and Generation Unlimited; SAP University Alliance
+Employees
+SDG 8 Decent Work and Economic Growth
+Direct:
+Our Potential Direct and Indirect
+Impact
+Indirect:
++ Create decent jobs at SAP through our growth plans,
+specifically in developing markets
++
+Enable an inclusive economy
++
+Facilitate socially responsible employment
++
+Respect human rights across value chains
++ Combat forced and child labor throughout supply
+-
+chains
+Fuel negative effects on employment through
+digitalization and automation; potentially increase
+precarious jobs
+Our KPIs and Targets
+Our Policies and Selected
+Activities and Programs to
+Enhance Positive Impacts and
+Mitigate Negative Impacts
+Direct:
+In Scope of
+External
+Audit86
+2-13
+SDGs
+In Scope of
+External
+Boundaries
+Audit86
+UN SDGs
+GRI Standards
+Disclosure Title
+GRI 3: Material Topics
+Management of material topics
+3-3
+2021
+GRI 205: Anti-
+corruption 2016
+205-1
+205-2
+Operations assessed for risks
+related to corruption
+Communication and training
+about anti-corruption policies
+and procedures
+Links, Content, and Omissions
+Business Conduct
+Risks and Risk Management
+Business Conduct
+Risk Management and Risks
+In alignment with the different legal requirements in
+various countries, and as per the SAP Global Risk
+Management Policy and supporting processes, SAP,
+together with legal advisory services as deemed
+appropriate, perform risk assessments globally.
+These include cross-business topics and the
+evaluation of risks related to compliance, bribery,
+and corruption. Overall, our corporate risk
+assessments focus on compliance topics. In
+addition, 38% of all audits concluded in 2023 under
+the risk-based audit plan are compliance-relevant
+audits. As part of this process, a regular and
+dedicated focus is also placed on identifying high-
+risk countries so as to identify deep dive reviews
+and necessary mitigations accompanied by regular
+monitoring.
+Furthermore, ad hoc audits are performed if there
+are grounds of suspicion. This regular auditing is a
+vital component of ensuring compliance worldwide
+in our business processes and identifying
+weaknesses or non-compliance to derive adequate
+measures.
+Given the holistic approach of our compliance risk
+assessment, SAP does not report on the number of
+audits solely related to corruption.
+SAP's Code of Ethics and Business Conduct
+(COEBC) provides the primary ethical and legal
+framework within which SAP conducts business. It
+also addresses SAP's policies regarding anti-
+corruption.
+The COEBC is available internally on the Company's
+intranet and externally on the Internet. All members
+of the SAP Executive Board and Supervisory Board,
+all SAP employees, all SAP partners, suppliers, and
+shareholders, as well as the general public, have full
+access to the COEBC.
+We do not collect the data of the geographical
+distribution and the type of our business partners
+who access the COEBC. For a breakdown of the
+geographical distribution of all SAP employees, see
+the Report Data Hub.
+The completion rate for mandatory training
+applicable to all SAP employees 88 on the subject of
+anti-corruption exceeded 99% in 2023. The
+numbers of employees per region are listed below:
+Ethics and Compliance
+Topic-Specific Disclosures
+Information
+Additional
+Links, Content, and Omissions
+GRI 3: Material
+Topics 2021
+3-1
+Process to determine material
+topics
+Materiality
+3-2
+List of material topics
+Materiality
+In Scope of
+External
+Audit86
+UN
+SDGs
+✓
+16
+In Scope
+SAP
+8
+Boundaries
+of External
+Audit86
+UN SDGs
+SAP
+SAP
+✓
+298/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information
+about Sustainability
+16
+SAP
+SAP +
+external
+parties
+2016
+competitive Behavior
+206-1
+Legal actions for anti-
+competitive behavior, anti-trust,
+and monopoly practices
+Note (G.3) Other Litigation, Claims, and Legal
+Contingencies
+SAP
+16, 17
+Of all cases, only material legal actions for anti-
+competitive behavior, anti-trust, and monopoly
+practices cases are reported in Note G.3.
+GRI 207: Tax 2019
+207-1
+Approach to tax
+SAP Global Tax Principles
+207-2
+Tax governance, control, and
+risk management
+GRI 206: Anti-
+SAP Global Tax Principles
+9, 11, 16
+SAP
+9, 11, 16
+207-3
+207-4
+Stakeholder engagement and
+management of concerns
+related to tax
+Country-by-country reporting
+SAP Global Tax Principles
+As a German company, we report our tax expense
+separately for Germany and for the rest of the
+world. We are confident that this information meets
+our stakeholders' demands.
+SAP
+9, 11, 16
+300/324
+SAP
+SAP
+Disclosure Title
+16
+Of all cases, only material corruption cases are
+reported in Note G.3.
+•
+APJ: 21,465
+• Greater China: 6,595
+EMEA: 13,221 (includes five Executive Board
+Members)
+• MEE: 33,446
+• LAC: 5,805
+North America: 21,325 (includes two Executive
+Board members)
+88 Excludes employees on long-term sick leave, parental leave, members of acquired companies, and those in early retirement.
+くくく
+299/324
+16
+SAP
+SAP Integrated Report 2023
+To Our
+SAP
+Stakeholders
+Consolidated Financial
+Statements IFRS
+Further Information
+about Sustainability
+Additional
+Information
+GRI Standards
+Disclosure Title
+Links, Content, and Omissions
+Furthermore, the Group Chief Compliance Officer
+(GCCO) reports on compliance matters on a
+quarterly basis to the Executive Board and to the
+Audit and Compliance Committee of the
+Supervisory Board.
+In Scope of
+Boundaries
+External
+Audit86
+UN SDGs
+205-3
+Confirmed incidents of
+corruption and actions taken
+Combined Management
+Report
+UN
+GRI Standards
+Stakeholder Engagement
+2-10
+Nomination and selection of
+the highest governance body
+Corporate Governance Statement
+2-11
+Chair of the highest governance
+body
+2-12
+Role of the highest governance
+body in overseeing the
+management of impacts
+German stock corporations have a two-tier governance system due to
+the legislation (AktG §105), that is, an executive board and a
+supervisory board. Members of the supervisory board cannot also
+serve on the executive board.
+Corporate Governance Statement
+Sustainability Management
+Risk Management and Risks
+In Scope of
+External
+Audit86
+UN
+SDGs
+✓
+8
+5,16
+5, 16
+✓
+16
+Delegation of responsibility for
+managing impacts
+Corporate Governance Statement
+Sustainability Management
+✓
+2-14
+Role of the highest governance
+body in sustainability reporting
+Corporate Governance Statement
+Materiality
+2-15
+2-16
+Conflicts of interest
+Corporate Governance Statement
+Communication of critical
+Supervisory Board
+Executive Board
+Sustainability Management
+Corporate Governance Statement
+Headcount and Personnel Expense
+Note (B.1) Employee Headcount
+Report Data Hub
+At SAP, we have a multitude of non-headcount-relevant employee
+categories defined. None of these categories match the GRI definition
+of "non-guaranteed hours employees." However, at SAP we have
+employees who are paid hourly (for example, working students) but
+who have a reliable minimum number of hours guaranteed. This group
+represents about 1.3% of the total SAP workforce.
+✓
+> >
+>
+8, 10
+86 Level of external audit: Limited assurance, reasonable assurance, and statutory audit. For more information about the External Audit scope,
+please refer to the Audit Scope checkboxes in each section.
+296/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+concerns
+Combined Management
+Report
+Further Information
+about Sustainability
+Additional
+Information
+GRI Standards
+Disclosure Title
+2-8
+Workers who are not
+employees
+2-9
+Links and Content
+Governance structure and
+composition
+In 2023, we had on average 999 workers 87 who were not employees
+and whose work was controlled by SAP. GRI's definition matches
+SAP's external workforce category "temporary staff."
+Temporary staff are all contracted through a recruitment agency, with a
+contract in line with country specific legislation.
+This external workforce is deployed to act as a replacement employee
+for a limited period of time, provide a specialist skill on a short-term
+basis, or cover temporary peaks in work. The performed work is
+equivalent to that done by employees and spans all types of roles in
+the business.
+Temporary staff has access to our Health, Safety & Well-Being
+offerings. However, we do not include temporary staff into our Health,
+Safety & Well-Being-related KPIs due to data collection boundaries.
+SAP Executive Board
+Consolidated Financial
+Statements IFRS
+Corporate Governance Statement
+Report by the Supervisory Board
+The Supervisory Board is informed regularly and on an ad-hoc basis by
+the Executive Board about the Company's strategy and the status of its
+implementation, business planning, profitability, and all aspects of
+business performance which are material for the SAP Group, including
+any deviations of actual business performance from plan, and about
+current risks, risk management, and corporate compliance. In addition,
+the Executive Board involves the Supervisory Board in decisions on
+matters of fundamental importance for the Company, including in case
+of transactions requiring the Supervisory Board's prior consent. The
+Supervisory Board's activities of the previous year, including its
+decisions on transactions requiring its prior consent, are described in
+detail in the Report by the Supervisory Board for the relevant fiscal
+year, which is included in SAP's Integrated Report. Due to the
+overlapping and not always sharply delineated nature of matters
+discussed, disclosing a total number of critical concerns would not be
+accurate. We provide transparency qualitatively through the Report by
+the Supervisory Board.
+87 Number represents the average headcount over the year 2023. The number of temporary staff declined by ~4% over the year 2023.
+Letter from the CEO
+2-22
+Statement on sustainable
+development strategy
+2-23
+Policy commitments
+Business Conduct
+Human Rights
+Code of Ethics and Business Conduct (CoEBC)
+Business Conduct
+2-24
+Embedding policy
+commitments
+2-25
+Processes to remediate
+Human Rights
+The average annual compensation of SAP employees and the
+information for the highest paid employee (CEO), from which the ratio
+can be calculated, has been provided in the Compensation
+Report 2023.
+negative impacts
+Mechanisms for seeking advice
+Business Conduct
+and raising concerns
+2-27
+Compliance with laws and
+regulations
+Note (G.3) Other Litigation, Claims, and Legal Contingencies
+2-28
+Membership associations
+Memberships, Partnerships, and Commitments
+2-29
+Approach to stakeholder
+engagement
+Stakeholder Engagement
+2-30
+Collective bargaining
+agreements
+2-26
+Disclosures on Material Topics
+Corporate Governance Statement
+AGM Voting on Resolutions
+16
+16
+297/324
+SAP
+GRI Standards
+2-17
+SAP Integrated Report 2023
+To Our
+Combined Management
+Stakeholders
+Report
+Consolidated Financial
+Statements IFRS
+Further Information
+about Sustainability
+Additional
+Information
+Compensation Report 2023
+Disclosure Title
+2-19
+Collective knowledge of the
+highest governance body
+Evaluation of the performance
+of the highest governance
+body
+Remuneration policies
+2-20
+Process to determine
+remuneration
+Links and Content
+Compensation Report 2023
+Corporate Governance Statement
+Report by the Supervisory Board
+Performance Management System
+Compensation Report 2023
+Corporate Governance Statement
+Compensation Report 2023
+2-21
+Annual total compensation
+ratio
+2-18
+SAP Integrated Report 2023
+external
+parties
+GRI 302: Energy 2016
+Employees
+4,5,8,9,10
+SAP
+4,5,8,9,10
+SAP
+8
+UN SDGs
+In Scope of
+External
+Audit86
+SAP
+Boundaries
+receiving regular performance
+and career development
+reviews
+Percentage of employees
+404-3
+SAP has both dedicated and volunteer staff that
+supports generational intelligence on matters of
+continued employability, managing career endings,
+and cross-generational integration and
+collaboration. These experts work to continuously
+improve processes and design programs that
+sustain employability for as long as possible. They
+provide training for cross-generation collaboration,
+facilitate flexible career endings for employees
+(such as part-time options), and keep employees
+connected with the Company after retirement.
+Employees
+SAP
+SAP offers a wide portfolio of learning and
+development offerings to help all of our employees
+to upskill and accelerate their career. We align
+training activities according to the needs of
+employees regardless of gender and employee
+categories, and they can freely choose from these
+offerings based on their role and development
+goals.
+5,8,10
+employee, regardless of gender and employee
+Report Data Hub
+Incidents of discrimination and
+corrective actions taken
+406-1
+GRI 406: Non-
+Discrimination 2016
+Ratio of basic salary and
+remuneration of women to men
+405-2
+Supervisory Board
+Opportunity 2016
+Corporate Governance Statement
+Employees
+Diversity of governance bodies
+and employees
+405-1
+GRI 405: Diversity
+and Equal
+goals with their manager at least once a quarter. For
+this reason, we do not consider this a relevant
+disclosure.
+category, has the opportunity to discuss the
+progress of their performance and development
+With our SAP Talk approach, employees and their
+managers regularly discuss performance and
+development goals, needs and progress, and share
+feedback. At SAP, it is expected that every
+SAP
+Employees
+Average hours of training per
+year per employee
+SAP
+Specific rates not disclosed since employees are
+subject to different parental leave rights that local
+regulations grant to them.
+Parental leave
+401-3
+Note (B.1) Employee Headcount
+Report Data Hub
+8
+SAP
+Employees
+New employee hires and
+employee turnover
+401-1
+SAP
+Employee Engagement
+5
+SAP
+SAP
+8
+Programs for upgrading
+employee skills and transition
+assistance programs
+302/324
+SAP Integrated Report 2023
+For the European Economic Area (EA) and
+European Union (EU), we consult with the SAP SE
+Works Council (Europe) on significant organizational
+changes. At the same time, the changes are
+discussed with the local social partners, including
+outside the EEA, EU, and United Kingdom (UK).
+There is no fixed lead time between informing
+employees and implementing the changes.
+However, in the event of significant changes, SAP
+provides extensive change management measures
+to bring employees closer to the justification for the
+implementation of the measure and to motivate
+them to contribute to the changes.
+404-2
+404-1
+GRI 404: Training and
+Education 2016
+Minimum notice periods
+regarding operational changes
+402-1
+Disclosure Title
+GRI Standards
+Information
+Additional
+Further Information
+about Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+Stakeholders
+To Our
+SAP
+UN SDGs
+5,8,10
+5,8,10
+parties
+external
+SAP +
+The Global Health, Safety & Well-Being team (led by
+SAP's Chief Medical Officer), together with their
+partners in Human Resources, Real Estate and
+Facilities, Occupational Safety and Physical Security,
+provide the information, education, and support to
+foster a healthy working culture and a supporting
+environment for all people. In doing so, we enable
+the organization to be a role model in safe, healthy,
+and sustainable people management.
+SAP provides manifold feedback opportunities and
+encourages its people to get involved and shape
+SAP's caring culture and working conditions by
+"telling it like it is," and in doing so, help us improve
+where needed. Our success is tracked through the
+Business Health Culture Index (BHCI) and the
+Stress-Satisfaction Score (measured by regular
+employee surveys), which revealed that job
+satisfaction was equal or higher than the perceived
+stress for about 74% of SAP participants in 2023.
+SAP Health & Safety Commitment Statement
+Conditions in which people live up to their full
+potential - now and in the future of work - are
+mainly defined by the organization's leadership style
+and working culture. We believe that there can be
+no organizational health without individual health.
+SAP and its leaders take ownership for workplaces
+and a caring culture that foster physical health,
+safety, and mental well-being, while every employee
+is enabled and encouraged to take care of their
+individual health.
+As an enterprise software company, SAP's
+occupational health and safety concerns relate to
+the knowledge industry and are different to those
+encountered in manufacturing industries. Most of
+our employees are of academic background and
+have sedentary, intellectually demanding jobs in a
+constantly changing business environment with
+specifically high demands on self-organization,
+international collaboration, flexibility, agility, and
+adaptability. Key health and safety management
+focus areas at SAP are stress management, self-
+management, work-life balance support, personal
+resilience, a psychologically safe work environment,
+an ergonomically safe office setup, travel medicine,
+pandemic management, vaccinations, road safety,
+and general medical prevention for all.
+Employees
+Nothing has a greater impact on our long-term
+success than the creativity, talent, commitment,
+health, safety, and well-being of our people. Their
+ability to collaborate, innovate, and understand the
+needs of our customers has the potential to deliver
+sustainable value to our company, customers, and
+society.
+Links, Content, and Omissions
+UN SDGs
+In Scope
+of External
+Audit86
+Boundaries
+Management of material topics
+3-3
+Disclosure Title
+Well-Being, Health, and Safety
+1,3,6
+Information
+305/324
+SAP
+Links, Content, and Omissions
+and Safety 2018
+Occupational health and safety
+management system
+Occupational Health
+403-1
+GRI 403:
+Disclosure Title
+Information
+Additional
+Further Information
+about Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+Stakeholders
+To Our
+SAP Integrated Report 2023
+GRI Standards
+SAP
+Additional
+Consolidated Financial
+Statements IFRS
+Information
+Additional
+Further Information
+about Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+To Our
+Stakeholders
+SAP Integrated Report 2023
+407-1
+GRI 407: Freedom of
+Association and
+Collective Bargaining
+2016
+GRI Standards
+SAP
+303/324
+8
+Confidentiality constraints. SAP does not publicly SAP
+disclose this data.
+Specific rates are not reported, given that SAP's
+bigger company goal is fair pay for all employees,
+following an approach of "aggregate, don't
+segregate" so that everyone's unique contribution is
+fairly and clearly reflected. Since data on gender
+pay is included but not exclusive to that philosophy,
+we only calculate and report this data on a local
+level where required by law.
+Disclosure Title
+Further Information
+about Sustainability
+Operations and suppliers in
+which the right to freedom of
+association and collective
+bargaining may be at risk
+Sustainable Procurement
+Stakeholder Engagement
+Report
+Stakeholders
+Combined Management
+To Our
+SAP Integrated Report 2023
+SAP
+GRI 3: Material
+Topics 2021
+GRI Standards
+304/324
+8
+UN SDGs
+In Scope of
+External
+Audit86
+SAP +
+external
+parties
+Boundaries
+Human Rights without further specification of the
+topic has been considered material as a result of
+our materiality assessment. "Freedom of association
+and collective bargaining" has not been specifically
+contemplated as part of the analysis.
+Links, Content, and Omissions
+Audit86
+Boundaries
+In Scope of
+External
+302-5
+7,8,13
+> > >
+Non-Financial Notes: Environmental Performance
+Allocation of energy consumption reductions
+(which we experienced in 2023, for example for our
+own data center electricity) to conservation and
+efficiency initiatives cannot be presented precisely
+due to overlapping effects (such as reductions
+caused by the COVID-19 pandemic).
+SAP
+Energy and Emissions
+Reduction of energy
+consumption
+302-4
+The energy intensity ratio uses only energy
+consumption within the organization.
+Five-Year Summary
+Report Data Hub
+Non-Financial Notes: Environmental Performance
+7, 8, 12, 13
+SAP
+Energy and Emissions
+Reductions in energy
+requirements of products and
+services
+Energy intensity
+Most of our products are hosted in the cloud. For SAP
+this reason, the energy consumption is included
+7,8,13
+GRI 305: Emissions
+Non-Financial Notes: Environmental Performance
+SAP
+Energy and Emissions
+Management of material topics
+3-3
+GRI 3: Material
+Topics 2021
+UN SDGs
+External
+Audit86
+Boundaries
+In Scope of
+Links, Content, and Omissions
+Disclosure Title
+GRI Standards
+Climate Change and Air Quality
+and reported in our CO2 emission calculation in the
+section Non-Financial Notes: Environmental
+Performance.
+305-1
+302-3
+7, 8, 12, 13
+Boundaries
+Links, Content, and Omissions
+Disclosure Title
+GRI Standards
+Energy
+Environmental Matters
+Additional
+Information
+Further Information
+about Sustainability
+Consolidated Financial
+Statements IFRS
+Report
+Stakeholders
+Combined Management
+To Our
+SAP Integrated Report 2023
+SAP
+In Scope of
+External
+Audit86
+parties
+UN SDGs
+3-3
+SAP +
+external
+Non-Financial Notes: Environmental Performance
+Report Data Hub
+Energy and Emissions
+Energy consumption outside of
+the organization
+302-2
+Non-Financial Notes: Environmental Performance
+Report Data Hub
+7, 8, 12, 13
+SAP
+Energy and Emissions
+Energy consumption within the
+organization
+302-1
+Non-Financial Notes: Environmental Performance
+SAP
+Energy and Emissions
+Management of material topics
+GRI 3: Material
+Topics 2021
+2016
+Direct (Scope 1) GHG
+emissions
+Energy and Emissions
+3, 12, 13, 14,
+15
+SAP
+As a software company with no production sites,
+emissions of ozone-depleting substances (ODS)
+are not material to SAP.
+Emissions of ozone-depleting
+substances (ODS)
+305-6
+Allocation of carbon emission reductions to
+avoidance and efficiency initiatives cannot be
+connected precisely due to overlapping effects
+(such as reductions caused by the COVID-19
+pandemic).
+external
+parties
+Non-Financial Notes: Environmental Performance
+Report Data Hub
+13, 14, 15
+SAP +
+Energy and Emissions
+Reduction of GHG emissions
+305-5
+13, 14, 15
+UN SDGs
+305-7
+In Scope of
+External
+Audit86
+Nitrogen oxides (NOx), sulfur
+oxides (SOX), and other
+significant air emissions
+SAP
+Employees
+Report Data Hub
+Employees
+Employees
+Women in Management
+Nothing has a greater impact on our long-term
+success than the creativity, talent, commitment,
+health, and well-being of our people. Their ability to
+innovate and understand the needs of our
+customers has the potential to deliver sustainable
+value to our Company and our society. The
+management approach is applicable not only to
+employee engagement and employee rights, but
+also to fair and inclusive workplace and talent and
+development.
+Management of material topics
+Links, Content, and Omissions
+Disclosure Title
+The management approaches for the material topics 'employee rights', 'employee engagement', 'talent
+and development' and 'fair and inclusive workplace' strongly overlap. This is why we decided to
+combine them in one joint table, including their corresponding topic-specific disclosures:
+Employee Matters
+GRI 401:
+Employment 2016
+3-3
+GRI 3: Material
+Topics 2021
+3, 12, 13, 15
+We report all our carbon emissions in CO2
+equivalents (CO2e) including the impact from CH4,
+N₂O, and HFCs in our Scope 1 and 2 emissions. We
+do not provide a breakdown. As a software
+company with no production sites, sulfur oxides
+(SOX) and other significant air emissions are not
+material to SAP.
+Report Data Hub
+SAP +
+external
+parties
+Five-Year-Summary
+External
+parties
+Non-Financial Notes: Environmental Performance
+Report Data Hub
+Energy and Emissions
+Other indirect (Scope 3) GHG
+emissions
+305-3
+15
+Non-Financial Notes: Environmental Performance
+Report Data Hub
+3, 12, 13, 14,
+SAP
+Energy and Emissions
+Energy indirect (Scope 2) GHG
+emissions
+305-2
+3, 12, 13, 14,
+15
+Non-Financial Notes: Environmental Performance
+Report Data Hub
+SAP
+3, 12, 13, 14,
+15
+301/324
+SAP
+Non-Financial Notes: Environmental Performance
+Boundaries
+Links, Content, and Omissions
+GRI Standards
+GHG emissions intensity
+305-4
+Disclosure Title
+SAP has developed an internal health and safety
+management system called "Run Healthy" which is
+built on International Labour Organization
+Occupational Health and Safety (ILO-OSH)
+standards and SAP's internal Health & Safety Policy.
+Run Healthy enables SAP organizations to assess
+their maturity state on health, safety, and well-being
+to develop and drive targeted initiatives across their
+organizations and to boost their local Business
+Health Culture Index, employee engagement, and
+employer attractivity. The implementation is
+voluntary and driven by the managing director
+according to country/line-of-business needs. We
+give all workers access to global offerings which are
+complemented according to local business needs.
+Local Run Healthy councils are key in the process to
+self-assess maturity levels in the light of covering
+local requirements and global standards. Run
+Healthy is expanded on a continuous basis. In
+addition, SAP engages with its suppliers, partners,
+and customers to promote the topics of people
+health and occupational safety beyond the
+boundaries of our company.
+GRI Standards
+Additional
+Further Information
+about Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+Stakeholders
+To Our
+SAP Integrated Report 2023
+Information
+SAP Supplier Code of Conduct
+Links, Content, and Omissions
+Please also refer to GRI 2-8.
+Operations and suppliers at
+significant risk for incidents of
+child labor
+GRI 409: Forced or
+Compulsory Labor
+2016
+409-1
+Sustainable Procurement
+Human Rights without further specification of the
+topic has been considered material as a result of
+our materiality assessment. "Risks of child labor"
+has not been specifically contemplated as part of
+the analysis. However, selected information has
+been included in the Human Rights section.
+SAP +
+external
+parties
+Operations and suppliers at
+significant risk for incidents of
+forced or compulsory labor
+Sustainable Procurement
+Human Rights without further specification of the
+topic has been considered material as a result of
+our materiality assessment. "Risks of forced labor"
+has not been specifically contemplated as part of
+the analysis. However, selected information has
+been included in the Human Rights section.
+SAP +
+external
+parties
+Security, Privacy, and Data Protection
+GRI Standards
+Disclosure Title
+Links, Content, and Omissions
+GRI 3: Material Topics
+2021
+3-3
+Management of material topics
+Security, Cloud Compliance, Data Protection and
+Privacy
+GRI 418: Customer
+Privacy 2016
+418-1
+Substantiated complaints
+concerning breaches of
+customer privacy and losses of
+customer data
+SAP Trust Center: Data Protection and Privacy
+SAP Privacy Statement
+Boundaries
+408-1
+SAP +
+external
+parties
+GRI 408: Child Labor
+2016
+SAP +
+external
+parties
+Consolidated Financial
+Statements IFRS
+Further Information
+about Sustainability
+Additional
+Information
+Human Rights
+In Scope of
+Boundaries
+External
+Audit86
+UN SDGs
+GRI Standards
+Disclosure Title
+Links, Content, and Omissions
+GRI 3: Material Topics
+2021
+3-3
+Management of material topics
+Human Rights
+GRI 407: Freedom of
+Association and
+407-1
+Collective Bargaining
+2016
+Operations and suppliers in
+which the right to freedom of
+association and collective
+bargaining may be at risk
+Sustainable Procurement
+Stakeholder Engagement
+Human Rights without further specification of the
+topic has been considered material as a result of
+our materiality assessment. "Freedom of
+association and collective bargaining" has not been
+specifically contemplated as part of the analysis.
+However, selected information has been included
+in the Human Rights section.
+SAP +
+external
+parties
+Combined Management
+Report
+In Scope of
+External
+Audit86
+3,8
+Customer Loyalty
+Boundaries
+In Scope of
+External
+Audit86
+Links, Content, and Omissions
+At SAP, we are committed to our purpose of
+helping the world run better and improving
+people's lives. To this end, we aim to create
+innovations that help accelerate economic
+prosperity, drive positive social impact, and
+safeguard the planet.
+Strategy and Business Model
+Performance Management System
+Note (A.4) Customer-Related Provisions
+Human Rights
+As a software company without any physical
+products or production sites, customer health and
+safety is mainly related to the responsible usage of
+technology, especially artificial intelligence.
+Guiding Principles for Artificial Intelligence
+SAP +
+external
+parties
+Customers
+Performance Management System
+UN SDGS
+SAP +
+external
+parties
+3
+SAP
+4,5,8,10
+QAudit Scope
+The content of the GRI Content Index section was subject to an independent limited assurance
+engagement by our external auditor The content of the column UN SDGs as well as quantitative and
+qualitative information in relation to GRI 207 Tax were not subject to the independent limited
+assurance engagement of our external auditor.
+310/324
+Safety Instructions for Contractors
+GRI 3: Material
+Topics 2021
+8
+Assessment of the health and
+safety impacts of product and
+service categories
+GRI 416: Customer
+Health and Safety
+2016
+3,8,10
+UN SDGs
+Security, Cloud Compliance, Data Protection and
+Privacy
+SAP +
+external
+12, 16
+SAP has not received a written statement
+addressed from a competent authority or similar
+official body on customer privacy breaches or a
+complaint filed with SAP that has been
+acknowledged as legitimate by SAP.
+parties
+309/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information
+about Sustainability
+Additional
+Information
+Customer Matters
+Customer Responsibility
+GRI Standards
+Disclosure Title
+GRI 3: Material
+Topics 2021
+3-3
+416-1
+Stakeholders
+Management of material topics
+SAP Integrated Report 2023
+Further Information
+about Sustainability
+Additional
+Information
+GRI Standards
+Disclosure Title
+403-3
+Occupational health services
+403-4
+403-5
+In Scope
+of External
+Links, Content, and Omissions
+Boundaries
+Audit86
+UN SDGS
+Employees: How We Measure and Manage Our
+Performance
+SAP +
+external
+parties
+3
+Worker participation,
+consultation, and
+communication on
+occupational health and safety
+Employees
+By regularly conducting surveys, we continuously
+receive insights which enable SAP and particularly
+its Global Health, Safety & Well-Being organization,
+together with its strong partners in Human
+Resources, Real Estate and Facilities, Occupational
+Safety and Physical Security to enforce and adjust
+its initiatives and counteract adverse developments
+in time.
+Our Global Health, Safety & Well-Being team
+provides global frameworks and a comprehensive
+health, safety, and well-being portfolio to enable
+SAP's business with its organizations at all levels to
+run healthy and safe.
+Consolidated Financial
+Statements IFRS
+Report
+Stakeholders
+Combined Management
+In Scope
+To Our
+of External
+Boundaries
+Audit86
+UN SDGS
+SAP +
+external
+parties
+3
+403-2
+Hazard identification, risk
+assessment, and incident
+investigation
+Employees: How We Measure and Manage Our
+Performance
+Please also refer to GRI 403-6 and GRI 2-8.
+SAP +
+Employees
+Sustainable Procurement: Improving Sustainability
+Through Practice
+Human Rights Commitment Statement
+SAP regularly conducts health risk assessments on
+global level with reporting on all manager levels.
+Mental health is key to SAP's ability to provide
+innovative solutions for our customers. SAP has a
+long tradition in taking action against stigmatization
+and applying the Employee Care Cycle covering
+prevention, early detection, case management, and
+re-integration. With the Stress-Satisfaction Score,
+SAP is monitoring an early-watch KPI to measure
+resilience on people level and to detect fields of
+action on individual and organizational level. In 2023,
+we conducted a hybrid-work-related risk
+assessment to identify health risk factors while
+working hybrid. A "Country Health Dashboard"
+based on SAP Analytics Cloud supports the
+identification of health risks on country level.
+SAP relies on the enablement of internal multiplier
+networks such as the Health Ambassador Network,
+and external trainings and certifications to ensure
+health and safety competence across the
+organization.
+Our employees can use various tools to report
+concerns, as outlined in the Human Rights
+Commitment Statement, and are protected against
+retaliation. This document is core to our people-
+related policies, such as the Global Health and
+Safety Policy. For more information, see the
+Employees section. Please also refer to GRI 2-8.
+306/324
+SAP
+SAP Integrated Report 2023
+To Our
+3
+SAP's Health & Safety program "Run Healthy"
+includes a self-assessment conducted by a cross-
+functional staffed council in order to drive tailor-
+made and effective local programs and initiatives.
+Digital solutions are leveraged to guide SAP's
+people to their relevant health content by
+considering individual needs and location and to
+gather their feedback to drive highest standards of
+quality, as we do with the permanent Qualtrics-
+based Health Feedback Survey across all health
+and well-being offerings.
+SAP Health & Safety Commitment Statement
+representative. The program is being expanded step
+by step; not all SAP employees are represented by
+the Run Healthy program.
+Promotion of worker health
+403-7
+Prevention and mitigation of
+occupational health and safety
+impacts directly linked by
+business relationships
+403-10 Work-related ill health
+Links, Content, and Omissions
+Employees
+SAP Health & Safety Commitment Statement
+At SAP, we offer a wide range of health and well-
+being services to our employees, ranging from
+general guidance on how to be more active and to
+deal with stress and challenging situations in- and
+outside SAP, conducting health and people days,
+consultation on ergonomic workplace set-up to
+prevent back pain, to local vaccination initiatives.
+Employees have access to these services and are
+informed about them in SAP's internal employee
+portal, monthly newsletters, live sessions, and
+campaigns, or by contacting the SAP Health team
+directly. In addition, we have Web-based tools such
+as the SAP Health Navigator which guides SAP
+people toward health offerings and tips according
+to their individual needs. The Run Your Way program
+on our Fit@SAP activity challenge platform
+encourages people to integrate more physical
+activity into their daily life.
+Please also refer to GRI 2-8.
+As outlined in GRI 403-2, we have various
+approaches to identify negative occupational health
+and safety impacts such as the BHCI and Country
+Health Dashboard as well as various channels to
+report concerns and incidents. In addition, to ensure
+the health, safety, and well-being of our employees
+worldwide, SAP runs dedicated crises management
+and business continuity frameworks. To safeguard
+our people on business travels, SAP ensures
+medical and security assistance through a Travel
+Assistance Program.
+Fatalities and injuries are not a material issue for
+SAP, as most of our employees work in an office
+environment. Please refer to GRI 3-3 for the main
+types of work-related ill health.
+The identification of work-related hazards that pose
+a risk of ill health (such as via the BHCI or the Run
+Healthy program), as well the actions taken to
+eliminate/ minimize these hazards and risks, are
+outlined in GRI 403-1 to GRI 403-7.
+Internally, we track and monitor an SAP illness rate
+(in %) which is defined as the total number of days
+absent (including absences shorter than 3 days) /
+scheduled workdays per year (250 days) x 100. In
+2023, SAP had a global illness rate of 2.1%.89 We do
+not break the illness rate down into different
+categories due to the low risk of specifically work-
+related illnesses. Therefore, we only track an overall
+illness rate.
+In 2023, our Stress Satisfaction Score evaluation
+(see GRI 403-2) confirmed lower stress levels on
+average compared to satisfaction. Furthermore, we
+leverage the company reports from our external
+Employee Assistance Program (EAP) providers to
+recognize health trends and to derivate appropriate
+actions.
+For non-employee workers, we require our suppliers
+and sub-suppliers to uphold health and safety
+standards via our Global Supplier Code of Conduct.
+In addition, in Germany we have safety Instructions
+for contractors in place.
+external
+parties
+SAP +
+external
+parties
+SAP +
+external
+parties
+89 Employees of recently acquired companies and SAP Israel as well as workers who are not SAP employees are excluded.
+3
+3
+A Run Healthy council is the execution entity for the
+Run Healthy program (see GRI 403-1 for its purpose
+and target). It meets regularly (usually quarterly) and
+contains the Run Healthy lead, different line-of-
+business representatives, such as from the Human
+Resources, Real Estate and Facilities, and Health
+departments, as well as an employee
+SAP
+308/324
+403-6
+Disclosure Title
+Please also refer to GRI 2-8.
+Please also refer to GRI 2-8.
+SAP +
+3
+Worker training on
+occupational health and safety
+At SAP, we offer a flexible training and enablement
+portfolio (such as SAP's learning platform Success
+Map) to enable our people to thrive in the future of
+work, foster healthy working habits, and become
+multipliers. In addition to flagship sessions on how
+to manage stress and foster a healthy work lifestyle,
+the "Are you OK?" mental well-being initiative
+continued and SAP launched its first Global Health
+Summit to enable stakeholders, people, and leaders
+on the renewed Health & Safety Policy.
+external
+parties
+3
+307/324
+GRI Standards
+SAP Integrated Report 2023
+To Our
+Stakeholders
+SAP
+Combined Management
+Report
+SAP +
+UN SDGS
+of External
+Audit86
+SAP +
+external
+parties
+In Scope
+Boundaries
+Information
+Additional
+Further Information
+about Sustainability
+Consolidated Financial
+Statements IFRS
+Please also refer to GRI 2-8.
+20.5
+Services gross margin (in %, IFRS)
+81.6
+81.2
+81.7
+23.6
+Gross margin (in %, IFRS)
+81.2
+Cloud and software gross margin (in %, non-IFRS)
+79.6
+79.7
+23.7
+80.8
+80.8
+80.4
+81.5
+22.7
+89.1
+Services gross margin (in %, non-IFRS)
+87.4
+Cloud and software gross margin (in %, IFRS)
+87.4
+89.7
+90.7
+90.1
+Software and support gross margin (non-IFRS, in %)
+86.6
+86.7
+90.1
+89.6
+Software and support gross margin (IFRS, in %)
+25.0
+27.0
+30.3
+29.7
+29.3
+19.4
+68.2
+-7,693
+68.4
+General and administration (IFRS)
+-7,106
+-6,856
+-7,946
+-8,828
+Sales and marketing (IFRS)
+15.6
+16.3
+19.6
+20.6
+20.3
+Research and development³ (in % of total revenue, IFRS)
+-4,292
+-4,454
+-6,080
+72.2
+-5,270
+-1,364
+69.7
+-1,289
+-1,356
+70.3
+72.6
+Cloud gross margin (in %, non-IFRS)
+63.5
+66.6
+66.9
+69.4
+71.6
+Cloud gross margin (in %, IFRS)
+Profits and Margins
+-1,872
+-1,831
+-1,537
+-1,569
+-1,373
+Depreciation and amortization (IFRS)
+-1,629
+-1,187
+72.8
+2,178
+71.2
+4,596
+7,220
+8,505
+4,513
+5,341
+Profit before tax (PBT)
+198
+PBT margin (in % of revenues)
+776
+-456
+Financial income, net
+29.7
+30.3
+30.4
+27.1
+28.0
+-1,389
+17.1
+15.3
+31.6
+32.6
+-6,324
+Effective tax rate (IFRS, in %)
+3,370
+5,283
+5,376
+1,708
+5,964
+Profit after tax
+-1,226
+-1,938
+-1,682
+-1,446
+-1,741
+Income tax expense
+16.7
+26.4
+Operating margin (in % of total revenue, non-IFRS)
+73.2
+16.2
+23.4
+SAP Integrated Report 2023
+SAP
+316/324
+4,473
+6,623
+6,308
+6,090
+To Our
+5,787
+72.3
+73.1
+74.9
+74.3
+74.1
+Gross margin (in %, non-IFRS)
+69.7
+Operating profit (IFRS)
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+20.6
+18.5
+Operating margin (in % of total revenue, IFRS)
+8,208
+8,287
+8,204
+7,989
+8,722
+2019
+2020
+2021
+2022
+2023
+Operating profit (non-IFRS)
+€ millions, unless otherwise stated
+Additional
+Information
+Further Information about
+Sustainability
+24.2
+Research and development³ (IFRS)
+Total revenue (non-IFRS)
+-7,362
+Total revenue (IFRS)
+Share of more predictable revenue (IFRS, in %)
+Share of more predictable revenue (non-IFRS, in %)
+13,664
+11,426
+8,701
+8,080
+2019
+6,933
+11,426
+8,701
+8,085
+7,013
+1,764
+2,056
+3,248
+13,664
+2020
+2021
+2022
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about Additional
+Sustainability
+Information
+Five-Year Summary1,2
+€ millions, unless otherwise stated
+Revenues
+Cloud (IFRS)
+Cloud (non-IFRS)
+Software licenses (IFRS)
+Software licenses (non-IFRS)
+Software support (IFRS)
+27,343
+Software support (non-IFRS)
+Cloud and software (IFRS)
+Cloud and software (non-IFRS)
+Services (IFRS = non-IFRS)
+2023
+3,642
+Stakeholders
+4,533
+2,056
+23,233
+23,093
+4,283
+4,128
+3,592
+4,110
+4,541
+23,361
+31,207
+26,953
+27,338
+27,553
+31,207
+29,520
+26,953
+32.0
+29,520
+25,391
+26,924
+23,012
+3,248
+3,642
+4,533
+11,496
+11,909
+11,412
+11,506
+11,547
+11,496
+11,909
+11,412
+11,506
+11,548
+26,924
+25,391
+23,361
+23,228
+1,764
+-7,655
+To Our
+SAP
+Cost of services (IFRS)
+-4,247
+-4,362
+-4,269
+-4,694
+-5,067
+Cost of cloud and software (non-IFRS)
+Cost of services (non-IFRS)
+-4,692
+-4,479
+-4,883
+-5,267
+Cost of cloud and software (IFRS)
+-2,018
+−1,911
+-1,516
+-4,707
+-3,407
+-3,155
+-2,740
+-6,775
+-7,598
+-8,096
+Total cost of revenue (non-IFRS)
+-8,355
+-7,886
+-7,219
+-8,038
+-8,674
+Total cost of revenue (IFRS)
+-3,408
+-3,000
+-2,506
+-2,904
+-3,029
+-3,662
+-3,178
+-1,302
+SAP Integrated Report 2023
+-1,318
+-2,159
+79
+81
+67
+72
+75
+79
+81
+75
+27,634
+316
+320
+Financial and Sustainability Publications
+321
+Publication Details
+323
+315/324
+Financial Calendar and Addresses
+72
+67
+Operating Expenses
+-2,008
+-1,598
+-1,384
+-1,383
+Cost of software licenses and support (IFRS)
+-2,228
+-2,451
+-2,754
+-3,391
+-3,749
+Cost of cloud (non-IFRS)
+-2,534
+-2,699
+-2,881
+-3,499
+-3,884
+Cost of cloud (IFRS)
+Cost of software licenses and support (non-IFRS)
+19.8
+Women managing teams 5,9 (in %)
+26.7
+59
+64
+Equity ratio (total equity in % of total assets)
+4,266
+3,996
+4,431
+5,309
+58
+4,975
+58,464
+71,174
+72,159
+68,335
+2019
+2020
+2021
+60,215
+51
+51
+Debt ratio (total liabilities in % of total assets)
+1,229
+1,229
+1,229
+Issued shares (in millions)
+Key SAP Stock Facts
+8,090
+1,780
+Five-Year Summary
+3,522
+2,226
+2,245
+Investments in goodwill, intangible assets, or property, plant, and equipment (including
+capitalizations due to acquisitions)
+49
+49
+42
+41
+36
+2022
+1,229
+2023
+Total assets
+Total non-current liabilities (including contract liabilities/deferred income)
+14,462
+12,842
+16,136
+17,453
+14,642
+Total current liabilities (including contract liabilities/deferred income)
+10,287
+44,999
+51,130
+53,638
+47,764
+Total non-current assets
+29,159
+27,538
+31,089
+43,395
+11,858
+13,515
+15,696
+€ millions, unless otherwise stated
+Additional
+Information
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+Stakeholders
+To Our
+SAP Integrated Report 2023
+SAP
+317/324
+30,822
+29,927
+41,523
+42,848
+43,406
+Total equity (including contract liabilities/deferred income)
+14,929
+Contract liabilities/Deferred income - current (IFRS)
+33,077
+1,229
+3.11
+107.22
+129.40
+96.39
+139.48
+SAP share price (in €)
+55
+41
+120.32
+53
+43
+Total dividend distributed (in % of profit after tax)
+1,864
+2,182
+2,865
+2,395
+2,568
+140
+SAP share price - peak (in €)
+148.18
+124.82
+44.7
+Return on SAP shares, 1-year investment period (in %)
+147.8
+131.7
+153.4
+118.5
+171.4
+Market capitalization5 (in € billions)
+84.31
+87.63
+101.78
+81.06
+97.42
+SAP share price - low (in €)
+124.72
+142.26
+128.98
+Total dividend distributed
+Earnings per share, basic (in €)
+1.58
+2.45
+2.78
+4.35
+5.45
+2.79
+3.08
+Earnings per share, diluted (in €)
+5.11
+Earnings per share, basic (in €) 4
+5.41
+4.03
+5.04
+Earnings per share, basic (non-IFRS, in €)
+2.78
+4.35
+5.45
+2.80
+6.65
+5.26
+1.95
+4.46
+2.05
+2.20
+Dividend per share (in €)
+2.78
+4.35
+4.46
+1.94
+5.20
+Earnings per share, diluted (in €)4
+5.11
+5.41
+6.73
+4.08
+7.05
+Earnings per share, basic (non-IFRS, in €)4
+2.78
+4.35
+1.85
+26.8
+29,088
+15,069
+30,057
+Segment margin (Segment profit in % of Segment revenue)
+Segment profit
+Segment gross margin (in % of corresponding revenue)
+0
+0
+0
+28,496
+0
+1,130
+-3
+157
+138
+215
+1,835
+1,084
+155
+26,170
+25,786
+26,167
+Net cash flows from operating activities from continuing operations
+Liquidity and Cash Flow
+35.9
+36.8
+35.6
+31.0
+32.6
+9,387
+9,479
+9,308
+8,824
+9,811
+72.7
+73.7
+74.9
+73.5
+73.5
+1,334
+6,210
+1,431
+689
+11,024
+13,745
+Current cloud backlog
+Current cloud backlog
+11
+17
+15
+8,674
+4
+Return on equity4 (profit after tax in percentage of average equity)
+26.2
+26.5
+20.7
+29.6
+29.3
+Effective tax rate (non-IFRS, in %)
+14
+7,155
+6,681
+Non-IFRS Adjustments
+577
+405
+330
+345
+81
+5
+0
+0
+0
+Segment revenue
+Applications, Technology & Support
+Segment Results
+Adjustment for regulatory compliance matters
+Adjustment for restructuring
+Adjustment for share-based payment expenses
+Adjustment for acquisition-related charges
+Revenue adjustments
+2,220
+15,213
+5,675
+7,194
+-7,755
+Financial debts
+(cash and cash equivalents/short-term investments/restricted cash)
+5,382
+6,781
+11,530
+9,694
+-11,764
+11,275
+67
+1,470
+2,632
+686
+3,151
+Short-term investments
+5,314
+Group liquidity
+Net liquidity (net debt)
+3,521
+-2,070
+20,044
+18,522
+20,571
+8,037
+6,730
+6,371
+6,236
+6,322
+Goodwill
+Total current assets
+Trade and other receivables
+Assets, Equity and Liabilities
+-8,286
+-6,503
+-13,668
+-13,283
+-13,094
+-1,563
+5,311
+6,182
+8,898
+8,124
+-800
+-877
+-785
+102
+-3,997
+-2,885
+-6,074
+-816
+-7,758
+-7,021
+-2,986
+-2,856
+699
+-4,603
+Net cash flows from investing activities from continuing operations
+3,496
+Net cash flows from financing activities from continuing operations
+Capital expenditure
+-817
+Free cash flow
+5,093
+Cash and cash equivalents
+104
+136
+115
+332
+104
+Cash conversion rate (net cash flows from operating activities in % of profit after tax)
+8
+22
+19
+15
+16
+Free cash flow in % of total revenue
+2,276
+6,000
+5,049
+4,388
+9,008
+Additional Information
+16.5
+Further Information about
+Sustainability
+6.0
+93.3
+95.3
+93.2
+92.8
+96.4
+59
+62
+67
+72
+9.0
+71
+80
+81
+81
+81
+83
+86
+83
+80
+80
+Employee retention (in %)
+80
+9.0
+7.0
+10.7
+0
+Net carbon emissions¹¹ per € revenue (in grams)
+3.0
+1.3
+1.0
+0.8
+0
+Net carbon emissions¹¹ per employees (in tons)
+300
+135
+110
+85
+0
+Net carbon emissions 11.12 (in kilotons)
+Environment
+-6
+4
+10
+7
+9
+Customer Net Promoter Score 10
+Customer
+Total turnover rate (in %)
+Leadership Trust Index (LTI, as NPS)
+2.8
+Business Health Culture Index (BHCI, in %)
+27.8
+55
+Operating profit per employee (in € thousands)
+131
+122
+121
+130
+139
+Personnel expenses per employee - excluding share-based payments (in € thousands)
+13,035
+12,336
+58
+12,152
+14,786
+Personnel expenses - excluding share-based payments
+14,870
+13,420
+13,487
+15,157
+17,006
+Personnel expenses
+27,634
+29,580
+13,726
+63
+65
+45
+29.0
+29.9
+30.9
+31.5
+-22.8
+22.5
+23.5
+24.1
+25.0
+24.5
+Women managing managers5,9 (in %)
+26.4
+27.5
+28.3
+29.3
+29.7
+Women in management 5,9 (total, in % of total number of employees)
+33.5
+33.6
+34.3
+34.9
+35.2
+Women working at SAP (in %)
+Employee Engagement Index (in %)
+3.9
+4.9
+10.9
+Results for the first quarter 2024
+July 22
+May 21
+May 15
+April 22
+2024
+Financial Calendar
+Addresses
+Financial Calendar and
+Additional
+Information
+Annual General Meeting of Shareholders, Mannheim, Germany
+Dividend payment
+Further Information about
+Sustainability
+Report
+Stakeholders
+Combined Management
+To Our
+SAP Integrated Report 2023
+SAP
+319/324
+13 In 2022, we changed the composition of included KPIs. We excluded electricity consumed by hyperscale services (inidrect energy of our value chain, Scope 3) due to the (still)
+very limited control over the energy / electricity procurement of our value chain partners. In addition, we moved electricity consumption of co-location data centers from Scope 3 to
+Scope 2 due to the underlying leasing model and SAP's operational control over the IT infrastructure.
+12 Rounded to 5 kilotons
+11 In CO2 equivalents
+Consolidated Financial
+Statements IFRS
+Results for the second quarter and half-year 2024
+October 21
+Results for the third quarter 2024
+320/324
+Web site www.sap.com/press
+E-mail press@sap.com
+Tel. +49 6227 74 63 15
+Press
+Web site www.sap.com/investor
+E-mail investor@sap.com
+Fax +49 6227 74 08 05
+Tel. +49 6227 76 73 36
+Investor Relations
+For more information about the matters discussed in the report, contact:
+site at www.sap.com/directory/main.html.
+The addresses of all our international subsidiaries and sales partners are available on our public Web
+Web site www.sap.com
+E-mail info@sap.com
+Fax +49 6227 75 75 75
+Tel. +49 6227 74 74 74
+Germany
+69190 Walldorf
+Dietmar-Hopp-Allee 16
+SAP SE
+Group Headquarters
+Addresses
+10 From 2022, we are using our updated methodology for calculating customer Net promoter score. Prior years have not been adjusted. Please see Performance Management
+Systems in the management report of this integrated report for further information..
+9 Relates to different levels of management position.
+8 Full-time equivalents
+Average annual return.
+845
+906
+805
+2019
+2020
+2021
+2022
+2023
+1 Based on SAP Group results, according to IFRS, unless otherwise stated.
+Data center electricity consumption (Scope 2) 13 per € revenue (in Wh)
+Renewable electricity sourced (Scope 2 and Scope 3) (in %)
+Total data center electricity consumption (Scope 2)13 (in GWh)
+Energy consumed (Scope 1 and Scope 2) 13 per employee¹4 (in kWh)
+Total energy consumption (Scope 1 and Scope 2) 13 (in GWh)
+€ millions, unless otherwise stated
+Additional
+Information
+Further Information about
+Sustainability
+Additional
+Information
+Combined Management
+Report
+Stakeholders
+To Our
+SAP Integrated Report 2023
+SAP
+318/324
+871
+33,377
+1,110
+8,140
+6 2023 numbers are based on the proposed dividend and on level of treasury stock at year end.
+5 Numbers at year end.
+4 From continuing and discontinued operations
+3 In 2023, SAP updated its cost allocation policy. R&D numbers for 2020 and 2019 have not been retrospectively adjusted. For more information, see the Notes to the Consolidated
+Financial Statements, Note (IN.1).
+2 Unless otherwise stated, 2023, 2022, and 2021 numbers reflect continuing operations as a result of the divestiture of Qualtrics.
+100
+100
+100
+100
+100
+12
+13
+12
+10
+7
+333
+353
+332
+306
+213
+11,180
+8,570
+8,050
+7,390
+35,280
+Consolidated Financial
+Statements IFRS
+Number of employees in research and development 5,8
+Topic
+Code
+Links
+Environmental Footprint of
+TC-SI-130a.1
+Energy and Emissions
+Hardware Infrastructure
+TC-SI-130a.2
+Waste and Water
+TC-SI-130a.3
+SAP maps existing sustainability disclosures to the standards of the Sustainability Accounting
+Standards Board (SASB). The table below presents a set of sustainable indicators based on the SASB
+standards for Software and IT Services (Version 2023-06).
+Energy and Emissions
+Waste and Water
+TC-SI-220a.1
+Data Security
+Recruiting & Managing a Global,
+TC-SI-330a.1
+Diverse and Skilled Workforce
+Comments
+Security, Data Protection, and Privacy
+Security, Data Protection, and Privacy
+Risk Management and Risks
+Employees
+Note (B.1) Employee Headcount
+Data Privacy & Freedom of
+Expression
+SASB Index
+Information
+Additional
+Training provided (#, $)
+Employees
+Prosperity
+In our Compensation Report, we disclose
+the vertical pay ratio. This ratio compares
+the total compensation granted to the
+CEO with that of all employees who were
+employed at year end.
+Training hours split by gender and
+employee category are not a material
+issue for SAP, as we align our training
+activities according to the needs of each
+employee and do not tolerate
+discrimination.
+Theme
+Core Metrics and Disclosures
+Links
+Comments
+Community and Social Vitality
+Total tax paid
+Analysis of Consolidated Statements of
+Cash Flow
+QAudit Scope
+The content of the Stakeholder Capitalism Metrics section was not subject to the independent limited
+assurance engagement of our external auditor.
+312/324
+SAP
+SAP Integrated Report 2023
+To Our
+Combined Management
+Stakeholders
+Report
+Consolidated Financial
+Statements IFRS
+Further Information
+about Sustainability
+For more information about data
+protection and privacy, see the
+SAP Trust Center.
+Skills for the Future
+SAP is a multinational company with
+locations all over the world. At each
+location, we hire people based on their
+qualifications and our business needs.
+For an overview of our headcount per
+geographical area, see Note (B.1).
+TC-SI-330a.3
+Actual and potential impacts of climate-related risks and opportunities on
+SAP's businesses, strategy, and financial planning where such information
+is material.
+Risk Management
+How does SAP identify, assess, and manage climate-related risks?
+Section
+Energy and Emissions
+Sustainability Management
+Energy and Emissions
+Sustainability Management
+Risk Management and Risks
+Strategy
+Energy and Emissions
+Metrics and Targets
+Metrics and targets that SAP uses to assess and manage relevant climate-
+related risks and opportunities where such information is material.
+Energy and Emissions
+Strategy
+Risk Management and Risks
+Non-Financial Notes:
+Environmental Performance
+Report Data Hub⁹0
+The content of the Task Force on Climate-Related Financial Disclosure (TCFD) section was not subject
+to the independent limited assurance engagement of our external auditor.
+90 Link leads to information that was neither part of the statutory audit nor the independent limited assurance engagement performed by our
+external auditor.
+314/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+36,444
+QAudit Scope
+SAP's governance of climate-related risks and opportunities.
+Governance
+Content
+Report Data Hub
+Employees
+Report Data Hub
+Employees
+As a global organization with employees
+from over 163 nationalities, our
+aspiration is that SAP's workforce mirrors
+the diversity in society that includes
+gender parity and demographics of all of
+the regions where we have employees.
+Managing Systemic Risks from
+Technology Disruptions
+TC-SI-550a.2
+Risk Management and Risks
+QAudit Scope
+The content of the SASB Index section was not subject to the independent limited assurance
+engagement of our external auditor.
+313/324
+SAP
+SAP Integrated Report 2023
+To Our
+Combined Management
+Stakeholders
+Report
+Consolidated Financial
+Statements IFRS
+Further Information
+Additional
+about Sustainability
+Information
+Task Force on Climate-
+Related Financial Disclosure
+(TCFD)
+The TCFD recommends companies to disclose their climate-related financial risks to investors, lenders,
+insurers, and other stakeholders. For more information, see the table below.
+Area
+TC-SI-330a.2
+Compensation Report
+TC-SI-230a.2
+Creating an inclusive workplace that
+benefits employees, customers, and
+partners is a strategic commitment for
+SAP. We have received numerous
+recognitions for our advances in creating
+an inclusive and more equal workplace,
+such as, best place to work as part of
+"Fortune 100 Best Companies to Work
+For 2022", Forbes' America's Best
+Employers For Women ranking, and many
+others.
+SAP
+SAP Integrated Report 2023
+To Our
+Combined Management
+Stakeholders
+Report
+Consolidated Financial
+Statements IFRS
+Further Information
+about Sustainability
+Stakeholder Capitalism
+Metrics
+Additional
+Information
+To support long-term value creation, SAP has committed to applying the World Economic Forum (WEF)
+Stakeholder Capitalism Metrics and encourages further global standardization and convergence in the
+ESG reporting landscape. We include the standards in our own reporting and also offer the framework
+in our core sustainability software solutions.
+The following table provides information about the core metrics proposed by the WEF White Paper
+titled "Measuring Stakeholder Capitalism: Towards Common Metrics and Consistent Reporting of
+Sustainable Value Creation."
+The table refers to the sections of our Combined Management Report, Notes, Form 20-F, and other
+sources that contain the respective disclosures. Core metrics that have not been identified as material
+for SAP during our latest materiality analysis have been omitted.
+Theme
+Governing Purpose
+Quality of Governing Body
+Principles of Governance
+Core Metrics and Disclosures
+Setting purpose
+Governance body composition
+Links
+Strategy
+-10.9
+Corporate Governance Statement
+Supervisory Board
+38.4
+9.9
+99,157
+101,476
+100,453
+105,582
+106,043
+Number of employees, annual average
+100,330
+102,430
+Wage level (%)
+106,312
+107,602
+Number of employees 5,8
+Employees and Personnel Expenses
+13.9
+11.0
+11.8
+4.7
+8.4
+Return on SAP shares', 10-year investment period (in %)
+15.6
+7.9
+8.6
+0.6
+Return on SAP shares, 5-year investment period (in %)
+Form 20-F Item 6
+102,658
+Stakeholder Engagement
+Climate Change
+Core Metrics and Disclosures
+Greenhouse gas (GHG) emissions
+TCFD implementation
+Links
+Energy and Emissions
+Report Data Hub
+Task Force on Climate-Related Financial
+Disclosure
+Energy and Emissions
+People
+Theme
+Core Metrics and Disclosures
+Links
+Dignity and Equality
+Diversity and inclusion (%)
+Employees
+Report Data Hub
+Pay equality (%)
+Comments
+SAP Named Among Best Companies to
+Work For in 2022
+SAP Among Forbes' America's Best
+Employers For Women 2022
+Comments
+No disclosure of other indicators of
+diversity due to legal requirements in
+Germany.
+Note (G.4)
+Theme
+Planet
+Additional
+Information
+Consolidated Financial
+Statements IFRS
+Material issues impacting stakeholders
+Further Information
+about Sustainability
+Ethical Behavior
+Anti-corruption
+Stakeholder Engagement
+Comments
+Business Conduct
+Note (G.3) Other Litigation, Claims, and
+Legal Contingencies
+SAP Partner Code of Conduct
+Provisions for material corruption cases
+would be reported together with further
+details in Note (G.3).
+Partners are also requested to complete
+any compliance training available based
+on their partner type. For more
+information, see SAP's Partner Code of
+Conduct.
+Materiality
+Protected ethics advice and reporting
+mechanisms
+Combined Management
+Report
+Risk and Opportunity Oversight
+Stakeholders
+SAP Integrated Report 2023
+SAP
+To Our
+311/324
+Risk Management and Risks
+Expected Developments and
+Opportunities
+Business Conduct
+Speak Out at SAP
+Integrating risk and opportunity into
+business process
+Agreement on the Involvement of Employees in SAP SE
+Declaration of Implementation pursuant to the German Stock Corporation Act, Section 161
+Global Code of Ethics and Business Conduct for Employees
+Corporate Governance Statement pursuant to the German Commercial Code, Sections 315d and
+289f
+Rules of Procedure for the SAP SE Supervisory Board
+Rules of Procedure for the SAP SE Executive Board
+German Code of Corporate Governance
+Profile of Skills and Expertise for the SAP SE Supervisory Board
+SAP
+Additional SAP policies are made public at http://www.sap.com/sustainability:
+321/324
+SAP Integrated Report 2023
+To Our
+Combined Management
+Stakeholders
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Overview of the participation of Supervisory Board members in meetings of the Supervisory Board
+and its committees
+Details of managers' (the Executive and Supervisory Board members') transactions in SAP securities
+Documents relating to SAP SE's Annual General Meetings of Shareholder, including voting results
+SAP SE's Articles of Incorporation
+SAP Quarterly Statements
+-
+SAP Integrated Report 2023
+Additional
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+Financial and Sustainability
+Publications
+We present our financial, social, and environmental performance in the SAP Integrated Report 2023,
+which is available at www.sapintegratedreport.com. This SAP Integrated Report 2023 comprises all of
+the information required by accounting and disclosure standards applicable to us.
+The following publications are available in English at www.sap.com/investor, or in German at
+www.sap.de/investor:
+-
+Annual Report on Form 20-F (IFRS, available in English only)
+SAP Integrated Report (PDF)
+SAP SE Statutory Financial Statements and Review of Operations (HGB, available in German only)
+Half-Year Reports
+SAP Compensation Report
+SAP INVESTOR, SAP's shareholder magazine
+Complete information on the governance of SAP SE is available at www.sap.com/corpgovernance.
+Materials include:
+Information about the management of SAP SE, including the current members of the Executive
+Board and the Supervisory Board, their CVs and memberships in boards of other companies
+Information about the Supervisory Boards' committees, including their tasks and current
+composition
+Information
+Concept and Realization
+SAP Global Health and Safety Management Policy
+SAP Integrated Report project team
+with the support of SAP solutions
+Printing
+SAP has decided to publish the SAP Integrated Report solely as an electronic document. A hard copy
+of the audited consolidated financial statements can also be requested free of charge by sending an
+email to investor@sap.com or via phone +49 6227 7-67336.
+Copyright
+SAP SE
+Dietmar-Hopp-Allee 16
+69190 Walldorf
+Germany
+© 2024 SAP SE or an SAP affiliate company. All rights reserved. No part of this publication may be
+reproduced or transmitted in any form or for any purpose without the express permission of SAP SE or
+an SAP affiliate company.
+SAP and other SAP products and services mentioned herein as well as their respective logos are
+trademarks or registered trademarks of SAP SE (or an SAP affiliate company) in Germany and other
+countries. All other product and service names mentioned are the trademarks of their respective
+companies. Please see www.sap.com/about/legal/copyright.html for additional trademark information
+and notices.
+323/324
+Group Headquarters
+SAP SE
+Dietmar-Hopp-Allee 16
+69190 Walldorf
+Germany
+E
+www.sap.com
+SAP
+Investor Relations
+SAP Human Rights Commitment Statement
+SAP SE
+Publication Details
+-
+SAP Environmental Policy
+-
+SAP Global Anti-Discrimination Statement
+SAP's Guiding Principles for Artificial Intelligence and SAP Global Artificial Intelligence Ethics Policy
+SAP Supplier Code of Conduct
+SAP Partner Code of Conduct
+SAP's Global Tax Principles
+Further, the SAP Glossary is available at www.sap.com/glossary
+322/324
+SAP
+SAP Integrated Report 2023
+To Our
+Combined Management
+Stakeholders
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about Additional
+Sustainability
+Information
+Publisher
+SAP
+www.sap.com/investor
+32/324
+Our responsibility is to express an opinion on SAP SE's internal control over financial reporting based
+on our audit. We are a public accounting firm registered with the PCAOB and are required to be
+independent with respect to the Company in accordance with U.S. federal securities laws and the
+applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
+We conducted our audit of internal control over financial reporting in accordance with the standards of
+the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
+assurance about whether effective internal control over financial reporting was maintained in all
+material respects. Our audit included obtaining an understanding of internal control over financial
+reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and
+operating effectiveness of internal control based on the assessed risk. Our audit also included
+performing such other procedures as we considered necessary in the circumstances.
+Auditor's Responsibility for the Internal Control over Financial Reporting in
+the Consolidated Financial Statements
+The Supervisory Board is responsible for overseeing SAP SE's internal control over financial reporting
+in the consolidated financial statements.
+A company's internal control over financial reporting is a process designed to provide reasonable
+assurance regarding the reliability of financial reporting and the preparation of financial statements for
+external purposes in accordance with generally accepted accounting principles. A company's internal
+control over financial reporting includes those policies and procedures that (1) pertain to the
+maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
+dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
+recorded as necessary to permit preparation of financial statements in accordance with generally
+accepted accounting principles, and that receipts and expenditures of the company are being made
+only in accordance with authorizations of management and directors of the company; and (3) provide
+reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
+disposition of the company's assets that could have a material effect on the financial statements.
+Because of its inherent limitations, internal control over financial reporting may not prevent or detect
+misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the
+risk that controls may become inadequate because of changes in conditions, or that the degree of
+compliance with the policies or procedures may deteriorate.
+Executive Board's and Supervisory Board's Responsibility for the Internal
+Control over Financial Reporting in the Consolidated Financial Statements
+The Executive Board is responsible for maintaining effective internal control over financial reporting
+and for its assessment of the effectiveness of internal control over financial reporting, included in
+Management's Annual Report on Internal Control over Financial Reporting in the Consolidated
+Financial Statements.
+We have audited SAP SE's internal control over financial reporting as of December 31, 2023, based on
+criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of
+Sponsoring Organizations of the Treadway Commission (the "COSO criteria"). In our opinion, SAP SE
+maintained, in all material respects, effective internal control over financial reporting as of
+December 31, 2023, based on the COSO criteria.
+Opinion on Internal Control over Financial Reporting in the Consolidated
+Financial Statements
+REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING IN THE
+CONSOLIDATED FINANCIAL STATEMENTS PURSUANT TO PCAOB
+OTHER LEGAL AND REGULATORY REQUIREMENTS
+Information
+Additional
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+To Our
+Stakeholders
+SAP Integrated Report 2023
+SAP
+Additional
+assurance engagement on the combined non-financial statement according to §§ 315c HGB in
+conjunction with §§ 289c to 289e HGB,
+-
+appropriate to provide a basis for our audit opinions. The risk of not detecting a material
+misstatement resulting from fraud is higher than the risk of not detecting a material misstatement
+resulting from error, as fraud may involve collusion, forgery, intentional omissions,
+misrepresentations, or the override of internal controls.
+obtain an understanding of internal control relevant to the audit of the consolidated financial
+statements and of arrangements and measures (systems) relevant to the audit of the combined
+group management report in order to design audit procedures that are appropriate in the
+circumstances.
+evaluate the appropriateness of accounting policies used by the Executive Board and the
+reasonableness of estimates made by the Executive Board and related disclosures.
+We believe that our audit provides a reasonable basis for our opinion.
+conclude on the appropriateness of the Executive Boards' use of the going concern basis of
+accounting and, based on the audit evidence obtained, whether a material uncertainty exists
+related to events or conditions that may cast significant doubt on the group's ability to continue as a
+going concern. If we conclude that a material uncertainty exists, we are required to draw attention in
+the auditor's report to the related disclosures in the consolidated financial statements and in the
+combined group management report or, if such disclosures are inadequate, to modify our
+respective audit opinions. Our conclusions are based on the audit evidence obtained up to the
+date of our auditor's report. However, future events or conditions may cause the group to cease to
+be able to continue as a going concern.
+obtain sufficient appropriate audit evidence regarding the financial information of the entities or
+business activities within the group to express audit opinions on the consolidated financial
+statements and on the combined group management report. We are responsible for the direction,
+supervision and performance of the group audit. We remain solely responsible for our audit
+opinions.
+evaluate the consistency of the combined group management report with the consolidated
+financial statements, its conformity with German law, and the view of the group's position it provides.
+- perform audit procedures on the prospective information presented by the Executive Board in the
+combined group management report. On the basis of sufficient appropriate audit evidence we
+evaluate, in particular, the significant assumptions used by the Executive Board as a basis for the
+prospective information, and evaluate the proper derivation of the prospective information from
+these assumptions. We do not express a separate opinion on the prospective information and on
+the assumptions used as a basis. There is a substantial unavoidable risk that future events will differ
+materially from the prospective information.
+We communicate with those charged with governance regarding, among other matters, the planned
+scope and timing of the audit and significant audit findings, including any significant deficiencies in
+internal control that we identify during our audit.
+We also provide those charged with governance with a statement that we have complied with the
+relevant independence requirements and communicate with them all relationships and other matters
+that may reasonably be thought to bear on our independence, and, where applicable, the actions
+taken or safeguards applied to eliminate independence threats.
+From the matters communicated with those charged with governance, we determine those matters
+that were of most significance in the audit of the consolidated financial statements of the current
+period and are therefore the key audit matters. We describe these matters in our auditor's report
+unless law or regulation precludes public disclosure about the matter.
+34/324
+evaluate the overall presentation, structure and content of the consolidated financial statements,
+including the disclosures, and whether the consolidated financial statements present the underlying
+transactions and events in a manner that the consolidated financial statements give a true and fair
+view of the assets, liabilities, financial position and financial performance of the group in compliance
+with IFRSS as adopted by the EU as well as with IFRSS as issued by the International Accounting
+Standards Board and the additional requirements of German commercial law pursuant to
+§ 315e (1) HGB.
+Further Information about
+Sustainability
+35/324
+SAP Integrated Report 2023
+assurance engagement on selected qualitative and quantitative sustainability disclosures of the
+Integrated Report 2023,
+In addition to the financial statement audit of SAP SE, we have performed various financial statement
+audits at subsidiaries and have provided to group entities the following services that are not disclosed
+in the consolidated financial statements or in the combined group management report for the audited
+entity or its controlled entities:
+We declare that the audit opinions expressed in this auditor's report are consistent with the additional
+report to the audit committee pursuant to Article 11 of the EU Audit Regulation (long-form audit
+report).
+We were elected as group auditor by the annual general meeting on May 18, 2022. We were engaged
+by the chairperson of the Audit and Compliance Committee on November 30, 2023. We have been the
+group auditor of SAP SE without interruption since the financial year 2023.
+FURTHER INFORMATION PURSUANT TO ARTICLE 10 OF THE EU AUDIT
+REGULATION
+obtain an understanding of internal control relevant to the assurance on the ESEF documents in
+order to design assurance procedures that are appropriate in the circumstances, but not for the
+purpose of expressing an assurance opinion on the effectiveness of these controls.
+evaluate the technical validity of the ESEF documents, i.e. whether the file containing the ESEF
+documents meets the requirements of the Delegated Regulation (EU) 2019/815, in the version in
+force at the date of the financial statements, on the technical specification for this electronic file.
+evaluate whether the ESEF documents provide an XHTML rendering with content equivalent to the
+audited consolidated financial statements and to the audited combined group management report.
+evaluate whether the tagging of the ESEF documents with Inline XBRL technology (iXBRL) in
+accordance with the requirements of Articles 4 and 6 of the Delegated Regulation (EU) 2019/815, in
+the version in force at the date of the financial statements, enables an appropriate and complete
+machine-readable XBRL copy of the XHTML rendering.
+identify and assess the risks of material intentional or unintentional non-compliance with the
+requirements of § 328 (1) HGB, design and perform assurance procedures responsive to those risks,
+and obtain assurance evidence that is sufficient and appropriate to provide a basis for our
+assurance opinion.
+Information
+Additional
+Further Information about
+Sustainability
+Combined Management
+Report
+To Our
+Stakeholders
+SAP Integrated Report 2023
+SAP
+36/324
+Our objective is to obtain reasonable assurance about whether the ESEF documents are free from
+material intentional or unintentional non-compliance with the requirements of § 328 (1) HGB. We
+exercise professional judgment and maintain professional skepticism throughout the assurance work.
+We also
+Auditor's Responsibilities for the Assurance Work on the ESEF documents
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about Additional
+Sustainability
+Information
+REPORT ON THE ASSURANCE ON THE ELECTRONIC RENDERING OF THE
+CONSOLIDATED FINANCIAL STATEMENTS AND THE COMBINED GROUP
+MANAGEMENT REPORT, PREPARED FOR PUBLICATION PURPOSES IN
+ACCORDANCE WITH § 317 (3A) HGB
+Assurance Opinion
+SAP
+We have performed assurance work in accordance with § 317 (3a) HGB to obtain reasonable
+assurance as to whether the rendering of the consolidated financial statements and the combined
+group management report (hereinafter the "ESEF documents") contained in the electronic file "sap-
+2023-12-31-DE.zip" and prepared for publication purposes complies in all material respects with the
+requirements of § 328 (1) HGB for the electronic reporting format ("ESEF format”). In accordance with
+German legal requirements, this assurance work extends only to the conversion of the information
+contained in the consolidated financial statements and the combined group management report into
+the ESEF format and therefore relates neither to the information contained within these renderings nor
+to any other information contained in the file identified above.
+Basis for the Assurance Opinion
+We conducted our assurance work on the rendering of the consolidated financial statements and the
+combined group management report contained in the file identified above in accordance with
+§ 317 (3a) HGB and the IDW Assurance Standard: Assurance Work on the Electronic Rendering of
+Financial Statements and Management Reports, Prepared for Publication Purposes in Accordance with
+§ 317 (3a) HGB (IDW ASS 410 (06.2022). Our responsibility in accordance therewith is further described
+in the "Auditor's Responsibilities for the Assurance Work on the ESEF Documents" section. Our audit
+firm has applied the requirements of the IDW Quality Management Standards, which implement the
+IAASB's International Standards on Quality Management.
+Responsibilities of the Executive Board and the Supervisory Board for the ESEF Documents
+The Executive Board of the company is responsible for the preparation of the ESEF documents with
+the electronic renderings of the consolidated financial statements and the combined group
+management report in accordance with § 328 (1) sentence 4 No. 1 HGB and for the tagging of the
+consolidated financial statements in accordance with § 328 (1) sentence 4 No. 2 HGB.
+In addition, the Executive Board of the company is responsible for such internal controls that they have
+considered necessary to enable the preparation of ESEF documents that are free from material
+intentional or unintentional non-compliance with the requirements of § 328 (1) HGB for the electronic
+reporting format.
+The Supervisory Board is responsible for overseeing the process for preparing the ESEF documents as
+part of the financial reporting process.
+In our opinion, the rendering of the consolidated financial statements and the combined group
+management report contained in the electronic file identified above and prepared for publication
+purposes complies in all material respects with the requirements of § 328 (1) HGB for the electronic
+reporting format. Beyond this assurance opinion and our audit opinion on the accompanying
+consolidated financial statements and the accompanying combined group management report for the
+financial year from January 1, 2023 to December 31, 2023, contained in the "Report on the audit of the
+consolidated financial statements and of the combined group management report” above, we do not
+express any assurance opinion on the information contained within these renderings or on the other
+information contained in the file identified above.
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+To Our
+Stakeholders
+Based on the audit procedures we performed, we have found management's judgements related to
+the estimation of uncertain tax positions, specifically from transfer pricing and intercompany
+transactions for the use of intellectual property, acceptable.
+MEASUREMENT OF UNLISTED EQUITY SECURITIES
+Matter
+The Group holds unlisted equity securities held at fair value of EUR 4,811 million as of
+December 31, 2023, primarily relating to Sapphire Ventures investments. These investments in unlisted
+equity securities are classified as financial instruments at fair
+31/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+value through profit and loss requiring a recurring fair value measurement using significant
+unobservable inputs. The measurement of the fair value of certain investments is complex and, with
+regard to the assumptions made, highly dependent on management's estimates and judgments. This
+applies particularly to the significant measurement uncertainty associated with the fair value of such
+investments relating to significant unobservable inputs used, such as the selection of appropriate
+comparable company data, in deriving revenue multiples as well as forecasted performance of the
+investees.
+The respective disclosures regarding the fair value measurement of unlisted equity securities of the
+Group are contained in sections "D.6 Equity Investments" and "F.2 Fair Value Disclosures on Financial
+Instruments" of the notes to the consolidated financial statements.
+Auditor's Response and Observations
+We involved internal experts with specialized skills and knowledge in valuation to assist in assessing
+and evaluating the appropriateness of the valuation technique used for a selection of certain
+investments in unlisted equity securities relating to Sapphire Ventures investments. We tested the
+appropriateness of the valuation technique selected by comparing it to our expectation based on
+industry experience and knowledge of the investment. We assessed the source, reliability and
+relevance of evidence used in determining significant unobservable inputs and we evaluated the
+significant unobservable inputs considered in the recurring measurement of fair value by comparing
+them to historical and market information. In addition, we developed an independent range of
+acceptable fair value estimates utilizing available market information from third party sources to assess
+whether managements estimates are reasonable.
+In addition, we were engaged to perform an independent assurance engagement on selected
+qualitative and quantitative sustainability disclosures, which is also other information of the integrated
+report 2023. In regard to the nature, extent and conclusions of this independent assurance
+engagement for specific other information we refer to our independent assurance report dated
+February 21, 2024.
+If, based on the work we have performed, we conclude that there is a material misstatement of this
+other information, we are required to report that fact. We have nothing to report in this regard.
+otherwise appears to be materially misstated.
+is materially inconsistent with the consolidated financial statements, with the combined group
+management report, or our knowledge obtained in the audit or
+In connection with our audit, our responsibility is to read the other information and thereby
+acknowledge whether the other information
+Our audit opinions on the consolidated financial statements and on the combined group management
+report do not cover the other information, and consequently we do not express an opinion or any
+other form of assurance conclusion thereon.
+We involved internal experts with specialized skills and knowledge in taxation to evaluate the
+appropriateness of management's methods and key assumptions used to estimate certain uncertain
+tax positions. We verified our understanding of the relevant facts by evaluating certain of the Group's
+transfer pricing documentation and we assessed whether the Group's processes and guidelines in
+connection with certain intercompany transactions support an arm's length position. For certain group
+business activities, we evaluated the reasonableness and consistency of management's judgments
+(including application of tax regulations and interpretations), key assumptions and processes. We
+assessed the overall reasonableness of conclusions reached regarding the identification, recognition,
+measurement and disclosure of certain uncertain tax positions from transfer pricing and intercompany
+transactions for the use of intellectual property.
+the annual report on Form 20-F and the other parts of the annual report, except for the audited
+financial statements and combined management report as well as our auditor's report.
+the separately published corporate governance statement, to which reference is made in section
+"Corporate Governance Fundamentals" of the combined group management report,
+the combined non-financial statement provided in section "Non-Financial Statement Including
+Information on Sustainable Activities" of the combined group management report,
+-
+The Executive Board and the Supervisory Board are responsible for the other information. The other
+information comprises:
+OTHER INFORMATION
+Based on the audit procedures we performed, we have found management's judgements related to
+the fair value measurement of unlisted equity securities acceptable.
+the information extraneous to the combined group management report and marked as unaudited,
+and
+Auditor's Response and Observations
+The respective disclosures regarding uncertain tax positions of the Group are contained in section “C.5
+Income Taxes" of the notes to the consolidated financial statements.
+change, and implement tax laws with complexities and uncertainties due to different
+interpretations of these tax laws, especially relating to transfer pricing and intercompany transactions
+for the use of intellectual property. The identification, recognition, measurement and disclosure of
+certain income tax risks specifically from transfer pricing and intercompany transactions for the use of
+intellectual property requires significant management judgement in determining key assumptions to be
+applied to the interpretation of tax laws, related regulations, case laws and mutual agreement
+procedures across multiple jurisdictions. Significant management judgement is also required to
+determine whether a transfer pricing tax position is more-likely-than-not to be sustained and to assess
+whether intercompany transactions are based on the arm's length principle. These management
+judgements demand a high degree of expertise, for which the Group regularly engages external
+experts to provide tax opinions to support their own risk assessment.
+Further Information about
+Sustainability
+Additional
+Information
+RESPONSIBILITIES OF THE EXECUTIVE BOARD AND THE SUPERVISORY BOARD
+FOR THE CONSOLIDATED FINANCIAL STATEMENTS AND THE COMBINED GROUP
+MANAGEMENT REPORT
+The Executive Board is responsible for the preparation of the consolidated financial statements that
+comply, in all material respects, with IFRSS as adopted by the EU and the additional requirements of
+German commercial law pursuant to § 315e (1) HGB as well as the IFRSS as issued by the International
+Accounting Standards Board and that the consolidated financial statements, in compliance with these
+requirements, give a true and fair view of the assets, liabilities, financial position and financial
+performance of the group. In addition, the Executive Board is responsible for such internal control as
+the Executive Board has determined necessary to enable the preparation of consolidated financial
+statements that are free from material misstatement, whether due to fraud (i.e. fraudulent financial
+reporting and misappropriation of assets) or error.
+In preparing the consolidated financial statements, the Executive Board is responsible for assessing
+the group's ability to continue as a going concern. The Executive Board also has the responsibility for
+disclosing, as applicable, matters related to going concern. In addition, the Executive Board is
+responsible for financial reporting based on the going concern basis of accounting unless there is an
+intention to liquidate the group or to cease operations, or there is no realistic alternative but to do so.
+Furthermore, the Executive Board is responsible for the preparation of the combined group
+management report that, as a whole, provides an appropriate view of the group's position and is, in all
+material respects, consistent with the consolidated financial statements, complies with German legal
+requirements, and appropriately presents the opportunities and risks of future development. In
+addition, the Executive Board is responsible for such arrangements and measures (systems) as the
+Executive Board has considered necessary to enable the preparation of a combined group
+management report that is in accordance with the applicable German legal requirements, the German
+Accounting Standard number 20 (GAS 20) and the IFRS Practice Statement Management Commentary
+and to be able to provide sufficient appropriate evidence for the assertions in the combined group
+management report.
+Consolidated Financial
+Statements IFRS
+The Supervisory Board is responsible for overseeing the group's financial reporting process for the
+preparation of the consolidated financial statements and of the combined group management report.
+Our objectives are to obtain reasonable assurance about whether the consolidated financial
+statements as a whole are free from material misstatement, whether due to fraud or error, and whether
+the combined group management report as a whole provides an appropriate view of the group's
+position and, in all material respects, is consistent with the consolidated financial statements and the
+knowledge obtained in the audit, complies with the German legal requirements and appropriately
+presents the opportunities and risks of future development, as well as to issue an auditor's report that
+includes our opinions on the consolidated financial statements and on the combined group
+management report.
+Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
+accordance with § 317 HGB and the EU Audit Regulation and in compliance with German Generally
+Accepted Standards for Financial Statement Audits promulgated by the Institut der Wirtschaftsprüfer
+(IDW) and supplementary compliance with the ISAs and standards of the PCAOB will always detect a
+material misstatement. Misstatements can arise from fraud or error and are considered material if,
+individually or in the aggregate, they could reasonably be expected to influence the economic
+decisions of users taken on the basis of these consolidated financial statements and this combined
+group management report.
+We exercise professional judgment and maintain professional skepticism throughout the audit. We also
+identify and assess the risks of material misstatement of the consolidated financial statements and
+of the combined group management report, whether due to fraud or error, design and perform
+audit procedures responsive to those risks, and obtain audit evidence that is sufficient and
+33/324
+SAP
+SAP Integrated Report 2023
+AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED
+FINANCIAL STATEMENTS AND OF THE COMBINED GROUP MANAGEMENT
+REPORT
+SAP
+Combined Management
+Report
+To Our
+The Group disclosed contingent liabilities relating to tax uncertainties of EUR 1,815 million. The Group
+operates in multiple tax jurisdictions which continually revise,
+Matter
+ASSESSMENT OF THE GROUP'S UNCERTAIN TAX TREATMENTS
+Based on the audit procedures we performed, we have found management's judgements used for
+revenue recognition of cloud contracts, particularly in the area of assessing whether certain contracts
+are economically linked and need to be combined, identifying separate performance obligations,
+allocating the transaction price to the performance obligation, and assessing the point in time at which
+the provision of services commenced, acceptable.
+performance obligations in certain contracts, and the point in time at which the provisioning of service
+commenced. We tested a sample of underlying contractual agreements and other related documents
+to evaluate the Group's assessment of whether certain agreements were economically linked, the
+identified performance obligations, the allocation of the transaction price and the point in time at
+which the provision of service for the performance obligations identified commenced. We tested key
+contractual terms and conditions from the respective contracts to evaluate the identified performance
+obligations and the point in time at which the provision of service for the identified performance
+obligations commenced.
+Information
+Stakeholders
+Additional
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+To Our
+Stakeholders
+SAP Integrated Report 2023
+SAP
+SAP Integrated Report 2023
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+service organization attestation procedures,
+Information
+Information
+Additional
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+Stakeholders
+that includes documented policies and procedures with regard to compliance with professional
+ethical requirements, professional standards as well as relevant statutory and other legal
+requirements.
+To Our
+SAP
+39/324
+Our audit firm applies the national legal requirements and professional pronouncements - in particular
+the By-laws Regulating the Rights and Duties of Wirtschaftsprüfer and vereidigte Buchprüfer in the
+exercise of their Profession and the Standards on Quality Management issued by the Institute of Public
+Auditors in Germany (IDW), and accordingly maintains a comprehensive quality management system
+We have complied with the German professional requirements on independence as well as other
+professional conduct requirements.
+Independence and Quality Assurance of the Assurance
+Practitioner's Firm
+The EU Taxonomy Regulation and the Delegated Acts issued thereunder contain wording and terms
+that are still subject to considerable interpretation uncertainties and for which clarifications have not
+yet been published in every case. Therefore, the executive directors have disclosed their interpretation
+of the EU Taxonomy Regulation and the Delegated Acts adopted thereunder in section "Sustainable
+Finance: EU Taxonomy Disclosures" of the combined non-financial statement. They are responsible for
+the defensibility of this interpretation. Due to the immanent risk that indeterminate legal terms may be
+interpreted differently, the legal conformity of the interpretation is subject to uncertainties.
+SAP Integrated Report 2023
+This responsibility of the executive directors includes the selection and application of appropriate
+non-financial reporting methods and making assumptions and estimates about individual non-financial
+disclosures of the group that are reasonable in the circumstances. Furthermore, the executive directors
+are responsible for such internal control as the executive directors consider necessary to enable the
+preparation of a combined non-financial statement that is free from material misstatement, whether
+due to fraud or error.
+Responsibility of the Assurance Practitioner
+We conducted our assurance engagement in accordance with International Standard on Assurance
+Engagements (ISAE) 3000 (Revised): "Assurance Engagements other than Audits or Reviews of
+Historical Financial Information" issued by the IAASB. This standard requires that we plan and perform
+the assurance engagement to obtain limited assurance about whether any matters have come to our
+attention that cause us to believe that the combined non-financial financial statement for the period of
+January 1 to December 31, 2023, is not prepared, in all material respects, in accordance with §§ 315c
+in conjunction with 289c to 289e HGB and the EU Taxonomy Regulation and the Delegated Acts issued
+thereunder as well as the interpretation by the executive directors disclosed in section "Sustainable
+Finance: EU Taxonomy Disclosures" of the combined non-financial statement.
+40/324
+Assessment of the overall presentation of the disclosures
+Evaluation of the data collection, validation and reporting processes as well as the reliability of
+reported data for taxonomy-aligned economic activities in connection with the assessment of the
+technical screening criteria and the documentation of the minimum safeguards
+Assessing the design and implementation of systems and procedures for identifying, processing
+and monitoring information on turnover, capital expenditures and operating expenditures for the
+taxonomy-relevant economic activities
+Inquiries of the management and relevant employees of SAP to obtain an understanding of the
+approach to identify relevant economic activities in accordance with EU taxonomy
+Reconciliation of selected data used in the calculation of the selected sustainability information
+with internal and external documents
+Our responsibility is to express a conclusion with limited assurance on the combined non-financial
+statement based on our assurance engagement.
+Analytical procedures on selected quantitative data
+Inquiries of personnel responsible for determining the disclosures relating to concepts, due
+diligence processes, results and risks, performing internal control procedures and consolidating the
+disclosures
+Assessing the design and implementation of systems and processes for identifying, handling and
+monitoring information on environmental, employee and social matters, respect for human rights
+and combatting corruption and bribery, including the consolidation of data
+Inquiries of the management and relevant employees responsible for the materiality analysis in
+order to gain an understanding of the procedure for identifying material topics and corresponding
+reporting boundaries of SAP
+-
+In the course of our assurance engagement we have, among other things, performed the following
+assurance procedures and other activities:Gain an understanding of the structure of the sustainability
+organization and stakeholder engagement
+In a limited assurance engagement, the procedures performed are less extensive than in a reasonable
+assurance engagement, and accordingly, a substantially lower level of assurance is obtained. The
+selection of the assurance procedures is subject to the professional judgment of the assurance
+practitioner.
+Identification of areas in the combined non-financial statement where material misstatements are
+likely to arise
+The executive directors of the Group are responsible for the preparation of the combined non-financial
+statement in accordance with §§ 315c in conjunction with 289c to 289e HGB ["Handelsgesetzbuch":
+German Commercial Code] and Article 8 of REGULATION (EU) 2020/852 OF THE EUROPEAN
+PARLIAMENT AND OF THE COUNCIL of 18 June 2020 on establishing a framework to facilitate
+sustainable investment and amending Regulation (EU) 2019/2088 (hereinafter the "EU Taxonomy
+Regulation") and the Delegated Acts adopted thereunder, as well as for making their own
+interpretation of the wording and terms contained in the EU Taxonomy Regulation and the Delegated
+Acts adopted thereunder, as set out in section "Sustainable Finance: EU Taxonomy Disclosures" of the
+combined non-financial statement.
+Evaluation of local data collection and reporting processes and reliability of reported data via a
+sampling survey at Walldorf and (remote) Bangalore (India)
+We have performed a limited assurance engagement on the combined non-financial statement
+published in the Combined Group Management Report (hereinafter referred to as the "combined non-
+financial statement") published by SAP SE, Walldorf, (hereinafter referred to as "SAP" or the "Group")
+for the period from January 1 to December 31, 2023.
+The German Public Auditor responsible for the engagement is Dr. Jens Freiberg.
+German Public Auditor Responsible for the Engagement
+Additional
+Information
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+Frankfurt am Main, February 21, 2024
+To Our
+Stakeholders
+SAP
+37/324
+―
+OTHER MATTER - USE OF THE AUDITOR'S REPORT
+audit of the compensation report including related disclosures of SAP SE pursuant to the
+requirements of section 162 of the German Stock Corporation Act [AktG].
+Responsibility of the Executive Directors
+SAP Integrated Report 2023
+BDO AG
+Our auditor's report must always be read together with the audited consolidated financial statements
+and the audited combined group management report as well as the assured ESEF documents. The
+consolidated financial statements and the combined group management report converted to the ESEF
+format including the versions to be published in the German Federal Gazette- ― are merely
+electronic renderings of the audited consolidated financial statements and the audited combined
+group management report and do not take their place. In particular, the ESEF report and our assurance
+opinion contained therein are to be used solely together with the assured ESEF documents provided
+in electronic form.
+Dr. Jens Freiberg
+Wirtschaftsprüfer
+Wirtschaftsprüfungsgesellschaft
+Independent Auditor's Report
+on a Limited Assurance
+Engagement of the Combined
+Non-Financial Statement
+Information
+To the Supervisory Board of SAP SE, Walldorf
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+Additional
+To Our
+SAP Integrated Report 2023
+SAP
+38/324
+German Public Auditor
+Klaus Eckmann
+Wirtschaftsprüfer
+Stakeholders
+German Public Auditor
+Auditing the 2023 data using internal and external documentation in order to determine in detail
+whether the data corresponds to the information in the relevant underlying sources, and whether all
+the relevant information contained in such underlying sources has been included in the Report
+Evaluation of local information management systems and reliability of reported data via a sampling
+survey at Walldorf and (remote) Bangalore (India)
+Assurance Opinion
+In our opinion the above-mentioned selected quantitative sustainability indicators in the Report,
+including the explanatory notes supplementing these indicators, of SAP SE, Walldorf for the business
+year from January 1 to December 31, 2023 are presented, in all material respects, in accordance with
+the Reporting Criteria.
+Based on the assurance procedures performed and the evidence obtained for the limited assurance,
+nothing has come to our attention that causes us to believe that the above-mentioned selected
+qualitative and quantitative sustainability disclosures in the Report of SAP SE, Walldorf for the period
+from January 1 to December 31, 2023 are not prepared, in all material respects, in accordance with the
+Reporting Criteria.
+Restriction of Use
+General Engagement Terms
+engagement. Consequently, it may not be suitable for any other purpose than the aforementioned.
+Accordingly, the report is not intended to be used by third parties for making (financial) decisions
+based on it. Our responsibility is to the Group alone. We do not accept any responsibility to third
+parties. Our assurance opinion is not modified in this respect.
+This engagement is based on the "Special Engagement Terms and Conditions of BDO AG
+Wirtschaftsprüfungsgesellschaft" of March 1, 2021, agreed with the Group as well as the "General
+Engagement Terms and Conditions for Auditors and Auditing Firms" of January 1, 2017, issued by the
+IDW (www.bdo.de/auftragsbedingungen).
+February 21, 2024
+BDO AG Wirtschaftsprüfungsgesellschaft
+Dr. Jens Freiberg
+We draw attention to the fact that the assurance engagement was conducted for the Group's purposes
+and that the report is intended solely to inform the Group about the result of the assurance
+Evaluation of the design, implementation and operating effectiveness of the systems and methods
+used to collect and process the data reported for the selected information, including the
+aggregation of the data into the indicators as presented in the Report
+SAP Integrated Report 2023
+Additional
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+To Our
+Stakeholders
+SAP
+43/324
+In addition, we conducted the following procedures to obtain reasonable assurance:
+Recalculation for mathematical accuracy of selected quantitative sustainability information
+Assessment of the overall presentation of the selected sustainability information
+Reconciliation of selected data used in the calculation of the selected sustainability information
+with internal and external documents
+Wirtschaftsprüfer
+Evaluation of local data collection and reporting processes and reliability of reported data via a
+sampling survey at Walldorf and (remote) Bangalore (India)
+Information
+(German Public Auditor)
+57
+44/324
+- Analytical procedures on selected quantitative sustainability information
+116
+110
+103
+99
+Business Conduct
+Corporate Governance Fundamentals
+Energy and Emissions
+Employees
+Security, Cloud Compliance, Data Protection and Privacy
+Non-Financial Statement Including Information on Sustainable Activities 90
+6624
+48
+46
+Financial Performance: Review and Analysis
+Performance Management System
+Strategy and Business Model
+General Information About This Combined Management Report
+Combined Management
+Report
+Additional
+Information
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+Stakeholders
+To Our
+SAP Integrated Report 2023
+SAP
+Carmen Auer
+Identification of areas in the selected sustainability information where material misstatements are
+likely to arise
+SAP Integrated Report 2023
+Inquiries of the executive directors and relevant employees involved in the determination of the
+sustainability information about the preparation process and about the internal control system
+related to this process
+Combined Management
+To Our
+119
+SAP
+41/324
+Carmen Auer
+(German Public Auditor)
+Wirtschaftsprüfer
+Dr. Jens Freiberg
+BDO AG Wirtschaftsprüfungsgesellschaft
+February 21, 2024
+This engagement is based on the "Special Engagement Terms and Conditions of BDO AG
+Wirtschaftsprüfungsgesellschaft" of March 1, 2021, agreed with the Group as well as the "General
+Engagement Terms and Conditions for Auditors and Auditing Firms" of January 1, 2017, issued by the
+IDW (www.bdo.de/auftragsbedingungen).
+General Engagement Terms
+engagement. Consequently, it may not be suitable for any other purpose than the aforementioned.
+Accordingly, the report is not intended to be used by third parties for making (financial) decisions
+based on it. Our responsibility is to the Group alone. We do not accept any responsibility to third
+parties. Our assurance opinion is not modified in this respect.
+We draw attention to the fact that the assurance engagement was conducted for the Group's purposes
+and that the report is intended solely to inform the Group about the result of the assurance
+Restriction of Use
+Based on the assurance procedures performed and the evidence obtained, nothing has come to our
+attention that causes us to believe that the combined non-financial statement of SAP SE, Walldorf for
+the period from January 1 to December 31, 2023 is not prepared, in all material respects, in
+accordance with §§ 315c in conjunction with 289c to 289e HGB and the EU Taxonomy Regulation and
+the Delegated Acts issued thereunder as well as the interpretation by the executive directors as
+disclosed in section "Sustainable Finance: EU Taxonomy Disclosures" of the combined non-financial
+statement.
+Assurance Opinion
+In determining the disclosures in accordance with Article 8 of the EU Taxonomy Regulation, the
+executive directors are required to interpret undefined legal terms. Due to the immanent risk that
+undefined legal terms may be interpreted differently, the legal conformity of their interpretation and,
+accordingly, our assurance engagement thereon are subject to uncertainties.
+Information
+Additional
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+To Our
+Stakeholders
+SAP Integrated Report 2023
+SAP
+Stakeholders
+Assessment of the suitability of the internal guidelines and the internally developed definitions for
+the selected sustainability information
+Report
+Further Information about
+Sustainability
+Inquiries of the executive directors and relevant employees responsible for the materiality analysis
+in order to gain an understanding of the procedure for identifying material topics and corresponding
+reporting boundaries of SAP
+In the course of our assurance engagement we have, among other things, performed the following
+assurance procedures and other activities:Gain an understanding of the structure of the sustainability
+organization and stakeholder engagement
+This Standard requires that we plan and perform the assurance engagement to obtain limited
+assurance about whether any matters have come to our attention that cause us to believe that the
+above-mentioned sustainability disclosures in the Report of the Group for the period from January 1
+to December 31, 2023 are not prepared, in all material respects, in accordance with the relevant
+Reporting Criteria. This does not imply that a separate conclusion is expressed on each of the
+disclosures. In a limited assurance engagement, the procedures performed are less extensive than in a
+reasonable assurance engagement, and accordingly, a significantly lower level of assurance is
+obtained. The procedures selected depend on the assurance practitioner's professional judgment.
+Accordingly, we have to comply with our professional duties and to plan and perform the assurance
+engagement in such a way that we, respecting the principle of materiality, reach our conclusion with a
+reasonable level of assurance on the above-mentioned sustainability indicators. The assurance of the
+sustainability indicators encompasses the performance of assurance procedures to obtain evidence
+for the information included in the Report. The choice of assurance procedures is subject to the
+professional judgement of the assurance practitioner.
+Our responsibility is to express a conclusion based on our work performed within the assurance
+engagement on the sustainability indicators and the sustainability disclosures described above. We
+conducted our work in accordance with the International Standard on Assurance Engagements (ISAE)
+3000 (Revised): "Assurance Engagements other than Audits or Reviews of Historical Financial
+Information", published by IAASB.
+Practitioner's Responsibility
+Our audit firm applies the national legal requirements and professional pronouncements - in particular
+the By-laws Regulating the Rights and Duties of Wirtschaftsprüfer and vereidigte Buchprüfer in the
+exercise of their Profession and the Standards on Quality Management issued by the Institute of Public
+Auditors in Germany (IDW), and accordingly maintains a comprehensive quality management system
+that includes documented policies and procedures with regard to compliance with professional
+ethical requirements, professional standards as well as relevant statutory and other legal
+requirements.
+Additional
+Information
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+To Our
+Stakeholders
+SAP Integrated Report 2023
+SAP
+42/324
+We have complied with the German professional regulations on independence as well as other
+professional conduct requirements.
+Independence and Quality Assurance of the Assurance
+Practitioner's Firm
+This responsibility of the executive directors includes the selection and application of appropriate
+sustainability reporting methods and making assumptions and estimates about individual non-financial
+disclosures that are reasonable in the circumstances. Furthermore, the executive directors are
+responsible for such internal controls as executive directors determine to enable the preparation of
+the Report that is free from material misstatement, whether due to fraud or error.
+The executive directors of the Group are responsible for the preparation of the Report in accordance
+with the principles stated in the Sustainability Reporting Standards of the Global Reporting Initiative
+and in accordance with the Corporate Accounting and Reporting Standard, the Greenhouse Gas
+Protocol Scope 2 Guidance and the Corporate Value Chain (Scope 3) Accounting and Reporting
+Standard of the Greenhouse Gas Protocol Initiative by the World Resources Institute and the World
+Business Council for Sustainable Development in combination with internal guidelines as described in
+the "Non-Financial Notes: Environmental Performance" (hereinafter: "Reporting Criteria") and for the
+selection of the disclosures to be assessed.
+Responsibility of the Executive Directors
+For selected qualitative and quantitative sustainability disclosures included in "Further Information on
+Economic, Environmental, and Social Performance" (sections: About This Further Information on
+Economic, Environmental, and Social Performance; Sustainability Management; Stakeholder
+Engagement; Materiality; Social Investments; Sustainable Procurement; Waste and Water; Public Policy;
+Non-Financial Notes: Environmental Performance; and GRI Content Index excluding quantitative and
+qualitative information in relation to GRI 207 Tax) and the chapter "About This Report" (hereinafter
+referred to as "sustainability disclosures") a limited assurance engagement was performed.
+For the selected quantitative sustainability indicators Business Health Culture Index, Employee
+Engagement Index, Employee Retention Rate, Ratio of Women in Management, Ratio of Women in
+Executive Roles, Total Gross and Net Greenhouse Gas Emissions (Scope 1, Scope 2 and selected
+Scope 3 emissions), Renewable Energy Certificates (Energy Attribute Certificates), Total Energy
+Consumption and Customer Net Promoter Score including the explanatory notes supplementing
+these indicators (hereinafter referred to as "sustainability indicators") a reasonable assurance
+engagement was performed.
+We have performed an independent assurance engagement on selected qualitative and quantitative
+sustainability disclosures as well as on selected quantitative sustainability indicators included in the
+Integrated Report 2023 (hereinafter referred to as “Report”) for the period from January 1 to December
+31, 2023 of SAP SE, Walldorf (hereinafter referred to as "SAP” or the “Group").
+To the Executive Board of SAP SE, Walldorf
+Independent Auditor's Report
+on a Limited Assurance
+Engagement on Sustainability
+Information
+Information
+Additional
+Consolidated Financial
+Statements IFRS
+122
+The words "aim," "anticipate,” “assume,” “believe,” “continue,” “could,” “counting on," "is confident,"
+"development," "estimate,” “expect,” “forecast,” “future trends," "guidance,” “intend,” “may,” “might,"
+"outlook,” “plan,” “predict,” “project,” “seek,” “should,” “strategy," "want,” “will,” “would,” and similar
+125
+For an overview of our product portfolio, see the Our Product Strategy section.
+We derive revenue from fees charged to our customers for subscriptions to use our cloud solutions.
+Software licenses, on-premise support, consulting, development, training, and other services also
+contribute significant revenue.
+We create value by first identifying the business needs of our customers and then developing and
+delivering cloud solutions, software, services, and support that address these needs. By proactively
+obtaining customer feedback on a regular basis, we strive to continuously improve our solutions,
+identify further business needs, and deliver enhanced value to our customers across the entire
+lifecycle - and thus continually improve the customer experience.
+Our business model, through which we implement our vision and strategy, can be summarized as
+follows:
+Our Business Model
+At SAP, our journey is one of continuous innovation and transformation, and we are committed to
+delivering solutions that are not only relevant and reliable but also responsible.
+We have evolved beyond mere sustainability aspirations to actionable, sustainable outcomes. SAP's
+green ledger initiative provides auditable sustainability practices as an extension of business
+operations. This approach enables organizations to record real impacts, report audit-ready ESG
+metrics, and act with ESG principles integrated into business processes, supporting data-driven
+sustainability management.
+Sustainability at Your Core
+We help organizations leverage the collective intelligence that SAP provides to optimize performance
+across their value chain. By connecting core processes – from finance to supply chains and human
+resources to customer relations – we support efficient growth throughout businesses. Our solutions go
+beyond internal systems, linking businesses across enterprises and digitalizing transactions to foster
+transparent, resilient, and sustainable value chains.
+In a rapidly changing landscape, the need for business agility is paramount to maintaining
+competitiveness. We facilitate this through data insights that help organizations adapt to market
+conditions. Our cloud ERP solutions and SAP Business Al capabilities are integrated, providing agility
+and empowering organizations to pivot, whether to strategic shifts or unexpected market scenarios.
+Achieve More Across the Value Chain
+Agility at Scale
+SAP's vision is to bring out the best in every business. In our pursuit of this vision, we focus on three
+areas:
+Subsidiaries, Acquisitions, and Joint Ventures
+Our Vision
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+Stakeholders
+To Our
+SAP Integrated Report 2023
+SAP
+Risk Management and Risks
+13 Gartner, Inc., Magic Quadrant for Process Mining Tools, Doc G00774746, March 2023
+12 Gartner, Inc., Magic Quadrant for Data Quality Solutions, Doc G00759931, November 2022
+11 Gartner, Inc., Magic Quadrant for Analytics and Business Intelligence Platforms, Doc G00768632, April 2023
+10 Gartner, Inc., Magic Quadrant for Financial Planning Software, Doc G00784792, December 2023
+Additional
+Information
+Subsidiaries
+SAP SE is the parent company of the SAP Group. As at December 31, 2023, the SAP Group comprised
+236 companies.
+For a list of our subsidiaries, associates, and other equity investments, see the Notes to the
+Consolidated Financial Statements, Note (G.9).
+50/324
+SAP S/4HANA Cloud and SAP BTP as key elements and foundation of those offerings, we strive for an
+expansion of our commercial models, with increased focus on packaged suite deals and flexible
+consumption models, such as RISE Premium Plus. Further, we aim to drive the adoption of multi-
+cloud solutions across the mentioned offerings.
+In December 2023, we introduced Cloud ERP Suite as a clustering of our strategic cloud solutions.
+The following offerings are currently part of our Cloud ERP Suite: SAP S/4HANA Cloud as part of
+Cloud ERP, SAP BTP, core solutions for HR and payroll, spend management, commerce, customer data
+solutions, business process transformation, and working capital management. With
+In November 2023, we introduced the new Al Foundation on SAP BTP group of technologies, new
+vector capabilities on SAP HANA to leverage Al, and SAP Build Code, an Al-powered solution set to
+make professional coders more productive.
+In September 2023, we launched Joule, a copilot built directly into our solutions.
+SAP Business Al refers to artificial intelligence (AI) capabilities available across SAP's suite of
+enterprise applications and SAP BTP. SAP offers a range of Al-powered use cases built into core
+business processes across finance, supply chain, procurement, sales, marketing, human resources, and
+IT. By using these Al capabilities, customers can benefit from automation, recommendations,
+forecasting, and natural human-machine interaction. In addition, SAP BTP provides business-specific Al
+services that empower our partners and customers to implement Al into their SAP applications and
+extensions while reducing data science effort, integration, and operational complexity.
+SAP's product portfolio allows enterprises to manage their resources, spend, employees, and
+customer relationships. SAP Business Technology Platform (SAP BTP) is the platform for SAP, our
+customers, and our ecosystem to build, integrate, and extend solutions, and to manage enterprise
+data. It also serves as a central place for SAP Business Al technology.
+Our Product Strategy
+In addition to our investments in organic growth and acquisitions, SAP also supports entrepreneurs
+that aspire to build industry-leading businesses through venture capital funds managed by Sapphire
+Ventures. Sapphire Ventures manages more than US$10 billion (over €9 billion) and has invested in
+more than 200 companies. It pursues opportunities in which it can help fuel enterprise growth by
+adding expertise, relationships, geographic reach, and capital. It places a particular focus on
+companies in Europe, Israel, the United Kingdom, and the United States. Sapphire Ventures has
+committed to investing more than US$1 billion in the next generation of Al-powered enterprise
+technology startups.
+Sapphire Ventures
+For more information about Qualtrics, see the Notes to the Consolidated Financial Statements,
+Note (D.1).
+On March 13, resulting from a process that was initiated on January 26, 2023, SAP announced it had
+agreed to sell all of its 423 million shares in Qualtrics International Inc. as part of the acquisition of
+Qualtrics by funds affiliated with Silver Lake and Canada Pension Plan Investment Board at a purchase
+price of US$18.15 in cash per share. The sale closed on June 28, 2023. SAP remains a close go-to-
+market and technology partner with Qualtrics.
+Qualtrics
+Divestitures
+For more information about LeanIX, see the Notes to the Consolidated Financial Statements,
+Note (D.1).
+The acquisition of LeanIX closed on November 7, 2023. LeanIX is a market leader in enterprise
+architecture management (EAM) software that drives the modernization of IT landscapes and
+continuous business transformation. The combined offering with SAP can provide a foundation for
+process optimization enabled by Al.
+Information
+Additional
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+To Our
+Stakeholders
+SAP Integrated Report 2023
+SAP
+49/324
+We continue to focus on organic investments in technology and innovations that should ensure
+sustainable growth of our product portfolio. Additionally, we may make targeted acquisitions to
+complement our solution offerings and improve coverage in key strategic markets.
+Material Acquisitions
+9 Gartner, Inc., Magic Quadrant for Data Integration Tools, Doc G00777860, December 2023
+8 IDC, Worldwide Semiannual Software Tracker, 2023H1, October 2023
+48/324
+6 IDC, Worldwide Semiannual Software Tracker, 2023H1, October 2023
+46/324
+This combined management report contains forward-looking statements and information based on the
+beliefs of, and assumptions made by, SAP management using information currently available to them.
+Any statements contained in this report that are not historical facts are forward-looking statements as
+defined in the U.S. Private Securities Litigation Reform Act of 1995. We have based these forward-
+looking statements on our current expectations, assumptions, and projections about future conditions
+and events. As a result, our forward-looking statements and information are subject to uncertainties
+and risks, many of which are beyond our control. If one or more of these uncertainties or risks
+materializes, or if management's underlying assumptions prove incorrect, our actual results could differ
+materially from those described in or inferred from our forward-looking statements and information.
+We describe these risks and uncertainties in the Risk Management and Risks section.
+Forward-Looking Statements
+Unless otherwise stated, all of the information in this report relates to the situation as at
+December 31, 2023, or the fiscal year ended on that date. Furthermore, all financial numbers in this
+combined management report are based on continuing operations (unless otherwise noted).
+Non-financial information has not been adjusted. For more information, including the results from
+discontinued operations, see the Notes to the Consolidated Financial Statements, Note (D.1).
+Because the numbers presented throughout this report are rounded, they may not add up exactly to
+the totals we provide, and percentages may not precisely reflect the absolute amounts.
+7 IDC, Worldwide Travel and Expense Management Software Market Shares, 2022: Evolving Travel Models Pushing Digital Transformation,
+Doc #US49194223, September 2023
+Our auditor, BDO AG Wirtschaftsprüfungsgesellschaft (BDO), audited SAP's combined management
+report, except for some information that relates to the Non-Financial Statement Including Information
+About Sustainable Activities that was not subject to the statutory audit of our combined management
+report, but on which a limited assurance engagement was performed. The Security, Data Protection,
+and Privacy, Employees; Energy and Emissions; Business Conduct; and Human Rights sections
+comprising the Non-Financial Statement also include information that was not subject to the statutory
+audit of our combined management report, but on which a limited assurance engagement was
+performed. These sections contain further explanations about the audit scope in an info box at the
+end of the respective section, marked by the symbol.
+For more information about SAP SE and its results of operations, financial position, and net assets, see
+the Report on the Economic Position of SAP SE.
+This combined management report by the SAP Group (collectively, “we,” “us,” “our,” “SAP," "Group," or
+"Company") and the management report of SAP SE have been prepared in accordance with
+sections 289, 289a, 289b, 289f, 298, 315, 315a, 315b, and 315d of the German Commercial Code and
+German Accounting Standard (GAS) No. 20.
+Basis of Presentation
+General Information About
+This Combined Management
+Report
+Information
+Additional
+SAP
+Further Information about
+Sustainability
+Report
+Stakeholders
+Combined Management
+To Our
+SAP Integrated Report 2023
+SAP
+45/324
+Human Rights
+150
+Responsibility Statement
+142
+Expected Developments and Opportunities
+Consolidated Financial
+Statements IFRS
+SAP Integrated Report 2023
+For more information about the scope of the assurance and the underlying reporting criteria, see
+BDO's Independent Auditor's Report, the Limited Assurance Report of the Independent Auditor
+Regarding the Combined Non-Financial Statement, and the Assurance Report of the Independent
+Auditor Regarding Sustainability Information.
+Combined Management
+Report
+5 IDC, Worldwide Semiannual Software Tracker, 2023H1, October 2023
+4 IDC, Worldwide Semiannual Software Tracker, 2023H1, October 2023
+3 IDC, Worldwide Enterprise Applications Software Market Shares, 2022: Cloud Is the Digital World Foundational Choice, Doc #US51040223,
+July 2023
+In addition, we want our own business operations and practices to be sustainable and inclusive. SAP is
+committed to the goal set by the Paris Agreement of limiting global warming to 1.5 degrees Celsius in
+comparison to preindustrial levels. SAP has committed to achieve net-zero emissions along our entire
+value chain by 2030. We also support the United Nations Sustainable Development Goals (UN SDGs).
+Together with our customers and partners, we engage in several initiatives across the UN SDGs.
+Our purpose at SAP remains steadfast: to "help the world run better and improve people's lives." We
+strive to achieve this by focusing on the challenges of current markets, the global environment, and by
+using the transformative power of artificial intelligence (AI) in business. SAP combines generative Al
+with business data. We are committed to providing Al solutions that are integral to our customers'
+critical business processes, and ensuring that they are embedded in our portfolio, relevant, reliable,
+and responsible. Our products and services aim to help our customers meet the challenges as well as
+take advantage of the opportunities presented by today's rapidly changing world.
+Our Purpose
+To Our
+Stakeholders
+Founded in 1972, SAP is a global company headquartered in Walldorf, Germany. Our legal corporate
+name is SAP SE. SAP has been recognized as a market share leader in the following areas worldwide:
+enterprise applications software,³ enterprise resource management applications, 4 supply chain
+management applications, 5 procurement applications software, 6 travel and expense management
+software, and enterprise resource planning software, among others. SAP Business Technology
+Platform comprises market-leading capabilities in key platform areas such as integration, planning 10
+and analytics, 11 data quality, 12 and process automation. 13 The SAP Group has a global presence and
+employed more than 107,000 people as at December 31, 2023.
+Overview of SAP
+Strategy and Business Model
+Information
+Additional
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Our ordinary shares are listed on the Frankfurt Stock Exchange. American Depositary Receipts (ADRs)
+representing SAP SE ordinary shares are listed on the New York Stock Exchange (NYSE). SAP is a
+member of Germany's DAX and TecDAX, the Dow Jones EURO STOXX 50, the Dow Jones Sustainability
+Index World, and the Dow Jones Sustainability Index Europe. As at December 31, 2023, SAP was the
+most valuable company in the DAX based on market capitalization and has been ranked under the top
+5% of S&P Global ESG Scores in the S&P Global Corporate Sustainability Assessment.
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Information
+expressions as they relate to us are intended to identify such forward-looking statements. Such
+statements include, for example, those made in the Operating Results subsection; our quantitative and
+qualitative disclosures about market risk pursuant to the International Financial Reporting Standards
+(IFRS), namely IFRS 7 and related statements in our Notes to the Consolidated Financial Statements;
+Expected Developments and Opportunities and Risk Management and Risks sections; and other
+forward-looking information appearing in other parts of this report.
+Additional
+This report includes statistical data about the IT industry and global economic trends that comes from
+information published by sources including International Data Corporation (IDC), Gartner, the
+European Central Bank (ECB), and the International Monetary Fund (IMF). This type of data represents
+only the estimates of IDC, Gartner, the ECB, the IMF, and other sources of industry data. SAP does not
+adopt or endorse any of the statistical information provided by sources such as IDC, Gartner, the ECB,
+the IMF, or other similar sources that is contained in this report. The data from these sources is subject
+to risks and uncertainties, and subject to change based on various factors, including those described
+above, in the Risk Management and Risks section, and elsewhere in this report. These and other
+factors could cause our results to differ materially from those expressed in the estimates made by third
+parties and SAP. We caution readers not to place undue reliance on this data.
+47/324
+SAP
+SAP Integrated Report 2023
+To Our
+To fully consider the factors that could affect our future financial results, both this report and our
+Annual Report on Form 20-F should be considered, as well as all of our other filings with the U.S.
+Securities and Exchange Commission (SEC). Readers are cautioned not to place undue reliance on
+these forward-looking statements, which speak only as of the date specified or the date of this report.
+We undertake no obligation to publicly update or revise any forward-looking statements as a result of
+new information that we receive about conditions that existed upon issuance of this report, future
+events, or otherwise, unless we are required to do so by law.
+Information
+The strategic pillars of SAP's product strategy and our development and innovations are presented
+below.
+As the IT landscape continues to rapidly evolve, SAP is seeing a clear shift in customer preferences
+together with a growing demand for flexibility, agility, scalability, and cost-effectiveness. Understanding
+the importance of helping customers embrace digital technologies to thrive in today's dynamic
+business environment, SAP has committed to a forward-thinking cloud strategy. SAP acknowledges
+that every organization's experience with the cloud can be unique and can therefore be challenging,
+yet many customers who have made the shift to a cloud strategy can use the benefits that today's
+business environments require, such as the ability to redistribute resources previously required for
+managing internal IT teams, and remote global accessibility from any location through an Internet
+connection regardless of where teams are located around the world. This strategy-shift to the cloud
+allows SAP to address these new market opportunities and requirements.
+GROW with SAP is a commercial offering designed specifically to help grow midmarket companies
+that do not yet use an ERP system from SAP and aspire to go live within a short period of time without
+extensive customization. With GROW with SAP, customers can use predefined best-practice
+processes that are available for different industries, and can benefit from predictable costs, the
+continuous provision of technical innovations, and scalability. It is designed so that companies can
+grow according to their needs, without significantly increasing the complexity for business processes
+and management.
+RISE with SAP is a business transformation solution aimed at helping customers migrate their ERP
+system to the cloud and accelerate their digital transformation. It is a tailored offering that targets SAP's
+existing customer base running on other SAP solutions, or net-new customers with large or complex
+business requirements. RISE with SAP aims to provide enhanced productivity by means of automated
+processes, with the option of running technology operations as a service with SAP or in the customer's
+own data center.
+Further, SAP strives to help customers grow their businesses profitably, while at the same time
+minimizing the risks. To this end, SAP has two offerings, RISE with SAP and GROW with SAP, which
+cater to different customer objectives and requirements.
+Additional
+SAP
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+To Our
+Stakeholders
+SAP Integrated Report 2023
+60/324
+Cloud ERP
+Further Information about
+Sustainability
+SAP S/4HANA Cloud provides software capabilities mainly for finance, risk management, project
+management, procurement, manufacturing, supply chain management, asset management, and
+research and development. It also includes platform capabilities such as a database (SAP HANA),
+data management, Al, and application lifecycle management, as well as cloud ERP solutions, which our
+customers consume as part of their transformation to SAP S/4HANA Cloud. These cloud ERP solutions
+help customers adopt new business models, such as subscription.
+Based on our detailed annual plans, we determine the budget for the respective fiscal year. We also
+have processes in place to forecast revenue and profit on a quarterly basis, to quantify whether we
+expect to realize our financial targets, and to identify any deviations from plan. We continuously
+monitor the affected operating segments and Board areas in the SAP Group to analyze their
+developments and define any appropriate actions. Our entire network of planning, control, and
+reporting processes is implemented in integrated planning and information systems, based on SAP
+software, across all organizational units so that we can conduct the evaluations and analyses needed
+to make informed decisions.
+SAP SuccessFactors solutions for human experience management aim to empower organizations to
+create an agile and future-ready workforce in a rapidly changing workplace. Customers can use new
+offers such as skills ontology, personal growth framework for employees, and dynamic teams to work
+across traditional organizational structures. The portfolio includes core HR and payroll, talent
+management, employee experience management, and people and workforce analytics.
+Employee engagement
+Carbon impact
+Outlook and Results for 2023
+Strategic Objective
+KPI
+Growth
+Profitability
+Customer loyalty
+Customer Loyalty
+Engagement
+Carbon Impact
+2023 Outlook*
+2023 Results
+Cloud revenue²
+€14.0 billion to €14.2 billion
+€14.06 billion
+Employee
+- Profitability
+Growth
+-
+54/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+Patents
+Our investment in R&D has resulted in numerous patents. As at December 31, 2023, SAP held a total of
+close to 13,000 (2022: close to 13,000) validated patents worldwide. Of these, more than 650
+(2022: more than 800) were granted and validated in 2023.
+While our intellectual property is important to our success, we believe our business as a whole is not
+dependent on any particular patent or a combination of patents.
+Competitive Intangibles
+The majority of (intangible) resources that are the basis for our current as well as future success does
+not appear in the book value of equity in our Consolidated Financial Statements. This is apparent from
+a comparison of the market capitalization of SAP SE (based on all issued shares), which was
+€171.4 billion at the end of 2023 (2022: €118.4 billion), with the book value of our equity in the
+Consolidated Financial Statements, which was €43.4 billion (2022: €42.8 billion). This means that the
+market capitalization of our equity is more than three times higher than the book value.
+Measuring Our Success
+We use the following financial and non-financial objectives to steer our company:
+Cloud and software revenue²
+14 Recalculated score according to 2023 methodology. Reported number for 2022 based on prior methodology was 3. Guidance for 2023 was
+based on the recalculated score of 7. For more information about Customer NPS calculation methodology, see Performance Management
+System.
+€27.0 billion to €27.4 billion
+Operating profit¹.2
+To Our
+Combined Management
+Stakeholders
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about Additional
+Sustainability
+Information
+Outlook for 2024
+SAP Integrated Report 2023
+Strategic Objective
+2023 Results
+2024 Outlook
+Cloud revenue
+€13.66 billion
+€17.0 billion to €17.3 billion²
+Growth
+Cloud and software revenue
+ΚΡΙ
+SAP
+55/324
+Note: For a reconciliation of non-IFRS results to IFRS equivalents, see the Performance Management System section.
+€8.65 billion to €8.95 billion
+€9.04 billion
+Free cash flow
+Approx. €4.9 billion
+€5.09 billion
+Customer Net Promoter Score
+8 to 12
+Employee Engagement Index
+76% to 80%
+Net carbon emissions
+O kt
+9
+80%
+O kt
+* The 2023 outlook was communicated in January 2023. It was updated twice during the year: in April to reflect the divestiture of Qualtrics,
+and again in July 2023. The 2023 outlook numbers above reflect the updated outlook from July 2023.
+1 Non-IFRS.
+2 At constant currencies.
+€27.64 billion
+Professional development of our R&D workforce
+Consulting related to our product strategy
+Patent attorney services and fees
+Further Information about
+Sustainability
+Additional
+Information
+holistically. The portfolio includes the following offerings: SAP Sustainability Control Tower for
+holistic steering and reporting across ESG metrics and SAP Sustainability Data Exchange for sharing
+standardized sustainability data across supply chains.
+Partners and Ecosystem
+Our worldwide ecosystem of more than 25,000 partners delivers not only services and support for our
+customers but also partner innovations that extend our solutions and ideally are built on SAP BTP.
+Services and Support
+Consolidated Financial
+Statements IFRS
+We have reimagined our cloud services and support portfolio to focus on customer adoption and
+consumption.
+Our Customers
+Vision and Strategy
+Focusing on Customer Success
+We aim to maximize the value our customers derive from their investment in, and relationship with, SAP
+at every touchpoint in their experience with us over the engagement lifecycle. Our customer-facing
+teams - across solutions, sales, services, customer engagement, ecosystem, and others - work
+together along an operating model that aims to harmonize internal processes with the goal of
+delivering improved outcomes for our customers.
+Company-Wide Global Experience Program
+To further address and improve customer feedback, we have a Company-Wide Global Experience
+(XM) Program in place. This program aims to achieve a consistent end-to-end experience for our
+customers by standardizing experience initiatives and methodologies to help identify and close
+experience gaps across SAP.
+Due Diligence
+The Services and Support portfolio includes SAP Enterprise Support, which provides foundational
+tools and services, curated content, and mission-critical support. It can be enhanced with incremental
+success plans such as SAP Preferred Success and SAP Cloud Application Services as well as
+success services and consulting services to address specific objectives, timelines, and plans. When
+customers pursue enterprise-wide transformational change, SAP offers SAP MaxAttention and
+SAP ActiveAttention plans for tailored, long-term strategic engagement.
+Combined Management
+Report
+To Our
+Stakeholders
+SAP Integrated Report 2023
+SAP Customer Experience solutions aim to deliver a personalized view across customers and
+business partners, connecting the front- and back office with solutions spanning from point-of-sale to
+manufacturing, logistics, customer experience, and returns management.
+Human Capital Management
+SAP Business Technology Platform
+SAP Business Technology Platform (SAP BTP) is our business-centric, and open platform consisting
+of market-leading technologies infused with Al that enables SAP development, customers, and the
+partner ecosystem to unlock innovation across the enterprise. SAP BTP enables customers and
+partners to build, integrate, and automate applications while leveraging insights from business data on
+a trusted enterprise-grade environment.
+Key capabilities of SAP BTP include: SAP Build and SAP Build Code tools, and the ABAP Cloud
+development model, which provides an intuitive, modern development environment for IT and citizen
+developers; SAP HANA Cloud, SAP Datasphere, and SAP Analytics Cloud solutions which offer
+database, data management, analysis, and planning capabilities that utilize the value of data;
+SAP Integration Suite for enterprise iPaaS and API management to connect and automate business
+processes; and Al Foundation on SAP BTP, which has a rich toolset including access to a broad range
+of large language models (LLMs) from third-party providers and vector database capabilities to enable
+developers to create Al- and generative-Al-powered extensions and applications.
+Industry Cloud
+SAP's industry cloud solutions offer SAP and our partners the opportunity to extend our core of
+business software with modular solutions addressing industry-specific functions built on SAP BTP.
+Business Network
+SAP Business Network is a business-to-business collaboration platform trusted by companies in 190
+countries. The network helps digitalize key business processes across the supply chain and enables
+communication between trading partners beyond the four walls of an organization. This enables
+buyers and suppliers to find each other and execute end-to-end transactions, and helps businesses
+be transparent, resilient, and sustainable.
+Business Process Transformation
+Our SAP Signavio solutions help enable our customers to discover, analyze, and understand their
+business process operations. By benchmarking current process landscapes against best practices and
+allowing them to act on change recommendations, customers can define a target state and adapt as-is
+processes accordingly, while measuring whether realized outcomes match strategic goals.
+In November 2023, SAP acquired LeanIX, a market leader in enterprise architecture management
+(EAM) which is designed to enable customers to visualize, assess, and manage the transition towards
+their target IT architectures. LeanIX solutions can help customers drive updates to their IT landscapes
+and, together with the SAP Signavio portfolio, enable continuous business transformation.
+Working Capital Management
+Taulia solutions for working capital management help enable customers to mitigate the effects of
+inflation by providing visibility into working capital and access to liquidity. The Taulia Cash Flow
+Acceleration Platform is designed to accelerate cash flow and create supply chain resilience. Taulia
+also embeds sustainability functions into core processes by offering financing to stimulate the supply
+base to impact its ESG (environmental, social, and governance) credentials.
+Sustainability Management
+52/324
+SAP
+Governance
+The head of Customer Success leads all customer-facing functions across sales, services, partner, and
+cloud engagements for SAP's businesses globally. The Chief Marketing and Solutions Officer leads the
+development of our solution value propositions to provide clarity on SAP's core differentiators. The
+People & Operations Board area is responsible for the Company-Wide XM Program, including
+conducting the Customer Net Promoter Score (NPS) survey.
+Customer NPS is a KPI in the short-term incentive component of Executive Board remuneration. For
+more information about the Customer NPS, see the Performance Management System section.
+Guidelines and Policies
+4,454
+4,292
+18%
+18%
+15%
+4%
+4%
+2019
+2020
+2021
+2022
+2023
+1 The numbers for 2023, 2022, and 2021 reflect continuing operations as a result of the divestiture of Qualtrics.
+2 In 2023, SAP updated its cost allocation policy. R&D numbers for 2020 and 2019 have not been retrospectively adjusted. For more
+information, see the Notes to the Consolidated Financial Statements, Note (IN.1).
+In 2023, our IFRS R&D ratio, reflecting R&D expenses as a portion of total revenue, decreased
+0.3 percentage points (pp) to 20.3% (2022: 20.6%). Our non-IFRS R&D ratio decreased 1.1 pp to 18.0%
+year over year (2022: 19.1%). At the end of 2023, our total full-time equivalent (FTE) headcount in
+development was 36,444 (2022: 35,280). Measured in FTEs, our R&D headcount increased 1 pp to 34%
+of total headcount (2022: 33%).
+Total R&D expense not only includes our own personnel costs but also the external costs of work and
+services from the providers and cooperation partners we work with to deliver and enhance our
+products. We also incur external costs for the following:
+Translating, localizing, and testing products
+• Obtaining certification for products in different markets
+5,270
+€26.92 billion
+6,080
+€ millions | change since previous year
+Policies such as the Global Code of Ethics and Business Conduct for Employees and applicable
+General Terms and Conditions for our product govern our relationships with our customers.
+53/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about Additional
+Sustainability
+Information
+How We Measure and Manage Our Performance
+We use the Customer NPS as a feedback mechanism to measure customer loyalty. This and other
+results from the customer survey allow us to directly understand the customer experience and identify
+key pain points for action. Because of the importance of our customers to SAP, Customer NPS is one of
+our main non-financial KPIs.
+In 2023, our Customer NPS increased 2 points year over year to 9 (2022: 714), which is within our target
+range of 8 to 12. The increase was driven by feedback regarding our comprehensive and robust SAP
+solutions, established value to customers' business, and relationships with account teams. The
+Company-Wide XM Program ensures that the feedback received is heard by the responsible
+organizations within SAP so they can act to continually improve the customer experience.
+For 2024, we expect a Customer NPS of 9 to 13. Further, we aim to see continuous improvements and
+to increase the score steadily in the medium term.
+Related Risks for SAP
+For related financial risks, see Sales and Services in the Risk Management and Risks section.
+Our Investments in Innovation
+SAP's strong commitment to research and development (R&D) is reflected in our expenditures:
+Research & Development (IFRS) 1,2
+6,324
+€29.0 billion to €29.5 billion²
+SAP offers sustainability solutions and services that can help customers drive sustainable practices
+not only inside their organization but across the entire value chain. SAP Cloud for Sustainable
+Enterprises is a flexible solution portfolio that aims to enable businesses to manage sustainability
+€6.51 billion
+We used the following supporting measure to provide insight into our non-operating financial
+performance:
+Financial income, net (IFRS and non-IFRS): This measure provides insight into the return on liquid
+assets and capital investments, and the cost of borrowed funds. To manage our financial income, net,
+we focus on cash flow, the composition of our liquid assets and capital investment portfolio, and the
+average rate of interest at which liquid assets and capital investments are invested. We also monitor
+average outstanding borrowings and associated finance costs.
+Measures to Manage Overall Financial Performance
+We used free cash flow as the key measure to manage our overall financial performance. In addition to
+that, we used several supporting measures to provide further insight into our overall financial
+performance:
+Earnings per share (EPS) (IFRS and non-IFRS) 16: EPS (basic and diluted) measures our overall
+performance because it captures all operating and non-operating elements of profit as well as income
+tax expense. It represents the portion of profit after tax attributable to equity holders of SAP SE
+allocable to each SAP share outstanding. EPS is influenced not only by our operating and non-
+operating business and income taxes but also by the number of shares outstanding.
+Effective tax rate (IFRS and non-IFRS): We define our effective tax rate as the ratio of income tax
+expense to profit before tax, expressed as a percentage.
+16 We report earnings per share for our continuing operations, and total earnings per share for our continuing and discontinued operations.
+Measures to Manage Our Non-Operating Financial Performance
+58/324
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+SAP
+Operating margin (non-IFRS): We use operating margin (non-IFRS) to measure our overall
+operational process efficiency. Operating margin (non-IFRS) is the ratio of our operating profit (non-
+IFRS) to total revenue, expressed as a percentage.
+Cloud gross margin (non-IFRS): We use our cloud gross margin (non-IFRS) to measure our process
+efficiency in our cloud business. Cloud gross margin (non-IFRS) is the ratio of our cloud gross profit
+(non-IFRS) to cloud revenue, expressed as a percentage.
+Operating profit (non-IFRS): We use operating profit (non-IFRS) expressed in both actual currencies
+and constant currencies to measure our overall operational process efficiency and overall business
+performance.
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+Cloud backlog: We use the following measures, in both actual and at constant currencies, to measure
+our forward-looking cloud performance:
+Total cloud backlog (TCB)
+-
+Current cloud backlog (CCB)
+SAP S/4HANA CCB (to be discontinued in 2024)
+As of a specific key date, the TCB is the total contractually committed cloud revenue we expect to
+recognize and the CCB is the contractually committed cloud revenue we expect to recognize over the
+upcoming 12 months. Thus, they are subcomponents of our overall remaining performance obligations
+following IFRS 15.120. For our committed cloud business, we believe the TCB and the CCB are
+valuable indicators of our go-to-market success, as they reflect both new contracts won and existing
+contracts renewed. For more information on how we calculate these numbers, see the Notes to the
+Consolidated Financial Statements, Note (A.1).
+As an additional metric, we used SAP S/4HANA CCB to measure the contractually committed cloud
+core ERP revenue we expect to recognize over the upcoming 12 months as of a specific key date.
+Starting in 2024, we will no longer disclose SAP S/4HANA CCB.
+Cloud gross profit (non-IFRS): We use cloud gross profit (non-IFRS) expressed in both actual
+currencies and constant currencies to measure the process efficiency and performance of our cloud
+business.
+Operating, investing, and financing cash flows and free cash flow: Our consolidated statements of
+cash flows provide insight into how we generated and used cash and cash equivalents. When applied
+in conjunction with the other primary financial statements, it provides information that helps us
+evaluate the changes in our net assets, our financial structure (including our liquidity and solvency),
+and our ability to affect the amounts and timing of cash flows to adapt to changing circumstances and
+opportunities. We use our free cash flow measure to determine the cash flow remaining after all
+expenditures required to maintain or expand our organic business have been paid off. This measure
+provides management with supplemental information to assess our liquidity needs. We calculate free
+cash flow as net cash from operating activities minus purchases (other than purchases made in
+connection with business combinations) of intangible assets and property, plant, and equipment, as
+well as payments of lease liabilities.
+57/324
+Measures to Manage Our Non-Financial Performance
+Customer NPS: The annual assessment of customer loyalty is based on a survey that includes the
+Customer NPS metric. The Customer NPS score is calculated based on the "Likelihood to
+Value-Based Management
+Our holistic view of the performance measures described above, and the associated analyses, are
+together the foundation of our value-based management. We use planning and control processes to
+manage the compilation of these key measures and their availability to our decision-makers across
+various management levels.
+SAP's long-term strategic plans are the point of reference for our short- and medium-term planning and
+controlling processes. We initially identify future growth and profitability drivers at a highly aggregated
+level for the entire SAP Group. In a first step, the financial plan's growth ambition is determined by its
+comprehensive product portfolio which is grouped into solution areas, with profitability drivers
+allocated to functions such as development, marketing, sales, delivery, and administration. In a second
+step, the planned total revenues and total expenses are generally allocated to the operating segments
+and the areas of functional responsibility of the individual members of the Executive Board ("Board
+area"). If a Board area represents not only a functional department but also has responsibility for
+operating segments within this Board area, the allocation is done at the lower segment level. Budget
+adjustments may be applied during the year to reflect changes in priorities, to achieve efficiency
+targets, and to reflect endogenous and exogenous factors. Such budget adjustments, and the
+assessment of performance, are handled at Board area level if the Board area is part of a segment, or
+at segment level if the Board area comprises several segments. It is then the individual Executive
+Board member's responsibility to break down the allocated budget adjustments within the segment
+budget boundary. Based on an integrated portfolio process running in parallel to the budgeting
+process, we ensure aligned investment behavior across Board areas with regard to specific solution
+and/or subsolution areas. In a final step, customer-facing revenue targets and cost-of-sales and
+marketing targets are broken down into sales regions and market units.
+Customer Experience
+Information
+Additional
+Further Information about
+Sustainability
+Gross greenhouse gas emissions: Starting in 2024, we will use this metric to measure greenhouse
+gas emissions along the value chain (scope 1, scope 2, and scope 3 emissions relevant for SAP's
+business model) as part of our Net Zero by 2030 commitment. We apply a market-based approach.
+Renewable energies, for example in the form of self-generated renewable electricity, investments in
+certified renewable energy certificates, long-term green electricity contracts (power purchase
+agreements), or renewable electricity purchased by our suppliers and customers can be counted
+toward the reduction of greenhouse gas emissions.
+Consolidated Financial
+Statements IFRS
+To Our
+SAP Integrated Report 2023
+SAP
+51/324
+SAP's spend management solutions aim to provide a more unified view of a customer's spending to
+reduce costs, mitigate risks, improve collaboration, and make sure every spend decision is aligned with
+the business strategy. They cover direct and indirect spend, travel and expense, and external
+workforce management. Our SAP Ariba solutions combine industry-leading cloud-based applications
+to help companies discover and collaborate with a global network of partners. Our SAP Concur
+portfolio contains the world's leading solutions for integrated travel, expense, and invoice
+management.
+Spend Management
+Operating profit
+Stakeholders
+Net carbon emissions: We used this metric to measure our progress toward our ambition to
+become carbon neutral in our own operations by 2023. The net carbon emissions (scope 1,
+scope 2, and selected scope 3 emissions) are calculated by deducting self-produced renewable
+energy, renewable energy certificates, and carbon offsets from our gross carbon emissions. The net
+carbon emissions metric will be discontinued from 2024 and replaced by the Gross greenhouse gas
+emissions metric.
+-
+Greenhouse gas emissions: We use the following metrics to measure our progress toward our
+ambitious short-term and long-term climate targets (in kilotons of CO2 equivalents, rounded to the
+nearest kiloton). We define, measure, and report our greenhouse gas emissions according to the
+Greenhouse Gas (GHG) Protocol.
+Recommend❞ question with its proprietary scoring, identified on a scale of 0–10. We use this measure
+because we believe that we can only achieve our financial goals when our customers are loyal to, and
+satisfied with, SAP and our solutions. To derive the Customer NPS, we start with the percentage of
+"promoters" of SAP, that is, those giving us a score of 9 or 10 on a scale of 0-10. We then subtract the
+percentage of "detractors," that is, those giving us a score of 0-6. The method ignores "passives," that is,
+those giving us a score of 7 or 8. Consequently, the range of achievable scores is -100 to +100, with the
+latter being the best achievable score for customer loyalty as measured by the Customer NPS
+methodology. Starting in 2023, we made adjustments to the survey to further improve data quality and
+to align the sample more closely with SAP's business priorities. We have excluded incomplete
+responses and responses from respondents who report that they have no influence over purchasing
+decisions, and we have restricted the number of eligible responses from Concur.
+We determine the Employee Engagement Index and the Leadership Trust NPS as the average of the
+scores retrieved in each of the surveys we run within a fiscal year. Our engagement survey program
+"#Unfiltered" runs according to a “continuously listening" approach that includes multiple data
+collections throughout the year. The average scores provide an assessment, for the full year, of our
+employees' engagement and trust level.
+We measure both the Employee Engagement Index and the Leadership Trust NPS to get insights on
+the following:
+Employee Engagement Index: We use this index to measure the satisfaction and commitment of
+our employees, how proud they are of our company, and how strongly they identify with SAP.
+Applying this measure is recognition that our growth strategy depends on engaged employees. The
+index is measured as a percentage of favorable responses using five questions from our #Unfiltered
+engagement survey program.
+Leadership Trust NPS: We use this score to further enhance accountability and to measure our
+collective effort to foster a work environment based on trust. It is derived from a question in our
+surveys that gauges employees' trust in our leaders. Based on the Customer NPS methodology, the
+Leadership Trust NPS is calculated as a percentage of "promoters" (a score of 9 or 10 on a 10-point
+scale) minus the percentage of "detractors" (a score of 1 through 6). The method ignores "passives"
+(a score of 7 or 8). Consequently, the value range of the NPS is -100 to +100, with the latter being
+the best achievable score.
+Women in Executive Roles (WIER): Starting in 2024, we will use this KPI to measure the ratio of
+women to all genders in the three executive levels below the SAP Executive Board, namely the Global
+Executive Team, the Senior Executive Team, and the Executive Team.
+59/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+SAP is dedicated to promoting gender equality in the workplace and is working toward achieving
+gender balance at all levels of the organization.
+Our priority, with the help of this KPI, is to monitor how the Company is progressing on this
+commitment, especially at the most senior levels of the organization.
+In the reporting year, we used the Customer Net Promoter Score (NPS), Employee Engagement Index,
+and net carbon emissions as our key measures to manage our non-financial performance. In addition
+to these, we used the Leadership Trust NPS as a supporting measure to provide further insight into our
+non-financial performance:
+15 Unless otherwise stated, all performance measures are based on our continuing operations.
+Combined Management
+Report
+Total revenue: We use total revenue to measure our growth at both actual currencies and constant
+currencies.
+76% to 80%
+Steady decrease of our
+greenhouse gas emissions
+across the relevant value
+chain in line with our net-
+zero target
+25% in end of year 2027:
+Steady increase
+1 Non-IFRS. The outlook for 2024 has been prepared in accordance with our updated non-IFRS definition applicable from 2024. For more
+information, see the Performance Management System section.
+2 At constant currencies.
+3 Based on the updated non-IFRS operating profit definition and excluding gains and losses from less material divestitures.
+Note: For a reconciliation of non-IFRS results to IFRS equivalents, see the Performance Management System section.
+4 GET: Global Executive Teams; SET: Senior Executive Teams; ET: Executive Teams.
+22.2%
+Ambition for 2025
+ΚΡΙ
+2025 Ambition
+Growth
+Profitability
+Cloud revenue
+Customer Loyalty
+Employee
+Strategic Objective
+% of women in GET/SET/ET
+job levels out of the combined
+total of men, women, and other
+genders at the 3 job levels.4
+6.9 million tons gross
+carbon emissions
+Gross greenhouse gas
+emissions
+€7.6 billion to €7.9 billion¹²
+(2024 methodology) 1,3
+Share of more predictable revenue: We use share of more predictable revenue as a measure to
+provide additional insight into our sustained business success. The total of cloud revenue and support
+revenue divided by total revenue is the share of more predictable revenue.
+Profitability
+Operating profit
+Customer Loyalty
+€8.72 billion
+€5.09 billion
+Approx. €3.50 billion
+Customer Net Promoter Score
+9
+9 to 13
+Employee Engagement
+Employee Engagement Index
+80%
+Climate Performance:
+Net zero by 2030
+Women in Executive Roles
+Total revenue
+Cloud gross profit¹
+(2023 methodology)
+Free cash flow
+Free cash flow
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+56/324
+Additional
+Information
+In the reporting year, we used various performance measures to manage our performance with regard
+to our primary financial objectives, which are growth and profitability, and our primary non-financial
+objectives, which are customer loyalty, employee engagement, and carbon impact. We view growth
+and profitability as indicators of our current performance, while we see customer loyalty, employee
+engagement, and carbon impact as indicators of our future performance.
+Measures to Manage Our Financial Performance
+Cloud and software revenue: We use cloud and software revenue expressed in both actual
+currencies and constant currencies to measure our product growth. Our cloud and software revenue
+includes cloud revenue plus software license revenue and software support revenue. Cloud revenue
+and software support revenue are our two largest revenue streams. Customers that purchase software
+licenses also enter into related support contracts that generate recurring support revenue after the
+software sale.
+In the reporting year, we used cloud revenue, cloud and software revenue, share of more predictable
+revenue, current cloud backlog, and operating profit (non-IFRS) as our key measures to manage our
+operating financial performance. In addition to these, we used several supporting measures to provide
+further insight into our financial performance:
+Cloud revenue: This revenue driver comprises the main revenues of our cloud business. Revenue
+from cloud is derived from fees earned from providing customers with software as a service (SaaS),
+platform as a service (PaaS), and infrastructure as a service (laaS). We measure cloud revenue at actual
+and constant currencies.
+SAP S/4HANA Cloud revenue: We used SAP S/4HANA Cloud revenue expressed in both actual
+currencies and constant currencies as an additional metric to measure our cloud core ERP growth. SAP
+offers a choice of SAP S/4HANA Cloud deployments - as a public cloud or private cloud SaaS offering.
+Starting in 2024, SAP S/4HANA Cloud revenue will be replaced by the Cloud ERP Suite revenue metric.
+Cloud ERP Suite revenue: We use Cloud ERP Suite revenue expressed in both actual currencies and
+constant currencies as a metric to measure the growth of our portfolio of strategic cloud solutions.
+Cloud ERP Suite references those offerings that are tightly integrated with our core ERP solutions and
+are included in key commercial packages, such as RISE with SAP. The following offerings currently
+contribute to Cloud ERP Suite revenue: SAP S/4HANA Cloud, SAP Business Technology Platform, and
+core solutions for HR and payroll, spend management, commerce, customer data solutions, business
+process transformation, and working capital management.
+Operating profit¹
+Performance Management
+System 15
+Note: For a reconciliation of non-IFRS results to IFRS equivalents, see the Performance Management System section.
+Measures to Manage Our Operating Financial Performance
+25% in end of year 2027
+Customer Net Promoter Score
+1 Non-IFRS. Our Ambition for 2025 has been adjusted in accordance with our updated non-IFRS definition applicable from 2024. For more
+information, see the Performance Management System section.
+Employee Engagement Index
+Engagement
+Climate Performance:
+Gross greenhouse gas emissions
+Net zero by 2030
+Women in Executive
+Roles
+% of women in GET /SET/ET job levels out of the combined total
+of men, women, and other genders at the 3 job levels
+For more information about the composition of cloud revenue, and for a description of these services,
+see the Notes to the Consolidated Financial Statements, Note (A.1).
+More than €37.5 billion
+More than €21.5 billion
+Archiving net zero across the
+Steady increase
+Steady increase
+value chain by 2030
+Approximately €10.0 billion
+Approximately €8.0 billion
+Approximately €16.2 billion
+SAP
+SAP Integrated Report 2023
+2,220
+215
+155
+-22,485 -23,429
+330
+1,431
+0
+345
+1 Share-based payments
+2 Regulatory compliance matters
+65/324
+138
+-21,531
+-5
+Total operating expenses
+0
+0
+138
+Other operating
+-16
+0
+0
+0
+0
+60
+-65
+0
+0
+0
+income/expense, net
+-25,420
+-16
+SAP
+Stakeholders
+Additional
+Information
+new tools; it's a major shift toward 'deep intelligence' and automation, bringing agility and an insight-
+driven approach to the center of digital enterprises."4
+A major topic, according to IDC, is sustainability: "ESG factors are swiftly emerging as critical
+determinants of a company's long-term value. In today's business climate, ESG considerations are no
+longer just a checklist. [...] These are factoring in and becoming integral components to a company's
+strategic plans." In IDC's view, therefore, “sustainability is increasingly linked to digital business [...].
+Digital technology spending can be both directly and indirectly dedicated to sustainability initiatives,
+either by specifically addressing corporate-sponsored endeavors or by establishing the platform
+necessary to eventually carry out sustainability goals.”² IDC assesses that “organizations are
+increasingly turning to applications that can help them meticulously monitor and report their activities
+as well as achieve real-world sustainability milestones."³
+1 European Central Bank, Economic Bulletin, Issue 8/2023, Publication Date: January 11, 2024.
+2 IDC FutureScape: Worldwide Digital Business Strategies 2024 Predictions, Doc #US50120323, October 2023.
+3 IDC FutureScape: Worldwide Intelligent ERP 2024 Predictions, Doc #US51300923, October 2023.
+4 IDC FutureScape: Worldwide CIO Agenda 2024 Predictions, Doc #US51294523, October 2023.
+Impact on SAP
+Despite macroeconomic uncertainties and geopolitical tensions, SAP again showed high resilience and
+all regions contributed positively to the results. The wind-down of business operations in Russia and
+Belarus was nearly completed in the first quarter of 2023 and remaining contract obligations were
+reduced to a non-material volume by the end of the year.
+After two years of significant investments to accelerate SAP's transition to the cloud (the so-called
+phase one), the second phase of our cloud transformation started in January 2023 with the publication
+of our results for the fourth quarter and full year 2022. At that time, SAP showed the passing of the
+tipping point towards positive profitability (non-IFRS), as planned and predicted in the strategy update
+that was communicated in October 2020.
+Continuous execution along the midterm ambition and forthcoming positive results over the remaining
+quarters in 2023 underpinned SAP's commitment to the corporate strategy. The focus on efficiencies
+and disciplined spending resulted in a significant expansion of its cloud gross margins (non-IFRS)
+throughout the year.
+0
+SAP has been an early adopter of Al technology. During the SAP Sapphire conference in May, the
+Company showcased the use of Al in various products. At the beginning of the second half of 2023, the
+Company announced strategic direct investments in three leading generative Al companies. The
+investments underscore SAP's open ecosystem approach to Al, which is aimed at leveraging the best
+technology to embed Al across SAP's portfolio. The Company anticipates significant possibilities for
+market expansion through these technologies and new premium offerings.
+Overall Financial Position
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+Financial Performance:
+Review and Analysis
+Economy and the Market
+The global economy expanded at a moderate but steady pace in 2023, describes the European
+Central Bank (ECB) in its most recent Economic Bulletin.¹ It attributes this development to strong
+private consumption and the support of resilient labor markets.
+To Our
+Concerning the EMEA (Europe, Middle East, Africa) region, the euro area economy grew minimally over
+the first half of 2023, reports the ECB. In the second half of the year, real GDP contracted slightly,
+mostly due to a decline in inventories but also because of subdued confidence, low competitiveness,
+renewed geopolitical tensions, and tighter financing conditions. However, services activity grew
+modestly and contributed positively to growth in the second half of the year.
+As for the APJ (Asia Pacific Japan) region, Chinese economic activity stabilized in 2023, driven by
+stronger consumer spending. The lifting of COVID-19 restrictions at the beginning of the year and a
+broader recovery in private consumption compensated for weakness in the Chinese residential sector.
+In Japan, however, real GDP growth contracted in 2023, as high inflation weighed on activity and
+consumption. However, growth returned to a slightly positive yet modest territory in the fourth quarter,
+states the ECB.
+The IT Market
+"The digital business era has arrived. Spending on digital technologies is growing while traditional,
+nondigital spending is stagnating or even slightly dropping. The demand for digital experiences from
+customers, employees, partners, and suppliers has shifted to an expectation. Companies looking to
+sustain and grow are seeking digital revenue streams while looking to digitize operations to reduce
+costs and increase efficiency."² This is how International Data Corporation (IDC), a U.S.-based market
+research firm, summarizes the current IT market situation. Therefore, reports IDC, "in the post-pandemic
+environment, digital-first strategies have moved from being a competitive advantage to being the basic
+standard needed for survival. Legacy systems are increasingly proving to be bottlenecks, hindering
+real-time data access and agile response mechanisms. In contrast, businesses that have embraced
+digital transformation are reaping the benefits of adaptability and more insightful data-driven decision-
+making."³
+In particular, IDC finds that "the technology within a digital business platform is essential for driving the
+innovation and new revenue streams that companies are looking for in the digital business era❞ and
+that "more digitally mature organizations with established digital business platforms are better able to
+compete in an increasingly digital world."2 That is because these "autonomous business processes
+evolve the nature of information from intelligence to insights to immediate decisive actions. These
+advances, when utilized, give organizations a competitive advantage in speed, scale, and agility and
+will transform them into truly digital businesses."³
+"Today's SaaS and cloud-enabled applications are packed with generative Al (GenAI), artificial
+intelligence, machine learning (ML), microservices, APIs, and automated workflows," explains IDC, and
+elaborates: "The convergence of Al, automation, and analytics signals a transformative era in digital
+business. As these technologies have matured, they offer organizations unprecedented capabilities to
+drive innovation, optimize processes, and uncover actionable insights. This isn't just about adopting
+66/324
+SAP Integrated Report 2023
+In the Americas region, U.S. economic growth showed more resilience than previously anticipated.
+Despite significant tightening of monetary policy, the United States showed a solid domestic demand
+and a strong labor market and, with significant government spending, reached a robust growth, states
+the ECB.
+0
+440
+0
+0
+-3,029
+-3,155
+1
+250
+0
+0
+0
+Research and development
+-6,324
+7
+703
+0
+0
+-2,904
+375
+2
+-3,407
+-1,383
+Executive Board's Assessment
+26
+38
+0
+0
+-1,318
+-1,384
+34
+48
+0
+0
+-1,302
+and support
+Cost of services
+-5,613
+-6,080
+11
+0
+0
+0
+-1,178
+-1,289
+9
+137
+0
+0
+-1,143
+Restructuring
+-215
+0
+0
+215
+0
+175
+-138
+11
+General and administration
+0
+-5,629
+Sales and marketing
+-8,828
+257
+834
+0
+155
+-7,581
+-7,946
+286
+503
+0
+0
+-7,157
+-1,364
+Given the macroeconomic environment outlined above, the course of business was again favorable for
+SAP in 2023.
+82%
+67/324
+26.0%
+to 28.0%
+26.0%
+to 28.0%
+26.0%
+to 28.0%
+29.3%
+1 Results for 2022 have been adjusted for continuing operations to reflect the divestiture of Qualtrics.
+26.0%
+to 28.0%
+In the current global economic climate shaped by continuously high asset prices and disrupted by
+international conflicts, coupled with an increasing demand for artificial intelligence and data
+warehousing, the demand for our cloud solutions and services confirms our revised expectations,
+reflecting the strong business performance which is expected to continue to accelerate cloud revenue
+growth.
+On December 31, 2023, total cloud backlog was up 37% to €44.25 billion (up 39% to €45.09 billion at
+constant currencies).
+At constant currencies, the resulting cloud revenue grew from €10.67 billion in 2022 to €14.06 billion in
+2023, in line with our guidance range of €14.0 billion to €14.2 billion. That represented an increase of
+23% at constant currencies.
+Cloud and software revenue grew 9% at constant currencies to €27.64 billion (2022: €24.01 billion),
+and thus ended higher than our revised outlook range forecasted for 2023 of €27.0 billion to
+€27.4 billion.
+Thanks to the strong increase in cloud business, we were able to increase the share of more
+predictable revenue 2pp to 81% (2022: 79%), which is 1pp below our revised outlook.
+Total revenue on a constant currency basis grew 9% in 2023 to €32.03 billion (2022: €27.90 billion).
+69/324
+Our current cloud backlog (contractually committed cloud revenue that we expect to recognize over
+the upcoming 12 months) reached €13.75 billion at actual currencies (€14.04 billion at constant
+currencies; 2022: €11.73 billion at constant currencies). This was an increase of 25% (27% on a
+constant currency basis; 2022: 24%). The growth rate of our current cloud backlog is in line with our
+guidance from the year before to achieve a growth rate similar to 2022, while at a larger scale.
+29.6%
+Effective tax rate
+(non-IFRS)
+32.6%
+83%
+82%
+82%
+81%
+revenue
+Free cash flow
+€4.39 billion
+Effective tax rate
+(IFRS)
+approx. €5.0 billion
+28.0%
+32.0%
+to 32.0%
+approx. €4.9 billion
+28.0%
+to 32.0%
+approx. €4.9 billion
+28.0%
+to 32.0%
+approx. €4.9 billion
+28.0%
+to 32.0%
+€5.08 billion
+SAP
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+-1%
+-1%
+2020
+2021
+31,207
+29,520
+10%
+6%
+2022
+1 The numbers for 2023, 2022, and 2021 reflect continuing operations as a result of the divestiture of Qualtrics.
+2023
+Total revenue increased from €29,520 million in 2022 to €31,207 million in 2023, representing an
+increase of €1,688 million, or 6%.
+Cloud and software revenue represented 86% of total revenue in 2023 (2022: 86%). Service revenue
+increased 4% from €4,128 million in 2022 to €4,283 million in 2023, which was 14% of total revenue
+(2022: 14%).
+70/324
+Cost of software licenses
+26,953
+79%
+€ millions | change since previous year
+2019
+Further Information about
+Sustainability
+Additional
+Information
+Operating expenses (non-IFRS) on a constant currency basis increased 7% in 2023 to €22.99 billion
+(2022: €20.23 billion).
+Our expense base in 2023 was impacted by our transformation to a fast-growing cloud business. The
+cloud gross margin (non-IFRS) for 2023 was 72.6%, increasing 2.2pp at constant currencies year over
+year. Our cloud margin benefitted from an increase in cloud revenue and significantly lower
+investments in the Next-Generation Cloud Delivery initiative (modernization of our cloud delivery to
+enable a more resilient and scalable cloud infrastructure).
+Our overall headcount increased by 1,291 full-time equivalents, or FTEs (732 thereof organically),
+primarily in the functional areas Research and Development and Cloud.
+Non-IFRS operating profit in 2023 was €9.04 billion on a constant currency basis (2022: €7.67 billion),
+reflecting an increase of 13%. Operating profit and margin benefitted from accelerated growth in
+revenue, completion of the Next Generation Cloud Delivery initiative, and strict cost management.
+Thus, non-IFRS operating profit came in above the target range (€8.65 billion to €8.95 billion).
+We achieved an effective tax rate (IFRS) of 32.6% and an effective tax rate (non-IFRS) of 29.3%, which is
+above the outlook of 28.0% to 32.0% (IFRS) and 26.0% to 28.0% (non-IFRS). This mainly resulted from
+changes in valuation allowances on deferred tax assets.
+Operating Results (IFRS)
+This section on operating results (IFRS) discusses results only in terms of IFRS measures, so the IFRS
+numbers are not expressly identified as such.
+We break our operations down into three regions: the Europe, Middle East, and Africa (EMEA) region,
+the Americas region, and the Asia Pacific Japan (APJ) region. We allocate revenue amounts to each
+region based on where the customer is located. For more information about revenue by geographic
+region, see the Notes to the Consolidated Financial Statements, Note (A.1).
+Revenue
+27,553
+27,338
+12%
+Total Revenue¹
+Noteworthy is the strong momentum in our cloud business: cloud revenue was up 20%, reaching
+€13.7 billion. SAP's current cloud backlog (CCB) exceeded €13.7 billion, an increase of 25%. Total
+revenue increased 6% to €31.2 billion, and IFRS operating profit decreased slightly to €5.8 billion. Non-
+IFRS operating profit increased 9% to €8.7 billion. Free cash flow increased 16% to €5.1 billion.
+Regarding SAP's non-financial performance, we met our initial outlook ranges for all three of our most
+important non-financial performance indicators: the Customer Net Promoter Score increased 6 points
+to 9 (initial outlook: 8 to 12), the Employee Engagement Index remained unchanged at 80% (initial
+outlook: 76% to 80%), and our net carbon emissions continued to decrease, dropping 85 kt to 0 kt
+(initial outlook: 0 kt).
+Share of predictable
+€8.65 billion
+to €8.95 billion
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+SAP
+Information
+Cloud revenue is within the range of our revised 2023 outlook, with the combined cloud and software
+and operating profit exceeding the upper end of our outlook range.
+Comparison of Outlook and Results for 2023
+Outlook for 2023
+(Integrated Report
+Results
+for 2022¹
+2022)
+2023 Actual Revenue and Profit Performance Compared to Outlook
+(Non-IFRS)
+68/324
+In October 2023, SAP reaffirmed its July 2023 outlook.
+€14.2 billion, and for cloud and software revenue to a range between €27.0 billion and €27.4 billion, but
+increased the range slightly for our expected operating profit (non-IFRS) to between €8.65 billion and
+€8.95 billion.
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+On this basis, we are confident we can deliver on our financial and non-financial outlook for 2024 and
+on our updated 2025 ambition.
+Performance Against Our Outlook for 2023 (Non-IFRS)
+As in previous years, our 2023 operating profit-related goals and published outlook were based on our
+non-IFRS financial measures at constant currencies. For this reason, in the following section we discuss
+performance against our outlook in terms of non-IFRS numbers, unless otherwise stated, (at constant
+currencies) derived from IFRS measures. The subsequent section about International Financial
+Reporting Standards (IFRS) operating results discusses numbers only in terms of IFRS, so the numbers
+in that section are not expressly identified as IFRS numbers.
+Outlook for 2023 (Non-IFRS)
+The initial outlook for 2023, including Qualtrics (for more information, see the table Comparison of
+Outlook and Results for 2023), expected full-year cloud revenue to range between €15.3 billion and
+€15.7 billion, and cloud and software revenue to range between €28.2 billion and €28.7 billion, with
+more predictable revenue anticipated to make up 83% of this result. Furthermore, we expected
+operating profit (non-IFRS) to range between €8.8 billion and €9.1 billion and a free cash flow of
+approximately €5.0 billion. We expected a full-year 2023 effective tax rate (IFRS) of 28.0% to 32.0%
+(2022: 32.0%) and an effective tax rate (non-IFRS) of 26.0% to 28.0% (2022: 29.6%), strongly depending
+on the development of Sapphire Ventures' investments. This initial outlook reflected SAP executing on
+its cloud strategy, which is driving the accelerated cloud growth through both new business and cloud
+adoption by existing customers, scaling SAP's cloud momentum towards its midterm ambition.
+In April 2023, we adjusted our outlook for continuing operations, reflecting the expected Qualtrics
+divestiture. We thereafter expected cloud revenue to range between €14.0 billion and €14.4 billion,
+cloud and software revenue to range between €26.9 billion and €27.4 billion, and operating profit (non-
+IFRS) to range between €8.6 billion and €8.9 billion. Furthermore, we adjusted the anticipated share of
+more predictable revenue to 82% and thereafter expected a free cash flow of approximately
+€4.9 billion.
+In July 2023, to reflect then-current market development, we updated and tightened our ranges
+slightly. We lowered our expectations for cloud revenue to a range between €14.0 billion and
+Revised Outlook
+for 2023
+Outlook for 2023
+(Q3 Quarterly
+Statement)
+Results
+for 2023
+(Q1 Quarterly
+Statement)
+to €28.7 billion
+to €27.4 billion
+€27.0 billion
+to €27.4 billion
+€27.0 billion
+€27.64 billion
+to €27.4 billion
+currencies)
+Operating profit
+€8.8 billion
+€8.6 billion
+(non-IFRS, at constant
+currencies)
+€7.67 billion
+to €9.1 billion
+to €8.9 billion
+€8.65 billion
+to €8.95 billion
+(non-IFRS, at constant
+€9.04 billion
+€24.01 billion
+€28.2 billion
+Revised Outlook
+for 2023
+(Half-Year Report)
+Cloud revenue
+€15.3 billion
+€14.0 billion
+(non-IFRS, at constant
+€10.67 billion
+to €15.7 billion
+to €14.4 billion
+€14.0 billion
+to €14.2 billion
+€14.0 billion
+€14.06 billion
+to €14.2 billion
+currencies)
+Cloud and software
+revenue
+€26.9 billion
+-3,391
+SAP Integrated Report 2023
+0
+IFRS
+Currency
+Impact
+Constant
+Currency
+IFRS
+13,664
+394
+14,058
+11,426
+1,764
+Non-IFRS
+37
+2,056
+11,496
+286
+11,782
+11,909
+13,261
+323
+13,584
+13,965
+1,801
+2022
+2023
+€ millions, unless otherwise stated
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+impact our performance. Therefore, we limit our use of constant currency measures to the analysis of
+changes in volume as one element of the full change in a financial measure. We do not evaluate our
+results and performance without considering operating profit (non-IFRS) at both nominal and constant
+currencies on the one hand, and changes in operating expenses, operating profit, or other measures of
+financial performance prepared in accordance with IFRS on the other. We caution the readers of our
+financial reports to follow a similar approach by considering actual and constant currency non-IFRS
+measures only in addition to, and not as a substitute for or superior to, changes in revenue, operating
+expenses, operating profit, or other measures of financial performance prepared in accordance with
+IFRS.
+Despite these limitations, we believe that the presentation of our non-IFRS measures and the
+corresponding IFRS measures, together with the relevant reconciliations, provide useful information to
+management and investors regarding present and future business trends relating to our financial
+condition and results of operations.
+Reconciliation of IFRS to Non-IFRS Financial Measures for 2023 and 2022
+Reconciliation of Non-IFRS Revenue
+€ millions, unless otherwise stated
+Revenue Numbers
+Cloud
+Software licenses
+Software support
+Software licenses and support
+Cloud and software
+Services
+Total revenue
+Reconciliation of Non-IFRS Operating Expenses
+26,924
+717
+27,641
+25,391
+Cost of software licenses and support
+-1,383
+64
+-1,318
+-1,384
+82
+-1,302
+Cost of cloud and software
+-5,267
+200
+-5,067
+-4,883
+190
+-4,694
+Cost of services
+-3,407
+378
+-3,029
+-3,155
+250
+-2,904
+-3,391
+SAP
+108
+-3,749
+4,283
+109
+4,392
+4,128
+31,207
+826
+32,033
+29,520
+2023
+2022
+IFRS
+Adj.
+Non-IFRS
+Currency
+Impact
+IFRS
+Adj.
+Non-IFRS
+Operating Expense Numbers
+Cost of cloud
+-3,884
+135
+-3,499
+63/324
+We believe that constant currency measures have limitations, particularly as the currency effects that
+are eliminated constitute a significant element of our revenue and expenses and could materially
+0
+■
+Settlements of preexisting business relationships in connection with a business combination
+Acquisition-related third-party expenses
+Share-based payment expenses (applicable only until 2023)
+· Restructuring expenses in accordance with IFRS
+· Expenses for regulatory compliance matters associated with the provision for (potential) penalties
+arising from certain ongoing governmental investigations into our business operations, which are
+61/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+described in the Notes to the Consolidated Financial Statements 2023, Note (G.3), and are limited
+to the scope of IAS 37.
+We exclude certain acquisition-related expenses for the purpose of calculating operating profit (non-
+IFRS) and operating margin (non-IFRS) when evaluating SAP's continuing operational performance,
+because these expenses generally cannot be changed or influenced by management after the
+relevant acquisition other than by disposing of the acquired assets. Since management at levels below
+the Executive Board does not influence these expenses, we generally do not consider these expenses
+for the purpose of evaluating the performance of management units. For similar reasons, until 2023 we
+excluded share-based payment expenses, as these costs are impacted by share price developments
+and other factors beyond our control. We also exclude restructuring expenses because they are
+volatile and generally cannot be influenced by management at levels below the Executive Board. We
+exclude expenses related to regulatory compliance matters, as these expenses are non-recurring and
+relate to conduct that took place in prior performance periods, and so that users of our consolidated
+financial statements and the combined management report can see the information that our
+management uses to manage the business.
+In recent years, SAP has replaced many of its cash-settled share-based compensation plans with
+equity-settled plans. Having most of these plans as equity-settled reduces the impact of share price
+fluctuations and of other factors outside of our control. For these reasons, SAP has decided that, from
+2024, it will no longer exclude share-based payment expenses from its operating profit (non-IFRS).
+Financial Income, Net (Non-IFRS)
+Starting in 2024, numbers that are identified as financial income, net (non-IFRS) will be adjusted by
+excluding the following gains and losses:
+Gains and losses from equity securities, net
+■
+■ Amortization expense/impairment charges for intangibles acquired in business combinations,
+including goodwill, and certain stand-alone acquisitions of intellectual property (including
+purchased in-process research and development) as well as sale/disposal gains and losses for
+these intangibles
+Includes realized and unrealized effects from the disposal of equity securities, ongoing mark-to-
+market adjustments on marketable equity investments, changes in fair value of non-marketable
+equity securities, and others.
+Acquisition-related charges
+Operating Expense (Non-IFRS)
+Expenses ascribed to the regulatory compliance matters may include penalties and legal costs, all
+of which would impact the operating cash flows of the business.
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+Non-IFRS Financial Measures Cited in This Report
+Explanation of Non-IFRS Measures
+We disclose certain financial measures that are not prepared in accordance with IFRS and are
+therefore considered non-IFRS financial measures. Our non-IFRS financial measures may not
+correspond to non-IFRS financial measures that other companies report. The non-IFRS financial
+measures that we report should only be considered in addition to, and not as substitutes for, nor as
+superior to, our IFRS financial measures.
+We believe that the disclosed supplemental historical and prospective non-IFRS financial information
+provides useful information to investors, because management uses this information, in addition to
+financial data prepared in accordance with IFRS, to attain a more transparent understanding of our
+past performance and our anticipated future results.
+We use these non-IFRS measures consistently in our internal planning and forecasting, reporting, and
+compensation, as well as in our external communications, as follows:
+Our management primarily uses these non-IFRS measures rather than IFRS measures as the basis
+for making financial, strategic, and operating decisions.
+The variable components of our Executive Board members' and employees' remuneration are
+based on non-IFRS numbers such as operating profit (non-IFRS) and operating margin (non-IFRS)
+rather than the respective IFRS measures. An additional variable component used is CCB. In
+September 2023, the SAP Supervisory Board decided that although expenses and corresponding
+releases for provisions for regulatory compliance matters are eliminated from operating profit (non-
+IFRS), they will affect the compensation paid to Executive Board members from fiscal year 2025
+onward. This amendment does not apply to 2023 or 2024, to ensure that the Executive Board
+members' current compensation is not affected by conduct that took place in performance periods
+prior to their appointment to the Executive Board.
+The annual budgeting process for all management units is based on operating profit (non-IFRS)
+numbers rather than the respective IFRS financial measure.
+All forecast and performance reviews with all senior managers globally are based on these non-
+IFRS measures, rather than the respective IFRS financial measures.
+Both our internal performance targets and the guidance we provide to the capital markets are
+based on profit (non-IFRS) measures rather than the respective IFRS financial measures.
+Our non-IFRS financial measures reflect adjustments based on the items below, as well as adjustments
+for the related income tax effects.
+Numbers that are identified as operating expenses (non-IFRS) have been adjusted by excluding the
+following expenses:
+Total cost of revenue
+Excluding gains and losses from equity securities, net, improves the period-over-period comparability,
+because there is less volatility caused by share price fluctuation, market developments, and other
+factors beyond our control.
+We believe it is important for investors to have information that provides insight into the development
+of our sales. Revenue measures determined under IFRS provide information that is useful in this
+regard. However, both sales volume and currency effects impact period-over-period changes in sales
+revenue. We do not sell standardized units of products and services so we cannot provide relevant
+information on sales volume by providing data on the changes in product and service units sold. To
+provide additional information that may be useful to investors in breaking down and evaluating
+changes in sales volume, we present information about our revenue and various values and
+components relating to operating profit that are adjusted for foreign currency effects. We calculate
+constant currency measures by translating foreign currencies using the average exchange rates from
+the comparative period instead of the current period. Constant currency measures on CCB use the
+closing exchange rate from the previous year's corresponding key date instead of the average
+exchange rate.
+-332
+-410
+-19
+Free cash flow
+5,093
+4,388
+16
+Usefulness of Non-IFRS Measures
+We believe that our non-IFRS measures are useful to investors for the following reasons:
+-
+Our expense (non-IFRS), and profit (non-IFRS) measures, along with the CCB measure (see above),
+provide investors with insight into management's decision-making because management uses these
+measures to run our business and make financial, strategic, and operating decisions. We exclude
+the expense adjustments outlined above when making decisions to allocate resources. In addition,
+we use these non-IFRS measures to facilitate comparisons of SAP's operating performance from
+period to period.
+The non-IFRS measures provide investors with additional information that enables a comparison of
+year-over-year operating performance by eliminating certain direct effects of acquisitions, share-
+based compensation plans, restructuring plans, and regulatory compliance matters.
+Non-IFRS and non-GAAP (Generally Accepted Accounting Principles) measures are widely used in
+the software industry. In many cases, inclusion of our non-IFRS measures may facilitate comparison
+with our competitors' corresponding non-IFRS and non-GAAP measures.
+Limitations of Non-IFRS Measures
+Without being analyzed in conjunction with the corresponding IFRS measures, the non-IFRS measures
+are not indicative of our present and future performance primarily for the following reasons:
+While our profit (non-IFRS) numbers reflect the elimination of certain acquisition-related expenses,
+no eliminations are made for the additional revenue or other income that results from the
+acquisitions.
+The acquisition-related amortization expense that we eliminate in deriving our profit (non-IFRS)
+numbers is a recurring expense that will impact our financial performance in future years.
+The remaining acquisition-related charges that we eliminate in deriving our profit (non-IFRS)
+numbers are likely to recur should SAP enter into business combinations in the future. Similarly, the
+restructuring expenses that we eliminate in deriving our profit (non-IFRS) numbers are likely to recur
+should SAP perform restructurings in the future.
+The expense adjustment for acquisition-related charges does not arise from a common conceptual
+basis. This is because the expense adjustment aims to improve the comparability between post-
+acquisition periods and pre-acquisition periods. This should particularly be considered when
+evaluating our operating profit (non-IFRS) and operating margin (non-IFRS) numbers, as these
+combine our revenue and expenses (non-IFRS) despite the absence of a common conceptual
+basis.
+Our restructuring charges resulted in significant cash outflows in the past and could do so in the
+future.
+- In the past, we have issued share-based payment awards to our employees every year and we
+intend to continue doing so in the future. Thus, our share-based payment expenses are recurring,
+although the amounts usually change from period to period.
+Payments of lease liabilities
+Constant Currencies Information
+-11
+-785
+Free Cash Flow
+Among other measures, we use free cash flow to manage our overall financial performance. We define
+free cash flow as net cash from operating activities minus purchases of intangible assets and property,
+plant and equipment, and payments of lease liabilities.
+62/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+Reconciliation of Operating Cash Flow from Continuing Operations to Free Cash Flow
+€ millions
+2023
+2022
+A in %
+Net cash flows from operating activities - continuing operations
+6,210
+5,675
+9
+Purchase of intangible assets and property, plant, and equipment
+-877
+-8,674
+Non-IFRS
+Constant
+Currency
+-8,096
+2,837
+4,545
+Attributable to owners of parent1
+6,139
+2,093
+8,232
+2,284
+577
+4,773
+Attributable to non-controlling interests1
+-175
+-62
+-236
+-576
+348
+-228
+Key Ratios
+Operating margin (in %)
+18.5
+28.0
+28.2
+1,708
+20.6
+7,995
+5,964
+3,600
+2,250
+5,850
+3,068
+1,449
+4,517
+Attributable to owners of parent
+3,634
+2,246
+5,880
+3,277
+1,442
+4,719
+Attributable to non-controlling interests
+-33
+4
+-29
+-210
+7
+-202
+Profit (loss) after tax¹
+2,032
+Profit (loss) after tax from continuing operations
+27.1
+32.6
+SBP1
+RCM²
+IFRS
+sition-
+SBP1
+turing
+IFRS
+Restruc-
+turing
+RCM² Non-IFRS
+Related
+Related
+Cost of cloud
+-3,884
+42
+94
+0
+0
+-3,749
+-3,499
+54
+53
+sition-
+Effective tax rate (in %)
+IFRS
+Restruc-
+29.3
+32.0
+29.6
+Earnings per share, basic (in €) from continuing
+3.11
+5.04
+2.80
+4.03
+operations
+Earnings per share, basic (in €)¹
+5.26
+7.05
+1.95
+4.08
+From continuing and discontinued operations
+Non-IFRS Adjustments by Functional Areas
+2023
+2022
+€ millions
+Acqui-
+Acqui-
+Non-
+-1,895
+2,489
+-1,446
+-1,364
+186
+-1,178
+-1,289
+146
+-1,143
+Restructuring
+-215
+215
+General and administration
+0
+138
+0
+Other operating income/expense, net
+-16
+0
+-16
+60
+-65
+-5
+-138
+-7,157
+789
+-7,946
+-8,038
+440
+-7,598
+Gross profit
+22,534
+577
+23,111
+21,482
+440
+21,922
+Research and development
+-6,324
+711
+-450
+-6,080
+451
+-5,629
+Sales and marketing
+-8,828
+1,246
+-7,581
+Total operating expenses
+-25,420
+-5,613
+-22,485
+Profit Numbers
+Operating profit (loss)
+5,787
+2,935
+8,722
+322
+9,044
+6,090
+1,898
+7,989
+Profit (loss) before tax from continuing operations
+5,341
+2,935
+4,513
+1,898
+6,412
+Income tax expense
+-1,741
+-685
+2,935
+-2,426
+Non-IFRS
+Adj.
+8,276
+Non-IFRS
+Constant
+Currency
+-22,989
+IFRS
+-23,429
+1,898
+-21,531
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+64/324
+Additional
+Information
+Further Information about
+Sustainability
+Currency
+Impact
+Adj.
+2022
+IFRS
+€ millions, unless otherwise stated
+-504
+Reconciliation of Non-IFRS Profit Numbers, Income Tax, and Key Ratios
+2023
+Non-IFRS
+Cost of revenue increased 5% (8% at constant currencies) compared to the prior year, ending 2023 at
+€7,951 million. This development was mainly driven by an increase in cost of cloud.
+Additional
+Consequently, segment profit increased 11% (15% at constant currencies) and reached €9,811 million
+in 2023, whereas segment margin improved 1.7pp (1.9pp at constant currencies).
+Overall, the share of more predictable revenue within the Applications, Technology & Services
+segment increased 1.6pp from 78.4% in 2022 to 80.0% in 2023.
+Cost of cloud for the Applications, Technology & Services segment increased 10% (13% at constant
+currencies), which overall caused the cloud gross margin to widen 2.7pp (2.9pp at constant currencies)
+to 70.5%. Thereof, PaaS and SaaS cloud gross margins grew 3.9pp and 1.5pp at constant currencies,
+which resulted in a cloud gross margin of 84.7% and 70.1% respectively. Software support revenue
+slightly decreased by 3% (1% at constant currencies) to €11,495 million in 2023. Software licenses
+revenue decreased 14% (12% at constant currencies) mainly due to the shift toward cloud revenue. As
+such, the segment achieved a total software licenses and support revenue of €13,259 million. Total
+segment revenue nevertheless rose 5% (8% at constant currencies) and ended 2023 at
+€30,057 million.
+Information
+To Our
+Stakeholders
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+SAP Integrated Report 2023
+SAP
+Reconciliation of Cloud Revenues and Margins
+77/324
+Further Information about
+Sustainability
+€ millions, unless otherwise stated
+322
+Currency
+Impact
+54
+The Applications, Technology & Services segment recorded a strong increase in cloud revenue of 20%
+in 2023 (24% at constant currencies), supported by SAP Business Technology Platform as well as
+SAP S/4HANA, whose cloud revenue increased 67% (72% at constant currencies) to €3,495 million.
+2,182
+Cloud revenue - PaaS²
+23
+19
+8,985
+11,056
+10,734
+Cloud revenue - SaaS¹
+A in %
+Constant
+Currency
+Actual
+Currency
+Actual Currency
+Q1-Q4 2022
+Q1-Q4 2023
+Constant
+Currency
+Actual
+Currency
+4 Mainly derived from the Applications, Technology & Services segment.
+28,496
+1 Software as a service: SaaS comprises all other offerings that are not shown as PaaS or laas.
+8
+5
+30,853
+30,057
+Segment revenue
+2.9pp
+Segment gross margin (in %)
+2.7pp
+70.7
+70.5
+Cloud gross margin (in %)
+-2.6pp
+-0.9pp
+2,236
+67.8
+2 Platform as a service: PaaS primarily includes SAP Business Technology Platform, the SAP LeanIX portfolio, and SAP Signavio solutions.
+3 Infrastructure as a service: A major portion of laaS comes from SAP HANA Enterprise Cloud.
+73.5
+73.5
+1.9pp
+1.7pp
+31.0
+32.8
+32.6
+Segment margin (in %)
+73.7
+15
+8,824
+10,129
+9,811
+Segment profit
+0.1pp
+0.0pp
+11
+1,533
+2.20
+46
+4.35
+Earnings per Share¹
+€ | change since previous year
+5.45
+25%
+56%
+3.11
+2.78
+-19%
+2.80
+11%
+-49%
+2019
+2020
+2021
+2022
+1 The numbers for 2023, 2022, and 2021 reflect continuing operations as a result of the divestiture of Qualtrics.
+Dividend
+Basic earnings per share increased to €3.11 (2022: €2.80). The number of shares outstanding
+decreased to 1,167 million in 2023 (2022: 1,170 million).
+2023
+2023
+2022
+Revenue by Revenue Type
+Cloud
+Additional
+Information
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+Combined Management
+Report
+Stakeholders
+To Our
+SAP Integrated Report 2023
+SAP
+2019
+2020
+2021
+3,600
+3,068
+17%
+-55%
+1 The numbers for 2023, 2022, and 2021 reflect continuing operations as a result of the divestiture of Qualtrics.
+Software licenses
+We hold the view that our shareholders should benefit appropriately from the profit the Company
+made in 2023. Our dividend policy is to pay a dividend totaling 40% or more of profit after tax.
+If the shareholders approve this recommendation, and based on the number of treasury shares as at
+December 31, 2023, the total amount distributed in dividends will be €2,568 million. The actual amount
+distributed could be different from this total amount, because the number of shares held as treasury
+2.05
+-16%
+7%
+2020
+2021
+2022
+2023
+Finances (IFRS)
+Overview
+Global Financial Management
+We use global centralized financial management to control liquid assets and monitor exposure to
+interest rates and currencies. The primary aim of our financial management is to maintain liquidity in
+the Group at a level that is adequate to meet our financial obligations at all times. Most SAP entities
+have their liquidity managed centrally by the Group, so that liquid assets across the Group can be
+consolidated, monitored, and invested in accordance with Group policy. High levels of liquid assets
+help keep SAP flexible, sound, and independent. In addition, various credit facilities are currently
+available for additional liquidity, if required. For more information about these facilities, see the Credit
+Facilities section.
+We manage credit, liquidity, interest rate, equity price, and foreign exchange rate risks on a Group-wide
+basis. We use selected derivatives exclusively for this purpose and not for speculation, which is
+defined as entering into a derivative instrument for which we do not have corresponding underlying
+transactions. The rules for the use of derivatives and other rules and processes concerning the
+management of financial risks are documented in our Treasury Guideline, which applies globally to all
+companies in the Group. For more information about the management of each financial risk and about
+our risk exposure, see the Notes to the Consolidated Financial Statements, Notes (F.1) and (F.2).
+Capital Structure Management
+The primary objective of our capital structure management is to maintain a strong financial profile for
+investor, creditor, and customer confidence, and to support the growth of our business. We seek to
+maintain a capital structure that will enable us to cover our funding requirements through the capital
+markets at reasonable conditions, and in so doing, ensure a high level of independence, and financial
+flexibility. For more information about the capital structure and its analysis, see the Analysis of
+Consolidated Statement of Financial Position section and the Notes to the Consolidated Financial
+Statements, Note (E.1).
+The long-term credit rating for SAP SE is "A2" by Moody's (positive outlook) and "A+" by Standard &
+Poor's (stable outlook).
+On May 16, 2023, SAP announced a new share repurchase program with an aggregate volume of up to
+€5 billion and a term until December 31, 2025. As at December 31, 2023, SAP had repurchased
+7,563,796 shares at an average price of €125.49, with payouts of approximately €949 million under the
+80/324
+Cloud and Software Revenue¹
+The Executive Board and the Supervisory Board of SAP SE will recommend to the Annual General
+Meeting of Shareholders in May 2024 a total dividend for 2023 of €2.20 per share (2022: €2.05). Based
+on this recommendation, the overall dividend payout ratio (which means the total distributed dividend
+as a percentage of profit after tax based on continued and discontinued operations) would be 43%
+(2022: 140%). Compared to the total dividend in 2023, the proposed dividend increased by 7%. The
+payment in 2022 included a special dividend of €0.50 to celebrate SAP's 50th anniversary.
+2.45
+32%
+5%
+79/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+stock might change before the Annual General Meeting of Shareholders. In 2023, we distributed
+€2,395 million in dividends.
+For more information about the development of our profit after tax, see the sections
+Financial Income, Net, Income Taxes, and Profit after Tax and Earnings per Share.
+Dividend per Share
+€ | change since previous year
+1.85
+1.58
+17%
+2019
+42
+1,764
+Services
+Cloud gross margin - SaaS¹ (in %)
+72.8
+73.1
+72.1
+0.7pp
+1.0pp
+Cloud gross margin - PaaS² (in %)
+84.7
+84.8
+80.9
+3.9pp
+3.9pp
+Cloud gross margin - laaS³ (in %)
+34.3
+32.5
+35.2
+-0.9pp
+72
+-2.6pp
+67
+3,599
+Cloud revenue - laaS³
+748
+18
+766
+908
+-18
+-16
+Cloud revenue
+13,664
+394
+14,058
+11,426
+20
+23
+Thereof SAP S/4HANA Cloud revenue4
+3,495
+105
+2,088
+Software support
+Cloud gross margin (in %)
+72.7
+Information
+Sapphire Ventures. For more information about income taxes, see the Notes to the Consolidated
+Financial Statements, Note (C.5).
+Profit After Tax and Earnings per Share
+Profit after tax increased to €3,600 million in 2023 (2022: €3,068 million).
+Profit After Tax¹
+€ millions | change since previous year
+6,824
+5,283
+29%
+57%
+3,370
+-18%
+For more information about our regional performance, see the Revenue by Region section.
+Cloud revenue refers to the income earned from contracts that permit the customer during the term of
+its contract with SAP to access specific software solutions hosted by SAP or third parties engaged by
+SAP. Software licenses revenue results from the fees earned from selling or licensing software to
+customers. Support revenue represents fees earned from providing customers with technical support
+services and unspecified software upgrades, updates, and enhancements. For more information about
+our revenue types, see the Notes to the Consolidated Financial Statements, Note (A.1).
+13,664
+11,496
+4,283
+€ millions
+Additional
+72.6
+Further Information about
+Sustainability
+Combined Management
+Report
+70.3
+2.2pp
+2.4pp
+1 Software as a service: SaaS comprises all other offerings that are not shown as PaaS or laaS.
+2 Platform as a service: PaaS primarily includes SAP Business Technology Platform, the SAP LeanIX portfolio, and SAP Signavio solutions.
+3 Infrastructure as a service: A major portion of laaS comes from SAP HANA Enterprise Cloud.
+4
+Mainly derived from the Applications, Technology & Services segment.
+Financial Income, Net
+Financial income, net, increased to -€456 million (2022: -€1,389 million). Our finance income was
+€857 million (2022: €811 million) and our finance costs were €1,313 million (2022: €2,200 million).
+Finance income primarily consists of interest income on investments in the amount of €486 million
+(2022: €193 million) and gains from IFRS 9-related fair value adjustments, mainly of Sapphire Ventures
+investments, and the disposal of equity securities totaling €380 million (2022: €608 million).
+Finance costs mainly consist of interest expense on financial liabilities and from derivative instruments
+(including a forward contract to hedge the USD purchase price from the Qualtrics sale against EUR-
+USD fluctuations. This forward contract matured in the second quarter of 2023 with a total realized loss
+of €91 million, of which €106 million was recognized in finance costs) amounting to €639 million
+(2022: €272 million), and IFRS 9-related fair value adjustments or losses from disposal of Sapphire
+Ventures investments totaling €525 million (2022: €1,802 million). For more information about financing
+instruments, see the Notes to the Consolidated Financial Statements, Note (D.1) and Note (E.3).
+Income Taxes
+The effective tax rate in 2023 was 32.6% (2022: 32.0%). The year-over-year increase mainly resulted
+from changes in valuation allowances on deferred tax assets, in non-deductible expenses and
+withholding taxes, which were partly compensated by changes in tax-exempt income, mainly related to
+78/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Consolidated Financial
+Statements IFRS
+23,012
+4,473
+12%
+10,211
+10,364
+5,241
+2,115
+2,608
+3,196
+4,137
+8,096
+7,756
+7,624
+6,943
+6,787
+2019
+2020
+2021
+2022
+1 The numbers for 2023, 2022, and 2021 reflect continuing operations as a result of the divestiture of Qualtrics.
+11,081
+73/324
+10,820
+■Cloud
+Consulting revenue and premium support revenue increased €165 million, or 4%, from €3,709 million
+in 2022 to €3,874 million in 2023. In 2023, consulting and premium support revenue contributed 90%
+of the total services revenue (2022: 90%) and 12% of total revenue (2022: 13%).
+Revenue from other services decreased €10 million, or 2%, to €409 million in 2023 (2022: €419 million).
+Revenue by Region
+Revenue by Region (Based on Customer Location)
+EMEA
+Americas
+€ millions
+APJ
+4,441
+12,762
+14,004
+EMEA Region
+In 2023, the EMEA region generated €14,004 million in revenue (2022: €12,909 million), which was 45%
+of total revenue (2022: 44%). Revenue in Germany increased 10% to €4,921 million
+(2022: €4,469 million). Germany contributed 35% (2022: 35%) of all EMEA region revenue. The
+remaining revenue in the EMEA region was primarily generated in France, Italy, the Netherlands,
+Switzerland, and the United Kingdom.
+Cloud and Software Revenue (EMEA)¹
+€ millions
+Software & Support
+12,028
+Services revenue increased €155 million, or 4%, from €4,128 million in 2022 to €4,283 million in 2023.
+This increase was predominantly caused by very strong growth across the entire services portfolio of
+offerings with accelerated growth in our premium support revenues. At the same time, the revenue
+development was positively impacted by a year-over-year increase in order entry.
+SAP
+To Our
+Stakeholders
+4,354
+5,227
+4,800
+4,455
+4,646
+4,317
+2019
+2020
+2021
+2022
+2023
+1 The numbers for 2023, 2022, and 2021 reflect continuing operations as a result of the divestiture of Qualtrics.
+Cloud and software revenue generated in the Americas region totaled €10,959 million
+(2022: €10,456 million). That was 86% of all revenue from the region (2022: 86%). Cloud revenue in the
+Americas region rose 14% to €6,642 million in 2023 (2022: €5,810 million). The United States
+contributed 81% of cloud revenue generated in the Americas region. Software licenses and software
+support revenue in the Americas regions amounted to €4,317 million in 2023 (2022: €4,646 million).
+APJ Region
+In 2023, 14% of our total revenue was generated in the APJ region (2022: 15%). Total revenue in the APJ
+region increased 1% to €4,441 million (2022: €4,384 million) despite unfavorable changes in currency
+exchange rates for SAP. Total revenue in Japan increased to €1,243 million (2022: €1,218 million).
+Revenue from Japan accounted for 28% of all revenue generated in the APJ region (2022: 28%). In the
+remaining countries of the APJ region, revenue increased 1%. Revenue in the remaining countries of the
+APJ region was generated primarily in Australia, China, and India.
+74/324
+SAP
+4,439
+SAP Integrated Report 2023
+3,945
+5,810
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+Cloud and software revenue generated in the EMEA region totaled €12,028 million
+(2022: €11,081 million). That was 86% of all revenue from the region (2022: 86%). Cloud revenue in the
+EMEA region rose 27% to €5,241 million in 2023 (2022: €4,137 million). Software licenses and software
+support revenue decreased 2% to €6,787 million in 2023 (2022: €6,943 million).
+Americas Region
+In 2023, 41% of our total revenue was generated in the Americas region (2022: 41%). Total revenue in
+the Americas region increased 4% to €12,762 million (2022: €12,227 million). Revenue in the United
+States increased to €10,204 million (2022: €9,799 million). The United States contributed 80%
+(2022: 80%) of all revenue generated in the Americas region. In the remaining countries of the Americas
+region, revenue increased 5% to €2,558 million. Revenue in the remaining countries of the Americas
+region was generated primarily in Brazil, Canada, and Mexico.
+Cloud and Software Revenue (Americas)¹
+€ millions
+Software & Support
+■Cloud
+10,959
+10,456
+9,172
+9,239
+8,808
+6,642
+SAP Integrated Report 2023
+Services revenue combines revenue from consulting services, premium support services, and other
+services such as training services. Consulting services primarily relate to the implementation of our
+cloud and on-premise software products. Our premium support offering consists of high-end support
+services tailored to customer requirements. For more information, see the Notes to the Consolidated
+Financial Statements, Note (A.1).
+Additional
+Further Information about
+Sustainability
+Additional
+Information
+39%
+Cloud Revenue¹
+€ millions | change since previous year
+13,664
+11,426
+8,701
+31%
+8,080
+6,933
+2019
+17%
+2020
+8%
+2021
+2022
+Consolidated Financial
+Statements IFRS
+20%
+Report
+Combined Management
+23,361
+1%
+1%
+2020
+2021
+26,924
+25,391
+9%
+6%
+2022
+2023
+1 The numbers for 2023, 2022, and 2021 reflect continuing operations as a result of the divestiture of Qualtrics.
+Cloud and software revenue grew from €25,391 million in 2022 to €26,924 million in 2023, an increase
+of 6%.
+71/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Information
+2023
+Cloud revenue increased €2,238 million, or 20%, from €11,426 million in 2022 to €13,664 million in
+2023. Cloud revenue growth benefitted from the accelerated transition of our customers to the cloud.
+The transactional cloud revenue remained approximately at the level of the previous year. Cloud
+revenue for Cloud ERP Suite increased 29%, or €2,417 million, to €10,626 million in 2023
+11,412
+11,909
+11,496
+2019
+2020
+2021
+2022
+2023
+1 The numbers for 2023, 2022, and 2021 reflect continuing operations as a result of the divestiture of Qualtrics.
+We define more predictable revenue as the sum of our cloud revenue and our software support
+revenue. Our more predictable revenue increased from €23,335 million in 2022 to €25,160 million in
+2023. Cloud revenue surpassed support revenue in 2023 and drove the growth of 8%. More
+predictable revenue accounted for 81% of our total revenue in 2023 (2022: 79%), continuing the
+upward trend from prior years.
+72/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+11,506
+1 The numbers for 2023, 2022, and 2021 reflect continuing operations as a result of the divestiture of Qualtrics.
+11,547
+8,080
+(2022: €8,209 million). For more information about Cloud ERP Suite, see the Performance Management
+System section.
+The current cloud backlog increased €2,721 million, or 25%, to €13,745 million in 2023
+(2022: €11,024 million).
+Our software licenses revenue declined €292 million from €2,056 million in 2022 to €1,764 million in
+2023.
+The demand for SAP software helped us maintain a stable maintenance customer base for software
+support, resulting in software support revenue of €11,496 million in 2023 (2022: €11,909 million). The
+slight decline is attributable to the accelerated transition of our customers to the cloud and to
+unfavorable currency exchange rates. SAP Enterprise Support was the largest contributor to our
+software support revenue.
+Software licenses and software support revenue decreased €705 million, or 5%, from €13,965 million
+in 2022 to €13,261 million in 2023.
+More Predictable Revenue¹
+€ millions
+Software support
+■Cloud
+25,160
+23,335
+19,586
+20,113
+18,480
+11,426
+13,664
+6,933
+8,701
+To Our
+2023
+Stakeholders
+Applications, Technology & Services
+2023
+2022
+A in %
+A in %
+€ millions, unless otherwise stated
+(non-IFRS)
+Actual
+Currency
+Constant
+Currency
+Actual
+Currency
+Actual
+Currency
+Constant
+Currency
+Cloud revenue - SaaS¹
+9,608
+9,901
+7,986
+20
+For more information about our segment reporting and the changes in the composition of our
+reportable segments in 2023, see the Notes to the Consolidated Financial Statements, Notes (C.1) and
+(C.2).
+24
+At the end of 2023, SAP had one reportable segment: Applications, Technology & Services. The
+segment information for 2023 and the comparative prior periods were restated to conform with the
+new segment composition.
+General and administration expense increased 6% from €1,289 million in 2022 to €1,364 million in
+2023. This increase is primarily due to higher personnel expenses in 2023, the majority thereof due to
+higher bonus payments. The ratio of general and administration expense to total revenue was flat year
+over year at 4.4% (2022: 4.4%).
+Our research and development (R&D) expense consists primarily of the personnel cost of our R&D
+employees, costs incurred for independent contractors whom we retain to assist in our R&D activities,
+and depreciation of the computer hardware and amortization of the software we use for our R&D
+activities.
+The R&D expense rose 4% to €6,324 million in 2023 from €6,080 million in 2022. This increase was
+mainly due to higher personnel costs driven by a 3% year-over-year growth in our R&D headcount for
+additional capacity demands in relation to the increased revenue. The R&D expense was also
+impacted by several initiatives to capture current and future growth opportunities. R&D expense as a
+percentage of total revenue decreased to 20.3% in 2023 (2022: 20.6%). For more information, see the
+Our Investments in Innovation section.
+76/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+Sales and Marketing Expense
+Sales and marketing expense consists mainly of personnel costs, direct sales costs, and the cost of
+marketing our products and services.
+Our sales and marketing expense grew 11% from €7,946 million in 2022 to €8,828 million in 2023. This
+increase is mainly attributable to higher personnel costs due to higher bonus payments prompted by
+strong revenue growth. In addition, travel costs for sales teams increased as COVID-related global
+travel restrictions accelerated to ease.
+Accordingly, the ratio of sales and marketing expense to total revenue, expressed as a percentage,
+increased 1.4pp in 2023 to 28.3% (2022: 26.9%).
+General and Administration Expense
+Our general and administration expense consists mainly of personnel costs to support our finance and
+administration, human resource, and corporate functions.
+Segment Information
+Research and Development
+Cloud revenue - PaaS²
+Combined Management
+Cloud gross margin - SaaS¹ (in %)
+70.1
+70.5
+69.0
+1.1pp
+1.5pp
+Cloud gross margin - PaaS² (in %)
+84.7
+84.8
+80.9
+3.9pp
+3.9pp
+Cloud gross margin - laaS³ (in %)
+34.3
+32.5
+35.2
+2019
+72
+2,182
+67
+3,599
+1,533
+42
+46
+Cloud revenue - laas³
+748
+766
+908
+-18
+-16
+Cloud revenue
+12,538
+12,903
+10,428
+20
+24
+Thereof SAP S/4HANA cloud revenue4
+3,495
+2,088
+Cost of services consists primarily of the cost of consulting, premium services, and training courses,
+and the cost of bought-in consulting and training resources. The cost of services increased 8% to
+€3,407 million (2022: €3,155 million), in line with increased demand for project consulting and premium
+engagement services as well as higher business travel costs as COVID-related travel restrictions further
+eased around the world. Our gross margin on services, defined as services profit as a percentage of
+services revenue, decreased 3.1pp to 20.5% (2022: 23.6%). As our services business trends away from
+traditional software licensing and consulting revenue toward more subscription revenue from cloud
+solutions, we continue to adjust our service delivery resources to support our cloud offerings.
+2,236
+In 2023, the cost of cloud and software increased 8% to €5,267 million (2022: €4,883 million) and our
+cloud margin increased 2.2pp from 69.4% in 2022 to 71.6% in 2023, based on strong revenue growth
+paired with a slower growth in cost of cloud due to a scalable cloud infrastructure and operational
+efficiency. The software licenses and software support margin was 89.6%, 0.5pp below the prior-year
+level (2022: 90.1%). Software licenses and software support revenue decreased 5% to €13,261 million
+(2022: €13,965 million), primarily attributable to a 14% decline in software revenue. Software licenses
+and software support costs remained relatively constant year over year at €1,383 million
+(2022: €1,384 million).
+2,377
+2,156
+2019
+2020
+2021
+2022
+2023
+1 The numbers for 2023, 2022, and 2021 reflect continuing operations as a result of the divestiture of Qualtrics.
+Cloud and software revenue in the APJ region totaled €3,937 million (2022: €3,855 million). That was
+89% of all revenue from the region (2022: 88%). Cloud revenue in the APJ region rose 21% to
+€1,781 million in 2023 (2022: €1,478 million). Software licenses and software support revenue
+decreased from €2,377 million in 2022 to €2,156 million in 2023.
+Operating Profit and Operating Margin
+Operating profit decreased to €5,787 million and operating margin decreased 2.1pp to 18.5%.
+Operating profit was impacted by a reduced contribution from software licenses revenue and from
+increased total operating expenses. Share-based payment expenses increased to €2,220 million
+(2022: €1,431 million), mainly due to an increase in the SAP share price of more than €40 from
+January 1, 2023, to December 31, 2023 (January 1, 2022, to December 31, 2022: drop in the SAP share
+price of around €30). A shorter contract life for on-premise support contracts led to accelerated
+amortization of costs related to these contracts, resulting in higher amortization expenses amounting
+to €121 million for 2023 (2022: €0 million). Furthermore, higher personnel costs were driven by higher
+bonus expenses prompted by strong revenue growth and robust attainment of other bonus measures.
+In addition, the recognition of a provision for fines in regard to anti-bribery matters led to expenses of
+€155 million in 2023 (2022: €0 million). Operating profit was also impacted by investments in the Next-
+Generation Cloud Delivery campaign and in other research and development and sales and marketing
+initiatives to capture current and future growth opportunities. Next-Generation Cloud Delivery from
+SAP is the modernization of our cloud delivery to enable a more resilient and scalable cloud
+infrastructure, and ended mid-2023. Additionally, the prior-year operating profit included a disposal
+gain of €175 million from the sale of the SAP Litmos business.
+Operating Profit¹
+€ millions | change since previous year
+-22%
+2019
+6,623
+48%
+2,582
+2,592
+2,757
+1,781
+Cost of Services
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+Cloud and Software Revenue (APJ)¹
+€ millions
+Software & Support
+2020
+■Cloud
+3,937
+3,732
+3,629
+3,625
+872
+1,033
+1,151
+1,478
+3,855
+6,308
+23,228
+5,787
+-6.9pp
+2019
+2020
+Operating Margin¹
+Percent change since previous year
+23.4
+18.5
+-0.8pp
+-2.1pp
+-2.8pp
+2021
+2022
+2023
+1 The numbers for 2023, 2022, and 2021 reflect continuing operations as a result of the divestiture of Qualtrics.
+Changes to the individual elements in our cost of revenue were as follows:
+Cost of Cloud and Software
+Cost of cloud and software consists primarily of costs for deploying and operating cloud solutions, the
+cost of developing custom solutions that address customers' specific business requirements, and
+customer support costs.
+6,090
+16.2
+8.0pp
+20.6
+€ millions | change since previous year
+-3%
+24.2
+-5%
+-5%
+2021
+2022
+2023
+75/324
+SAP
+1 The numbers for 2023, 2022, and 2021 reflect continuing operations as a result of the divestiture of Qualtrics.
+Further Information about
+Sustainability
+To Our
+Combined Management
+Stakeholders
+Report
+Consolidated Financial
+Statements IFRS
+SAP Integrated Report 2023
+Additional
+Information
+Surplus arising from offsetting
+558
+602
+774
+15,945
+680
+0
+Deferred taxes
+0
+Deferred income
+47,752
+48,996
+Equity and liabilities
+Shareholders' equity
+Provisions
+Liabilities
+Total shareholders' equity and liabilities
+Prepaid expenses and deferred charges
+Total assets
+6,892
+1,561
+Short-term assets
+Financial assets
+Fixed assets
+1,111
+13,540
+1,451
+1,393
+34,323
+37,912
+36,885
+40,866
+Inventories
+1
+1
+Accounts receivable and other assets
+5,712
+5,469
+Marketable securities and liquid assets
+3,778
+1,423
+9,491
+2,846
+The increase of €243 million in accounts receivable and other assets was primarily the result of a
+€168 million increase in receivables from affiliated companies and a €77 million increase in other
+assets.
+28,951
+SAP SE is subject to essentially the same opportunities and risks as the SAP Group. For more
+information, see the Risk Management and Risks section and the Expected Developments and
+Opportunities section.
+89/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+Non-Financial Statement
+Including Information on
+Sustainable Activities
+With this section and the information referenced to in this section, SAP SE fulfills its duty to produce a
+non-financial statement (NFS) for the holding company, pursuant to section 289b-e of the German
+Commercial Code (HGB), and a non-financial group statement, pursuant to section 315b-c in
+conjunction with section 289c-e of the German Commercial Code (HGB), in the form of a combined
+non-financial statement. The relevant non-financial matters are referenced in the table below and can
+be found in the relevant sections of our combined management report.
+Additionally, following Article 8 of Regulation 2020/852 of the European Parliament and of the Council
+of the European Union (EU Taxonomy), we have included information on how and to what extent SAP's
+activities are associated with economic activities that qualify as environmentally sustainable under this
+regulation.
+For more information, see the EU Taxonomy Disclosures subsection.
+Reporting Framework
+Business Model
+SAP's business model is described in the Strategy and Business Model section of the combined
+management report. Good governance is a prerequisite for continued success and is described
+throughout the combined management report. Therefore, we did not include governance as an
+individual material topic in our materiality assessment and our non-financial statement.
+90/324
+Property, plant, and equipment
+Opportunities and Risks
+2,410
+The statements made for the SAP Group in respect to Capital Structure, Capital Expenditures and
+Liquidity are mainly equally applicable to SAP SE. For more information, see the Finances (IFRS)
+section and the Assets (IFRS) section.
+Provisions increased €436 million to €2,846 million (2022: €2,410 million). Other provisions increased
+€437 million to €2,091 million (2022: €1,654 million), primarily as a result of an increase in other
+obligations toward employees and provisions for stock-based compensation. Provisions for tax
+remained at €741 million (2022: €741 million).
+33,036
+10
+11
+47,752
+48,996
+Intangible assets decreased €450 million year over year to €1,111 million (2022: €1,561 million), mainly
+due to scheduled depreciations on intangibles.
+Financial assets decreased €3,589 million year over year to €34,323 million (2022: €37,912 million). This
+was mainly due to the disposal of shares in affiliated companies totaling €5,254 million. Of this,
+€4,244 million was attributable to the share buyback of SAP America Inc., and €929 million was
+attributable to the SAP Portals Europe GmbH shares canceled as a result of the merger. Additions to
+the shares in affiliated companies amounting to €1,782 million had an opposite effect. Of this amount,
+88/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+€1,238 million was attributable to the acquisition of LeanIX GmbH, Bonn, Germany, and €493 million
+was attributable to the shares in SAP Nederland B.V., 's-Hertogenbosch, Netherlands, taken over as part
+of the merger of SAP Portals Europe GmbH.
+Marketable securities and liquid assets increased €2,355 million to €3,788 million
+(2022: €1,423 million).
+SAP SE shareholders' equity increased 18% to €15,945 million (2022: €13,540 million). Against outflows
+of €2,395 million associated with the payment of the dividend and €960 million for the repurchase of
+stock in treasury, there was a €4,766 million increase due to net income for 2022 and €995 million from
+the issuance of treasury stock to serve the share-based payments of employees. The equity ratio (that
+is, the ratio of shareholders' equity to total assets) is 33% (2022: 28%).
+Liabilities decreased €4,084 million to €28,951 million (2022: €33,036 million). This decrease mainly
+resulted from a decrease in liabilities to financial institutions of €2,380 million due to scheduled
+repayments of bank loans (€1,450 million) and commercial papers (€930 million), the scheduled
+repayment of bonds in the total amount of €1,600 million, and a decrease of €218 million in trade
+payables. In contrast, other payables increased €143 million.
+The social and environmental data and information included in the SAP Integrated Report have been
+prepared in accordance with the Global Reporting Initiative (GRI) Standards.
+Assets
+2022
+519
+1,899
+-4,210
+6,109
+Group liquidity consists of cash and cash equivalents (for example, cash at banks, money market
+funds, and time deposits with original maturity of three months or less) and current investments (for
+example, time deposits and debt securities with original maturities of greater than three months, and
+remaining maturities of less than one year included in current other financial assets). Group liquidity on
+December 31, 2023, primarily comprised amounts in euros and U.S. dollars.
+The net increase in group liquidity compared to 2022 was mainly due to the Qualtrics divestiture,
+compensated by the acquisition of LeanIX, the share buyback program, and the repayment of
+Eurobonds, loans, and commercial paper.
+Net liquidity/net debt is group liquidity less financial debt. For more information about our liquidity,
+see the Notes to the Consolidated Financial Statements, Note (E.3).
+For more information about the impact of cash, cash equivalents, current investments, and our financial
+liabilities on our income statements, see the analysis of our financial income, net, in the
+Operating Results (IFRS) section.
+83/324
+-2,140
+SAP
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+Development of Net Debt
+2023¹
+2022
+Net debt 12/31/2022 (PY: 12/31/2021)
+SAP Integrated Report 2023
+Free Cash Flow
+-1,621
+-2,070
+686
+2,464
+Group liquidity
+Current financial debt
+Non-current financial debt
+11,275
+9,694
+1,581
+-1,143
+-3,986
+5,590
+2,843
+-7,778
+1,166
+Financial debt
+Net liquidity (+)/net debt (-)
+Lease liabilities
+Net debt including lease liabilities
+-7,755
+-11,764
+4,009
+3,521
+-6,612
+-2,070
+-1,563
+Net cash flows from operating activities - continuing
+3,521
+-2,070
+1 Net debt as at 12/31/2022 includes continuing and discontinued operations, net liquidity/net debt as at 12/31/2023 only includes continuing
+operations.
+Analysis of Consolidated Statements of Cash Flow
+€ millions
+Net cash flows from operating activities
+2023
+2022
+A in %
+6,210
+(PY: 12/31/2022)
+5,675
+Net cash flows from investing activities
+Net cash flows from financing activities
+-4,603
+699
+<-100
+-7,758
+-6,074
+28
+In 2023, cash inflows from operating activities increased €535 million to €6,210 million
+(2022: €5,675 million). This is particularly due to higher profitability, improvements in working capital,
+lower share-based payments (€1.1 billion in 2023 compared to €1.2 billion in 2022), and higher net
+interest received (€0.1 billion in 2023 compared to €0.1 billion net interest paid in 2022), which were
+compensated by higher income tax payments (€2.2 billion in 2023 compared to €1.6 billion in 2022)
+and higher restructuring payouts (€0.2 billion in 2023 compared to €0.1 billion in 2022). In addition, the
+decreased volume of trade receivables sold in 2023 amounting to €0.6 billion (€0.9 billion in 2022)
+affected operating cash flow. Cash collected from customer contracts increased compared to 2022.
+Cash outflows from investing activities were €4,603 million in 2023, compared to €699 million cash
+inflows in 2022. We increased short-term time deposits and debt instruments by €2.5 billion. We paid,
+net of cash received, a total of €1.2 billion mainly for the LeanIX acquisition in 2023, compared to
+€0.7 billion mainly for the Taulia and Askdata acquisitions in 2022. We received, net of taxes paid,
+approximately €5.5 billion for the divestiture of Qualtrics in 2023. Capital expenditure on intangible
+assets and property, plant, and equipment decreased to €0.8 billion (€0.9 billion in 2022). For more
+information about current and planned capital expenditures, see the Assets section and the
+Investment Goals section.
+In 2023, free cash flow (for the definition, see the Performance Management System section) increased
+to €5,093 million (2022: €4,388 million). The free cash flow conversion rate, defined as free cash flow as
+a percentage of profit after tax, decreased to 141% (2022: 143%).
+9
+Net liquidity (+)/net debt (-) 12/31/2023
+150
+-500
+6,210
+5,675
+operations
+5,093
+Capital expenditure
+-785
+-877
+Lease payments
+-332
+-410
+Business combinations
+Dividends
+Treasury shares
+Net proceeds from Qualtrics sale
+Other
+-1,168
+-679
+-2,395
+-2,865
+-949
+-1,500
+5,510
+0
+3,151
+Current time deposits and debt securities
+-883
+8,124
+Financial Debt
+Financial debt is defined as the nominal volume of bank loans, commercial paper, private placements,
+and bonds.
+1,143
+Maturity Profile of Financial Debts
+€ millions
+■Variable
+Fixed
+1,100
+1,091
+1,000
+Information
+871
+91
+1,250
+500
+1,250
+1,052
+1,100
+1,000
+1,000
+871
+800
+800
+Additional
+Further Information about
+Sustainability
+Consolidated Financial
+Statements IFRS
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+program in 2023. Repurchased shares will primarily be used to service future awards granted under
+the 'Move SAP' share-based compensation plan.
+Liquidity Management
+Our primary source of cash, cash equivalents, and current investments is funds generated from our
+business operations. Over the past several years, our principal use of cash has been to support
+operations and our capital expenditure requirements resulting from our growth, to quickly repay
+financial debt, to acquire businesses, to pay dividends on our shares, and to buy back SAP shares on
+the open market. On December 31, 2023, our cash, cash equivalents, and current investments were
+primarily held in euros and U.S. dollars. We generally invest only in the financial assets of issuers or
+funds with a minimum credit rating of BBB, and pursue a policy of cautious investment characterized
+by wide portfolio diversification with a variety of counterparties, predominantly short-term investments,
+and standard investment instruments. Our investments in financial assets of issuers with a credit rating
+lower than BBB were not material in 2023.
+We believe that our liquid assets combined with our undrawn credit facilities are sufficient to meet our
+operating financing needs in 2024 and, together with expected cash flows from operations, will support
+debt repayments, currently planned capital expenditure requirements, and capital returns to our
+shareholders over the near term and medium term. It may also be necessary to enter into financing
+transactions when additional funds are required that cannot be wholly sourced from free cash flow, to
+maintain flexibility, and/or limit repayment risk.
+Therefore, we continuously monitor funding options available in the capital markets and trends in the
+availability of funds, as well as the cost of such funding. In recent years, we were able to repay
+additional debt within a short period of time due to our persistently strong free cash flow. For more
+information about the financial debt, see the Cash Flows and Liquidity section.
+Credit Facilities
+Other sources of liquidity are available to us through various credit facilities, if required.
+To retain high financial flexibility, we have available a €3.0 billion syndicated revolving credit facility with
+an end date in March 2028 plus two one-year extension options. A possible future utilization is not
+subject to any financial covenants. So far, we have not used, and do not currently foresee any need to
+use, this credit facility.
+As at December 31, 2023, SAP SE had additional available credit facilities totaling €550 million. Several
+other SAP entities have credit facilities available that allow them to borrow funds at prevailing interest
+rates.
+81/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+500
+Net cash outflows from financing activities were €7,758 million in 2023, compared to €6,074 million in
+2022. The buyback of treasury shares with a volume of €0.95 billion in 2023 is included herein. Apart
+from the buyback of treasury shares, cash outflows in 2023 resulted from the repayment of €1.6 billion
+in Eurobonds, €1.45 billion in loans, and €0.93 billion in commercial paper when they matured. In 2022,
+we bought back treasury shares with a volume of €1.5 billion. Further cash outflows in 2022 resulted
+from the repayment of €0.9 billion in Eurobonds and US$0.445 billion in U.S. private placements when
+they matured.
+91
+2025
+Additional
+Information
+Cash Flows and Liquidity
+2023 Actual Cash Flow and Liquidity Performance Compared to Outlook
+We met or exceeded the updated outlook for 2023.
+€ billions
+Capital expenditure
+Free cash flow
+2022 Results
+2023 Outlook¹
+2023 Results
+-0.88
+Further Information about
+Sustainability
+Approximately 0.95
+Approximately 4.9
+-0.79
+1 The 2023 outlook was communicated in January 2023 and updated in April 2023 to reflect the expected Qualtrics divestiture. The 2023
+outlook numbers reflect the updated outlook from April 2023.
+5.09
+Group Liquidity and Net Liquidity/Net Debt
+€ millions
+2023
+2022
+Δ
+Cash and cash equivalents
+4.39
+Consolidated Financial
+Statements IFRS
+Report
+Stakeholders
+2026
+2027
+2028
+2029
+2030
+2031
+Nominal volume of financial debt on December 31, 2023, included amounts in euros (€7,755 million)
+and U.S. dollars (€655 million). On December 31, 2023, approximately 60% of the financial debt was
+held at variable interest rates, partially swapped from fixed into variable using interest rate swaps.
+For information about the intended repayments, see the goals for liquidity and finance in the Financial
+Targets and Prospects section.
+Financial Debt by Instrument
+Bonds
+Private Placement
+383
+Commercial Paper
+0
+Bank Loan 0
+Financial Debt
+€ millions
+7,371
+For more information about our financial debt, see the Notes to the Consolidated Financial
+Statements, Note (E.3).
+82/324
+SAP
+SAP Integrated Report 2023
+To Our
+Combined Management
+2024
+The dividend payment made in 2023 was €2,395 million compared to €2,865 million paid the
+preceding year.
+84/324
+SAP
+slight increase
+€14,055 million
+€739 million
+slight decrease
+€4,396 million
+While product revenue is within our 2023 outlook, operating profit is well above expectations at
+€4,396 million. This development is mainly attributable to the €3,749 million gains realized under the
+intra-Group share buyback.
+The course of business for SAP SE was favorable in 2023.
+Income
+SAP SE's income statement is classified following the nature of expense method and presents
+amounts in millions of euros.
+-
+€13,550 million
+SAP SE Income Statement – German Commercial Code (Short Version)
+Total revenue
+Other operating income
+Cost of services and materials
+Personnel expenses
+Depreciation and amortization
+Other operating expenses
+Operating profit
+Finance income
+Income before taxes
+Income taxes
+€ millions
+(Integrated Report 2022)
+Results for 2023
+Results for 2022
+86
+8
+December 2025
+For more information about our planned investment expenditures, see the Investment Goals section.
+There were no material divestitures of facilities within the reporting period.
+Report on the Economic Position of SAP SE
+SAP SE is headquartered in Walldorf, Germany, and is the parent company of the SAP Group, which
+comprises 235 companies. SAP SE is the Group holding company and employs most of the Group's
+Germany-based development and service and support personnel.
+As the owner of the intellectual property in most SAP software, SAP SE derives its revenue mainly from
+software license fees and bears the bulk of the Group-wide research and development expenses.
+In 2023, as part of Group-internal restructuring measures, SAP America Inc., Newtown Square, United
+States, repurchased and withdrew own shares from SAP SE. This resulted in a disposal of the shares in
+affiliated companies in the amount of €4,244 million and a gain from the disposal of affiliated
+companies in the amount of €3,749 million, reported under Other operating income.
+With effect from January 1, 2023, based on a merger agreement concluded on August 9, 2023, SAP SE
+took over all assets and liabilities of SAP Portals Europe GmbH, Walldorf, Germany. The merger was
+conducted at book value.
+The SAP SE annual financial statements are prepared in accordance with the reporting standards in
+the German Commercial Code and the German Stock Corporation Act. The full SAP SE annual
+financial report and unqualified audit report are submitted to the operator of the
+Unternehmensregister (German Business Register) for publication and inclusion in the
+Unternehmensregister (German Business Register). It is available from SAP SE on request.
+Product revenue and operating profit are defined as the most significant financial performance
+indicators with regards to SAP SEs standalone financial statements.
+86/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+Performance Against Our Outlook for 2023
+Product revenue
+Operating profit
+Outlook for 2023
+Income after taxes
+New office building for approx. 3,500
+employees
+Other taxes
+2023
+The total revenue of SAP SE in 2023 was €19,018 million (2022: €17,786 million), an increase of 7%.
+Product revenue increased 4% to €14,055 million (2022: €13,550 million). As in previous years, product
+revenue was primarily generated from license fees paid by subsidiaries of SAP SE.
+Service revenue increased 11% to €1,065 million in 2023 (2022: €958 million), while other revenue
+increased 19% to €3,898 million (2022: €3,278 million).
+SAP SE operating profit increased €3,656 million to €4,396 million (2022: €739 million). Other operating
+income increased €3,463 million to €4,996 million (2022: €1,534 million). The year-over-year increase is
+primarily due to €3,749 million in gains from the disposal of affiliated companies as a result of the intra-
+Group share buyback by SAP America Inc.
+SAP SE cost of services and materials increased 6% to €12,217 million (2022: €11,560 million). Services
+received increased €579 million to €10,177 million (2022: €9,599 million), mainly due to increased
+services received in the context of intra-Group cost allocations. The costs for licenses and
+commissions increased €93 million to €2,006 million (2022: €1,914 million).
+SAP SE personnel expenses, mainly the labor cost of software developers, service and support
+employees, and administration staff employed by SAP SE, increased 17% to €3,386 million
+(2022: €2,905 million), primarily due to an increase in stock based compensation expenses and an
+increased headcount in the reporting year.
+87/324
+SAP
+SAP Integrated Report 2023
+To Our
+Stakeholders
+1,912
+Combined Management
+Report
+Further Information about
+Sustainability
+Additional
+Information
+Other operating expenses decreased €104 million to €3,329 million (2022: €3,433 million). This
+decrease is mainly attributable to a €287 million decrease in currency exchange losses and a
+€36 million decrease in impairment of receivables. The decrease was partly offset by a €114 million
+increase in services purchased and by a €179 million increase in other expense, mainly attributable to
+€155 million in regulatory compliance expenses.
+Finance income was €897 million (2022: €1,685 million), representing a year-over-year decrease of
+€788 million. This decrease is primarily due to a €694 million decrease in net interest income, a
+€79 million decrease in results from profit and loss transfer agreements, and a €84 million increase in
+write-downs on financial assets. The decrease was partly offset by a €61 million increase in income
+from investments.
+SAP SE income before taxes increased €2,868 million to €5,292 million (2022: €2,424 million). Income
+taxes increased €7 million to €504 million (2022: €497 million). After deducting taxes, the resulting net
+income was €4,766 million (2022: €1,912 million), representing a increase of €2,854 million year over
+year.
+Assets and Financial Position
+In 2023, SAP SE total assets closed at €47,752 million (2022: €48,996 million).
+SAP SE Balance Sheet as at December 31 - German Commercial Code (Short
+Version)
+€ millions
+2023
+Consolidated Financial
+Statements IFRS
+4,766
+-14
+-23
+2022
+19,018
+17,786
+4,996
+1,534
+-12,217
+-11,560
+-3,386
+-2,905
+-686
+-682
+-3,329
+-3,433
+4,396
+739
+897
+1,685
+5,292
+2,424
+-504
+-497
+4,788
+1,927
+Net income
+Intangible assets
+225
+March 2027
+3,522
+2,245
+2,226
+1,780
+-78%
+1%
+-37%
+2019
+2020
+2021
+2022
+98%
+2023
+2022
+Liabilities
+Percent
+■Shareholders' equity
+■Non-current
+59
+64
+15
+Current
+16
+2023
+(Incl. Additions from Business Combinations)
+€ millions | change since previous year
+Investment in Goodwill, Intangible Assets, and
+Property, Plant, and Equipment
+118%
+SAP Integrated Report 2023
+To Our
+Stakeholders
+Combined Management
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+Assets (IFRS)
+Analysis of Consolidated Statements of Financial Position
+Total assets decreased 5% year over year to €68,335 million.
+2023
+2022
+Assets
+Percent
+Current
+■Non-current
+70
+74
+30
+26
+Total current assets increased 11% in 2023 from €18,522 million to €20,571 million, mainly driven by an
+increase in time deposits in other financial assets.
+Total non-current assets decreased 11% to €47,764 million (2022: €53,638 million). Among other
+effects, this change was mainly due to the divestiture of Qualtrics and the corresponding disposal of
+goodwill and intangible assets.
+8,090
+24
+General renovation of headquarters
+building for approx. 1,600 employees
+21
+Total non-current liabilities decreased 13% to €10,287 million in 2023 compared to the previous year's
+figure of €11,858 million. This was mainly due to a decrease in non-current financial liabilities. For more
+information about our financing activities in 2023, see the Finances (IFRS) section.
+2023
+Construction Projects
+€ millions
+Principal Investments Currently in Progress
+In 2023, we finalized various construction projects and continued construction activities in several
+locations. We plan to finance all of these projects from operating cash flow. Our most important
+projects are listed below.
+Location of Facility
+Short Description
+Country
+Germany
+Munich
+2022
+Germany
+India
+Bangalore
+New office building for approx. 740
+employees
+Estimated
+Total Cost
+Costs Incurred as at
+12/31/2023
+Estimated
+Completion Date
+99
+91
+June 2024
+18
+Walldorf
+2021
+1pp
+5pp
+The equity ratio (that is, the ratio of shareholders' equity to total assets) grew 5pp to 64% (2022: 59%).
+85/324
+SAP
+SAP Integrated Report 2023
+To Our
+Combined Management
+Stakeholders
+Report
+Consolidated Financial
+Statements IFRS
+Further Information about
+Sustainability
+Additional
+Information
+51
+51
+-5pp
+2019
+Opp
+2020
+Equity Ratio
+Percent | change since previous year
+58
+7pp
+64
+59
+Current liabilities decreased 16% to €14,642 million in 2023 (2022: €17,453 million). This was mainly
+due to a decrease in loans payable, bonds, and commercial paper in current financial liabilities.
+9,008